Ramming v. Natural Gas Pipeline Co. of America

• Decision Date: 05 November 2004
• Docket Number: No. 03-11160 Summary Calendar.,03-11160 Summary Calendar.
• Citation: 390 F.3d 366
• Parties: R.A. RAMMING; Marilyn Roddy; Evelyn Halfhill; Reva Sue Simms; David Reeves; Karla Jean Hughes; Loretta Kay Owen; Donnie Lou Williams; W.L. Bruce, individually; W.L. Bruce, a Texas General Partnership, Plaintiffs-Appellees, v. NATURAL GAS PIPELINE COMPANY OF AMERICA; et al., Defendants, Chesapeake Panhandle Limited Partnership, formerly known as MC Panhandle Inc., formerly known as Chesapeake Panhandle Inc.; Chesapeake Operating Inc., Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

390 F.3d 366

R.A. RAMMING; Marilyn Roddy; Evelyn Halfhill; Reva Sue Simms; David Reeves; Karla Jean Hughes; Loretta Kay Owen; Donnie Lou Williams; W.L. Bruce, individually; W.L. Bruce, a Texas General Partnership, Plaintiffs-Appellees, v. NATURAL GAS PIPELINE COMPANY OF AMERICA; et al., Defendants Chesapeake Panhandle Limited Partnership, formerly known as MC Panhandle Inc., formerly known as Chesapeake Panhandle Inc.; Chesapeake Operating Inc., Defendants-Appellants.

No. 03-11160 Summary Calendar.

United States Court of Appeals, Fifth Circuit.

November 5, 2004.

COPYRIGHT MATERIAL OMITTED

James Douglas Ray, Austin, TX, for Plaintiffs-Appellees.

Maston C. Courtney, Courtney, Countiss, Brian & Bailey, Amarillo, TX, Raymond B. Roush, Chesapeake Operation Inc., Oklahoma City, OK, for Defendants-Appellants.

Appeal from the United States District Court for the Northern District of Texas.

Before SMITH, DeMOSS and STEWART, Circuit Judges.

PER CURIAM:

In this diversity action, Chesapeake Panhandle Limited Partnership and Chesapeake Operating Inc. (collectively Chesapeake) appeal the district court's awarding of summary judgment for the plaintiffs and the district court's modification of the parties' Rule 68 Offer of Judgment. Chesapeake argues that the district court erred as a matter of law in holding that Chesapeake breached the gas contract by deducting post-production charges from Appellees' royalty payments. Chesapeake also asserts the district court erred as a matter of law in refusing to file the parties' Rule 68 Offer of Judgment. We hold that Chesapeake can appeal the district court's summary judgment order because the judgment entered by the district court, dismissing Chesapeake's right to appeal, was invalid as a matter of law. Because we also find that the district court erred in holding that the post-production charges could not be deducted from the plaintiffs' royalty payments, we reverse the district court's grant of summary judgment as to that claim.

FACTUAL AND PROCEDURAL BACKGROUND

This claim concerns two leases (collectively the "Ramming leases") covering 640 acres in Carson County, Texas. The first lease is a 1930 lease from William Ramming covering 560 acres. The second lease is a 1937 lease from Bertha Ramming covering the remaining 80 acres. The plaintiffs in this action have succeeded to the original lessors' interests under those oil and gas leases, and the defendant on appeal is the current operator and seller of natural gas produced from them.

The 1930 lease states royalties are to be paid on the basis of 1/8 of net proceeds from sales at the mouth of the well. The 1937 lease states royalties are to be paid on the basis of 1/8 of the market value, at the well, of gas sold or used on the basis set out in a division order executed by lessor to lessee.

On December 23, 1937, the plaintiffs' predecessors in interest executed a consolidation agreement aggregating the entire leasehold as a single unit for the production of natural gas and apportioning the royalties that may be due from natural gas production under the terms of the consolidation agreement.

The plaintiffs initiated the underlying suit against the former and current owners and operators of an active gas well subject to said lease. The claims against the prior owners and operators of the well, and certain other matters, were all settled. The remaining claims before the district court were breach of contract claims in which the plaintiffs allege that defendant-appellant Chesapeake, the current owner and operator, breached the lease by underpaying gas royalties, by improperly deducting gathering and other post-production charges from the royalty owners' payments, and by failing to provide free gas for the household attached to the subject lease.

On August 26, 2003, the District Court granted summary judgment as to the issue of liability in favor of the plaintiffs on all of their claims. On September 8, 2003, the parties filed a Rule 41 Stipulation of Dismissal with Prejudice, which stipulated that the parties had resolved their differences and requested the district court to withdraw its summary judgment. The District Court refused to sign the order of dismissal or withdraw its summary judgment order.¹ On September 10, 2003, the parties entered into a Rule 68 Offer of Judgment agreement, which, among other things, preserved Chesapeake's right to appeal the August 26 summary judgment order. The parties submitted the written acceptance of the Rule 68 Offer of Judgment to the clerk of court to file, along with a form of judgment for the district court to sign. Chesapeake's counsel states that the district court indicated by conference call with all counsel that the court would not sign the form of judgment because it did not settle all issues. The district court then ordered the parties to file a stipulation of facts. On September 15, 2003, the parties submitted their stipulated facts along with another form of judgment for the court to sign, which mirrored the previous judgment. The district court did not sign the parties' agreed judgment; instead, the court entered its own judgment filed on September 18, 2003. The court's judgment wrote out Chesapeake's stipulation that the judgment was without prejudice to their right to appeal the August 26 summary judgment order, but in all other ways mirrored the parties' agreed upon judgment. The defendants filed a Motion to Amend Judgment, which the district court denied. A timely notice of appeal was subsequently filed.

DISCUSSION

On appeal, Chesapeake argues that the district court erred in failing to enter their form of judgment and in not granting their Motion to Amend Judgment. Chesapeake also appeals only that part of the August 26, 2003 summary judgment order that found they improperly deducted post-production charges from the payments of the royalty owners.

I. Rule 68 Offer of Judgment

We review an interpretation of Rule 68 de novo. Jason D.W. by Douglas W. v. Houston Independent School Dist., 158 F.3d 205, 208 (5th Cir.1998).

Federal Rule of Civil Procedure 68 provides, in relevant part:

At any time more than 10 days before the trial begins, a party defending against a claim may serve upon the adverse party an offer to allow judgment to be taken against the defending party . . . If within 10 days after the service of the offer the adverse party serves written notice that the offer is accepted, either party may then file the offer and notice of acceptance together with proof of service thereof and thereupon the clerk shall enter judgment.

FED. R. CIV. PRO. 68

Rule 68 permits defendants in an action to present an offer of judgment to the plaintiffs at any time more than 10 days before trial; the plaintiff has 10 days in which to unconditionally accept the offer.² FED.R.CIV.P. 68. Generally, a Rule 68 offer is considered irrevocable during that 10 day period. 12 WRIGHT & MILLER, FED. PRAC. & PROC. § 3005 (2d ed.1997). A party must reserve its right to appeal prejudgment rulings in the offer of judgment, otherwise no appeals from judgment will be allowed. See, e.g., Shores v. Sklar, 885 F.2d 760 (11th Cir.1989) (holding that plaintiff's consent to offer of judgment without reserving right of appeal waives plaintiff's right to appeal denial of class certification).

If the plaintiff accepts the offer, either party may file the offer and acceptance with the clerk of the court, who shall then enter judgment. FED.R.CIV.P. 68. The court generally has no discretion whether or not to enter the judgment. A Rule 68 Offer of Judgment is usually considered self-executing. See generally Mallory v. Eyrich, 922 F.2d 1273,1279 (6th Cir.1991) ("By directing that the clerk shall enter judgment after proof of offer and acceptance have been filed, the explicit language of the rule signifies that the district court possesses no discretion to alter or modify the parties' agreement"); Webb v. James, 147 F.3d 617, 621 (7th Cir.1998) ("Rule 68 operates automatically, requiring that the clerk `shall enter judgment' upon the filing of an offer, notice of acceptance and proof of service. This language removes discretion from the clerk or the trial court as to whether to enter judgment upon the filing of the accepted offer"); Perkins v. U.S. West Communs., 138 F.3d 336, 338 (8th Cir.1998) ("Rule 68 leaves no discretion in the district court to do anything other than enter judgment once an offer of judgment has been accepted."); Goodheart Clothing Co. v. Laura Goodman Enterprises, Inc., 962 F.2d 268, 275 (2nd Cir.1992) (dissent) ("Indeed, the district court had no alternative but to enter the judgment exactly as offered and accepted, in view of the `self-executing' nature of Rule 68 judgments"); Harris v. City of New York, 2004 WL 1555194, at *1, 2004 U.S. Dist. LEXIS 12879 at *2 (S.D.N.Y.2004) ("the entry of final judgment pursuant to Rule 68 is a ministerial act that does not require the action of the judge"). There are certain limited circumstances under which courts retain authority to review an offer of judgment: in a class action, pursuant to Rule 23, a court is charged with the authority to accept a settlement; and in a case seeking injunctive relief, a court is vested with the ultimate power to enter an injunction. 12 WRIGHT & MILLER, FED. PRAC. & PROC. § 300. Outside of those limited circumstances, a court must enter a judgment accepted by the parties. Id.

The district court erred in refusing to sign the parties' Offer of Judgment and in denying the defendant's Motion to Amend Judgment. The district court did not assign any reason for its refusal to sign the Offer of Judgment or its denial of defendant's Motion to Amend Judgment. The plaintiffs in this case are not certified as a class nor do they make a claim for injunctive relief. Pursuant to Rule 68, the defendants served their offer of judgment upon the plaintiffs more than 10 days before the September 22nd trial date and the...