A. Ballard v. Devon Louisiana Corp. ( 2012 )

REVISED MAY 8, 2012
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
April 19, 2012
No. 10-20497
Lyle W. Cayce
Clerk
A. L. BALLARD,
Plaintiff-Appellant
v.
DEVON ENERGY PRODUCTION COMPANY, L.P.,
Defendant-Appellee
Appeal from the United States District Court
for the Southern District of Texas
Before WIENER, BENAVIDES, and STEWART, Circuit Judges.
WIENER, Circuit Judge:
Plaintiff-Appellant, A. L. Ballard (“Ballard”), successor in interest to Kilroy
Properties, Incorporated (“Kilroy”), sued Defendant-Appellee Devon Energy
Production Company (“Devon”), successor in interest to Wise Oil Company (“Wise
Oil”) for breach of a provision in an American Association of Petroleum Land Men
(“AAPL”) Model Form Operating Agreement (“Operating Agreement”) that was an
exhibit to and incorporated by reference in a May 1971 Farmout Agreement
No. 10-20497
(collectively “Joint Operating Agreement” or “JOA”) between Kilroy and Wise
Oil.1 That agreement memorialized a joint venture for the drilling of shallow oil
wells pursuant to numerous mineral leases assigned in the Farmout Agreement
covering, in the aggregate, almost a quarter million acres in ten Montana
townships.2 Ballard’s lawsuit turns on the interpretation of one sentence in the
multi-paragraph “Area of Mutual Interest” (“AMI”) provision of the Operating
Agreement, which is Exhibit “B” to the Farmout Agreement. In answering
Ballard’s complaint, Devon asserted that the AMI provision had expired
automatically under its own three-year time limit. The district court agreed
with Devon and granted a take-nothing summary judgment against Ballard. We
affirm that summary judgment, albeit for reasons that differ from those of the
district court.
I.
FACTS AND PROCEEDINGS
A. Facts
Ballard’s and Devon’s predecessors signed the JOA on May 31, 1971. As
noted, the JOA contains a Farmout Agreement and several attached exhibits —
one of which is the Operating Agreement — pertaining to drilling on premises
covered by oil and gas leases on described tracts of land in Montana. The contract
documentation was presumably prepared by Devon’s predecessor, Wise Oil, or by
its law firm, employing a model form disseminated by the AAPL. As thus
promulgated, the AAPL printed form Operating Agreement consisted of 31 articles
or sections, the first 30 of which contain substantive provisions, but the last — “31.
Other Conditions, If Any, Are:” — was left completely blank, in anticipation that
1
Ballard’s suit was brought in federal court pursuant to diversity jurisdiction under
28 U.S.C. § 1332. Ballard later sought leave to amend his complaint to add a breach of
fiduciary duty claim, but the district court denied its motion.
2
A regular township comprises 36 sections, each of which is one square mile or 640
acres, thus 230,040 acres covered by ten townships.
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No. 10-20497
the parties using it would supplement the printed agreement by adding their own
provisions in article 31 to express any unique supplemental features of the
negotiated transaction that were not contained in the first 30 sections.
In confecting the instant contract, several of the first 30 of the printed
articles in the Operating Agreement were revised, modified, and, in some
instances, eliminated altogether, by the use of typewritten changes, strike-outs,
and the like. The final article, “31,” was entirely typewritten and contains six
lettered sections (a seventh section — “G.” if in alphabetical order — was
apparently omitted inadvertently and does not affect this case). The sixth of article
31’s lettered sections, designated “F. Area of Mutual Interest:” (hereafter, “31.F”),
consists of five separate or “grammatical” paragraphs.3 The first two comprise
multiple sentences; each of the last three consists of a single sentence. None of
these five paragraphs is lettered or numbered and none has a descriptive title.
31.F designates the AMI as the ten-township area outlined on a map
attached to the Farmout Agreement and identified as “Exhibit ‘E’”. Together, the
first three of 31.F’s grammatical paragraphs define the AMI, state the results of
the acquisition of additional oil and gas leases or mineral interests that lie within
the AMI, and explain what will happen if less than all of the parties should elect
to participate in such a future acquisition. Thus, those first three grammatical
paragraphs of 31.F. provide the effects of any and all such future acquisitions. Of
importance here, these acquisition provisions specify that a party who
subsequently acquires a minimal lease or interest in land lying within the AMI
must give the other parties an opportunity to participate in the interest thus
acquired. Ballard claims that Devon has breached its contract by failing to inform
Ballard about new acquisitions in the AMI.
3
“A distinct division of a written work or composition that expresses some thought or
point relevant to the whole but is complete in itself, and may consist of a single sentence or
several sentences.” (emphasis added) THE AMERICAN HERITAGE DICTIONARY OF THE ENGLISH
LANGUAGE (Houghton Mifflin Co. 1976).
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No. 10-20497
By contrast, the fourth grammatical paragraph of 31.F states what will
happen if “all leases within a township” — of which ten constitute the AMI — are
surrendered or not maintained, either by all of the parties to the JOA or by any
individual party. This fourth grammatical paragraph of 31.F specifies that a party
will lose its future AMI rights as to an entire township if it surrenders or fails to
maintain its lease or leases covering property in that particular township. Thus,
the three initial grammatical paragraphs of 31.F. contain “acquisition” provisions,
but the fourth contains a “surrender” provision.
This action turns on the fifth and final single-sentence paragraph of 31.F
which contains a three-year automatic expiration provision that states:
31. OTHER CONDITIONS, IF ANY, ARE:
.......
F. Area of Mutual Interest:
.......
The above subparagraph of 31F shall be effective from the
date of the Farmout Agreement to which this Operating
Agreement is attached and shall terminate and be of no
further force and effect after three years from the date of this
operating agreement.
It is undisputed that “[t]he above subparagraph of 31 F” expired on May 31, 1974
because the Operating Agreement is dated May 31, 1971. The parties vigorously
dispute, however, just what the phrase “[t]he above subparagraph of 31 F” applies
to, viz., whether it calls for the expiration of the entire subparagraph F. of
paragraph 31 — both its acquisition provisions and its surrender provision — or
only the fourth grammatical paragraph of F., i.e., the surrender provision only.
B. Proceedings
In 2005, Ballard sued Devon in federal court pursuant to diversity
jurisdiction for failing to offer him the opportunity to participate in various recent
oil and gas lease acquisitions in the AMI, as generally required under acquisition
4
No. 10-20497
provisions of 31.F. Ballard insisted that the phrase “[t]he above subparagraph of
31 F” referred only to the surrender provision, i.e., the fourth grammatical
paragraph of 31.F, so that only the surrender provision had expired in 1974, three
years after the agreement was signed. Ballard contended that the rest of 31.F,
being the acquisition provisions, remains in full force and effect.4 He subsequently
moved to amend his complaint to add a claim of breach of fiduciary duty.
Devon countered that the phrase in question, “[t]he above subparagraph of
31 F,” applies to the entirety of 31.F, so that all provisions of 31.F — both
acquisition and surrender — had expired simultaneously on May 31, 1974. In
Devon’s view, the inclusion of the preposition “of” in the phrase was at most a
typographical error—but even if it were not, Devon argued, a plain reading of the
agreement as a whole, and the transaction memorialized in it, shows that the
phrase applies to the entirety of 31.F, not just the surrender provision.
The district court denied Ballard leave to amend and rejected his
interpretation of the AMI provision. The district court concluded, as a matter of
Montana law, that the only practical interpretation of “[t]he above subparagraph
of 31 F” confirms that the preposition “of” was a typographical error and that the
parties unambiguously intended for the three-year limitation to apply to the
entirety of 31.F. The court’s conclusion was based on summary judgment evidence
regarding the purpose of the agreement, the operating history of the parties, and
the multiple affidavits of the attorney who drafted the agreement. The district
court also concluded that because Ballard knew as early as 1976 that the AMI
provision had expired and his delay in bringing the suit prejudiced Devon, the suit
was barred by the doctrine of laches.5
4
Because there are no additional temporal limits with regard to 31.F, as further
discussed below, Ballard’s interpretation would mean that the first three paragraphs or
acquisition provisions of 31.F remains effective ad infinitum.
5
See Ballard v. Devon La. Corp., No. 05-CV-3454, 2010 WL 2521391, at *2–4 (S.D.
Tex. June 22, 2010).
5
No. 10-20497
Finding no genuine dispute of material fact regarding Devon’s liability, the
district court granted summary judgment and entered final judgment for Devon.
Ballard appeals the district court’s denial of his motion to amend the complaint
and summary judgment in favor of Devon.
II.
ANALYSIS
A. Leave to Amend
Whether to grant leave to amend a complaint “is entrusted to the sound
discretion of the district court, and that court’s ruling is reversible only for an
abuse of discretion.”6 “Denial of leave to amend may be warranted for undue delay,
bad faith or dilatory motive on the part of the movant, repeated failure to cure
deficiencies, undue prejudice to the opposing party, or futility of a proposed
amendment.”7
In this case, Ballard filed his first complaint in September 2005 and did not
seek leave to amend until January 2009. In doing so, he sought to add a claim that
Devon owed him a fiduciary or quasi-fiduciary duty under the AMI provision.
Given Ballard’s failure to sufficiently explain his three-year delay in requesting
leave to amend and the claim’s apparent lack of merit, we cannot say that the
district court abused its discretion in denying Ballard leave to amend his complaint
to add such a claim.
B. Summary Judgment
1. Standard of Review
6
Lozano v. Ocwen Fed. Bank, FSB, 489 F.3d 636, 644 (5th Cir. 2007) (citation omitted).
7
United States ex rel. Steury v. Cardinal Health, Inc., 625 F.3d 262, 270 (5th Cir. 2010)
(citation omitted); see also Lozano, 489 F.3d at 644 (“[T]he district court may consider that the
moving party failed to take advantage of earlier opportunities to amend.”).
6
No. 10-20497
We review a district court’s grant of summary judgment de novo, applying
the same legal standards as the district court.8 Summary judgment should be
granted if “there is no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.”9 A genuine issue of material fact exists
when the evidence is such that a reasonable jury could return a verdict for the
non-movant.10 “[A]ll facts and evidence must be taken in the light most favorable
to the non-movant.”11 To avoid summary judgment, however, the non-movant must
go beyond the pleadings and come forward with specific facts indicating a genuine
issue for trial.12 We are “not limited to the district court’s reasons for its grant of
summary judgment” and “may affirm the district court’s summary judgment on
any ground raised below and supported by the record.”13
2. Montana Law and Contract Interpretation
8
United States v. Caremark, Inc., 634 F.3d 808, 814 (5th Cir. 2011).
9
FED. R. CIV. P. 56(c).
10
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248(1986).
11
LeMaire v. La. Dep’t of Transp. & Dev., 480 F.3d 383, 387 (5th Cir. 2007).
12
Piazza's Seafood World, LLC v. Odom, 448 F.3d 744, 752 (5th Cir.2006).
13
Aryain v. Wal-Mart Stores Tex. LP, 534 F.3d 473, 478 (5th Cir. 2008).
7
No. 10-20497
Like the district court before us, we apply Montana law to the parties’
dispute, in accordance with the choice-of-law rules of the forum state, here Texas.14
The parties do not dispute that Montana substantive law applies to this case.
In Montana, a court must interpret a contract “to give effect to the mutual
intention of the parties as it existed at the time of contracting, so far as the same
is ascertainable and lawful.”15 When, as in here, the contract is in writing, “the
intention of the parties is to be ascertained from the writing alone if possible.”16
Moreover, if “[t]he language of a contract is . . . clear and explicit and does not
involve an absurdity,” the language governs the interpretation of the contract.17
Whether an ambiguity exists in a contract is a question of law that must be
determined on an objective basis.18 Contractual language is unambiguous if it is
“reasonably susceptible to only one construction”.19 When that is the case, it is “the
14
In Texas, “[w]hen evaluating choice-of-law issues in contractual disputes, we consider
the facts of the case under the ‘most significant relationship’ test set forth in section 188 of the
Restatement (Second) of Conflicts of Laws.” Minn. Mining & Mfg. Co. v. Nishika Ltd., 953
S.W.2d 733, 735 (Tex. 1997). Under the section 188 test, the court “determine[s] contractual
rights and duties by the law of the state with the most significant relationship to the
transaction and the parties.” Id. “When, as here, the parties have not expressly chosen the
applicable law, we consider . . . contacts” such as the place of contracting, negotiation,
performance, and the location of the contract’s subject matter. Id. All of these factors counsel
for the application of Montana substantive law to this case. See also Ellis v. Trustmark
Builders, Inc., 625 F.3d 222, 225 (5th Cir. 2010) (“When sitting in diversity, we apply the
choice-of-law rules of the forum state . . . to determine which state’s substantive law should
apply.” ).
15
MONT. CODE § 28-3-301.
16
Id. § 28-3-303. See also MONT. CODE § 28-2-905(1) (“Whenever the terms of an
agreement have been reduced to writing by the parties, it is to be considered as containing all
those terms.”).
17
Id. § 28-3-401.
18
Mary J. Baker Revocable Trust v. Cenex Harvest States, Coop., Inc., 164 P.3d 851, 857
(Mont. 2007) (citation omitted).
19
Id. (emphasis added).
8
 No. 10-20497
duty of the court . . . to apply the language as written.”20 Conversely, contractual
language is ambiguous “only if the language is susceptible to at least two
reasonable but conflicting meanings.”21 Only if the contractual language is
determined to be ambiguous must “a factual determination . . . be made as to the
parties’ intent in entering into the contract.”22 Thus, under Montana law, two
sequential questions must be answered to test for ambiguity: First, whether two
or more different meanings or interpretations have been proffered by the opposing
proponents; second, if so, whether at least two of the proffered meanings or
interpretations is “reasonable.”
In determining the meaning of a contract’s language, the court “view[s] the
contract as a whole so as to give effect to every part if reasonably practicable, each
clause helping to interpret the other.”23 The court “will not isolate tracts, clauses,
or words, but rather . . . grasp[s] the instrument by its four corners and in the light
of the entire instrument . . . ascertain the parties’ intent.”24 With these principles
of Montana law in mind, we turn to the contractual language here in dispute.
3. Application
First, we cannot sanction the district court’s approach to construing the AMI
provision. That court relied principally on extrinsic evidence to conclude that the
20
Id.
21
Id. (emphasis added).
22
Id. (internal quotations omitted); see also MONT. CODE § 28-3-306(1) (“If the terms of
a promise are in any respect ambiguous or uncertain, the promise must be interpreted in the
sense in which the promisor believed, at the time of making it, that the promisee understood
it.”).
23
K&R P’p v. City of Whitefish, 189 P.3d 593, 600 (Mont. 2008) (quoting MONT. CODE
§ 28-3-202).
24
Id. (internal quotation marks and citation omitted); see also Sandtana, Inc. v. Wallin
Ranch Co., 80 P.3d 1224, 1229 (Mont. 2003) (stating it “is well established that a court, in
interpreting a written instrument, will not isolate certain phrases of that instrument in order
to garner the intent of the parties”).
9
No. 10-20497
parties’ obligations under that provision had expired. Such an approach is directly
contrary to Montana’s controlling analytical method of contract construction. To
discern the parties’ mutual intent, a court applying Montana law must begin with
the pure language of the contract. Only if the court determines that the contract’s
language is ambiguous may it consider extrinsic evidence to divine the parties’
intent.25 Here, the district court considered extrinsic evidence to determine the
parties’ mutual intent without first considering whether that intent could be
ascertained from the writing alone, as required.26
In our de novo review of Devon’s motion for summary judgment, we begin —
and, in this case, end — with the four corners of the entire JOA, including all
incorporated attachments. When we do so, and ultimately focus on the language
of the fifth grammatical paragraph of 31.F in the context of the contract as a whole,
we conclude that (1) the language is unambiguous, and (2) the three-year
expiration applies to the entirety of 31.F. To be sure, the drafting of the JOA is,
at times, inconsistent and confusing.27 Such drafting notwithstanding, however,
25
See Baker Revocable Trust, 164 P.3d at 866–67 (“[I]f the court determines that an
ambiguity is present in the instrument, then the extrinsic evidence may be introduced at trial
to allow the trier of fact to determine the intent of the parties in entering into the contract.”)
26
It is true that in Montana, a court may consider “objective evidence of ‘the
circumstances under which [the instrument] was made’” for the limited purpose of
“determining, as a preliminary matter, whether the instrument contains an ambiguity.” Baker
Revocable Trust, 164 P.3d at 872 (emphasis added) (quoting MONT. CODE § 1-4-102). But here,
the district court relied on extrinsic evidence to support its conclusion that the contractual
language was unambiguous. This it may not do. See id. at 864 (“If the court determines that
the instrument contains no ambiguity, then the extrinsic evidence may not be considered
further.”) (citation omitted). Similarly, Brewer v. Hawkinson, 221 P.3d 643 (Mont. 2009), is
distinguishable because there the Montana Supreme Court’s concludes that a contract was not
ambiguous but contained a typographical error was made solely “by reference to the plain
language” of the contract. Id. at 647. The district court here erred by impermissibly relying
on extrinsic evidence alone to reach the same conclusion.
27
For example, although the Table of Contents lists each of the 31 articles under the
heading “Paragraph Number,” that is the only place in the entire printed document that the
word “Paragraph” appears —— and the lower-case version, “paragraph,” never appears. In
the printed body of the Operating Agreement, neither the numbers nor the verbal descriptions
10
No. 10-20497
a review of the transaction as documented in the contract leads to only one
reasonable conclusion of the original parties’ intent vis a vis the AMI provision.
As the first step in the test for ambiguity, we review the two conflicting
interpretations proffered by the parties. Ballard contends that the fifth and final
sentence of 31.F applies only to the immediately preceding fourth substantive
paragraph of 31.F., i.e., only to the surrender and release rule of the AMI provision.
Thus, Ballard would read that final sentence of 31.F to mean that only the fourth
subparagraph of the AMI provision terminated and was of no further force and
effect three years after the date of the Operating Agreement, but that the
preceding three paragraphs — the acquisition provisions — continued to be in
effect for the entire duration of the JOA.
By contrast, Devon contends that the final, single sentence, grammatical
paragraph of 31.F applies to the entire AMI provision, i.e., to the three acquisition
paragraphs and the one surrender paragraph, as a result of which the entire AMI
provision — the entirety of subparagraph F of paragraph 31 — expired on its own
terms after three years, i.e., on May 31, 1974. Thus, Devon reads the final
sentence of 31.F to mean that all four substantive paragraphs of the AMI provision
would be of no further force and effect after three years from the initial date of the
Operating Agreement.
Thus, at the completion of the first step of the test for ambiguity, we have
two proffered interpretations. Both are facially plausible from the standpoint of
of the 31 articles are listed at the margins, as might be paragraphs. Rather, they are set out
in all caps in the middle of the page, with no accompanying “outline” words of identification,
i.e., no “Title,” no “Section,” no “Article,” and —— most notably —— no “Paragraph.”
Moreover, every time that one of the 31 articles is referred to within the body of some other
article of the Operating Agreement, it is identified as a “Section,” followed by its numeric
identifier, further eschewing the propriety of referring to them as “paragraphs.” Specifically,
article 10 and article 11 both refer to “Section 12”; article 12 refers to “Section 7”, “Section 25”
and “Section7” [note also that the penultimate grammatical paragraph of article 12 refers to
itself as “This Section 12,” in contrast to typed-in article 31 which refers to itself as “Paragraph
31” and refers to its AMI subsection as “subparagraph 31.F”; article 16 refers to “Section 12”;
and article 17 refers to “Section 23”.
11
No. 10-20497
grammar, syntax, word usage, punctuation, etc., when read in a vacuum or in
isolation. We must therefore proceed to the second step of that test to see if both
proffered interpretations are substantively reasonable when read in the context of
the commercial “oil patch” transaction entered into by the parties. When we do
that, we conclude that only one proffered interpretation objectively conveys the
reasonable intent of the parties in the context of the whole transaction.
As noted at the outset, the 1971 Farmout Agreement and its attached and
incorporated exhibits embody a mineral transaction in which two lessee-companies
that owned oil and gas leases covering almost a quarter million acres in Montana
contributed their leases to form a joint venture with a third company, a drilling
and exploration company. That third company undertook to drill and develop
those leases. The document and its attached and incorporated exhibits show that
the initial phase of that venture contemplated the drilling of twenty wells on
portions of the various leased premises during their primary terms (likely three
years for each lease) and, if successful, the completion of such wells as producers,
thereby extending the leases into their secondary terms by production, i.e., for
their commercially productive lives. The initial phase of the program contemplated
the drilling of 20 wells to the specified depth of approximately 2,500 feet, over the
course of approximately three years.
The several documents that together make up the joint venture contract
identify, by both legal descriptions and a map, hundreds of sections within some
ten townships where the premises of the contributed leases are located.
Importantly, the total geographical area delineated on the AMI map — “Exhibit
‘E’” to the Farmout Agreement — includes, but is more extensive than, the total
acreage covered by all of the contributed oil and gas leases. And, finally, the “F”
portion of the Operating Agreement’s typed-in article 31 describes the legal effects
and the duration of the transaction’s AMI provision, which, like the primary terms
12
No. 10-20497
of the leases and the time contemplated for the drilling of the initial twenty
exploratory wells, is three years.
In combination, the first four paragraphs of 31.F — its substantive
provisions — present two sides of the same AMI coin. Together, the first three
paragraphs address possible acquisitions of new leases on previously unleased
lands within the ten AMI townships. The flip side of the AMI coin is the fourth
and final substantive sub-subparagraph of subparagraph F of paragraph 31. This
single-sentence fourth grammatical paragraph addresses the surrender or release
of the entire surface acreage of any single township from the operation of the AMI
when and if all of the venture’s leases covering portions of that township —
whether originally contributed or subsequently acquired leases — are
“surrendered,” i.e., cease to be retained, either by the entire venture or,
alternatively, by one of the parties to it. Therefore, when 31.F is read in the
context of the JOA as a whole, it becomes apparent that the surrender and
acquisition provisions are meant to balance the benefits and risks to each party of
(1) acquiring new leases and (2) maintaining its interest in such leases by paying
its proportionate rentals.
Albeit facially sensible when read in a vacuum, Ballard’s proffered
interpretation leads to a result that is unreasonable, if not completely absurd,
when read in the context of the entire contract. It simply makes little if any sense
for such a contract to contain an AMI provision under which the acquisition rules
remain in full force and effect ad infinitum, but the surrender rules terminate ipso
facto after a relatively short time — here, three years. The unreasonableness of
such an interpretation is illustrated by the following hypothetical example: During
the first three years of the venture, one (or a few) of the venture’s ten townships
are released from the operation of the AMI by virtue of the surrender or
non-maintenance of all leases covering land in such township or townships. After
the passage of three years, however, all lands within the AMI’s remaining,
13
No. 10-20497
unreleased townships would forever thereafter continue to be (1) subject to the
AMI’s acquisition rules, but (2) not subject to the AMI’s surrender rules, with
which those acquisition provisions are otherwise inextricably intertwined. This
would lead to the absurd — or, at least, anomalous — situation of one party to the
venture being able to (1) lie behind the log at all times after the expiration of three
years; (2) forfeit, by surrender or non-maintenance, its interests in leases in all
theretofore non-surrendered townships; but (3) forever thereafter be entitled to
claim a share of leasehold interests subsequently acquired by another party in any
or all non-surrendered townships. Indeed, this is precisely what Ballard has
attempted to do by bringing the instant action.
Simply stated, without the effect of the surrender provision, little if any
incentive would remain after the first three years, for a party to pay its
proportionate share of lease bonuses or rentals in any given township. Under
Ballard’s interpretation, then, a party could, after the passage of the initial three
years of the venture, surrender or fail to maintain its interest in the leases within
any given township, yet that part of the AMI would nevertheless remain subject
to such surrendering party’s rights to claim participation rights in newly leased
acreage in that very same township for the entire life of the venture — now 40
years and presumably still going. Thus, following the passage of three years, one
party to the venture could, with impunity, fail to pay its proportionate share of
bonuses and rentals on leases within a given township but remain entitled to
cherry-pick its participation in future leases after the fact. This is because, after
the passage of three years, such behavior would no longer terminate that party’s
future entitlement to participate in any and all new leases on any and all lands
located in any and all townships within the AMI that had not been surrendered
and released from the AMI during the first three years of the venture.
This amply demonstrates to our satisfaction that, as a functional matter, the
intent of the parties was to have the acquisition provisions and the surrender
14
No. 10-20497
provision of the JOA’s AMI section remain temporally inseparable and coextensive.
In other words, the continued existence of one does not make sense without the
continued existence of the other; neither does the termination of one make sense
without the termination of the other.28 We decline to credit Ballard’s
interpretation of the last sentence of 31.F as reasonable.
We do, however, credit Devon’s proffered interpretation as reasonable. It
presents a logical application of the JOA’s AMI provisions by ensuring that the
acquisition and surrender provisions coexist and that they terminate
simultaneously. It follows that, because only Devon’s interpretation is reasonable
and Ballard’s is not, only one reasonable reading of the final sentence of 31.F has
been posited; ergo the language in 31.F is not ambiguous. We therefore credit
Devon’s interpretation and hold that the final sentence in 31.F applies to the
entirety of 31.F.29 Accordingly, because the entire AMI provision — including both
its acquisition provisions and its surrender provision — expired before the claims
asserted by Ballard arose, Devon has not breached its contract with Ballard, and
the district court’s summary judgment was proper.
III.
Conclusion
The district court’s take-nothing summary judgment rejecting Ballard’s
claims, and that court’s denial of Ballard’s motion to amend, are, in all respects
AFFIRMED, with all costs assessed against Ballard.
28
We acknowledge that there could be a situation in some other such joint ventures
when the surrender provision of an AMI clause could continue after the acquisition provision
expires, but that is just the opposite of the interpretation advanced here by Ballard.
29
Because we conclude that the contract is unambiguous and affirm the district court’s
summary judgment, we do not reach Devon’s alternative argument that Ballard’s claim is
barred by laches.
15