Xtreme Coil Drilling Corp. v. Oil

• Decision Date: 23 July 2013
• Docket Number: Civil Action No. 08–cv–02750–MSK–KMT.
• Citation: 958 F.Supp.2d 1238
• Court: U.S. District Court — District of Colorado
• Parties: XTREME COIL DRILLING CORPORATION, Plaintiff, v. ENCANA OIL & GAS (USA), INC., Defendant.

958 F.Supp.2d 1238

XTREME COIL DRILLING CORPORATION, Plaintiff,

v.ENCANA OIL & GAS (USA), INC., Defendant.

Civil Action No. 08–cv–02750–MSK–KMT.

United States District Court, D. Colorado.

July 23, 2013.

Cory Murray Curtis, Laurin D. Quiat, Baker & Hostetler, LLP, Denver, CO, Eric Walter Kristiansen, Baker & Hostetler, LLP, Houston, TX, for Plaintiff.

Michael James Hofmann, Paul Joseph Lopach, Stephen D. Gurr, Stephen D. Rynerson, Bryan Cave Hro, Adam Patrick O'Brien, Mary Alice Wells, Wells, Anderson & Race, LLC, Denver, CO, for Defendant.

OPINION AND ORDER DENYING MOTION FOR JUDGMENT AS A MATTER OF LAW OR FOR NEW TRIAL, GRANTING MOTION FOR ATTORNEY'S FEES, AND DENYING MOTION FOR PREJUDGMENT INTEREST

MARCIA S. KRIEGER, Chief Judge.

THIS MATTER comes before the Court pursuant to the Plaintiff's Motion for Attorney's Fees (# 238), the Defendant's response (# 253), and the Plaintiff's reply (# 256); the Plaintiff's Motion to Amend the Judgment (# 240) to include prejudgment interest, the Defendant's response (# 247), and the Plaintiff's reply (# 248); the Defendant's Renewed Motion for Judgment as a Matter of Law or, in the alternative, For a New Trial (# 242), the Plaintiff's response (# 246), and the Defendant's reply (# 249); and the Defendant's Motion to Strike (# 57) an exhibit supporting the Plaintiff's reply in support of its attorney's fees motion, the Plaintiff's response (# 258), and the Defendant's reply (# 259).

The Court will assume the reader's familiarity with the proceedings to date, offering only a brief summary here and elaborating as necessary in its analysis. Pursuant to a contract between the parties, Plaintiff Xtreme Coil Drilling Corporation (“Xtreme”) provided various oil and gas drilling services to Defendant Encana Oil & Gas (“Encana”) on two drilling rigs (Rig 6 and Rig 7). On May 4, 2008, a catastrophic accident happened at Rig 6 when a “runaway condition” occurred in the drawworks (essentially, the rig's motor, mounted at the top of the rig) and the brakes were insufficient to prevent the drawworks from falling to the rig floor. Both Rig 6 and Rig 7 were shut down for approximately three weeks, while Xtreme and its suppliers conducted an investigation into the matter. At the conclusion of that investigation, Xtreme presented its findings and proposed fixes to Encana, and Encana agreed to continue to retain Xtreme's services. Although the relationship was somewhat adversarial, Encana continued to enjoy Xtreme's performance under the contract until late October 2008, when it terminated both rigs. It is undisputed that Encana refused to pay certain invoices submitted by Xtreme for services that Xtreme had provided to Encana between May and October 2008. However, Encana contends that it was relieved of its contractual duty to pay the invoices because Xtreme's performance failed to comply with the contractual requirements.

In September 2012, the case proceeded to jury trial on two claims of breach of contract by Xtreme (one for each rig). The jury returned a verdict in favor of Xtreme, awarding approximately $2 million on the claim involving Rig 6, and $500,000 on the claim involving Rig. 7.

The parties have now filed various post-judgment motions. Xtreme has moved for an award of attorney's fees (# 238) and for pre-judgment interest (# 240) under the terms of the contract. Encana moves (# 242) for judgment as a matter of law on the merits, or, in the alternative, for a new trial, citing evidentiary deficiencies in Xtreme's case and errors made by the Court during the trial.

A. Encana's motion

The Court turns first to Encana's motion. It argues that the Court should reconsider (and, upon such reconsideration, grant) Encana's mid-trial motion for judgment as a matter of law pursuant to Fed.R.Civ.P. 50 on the contract claim relating to Rig 6. Encana contends that the evidence established that Xtreme materially breached the requirements of Paragraph 11 of the contract, which required it to provide equipment “of adequate size and capacity to perform [the drilling] work efficiently and safely.” ¹ In addition, it argues in the alternative that the Court should grant a new trial pursuant to Fed.R.Civ.P. 59 because the Court erred in failing to give a jury instruction indicating that Encana was relived from performance of its contractual obligations if Xtreme materially breached the contract, even if Encana was not aware of such breaches at the time of its own non-performance. Finally, it contends that the Court should grant a new trial because the Court erred in failingto give Encana's requested jury instructions on setoff and the affirmative defense of estoppel.

1. Rule 50 motion

Turning first to the Rule 50 motion, Fed.R.Civ.P. 50(a)(1) permits the Court to grant judgment as a matter of law if, after a party has been fully heard on an issue, “there is no legally sufficient evidentiary basis for a reasonable jury to find for that party on that issue.” The Court may grant the motion only if the evidence points but one way and is susceptible to no reasonable inferences which may support the opposing party's position. Jones v. United Parcel Service, 674 F.3d 1187, 1195 (10th Cir.2012). As with a motion for summary judgment, in evaluating a Rule 50 motion, the Court views the evidence in the light most favorable to the nonmovant—here, Xtreme. Id.

Encana argues that the evidence demonstrated that Xtreme breached Paragraph 11's requirement that it provide equipment “of adequate size and capacity to perform [drilling] work efficiently and safely” in several respects: (i) it failed to install a kinetic energy management system on either rig, which contributed to the May 2008 accident on Rig 6 that caused the rig to shut down for several weeks; (ii) it allowed Rig 6 to function with defectively-designed brakes (also contributing to the accident); (iii) it initially provided a 600 horsepower motor on Rig 6, in violation of the contract's requirement for a 750 horsepower motor, and that the performance of Rig 6 suffered until Xtreme eventually installed a 1,000 horsepower motor instead; and (iv) the use of “new technology” on Rig 6 that caused “equipment-related issues” in drilling some of the earlier wells.

Before turning to the evidence introduced at trial, the Court pauses to address the legal standards governing breach of contract claims. The elements of a claim for breach of contract are: (i) the existence of a binding agreement; (ii) the plaintiff's performance of its obligations (or some justification for its non-performance); (iii) the defendant's failure to perform its obligations; and (iv) resulting damages. Western Distributing Co. v. Diodosio, 841 P.2d 1053, 1058 (Colo.1992). The requirement of “performance” means “substantial performance”—that is, that any deviations by the performing party from the contract's standards are “trifling particulars not materially detracting from the benefit the other party would derive from a literal performance,” such that the defendant “has received substantially the benefit he expected.” Id. The plaintiff—Xtreme—bears the burden of proving “that he substantially performed his part of the contract ...” Id.

Paragraph 11 of the parties' contract states “[Xtreme] represents that the equipment to be used to accomplish the work under this Contract shall be of adequate size and capacity to perform said work efficiently and safely.” Thus, the question presented is whether there is competent evidence in the record indicating that the kinetic energy management system (or lack thereof), brakes, and motor size of the equipment provided by Xtreme on Rig 6 were “of adequate size and capacity to perform” the work of Rig 6 “efficiently and safely.” ² The Court finds sufficient evidence in the record to meet that standard.

Although the Court's review of the record does not reveal any testimony from a witness contending, in express terms, that the equipment Xtreme supplied to Encana was indeed “of adequate size and capacity to perform said work efficiently and safely,” such an inference can reasonably be drawn from the record as a whole. Kyle Swingle, Xtreme's representative, was asked whether “Xtreme substantially performed its obligations under these contracts,” and responded that “I believe we did everything that we were required to do in the contract.” He also gave testimony that generally reflected Xtreme's belief that the equipment it provided for Rig 6 was adequate for the job. Given that the Court must, on a Rule 50 motion, draw all reasonable inferences in favor of Xtreme, the Court finds that the record permits a conclusion that Xtreme showed, albeit very generally and only via inference, that its equipment met Paragraph 11's requirement.

Turning to the question of whether there is evidence indicating that Xtreme materially breached its obligations under Paragraph 11, the Court finds that an extended recitation of the facts in the record is not necessary, as the matter can be resolved on a simpler level. All four of Encana's arguments—that Xtreme breached Paragraph 11 due to the lack of a kinetic energy management system, insufficient brakes, an underpowered motor, and “equipment failures” on the first few wells—all relate to a state of affairs that occurred prior to the May 4, 2008 accident. After completing its investigation of that accident, Xtreme made several changes to Rig 6, including installing a kinetic energy management system, better brakes, and a larger motor. Xtreme presented its findings from the investigation and the nature of its repairs to Encana, and with Encana's consent, resumed drilling on Rig 6. Testimony by Timothy Baer, a representative of Encana, is significant on this point. Mr. Baer explained that after the May 2008 accident, Encana believed that it had the right to terminate the Rig 6 contract, but it chose not to do so because “we were optimistic—we could help make Xtreme work at a level that was acceptable to us.”

Whe...