Williams Gas Processing-Wamsutter Company v. Union Pacific Resources Co.

• Citation: Williams Gas Processing-Wamsutter Company v. Union Pacific Resources Co., 25 P.3d 1064, 2001 WY 57 (Wyo. 2001)
• Decision Date: 20 June 2001
• Citation: 2001 WY 57,25 P.3d 1064
• Docket Number: No. 00-40.,00-40.
• Parties: WILLIAMS GAS PROCESSING—WAMSUTTER COMPANY, and Williams Gas Processing Company, Appellants (Plaintiffs), v. UNION PACIFIC RESOURCES COMPANY, Union Pacific Fuels, Inc., and Fuels Acquisition Company, Appellees (Defendants).
• Court: Wyoming Supreme Court

25 P.3d 1064

2001 WY 57

WILLIAMS GAS PROCESSING—WAMSUTTER COMPANY, and Williams Gas Processing Company, Appellants (Plaintiffs), v. UNION PACIFIC RESOURCES COMPANY, Union Pacific Fuels, Inc., and Fuels Acquisition Company, Appellees (Defendants).

No. 00-40.

Supreme Court of Wyoming.

June 20, 2001.

Rehearing Denied July 31, 2001.

Representing Appellant: Ford T. Bussart of Bussart, West, Rossetti, Piaia & Tyler, P.C., Rock Springs, WY; and John D. Ray and Robert Palmer Rees of Fabian & Clendenin of Salt Lake City, UT. Argument by Mr. Rees.

Representing Appellee: Paul J. Hickey of Hickey, Mackey, Evans & Walker, Cheyenne, WY; John B. Thomas of Hicks, Thomas & Lilienstern, Houston, TX; Jerome T. Wolf and Jan P. Helder Jr. of Sonnenschein, Nath & Rosenthal, Kansas City, MO; and Thomas F. Reese and Morris R. Massey of Brown, Drew & Massey, LLP, Casper, WY. Argument by Mr. Hickey.

Before LEHMAN, C.J., and GOLDEN, HILL, JJ.; and DAN SPANGLER, D.J. (Retired).

HILL, Justice.

[¶ 1] In this appeal, we review Appellants', Williams Gas Processing—Wamsutter Division (a Delaware corporation) and Williams Gas Processing Company (a Delaware corporation) (hereafter collectively "Williams"), challenge to an order of the district court that denied a motion for partial summary judgment in favor of Williams. The district court instead granted a motion for summary judgment in favor of Appellees, Union Pacific Resources Company (a Delaware corporation) (hereafter "UPRC" or "UPR"), Union Pacific Fuels, Inc. (a Delaware corporation) (hereafter "UPF¹"), and Fuels Acquisition Company (a Delaware corporation) (hereafter "FAC"), and Williams also challenges that decision on a variety of grounds. According to Williams, UPRC structured its transfer of a gas processing plant and gathering system (hereafter "Echo System") to Duke Energy Field Services, Inc. (hereafter "DEFS" or "Duke") in such a manner as to violate the preferential purchase rights afforded Williams under the agreements between Williams and UPRC. Williams contends that the district court's resolution of this case is contrary to its unambiguous contractual rights and applicable law. In other arguments, Williams contends that there are genuine issues of material fact which must be resolved by a jury, and that the district court abused its discretion in disallowing discovery requested by Williams.

[¶ 2] We will reverse and remand for further proceedings consistent with this opinion.

ISSUES

[¶ 3] Williams provides this statement of the issues for review:

The issues on appeal are whether the lower court erred in denying Plaintiffs-Appellants Williams' motion for partial summary judgment and granting the Defendants-Appellees' cross-motion for summary judgment. Specifically:

1. Williams and defendant UPRC were co-owners of a gas plant and gathering system. The Ownership Agreements granted each owner a preferential purchase right if the other owner "desires to sell" its co-interests, either "as a separate transaction" or "in a package of assets." Did the lower court err in ruling that UPRC did not "sell" its co-interests to Duke when it executed a contract mandating each of the following steps:

a. UPRC must create a new second-tier subsidiary (i.e., defendant FAC),

b. UPRC must next deed its co-interests into FAC, and

c. UPRC must next sell to Duke all the stock of defendant UP Fuels (i.e., UPRC's first-tier subsidiary and FAC's parent company)?

2. An exemption to Williams' preference rights permitted UPRC to transfer its co-interests to any "Affiliate." Did the lower court err in holding that FAC was still an "Affiliate" of UPRC on the transfer date, even though UPRC was already contractually committed to sell all the stock of FAC's parent company to Duke?

3. A second exception to Williams' preference rights permitted UPRC to dispose of its co-interests by "merger." Did the lower court err in holding that UPRC disposed of its co-interests by a merger, even though UPRC itself never merged?

4. Did the lower court err in not ruling that the following were genuine issues of material fact precluding summary judgment in favor of Defendants-Appellees:

a. When UPRC and Williams executed their Ownership Agreements, did both parties intend that their preferential rights could not be avoided by a multi-step transaction?

b. If a multi-step transfer does not trigger the preference rights as written, did UPRC and Williams commit a mutual mistake in drafting their preference rights language?

5. Did the lower court abuse its discretion by not granting plaintiffs an opportunity, as requested pursuant to Wyoming Rule of Civil Procedure 56(f), to take depositions and conduct other discovery?

Appellees propose these as the issues:

Although Williams now attempts to raise numerous issues related to the Echo System Agreements, the ultimate issue in this appeal is:

1. Whether the district court was correct in entering summary judgment for UPR based upon its construction of the unambiguous provisions of the Echo System Agreements?

Because Williams has raised novel issues on appeal, this Court should address additional procedural issues, specifically:

2. Whether Williams can raise for the first time on appeal, theories of contract construction not presented to the district court?

3. Whether the district court abused its discretion in not allowing discovery when both parties argued the contracts were unambiguous and requested deferral of discovery?

In its reply brief, Williams articulates these additional issues:

The new issues and arguments raised in Appellees' Brief, addressed herein, are:

1. Does this Court's intervening decision in McGuire v. Lowery support or reject Appellants' claim that a "sale" occurred under Raymond (Wyoming) and Prince (Utah)?

2. Is Appellants' claim that a "sale" occurred upon execution of the November 20, 1998 Purchase Agreement a new argument on appeal?

3. Does the magnitude of the overall Purchase Agreement mean that a "sale" of the individual Property did not occur?

4. Does Appellees' Brief establish that FAC was an exempt "Affiliate" as of its December 2 deed from UPRC?

5. Does Appellees' Brief identify any exempt "merger" or "reorganization" within the language of Article 9.3?

6. Do Appellees' own constructions of Articles 9.1, 9.2 and 9.3 establish that those clauses are ambiguous?

7. Have Appellants established a prima facie case of mutual mistake?

8. Have Appellants waived their right to request relief under Rule 56(f)?

FACTS

[¶ 4] On August 27, 1993, Williams and UPRC entered into two agreements. The first was entitled Echo Springs Gas Processing Plant Construction, Ownership and Operation Agreement, and the second was entitled Wamsutter Gas Gathering System Construction, Ownership and Operation Agreement. For purposes of this appeal the terms of both contracts are identical, and the provisions of those contracts, which are set out below, apply equally to both. In those contracts, Williams and UPRC agreed to build a gas processing plant and a gas gathering system, with Williams owning 66% of the property and UPRC owning 34%² of the property. Williams was designated as the operator under both contracts. In 1998, UPRC decided to sell³ its interests under those contracts, and the process by which that transfer to Duke was achieved created the controversy that must be resolved in this appeal. Of central importance to this appeal are these provisions of the Echo System agreements:

IX. SALE OF PLANT [SYSTEM] INTEREST

9.1 Should any Owner⁴ desire to sell all or part of its interest in the Plant [System] to a non-Affiliate⁵ as a separate transaction, it shall promptly give written notice to the other Owners with full information concerning its proposed sale, which shall include the name and address of any prospective purchaser, the purchase price, and all other terms of any offer received by that Owner. Any of the other Owners shall then have an optional prior right, for a period of thirty (30) days after receipt of the notice, to purchase on the same terms and conditions the entire interest which the other Owner proposes to sell; and, if this optional right is exercised, the purchasing Owners shall share the purchased interest in the proportions that the interest of each bears to the total interest of all purchasing Owners.

9.2 Should any Owner desire to sell or trade its interest in the Plant [System] to a non-Affiliate in a package of assets, it shall promptly give written notice to the other Owners with full information concerning the proposed sale and the selling Owner's valuation of its interest in the Plant [System]. Each Owner desiring to buy the selling Owner's interest ("Buying owner") must so notify the selling Owner in writing within thirty (30) business days of receipt of the selling Owner's notice. Such notice shall state whether the Buying Owner accepts or rejects the selling Owner's valuation of its interest.

. . .

9.3 If all other Owners fail to exercise the option, the Owner desiring to sell shall be at liberty to close a sale of its interest at any time not later than one hundred twenty (120) days after the end of the option period to the prospective purchaser at a price not less than and on terms no more favorable to the purchaser than the price and terms stated in the aforementioned notice; and if such sale is made, the preferential right to purchase shall continue as to the interest acquired by said purchaser. If the interest is not so sold within such 120-day period, then the provisions hereinabove shall apply, in the event of a subsequent offer to sell such interest, as though such interest had never been offered for sale. However, there shall be no preferential right to purchase in those cases where any party⁶ wishes to mortgage its interests, or to dispose of its interests by merger, reorganization, consolidation, or sale of all of its assets, or a sale or transfer of its interests to a subsidiary or parent company, or subsidiary of a

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