Midstream v. Anadarko Petroleum Corp.

• Decision Date: 24 June 2013
• Docket Number: No. 12SA307,12SA307
• Court: Colorado Supreme Court
• Parties: In re DCP MIDSTREAM, LP, a Delaware limited partnership, Plaintiff v. ANADARKO PETROLEUM CORPORATION, a Delaware corporation; Kerr–McGee Oil & Gas Onshore LP, a Delaware limited partnership; and Kerr–McGee Gathering LLC, a Delaware limited liability company, Defendants.

303 P.3d 1187

In re DCP MIDSTREAM, LP, a Delaware limited partnership, Plaintiff

v.ANADARKO PETROLEUM CORPORATION, a Delaware corporation; Kerr–McGee Oil & Gas Onshore LP, a Delaware limited partnership; and Kerr–McGee Gathering LLC, a Delaware limited liability company, Defendants.

No. 12SA307

Supreme Court of Colorado.

June 24, 2013

Original Proceeding Pursuant to C.A.R. 21, Weld County District Court Case No. 11CV222, Honorable Elisabeth Strobel, Judge

Perkins Coie LLP, Robert N. Miller, Michael A. Sink, Elizabeth Manno Banzhoff, Denver, Colorado, Barnes & Lewis, LLP, Robert N. Barnes, Oklahoma City, Oklahoma, Attorneys for Plaintiff.

Lewis, Bess, Williams & Weese P.C., Ezekiel J. Williams, Steven K. Imig, Christopher S. Mills, Lee F. Fanyo, Denver, Colorado, Susman Godfrey LLP, Mary Kathryn Sammons, Mark L.D. Wawro, Karen A. Oshman, David M. Peterson, Houston, Texas, Susman Godfrey LLP, LeElle Krompass, Dallas, Texas, Attorneys for Defendants.

Poulson, Odell & Peterson, LLC, Scott M. Campbell, Jeremy I. Ferrin, Denver, Colorado, Attorneys for Amicus Curiae Chevron U.S.A. Inc.

Shook, Hardy & Bacon L.L.P., Jonathan H. Gregor, Kansas City, Missouri, Shook, Hardy & Bacon L.L.P., Mark A. Behrens, Washington, DC, Attorneys for Amici Curiae National Association of Manufacturers and American Tort Reform Association.

Bjork Lindley Little PC, Robert C. Mathes, Heather R. Buller, Denver, Colorado, Attorneys for Amici Curiae American Petroleum Institute and American Association of Professional Landmen.

Wells, Anderson & Race, LLC, Mary A. Wells, L. Michael Brooks, Marilyn S. Chappell, Denver, Colorado, Attorneys for Amicus Curiae Product Liability Advisory Council.

En Banc

P.3d CHIEF JUSTICE BENDER delivered the Opinion of the Court.

¶ 1 This original proceeding involves questions about the scope of discovery under Rule 26 of the Colorado Rules of Civil Procedure and the application of the attorney-client privilege to title opinions prevalent in the oil and gas industry.

¶ 2 Plaintiff DCP Midstream, LP, the respondent in this court, sued Anadarko Petroleum Corporation, the petitioner, for breach of contract and other claims. DCP asserted eleven breach of contract claims but stated in its complaint that it anticipated adding additional breach of contract claims after conducting discovery. During discovery, DCP sent Anadarko fifty-eight requests for production seeking millions of pages of paper and electronic documents and many of Anadarko's “title opinions”—attorney-authored opinions about the state of title to land or mineral interests. Anadarko refused to produce many of the requested documents. DCP then filed a motion to compel. In response, Anadarko argued that many of DCP's requests were not relevant to the eleven breach of contract claims pleaded and were thus outside the scope of discovery permitted by C.R.C.P. 26(b)(1). Anadarko also argued that the title opinions were privileged attorney-client communications.

¶ 3 Without holding a hearing, the trial court granted DCP's motion. The trial court did not address any of Anadarko's objections, nor did it provide any analysis under C.R.C.P. 26(b) in support of its conclusions. In a later written order, the trial court reasoned that DCP was entitled to discovery on any issue that is or may become relevant and ruled that Anadarko's title opinions were not privileged because they were based on public information. Following this order, Anadarko petitioned this court for relief under C.A.R. 21.

¶ 4 This proceeding raises important questions about the scope of discovery and the extent to which trial courts must manage the discovery phase of a case to accomplish the overriding purpose of our civil rules—“the just, speedy, and inexpensive determination of every action.” C.R.C.P. 1. The civil rules, and our cases interpreting them, reflect an evolving effort to require active judicial management of pretrial matters to curb discovery abuses, reduce delay, and decrease litigation costs. SeeC.R.C.P. 16 committee comment (“It is expected that trial judges will assertively lead the management of cases to ensure that justice is served.”).

¶ 5 This principle of active judicial management is also reflected in C.R.C.P. 26(b), which defines the permissible scope of discovery in any given case. As amended in 2002, C.R.C.P. 26(b)(1) restricts the scope of discovery available as a matter of right to that relevant to the “claim or defense of any party.” The trial court may allow broader discovery into the “subject matter” involved in the action for “good cause”—a standard that is “meant to be flexible” but is otherwise undefined. As it did before the 2002 amendments, C.R.C.P. 26(b)(2) imposes limits on the number of depositions, interrogatories, and requests for production, and these limits can also be modified for “good cause”—a standard that requires the trial court to consider the cost-benefit and proportionality factors listed in subsection (b)(2)(F).

¶ 6 It is clear that the “claim or defense” category is intended to be narrower than the “subject matter” category, and broader discovery should be permitted only for good cause. It is also clear that the 2002 amendments are designed “to involve the court more actively in regulating the breadth of sweeping or contentious discovery.” Thus, the amendments are intended to narrow the scope of permissible discovery available to parties as a matter of right and to require active judicial management when a party objects that the discovery sought exceeds that scope.

¶ 7 The rule suggests that if a party objects to discovery because it is not relevant to a claim or defense, then the trial court must become involved. From the rule's plain language, it appears that the trial court need only make a simple determination as to whether the discovery sought is relevant to any party's “claim or defense” and, if not, whether good cause exists for permitting discovery into the “subject matter” of the case. However, the rule does not explain the difference between discovery relevant to a “claim or defense” and discovery relevant to the “subject matter.” The advisory committee's notes offer a practical approach. They state that “[w]hen judicial intervention is invoked, the actual scope of discovery should be determined according to the reasonable needs of the action.” We perceive no meaningful distinction between the result of this approach and the goal of the rule's “claim or defense” and “subject matter” categories, as both require active judicial management of discovery when disagreements about the scope of discovery arise. We prefer the practical approach offered by the advisory committee's notes because it avoids the possibility of additional litigation that the “claim or defense” and “subject matter” categories appear destined to invite.

¶ 8C.R.C.P. 26(b) requires trial courts to take an active role managing discovery when a scope objection is raised. When faced with a scope objection, the trial court must determine the appropriate scope of discovery in light of the reasonable needs of the case and tailor discovery to those needs. Because each case is unique and deserves unique treatment, the reasonable needs of the case will necessarily vary, depending on the subject matter and complexity of the case, the nature of the parties' claims or defenses, and the discovery necessary to resolve the dispute. To tailor discovery to the specific needs of the case, we find the cost-benefit and proportionality factors listed in C.R.C.P. 26(b)(2)(F) helpful. Like the 2002 amendments, these factors require active judicial management to control excessive discovery.

¶ 9 Hence, we hold that, to resolve a dispute regarding the proper scope of discovery in a particular case, the trial court should, at a minimum, consider the cost-benefit and proportionality factors set forth in C.R.C.P. 26(b)(2)(F). When tailoring discovery, the factors relevant to a trial court's decision will vary depending on the circumstances of the case, and trial courts always possess discretion to consider any or all of the factors listed—or any other pertinent factors—as the needs of the case require.

¶ 10 After review of the trial court's order compelling discovery of voluminous documents and extensive electronic information, we conclude that the trial court has not yet taken an active role managing discovery because it has not determined the appropriate scope of discovery in light of the reasonable needs of the case and has not attempted to tailor discovery to those needs. We also conclude that the trial court's analysis compelling production of Anadarko's title opinions is without legal support. Thus, we conclude that the trial court abused its discretion. We make the rule absolute and return the case to the trial court for proceedings consistent with this opinion.

I. Facts and Proceedings Below

¶ 11 The parties to this original proceeding are oil and gas companies that gather, transport, and process natural gas in the Wattenberg Gas Field in northeastern Colorado. Plaintiff DCP Midstream, LP is a natural gas transporter, meaning it transports natural gas from gas wells to processing plants where the gas is eventually sold. This is accomplished under contractual arrangements called “gas purchase, gathering, and processing agreements” between DCP and natural gas producers such as defendant Kerr–McGee Oil & Gas Onshore, LP.

¶ 12 According to DCP, it had a “stable, productive relationship” with Kerr–McGee Oil & Gas until defendant Anadarko Petroleum Corporation acquired it. At that time, Anadarko Petroleum also acquired defendant Kerr–McGee Gathering LLC, another natural gas transporter and DCP competitor. Since then, according to DCP's complaint, Anadarko Petroleum has directed Kerr–McGee Oil & Gas and Kerr–McGee Gathering to transport and process natural gas in violation of DCP's contractual rights.

¶ 13 DCP sued Anadarko Petroleum, Kerr–McGee Oil & Gas, and Kerr–McGee Gathering...