Nexen Inc. v. Gulf Interstate Engineering

• Citation: 224 S.W.3d 412
• Decision Date: 30 November 2006
• Docket Number: No. 01-04-01223-CV.,01-04-01223-CV.
• Parties: NEXEN INC., Nexen Petroleum Operations Yemen Limited, and Canadian Nexen Petroleum Yemen, Appellants, v. GULF INTERSTATE ENGINEERING CO., Appellee.
• Court: Court of Appeals of Texas

224 S.W.3d 412

NEXEN INC., Nexen Petroleum Operations Yemen Limited, and Canadian Nexen Petroleum Yemen, Appellants, v. GULF INTERSTATE ENGINEERING CO., Appellee.

No. 01-04-01223-CV.

Court of Appeals of Texas, Houston (1st Dist.).

November 30, 2006.

David R. Noteware, Scott P. Stolley, Thompson & Knight, LLP, Dallas, for Appellant.

George T. Jackson, Burck, Lapidus & Lanza, P.C., Houston, for Appellee.

Panel consists of Justices TAFT, KEYES, and HANKS.

OPINION

TIM TAFT, Justice.

Appellants, Nexen Inc., Nexen Petroleum Operations Yemen Limited, and Canadian Nexen Petroleum Yemen (collectively, "the Nexen parties"), appeal from a take-nothing summary judgment rendered on their claims against appellee, Gulf Interstate Engineering Co. ("GIE"), for engineering work that GIE had done in Yemen on a pipeline for the Nexen parties' corporate predecessor. We determine whether (1) the statute of repose of Texas or Alberta, Canada applied and (2) GIE conclusively proved its affirmative defense that the applicable statute of repose barred the Nexen parties' claims again it. We affirm the judgment.

Background

In 1991, as alleged by the Nexen parties, CanadianOxy Offshore International Ltd. ("COIL") entered into a contract ("the contract") with GIE, a company headquartered in Texas, for GIE to provide engineering services for COIL's proposed oil processing and development facility in the Masila Block area of Yemen ("the Masila Project"). Under the contract, GIE provided engineering services for what was designated "Phase 1" of the Masila Project, which included preparation of a design-basis manual, a project-execution plan, and a detailed estimate of total installation costs for the facilities for the Masila Project. The Masila Project had nine principal components: a gathering system, a pump station, a central production facility, a pipeline, an export terminal, data and communications systems, offshore facilities, infrastructure, and power generation and distribution.

On January 1, 1992, COIL and GIE entered into an amendment to the 1991 contract ("the amended contract"). The amended contract provided for GIE's engineering services to continue into "Phase 2." In Phase 2, GIE was to design and to engineer the detailed design, procurement, engineering, and "other project-related services" required for the Masila Project facilities. At no time did GIE perform construction services for the Masila Project.

The Nexen parties alleged in their petition and have asserted in their brief, without dispute by GIE, that appellant Nexen Inc. is the corporate successor to the company that was the corporate assignee of COIL; that appellant Nexen Inc. was a partner in appellant Canadian Nexen Petroleum Yemen, which in turn had an interest in the ownership and operations of the Masila Project; and that appellant Nexen Petroleum Operations Yemen Limited was a partner in appellant Canadian Nexen Petroleum Yemen and was also a successor to COIL.

In July or August 1993, the pipeline at the Masila Project was completed, with the exception of punch-list and "ROW clean-up" items, and became operational, although engineering and construction on the overall Masila Project was still on-going. In July 1994, GIE certified that it had completed all of its engineering work for the Masila Project.

The Nexen parties alleged that, in April 2002, rainfall caused flooding at the Masila Project site. The flooding caused the pipeline to move, which further caused the pipeline to strain, to buckle, and to lose its concrete coating, resulting in damage to the pipeline. In April 2004, the Nexen parties sued GIE for failing to design and to engineer the pipeline and its route properly, alleging claims for breach of contract, breach of warranty, negligence, and strict liability for design defect. GIE answered, alleging, among other things, the affirmative defense of the 10-year statute of repose under Texas or Alberta law.

GIE moved for traditional summary judgment against all of the Nexen parties' claims. GIE asserted that the statute of repose under both Texas and Alberta law precluded the Nexen parties' claims. Concerning the choice of law, GIE argued:

Although there is some indication in the contract[s] between the parties that the laws of Alberta, Canada should apply, the choice of law is immaterial because the overall result is the same whether Texas law or Alberta law applies: [the Nexen parties'] claims must be dismissed with prejudice as a matter of law.

GIE then analyzed the statutes of repose under both jurisdictions' laws.¹ The crux of GIE's argument was that (1) under both statutes, the date of substantial completion of GIE's work was the accrual date for purposes of repose and (2) that date was July 1993, when the pipeline became fully operational. The Nexen parties responded that (1) the repose law of Alberta and Texas differed materially; (2) Alberta law applied; (3) the Nexen parties' claims were timely filed under Alberta's repose statute; and, alternatively, (4) the Nexen parties' claims were timely filed under Texas's repose statute.² In particular, the Nexen parties argued that the pipeline portion of GIE's work was only part of the work that GIE had contracted to do for the Masila Project and that GIE's overall work was not substantially completed until at least July of 1994.

GIE filed a summary-judgment reply, in which it again argued that the result was the same under either Texas or Alberta law and in which GIE also clarified its summary-judgment grounds by arguing that, because the Nexen parties had sued for GIE's actions relating to the pipeline portion of the Masila Project, the accrual date for calculating the statutes of repose should be the date that GIE finished its work on the pipeline. In their supplemental briefing below, the Nexen parties responded that GIE could not sever its work under the contract into discrete portions merely to invoke the statutes of repose starting at an earlier date. GIE then filed another brief, again asserting that the result was the same under either Texas or Alberta law and that, for purposes of calculating the repose statutes' accrual dates, the pipeline portion of GIE's work was severable from its overall work.³

In October 2004, the trial court rendered a take-nothing summary judgment in favor of GIE on all of the Nexen parties' claims against it. The summary-judgment order did not specify the grounds upon which it was rendered.

Standard of Review

GIE moved for traditional summary judgment. See TEX.R. CIV. P. 166a(c). Summary judgment under rule 166a(c) is proper only when a movant establishes that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Randall's Food Mkts., Inc. v. Johnson, 891 S.W.2d 640, 644 (Tex. 1995). A defendant is entitled to summary judgment if the evidence disproves as a matter of law at least one element of each of the plaintiff's causes of action or if it conclusively establishes all elements of an affirmative defense. Id.

In our review, we indulge every reasonable inference in favor of the nonmovant, resolve any doubts in its favor, and take as true all evidence favorable to it. Id. When, as here, an order granting summary judgment does not specify the grounds upon which the trial court ruled, we must affirm to the extent that any of the summary judgment grounds is meritorious. See Star-Telegram, Inc. v. Doe, 915 S.W.2d 471, 473 (Tex.1995).

The statute of repose operates as an affirmative defense. Ryland Group, Inc. v. Hood, 924 S.W.2d 120, 121 (Tex. 1996). Accordingly, GIE, as the traditional summary-judgment movant, had the burden conclusively to prove each essential element of that defense. Id. Only if GIE carried this burden would the burden then shift to the Nexen parties to raise a fact issue precluding summary judgment on this defense. See, e.g., id.

Choice of Law

In their first argument under their issue, the Nexen parties assert that the statute of repose of Alberta, Canada, rather than of Texas, applied to their claims because, among other things, both the contract and the amended contract called for application of Alberta's law. GIE responds that the Nexen parties waived the application of Alberta law for various reasons and that, in any event, the same result obtains under either jurisdiction's repose law.

The contract and the amended contract between the Nexen parties and GIE expressly called for the application of the laws of Alberta, Canada. Texas courts generally apply Texas procedural law even while applying the parties' contractual choice of law for substantive matters. See Ill. Tool Works, Inc. v. Harris, 194 S.W.3d 529, 532 (Tex.App.-Houston [14th Dist.] 2006, no pet.). Statutes of repose have been described as a substantive definition of rights, as opposed to a procedural limitation on rights.⁴ E.g., Trinity River Auth. v. URS Consultants, Inc.-Tex., 889 S.W.2d 259, 261 (Tex.1994). Therefore, if the choice-of-law provision is enforceable, it requires the application of Alberta's statute of repose.

GIE's summary-judgment argument was consistently that the two jurisdictions' statutes of repose did not differ materially, so that the Nexen parties would lose under either law. The Nexen parties argued below, as they do on appeal, that the contract and the amended contract required the application of Alberta law and, alternatively, that even if Texas law applied, they would prevail. The trial court did not recite in its summary-judgment order which law it had applied, and there is no other choice-of-law ruling that we may consider.⁵ However, "[b]ecause the question of which . . . law applies is one for the court, in the absence of any indication as to which . . . law the trial court actually applied, we presume that the trial court correctly analyzed the [applicable choice-of-law rules], took judicial notice of the relevant law brought to its attention, and applied the correct law...