Jones, In re

• Citation: 804 F.2d 1133
• Decision Date: 05 November 1986
• Docket Number: No. 82-2391,82-2391
• Parties: Bankr. L. Rep. P 71,499, Prod.Liab.Rep.(CCH)P 11,164 In re Jay D. JONES, Debtor. Jay D. JONES, Appellee, v. WILSON INDUSTRIES, INC. a Texas Corporation, Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

Page 1133

804 F.2d 1133

Bankr. L. Rep. P 71,499, Prod.Liab.Rep.(CCH)P 11,164

In re Jay D. JONES, Debtor Jay D. JONES, Appellee, v. WILSON INDUSTRIES, INC. a Texas Corporation, Appellant.

No. 82-2391.

United States Court of Appeals, Tenth Circuit.

Nov. 5, 1986.

Gerald P. Green and Stephanie Mather Croy of Pierce, Couch, Hendrickson, Johnston & Baysinger, Oklahoma City, Okl. (John R. Couch, was also on the brief) for appellant.

John T. Edwards of Monnet, Hayes, Bullis, Thompson & Edwards, Oklahoma City, Okl., for appellee.

Before HOLLOWAY, Chief Judge, and BREITENSTEIN ^* and SEYMOUR, Circuit Judges.

HOLLOWAY, Chief Judge.

The plaintiff-appellee Jones filed this action as an adversary proceeding arising out of a Chapter 11 bankruptcy. The plaintiff initially sued three entities: (1) Production Services, Inc. (PSI); (2) Otis Engineering, Inc. (Otis); and (3) Wilson Industries, Inc. (Wilson or defendant). The dispute between the plaintiff and Wilson arose out of drilling operations at the plaintiff's oil well. Initially, the plaintiff retained PSI as a consultant and supervisor to recomplete the well. PSI began work on the well in March of 1979. PSI cleared the well of shale bridges; however, the well continued to bridge over. PSI then ordered Otis to the well site to dislodge the shale bridges.

Otis first attempted to clear the well with the use of a coil tubing unit. This effort proved to be unsuccessful. Otis then employed a milling device known as a dyna-drill ¹ to attempt to clear the well. After a short period of drilling, the dyna-drill became stuck in the well. (Tr. XXXI, 101). A "fishing" job was required to remove about 11,700 feet of coil tubing and the dyna-drill from the well.

Wilson was employed to fish the coil tubing and the dyna-drill from the well. (Id. at 114). Wilson was successful in retrieving a large portion of the tubing. It then advised PSI and the plaintiff that it would be difficult to fish out the remaining tubing due to the conditions of the well. The plaintiff, however, with the advice of PSI, decided to attempt to mill up the remaining tubing in the well with the use of a flat-bottom mill. (Id. at 106-07, 247). This was unsuccessful, and the mill was removed from the well. Shortly after removal, it was discovered that the mill had separated from the shaft body and had remained in the well at about 11,000 feet. (Id. at 110).

Wilson spent the next twenty-one days attempting to fish the severed mill from the well. The task was eventually successful. However, the operation at the well was subsequently shut down due to the loss of circulation. (Id. at 115-17). The plaintiff then filed a Chapter 11 petition in bankruptcy.

Pursuant to the then Interim Rules implementing 28 U.S.C. Sec. 1471(c), the plaintiff sued PSI, Otis, and Wilson in an adversary proceeding. The plaintiff sought recovery for the cost of the fishing jobs and damage to the well. ² The initial complaint alleged counts of negligence and breach of contract as to PSI, and negligence and manufacturer's products liability as to Otis and Wilson. The plaintiff, however, dismissed the negligence count against PSI in his Amended Pretrial Order for the first trial. ³ (Tr. II, 382).

On the day of the first trial, PSI settled with the plaintiff for $100,000 and a release of its claim filed in the bankruptcy proceeding for services performed at the well site. (Tr. XXIV, 3-4). The trial proceeded against Otis and Wilson. The jury was unable to agree upon a verdict and a mistrial was declared. Before the second trial, Otis settled with the plaintiff for $125,000 and a release of its claim in bankruptcy. (Tr. XXXI, 5). The trial then proceeded against Wilson as the sole defendant.

The jury returned a verdict in the p1aintiff's favor for $265,000. Wilson's counsel then moved the bankruptcy court to reduce the verdict by the amounts paid in settlement by PSI and Otis pursuant to Okla.Stat. tit. 12, Sec. 832(H) (1981) (Okla. Contribution Statute). (Tr. XXXI, 670). The court denied Wilson's motion but did offset the amount of Wilson's claim for services against the verdict. ⁴ The parties then agreed to a direct appeal to this court from the final judgment of the bankruptcy court pursuant to 28 U.S.C. Sec. 1293(b) of the 1978 Bankruptcy Code. See Berg v. Shannon (In re Shannon), 670 F.2d 904, 905-06 (10th Cir.1982) (per curiam). The notice of appeal was filed on October 15, 1982. We, therefore, have appellate jurisdiction of this case. Accord In re Quanta Resources Corp., 739 F.2d 927 (3d Cir.1984), aff'd sub nom., Midlantic Nat'l Bank v. New Jersey Dept. of Environmental Protection, --- U.S. ----, 106 S.Ct. 755, 88 L.Ed.2d 859 (1986). ⁵

Wilson contends on appeal that the bankruptcy court lacked subject matter jurisdiction to hear the state negligence and products liability claims against it. Wilson further says that the court erred in failing to enforce an exculpatory clause in the contract between it and the plaintiff. Wilson finally argues that the court erred in failing to reduce the judgment against it by the amounts paid in settlement by PSI and Otis.

I

Wilson contends that the bankruptcy court could not constitutionally exercise jurisdiction over the state negligence and products liability claims. It bases its argument on Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982). In Northern Pipeline, the Court held that Sec. 1471(c) constituted an unconstitutional delegation of judicial power to a non-Article III court, i.e., the bankruptcy courts. The Court stayed entry of its judgment, however, until December 24, 1982, ⁶ stating:

In the present case, all of these considerations militate against the retroactive application of our holding today. It is plain that Congress' broad grant of judicial power to non-Article III bankruptcy judges presents an unprecedented interpretation of Article III. It is equally clear that retroactive application would not further the operation of our holding, and would surely visit substantial injustice and hardship upon those litigants who relied upon the Act's vesting of jurisdiction in the bankruptcy courts.... We hold, therefore, that our decision shall apply only prospectively.

Id. at 88, 102 S.Ct. at 2880. (emphasis added).

Wilson argues that we should apply the Northern Pipeline decision to all cases pending at trial level, on appeal, or in which no final order had been entered as of June 28, 1982, the day of the Supreme Court's decision. (Appellant Reply Brief 9). The effect of this contention here would be to nullify the proceedings to date, necessitating the retrial of the case.

In deciding what the Supreme Court intended when it stated that the Northern Pipeline decision was to be applied prospectively, we begin with the decision itself. The prospective or retroactive effect of a new rule depends upon the enunciating court's intention. N.S.C. Contractors, Inc. v. Twin Parks Limited Partnership (In re Twin Parks Limited Partnership), 720 F.2d 1374, 1376 (4th Cir.1983), cert. denied, 465 U.S. 1103, 104 S.Ct. 1602, 80 L.Ed.2d 132 (1984). It must further be noted that Northern Pipeline has not only a component as to prospective application, but also a component staying the application of the entire judgment to December 24, 1982. See 459 U.S. at 813, 103 S.Ct. at 199.

The language employed by the Court is not dispositive itself. The opinion states "that our decision shall apply only prospectively." 458 U.S. at 88, 102 S.Ct. at 2880. However, the Court did cite three cases in a footnote to explain the nature of the prospective-only provision. ⁷ Id. at 88 n. 41, 102 S.Ct. at 2880 n. 41. These cases deal with the effect of a decision like Northern Pipeline on final orders or actions taken before the decision. See White Motor Corp. v. Citibank, N.A., 704 F.2d 254, 257-59 (6th Cir.1983). Prospective application thus appears to have been intended to protect final judgments entered by the bankruptcy courts prior to the date Northern Pipeline became effective--December 24, 1982.

In Boise City Farmers Cooperative v. Palmer, 780 F.2d 860 (10th Cir.1985), we adopted the analysis of the Sixth Circuit in White Motor Corp. v. Citibank, N.A., 704 F.2d 254 (6th Cir.1983), quoting approvingly the conclusion "that the prospective-only provision in Northern Pipeline simply validates orders and dispositions by the bankruptcy courts which became final in the Bankruptcy Court as of December 24, 1982." 780 F.2d at 863 (quoting White Motor, 704 F.2d at 258). We then concluded "that bankruptcy courts had subject matter jurisdiction to enter final orders in related proceedings under 28 U.S.C. Sec. 1471 until December 24, 1982, the effective date of Northern Pipeline." Id.

Such a result is supported by the reasons given by the Court for the prospective effect of its decision in Northern Pipeline. Substantial injustice and hardship would surely be visited "upon those litigants who relied upon the Act's vesting of jurisdiction in the bankruptcy courts...." Northern Pipeline, 458 U.S. at 88, 102 S.Ct. at 2880; see also United States v. Security Industrial Bank, 459 U.S. 70, 74 n. 5, 103 S.Ct. 407, 410 n. 5, 74 L.Ed.2d 235 (1982). We therefore view the Court's prospective application and stay components of Northern Pipeline as contemplating "full rights to appellate review from all final judgments, orders, or decrees entered by the bankruptcy courts prior to the expiration of the stay." Massachusetts v. Dartmouth Nursing Home, Inc., 726 F.2d 26, 30 (1st Cir.1984); see Boise City Farmers Cooperative, 780 F.2d at 863; see also Christison v. The Norm Ross Co. (In re Eastview Estates II), 713 F.2d 443, 447 (9th Cir.1983); Klapp v. Landsman (In re Klapp), 706 F.2d 998, 999 n. 1 (9th Cir.1983) (per curiam); Gray v. Snyder, 704 F.2d 709, 711 (4th Cir.1983). The case here was fully tried and a jury verdict rendered on April 1, 1982. Final judgment was...