EQT Production Company v. Magnum Hunter Production, Inc.
MEMORANDUM OPINION & ORDER: It is ordered that 73 MOTION in Limine is GRANTED IN PART and DENIED IN PART AS MOOT. Signed by Judge Joseph M. Hood on 8/11/2017.(SCD)cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION at LEXINGTON
EQT PRODUCTION COMPANY,
Civil No. 5:16-cv-150-JMH
) MEMORANDUM OPINION AND ORDER
MAGNUM HUNTER PRODUCTION, INC.,
This matter is before the Court upon Plaintiff EQT Production
Company’s Motion in Limine [DE 73], in which it seeks to preclude
Defendant Magnum Hunter Production, Inc. from introducing evidence
negotiations between the parties; (2) other royalty deduction
lawsuits to which EQT was a party; (3) actions or conduct of its
joint farmor, KRCC; and (4) the parties’ course of conduct. Magnum
Hunter has filed a Response [DE 79], making this matter ripe for
the Court’s review.
The parties have since submitted Witness
Lists, Exhibit Lists and Pretrial Memoranda [DE 81, 82, 83, 84,
85, 86], which implicate many of these same evidentiary issues, in
compliance with the Court’s Scheduling Order of August 2, 2016 [DE
As for the first of these items, EQT specifically asks the
Court to preclude Magnum Hunter from characterizing the claim for
unpaid royalties on natural gas liquids (“NGLs”) as a “bargaining
[DE 73 at 6].
Such a request is likely moot in light of
the Court’s decision to grant summary judgment in Magnum Hunter’s
favor on the NGL claim.
While Magnum Hunter concedes that this
request is reasonable and indicates that it will not use such
language at trial, it also expresses some concern about the scope
of EQT’s request.
Specifically, Magnum Hunter questions whether
EQT wishes to preclude Magnum Hunter from introducing evidence or
eliciting testimony about communications related to the audit
and/or bankruptcy proceeding.
[DE 79 at 2-7].
EQT declined to
file a Reply, but indicates in its pretrial filings that it too
wishes to introduce evidence of such discussions, which would make
Magnum Hunter’s concerns moot. [DE 84 at 2-4]. However, the Court
finds it necessary to make a few observations on this issue.
As a general matter, evidence is relevant if “it has any
tendency to make a fact more or less probable than it would be
determining the action.”
Fed. R. Evid. 401.
may be excluded “if its probative value is substantially outweighed
by a danger of one or more of the following: unfair prejudice,
confusing the issues, misleading the jury, undue delay, wasting
time, or needlessly presenting cumulative evidence.” Fed. R. Evid.
(a) Evidence of the following is not admissible—on
behalf of any party—either to prove or disprove the
validity or amount of a disputed claim or to impeach by
a prior inconsistent statement or contradiction:
accepting, promising to accept, or offering to accept—a
valuable consideration in compromising or attempting to
compromise the claim; and
(2) conduct or a statement made during compromise
negotiations about the claim—except when offered in a
criminal case and when the negotiations related to a
claim by a public office in the exercise of its
regulatory, investigative, or enforcement authority.
(b) The Court may admit this evidence for another
purpose, such as proving a witness’s bias or prejudice,
negating a contention of undue delay, or proving an
effort to obstruct a criminal investigation or
Both parties indicate that they will introduce evidence about
amounts included in the EQT Cash Payment.1
[DE 84 at 3].
evidence likely would not be subject to exclusion under Rule 408
discussions regarding the instant claim to prove or disprove the
validity or amount of the claim.
Rather, they indicate that they
Out of an abundance of caution, the Court reiterates that the
Confirmation Order did not bar EQT from seeking to recover the full
amount stated in the Proof of Claim minus the amount of the EQT Cash
Payment. This matter is not open for further discussion.
will use evidence of communications from the bankruptcy proceeding
to demonstrate what sums the EQT Cash Payment represented.
Even if such evidence is not excludable under Rule 408, the
Court harbors some concerns about its use at trial.
Memorandum Opinion and Order, the Court declined to make explicit
findings about what claims were included in the EQT Cash Payment.
However, it did reject Magnum Hunter’s contention that the EQT
Cash Payment fully disposed of EQT’s claim for sums relating to
the 2011 to 2013 audit period.
The parties will not be permitted
to re-litigate the Court’s findings pertaining to the EQT Cash
Payment by introducing contrary evidence at trial.
The Court also urges the parties to carefully consider the
respective Motions for Summary Judgment, the parties argued that
the EQT Cash Payment represented compensation for certain sums
owed by Magnum Hunter.
As noted above, Magnum Hunter insisted
that the EQT Cash Payment corresponded to the 2011 to 2013 audit
However, these numbers did not match up and Magnum
Hunter failed to provide any evidence that would explain the
The Court foresees that the parties will introduce
testimony from their corporate representatives about what items
were covered by the EQT Cash Payment.
While such testimony is
outweighed by its potential to confuse the issues and mislead the
See Fed. R. Evid. 403.
The Court questions whether it is truly necessary to burden
the jury with conflicting testimony about what the EQT Cash Payment
represented and then require them to parse out which of EQT’s
breach of contract claims have already been satisfied by the
aforementioned payment. It may be more efficient to simply explain
that EQT received the Cash Payment in partial satisfaction of the
amount stated in its Proof of Claim and that the purpose of this
lawsuit is to determine whether EQT is entitled to the remainder.
EQT would then have the opportunity to introduce evidence relevant
to each breach of contract claim and substantiate its request for
Magnum Hunter would have the opportunity to counter this
The jury would then be left with two simple questions: Has
EQT proven breaches of the FOAs?
If so, has EQT proven that it
suffered damages in excess of the sum it received in the EQT Cash
As for the audit discussions, such evidence likely falls
outside the ambit of Rule 408 because they were not made in
furtherance of settlement, but rather in the course of the auditing
Because the calculation and adjustment of the audit
exceptions is relevant to the issues of breach and damages, the
parties will be permitted to introduce evidence of communications
made throughout the audit process.
See Fed. R. Evid. 401.
EQT also asks the Court to preclude Magnum Hunter from
introducing proof of KRCC’s involvement in the audit. As explained
in the Memorandum Opinion and Order, KRCC and EQT were joint
farmors in one of the FOAs that was subject to the audit.
Hunter argues that KRCC’s actions and conduct are relevant and
admissible because of its status as joint farmor and resulting
involvement in the audit.
However, the fact that KRCC ultimately
chose to accept payment from Magnum Hunter and resume their normal
dealings is not relevant or admissible to the question of whether
EQT is entitled to damages for breaches of contract. Fed. R. Evid.
While the parties will not be required to remove all mention
of KRCC from evidence relating to the audit, Magnum Hunter may not
rely on any evidence or testimony relating to KRCC’s relationship
with Magnum Hunter before or after the audit.2
litigation and evidence of either party’s course of conduct.
The Court will not require the parties to redact all mention of KRCC
from the FOA and Audit Report because such an exercise would confuse the
jury because the FOA payment provisions apply to both parties. Without
any mention of KRCC, the jury would not be able to understand how payment
provisions that applied to both farmors would give rise to the audit
exceptions pertaining to EQT alone.
Magnum Hunter agrees that this is appropriate and suggests that
the Court deny the Motion as moot.
While this suggestion is well-
taken, the Court finds it necessary to advise the parties on a
related issue that neither raised.
Specifically, both parties
indicate that they will introduce testimony about the relationship
between EQT and Magnum Hunter prior to the audit.
exchanges between corporate representatives may be useful, but
relationship for years does not have “any tendency to make a fact
more or less probable than it would be without the evidence.”3
Fed. R. Evid. 401(a).
In sum, evidence of communications relating to the bankruptcy
proceeding and the resulting EQT Cash Payment will not be totally
However, the parties are advised to carefully consider
the utility of such evidence.
If they choose to introduce it,
they must tailor it so that it does not run afoul of issues already
communications related to the audit will be permitted.
parties are not barred from mentioning KRCC’s role in the audit
process as joint farmor with EQT, they may not introduce any
evidence relating to KRCC’s resolution of the exceptions found in
the audit or its continuing relationship with Magnum Hunter.
The Court encountered several assertions of this kind in handling the
parties’ Motions for Summary Judgment.
relationship will be prohibited.
The parties are instructed to
review their exhibit and witness lists and cull any evidence that
does not comport with these rulings therefrom.
As a final matter, the Court notes that both parties have
expressed an intent to request reconsideration of matters that the
Court decided in its Memorandum Opinion and Order.
EQT indicates that it will continue to argue about the NGL claim,
while Magnum Hunter asks the Court to reconsider its ruling on
[DE 79 at p. 6, n. 6; 84 at p. 1, n. 1].
voluminous exhibits in support of their respective positions, and
then supplemented those filings.
The Court reviewed all of these
documents and thoroughly considered each argument before issuing
its Memorandum Opinion and Order.
Because the Court has already
devoted ample time and effort to the adjudication of these issues,
and because the trial date is fast approaching, the Court is
disinclined to consider any such Motions.
IT IS ORDERED that Plaintiff EQT Production Company’s Motion
in Limine [DE 73] be, and is, hereby GRANTED IN PART and DENIED IN
PART AS MOOT.
This the 11th day of August, 2017.
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