Crawford et al v. Summit Drilling Company, Inc.
OPINION AND ORDER by Judge Claire V Eagan ; finding as moot 52 Motion in Limine; finding as moot 53 Motion in Limine; finding as moot 54 Motion in Limine; granting 55 Motion for Summary Judgment; finding as moot 56 Motion for Partial Summary Judgment (djh, Dpty Clk)
UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF OKLAHOMA
SUMMIT DRILLING COMPANY, INC.,
Case No. 16-CV-0226-CVE-FHM
OPINION AND ORDER
Now before the Court is defendant Summit Drilling Company, Inc.’s (Summit) motion for
summary judgment (Dkt. # 55). Summit moves for summary judgment, arguing that plaintiff BDI,
LLC’s (BDI) breach of contract and negligence claims are barred by the parties’ contract and that
BDI has failed to provide sufficient evidence to support its fraud claim. Dkt. # 55, at 8-13. BDI
responds that it assumed only reasonably foreseeable risks in the contract, that the contract does not
restrain consequential damages in this case, and that questions of fact remain as to Summit’s alleged
fraudulent misrepresentation. Dkt. # 76, at 10-15.
On October 16, 2014, the parties entered into a drilling contract, under which Summit would
drill an oil well in Richardson County, Nebraska. Dkt. # 55-1, at 1. The contract is a standard form
created by the International Association of Drilling Contractors (IADC) (Drilling Bid Proposal and
Footage Drilling Contract - U.S. # 14-2114, revised 2003). See Dkt. # 55-1, at 1. First, the contract
When operating on a Daywork Basis,1 [Summit] . . . assumes only the obligations
and liabilities stated herein as being applicable during Daywork operations. Except
for such obligations and liabilities specifically assumed by [Summit], [BDI] shall be
solely responsible and assumes liability for all consequences of operations by both
parties while on a Daywork Basis, including results and all other risks or liabilities
incurred in or incident to such operations.
Dkt. # 55-1, at 1 (emphasis omitted). The contract also specifies that “[i]n the event the hole should
be lost or damaged, while [Summit] is working on a Daywork Basis, [BDI] shall be solely
responsible for such damage to or loss of the hole . . . .” Id. at 4. Additionally, the contract states
it is the intent of the parties hereto that all releases, indemnity obligations and/or
liabilities assumed by such parties under terms of this Contract . . . be without limit
and without regard to the cause or causes thereof, including but not limited to . . . any
theory of tort, breach of contract, fault, the negligence of any degree or character, . . .
or any other theory of legal liability.
Id. at 5.
Summit drilled the well to the depth set out in the contract, but BDI determined that it was
likely unproductive and asked defendant to plug the well. Dkt. # 55, at 5; Dkt. # 76, at 5.
Approximately a year later, BDI hired a different drilling company to re-open the well by
performing a washdown, a procedure for opening a plugged well by drilling through the cement
plugs. Dkt. # 55, at 2 & n.1. After drilling through the upper cement plug, the drilling company hit
an object that prevented further drilling. Dkt. # 55-2, at 33. After hitting the object, BDI president
Mark Crawford sent a text message to Summit employee Scott Miller informing him of BDI’s
The conduct at issue in this case all occurred after the well was drilled, and the parties agree
that any work performed by defendant after the well was drilled, including plugging the well,
was done on a daywork basis. Dkt. # 55, at 6; Dkt. # 76, at 6-7; Dkt. # 55-1, at 2.
attempted washdown of the well and asking if Miller knew anything about a metal object left in the
well. Id. Miller responded:
I understand. I will ask. Shouldn’t be anything down that hole other than cement!
I’ve talked to the guys that are still with us and no one knows of anything dropped
down hole. Unfortunately that doesn’t mean much at this point. If you do identify the
metal, I’d like to know. Especially if it points to us. That’s not the reputation I want
Id. at 33-34. BDI alleges that the object was a joint of a metal drill pipe left by Summit when it was
plugging the well. Dkt. # 76, at 9. Plaintiff asserts that the object blocking the well destroyed the
well’s ability to effectively produce oil. Id. at 10.
Summary judgment pursuant to Federal Rule of Civil Procedure 56 is appropriate where
there is no genuine dispute as to any material fact and the moving party is entitled to judgment as
a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 250 (1986); Kendall v. Watkins, 998 F.2d 848, 850 (10th Cir. 1993). The plain
language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery
and upon motion, against a party who fails to make a showing sufficient to establish the existence
of an element essential to that party’s case, and on which that party will bear the burden of proof at
trial. Celotex, 477 U.S. at 317. “Summary judgment procedure is properly regarded not as a
disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which
are designed ‘to secure the just, speedy, and inexpensive determination of every action.’” Id. at 327
(quoting Fed. R. Civ. P. 1).
“When the moving party has carried its burden under Rule 56(c), its opponent must do more
than simply show that there is some metaphysical doubt as to the material facts. Where the record
taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no
‘genuine issue for trial.’” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87
(1986) (citations omitted). “The mere existence of a scintilla of evidence in support of the plaintiff’s
position will be insufficient; there must be evidence on which the [trier of fact] could reasonably
find for the plaintiff.” Anderson, 477 U.S. at 252. In essence, the inquiry for the Court is “whether
the evidence presents a sufficient disagreement to require submission to a jury or whether it is so
one-sided that the party must prevail as a matter of law.” Id. at 251-52. In its review, the Court
construes the record in the light most favorable to the party opposing summary judgment. Garratt
v. Walker, 164 F.3d 1249, 1251 (10th Cir. 1998).
Summit argues that the parties’ contract precludes BDI’s breach of contract and negligence
claims. The contract provides that it will be “construed, governed, interpreted, enforced and
litigated, and the relations between the parties determined in accordance with the laws of [the] State
of Kansas.” Dkt. # 55-1, at 6. The parties agree that Kansas law should be applied to BDI’s breach
of contract and negligence claims in this case. Dkt. # 55, at 5, 7; Dkt. # 76, at 5, 10.
“The primary rule for interpreting written contracts is to ascertain the parties’ intent. If the
terms of the contract are clear, the intent of the parties is to be determined from the language of the
contract without applying rules of construction.” Waste Connections of Kan., Inc. v. Ritchie Corp.,
298 P.3d 250, 264 (Kan. 2013) (quoting Osterhaus v. Toth, 249 P.3d 888 (Kan. 2011)) (internal
quotation marks omitted). If the language of a contract is ambiguous, the court may consider
extrinsic evidence to construe the contract’s meaning. Id. “To be ambiguous, a contract must contain
provisions or language of doubtful or conflicting meaning, as gleaned from the natural and
reasonable interpretation of its language.” Farm Bureau Mut. Ins. Co. v. Old Hickory Cas. Ins. Co.,
810 P.2d 283, 286 (Kan. 1991). The meaning of a contractual provision should not be construed in
isolation, but in light of “the entire instrument from its four corners.” Levin v. Maw Oil & Gas, LLC,
234 P.3d 805, 814 (Kan. 2010) (quoting Johnson Cnty. Bank v. Ross, 13 P.3d 351 (Kan. Ct. App.
Here, BDI alleges that Summit breached the contract and acted negligently by leaving
materials in the well while plugging it. Dkt. # 2-2, at 5. The contract calls for Summit to “either
complete the well and install well head equipment and connections or plug and abandon same, in
accordance with [BDI’s] instructions.” Dkt. # 55-1, at 3. The parties agree that, on BDI’s request,
Summit plugged the well. Dkt. # 55, at 5; Dkt. # 76, at 6. BDI’s allegation is not that Summit failed
to plug the well, but that it did so in a manner that rendered the well unusable by leaving a drill pipe
down the hole. The contract does not contain a provision in which Summit agreed to perform its
work under the contract pursuant to a certain standard. However, under Kansas law, “there is
implied in every contract for work or services a duty to perform it skillfully, carefully, diligently,
and in a workmanlike manner.” Coker v. Siler, 304 P.3d 689, 695 (Kan. Ct. App. 2013); see also In
re Talbott’s Estate, 337 P.2d 986, 991 (Kan. 1959). It appears that BDI is arguing that Summit
breached this duty by leaving a drill pipe in the well. The problem with BDI’s breach of contract and
negligence claims is that in the contract BDI explicitly and unambiguously assumed broad liability
for the conduct alleged in these claims.
First, BDI unambiguously assumed all liability for the actions of both parties while Summit
worked on a daywork basis unless stated otherwise in the contract, Dkt. # 55-1, at 1, and BDI has
not pointed to any provision in the contract, nor could the Court find any in its own examination,
that could conceivably place liability on Summit for its work plugging the well. Second, BDI
assumed sole responsibility for any damage to or loss of the hole while Summit worked on a
daywork basis, including “the cost of removal of any debris.” Id. at 4. And third, the parties made
clear that they intended any release or assumption of liability to be “without limit and without regard
to the cause or causes thereof,” including “any theory of tort, breach of contract, fault, [or]
negligence of any degree or character.” Id. at 5.
The Court agrees with Summit that, under the plain meaning of the contract, BDI
unambiguously assumed all liability, and released Summit of all liability, for damage to or loss of
the hole while Summit was plugging the well, including any damage caused by Summit leaving a
drill pipe in the hole. Although exculpatory contract provisions are disfavored and should be strictly
construed, Talley v. Skelly Oil Co., 433 P.2d 425, 431 (Kan. 1967), when a “contract is
unambiguous, a court may not rewrite the contract for the parties; ‘[i]t’s function is to enforce the
contract as made.’” BancInsure, Inc. v. FDIC, 796 F.3d 1226, 1233 (10th Cir. 2015) (quoting
Catholic Diocese of Dodge City v. Raymer, 840 P.2d 456, 459 (Kan. 1992)) (alteration in original);
see also B & K Mech., Inc. v. Fed. Ins. Co., 33 F. Supp. 2d 941, 944 (D. Kan. 1998) (“[T]he court
should not strain to create an ambiguity where, in common sense, none exists.”) (citing Miner v.
Farm Bureau Mut. Ins. Co., 841 P.2d 1093, 1105 (Kan. Ct. App. 1992)). The contract
unambiguously releases Summit from any liability arising while Summit worked on a daywork basis
unless explicitly contradicted by another provision in the contract. There is no contract provision
placing liability on Summit for how it plugged the well. Even without BDI’s general assumption of
liability, BDI’s claim that Summit damaged the well and rendered it unusable by leaving a drill pipe
in it while plugging the hole falls squarely under BDI’s specific assumption of liability for damage
to or loss of the hole. Moreover, under the contract, it does not matter how the damage to the well
occurred or who was at fault; BDI clearly assumed broad liability for all damage to and loss of the
well while Summit worked on a daywork basis, including any damage or loss caused by leaving a
drill pipe in the well while plugging it. Thus, under the plain terms of the contract, BDI has no valid
claim for breach of contract or negligence even if Summit left a drill pipe in the well.2
However, there are limits to the enforceability of exculpatory agreements, and the Court must
determine whether the exculpatory provisions of the contract that bar BDI’s breach of contract and
negligence claims are enforceable under Kansas law. See Sundance Energy Okla. LLC v. Dan D.
Drilling Corp., 836 F.3d 1271, 1276-77 (10th Cir. 2016) (looking to Oklahoma law to determine
whether defendant could use a drilling contract’s exculpatory clause to defend against a gross
negligence claim); ANR Prod. Co. v. Westburne Drilling, Inc., 581 F. Supp. 542, 547 (D. Colo.
1984) (looking to Colorado law to determine enforceability of a drilling contract’s exculpatory
clause releasing defendant from liability for its own negligence). “It is the traditional rule, followed
BDI argues that Summit cannot rely the assumption of risk defense. Dkt. # 76, at 10-13. The
assumption of risk doctrine can bar recovery for an employee’s claim against her employer
for failure to provide a reasonably safe workplace when the employee knew of the dangerous
situation and voluntarily exposed herself to that danger. See Simmons v. Porter, 312 P.3d
345, 348 (Kan. 2013). BDI’s argument regarding assumption of risk is irrelevant because
Summit does not assert an assumption of risk defense, see Dkt. # 85, at 6, and, even if BDI
had made such an assertion, the Kansas Supreme Court abandoned the doctrine in 2013.
Simmons, 312 P.2d at 355 (“We . . . are now clearly convinced preserving assumption of risk
as a complete bar to recovery is no longer sound and should be of no practical effect given
the statutory scheme of comparative fault.”). Summit’s argument is that BDI specifically and
explicitly assumed the risk of damage to the well in the contract, and therefore BDI cannot
bring its breach of contract or negligence claims against Summit for damage to the well,
which is different from the narrow assumption of risk doctrine recently abandoned in
in Kansas, that mentally competent parties may make contracts on their own terms and fashion their
own remedies where they are not illegal, contrary to public policy, or obtained by fraud, mistake,
overreaching, or duress.” Corral v Rollins Protective Serv. Co., 732 P.2d 1260, 1263 (Kan. 1987).
In general, “Kansas law is fairly liberal in allowing business parties standing on equal footing
freedom to negotiate contractual provisions, including certain risk allocation provisions.” Butler
Mfg. Co. v. Americold Corp., 835 F. Supp. 1274, 1278-79 (D. Kan. 1993). Exculpatory clauses for
negligent conduct that are voluntarily executed between parties standing on an equal footing are
generally valid and enforceable between the parties themselves. . Talley, 433 P.2d at 430; see also
Mid-Am. Sprayers, Inc. V. U.S. Fire Ins. Co., 660 P.2d 1380, 1385 (Kan. Ct. App. 1983) (reviewing
Kansas law on the enforceability of exculpatory clauses).
Here, the parties are both businesses that regularly deal with drilling and drilling contracts,
and the contract signed is a standard form written by the IADC. See Dkt. # 85-1, at 2 (“Q: And have
you read the agreement you entered into with Summit from beginning to end? A: I have not studied
it. You know, I read it. It’s a pretty standard contract. I’ve seen a bunch of them before.”)
(deposition testimony of BDI president Mark Crawford). BDI’s negligence and breach of contract
claims do not involve any bad faith or gross negligence. This is not the sort of situation where
Kansas law would permit the Court to step in and refuse to enforce an exculpatory provision. There
is no evidence that Summit did anything illegal, or that the agreement was “obtained by fraud,
mistake, overreaching, or duress.” Additionally, the Court sees no reason why enforcing the
exculpatory provision in this case would be detrimental to the interests of the public. See Belger
Cartage Serv., Inc. v. Holland Constr. Co., 582 P.2d 1111, 1119 (Kan. 1978) (“A contract is not void
as against public policy unless injurious to the interests of the public or [it] contravenes some
established interest of society.”). This is an industry standard drilling contract between two
businesses that have experience in, and are familiar with, the drilling industry. In these
circumstances, the exculpatory provisions of the contract are enforceable under Kansas law as to
BDI’s breach of contract and negligence claims. Thus, Summit’s motion for summary judgment
should be granted as to BDI’s breach of contract and negligence claims.
Summit argues that BDI has failed to provide sufficient evidence to support its fraud claim.
It is unclear what state’s law applies to BDI’s fraud claim. The parties each argue under both
Oklahoma and Kansas law, and the information required to make the choice of law determination
has not been presented to the Court. Fortunately, the elements of fraud are the same under Oklahoma
and Kansas law, and the Court will proceed, as the parties did in their briefs, under both Oklahoma
and Kansas law.
The elements of a fraud claim are: (1) defendant made a material representation that was
false; (2) defendant knew the representation was false or made the statement with reckless
indifference to its veracity; (3) defendant made the representation with the intent to induce plaintiff
into act upon it; and (4) plaintiff relied upon the representation. See Bowman v. Presley, 212 P.3d
1210, 1217-18 (Okla. 2009); Kelly v. VinZant, 197 P.3d 803, 808 (Kan. 2008). BDI alleges that
Summit made false representations in two ways. First, BDI alleges that Summit’s failure to tell BDI
that it left a drill pipe in the well was a false representation. Dkt. # 76, at 15. Second, BDI alleges
that the text message conversation between Crawford and Miller, during which Miller said that there
should not be an object down the well and that no one he had talked to at Summit knew about a
potential object left in the well, was a false representation. Id.
BDI has presented no evidence that, even if Summit had left a drill pipe in the well, Summit
made knowingly false misrepresentations about it to BDI and intended BDI to act upon that
misinformation. In its response brief, BDI simply states that “[a] question of fact remains as to
whether the statement was known to be false at the time it was made, and whether Summit intended
that BDI rely on that misrepresentation.” Dkt. # 76, at 15. BDI cites no evidence to support its
assertions, and the Court has found none in the record. In the case of the alleged fraud by omission,
it is even unclear what action BDI is alleging Summit to have intentionally tried to induce. As for
the alleged fraud in the text messages between Crawford and Miller, there is no evidence in the
messages themselves to support BDI’s allegation that Miller was attempting to get BDI to continue
trying to unplug the well. Throughout the messages Miller conveys surprise, states that Summit does
not know what the object in the well could be, attempts to find out whether the evidence points to
a Summit mistake, and offers to help Crawford and BDI. See Dkt. # 55-2, at 33-37. Miller makes
no statement that could conceivably be construed as deliberately encouraging BDI to continue trying
to unplug the well. In his deposition, Crawford was unsure whether the text messages even
constituted a misrepresentation. Id. at 18 (“Q: If Summit provided misinformation to BDI, I’d like
to know what that misinformation is. A: I don’t really have an answer for that. Q: You’re unaware
of any? . . . A: Yeah, I don’t think there’s any – I’m not aware of any misinformation. It’s just we
didn’t get any help from them at all.”). But even if the Court assumes Summit made a false
misrepresentation, there is no evidence in the messages of Summit attempting to induce BDI into
action, and BDI has presented no other evidence of inducement. Because BDI has presented no
evidence to show that Summit made a false representation with the intent to induce BDI to act upon
it, there is no genuine issue of fact as to inducement, and Summit’s motion for summary judgment
will be granted.
IT IS THEREFORE ORDERED that Summit Drilling Company, Inc.’s motion for
summary judgment (Dkt. # 55) is granted. A separate judgment is entered herewith.
IT IS FURTHER ORDERED that BDI, LLC’s motions in limine (Dkt. ## 52, 53, 54) and
motion for partial summary judgment (Dkt. # 56) are moot.
DATED this 14th day of April, 2017.
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