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Newfield Production Co. v. Eighty-Eight Oil LLC

United States District Court, D. North Dakota

September 22, 2017

Newfield Production Company, Plaintiff,
v.
Eighty-Eight Oil LLC, Defendants.

          ORDER

          CHARLES S. MILLER, JR., MAGISTRATE JUDGE

         Before the court is Plaintiff Newfield Production Company (“Newfield”)'s Motion for Leave to File Third Amended Complaint. (Doc. No. 30). In the motion, Newfield requests the court's leave to allow it to file an amended complaint containing a new claim for fraud and a claim for punitive damages. Eighty-Eight Oil LLC (“Eighty-Eight”) opposes the motion. (Doc. No. 31).

         I. BACKGROUND

         Eighty-Eight is a shipper of crude oil in North Dakota and the western United States. In 2011, Eighty-Eight was exploring the feasability of building another pipeline in North Dakota. In furtherance of that end, Eighty-Eight reached out to various oil producers in North Dakota to gauge interest and secure commitments of oil that would be sent through that pipeline. Eighty-Eight and Newfield signed a “Crude Oil Volume Commitment Sales Agreement” (“Sales Agreement”) in December 2011. (Doc. No. 30-3). Generally speaking, the Sales Agreement obligated Newfield to sell a specific volume of crude oil to Eight-Eighty at a price to be determined by Section 4(a) of the Sales Agreement, which dictated Eighty-Eight was to pay Newfield a price equal to:

The average of the daily settlement price of the NYMEX near month WTI crude oil contract as it trades for the calendar month of delivery, excluding weekends and holidays, gravity deemed 40 degree API, EDQ, minus Eighty-Eight's differential for NDL (North Dakota Light) type crude oil, minus all transportation from Guernsey, Wyoming, back to the point of purchase, and less a marketing fee of $0.85 per barrel minus transportation charges if the barrel is trucked from the wellhead to the Carrier Line inlet flange, if applicable.

         (Doc. No. 30-3 p. 3). This litigation focuses upon how Eighty-Eight interpreted and applied the “differential for NDL (North Dakota Light) type crude oil” clause of Section 4(a) (hereinafter the “NDL differential”) to the amounts it paid Newfield under the Sales Agreement.

         Newfield initiated this action on July 22, 2016, asserting one claim for breach of contract. (Doc. No. 1). Newfield alleged Eighty-Eight applied the NDL differential in a commercially unreasonable manner in determining the amount to be paid to Newfield. Among other requested forms of relief, Newfield sought monetary compensation for the alleged breach. (Doc. No. 1). Before Eighty-Eight answered, Newfield filed its First Amended Complaint. (Doc. No. 7). The First Amended Complaint was, in substance, analogous to Newfield's original complaint in that it did not allege any additional counts against Eight-Eight, but contained a more fleshed out factual predicate for the breach of contract claim. Following Eighty-Eight's answer, (Doc. No. 9), the court entered a scheduling order, under which discovery is due September 25, 2017, with dispostive motions due October 27, 2017. (Doc. No. 16). Trial is currently set for June 4, 2018. (Doc. No. 18).

         Upon stipulation of the parties, the court allowed Newfield to file a Second Amended Complaint. (Doc. No. 26). In the Second Amended Complaint, Newfield retooled its breach of contract claim and added a second breach of contract claim. Newfield's first claim alleges Eighty-Eight breached the Sales Agreement by not properly calculating the price to be paid to Newfield under Section 4(a). Newfield's second claim alleges Eighty-Eight breached its duty of good faith imposed under North Dakota law by paying Newfield a commercially unreasonable price.

         In the motion currently before the court, Newfield seeks the court's leave to file a Third Amended Complaint. Newfield has provided the court with a copy of its proposed complaint. (Doc. No. 30-2). The proposed complaint realleges the two breach of contract claims set forth in the Second Amended Complaint. Additionally, the proposed complaint contains a third claim for “actual fraud” based upon Eighty-Eight allegedly not disclosing to Newfield how it understood the NDL differential would operate. Specifically, the proposed fraud claim reads:

COUNT THREE
ACTUAL FRAUD
21
Newfield re-alleges and incorporates the allegations contained in ...

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