Valley View Angus Ranch, Inc. v. Duke Energy Field Services, LP ( 2010 )

FILED
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
December 6, 2010
FOR THE TENTH CIRCUIT
Elisabeth A. Shumaker
Clerk of Court
VALLEY VIEW ANGUS RANCH,
INC.; OTIS CULPEPPER,
Plaintiffs-Appellees, No. 09-6185
(D.C. No. 5:04-CV-00191-D)
v. (W.D. Okla.)
DUKE ENERGY FIELD SERVICES,
LP,
Defendant-Appellant.
ORDER AND JUDGMENT *
Before HARTZ, Circuit Judge, PORFILIO and BRORBY, Senior Circuit
Judges.
In this diversity action, Valley View Angus Ranch, Inc. and its President,
Otis Culpepper (plaintiffs), sued Duke Energy Field Services, LP (now known as
DCP Midstream, LP), to recover damages for injury caused when Duke’s
oil-and-gas pipeline underlying Valley View’s property leaked condensate.
*
After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and
collateral estoppel. It may be cited, however, for its persuasive value consistent
with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
Plaintiffs’ amended complaint raised claims for private and public nuisance,
trespass, unjust enrichment, and punitive damages. After this court reversed and
remanded the district court’s grant of summary judgment in favor of Duke,
see Valley View Angus Ranch, Inc. v. Duke Energy Field Servs., Inc., 497 F.3d
1096 (10th Cir. 2007), Duke admitted liability for any harm to Valley View
directly caused by the pipeline leak. The district court entered partial summary
judgment in favor of Valley View on this issue and held a jury trial to determine
the nature and extent of the plaintiffs’ injuries and to assess what damages, if any,
each plaintiff should recover.
During the July 2008 trial, the jury heard testimony that Duke had spent
$222,124 on cleanup. The jury was also presented with evidence that it would
cost $756,592 to remove the remaining pollution from the Valley View property,
and plaintiffs’ real estate appraiser testified that the cleanup cost far exceeded the
market value of Valley View’s 470-acre ranch—which he estimated to be $1,000
per acre—before the leak.
The jury found Valley View entitled to $131,500 for injury to the property
and Mr. Culpepper entitled to $37,500 for his inconvenience, annoyance, and
discomfort. The district court entered judgment on the jury’s verdict; denied
Duke’s motion for judgment as a matter of law and alternative motion for
remittitur or a new trial; granted plaintiffs’ motion to amend judgment to award
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Mr. Culpepper prejudgment interest; and entered an amended judgment. Duke
filed a timely notice of appeal.
On appeal Duke contends that the district court (1) erroneously instructed
the jury on the measure of damages recoverable by Valley View; (2) improperly
admitted expert testimony and denied Duke’s posttrial motions; and
(3) incorrectly awarded prejudgment interest. Our jurisdiction arises under
28 U.S.C. § 1291. We affirm.
I. Background
Because the parties are familiar with the procedural history and trial
testimony in this case, we provide only an abbreviated summary. Mr. Culpepper
discovered Duke’s pipeline leak in October 2003. Duke hired an environmental
contractor to dig out polluted soil and perform other remediation. Plaintiffs filed
suit in February 2004. About two months later, Duke completed its excavation
and backfilled the excavation site with clean soil.
Throughout this litigation, plaintiffs have maintained that Duke “failed to
adequately clean up the leak,” J.A., Vol. 2 at 336. Duke, on the other hand, has
maintained that the plaintiffs have not “suffered either the type or extent of
damages which they seek,” id.II. Measure of Damages
Neither party disputes on appeal the district court’s ruling that Valley
View’s claim was for temporary injury to its property. Nor does either party
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dispute that therefore the measure of damages in this case was the reasonable cost
of repairing and restoring the property to its original condition, but not to exceed
the decrease in the property’s fair market value caused by the injury. They also
agree that if the cost of repair and restoration exceeded that decrease in value, the
measure of damages amounted to that decrease. Where the parties differ in their
appellate briefs is on how much property should be considered in making the
decrease-in-value calculation. Duke asserts that the pipeline leak did not injure
more than two of Valley View’s 470 acres and that damages under Oklahoma law
should be limited to the diminution in value of only the injured portion of land.
Duke therefore challenges the following portion of jury Instruction Number 18:
“‘In determining the fair market value, you may consider the extent to which the
Valley View property, or some portion of it, was harmed.’” Aplt. Opening Br.
at 16 (quoting J.A., Vol. 2 at 592-93). Duke contends that the jury
“misconstrued” Instruction Number 18, asserting:
The only way the jury’s verdict [for Valley View] makes any sense is
if the jury read Instruction No. 18 to mean that they could consider
the fair market value of the entire 470-acre tract, even if only some
portion of it was harmed . . . . However, . . . this would be an
erroneous measure of damages.
Id.Plaintiffs counter that the leak impacted more than two acres and that
Oklahoma law requires consideration of the diminution in value of Valley View’s
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entire 470-acre ranch. They assert that Instruction Number 18 gave proper
guidance to the jury concerning the measure of damages.
In a diversity case such as this, “the substance of a jury instruction is a
matter of state law, but the grant or denial of a tendered instruction is governed
by federal law.” Blanke v. Alexander, 152 F.3d 1224, 1232 (10th Cir. 1998).
Although we review the district court’s refusal to give a particular instruction for
an abuse of discretion, “[w]e review de novo whether, as a whole, the district
court’s jury instructions correctly stated the governing law and provided the jury
with an ample understanding of the issues and applicable standards.” Martinez v.
Caterpillar, Inc., 572 F.3d 1129, 1132 (10th Cir. 2009) (internal quotation marks
omitted). “We reverse only in those cases where we have a substantial doubt
whether the jury was fairly guided in its deliberations . . . .” Id. (brackets and
internal quotation marks omitted).
On appeal Duke principally relies on Houck v. Hold Oil Corp., 867 P.2d
451, 461 (Okla. 1993), which held that a plaintiff could recover damages for
temporary injury to one portion of its land and damages for permanent injury to
another portion, so long as there was no double recovery. Houck’s holding,
argues Duke, shows that the jury need not consider the entire property in
assessing damages for temporary injury. This argument, however, does not get
Duke very far. Duke appears to believe that the only portion of the property that
can be considered injured is that portion where the leak occurred—the two acres.
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But Houck tells us otherwise. It states: “[I]f the wrongful act somehow adversely
affected the entire parcel . . . , it is appropriate to compute the damages on the
basis of the diminution of the value of the total acreage and not just on the value
of the portion damaged.” Id. (emphasis added). Thus, if the value of portions of
the property other than the two acres was diminished by the leak, that loss must
be considered by the jury even if only the two acres were damaged. And because
the issue is the decrease in market value of the property, Duke could not be
prejudiced by the jury’s consideration of too much property. If, say, 450 of the
470 acres were not adversely affected by the leak—that is, the market value of the
450 acres was not decreased—then consideration of those 450 acres would not
have increased the amount of damages awarded.
Accordingly, we hold that the challenged language in Instruction Number
18 was correct. As the district court explained: “[T]he current instruction
recognizes that the extent of the harm caused by the leak may be considered in
determining fair market value but leaves to the jury, based on and in light of the
conflicting evidence, the determination of how that harm . . . impact[s] . . . the
value of the property.” J.A., Vol. 6 at 2057.
We now turn to Duke’s argument that the evidence, even assuming that
Instruction 18 is correct, could not support the verdict.
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III. Sufficiency of the Evidence/Expert Testimony
Duke states its second issue on appeal as “The District Court improperly
denied [Duke’s] post-trial motions for judgment as a matter of law and for new
trial.” Aplt. Opening Br. at 18. Included within the discussion under this
heading, however, is a separate issue—the admissibility of testimony by
plaintiffs’ expert witness Jerry Black. We address that issue before turning to the
posttrial motions.
Duke contends that the district court should have excluded Black’s
testimony about his cleanup plan, which envisioned re-excavating soils
underlying the initial excavation area to a depth of 19 feet. 1 In evaluating the
admissibility of expert testimony under Federal Rule of Evidence 702, a district
court “must first determine whether an expert is qualified by knowledge, skill,
1
Duke also asserts in conclusory fashion that Black’s “estimated cost of
remediation lacked sufficient support to be submitted to the jury” because his
opinions about the efficacy of a remedial pumping treatment system were “not
reliable,” and that, to the extent the opinions of other experts “were based on
Black’s flawed cost estimate, . . . their testimony should also have been
excluded.” Aplt. Opening Br. at 23-24. We decline to review this issue on appeal
because Duke “has failed to provide arguments or authorities in support.”
Burlington N. & Santa Fe Ry. Co. v. Grant, 505 F.3d 1013, 1031 (10th Cir. 2007);
see also Bronson v. Swensen, 500 F.3d 1099, 1105 (10th Cir. 2007) (“[C]ursory
statements, without supporting analysis and case law, fail to constitute the kind of
briefing that is necessary to avoid application of the forfeiture doctrine.”).
Similarly, we need not address Duke’s perfunctory assertion that the district court
should have excluded “Black’s opinions regarding groundwater remediation”
because he had not calculated “the quantity of groundwater which could be
produced from the site.” Aplt. Opening Br. at 23.
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experience, training, or education to render an opinion. . . . [I]f the court
determines that a witness is qualified, it must then determine whether her
opinions are reliable.” Milne v. USA Cycling Inc., 575 F.3d 1120, 1133 (10th Cir.
2009) (brackets, citation, and internal quotation marks omitted); see also United
States v. Rodriguez-Felix, 450 F.3d 1117, 1122-23 (10th Cir. 2006) (discussing
district court’s gatekeeper role). Because Duke does not claim that “the district
court failed to employ the proper legal framework required by Daubert[ v.
Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993)], we consider only
whether the district court abused its discretion in actually applying this
framework to the testimony at hand.” Rodriguez-Felix, 450 F.3d at 1125. “We
will not . . . disturb a district court’s ruling absent our conviction that it is
arbitrary, capricious, whimsical, manifestly unreasonable, or clearly erroneous.”
Bitler v. A.O. Smith Corp., 400 F.3d 1227, 1232 (10th Cir. 2004).
Before allowing Black’s testimony the district court held a pretrial Daubert
hearing and considered the parties’ various pleadings in opposition to and support
of the proposed testimony. Thereafter, the court issued an order acknowledging
Black’s education and nearly 30 years’ experience as an environmental consultant
and ruling that Black could testify regarding his cleanup plan. The court
acknowledged Duke’s assertion that the soil samples relied upon by Black “do not
cover a sufficient area to support his conclusion that contamination was
extensive.” J.A., Vol. 2 at 551. But it concluded that Duke had failed to “present
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a sufficient basis for rendering [the evidence] inadmissible as unreliable.” Id.“Instead,” it said, “the deficiencies in his methodology should be the subject of
cross-examination, as they impact the weight of Black’s testimony.” Id. The
court also ruled that even though Black’s cleanup plan was a one-page document
with recommended remedial actions, the cost of each action, and a sum of the
costs, it held “that any deficiencies in the plan . . . d[id] not render it inadmissible
under Fed. R. Evid. 702”; rather, “such deficiencies go to the weight of the
evidence and should be the subject of cross-examination.” J.A., Vol. 2 at 547.
The district court’s ruling was not “arbitrary, capricious, whimsical,
manifestly unreasonable, or clearly erroneous.” Bitler, 400 F.3d at 1232. The
court heard extensive testimony about Black’s education and experience, and
about the methodologies he employed in this case. On review “we are concerned
with” whether the district court performed “its obligation under Rule 702 and
Daubert, not upon the exact conclusions reached to exclude or admit expert
testimony.” Id. In demonstrating that an expert’s testimony is reliable, a
“plaintiff need not prove that the expert is undisputably correct or that the
expert’s theory is generally accepted in the scientific community.” Id. at 1233
(internal quotation marks omitted). “Instead, [a] plaintiff must show that the
method employed by the expert in reaching the conclusion is scientifically sound
and that the opinion is based on facts which sufficiently satisfy Rule 702’s
reliability requirements.” Id. (internal quotation marks omitted). On the record
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before us, plaintiffs met their burden. See Daubert, 509 U.S. at 596 (“Vigorous
cross-examination, presentation of contrary evidence, and careful instruction on
the burden of proof are the traditional and appropriate means of attacking shaky
but admissible evidence.”). In particular, Duke has not shown why Black could
not properly testify that excavation to 19 feet was necessary given his testimony
that (1) the groundwater level was 19 feet, (2) there was evidence that the
condensate had seeped into the groundwater and traveled to neighboring areas,
and (3) condensate had seeped into Duke’s excavation from below. To be sure,
Duke had plausible grounds for challenging Black’s testimony, but the district
court did not abuse its discretion in leaving the matter to the jury.
The argument by Duke that matches its statement of the second issue on
appeal is that the district court improperly denied its motions for judgment as a
matter of law and for a new trial. These motions were based on Duke’s
contention “that there was no evidence in the record from which the jury could
find that the extent of the injury to the soil and groundwater directly caused by
the leak extended beyond the area of the leak site itself.” J.A., Vol. 2 at 385.
According to Duke, “[e]ven if Plaintiffs’ experts’ testimony was properly
admitted, [Duke] was and is entitled to judgment as a matter of law on the issue
of the extent of the injury to the property because the evidence was not
conflicting,” Aplt. Opening Br. at 24. Alternatively, Duke asks this court to
reverse and remand for a new trial.
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We review de novo the district court’s denial of a Fed. R. Civ. P. 50(b)
motion for judgment as a matter of law (JMOL), “[d]rawing all reasonable
inferences in favor of the nonmoving party.” Wagner v. Live Nation Motor
Sports, Inc., 586 F.3d 1237, 1243-44 (10th Cir. 2009), cert. denied, 130 S. Ct.
2405 (2010). We will reverse the court’s refusal to grant JMOL only “if the
evidence points but one way and is susceptible to no reasonable inferences
supporting the party opposing the motion.” Id. at 1244 (internal quotation marks
omitted). We review for an abuse of discretion the district court’s denial of a
Rule 59 motion for a new trial. See M.D. Mark, Inc. v. Kerr-McGee Corp.,
565 F.3d 753, 762 (10th Cir. 2009). Where, as here, “a new trial motion asserts
that the jury verdict is not supported by the evidence, the verdict must stand
unless it is clearly, decidedly, or overwhelmingly against the weight of the
evidence.” Id. (internal quotation marks omitted). In diversity cases, federal law
governs whether JMOL or a new trial is appropriate, see Wagner, 586 F.3d
at 1244 (JMOL); Blanke, 152 F.3d at 1235-36 (new trial), but the substantive law
of the forum state governs analysis of the underlying claim, see Wagner, 586 F.3d
at 1244 (JMOL); Romero v. Int’l Harvester Co., 979 F.2d 1444, 1449 (10th Cir.
1992) (new trial).
Contrary to Duke’s position, the jury was presented with evidence from
which it could infer that the pipeline leak had affected the value of more than two
acres. Experts testified that polluted material still existed at the initial excavation
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site. Black testified that when polluted material is left in the ground, “[i]t
travels, . . . goes through various type[s] of medias, whether it be soil or water,”
J.A., Vol. 4 at 1177, and can persist for 30 years. He also testified that the
groundwater monitoring wells’ test results indicated that the groundwater was
polluted and was “expanding.” Id. at 1173. In particular, he noted groundwater
samples from a monitoring well not on Valley View’s property but across the
road, which showed that pollution had “migrated” and that the “service area of the
groundwater pollution ha[d] expanded,” which is what “you expect when you
don’t have the source removed and groundwater moves.” Id. at 1163. Another of
the plaintiffs’ experts, Dr. Robert Knox (a groundwater hydrologist), further
testified about the well off of Valley View’s property, stating that its test results
were “a very large concern,” because they indicate “the contamination has moved
off site” by flowing “with the groundwater.” Id. at 1329. He said that without a
proper cleanup the “problem gets worse” because groundwater is moving and
spreading out. Id.
The jury also heard testimony from plaintiff Culpepper that the leak had
affected the entire ranch’s value, reducing the value “by at least half,” id. at 1040,
by making it unattractive to prospective buyers. Plaintiffs’ real estate appraiser
concurred, stating that the property “would not be marketable.” Id. at 1265. On
cross-examination he said that even if the two-acre area were carved out, buyers
would not be interested in land near the polluted site, although he acknowledged
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that if a larger area around the two-acre site were carved out, the remaining
acreage could have a residual value of $210,000 (meaning that the decrease in
value was $260,000). There was evidence that Valley View had sold some
acreage near the leak site (but not on the 470-acre ranch) in 2008 for more than
$1,000 per acre; but the record does not indicate whether the buyers were
informed of the leak.
The jury observed the witnesses, heard the testimony, and reviewed the
parties’ exhibits. Its verdict of $131,500 implies both that it concluded that the
pipeline leak impacted more than two of Valley View’s 470 acres, and that it
rejected contentions that the 470 acres had become worthless or had lost half its
value. Having reviewed the record in light of the applicable deferential standards
of review, we cannot conclude that the evidence “points but one way,” Wagner,
586 F.3d at 1244 (JMOL) (internal quotation marks omitted), or that the verdict
“is clearly, decidedly, or overwhelmingly against the weight of the evidence,”
M.D. Mark, Inc., 565 F.3d at 762 (new trial) (internal quotation marks omitted).
IV. Award of Prejudgment Interest to Mr. Culpepper
The district court granted plaintiffs’ request that Mr. Culpepper be awarded
prejudgment interest under Okla. Stat. tit. 12, § 727. 2 Duke agrees that § 727
applies to this case but contends that Mr. Culpepper cannot be awarded any
2
Unless otherwise noted, all citations to Okla. Stat. tit. 12, §§ 727 and 727.1
are from the Oklahoma Statutes’ 2008 Supplement.
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interest because Oklahoma’s State Treasurer has never certified what the rate of
interest should be. To understand and evaluate Duke’s contention, we must
consider § 727, its successor statute, and what the State Treasurer did, and did
not, certify with respect to interest rates.
Section § 727 is “applicable to all actions . . . filed . . . on or after
January 1, 2000, but before January 1, 2005.” Id. § 727(K). It governs
prejudgment interest in this case because plaintiffs filed suit on
February 25, 2004. Section 727(I) states:
[P]ostjudgment interest and prejudgment interest . . . shall be
determined by using a rate equal to the average United States
Treasury Bill rate of the preceding calendar year as certified to the
Administrative Director of the Courts by the State Treasurer on the
first regular business day in January of each year, plus four
percentage points.
The certification required by the State Treasurer seems simple enough, but a
problem arose when the State Treasurer was given an additional certification duty
under a successor statute to § 727. In 2004 the state legislature enacted
Okla. Stat. tit. 12, § 727.1 (Supp. 2004). Section 727.1 did not repeal § 727 but it
set the rate for prejudgment interest for suits filed “on or after January 1, 2005.”
Okla. Stat. tit. 12, § 727.1(K). Under § 727.1, that rate is:
the prime rate, as listed in the first edition of the Wall Street Journal
published for each calendar year and as certified to the
Administrative Director of the Courts by the State Treasurer on the
first regular business day following publication in January of each
year, plus two percent (2%).
Id. § 727.1(I).
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Unfortunately, the State Treasurer has not found it possible to perform two
certifications for the same year. There is a published interest rate for the year
2004, calculated under § 727(I). See 2004 Notice Re: Interest on Judgments,
available at http://www.oscn.net/applications/oscn/DeliverDocument.asp?Cite
ID=438218. But the published interest rates for the years 2005, 2006, 2007, and
2008, which are listed in the statutory note to § 727, see Okla. Stat. tit. 12, § 727(“NOTICE RE: INTEREST ON JUDGMENTS . . . . Interest rates since the
inception of the law of November 1, 1986, are as follows:”) were apparently
calculated under § 727.1(I). The district court applied the published interest rates
contained in the statutory note to § 727, ruling that “a party otherwise entitled to
prejudgment interest should not be deprived of the same because of the absence of
the . . . certification of interest rates applicable to § 727.” J.A., Vol. 2 at 630.
“[A] federal court sitting in diversity applies state law, not federal law,
regarding the issue of prejudgment interest. Although an award of prejudgment
interest is generally reviewed for abuse of discretion, any statutory interpretation
or legal analysis underlying such an award is reviewed de novo.” AE, Inc. v.
Goodyear Tire & Rubber Co., 576 F.3d 1050, 1055 (10th Cir. 2009) (citation and
internal quotation marks omitted). Further, under Oklahoma law a court’s “goal
in construing statutes is to determine the Legislature’s intent.” Russell v. Chase
Inv. Servs. Corp., 212 P.3d 1178, 1185 (Okla. 2009); see also United States v.
DeGasso, 369 F.3d 1139, 1145 (10th Cir. 2004) (observing that if “the state
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supreme court has not interpreted a provision of the state’s statutory code, the
federal court must predict how the court would interpret the code in light of state
appellate court opinions, decisions from other jurisdictions, statutes, and
treatises” (brackets and internal quotation marks omitted)).
Guided by these standards, we affirm the district court’s award of
prejudgment interest. We cannot agree with Duke that the legislature intended
that a party otherwise entitled to prejudgment interest under § 727 should be
totally deprived of that interest because of a glitch in the procedure for computing
that interest. Would parties be deprived of prejudgment interest under § 727.1 if
the Wall Street Journal ceased publication? The more difficult question is what
interest rate to apply. But Duke has made no argument on that point, so we must
affirm the rate chosen by the district court.
V. Conclusion
For the foregoing reasons, we reject Duke’s appellate arguments and
AFFIRM the amended judgment of the district court.
Entered for the Court
Harris L Hartz
Circuit Judge
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