Murphy Exploration & Production Co. v. Oryx Energy Co.

• Decision Date: 22 November 1996
• Docket Number: No. 96-1108,96-1108
• Parties: MURPHY EXPLORATION & PRODUCTION COMPANY, Plaintiff-Appellant, v. ORYX ENERGY COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

Page 670

101 F.3d 670

MURPHY EXPLORATION & PRODUCTION COMPANY, Plaintiff-Appellant, v. ORYX ENERGY COMPANY, Defendant-Appellee.

No. 96-1108.

United States Court of Appeals Federal Circuit.

Nov. 22, 1996.

Jerry E. Rothrock, Akin, Gump, Strauss, Hauer & Feld, L.L.P., Washington, DC, argued, for plaintiff-appellant. With him on the brief, were Michael K. Swan, C. Fairley Spillman, and John C. Crespo. Of counsel on the brief, was James R. Nieset, Plauche, Smith & Nieset, Lake Charles, LA.

James Baller, The Baller Law Group, Washington, DC, argued, for defendant-appellee. With him on the brief, was Lana L. Meller. Of counsel on the brief, was J. Michael Veron, Jr., Scofield, Gerard, Veron, Singletary & Pohorelsky, Lake Charles, LA.

Before RICH, NEWMAN, and BRYSON, Circuit Judges.

PAULINE NEWMAN, Circuit Judge.

Murphy Exploration & Production Company (Murphy ¹) seeks reimbursement from Oryx Energy Company (Oryx ²) of certain sums that Murphy paid the Department of Energy (DOE) in settlement of litigation concerning violation of the Economic Stabilization Act of 1970 (ESA), 12 U.S.C. § 1904 note, incorporated in the Emergency Petroleum Allocation Act (EPAA), 15 U.S.C. § 754(a)(1). Murphy states that it was required to make restitution to the DOE for overcharges that in fact were charged and received by Oryx as owner of working interests in oil leases operated by Murphy. Oryx responds that Murphy can not be deemed to have been charged by the DOE for the Oryx overcharges or to have made restitution on behalf of Oryx, because Oryx had previously settled with the DOE and had paid restitution for all of the overcharges for which it was liable.

On cross-motions for summary judgment, the District Court for the Western District of Louisiana held that Murphy was not entitled to the requested reimbursement. ³ This appeal followed. We affirm.

BACKGROUND

From August 19, 1973 until January 28, 1981, Murphy operated various oil and gas leases off the coast of Louisiana in the Ship Shoal Block 113 and South Pelto Block 20 fields. These leases were subject to the ESA/EPAA price controls. Oryx owned non-operating working interests in several of these leases, and took in kind and sold its share of the product. In 1975 the DOE began its audit of Murphy's activities, and issued a Remedial Order on June 17, 1992. Relying on the "operator liability doctrine," the Remedial Order assessed Murphy for restitution of the full amount of alleged overcharges based on all the oil produced and sold from the leases during the relevant period, whether sold by Murphy or taken in kind and sold by the working-interest owners.

In accordance with the operator liability doctrine the DOE has under certain circumstances held the operator liable for overcharges attributed to sales made by working-interest owners, without regard to whether the operator itself made the overcharges or received the proceeds. The operator liability doctrine has been imposed when the operator is the "animating force" or "central figure" and thus is deemed to have caused the overcharges, or when the operator is made liable as a matter of administrative convenience to the government enforcement effort. Murfin v. Department of Energy, 90 F.3d 1551, 1555 (Fed.Cir.1996). The DOE proceeded against Murphy on the "central figure" theory, stating in the 1992 Remedial Order that "The ERA [Economic Regulatory Administration] has also established a prima facie showing that Murphy or ODECO was a 'central figure' in setting prices for in-kind oil sales from these properties, and should therefore be liable for resulting overcharges under the operator liability doctrine."

Murphy appealed the Remedial Order to the Federal Energy Regulatory Commission. The Commission's administrative law judge found that the DOE had not established that price violations had occurred on sale of the oil taken in kind by the working-interest owners. The ALJ also found that "the evidence of record does not establish that [Murphy] caused any of the in-kind takers' overcharges, if such overcharges in fact occurred." Ocean Drilling & Exploration Co., 66 FERC (CCH) p 63,002, 1994 WL 18600, * 24 (1994). The ALJ ordered modification of the Remedial Order to reduce Murphy's liability from the government's asserted $70 million to about $5 million, none of which was attributed to overcharges on oil taken and sold by owners of working interests. Id.

The DOE appealed the ALJ's decision to the full Commission. Before the appeal was heard Murphy and the DOE entered into a settlement agreement effective September 15, 1994. The DOE agreed to dismiss all charges against Murphy for a total payment of $10.7 million. Murphy then sought reimbursement from the working-interest owners for a proportionate share of this liability. However, during the settlement negotiations, of which Murphy had notified the working-interest owners, Oryx had notified Murphy that it had already extinguished its entire liability in an independent settlement with the DOE. Thus Oryx refused to contribute to Murphy's settlement.

Murphy brought suit against Oryx in the district court, invoking federal common law as the basis for Oryx's obligation to reimburse Murphy based on Oryx's working interest share. Murphy relied on Koch Industries, Inc. v. Mobil Oil Corp., 968 F.2d 27, 37 (Temp.Emer.Ct.App.1992), ⁴ wherein the court recognized the operator's entitlement to recover from "other parties" for restitution levied by the DOE under the operator liability doctrine. As an alternative theory of recovery, Murphy relied on an express indemnity contained in a January 19, 1984 Agreement of Sale and Purchase whereby Oryx sold its working interest in the Ship Shoal leases to Murphy, the operator. The agreement provided that Oryx shall "indemnify and hold harmless" Murphy for

liabilities [that] shall include, but not be limited to, all refund obligations, fines, penalties, or payments to be made of any kind due to the price received by [Oryx] for the sale of crude oil, condensate and natural gas or for services connected therewith.

Despite this indemnity obligation, Oryx's position is that Murphy's claim for reimbursement is defeated by a September 1980 Consent Order between the DOE and Oryx which settled all claims "arising out of [Oryx's] compliance with the federal petroleum price and allocation regulations." Oryx states that this Consent Order resolved all claims that the DOE had or could raise concerning Oryx's compliance with the petroleum price controls during the covered period. Oryx states that because its entire liability under the ESA/EPAA was extinguished in 1980, there were no remaining obligations to Murphy in 1984 under the indemnity clause, and no remaining obligations to the DOE that Murphy could have settled in 1994. Murphy responds that the DOE continued to assess Murphy as operator for Oryx's overcharges and, despite the holding of the ALJ that there were no Oryx overcharges attributable to Murphy, the DOE had not abandoned its position that it could recover from Murphy despite the settlement with Oryx.

The district court held that the 1980 Consent Order was a complete defense to Murphy's claim for reimbursement. The court stated that Murphy did not discharge any obligation of Oryx to the DOE because "any alleged wrongdoing on Oryx's behalf has already been expiated by the [Oryx] consent order." The district court also held that the 1984 indemnity clause between Murphy and Oryx did not apply to Murphy's 1994 settlement and payment to the DOE, even were a portion of that payment attributable to overcharges by Oryx. The court applied Louisiana law that provides that an indemnitee shall not be indemnified for its own negligence absent an express agreement calling for such indemnification. Finding no such provision in the 1984 Agreement, on this alternative ground the court held that Murphy could not recover from Oryx.

DISCUSSION

Summary judgment is appropriate where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, 477 U.S. 242, 255, 106 S.Ct. 2505, 2513-14, 91 L.Ed.2d 202 (1986). Upon such motion, the evidence of the non-movant is to be believed and all justifiable inferences are to be drawn in its favor. Id.; Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). When both parties move for summary judgment, grant of the motion in favor of one party must satisfy this rule concerning factual inferences; cross-motions do not change the requirement that all justifiable inferences must be drawn in favor of the losing party. See, e.g., Scripps Clinic & Research Found. v. Genentech, 927 F.2d 1565, 1576, 18 USPQ2d 1001, 1005 (Fed.Cir.1991). We give plenary appellate review to the grant of summary judgment. MAPCO Int'l Inc. v....