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EOG Resources, Inc. v. Badlands Power Fuels

November 17, 2009

EOG RESOURCES, INC., PLAINTIFF,
v.
BADLANDS POWER FUELS, LLC, B.O.S. ROUSTABOUT & BACKHOE SERVICE, INC., AND PETROLEUM EXPERIENCE, INC., DEFENDANTS.



The opinion of the court was delivered by: Daniel L. Hovland, District Judge United States District Court

ORDER DENYING BADLANDS POWER FUELS'S MOTION FOR SUMMARY JUDGMENT

Before the Court is Defendant Badlands Power Fuels's motion for summary judgment filed on June 11, 2009. See Docket No. 62. The Plaintiff filed a response in opposition to the motion on June 29, 2009. See Docket No. 68. For the reasons set forth below, Badlands Power Fuels's motion for summary judgment is denied.

I. BACKGROUND

The plaintiff, EOG Resources, Inc. (EOG), is the owner and operator of the Zacher Oil Well in Mountrail County, North Dakota. On the evening of May 26, 2007, EOG's contractors, Petroleum Experience, Inc., B.O.S. Roustabout & Backhoe Service, Inc. (BOS), and Badlands Power Fuels, LLC, were performing a flow back operation on the well. During this operation, a fire occurred and injured BOS employees Tom Grady and Calvin Grady and Badlands Power Fuels employee Ted Seidler.

On March 31, 2008, EOG filed a complaint in federal court seeking a declaration of the rights and responsibilities of the parties under master service contracts it entered into with the Defendants. See Docket No. 1. On June 5, 2009 and June 9, 2009, the Court issued orders denying BOS's motion for partial summary judgment (Docket No. 25) and granting EOG's motions for summary judgment (Docket Nos. 32 and 46). See Docket Nos. 56, 57, and 58. On June 10, 2009, judgment was entered in accordance with the Court's rulings. See Docket No. 59.

On June 11, 2009, Badlands Power Fuels filed a motion to vacate the judgment on the grounds that it had prepared a motion for summary judgment which included evidence that had not been previously disclosed in the pleadings or in any of the parties' motions or briefs. See Docket No. 60. On November 9, 2009, the Court granted Badlands Power Fuels's motion to vacate the judgment. See Docket No. 70. The judgment was vacated for the sole purpose of reviewing the additional information provided in Badlands Power Fuels's motion for summary judgment and corresponding memorandum (Docket Nos. 62 and 63). The Court did not vacate its orders (Docket Nos. 56, 57, and 58) denying BOS's motion for partial summary judgment and granting EOG's motions for summary judgment.

Before the Court is Badlands Power Fuels's motion for summary judgment. See Docket No. 62. On May 26, 2007, the date that a fire occurred at the Zacher Oil Well in Mountrail County, North Dakota, a flat tank system was used at the well to perform the flow back operation. Badlands Power Fuels states, Just a few weeks earlier, on May 2, 2007, a fire occurred at an EOG well site in Morton County Texas, where a flat tank system was being used during a flow back procedure. In that incident, Annette Lamberson, an employee of Sandoval Roustabout Service received burns to over 60% of her hands, arms, & legs when the vapor from an open flat tank ignited. Although EOG had notice of this incident involving a similar flat tank system, EOG did not provide notice or warning of this fire to Badlands or other [] contractors at the Zacher Well Site.

See Docket No. 63 (internal citations omitted).

II. LEGAL DISCUSSION

The Court, in its previous orders, found that the defense and indemnity provisions of the master service contracts are valid and enforceable under the Texas Oilfield Anti-Indemnity Act. The parties had previously conceded that Texas law governed the contracts, and the Court determined that the forum selection clause of the master service contracts is controlling. The forum selection clause states, "THIS CONTRACT SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE GENERAL MARITIME LAWS OF THE UNITED STATES, WHERE APPLICABLE, AND WHERE NOT APPLICABLE, THE LAWS OF THE STATE OF TEXAS SHALL APPLY, EXCLUDING ANY CHOICE-OF-LAW RULE WHICH WOULD REFER THE MATTER TO ANOTHER JURISDICTION." See Docket Nos. 20-1, 20-2, and 20-3. Badlands Power Fuels is now asking this Court to find that the indemnity provisions of the master service contracts are in violation of the public policy of North Dakota and, therefore, are unenforceable. Badlands Power Fuels contends that allowing EOG to recover contractual indemnity from it following EOG's failure to warn of the earlier fire would violate public policy. In essence, Badlands Power Fuels argues that EOG's failure to warn of the previous fire that occurred in Texas two weeks before the fire in North Dakota constitutes a "willful injury" to the person or property of another.

Pursuant to N.D.C.C. § 9-08-01, a contract is unlawful if contrary to an express provision of law, public policy, or good morals. "Since N.D.C.C. § 9-08-01 voids contracts as unlawful if either contrary to express provision of law or contrary to public policy underlying the express law, we find it unnecessary to conduct a choice of law inquiry." Meyer v. Hawkinson, 626 N.W.2d 262, 266 n.1 (N.D. 2001) (emphasis in original). When faced with the issue of deciding whether a contract is against public policy, the court must be mindful of an individual's right to enter into a contract. Martin v. Allianz Life Ins. Co. of N. Am., 573 N.W.2d 823, 828 (N.D. 1998). "Public policy, with respect to contract provisions, is a principle of law whereby a contract provision will not be enforced if it has a tendency to be injurious to the public or against the public good." Johnson v. Peterbuilt of Fargo, Inc., 438 N.W.2d 162, 163 (N.D. 1989).

N.D.C.C. § 9-08-02 describes the contracts that are against the public policy of North Dakota. N.D.C.C. § 9-08-02 provides: "All contracts which have for their object, directly or indirectly, the exempting of anyone from responsibility for that person's own fraud or willful injury to the person or property of another, or violation of law, whether willful or negligent, are against the policy of the law." In Nodak Mut. Ins. Co. v. Heim, 559 N.W.2d 846, 851 (N.D. 1997), the North Dakota Supreme Court extended the exemption provisions of N.D.C.C. § 9-08-02 to indemnification stating, "Those statutes [N.D.C.C. §§ 9-08-02 and 26.1-32-04*fn1 ] manifest a public policy precluding an insured from being indemnified for losses caused by the insured's intentional or willful conduct." (emphasis added).

The North Dakota Legislative Assembly has not defined "willful injury." However, the North Dakota Supreme Court's interpretation of N.D.C.C. § 9-08-02 in Heim provides the clearest guidance as to its meaning. In Heim, the North Dakota Supreme Court considered the scope of N.D.C.C. §§ 9-08-02 and 26.1-32-04. Maurus Heim had pled guilty to gross sexual imposition and sexual assault in a criminal action in state district court. The victims, his nephews, sued Maurus in a civil action for assault and battery, intentional infliction of emotional distress, negligent infliction of emotional distress, and invasion of privacy. Nodak Mutual Insurance Company insured Maurus under a farm and ranch policy and a bonanza umbrella policy. Nodak Mutual filed a declaratory judgment action against Maurus and the victims, seeking a declaration that it had no duty to defend or indemnify Maurus for his nephews' claims. The state district court granted summary judgment in favor of Nodak Mutual and the North Dakota Supreme Court agreed. The North Dakota Supreme Court said,

We conclude the alleged inadvertent or negligent acts by Maurus are a continuous pattern of conduct which are inextricably linked with his intentional molestation, and his intent to harm therefore may be inferred from his conduct. We hold the trial court did not err in concluding Nodak had no ...


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