Traxys North America, LLC v. Fila Oilfield Services, LLC et al

Filing 58

MEMORANDUM OPINION AND ORDER denying 30 MOTION to Exclude Testimony of Charles Mazur; granting 31 MOTION for Partial Summary Judgment on the Pleadings; denying 32 MOTION for Summary Judgment ; granting 33 MOTION to Amend Answer; granting 34 MOTION for Leave to File Amended Answer; denying 38 MOTION for Summary Judgment on Damages and denying in part 39 MOTION for Summary Judgment . Case is well-suited for mediation. 50 Order granting Motion to Continue Docket Call is vacated and a new amended docket control order will be entered. (Signed by Judge Sim Lake) Parties notified.(gclair, 4)

United States District Court
Southern District of Texas

ENTERED
September 12, 2017

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIV ISION

David J. Bradley, Clerk

TRAXYS NORTH AMERICA , LLC,

Plaintiff,

CIVIL ACTION NO . H-16-0721

FILA OILFIELD SERV ICES , LLC ;
FILA -MAR ENERGY SERVICES, LLC;
NST TRANSLOAD OPERATING

COMPANY, LLC (
d/b/a NORTHSTAR
MIDSTREAM); and NORTHSTAR
M IDSTREAM ,

Defendants .

MEMODAHRUM OPIN ION AND ORDER

Pending

before

the

court

are

Defendants

Fila

Oilfield

Services, LLC and Fila-Mar Energy Services, LLC'S ('Fila' Motion
'
')
Exclude Testimony of Charles Mazur (nFila's Motion to Exclude')
'
(
Docket Entry No . 30); Defendants Fila Oilfield Services, LLC and
Fila-Mar Energy Services, LLC 'S Motion for Partial Judgment on the

Pleadings CA
Fila's Motion for Partial Judgment on the Pleadings')
'
(
Docket Entry No.

Defendant NST Transload Operating Company ,

LLC d/b/a Northstar Midstream's (I ') Motion for Summary Judgment
'
NST'
('
%
NST'S MSJ'
') (
Docket Entry No. 32); Defendants Fila Oilfield
Services , LLC and Fila-Mar Energy Services , LLC'S Motion for Leave

to Amend Answer C'
Fila's Motion for Leave to Amend' (
') Docket Entry

No.

Defendant NST Transload Operating Company,

d/b/a

Northstar M idstream 's Motion for Leave to File an Amended Answer

('
'
NST'S Motion for Leave to Amend'
')

(
Docket Entry No . 34)7

Defendant NST Transload Operating Company, LLC d/b/a Northstar
Midstream's Motion for Summary Judgment on Damages ('
'
NST's MSJ on
Damages') (
'
Docket Entry No . 38); and Defendants Fila Oilfield
Services , LLC and Fila-Mar Energy

Services , LLC 'S Motion for

Summary Judgment ('Fila's MSJ' (
'
') Docket Entry No. 39).
For the reasons stated below , Fila's Motion to Exclude will be
denied , Fila 's Motion for Partial Judgment on the Pleadings will be
granted, NST 'S MSJ will be denied, Fila 's Motion for Leave to Amend

will be granted, NST 'S Motion for Leave to Amend will be granted ,
NST 'S MSJ on Damages will be denied , and Fila 's MSJ
is ripe for decision

insofar as

will be denied .

Factual and Procedural Backqround

In the spring of 2014 an associate trader w ith plaintiff

Traxys North America, LLC

l'
'
Traxys/
'l, Scott Musser, visited

North Dakota in an attempt to locate indoor warehousing suitable

for ceramic proppant x

While there Musser saw an advertisement for

storage at the NST transloading facility and contacted NST about
the possibility of storing proppant .z NST could not meet Traxys'

l
videotaped Deposition of Scott Musser taken March 31 , 2017

(
hereinafter n
Musser Depo'
'), at 242:2-7, Exhibit 1 to Plaintiff's
Response

in Opposition to

Fila 's Motion

for Summary

Judgment

(uTraxys' Response in Oppositionz' Docket Entry No . 54), Docket
'
Entry No . 55 , p . 6 .

z
Musser Depo at 241 :10-242 :1 , Exhibit l to Traxys ' Response in
Opposition , Docket Entry No . 55 , pp . 5-6 .

storage needs because

did not have indoor facilities.3

NST

referred Musser to Fila , which was planning to construct indoor
storage facilities at the NST term inal .4

Fila had an agreement

with NST, titled the Commodity Transloading Services Agreement,

under which it could store goods at the NST terminalx

But per

that agreement, Fila's right to access the storage facility was not

substantially interfere with or diminish

E
NST'S) complete

control and responsibility for the operation

the

(
storage

facility! and the performance of the (
transloading servicesl.'
'E
Traxys eventually entered

into an agreement w ith Luoyang

Aoxiang Ceramics Co., Ltdw to purchase 6,000 metric tons of 20/40
ISP ceramic proppant to be shipped from Qingdao , China .
?

On

August 28, 2014 , Traxys entered into an agreement with Fila for the
delivery of the 6,000 metric tons of ceram ic proppant in 4,000 bulk

bags, each containing 1 .5 metric tons of proppant .8

3
See Declaration of Mar Het
k
heri
ngton at f

Fila agreed

Exhib it A to

NST 'S MSJ , Docket Entry No . 32-1, p . 2 .
4 .
Id

s
commodity Transloading Services Agreement , dated July 2 ,
2014 , Exhibit 4 to Traxys' Response in Opposition , Docket Entry
No . 55, pp . 21-36 .

6
Id. at 29 î 13.
?
Email with Traxy s and Luoyang contract attached , Exhibit 5 to
Traxys? Response in Opposition , Docket Entry No . 55, pp . 37-38 .
B
Agreement between Traxys and Fila , dated August 28, 2014

(
hereinafter uFila Agreement'
'), Exhibit 3 to Traxys' Response in
Opposition , Docket Entry No . 55 , pp . 19-20 .

that it would be responsib le for the loading , ocean transport ,

discharging , load ing onto ra ilcars , and rail freight from Qingdao ,
China to the Bakken Shale p lay in North Dakota , and the discharging
of railcars to a warehouse .g The agreement between Traxys and Fila
also included the following term : BWarehouse storage at Northstar

Terminal is $5.00 per 1. MT super-sack after 30 free days.'l
5
'o
The proppant was loaded at the Port of Qingdao on or about
October 23 , 2014 .11

The vessel carrying the proppant arrived in

Everett , Washington , on or around November 12 , 2014 .1
2

A Fila -

ordered survey of the proppant completed upon arrival found that
moisture levels in the proppant ranged from 9 to 11% .1
3
In mid-December of 2014 the proppant began to be transported

by rail from the port and to NST'S terminal in North Dakota x4 When

9'a
rm
,- a
l 'a
0r

l Email from Dom Pere to Scott Musser, dated October 24 , 2014 ,
l
Exhibit 5 to Traxys ' Response in Opposition , Docket Entry No . 55,
pp . 37-38.
HEmail from Dom Pere to Scott Musser , dated November 6, 2014 ,
Exhibit 8 to Traxys' Response in Opposition , Docket Entry No . 55 ,
p . 69 .
Hsurvey Report dated November 18, 2014 , from Cullen Maritime
Services , Inc ., Exhib it 9 to Traxys' Response in Opposition , Docket
Entry No . 55 , pp . 70-87 .
MEmail from Lambert Arceneaux to Scott Musser, dated
December 12, 2014, Exhibit 12 to Traxys ' Response in Opposition ,
Docket Entry No . 55, p . 102 ; Survey Report conducted by Vericlaim
Inc w dated November 4, 2015, Exhib it 13 to Traxys ' Response in
Opposition , Docket Entry No . 55, pp . 103-15.

Traxys v isited the NST facility on May
condition of the bags,

2015, to check on the

found that only 1,090 of the 4,000 bags

had been moved inside the warehouse x s A moisture probe analysis
conducted by Scott Musser in May of 2015 revealed that some of the
bags had moisture readings up to 29 .9: .1 Traxys w ithheld storage
6

payments from

February of 2015 through June

2015 .1
7

Fila

eventually sent an invoice reflecting a reduced rate of $3 per bag
to cover the months of outdoor storage , which Traxys paid .l8 Fila 's

later invoices reverted to the rate of $5 per bag . 9
l

As of

September of 2015, approximately 1,000 bags remained outside xo A
number of the bags had been damaged during attempts to move them by
forklift .z On September
l

2015, Fila notified Traxy s that Fila

l Email from Scott Musser to Fila , dated May 11, 2015 ,
s
Exhibit 18 to Traxys ' Response in Opposition , Docket Entry No . 55 ,
pp . 122-24 .
l Email from Scott Musser to Fila Accounting Support , dated
6
May 11 , 2015, Exhibit 20 to Traxys' Response in Opposition , Docket
Entry No . 55 , pp . 126-27 .
UEmail dated March 4, 2015 , from Fila to Scott Musser ,
Exhibit 15 to Traxys ' Response in Opposition , Docket Entry No . 55 ,
pp . 118-19 .

l lnvoice #1521 dated May 28, 2015, Exhibit 16 to Traxys'
B
Response in Opposition , Docket Entry No . 55 , p . 120 .
l Email from Scott Musser to Fila Accounting Support , dated
g
May 11, 2015, Exhibit 20 to Traxys ' Response in Opposition, Docket
Entry No . 55 , pp . 126-27 .
M Email dated September 8, 2015 , from Fila to Scott Musser,
Exhibit 21 to Traxy s' Response in Opposition , Docket Entry No . 55 ,
pp . 128-31.
z
lEmail from Scott Musser to Todd Frank , dated October 6 , 2015,
Exhibit 23 to Traxys' Response in Opposition , Docket Entry No . 55,
pp . 133-34 .

was defaulting on its storage agreement with NST that required Fila
to move a specified quantity of m aterial through

facility monthly .2
2

the storage

Traxys subsequently sold the proppant for

salvage . Traxys sold 828,000 pounds of proppant to Rockpile Energy

Services at $O.
O6/1b for a total of $46,368,2 and Traxys sold
3
12,387,720 pounds of proppant to Kelly Supply at $0.009/15 for a
total of $111,
489. 2
48. 4
On March l8, 2016, Traxys sued NST and Fila asserting breach of-contract and negligence claims in connection with damages to the
ceram ic proppant stored on NST 'S property . Defendants have moved

for summary judgment

several issues, moved to amend their

original answers, and moved to exclude Traxys' expert testimony .
II.

Choice of Law

As a prelim inary matter , defendants argue that North Dakota
law controls .

A federal court sitting in diversity applies the

forum state 's choice-of-law rules to determ ine which sub stantive
law will apply .

See Erie Railroad Co . v . Tompkins , 58 S . Ct . 817

2 Email from Scott Musser to Todd Frank , dated November l9,
2
2015, Exhib it 22 to Traxys' Response in Opposition , Docket Entry
No . 55, p . 132 ; Email from Scott Musser to Todd Frank , dated
October 6 , 2015 , Exhibit 23 to Traxy s' Response in Opposition ,
Docket Entry No . 55 , pp . 133-34 .
H purchase order for Rockpile Energy Services , LLC , dated
December 29, 2015, Exhibit 29 to Traxys' Response in Opposition ,
Docket Entry No . 55 , pp . 162-67 .
M purchase order for Kelly Supply LLC, dated December 14 , 2015 ,
Exhibit 30 to Traxys ' Response in Opposition , Docket Entry No . 55 ,
pp . 167-71 .
-

6-

(
1938); Klaxon Co . v . Stentor Electric Manufacturing Co ., Inc ., 61
-

S.

1020 (
1941).

state 's 1aw

Texas courts resolve the issue of which

app lies in a contract dispute by looking

to the

Restatement (
Second) of Conflict of Laws (
1971). Maxus Exploration
Co . v . Moran Brothers, Incw

S.
W.2d

(
Tex. 1991). If the

contract does not stipulate the law to be applied in the event of
a dispute , as is the case here , the general rule of section 188 of
the Restatement controls . See id .; see also Desantis v . Wackenhut

Corp ., 793 S. . 670, 677-78 (
W 2d
Tex . 1990), cert. denied, 111 S. Ct.
755 (
1991)

Under that rule uE
tlhe rights and duties of the

parties with respect to an issue in contract are determined by the
local 1aw of the state which , with respect to that issue, has the
most significant relationship to the transaction and the parties

under the principles stated

Restatement (
Second) of

Conflicts of Laws 5 188(
1) (
1971).

State contacts are evaluated

not by their number, but by their quality .

Minnesota M ininq and

Manufacturing Co. v . Nishika Ltd w 955 S . .2d 853, 856 (
W
Tex . 1996)
(
citations omitted).

In applying this test, the court considers

uthe place of contracting,' ( uthe place of negotiation of
' 2)
the contractz'
'

uthe place of performance,' ( nthe location
' 4)

of the subject matter of the contract,' and ( uthe domicile,
'
5)
residence , nationality , place

of

incorporation

and

place

of

business of the parties .' Bailey v . Shell Western E&P, Inc ., 609
'

F. 710, 723 (5th Cir. 2010).
3d

The parties' contract does not stipulate which 1aw is to be
applied

the event of a dispu te .

Defendants argue that the

balance of factors supports application of North Dakota law . Fila
notes that the proppant at issue was to be delivered to and stored

in North Dakota . The remaining factors do not clearly indicate a
more significant relationship with another state . Traxy s does not
dispute the significance of the relationship w ith North Dakota but
argues that no choice of 1aw analysis is required because it has
withdrawn its claims for pun itive damagesz and thereby removed the
s

conflict Fila identified between the applicable law of Texas and
that of North Dakota . But Fila identifies another conflict between
North Dakota and Texas law in its Reply .26 Moreover , the alleged
torts and the resulting damage occurred in North Dakota .
clarity

and

consistency ,

the

court

will

therefore

For
apply

North Dakota 1aw to al1 state 1aw issues .
111.
A.

Fila Motions

Motion to Exclude

Fila asks the court to exclude the testimony of Traxys' expert
witness , Charles Mazur . Fila argues that Mazur's references to the
facts

and

data

he

relied

upon

do

not

satisfy

the

notice

z
splaintiff's Response in Opposition to Fila 's Motion for
Partial Judgment on the Pleadings, Docket Entry No . 42, p . 5 .
MDefendants Fila Oilfield Serv ices, LLC and Fila-Mar Energy
Services , LLC 'S Reply in Support of Motion for Summary Judgment

with Objections, Docket Entry No. 57, p. 5, n.l.
-

8-

requirements of Federal Rule of Civil Procedure 26 , that Mazur
lacks the requ isite background , that Mazur 's testimony is based on
sources not reasonably relied upon by experts in the relevant
fields, and that Mazur offers impermissible legal op inions . Traxys

argues that Mazur's experience valuing projects in the oil and gas
industry qualifies him uto testify on the market conditions of
ceramic proppant , as well as other related matters , including

logistics .' 1
'2
Unless an expert is clearly unqualified to render an opinion ,
the court's usual practice is to rule on such motions
because

counsel

frequently

testimony at trial ,
predicates

for

limit

their

scope

of

experts '

counsel often establish more extensive

experts' testimony

sometimes modify

the

trial

opinions

at

trial, and
trial .

Having

experts
carefully

considered the parties ' arguments the court is not persuaded that
Mazur should be excluded .

A lthough there is no indication that

Mazur is an expert on proppant from a materials standpoint, his

experience as a valuation expert for oil and gas projects may
qualify him to op ine on relevant aspects of the proppant market .

At any rate, the court is not persuaded that Mazur is clearly

unqualified .

Questions regarding the sources relied upon by an

expert typically go to credibility rather than admissib ility . For

z7
plaintiff 's Response in Opposition
Exclude Mazur , Docket Entry No . 43, p . 9.
-

9-

to

Fila 's Motion

to

the

reasons

stated

above ,

the

court

will

decide

on

the

adm issibility of specific portions of Mazur's testimony at trial .
Accordingly , Fila 's Motion to Exclude w ill be denied .

Traxys

should , however , supplement Mazur's report with

the

specific

identities of sources upon which Mazur relies .

Specifically ,

Traxys must identify the records and information on which Mazur
relied, the identity of the source from Carbo Ceramics w ith whom
Mazur or his organization discussed moisture testing of ceram ic

proppant , the industry sources on which Mazur relied for his
pricing

distressed

ceramic

proppant , and

the

identifying

information of the Carbo Ceramics report on the value of undamaged
proppant .

Traxys will have

14 days from

the entry of this

Memorandum Opinion and Order to provide that in formation to al1
defendants .

B.

Motion for Partial Judgment on the Pleadings
Once a responsive pleading has been filed , a motion to dismiss

for failure to state a claim is treated as a motion for judgment on
the pleadings under Rule l2 (
c). Jones v . Greninqer, 188 F. 322,
3d
(
5th

1999) (
per curiam).

motion brought pursuant to

FED. R. Cl P. 12(
v.
c) is designed to dispose of cases where the

material facts are not in dispute and a judgment on the merits can
be rendered by looking to the substance of the pleadings and any

judicially noticed facts.''
'
Derivative

&

In re Enron Corp. Securities,

'ERISA ' Litiqation ,
'
'

439

F . Supp . 2d

692,

695

( D . Tex . 2006) (
S.
quoting Great Plains Trust Co. v . Morqan Stanley
Dean Witter & Co ., 313 F .3d 305,

(
5th Cir. 2002) and Herbert

Abstract Co . v . Touchstone Properties , Ltd w

914 F .2d

76 (5th

Cir. 1990) (
per curiaml). U motion for judgment on the pleadings
A
under Rule 12( is subject to the same standard as a motion to
c)
dismiss under Rule l2( 6)
b)(
4l8 (
5th

Doe v . Myspace, Inc w 528 F.3d 413,

2008) (
citing Johnson v . Johnson, 385 F .
3d

(
5th Cir. 2004))

Accepting the plaintiff's factual allegations as

true , the court considers whether the comp laint states a plausible

claim for relief . See Young v . City of Houston , 599 F . App 'x 553 ,

554 (
5th Cir. 2015).

Fila seeks judgment as a matter of 1aw as to Traxys' tort
claim s .2
8

Fila argues that a breach

contract , without more,

cannot support a tort claim , such as negligence . Traxys responds
by

citing

Texas

cases

involv ing parties

who

were

not

in

a

contractual relationship . Under North Dakota 1aw u E
clonduct that

constitutes a breach of contract does not subject the actor to an
action in tort for negligence , unless the conduct also constitutes
breach

an independent duty that did not arise from

the

contract .' Dakota Grain Co ., Inc . v . Ehrmantrout, 502 N .W .2d 234,
'

236-37 ( . . 1993). Accepting Traxys' factual allegations as true,
N D
Traxys has not identified any independent duty that did not arise

2 The remaining arguments addressed in Fila 's Motion for
8
Partial Judgment on the Pleadings--choice of 1aw and punitive
damages--are addressed in Section II, supra .

from its contract with Fila .

See Olander Contractinq Co . v . Gail

Wachter Investments, 643 N .
W.2d 29, 39 ( . 2002). Fila's Motion
N D.
for Partial Judgment on the Pleadings will therefore be granted ,
and Traxys' tort claims against Fila will be dismissed .

Motion for Leave to Amend

Under Rule 16(
b)

uE
alfter a scheduling order deadline has

passed, a party must show good cause ( orderq to obtain leave to
in
amend the operative pleadings .' Meaux Surface Protection , Inc . v .
'

Fogleman, 607 F.3d

161, 167

(
5th

2010).

The

court's

discretion to grant such leave is nguided by the following factors :
the explanation for the failure to timely move for leave to

amend; ( the importance of the amendment;
2)

potential prejudice

in

availability

allowing

continuance

the

to

amendment; and

cure

such

(
4) the

prejudice.''
'

Id.

of a

(
quoting

S&W

Enterprises, L .L .C . v . SouthTrust Bank of Alabama , NA , 3l5 F .3d

533, 536 (
5th Cir . 2003)).

Once the Rule l6( 4) standard has
b)(

been met, the court applies the more liberal Rule l5( standard by
a)
which uleave

amend

'shall be

freely given when justice so

requires.z' S&W Enterprises, 315 F. at 535 (
'
3d
quoting FE R. Cl
D.
v.
l5 ( ))
a

Leave may be denied under Rule 15 (
a) only for a

'substantial reason .'
'
'

In re Southmark Corp w

88 F .3d

314-15

(
5th Cir. 1996)
Fila asks the court to modify its September 23 , 2016, deadline
for amended pleadings to perm it Fila to amend its answer to include

counterclaims for breach of contract and quantum meruit .

Fila

argues that there is good cause to amend the scheduling order
because

the amendment is of critical importance ,

will not suffer prejudice by the amendment, but
prejudiced, a

continuance

could

cure

the

Traxys

if Traxys is
prejudice, and

litigation had not begun in earnest as of the deadline for
motions to amend .

Fila 's argument regarding the status of the

litigation at the time of the deadline for amendments constitutes
an adequate excuse for Fila 's failure to timely amend its answer .
The court encourages parties to attempt early resolution , and the
fact that no parties had begun conducting discovery as of the
court 's initial deadline for amendment suggests that all parties
were working toward that end . The court concludes that the delayed

start of discovery also minimizes the potential prejudice to
Traxy s.

When Fila filed

its motion , it had only

deposition and Traxys had taken none .

taken one

The court also concludes

that the amendment is important as it may constitute a dispositive
defense and allow the suit to serve as a 'final accounting' between
'
'

the parties.9 Moreover, a continuance would cure any prejudice
2
Traxys may suffer from the amendment .

Rule 16 factors weighs in

Because the balance of

favor of permitting amendment, and

because the court is not aware of any substantial reason to deny

2
9Fila 's Motion for Leave to Amend , Docket Entry No . 33 ,
pp . 3-4 .

the amendment , Fila 's Motion for Leave to Amend will be granted .
Fila will not , however , be permitted to re-depose any w itness .
D.

Motion for Summary Judgm ent

Fila seeks summary judgment on Traxys' breach-of-contract
claim , on damages, on Traxys' gross-negligence claim , and on
counterclaims for breach of contract and quantum meruit .3o Because
Traxy s' tort claim s will be dism issed for the reasons stated
Section III .B ., Fila 's motion is moot as to those claims . Summary

judgment is appropriate

the movant establishes that there is no

genuine dispute about any material fact and the movant is entitled

to judgment as a matter of law. FED. R. CI P. 56(
V.
a)

'The movant
'

accomp lishes this by inform ing the court of the basis for its
motion , and by identifying portions of the record which h ighlight
the absence of genuine factual issues .'
'
F .2d 1125 ,
BIn order to

Topalian v . Ehrman, 954

(
5th Cir . 1992) (
citing Fed.

56 (
c)).

avoid summary judgment, the nonmovant must identify

specific facts within the record that demonstrate the ex istence of
a genuine issue of material fact .' CO , Inc . v . TXU Mininq Comoany ,
'

L.
P., 565 F.3d 268, 273 (
5th Cir . 2009).
reviewing the evidence uthe court must draw al1 reasonable
inferences in favor of the nonmoving party , and it may not make
credibility determ inations or weigh the ev idence .'
'

Reeves v .

3Fila also objects to portions of Traxys' summary-judgment
0
evidence. Because the court does not rely on the objectionable
evidence, it does not decide those objections at this time.

Sanderson Plumbinq Products, Incw 120 S. Ct. 2097, 2110 (
2000).
The court resolves factual controversies in favor of the nonmovant ,
nbut only when there is an actual controversy , that is, when both

parties have subm itted evidence of contradictory facts .' Little v .
'

Liqu id

Air

Corp .,

F.3d

1069,

1075

(
5th

Cir.

1994).

'Unsubstantiated assertions are not competent summary judgment
'
evidence .' Huqh Svmons Grour , r1c v . Motorola , Inc w 292 F .3d 466,
'

468 (
5th Cir. 2002) (
citing Celotex Corp. v . Catrett, 106
2548, 2553 (
1986)).

And ' mqere conclusory allegations are not
'E

competent summary judgment evidence.' Id. (
'
citing Eason v . Thaler,
73 F. 1322, 1325 (
3d
5th Cir. 1996)).
Traxys ' Breach-of-contract Claim
Fila argues that Traxys' breach-of-contract claim should be

dismissed

on

the

basis

contractual rights or

that

either

Traxys

waived

its

the parties modified the contract .3 Fila
l

argues that by initially withholding payment and then pay ing a
reduced amount for outside storage of a portion of the proppant
Traxys voluntarily and intentionally relinqu ished its contractual
rights or , alternatively , agreed to modify the existing contract
a 'novation' under North Dakota law .
'
'
hWaiver

a voluntary and

intentional relinquishment or

abandonment of a known advantage , benefit , claim , privilege, or

3 For summary purposes, Fila does not argue that it did not
l
breach the original agreement .
-

15 -

right .' Hanson v . Cincinnati Life Insurance CQ- , 57l N . .2d 363,
'
W

( D . 1997) (
N.
citations omitted).

waiver may be established

either by an express agreement , or by inference from acts or
conduct .'
'

Id . at

The existence of waiver generally is a

question of fact , but if circumstances of an alleged waiver are

clearly established and reasonab le persons can draw only

one

conclusion from those circum stances, the existence of waiver is a
question of law .

Id .

is elementary that an innocent party

may waive a breach of a contract and continue performance on his
part .

If

such

performance

is

continued

with

no

conditions

attached, the innocent party has made an election and waived the

breach.'' Dangerfield v . Markel, 252 N .
'
W.2d 184, l9l ( . 1977)
N D.
(
quoting Western Transmission Corp . v . Colorado Mainline, Inc ., 376
F.2d 470,

(
10th Cir . 1967)). The court is not persuaded that

Traxys voluntarily and intentionally relinquished its contractual
rights as a matter of law .

Traxys did not continue performance

under the original agreement .

Instead , Traxys withheld payments .

When Traxys eventually agreed to pay a lesser amount, it was on the
condition that Fila have the remaining proppant moved indoors , a
condition which Fila allegedly never fulfilled . There is therefore
a genuine

dispute

as

whether Traxys ' actions manifest an

intention to relinquish its contractual rights after the initial
alleged breach .
The court also is not persuaded that there was sufficient

meeting of the minds to show a modification or novation as a matter

of law . A 'novation' under North Dakota 1aw is uthe substitution
'
'
a new obligation between the same parties with intent to

extinguish the o1d obligation.' N . . CE
'
D
NT. CO 5 9-13-10(1). 'To
DE
'
have a novation , the parties must intend to extinguish the
obligation , there must be mutual assent , and

there

must

be

sufficient consideration .' Schmitt v . Berwick Township , 488 N .W .2d
'

398, 400 ( . . 1992).
N D

Traxys argues that it never intended to

extinguish Fila 's original obligation to store the proppant indoors
and that

was acting in good faith by paying the $3 per bag

outside rate with the understanding that Fila would move the
remaining bags indoors. Fila 's reversion to the original rate upon
being notified that the proppant had been moved indoors supports
the position that the parties intended to return to the term s of

the original agreement .

But even assuming arquendo that the

parties did modify the contract , Fila does not cite any authority
supporting the position that by modifying the contract Traxys
waived its right to recover damages caused by the previous breach .3
2

Damages
uThe elements of a prima facie case for breach of contract
are :
and

the existence of a contract;

breach of the contract;

damages which flow from the breach .'
'

WFND , LLC v . Fargo

32
At least one court has held to the contrary : 'The
'
modification of a contract after its breach does not waive damages
for the past breach unless the terms of the modification expressly
or by implication show such waiver .'
'
Peak v . International

Harvester Company of America, l86 S. 574, 576 (1916).
W.

Marc, LLC, 730 N . . 841, 848 ( . 2007).
W 2d
N D.

'Under North Dakota
'

law , uncertainty as to the amount of damages , as opposed to the
fact of damages , w ill not prevent recovery .'
'

Hardrives, Incw

85 F .
3d 343, 347

(
8th

Triton Corp . v .

1996)

(
citing

Bergguist-Walker Real Estate , Inc . v . William Clairmont , Inc w 333
N .W .2d

42O ( . . 1983))
N D

Instead, î a) party who proves a
1(

breach of a contractual duty , but who fails to prove damages
resulting from the breach , is entitled to nom inal damages on ly .'
'

Hummel v . Mid Dakota Clinic, P.C., 526 N . . 704, 709 ( . . 1995)
W 2d
N D
(
citing 11 Williston on Contracts 5 1339A ( ed. 1968)7 5 Corbin
3d
on Contracts 5 1001 (
1964); Restatement (
Second) of Contracts 5 346
(
1981)). Traxys has shown that an actual controversy exists as to
( whether Fila breached its contract with Traxys and ( the fact
1)
2)
of damages , however minimal , to Traxys ' proppant as a resu lt of the
alleged breach .

If Traxys prevails on its breach-of-contract

claim , it may at least be entitled to nominal damages .

Summary

judgment will therefore be denied as to damages for Fila's alleged
breach of contract .

Counterclaim s
Because the court

only now granting Fila 's Motion for Leave

to Amend , and because Traxys has not yet been given the opportunity

to respond to Fila's summary judgment arguments in support of its
counterclaims, the court will refrain from deciding them at this
time . As explained below , the parties will be required to mediate .
-

1 8-

Traxy s will be given an opportunity to respond to Fila 's MSJ on its
counterclaims if and when the mediator declares an impasse .
IV . NST Motion s

A.

Motion for Summary Judgment

NST moves for summary judgment on both of Traxys' claims
against

NST argues that Traxy s' breach of bailment contract

claim fails because Traxys had no contract, express or implied ,
with NST . NST argues that Traxys' negligence claim fails because
NST owed no duty to Traxys,

the econom ic loss rule bars

Traxys' tort claim, and ( NST did not breach any duty it may have
3)
owed to Traxys .

is undisputed that NST had no express contract with Traxys .
Traxys argues that , by storing the proppant , NST entered into an
implied bailment contract with Traxys .

Traxy s argues that NST

uassumed possession of E
the proppantl' so as to create a contract
'
of bailment as a matter of law .3
3

NST did not reply to this

argument . Whether NST 'S contract with Fila gave rise to a bailment
or merely a landlord and tenant relationship is a question of fact .
The North Dakota Supreme Court has adopted the following test to
distinguish the two :

the test is whether the person leav ing the property has
made such a delivery to the owner of the premises as to
amount to a relinquishment , for a time , of h is exclusive
possession , control, and dominion over the property , so

H plaintiff's Response in Opposition to
Summary Judgment , Docket Entry No . 44 , p . 20 .

NST 'S Motion

for

that the latter can exclude , within the lim its of the
agreement , the possession of a1l others . If he has , the
general rule is that the transaction is a bailment . If
there is no such delivery and relinquishment of exclusive
possession , and control and dominion over the goods is
dependent in no degree upon the co -operation of the owner
of the premises, and access to the goods is in no wise

subject to the latter's control, it is generally held
that the owner of the goods is a tenant or lessee of the
space upon the prem ises where they are left .

Great Plains Supply Co . v . Mobil Oil Co .,

N . . 241, 245 ( . .
W 2d
N D

1969) (
quoting 8 Am . Jur . 2d, Bailments 5
elaborated that

p . 926). The court

constitute a bailment , there must be such a

full transfer , actual or constructive , of the property to the
bailee as to exclude the possession of

owner and

other

persons and give the bailee the sole custody and control of the

goods.' Id . (
'
citations omitted). Record evidence shows that NST
had u Acomplete control and responsibility for the operation of the

E
storage

facilityq and the performance

of

the

E
transloading

servicesl.''3 Drawing al1 reasonable inferences in favor of the
'4
non-movant , there is at least a genuine issue of material fact as
to the ex istence of an implied bailment .

Even if there were no contractual relationship between Traxys
and NST , Traxys may yet prevail on its tort claim against NST . NST
argues that it owed no ex tracontractual duty to Traxys .

Traxys

argues that , as a sub -bailee, NST may be liable for damages. North
Dakota law supports Traxys ' argument . In answer to the question of
whether a bailor may maintain an action against a stranger to the

3
4Fi1a 's MSJ , Docket Entry No . 39, p . l1 , n .26 and accompanying

text (
citing Docket Entry No. 32-3 at $$ 7. 13)
4,
-

20 -

bailment for negligently damaging a bailed chattel, the North
Dakota

Supreme

Court

'unquestionably ' be
'

stated

maintained .

that

such

Grossman

an

action

Chevrolet

may

Co . v .

Enockson, 86 N . . 644, 646-47 ( . 1957) (
W 2d
N D.
citations omitted).
The court cited the 'well-settled' rule that 'where any permanent
'
'
'

injury is done to a chattel, the bailor may maintain an action
against a third person for injury to the reversionary interest and
where

the bailor may , at his option , terminate

the bailee's

possession , he may recover the entire amount of damages to the

property.' Id. (
'
citing Roval Stein Inc . v. B . C. U . Holding Corp w
l27 N . . 2d 886, 887 (
Y S.
1954)). Record evidence raises a genuine
issue of material fact as to whether NST damaged the proppant when
attempting to move

by forklift .

NST argues that the econom ic loss ru le bars Traxys' tort
claim s.

But the econom ic loss rule only app lies

the proppant

was the subject of an implied contract between NST and Traxys , an
allegation that NST denies and that the court will submit to the
finder of fact .

Dismissal of Traxys ' tort claim on the basis of

the econom ic loss rule wou ld therefore be premature .
NST argues that, even assuming it owed an independent duty to

Traxys, Traxys

unab le to show that NST breached that duty . The

essence of NST 'S argument is that it performed its obligations

under its eontract with Fila and that, as a result , Traxys is
uestopped from arguing that NST should have acted different from or

contrary to the Fila/NST Agreement by failing to contract or

communicate directly with NST knowing full well that NST would be
handling the Proppant .' s NST argues that Traxy s 'impliedly waived
'3
'
any right to complain over how NST performed .' 6 NST does not cite
'3
to specific facts or authority in support of its argument , and the
court is not persuaded that NST 'S estoppel defense en titles it to
dismissal of Traxys' claims as a matter of law .

B.

Motion for Leave to Amend

Because the reasons stated above in Section III .C . also apply
to NST 'S Motion for Leave to Amend , NST 'S motion will be granted .
C.

MSJ on Damages

NST 'S arguments in support of its MSJ on Damages have been

rendered moot or rejected as a result of the court's decisions on
the issues discussed above . NST 'S motion will therefore be denied .
V.

For

the

reasons

Conclusions and Orders

stated

above , Defendants

Fila

Oilfield

Services, LLC and Fila-Mar Energy Services , LLC 'S Motion to Exclude

Testimony of Charles Mazur
Defendants

Fila

Oilfield

Services , LLC'S Motion

(
Docket Entry

Serv ices ,

D EN IED ;

and

Fila-Mar

Energy

for Partial Judgment on the Pleadings

(
Docket Entry No. 3l) is GRANTED ; Defendant NST Transload Operating

Company, LLC d/b/a Northstar Midstream's Motion for Summary
3 NST 's MSJ , Docket Entry No . 32 ,
5
3 yd .
6

l8 .

Judgment (
Docket Entry No. 32) is DENIED; Defendants Fila Oilfield
Services , LLC and Fila-Mar Energy Services, LLC 'S Motion for Leave

to Amend Answer (
Docket Entry No.

is GRANTED; Defendant NST

Transload Operating Company, LLC d/b/a Northstar Midstream's Motion
is

for Leave to File an Amended Answer (
Docket Entry No .

GRANTED; Defendant NST Transload Operating Company, LLC d/b/a
Northstar Midstream 's Motion

for Summary

Judgment on

Damages

(
Docket Entry No. 38) is DENIED ; and Defendants Fila Oilfield
Services, LLC and

Fila -Mar Energy

Services, LLC 'S Motion

Summary Judgment (
Docket Entry No .

for

is DENIED in part as to

Traxys ' breach -of-contract claim and damages and is not yet ripe
for decision as to Fila 's counterclaims .
The

court

mediation .

believes

that

this

case

is

well-suited

for

If the parties are unable to settle the case in the

next 30 days , they will adv ise the court and will provide the name
and contact information of an agreed mediator . If the mediation is
not successful , the court will enter an amended docket control
order .

The court's Order (
Docket Entry No. 50) is VACATED as to the

dates for filing the joint pretrial order and for docket call.
SIGNED at Houston , Texas, on this 12th day of Sep tember , 2017 .

e

S IM LA KE
UNITED STATES DISTRICT JUDGE
-

23 -