Questar Pipeline Co. v. Grynberg

F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
JAN 24 2000
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT

QUESTAR PIPELINE COMPANY,

Plaintiff - Counter - Defendant -
Appellee, Nos. 98-8054 and 98-8092
vs.

JACK J. GRYNBERG; CELESTE C.
GRYNBERG; L & R EXPLORATION
VENTURE,

Defendants - Counter -
Claimants - Appellants.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF WYOMING
(D.C. No. 92-CV-265)

John F. Shepherd (Jane L. Montgomery and Donald I. Schultz, Holland & Hart,
and Terrie T. McIntosh, Questar Corporation, with him on the brief), for the
Plaintiff-Counter-Defendant- Appellee.

Tom C. Toner, Yonkee & Toner, Sheridan, Wyoming, for Defendants-Counter-
Claimants-Appellants.

Before TACHA, KELLY, and LUCERO, Circuit Judges.

KELLY, Circuit Judge.

This case arises from disputes concerning several natural gas sales
contracts. Appellee Questar Pipeline Company (“Questar”) purchased natural gas

from appellants Jack J. Grynberg, Celeste C. Grynberg, and L&R Exploration

Venture (“Grynberg”). The gas purchase agreements at issue in this case were

entered into in 1974, when gas prices were still regulated. Because the parties

disagreed on the interpretation of the contract provision governing how to

determine the price after deregulation, Questar brought a declaratory judgment

action in 1992. Grynberg counterclaimed, charging that Questar: (1) did not take

the amount of gas it was obligated to under several take-or-pay contracts; (2)

breached the gas purchase agreements and an earlier settlement agreement; (3)

intentionally interfered with the contractual relationship between Grynberg and

the unit operator; (4) breached its duty of good faith and fair dealing by refusing

to agree to decontrol certain wells upon Grynberg’s request; (5) provided

incorrect information to the unit operator concerning Grynberg’s working interest,

resulting in an underpayment; and (6) intentionally took gas without paying for it

by placing devices on wells that allowed gas to flow around meters.

The district court granted summary judgment for Questar on the stolen gas

issue (counterclaim 6). The deregulation price issue and the remaining

counterclaims were then tried. The jury returned a verdict for Grynberg on all of

its claims. Questar then sought judgment as a matter of law (formerly J.N.O.V.)

under Fed. R. Civ. P. 50(b). The court greatly reduced the jury’s determination of

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the price to be paid after deregulation and the amount to be paid under the take-

or-pay contracts, and granted judgment for Questar on all of the counterclaims.

Grynberg appeals the grants of judgment as a matter of law as well as the

summary judgment on the stolen gas claim.

We reverse the district court’s determination on the deregulation price

issue, the take-or-pay contracts (counterclaim 1), and the breach of contract and

intentional interference with contract claims (counterclaims 2 & 3). We affirm its

ruling on the duty to decontrol (counterclaim 4), the working interest claim

(counterclaim 5), and the stolen gas claim (counterclaim 6).

A. Take-or-Pay Contracts

1. Contract 246

Proper damages for Grynberg’s take-or-pay claims under contract 246 for

the years 1988 and 1990 are still in dispute. The jury awarded Grynberg

$163,883.56 for 1988 and $124,976.83 for 1990. The district court denied

Questar’s motion for judgment as a matter of law on these claims, but several

years later reduced the damage awards to $15,812.44 and $28,337.10

respectively. This was an abuse of discretion.

The court entered judgment on the reduced damage amounts,

characterizing the evidence on damages as “undisputed.” In fact, evidence had

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been admitted--a Grynberg exhibit calculating damages in exactly the amount the

jury ultimately awarded. This exhibit was part of the record, and the jury had the

right to rely on it in reaching its verdict. While some conflicting evidence

supported the court’s finding of lower damages, the evidence was far from

“undisputed,” and the jury’s verdict should not be disturbed.

The controversy centers on the proper way to calculate the volume of gas

Questar was obligated to take from Grynberg in various years under the take-or-

pay contracts. The initial amount Questar was obligated to take was determined

by a yearly test of the production capacity of all of the wells in the contract area.

In some cases, wells could not be tested during the test period due to temporary

mechanical problems. In other cases, new wells were brought on line after the

date of the tests. In a pre-trial order, the court ruled that Grynberg could not

increase Questar’s take obligation by counting the additional production from any

new wells added after the test period, unless Grynberg specifically requested a

retest.

Abiding by the pre-trial order, Grynberg did not consider the production

from any new wells when increasing Questar’s obligation over the amount

indicated by the initial tests. Rather, he attempted to increase the obligation by

counting the increased capacity generated by the addition of compressors to

existing wells that had been unable to produce during the initial testing period.

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Grynberg argued that this was allowed by Paragraph V-2(c) of its gas purchase

agreement with Questar which provided “Should any well or wells be unable to

be produced during the test period for temporary reasons such as mechanical

failure or reworks, the test results shall be adjusted accordingly.” Aplt. App. at

6238.

Questar contended, and the court agreed, that this method of calculation

violated its pre-trial order. The court therefore reduced the jury’s damage award

(which took into account the increased production capability generated by adding

compressors to existing wells) and entered judgment in an amount that

disregarded any compressor-enhanced obligations.

Grynberg introduced into evidence several different calculations of take-

or-pay damages. One of these was Exhibit G-490, which contained the amounts

the jury ultimately awarded. A footnote to this exhibit contained the words

“Deliverability not changed due to compressor installation.” In fact, the numbers

in the exhibit did include changes in deliverability due to compressor installation.

Because Questar believed the footnote to be accurate, it did not object when the

exhibit was offered. The general rule is that a party may not protest the jury’s

use of an exhibit to which that party did not object when offered into evidence.

See United States v. Ivy , 83 F.3d 1266, 1287 (10th Cir. 1996). In this case,

however, the inaccurate statement in the exhibit was not apparent on the exhibit’s

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face and the basis of the objection -- that the damage calculations were

inconsistent with the footnote, only became apparent on cross-examination.

Thus, Questar’s right to later contest the jury’s use of the exhibit was not waived

by its failure to object when the exhibit was first offered.

However, after admission of the exhibit, Questar was able to elicit on

cross-examination that some of the figures in the exhibit included increases due

to compressor installation. Grynberg’s witness admitted that these figures were

inconsistent with the exhibit’s footnote, admitted that increasing damage amounts

to reflect the addition of compressors appeared to be a mistake in the analysis,

and agreed that taking out the compressor-increased amounts would result in a

reduced claim for damages from what was included in the exhibit. Aplt. App. at

4231-33. Questar never moved to strike the exhibit. Nor did it move for

judgment as a matter of law at the close of evidence that Exhibit G-490 displayed

a legally inaccurate calculation of damages. The damage figures in the exhibit

remained in the record for the jury to consider.

Questar argues that it did not need to object to the exhibit or make a Rule

50 motion because it had obtained partial summary judgment on the issue. The

district court agreed, finding that any damages claimed as a result of adding

compressors were in violation of its pre-trial order. But the pre-trial order only

concerned the need to subject new wells to a retest; it did not address the issue of

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how Questar’s obligations would be affected by the addition of a compressor to

an existing well that had been temporarily shut in due to mechanical problems

during the initial testing period. Far from being an “inexorable extension” of the

order, as Questar claimed, this issue remained open after the pre-trial order.

Additionally, our review of the transcript does not support a

characterization of the evidence as “undisputed.” After discovering on cross-

examination that the damage figures in Exhibit G-490 were enhanced by

compressor installation, Questar called another Grynberg employee as an adverse

witness. This witness’s purpose was to present damage figures reflecting the

elimination of compressor-enhanced delivery obligations. The reduced figures

presented by this witness were those the court ultimately awarded to Grynberg.

The witness did say that he believed his initial (larger) calculations may have

been in error to the extent they included compressor-enhanced obligations. Aplt.

App. at 5715. Had this been the end of the testimony, the court may have been

correct in characterizing the evidence as “undisputed.” However, the witness

went on to say that the lower damage figures were only an alternative scenario,

not the “correct” scenario; that Grynberg was not changing its initial position,

and that Grynberg was still asking for the full amount listed in Exhibit G-490.

Id. at 5733-36. In fact, this witness testified that, in his opinion, the new, lower

figures should not be used by the jury. Id. at 5735.

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 Questar argues that a court may reduce damages “in those cases in which it

is apparent as a matter of law that certain identifiable sums included in the

verdict should not have been there.” 11 Charles Alan Wright et al., Federal

Practice and Procedure § 2815 (2d ed. 1995). This is not such a case. The jury’s

award was within the range of proof and was supported by evidence that Questar

never moved to strike. Grynberg’s method of calculating damages did not violate

the court’s pre-trial order. The jury’s award was not so excessive as to shock our

conscience, nor did it “raise an irresistible inference that passion, prejudice,

corruption or other improper cause invaded the trial.” Malandris v. Merrill

Lynch, Pierce, Fenner & Smith, Inc. , 703 F.2d 1152, 1168 (10th Cir. 1983). We

therefore remand to the district court to enter judgment on this claim consistent

with the jury’s verdict.

2. Contract 245

The jury awarded Grynberg $45,385.09 on Contract 245 for the year

1988. Due to either simple oversight or a clerical error, this amount was omitted

from the final judgment. Questar consents to modification of the judgment to

correct this error. We remand to the district court to modify the judgment

accordingly.

B. Breach of Contract; Intentional Interference with Contract; Punitive Damages

Questar and Grynberg settled prior litigation in December 1988. Under the

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terms of the settlement agreement, Questar made a $1.7 million prepayment to

Grynberg. The agreement provided that Questar had up to five years after the

date of prepayment to “make up the gas in the manner provided for in the

applicable gas purchase contracts.” Aplt. App. at 6320. In other words, once

Questar had taken the minimum amount of gas it was obligated to take from

Grynberg in a given year under existing take-or-pay contracts, any additional gas

taken from Grynberg in that year would be credited toward making up the prepaid

amount under the settlement agreement. Thus, the lower the price of gas at the

time Questar was making up its gas, the greater the volume Questar could take

before reaching its prepaid $1.7 million total.

The parties do not dispute that Questar had the right to make up the

prepayment. Rather, the dispute centers on how that right could be exercised.

Once it had taken its minimum requirements from all of the owners in the Nitchie

Gulch Unit for 1989, Questar attributed all further production in the unit for that

year as having come from Grynberg’s interest, even though Grynberg only had a

32% working interest share in the unit. In doing so, Questar made up its

prepayment much more quickly than it could have done without allocating 100%

of unit production to Grynberg.

Grynberg contends that Questar was only permitted to make up the

payment out of its 32% working interest share, and that Questar had no right

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under existing contracts to force Grynberg to produce in a non-ratable fashion.

Grynberg further contends that the only way Questar could accomplish the result

it did was by improperly inducing a third party, Terra Resources (“Terra”), 1
to

breach its agreement with Grynberg by agreeing to non-ratable production.

By being forced to take more than its share of the gas produced in the unit,

Grynberg became “overproduced” vis-a-vis the other interest owners and was

required to pay back the excess gas in the future. At the time it had to give back

the gas to the other interest owners, gas was more valuable than it had been at the

time it was forced into overproduction by Questar.

The jury found for Grynberg on all three of its claims: (1) that Questar

breached its contract in the manner it made up the gas in 1989; (2) that Questar

intentionally interfered with Grynberg’s contract with Terra; and (3) that Questar

should pay punitive damages for its willful and wanton actions in connection

with the intentional interference claim. It awarded Grynberg $381,764.83 on the

breach of contract claim, $338,585.76 on the intentional interference claim, and

$200,000 in punitive damages.

The district court set aside the jury’s verdict more than four years after the

trial, and granted Questar judgment as a matter of law on these issues. Four

1
Shortly after signing the agreement with Questar, Terra became known as
Pacific Enterprises Oil Company. The company will be referred to as “Terra”
throughout the opinion to avoid confusion.

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years appears to be an inordinate amount of time. While we appreciate the busy

caseload of a district court, fundamental fairness to the parties and the integrity

of the judicial system require disposition of post-trial motions in a far more

expeditious manner.

We review a district court’s ruling on a motion for judgment as a matter of

law de novo. See Greene v. Safeway Stores Inc. , 98 F.3d 554, 557 (10th Cir.

1996). Judgment as a matter of law is appropriate “‘only if the evidence points

but one way and is susceptible to no reasonable inferences supporting the party

opposing the motion.’” Vining v. Enterprise Fin. Group, Inc. , 148 F.3d 1206,

1213 (10th Cir.1998) (citation omitted). In reviewing, “we may not weigh the

evidence, pass on the credibility of witnesses, or substitute our judgment for that

of the jury.” Wolfgang v. Mid-America Motorsports, Inc. , 111 F.3d 1515, 1522

(10th Cir.1997). We find that the district court erred when it set aside the jury’s

verdict on these claims.

Under Wyoming law, a claim of intentional interference with contract

requires proof of “(1) the existence of a valid contractual relationship; (2)

knowledge of the contractual relationship on the part of the Defendant; and (3)

intentional and improper interference by the [defendant] inducing or otherwise

causing a breach of the relationship; (4) which resulted in damage to the

Plaintiffs.” First Wyoming Bank v. Mudge , 748 P.2d 713, 716 (Wyo. 1988).

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 In order to induce Terra, which was a working interest owner as well as the

unit operator, not to take or dispose of its entire share of gas production, Questar

secretly offered to build gathering lines to connect wells owned by Terra outside

the unit to the main gas transmission line. These lines would allow Terra to sell

gas it could not otherwise have produced. Questar and Terra finalized their

arrangement in a confidential agreement in which Terra agreed to reduce its take

non-ratably. Aplt. App. at 10570-75.

Questar admitted at trial that it would never have been able to make up all

of its prepaid gas within the allotted period without the side agreement with

Terra. Aplt. App. at 4923. The relationship between the operator and the

working interest owners, including how the gas is to be allocated, is governed by

the Unit Agreement and the Unit Operating Agreement, two contracts to which

Questar was not a party. Questar argued, and the court agreed, that the Unit

Operating Agreement permitted non-ratable production, so that convincing Terra

to forego production could not be considered an improper interference with the

contracts.

Grynberg argues that ratable production is mandatory, and is compelled by

Section 6.3 of the Unit Operating Agreement, which provides that “Each Party

shall currently as produced take in kind or separately dispose of its share of

Production and pay Unit Operator for any extra expenditure necessitated

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thereby.” Aplt. App. at 10591. Grynberg contends, and no evidence was

adduced at trial to show otherwise, that because of this mandatory provision, no

owner had ever failed to take its entire share of gas during the 20 year history of

the Nitchie Gulch Unit except for the time Questar interfered with the contract.

The court based its conclusion that non-ratable production was permitted

by the contract primarily on Section 6.4 of the Unit Operating Agreement, which

permits the operator to sell gas on a limited basis if a working interest owner fails

to take or separately dispose of its share of production. Id. The court also relied

heavily on Doheny v. Wexpro Co. , 974 F.2d 130 (10th Cir. 1992), which

prescribed in-kind balancing of the type employed in this case as a remedy for

one party’s underproduction. In so finding, the court misconstrued both the Unit

Operating Agreement and Doheny .

The court’s reading of Section 6.4 would turn Section 6.3’s requirement

that each owner take its full share of production into a mere option to take. This

would contradict the contract language, as well as industry custom. If an owner

were allowed to choose to underproduce when it could have a market for gas,

thereby putting other owners into a position of overproduction, an environment

for speculation would be created. The underproducing owner could either sell

his withheld gas for a higher price at a later date, or, if the higher price never

materializes, demand monetary compensation from the overproducing party. See

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Patrick H. Martin, The Gas Balancing Agreement: What, When, Why, and How ,

36 Rocky Mtn. Min. L. Inst. 13-1, 13-8 (1990). Questar’s senior attorney, an

expert on industry practice, admitted that industry custom dictates that as long as

an owner has a market for its gas it should not be allowed to make the strategic

decision not to sell its gas and to make someone else take more than their share.

Aplt. App. at 5010. In this context, the purpose of Section 6.3 is clear, and the

Unit Operating Agreement must be read to prohibit voluntary non-ratable

production.

The better reading of Section 6.4 and Doheny is to view them as

addressing what to do in the event of underproduction, rather than whether

voluntary underproduction is permitted. By providing a remedy for

underproduction the Unit Operating Agreement is not authorizing it, but merely

supplying a contractual response in case of a breach. Additionally, not all

underproduction is the result of a breach; sometimes it is involuntary. For

instance, in Doheny , the plaintiff was underproduced because it did not have a

contract to sell gas, while other working interest owners did have contracts.

When those with contracts met their obligations, the plaintiff became

underproduced. The suit was to determine whether the proper way to achieve

balance within the unit was to give plaintiff cash or gas. Doheny , 974 F.2d at

132-33. In the instant case, by contrast, the issue is whether the imbalance was

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caused by a breach of contract, not what the proper remedy should be for the

imbalance situation. Thus, Doheny is distinguishable, and Section 6.4 can be

read in harmony with the mandatory take provisions of Section 6.3.

Questar also argues that, under Article 8 of the Unit Agreement, Grynberg

delegated to Terra, the operator, the power to allocate production among the

various interest owners. Thus, Questar argues, Terra’s allocation of 100% of unit

production to Grynberg was not a breach of contract, and therefore Questar’s

actions cannot be considered improper. This argument fails for two reasons.

First, Questar’s reading of Article 8 ignores other relevant sections of the Unit

Agreement. Second, even if Terra did have the authority to allocate 100%

percent of the unit’s production to Grynberg, it was Questar, not Terra, who

manipulated this allocation.

Article 8 says, in relevant part:

Except as otherwise specifically provided herein, the exclusive right,
privilege, and duty of exercising any and all rights of the parties
hereto which are necessary or convenient for prospecting for,
producing, storing, allocating, and distributing the unitized
substances are hereby delegated to and shall be exercised by the Unit
Operator as herein provided.

Aplt. App. at 11979

Questar argues that the power of “allocating” granted to the Unit Operator

gives Terra the right to consider Grynberg the producer of 100% of the gas in the

unit. But Article 8 says except as otherwise specifically provided herein , and

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Questar’s reading ignores specific limitations on this power found elsewhere in

the Unit Agreement and the Unit Operating Agreement. Article 7 specifically

declares that the Unit Operating Agreement “shall also provide the manner in

which the working interest owners shall be entitled to receive their respective

proportionate and allocated share of the benefits . . . .” Id. The Unit Operating

Agreement provides this manner of allocation in Section 6.3, requiring each

owner to take proportionately, rather than subjecting allocation to the operator’s

whims.

Additionally, Article 12 of the Unit Agreement once again reiterates that

all gas produced in the unit shall be allocated “on the basis prescribed in the unit

operating agreement . . . .” Aplt. App. at 11983. Once again, this is clear

evidence that Grynberg did not give up its right to a ratable allotment when it

signed the Unit Agreement.

Quite simply, under the circumstances, Grynberg could not be forced to

sell any more than its 32% interest in the unit’s production. Even Questar’s own

expert witness admitted that if Terra did not take its share of production, industry

standard and practice dictated that Grynberg had the right, but not the obligation ,

to take that additional share. Aplt. App. at 5004.

Notwithstanding the fact that Terra did not have the power to allocate

100% of the production to Grynberg, Questar’s claim that Terra made such an

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allocation is also belied by the evidence. In fact it was Questar, not Terra, that

treated 100% of the unit’s production as having come from Grynberg. When

Questar told Terra that it was allocating 100% of production to Grynberg, Terra

protested that Questar’s actions were “without basis or justification,” and

expressed concerns that Questar’s actions “may run afoul of pre-existing rights

and obligations” of working interest owners based on operating agreements and

unit agreements. Aplt. App. at 10579-81. Clearly, Terra was not making the

allocation, and Questar did not have the right to make it either.

Though it did not provide the essential basis for the court’s decision to set

aside the jury verdict, the court also found that Questar’s affirmative defense of

estoppel was supported by the evidence. The jury was instructed on all of the

elements of this defense, and specifically found in a special verdict that Questar

had failed to establish it. Numerous contradictions existed in the testimony as to

both Grynberg’s knowledge of Questar’s activities, and whether Questar

detrimentally relied on Grynberg’s lack of protest. In light of the special jury

verdict, and the evidence supporting it, the court’s finding that Grynberg should

be estopped from contesting Questar’s actions is error.

Questar argues that the jury’s award of $338,585.76 on the intentional

interference with contract claim is duplicative of its award of $381,764.83 on the

breach of contract claim. This argument fails for two reasons. First, the jury was

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explicitly instructed both by the court and on the special verdict form that it could

not duplicate damages. Aplt. App. at 1520, 1585. Juries are presumed to follow

the court’s instructions. See Townsend v. Daniel, Mann, Johnson, & Mendenhall ,

196 F.3d 1140, 1150 (10th Cir. 1999). Absent further showing, we find no reason

to conclude that the jury disobeyed its instructions. Second, the total of the two

amounts awarded was actually less than the amount ($763,268.66) claimed by

Grynberg as damages resulting from the way the gas prepayment was made up,

and was supported by exhibits. Aplt. App. at 4185-93, 10728-39. Because the

award is within a range of the evidence, we will not disturb it.

Finally, we reinstate the jury’s award of punitive damages. The district

court overturned this award based on its findings that Questar had the right to act

as it did in making up the gas, and that Terra had the right to choose to take non-

ratably, meaning that there was no evidence that Questar acted inappropriately.

The court can set aside a jury’s punitive damage award only if no reasonable jury

could have found on the record as a whole that Questar acted willfully and

wantonly. See Patton v. TIC United Corp. , 77 F.3d 1235, 1245 (10th Cir. 1996).

Because we conclude that the evidence supports the finding that Questar did, in

fact, wilfully breach its agreement with Grynberg and induce Terra to breach its

agreement as well, we hold that the jury had sufficient grounds to award punitive

damages.

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C. Price

Another issue in this case is the price Questar was obligated to pay

Grynberg for gas it purchased once gas prices were deregulated by the

government. The method of calculating the price was governed by the Gas

Purchase Agreements between Questar and Grynberg. The agreements provided

for two methods of determining a price in the event of deregulation. The price

would be the higher of 1) “the price provided in this contract”; or 2) “the average

price of the two highest prices under contracts . . . whose terms are for three

years or longer adjusted to like quality and comparable terms and conditions as

established by contracts made subsequent to the above mentioned legal change . .

. .” Paragraph VI-3, Aplt. App. at 6240.

Before trial, the district court made several rulings interpreting the

language of these agreements. On two of these rulings, the court granted

Questar’s motions for summary judgment on the contested interpretations. First,

the court ruled that the meaning of the phrase “the price provided in this

contract” in Paragraph VI-3 of the agreements was unambiguous, and referred to

a specific base price subject to adjustment, as opposed to Grynberg’s contention

that it could refer to the last regulated price for gas prior to deregulation.

Attachment to Aplt. Br. at 56-57. Next, the court ruled that the phrase “contracts

made subsequent to the above mentioned legal change” referred to contracts that

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took effect or were entered into after deregulation occurred, as opposed to

Grynberg’s interpretation that it referred to contracts entered into after Congress

passed the Decontrol Act, but before deregulation actually occurred. Id. at 57-

58. 2

Despite these two rulings, which narrowed the issues and evidence to be

considered at trial, conflicts remained over whether “the price provided in this

contract” was higher than the average of the two highest prices under comparable

contracts, and which contracts could appropriately be considered “comparable.”

Article VI-1(b), integral in defining “the price provided in this contract,”

stated that prices “shall be adjusted to reflect the effective date and price as set

out in an order in the forthcoming proceedings in FPC [Federal Power

Commission] Docket No. R-389B.” Aplt. App. at 6239. Docket R-389B

consisted of several opinions, the final one of which was called 699-H. This

opinion provided for a base price of $.50 per mcf, with annual escalations of $.01

per mcf. If “the price provided in this contract” were limited to the opinions

issued under Docket R-389B, as Questar argued it should be, this would result in

a final price lower than the qualifying contract prices, requiring the price to be

Because of our reinstatement of the jury verdict, Grynberg is no longer
2

pursuing its claims that the court erred in granting summary judgment for Questar
on these contract interpretation issues. Thus, we need not address whether the
court’s interpretations were correct.

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determined by adjusting qualifying contracts for comparable terms and conditions

under Article VI-3.

Grynberg argued, however, that because Docket R-389B contained

language mandating a review of prices every two years, pricing revisions issued

as part of future dockets should be considered part of the contract as well.

Before trial, the district court found that there was an issue of material fact as to

how the language referring to Docket R-389B should be interpreted, and denied

Questar’s motion for summary judgment on that issue. The court allowed expert

testimony on the issue.

Grynberg’s primary expert on this issue was Nancy Skancke, an

experienced consultant on energy regulation and pricing issues. Ms. Skancke

testified that the pricing provision should be read to include opinions issued in

future dockets, as well as the Natural Gas Policy Act of 1978. She testified that,

if the contract were so interpreted, the prices Grynberg should be paid under the

contract would be $3.076 per MMBTU for wells that deregulated on May 15,

1991, and $3.217 per MMBTU for wells that deregulated on January 1, 1993.

These are precisely the prices the jury awarded to Grynberg.

After the jury returned its verdict, the district court concluded it had erred

in not granting summary judgment on this interpretation issue in favor of

Questar. It declared that the contract language referring to Docket R-389B was

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unambiguous as a matter of law, and that Ms. Skancke’s testimony was extrinsic

evidence that contradicted the plain language of Paragraph VI-1(b) and should

not have been allowed. It thus ordered her testimony as it related to that issue to

be stricken. Grynberg argues that the trial court erred in finding the language

unambiguous. In making this argument, Grynberg relies heavily on City of

Farmington v. Amoco Gas Co. , 777 F.2d 554 (10th Cir. 1985), which found a

price redetermination clause to be ambiguous in light of changed regulatory

circumstances, and interpreted the clause to include future dockets and even the

National Gas Policy Act.

We agree with the district court’s finding that the language of Paragraph

VI-1(b) is unambiguous. Farmington does not persuade us otherwise. The clause

at issue in Farmington did not specify any particular docket number which was to

be binding. 777 F.2d at 557. In contrast, the contract at issue in this case

manifestly limits pricing considerations to Docket R-389B. The parties were free

to put in a provision to incorporate future proceedings, but did not do so. Ms.

Skancke’s testimony was extrinsic evidence contradicting the plain language of

the contract and was properly stricken.

However, this does not end the matter. The jury’s award was within the

range of evidence presented by Mr. Grynberg’s testimony, which calculated the

proper price as lying somewhere between $2.81 and $4.12 for wells that

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deregulated in 1991, and between $2.80 and $4.97 for wells deregulating in

1993. Because the award was within the range of evidence, judgment as a matter

of law or a new trial is not appropriate even though the amount awarded was the

same as that presented in the stricken testimony. See Midwest Underground

Storage, Inc. v. Porter , 717 F.2d 493, 500-01 (10th Cir. 1983) (upholding jury’s

verdict for a winning claim that was, to the penny, an identical amount claimed as

damages for a different claim on which plaintiff lost). To do so would be to

impermissibly speculate as to the manner by which jurors arrived at the verdict.

See Howard D. Jury, Inc. v. R & G Sloane Mfg. Co. , 666 F.2d 1348, 1352 (10th

Cir. 1981).

The district court acknowledged that the verdict was within the range of

evidence presented to the jury, but held that the jury should not have been

allowed to consider Mr. Grynberg’s testimony concerning how to calculate prices

using the method of adjusting qualifying contracts for comparable terms and

conditions under Article VI-3. The district court ruled post-trial that Mr.

Grynberg’s testimony was based on an improper methodology and not supported

by a sufficient foundation. This was an abuse of the court’s discretion, because

Questar failed to make a timely objection to this evidence at trial.

At trial, Questar did not object to Mr. Grynberg’s testimony during direct

examination. In fact, when Grynberg sought to introduce an exhibit showing Mr.

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Grynberg’s conclusions on the price range and his methodology in arriving at

those figures , Questar stated “No objection.” Aplt. App. at 4456. It was only

after Mr. Grynberg’s direct examination that Questar objected to his testimony.

The court overruled the objection on the grounds that it was untimely. Questar

had a copy of the exhibit, showing Mr. Grynberg’s methodology, before trial. In

addition, it had deposed Mr. Grynberg on the matter extensively. It cannot now

claim that it had to hear all of Mr. Grynberg’s testimony before knowing whether

it had grounds to object. By not making a timely objection, and even

affirmatively stating that it had no objection to Mr. Grynberg’s primary exhibit,

Questar waived its right to later challenge this evidence.

Finally, by reversing its ruling made during trial that Questar’s objection to

Grynberg’s testimony was untimely, the court unfairly prejudiced Grynberg,

which had no way of knowing that it should offer additional evidence or try to

prove the issue in a different manner. See Vallegos v. C.E. Glass Co. , 583 F.2d

507, 511-12 (10th Cir. 1978).

Questar now argues that the timeliness of its objection is irrelevant in part

because it would be plain error to admit Mr. Grynberg’s testimony. In civil

cases, the plain error exception is limited to errors that significantly affect “the

fairness, integrity or public reputation of judicial proceedings.” Polys v. Trans-

Colorado Airlines, Inc. , 941 F.2d 1404, 1408 (10th Cir. 1991) (citation and

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internal quotes omitted). We find that admission of Mr. Grynberg’s testimony

does not meet this high standard.

Questar also argues that the court’s role as “gatekeeper” concerning

scientific opinion evidence is ongoing throughout the proceedings, allowing the

court to strike evidence at any time, even without an objection ever having been

lodged. See Kumho Tire Co., Ltd. v. Carmichael , 526 U.S. 137 (1999); Daubert

v. Merrell Dow Pharmaceuticals, Inc. , 509 U.S. 579 (1993). Daubert does note

that, even after evidence is initially admitted, “in the event the trial court

concludes that the scintilla of evidence presented supporting a position is

insufficient to allow a reasonable juror to conclude that the position more likely

than not is true, the court remains free to direct a judgment . . . .” 509 U.S. at

596. However, we do not read this as overriding the general requirement of a

timely objection to the evidence. A party may waive the right to object to

evidence on Kumho/Daubert grounds by failing to make its objection in a timely

manner.

Questar supports its argument that the trial court may strike expert

testimony even in the absence of an objection by citing Hoult v. Hoult , 57 F.3d 1,

4 (1st Cir. 1995). In Hoult , the defense did not object to the plaintiff’s medical

testimony before or during trial. However, the trial court did not strike the

testimony, but accepted it. The First Circuit found that “ Daubert does instruct

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district courts to conduct a preliminary assessment of the reliability of expert

testimony, even in the absence of an objection.” Id. It went on to say that

district courts were not required, sua sponte, to make specific on-the-record

rulings concerning the admissibility of expert testimony. Id at 4-5. We agree

with this principle, but it does not aid Questar in these circumstances. The Hoult

court spoke of a “preliminary assessment,” which the district court made in this

case. Nothing in the language of Hoult suggests the ability of a court to strike

testimony after trial that it has otherwise deemed admissible during trial, in the

absence of an objection.

Further, Questar has not pointed us to any material indicating that Mr.

Grynberg was actually testifying as an expert on the issue of prices. If Mr.

Grynberg was not testifying as an expert witness on this subject, Daubert does

not apply. In fact, just before overruling Questar’s objection to Mr. Grynberg’s

testimony as untimely, the court indicated it was inclined to instruct the jury that

Mr. Grynberg “is not an expert in this area but is entitled to state his opinion as

to how he values his gas.” Aplt. App. at 4475.

Because we find Mr. Grynberg’s testimony was improperly stricken, and

because the testimony’s inclusion puts the jury’s award within the range of

evidence, the jury’s award of $3.076 per MMBTU for wells that deregulated on

May 15, 1991, and $3.217 per MMBTU for wells that deregulated on January 1,

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1993 should be reinstated.

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D. Duty to Decontrol

In 1989, Congress enacted the Natural Gas Wellhead Decontrol Act, which

scheduled certain wells for deregulation on May 15, 1991, and others on January

1, 1993. Under the Act, parties to existing gas purchase contracts were permitted

to voluntarily agree to deregulate the price of gas covered by those contracts

prior to the effective dates of deregulation. In order to put such an agreement

into effect, the parties could simply execute a document after March 23, 1989,

agreeing that the gas sold from the existing well would no longer be subject to

the maximum price ceilings.

Grynberg claims it requested that Questar agree to deregulate a number of

wells before the 1991 and 1993 effective dates of deregulation. Grynberg argues

that Questar had a duty to agree to decontrol the prices, relying on the following

language in Article VI of the gas purchase agreements:

NOTWITHSTANDING anything herein to the contrary, it is agreed
that if the Federal Power Commission, or any successor
governmental authority having jurisdiction in the premises, shall
prescribe or approve a price or prices, however determined,
applicable to the gas being sold hereunder which . . . is higher than
the price otherwise applicable hereunder, then the price for gas sold
hereunder shall be increased to equal such higher price effective
upon the effective date prescribed by such governmental authority.

Aplt. App. at 6239.

Grynberg’s claim is that the Act “approve[d] a price . . . higher than the

price otherwise applicable hereunder” and that Questar was obligated to agree to

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decontrol the wells, if requested, in order to comply with its duty of good faith

and fair dealing. Questar contends that the NOTWITHSTANDING clause does

not compel Questar to agree to decontrol simply at Grynberg’s request. Prior to

trial, the court denied Questar’s motion for summary judgment on the issue,

finding that the issue of whether or not Questar acted in good faith was a fact

question.

The jury found that Questar acted in bad faith in refusing to decontrol the

wells upon Grynberg’s request. However, in ruling on Questar’s post-trial

motion for judgment as a matter of law, the court found that the contract

provided no duty to decontrol. This was a contractual interpretation issue and a

question of law for the court; good faith is not an issue in the absence of a

specific duty, thus the question should not have been submitted to the jury.

We agree with the district court that the contractual issue of duty to

decontrol is a question of law, and affirm the court’s finding that no such duty

can be found in the gas purchase agreements. The Act permitted, but did not

require, parties to agree to deregulate. It merely set the stage for negotiations,

and was not intended to give a seller the unilateral power to deregulate its wells

early. The Act’s legislative history speaks explicitly of the opportunity for

existing contracts to be “voluntarily renegotiated.” H.R. Rep. No. 101-29, at 2

(1989), reprinted in 1989 U.S.C.C.A.N. 51. In this sense, the Act cannot

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properly be read as a governmental authority “prescrib[ing]” or “approv[ing]” a

higher price. If Grynberg’s claim was valid, it would undermine Congress’ intent

that the renegotiation provision be voluntary.

Finally, we note that Grynberg’s reliance on Grynberg v. Rocky Mountain

Natural Gas Co. , 93-CA-0925 (Colo. App. Div. II, May 25, 1995) is misplaced.

While the court in that case did find a duty to decontrol, the parties’ agreement

was significantly different from the gas purchase agreement at issue in this case.

In Rocky Mountain , the gas purchase agreement was modified by a settlement

agreement between the parties. The settlement agreement had a provision

specifically requiring that the parties execute all documents and take all steps

reasonably necessary to carry out the terms and intent of the settlement

agreement. The context and language of the agreements are distinguishable from

those in this case.

E. Ownership Interests

When Questar purchases gas, it pays the unit operator, which then divides

the payment among the various working interest owners. At one point,

Grynberg’s working interest ownership percentage increased. Grynberg alleges

that, although Questar paid for all of the gas it took from the unit, the records it

sent to the operator did not reflect Grynberg’s increased working interest

ownership. As a result, the operator did not pay Grynberg the percentage he was

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owed. Grynberg claims it was Questar’s responsibility to make sure the records it

sent to the operator accurately reflected the various working interests.

The trial court denied Questar’s motion for summary judgment on this

issue, and presented it to the jury, which awarded Grynberg $112,685.11. In

ruling on Questar’s motion for judgment as a matter of law, the court concluded

that the issue should not have been submitted to the jury, because it was properly

a dispute between Grynberg and the unit operator.

We agree with the district court’s ruling on this matter, and uphold its

ruling for Questar as a matter of law. Pursuant to the division order, Questar was

obligated only to make payments for the gas to the operator. The operator

explicitly agreed to account to all owners of the gas. Aplt. App. at 13258. Once

it paid the operator for the gas, Questar’s obligations were complete.

F. Stolen Gas Claim

Grynberg contends that Questar stole gas from Grynberg by installing

valves on the wells that allowed gas to bypass sales meters. The court held a

two-day hearing on a motion to strike Mr. Grynberg’s declaration of opinions

about the stolen gas. After granting this motion, the court dismissed the claim on

summary judgment, finding that no evidence supported the stolen gas claim other

than the conclusions and opinions of Mr. Grynberg.

Grynberg does not appeal the striking of Mr. Grynberg’s opinion. Instead,

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it argues that other evidence remaining in the record is sufficient to create a

question of fact. In creating its appendix, Grynberg left out the hearing

testimony of Questar’s expert, as well as Mr. Grynberg’s own hearing testimony.

Because Grynberg claims that the district court’s finding that there was no

genuine issue of material fact was contrary to the evidence, it must “include in

the record a transcript of all evidence relevant to that finding or conclusion.”

F.R.A.P. 10(b)(2). See also 10th Cir. Rule 10.1(A)(1) (Appellant required to

“provide all portions of the transcript necessary to give the court a complete and

accurate record of the proceedings related to the issue[] on appeal.”). While we

understand Grynberg’s contention that this testimony need not be considered

because sufficient evidence exists even without Mr. Grynberg’s testimony, we are

reluctant to overturn a district court’s ruling without being able to examine the

evidence or arguments it heard in making its ruling. Grynberg claims that a

material question of fact is created by the numbers in Questar’s “unaccounted-for

gas reports” and other documents. In the absence of a complete record, we agree

with the district court that, on the basis of the material in front of us, insufficient

evidence exists to withstand a summary judgment motion.

G. Conclusion

We REVERSE the district court’s reduction in damages on the take-or-pay

contracts (counterclaim 1) and its grant of judgment as a matter of law on the

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breach of contract claim (counterclaim 2), the intentional interference with

contract claim (counterclaim 3), and the price after deregulation issue. We

AFFIRM the district courts grant of judgment as a matter of law on the duty to

decontrol issue (counterclaim 4) and the working interest claim (counterclaim 5),

as well as its grant of summary judgment on the stolen gas claim (counterclaim

6). We REMAND to the district court to enter judgment consistent with this

opinion. The court’s conditional grant of a new trial in the event of reversal is

specifically overruled as unnecessary. See Fed. R. Civ. P. 50(c)(1).

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