Questar Pipeline Co. v. Grynberg, Nos. 98-8054

• Decision Date: 24 January 2000
• Docket Number: 98-8092,Nos. 98-8054
• Citation: 201 F.3d 1277
• Parties: (10th Cir. 2000) QUESTAR PIPELINE COMPANY, Plaintiff - Counter - Defendant - Appellee, v. JACK J. GRYNBERG; CELESTE C. GRYNBERG; L & R EXPLORATION VENTURE, Defendants - Counter - Claimants - Appellants
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1277

201 F.3d 1277 (10th Cir. 2000)

QUESTAR PIPELINE COMPANY, Plaintiff - Counter - Defendant - Appellee, v. JACK J. GRYNBERG; CELESTE C. GRYNBERG; L & R EXPLORATION VENTURE, Defendants - Counter - Claimants - Appellants.

Nos. 98-8054, 98-8092

UNITED STATES COURT OF APPEALS TENTH CIRCUIT

January 24, 2000

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF WYOMING. D.C. No. 92-CV-265

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] John F. Shepherd (Jane L. Montgomery and Donald I. Schultz, Holland & Hart, and Terrie T. McIntosh, Questar Corporation, with him on the brief), for the Plaintiff-Counter-Defendant- Appellee.

Tom C. Toner, Yonkee & Toner, Sheridan, Wyoming, for Defendants-Counter-Claimants-Appellants.

Before TACHA, KELLY, and LUCERO, Circuit Judges.

KELLY, Circuit Judge.

This case arises from disputes concerning several natural gas sales contracts. Appellee Questar Pipeline Company ("Questar") purchased natural gas from appellants Jack J. Grynberg, Celeste C. Grynberg, and L&R Exploration Venture ("Grynberg"). The gas purchase agreements at issue in this case were entered into in 1974, when gas prices were still regulated. Because the parties disagreed on the interpretation of the contract provision governing how to determine the price after deregulation, Questar brought a declaratory judgment action in 1992. Grynberg counterclaimed, charging that Questar: (1) did not take the amount of gas it was obligated to under several take-or-pay contracts; (2) breached the gas purchase agreements and an earlier settlement agreement; (3) intentionally interfered with the contractual relationship between Grynberg and the unit operator; (4) breached its duty of good faith and fair dealing by refusing to agree to decontrol certain wells upon Grynberg's request; (5) provided incorrect information to the unit operator concerning Grynberg's working interest, resulting in an underpayment; and (6) intentionally took gas without paying for it by placing devices on wells that allowed gas to flow around meters.

The district court granted summary judgment for Questar on the stolen gas issue (counterclaim 6). The deregulation price issue and the remaining counterclaims were then tried. The jury returned a verdict for Grynberg on all of its claims. Questar then sought judgment as a matter of law (formerly J.N.O.V.) under Fed. R. Civ. P. 50(b). The court greatly reduced the jury's determination of the price to be paid after deregulation and the amount to be paid under the take-or-pay contracts, and granted judgment for Questar on all of the counterclaims. Grynberg appeals the grants of judgment as a matter of law as well as the summary judgment on the stolen gas claim.

We reverse the district court's determination on the deregulation price issue, the take-or-pay contracts (counterclaim 1), and the breach of contract and intentional interference with contract claims (counterclaims 2 & 3). We affirm its ruling on the duty to decontrol (counterclaim 4), the working interest claim (counterclaim 5), and the stolen gas claim (counterclaim 6).

A. Take-or-Pay Contracts

1. Contract 246

Proper damages for Grynberg's take-or-pay claims under contract 246 for the years 1988 and 1990 are still in dispute. The jury awarded Grynberg $163,883.56 for 1988 and $124,976.83 for 1990. The district court denied Questar's motion for judgment as a matter of law on these claims, but several years later reduced the damage awards to $15,812.44 and $28,337.10 respectively. This was an abuse of discretion.

The court entered judgment on the reduced damage amounts, characterizing the evidence on damages as "undisputed." In fact, evidence had been admitted--a Grynberg exhibit calculating damages in exactly the amount the jury ultimately awarded. This exhibit was part of the record, and the jury had the right to rely on it in reaching its verdict. While some conflicting evidence supported the court's finding of lower damages, the evidence was far from "undisputed," and the jury's verdict should not be disturbed.

The controversy centers on the proper way to calculate the volume of gas Questar was obligated to take from Grynberg in various years under the take-or-pay contracts. The initial amount Questar was obligated to take was determined by a yearly test of the production capacity of all of the wells in the contract area. In some cases, wells could not be tested during the test period due to temporary mechanical problems. In other cases, new wells were brought on line after the date of the tests. In a pre-trial order, the court ruled that Grynberg could not increase Questar's take obligation by counting the additional production from any new wells added after the test period, unless Grynberg specifically requested a retest.

Abiding by the pre-trial order, Grynberg did not consider the production from any new wells when increasing Questar's obligation over the amount indicated by the initial tests. Rather, he attempted to increase the obligation by counting the increased capacity generated by the addition of compressors to existing wells that had been unable to produce during the initial testing period. Grynberg argued that this was allowed by Paragraph V-2(c) of its gas purchase agreement with Questar which provided "Should any well or wells be unable to be produced during the test period for temporary reasons such as mechanical failure or reworks, the test results shall be adjusted accordingly." Aplt. App. at 6238.

Questar contended, and the court agreed, that this method of calculation violated its pre-trial order. The court therefore reduced the jury's damage award (which took into account the increased production capability generated by adding compressors to existing wells) and entered judgment in an amount that disregarded any compressor-enhanced obligations.

Grynberg introduced into evidence several different calculations of take-or-pay damages. One of these was Exhibit G-490, which contained the amounts the jury ultimately awarded. A footnote to this exhibit contained the words "Deliverability not changed due to compressor installation." In fact, the numbers in the exhibit did include changes in deliverability due to compressor installation. Because Questar believed the footnote to be accurate, it did not object when the exhibit was offered. The general rule is that a party may not protest the jury's use of an exhibit to which that party did not object when offered into evidence. See United States v. Ivy, 83 F.3d 1266, 1287 (10th Cir. 1996). In this case, however, the inaccurate statement in the exhibit was not apparent on the exhibit's face and the basis of the objection -- that the damage calculations were inconsistent with the footnote, only became apparent on cross-examination. Thus, Questar's right to later contest the jury's use of the exhibit was not waived by its failure to object when the exhibit was first offered.

However, after admission of the exhibit, Questar was able to elicit on cross-examination that some of the figures in the exhibit included increases due to compressor installation. Grynberg's witness admitted that these figures were inconsistent with the exhibit's footnote, admitted that increasing damage amounts to reflect the addition of compressors appeared to be a mistake in the analysis, and agreed that taking out the compressor-increased amounts would result in a reduced claim for damages from what was included in the exhibit. Aplt. App. at 4231-33. Questar never moved to strike the exhibit. Nor did it move for judgment as a matter of law at the close of evidence that Exhibit G-490 displayed a legally inaccurate calculation of damages. The damage figures in the exhibit remained in the record for the jury to consider.

Questar argues that it did not need to object to the exhibit or make a Rule 50 motion because it had obtained partial summary judgment on the issue. The district court agreed, finding that any damages claimed as a result of adding compressors were in violation of its pre-trial order. But the pre-trial order only concerned the need to subject new wells to a retest; it did not address the issue of how Questar's obligations would be affected by the addition of a compressor to an existing well that had been temporarily shut in due to mechanical problems during the initial testing period. Far from being an "inexorable extension" of the order, as Questar claimed, this issue remained open after the pre-trial order.

Additionally, our review of the transcript does not support a characterization of the evidence as "undisputed." After discovering on cross-examination that the damage figures in Exhibit G-490 were enhanced by compressor installation, Questar called another Grynberg employee as an adverse witness. This witness's purpose was to present damage figures reflecting the elimination of compressor-enhanced delivery obligations. The reduced figures presented by this witness were those the court ultimately awarded to Grynberg. The witness did say that he believed his initial (larger) calculations may have been in error to the extent they included compressor-enhanced obligations. Aplt. App. at 5715. Had this been the end of the testimony, the court may have been correct in characterizing the evidence as "undisputed." However, the witness went on to say that the lower damage figures were only an alternative scenario, not the "correct" scenario; that Grynberg was not changing its initial position, and that Grynberg was still asking for the full amount listed in Exhibit G-490. Id. at 5733-36. In fact, this witness testified that, in his opinion, the new, lower figures should not be used by the jury. Id. at 5735.

Questar argues that a court may reduce damages "in those cases in which it is apparent as a matter of law that certain identifiable sums included in the verdict should not have been there." 11 Charles Alan Wright et al., Federal Practice and Procedure 2815...