Uri, Inc. v. Kleberg Cnty.

• Decision Date: 23 March 2018
• Docket Number: No. 16–0336,16–0336
• Citation: Uri, Inc. v. Kleberg Cnty., 543 S.W.3d 755 (Tex. 2018)
• Parties: URI, INC., Petitioner v. KLEBERG COUNTY, Respondent
• Court: Texas Supreme Court

543 S.W.3d 755

URI, INC., Petitioner

v.KLEBERG COUNTY, Respondent

No. 16–0336

Supreme Court of Texas.

OPINION DELIVERED: March 23, 2018

Eric Michael Allmon, Marisa Perales, Bradley L. Rockwell, Robert C. Hilliard, David Frederick, for Kleberg County.

J. A. (Tony) Canales, Jeptha P. Hill, Jeffrey S. Reed, Duncan C. Norton, Jo Ellen Hewins, for URI, Inc.

Justice Guzmandelivered the opinion of the Court.

A word is not a crystal, transparent and unchanged, it is the skin of a living thought and may vary greatly in color and content according to the circumstances and the time in which it is used.

—Oliver Wendell Holmes

We have long articulated a principle of contract construction that permits courts to consult the facts and circumstances surrounding a negotiated contract's execution to aid the interpretation of its language.²Despite expounding on this principle from time to time, and as recently as last term,³ it remains susceptible to confusion and inconsistency when applied to unambiguous contract terms.The principle's limitations are, however, clear: surrounding facts and circumstances cannot be employed to "make the language say what it unambiguously does not say"⁴ or "to show that the parties probably meant, or could have meant, something other than what their agreement stated."⁵In other words, extrinsic evidence may only be used to aid the understanding of an unambiguous contract's language, not change it or "create ambiguity."⁶

When interpreting a written contract, the prime directive is to ascertain the parties' intent as expressed in the instrument."[O]bjective, not subjective, intent controls,"⁷ so the focus is on the words the parties chose to memorialize their agreement.But language is nuanced, and meaning is often context driven.⁸Contract language is thus construed in its lexical environment, which may include objectively determinable facts and circumstances that contextualize the parties' transaction.⁹Surrounding facts and circumstances can inform the meaning of language¹⁰ but cannot be used to augment, alter, or contradict the terms of an unambiguous contract.¹¹

This case involves construction of a settlement agreement that conditioned resumption of uranium mining operations on restoration of well-water quality if pre-mining data showed the water had been suitable for specified uses before prior mining operations began.Construing the contract, the lower courts held that, in determining whether a restoration obligation exists as to a disputed well, the mining company was contractually required to ignore data showing no pre-mining suitability.In so holding, the courts impermissibly employed surrounding facts and circumstances to divine subjective intent and interpolate constraints not found in the contract's unambiguous language.We therefore reverse the court of appeals' judgment and render judgment for the mining company.

I.Background

More than a decade ago, the Texas Commission on Environmental Quality(TCEQ) authorized URI, Inc. to commence uranium mining operations in the third production area (PAA 3) of the Kingsville Dome Mine in Kleberg County, Texas.¹²Mining operations were suspended, however, due to opposition from the County and local activists, including a group called South Texas Opposes Pollution (STOP).Ensuing litigation between Kleberg County and URI was resolved in December 2004 after protracted and contentious negotiations produced a settlement agreement (Settlement Agreement).This lawsuit concerns URI's performance under that agreement.

In the proceedings below, the parties clashed over URI's compliance with myriad terms of the Settlement Agreement, and all matters were ultimately resolved favorably to URI except questions about its compliance with section 11.1 of the agreement.That provision, which is the only one at issue here, conditions URI's resumption of mining operations in PAA 3 on URI's certification that wells in a previously mined area—PAA 1—have been restored to pre-mining water quality if the water had been suitable for specified uses before URI began mining that area in 1988.Section 11.1 provides:

11.Other Provisions.

11.1.Resumption of PAA 3Mining To AwaitPAA 1 Restoration Certificate and Data.URI will not resume economic mining in KVD [Kingsville Dome] Production Area 3 before it has submitted to the County Judge of Kleberg County both(1) a sworn statement of a URI officer certifying to the Kleberg County Judge

(i) that URI has completed treatment of 6 pore volumes of water in KVD Production Area 1; and

(ii) that 90% or more of the combined total of TCEQ production area baseline wells in KVD Production Area 1 and any other wells in the production patterns that URI sampled and for which baseline is available before mining begins, whose water was suitable on a well-by-well basis before URI's mining in PAA 1 for use as either drinking water, livestock water, or irrigation water according to the criteria of 1.7(3) and parameters and limits set out in the Water Quality Use Limits Table in Par. 1.7 of this agreement, has been returned to suitability, based on the same parameters and limits on a well-by-well basis, for the same use to which it was suited before such mining; and,

(2) a copy of the analytical data the URI officer relies upon in making the certification under this sub-par. 11.1 as to (i) which individual baseline wells are deemed to have produced water suitable for either drinking, stock watering, or irrigation use before URI's mining in PAA 1 and (ii) the use suitability to which post-mining water quality in the relevant Production Area 1 baseline wells has been returned.

In 2007, URI recommenced mining in PAA 3 after certifying that (1) 6 pore volumes of water in PAA 1 had been treated and (2) no wells in PAA 1 were subject to restoration to the levels specified in the parties' agreement.Kleberg County disputed URI's compliance with subsection 11.1(1)(ii)'s 90%–restoration requirement and resolved to enforce the Settlement Agreement before any further mining could take place.¹³

Advancing conflicting constructions of section 11.1, URI sought a declaration that it had complied with its contractual obligations while Kleberg County countersued for breach of contract and declaratory relief to the contrary.In addition to damages, Kleberg County sought abeyance of PAA 3 mining through specific performance of section 11.1.Though URI was undertaking restoration of PAA 1 wells in accordance with TCEQ mandates, the County argued the parties intended section 11.1 to impose a higher restoration standard before URI could proceed with further mining operations in PAA 3.The crux of the dispute is whether any of the PAA 1 wells described in subsection 11.1(1)(ii) had water suitable for drinking, livestock, or irrigation uses before URI started mining that area.If so, URI breached the Settlement Agreement when it began mining PAA 3 before restoring 90% of the subject wells to prior water quality.

No dispute exists regarding the combined total of wells subsection 11.1(1)(ii) encompasses that qualify as either (1)"TCEQ production area baseline wells in KVD Production Area 1" or (2)"any other wells in the production patterns that URI sampled and for which baseline is available before mining begins" in PAA 3.Sixteen wells fall within the former and twenty-three in the latter, for a total of thirty-nine wells with pre-mining baseline data.Nor is there any dispute that of those wells, thirty-eight were not subject to the restoration-to-suitability mandate in subsection 11.1(1)(ii) because they did not have water suitable for drinking, livestock, or irrigation purposes before URI commenced PAA 1 mining in 1988.

At issue is URI's contractual obligation to "return[ ] to suitability" a single well (Well I–11)¹⁴ whose water was suitable for irrigation purposes based on pre-mining baseline samples URI took in 1985 but not suitable for any of the contractually specified uses based on pre-mining baseline samples URI took in 1987.Averaging the two data points, URI determined the water in Well I–11 was not suitable for any of the contractually specified uses before URI began mining PAA 1 in 1988.Having undertaken the certification process outlined in the Settlement Agreement, URI took the position that it had no obligation under subsection 11.1(1)(ii) to "return[ ] to suitability" any of the PAA 1 wells before recommencing mining operations in PAA 3.

Relying on the 1985 baseline data, Kleberg County argued URI was obliged to restore Well I–11's groundwater to use for irrigation.According to the County, the Settlement Agreement prohibits use of the 1987 data because that information was not publicly available or otherwise made available to the County when the parties executed the Settlement Agreement, though it was subsequently filed with the TCEQ and accepted as "accurately reflect[ing] baseline quality."¹⁵Kleberg County asserts the parties contemplated that only the 1985 data—which URI had submitted to the TCEQ as part of the application for the original PAA 1 mining permit—would be used to determine URI's well-restoration obligation and, based on that information, the parties intended that URI would restore Well I–11 to pre-mining suitability for irrigation uses.

As support for its construction of the Settlement Agreement, the County cites the 2004 transcript of a Kleberg County Commissioners' Court meeting which concluded with a majority of the commissioners voting to execute the Settlement Agreement.During the meeting, a member of STOP had interjected to express strong opposition to the proposed settlement's terms.Among other objections, STOP's representative argued section 11.1 was "totally worthless" because documentation she had obtained from TCEQ and provided to the commissioners showed only one well would be subject to restoration on the terms stated.¹⁶The transcript indicates that some of the commissioners believed the Settlement Agreement's terms, separately and...