Valley View Angus Ranch, et al v. Duke Energy Field Services

Filing 920101206

Opinion

U N I T E D STATES COURT OF APPEALS F O R THE TENTH CIRCUIT

U n i t e d States Court of Appeals T e n t h Circuit

FILED

D e c e m b e r 6, 2010
E l i s a b e t h A. Shumaker C l e r k of Court

V A L L E Y VIEW ANGUS RANCH, I N C . ; OTIS CULPEPPER, Plaintiffs-Appellees, v. D U K E ENERGY FIELD SERVICES, LP, Defendant-Appellant. N o . 09-6185 ( D . C . No. 5:04-CV-00191-D) ( W . D . Okla.)

O R D E R AND JUDGMENT * B e f o r e HARTZ, Circuit Judge, PORFILIO and BRORBY, Senior Circuit Judges.

I n this diversity action, Valley View Angus Ranch, Inc. and its President, O t i s Culpepper (plaintiffs), sued Duke Energy Field Services, LP (now known as D C P Midstream, LP), to recover damages for injury caused when Duke's o i l - a n d - g a s pipeline underlying Valley View's property leaked condensate.

A f t e r examining the briefs and appellate record, this panel has determined u n a n i mo u s l y to grant the parties' request for a decision on the briefs without oral a r g u me n t . See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore o r d e r e d submitted without oral argument. This order and judgment is not binding p r e c e d e n t , except under the doctrines of law of the case, res judicata, and c o l l a t e r a l estoppel. It may be cited, however, for its persuasive value consistent w i t h Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.

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P l a i n t i f f s ' amended complaint raised claims for private and public nuisance, t r e s p a s s , unjust enrichment, and punitive damages. After this court reversed and r e ma n d e d the district court's grant of summary judgment in favor of Duke, s e e Valley View Angus Ranch, Inc. v. Duke Energy Field Servs., Inc., 497 F.3d 1 0 9 6 (10th Cir. 2007), Duke admitted liability for any harm to Valley View d i r e c t l y caused by the pipeline leak. The district court entered partial summary j u d g me n t in favor of Valley View on this issue and held a jury trial to determine t h e nature and extent of the plaintiffs' injuries and to assess what damages, if any, e a c h plaintiff should recover. During the July 2008 trial, the jury heard testimony that Duke had spent $ 2 2 2 , 1 2 4 on cleanup. The jury was also presented with evidence that it would c o s t $756,592 to remove the remaining pollution from the Valley View property, a n d plaintiffs' real estate appraiser testified that the cleanup cost far exceeded the ma r k e t value of Valley View's 470-acre ranch--which he estimated to be $1,000 p e r acre--before the leak. The jury found Valley View entitled to $131,500 for injury to the property a n d Mr. Culpepper entitled to $37,500 for his inconvenience, annoyance, and d i s c o mf o r t . The district court entered judgment on the jury's verdict; denied D u k e ' s motion for judgment as a matter of law and alternative motion for r e mi t t i t u r or a new trial; granted plaintiffs' motion to amend judgment to award

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M r . Culpepper prejudgment interest; and entered an amended judgment. Duke f i l e d a timely notice of appeal. On appeal Duke contends that the district court (1) erroneously instructed t h e jury on the measure of damages recoverable by Valley View; (2) improperly a d mi t t e d expert testimony and denied Duke's posttrial motions; and ( 3 ) incorrectly awarded prejudgment interest. Our jurisdiction arises under 2 8 U.S.C. § 1291. We affirm. I. Background B e c a u s e the parties are familiar with the procedural history and trial t e s t i mo n y in this case, we provide only an abbreviated summary. Mr. Culpepper d i s c o v e r e d Duke's pipeline leak in October 2003. Duke hired an environmental c o n t r a c t o r to dig out polluted soil and perform other remediation. Plaintiffs filed s u i t in February 2004. About two months later, Duke completed its excavation a n d backfilled the excavation site with clean soil. Throughout this litigation, plaintiffs have maintained that Duke "failed to a d e q u a t e l y clean up the leak," J.A., Vol. 2 at 336. Duke, on the other hand, has ma i n t a i n e d that the plaintiffs have not "suffered either the type or extent of d a ma g e s which they seek," id. I I . Measure of Damages N e i t h e r party disputes on appeal the district court's ruling that Valley V i e w ' s claim was for temporary injury to its property. Nor does either party -3-

d i s p u t e that therefore the measure of damages in this case was the reasonable cost o f repairing and restoring the property to its original condition, but not to exceed t h e decrease in the property's fair market value caused by the injury. They also a g r e e that if the cost of repair and restoration exceeded that decrease in value, the me a s u r e of damages amounted to that decrease. Where the parties differ in their a p p e l l a t e briefs is on how much property should be considered in making the d e c r e a s e - i n - v a l u e calculation. Duke asserts that the pipeline leak did not injure mo r e than two of Valley View's 470 acres and that damages under Oklahoma law s h o u l d be limited to the diminution in value of only the injured portion of land. Duke therefore challenges the following portion of jury Instruction Number 18: "`In determining the fair market value, you may consider the extent to which the V a l l e y View property, or some portion of it, was harmed.'" Aplt. Opening Br. a t 16 (quoting J.A., Vol. 2 at 592-93). Duke contends that the jury " mi s c o n s t r u e d " Instruction Number 18, asserting: The only way the jury's verdict [for Valley View] makes any sense is i f the jury read Instruction No. 18 to mean that they could consider t h e fair market value of the entire 470-acre tract, even if only some p o r t i o n of it was harmed . . . . However, . . . this would be an e r r o n e o u s measure of damages. Id. P l a i n t i f f s counter that the leak impacted more than two acres and that O k l a h o ma law requires consideration of the diminution in value of Valley View's

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e n t i r e 470-acre ranch. They assert that Instruction Number 18 gave proper g u i d a n c e to the jury concerning the measure of damages. I n a diversity case such as this, "the substance of a jury instruction is a ma t t e r of state law, but the grant or denial of a tendered instruction is governed b y federal law." Blanke v. Alexander, 152 F.3d 1224, 1232 (10th Cir. 1998). Although we review the district court's refusal to give a particular instruction for a n abuse of discretion, "[w]e review de novo whether, as a whole, the district c o u r t ' s jury instructions correctly stated the governing law and provided the jury w i t h an ample understanding of the issues and applicable standards." Martinez v. C a t e r p i l l a r , Inc., 572 F.3d 1129, 1132 (10th Cir. 2009) (internal quotation marks o mi t t e d ) . "We reverse only in those cases where we have a substantial doubt w h e t h e r the jury was fairly guided in its deliberations . . . ." Id. (brackets and i n t e r n a l quotation marks omitted). O n appeal Duke principally relies on Houck v. Hold Oil Corp., 867 P.2d 4 5 1 , 461 (Okla. 1993), which held that a plaintiff could recover damages for t e mp o r a r y injury to one portion of its land and damages for permanent injury to a n o t h e r portion, so long as there was no double recovery. Houck's holding, a r g u e s Duke, shows that the jury need not consider the entire property in a s s e s s i n g damages for temporary injury. This argument, however, does not get D u k e very far. Duke appears to believe that the only portion of the property that c a n be considered injured is that portion where the leak occurred--the two acres. -5-

B u t Houck tells us otherwise. It states: "[I]f the wrongful act somehow adversely a f f e c t e d the entire parcel . . . , it is appropriate to compute the damages on the b a s i s of the diminution of the value of the total acreage and not just on the value o f the portion damaged." Id. (emphasis added). Thus, if the value of portions of t h e property other than the two acres was diminished by the leak, that loss must b e considered by the jury even if only the two acres were damaged. And because t h e issue is the decrease in market value of the property, Duke could not be p r e j u d i c e d by the jury's consideration of too much property. If, say, 450 of the 4 7 0 acres were not adversely affected by the leak--that is, the market value of the 4 5 0 acres was not decreased--then consideration of those 450 acres would not h a v e increased the amount of damages awarded. A c c o r d i n g l y , we hold that the challenged language in Instruction Number 1 8 was correct. As the district court explained: "[T]he current instruction r e c o g n i z e s that the extent of the harm caused by the leak may be considered in d e t e r mi n i n g fair market value but leaves to the jury, based on and in light of the c o n f l i c t i n g evidence, the determination of how that harm . . . impact[s] . . . the v a l u e of the property." J.A., Vol. 6 at 2057. We now turn to Duke's argument that the evidence, even assuming that I n s t r u c t i o n 18 is correct, could not support the verdict.

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I I I . Sufficiency of the Evidence/Expert Testimony D u k e states its second issue on appeal as "The District Court improperly d e n i e d [Duke's] post-trial motions for judgment as a matter of law and for new t r i a l . " Aplt. Opening Br. at 18. Included within the discussion under this h e a d i n g , however, is a separate issue--the admissibility of testimony by p l a i n t i f f s ' expert witness Jerry Black. We address that issue before turning to the p o s t t r i a l motions. Duke contends that the district court should have excluded Black's t e s t i mo n y about his cleanup plan, which envisioned re-excavating soils u n d e r l y i n g the initial excavation area to a depth of 19 feet. 1 In evaluating the a d mi s s i b i l i t y of expert testimony under Federal Rule of Evidence 702, a district c o u r t "must first determine whether an expert is qualified by knowledge, skill,

D u k e also asserts in conclusory fashion that Black's "estimated cost of r e me d i a t i o n lacked sufficient support to be submitted to the jury" because his o p i n i o n s about the efficacy of a remedial pumping treatment system were "not r e l i a b l e , " and that, to the extent the opinions of other experts "were based on B l a c k ' s flawed cost estimate, . . . their testimony should also have been e x c l u d e d . " Aplt. Opening Br. at 23-24. We decline to review this issue on appeal b e c a u s e Duke "has failed to provide arguments or authorities in support." Burlington N. & Santa Fe Ry. Co. v. Grant, 505 F.3d 1013, 1031 (10th Cir. 2007); s e e also Bronson v. Swensen, 500 F.3d 1099, 1105 (10th Cir. 2007) ("[C]ursory s t a t e me n t s , without supporting analysis and case law, fail to constitute the kind of b r i e f i n g that is necessary to avoid application of the forfeiture doctrine."). Similarly, we need not address Duke's perfunctory assertion that the district court s h o u l d have excluded "Black's opinions regarding groundwater remediation" b e c a u s e he had not calculated "the quantity of groundwater which could be p r o d u c e d from the site." Aplt. Opening Br. at 23. -7-

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e x p e r i e n c e , training, or education to render an opinion. . . . [I]f the court d e t e r mi n e s that a witness is qualified, it must then determine whether her o p i n i o n s are reliable." Milne v. USA Cycling Inc., 575 F.3d 1120, 1133 (10th Cir. 2 0 0 9 ) (brackets, citation, and internal quotation marks omitted); see also United S t a t e s v. Rodriguez-Felix, 450 F.3d 1117, 1122-23 (10th Cir. 2006) (discussing d i s t r i c t court's gatekeeper role). Because Duke does not claim that "the district c o u r t failed to employ the proper legal framework required by Daubert[ v. M e r r e l l Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993)], we consider only w h e t h e r the district court abused its discretion in actually applying this f r a me w o r k to the testimony at hand." Rodriguez-Felix, 450 F.3d at 1125. "We w i l l not . . . disturb a district court's ruling absent our conviction that it is a r b i t r a r y , capricious, whimsical, manifestly unreasonable, or clearly erroneous." Bitler v. A.O. Smith Corp., 400 F.3d 1227, 1232 (10th Cir. 2004). B e f o r e allowing Black's testimony the district court held a pretrial Daubert h e a r i n g and considered the parties' various pleadings in opposition to and support o f the proposed testimony. Thereafter, the court issued an order acknowledging B l a c k ' s education and nearly 30 years' experience as an environmental consultant a n d ruling that Black could testify regarding his cleanup plan. The court a c k n o w l e d g e d Duke's assertion that the soil samples relied upon by Black "do not c o v e r a sufficient area to support his conclusion that contamination was e x t e n s i v e . " J.A., Vol. 2 at 551. But it concluded that Duke had failed to "present -8-

a sufficient basis for rendering [the evidence] inadmissible as unreliable." Id. "Instead," it said, "the deficiencies in his methodology should be the subject of c r o s s - e x a mi n a t i o n , as they impact the weight of Black's testimony." Id. The c o u r t also ruled that even though Black's cleanup plan was a one-page document w i t h recommended remedial actions, the cost of each action, and a sum of the c o s t s , it held "that any deficiencies in the plan . . . d[id] not render it inadmissible u n d e r Fed. R. Evid. 702"; rather, "such deficiencies go to the weight of the e v i d e n c e and should be the subject of cross-examination." J.A., Vol. 2 at 547. T h e district court's ruling was not "arbitrary, capricious, whimsical, ma n i f e s t l y unreasonable, or clearly erroneous." Bitler, 400 F.3d at 1232. The c o u r t heard extensive testimony about Black's education and experience, and a b o u t the methodologies he employed in this case. On review "we are concerned w i t h " whether the district court performed "its obligation under Rule 702 and D a u b e r t , not upon the exact conclusions reached to exclude or admit expert t e s t i mo n y . " Id. In demonstrating that an expert's testimony is reliable, a " p l a i n t i f f need not prove that the expert is undisputably correct or that the e x p e r t ' s theory is generally accepted in the scientific community." Id. at 1233 ( i n t e r n a l quotation marks omitted). "Instead, [a] plaintiff must show that the me t h o d employed by the expert in reaching the conclusion is scientifically sound a n d that the opinion is based on facts which sufficiently satisfy Rule 702's r e l i a b i l i t y requirements." Id. (internal quotation marks omitted). On the record -9-

b e f o r e us, plaintiffs met their burden. See Daubert, 509 U.S. at 596 ("Vigorous c r o s s - e x a mi n a t i o n , presentation of contrary evidence, and careful instruction on t h e burden of proof are the traditional and appropriate means of attacking shaky b u t admissible evidence."). In particular, Duke has not shown why Black could n o t properly testify that excavation to 19 feet was necessary given his testimony t h a t (1) the groundwater level was 19 feet, (2) there was evidence that the c o n d e n s a t e had seeped into the groundwater and traveled to neighboring areas, a n d (3) condensate had seeped into Duke's excavation from below. To be sure, D u k e had plausible grounds for challenging Black's testimony, but the district c o u r t did not abuse its discretion in leaving the matter to the jury. T h e argument by Duke that matches its statement of the second issue on a p p e a l is that the district court improperly denied its motions for judgment as a ma t t e r of law and for a new trial. These motions were based on Duke's c o n t e n t i o n "that there was no evidence in the record from which the jury could f i n d that the extent of the injury to the soil and groundwater directly caused by t h e leak extended beyond the area of the leak site itself." J.A., Vol. 2 at 385. According to Duke, "[e]ven if Plaintiffs' experts' testimony was properly a d mi t t e d , [Duke] was and is entitled to judgment as a matter of law on the issue o f the extent of the injury to the property because the evidence was not c o n f l i c t i n g , " Aplt. Opening Br. at 24. Alternatively, Duke asks this court to r e v e r s e and remand for a new trial. -10-

W e review de novo the district court's denial of a Fed. R. Civ. P. 50(b) mo t i o n for judgment as a matter of law (JMOL), "[d]rawing all reasonable i n f e r e n c e s in favor of the nonmoving party." Wagner v. Live Nation Motor S p o r t s , Inc., 586 F.3d 1237, 1243-44 (10th Cir. 2009), cert. denied, 130 S. Ct. 2 4 0 5 (2010). We will reverse the court's refusal to grant JMOL only "if the e v i d e n c e points but one way and is susceptible to no reasonable inferences s u p p o r t i n g the party opposing the motion." Id. at 1244 (internal quotation marks o mi t t e d ) . We review for an abuse of discretion the district court's denial of a R u l e 59 motion for a new trial. See M.D. Mark, Inc. v. Kerr-McGee Corp., 5 6 5 F.3d 753, 762 (10th Cir. 2009). Where, as here, "a new trial motion asserts t h a t the jury verdict is not supported by the evidence, the verdict must stand u n l e s s it is clearly, decidedly, or overwhelmingly against the weight of the e v i d e n c e . " Id. (internal quotation marks omitted). In diversity cases, federal law g o v e r n s whether JMOL or a new trial is appropriate, see Wagner, 586 F.3d a t 1244 (JMOL); Blanke, 152 F.3d at 1235-36 (new trial), but the substantive law o f the forum state governs analysis of the underlying claim, see Wagner, 586 F.3d a t 1244 (JMOL); Romero v. Int'l Harvester Co., 979 F.2d 1444, 1449 (10th Cir. 1 9 9 2 ) (new trial). C o n t r a r y to Duke's position, the jury was presented with evidence from w h i c h it could infer that the pipeline leak had affected the value of more than two a c r e s . Experts testified that polluted material still existed at the initial excavation -11-

s i t e . Black testified that when polluted material is left in the ground, "[i]t t r a v e l s , . . . goes through various type[s] of medias, whether it be soil or water," J . A . , Vol. 4 at 1177, and can persist for 30 years. He also testified that the g r o u n d w a t e r monitoring wells' test results indicated that the groundwater was p o l l u t e d and was "expanding." Id. at 1173. In particular, he noted groundwater s a mp l e s from a monitoring well not on Valley View's property but across the r o a d , which showed that pollution had "migrated" and that the "service area of the g r o u n d w a t e r pollution ha[d] expanded," which is what "you expect when you d o n ' t have the source removed and groundwater moves." Id. at 1163. Another of t h e plaintiffs' experts, Dr. Robert Knox (a groundwater hydrologist), further t e s t i f i e d about the well off of Valley View's property, stating that its test results w e r e "a very large concern," because they indicate "the contamination has moved o f f site" by flowing "with the groundwater." Id. at 1329. He said that without a p r o p e r cleanup the "problem gets worse" because groundwater is moving and s p r e a d i n g out. Id. T h e jury also heard testimony from plaintiff Culpepper that the leak had a f f e c t e d the entire ranch's value, reducing the value "by at least half," id. at 1040, by making it unattractive to prospective buyers. Plaintiffs' real estate appraiser c o n c u r r e d , stating that the property "would not be marketable." Id. at 1265. On c r o s s - e x a mi n a t i o n he said that even if the two-acre area were carved out, buyers w o u l d not be interested in land near the polluted site, although he acknowledged -12-

t h a t if a larger area around the two-acre site were carved out, the remaining a c r e a g e could have a residual value of $210,000 (meaning that the decrease in v a l u e was $260,000). There was evidence that Valley View had sold some a c r e a g e near the leak site (but not on the 470-acre ranch) in 2008 for more than $ 1 , 0 0 0 per acre; but the record does not indicate whether the buyers were i n f o r me d of the leak. T h e jury observed the witnesses, heard the testimony, and reviewed the p a r t i e s ' exhibits. Its verdict of $131,500 implies both that it concluded that the p i p e l i n e leak impacted more than two of Valley View's 470 acres, and that it r e j e c t e d contentions that the 470 acres had become worthless or had lost half its v a l u e . Having reviewed the record in light of the applicable deferential standards o f review, we cannot conclude that the evidence "points but one way," Wagner, 5 8 6 F.3d at 1244 (JMOL) (internal quotation marks omitted), or that the verdict " i s clearly, decidedly, or overwhelmingly against the weight of the evidence," M . D . Mark, Inc., 565 F.3d at 762 (new trial) (internal quotation marks omitted). IV. Award of Prejudgment Interest to Mr. Culpepper T h e district court granted plaintiffs' request that Mr. Culpepper be awarded p r e j u d g me n t interest under Okla. Stat. tit. 12, § 727. 2 Duke agrees that § 727 a p p l i e s to this case but contends that Mr. Culpepper cannot be awarded any

U n l e s s otherwise noted, all citations to Okla. Stat. tit. 12, §§ 727 and 727.1 a r e from the Oklahoma Statutes' 2008 Supplement. -13-

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i n t e r e s t because Oklahoma's State Treasurer has never certified what the rate of i n t e r e s t should be. To understand and evaluate Duke's contention, we must c o n s i d e r § 727, its successor statute, and what the State Treasurer did, and did n o t , certify with respect to interest rates. Section § 727 is "applicable to all actions . . . filed . . . on or after J a n u a r y 1, 2000, but before January 1, 2005." Id. § 727(K). It governs p r e j u d g me n t interest in this case because plaintiffs filed suit on F e b r u a r y 25, 2004. Section 727(I) states: [ P ]o s t j u d g me n t interest and prejudgment interest . . . shall be d e t e r mi n e d by using a rate equal to the average United States T r e a s u r y Bill rate of the preceding calendar year as certified to the A d mi n i s t r a t i v e Director of the Courts by the State Treasurer on the f i r s t regular business day in January of each year, plus four p e r c e n t a g e points. T h e certification required by the State Treasurer seems simple enough, but a p r o b l e m arose when the State Treasurer was given an additional certification duty u n d e r a successor statute to § 727. In 2004 the state legislature enacted O k l a . Stat. tit. 12, § 727.1 (Supp. 2004). Section 727.1 did not repeal § 727 but it s e t the rate for prejudgment interest for suits filed "on or after January 1, 2005." Okla. Stat. tit. 12, § 727.1(K). Under § 727.1, that rate is: t h e prime rate, as listed in the first edition of the Wall Street Journal p u b l i s h e d for each calendar year and as certified to the A d mi n i s t r a t i v e Director of the Courts by the State Treasurer on the f i r s t regular business day following publication in January of each y e a r , plus two percent (2%). I d . § 727.1(I). -14-

U n f o r t u n a t e l y , the State Treasurer has not found it possible to perform two c e r t i f i c a t i o n s for the same year. There is a published interest rate for the year 2 0 0 4 , calculated under § 727(I). See 2004 Notice Re: Interest on Judgments, a v a i l a b l e at http://www.oscn.net/applications/oscn/DeliverDocument.asp?Cite I D = 4 3 8 2 1 8 . But the published interest rates for the years 2005, 2006, 2007, and 2 0 0 8 , which are listed in the statutory note to § 727, see Okla. Stat. tit. 12, § 727 ( " N O T I C E RE: INTEREST ON JUDGMENTS . . . . Interest rates since the i n c e p t i o n of the law of November 1, 1986, are as follows:") were apparently c a l c u l a t e d under § 727.1(I). The district court applied the published interest rates c o n t a i n e d in the statutory note to § 727, ruling that "a party otherwise entitled to p r e j u d g me n t interest should not be deprived of the same because of the absence of t h e . . . certification of interest rates applicable to § 727." J.A., Vol. 2 at 630. "[A] federal court sitting in diversity applies state law, not federal law, r e g a r d i n g the issue of prejudgment interest. Although an award of prejudgment i n t e r e s t is generally reviewed for abuse of discretion, any statutory interpretation o r legal analysis underlying such an award is reviewed de novo." AE, Inc. v. G o o d y e a r Tire & Rubber Co., 576 F.3d 1050, 1055 (10th Cir. 2009) (citation and i n t e r n a l quotation marks omitted). Further, under Oklahoma law a court's "goal i n construing statutes is to determine the Legislature's intent." Russell v. Chase I n v . Servs. Corp., 212 P.3d 1178, 1185 (Okla. 2009); see also United States v. D e G a s s o , 369 F.3d 1139, 1145 (10th Cir. 2004) (observing that if "the state -15-

s u p r e me court has not interpreted a provision of the state's statutory code, the f e d e r a l court must predict how the court would interpret the code in light of state a p p e l l a t e court opinions, decisions from other jurisdictions, statutes, and t r e a t i s e s " (brackets and internal quotation marks omitted)). G u i d e d by these standards, we affirm the district court's award of p r e j u d g me n t interest. We cannot agree with Duke that the legislature intended t h a t a party otherwise entitled to prejudgment interest under § 727 should be t o t a l l y deprived of that interest because of a glitch in the procedure for computing t h a t interest. Would parties be deprived of prejudgment interest under § 727.1 if t h e Wall Street Journal ceased publication? The more difficult question is what i n t e r e s t rate to apply. But Duke has made no argument on that point, so we must a f f i r m the rate chosen by the district court. V . Conclusion F o r the foregoing reasons, we reject Duke's appellate arguments and A F F I R M the amended judgment of the district court. E n t e r e d for the Court H a r r i s L Hartz C i r c u i t Judge

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