Cont'l Res., Inc. v. Wolla Oilfield Servs. LLC
| Decision Date | 09 July 2021 |
| Docket Number | Case No. 20-cv-00200-PRW |
| Parties | CONTINENTAL RESOURCES, INC., Plaintiff, v. WOLLA OILFIELD SERVICES LLC, Defendant. |
| Court | U.S. District Court — Western District of Oklahoma |
Before the Court is Defendant's "Motion to Dismiss Plaintiff's Second Amended Complaint" (Dkt. 28) (the "Motion to Dismiss"). For the reasons set forth below, the Court DENIES Defendant's Motion to Dismiss.
When pumping oil and gas, solids can build up in the pipes, constricting or blocking the flow. Hot oil service providers prevent and clear this buildup by circulating heated fluid in the equipment. This dispute is between an oil and gas producer and a hot oil service provider: Plaintiff, Continental Resources, Inc. ("Continental"), is the oil and gas producer and Defendant, Wolla Oilfield Services LLC ("Wolla"), is the hot oil service provider.
According to Continental's Second Amended Complaint (Dkt. 25)—and bearing in mind that Wolla contests Continental's version of events—Continental and Wolla entered into an agreement (the "Master Service Contract") under which Wolla would provide hot oil services at any hourly rate for Continental's North Dakota wells. As part of that contract, Wolla agreed to submit its invoices through an online billing system, to comply with applicable law, and to bill accurately and comprehensively for the work it performed.
Continental alleges that a whistleblower in Wolla's accounting department contacted it to report systematic overbilling in connection with this arrangement. Wolla's upper management, the whistleblower explained, was training and incentivizing its hot oil truck drivers to secretly overbill customers, including Continental.
Continental conducted an audit to investigate. In the course of that audit, Wolla repeatedly assured Continental that its bills were accurate. Continental concluded otherwise. It found that Wolla employees were overbilling it for time worked, including billing it for more than twenty-four hours of work in a single day by a single employee. It also found that Wolla employees were shifting hours worked from one day to another to give the appearance of compliance with a Department of Transportation regulation limiting drivers to fourteen-hour workdays. Continental also determined that Wolla was overcharging it for propane, which, it alleges, was to be billed at cost. In total, Continental calculated overbilling of at least $2,400,000.00.
Continental confirmed these suspicions with video surveillance. It even discovered several instances of "ghost billing"—billing for time when no worker was present at any point in the day.
On March 4, 2020, Continental sued Wolla in this Court. Continental filed its Second Amended Complaint (Dkt. 25) on August 25, 2020. In the Second Amended Complaint, Continental asserts claims for breach of contract, actual fraud, constructive fraud, and unjust enrichment, as well as a claim under the Oklahoma Consumer ProtectionAct. Wolla subsequently filed its "Motion to Dismiss Plaintiff's Second Amended Complaint" (Dkt. 28) pursuant to Federal Rule of Civil Procedure 12(b)(6), asking the Court to dismiss each of these claims.
In reviewing a Rule 12(b)(6) motion to dismiss, all well-pleaded allegations in the complaint must be accepted as true and viewed "in the light most favorable to the plaintiff."1 While a complaint need not recite "detailed factual allegations," "a plaintiff's obligation to provide the grounds of [her] entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do."2 The pleaded facts must establish that the claim is plausible.3
Fraud-based claims must also satisfy Rule 9(b)'s heightened pleading standard, which requires "a party [to] state with particularity the circumstances constituting fraud."4
Wolla first argues that the breach of contract claim should be dismissed because the Master Service Contract does not obligate it to perform any work.5 Rather, the MasterService Contract merely provides a framework for future agreements to provide hot oil services,6 which are to be separately agreed to at a later date in the form of a "Scope of Work."7 And because Continental identifies no such "Scope of Work,"8 it can allege no breach. As for Continental's allegations that Wolla agreed to charge it at "an hourly rate for the hot oil services" and "at cost as a pass-through item" for propane, Wolla simply responds that these allegations are conclusory and therefore insufficient.
The Court does not agree with Wolla's argument that Continental must identify a "Scope of Work" in order to allege a breach. Specifics are not needed at this juncture.9 It is enough at this early stage that Continental plausibly alleges a contract, a breach of that contract, and damages,10 and Continental has done just that. It alleges that it entered into an agreement with Wolla in contemplation of future hot oil services; that the provision of those hot oil services was subject to various conditions; that the hot oil services were rendered; that the conditions were not met; and that the failure to satisfy those conditions resulted in damages.
Even if Continental needed to allege a "Scope of Work," such an agreement can be inferred from the facts that are alleged. Continental alleges that it entered into the Master Service Contract with Wolla in contemplation of future hot oil services and that Wolla subsequently rendered those services. By Wolla's own account, those services would only have been rendered if Continental and Wolla agreed to a "Scope of Work." As such, it can be inferred that a "Scope of Work" exists.
Wolla's argument that Continental's allegations pertaining to the agreement to bill at "an hourly rate for the hot oil services" and "at cost as a pass-through item" for propane are conclusory and therefore insufficient is also unpersuasive. These allegations are not conclusory: they are specific, factual, cohere with the other factual allegations, and, as a result, are more than enough to state a claim.
Next, Wolla makes three arguments that Continental's claim under the Oklahoma Consumer Protection Act (the "OCPA")11 fails as a matter of law. First, it argues that the OCPA does not cover service contracts, like the Master Service Contract. Second, for related reasons, it posits that the OCPA is inapplicable because Continental is not a "consumer," as defined by and necessary under the statute. Finally, it argues that the OCPA does not apply because the alleged prohibited acts occurred in North Dakota, not in Oklahoma. The Court addresses these contentions in turn.
As to this first argument, the Court concludes that the OCPA does not exclude service contracts. Wolla draws on the following language from an Oklahoma Supreme Court case to argue that only the end users of goods—and not the end users of services—can be "consumers" for purposes of the OCPA: "the plain and ordinary meaning of 'consumer'" is "one who consumes or uses economic goods."12 This interpretation collapses upon consideration of the definition of "economic good," the balance of the quoted case, the text of the Oklahoma Consumer Protection Act, and an earlier decision of the Oklahoma Supreme Court.
First, the definition of an "economic good" explicitly includes services: an economic good is "a product or service which can command a price when sold."13
Second, language elsewhere in the quoted case (Lumber 2, Inc. v. Illinois Tool Works, Inc.)14 confirms that consumers of services are protected by the Oklahoma Consumer Protection Act. In defining "consumer" in Lumber 2, the Oklahoma Supreme Court resorted to the "plain and ordinary meaning" of the term.15 It quoted three dictionary definitions of "consumer" to that end.16 The first of these, as discussed above, uses the term"economic good," which is understood to include services. And the remaining two expressly include services:
Third, the plain text of the Oklahoma Consumer Protection Act clearly contemplates application to services. For example, Okla. Stat. tit. 15, § 753(8), read in conjunction with the definition set forth in Okla. Stat. tit. 15, § 752(2), prohibits advertising "any service" with intent not to sell it as advertised. Likewise, Okla. Stat. tit. 15, § 753(15) prohibits "[f]alsely stat[ing], knowingly or with reason to know, that services, replacements, or repairs are needed." To categorically exclude services despite this language would render a wide swath of the statute nugatory, flying in the face of the well-established interpretive canon requiring courts to give effect to every word of a statute if possible.18
Finally, the Oklahoma Supreme Court has tacitly acknowledged the applicability of the OCPA to the service-contract context: in Patterson v. Beall, the Oklahoma SupremeCourt stated that it would "have no difficulty concluding" that a demand for payment for a real estate appraisal (i.e., a service) that was neither requested nor performed "constituted an unfair trade practice as that phrase is defined in the OCPA."19
For these reasons, the Court finds that the Oklahoma Consumer Protection Act covers services.20
The Court also finds that Continental is a "consumer" with respect to the transaction at issue. The OCPA confers a private...
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