Gardes Directional Drilling v. U.S. Turnkey Exploration Co.

• Decision Date: 05 November 1996
• Docket Number: KERR-M,No. 95-30963,95-30963
• Citation: 98 F.3d 860
• Parties: GARDES DIRECTIONAL DRILLING, Plaintiff-Appellant, v. U.S. TURNKEY EXPLORATION CO., et al., Defendants. LAJFP DRILLING, LTD., Plaintiff-Appellant, v. CHEVRON USA, INC., et al., Defendants, Chevron USA, Inc., et al., Defendants-Appellees.cGEE CORP., et al., Plaintiffs, v. LAJFP DRILLING LTD., et al., Defendants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 860

98 F.3d 860

GARDES DIRECTIONAL DRILLING, Plaintiff-Appellant, v. U.S. TURNKEY EXPLORATION CO., et al., Defendants.

LAJFP DRILLING, LTD., Plaintiff-Appellant, v. CHEVRON USA, INC., et al., Defendants, Chevron USA, Inc., et al., Defendants-Appellees.

KERR-McGEE CORP., et al., Plaintiffs, v. LAJFP DRILLING LTD., et al., Defendants.

No. 95-30963.

United States Court of Appeals, Fifth Circuit.

Nov. 5, 1996.

Susan C. Severance, Gachassin & Hunter, Lafayette, LA, for Gardes Directional Drilling.

Bryan D. Scofield, Paul B. David, Broussard, David and Daigle, Lafayette, LA, for LAJFP Drilling Ltd.

Jennifer Lynn Davis, McGlinchey, Stafford & Lang, Houston, TX, Skipper M. Drost, Lake Charles, LA, for U.S. Turnkey Exploration Co.

Patrick Wise Gray, Kerry Michael Massari, Joseph Patrick Hebert, George Graham Arceneaux, III, Liskow & Lewis, Lafayette, LA, for defendants-appellees.

Appeals from the United States District Court for the Western District of Louisiana.

Before REYNALDO G. GARZA, DeMOSS and PARKER, Circuit Judges.

REYNALDO G. GARZA, Circuit Judge:

This appeal concerns lien rights on certain property associated with an oil drilling operation in the Gulf of Mexico. Because we find that Louisiana law applies to this controversy and that it provides for personal liability in this instance, we must reverse the district court's grant of summary judgment in favor of the appellees and remand this case for further proceedings, including a determination of the value of the lien property.

I.

In 1977, the United States Department of the Interior, Minerals Management Service ("MMS"), entered into an oil, gas, and mineral lease with several companies, including Kerr-McGee Corp., Chevron USA, Inc., Phillips Petroleum Co., Sonat Exploration Co., Felmont Oil Corp., Cabot Oil & Gas Corp., and Case-Pomeroy Oil Corp. (collectively the "Owners"). The lease encompassed an area entitled East Cameron Block 34 ("Block 34"), located on the Outer Continental Shelf off the coast of Cameron Parish, Louisiana, in the Gulf of Mexico. When production from Block 34 began to diminish in the late 1980's, the Owners decided to let others in on the lease. Accordingly, they entered into a farmout agreement in 1988 which transferred all lease operations to Senior G & A Operating Co. ("Senior") but reserved a revenue interest in any production for the Owners. Senior contracted with U.S. Turnkey Exploration Co. ("U.S.Turnkey") to drill another well on the lease. U.S. Turnkey, in turn, contracted with LAJFP Drilling Ltd., Gardes Directional Drilling, and several other businesses to provide the necessary labor, equipment, and services in connection with the drilling activities alongside the fixed production platforms.

This new well proved unsuccessful, however, causing the contractor, U.S. Turnkey, to be unable to pay its subcontractors, including LAJFP and Gardes (collectively the "Providers"). ¹ The Providers properly filed liens against the property associated with the lease of Block 34 in accordance with the Louisiana Oil Well Lien Act, La.Rev.Stat. Ann. §§ 9:4861, et seq. ("Lien Act"). This property included drilling platforms, employee housing, and a heliport ("lien property"). In June 1989, the Providers filed an action in the 38th Judicial District Court, Cameron Parish, Louisiana, for recognition of their liens. The Owners removed the action to the United States District Court for the Western District of Louisiana asserting federal question jurisdiction under 28 U.S.C. § 1331. ²

Unbeknownst to the Providers, these liens would become very important to their recovery. Both U.S. Turnkey and Senior filed for bankruptcy and did not fully satisfy the debt they owed. An attempt by the Providers to seize an arbitration award rendered in favor of U.S. Turnkey failed as well. The Providers eventually found that their only means of possibly effecting a recovery on the debt would be through their interests in the lien property.

The instant litigation came to a head during the period of May to August, 1991. In May 1991, the Owners filed an action in interpleader seeking to bring together all claims against the lien property. Immediately after the commencement of this suit, however, the Owners engaged in a series of maneuvers which form the focus of this appeal.

The MMS had, in 1989, ordered the Owners to remove all physical structures from Block 34 by July 1990, notwithstanding that the lease operations had been transferred to Senior. The Owners were able to obtain a one-year extension for compliance with the order, leaving the deadline at July 1991. ³ As this deadline approached, the Owners allegedly began taking bids to determine both the value of the structures and the cost of removing them from Block 34. The winner of the bidding process was Teledyne Movible Offshore ("Teledyne"), which offered to credit the Owners $ 43,000 against the $ 400,000 cost of removing the property and transporting it to shore, if it were allowed to keep the property. The Owners contend that other bidders refused to give the property any value at all. On June 7, 1991, the Owners' counsel informed the Providers that it had obtained the Teledyne bid and requested that they stipulate to the value of the lien property within three days. On June 11, the Providers responded that LAJFP's principals were unavailable and asked for an opportunity to conduct an independent appraisal of the lien property. On June 12, they requested certain documents that they believed would facilitate the appraisal process.

Rather than comply with this document request, the Owners, on the same day, approached Judge Richard J. Putnam of the Western District of Louisiana, the "on-duty" judge that day. Judge Putnam was completely unfamiliar with the facts or history of this litigation. The Owners presented him with an ex parte motion to release the Providers' lien rights in exchange for the posting of bond in the amount of $ 43,000, the amount they asserted the lien property was worth based on the Teledyne bid. The Providers' lien, however, was in the amount of $ 1.68 million. Judge Putnam, by order dated June 12 (but not filed until June 14), released the liens and ordered the posting of the nominal bond.

By a letter dated June 13, the Owners advised the Providers that the material had been removed from Block 34 and was now onshore. The letter did not, however, inform them that their lien rights had been canceled or that the lien property was already being salvaged. Upon receipt of this letter, the Providers responded, objecting to the removal of the property and again requesting information about the property to help facilitate an independent appraisal of the value of the property. The documents request was ignored.

The order accepting the bond and releasing the liens was not filed and mailed to the Providers until June 14, 1991, two days after entry by the judge. The Owners had enjoyed a two-day window in which they were able to remove the property and dispose of it free of the lien rights of the Providers. The Providers began proceedings to have their rights reinstated and, on August 30, Judge Edwin F. Hunter invalidated the ex parte order. Judge Rebecca F. Doherty later amended Judge Putnam's order to properly invoke the court's interpleader jurisdiction and ordered the Owners to deposit a bond in the value of the lien claims. However, on August 9, 1991, while the Providers' motion was pending, the Owners informed them that the lien property had been completely salvaged, leaving no res. This was less than two months after the Owners' instituted their interpleader action.

Rather than post the cash bond, the Owners moved to dismiss the interpleader action they had brought. On May 27, 1992, Judge Doherty granted the Owners' motion and dismissed the suit. Judge Doherty further ordered the return of the bond the Owners posted before Judge Putnam in June 1991. Before the Owners moved to dismiss, however, the various subcontractors involved filed numerous counterclaims against the Owners and filed cross claims amongst themselves in what a court at an earlier stage of this litigation described as "an apparent legal free-for-all." Gardes Directional Drilling v. U.S. Turnkey Exploration, 815 F.Supp. 956, 960 (W.D.La.1993). Among the counterclaims was the assertion that the Owners wrongfully disposed of the lien property. Judge Doherty referred a motion by the Providers to consolidate the cases to Judge James T. Trimble, Jr. who, on August 4, 1992, ordered the consolidation of all the cases.

The Providers' claim asserted that the Owners were liable under Louisiana tort law and the Louisiana Unfair Trade Practices Act for damages from the Owners' non-compliance with the Lien Act in their disposal of the lien property. Because the lien property, the res, was gone, the Providers were forced to pursue the Owners on a theory of personal liability. On the Owners' motion, the district court, per Judge Nauman S. Scott, granted summary judgment in their favor holding that Louisiana law made no provision for personal liability. It held that the sole remedy provided to lien claimants is in rem, via sequestration of the property. The court further held that whatever lien rights the Providers had previously held were waived by their failure to sequester the property while it was in the Gulf. The Providers appeal.

II.

A. Standard of Review

We review the district court's decision to grant summary judgment de novo, applying the same legal standard as the district court. Summary judgment is appropriate when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). Our review of the district court's interpretations of law, both state and federal, is plenary. Salve Regina College v. Russell, 499 U.S. 225, 111 S.Ct. 1217, 113 L.Ed.2d 190 (1991).

B. Application of the OCSLA (and Louisiana) Law

The first contested issue on appeal...