EQT Production Company v. Magnum Hunter Production, Inc.
MEMORANDUM OPINION & ORDER: EQT's 124 Motion for a New Trial or Altered Judgment is DENIED. Signed by Judge Joseph M. Hood on 3/8/2018. (STC)cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION at LEXINGTON
EQT PRODUCTION COMPANY,
MAGNUM HUNTER PRODUCTION
Action No. 5:16-cv-150-JMH
If nothing else, EQT Production Company (“EQT”) embodies
persistence. If at first EQT does not succeed, it tries again.
numerous issues at trial, EQT did not succeed.
EQT wants to try again.
Now after trial,
Such persistence is often laudable.
the Court appreciates the zealous advocacy in this case.
some point, the time for second chances is over.
And here EQT’s
request for a new trial or altered judgment [DE 125] consists
merely of arguments already rejected by this Court.
a different result, but it will not get one.
The decisions of the
Court stand, and EQT’s motion is DENIED.
The Court has laid out the factual and procedural background
of this case in multiple prior orders.
suffices for the present Motion.
A truncated version
EQT and Magnum Hunter long enjoyed a working relationship in
(“FOAs”), Magnum Hunter drilled wells on property owned or leased
by EQT and sold oil and/or gas from those wells.
[DE 1; DE 117,
In exchange, EQT received a royalty, amounting to a
percentage of 8/8ths of the gross proceeds received from the sale
of oil and/or gas produced from wells drilled thereunder without
deductions of any kind.
[Pl.’s Trial Exs. 1-11].
For a while, it
worked. But over time, as the oil and gas market dried up, EQT and
Magnum Hunter came to disagreements regarding certain rights,
September 2013, EQT exercised its audit rights under the contracts.
The audit, conducted by Mercadante & Company, P.C. (“Mercadante”),
contained specific written “exceptions” that indicated Magnum
overriding royalties, and escalation fees.
[DE 77, p. 6; DE 118,
pp. 4-5; DE 122, p. 4; Pl.’s Trial Ex. 14].
The audit identified
net exceptions of $2,367,307 for the 2011-2013 period.
Trial Ex. 14; Def.’s Trial Ex. 176].
After the audit, the parties
agreed to adjust the amount of the audit findings to $1,833,780.
[Def.’s Trial Ex. 50; Def.’s Trial Ex. 176].
The amount excluded
$607,216 related to Natural Gas Liquids (“NGLs”) that had been
included in the audit.
[DE 119-1, p. 7; DE 120-3, p. 26; Def.’s
Trial Ex. 50; Def.’s Trial Ex. 176].
The parties continued to
dispute whether Magnum Hunter owed additional amounts related to
NGLs, but otherwise EQT and Magnum Hunter agreed to the $1,833,780
amount for the audit period.
After the audit, in December 2015, Magnum Hunter entered
[DE 117, p. 30].
[Pl.’s Trial Ex.
EQT filed a Proof of Claim for
This included the full audit
amount of more than $2 million, despite the parties’ agreement on
The Proof of Claim also included amounts from
2002-2010 and amounts from the post-audit period.
used the audit numbers as a baseline and extrapolated to determine
some of the new amounts it sought to recover.
Once Magnum Hunter came out of bankruptcy, it made the $1.8
million cash payment to EQT that the parties previously agreed to.
[DE 122, pp. 6-7].
The payment did not include any amount for
NGLs or any claims for 2002-2010 or post-audit periods.
Magnum Hunter’s payment, EQT filed this lawsuit seeking the entire
amount—nearly $5.9 million—listed in its proof of claim.
In particular, EQT alleged Magnum Hunter took deductions
against oil and gas royalties in violation of the FOAs.
EQT also contended Magnum Hunter failed to pay certain shut-in
fees, and the parties continued to disagree over what amount, if
any, Magnum Hunter owed EQT for NGL royalties.
Before trial, the Court issued several orders relevant to the
First, the Court settled the NGL question in its
July 2017 Memorandum Opinion and Order. [DE 77]. There, the Court
granted Magnum Hunter summary judgment on the NGL question and
ruled that NGLs were not “oil and/or gas” under the FOAs.
EQT asked the Court to reconsider, but the Court declined
[DE 93; DE 98].
Second, after a
discovery dispute, Magistrate Judge Wier
issued a provisional ruling that limited EQT’s damages proof to
“the current universe of produced discovery and preclude[d] EQT
from offering evidence to calculate damages that it ha[d] not yet
produced to Magnum.”
[DE 43, p.
Judge Wier then denied
EQT’s Motion for Reconsideration and froze EQT’s damages-related
proof to “where it happily stood at the time of the Bergonzi
[DE 63, p. 17].
The rulings stemmed from EQT’s
failure to turn over internal records, known as “Enertia,” that
EQT used to calculate its damages.
EQT never provided the records
to Magnum Hunter prior to Magnum Hunter’s deposition of John
Bergonzi, EQT’s witness.
EQT filed objections to Judge Wier’s
Order, but this Court overruled those objections.
The parties tried the case to the bench September 5-6, 2017
in Lexington, Kentucky.
[DE 117; DE 118].
admitted Plaintiff’s Exhibit 52 by avowal.
At trial, the Court
[DE 117, p. 18].
Court found that the exhibit—which allegedly showed that Magnum
Hunter made improper deductions on EQT’s royalties from before
2010—was precluded by the Court’s prior discovery orders freezing
[DE 117, p. 18].
At the close of evidence, the parties submitted proposed
findings of fact and conclusions of law and a memorandum of law in
lieu of closing arguments.
[DE 119; DE 120; DE 121].
and in post-trial filings, EQT made the same arguments it makes in
the present motion.
The Court issued its
Findings of Fact
Conclusions of Law in December and found (1) Magnum Hunter breached
the FOAs by failing to make timely royalty payments
(2) Magnum Hunter
the FOAs by failing to
in fees from 2013 to present under
to prove that Magnum Hunter made
Count II; and (3) EQT failed
improper deductions under Count
V, largely because EQT could not produce admissible damagesrelated proof.
[DE 122, pp. 33-34].
request for declaratory relief.
The Court also denied EQT’s
[Id. at p. 34].
After the Court issued its Judgment, EQT filed the present
Motion under Rule 59 for a new trial and for an altered or amended
judgment, and under Rule 52(b) for amended findings.
Magnum Hunter filed its response [DE 125] to which EQT replied [DE
127], making the matter ripe for review.
“When a district court enters a judgment, the Federal Rules
give the losing party several types of recourse: The party may ask
the court to amend its findings or make additional findings, see
Fed R. Civ. P. 52(b); it may seek a new trial, see Fed R. Civ. P.
59(a); it may seek to alter or amend the judgment, see Fed. R.
Civ. P. 59(e).”
Gencorp Inc. v. Olin Corp., 477 F.3d 368, 372
findings of fact or make additional findings may “accompany a
motion for a new trial under Rule 59.”
Fed. R. Civ. P. 52(b).
Although the rules supply litigants several post-judgment options,
“[t]he ‘public policy favoring finality of judgments’ limits the
Waifersong Ltd., Inc. v. Classic Music Vending, 976 F.2d 290, 292
(6th Cir. 1992)).
“A Rule 59 motion should only be granted if there was (1)
intervening change in controlling law; or (4) a need to prevent
Michigan Flyer, LLC v. Wayne Cty. Airport
Auth., 860 F.3d 425, 431 (6th Cir. 2017) (quoting Leisure Caviar,
LLC v. U.S. Fish & Wildlife Serv., 616 F.3d 612, 615 (6th Cir.
“The purpose of Rule 59(e) is ‘to allow the district
court to correct its own errors, sparing the parties and appellate
courts the burden of unnecessary appellate proceedings.’” Howard
v. United States, 533 F.3d 472, 475 (6th Cir. 2008) (quoting York
v. Tate, 858 F.2d 322, 326 (6th Cir. 1988)).
But the Sixth Circuit
has repeatedly held that a “’motion under Rule 59(e) is not an
opportunity to re-argue a case.’”
Michigan Flyer, 860 F.3d at 431
(quoting Sault Ste. Marine Tribe of Chippewa Indians v. Engler,
146 F.3d 367, 374 (6th Cir. 1998)).
Rule “to relitigate old matters.”
554 U.S. 471, 486, n.5 (2008).
And a party may not use the
Exxon Shipping Co. v. Baker,
Indeed, these motions are “‘seldom
repose.’” Zell v. Klingelhafer, No. 13-cv-458, 2018 WL 334386, at
*4 (S.D. Ohio Jan. 8, 2018) (quoting Coleman v. United States, No.
2:05-CR-0043(1), 2017 WL 2266881, at *2 (S.D. Ohio May 23, 2017));
see also Day v. Krystal Co., 241 F.R.D. 474, 476 (E.D. Tenn. 2007).
“If . . . a Rule 59 motion merely quibbles with the Court’s
decision, the proper recourse is not a motion for reconsideration
but instead an appeal to the Sixth Circuit.”
Zell, 2018 WL334386,
The Rule is not “a substitute for appeal.”
City of Toledo, 671 F. Supp. 2d 967, 969 (N.D. Ohio 2009).
disagreement with the Court’s decision is not enough.
When parties try their claims to the bench, the Court may
grant a new trial under Rule 59 “where it concludes that it has
made a ‘manifest error of law or mistake of fact’ and that
‘substantial reasons’ exist for setting aside the judgment.”
Corp. v. HTM Sports, B.V., 896 F. Supp. 751, 754 (E.D. Tenn. 1995)
(quoting Hager v. Paul Revere Life Ins. Co., 489 F. Supp. 317, 321
(E.D. Tenn. 1977)).
Like Rule 59, Rule 52(b) allows courts to alter and amend the
Fed. R. Civ. P. 52(b).
Also like Rule 59, Rule 52 “is
‘not intended to allow parties to rehash old arguments already
considered and rejected by the trial court.’”
Zell, 2018 WL
BarclaysAmerican / Commercial, Inc., 899 F.2d 119, 123 (1st Cir.
In addition, Rule 52(b) allows the court to amend its
findings or make additional findings.
But “a party who failed to
prove his strongest case is not entitled to a second opportunity
to litigate a point” under Rule 52(b).
9C Charles Alan Wright &
Arthur R. Miller, Federal Practice and Procedure § 2582 (3d ed.
EQT argues the Court made four errors that require an amended
judgment or new trial: the Court (1) erred in finding that EQT did
not prove damages for its breach of contract claim under Count V;
(2) improperly found that Magnum Hunter did not breach the FOAs by
netting costs related to NGLs against oil and gas royalty payments;
(3) should have granted EQT a declaratory judgment; and (4) failed
to award EQT certain prejudgment interest.
As an initial matter, the Court recognizes that EQT simply
repackages arguments the Court has already considered at trial and
in post-trial filings.
And because Rule 59 is “not an opportunity
to re-argue a case,” the Court could simply deny EQT’s motion.
appropriate to further explain why EQT’s arguments are without
A. EQT’s Failure to Prove Damages
EQT’s ability to prove damages under Count V hinges on the
purportedly shows improper deductions Magnum Hunter took against
EQT’s gas royalty before 2010.
document by avowal.
[DE 117, p. 18].
At trial, the Court admitted this
The Court reasoned that
[DE 117; 122, pp. 20-22].
damages-related proof that it did not produce to Magnum Hunter as
of the date of the Bergonzi deposition.
The Court made the
calculation to Magnum Hunter when it sought to depose Bergonzi,
effectively depriving Magnum Hunter of a full opportunity to
investigate EQT’s claims.
EQT argued then, as it does now, that
the raw data initially came from Magnum Hunter, and thus Magnum
Hunter could not be prejudiced.
The Court saw it differently.
Despite the fact that information “may well have (and apparently
did) originally come from MHP,” Magnum Hunter “was not aware of
computed, or utilized it, how EQT used it to calculate damages,
and the like.”
[DE 61, p. 9].
“Without such information, Magnum
Bergonzi.” [DE 78, p. 6]. Therefore, the Court ruled, EQT “should
not be permitted to use in any proceeding damages proof it had not
supplied as of the Bergnozi deposition.”
[DE 61, p. 17].
the Court was explicit: “any evidence on which EQT relied to make
a damages calculation that EQT did not produce” to Magnum Hunter
[DE 61, pp. 4-5] (emphasis added).
“h[e]ld EQT to what EQT . . . produced.”
[Id. at p. 5].
Based on these pretrial rulings, the Court admitted Exhibit
52 only by avowal.
EQT argues that Exhibit 52 does not fall under
the Court’s prior discovery orders because Magnum Hunter produced
the document, not EQT.
the data in Exhibit
[DE 124-1, p. 9].
After all, EQT
52 was always in Magnum Hunter’s hands and,
as EQT puts it, the exhibit
possibly fall under the
Court’s discovery ruling, as EQT could not have
[Id. at p. 10].
Hunter prior to Bergonzi’s deposition.”
In the first place, it is the Court, and not EQT, who is in
the best position to understand the scope of its own orders.
its Motion, EQT argues Exhibit 52 “cannot” fall under the Court’s
prior orders, but the Court disagrees and finds this is precisely
the type of proof EQT was barred from introducing.
EQT contends that under Howe v. City of Akron, 801 F.3d 718
(6th Cir. 2015), the Court should admit Exhibit 52 because the
information came from Magnum Hunter.
analyzed the Howe factors in his initial opinion, and this Court
considered EQT’s argument in its Findings of Fact and Conclusions
[DE 61; DE 122].
In Howe, the defendant had all relevant
Plaintiffs intended to use . . . simple math . . . to calculate”
801 F.3d at 748. (emphasis added).
The Court held that
district courts should not exclude evidence when “the defendant
‘had all the information relevant to the computation of damages in
plaintiff’s] deposition to question him about damages.’”
That is not the case here where Magnum Hunter,
at the time of the Bergonzi deposition, did not have a full
opportunity to question Bergonzi about EQT’s damages calculations.
Magnum Hunter could not do so because EQT never disclosed where
the damages calculations came from.
Without that information,
Magnum Hunter did not have a full opportunity to depose Bergonzi.
True, as EQT argues, the information contained in Exhibit 52
came from Magnum Hunter, but so too did the data entered into
And more to the point, the source of the document does
not, by itself, compel admission.
The Court instead based its
prevented Magnum Hunter from having any meaningful deposition of
After all, even though Exhibit 52 came directly from
Magnum Hunter, Magnum Hunter did not know at the time of the
Bergonzi deposition that EQT was using information in Exhibit 52
as its basis for damages calculations. Indeed, Magnum Hunter could
not have known what EQT used to come up with its damages numbers.
Thus, Magnum Hunter could not question Bergonzi about EQT’s method
to calculate damages and was deprived a full opportunity to depose
Bergonzi on this issue.
EQT disputes this point arguing “[n]o basis exists for finding
that Magnum Hunter did not have a full opportunity to question EQT
regarding the information contained in Plaintiff’s Exhibit 52.”
[DE 124, p. 11].
But EQT does not tell us why “no basis exists.”
The Court finds no merit to the argument.
The basis is simple:
when Bergonzi came to testify at his deposition, EQT had not
provided information regarding how it came up with damages for
these claims; thus, Magnum Hunter had no opportunity to fully and
meaningfully question Bergonzi about those calculations.
knowing where EQT’s numbers came from, Magnum Hunter could not
question Bergonzi about the numbers.
EQT also argues that the Court must admit the exhibit because
EQT did not have possession of the document at the time of the
Bergonzi deposition and thus EQT could not have produced it to
Indeed, EQT argues it “could not have produced the
information” in Exhibit 52 “prior to Mr. Bergonzi’s deposition
because it was created” by Magnum Hunter.
This again illustrates EQT’s failure to fully grasp the
Court’s orders. The Court froze EQT’s proof to what it had offered
at the time of the Bergonzi deposition because EQT failed to turn
over Enertia data.
As such, the Court precluded EQT from offering
any additional damages proof, regardless of whether EQT had the
information at the time of the Bergonzi deposition or not.
Court did not provide an exception for things not yet produced or
The Court froze EQT’s proof because it had not turned
over information it should have.
EQT will not be permitted to
circumvent these rulings by introducing new documents it did not
have prior to the Bergonzi deposition.
The Court also remains puzzled by EQT’s argument that it could
not have turned over the data in Exhibit 52.
On the one hand, EQT
argues that Exhibit 52 proves its damages under Count V for pre2010 claims.
On the other hand, EQT argues that it could not have
produced “the information” in Exhibit 52 until Magnum Hunter
provided the document only days before trial.
As Judge Wier
previously wrote, “EQT, as the Plaintiff, the master of its claim,
and the party making its own damages calculation, should have been
well aware, early in the case, of the basis for [the damages]
[DE 61, p. 14].
If, as EQT argues, EQT could not
have produced the information that purportedly proves its damages
until days before trial, then how did EQT calculate its damages?
Exhibit 52 cannot both prove EQT’s damages and also be information
that EQT did not have access to during discovery.
EQT likely did
not have Exhibit 52 itself, but EQT certainly had access to the
information within the document, since, by EQT’s argument, the
Exhibit proves damages.
The Court also rejects EQT’s argument that “[n]o discernible
Defendant’s Trial Exhibit 177 that would compel admission of one
but not the other.”
admitted Exhibit 177.
[DE 124, p. 12].
As EQT notes, the Court
But fundamental differences exist between
Exhibits 52 and 177. First, Exhibit 52 was plaintiff’s exhibit,
while 177 was defendant’s exhibit.
The Court’s prior discovery
orders froze only EQT’s proof, not proof generally.
EQT could no longer produce additional proof, nothing in prior
discovery orders barred Magnum Hunter from introducing such an
Second, Exhibit 177 was admitted without objection.
fact, both parties relied on this Exhibit.
Exhibit 52 was the
center of a long dispute before trial, during trial, in post-trial
filings, and in the present motion.
Far from “no discernible
In short, EQT failed to turn over crucial damages information
So the Court froze EQT “where it happily stood”
at the time of the Bergonzi deposition. The Court’s orders plainly
prevented EQT from offering any additional damages-related proof.
At trial, EQT still attempted to admit Exhibit 52 to prove damages.
But EQT had a duty to disclose such information during discovery.
Even if EQT did not have Exhibit 52 itself during discovery, the
information and data within Exhibit 52 must have been available to
EQT if the document proves damages under Count V, as EQT argues.
And as this Court previously ruled, it will not “reward EQT for
its failure to comply with the rules of discovery.”
[DE 78, p.
EQT presents no clear error or law, manifest injustice, or
other substantial reason to set aside the judgment.
rehashes old arguments that this Court already rejected.
2018 WL 334386, at *3.
The Court’s rulings on Exhibit 52 stand.
B. Magnum Hunter’s NGL Offset
Next, EQT argues the Court erred in finding Magnum Hunter did
not breach the FOAs when it subtracted NGL post-production costs
from the total oil and gas royalties it owed to EQT.
In total, Magnum Hunter owed $776,862.08 in oil and gas
From that number, Magnum Hunter subtracted
$206,926.36, or the amount that NGL post-production costs exceeded
NGL revenue during the same time period. [Id. at p. 16].
Magnum Hunter contended it owed $569,935.72 in royalty payments
instead of the full $776,862.08.
The FOAs required Magnum Hunter to remit royalty payments on
oil and/or gas “without deductions of any kind.”
Pls. Trial Exs.
EQT argued at trial, and argues again now, that Magnum
Hunter breached this provision of the FOAs by deducting NGL costs
against oil and gas revenues.
[DE 124-1, p. 13].
already considered this argument and specifically rejected it in
its Findings of Fact and Conclusions of Law.
[DE 122, pp. 16-18].
The Court reasoned that offsetting the total gas and oil royalty
by the net amount of NGL revenue less NGL post-production costs is
not a “deduction” under the FOAs.
[Id. at p. 17].
Hunter simply netted the costs against royalties it owed EQT. This
is not a “deduction” but simply the net amount Magnum Hunter owed
EQT based on two separate accounts.
The Court explained that
Magnum Hunter could have sent EQT an invoice for the $206,926.36,
“but the net effect is the same.”
[Id. at p. 18].
EQT now wants the Court to reconsider.
In particular, EQT
contends that the Court’s July 2017 Order that found NGLs did not
fall under the contract means Magnum Hunter had no right to produce
the NGLs at all, and thus EQT has no obligation to pay for the
[DE 124-1, pp. 14-15].
Because NGLs do not
fall under the FOAs, EQT argues, “Magnum Hunter is committing
trespass by taking NGLs from EQT’s gas stream.”
This is, again, a repackaging of old arguments.
Magnum Hunter produced NGLs and paid royalties to EQT.
that time, Magnum Hunter charged EQT costs.
And when revenue
exceeded costs, EQT received royalty payments.
It was only when
costs exceeded revenue that NGLs became a net negative to EQT.
trial, Magnum Hunter’s witness, Michael Wallen, testified that
Magnum Hunter paid, and EQT accepted, NGL royalty payments since
2008 even when NGL costs exceeded NGL revenues.
[DE 118, p. 81].
Before trial, the Court ruled that these deductions—that is,
Magnum Hunter’s subtracting NGL post-production costs from NGL
revenues—did not amount to a breach of contract under the FOAs
because NGLs are not subject to the FOAs.
[DE 77, pp. 19-20].
And because the FOAs do not apply to NGLs, any post-production
deductions from NGL royalty payments are not a breach. [Id.] NGLs
simply fall outside the reach of the agreements.
But when the reverse scenario occurred—that is, when NGL postproduction costs exceeded revenue—EQT received no royalty because
the balance was negative.
EQT contends that this amounts to a
breach because Magnum Hunter then netted the negative amount
against other oil and gas royalties, not just NGL royalties. Given
the Court’s prior Order, EQT’s argument would mean that Magnum
Hunter would never breach the FOAs so long as revenue exceeded
costs; i.e., as long as EQT continued to receive a royalty.
at the point where costs exceeded revenue—and EQT stopped receiving
a royalty—Magnum Hunter would suddenly be in breach because it
netted the amount against oil and gas royalties.
It is illogical
that Magnum Hunter’s breach or non-breach under the FOAs would
depend on the NGL market—namely how much it cost to produce NGLs
and the price at which Magnum Hunter could sell them.
rejects this position.
In short, like its Exhibit 52 argument, EQT disagrees with
the Court, but EQT fails to present any clear error of law or need
to prevent manifest injustice.
Indeed, EQT fails to present any
argument it has not already made to the Court.
And because the
Court sees no reason to alter its judgment, EQT’s motion is denied.
C. EQT’s Request for Declaratory Relief
EQT’s next argument is quickly disposed of.
EQT asked the
Court for a declaration that EQT is (1) entitled to royalty without
deductions of any kind, and (2) entitled to recover all payments
for NGLs that Magnum Hunter received under the FOAs.
The Court denied these requests in its Findings of Fact
and Conclusions of Law.
[DE 122, pp. 27-29].
The Court will also
reject them here.
As discussed at length in this case, NGL deductions were
proper because NGLs are not contemplated by the FOAs.
17-19; DE 122, p. 29].
In addition, EQT did not prove damages for
improper deductions on oil and gas royalties.
[DE 77, pp.
[DE 122, pp. 23-
As such, a declaration on that claim is improper.
D. Prejudgment Interest on Cash Payment
Finally, EQT argues it is entitled to an altered judgment
because the Court did not award prejudgment interest on the
$1,833,780 Cash Payment.
[DE 124-1, p. 18].
But Magnum Hunter
bankruptcy, not because this Court awarded EQT damages.
the Cash Payment was made before this case ever came to trial.
EQT argues that it must receive prejudgment interest because Magnum
Hunter failed to timely remit full payment.
But evidence at trial
indicated EQT held up the Cash Payment because EQT believed it was
entitled to additional amounts related to NGLs.
68; DE 118, p. 93].
Thus, the Court did not award prejudgment
EQT does not like the Court’s ruling, but EQT cannot
[DE 117, pp. 65-
point to any clear error of law or manifest injustice that requires
a new trial or altered judgment on this issue.
In short, EQT disagrees with the Court.
parties often are unsatisfied.
But after trials,
That is not a grounds for granting
a new trial or altered judgment.
Accordingly, for the reasons
stated herein, EQT’s Motion for a New Trial or Altered Judgment is
This the 8th day of March, 2018.
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