Antero Res. Corp. v. Tejas Tubular Prods., Inc.
| Decision Date | 06 July 2022 |
| Docket Number | Case No. 2:19-cv-804 |
| Citation | 610 F.Supp.3d 1047 |
| Parties | ANTERO RESOURCES CORPORATION, Plaintiff, v. TEJAS TUBULAR PRODUCTS, INC., et al., Defendants. |
| Court | U.S. District Court — Southern District of Ohio |
John Kevin West, John C. Ferrell, Vincent I. Holzhall, Steptoe & Johnson PLLC, Columbus, OH, for Plaintiff.
Douglas William Rennie, Porter Rennie Woodard Kendall LLP, Cincinnati, OH, Larissa A. Prilliman, Pro Hac Vice, Paul A. Bezney, Pro Hac Vice, Adkerson, Hauder & Bezney, Dallas, TX, for Defendant Tejas Tubular Products, Inc.
Daniel F. Gourash, Seeley Savidge Ebert & Gourash Co., LPA, Cleveland, OH, Robert Douglas Anderle, Seeley Savidge Ebert & Gourash, Westlake, OH, for Defendants Ken Miller Supply, Inc., Ken Miller Supply of W. Va., Inc.
This matter is before the Court on the motions for summary judgment filed by Defendants Ken Miller Supply, Inc. and Ken Miller Supply of W. Va., Inc. (together, "KMS"), and by Tejas Tubular Products. (ECF Nos. 94, 101.) The motions are ripe for ruling.1
This case deals with the fallout from a failed horizontal "fracking" oil well. Plaintiff Antero Resources Corporation's Wehr 3H well lost pressure after steel production casing ruptured during a pressure test. Production casing is used to maintain hydraulic pressure inside this type of well. Antero believes the casing failure occurred because of a manufacturing defect resulting in casing that was noncompliant with the required American Petroleum Industry ("API") 5CT specifications.
KMS, a distributor of oilfield supplies including tubing and casing products, supplied the casing to Antero for use in the Wehr 3H well. Tejas manufactured the casing. KMS and Tejas deny any liability to Antero.
There are five separate contracts at issue. Four of the contracts are between Antero and KMS, and one is between KMS and Tejas.
Work Order. To complete the Wehr 3H well, Antero issued a Request for Quote ("RFQ") seeking a supply of, among other products, casing that met API 5CT specifications. (ECF No. 79-1, RFQ, PageID 1299–1310; ECF No. 80-4, Waltz Dep., PageID 2120–21, 2281–82.) Antero's RFQ required a manufacturer's warranty on all products supplied. (RFQ, PageID 1304–07.)
KMS responded to the RFQ and represented that it could fulfill Antero's requirements. (RFQ, PageID 1310.) Tejas would manufacture and KMS would supply the casing to Antero. (ECF No. 79-1, PageID 1288–91, 1306–07.) Antero and KMS then executed a Work Order that incorporated the RFQ's product specifications and warranty requirements – including a representation by KMS that the casing was warranted by the manufacturer, Tejas. (See, RFQ, PageID 1299–1307; ECF No. 100-3, Work Order, PageID 12212–17; ECF No. 79-1, Dye Dep., PageID 1101–04.) Relevant here, KMS agreed to supply:
5.5 [inch] P-110-pipe to be certified to meet API specification 5CT with supplementary requirement SR16 and that no pipe is to have yield strengths exceeding 140,000 pounds. There has to be a process where [KMS] regularly inspect[s] the casing (a third party not associated with the tubular provider is preferred) and randomly test[s] casing properties to validate they are conforming to API specification 5ct w[ith] sr16.
(RFQ, PageID 1307; Work Order, PageID 12216.)
Master Services Agreement. Antero and KMS then entered into a Master Services Agreement ("MSA"). (ECF No. 1-1, MSA.) The previously executed Work Order was incorporated into the MSA. (Id. , PageID 15.)
Sales Order Confirmation. KMS then contacted Tejas and placed an order for the required casing. (ECF No. 81-1, Sales Order Confirmation, PageID 2883.) KMS told Tejas that the casing was for resale to Antero, so Tejas knew that Antero was the end user. (ECF No. 78-1, Khandavelli Dep., PageID 468–49; ECF No. 79-1, Dye Dep., PageID 1122; ECF No. 81-1, PageID 2890.)
According to the Sales Order Confirmation, Tejas agreed to "[p]rocess [the casing] per API 5CT Latest Edition Specifications." (Sales Order Confirmation, PageID 2883.) Tejas was to perform various inspections and tests on the casing to ensure conformance with Antero's specifications. (ECF No. 81-1, PageID 2888–2901; See generally, ECF No. 101, Tejas Mot., PageID 13353–54 (citing inspection and test results).)
Sales Order. KMS and Antero subsequently executed their own Sales Order memorializing Antero's purchase of the casing. The Sales Order included pricing and limited remedy and warranty disclaimer provisions. (ECF No. 80-4, Sales Order, PageID 2291–92.)
Partial Settlement Agreement. After the production casing ruptured, KMS and Antero entered into a partial settlement agreement in which KMS paid Antero $1,200,000, subject to a refund if Antero is later satisfied that KMS, Tejas, and any third parties are not liable for the casing failure. (ECF No. 1-2, Settlement Agreement, PageID 32.) Antero was required to provide information to KMS as requested and Antero agreed that it would not plug the well for a period of time. (Id. )
After installing the Tejas casing into its Wehr 3H well, Antero ran a pressure test in preparation for operation. A 4-foot split occurred somewhere along a joint or the body of the casing. (ECF No. 91-1, Hansen Dep., PageID 8576; ECF No. 89-1, Malloy Dep., PageID 6150, 6172.) The casing, which Antero argues was supposed to withstand a 14,530-psi burst, failed at roughly 10,837 psi – 75 percent of its burst rating. (ECF No. 88-1, Mason Dep., PageID 5843–44.) The parties dispute whether API 5CT standards required the casing to withstand 14,530-psi; Tejas contends that it only had to test the casing up to 10,000 psi of pressure. (See, ECF No. 91-1, Hansen Dep., PageID 8616.)
The parties' experts disagree on the cause of the casing failure. Antero's primary expert, John Hadjioannou, believes that a manufacturing defect caused the casing failure. (ECF No. 90-1, Hadjioannou Dep., PageID 6708.) He opines that the culprit is a "cold weld," a defect that is "nearly indetectable, if not impossible to detect." (Id. , PageID 6689.)
Tejas's experts, on the other hand, believe that "fatigue" of the casing due to improper movement during installation caused the failure. (ECF No. 91-1, Hansen Dep., PageID 8577–78; Malloy Dep., PageID 6251–52.) They argue that the casing could have been damaged while being transported, stored, or prepared for installation. (Hansen Dep., PageID 8480–81, 8618–19.)
For its part, KMS argues that some error on Antero's part caused the failure. (See, ECF No. 94, PageID 9273.)
The one consensus among the experts is that it is difficult to determine the cause of the failure with certainty without retrieving the casing. (See e.g., Hansen Dep., PageID 8577; ECF No. 99-1, Luo Dep., PageID 10506–08; ECF No. 94, KMS Mot., PageID 9295 n.7.) Antero attempted and failed to retrieve the casing from the well. (ECF No. 80-4, PageID 2190.) But even without the casing, the cause of the failure can be investigated. Tejas expert Kenneth Malloy testified that in roughly 75 percent of his investigations the casing is not retrieved from the well, but he can still determine the likely cause of failure in each case – retrieving the defective casing is "just an added bonus." (Malloy Dep., PageID 6127–28, 6150.)
After the conclusion of the investigations, Antero determined that the Wehr 3H well was irreparable and did not take any further remedial action. (ECF No. 87-4, PageID 5597.) Roughly four years have passed since the initial casing failure, and Antero has received an order from the Ohio Department of Natural Resources requiring it to plug and abandon the well. (ECF No. 112-1, ODNR Order.)
Antero brought this suit against KMS and Tejas in March 2019. (ECF No. 1, Compl.) It brings claims against KMS for: Breach of Express Warranty (Count I); Breach of Implied Warranty in Contract (Count III); Negligence under the Ohio Products Liability Act (OPLA) (Count VII); and Supplier Nonconformance with Representations under the OPLA (Count VIII). Antero's claims against Tejas are for: Breach of Express Warranty (Count II); Breach of Implied Warranty in Contract (Count III); Breach of Implied Warranty in Tort (Count IV); Defect in Manufacture or Construction under the OPLA (Count V); and Manufacturer's Nonconformance with Representation under the OPLA (Count VI).
KMS filed its Answer and brought counterclaims against Antero for declaratory judgment that it is entitled to return of the settlement payment, breach of the partial settlement agreement, unjust enrichment, and conversion. KMS brought two crossclaims against Tejas for implied indemnity at Ohio common law and one for statutory indemnity under Texas law. (ECF No. 16.)
KMS has moved for summary judgment on all of Antero's claims against it and on its counterclaims and crossclaims. (ECF No. 94.) Tejas moved for summary judgment on all of Antero's claims against it and on KMS's crossclaims. (ECF No. 101.) The motions have been briefed by the parties. (ECF Nos. 111–14, 117–19.)
Summary judgment is appropriate when "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The movant has the burden of establishing there are no genuine issues of material fact, which may be achieved by demonstrating the nonmoving party lacks evidence to support an essential element of its claim.
Celotex Corp. v. Catrett , 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; Barnhart v. Pickrel, Schaeffer & Ebeling Co. , 12 F.3d 1382, 1388–89 (6th Cir. 1993). The burden then shifts to the nonmoving party to "set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (quoting Fed. R. Civ. P. 56 ). When evaluating a motion for summary judgment, the evidence must be viewed in the light most favorable to the...
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