In re NCS Multistage, LLC

• Decision Date: 14 October 2021
• Docket Number: 08-21-00020-CV
• Citation: 650 S.W.3d 182
• Parties: IN RE: NCS MULTISTAGE, LLC and NCS Multistage Holdings, Inc., Relators.
• Court: Texas Court of Appeals

650 S.W.3d 182

IN RE: NCS MULTISTAGE, LLC and NCS Multistage Holdings, Inc., Relators.

No. 08-21-00020-CV

Court of Appeals of Texas, El Paso.

October 14, 2021

ATTORNEY FOR REAL PARTIES IN INTEREST: John A. ‘Jad’ Davis, Davis Gerald & Cremer PC, 400 W. Illinois, Suite 1400, P. O. Box 2796, Midland, TX 79702-2796.

ATTORNEY FOR RELATORS: Natasha N. Taylor, Wright Close & Barger, LLP, One Riverway, Ste. 2200, Houston, TX 77056.

RESPONDENT: John L. Pool, Judge, 109th District Court, 201 N. Main St., Rm. 201, Andrews, TX 79714.

Before Rodriguez, C.J., Palafox, and Alley, JJ.

OPINION

YVONNE T. RODRIGUEZ, Chief Justice

In this products-liability case, Relators NCS Multistage, LLC and NCS Multistage Holdings, Inc. filed a mandamus petition to challenge an order of the 109th District Court of Winkler County, denying Relators the opportunity to designate a component-part manufacturer as a responsible third party in the case. Boyd & McWilliams Energy Group, Inc.; Boyd & McWilliams Operating; Rubicon Oil & Gas II LP; OIE Winkler JV, LP; Harry M. Bettis, Jr., L.L.C.; John D. Bettis, L.L.C.; Collins Permian LP; Rockport Oil & Gas, L.L.C.; David McWilliams; and EKH Minerals comprise the Real Parties in Interest (RPI). The RPI argue the party Relators seek to designate is precluded from designation as a responsible third party because of the exception under Section 33.011(6) of the Texas Civil Practice and Remedies Code. Additionally, RPI claim Relators failed to adequately plead factual allegations implicating the third party's responsibility for RPI's alleged damages.

We conditionally grant mandamus relief.

BACKGROUND

The RPI own oil and gas leasehold working interests in various oil and gas leases in West Texas. Relators manufacture and assemble frac sleeve assemblies known as the NCS Multicycle® frac sleeve assembly, which is the product at issue. The frac sleeve assembly is an oil and gas fracturing product. The assembly consists of multiple component parts, including a frac sleeve, two pup joints, and one coupling. Relators purchase the component parts from third-party suppliers and then constructs the end product assembly, which it sells to consumers as a single unit assembly.

The RPI drilled four horizontal wells on the leased lands. They purchased frac sleeve assemblies from Relators to use in the horizontal wells on the leased lands. After the assemblies were run into the wells in question, fracturing operations began. According to the RPI, assemblies in three of the four horizontal wells failed, forcing the RPI to suspend operations on those wells. Operations on the fourth well were also suspended at Relators’ suggestion, since the assembly in the fourth well was from the same batch manufactured by Relators that failed in the other three wells.

According to the RPI, an investigation by Relators determined the leaks in the assembly "likely occurred between the pup joints and couplings due to a defect in the [a]ssemblies." As a result of the failures and required remediation in the four wells, the RPI allege they caused permanent damage both to the wells and the oil and gas formation on the leased lands. The RPI estimates their total damages exceed $20 million.

The RPI sued Relators for various causes of action sounding in products liability. On January 17, 2020,¹ Relators served the RPI with a motion for leave to designate Aero Lift Machine, LLC (Aero Lift) as a responsible third party (hereafter, motion for leave). In their motion for leave, Relators claimed Aero Lift was responsible for any failure associated with the pup joints or couplings because Aero Lift manufactured those component parts of the assembly. However, Relators continued to deny any defect in the assembly product or its component parts.

Ten days after the motion for leave was served, the trial court granted the motion and entered an order designating Aero Lift as a responsible third party. The RPI filed a motion to set aside and objected to the motion for leave within the statutory deadline to do so. In their initial objection, the RPI objected on the grounds that Relators failed to plead adequate facts regarding Aero Lift's purported responsibility.

On April 2, 2020, the RPI filed its first amended motion to set aside, objecting to the order granting the designation, and arguing for the first time Aero Lift does not meet the definition of "responsible third party" because the definition excludes "a seller eligible for indemnity under Section 82.002." See TEX.CIV.PRAC. & REM.CODE ANN. § 33.011(6). Relators responded, arguing its allegations against Aero Lift were sufficient under Texas’ notice-pleading standard, and Aero Lift is a proper responsible third party because Relators—and not Aero Lift—were the innocent-sellers of Aero Lift's allegedly-defective product.

On July 6, 2020, the RPI filed a second amended motion to set aside and motion to strike, in which it again sought to set aside the order designating Aero Lift as a responsible third party. However, for the first time in their second amended motion, the RPI requested the trial court strike Aero Lift's designation, or, alternatively, set it aside. The substantive basis in the second amended motion was identical to the first amended motion, objecting to the designation as insufficiently pleaded and precluded under the exception to the definition of "responsible third party" in Section 33.011(6).

Three days after the second amended motion was filed, the trial court held a hearing. The trial court entered an order "set[ting] aside" its January 27, 2020, order granting leave to designate Aero Lift as a responsible third party. The same order denied Relators’ motion for leave to designate Aero Lift as a responsible third party and struck Aero Lift as a responsible third party in the lawsuit.

Relators subsequently filed a motion to reconsider, which the trial court denied. This original proceeding followed.

DISCUSSION

Relators raise three issues in its petition for writ of mandamus:

1. Whether the trial court abused its discretion by striking and/or setting aside its order designating Aero Lift as a responsible third party;

2. Whether the trial court abused its discretion when it granted Plaintiffs’ (RPI's) motion to strike because inadequate time for discovery had elapsed; and

3. Whether the trial court abused its discretion when it denied Relators’ motion for leave to replead after striking its designation of Aero Lift as a responsible third party.

Standard of Review

Mandamus is an extraordinary remedy only available when a trial court clearly abuses its discretion and there is no adequate remedy by appeal. In re Prudential Ins. Co. of America , 148 S.W.3d 124, 135-36 (Tex. 2004)(orig. proceeding). A trial court abuses its discretion if it acts arbitrarily, capriciously, and without reference to guiding rules or principles, or if its decision is so arbitrary and unreasonable as to amount to a clear and prejudicial error of law. In re Cerberus Capital Mgmt., L.P. , 164 S.W.3d 379, 382 (Tex. 2005)(orig. proceeding).

When a trial court erroneously denies a party's motion for leave to designate a responsible third party, mandamus relief is the appropriate remedy. In re Mobile Mini, Inc. , 596 S.W.3d 781, 787-88 (Tex. 2020)(orig. proceeding) (citing In re Coppola , 535 S.W.3d 506, 507-09 (Tex. 2017)(orig. proceeding) ). Mandamus in these cases is appropriate because "an adequate appellate remedy is ordinarily lacking because allowing a case to proceed to trial without a properly requested responsible-third-party designation ‘would skew the proceedings, potentially affect the outcome of the litigation, and compromise the presentation of the relator's defense in ways unlikely to be apparent in the appellate record.’ " Id. (quoting In re Coppola , 535 S.W.3d at 509 ).

Proportionate Responsibility in Texas

Texas tort law follows a proportionate responsibility allocation of liability in cases submitted to the trier of fact. See TEX.CIV.PRAC. & REM.CODE ANN. §§ 33.002, 33.003. Under Section 33.003, the trier of fact determines proportionate responsibility for each cause of action alleged by assigning a whole-number percentage of responsibility to each claimant, each defendant, each settling person, and each responsible third party designated under Section 33.004. Id. at § 33.003(a). However, a person's conduct may only be submitted to the trier of fact to determine their percentage of responsibility when sufficient evidence—that is, more than a scintilla—exists tending to show the person bears some responsibility for the alleged harm. See id. at § 33.003(b) ; see also Gregory v. Chohan , 615 S.W.3d 277, 292 (Tex.App.—Dallas 2020, pet. filed) ("The evidence is legally sufficient if ‘more than a scintilla of evidence exists.’ ")(quoting Browning-Ferris, Inc. v. Reyna , 865 S.W.2d 925, 928 (Tex. 1993) ).

A "responsible third party" is a person or entity not named as a party in the litigation but nevertheless may bear responsibility for the claimant's injury. New Hampshire Ins. Co. v. Rodriguez , 569 S.W.3d 275, 298 n.9 (Tex.App.—El Paso 2019, pet. denied) (citing In re CVR Energy, Inc. , 500 S.W.3d 67, 78 (Tex.App.—Houston [1st Dist.] 2016, orig. proceeding)(opin. on reh'g)). To designate a responsible third party, a defendant must file a motion for leave to designate the person or entity as a responsible third party. TEX.CIV.PRAC. & REM.CODE ANN. § 33.004(a). Unless another party files an objection to the defendant's motion for leave on or before the fifteenth day after service of the motion, the trial court shall grant the requested leave to designate. Id. at § 33.004(f). Furthermore, even if an objection to the motion for leave is timely filed, the trial court still must grant leave to designate unless the objecting party can show: (1) the defendant failed to plead sufficient facts regarding the alleged responsibility of the person based on the Texas Rules of Civil Procedure's notice-pleading requirement; and (2) after...