Northern Natural Gas Co. v. Trans Pacific Oil Corp.

FILED
United States Court of Appeals
Tenth Circuit
UNITED STATES CO URT O F APPEALS
September 19, 2007
TENTH CIRCUIT
Elisabeth A. Shumaker
Clerk of Court

N O RTH ER N N A TU RA L G A S
C OM PA N Y ,
No. 05-3411
Plaintiff - Appellant,
v. D. Kansas
TRANS PACIFIC OIL (D.C. No. 02-CV-1418-JTM )
CORPO RATION; BE USA LP 1987-1;
V ESEC O; A IR PIPELIN E
C ORPO RA TIO N ,

Defendants-Third-Party-
Plaintiffs-Appellees.

and

SO N D RA BO Y D ; D A LM ER CRICK;
G ERTR UD E C RIC K; K A TH Y
EPPER LY; H ER BER T PA RK ;
M A RV IN PA RK ; C ON N IE SU E
PA RM ELY ,

Third-Party-Defendants-
Appellees.

OR D ER AND JUDGM ENT *

*
This order and judgment is not binding precedent except under the
doctrines of law of the case, res judicata, and collateral estoppel. It may be cited,
however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th
Cir. R. 32.1.
Before HA RTZ, SE YM OU R, and O’BRIEN, Circuit Judges.

Northern Natural Gas Company (Northern) appeals from the district court’s

denial of its renewed motion for judgment as a matter of law or in the alternative

m otion for new trial. Exercising jurisdiction pursuant to 28 U.S.C. § 1291, we

affirm.

I. Background

In the late 1970’s, Northern began storing previously extracted natural gas

in the Cunningham Field’s V iola formation located in Kingman and Pratt

Counties, Kansas. 1 By 1980, Northern had injected enough gas to begin

extracting it when necessary. Trans Pacific Oil Corporation (Trans Pacific)

subsequently acquired oil and gas leases on land just north of the Cunningham

Field. In 1987, it drilled two wells called “Park # 1” and “Park ‘A’ # 1.”

(A ppellees’ Supp. App. at 76, 94.) After finding oil and gas, Trans Pacific

received a “New Pool Determination” for each well from the Kansas Corporation

Commission.

Sometime in the 1990’s, Northern began to suspect its storage gas was

migrating and Trans Pacific was extracting the storage gas from its Park wells.

1
The Cunningham Field consists of several formations underneath the
earth. The Viola formation is a specific stratum found within the Cunningham
Field.

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Northern conducted tests on these wells in 1998 to determine whether Trans

Pacific w as producing Northern’s injected storage gas. Northern confirmed its

belief based on the tests and historical data. Relying mainly on Kan. Stat. Ann. §

55-1210, 2 Northern initiated the current lawsuit against Trans Pacific in 2002. 3

Northern alleged Trans Pacific was producing its storage gas, which had migrated

underground from Northern’s Cunningham Field. 4 Thereafter, Northern filed a

motion for a preliminary injunction to prohibit Trans Pacific from producing

Northern’s storage gas through the Park wells. The district court entered a

stipulated order regarding the motion shutting in Trans Pacific’s wells. The final

sentence of the order stated:

Notwithstanding the foregoing, if the final judgment in these
proceedings is that Trans Pacific is entitled to once again to [sic]
produce the above-described wells, it is understood that Trans Pacific
will contend that it is entitled to damages due to the fact that the wells

2
Kan. Stat. Ann. § 55-1210 was passed in 1993 and provides that a gas
injector does not lose its rights to the gas it has injected should the gas migrate
outside of the injector’s storage area. § 55-1210(c).
3
Northern also named BE USA L.P., 1987-1; Vesoco, LLC; and A I R
Pipeline Corporation, all who had working interests in the Park leases, as
defendants. W e will refer to these defendants collectively as “Trans Pacific.”
4
Trans Pacific joined Sondra Boyd, Dalmer Crick, Gertrude Crick, Kathy
Epperly, Herbert Park, M arvin Park and Connie Sue Parmely as third-party
defendants asserting they, as royalty or overriding royalty interest holders, w ould
also be liable for and should contribute to any damages due Northern. At this
point the interests of the third-party defendants seem to be the same as those of
the original defendants; they have joined with Trans Pacific in this appeal.
Accordingly, our reference to Trans Pacific w ill also include the third-party
defendants.

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 were shut in pursuant to this injunction, and nothing in this O rder shall
be interpreted to prohibit or bar such a claim by Trans Pacific, the
other D efendants, or any other interest owners in the wells.

(A ppellees’ Supp. App. at 49.)

On M ay 11, 2004, the final Pretrial Order was entered without objection by

either party. The “Defendants’ Damages” section stated:

[Trans Pacific] contend[s] that [it is] entitled to retain $173,497.69 for the
period when the Park wells were shut-in while Northern conducted
testing. In addition, [Trans Pacific is] entitled to damages for lost
production due to shutting in the wells, in an amount based on historical
production amounts, applied to the months in question, and to any future
periods on similar grounds, based on the value of native oil and gas which
could be recovered by [Trans Pacific].

(A ppellant’s App. Vol. I at 55.)

Trial was held in M ay 2005. After the close of Northern’s evidence, Trans

Pacific orally asked for judgment as a matter of law under Rule 50(a) of the

Federal Rules of Civil Procedure. Specific to this appeal, Trans Pacific asserted

Kan. Stat. Ann. § 55-1210 was not retroactive and Northern could not receive

money for storage gas which had migrated or was removed prior to its enactment

in 1993. Trans Pacific sought judgment because Northern provided no evidence

as to when the storage gas migrated. The district court took the motion under

advisement. At the close of all the evidence, Northern orally asked for judgment

as a matter of law under Rule 50(a) on Trans Pacific’s counterclaims of trespass,

nuisance, inverse condemnation and fair rental value of storage but did not

address Trans Pacific’s shut-in damages claim. The court took Northern’s motion

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under advisement. Later the same day, the court sent unedited copies of the

tentative jury instructions and proposed Special Verdict Form to all of the parties

for review over the weekend.

Subsequently, the court held an in-chambers conference to discuss the final

jury instructions and Special Verdict Form. Northern did not object to Jury

Instruction No. 13 which included a sentence stating: “In relation to the

continuing closure of [its] wells, defendant Trans Pacific seeks compensation for

the shutting in of [its] wells from November 19, 2002, to the present.”

(Appellant’s App. Vol. I at 93.) Next, the court went through Trans Pacific’s

proposed Special Verdict Form which w as submitted at the conference. Northern

did not object to Question 1 which required the jury to determine whether

Northern’s storage gas had migrated to Trans Pacific’s wells “after June 30,

1993.” (Id. at 85.) Furthermore, Northern did not object to Questions 6a and 6b

which asked the jury to (a) determine whether Trans Pacific w as entitled to shut-

in damages and, if so, (b) how much “should Northern pay.” (Appellant’s App.

Vol. I at 87.) Immediately below Question 6b was an explanatory note: “(Note:

These damages w ill be paid to Trans Pacific, w ho will in turn be responsible to

distribute the funds to the working, overriding royalty, and royalty interest

owners pursuant to their percentage interest in the leases).” (Id.) W hile the

explanatory note did not change, Question 6b on the final Special Verdict Form

called for the jury to determine how much in damages, if any, “should each

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defendant receive?” (Appellant’s A pp. Vol. I at 106.) Northern did not object to

the final Special Verdict Form when read or after it was submitted to the jury.

During jury deliberations, the jury submitted a question to the court:

“Estimate cost on re-opening well (Park , Park A). -or- may we get a w ay to

calculate fair start up costs.” (Appellant’s App. Vol. I at 101.) A few minutes

later, the jury submitted another question: “W e would like a market value for gas

and oil for the shut out time in order to consider fair losses.” (Id. at 102.) The

court asked the parties if they wished to clarify their positions on damages but

both parties declined, preferring the jury rely on the evidence presented at trial.

The court explained this to the jury and responded on the jury question forms:

“This was answered on the record in the courtroom.” (Id. at 101-02.) The jury

returned the Special Verdict Form determining no gas had migrated from

Northern’s storage area to Trans Pacific’s wells “on or after July 1, 1993,” and

awarded $1,140,000 in shut-in damages to each defendant. (Appellant’s App.

Vol. I at 104.) The court entered judgment for Trans Pacific and awarded

$1,140,000 in damages to each defendant.

Thereafter, Northern filed a renewed motion for judgment as a matter of

law or in the alternative a motion for new trial under Rules 50(b) and 59 of the

Federal Rules of Civil Procedure, respectively. It asserted: (1) Trans Pacific’s

shut-in damages claim was not properly pled in the Pretrial Order, (2) N orthern

did not consent to trying the shut-in damages claim nor was there sufficient

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evidence presented at trial to put it on notice of such a claim, (3) the jury was not

specifically instructed on the shut-in damages claim and there was no factual

basis supporting such instruction, (4) Questions 6a and 6b on the Special Verdict

Form were flawed, and (5) the Special Verdict Form contained a material

misstatement of the law because it required the jury to determine whether any of

Northern’s storage gas had migrated after July 1, 1993. The court denied

Northern’s motion on the merits.

II. Discussion

Northern’s issues on appeal are similar to those in its Rule 50(b) or in the

alternative Rule 59 motion and further argues the cumulative effect of these errors

requires a new trial.

(1) Whether Trans Pacific’s C laim for Shut-in Damages W as Properly
Pled in the Pretrial Order

Northern raised the issue of whether Trans Pacific properly pled its claim

for shut-in damages in the Pretrial Order for the first time in its post-trial Rule 59

motion. Upon review of the Pretrial Order, the district court determined Trans

Pacific properly pled shut-in damages. “Because the district court is in the best

position to interpret its pretrial order, our standard of review on appeal is abuse of

discretion.” Tyler v. City of M anhattan, 118 F.3d 1400, 1403 (10th Cir. 1997).

The Pretrial Order stated: “[Trans Pacific is] entitled to damages for lost

production due to shutting in the wells, in an amount based on historical

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production amounts, applied to the months in question, and to any future periods

on similar grounds, based on the value of native oil and gas which could be

recovered by [Trans Pacific].” (Appellant’s App. Vol. I at 55.) Northern did not

object to the Pretrial Order’s inclusion of a shut-in damages claim. M oreover,

when faced with Jury Instruction No. 13 which specifically said “Trans Pacific

seeks compensation for the shutting in of [its] w ells from November 19, 2002, to

the present,” Northern did not object. (Id. at 93.) Finally, as the district court

noted, Northern did not object to Questions 6a and 6b on the Special Verdict

Form, which directly asked about shut-in damages, at either the jury instruction

conference or after it was read to the jury. It is apparent the court did not abuse

its discretion in concluding Trans Pacific’s claim for shut-in damages was

properly pled in the Pretrial Order and Northern never properly objected in the

district court.

(2) Whether the Evidence was Sufficient to Prove Shut-in Damages

“To preserve a sufficiency of the evidence claim for appellate review, a

party must move for judgment as a matter of law (directed verdict) under [Rule]

50(a) at the close of the evidence.” United Int’l Holdings, Inc. v. Wharf

(Holdings) Ltd., 210 F.3d 1207, 1228 (10th Cir. 2000). However, “[m]erely

moving for directed verdict is not sufficient to preserve any and all issues that

could have been, but were not raised in the directed verdict motion.” Id. at 1229.

“A party may not circumvent Rule 50(a) by raising for the first time in a post-trial

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motion issues not raised in an earlier motion for directed verdict.” Id. at 1228.

Northern made a Rule 50(a) motion, but never mentioned Trans Pacific’s

claim for shut-in damages. Had Northern believed there was insufficient evidence

of shut-in damages, it should have raised the issue prior to allowing the case to be

submitted to the jury. Furthermore, during deliberations the jury submitted

questions regarding how to calculate the shut-in damages. The district court

offered both parties the opportunity to clarify their position, but both decided to

let the jury rely on the evidence submitted at trial. Because Northern failed to

raise this issue until after the jury returned its verdict, it was not properly

preserved for our review.

(3) Whether the Special Verdict Form was Inconsistent

Northern claims the Special Verdict Form was irreconcilably inconsistent.

Northern finds error with Question 6b because it asked the jury to determine how

much each defendant should receive in shut-in damages, but the parenthetical

below the question asserted the damages award would be divided up according to

each defendants’ percentage interest in the leases. Northern argues this is

irreconcilably inconsistent because the question appeared to give each defendant

the same amount of money but the parenthetical indicated the defendants w ill

only receive a percentage of the amount. “A verdict is irreconcilably inconsistent

only when the essential controlling findings are in conflict, the jury has failed

utterly to perform its function of determining the facts, and its verdict is a

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nullity.” Johnson v. Ablt Trucking Co., 412 F.3d 1138, 1144 (10th Cir. 2005)

(quotation omitted).

Northern claims it did not waive this issue because the jury returned a

Special V erdict Form. “A lthough a party waives a claim of inconsistent verdicts

based on a general jury verdict under Fed. R. Civ. P. 49(b), if not timely raised,

this rule does not apply to special verdicts under Fed. R. Civ. P. 49(a).” Heno v.

Sprint/United M gmt. Co., 208 F.3d 847, 851 (10th Cir. 2000). “W hen the verdicts

are special verdicts a party is not required to object to the inconsistency before

the jury is discharged in order to preserve that issue for a subsequent motion

before the district court.” Id. at 851-52 (quotation omitted).

In Heno, the jury rejected an agent’s liability in one special verdict

question, but then found the principal liable based on the agent’s actions in

another question. Id. at 851. The Heno verdict was irreconcilably inconsistent

because the principal in that case could not be held liable for an innocent agent.

Id. at 852-53. In this instance, however, the Special Verdict Form is not

irreconcilably inconsistent. Northern does not argue the jury’s answer to one

special verdict question is irreconcilable with another one of its answers, but

rather claims one question on the verdict form is internally inconsistent. In

essence, Northern is arguing the jury’s award of damages is ambiguous by

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operation of the language in Special Verdict Form Question 6b. 5

“A party who fails to bring to the trial court’s attention ambiguities created

by jury instructions or special verdict forms may not seek to take advantage of

such ambiguities on appeal.” Kenworthy v. Conoco, Inc., 979 F.2d 1462, 1468

(10th Cir. 1992) (finding waiver where party did not object to either the jury

instruction or the special verdict form and did not seek clarification of the verdict

before the jury was dismissed); see also Kloepfer v. Honda M otor Co., 898 F.2d

1452, 1456 (10th Cir. 1990) (holding the plaintiffs waived their right to challenge

a special verdict form where they did not submit their own form and participated

in editing the form sent to the jury). Northern did not object to Questions 6a or

6b on the Special Verdict Form at the jury instruction conference; it raised the

issue for the first time in its post-trial Rule 50(b) motion. Furthermore, Northern

did not object to the Special Verdict Form after it was read and submitted to the

jury or seek clarification of the verdict before the jury was dismissed. It cannot

now assert the form was flawed.

(4) Whether Special Verdict Form Question 1 contained a material
misstatement of the law.

5
Northern disclaims any argument the jury verdict is ambiguous stating
“the jury’s verdict is crystal clear; it awarded $1.14 million in damages to ‘each’
defendant.” (Appellant’s Reply Br. at 15.) However, it takes issue with how the
jury’s aw ard operates in connection with the parenthetical of the verdict form
question. No matter what dollar amount the jury awarded, Northern is appealing
the language of the verdict question which it claims makes the award of damages
irreconcilably inconsistent. Northern’s argument is akin to arguing the verdict
form itself creates an ambiguity.

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 In its post-trial motion, Northern asserted it was entitled to a new trial

because Special Verdict Form Question 1 contained a misstatement of law in that

it improperly required Northern to prove its storage gas migrated on or after July

1, 1993, the effective date of Kan. Stat. Ann. § 55-1210, in order to recover. The

district court concluded Question 1 was not improper because § 55-1210 only

applied to storage gas which had migrated after its effective date. Even assuming

Q uestion 1 w as flaw ed, the court noted Northern had not objected to it. On

appeal, N orthern argues the court’s interpretation of § 55-1210 was erroneous.

Normally, we review a court interpretation of a state statute de novo. Cooper v.

Cent. & Sw. Servs., 271 F.3d 1247, 1251 (10th Cir. 2001). However, Northern

did not object to Special Verdict Form Question 1, which contained the court’s

“interpretation” of § 55-1210 and specifically asked the jury to determine whether

Northern’s stored gas had migrated to Trans Pacific’s wells on or after July 1,

1993, at either the instruction conference or upon it being submitted to the jury.

Therefore, Northern has waived the right to appellate review. Kenworthy, 979

F.2d at 1468-69; Kloepfer, 898 F.2d at 1456.

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 III. Conclusion

Northern failed to preserve any of its claims making a cumulative error

analysis moot. AFFIRM ED.

FOR TH E CO UR T:

Terrence L. O’Brien
United States Circuit Judge

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