Sabine Corp. v. ONG Western, Inc., Civ. No. 88-99-R.

CourtUnited States District Courts. 10th Circuit. Western District of Oklahoma
Writing for the CourtDAVID L. RUSSELL
Citation725 F. Supp. 1157
PartiesSABINE CORPORATION, Plaintiff, v. ONG WESTERN, INC., Defendant.
Docket NumberCiv. No. 88-99-R.
Decision Date09 August 1989





Richard K. Books, David W. Simpson, Watson & McKenzie, Oklahoma City, Okl., Michael V. Powell, J. Robert Beatty, Locke Purnell Rain Harrell, Dallas, Tex., J. Randall Robinson, Patricia G. Parrish, Musser Bunch Robinson & Hirsch, Oklahoma City, Okl., for plaintiff.

Burch Bailey, David L. Kearney, Harry H. Selph, II, Terry W. Tippens, Fellers, Snider, Blankenship, Bailey & Tippens, Oklahoma City, Okl., John L. Arrington, Jr., Thomas J. Kirby, Huffman Arrington Kihle Gaberino & Dunn, Tulsa, Okl., for defendant.


DAVID L. RUSSELL, District Judge.

Before the Court is the motion for partial summary judgment of Plaintiff Sabine Corporation ("Sabine"). Plaintiff seeks summary judgment on its claim against Defendant ONG Western, Inc. ("ONG") for breach of a take-or-pay gas contract for the years 1982, 1983, 1985, 1986 and 1987. Plaintiff asserts that evidence submitted by it shows there are no genuine issues of material fact concerning the existence of a contract between the parties; that Sabine had available gas to produce to ONG; that ONG refused to either take or pay for the contractually specified quantities of gas during the years in question; and the amount of damages sustained by Plaintiff as a result of ONG's failure to take or pay for gas. Additionally, with respect to Defendant's affirmative defenses, Plaintiff asserts that Defendant has not and cannot adduce facts to support certain of its affirmative defenses and that others are either inapplicable, legally insufficient or precluded by collateral estoppel. Defendant ONG, in opposing the motion, asserts that material issues of fact exist as to the amount of Sabine's damages and further asserts that all of its affirmative defenses are legally sufficient under the current status of Oklahoma law. Defendant maintains that evidence submitted by it at least raises genuine factual issues concerning the applicability of those defenses. ONG does not dispute the existence of a contract between the parties or that it neither took nor paid for the quantity of gas specified in Article IV of the contract. See Appendix to Brief of Defendant ONG in Response to Motion for Partial Summary Judgment (hereinafter "Defendant's Brief"), Exhibit "A", "Statement in Opposition to Sabine's Statement of Undisputed Facts." Rather, Defendant disputes the accuracy of Plaintiff's calculations of the minimum volumes of gas ONG was required to take under the contract, see id. at ¶ 5, and Plaintiff's figures for the volumes of gas actually purchased by ONG during the years in question. Further, in any event, ONG contends that its total take-or-pay obligation for the years in question was modified or excused by certain contractual provisions and legal defenses.

Also before the Court is Plaintiff's motion to strike the affidavits of Eddie J. Hudson, James A. Metcalf, Jr. and C.F. Hughes, Jr., filed as exhibits to Defendant ONG's response brief to Plaintiff's motion for partial summary judgment. In response to this motion ONG included supplemental affidavits of the latter two affiants. Plaintiff has objected to ONG's submission of these supplemental affidavits without having first obtained leave from the Court. ONG has responded in turn to this objection, asserting that leave was not necessary and alternatively requesting leave to file the supplemental affidavits. The Court will address the motion to strike the affidavits and objection to the supplemental affidavits hereinafter only to the extent the affidavits and/or supplemental affidavits are material to the determination of whether there is a genuine issue of material fact on a point raised by Plaintiff's motion.

I. Force Majeure Defense

Plaintiff asserts that it is entitled to summary judgment on Defendant's affirmative defense of force majeure because 1) Defendant failed to give Plaintiff notice of a particular force majeure event; 2) Defendant has failed to allege a specific act of a governmental body or authority which would constitute an act of force majeure and, to the extent it has alleged same, has failed to submit evidence necessary to the existence of a defense based thereon; 3) a mere price increase cannot constitute a force majeure event because Defendant assumed the risk of such increase; 4) force majeure is not a defense to Defendant's alternative mode of performance under the contract, that of paying for rather than taking gas; 5) the governmental regulation which Defendant alleges constitutes a force majeure event was foreseeable as a matter of law; and 6) Defendant cannot rely upon a "failure of markets" as a force majeure event because "failure of markets" is not an event of force majeure in the contractual force majeure clause in issue. To the extent a "failure of markets" falls within the scope of the force majeure clause in issue, Plaintiff asserts that Defendant is collaterally estopped from relying upon a mere inability to resell gas at a profit as a "failure of markets" in a force majeure clause by virtue of the determination of this issue adversely to ONG Western, Inc. in the case of Golsen v. ONG Western, Inc., 756 P.2d 1209 (Okla.1988).

Defendant ONG in response contends that on May 4, 1983, it notified working interest owners of the Sarkeys No. 1-32 well, gas production from which is the subject of the take-or-pay contract in issue, that ONG had instituted ratable takes of gas under Okla.Stat. title 52, § 240, and that by letter dated November 15, 1983, ONG notified Sabine of its intent to implement the priority purchase schedule established by the Corporation Commission. Defendant asserts that the sufficiency of the notice, i.e., whether these letters gave "reasonably full particulars" of the force majeure event, is a question of fact for the jury. ONG also maintains that by the express language of the force majeure clause, ONG's payment obligation is also excused or reduced whenever ONG is unable to take gas or is able to take only a lesser quantity as a result of a force majeure event. In this regard, ONG suggests that the force majeure clause in question should be construed in a manner analogous to the Tenth Circuit's construction of take-or-pay, force majeure and "adjustment to minimum bill" clauses in International Minerals & Chemical Corp. v. Llano, Inc., 770 F.2d 879 (10th Cir.1985), cert. denied, 475 U.S. 1015, 106 S.Ct. 1196, 89 L.Ed.2d 310 (1986). Defendant ONG further argues that it did not assume the risk of the force majeure event of intervening regulation. Assumption of the risk of a specified force majeure event is, ONG posits, logically inconsistent with the purpose of a force majeure clause, which is to shift risks and limit the parties' obligations. See Introductory Note to Restatement (Second) of Contracts, ch. 11, p. 309 (1981). ONG notes that the Uniform Commercial Code contemplates that the parties may by agreement expand the parameters of the legal excuse from performance provided in Section § 2-615. See Official Code Comment 8 to U.C.C. § 2-615, codified at Okla.Stat. title 12A, § 2-615. Finally, contrary to Sabine's argument, ONG argues that a force majeure event need not be unforeseeable. Relying on Eastern Air Lines, Inc. v. McConnell Douglas Corp., 532 F.2d 957, 992 (5th Cir.1976) and Atlantic Richfield Co. v. ANR Pipeline Co., 768 S.W.2d 777 (Tex. App.1989), it suggests that parties are at liberty to define force majeure as they wish and to include foreseeable events as events of force majeure. The sole question in ONG's view is whether the elements of the defense have been satisfied. ONG submits that because it has presented facts to support the defense, that is a jury question.

The gas purchase contract in question was entered into on March 20, 1978 by Defendant and Plaintiff's wholly-owned subsidiary whose interest in the well covered by the contract, the Sarkeys 1-32 well, was subsequently acquired by Plaintiff. The term of the contract is twenty (20) years. In precatory language, it is recited that the Seller (Sarkeys, Inc., now Sabine) is "desirous of obtaining a market for the gas produced from its interest in the Sabine well ... and to conserve said gas" and that Buyer (ONG) "is desirous of augmenting its supply of gas, and of conserving the gas produced and to be produced for the benefit of its parent company's utility customers...." Gas Purchase Contract (Exhibit "A" to Plaintiff's Motion) at p. 1. The essentials of the Seller's delivery obligations and the Buyer's take-or-pay obligations are set forth in Article IV of the contract, as follows:

4.1 Seller agrees to deliver and Buyer agrees to take or pay for if tendered and not taken at the respective delivery points during each accounting year certain volumes of gas from each gas well or gas condensate well in which Seller has a working interest, completed, producible, and connected by Buyer on the lands and leases covered hereunder. Such volumes of gas required to be taken or paid for if tendered and not taken attributable to Seller's interest or interests in the mineral interests covered hereby shall be determined as follows:
A. In the absence of an applicable gas proration order established by the Oklahoma Corporation Commission or successor body having jurisdiction, the minimum yearly volume to be taken or paid for hereunder attributable to Seller's interest in each such gas or gas condensate well shall be the cumulative total for an accounting year of the daily volume of gas calculated as set forth below which represents the smallest volume of gas.
(1) Basic Volume — This daily volume of gas shall be Seller's percent of working interest in each such gas well or gas condensate well times ten

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