Ridgelake Energy, Inc. v. Apache Corporation

Filing 28

ORDER denying 13 Motion for Summary Judgment. Signed by Judge Nannette Jolivette Brown. (jrc)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
RIDGELAKE ENERGY, INC.

CIVIL ACTION

VERSUS

NO. 14-2248

APACHE CORP.

SECTION: “G”(2)

ORDER
Before the Court is Plaintiff Ridgelake Energy, Inc.’s (“Ridgelake”) “Motion for Summary
Judgment,” wherein it contends that it is entitled to summary judgment dismissing Apache’s
counterclaim.1 Having considered the motion, the memoranda in support and in opposition, the
statements made during oral argument, the record, and the applicable law, the Court will deny the
motion.
I. Background
This lawsuit arises out of a contract dispute between co-owners of an oil well. At all times
relevant to this lawsuit, Defendant Apache Corporation (“Apache”) owned and operated the Ship
Shoal Block 26 production platforms (the “Host Facility”).2 Ridgelake and Apache each owned a
fifty percent interest in Ship Shoal Well #14 (the “Well”), the production from which flows through
the Host Facility.3
In 1995, Ashlawn Energy, Inc. (“Ashlawn”) and Forcenergy Gas Exploration, Inc.
(“Forcenergy”) entered into a “Letter Agreement,” which provides that Ashlawn “shall pay to

1

Rec. Doc. 13.

2

Rec. Doc. 13-6 at ¶¶ 1–2.

3

Id. at ¶ 4.

1

Forcenergy its pro-rata share of all operating expenses directly attributable to the well or wells in
which it participates.”4 At some point, Ridgelake acquired Ashlawn, and Forest Oil Corporation
(“Forest Oil”) acquired Forcenergy.
On September 30, 2005, Ridgelake and Forest Oil entered into a Participation Agreement,
which provides, in part, that Ridgelake “shall pay its pro-rata share of all Host Facility operating
expenses, including, but not limited to LOE and routine maintenance costs, that are directly
attributable to the SS 26 #14 Well and the SS 26 #14 Production.”5 Forest Oil was later purchased
by Mariner Energy, Inc. (“Mariner”), which was then acquired by Apache. It is undisputed that the
relationship between Ridgelake and Apache is governed, at least in part, by the Participation
Agreement.
On September 30, 2014, Ridgelake filed the underlying complaint in this case, seeking
reimbursement for payments that it made to Apache for expenses which, it claims, were not directly
attributable to the Well.6 Ridgelake additionally alleges that Apache owes it a refund of $16,960.56
for “estimated plug and abandonment expenses” related to the Well.7 In total, Ridgelake seeks
damages of $608,434.66 from Apache.8
On October 28, 2014, Apache filed a counterclaim against Ridgelake, seeking $531,299.00
in unpaid Joint Interest Billing (“JIBs”) related to maintenance work that was performed on the

4

Rec. Doc. 13-4 at p. 4.

5

Rec. Doc. 13-3 at ¶ 3.4.

6

Id. at ¶ 18.

7

Id. at ¶ 23.

8

Id.. at ¶ 25.

2

Host Facility.9 According to the counterclaim, Ridgelake has wrongfully refused to pay its fifty
percent share of costs related to platform coatings to the Host Facility and for the replacement of a
boat landing on one of the Host Facility’s production platforms.10
Ridgelake filed the pending Motion for Summary Judgment on April 28, 2015, wherein it
seeks dismissal of Apache’s counterclaim because, it contends, the expenses at issue were not
“directly attributable” to the operation of the Well.11 Apache filed a memorandum in opposition on
May 18, 2015,12 and Ridgelake filed a memorandum in reply on May 21, 2015.13 The Court heard
oral argument on the pending motion on May 27, 2015.
II. Parties’ Arguments
A.

Ridgelake’s Arguments in Support of Summary Judgment
Ridgelake contends that it is entitled to summary judgment on Apache’s counterclaim

because, under the terms of Letter Agreement and the Participation Agreement, Ridgelake is only
required to pay its pro-rata share of expenses “directly attributable” to the well.14 According to
Ridgelake, the costs of painting the Host Facility and replacing an attached boat launch are not
“directly attributable” to the Well, but are rather matters of “routine maintenance” of the Host
Facility.15

9

Rec. Doc. 5 at ¶¶ 10, 11.

10

Id. at ¶ 7.

11

Rec. Doc. 13.

12

Rec. Doc. 19.

13

Rec. Doc. 22.

14

Rec. Doc. 13-2 at p. 4.

15

Id.

3

Ridgelake argues that the phrase “directly attributable,” as it appears in the Participation
Agreement, is unambiguous, and that the Court need not consider extrinsic evidence in resolving
this dispute.16 However, if the Court finds that the phrase is ambiguous, Ridgelake states that it “has
presented affidavits from both of the sides [sic] that negotiated the very language at issue and both
agree that the painting and boat landing expenses at issue are not expenses ‘directly attributable’ to
the [Well] and its production and, hence, not owed by Ridgelake.”17 Ridgelake submits the affidavits
of Louis F. Gilbert (“Gilbert”), former shareholder of Ashlawn, and J. Russell Porter (“Porter”), the
former Vice President of Financial Planning and Analysis of Forcenergy.18 Both Gilbert and Porter
state that they negotiated the 1995 Letter Agreement and intended the language “operating expenses
directly attributable” to exclude “expenses or costs for general maintenance of the Host Facility,
such as the painting of those facilities and/or the replacement thereto of a boat landing.”19
According to Ridgelake, Apache, as successor to the Participation Agreement, cannot offer any
interpretation of that document that differs from the meaning intended and given by Gilbert and
Porter, the original parties.20 Since the original contracting parties did not intend for the Letter
Agreement to include the expenses at issue in the counterclaim, Ridgelake contends, summary
judgement on the counterclaim is appropriate.21

16

Id. at p. 5.

17

Id.

18

Rec. Docs. 13-4; 13-5.

19

Rec. Doc. 13-4 at p. 2; Rec. Doc. 13-5 at p. 2.

20

Id. at pp. 5–6.

21

Id. at p. 6.

4

B.

Apache’s Arguments in Opposition to Summary Judgment
In opposition, Apache contends that Ridgelake’s reliance on the Letter Agreement is

erroneous because the Participation Agreement is the controlling contract in this case.22 According
to Apache, the Letter Agreement refers only to well-related expenses, but the Participation
Agreement clearly encompasses both “Host Facility operating expenses” and “[Well] production.”23
Like Ridgelake, Apache contends that the language in the Participation Agreement is
unambiguous and that parol evidence is inadmissible in this case.24 Alternatively, Apache argues,
if the Court finds that the Participation Agreement is ambiguous, the Court should deny the pending
motion for summary judgment because “[s]ummary judgment is rarely appropriate where a question
remains as to the meaning of or intent behind certain provisions of a contract.”25 To the extent that
this Court considers the affidavits submitted by Ridgelake, Apache states that those affidavits pertain
only to the Letter Agreement, not the Participation Agreement, and that the affidavits are therefore
irrelevant to the interpretation of the Participation Agreement.26 Apache also argues that neither
affiant was involved in drafting the Participation Agreement and, moreover, Gilbert may be biased
because he has a financial interest in Ridgelake.27
Apache also argues that Ridgelake approved and paid for virtually identical authorizations

22

Rec. Doc. 19.

23

Id.

24

Id. at p. 6.

25

Id. at p. 7 (citing Lacrouts v. Succession of Longo, 923 So.2d 717, 719 (La. App. 1 Cir. 9/23/05)).

26

Id.

27

Id. at pp. 7–8.

5

for expenditure (“AFEs”) relating to the maintenance and repair of platform coatings in 2008.28
Apache points to the deposition testimony of Ridgelake’s Vice President of Petroleum Engineering,
John V. Rubin, who allegedly approved an AFE for repair and painting of a heliport located on the
“C” platform of the Host Facility.29 According to Apache, Rubin characterized that AFE as one for
routine operating expenses and conceded that maintenance of the platform was critical to keep the
Well in production because without a working platform, there would be no production from the
Well.30 Apache contends, additionally, that the Bureau of Safety and Environmental Enforcement
(“BSEE”) advised it that the Host Facility was in need of maintenance and repairs, and issued a
verbal warning to that effect.31 Finally, Apache argues that Rubin visited the Host Facility in June
2011 while the maintenance work at issue was underway and may have made recommendations “for
additional work, or alterations to the existing work.”32 According to Apache, this demonstrates that
Ridgelake recognized its obligations under the Participation Agreement.33
C.

Ridgelake’s Arguments in Further Support of Summary Judgment
According to Ridgelake, the merits of Apache’s counterclaim turns on the meaning of the

phrase “directly attributable” as used in the Letter Agreement and the Participation Agreement.34
Specifically, Ridgelake characterizes the issue in this case as whether the painting and boat launch

28

Id. at p. 8.

29

Id.

30

Id. at p. 9.

31

Id. at p. 11.

32

Id. at p. 10.

33

Id. at p. 11.

34

Rec. Doc. 22 at p. 1.

6

repair expenses for which Apache seeks contribution from Ridgelake were “directly attributable”
to the Well and its production.35 Ridgelake argues that Apache was not a party to the transaction
leading to either Agreement.36 Rather, according to Ridgelake, Apache inherited those Agreements
through the acquisition of Mariner, and thus is bound by the intent of the parties to those
agreements.37
Ridgelake additionally contends that the Participation Agreement did not replace the Letter
Agreement, but rather provides that the Letter Agreement “is ratified by the parties and incorporated
into the Participation Agreement.”38 According to Ridgelake, the Participation Agreement explicitly
provides that “[n]otwithstanding anything to the contrary, nothing in this Participation Agreement
shall be considered as reducing or amending, nor does it reduce or amend, any rights Ridgelake
currently enjoys under the 1995 [Letter] Agreement.”39
Regarding the differences in wording between the Participation Agreement and the Letter
Agreement, Ridgelake argues that the relevant phrase “directly attributable” is used in both
agreements as a modifier to the term “operating expense,” and that the purpose and meaning of
“directly attributable” is the same in both agreements.40 Next, Ridgelake contends that Apache seeks
to “import meaning” from the fact that the Participation Agreement refers to “Host Facility operating
expenses” while the Letter Agreement refers to “operating expenses,” and the Participation

35

Id.

36

Id.

37

Id. at p. 2.

38

Id. at p. 3.

39

Id.

40

Id.

7

Agreement specifically references Well production, whereas the Letter Agreement does not.41 It is
Ridgelake’s position that the use of the phrase “directly attributable” as a limitation on the operating
expenses for which Ridgelake was responsible remained consistent in both agreements, and that this
was the parties’ intent.42 Ridgelake additionally argues that the term “Host Facility” was included
in both agreements.43
With respect to Apache’s argument that Ridgelake’s prior conduct demonstrates that it is
liable for the expenses at issue, Ridgelake argues that Rubin signed only one AFE for similar
expenses in 2008, and that he felt that “it certainly was not a good time to quibble over a small
expense.”44 According to Ridgelake, Rubin received other AFEs for similar work after 2008, but “he
did not sign those AFEs and, as a result realized that he had mistakenly signed the 2008 AFE.”45
Finally Ridgelake submits that it is irrelevant whether Rubin or Apache believed the work was
necessary, or whether it was required by BSEE, because Ridgelake was only contractually obligated
to pay for expenses “directly attributable” to the Well and its production, which does not include the
expenses at issue.
III. Law and Analysis
A.

Standard on a Motion for Summary Judgment
Summary judgment is appropriate when the pleadings, the discovery, and any affidavits show

that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as
41

Id. at pp. 3–4.

42

Id. at p. 4.

43

Id.

44

Id. at p. 5.

45

Id. at p. 6.

8

a matter of law.”46 When assessing whether a dispute as to any material fact exists, the court
considers “all of the evidence in the record but refrains from making credibility determinations or
weighing the evidence.”47 All reasonable inferences are drawn in favor of the nonmoving party, but
“unsupported allegations or affidavits setting forth ‘ultimate or conclusory facts and conclusions of
law’ are insufficient to either support or defeat a motion for summary judgment.”48 If the record, as
a whole, could not lead a rational trier of fact to find for the non-moving party, then no genuine issue
of fact exists and the moving party is entitled to judgment as a matter of law.”49 The nonmoving
party may not rest upon the pleadings, but must identify specific facts in the record and articulate
the precise manner in which that evidence establishes a genuine issue for trial.50
The party seeking summary judgment always bears the initial responsibility of informing the
Court of the basis for its motion and identifying those portions of the record that it believes
demonstrate the absence of a genuine issue of material fact.51 Thus, the nonmoving party should
“identify specific evidence in the record, and articulate” precisely how that evidence supports his
claims.52 To withstand a motion for summary judgment, a plaintiff must show that there is a genuine
issue for trial by presenting evidence of specific facts.53 The nonmovant’s burden of demonstrating
a genuine issue of material fact is not satisfied merely by creating “some metaphysical doubt as to

46

Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986); Little v. Liquid Air
Corp., 37 F.3d 1069, 1075 (5th Cir. 1994).
47

Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398–99 (5th Cir. 2008).

48

Galindo v. Precision Am. Corp., 754 F.2d 1212, 1216 (5th Cir. 1985); Little, 37 F.3d at 1075.

49

Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586 (1986).

50

See, e.g., Celotex, 477 U.S. at 325; Ragas v. Tenn. Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998).

51

Celotex, 477 U.S. at 323.

52

Forsyth v. Barr, 19 F.3d 1527, 1537 (5th Cir. 1994), cert. denied, 513 U.S. 871 (1994).

53

Bellard v. Gautreaux, 675 F.3d 454, 460 (5th Cir. 2012), citing Anderson, 477 U.S. 242 at 248-49.

9

the material facts,” “by conclusory allegations,” by “unsubstantiated assertions,” or “by only a
scintilla of evidence.”54 Rather, a factual dispute precludes a grant of summary judgment only if the
evidence is sufficient to permit a reasonable trier of fact to find for the nonmoving party. Hearsay
evidence and unsworn documents that cannot be presented in a form that would be admissible in
evidence at trial do not qualify as competent opposing evidence.55
B.

Analysis
Under the Louisiana Civil Code, “[i]nterpretation of a contract is the determination of the

common intent of the parties.”56 “The language of the policy is the starting point for determining that
common intent.”57 “The words of a contract must be given their generally prevailing meaning.”58
“Words susceptible of different meanings must be interpreted as having the meaning that best
conforms to the object of the contract.”59 “The determination of whether a contract is clear or
ambiguous is a question of law. Moreover, when a contract can be construed from the four corners
of the instrument without looking to extrinsic evidence, the question of contractual interpretation
is answered as a matter of law and summary judgment is appropriate.”60 When the words of a
contract are clear and explicit and lead to no absurd consequences, no further interpretation may be
made in search of the parties’ intent.61 “[O]nly when there is a choice of reasonable interpretations
of the contract is there a material fact issue concerning the parties’ intent that would preclude
54

Little, 37 F.3d at 1075.

55

Martin v. John W. Stone Oil Distrib., Inc., 819 F.2d 547, 549 (5th Cir. 1987); Fed. R .Civ. P. 56(c)(2).

56

La. Civ. Code Ann. art. 2045.

57

Six Flags, Inc. v. Westchester Surplus Lines Ins. Co., 565 F.3d 948, 954 (5th Cir. 2009).

58

La. Civ. Code Ann. art. 2047.

59

La. Civ. Code Ann. art. 2048.

60

Sims v. Mulhearn Funeral Home, Inc., 956 So.2d 583, 590 (La. 2007) (internal citations omitted).

61

La. Civ. Code Ann. art. 2046.

10

summary judgment.”62 “A doubtful provision must be interpreted in light of the nature of the
contract, equity, usages, the conduct of the parties before and after the formation of the contract, and
of other contracts of a like nature between the same parties.”63
At issue in the pending motion is whether the expenses related to the painting of the Host
Facility and replacing a boat launch attached thereto are “directly attributable” to the Well. The
Participation Agreement provides that:
[Ridgelake] shall pay its pro-rata share of all Host Facility operating expenses,
including, but not limited to LOE and routine maintenance costs, that are directly
attributable to the SS 26 #14 Well and the SS 26 #14 Production.64
The Participation Agreement also incorporates by reference the terms of the 1995 Letter
Agreement,65 which states that:
. . . it is understood that . . . Ridgelake] shall pay to Forcenergy its pro-rata share of
all operating expenses directly attributable to the well or wells in which it
participates.66
Ridgelake’s position is that the expenses at issue here were not “caused by” the Well, and
that the original contracting parties did not intend the Letter Agreement to include expenses or costs
for general maintenance of the Operator’s facilities, such as the painting of those facilities and/or
the replacement of a boat landing.67 In response, Apache argues that consideration of extrinsic
evidence of the parties’ intent is inappropriate at the summary judgment stage, and that the parties’
prior conduct creates a genuine issue of material fact with respect to whether they considered the

62
63

Amoco Prod. Co. v. Tex. Meridian Res. Exploration Inc., 180 F.3d 664, 669 (5th Cir. 1999).
La. Civ. Code Ann. art. 2053.

64

Rec. Doc. 13-3 at ¶ 3.4 (emphasis added).

65

Id. at ¶ 2.2.

66

Rec. Doc. 13-4 at p. 4 (emphasis added).

67

Rec. Doc. 13-4 at p. 2; Rec Doc. 13-5 at p. 2.

11

expenses at issue to be “directly attributable” to the Well.
Summary judgment is a proper procedural method of determining the meaning of a contract
when no factual issue is raised.68 However, “[s]ummary judgment is rarely appropriate where a
question remains as to the meaning of or intent behind certain provisions of a contract.”69 In this
case, the provisions of both the Letter Agreement and the Participation Agreement are unclear and
susceptible to multiple, inconsistent interpretations with respect to which types of “operating
expenses” are considered “directly attributable to the well or wells.”70 Ridgelake proffers nearly
identical affidavits purporting to establish the intent of the contracting parties, but the consideration
of extrinsic evidence to determine the parties’ intent raises a question of material fact which
precludes summary judgement.71 The Court finds, accordingly, that there is a material fact issue as
to the true intent of the parties, and as to whether the contract requires Ridgelake to pay for its prorata share of the expenses at issue here.
Summary judgment is not appropriate for the additional reason that Apache has proffered
sufficient evidence of the parties’ prior conduct to raise a genuine issue of material fact as to whether
the expenses at issue here were “directly attributable” to the well at issue. Accordingly, the Court

68

Lacrouts v. Succession of Longo, 923 So.2d 717, 719 (La. App. 1 Cir. 9/23/05, 4) (citing Latter & Blum, Inc.
v. von Ruekfrang, 249 So.2d 229, 233 (La. App. 4 Cir. 1971)).
69

Id. (citing Eiche v. East Baton Rouge Parish School Bd., 623 So.2d 167, 170 (La. App. 1 Cir. 1993)).

70
See Angus Chem. Co. v. Glendora Plantation, Inc., 782 F.3d 175, 182 (5th Cir. 2015) (“ It is too much of
a stretch to say that the Agreement is clear and unambiguous in its language when there are multiple reasonable
interpretations of the implications of the word ‘replace.’”).
71

See Carpenters Amended & Restated Health Ben. Fund v. Holleman Const. Co. Inc., 751 F.2d 763, 766 (5th
Cir. 1985) (“To resolve these ambiguities, a court can no longer rely solely on the language of the contract to determine
the parties' intent, and must look to extrinsic or parol evidence. Consequently, in these cases, questions of contract
interpretation are questions of fact . . .”).

12

finds that genuine issues of material fact are in dispute, and Ridgelake’s motion for summary
judgment must be denied.
IV. Conclusion
Accordingly,
IT IS HEREBY ORDERED that Ridgelake’s “Motion for Summary Judgment”72 is
DENIED.
NEW ORLEANS, LOUISIANA, this 18th of June, 2015.
___ day
_________________________________
NANNETTE JOLIVETTE BROWN
UNITED STATES DISTRICT JUDGE

72

Rec. Doc. 13.

13