Grynberg v. Questar Pipeline Co.

• Decision Date: 21 March 2003
• Docket Number: No. 20010731.,20010731.
• Citation: 70 P.3d 1,2003 UT 8
• Parties: Jack J. GRYNBERG, Celeste C. Grynberg, and L & R Exploration Venture, Plaintiffs and Appellants, v. QUESTAR PIPELINE COMPANY, a Utah corporation, Questar Gas Management Company, a Utah corporation, and Questar Energy Trading Company, a Utah corporation, Defendants and Appellees.
• Court: Utah Supreme Court

70 P.3d 1
2003 UT 8

Jack J. GRYNBERG, Celeste C. Grynberg, and L & R Exploration Venture, Plaintiffs and Appellants,
v.
QUESTAR PIPELINE COMPANY, a Utah corporation, Questar Gas Management Company, a Utah corporation, and Questar Energy Trading Company, a Utah corporation, Defendants and Appellees

No. 20010731.

Supreme Court of Utah.

March 21, 2003.

Rehearing Denied May 7, 2003.

70 P.3d 4

Brent V. Manning, Alan C. Bradshaw, Jack M. Morgan, Salt Lake City, for plaintiffs

Reha Deal, Susie Inskeep Hindley, Terrie T. McIntosh, Salt Lake City, and Donald I. Schultz, Cheyenne, Wyoming, for defendants.

WILKINS, Justice:

¶ 1 Jack J. Grynberg, Celeste C. Grynberg, and L & R Exploration (collectively "Grynbergs") appeal the district court's order granting summary judgment to Questar Pipeline Company and its affiliates (collectively "Questar") on all of the Grynbergs' contract and tort claims for breach of several natural gas purchase agreements. We affirm in part and reverse in part.

FACTUAL AND PROCEDURAL HISTORY

¶ 2 For over thirty years, Questar has been purchasing, gathering, and/or transporting natural gas owned by the Grynbergs. While heavily regulated when the contracts were signed in 1974, deregulation has since transformed the natural gas industry. Since 1987, Questar and the Grynbergs have been embroiled in multiple lawsuits under the gas purchase agreements governing their relationship. This case is the fifth, and hopefully final, effort to resolve the many disputes that stem from their relationship. We recite the facts of this case, and all reasonable inferences to be drawn therefrom, in the light most favorable to the Grynbergs. See, e.g., Norman v. Arnold, 2002 UT 81, ¶ 2, 57 P.3d 997.

I. FACTUAL HISTORY

A. The Contracts

¶ 3 The Grynbergs own working interests in natural gas wells located in Wyoming and Colorado. In 1971, the Grynbergs signed a gas purchase agreement with Mountain Fuel Supply Company, predecessor in interest to Questar Pipeline Company, for the sale of gas from the Colorado wells (Colorado Contract). In April and June of 1974, the Grynbergs signed three more gas purchase agreements with Mountain Fuel for the sale of gas from their Wyoming wells (Wyoming Contracts). All four were twenty year contracts, continuing year to year after that if not terminated according to their terms.

¶ 4 Under the Wyoming Contracts, the ultimate gas price paid by Questar was determined by a formula with three variables: price, volume, and gross heating value (BTU adjustment). The contracts obligated Questar to gather, measure, analyze, and transport the natural gas they were purchasing, and to provide monthly statements and payments to the Grynbergs. Questar's responsibilities also included measuring the volume and gross heating value of the gas according to formulas set forth in the contracts and performing regular equipment tests. The Grynbergs were authorized to demand periodic equipment tests and to participate in all gas or equipment tests performed routinely or on demand.

¶ 5 The Colorado Contract was terminated January 1, 1992. After raising concerns about Questar's adherence to take-or-pay obligations under the Colorado Contract, the Grynbergs signed a new, 96-day gas purchase agreement with Questar on February 11, 1992 that contained a general settlement and release of all claims from the Colorado Contract. Questar attempted to terminate the Wyoming Contracts on June 28, 1993, and again on January 1, 1994; the final termination date, however, remains in dispute.

¶ 6 Sometime after Questar's attempted termination of the Wyoming Contracts, the Grynbergs contracted with their well operator, Hunt Oil Company (Hunt), to sell the natural gas from the Wyoming wells on their behalf. Hunt, in turn, contracted with Questar affiliates to purchase, gather, and/or transport the natural gas from the Wyoming wells (Hunt Contracts). According to the Grynbergs, Questar affiliates purchased natural gas from the Wyoming wells through the end of 1997, and continue to gather and transport natural gas from the Wyoming wells to this day.

B. Prior Litigation

1. Questar I

¶ 7 In 1987, the Grynbergs brought their first suit against Questar in Wyoming federal

2003 UT 5

district court under all four contracts (Questar I). The complaint alleged, inter alia, fraud, misrepresentation, conversion, and breach of contract based upon take-or-pay obligations, and covered gas sales transactions from 1974 through 1988. The parties eventually settled this case, agreeing to a mutual general release of all claims before December 1988

2. Questar II

¶ 8 In 1992, Questar brought a declaratory judgment action in Wyoming federal district court to determine the appropriate price, after deregulation, of natural gas sold under the Colorado and Wyoming Contracts (Questar II). The Grynbergs counterclaimed, alleging intentional interference with contractual relations, breach of the duty of good faith and fair dealing, and numerous breaches of contract including failing to take or pay, underreporting gas volume, and making gas payments "using incorrect btu adjustments."

¶ 9 The district court granted Questar's summary judgment motion on the Grynbergs' claim that Questar was "stealing gas," but allowed the remaining claims to go to trial. After discovery, and immediately before the trial was to begin, the Grynbergs informed Questar and the court that the "incorrect [BTU] adjustment" claim was far greater than previously understood. In a February 28, 1994 hearing, the district court stated that it "would construct a dismissal [of the BTU claim] in this case without prejudice," allowing the parties to resolve the BTU adjustment issue in another suit. However, it was not until October 1, 1998 that the district court issued a final order dismissing without prejudice "defendants' claim against plaintiff for paying for gas using incorrect [BTU] adjustments (the [BTU] claims)."

¶ 10 The deregulation price question and all remaining counterclaims were tried before the jury, who returned a verdict for the Grynbergs on all counts. Four years later, after Questar's request for judgment as a matter of law, the district court reduced the jury's deregulation price determination and granted judgment for Questar on all of the Grynbergs' counterclaims. The Tenth Circuit reversed the district court's price reduction and substantially reinstated the jury verdict in Questar Pipeline Co. v. Grynberg, 201 F.3d 1277, 1281 (10th Cir.2000). A final judgment following remand was entered March 20, 2000.

3. Questar III

¶ 11 A third lawsuit was filed in Wyoming federal district court by the Grynbergs against Questar in 1997, alleging pricing and take-or-pay claims under the four contracts for the time period following Questar II (Questar III). The suit was filed to preserve claims that would otherwise be barred by the four-year statute of limitations for gas sales in Wyoming, and does not include the BTU adjustment claim from Questar II.

¶ 12 Questar moved for summary judgment, seeking a determination of the Wyoming Contracts' termination date. On December 11, 1998, the district court granted partial summary judgment to Questar, ruling that the Wyoming Contracts terminated on July 1, 1994 (Termination Ruling). No final judgment has been issued in that case.

II. PROCEDURAL HISTORY

¶ 13 The current case against Questar was filed by the Grynbergs in Utah's Third District Court on September 29, 1999 (Questar IV). The first amended complaint alleges in detail improper measurement and analysis of the gross heating content of natural gas under the Wyoming Contracts, and also alleges that Questar fraudulently induced the Grynbergs to release all claims under the Colorado Contract. The complaint sets forth nine causes of action under the Wyoming and Hunt Contracts: (1) breach of contract by incorrectly measuring and analyzing the gross heating content of the gas; (2) declaratory judgment of the correct BTU adjustment; (3) negligent or intentional misrepresentation of the incorrect BTU adjustments; (4) fraud in the mismeasurement and misanalysis of the BTU adjustments; (5) common carrier liability for incorrect BTU adjustments; (6) conversion through incorrect BTU adjustments; (7) res ipsa loquitur and negligence in the mismeasurement of BTU adjustments; (8) breach of fiduciary duty by

2003 UT 6

incorrect BTU adjustments; and (9) equitable remedies for incorrect BTU adjustments (injunction, accounting, quantum meruit, and unjust enrichment). A tenth cause of action is asserted under the Colorado Contract: (10) failure to take or pay under the contract and fraudulent inducement or mutual mistake in the settlement and release of all claims from the contract

¶ 14 Questar moved to dismiss the first amended complaint, arguing that the claims are barred by the applicable statutes of limitation, the U.C.C. "savings" statute, the economic loss doctrine, the lack of any contract or tort duties, and/or the failure to properly plead the claims. Upon receiving multiple memoranda and extraneous materials submitted by both parties, and after hearing oral argument on the matter, the district court chose to treat the motion to dismiss as a motion for summary judgment pursuant to Utah Rules of Civil Procedure 12(b) and 56.

¶ 15 The district court granted summary judgment in favor of Questar for all claims. In its order, the district court first denied the Grynbergs' request to postpone the ruling to conduct discovery because the Grynbergs failed to demonstrate how additional discovery would assist them. Then, relying on the partial summary judgment ruling from Questar III, the district court determined that the Wyoming Contracts terminated on July 1, 1994, and that the actions based on those contracts are barred by the four-year U.C.C. statute of limitations. Next, the court found that there were no genuine issues of material fact regarding the Grynbergs' fraudulent...