Conoco Pipeline v. Oneok, Inc.

PUBLISH

UNITED STATES COURT OF APPEALS
Filed 8/1/96TENTH CIRCUIT

CONOCO INCORPORATED,

Third-Party Plaintiff,

and

CONOCO PIPELINE CO.,

Third-Party Plaintiff-Appellant/
Cross-Appellee,

v. Nos. 95-6095
95-6118
ONEOK, INC., doing business as
Oklahoma Natural Gas Company,

Third-Party Defendant-
Appellee/Cross-Appellant.

________________________

ASSOCIATION OF OIL PIPE LINES,

Amicus Curiae.

Appeal from the United States District Court
for the Western District of Oklahoma
(D.C. No. CIV-93-1060-L)

Gary W. Davis, of Crowe & Dunlevy, Oklahoma City, Oklahoma (L. Mark Walker
and Fred R. Gipson of Crowe & Dunlevy, Oklahoma City, Oklahoma; and Mark
R. Zehleer, Conoco Inc., Houston, Texas, with him on the briefs), for Third- Party
Plaintiff-Appellant/Cross-Appellee.

Peter L. Wheeler (D. Lynn Babb and Susan A. Doke, with him on the briefs) of
Pierce Couch Hendrickson Baysinger & Green, Oklahoma City, Oklahoma, for
Third-Party Defendant-Appellee/Cross-Appellant.

Before SEYMOUR, Chief Judge, PORFILIO and TACHA, Circuit Judges.

SEYMOUR, Chief Judge.

-2-
 Mr. Don E. Moore and Ms. Connie J. Moore brought this action alleging

their property was polluted by Conoco, Inc. and Conoco Pipe Line Co. 1 The

Moores alleged that Conoco owned and operated a pipeline which broke and

spilled gasoline and fuel oil into nearby soil and ground water. Conoco brought a

third-party action against ONEOK, Inc., d/b/a Oklahoma Natural Gas Company

(ONG), alleging that the leak was caused by the installation of an ONG pipeline

on top of the Conoco pipeline, and seeking damages for the Moore claim and for

state-ordered remediation costs. Conoco settled with the Moores, leaving only the

dispute between Conoco and ONG to be decided by the jury. The jury returned a

verdict in favor of Conoco with regard to the Moore settlement, establishing the

proportion of ONG’s liability at fifty percent, and in favor of ONG on Conoco’s

unjust enrichment claim for the remediation costs. Both parties appeal. We

affirm in part and reverse in part.

I.

In 1962, Conoco completed the installation of a pipeline which runs north

and south through Del City, Oklahoma, and started utilizing the pipeline to carry

gasoline and fuel oil. In 1964, ONG hired P&A Construction Co. to install a

1
After discovery, the Moores dropped their claims against Conoco, Inc.
and proceeded solely against Conoco Pipe Line Co.

-3-
pipeline running east and west through Del City, which ONG then used to carry

natural gas. In 1976, Conoco’s pipeline ruptured, releasing gasoline and fuel oil

in the nearby area. The ONG pipeline was resting on top of the Conoco pipeline

and had caused a dent at the location of the rupture. Conoco conducted a cleanup

of the leak site and repaired the pipeline without seeking reimbursement from

ONG.

Mr. Richard Keen, whose property was in the vicinity of the 1976 leak,

discovered gasoline in his underground water well in 1991. The State of

Oklahoma investigated and concluded that the source of the gasoline was the

1976 leak. The State ordered Conoco to remediate the leak. 2 The State approved

Conoco’s cleanup plan and remediation has been ongoing since 1991.

The Moores, whose property is adjacent to the Keen property, filed this

action in 1993 alleging that the 1976 leak also polluted their soil and underground

water. After Conoco settled with the Moores, ONG stipulated that the settlement

and the state-ordered cleanup costs were reasonable. At the close of Conoco’s

evidence, and again prior to the jury instruction conference, ONG moved for a

directed verdict determining as a matter of law that P&A was an independent

contractor for whose negligent acts ONG would not be liable. The district court

declined to direct a verdict, holding that fact issues existed regarding P&A’s

2
State waters and other properties were polluted as a result of the leak.

-4-
independence.

During the jury instruction conference, Conoco requested that the jury be

instructed it could find ONG liable to Conoco under both a contribution and an

unjust enrichment theory with respect to the cleanup costs and the Moore

settlement costs. The district court determined instead that the cleanup claim

would be submitted solely under an unjust enrichment theory and the Moore claim

would be submitted solely under a contribution theory. The jury found that

Conoco and ONG were each negligent on an equal basis, and that Conoco was

entitled to contribution for fifty percent of the amount it paid in settlement to the

Moores. The jury found in favor of ONG on Conoco’s unjust enrichment claim

for the state remediation costs.

On appeal, ONG contends the district court erred in denying its motion for

directed verdict on P&A’s status as an independent contractor. Conoco contends

the district court erred in denying its request to submit the state-ordered

remediation costs to the jury under a theory of contribution, and asserts we should

order contribution as a matter of law in accordance with the jury’s determination

that each party was fifty percent responsible for the pipeline leak.

II.

We first address ONG’s claim that it was entitled to a directed verdict on

-5-
P&A’s status as an independent contractor, which if successful would entitle

ONG to judgment as a matter of law. In a diversity case, we apply the federal

standard and review de novo the district court’s denial of a motion for directed

verdict. J.I. Case Credit Corp. v. Crites, 851 F.2d 309, 311 (10th Cir. 1988). A

directed verdict is appropriate “‘only if the proof is all one way or so

overwhelmingly preponderant in favor of the movant as to permit no other

rational conclusion.’” Id. (quoting McKinney v. Gannett Co., Inc., 817 F.2d 659,

663 (10th Cir. 1987)). If “the evidence is sufficient to create an issue for the

jury,” a motion for directed verdict is inappropriate. Id.

Under Oklahoma law, independent contractor status depends upon

whether the alleged employer had the right to control, or purported or
attempted to control, the manner of doing the job by the alleged
servant . . . . If he did have that right or exercised it regardless of his
right to exercise it, then the relationship is that of master and
servant. . . . [W]here the facts bearing on such issue are either
disputed or conflicting inferences may be reasonably drawn from the
known facts, it would be error to withhold the issue from the
determination of the jury.

Holland v. Dolese Co., 643 P.2d 317, 319-20 (Okla. 1982). Moreover, “although

under a written contract the question whether the relation of employer and

independent contractor ordinarily is a question of law for the court, a contract

which purports to create such relationship will not protect the employer when it

may be inferred from facts and circumstances revealed by evidence that, despite

provisions of contract, the real relation was that of master and servant.”

-6-
McReynolds v. Oklahoma Turnpike Auth., 291 P.2d 341, 345 (Okla. 1955); see

Mistletoe Express Service v. Culp, 353 P.2d 9, 12 (1959) (listing elements to be

considered in determining whether relationship was that of servant or independent

contractor).

In the present case, conflicting inferences regarding ONG’s relationship

with P&A may reasonably be drawn from their contract. The memorandum

contract stated that P&A was an independent contractor and that ONG reserved no

right to control the manner and method of performance. In addition, the general

specifications incorporated into the contract stated that P&A was solely

responsible for determining the depth of other pipelines. On the other hand, the

proposal, which was also incorporated into the contract, stated that while

pipelines were required to be at least forty-eight inches below ground level,

greater depths to pass under existing pipelines could be required by ONG 3 and

would be considered part of the pipeline installation. The general specifications

also stated that ONG reserved the right to make changes in location of the

pipelines if necessitated by right-of-way difficulties or unforseen obstructions,

and that P&A could not make any changes in the location without the approval of

ONG. The general specifications further stated, among other things, that where

3
Two ONG employees were involved in the pipeline installation, a chief
inspector and a welding inspector.

-7-
ONG deemed it necessary, excavations were required around valves and other

protruding fittings; that the method of crossing rivers, creeks, and drainage

channels was to be determined by ONG; and that additional expenses incurred in

the lowering of the pipe as a result of direction from ONG would be paid by

ONG. 4 Based on the foregoing, the terms of the contract are susceptible to the

inference that ONG had the right to control the manner or method of installation,

notwithstanding its characterization of P&A as an independent contractor.

Conflicting inferences may also be drawn from testimony at trial. Mr.

Jimmy Luster, a retired ONG welding inspector, testified that he was present

during the installation of the pipeline and that he did not direct the employees of

P&A, nor instruct them on the method of installation. Mr. Luster also testified,

however, that ONG had authority under the contract to ensure that the pipeline

was installed in the way ONG would have installed it. Mr. J.T. Hyatt, also a

retired ONG inspector, testified that ONG inspectors did not in general have

direct responsibility over individual contractors or employees. Mr. Hyatt also

testified, however, that under the contract in this case ONG controlled the depths

at which new pipeline should pass under existing pipeline and also directed

pipeline lowering.

4
The contract contains numerous other examples of ONG’s control over the
details of the pipeline installation. For example, the thinning of primer was
prohibited except under the direct supervision of ONG. Aplee. App. at 33.

-8-
 Ample evidence existed from which a jury could reasonably infer that P&A

was not an independent contractor. Both the contract and testimony at trial

support the inference that ONG had the right to control, or purported or attempted

to control, the manner or method of installing the pipeline. Consequently, the

district court did not err in denying ONG’s motion for a directed verdict on this

issue. 5

III.

We now address whether the jury should have been instructed under a

contribution theory on Conoco’s claim for state-ordered remediation costs. In a

diversity case, we apply the substantive law of the forum state and review the

district court’s determinations of state law de novo. Farmers Alliance Mut. Ins.

Co. v. Salazar, 77 F.3d 1291, 1294 (10th Cir. 1996). Under Oklahoma statutory

law, “[w]hen two or more persons become jointly or severally liable in tort for the

same injury to person or property . . . there is a right of contribution among them

even though judgment has not been recovered against all or any of them . . . .”

Okla. Stat. tit. 12, § 832 (A) (1988). 6

5
To the extent that ONG contends the evidence was insufficient to support
the jury’s verdict, we disagree.
6
“The right of contribution exists only in favor of a tort-feasor who has
paid more than their pro rata share . . . .” Okla. Stat. tit. 12, § 832 (B).

-9-
 Conoco committed a tort and the State of Oklahoma suffered an injury

when the gasoline and fuel oil from the 1976 leak polluted state waters. See

Okla. Stat. tit. 27A, § 2-6-105 (1996) (“It shall be unlawful for any person to

cause pollution of any waters of the state . . . . Any such action is hereby

declared to be a public nuisance.”). The parties stipulated that the State ordered

Conoco to remediate the 1976 leak site. ONG contends, however, that the

expenses incurred by Conoco to remediate the leak were Conoco’s own damages

and therefore form the basis of an independent claim rather than a contribution

claim. We disagree. The costs Conoco incurred in complying with the State’s

order were the direct result of a tort committed against state waters, and Conoco

presented evidence at trial that ONG was jointly or severally liable for the leak

that caused the pollution. We therefore hold that the jury should have been

instructed under a contribution theory on the state-ordered remediation costs.

The question remains whether the jury verdict and stipulations support an

order of contribution as a matter of law. The jury found that ONG and Conoco

were joint tortfeasors in polluting the Moores’ property and found them each fifty

percent liable. The only evidence before the jury establishing causation was the

A tortfeasor may seek contribution for payment of a joint liability where
the payment is cash, its equivalent, or anything else accepted in satisfaction for
injury to person or property. See Power v. Sullivan, 852 P.2d 790, 792 (Okla. Ct.
App. 1993).

-10-
1976 leak. ONG and Conoco stipulated that the proportion of liability established

by the jury would apply to liability incurred for the cleanup. Aplt. App. at 316-

17. ONG and Conoco further stipulated that the current costs of the cleanup were

reasonable and that the future costs of the cleanup would be subject to the

proportion of liability established by the jury. Id. at 317. There is thus no fact

issue left for trial. Accordingly, we hold that ONG is fifty percent liable for the

past and future costs incurred in the 1976 leak cleanup.

We AFFIRM the denial of ONG’s motion for directed verdict. We

REVERSE the district court’s refusal to send Conoco’s contribution claim against

ONG to the jury, and we hold that on this record Conoco is entitled to

contribution with respect to stipulated current and future cleanup costs in

accordance with the percentages of fault established by the jury. We REMAND

the case to the district court to enter judgment in favor of Conoco consistent with

this opinion.

-11-