Geosouthern Energy Corp. v. Chesapeake Operating, Inc.

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 99-20852

GEOSOUTHERN ENERGY CORP.,
Plaintiff - Counter Defendant - Appellee - Cross-Appellant,

AMERICAN FLOURITE, INC.,
Counter Defendant - Appellee - Cross-Appellant,

versus

CHESAPEAKE OPERATING, INC.,
Defendant - Counter Claimant - Appellant - Cross-Appellee.

Appeals from the United States District Court
for the Southern District of Texas

February 1, 2001

Before HIGGINBOTHAM and DeMOSS, Circuit Judges, and FISH,* District
Judge.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

This is an appeal from an order of the district court granting

declaratory relief, but declining to determine and award damages in

a contract dispute. Because the order is neither a final judgment

nor an order certified for appeal under Rule 54(b), we dismiss the

appeal for lack of jurisdiction.

I

*
District Judge of the Northern District of Texas, sitting by
designation.
 In 1991, GeoSouthern Energy Corp.1 and Chesapeake Operating,

Inc. signed a Joint Development Agreement under which they would

share the risks and rewards of developing various oil prospects.

Under the terms of the JDA, either party could suggest a

“horizontal prospect” for development. Should GeoSouthern select

a property, Chesapeake would have the option to participate in

developing it. The JDA stated, “GeoSouthern will advise Chesapeake

in writing of such a proposal . . . . Chesapeake will notify

GeoSouthern in writing whether Chesapeake will participate and the

amount of such participation not less than fifteen (15) days after

receipt of such notice.”2 Should Chesapeake opt to participate,

GeoSouthern was required to assign to Chesapeake an interest in the

prospect. If the prospect proved unprofitable for sixty

consecutive days, GeoSouthern was entitled to a reassignment of all

rights.3

Three disputes arose between GeoSouthern and Chesapeake

concerning the development of properties under the JDA. First,

regarding the Victoria OL No. 1 Well, Chesapeake gave notice of

1
American Flourite, Inc. is an affiliate of GeoSouthern. It
was joined in this case as a third-party defendant. All references
to GeoSouthern in this opinion should be understood to refer to
American Flourite, Inc., as well.
2
Emphasis supplied.
3
In 1993, GeoSouthern and Chesapeake signed another Joint
Development Agreement materially modifying the terms of the 1991
JDA. While the terms of this agreement are relevant to the
substantive issues in this case, we do not go into its details
because we resolve this dispute on jurisdictional grounds.

2
intent to participate nineteen days after GeoSouthern proposed the

prospect. GeoSouthern refused participation on the grounds that

the notice was untimely. Chesapeake argues that the contract

provides for a response in “not less than” fifteen days, and points

out that nineteen days is not less than fifteen days. GeoSouthern

replies that the “not less than” language constitutes a mutual

mistake, and the intent of the parties was to provide for a

response within fifteen days.

Second, regarding the Brangus No. 1-RE Unit, GeoSouthern and

Chesapeake originally participated jointly in developing a well in

the Brangus area. It was not profitable. Chesapeake reassigned

all rights to GeoSouthern. GeoSouthern then combined the land for

which rights had been reassigned with other land not subject to the

JDA, to produce a commercially viable well. Chesapeake argues that

it should be entitled to a pro rata interest in the new well,

proportionate to the amount of land subject to the JDA that is used

in the new well. GeoSouthern disagrees, arguing that the

reassignment divested Chesapeake of all rights to the land used in

the new well.

Third, a similar dispute arose regarding the Abbie 1-H and

Neidra #1-H wells. Here, the JDA provides for 160-acre units, but

the wells proposed by Chesapeake were 240 and 314.53 acres.

Chesapeake agreed to give GeoSouthern the right to reassignment of

the excess acreage. GeoSouthern exercised that right, and again

combined the reassigned land with other land not subject to the JDA

3
to produce the Helene No. 1-RE Unit. Chesapeake again argues for

a pro rata share, and GeoSouthern again says that the reassignment

divested Chesapeake of all rights.

GeoSouthern sued, seeking reformation of the JDA to change the

“not less than” language to “not more than.” GeoSouthern also

sought a declaration that Chesapeake was not entitled to any

interest in the Victoria well. Chesapeake counterclaimed, seeking

a declaration that it did have an interest in the Victoria well, as

well as the Helene and Brangus wells. Chesapeake requested an

accounting and recovery of proceeds from the disputed wells.

The case was scheduled for a bench trial. Both parties filed

cross-motions for summary judgment. In an order captioned “Final

Order,” the district court granted Chesapeake’s motion and denied

GeoSouthern’s. The order did not determine the percentage interest

to which Chesapeake was entitled; nor did it order an accounting

and award damages. Chesapeake filed a motion to amend, and the

district court vacated the order and scheduled a hearing on relief.

After the hearing, the district court issued an “Amended Final

Judgment,” which specified the percentage interests to which

Chesapeake was entitled and awarded attorney’s fees. The order

stated that the court “declines to calculate and award monetary

relief at this time.” The order concluded with “THIS IS A FINAL

JUDGMENT.”

Chesapeake appealed, and GeoSouthern cross-appealed.

II

4
 The Courts of Appeals have jurisdiction only over appeals from

“final decisions of the district courts.”4 Decisions are final

only when they “end[ ] the litigation on the merits and leave[ ]

nothing for the court to do but execute the judgment.”5

Ordinarily, computing and awarding damages is more than mere

execution, and a judgment is not final without it. At the same

time, as we recently held in Goodman v. Lee,6 a judgment failing to

award damages may still be final if the computation of damages is

“purely ‘ministerial’ and/or ‘mechanical.’”7 In Goodman, the

plaintiff won a declaration that she was a co-author of the song

“Let the Good Times Roll,” and was entitled to a share of

royalties, but the judgment did not state the damages she was owed.

We held that computing such damages was not “ministerial” or

“mechanical,” because the parties did not even know “who all paying

parties were and/or the amounts involved.”8 We contrasted that

with a situation in which “the computation of damages required

4
28 U.S.C. § 1291 (2000).
5
Cunningham v. Hamilton County, 527 U.S. 198, 204 (1999)
(citations and internal quotations omitted); see also Moreau v.
Harris County, 158 F.3d 241, 244 (5th Cir. 1998).
6
988 F.2d 619 (5th Cir. 1993).
7
Id. at 626 (quoting Winston Network v. Indiana Harbor Belt
R. Co., 944 F.2d 1351, 1357 (7th Cir. 1991)).
8
Id. at 626.

5
nothing more than adding a predetermined portion of a state court

judgment along with statutory interest to defense costs.”9

This case sits somewhere between those two extremes. Unlike

Goodman, there are no unidentified payors here, and it appears that

an audit of GeoSouthern’s books, not yet in the record, will

provide the database for the calculation. The computation,

however, is relatively complex, involving the tracking of

production over time and computing the ongoing revenue stream of

which Chesapeake was entitled to a share. This is more than

summing two numbers readily locatable in the record, but less than

finding unknown payors and learning the amounts they paid.

Although the district court declined to order an accounting

because it saw no reason to believe that GeoSouthern would not be

forthcoming with the relevant figures, the act of acquiring that

information is more than ministerial. The computation, while

theoretically determinate, is not simple. The task of dividing up

an ongoing revenue stream, while perhaps not challenging for a

professional accountant, goes beyond the routine ministerial duties

of courts. Finally, on this record we cannot say that there will

be no disputes over what oil and revenue is to be counted. We

therefore conclude that the tasks of computing damages is more than

“ministerial” or “mechanical,” and thus this is not an appealable

final judgment. That is, enough remains to be done of sufficient

9
Id.

6
complexity that it risks two appeals when one should do. And the

level of risk of multiple piecemeal appeals informs the

determination of what is “ministerial or mechanical.”10 It is, in

short, a pragmatic and predictive judgment.

DISMISSED for lack of jurisdiction.

10
Nor is this order immediately appealable under Rule 54(b).
The district court did not expressly certify this matter for appeal
under Rule 54(b). “THIS IS A FINAL JUDGMENT” is insufficient to
meet Rule 54(b)’s requirements. See Briargrove Shopping Center
Joint Venture v. Pilgrim Enterprises, 170 F.3d 536, 540 (5th Cir.
1999) (holding that labeling an order a “Final Judgment” is not
sufficient to trigger Rule 54(b) because it does not indicate an
intent that the order be immediately appealable).

7