Wildcat Drilling, L.L.C. v. Discovery Oil & Gas, L.L.C.

[Cite as Wildcat Drilling, L.L.C. v. Discovery Oil & Gas, L.L.C., 2018-Ohio-4015.]
IN THE COURT OF APPEALS OF OHIO
SEVENTH APPELLATE DISTRICT
MAHONING COUNTY
WILDCAT DRILLING, LLC,
Plaintiff-Appellee/Cross-Appellant,
v.
DISCOVERY OIL AND GAS, LLC,
Defendant-Appellant/Cross-Appellee.
OPINION AND JUDGMENT ENTRY
Case No. 17 MA 0018
Civil Appeal from the
Court of Common Pleas of Mahoning County, Ohio
Case No. 15 CV 1959
BEFORE:
Gene Donofrio, Carol Ann Robb, Kathleen Bartlett, Judges.
JUDGMENT:
Affirmed in part and Reversed in part.
Atty. Molly Johnson, Johnson & Johnson Law Firm, 12 West Main Street, Canfield, Ohio
44406, for Plaintiff-Appellee/Cross Appellant, and
Atty. David Detec and Atty. Thomas Hull II, Manchester Newman & Bennett, LPA,
Atrium Level Two, The Commerce Building, 201 East Commerce Street, Youngstown,
Ohio 44503, for Defendant-Appellant/Cross-Appellee.
–2–
Dated:
September 28, 2018
Donofrio, J.
{¶1} Defendant-appellant/cross-appellee, Discovery Oil and Gas, LLC,
(Discovery) appeals the judgment of the Mahoning County Common Pleas Court
granting summary judgment on a breach of contract claim by plaintiff-appellee/cross-
appellant Wildcat Drilling, LLC, (Wildcat). Wildcat appeals the trial court’s award of
damages.
{¶2} On December 19, 2014, Discovery and Wildcat entered into a contract.
Discovery hired Wildcat to drill the J. Klick #2 well (the well) in Stark County, Ohio. In
return, Discovery agreed to pay Wildcat $13.85 per foot drilled and $11,000.00 per day
of work on the well. The drilling was to commence on December 31, 2014. Pursuant to
the contract, Discovery was required to pay any invoices submitted by Wildcat within ten
days. If Discovery disputed any item on any invoice, it was required to notify Wildcat
about the dispute within five days of receiving the invoice. In addition, the contract
specified that Discovery was required to timely pay any undisputed portion of the
invoice.
{¶3} The contract contained multiple indemnification clauses. One such
clause, section 17.9.1 of the contract, provides:
[Wildcat] shall assume full responsibility for and shall defend, indemnify,
and hold [Discovery] and its joint owners harmless from and against any
loss, damage, expense, claim, fine and penalty, demand, or liability for
pollution or contamination, including control and removal thereof, that
originates on or above the surface of the land or water from spills, leaks,
or discharges of motor fuels, lubricants, and oils; pipe dope; paints and
solvents; ballast, bilge, sludge, and garbage; and other liquids or solids in
possession and control of [Wildcat]. These obligations are assumed
without regard to the negligence of any party or parties.
Complaint Exhibit A.
Case No. 17 MA 0018
–3–
{¶4} Wildcat completed drilling the well. On February 13, 2015, Wildcat sent
Discovery an invoice for the drilling services provided. The invoice charged Discovery
$190,350.37. At no point did Discovery pay any portion of the invoice amount.
{¶5} The reason Discovery did not pay was because it was fined by the Ohio
Department of Natural Resources (ODNR) for Wildcat’s drilling practices. On January 7,
2015, an inspector from the ODNR was on the site where Wildcat was drilling the well.
The inspector tested the water on the well site and determined that Wildcat was illegally
using brine water in its drilling operation. Discovery was fined by the ODNR for Wildcat’s
supposed use of brine water while drilling the surface casing. The ODNR issued a
compliance notice to Discovery and Discovery paid $50,000.00 in fines for the brine
water issue. Discovery paid the ODNR in March of 2015.
{¶6} After Discovery paid the ODNR fine, Discovery requested that Wildcat
indemnify it fully for the fine. Wildcat refused. In return, Discovery refused to pay any
portion of the invoice until Wildcat agreed to fully indemnify it for the ODNR fine.
{¶7} Wildcat brought an action against Discovery asserting a breach of contract
claim. Wildcat’s claim is based on the fact that Discovery never timely paid the invoice.
Discovery filed a counterclaim asserting breach of contract and a claim for civil liability
for criminal conduct. Discovery’s breach of contract claim was based on the fact that
Wildcat refused to indemnify Discovery for the ODNR fine. Discovery’s civil liability for
criminal conduct claim stemmed from Wildcat’s usage of brine water while drilling the
surface casing of the well.
{¶8} After discovery was completed, Discovery filed a motion for partial
summary judgment and Wildcat filed a motion for summary judgment. Discovery’s
motion sought summary judgment on liability only and requested a separate hearing on
damages. Discovery argued that Wildcat breached the contract by using brine water
during its drilling process, which is a crime under Ohio law. Discovery also argued that
Wildcat breached the contract when it failed to later indemnify Discovery pursuant to
section 17.9.1 for the fine Discovery paid to the ODNR.
{¶9} Wildcat’s motion argued that Discovery breached the contract when it did
not timely pay or timely dispute any portion of the invoice. Wildcat also argued that it
was unaware of any fine issued by the ODNR for its practices and should not be
Case No. 17 MA 0018
–4–
required to indemnify Discovery for a fine based on an alleged offense that Wildcat
could not challenge or defend against.
{¶10} The trial court granted both parties’ motions for summary judgment finding
that both parties were in breach of the contract. The trial court found that Discovery was
in breach for not timely paying the invoice and Wildcat was in breach for not
indemnifying Discovery for the ODNR fine. The trial court ordered Discovery to pay
Wildcat $190,350.37 less the $50,000.00 fine and expenses of $14,150.09 that
Discovery incurred as a result of the fine. This came to a total of $126,200.28 that
Discovery was to pay Wildcat. The trial court also ordered Discovery to pay
prejudgment interest starting from February 23, 2015. Discovery timely filed this appeal
on February 6, 2017. Wildcat cross appealed. Discovery now raises four assignments
of error.
{¶11} Discovery’s first assignment of error states:
THE TRIAL COURT ERRED IN AWARDING WILDCAT
PREJUDGMENT INTEREST.
{¶12} Discovery makes three arguments pertaining to this assignment of error.
First, Discovery argues that prejudgment interest was inappropriate due to a good faith
dispute regarding the indemnification issue. Second, Discovery argues that Wildcat is
not entitled to prejudgment interest because it is not an “aggrieved party” under R.C.
1347.03. Third, Discovery argues, in the alternative, that the trial court’s award of 18%
prejudgment interest is inappropriate.
{¶13} An appellate court reviews a trial court’s summary judgment decision de
novo, applying the same standard used by the trial court. Ohio Govt. Risk Mgt. Plan v.
Harrison, 115 Ohio St.3d 241, 2007-Ohio-4948, 874 N.E.2d 1155, ¶ 5. A motion for
summary judgment is properly granted if the court, upon viewing the evidence in a light
most favorable to the nonmoving party, determines that: (1) there are no genuine
issues as to any material facts; (2) the movant is entitled to judgment as a matter of
law, and (3) the evidence is such that reasonable minds can come to but one
conclusion and that conclusion is adverse to the opposing party. Civ. R. 56(C); Byrd v.
Smith, 110 Ohio St. 3d 24, 2006-Ohio-3455, 850 N.E.2d 47, ¶ 10.
Case No. 17 MA 0018
–5–
{¶14} “[T]he moving party bears the initial responsibility of informing the trial
court of the basis for the motion, and identifying those portions of the record which
demonstrate the absence of a genuine issue of fact on a material element of the
nonmoving party’s claim.” Dresher v. Burt, 75 Ohio St.3d 280, 296, 662 N.E.2d 264(1996). The trial court’s decision must be based upon “the pleadings, depositions,
answers to interrogatories, written admissions, affidavits, transcripts of evidence and
written stipulations of fact, if any, timely filed in the action.” Civ.R. 56(C). The
nonmoving party has the reciprocal burden of specificity and cannot rest on the mere
allegations or denials in the pleadings. Id. at 293.
{¶15} In Dresher, the Ohio Supreme Court held that a party who moves for
summary judgment need not support its motion with affidavits provided that the party
does not bear the burden of proof on the issues contained in the motion. Dresher at
277. Further, there is no requirement in Civ.R 56 that any party submit affidavits to
support a motion for summary judgment. See, e.g., Civ.R. 56(A) and (B). Id. However,
there is a requirement that a moving party, in support of a summary judgment motion,
specifically point to something in the record that comports with the evidentiary materials
set forth in Civ.R. 56(C). Id.
{¶16} Summary judgment is appropriate when there is no genuine issue as to
any material fact. A “material fact” depends on the substantive law of the claim being
litigated. Hoyt, Inc. v. Gordon & Assoc., Inc., 104 Ohio App.3d, 598, 603, 662 N.E.2d
1088 (8th Dist. 1995), citing Anderson v. Liberty Lobby, Inc. 477 U.S. 242, 247-248, 106
S.Ct. 2505, 91 L.Ed.2d 202 (1986).
{¶17} Analyzing Discovery’s good faith dispute argument, Discovery relies on
Dickerson v. Thompson, 89 Ohio App.3d 399, 624 N.E.2d 784 (8th Dist.1993). In
Dickerson, the Eighth District held that an award of prejudgment interest is not
appropriate where “liability was in dispute and the amount of potential liability was not
readily ascertainable because allowance of a setoff was disputed by the parties.” Id. at
405. Discovery argues that this entire litigation concerns whether Discovery was entitled
to indemnification and a setoff against Wildcat’s invoice.
{¶18} In response, Wildcat cites article 5 of the contract. Article 5 states, in
relevant part:
Case No. 17 MA 0018
–6–
[Discovery] shall pay all invoices within ten (10) days after the receiving of
an invoice. If [Discovery] disputes an invoice or any part thereof,
[Discovery] shall, within five days of receiving an invoice, notify [Wildcat] of
the disputed item, specifying the reason therefore, and payment of the
disputed item may be withheld until resolution of the dispute. But timely
payment shall be made on the undisputed portion of all invoices. Any
sums * * * not paid within the above specified time shall bear interest at
the rate of 18 percent per annum, or the maximum legal rate, whichever is
higher, from the date due until paid.
Complaint, Exhibit A.
{¶19} Wildcat argues that the interest the trial court ordered Discovery to pay
was the interest that was stated in the contract, 18 percent per annum.
{¶20} R.C. 1343.03(A) provides when money becomes due and payable upon,
among other items, “other instrument of writing,” the creditor is entitled to the federal
short term rate of interest unless a contract provides for a different rate of interest. If a
contract does specify a rate of interest, the creditor is entitled to the rate of interest
expressed in the contract. The contract states that Wildcat was entitled to 18 percent
interest per annum on any balance that was not timely paid. Because of the interest
provision in the contract, appellant’s first argument lacks merit.
{¶21} Addressing Discovery’s aggrieved party argument, Discovery argues that
because Wildcat breached the contract first by not indemnifying Discovery for the
ODNR fine, Wildcat is not an “aggrieved party” entitled to prejudgment interest.
Discovery relies on two cases for this argument.
{¶22} The first case is the Eleventh District’s decision in Gray v. Petronelli, 11th
Dist. No. 2016-T-0030, 2017-Ohio-2601. In Gray, Petronelli was a contractor hired to
perform construction work for the Grays. Id. at ¶ 2-3. The Grays terminated Petronelli
from the job due to Petronelli’s deviations from the construction plans. Id. at ¶ 4-6. After
a trial, the trial court awarded Petronelli $6,323.08. Id. at ¶ 14.
{¶23} Petronelli appealed arguing, among other things, that he was entitled to
prejudgment interest. Id. at ¶ 51-53. The Eleventh District held that because Petronelli
Case No. 17 MA 0018
–7–
breached the contract, Petronelli was not entitled to prejudgment interest and was only
entitled to the quantum meruit amount the trial court ordered. Id. at ¶ 56-57. But the
contracts in this case do not include anything about interest on unpaid sums.
{¶24} The second case is Protek, Ltd. v. Lake Erie Screw Corporation, 5th Dist.
No. 2005CA00018, 2005-Ohio-5958. In Protek, the Fifth District held that a
manufacturer was not entitled to prejudgment interest pursuant to R.C. 1343.03 where
the manufacturer materially breached the contract. Id. at ¶ 172-175. But this case does
not involve a contract which provides for interest on unpaid sums.
{¶25} Interest rates that are a part of a contract, even if the interest rate is above
what is specified in R.C. 1343.03, have been upheld. See Ohio Valley Mall Co. v.
Fashion Gallery, Inc., 129 Ohio App.3d 700, 719 N.E.2d 8 (7th Dist.1998), see also
Ohio Neighborhood Fin., Inc. v. Adkins, 7th Dist. No. 09-CO-38, 2010-Ohio-3164.
Furthermore, as Discovery did breach the contract, awarding prejudgment interest to
Wildcat was proper pursuant to R.C. 1343.03. Rudy v. Carter, 8th Dist. No. 92247,
2009-Ohio-2729.
{¶26} Once a plaintiff prevails on a contract claim and requests prejudgment
interest, the plaintiff is entitled to prejudgment interest pursuant to R.C. 1343.03(A).
Cantwell Mach. Co. v. Chicago Mach. Co., 184 Ohio App.3d 287, 2009-Ohio-4548, 920
N.E.2d 994 (10th Dist.). Moreover, as previously stated, the contract did provide for
Wildcat to receive 18 percent interest on any unpaid sums. This is what the trial court
awarded. As such, Discovery’s second argument is without merit.
{¶27} Addressing Discovery’s argument that 18 percent interest is inappropriate,
Discovery argues that the trial court’s judgment entry did not specify what rate of
interest Wildcat is entitled to. Discovery also argues that it was entitled to withhold any
disputed amounts under the contract.
{¶28} Article 5 of the contract specifically provides that Wildcat is entitled to 18
percent interest on all unpaid sums. It also provides that “[i]f [Discovery] disputes an
invoice or any part thereof, [Discovery] shall, within five days of receiving an invoice,
notify [Wildcat] of the disputed item, specifying the reason therefore, and payment of the
disputed item may be withheld until resolution of the dispute.”
Case No. 17 MA 0018
–8–
{¶29} Discovery’s argument in summation is that the entire amount of the
invoice is essentially disputed because the issue of brine water contaminating the
ground water could potentially subject Discovery to future damages. With future
damages that Discovery may be subject to being unascertainable, the entire invoice is
essentially in dispute.
{¶30} This argument lacks merit. Article five required Discovery to dispute any
portion of the invoice within five days of receiving the invoice. According to the affidavit
of Richard Liddle, a Wildcat employee, Wildcat did not receive any notice about
disputes regarding the invoice until April 23, 2015. (Aff. of R. Liddle ¶ J). As the invoice
is dated February 13, 2015, disputes should have been conveyed to Wildcat by
February 18, 2015. Furthermore, Michael Ellenis, Discovery’s vice president of
operations, testified that he had no knowledge of anyone from Discovery contacting
Wildcat about the brine issue until two or three months after the ODNR inspection on
January 7, 2015. (Dep. of M. Ellenis 39-40).
{¶31} But Discovery argues that Wildcat’s award of interest is inappropriate
because Discovery was excused from performing on the contract due to Wildcat’s
breach by not indemnifying Discovery. In support of this argument, Discovery cites
Sanders v. Ohio Edison Co., 69 Ohio St.3d 582, 635 N.E.2d 19 (1994).
{¶32} In Sanders, an insurance company was bound by its policy with an
insured to defend any action against the insured seeking damages payable under the
policy “even if any of the allegations of the suit are groundless, false, or fraudulent”. Id.
at 586. The insurer refused to defend an action against its insured arguing that the
accident that the insured caused was not covered by the policy. Id. at 583. The insured
then settled the action and sought damages from the insurer. Id. at 583-584.
{¶33} The insurer argued, among other things, that the insured breached the
policy by settling without insurer’s assent. Id. at 585. The Ohio Supreme Court held that
the accident was covered by the policy and the insured did not have to comply with the
policy because the insurer breached the policy first. Id. at 585-586.
{¶34} Discovery’s reliance on Sanders depends on when the parties breached
the contract. In order for Sanders to apply as Discovery argues, Wildcat would need to
have breached the contract first. But Discovery breached the contract first. As
Case No. 17 MA 0018
–9–
previously stated, article five of the contract required Discovery to pay all invoices within
10 days of receipt or dispute any portion an invoice within 5 days. Because the invoice
was issued on February 13, 2015 and Discovery never paid any portion nor disputed
the invoice, Discovery breached the contract February 23, 2015.
{¶35} Wildcat’s claimed breach was the failure to indemnify Discovery for the
ODNR fine. But Discovery was not officially fined until March of 2015 and the failure to
indemnify occurred after Discovery paid the fine. Because Discovery breached the
contract first, Discovery’s third argument lacks merit.
{¶36} Accordingly, Discovery’s first assignment of error lacks merit and is
overruled.
{¶37} Discovery’s second assignment of error states:
THE TRIAL COURT ERRED IN GRANTING SUMMARY
JUDGMENT TO WILDCAT ON THE ISSUE OF WHETHER OR NOT
DISCOVERY OIL WAS ENTITLED TO STATUTORY DAMAGES UNDER
O.R.C. §§ 2307.60 AND 2307.61.
{¶38} Discovery argues that Wildcat’s use of brine water at the drilling site was a
crime. As a crime, Discovery argues that it is entitled to punitive damages, attorney’s
fees, and costs pursuant to R.C. 2307.60. In the alternative, Discovery argues that it is
entitled to triple damages pursuant to R.C. 2307.61.
{¶39} This assignment of error is also reviewed under the same standard of
review for summary judgment set forth in the first assignment of error.
{¶40} In addressing R.C. 2307.61, subsection (A) of this statute allows property
owners to pursue civil actions for damages from any person who damages the owner’s
property or who commits a theft offense. But recovery under R.C. 2307.61 is limited to
claims of property damage or theft offenses. CitiMortgage, Inc. v. Rudzik, 7th Dist. No.
13 MA 20, 2014-Ohio-1472.
{¶41} Discovery’s claims against Wildcat are not premised on damage to
Discovery’s property or on theft, they are based on breach of contract and brine water
contamination. As such, Discovery is not entitled to damages pursuant to R.C. 2307.61.
{¶42} Addressing R.C. 2307.60, this statute provides:
Case No. 17 MA 0018
– 10 –
Anyone injured in person or property by a criminal act has, and may
recover full damages in, a civil action unless specifically excepted by law,
may recover the costs of maintaining the civil action and attorney's fees if
authorized by any provision of the Rules of Civil Procedure or another
section of the Revised Code or under the common law of this state, and
may recover punitive or exemplary damages if authorized by section
2315.21 or another section of the Revised Code.
R.C. 2307.60(A)(1).
{¶43} R.C. 2307.60 allows recovery in civil actions for criminal acts that injure
person or property. Discovery’s action against Wildcat is not premised on a criminal act
that injured Discovery in person or property. Discovery’s claims are based on Wildcat
allegedly breaching the contract, failure to identify, and brine water contamination. In
this case, Discovery met with the ODNR and paid the fine after an ODNR inspector
alleged Wildcat illegally used brine water in its drilling operation. Wildcat was not
notified of the ODNR’s allegations in time for it to challenge the allegation nor was
Wildcat given the opportunity to defend against the ODNR’s charge. Thus, there is no
evidence that a criminal act was ever proved in this case. As such, R.C. 2307.60 is
inapplicable.
{¶44} Accordingly, Discovery’s second assignment of error lacks merit and is
overruled.
{¶45} Discovery’s third assignment of error states:
THE TRIAL COURT ERRED IN FAILING TO SET A HEARING
FOR FURTHER INDEMNIFICATION DAMAGES OWED TO DISCOVERY
OIL OVER AND ABOVE THAT WHICH WAS ALREADY ASSESSED
AGAINST WILDCAT.
{¶46} Discovery argues that the trial court should have held a hearing to account
for R.C. 2307.60 and R.C. 2307.61 damages. Discovery also argues that it faces the
possibility of even more damages if it is discovered that Wildcat’s drilling practices
affected the surrounding environment.
Case No. 17 MA 0018
– 11 –
{¶47} Whether to grant a party's request for oral hearing on a summary
judgment motion is a decision within the trial court's discretion. Hooten v. Safe Auto Ins.
Co., 100 Ohio St.3d 8, 2003-Ohio-4829, 795 N.E.2d 648, ¶ 14. Abuse of discretion
implies that the court acted in an unreasonable, arbitrary, or unconscionable manner.
State ex rel. Sartini v. Yost, 96 Ohio St. 3d 37, 2002-Ohio-3317, 770 N.E.2d 584.
{¶48} In its motion for summary judgment, Discovery put forth evidence that it
paid the ODNR a $50,000.00 fine and incurred expenses of $14,150.09 related to the
fine. This was the amount the trial court deducted from its ultimate award in favor of
Wildcat. There is no indication in the record that Discovery faces any other action as a
result of the ODNR fine or the brine issue. With no other evidence of any other
damages, the trial court’s lack of a hearing on damages was not an abuse of discretion.
{¶49} Moreover, to the extent Discovery would face additional liability for the
brine water issue, there is nothing in the record that indicates Discovery is precluded
from seeking reimbursement from Wildcat for that issue at a later date. To the contrary,
section 17.9.1 of the contract requires Wildcat to indemnify Discovery for any pollution
or contamination that Wildcat causes.
{¶50} Accordingly, Discovery’s third assignment of error lacks merit and is
overruled.
{¶51} Discovery’s fourth assignment of error states:
THE TRIAL COURT ERRED IN GRANTING SUMMARY
JUDGMENT IN FAVOR OF WILDCAT ON ITS INVOICE.
{¶52} Discovery argues that Wildcat should only be entitled to quantum meruit
damages and not prejudgment interest. Discovery also argues that it is entitled to set-off
any and all other damages caused by Wildcat’s use of brine.
{¶53} This assignment of error restates arguments Discovery already made in its
previous assignments of error. As such, this assignment of error does not require any
additional analysis.
{¶54} Accordingly, Discovery’s fourth assignment of error is overruled as moot.
{¶55} Wildcat filed a cross-appeal in which it raises one assignment of error.
Wildcat’s sole assignment of error states:
Case No. 17 MA 0018
– 12 –
THE TRIAL COURT ERRED BY RULING THAT PLAINTIFF WAS
REQUIRED TO INDEMNIFY DEFENDANT.
{¶56} Wildcat argues that Discovery’s failure to notify it of the fine and provide
Wildcat an opportunity to defend against the fine invalidates Discovery’s ability to claim
indemnification. Wildcat also argues that it should not be required to indemnify
Discovery for the full ODNR fine because the fine greatly exceeded what is permitted
under Ohio law.
{¶57} As this assignment of error challenges the trial court’s award of summary
judgment in favor of Discovery on its claim for indemnification, it is subject to the same
summary judgment standard of review set forth earlier.
{¶58} Wildcat argues that Discovery intentionally did not inform it of the ODNR
meeting where Discovery agreed to pay the fine. Wildcat argues that because it was
unaware of the meeting, it was not able to defend itself and mitigate the damages and
therefore should not be required to indemnify Discovery
{¶59} In support of this argument, Wildcat cites the Fourth District’s decision in
Brown v. Gallagher, 4th Dist. No. 12CA3332, 2013-Ohio-2323. In Brown, Brown caused
an automobile accident which resulted in injuries to Gallagher, a deputy with the Ross
County Sheriff’s Department. Id. at ¶ 2. Gallagher brought a civil action against Brown
for damages sustained as a result of the accident. Id. Prior to trial, the parties settled. Id.
The settlement provided that Brown would pay Gallagher $87,500.00, Gallagher would
release all claims against Brown, and Gallagher would indemnify Brown for “any and all
claims, liability, and expense, including attorney fees, for any claim or demand of any
party, and any claim or demand of any third party” resulting from the auto collision. Id.
{¶60} After the civil suit, Brown was criminally charged with vehicular assault for
the crash where he injured Gallagher. Id. at ¶ 3. Brown was convicted and sentenced to
17 months in prison and ordered to pay $7,923.44 in restitution to the Ross County
Sheriff’s Department for payments the sheriff’s department made to Gallagher. Id.
Brown then filed a complaint against Gallagher seeking indemnification of the restitution
Brown was ordered to pay. Id. at ¶ 4. Eventually, the parties submitted a stipulation of
facts before the trial court for a full adjudication on the merits. Id. at ¶ 6. The trial court
held that Gallagher was not required to indemnify Brown because (1) Brown failed to
Case No. 17 MA 0018
– 13 –
provide Gallagher with notice of the claim for restitution and (2) Brown failed to provide
Gallagher with an opportunity to defend against the claim for restitution. Id. Brown
appealed.
{¶61} In affirming the trial court’s judgment, the Fourth District relied on the
requirements set out by the Ohio Supreme Court:
[W]hen an indemnitee settles a claim, instead of litigating it, the indemnitee is
entitled to indemnification if the indemnitee shows (1) that the indemnitee has
given proper and timely notice to the party from whom indemnity is sought, (2)
that the indemnitee was legally liable to respond to the settled claim, and (3) that
the settlement was fair and reasonable.
Id. at ¶ 13, citing Portsmouth Ins. Agency v. Med Hut of Ohio, 188 Ohio App.3d 111,
2009-Ohio-941, ¶ 19, citing Globe Indemn. Co. v. Schmitt, 142 Ohio St. 595, 53 N.E.2d
790 (1944).
{¶62} The Fourth District held that Brown had a valid indemnification clause. Id.But Brown was not allowed to enforce it because he did not provide Gallagher notice of
the restitution hearing. Id.{¶63} Brown is based in large part on Globe, 142 Ohio St. 595. In Globe, the
Ohio Supreme Court held that “the one seeking indemnity, after making voluntary
settlement, must prove that he has given proper and timely notice to the one from whom
it is sought, that he was legally liable to respond and that the settlement effected was
fair and reasonable”. Id. at 604.
{¶64} Attached to Discovery’s motion for partial summary judgment is the
affidavit of Emmanual Ellenis, Discovery’s vice president of operations. This affidavit
explains that Discovery felt having Wildcat present during the ODNR negotiations as a
result of the fine “would only escalate tensions with [ODNR] and it would be counter-
productive to negotiating a favorable settlement”. (Aff. E. Ellenis ¶ 6). This indicates
that Discovery intentionally did not inform Wildcat about meeting with the ODNR to
settle the fine.
{¶65} Discovery argues that Globe and its progeny are based on common law
indemnification and not contractual indemnification. Discovery cites Shelly Co. v. Karas
Properties, Inc., 8th Dist. No., 98039, 2012-Ohio-5416 in support of its argument. In
Case No. 17 MA 0018
– 14 –
Shelly, Shelly leased property from Karas. Id. at ¶ 3. The lease contained an
indemnification clause where Karas agreed to indemnify Shelly “from any and all fines,
costs of cleanup or any costs incidental to or a consequence of any environmental
violations arising out of Lessor's or any or all of its predecessor's prior use or ownership
of the premises, without limitation”. Id. at ¶ 4. Shelly and Karas were both fined by the
City of Cleveland for illegally placed culverts on the property. Id. at ¶ 5. After
negotiations, Shelly and Karas each paid $10,650.00 in fines. Id. at ¶ 6-7.
{¶66} Shelly then brought an action against Karas seeking indemnification
pursuant to the lease agreement. Id. at ¶ 8. The trial court eventually granted summary
judgment to Shelly on the indemnification issue and a trial was held on Shelly’s other
counts. Id. at ¶ 9-11. Karas appealed.
{¶67} On appeal, Karas argued that Shelly did not comply with the Globe
requirements. Id. at ¶ 24. The Eighth District held that Globe did not apply in a landlord
tenant dispute regarding a commercial lease because Globe “involved an insurance
company's right to subrogation after adjusting claims brought against its insured and its
insured's codefendant, who was jointly liable to an injured third party”. Id. at ¶ 24. The
Eighth District went on to say that Karas’ failure to indemnify Shelly was a breach of the
lease. Id. at ¶ 25.
{¶68} Shelly is distinguishable from the case at bar. In Shelly, both parties were
fined by the City for violations. Both parties were likewise included in the settlement
negotiations. In the present case, however, Wildcat was not fined by the ODNR and
was not privy to the meeting between Discovery and the ODNR regarding the fine.
{¶69} We find Brown and Globe applicable to the case at bar. Like Brown, there
was a written indemnification agreement between Discovery and Wildcat, Discovery met
with the ODNR to discuss the fine regarding Wildcat’s drilling practices, Discovery
agreed to a fine, and then Discovery sought indemnification from Wildcat. Because
Wildcat was not notified of the ODNR meeting or given the opportunity to appear at the
meeting, Discovery is not entitled to indemnification.
{¶70} Accordingly, Wildcat’s sole assignment of error has merit and is sustained.
{¶71} For the reasons stated above, the trial court’s judgment granting Wildcat’s
motion for summary judgment is hereby affirmed. The trial court’s judgment granting
Case No. 17 MA 0018
– 15 –
Discovery’s motion for summary judgment is reversed. The trial court’s award of
damages is modified. Discovery is ordered to pay Wildcat the amount of the invoice,
which is $190,350.37, plus 18 percent interest from February 23, 2015.
Robb, P. J., concurs
Bartlett, J., concurs
Case No. 17 MA 0018
[Cite as Wildcat Drilling, L.L.C. v. Discovery Oil & Gas, L.L.C., 2018-Ohio-4015.]
For the reasons stated in the Opinion rendered herein, Discovery’s four
assignments of error are without merit and are overruled. Wildcat’s sole assignment of
error has merit and is sustained. It is the final judgment and order of this Court that the
judgment of the Court of Common Pleas of Mahoning County, Ohio granting Wildcat’s
motion for summary judgment is hereby affirmed. The judgment granting Discovery’s
motion for summary judgment is hereby reversed. Discovery is ordered to pay the full
amount of the invoice, which is $190,350.37, plus prejudgment interest at 18 percent
from February 23, 2015. Costs to be taxed against Discovery.
A certified copy of this opinion and judgment entry shall constitute the mandate in
this case pursuant to Rule 27 of the Rules of Appellate Procedure. It is ordered that a
certified copy be sent by the clerk to the trial court to carry this judgment into execution.
NOTICE TO COUNSEL
This document constitutes a final judgment entry.