EP Energy E&P Company, L.P. F/K/A El Paso Production v. Cudd Pressure Control, Inc. ( 2014 )

Affirmed and Memorandum Opinion filed December 23, 2014.
In The
Fourteenth Court of Appeals
NO. 14-13-00734-CV
EP ENERGY E&P COMPANY, L.P. F/K/A EL PASO PRODUCTION,
Appellant
V.
CUDD PRESSURE CONTROL, INC., Appellee
On Appeal from the 270th District Court
Harris County, Texas
Trial Court Cause No. 2013-000617
MEMORANDUM OPINION
Appellant EP Energy E&P Company, L.P., sued appellee Cudd Pressure
Control, Inc., for an alleged breach of a Rule 11 agreement entered into by the
parties in a prior lawsuit. EP Energy contends that the trial court erred in granting
summary judgment in favor of Cudd on EP Energy’s breach of contract claim. We
affirm.
FACTUAL AND PROCEDURAL BACKGROUND
The facts and procedural background leading up to this appeal are well
established in prior opinions. See Sonat Exploration Co. v. Cudd Pressure Control,
Inc., 271 S.W.3d 228 (Tex. 2008); In re Lumbermens Mut. Cas. Co., 184 S.W.3d
718 (Tex. 2006); Sonat Exploration Co. v. Cudd Pressure Control, Inc., 340
S.W.3d 570 (Tex. App.—Texarkana 2011, no pet.); Cudd Pressure Control, Inc. v.
Sonat Exploration Co., 202 S.W.3d 901 (Tex. App.—Texarkana 2006), aff’d, 271
S.W.3d 228 (Tex. 2008). We recount only the facts and procedural background
necessary to place the current dispute in context.
In May 1998, Sonat Exploration Company1 and Cudd signed a Master
Service Agreement to carry out oilfield services for Sonat’s wells. The Master
Service Agreement required the parties to indemnify each other for claims brought
by each company’s employees and also required that Cudd name Sonat as an
additional insured on its insurance policies. In October 1998, a blowout occurred at
one of Sonat’s wells in Louisiana and killed seven workers, including four Cudd
employees. Survivors of Cudd’s employees sued Sonat in Texas2 and Cudd refused
to indemnify Sonat.
Sonat filed a cross-claim in Harrison County against Cudd for indemnity
based on the Master Service Agreement, which later was severed to create a stand-
alone action. Sonat also filed a separate lawsuit against Cudd in Harrison County
for Cudd’s failure to name Sonat as an additional insured on its insurance policies.
1
Sonat, Inc., the parent company of Sonat Exploration Company, later merged with El
Paso Energy Corporation in 1998 and was eventually renamed EP Energy E&P Company, L.P.
This litigation was initiated by Sonat and is now being pursued by EP Energy, the same
company. Any reference to Sonat is a reference to the appellant, EP Energy.
2
Representatives of two Cudd employees sued Sonat in Harris County and
representatives of a third Cudd employee sued Sonat in Harrison County.
2
Sonat settled the underlying personal injury suits brought by the survivors of
Cudd’s employees and pursued its indemnity suit against Cudd in Harrison
County, in which “[o]ne of the issues presented was whether Texas or Louisiana
law applied to the indemnity claim.” In re Lumbermens, 184 S.W.3d at 721. The
parties contended that the issue was “potentially dispositive because under
Louisiana statutory law the MSA’s indemnity provision was void, while under
Texas law it was valid.” Id. The trial court granted partial summary judgment in
favor of Sonat in the indemnity suit; it held that “Texas law applied and Sonat was
entitled to indemnity for the damages it had paid to settle the Cudd employees’
lawsuits.” Id. “The case went to trial on damages only, and the jury returned a
$20.7 million verdict in Sonat’s favor upon which the trial court rendered
judgment” in conformity with the verdict. Id.
Cudd appealed to the Texarkana Court of Appeals and the parties entered
into a Rule 11 agreement. The Rule 11 agreement between Sonat and Cudd stated,
in relevant part, as follows:
In the [indemnity suit], Cudd will not appeal the trial court’s ruling
that Texas law applies to the Master Service Agreement between
Cudd and Sonat/El Paso and, in the event of remand, will not contend
that any other state’s laws apply to the MSA (nor will it so advocate in
any other lawsuit between Sonat and Cudd arising out of the October
24, 1998 blowout); and
Sonat/El Paso agree to dismiss, with prejudice, all breach of contract
claims against Cudd (except the failure to defend/indemnify claims
currently pending in [the indemnity suit]), in all actions (including No.
00-0775-1) and will not bring any such claims in the future against
Cudd arising out of the October 24, 1998 blowout.
Following the Rule 11 agreement, Cudd refrained from arguing the choice-of-law
issue on appeal. Sonat dismissed its separate Harrison County lawsuit predicated
on Cudd’s failure to name Sonat as an additional insured.
3
Choice of law nonetheless was litigated on appeal because Cudd’s insurer,
Lumbermens Mutual Casualty Company, intervened in the appeal and argued that
Louisiana law applied to the Master Service Agreement. The Texas Supreme Court
granted Lumbermens’ writ of mandamus and allowed the intervention, holding that
Lumbermens could raise the choice-of-law issue through the doctrine of virtual
representation. Id. at 729. At this point, only Lumbermens was advocating for
Louisiana law while Cudd remained silent on the issue.
After Lumbermens intervened in the indemnity case on appeal, the
Texarkana Court of Appeals reversed the trial court’s judgment in favor of Sonat
and held that Louisiana law applied to the Master Service Agreement. Cudd
Pressure Control, Inc., 202 S.W.3d at 911. The Texas Supreme Court affirmed the
holding that Louisiana law applied, and remanded to the district court in Harrison
County “for further proceedings applying Louisiana law.” Sonat Exploration, 271
S.W.3d at 238. In so doing, the Texas Supreme Court specifically referenced the
Louisiana Oilfield Anti-Indemnity Act (“the Act”). Id. The parties agree that the
Act, if applicable, makes the Master Service Agreement’s indemnity provision
unenforceable. Id.; see La. Rev. Stat. § 9:2780. In determining whether to render
judgment in favor of Cudd on appeal or instead to remand for further trial court
proceedings, the Texas Supreme Court stated that the Act would apply to foreclose
Sonat’s indemnity claim only if Sonat was found to be negligent or strictly liable—
an issue that had not yet been determined. Sonat Exploration, 271 S.W.3d at 238.
Accordingly, the supreme court remanded for further trial court proceedings. Id.
When the case was remanded to the district court in Harrison County, Cudd
filed a motion for summary judgment arguing that the Act would render the Master
Service Agreement’s indemnity provision unenforceable if Sonat was found to be
at fault for the fatal blowout.
4
Cudd then filed a third amended answer which included two new affirmative
defenses. The first affirmative defense stated that “Cudd pleads the effects of the
applicable oilfield anti-indemnity statute as determined by the Texas Supreme
Court.” The second affirmative defense also cited Louisiana law. For the purposes
of that lawsuit, Sonat filed a stipulation in the trial court that it did bear some fault
relating to the well blowout.
After this stipulation of fault, the district court in Harrison County applied
the Act to the Master Service Agreement and granted Cudd’s motion for summary
judgment. The Texarkana Court of Appeals affirmed the trial court’s judgment,
holding that Cudd raised the Act as an affirmative defense and did not waive the
defense. Sonat Exploration, 340 S.W.3d at 577.
EP Energy then sued Cudd for breach of contract in Harris County.
According to EP Energy’s allegations, Cudd breached its Rule 11 agreement to
refrain from contending that “any other state’s laws apply to the MSA” when Cudd
added affirmative defenses in its third amended answer in the Harrison County
indemnity suit. Both parties moved for summary judgment. The trial court granted
Cudd’s traditional motion for summary judgment and denied EP Energy’s cross-
motion for summary judgment; in so doing, the trial court determined that Cudd
had not breached the Rule 11 agreement. EP Energy now challenges this
determination in the present appeal.
STANDARD OF REVIEW
We review a trial court’s grant of summary judgment de novo. NuStar
Energy, L.P. v. Diamond Offshore Co., 402 S.W.3d 461, 465 (Tex. App.—Houston
[14th Dist.] 2013, no pet.). The movant for a traditional summary judgment bears
the burden of showing that there is no genuine issue of material fact and that it is
entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c). When both sides
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move for summary judgment and the trial court grants one motion and denies the
other, reviewing courts consider both sides’ summary judgment evidence,
determine all questions presented, and render the judgment the trial court should
have rendered. Gilbert Tex. Constr., L.P. v. Underwriters at Lloyd’s London, 327
S.W.3d 118, 124 (Tex. 2010).
ANALYSIS OF APPELLANT’S ISSUE
In its sole issue on appeal, EP Energy contends that the trial court erred in
granting summary judgment in favor of Cudd and denying EP Energy’s cross-
motion for summary judgment because Cudd’s litigation conduct breached the
Rule 11 agreement with respect to choice of law.
A party may seek to enforce a Rule 11 agreement under contract law.
ExxonMobil Corp. v. Valence Operating Co., 174 S.W.3d 303, 309 (Tex. App.—
Houston [1st Dist.] 2005, pet. denied). To prevail on a breach of contract claim, a
party must show: (1) the existence of a valid contract; (2) that the plaintiff
performed or tendered performance; (3) that the defendant breached the contract;
and (4) that the plaintiff was damaged as a result of the breach. Frost Nat’l Bank v.
Burge, 29 S.W.3d 580, 593 (Tex. App.—Houston [14th Dist.] 2000, no pet.). A
breach of contract occurs when a party fails or refuses to do something he has
promised to do. Mays v. Pierce, 203 S.W.3d 564, 575 (Tex. App.—Houston [14th
Dist.] 2006, pet. denied).
It is undisputed that the parties entered into a valid Rule 11 agreement. Rule
11 agreements are “contracts relating to litigation.” Trudy’s Tex. Star, Inc. v. City
of Austin, 307 S.W.3d 894, 914 (Tex. App.—Austin 2010, no pet.). The parties
signed this agreement and filed it with the district court in Harrison County. It is
also undisputed that EP Energy performed under this agreement by dismissing its
separate breach of contract suit against Cudd predicated on Cudd’s failure to name
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Sonat as an additional insured on Cudd’s insurance policies. Therefore, the only
issues to be decided are whether Cudd breached the Rule 11 agreement, and if so,
whether EP Energy was damaged as a result of the breach. For purposes of this
appeal, we assume Cudd breached the Rule 11 agreement by pleading affirmative
defenses referencing Louisiana law.
To recover damages for a breach of contract, a plaintiff must show it
suffered a pecuniary loss as a result of the breach. S. Elec. Servs., Inc. v. City of
Houston, 355 S.W.3d 319, 324 (Tex. App.—Houston [1st Dist.] 2011, pet. denied).
Actual damages must be the “natural, probable, and foreseeable consequence of the
defendant’s conduct.” Mead v. Johnson Group, Inc., 615 S.W.2d 685, 687 (Tex.
1981). A plaintiff may not recover damages if they are remote, contingent,
speculative, or conjectural. S. Elec. Servs., Inc., 355 S.W.3d at 324. Therefore, the
lack of a causal connection between the breach of contract and damages will
preclude recovery. Clearview Props., L.P. v. Prop. Tex. SC One Corp., 287 S.W.3d
132, 139–40 (Tex. App.—Houston [14th Dist.] 2009, pet. denied) (holding that
plaintiff’s actions caused its damages, rather than the defendant’s actions).
EP Energy asserts that it suffered damages in the amount of $20,719,166.74
as a result of Cudd pleading the Act as an affirmative defense in the Harrison
County suit. EP Energy alleges that by pleading the Act on remand, Cudd breached
the express terms of the Rule 11 agreement. According to EP Energy, if Cudd did
not plead the Act as an affirmative defense, then Cudd would have waived the
defense and the court would have granted EP Energy’s summary judgment as a
matter of law because its indemnity agreement with Cudd would have been
enforceable. EP Energy argues that, as a result, it suffered damages of
$20,719,166.74, the amount awarded by the jury in 2001 for Cudd’s failure to
indemnify EP Energy.
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In response, Cudd argues that there is no causal connection between its
alleged breach and EP Energy’s claimed damages because the Harrison County
district court was obligated to apply the Act in accordance with the Texas Supreme
Court’s decision in Sonat Exploration. Thus, according to Cudd, pleading the Act
as an affirmative defense did not cause the district court in Harrison County to
deny EP Energy’s motion for summary judgment. We agree with Cudd.
In granting Cudd’s motion for summary judgment in the indemnity suit, the
Harrison County district court stated: “In said Remand the Texas Supreme Court
directed this court to conduct ‘. . . [further] proceeding[s] applying Louisiana
Law.’” The Louisiana law referenced in the Texas Supreme Court’s decision was
the Act. See Sonat Exploration, 271 S.W.3d at 238. The Harrison County district
court then applied the Act and concluded that the Master Service Agreement’s
indemnity provision was invalid because EP Energy stipulated to its own fault. The
district court’s judgment expressly stated that it was applying the Act in
accordance with the Texas Supreme Court’s decision in Sonat Exploration.3
The Texas Supreme Court’s ruling on the application of the Act became the
law of the case; therefore, the Harrison County district court was required to apply
the Louisiana statute to the Master Service Agreement if it found EP Energy was at
fault. The “law of the case” doctrine provides that questions of law decided on
appeal to a court of last resort will govern the case throughout its subsequent
3
It is also important to note that throughout all stages of this litigation, every court that
has examined the choice-of-law issue was fully aware of the existence of the Rule 11 agreement.
These courts have considered the choice-of-law issue raised by Lumbermens, despite knowing
that the Rule 11 agreement prevented Cudd from pleading it on appeal or remand. See Sonat
Exploration, 271 S.W.3d at 237 (“We understand Sonat’s complaint that it is unfair to let Cudd
escape the burden of its Rule 11 agreement while Sonat cannot. . . . In some circumstances, such
agreements are against public policy and unenforceable.”); In re Lumbermens, 184 S.W.3d at
728 (allowing Lumbermens to raise the choice-of-law issue because the Rule 11 agreement may
have allowed Cudd to “foist[] liability for uninsured claims onto its insurer”).
8
stages. Hudson v. Wakefield, 711 S.W.2d 628, 630 (Tex. 1986). The law of the
case doctrine only applies to questions of law and not questions of fact. Id. When
the Texas Supreme Court remands a case and limits a subsequent trial to a
particular issue, the trial court is restricted to a determination of that particular
issue. Id. A reviewing court may not again decide any matter that was in effect
disposed of on a former appeal or mandamus to that court. City of Dallas v.
Cornerstone Bank, N.A., 879 S.W.2d 264, 268 (Tex. App.—Dallas 1994, no writ).
EP Energy contends that the Texas Supreme Court mandated only that the
district court in Harrison County apply Louisiana law, rather than the Act.
Accordingly, EP Energy argues that if Cudd did not plead the Act as an affirmative
defense, the district court would have not considered the Act, and would have held
that the indemnity provision of the Master Service Agreement was enforceable
under Louisiana law. In response, Cudd asserts that under the law of the case
doctrine, the district court in Harrison County was required to apply the Act as
raised by Lumbermens and mandated by the Texas Supreme Court, whether or not
Cudd pleaded it as an affirmative defense.
In interpreting the mandate of an appellate court, the court should look not
only to the mandate itself, but also to the opinion of the court. Hudson, 711 S.W.2d
at 630. In determining whether Louisiana or Texas law would apply to the Master
Service Agreement, the Texas Supreme Court cited only one indemnity-related
Louisiana law in its opinion, the Act. Sonat Exploration, 271 S.W.3d at 238; see
also La. Rev. Stat. § 9:2780(B).4 The court specifically held that the Act would
only apply if EP Energy was negligent or strictly liable, a finding that had not been
4
The Texarkana Court of Appeals also recognized that the Act was the only anti-
indemnity statute cited by the Texas Supreme Court. See Sonat Exploration, 340 S.W.3d at 577
(“There can be no question that the only anti-indemnity statute referenced by the Texas Supreme
Court is the LOAIA, La. Rev. Stat. 9:2780.”) (emphasis added).
9
made at that point but that EP Energy later supplied by stipulation. Sonat
Exploration, 271 S.W.3d at 238 (“[N]either the trial court nor the jury found Sonat
negligent or strictly liable, and without such a finding the plain terms of
Louisiana’s law do not appear to apply.”). The court then quoted the Act in its
entirety and remanded the case for “further proceedings applying Louisiana law.”
Id. Thus, the opinion reflects that the Act would invalidate the Master Service
Agreement, but only if EP Energy was at fault. The court’s mandate stated that the
case was “remanded to the trial court for further proceedings consistent with this
Court’s opinion.”
When viewing both the opinion and the mandate, it is clear that the Texas
Supreme Court remanded the case with instructions to apply the Act, not merely
Louisiana law in general, if the trial court found that EP Energy was negligent or
strictly liable. See Int’l Fid. Ins. Co. v. State, No. 14-98-00324-CR, 2000 WL
729384, at *1 (Tex. App.—Houston [14th Dist.] June 8, 2000, pet. ref’d) (not
designated for publication) (“The [law of the case] doctrine applies to implicit
holdings, i.e., conclusions that are logically necessary implications of positions
articulated by the court, as well as explicit ones.”). Although the court’s mandate
did not explicitly direct the trial court to apply the Act, it is implicit from the
court’s opinion. The only issue left to be determined by the district court upon
remand was whether EP Energy was negligent or strictly liable. See Lifshutz v.
Lifshutz, 199 S.W.3d 9, 20 (Tex. App.—San Antonio 2006, pet. denied) (holding
that “the alter ego finding on remand was precluded by the law of the case and the
scope of the remand”). The legal question of which law applied to the Master
Service Agreement was fully litigated by the parties and determined by the Texas
Supreme Court in Sonat Exploration. Thus, the law of the case doctrine prohibited
re-litigation of this issue on remand, and the trial court did not have discretion to
10
refuse to apply the Act once EP Energy stipulated to its fault. See Lee v. Downey,
842 S.W.2d 646, 648 (Tex. 1992) (holding that the trial court abuses its discretion
if it declines to follow the mandate of the Texas Supreme Court); City of Mission v.
Cantu, 89 S.W.3d 795, 809 n.21 (Tex. App.—Corpus Christi 2002, no pet.) (“[W]e
are bound to follow the expression of the law as stated by the Texas Supreme
Court.”).
Further, we recognize that the law of the case doctrine does not apply if (1)
the earlier holding is clearly erroneous, or (2) the later stage of litigation presents
different parties, different issues, or more fully developed facts. See Briscoe v.
Goodmark Corp., 102 S.W.3d 714, 716−17 (Tex. 2003); see also Hudson, 711
S.W.2d at 630. However, these exceptions do not apply here because no party
asserts that the court’s holding in Sonat Exploration was erroneous, and the issue
upon remand remained the same. See Hudson, 711 S.W.2d at 630 (“[T]he doctrine
does not necessarily apply when either the issues or the facts presented at
successive appeals are not substantially the same as those involved on the first
trial.”).
When the case was remanded to the district court in Harrison County, the
parties remained the same, the issues remained the same, and the facts did not
substantially change. Although Cudd amended its pleadings to add the Act as an
affirmative defense, this did not substantially change the issue before the court
because the Texas Supreme Court had already determined that the Master Service
Agreement would be unenforceable under the Act if EP Energy was negligent or
strictly liable. See id. (holding that when a party amends its pleadings, it may be
that the issues or facts have sufficiently changed so that the law of the case no
longer applies). Even if Cudd waived the Act as an affirmative defense, the law of
the case provided that the district court was required to apply the Act if it found
11
that EP Energy was negligent or strictly liable. Therefore, because the Texas
Supreme Court mandated that the district court in Harrison County apply the Act,
Cudd’s pleading the Act did not cause EP Energy to suffer damages of
$20,719,166.74, the amount awarded by the jury in 2001 for Cudd’s failure to
indemnify EP Energy.
We also note that the policy behind the law of the case doctrine supports
holding that the district court was required to apply the Act. The doctrine operates
to narrow the issues in successive stages of litigation and to achieve uniformity of
decisions and judicial economy. Id. The doctrine is based on public policy and is
aimed at putting an end to litigation. Id.; Barrows v. Ezer, 624 S.W.2d 613, 617
(Tex. Civ. App.—Houston [14th Dist.] 1981, no writ). In applying the Act, the
district court stated that “this matter has arrived before the Court following a
lengthy odyssey through the Texas Appellate Courts System; with the last stop and
direction in the odyssey being a Remand to this Court from the Supreme Court of
Texas.” Accepting EP Energy’s argument that the district court could apply
anything other than the Act would frustrate the public policy behind the law of the
case doctrine.
EP Energy further argues that the law of the case doctrine should not apply
because Cudd already had breached the Rule 11 agreement prior to the Texas
Supreme Court’s decision in Sonat Exploration. EP Energy asserts that Cudd’s
first amended answer was the active pleading before the Texas Supreme Court and
it pleaded the Act as an affirmative defense. However, this argument was already
addressed by the Texarkana Court of Appeals, which held that Cudd did not violate
the Rule 11 agreement because “counsel scrupulously avoided even the barest
mention of the choice-of-law issue.” Cudd Pressure Control, Inc., 202 S.W.3d at
911. The court held that only Lumbermens raised the choice-of-law issue because
12
the Texas Supreme Court allowed them to do so. Id.
EP Energy also asserts that Cudd should be collaterally estopped from
claiming that it did not breach the Rule 11 agreement. Collateral estoppel issues
concern only whether (1) the facts sought to be litigated in the second action were
fully and fairly litigated in the first action, and (2) those facts were essential to the
judgment in the first action. Johnson & Higgins of Tex., Inc. v. Kenneco Energy,
Inc., 962 S.W.2d 507, 519 (Tex. 1998). However, we need not make this
determination here because collateral estoppel applies to fact issues and choice of
law is a question of law. See Jenkins v. Entergy Corp., 187 S.W.3d 785, 807 n.21
(Tex. App.—Corpus Christi 2006, pet. denied).
We overrule EP Energy’s issue regarding its breach of contract claim.
CONCLUSION
We hold that the trial court did not err by granting Cudd’s motion for
summary judgment and denying EP Energy’s cross-motion, and we affirm the
judgment of the trial court.
/s/ Ken Wise
Justice
Panel consists of Justices Boyce, Busby, and Wise.
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