Brannon Properties, LLC v. Chesapeake Operating, Inc. , 514 F. App'x 459 ( 2013 )

Case: 12-30306 Document: 00512151728 Page: 1 Date Filed: 02/21/2013
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
February 21, 2013
No. 12-30306 Lyle W. Cayce
Clerk
BRANNON PROPERTIES, LLC,
Plaintiff - Appellant
v.
CHESAPEAKE OPERATING, INC.,
Defendant - Appellee
Appeal from the United States District Court
for the Western District of Louisiana
USDC No. 5:11-CV-0071
Before HIGGINBOTHAM, CLEMENT, and HAYNES Circuit Judges.
PER CURIAM:*
This diversity case turns on the interpretation of a Louisiana statute
requiring the operator of an oil or gas well within a drilling unit to provide a
detailed report to the unleased mineral owners. Brannon Properties (“Brannon”)
sued Chesapeake Operating, Inc. (“Chesapeake”), contending that the report
Chesapeake provided it under this statute did not meet the “detailed”
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
Case: 12-30306 Document: 00512151728 Page: 2 Date Filed: 02/21/2013
No. 12-30306
requirement. The district court granted summary judgment to Chesapeake, and
Brannon appeals. We REVERSE and REMAND.
FACTS AND PROCEEDINGS
Under Louisiana law, operators of oil or gas wells within a drilling unit
“shall issue” to owners of land in the unit “a sworn, detailed, [and] itemized
statement . . . contain[ing] the costs of drilling, completing, and equipping the
unit well.” LA. REV. STAT. ANN. § 30:103.1 (emphasis added). If an operator fails
to furnish this report within the time frame specified, the operator “shall forfeit
his right to demand contribution from the owner or owners of the unleased oil
and gas interests for the costs of the drilling operations of the well.” Id. at
§ 30:103.2.
Brannon owns property in Caddo Parish, Louisiana that was unitized by
the Louisiana Office of Conservation. Chesapeake currently operates one
actively producing well in this unit. As an unleased mineral owner, Brannon
requested a report pursuant to § 30:103.1. Chesapeake timely provided a report
consisting of eighteen pages of itemized entries. Each entry gave the date and
amount of the expenditure, as well as whether it was an “Intangible Drilling and
Completion” cost or a “Tangible Drilling and Completion” cost, but no additional
detail. Brannon brought suit against Chesapeake, seeking a court order that
Chesapeake had forfeited its right to demand contribution for the well’s drilling
and operating costs because its report was insufficiently detailed to comply with
the statute.
After a hearing, the district court granted Chesapeake’s motion for
summary judgment, concluding that Chesapeake’s report contained sufficient
detail. In reaching this conclusion, the court noted initially that since “there is
absolutely no case law” on the issue of what is “detailed enough” to meet the
statutory requirement, it was forced to conduct its own interpretation of the
provision. The court first looked to the plain meaning of the text. It determined
2
Case: 12-30306 Document: 00512151728 Page: 3 Date Filed: 02/21/2013
No. 12-30306
that “the plain language and if you use the [Oxford English Dictionary], then
this [report] isn’t, quote, detailed enough.” Nevertheless, it ultimately found
that the report was “detailed enough, because the purpose of the statute is that
you alert these non-participants as to how much it has cost and how long before
you begin drawing your check.” Chesapeake’s report accomplished this purpose.
Thus, in the district court’s opinion, Chesapeake had complied with § 30:103.1.
Brannon appeals.
STANDARD OF REVIEW
We review a grant of summary judgment de novo, applying the same Rule
56 standard as the district court. In re Katrina Canal Breaches Litig., 620 F.3d
455, 459 (5th Cir. 2010). “Summary judgment is warranted where there is no
genuine issue as to any material fact and [] the movant is entitled to judgment
as a matter of law.” Id. (alteration in original) (citation and internal quotation
marks omitted). We review the district court’s interpretation of a statute de
novo. Woodfield v. Bowman, 193 F.3d 354, 358 (5th Cir. 1999).
DISCUSSION
Brannon claims that the district court erred in concluding that
Chesapeake’s initial report was sufficiently detailed to satisfy § 30.103.1. It
contends that, under the plain language of the statute, the report failed to
satisfy any commonly accepted definition of “detailed.” Brannon further argues
that the district court violated the rules of statutory construction when,
notwithstanding the unambiguous text, it went on to consider the purpose of the
statute. Finally, Brannon contends that, even if the district court properly
considered the purpose of the statute, the court misunderstood that purpose and
erred in finding that Chesapeake’s report fulfilled that purpose. We agree.
The district court’s grant of summary judgment was erroneous both
because it looked to the purpose of the statute when the provision’s text was
unambiguous and because the purpose it considered is contravened by the
3
Case: 12-30306 Document: 00512151728 Page: 4 Date Filed: 02/21/2013
No. 12-30306
statutory language. Looking first to the text of § 30.103.1, the district court
determined that, based on the plain language of the law, Chesapeake’s report
was not “detailed.” This conclusion is correct and should have ended the court’s
statutory interpretation.
The district court determined that “if you use the O.E.D.” (Oxford English
Dictionary) definition of “detailed,” the report was not “detailed enough.”1 In
making this determination, the district court implicitly concluded that, on this
point, the statute “is sufficiently unambiguous to foreclose any contention” that
the report provided enough information to meet the statutory requirement of
detail. United States v. 92 Buena Vista Ave., 507 U.S. 111, 123 (1993). Although
the statute does not specify which details a report must contain, that lack of
precision does not necessarily make the provision ambiguous. See State v.
Evans, 38 So. 2d 140, 142-43 (La. 1948) (“The word ‘prospect’ has a well defined
and a common accepted meaning. . . . The same may be said of ‘mechanical
devices’. It would be folly for the Legislature to define words in an act that have
a common accepted meaning. . . . The ordinary man has no difficulty in
understanding what prospecting for oil with mechanical devices means,
especially when these phrases are used in connection with the oil industry. It
is not necessary to state any and every mechanical device that might be used in
the discovery of minerals in the statute.”); see also Hamling v. United States, 418
U.S. 87, 111 (1974) (“That there may be marginal cases in which it is difficult to
determine the side of the line on which a particular fact situation falls is no
sufficient reason to hold the language too ambiguous.”).
Here, the district court determined that, given the commonly-understood,
dictionary definition of “detailed,” the amount of information in Chesapeake’s
report was not reasonably “detailed enough.” See In re La. Health Serv. &
1
Brannon points out that the Oxford English Dictionary defines “detailed” as “abounding in
details, minute, particular, circumstantial.”
4
Case: 12-30306 Document: 00512151728 Page: 5 Date Filed: 02/21/2013
No. 12-30306
Indem. Co., 749 So. 2d 610, 616 (La. 1999) (explaining that a statute is
ambiguous if it is susceptible of two reasonable interpretations). Because the
only details provided by Chesapeake’s report (in addition to the cost) were the
date and whether the expenditure was for tangible or intangible drilling costs,
we agree that the report did not satisfy the plain meaning of “detailed.” An
ordinary man understands what “detailed” means, especially when the term is
used in connection with a report informing the unleased mineral owner of the
“costs of drilling, completing, and equipping the unit well.” See Evans, 38 So. 2d
at 143. It is not necessary to state each detail that must be included in the
report. See id. The statute clearly connects the costs reported to the benefits
received in exchange. The “detailed” requirement, therefore, must mean that
the report has to relate the cost to the benefit: it must tell the unleased mineral
owner what it is getting for its money.
For example, the subsequent quarterly reports in the record that
Chesapeake provided Brannon were detailed because they included, in addition
to a vendor name and invoice number, a description of the service or parts
provided (e.g., “NSTLL VLVS” for $232.50 and “BONNET/SEAL KIT” for
$864.17). Chesapeake’s initial report to Brannon for another oil well satisfies
the statutory requirement for the same reason. It, too, had a shorthand
description of the part provided or service rendered for each itemized
expenditure (e.g., “GATE GUARD” for $2,248.00 and “CALIBRATE CHOKE” for
$120.00). These reports, moreover, show that Chesapeake could and, as a
standard practice, did provide more information to satisfy the statutory
requirement of a “detailed” report.
The district court’s conclusion that the report was insufficiently detailed
under the unambiguous language of § 30.103.1 resolves the case because courts
only look to the purpose of a statute if the language is ambiguous. See LA. CIV.
CODE ANN. art. 9 (“When a law is clear and unambiguous and its application
5
Case: 12-30306 Document: 00512151728 Page: 6 Date Filed: 02/21/2013
No. 12-30306
does not lead to absurd consequences, the law shall be applied as written and no
further interpretation may be made in search of the intent of the legislature.”);
see also LA. CIV. CODE ANN. art. 11 (“The words of a law must be given their
generally prevailing meaning.”); In re La. Health Serv., 749 So. 2d at 615(“[L]egislative intent is not the appropriate starting point for statutory
interpretation. Rather the appropriate starting point is the language of the
statute itself.” (citations omitted)). The district court should have granted
Brannon’s motion for summary judgment based on the statute’s plain language.
It should not have proceeded to examine the report in light of the statute’s
purpose.
Even if it had been proper for the court to consider the purpose of the
statute, the purpose it used in its analysis cannot be correct. To assess the
purpose of the statute, the district court looked to a state appellate court opinion,
which concluded, without citation, that the laws were enacted “to provide a
procedure by which the owner of unleased lands in a drilling or production unit
could have the amount of drilling costs fixed, so that the remaining proceeds of
the sale of production could be released and he could obtain his proportionate
part of those proceeds without too great a delay.” Scurlock Oil Co. v. Getty Oil
Co., 324 So. 2d 870, 876 (La. Ct. App. 1975). But, as the district court noted,
such a purpose would be fulfilled if the report simply contained a lump sum of
the cost of the well. Yet the statute requires that the report be itemized as well
as detailed. The itemization requirement strongly suggests that the Louisiana
legislature intended the statute to do more than simply notify the unleased
mineral owner of the drilling costs. Because we have no evidence before us
about what this additional purpose could have been, it is impossible for us to
determine whether Chesapeake’s report fulfilled that purpose. Thus, the
analysis of the statute’s purpose does not support summary judgment for
Chesapeake.
6
Case: 12-30306 Document: 00512151728 Page: 7 Date Filed: 02/21/2013
No. 12-30306
CONCLUSION
Under the plain language of the statute, Chesapeake’s initial report was
insufficiently detailed to comply with its reporting requirements. Because of
Chesapeake’s failure to provide a report that comports with § 30.103.1, Brannon
need not contribute to the costs of the drilling operations of Chesapeake’s well
for the period covered by the deficient report. REVERSED and REMANDED for
proceedings consistent with this opinion.
7