Wildcat Drilling, LLC v. Discovery Oil and Gas, LLC

Citation121 N.E.3d 65,2018 Ohio 4015
Decision Date28 September 2018
Docket NumberNo. 17 MA 0018,17 MA 0018
Parties WILDCAT DRILLING, LLC, Plaintiff-Appellee/Cross-Appellant, v. DISCOVERY OIL AND GAS, LLC, Defendant-Appellant/Cross-Appellee.
CourtOhio Court of Appeals

Atty. Molly Johnson, Johnson & Johnson Law Firm, 12 West Main Street, Canfield, Ohio 44406, for Plaintiff-Appellee/Cross Appellant, and

Atty. David Detec and Atty. Thomas Hull II, Manchester Newman & Bennett, LPA, Atrium Level Two, The Commerce Building, 201 East Commerce Street, Youngstown, Ohio 44503, for Defendant-Appellant/Cross-Appellee.

BEFORE: Gene Donofrio, Carol Ann Robb, Kathleen Bartlett, Judges.

OPINION AND JUDGMENT ENTRY

Donofrio, J.

{¶ 1} Defendant-appellant/cross-appellee, Discovery Oil and Gas, LLC, (Discovery) appeals the judgment of the Mahoning County Common Pleas Court granting summary judgment on a breach of contract claim by plaintiff-appellee/cross-appellant Wildcat Drilling, LLC, (Wildcat). Wildcat appeals the trial court's award of damages.

{¶ 2} On December 19, 2014, Discovery and Wildcat entered into a contract. Discovery hired Wildcat to drill the J. Klick # 2 well (the well) in Stark County, Ohio. In return, Discovery agreed to pay Wildcat $13.85 per foot drilled and $11,000.00 per day of work on the well. The drilling was to commence on December 31, 2014. Pursuant to the contract, Discovery was required to pay any invoices submitted by Wildcat within ten days. If Discovery disputed any item on any invoice, it was required to notify Wildcat about the dispute within five days of receiving the invoice. In addition, the contract specified that Discovery was required to timely pay any undisputed portion of the invoice.

{¶ 3} The contract contained multiple indemnification clauses. One such clause, section 17.9.1 of the contract, provides:

[Wildcat] shall assume full responsibility for and shall defend, indemnify, and hold [Discovery] and its joint owners harmless from and against any loss, damage, expense, claim, fine and penalty, demand, or liability for pollution or contamination, including control and removal thereof, that originates on or above the surface of the land or water from spills, leaks, or discharges of motor fuels, lubricants, and oils; pipe dope; paints and solvents; ballast, bilge, sludge, and garbage; and other liquids or solids in possession and control of [Wildcat]. These obligations are assumed without regard to the negligence of any party or parties.

Complaint Exhibit A.

{¶ 4} Wildcat completed drilling the well. On February 13, 2015, Wildcat sent Discovery an invoice for the drilling services provided. The invoice charged Discovery $190,350.37. At no point did Discovery pay any portion of the invoice amount.

{¶ 5} The reason Discovery did not pay was because it was fined by the Ohio Department of Natural Resources (ODNR) for Wildcat's drilling practices. On January 7, 2015, an inspector from the ODNR was on the site where Wildcat was drilling the well. The inspector tested the water on the well site and determined that Wildcat was illegally using brine water in its drilling operation. Discovery was fined by the ODNR for Wildcat's supposed use of brine water while drilling the surface casing. The ODNR issued a compliance notice to Discovery and Discovery paid $50,000.00 in fines for the brine water issue. Discovery paid the ODNR in March of 2015.

{¶ 6} After Discovery paid the ODNR fine, Discovery requested that Wildcat indemnify it fully for the fine. Wildcat refused. In return, Discovery refused to pay any portion of the invoice until Wildcat agreed to fully indemnify it for the ODNR fine.

{¶ 7} Wildcat brought an action against Discovery asserting a breach of contract claim. Wildcat's claim is based on the fact that Discovery never timely paid the invoice. Discovery filed a counterclaim asserting breach of contract and a claim for civil liability for criminal conduct. Discovery's breach of contract claim was based on the fact that Wildcat refused to indemnify Discovery for the ODNR fine. Discovery's civil liability for criminal conduct claim stemmed from Wildcat's usage of brine water while drilling the surface casing of the well.

{¶ 8} After discovery was completed, Discovery filed a motion for partial summary judgment and Wildcat filed a motion for summary judgment. Discovery's motion sought summary judgment on liability only and requested a separate hearing on damages. Discovery argued that Wildcat breached the contract by using brine water during its drilling process, which is a crime under Ohio law. Discovery also argued that Wildcat breached the contract when it failed to later indemnify Discovery pursuant to section 17.9.1 for the fine Discovery paid to the ODNR.

{¶ 9} Wildcat's motion argued that Discovery breached the contract when it did not timely pay or timely dispute any portion of the invoice. Wildcat also argued that it was unaware of any fine issued by the ODNR for its practices and should not be required to indemnify Discovery for a fine based on an alleged offense that Wildcat could not challenge or defend against.

{¶ 10} The trial court granted both parties' motions for summary judgment finding that both parties were in breach of the contract. The trial court found that Discovery was in breach for not timely paying the invoice and Wildcat was in breach for not indemnifying Discovery for the ODNR fine. The trial court ordered Discovery to pay Wildcat $190,350.37 less the $50,000.00 fine and expenses of $14,150.09 that Discovery incurred as a result of the fine. This came to a total of $126,200.28 that Discovery was to pay Wildcat. The trial court also ordered Discovery to pay prejudgment interest starting from February 23, 2015. Discovery timely filed this appeal on February 6, 2017. Wildcat cross appealed. Discovery now raises four assignments of error.

{¶ 11} Discovery's first assignment of error states:

THE TRIAL COURT ERRED IN AWARDING WILDCAT PREJUDGMENT INTEREST.

{¶ 12} Discovery makes three arguments pertaining to this assignment of error. First, Discovery argues that prejudgment interest was inappropriate due to a good faith dispute regarding the indemnification issue. Second, Discovery argues that Wildcat is not entitled to prejudgment interest because it is not an "aggrieved party" under R.C. 1347.03. Third, Discovery argues, in the alternative, that the trial court's award of 18% prejudgment interest is inappropriate.

{¶ 13} An appellate court reviews a trial court's summary judgment decision de novo, applying the same standard used by the trial court. Ohio Govt. Risk Mgt. Plan v. Harrison , 115 Ohio St.3d 241, 2007-Ohio-4948, 874 N.E.2d 1155, ¶ 5. A motion for summary judgment is properly granted if the court, upon viewing the evidence in a light most favorable to the nonmoving party, determines that: (1) there are no genuine issues as to any material facts; (2) the movant is entitled to judgment as a matter of law, and (3) the evidence is such that reasonable minds can come to but one conclusion and that conclusion is adverse to the opposing party. Civ. R. 56(C) ; Byrd v. Smith , 110 Ohio St. 3d 24, 2006-Ohio-3455, 850 N.E.2d 47, ¶ 10.

{¶ 14} "[T]he moving party bears the initial responsibility of informing the trial court of the basis for the motion, and identifying those portions of the record which demonstrate the absence of a genuine issue of fact on a material element of the nonmoving party's claim." Dresher v. Burt, 75 Ohio St.3d 280, 296, 662 N.E.2d 264 (1996). The trial court's decision must be based upon "the pleadings, depositions, answers to interrogatories, written admissions, affidavits, transcripts of evidence and written stipulations of fact, if any, timely filed in the action." Civ.R. 56(C). The nonmoving party has the reciprocal burden of specificity and cannot rest on the mere allegations or denials in the pleadings. Id. at 293, 662 N.E.2d 264.

{¶ 15} In Dresher, the Ohio Supreme Court held that a party who moves for summary judgment need not support its motion with affidavits provided that the party does not bear the burden of proof on the issues contained in the motion. Dresher at 277, 662 N.E.2d 264. Further, there is no requirement in Civ.R 56 that any party submit affidavits to support a motion for summary judgment. See, e.g., Civ.R. 56(A) and (B). Id. However, there is a requirement that a moving party, in support of a summary judgment motion, specifically point to something in the record that comports with the evidentiary materials set forth in Civ.R. 56(C). Id.

{¶ 16} Summary judgment is appropriate when there is no genuine issue as to any material fact. A "material fact" depends on the substantive law of the claim being litigated. Hoyt, Inc. v. Gordon & Assoc., Inc., 104 Ohio App.3d, 598, 603, 662 N.E.2d 1088 (8th Dist. 1995), citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

{¶ 17} Analyzing Discovery's good faith dispute argument, Discovery relies on Dickerson v. Thompson , 89 Ohio App.3d 399, 624 N.E.2d 784 (8th Dist. 1993). In Dickerson , the Eighth District held that an award of prejudgment interest is not appropriate where "liability was in dispute and the amount of potential liability was not readily ascertainable because allowance of a setoff was disputed by the parties." Id. at 405, 624 N.E.2d 784. Discovery argues that this entire litigation concerns whether Discovery was entitled to indemnificationand a setoff against Wildcat's invoice.

{¶ 18} In response, Wildcat cites article 5 of the contract. Article 5 states, in relevant part:

[Discovery] shall pay all invoices within ten (10) days after the receiving of an invoice. If [Discovery] disputes an invoice or any part thereof, [Discovery] shall, within five days of receiving an invoice, notify [Wildcat] of the disputed item, specifying the reason therefore, and payment of the disputed item may be withheld until resolution of the dispute. But timely payment shall
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  • Wildcat Drilling, L.L.C. v. Discovery Oil & Gas, L.L.C.
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    • Ohio Supreme Court
    • December 22, 2020
    ...to indemnify Discovery, because Discovery did not provide Wildcat with the notice required to be entitled to indemnification. 2018-Ohio-4015, 121 N.E.3d 65, ¶ 69-71.{¶ 9} Applying Globe Indemn. Co. , the Seventh District determined that Discovery could be entitled to indemnification only if......
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    • December 22, 2020
    ...indemnify Discovery because Discovery did not provide Wildcat with the notice required to be entitled to indemnification. 2018-Ohio-4015, 121 N.E.3d 65, ¶ 69-71. {¶ 9} Applying Globe Indemn. Co., the Seventh District determined that Discovery could be entitled to indemnification only if (1)......
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