Hess Corporation v. Schlumberger Technology Corporation

Filing 158

MEMORANDUM OPINION AND ORDER granting in part and denying in part 116 Corrected SEALED MOTION For Summary Judgment, granting in part and denying in part 117 MOTION for Partial Summary Judgment , granting in part and denying in part 118 SEALED MOTION for Partial Summary Judgment, granting 119 Opposed MOTION to Exclude Expert Testimony, granting 120 Opposed SEALED MOTION to Exclude Expert Testimony, denying without prejudice 121 SEALED MOT ION to Exclude Expert Testimony of Dennis Read, denying without prejudice 122 SEALED MOTION to Exclude Expert Testimony of David Hirth, denying without prejudice 123 SEALED MOTION to Exclude Expert Testimony of Peter Koo pmans, denying without prejudice 124 SEALED MOTION to Exclude the Expert Testimony of Barry Pulliam, denying as moot 125 SEALED MOTION to Exclude the Expert Testimony of Rolle Hogan (Revised Joint Pretrial Order due by 12/4/2019. Docket Call set for 12/11/2019 at 11:30 AM in Courtroom 9B before Judge Sim Lake.)(Signed by Judge Sim Lake) Parties notified.(aboyd, 4)

United States District Court
Southern District of Texas

ENTERED
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
HESS CORPORATION,
Plaintiff,
v.
SCHLUMBERGER TECHNOLOGY
CORPORATION,
Defendant.

§
§
§
§
§
§
§
§
§
§

November 07, 2019
David J. Bradley, Clerk

CIVIL ACTION NO. H-16-3415

MEMORANDUM OPINION AND ORDER

I.

Motions to Exclude .

II.

Undisputed Facts and Procedural Background

.

. 4
. 7

III. Standard of Review .

15

IV.

Applicable Law .

17

V.

Schlumberger's Motion for Summary Judgment .

21

A.

Schlumberger is Not Entitled to Summary Judgment on
Hess's Breach of Contract Claims as to the Four Valves

22

1.

Hess Did Not Expressly Disclaim the Right to
Challenge the Alleged Non-Conformities After a Year
22

(a)

The Court's Prior Ruling Does Not Foreclose
23
Any Aspect of Schlumberger's MSJ

(b)

Whether Hess's Revocation Claims Are TimeBarred is a Fact Issue for Trial
24

2.

Schlumberger Is Entitled to Partial Summary
Judgment Based on the MSC's Indemnity and Release
Provisions .
33
(a)

(b)

Costs to Retrieve and Replace the SSVs Is Not
"Damage To or Loss of" Hess's Property
38

(c)

Lost Profits Are Not "Damage to or Loss of"
43
Hess's Property .

(d)
3.

Replacement Valve Cost Is Not "Damage To or
36
Loss of" Hess's Property

Methanol Contamination is "Damage to or Loss
of" Hess's Property .
44

Whether Schlumberger Breached the Contract Presents
Fact Issues for Trial
46
(a)
(b)

Whether Schlumberger Breached API 14A § 7.6.2
50
is a Fact Issue for Trial .

(c)

Whether
Schlumberger
Breached
API
§ 7.6.3(c) is a Fact Issue for Trial

(d)
B.

Whether
Schlumberger
Breached
API
§ 6.3.2.2 is a Fact Issue for Trial

14A
47

Hess Has Alleged Violations of the Eleventh
56
Edition of API 14

14A
54

Schlumberger is Not Entitled to Summary Judgment on
Hess's Breach of Contract Claim for the Well B(2) Valve
58
1.

Well B(2) Claim is a "Disputed Claim" under Clause
59
(a) of the Bridging Agreement

2.

Well B(2) Claim is Not a "Disputed Claim" Pursuant
to Clause (b) of the Bridging Agreement
61
-2-

C.

VI.

Schlumberger is Not Entitled to Summary Judgment because
Hess has Failed to Satisfy the Appropriate Standard to
Recover Incidental Damages
62

Hess's Motion for Partial Summary Judgment .
A.

The MSC's Indemnity-and-Release
Hess's Breach of Contract Claims

B.

Hess Is Entitled to Partial Summary
Schlumberger's Affirmative Defense of
Counterclaim for Indemnity

VII. Conclusions and Order

67

Provisions Encompass
70

Judgment on
Release and
77
78

-3-

Pending before the court are Defendant Schlumberger Technology
Corporation's Motion for Summary Judgment

("STC's MSJ") (Docket

Entry No. 116), and Hess Corporation's Motion for Partial Summary
Judgment on Schlumberger's Affirmative Defense of Release and
Counterclaim for Indemnity ("Hess's MPSJ") (Docket Entry Nos. 117
(redacted) and 118 (unredacted)).

For the reasons stated below,

STC's MSJ will be granted in part and denied in part, and Hess's
MPSJ will be granted in part and denied in part.

Also pending are

Hess Corporation's Motion to Exclude Expert Report of Lawyer
Cary A.

Moomjian

(Docket

Entry

Nos.

119

(redacted)

and

120

(unredacted) ) and a number of motions seeking to exclude the
testimony of expert witnesses:

Schlumberger Technology Corpora­

tion's Motion to Exclude the Expert Testimony of Dennis Read
(Docket Entry No.

121);

Schlumberger Technology Corporation's

Motion to Exclude the Expert Testimony of David Hirth (Docket Entry
No. 122); Schlumberger Technology Corporation's Motion to Exclude
the Expert Testimony of Peter Koopmans

(Docket Entry No. 123);

Schlumberger Technology Corporation's Motion to Exclude the Expert
Testimony of Barry Pulliam (Docket Entry No. 124); and Schlumberger
Technology Corporation's Motion to Exclude the Expert Testimony of
Rolle Hogan (Docket Entry No. 125).
I.

Motions to Exclude

Hess moves to exclude the Moomjian Report arguing that his
"legal opinions

interpreting

the
-4-

indemnity-and-release

provisions should be excluded because they are irrelevant and do
not provide meaning to any specialized or scientific terms of
art."1

On the first page of his report Lawyer Cary A. Moomjian
"I have been retained in relation to the Litigation for

states:
the

sole

purpose

applicability

of

of
the

providing
releases

my

expert

and

opinion

on

indemnities

the

between

[Schlumberger] and Hess under the relevant contracts. I will limit
this Report & Opinion to that issue and related matters."2

Because

the parties do not contend that the contract language at issue is
ambiguous,

the

applicability

of

the

contract's

release

and

indemnity provisions present questions of law for the court to
decide.

See Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983) ("If

the written instrument is so worded that it can be given a certain
or definite legal meaning or interpretation,

then it is not

ambiguous and the court will construe the contract as a matter of
law.").
Under Rule 702 an expert must possess "specialized knowledge
[that] will help the trier of fact to understand the evidence or to
determine a fact in issue."

Fed. R. Evid. 702(a).

The Fifth

Hess Corporation's Motion to Exclude Expert Report of Lawyer
Cary A. Moomjian ("Hess's Motion to Exclude Moomjian Report"),
Docket Entry Nos. 119 (redacted) and 120 (unredacted), pp. 3-4.
1

Report and Opinion of C. A. Moomjian, Jr., President, CAM
OilServ Advisors LLC ("Moomjian Report"), p. 1:32-35, Exhibit 1 to
Hess's Motion to Exclude Moomjian Report, Docket Entry No. 120-2,
p. 2:32-35.
2

-5-

Circuit has consistently held that legal opinions are not a proper
subject of expert testimony because they do not assist the trier of
fact in understanding the evidence, but instead merely tell the
trier of fact what result to reach.

See Estate of Sowell v.

United States, 198 F.3d 169, 171-72 (5th Cir. 1999) (forbidding
expert

testimony

as

to

whether

a

fiduciary

was

"acting

reasonably"); Askanase v. Fatjo, 130 F.3d 657, 672-73 (5th Cir.
1997) (holding that the trial court properly excluded expert legal
opinions as to whether defendants

breached various fiduciary

duties); Salas v. Carpenter, 980 F.2d 299, 305 (5th Cir. 1992)
(noting that expert testimony must bring to the trier of facts more
than the lawyers can offer in argument). Because the applicability
of the releases and indemnities in the parties' contract presents
questions of law for the court to decide, because the Moomjian
Report offers only legal opinions, and because the legal questions
at issue have been fully briefed by the parties, Hess's Motion to
Exclude the Moomjian Report will be granted.
Schlumberger moves to exclude the expert testimony of Rolle
Hogan arguing that he is neither qualified nor able to opine on
provisions of the parties' contract. 3

Hess responds that it "does

not intend to offer Mr. Hogan to tell the Court how to interpret
the unambiguous [contract]. That is for the Court to decide, which

Schlumberger Technology Corporation's Motion to Exclude the
Expert Testimony of Rolle Hogan, pp. 5-11, Docket Entry No. 125,
pp. 10-16.
3

-6-

is

the

precise

reason

why

Hess

has

moved

to

exclude

the

inadmissible legal opinions of Schlumberger's lawyer expert. " 4
Hess also states:

"If the Court grants Hess's motion,

then

Schlumberger's becomes moot; Hess will de-designate Mr. Hogan as an
expert witness, and call him instead only as a fact witness." 5
Because the court has decided to grant Hess's Motion to Exclude the
Moomjian Report,

Schlumberger's Motion to

Exclude

the Expert

Testimony of Rolle Hogan will be denied as moot.
The court's usual practice is to rule on motions to exclude
expert testimony during the course of
frequently modify their opinions,
establish

more

extensive

trial because experts

and at trial counsel often

predicates

for

experts'

testimony.

Moreover, the context in which an expert's opinion is offered is
necessary to effectively rule on such issues.

Accordingly, the

remaining motions to exclude expert testimony, which deal with
disputed fact issues concerning liability, causation, and damages,
will all be denied without prejudice to being reurged during trial.
II.

Undisputed Facts and Procedural Background

This is a breach of contract action arising from the failure
of four Subsurface Safety Valves ("SSVs") that Hess purchased from
Schlumberger for Wells B, C, and D in the Tubular Bells Field of
Hess Corporation's Response in Opposition to Schlumberger
Technology Corporation's Motion to Exclude Expert Testimony of
Rolle Hogan, Docket Entry No. 134, p. 1.
4

5

Id. at n.l.
-7-

the Mississippi Canyon on the Outer Continental Shelf of the Gulf
of

Mexico

Louisiana. 6

approximately

135

miles

southeast

of

New

Orleans,

Hess is the operator of the Tubular Bells Field, and

Chevron is the non-operating working interest owner.

The subsea

wells are connected to the Gulfstar One production facility. 7
The contract consists of multiple agreements and project
documents,

including:

Commercial Agreement Number 46000010410

("Commercial Agreement") effective April 18, 2012; 8 Hess project
document titled "GoM Tubular Bells & Llano 4 SCSSV Requirements
Rev. 5" incorporated into the Commercial Agreement at Exhibit A Scope of Work; 9 Schlumberger Quality Control Plan dated March 22,
2012, incorporated into the Commercial Agreement at Exhibit J; 10
The following facts are derived from the factual allegations
included in Plaintiff's Third Amended Complaint ("TAC"), Docket
Entry No. 71, pp. 11-29, and from the factual statements included
in STC's MSJ, pp. 5-11, Docket Entry No. 116, pp. 11-17, and Hess's
MPSJ, pp. 2-7, Docket Entry No. 118, pp. 9-14. Page numbers for
docket entries in the record refer to the pagination inserted at
the top of the page by the court's electronic filing system.
6

7

Id.

Exhibit 1 - Tab 1 to Plaintiff's Second Amended Complaint,
Docket Entry No. 25-1. See also TAC, Docket Entry No. 71, p. 11 &
n.1 (stating that citations to exhibits are to exhibits attached to
Hess's Second Amended Complaint).
8

9

Exhibit 1 - Tab 2 to Plaintiff's Second Amended Complaint,
Docket Entry No. 25-2.
See also Exhibit A to the Commercial
Agreement, Exhibit 1
Tab 1 to Plaintiff's Second Amended
Complaint, Docket Entry No. 25-1, p. 13 ("The document titled GoM
Tubular Bells & Llano 4 SCSSV Requirements Rev. 5 (seventeen [17)
pages) is attached hereto and made a part hereof.").
Exhibit 1 - Tab 4 to Plaintiff's Second Amended Complaint,
Docket Entry No. 25-4.
See also Exhibit J to the Commercial
(continued...)
10

-8-

American

Petroleum

Institute

Specification

14A

( "API

14A")

incorporated into the Commercial Agreement at Exhibit J; 11 the
Master Service Contract 7525 ("MSC") entered into by the parties in
February of 2000 incorporated into the Commercial Agreement at

1 2;

12

Hess Drawings and Specifications incorporated into the

Commercial Agreement at Exhibit K, p. 78; 13 and project Purchase
Orders and Field Tickets incorporated into the Commercial Agreement
at

1 2(a) of the MSC.14

continued)
Agreement, Exhibit 1
Tab 1 to Plaintiff's Second Amended
Complaint, Docket Entry No. 25-1, p. 76 1 2.4 ("Quality
Assurance").
1

0 ( ••
•

11 Exhibit 1 - Tab 5 to Plaintiff's Second Amended Complaint,
Docket Entry No. 25-5. See also Exhibit J to the Commercial
Agreement, Exhibit 1
Tab 1 to Plaintiff's Second Amended
Complaint, Docket Entry No. 25-1, pp. 76-77 1 2.10.

Exhibit 1 - Tab 3 to Plaintiff's Second Amended Complaint,
Docket Entry No. 25-3. See also Commercial Agreement, p. 1 1 2,
Exhibit 1 - Tab 1 to Plaintiff's Second Amended Complaint, Docket
Entry No. 25-1, p. 5 ("The Parties and their Affiliates entered
into Master Service [Contract] No. 7525 dated effective as of
February 6, 2000 (the 'MS[C] ').
The Parties agree that this
Agreement is made subject to and in accordance with all the terms
and conditions of the MS[C] (as such MS[C] may have been and may be
amended), and that the terms and conditions of the MS[C] are hereby
incorporated by reference and made part of the Agreement. . . .").
12

Exhibit 1 - Tab 6 to Plaintiff's Second Amended Complaint,
Docket Entry No. 25-6.
See also Exhibit K - Drawings and
Specifications to the Commercial Agreement, p. 78, Exhibit 1 Tab 1 to Plaintiff's Second Amended Complaint, Docket Entry
No. 25-1, p. 82.
13

Exhibit 1 - Tab 7 (Purchase Orders) and Tab 8 (Field Tickets)
to Plaintiff's Second Amended Complaint, Docket Entry Nos. 25-7 and
25-8. See also MSC, p. 1 1 2(a), Exhibit 1 - Tab 3 to Plaintiff's
Second Amended Complaint, Docket Entry No. 25-3, p. 3 1 2(a).
14

-9-

The SSVs were installed in April of 2014 in Well D, June of
2014 and February of 2016 in Well B, and April of 2015 in Well C. 15
Production on Well B began on December 14, 2014, and ceased on
January

29,

2016,

due

to

valve

A

failure. 16

Schlumberger

replacement valve installed in Well B allowed production to resume
on June 13, 2016, but in March of 2018 production ceased again due
to the replacement valve's failure. 17

Production on Well D began

on January 14, 2015, and ceased on August 10, 2015, due to valve
failure. 18

Production on Well C began on July 21, 2015, and ceased

due to valve failure on July 28, 2016. 19
Hess

reported

each

valve

failure

to

Schlumberger.

Schlumberger investigated the failures and concluded that they
were primarily caused by the quality of the Metal Spring Energized
("MSE") seals.

On April 29, 2016, Schlumberger issued a report

stating that it had identified an issue with the seals and had
engaged in a recall of all SSVs manufactured from 2012 to 2015. 20
15

TAC, Docket Entry No. 71, p. 15 ,, 41-43.

16

Id. at 16 , 45.

17

Id. at 17 ,, 53-54.

18

Id. 15-16 , 44.

Id. at 16, , 46.
See also Expert Report of Barry Pulliam
("Pulliam Report"), ,, 15-17, Exhibit 7 to STC's MSJ, Docket Entry
No. 116-7, ,, 15-17.
19

Schlumberger Field Return Analysis Report Rev. 7, dated
April 29, 2016, pp. 28-29 of 55, Exhibit 3 to Plaintiff's Second
Amended Complaint, Docket Entry No. 25-10, pp. 29-30.
20

-10-

On May 17, 2016, Hess notified Schlumberger that it revoked
acceptance of the SSVs used in Wells D and B pursuant to§ 2.608 of
the Texas Business

&

Commerce Code.21

On July 29, 2016, Hess

notified Schlumberger that it revoked acceptance of the SSV used in
Well C on the same basis.22
On November 18, 2016, Hess filed this action alleging breach
of contract under Texas Business and Commerce Code§ 2.608 seeking
cost

"the

of

cover

for

each

valve,

incidental

damages,

consequential damages, attorney's fees and expenses, costs of suit,
pre- and post-judgment interest at the maximum legal rate, and all
such other and further relief, equitable and legal, to which Hess
justly is entitled." 23

After Hess filed this action, the parties

entered a Bridging Agreement that excepts "Disputed Claims," but
otherwise amends the MSC "for contracts between the Parties entered
into before, on or after" the effective date of January 1, 2017.24
TAC, Docket Entry No. 71, p. 27, 81. See also Hess's MPSJ,
p. 5, Docket Entry No. 118, p. 12, and Notice of Revocation Under
Section 2.608 of Tex. Bus. & Com. Code, dated May 17, 2016,
Exhibit 16 to Hess's MPSJ, Docket Entry No. 118-17.
21

TAC, Docket Entry No. 71, p. 27, 82. See also Hess's MPSJ,
p. 5, Docket Entry No. 118, p. 12, and Notice of Revocation Under
Section 2.608 of Tex. Bus. & Com. Code, dated July 29, 2016,
Exhibit 17 to Hess's MPSJ, Docket Entry No. 118-18. Hess revoked
acceptance of the replacement valve used in Well B on March 23,
2018, on the same basis. See TAC, Docket Entry No. 71, p. 27, 84.
See also Hess's MPSJ, p. 5, Docket Entry No. 118, p. 12, and Notice
of Revocation Under Section 2.608 of Tex. Bus. & Com. Code, dated
March 23, 2018, Exhibit 18 to Hess's MPSJ, Docket Entry No. 118-19.
22

2
3

p. 10.

See Plaintiff's Original Complaint, Docket Entry No. 1,

Bridging Agreement, Exhibit
No. 116-4, p. 2, l.a.
24

-11-

4

to STC's MSJ, Docket Entry

On December 8, 2016,

Schlumberger moved to dismiss Hess's

Original Complaint because the SSVs complied with the contract's
time-limited warranties.25

On January 27, 2017, the court entered

a Memorandum Opinion and Order directing Hess to file an amended
complaint identifying specific contractual obligations the SSVs
failed to meet. 26
On February 15, 2017, Hess filed Plaintiff's First Amended
Complaint, 27 and on March

1, 2017, Schlumberger filed Defendant's

Motion to Dismiss First Amended Complaint under Rule 12 (b) (6).28
At the initial pretrial and scheduling conference held on March 3,
2017, the court ordered Hess to amend its complaint again, ordered
Schlumberger to file an amended motion to dismiss, and directed the
parties to identify legal criteria for distinguishing claims for
breach of contract from claims for breach of warranty.29
On March 17,

2017,

Hess filed Plaintiff's Second Amended

Complaint asserting claims for breach of contract under Texas
common law and Texas Business and Commerce Code

§

2.608.30

Hess

Defendant's Motion to Dismiss Under Rule 12 (b) (6), Docket
Entry No. 8.
25

26

Memorandum Opinion and Order, Docket Entry No. 13.

Plaintiff's First Amended Complaint, Docket Entry No. 15,
pp. 17-19 11 63-73 (breach of contract pursuant to Texas Business
and Commerce Code 1 2.608), and 11 74-77 (breach of contract).
27

28

Docket Entry No. 18.

Transcript of Hearing on Scheduling Conference Before the
Honorable Sim Lake, Docket Entry No. 22.
29

Plaintiff's Second Amended Complaint, Docket Entry No. 25,
pp. 28-30 11 87-98 (breach of contract pursuant to Texas Business
(continued...)
30

-12-

alleged that the SSVs containing the defective MSE seals were
non-conforming goods and that the non-conformities substantially
impaired the value of the SSVs to Hess.

Hess reasserted the prayer

for relief from its Original Complaint seeking the cost of cover,
incidental damages,

consequential damages,

attorney's fees and

expenses, costs of suit, pre- and post-judgment interest, and all
other relief,

equitable and legal,

to which

Hess is

justly

entitled.31
Citing disclaimers contained in the parties' contract, and
arguing that each of the installed SSVs functioned for a period of
at least one year, Schlumberger moved to dismiss Plaintiff's Second
Amended Complaint pursuant to Rule 12(b)(6). 32

On June 29, 2017,

the court entered a Memorandum Opinion and Order granting in part
and

denying

in

part

Schlumberger's

motion

to

dismiss

upon

concluding that the two breach of contract claims asserted in
Hess's Second Amended Complaint were indistinguishable and that
Chapter 2 of the Texas Business and Commerce Code provides the
applicable law.33

The court also concluded that Hess had alleged

enough facts to support a viable revocation claim because
( ••• continued)
and Commerce Code � 2. 608), and pp. 30-31 �� 99-103 (breach of
contract)
30

31

Id. at 31 ( Prayer for Relief).

Defendant's Motion to Dismiss Second Amended Complaint Under
Rule 12(b)(6), Docket Entry No. 29.
32

Memorandum Opinion and Order, Docket Entry No. 4 O, p. 6 n.2 O.
See also Hess Corp. v. Schlumberger Technology Corp., Civil Action
No. H-16-3415, 2017 WL 2829697 (S.D. Tex. June 29, 2017).
33

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Schlumberger's argument is, in essence, that the SSVs
were conforming. But that is for the trier of fact to
determine. Hess may proceed with its claims based on the
alleged non-conformity of the SSVs at the time of
delivery. Hess may not proceed with its claims based on
the failure of the SSVs to function after the warranty
period had expired. 34
On July 13, 2017, Schlumberger filed Schlumberger Technology
Corporation's Answer,

Affirmative Defenses and Counterclaim to

Hess's Second Amended Complaint. 35

Among the affirmative defenses

that Schlumberger asserts is an affirmative defense of release
alleging that the MSC released Schlumberger
brought by any party for any and all
property' .

"from all claims

'damage to or loss of

[MSC] § 13. " 36 Schlumberger also asserts a counterclaim

for indemnity seeking to recover from Hess any judgment that Hess
receives

from

Schlumberger

on

Hess's

affirmative

claim

plus

attorney's fees and costs. 37
On May 9, 2018, Hess filed the TAC asserting claims for breach
of contract pursuant to Texas common law and Texas Business and
Commerce Code § 2.608. 38
defective

MSE

seals

Hess alleges that the SSVs containing the

were

non-conforming

goods

and

that

the

Memorandum Opinion and Order, Docket Entry No. 40, p. 17.
See also Hess, 2017 WL 2829697, *7.
34

35

Docket Entry No. 43.

36

Id. at 18.

37

Id. at 18-21.

TAC, Docket Entry No. 71, pp. 29-31 ,, 92-104 (breach of
contract pursuant to Texas Business and Commerce Code, 2.608), and
pp. 31-32 ,, 105-109 (breach of contract)
38

-14-

non-conformities substantially impaired the value of the SSVs to
Hess.

Hess alleges that it

"incurred substantial expense to

retrieve and replace the non-conforming valves and restore the
wells to production,
production."39

and lost profits from deferred and lost

Hess also alleges:

Schlumberger's failure to perform its manufacturing and
inspections according to the applicable contractual
specifications and standards has resulted in significant
damages to Hess, including but not limited to costs
associated with retrieval and replacement of the failed
Schlumberger Safety Valves and restoration of the wells,
and lost profits from deferred and lost production.40
Hess reasserts the prayer for relief from its Original Complaint
seeking the cost of cover for each valve,

incidental damages,

consequential damages, attorney's fees and expenses, costs of suit,
pre- and post-judgment interest, and all other relief, equitable
and legal, to which Hess is justly entitled.41

On April 8, 2019, the parties submitted a Joint Status Report
Concerning Trial (Docket Entry No. 114), stating:

"[T]he parties

have agreed to try this case to the bench rather than a jury."
III.

Standard of Review

Summary judgment is authorized if the movant establishes that
there is no genuine dispute about any material fact and the law
entitles it to judgment.

Fed. R. Civ. P.

39Id. at 31 1 103.
40Id. at 32 1 109.
41Id. at 32.
-15-

56.

Disputes about

material facts are

"genuine"

if the evidence is such that a

reasonable jury could return a verdict for the nonmoving party.
Anderson v. Liberty Lobby, Inc., 106 S. Ct. 2505, 2511 (1986).

A

"party moving for summary judgment must 'demonstrate the absence of
a genuine issue of material fact,' but need not negate the elements
of the nonmovant's case."

Little v. Liquid Air Corp., 37 F.3d

1069, 1075 (5th Cir. 1994) (en bane) (per curiam) (quoting Celotex
Corp. v. Catrett, 106 S. Ct. 2548, 2553 (1986)).

"If the moving

party fails to meet this initial burden, the motion must be denied,
If, however, the

regardless of the nonmovant's response."

moving party meets this burden, Rule 56 requires the nonmovant to
go beyond the pleadings and show by admissible evidence that
specific facts exist over which there is a genuine issue for trial.
Id.

"[T]he court must draw all reasonable inferences in favor of

the nonmoving party, and it may not make credibility determinations
or weigh the evidence."

Reeves v. Sanderson Plumbing Products,

Inc., 120 S. Ct. 2097, 2110 (2000).

Factual controversies are to

be resolved in favor of the nonmovant, "but only when there is an
actual controversy, that is, when both parties have submitted
evidence of contradictory facts."
"When

parties

file

Little, 37 F.3d at 1075.

cross-motions

for

summary

judgment,

[courts] review 'each party's motion independently, viewing the
evidence and inferences in
nonmoving party."'

the

light most

favorable

to the

Cooley v. Housing Authority of the City of

Slidell, 747 F.3d 295, 298 (5th Cir. 2014) (quoting Ford Motor Co.
-16-

v. Texas Department of Transportation, 264 F.3d 493, 498 (5th Cir.
2001)).

See also Shaw Constructors v. ICF Kaiser Engineers, Inc.,

395 F.3d 533, 538-39 (5th Cir. 2004), cert. denied sub nom. PCS
Nitrogen Fertilizer, L.P. v. Shaw Constructors, Inc., 126 S. Ct.
342 (2005) ("Cross-motions must be considered separately, as each
movant bears the burden of establishing that no genuine issue of
material fact exists and that it is entitled to judgment as a
matter of law.").
IV.

Applicable Law

Hess asserts claims for breach of contract pursuant to Texas
common law and Texas Business and Commerce Code

§

2.608.42

The

court has already held that the two breach of contract claims Hess
asserts are indistinguishable and that Chapter 2 of the Texas
Business and Commerce Code provides the applicable law.43

Under

Texas law "[i]f the written instrument is so worded that it can be
given a certain or definite legal meaning or interpretation, then
it is not ambiguous and the court will construe the contract as a
matter of law."

Coker, 650 S.W.2d at 393.

The parties do not

dispute that Texas law applies to the contract, and neither party
argues that any part of their contract is ambiguous.
TAC, Docket Entry No. 71, pp. 29-31 11 92-104 (breach of
contract pursuant to Texas Business and Commerce Code 1 2.608), and
pp. 31-32 11 105-109 (breach of contract).
42

Memorandum Opinion and Order, Docket Entry No. 4 O, p. 6 n.2 O.
See also Hess, 2017 WL 2829697, *3 n.20.
43

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Section

2.608

of

the

Texas

Business

and

Commerce

Code

describes the conditions necessary for revocation:
(a) The buyer may revoke his acceptance of a lot or
commercial unit whose non-conformity substantially
impairs its value to him if he has accepted it .
(2) without discovery of such non-conformity if his
acceptance was reasonably induced either by the
difficulty of discovery before acceptance or by the
seller's assurances.
(b) Revocation of acceptance must occur within a
reasonable time after the buyer discovers or should have
discovered the ground for it and before any substantial
change in condition of the goods which is not caused by
their own defects. It is not effective until the buyer
notifies the seller of it.
(c) A buyer who so revokes has the same rights and
duties with regard to the goods involved as if he had
rejected them.
Tex. Bus.

&

Com. Code § 2.608.

A seller delivers conforming goods

when the goods "are in accordance with the obligations under the
contract."

Tex. Bus.

&

Com. Code § 2.106 (b).

Non-conformity

includes any failure of the seller to perform according to his
obligations under the contract, including breaches of warranties.
See Tex. Bus.

&

Com. Code § 2.714, Comment 2.

is a subset of non-conformity.

Breach of warranty

See Ford Motor Credit Co. v.

Harper, 671 F.2d 1117, 1122 (8th Cir. 1982)
A claim for "revocation seeks to put the buyer in the same
position as if he had rejected the goods at the time of delivery."
Neal v. SMC Corp., 99 S.W.3d 813, 816 (Tex. App. - Dallas 2003, no
pet.). See also A.O. Smith Corp. v. Elbi S.P.A., 123 F. App'x 617,
-18-

619 (5th Cir. 2005) (per curiam) ("[B]reach of contract damages are
not available when a buyer accepts non-conforming goods.

In that

instance, breach of warranty is the remedy . . . Breach of contract
remedies are available,

however,

to a buyer who,

inter alia,

properly revokes acceptance.") (citing Selectouch Corp. v. Perfect
Starch, Inc., 111 S.W.3d 830,
pet.) ("A buyer who .

834

(Tex. App.

Dallas 2003, no

justifiably revokes his acceptance may

recover breach of contract remedies for delivery of non-conforming
goods under section 2.711.

•

ti

) ) •

The remedies for breach of contract for a sale of goods are
set forth in Tex. Bus. & Com. Code§§
part§

2.711-2.715.

In pertinent

2.711 governing "Buyer's Remedies in General" provides:

(a) Where the seller fails to make delivery or
repudiates or the buyer rightfully rejects or justifiably
revokes acceptance then with respect to any goods
involved, and with respect to the whole if the breach
goes to the whole contract (Section 2.612), the buyer may
cancel and whether or not he has done so may in addition
to recovering so much of the price as has been paid
(1) "cover" and have damages under the next
section as to all the goods affected whether or not
they have been identified to the contract; or
(2) recover damages for non-delivery as provided
in this chapter (Section 2.713).
Tex. Bus.

&

Com. Code§

2.711.

Section 2.712 governing "Cover" provides:
(a) After a breach within the preceding section the
buyer may "cover" by making in good faith and without
unreasonable delay any reasonable purchase of or contract
to purchase goods in substitution for those due from the
seller.
-19-

(b) The buyer may recover from the seller as damages the
difference between the cost of cover and the contract
price together with any incidental or consequential
damages as hereinafter defined (Section 2.715), but less
expenses saved in consequence of the seller's breach.
Tex. Bus. & Com. Code § 2.712.
Section 2.713 governing "Buyer's Damages for Non-Delivery or
Repudiation" provides:
(a) Subject to the provisions of this chapter with
respect to proof of market price (Section 2.723), the
measure of damages for non-delivery or repudiation by the
seller is the difference between the market price at the
time when the buyer learned of the breach and the
contract price together with any incidental and
consequential damages provided in this chapter (Section
2.715), but less expenses saved in consequence of the
seller's breach.
(b) Market price is to be determined as of the place for
tender or, in cases of rejection after arrival or
revocation of acceptance, as of the place of arrival.
Tex. Bus. & Com. Code § 2.713.
Section 2.715 governing "Buyer's Incidental and Consequential
Damages" provides:
(a) Incidental damages resulting from the seller's
breach
include
expenses
reasonably
incurred
in
inspection, receipt, transportation and care and custody
of goods rightfully rejected, any commercially reasonable
charges, expenses or commissions in connection with
effecting cover and any other reasonable expense incident
to the delay or other breach.
(b) Consequential damages resulting from the seller's
breach include
(1) any loss resulting from general or particular
requirements and needs of which the seller at the
time of contracting had reason to know and which
could not reasonably be prevented by cover or
otherwise; and
-20-

(2) injury to person or property proximately
resulting from any breach of warranty.
Tex. Bus.

&

Com. Code§ 2.715.

The effect of these provisions may

be altered by agreement of the contracting parties.

Tex. Bus. &

Com. Code§ 1.302(a) ("Except as otherwise provided .

. elsewhere

in this title, the effect of provisions of this title may be varied
by agreement.").
V.

Schlwnberger's Motion for Summary Judgment

Schlumberger argues that it is entitled to summary judgment on
Hess's breach of contract claims as to all four of the failed
valves because (1) Hess expressly disclaimed its right to challenge
non-conformities after a year, (2) Hess released Schlumberger from
all of the claims asserted in this action, and (3) the contract was
not

breached

because

specifications.44

it

prescribes

processes,

not

product

Alternatively, Schlumberger argues that it is

entitled to judgment on the Well B(2) valve claims pursuant to the
January 1,

2017,

Bridging Agreement45 and on Hess's claims for

workover costs and any lost-opportunity costs because Hess provides
no evidence using the proper measure of damages.46

44 STC's
45

46

MSJ, pp. 11-20, Docket Entry No. 116, pp. 17-26.

Id. at 20-22, Docket Entry No. 116, pp. 26-28.
Id. at 22-25, Docket Entry No. 116, pp. 28-31.
-21-

A.

Schlumberger is Not Entitled to Swnmary Judgment on Hess's
Breach of Contract Claims as to the Four Valves

1.

Hess Did Not Expressly Disclaim the Right to Challenge
the Alleged Non-Conformities After a Year

Citing the one-year warranty provision contained in the MSC,
and asserting that the MSC disclaims all "OTHER WARRANT [IES]"
except those "EXPRESSLY STATED HEREIN," 47 Schlumberger argues that
it is entitled to summary judgment on all of Hess's claims because
Hess expressly disclaimed its right to challenge non-conformities
after a year. 48

Hess argues in response that Schlumberger's

warranty argument "is essentially a two-year old cut-and-paste job
that the Court already said would be disallowed," 49 and that "[t]hat
alone is reason to deny Schlumberger's motion. " 50

Alternatively,

Hess argues that
[o]n the merits, Schlumberger's argument has lost even
further ground. Hess alleges that it properly revoked
acceptance and therefore never
finally
accepted
Schlumberger's tender of safety valves that failed to
conform at delivery to the independent contractual
obligations contained in the Commercial Agreement.
Schlumberger' s own documents repeatedly confirm this
allegation as true.
Because Hess has properly revoked
acceptance, its claim sounds in contract and not
warranty. 51

47

Id. at 13, Docket Entry No. 116, p. 19.

48

Id. at 11, Docket Entry No. 116, p. 17.

Hess Corporation's Response in Opposition to Schlumberger
Technology Corporation's Motion for Summary Judgment ("Hess's
Response in Opposition to STC's MSJ"), p. 9, Docket Entry No. 127,
p. 17.
49

-22-

Quoting Neal, 99 S. W. 3d at 816, Hess argues that "[u]nder Texas
law, Hess must be put 'in the same position as if [it] had rejected
the goods at the time of delivery.'" 52
(a)

The Court's Prior Ruling Does Not Foreclose Any
Aspect of Schlumberger's MSJ

Schlumberger argues that it is entitled to summary judgment on
Hess's claims because the non-conformities for which Hess seeks
relief are violations of express warranties and as such are subject
to the MSC's one-year warranty provision.

Although Schlumberger

raised similar arguments in a previously denied motion to dismiss,
see Hess, 2017 WL 2829697, at *6-*7, the court's prior ruling does
not foreclose any aspect of Schlumberger's present motion for
summary judgment.

The court's prior ruling accepted Hess's

allegations as true, viewed them in the light most favorable to
Hess, and analyzed the facts alleged in Hess's complaint against
the elements of a claim for revocation under Tex. Bus. & Com. Code
§ 2.608.

Recognizing that "[t]he question before the court on a

motion to dismiss is whether Hess has plausibly alleged that
Schlumberger's SSVs were non-conforming at the time of delivery,"
id. at *6, the court concluded that "Hess's claim is plausible"
because Hess alleged that Schlumberger's failure to fulfill its
contractual obligations resulted in delivery of non-conforming
SSVs, and that "Schlumberger's contractual obligation to deliver
52

Id. at 10, Docket Entry No. 12 7, p. 18.
-23-

[conforming, i.e.,] parts .

is not time limited."

Id. at *7.

The court's prior ruling does not foreclose any aspect of STC's MSJ
because that ruling was based on the Plaintiff's Second Amended
Complaint, which has been superseded by the TAC, and was entered
before the court had considered the summary judgment evidence.
Whether Hess's Revocation Claims Are Time-Barred is
a Fact Issue for Trial

(b)
Hess

alleges

that

it

justifiably

revoked

its

initial

acceptance of the four SSVs under Texas Business and Commerce Code
§

2.608 because the SSVs "failed to conform at delivery to the

independent contractual obligations contained in the Commercial
Agreement." 53

The elements of a revocation claim are:

(1) initial acceptance (.
. without discovery of the
non-conforming item if acceptance was induced by
difficulty of discovery or by seller's assurance); (2) of
non-conforming
item;
(3)
such
non-conformity
substantially impairs the value to the buyer; (4) and
revocation occurs within a reasonable time; (5) in any
event, the revocation must occur before a substantial
change in the condition of the goods occurs (which change
is not caused by defect of the goods).
Neily v. Aaron, 724 S.W.2d 908, 913-14 (Tex. App. - Fort Worth
1987, no writ).

"The determination of each of these elements is a

question of fact."

Id. at 914 (citing Vista Chevrolet v. Lewis,

704 S.W.2d 363, 368 (Tex. App. - Corpus Christi 1985), rev'd on
other grounds, 709 S.W.2d 176 (Tex. 1986)).
Distinguishing the argument now being made in its MSJ from the
argument advanced in its previous motion to dismiss, Schlumberger
53

Id. at 9, Docket Entry No. 127, p. 17.
-24-

argues that
warranty's

"this Court thus far has construed only the MSC
performance

language

and

has

nonconformity provision in the warranty." 54

not

construed

the

Asserting that the

MSC's warranty provision governs both performance and conformity,
Schlumberger argues
Hess suggests that this Court has already ruled on the
warranty argument Schlumberger asserts in Section I.A of
its summary judgment motion, but Hess is mistaken.
Tellingly, Hess does not dispute that this Court thus far
has construed only the MSC warranty's performance
language and has not construed the nonconformity
provision in the warranty. At the pleading stage, the
Court dismissed Hess's "allegations [that] involve the
failure of the [valves] to perform as expected."
ECF
"[A] s the disclaimers in the MSC make
No. 4 O at 16.
clear," the Court held, "Schlumberger did not warrant
that the valves would do so indefinitely. Schlumberger
for one year
explicitly warranted performance
only." Id. Hess pressed the Court to construe only this
part of the warranty, stating - incorrectly - that "[t]he
MSC's warranty provision does not mention Schlumberger's
specifications." ECF No. 34 at 29. Today, however, Hess
does not dispute that the warranty does just that,
promising that the valves would "be free from defects in
design, materials, fabrication and other workmanship" and
conform to [the] specifications, drawings or other
descriptions contained in the applicable service
agreement, purchase order, work order or other project
document." . . . (emphasis added) . Hess does not dispute
that it did not raise the alleged nonconformities within
one year. That resolves all of Hess's claims.55
Citing Gasmark, Ltd. v. Kimball Energy Corp., 868 S.W.2d 925, 928
(Tex. App. - Fort Worth 1994, no writ), for its statement that "the
effect of the UCC may be varied by agreement," Schlumberger argues
Defendant Schlumberger Technology Corporation's Reply in
Support of Its Motion for Summary Judgment ( "STC's Reply in Support
of MSJ"), p. 3, Docket Entry No. 144, p. 10.
54

55

Id. (emphasis added).
-25-

"[t] hat is exactly what the parties' contract does here.

Hess

agreed not to bring nonconformity claims after a year, and promised
that there were 'NO OTHER WARRANT[IES] . 1156 Schlumberger's argument
that Hess's revocation claims are precluded by the MSC warranty
provision's

one-year

limitation

challenges

Hess's

ability

to

establish element (4) of its revocations claims, �, that the
revocation occurred within a reasonable time. 57
Hess argues that the SSVs "failed to conform at delivery to
the independent contractual obligations contained in the Commercial
Agreement, 1158 specifically, that the SSVs would be manufactured,
tested, and monogrammed to the latest edition of API 14A, and would
conform to Hess's and Schlumberger's specifications and to industry
standards.59 Schlumberger's contractual obligation to provide Hess
with SSVs that would be manufactured, tested, and monogrammed to
the latest edition of API 14A, and would comply to Hess's and
Schlumberger's

specifications

and

to

industry

standards,

are

express warranties because they are affirmations of fact, promises,
and/or descriptions related to the SSVs that became part of the
basis of the parties' bargain.
56

See Tex. Bus. & Com. Code § 2.313

Id. at 4, Docket Entry No. 144, p. 11.

Hess has not moved for summary judgment on this or any other
element of its revocation claims.
57

Hess's Response in Opposition to STC's MSJ, p. 9, Docket
Entry No. 127, p. 17.
58

59

TAC, Docket Entry No. 71, pp. 21-27 11 66-80.
-26-

and Comment 5. 60 The concept of non-conformity includes any failure
of the seller to perform according to his obligations under the
contract, including breaches of warranties. See Texas Business and
Commerce Code§ 2.714, Comment 2. See also

Ford, 671 F.2d at 1122

(recognizing breach of warranty as a subset of non-conformity).
Section 2.316 (d) of the Texas Business and Commerce Code
states that "[r]emedies for breach of warranty can be limited in
accordance with the provisions of this chapter on liquidation or
Section 2.313 to the Texas Business and Commerce Code governs
express warranties and states in pertinent part:
60

(a)

Express warranties by the seller are created as
follows:
(1)

(2)

Any description of the goods which is made
part of the basis of the bargain creates an
express warranty that the goods shall conform
to the description.

(3)

(b)

Any affirmation of fact or promise made by the
seller to the buyer which relates to the goods
and becomes part of the basis of the bargain
creates an express warranty that the goods
shall conform to the affirmation or promise.

Any sample or model which is made part of the
basis of the bargain creates an express
warranty that the whole of the goods shall
conform to the sample or model.

It is not necessary to the creation of an express
warranty that the seller use formal words such as
"warrant" or "guarantee" or that he have a specific
intention to make a warranty,

Comment 5 to this section recognizes that "[a] description need not
be by words. Technical specifications, blueprints and the like can
afford more exact description than mere language and if made part
of the basis of the bargain goods must conform with them."
-27-

limitation of damages and on contractual modification of remedy
(Section 2.718 and 2.719)."

Schlumberger's obligation to deliver

SSVs that conformed to express warranties is covered in the MSC's
warranty provision, which provides in pertinent part:
Contractor warrants that all equipment, products,
materials and other items furnished hereunder shall:
(2) be free from defects in design, materials,
fabrication and other workmanship; and (3) conform to
AHC's
[Amerada Hess Corporation's]
specifications,
drawings or other descriptions contained in the
applicable service agreement, purchase order, work order
or other project document. 61
The MSC's warranty provision also covers

"all work and other

services performed" by stating:
Contractor warrants that all work and other services
performed hereunder (whether by
Contractor,
its
subcontractors or other parties for whom it is
responsible) shall be free from all faults and defects
and of a quality consistent with the prevailing standards
of workmanship for experienced contractors with expertise
in the particular type of work or service being
performed. 62
The MSC's warranty provision limits Schlumberger's warranties to a
period of one year by stating:
Contractor's foregoing warranties shall continue for a
period of one (1) year after Contractor's delivery and/or
installation (if performed by Contractor) of the
equipment, product, materials or other item in question
or performance of other applicable work or services, as
63
the case may be.
The MSC's warranty provision expressly and conspicuously disclaims
all other express or implied warranties:
61

MSC,

Exhibit

1

Tab

3

to

Plaintiff's

Complaint, Docket Entry No. 25-3, p. 3
62Id.

-28-

§

2(a).

Second

Amended

[SCHLUMBERGER] MAKES NO OTHER WARRANTY AS TO PRODUCTS,
WORKMANSHIP OR MERCHANTABILITY, WHETHER EXPRESSED OR
IMPLIED (INCLUDING, WITHOUT LIMITATION, THAT THE PRODUCTS
OR SERVICES SHALL BE FIT FOR ANY PARTICULAR PURPOSE) ,
EXCEPT AS EXPRESSLY STATED HEREIN OR IN AN EXPRESS
AMENDMENT HERETO . 64
64

The full text of the warranty provision is as follows:

(a) Upon Company notifying Contractor of the
services, products, equipment, materials or other items
desired, Contractor will commence furnishing same at the
agreed upon time, and continue such operations diligently
and without delay, in strict conformity with the
specifications and requirements contained herein and in
any applicable work order, purchase order, service
agreement or other project document.
Contractor warrants that all equipment, products,
materials and other items furnished hereunder shall:
(1) be new if specified by Company; (2) be free from
defects in design, materials, fabrication and other
workmanship; and (3) conform to AHC's specifications,
drawings or other descriptions contained in the
applicable service agreement, purchase order, work order
or other project document. Contractor warrants that all
work and other services performed hereunder (whether by
Contractor, its subcontractors or other parties for whom
it is responsible) shall be free from all faults and
defects and of a quality consistent with the prevailing
standards of workmanship for experienced contractors with
expertise in the particular type of work or service being
performed.
In the event of a breach of any of the
foregoing warranties, Contractor shall, promptly after
receipt of written notice thereof from Company and at
Contractor's sole cost, repair or replace (as determined
by Contractor) all applicable equipment, products,
materials, work, services, and other items necessary to
cure the breach of warranty, as confirmed by Company,
whose approval shall not be unreasonably withheld.
If Contractor does not promptly correct or replace
such defective or non-conforming equipment, products,
materials, work, services or other items in accordance
with the foregoing warranties within a reasonable time,
as specified in Company's written notice, Company may
have the warranty deficiency or non-conformity corrected
(continued...)
-29-

Hess alleges that it "did not limit its rights of revocation
under[§] 2.608 in its agreements with Schlumberger[; t]hose rights
exist at law and are nowhere modified by any agreement with
Schlumberger. " 65

But Hess neither alleges in its live complaint,

nor argues in its summary judgment briefing that the MSC's warranty
provision is unenforceable or unreasonable under § 2.316 or any
other provision of the Texas Business and Commerce Code.
Schlumberger argues that the MSC warranty provision represents
the parties' agreement to limit to one year the time that Hess had
to

challenge

non-conformity

with

the

contract's

express

continued)
or replaced by another contractor, and all of Company's
costs incurred in the performance and/or remedying of
such defective work (including compensation for work and
services performed and/or materials, products, equipment
and other items furnished by other contractors) shall be
charged against the Contractor pursuant to a deductive
change order, to the extent that such additional costs
incurred by Company to cure Contractor's breach do not
exceed the applicable project price otherwise payable to
Contractor.
Contractor's foregoing warranties shall
continue for a period of one (1) year after Contractor's
delivery and/or installation (if performed by Contractor)
of the equipment, product, materials or other item in
question or performance of other applicable work or
services, as the case may be; provided that with regard
to all replacement, repair or other corrective work
pursuant to a breach of warranty, Contractor's warranty
shall continue for an additional year after completion of
same . CONTRACTOR MAKES NO OTHER WARRANTY AS TO PRODUCTS,
64 (
•••

WORKMANSHIP OR MERCHANTABILITY, WHETHER EXPRESSED OR
IMPLIED (INCLUDING, WITHOUT LIMITATION, THAT THE PRODUCTS
OR SERVICES SHALL BE FIT FOR ANY PARTICULAR PURPOSE),
EXCEPT AS EXPRESSLY STATED HEREIN OR IN AN EXPRESS
AMENDMENT HERETO.

65

TAC, Docket Entry No. 71, p. 31 1 104.
-30-

warranties.66

Schlumberger's argument - that the MSC warranty

provision's one-year limitation represents the time to which the
parties agreed non-conformities could be challenged - does not
preclude Hess from obtaining relief under § 2.608 merely because
Hess failed to revoke within the one-year period.
Comment 4 to§ 2.608 provides:
Subsection (2) requires notification of revocation of
acceptance within a reasonable time after discovery of
the grounds for such revocation. Since this remedy will
be generally resorted to only after attempts at
adjustment have failed, the reasonable time period should

extend in most cases beyond the time in which
notification of breach must be given, beyond the time for
discovery of non-conformity after acceptance and beyond

the time for rejection after tender. The parties may by
their agreement limit the time for notification under
this section,
(emphasis added)
Accepting

Schlumberger's

contention

that

the

MSC

warranty

provision's one-year limitation represents the time in which the
parties agreed non-conformity with an express warranty could be
challenged, pursuant to Comment 4 the "reasonable time period" that
§ 2.608 provides for revocation "should extend in most cases beyond
the time in which notification of breach must be given, [and/or]
beyond the time for discovery of non-conformity after acceptance."
Under the facts of this case that means that§ 2.608's "reasonable
time period" may extend beyond the MSC warranty provision's one­
year period. Although Comment 4 recognizes that "[t] he parties may
by their agreement limit the time for notification under this
66

STC's MSJ, p. 11, Docket Entry No. 116, p. 19.
-31-

section .

" id. , neither the MSC warranty provision nor any

other provision of the parties' contract expressly limits the time
for revocation under§ 2.608.

While Hess did disclaim the time to

challenge non-conformities to one year, Hess did not disclaim the
Accordingly, the court

time to revoke under§ 2.608 to one year.

concludes that Hess was only obligated to notify Schlumberger of
its revocation of the SSVs reasonably soon after the agreed-upon
one-year period expired.

Whether Hess can satisfy the fourth

element of its revocation claims for the four SSVs by establishing
that

its

revocations

occurred

questions of fact for trial.
determination of each

within

a

reasonable

time

are

See Neily, 724 S.W.2d at 914 ("The
element [ of a § 2.608 claim] is a

question of fact.").
If, as Hess alleges, Hess justifiably revoked acceptance of
the SSVs, Hess would have the same rights as if it had rejected the
SSVs at the time of delivery, including the right to damages for
breach of contract. See Neal, 99 S.W.3d at 816 (citing Tex. Bus.
Com. Code § 2. 6 O 8)

&

See also A.O. Smith, 123 F. App'x at 619

("Breach of contract remedies are available
. properly revokes acceptance.").

. to a buyer who

Whether Hess justifiably

revoked acceptance of the SSVs is a fact issue for trial that
precludes the court from granting Schlumberger's MSJ on Hess's
breach of contract claims for the four valves.
at 914.
-32-

Neily, 724 S.W.2d

2.

Schlumberger Is Entitled to Partial Summary Judgment
Based on the MSC's Indemnity and Release Provisions

Citing § 13(c) of the MSC, Schlumberger argues that it is
entitled to summary judgment because Hess released it from all
claims for property damage.

Schlumberger argues that

[a]s is "customary practice" in the oil-and-gas industry,
Hess and Schlumberger agreed to release and indemnify
each other for property damage claims tied to work
performed under the [MSC].
This "knock-for-knock"
agreement requires each party to assume responsibility
for damage to its property, regardless of who caused the
damage. In the MSC's knock-for-knock provision, Hess
"fully release[d]" Schlumberger as follows:
[Hess]
shall
fully
release
all claims
from
[Schlumberger]
brought by
any party or person, for any
and all . . . damage to or loss of property of
[Hess]
whether real or personal
(including, without limitation, production and
casing,
drilling
equipment,
wellbore,
subsurface reservoirs and any oil and gas or
other hydrocarbon substances located therein)
whenever and wherever occurring, arising
directly or indirectly out of or in any way
involving [Schlumberger's] work and other
operations (including acts and omissions)
without limit and regardless of cause or
fault
Ex. 1 at§ 13(c) (emphasis added; all-caps omitted).
Under this broadly worded provision, Schlumberger is
released "without limit" for "loss of property" "whether
real or personal." . . . Though not defined in the MSC,
real property includes "[l]and and anything growing on,
attached to, or erected on it." Black's Law Dictionary
(10th ed. 2014) (entry for "property").
Personal
property is "[a]ny moveable or intangible thing that is
subject to ownership and not classified as real property"
(id.); it includes money (San Antonio Area Found. v.
Lang, 35 S.W.3d 636, 640 (Tex. 2000)).
-33-

Hess's alleged damages all constitute "damage to or
According
loss of property." Ex. 1 at§ 13(c)(1)(iii)
to Hess's expert, Hess's damages fall into four
categories:
(1) costs "to purchase replacements for the failed
[valves]";
(2)
(3)

"costs for the retrieval and replacement of
the [valves] ";
"reduced revenues associated with work on the
Gulfstar One facility"; and

(4)

costs "due to methanol contamination."

Ex. 7 at � 9. "Costs" and "reduced revenues" are of
course lost money, which, again, is intangible property.
At the same time, each category also involves lost
tangible property. 67
Citing Energy XXI, GoM, LLC v. New Tech Engineering, L.P., 787
F. Supp. 2d 590 (S.D. Tex. 2011), and Valero Energy Corp. v. M.W.
Kellogg Construction Co.,
Christi

1993,

writ

866 S.W. 2d 252 (Tex. App.

denied),

Schlumberger

argues

that

Corpus
courts

regularly enforce such releases. 68
Hess responds that Schlumberger is not entitled to summary
judgment because its claims do not allege "damage to or loss of"
Hess's property, and because it did not release Schlumberger from
its breach of contract claim. 69

Arguing that the MSC's indemnity

and release provisions do not apply to claims alleging breach of

STC's MSJ, pp. 13-14, Docket Entry No. 116, pp. 19-20 (citing
Exhibit 7, Pulliam Report, � 9, Docket Entry No. 116-7, � 9).
67

68

Id. at 15, Docket Entry No. 116, p. 21.

Hess's Response in Opposition to STC's MSJ, pp. 10-14, Docket
Entry No. 127, pp. 18-22.
69

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the underlying contract, 70 Hess has moved for partial summary
judgment.71
Section 13 of the MSC governs "Indemnities," and in pertinent
part provides:
(c)

Company's Indemnity Obligations:
1.

COMPANY SHALL FULLY RELEASE, DEFEND, INDEMNIFY
AND HOLD CONTRACTOR GROUP HARMLESS FROM AND
AGAINST ALL CLAIMS BROUGHT BY OR ON BEHALF OF
ANY PARTY OR PERSON, FOR ANY AND ALL:
(iii)

DAMAGE TO OR LOSS OF PROPERTY OF
COMPANY AND ITS EMPLOYEES, WHETHER
REAL OR PERSONAL (INCLUDING, WITHOUT
LIMITATION, PRODUCTION AND DRILLING
CASING,
EQUIPMENT,
WELLBORE,
SUBSURFACE RESERVOIRS AND ANY OIL AND
GAS OR OTHER HYDROCARBON SUBSTANCES
LOCATED THEREIN) WHENEVER AND WHEREVER
OR
OCCURRING,
DIRECTLY
ARISING
INDIRECTLY OUT OF OR IN ANY WAY
INVOLVING CONTRACTOR'S WORK
EQUIPMENT, TOOLS, MATERIALS, AND OTHER
ITEMS WHATSOEVER FURNISHED, DELIVERED,
STORED,
OR
OTHERWISE
HANDLED
BY
WITHOUT LIMIT AND
CONTRACTOR
REGARDLESS OF CAUSE OR FAULT, AS
PARTICULARLY DESCRIBED IN SECTION
13(b) ABOVE. 72

Section 13(c) is informed by§ 13(b), which provides:
IT IS THE SPECIFIC AND EXPRESSED INTENT AND AGREEMENT OF
THE COMPANY AND THE CONTRACTOR THAT ALL RELEASE, DEFENSE,
Id. at 10, Docket Entry No. 127 at 18. See also id. at n.5
(stating "Hess previously raised the Texas Oilfield Anti-Indemnity
ECF No. 75, at 3.
Under Hess's current
Act as a defense.
understanding of Schlumberger's indemnity counterclaim, Hess
withdraws this defense.").
70

71

See Hess's MPSJ, Docket Entry No. 118, and§ VI, herein.

72

MSC, § 13, Docket Entry No. 25-3, pp. 7-8.
-35-

HOLD HARMLESS AND INDEMNITY OBLIGATIONS AND OTHER
LIABILITIES
ASSUMED
BY
COMPANY
AND
CONTRACTOR
RESPECTIVELY UNDER SECTIONS 13(c) AND (d) SHALL BE
WITHOUT REGARD TO THE NEGLIGENCE (WHETHER SOLE, JOINT, OR
CONCURRENT, ACTIVE OR PASSIVE), BREACH OF WARRANTY,
STRICT LIABILITY, PREMISES LIABILITY, DEFECTIVE CONDITION
(WHETHER PRE-EXISTING OR OTHERWISE) OF ANY FACILITIES,
EQUIPMENT, MATERIALS, TOOLS, OR OTHER ITEM WHATSOEVER
. OR ANY OTHER FAULT OF THE INDEMNIFIED PARTIES OR
ANY OTHER PARTY EXCEPTING ONLY THE GROSS NEGLIGENCE,
RECKLESSNESS OR WILLFUL MISCONDUCT OF COMPANY GROUP OR
CONTRACTOR GROUP.73
"Under Texas law a release is a contract."

Williams v. Glash,

789 S.W.2d 261, 264 (Tex. 1990). The court's primary concern is to
ascertain the true intentions of the parties as expressed in the
instrument.

Coker,

650 S.W.2d at 393.

"The language in an

agreement is to be given its plain grammatical meaning unless to do
so would defeat the parties' intent."
Cooperative,

Inc.

v.

Parks,

1

S.W.3d

DeWitt County Electric
96,

101

(Tex.

1999).

Undefined terms in a contract are given their commonly understood
or

generally

accepted

meanings.

See

Lamar

Homes,

Inc.

v.

Mid-Continent Casualty Co., 242 S.W.3d 1, 8 (Tex. 2007).
(a)
If Hess

Replacement Valve Cost Is Not "Damage To or Loss
of" Hess's Property
justifiably

revoked

acceptance

of

the

SSVs,

by

operation of law title revested in the seller, Schlumberger, Tex.
Bus. & Com. Code § 2.401(d), 74 and Hess would have the same rights
73

Id. at 7.

Section 2.401(d) of the Texas Business and Commerce Code
states in pertinent part: "[A] justified revocation of acceptance
revests title to the goods in the seller. Such revesting occurs by
operation of law and is not a 'sale'."
74

-36-

and duties with regard to the SSVs as if it had rejected them.
Tex. Bus. & Corn. Code§ 2.608(c).

See also Neal, 99 S.W.3d at 816

("[R)evocation seeks to put the buyer in the same position as if he
Revocation

had rejected the goods at the time of delivery.

cancels a contract of sale and returns the goods to the seller and
the purchase price to the buyer.

It places the parties in the

same position as before the sale."); Delhomme Industries. Inc. v.
Houston Beechcraft,

Inc.,

735 F.2d 177,

181 (5th Cir.

1984)

("Revocation of acceptance by a buyer under the UCC is necessarily
a recognition by

the

buyer

that

the

property

[as

to which

acceptance is revoked] belongs to the seller.") (internal quotation
marks and citation omitted).

A buyer who justifiably revokes

acceptance may, in addition to recovering the price paid, cover by
purchasing goods in substitution for those due from the seller, and
recover as damages the difference between the cost of cover and the
contract price together with any incidental or consequential
damages. Tex. Bus. & Corn. Code§§ 2.711-2.712, and 2.715 (defining
incidental and consequential damages)
acceptance of the SSVs,
operation

of

law,

the

If Hess justifiably revoked

and title revested in Schlumberger by
costs

that

Hess incurred to

purchase

replacements for the failed SSVs could not be subject to the MSC's
indemnity provision because those costs would not constitute
"damage to or loss of" Hess's property.

Accordingly, the court

concludes that Schlumberger is not entitled to summary judgment on
these damages based on the MSC's indemnity provision.
-37-

(b)

Costs to Retrieve and Replace the SSVs Are Not
"Damage[s] to or Loss of" Hess's Property

Citing the Failure Analysis Report prepared by Hess's expert,
Barry Pulliam, Schlumberger argues that
according to Hess, a valve defect caused the valves to
"close[] " so they "could not be reopened" and became
"non-functional." E.g., ECF No. 71 at 11 44-45. That
failure allegedly caused other well equipment to fail,
and the wells to "cease[] production." Ex. 10 at 4. The
defect therefore caused "damage to or loss of property,"
including to the valves and other production equipment.75
Citing Bay Rock Operating Co. v. St. Paul Surplus Lines Insurance
Co., 298 S.W.3d 216, 23 O

( Tex.

App.

San Antonio 2009, pet.

denied), Mid-Continent Casualty Co. v. Bay Rock Operating Co.,
No. SA-07-CA-274-OG, 2009 WL 5341825, at *2 (W.D. Tex. Sept. 30,
2009), Energy EXXI, 787 F. Supp. 2d at 598, and Valero, 866 S.W.2d
at 257, Schlumberger argues courts have held that similar damages
are "property damage." 76
Hess does not allege, and Schlumberger has not cited facts
establishing, that the costs Hess expended to retrieve and replace
the failed SSVs constitute "damage to or loss of" Hess's property.
Hess alleges:
The non-conforming Schlumberger Safety Valves in Wells B,
C, and D failed and as a result, production from each of
Hess incurred
Wells B, C, and D had to be shut in.
substantial expense to retrieve and replace the non­
conforming valves and restore the wells to production,
and lost profits from deferred and lost production.77
75

STC's MSJ, pp. 14-15, Docket Entry No. 116, pp. 20-21.

76

Id. at 15, Docket Entry No. 116, p. 21.
TAC, Docket Entry No. 71, p. 31 , 103.

77

-38-

Schlumberger

replies

that

the

SSVs

themselves

suffered

physical damage when they failed, blocked production, and needed to
be replaced. 78

Asserting that "the valves 'failed' and needed to

be replaced," Schlumberger argues "[t]hat was a loss of 'production
and drilling equipment,' which is expressly covered by the knock­
for-knock provision." 79 Citing Energy EXXI, 787 F. Supp. 2d at 60508, Schlumberger argues that "at least one court in this district
has interpreted similar language to cover the costs of repairing
defective work without imposing any separate physical injury
requirement.

1180

As explained in

§

IV.A.2 (a), above, if Hess justifiably

revoked acceptance of the SSVs, and title in the SSVs revested in
Schlumberger by operation of law, the costs that Hess incurred to
retrieve and replace the SSVs would not constitute "damage to or
loss of" Hess's property.

Schlumberger argues that even if the

SSVs revested in Schlumberger, "it would not matter because the
valves were still Hess's property upon delivery, which is when Hess
contends that Schlumberger breached the contract." 81

The court is

not persuaded by this argument because it contradicts the law of
revocation and is not supported by any authority.
78

p. 12.

See Tex. Bus. &

STC's Reply in Support of MSJ, p. 5, Docket Entry No. 144,

79Id.
80

Id. at 6, Docket Entry No. 144, p. 13.

81

Id. at 5, Docket Entry No. 144, p. 12.
-39-

Com. Code § 2.608(c) ("A buyer who so revokes has the same rights
and duties with regard to the goods involved as if he had rejected
them."); Neal, 99 S.W.3d at 816 ("revocation seeks to put the buyer
in the same position as if he had rejected the goods at the time of
delivery").
In addition, the cases Schlumberger cites in support of its
argument that the costs Hess expended to retrieve and replace the
SSVs

constitute

"damage

to or loss

of"

Hess's

property

are

inapposite because none of those cases involved retrieving and
replacing a non-conforming good whose acceptance had been revoked.
Instead, the cases Schlumberger cites involved disputes in which
the plaintiffs were seeking relief for physical damage to tangible
property such as an oil well damaged by a blow out and fire, Bay
Rock Operating, 298 S.W.3d at 220, and Mid-Continent Casualty, 2009
WL 5341825; an oil well damaged by blocked tubing, Energy EXXI, 787
F. Supp. 2d at 598; and a plant damaged by a machine's explosion,
Valero, 866 S.W.2d at 253.
Mid-Continent Casualty, 2009 WL 5341825, involved a dispute
over whether damages arising from a blow out that caused an oil rig
to burn were economic damages or property damages covered under an
insurance policy that defined "property damage" as "physical injury
to tangible property, including all resulting loss of use of that
property .

. or loss of use of tangible property that is not

physically injured." Id. at *3. Plaintiffs sought damages arising
from a blowout, "including but not limited to 'repair, completion
-40-

and evaluation of the well, well control, lost gas sales and
redrill of the well,'" id. at *4, and the court held that those
damages were property damages covered by the policy.

Id. at *5.

The insurance policy at issue in Mid-Continent Casualty defined
"property damage" broadly to include not just damage to tangible
property but also loss of the property's use, and the court's
holding was based in part on the observation that " [w] hen there is
an injury to property, the tortfeasor must pay all economic losses
that flow from that injury."

Id. at *4.

Schlumberger's reliance on Energy EXXI, 787 F. Supp. 2d at
605-08, is misplaced because while that court interpreted similar
indemnity language to cover costs of repairing defective work, in
holding that the indemnity clause covered breach of contract claims
and

did

not

render

the

Good

and

Workmanlike

Manner

Clause

meaningless, the court explained that
[t]he indemnity provision makes Energy XXI responsible
for "property damage of, personal injury to, or death of
Energy XXI and any of Energy XXI employees." . . . Here,
the injury associated with the alleged breach of the Good
and Workmanlike Manner Clause is property damage. There
are, however, certainly scenarios in which New Tech could
breach the Good and Workmanlike Manner Clause that do not
fall under the indemnity provision. For instance, if a
breach of the Good and Workmanlike Manner Clause resulted
only in economic loss as opposed to property damage,
personal injury, or death, Energy XXI may have a valid
claim for breach, and New Tech would not be protected by
the Indemnity Clause. Thus, the court's interpretation
of the Indemnity Clause as requiring indemnity in this
case does not render the Good and Workmanlike Manner
Clause meaningless in all cases.
Energy XXI, 787 F. Supp. 2d at 608.
-41-

Unlike the plaintiffs in the cases on which Schlumberger
relies who were seeking relief for physical damage to tangible
property, Hess asserts that "Hess's wells suffered no damage, and
that non-existent damage did not cause them to shut down." 82

Hess

is seeking relief for economic losses caused by Schlumberger's
alleged breaches of contract.

See Bass v. City of Dallas, 34

S.W.3d 1, 9 (Tex. App. - Amarillo 2000, no pet.) (distinguishing
between damages for economic losses available in contract actions
and damages for property losses available in tort actions).
"' Economic loss' has been defined as 'damages for inadequate value,
costs of repair and replacement of the defective product,

or

consequent loss of profits - without any claim of personal injury
or damage to other property .

I II

Id. (quoting Thomson v. Espey

Huston & Associates, Inc., 899 S.W.2d 415, 421 (Tex. App. - Austin
1995, no writ))

See also Black's Law Dictionary 589 (9th ed.

2009) (defining "economic loss" as "[a) monetary loss such as lost
wages or lost profits").

Schlumberger has not cited evidence

establishing as a matter of law that Hess's claims for costs
incurred to retrieve and replace the SSVs and restore the wells to
production are claims for "damage to or loss of" Hess's property
instead of claims for economic loss. See United States Steel Corp.
V.

John H. Young, Inc., No. 03-16-00206-CV, 2018 WL 911861, at *4

(Tex. Civ. App. - Austin, Feb. 16, 2018, no pet.) (holding economic
Hess's Response in Opposition to STC's MSJ,
Docket Entry No. 127, p. 20 n.10.
82

-42-

p. 12 n.10,

loss rule barred recovery for damages because the "subject matter
of this dispute is the defective

[oil well] casing provided

by [defendant] under its contract with [plaintiff], and the damages
[plaintiff] incurred flowed from that contract
suffered no damage beyond economic losses").

[plaintiff]
Accordingly, the

court concludes that the MSC's indemnity provision does not entitle
Schlumberger to summary judgment on Hess's claims for costs to
retrieve and

replace the

SSVs

and

to

restore

the

wells to

production.
(cl

Lost Profits Are Not "Damage to or Loss of" Hess's
Property

Citing the Pulliam Report Schlumberger asserts that Hess
argues that

"if the safety valves here had not failed,

production rates

'would have been higher,

its

resulting in higher

payments from Gulfstar One.'"83 Citing Bay Rock Operating,

298

S.W.3d at 230, Schlumberger argues that "Hess seeks to recover for
harms caused by its wells being damaged and shutting down - which
are classic property damages. "84

Hess responds that its claim for

$5.24 million in lost profits does not call for "damage to or loss"
of Hess property. 85
STC' s MSJ, p. 16, Docket Entry No. 116, p. 22 (quoting
Pulliam Report, p. 9 1 29, Exhibit 7 to STC's MSJ, Docket Entry
No. 116-7, p. 12 1 29).
83

84Id.

Hess's Response in Opposition to STC's MSJ, p. 12, Docket
Entry No. 127, p. 20. Although the Pulliam Report refers to lost
revenues, these damages are apparently meant to measure Hess's lost
profits.
85

-43-

In Bay Rock Operating after pressure pushed drilling mud into
the formation, causing the well to blow out and the rig to burn,
the leasee's insurance company asserted inter alia a negligence
claim against the company hired to design and drill the well for
"damages arising from the blowout, including but not limited to
'repair, completion and evaluation of the well, well control, lost
gas sales and redrill of the well.'"

298 S.W.3d at 230.

held that the damages at issue were
Id. at 230.

The court

"clearly property damages."

Bay Rock Operating involved the same facts as and was

a companion case to Mid-Continent Casualty,
discussed and distinguished in

§

2009 WL 5341825,

IV .A.2 (b), above.

The court

concludes therefore that Bay Rock Operating is inapposite and that
Hess's claim for reduced revenues are claims for economic - not
property - damages.

See Black's Law Dictionary 589 (9th ed. 2009)

(defining "economic loss 0 as "[a] monetary loss such as lost wages
or lost profits"). Accordingly, the court concludes that the MSC's
indemnity provision does not entitle Schlumberger to summary
judgment on Hess's claims for reduced revenues.
(d)

Methanol Contamination is "Damage to or Loss of"
Hess's Property

Citing the Pulliam Report, Schlumberger asserts that Hess
injected methanol into the wells in an attempt to re-open the SSVs
after they failed, that the methanol contaminated the oil in the
wells, that when oil is contaminated it is damaged, and asserting
that under the release "property" includes "any oil and gas,"
-44-

Schlumberger argues that the costs Hess incurred due to methanol
contamination is "damage to or loss of" Hess's property. 86
Hess responds that
Schlumberger paints with broad strokes, ignoring the four
separate and distinct subcategories of methanol­
contamination damages: (1) lost profits from selling the
methanol-contaminated oil at a markdown, (2) costs
incurred transporting and blending the methanol­
contaminated oil, ( 3) costs incurred storing and treating
the methanol-contaminated oil, and (4) compensation paid
to other producers for contaminating their clean
production during the commingling process. Much like the
Gunflint Damages, the first subcategory claims lost
profits relating to a non-conforming good, not "damage to
or loss" of Hess's property.
. The second and third
subcategories similarly seek lost profits - that is,
Hess's "loss of net income" spent to make the methanol­
contaminated oil marketable. . . . The fourth subcategory
alleges damages to third parties, not to Hess.
Accordingly, Hess has not released Schlumberger for these
damages. 87
Hess does not dispute that it injected the methanol into the wells
that contaminated the oil, or that it owned the oil that was
contaminated.

Because the indemnity provision applies to "damage

to or loss of property of company
(including, without limitation .

. whether real or personal
subsurface reservoirs and any

oil and gas or other hydrocarbon substances located therein)," the
STC's MSJ, p. 16, Docket Entry No. 116, p. 22 (citing Pulliam
Report, p. 10 1 32, Exhibit 7 to Schlumberger's MSJ, Docket Entry
No. 116-7, p. 13 1 32 ( "Hess injected methanol into the TBells
wells to attempt to re-open the SCSSVs after they failed and then
also to prevent the formation of hydrates in the deepwater wells
during the workovers to retrieve and replace the SCSSVs.
In
sufficient quantities, methanol is considered a harmful contaminant
and must be removed from the crude oil stream before it is
processed in a refinery.").
86

Hess's Response in Opposition to STC's MSJ, p. 13, Docket
Entry No. 127, p. 21.
87

-45-

court concludes that Schlumberger is entitled to summary judgment
on Hess's claims for costs incurred due to methanol contaminated
oil in its wells because those costs seek relief for damage to or
loss of Hess's property.
3.

Whether Schlumberger Breached the Contract Presents Fact
Issues for Trial

Asserting that
product

"[t]he contract prescribes processes, not

specifications," 88

and

that

Hess

alleges

"the

[SSVs]

violated three principal sections of API 14A, " 89 Schlumberger argues
that "Hess misreads those sections," 90 and that "[u]nder properly
construed API standards, there was no breach here." 91 Hess responds
that "the evidence shows the opposite," 92 and that the Twelfth, not
the Eleventh, Edition of API 14A applies to the Well B(2) valve. 93
Hess alleges that
[t] he Schlumberger Safety Valves themselves did not
conform to the agreed specifications and standards under
the Contract.
Moreover, Schlumberger's process to
manufacture and test the valves did not conform to the
88

STC's MSJ, p. 16, Docket Entry No. 116, p. 22.

Id. at 17, Docket Entry No. 116, p. 23 (citing TAC pp. 23-25
�� 73, 74, and 77).
89

90Id.

Id. at 20, Docket Entry No. 116, p. 26. See also STC's Reply
in Support of MSJ, pp. 8-15, Docket Entry No. 144, pp. 15-22.
91

Hess's Response in Opposition to STC' s MSJ, Docket Entry
No. 127, p. 23.
92

93

Id.

at 26.
-46-

processes Schlumberger was contractually required to
follow. 94
Although

Hess

alleges

that

"[t]

he

non-conformity

of

the

Schlumberger Safety Valves includes, but is not limited to" at
least ten different requirements, 95 Schlumberger seeks summary
judgment on only three of the alleged requirements.
(a)

Whether Schlumberger Breached API 14A
a Fact Issue for Trial

§

6.3.2.2 is

Hess alleges:
API 14A Section 6. 3. 2.2 provides that "SSSV equipment
conforming to this International Standard shall be
manufactured to drawings and specifications that are
substantially the same as those of the size, type, and
model SSSV equipment that has passed the validation
test." Exhibit 1, Tab 5, at page 11.
. Schlumberger
has admitted that the Schlumberger Safety Valves were not
manufactured to drawings and specifications that were
substantially the same as those of the size, type, and
model safety valve equipment that had passed a validation
test. Exhibit 3, at pages 28-29. Certain component
parts of the Schlumberger Safety Valves were instead
manufactured to incorrect dimensions that did not meet
the required specifications for Schlumberger' s safety
valves that had passed validation tests.
Because
component parts of the MSE seals in the Schlumberger
Safety Valves did not meet a required geometric seal
design that had been qualified and validated in
accordance with API 14A, Schlumberger has admitted that
the MSE seals and Schlumberger Safety Valves delivered to
Hess were never validated, qualified, or properly
certified in accordance with API 14A.
Exhibit 4;
The Schlumberger Safety Valves did not
Exhibit 5.
conform to API 14A Section[] 6.3.2.2 .
. Schlumberger

94

TAC, Docket Entry No. 71, p. 21

95

Id. at 22-27 11 68-80.
-47-

§

66.

was contractually obligated to provide an API 14A­
compliant valve and failed to do so. 96
Asserting that " [a] manufacturer complies with Section 6.3.2.2
when

its

SSV

equipment

is

'manufactured

to

drawings

and

specifications that are substantially the same as those [i.e., the
drawings and specifications]

of the .

. model SSV equipment,"97

and citing the Rebuttal Expert Report of David E. Mccalvin,
Schlumberger argues that "[t]here is no genuine dispute that the
'drawings and specifications' used to manufacture the safety valves
sold to Hess were 'substantially the same' as the drawings and
specifications of the validated valves." 98
Hess counters that the word "those" used in § 6.3.2.2 refers
not to drawings and specifications but, instead, to validated
safety valve equipment. In other words, Hess argues that§ 6.3.2.2
requires the SSVs manufactured and sold to it by Schlumberger to be
substantially the same as the validated valves.99 As evidence that
the SSVs at issue were not substantially the same as the validated
96 TAC,
Docket Entry No. 71, pp. 23-24, 1 73 (quoting
Specification for Subsurface Safety Valve Equipment, ANSI/API
Specification 14A, Eleventh Edition, p. 11 § 6.3.2.2, Exhibit 1Tab 5 to Plaintiff's Second Amended Complaint, Docket Entry
No. 26-5, p. 20).
97

STC's MSJ, p. 17, Docket Entry No. 116, p. 23.

Id. (citing Exhibit 11 to STC's MSJ, Rebuttal Expert Report
of David E. Mccalvin ("Mccalvin Rebuttal Report"), pp. 13, 32-33,
44, 177-78, 196-97, 219-21, Docket Entry No. 116-11, pp. 4-6, 10,
19-22, 24-26).
98

Hess' s Response in Opposition to STC' s MSJ, pp. 15-16, Docket
Entry No. 127, pp. 22-23.
99

-48-

valves, Hess cites the Safety Valve Test and Inspection Engineering
Report prepared by Schlumberger stating:
The MSE Seal Spring is the primary root cause of the
failure as the MSE Seal is from the suspect batch of MSE
Seals.
It was found that the supplier was no longer providing
the same qualified spring as to the 2004 MSE Seal Set
qualification. The non-conformance in the spring altered
the performance of the MSE and compromised the sealing
capability of the seal stack.100
Alternatively, Hess argues that Schlumberger breached § 6.3.2.2
even under its own interpretation because Schlumberger lacked
drawings and specifications of the 2004 certified MSE seal until a
subcontractor, Greene Tweed, reverse engineered such drawings from
existing seals after the SSVs were installed in Wells B, C, and
D. 101

In support of this argument Hess cites the deposition

testimony of Dwayne May that "[t]here was no assembly drawing, no
dimensional assembly drawing other than the parts themselves,"102
Exhibit 13 to Hess's Response in Opposition to STC's MSJ,
Safety Valve Test and Inspection Engineering Report, p. 28 of 55,
Docket Entry No. 127-14, p. 3.
100

Hess's Response in Opposition to STC's MSJ, p. 16, Docket
Entry No. 127, p. 24 (citing Exhibit 18, Oral and Videotaped
Deposition of Dwayne May ("May Deposition"), p. 239:10-23, Docket
Entry No. 127-19, p. 4). See also Exhibit 13, Safety Valve Test,
p. 30 of 55, Docket Entry No. 127-14, p. 5 ("No dimensional
inspection drawing was initially included in the SLB part record.
The inspection requirements were found to be sub-standard.
Dimensional inspection prints were developed by Greene Tweed and
are now included in all part records to ensure all critical
dimensions are met.").
101

Id. (citing Exhibit 18 to Hess's Response in Opposition to
STC's MSJ, May Deposition, p. 238:14-21, Docket Entry No. 127-19,
p. 3} .
102

-49-

and the deposition testimony of Schlumberger's API expert, David
Mccalvin,

that safety equipment could not be manufactured in

compliance with the API standard if there were no drawings and
specifications. 103
Regardless of whether the word "those" used in § 6. 3.2.2
refers to drawings and specifications as Schlumberger argues, or to
safety valve equipment as Hess argues, Hess's evidence that the
SSVs at issue were not substantially the same as validated seals,
and were manufactured before Greene Tweed reverse engineered
drawings and specifications,

persuade the court that whether

Schlumberger breached§ 6.3.2.2 of the API 14A requirements is a
genuine issue of material fact for trial.
(b)

Whether Schlumberger Breached API 14A§ 7.6.2 is a
Fact Issue for Trial

Hess alleges:
API 14A Section 7.6.2 provides that components such as
MSE seals "shall be dimensionally inspected to assure
proper function and compliance with design criteria and
specifications."
Exhibit 1, Tab 5, at page 18.
Schlumberger failed to dimensionally inspect the MSE
seals to assure proper function and compliance with
design criteria and specifications.
Schlumberger has
admitted that no dimensional inspection was performed on
the MSE seals in the Schlumberger Safety Valves.
Exhibit 4; Exhibit 5. The Schlumberger Safety Valves did
not conform to API 14A Section 7.6.2. Schlumberger was

Id. (citing Exhibit 34 to Hess's Response in Opposition to
STC's MSJ, oral Deposition of David E. Mccalvin ("Mccalvin
Deposition"), pp. 54:8-55:5, Docket Entry No. 127-35, pp. 3-4).
103

-50-

contractually obligated to provide an API 14A-compliant
valve and failed to do so. 104
Asserting

that

§

7.6.2

states

components, except non-metallic seals,

that

"[a]ll

traceable

shall be dimensionally

inspected to assure proper function and compliance with design
criteria and specifications," Schlumberger argues that this section
does not apply to the SSVs because "'the seal is created by using
a non-metallic substance.'"105 Acknowledging that seals may contain
metal components such as springs,106 Schlumberger argues that it is
entitled to summary judgment that it did not breach§ 7.6.2 because
"the seals here have a non-metallic surface,

'the entire seal

assembly,' including any components, 'is considered part of the
non-metallic seal.'

. Thus, Section 7.6.2 'does not require

Schlumberger to perform dimensional inspections' of the seals." 107
In support of this argument, Schlumberger cites the McCalvin
Rebuttal Report,108 stating in pertinent part:
TAC, Docket Entry No. 71, p. 25 1 77 (quoting Specification
for Subsurface Safety Valve Equipment, ANSI/API Specification 14A,
Eleventh Edition, p. 18, § 7.6.2, Exhibit 1-Tab 5 to Plaintiff's
Second Amended Complaint, Docket Entry No. 26-5, p. 27).
104

STC's MSJ, p. 19, Docket Entry No. 116, p. 25 (citing
Exhibit 11 to STC's MSJ, Mccalvin Rebuttal Report, pp. 165-67, 208,
Docket Entry No. 116-11, pp. 11-13, 23; and Exhibit 15 to STC's
MSJ, Oral Deposition of Dennis M. Read, Jr. ("Read Deposition"),
p. 15:1-8, Docket Entry No. 116-15, p. 5.
105

Id. (citing Exhibit 10, Schlumberger TRC-II 5-1/2" 15k SCSSV
Failure Analysis Report Tubular Bells Wells D, B & C by David E.
Hirth ("Hirth Report"), p. 4, Docket Entry No. 116-10, p. 3).
106

Id. (quoting Exhibit 11 to STC's MSJ, McCalvin Rebuttal
Report, pp. 166-67, Docket Entry No. 116-11, pp. 12-13).
107

STC's Reply in Support of MSJ, pp.
No. 144, pp. 19-20.
108

-51-

12-13, Docket Entry

MSE seal assemblies are considered non-metallic seals in
the industry. This is because the sealing surfaces of
the MSE seals themselves are non-metallic. The opposite
of a non-metallic seal is a metallic seal, which would
create a metal-to-metal seal. Notably, a MSE seal is not
a metallic seal. The metal in the MSE seals is used to
energize the sealing surface, not to create the seal. As
a result, there is no requirement within API 14A,
Eleventh Edition to dimensionally inspect every MSE seal
assembly because they are non-metallic seals, and not
subject to the requirements of Section 7.6.2. This has
been the common understanding of the meaning of this
section throughout the industry. 109
Asserting that Mccalvin testified at his deposition that the
rosette spring "is not a sealing surface" and "could be considered
a component of the MSE seal assembly,"110 Hess argues in response
that rosette springs are "traceable components" for which§ 7.6.2
requires dimensional testing.

Then, citing the Safety Valve Test

that Schlumberger prepared for Hess, Hess argues that "Schlumberger
never dimensionally inspected the rosette spring component
until September 2015 at the earliest (nor did Greene Tweed always
do so, for that matter).

It therefore breached§ 7. 6.2. "111

Exhibit 11 to STC's MSJ, McCalvin Rebuttal Report, pp. 3435, Docket Entry No. 116-11, pp. 7-8. See also id. at 165-66,
Docket Entry No. 116-11, pp. 11-12 ("If a seal is non-metallic,
then it is not governed by the dimensional inspection requirement
of [§] 7.6.2 of API 14A. As I have explained earlier in my report,
the industry considers MSE seal assemblies of the type at issue
here, where the sealing surface is non-metal and the non-metal
sealing surface is merely energized by two metal springs, to be
non-metallic seals.").
109

Hess's Response in Opposition to STC's MSJ, p. 17, Docket
Entry No. 127, pp. 25-26 (citing Exhibit 34 to STC's MSJ, Mccalvin
Deposition, pp. 64:5-8 and 106:8-11, Docket Entry No. 127-35, pp. 6
and 12).
0
11

Id. at 17-18, Docket Entry No. 127, pp. 25-26 (citing
Exhibit 13 to Hess's Response in Opposition to STC's MSJ, Safety
Valve Test, p. 28 of 55, Docket Entry No. 127-14, p. 3).
111

-52-

Section 7.6.2 governing "[c]omponent dimensional inspection,"
states:
All traceable components, except non-metallic seals,
shall be dimensionally inspected to assure proper
function and compliance with design criteria and
specifications. Inspection shall be performed during or
after the manufacture of the components but prior to
assembly, unless assembly is required for proper
measurement. 112
While Mccalvin testified that the SSVs are exempt from dimensional
inspection under

§

7. 6.2 because they are non-metallic seals,

Schlumberger has failed to cite evidence establishing as a matter
of law that the component parts of the SSVs are not "traceable
components" subject to the dimensional testing required by

§

7.6. 2.

To the contrary Schlumberger has acknowledged that the SSVs have
component parts that are metallic, i.e., seal springs, and the
Safety Valve Test that Schlumberger prepared for Hess concluded
that the seal springs were the "primary root cause" of the SSV
failures, "the supplier was no longer providing the same qualified
[seal]

spring as to the 2004 MSE Seal Set qualification," and

"[t] hese critical components now all require 100% dimensional
inspection." 113 Because the seal springs are not non-metallic seals
but, instead, component parts of non-metallic seals, whether the
Specification for Subsurface Safety Valve Equipment,
ANSI/API Specification 14A, Eleventh Edition, p. 18, § 7.6. 2,
Exhibit 1-Tab 5 to Plaintiff's Second Amended Complaint, Docket
Entry No. 26-5, p. 27.
112

Exhibit 13 to Hess's Response in Opposition to STC's MSJ,
Safety Valve Test, p. 28 of 55, Docket Entry No. 127-14, p. 3.
3
11

-53-

seal springs are
dimensional

"traceable components" subject to §

inspection

requirement

and

whether

7.6.2's

Schlumberger

breached that requirement by failing to dimensionally inspect the
seal springs are fact issues for trial.
(c)

Whether Schlumberger Breached API 14A§ 7.6.3(c) is
a Fact Issue for Trial

Hess alleges:
API 14A Section 7.6.3(c} provides that "sealing elements
shall meet dimensional tolerances of the manufacturer's
written specifications." Exhibit 1, Tab 5, at page 18.
Schlumberger has admitted that certain component parts of
the MSE seals used in the Schlumberger Safety Valves did
not meet dimensional tolerances of the manufacturer's
written specifications. Exhibit 3, pages 28-29. The
Schlumberger Safety Valves did not conform to API 14A
Section 7.6.3(c).
Schlumberger was contractually
obligated to provide an API 14A-compliant valve and
failed to do so.114
Schlumberger argues that it is entitled to summary judgment
that it did not breach the requirements of§ 7.6.3(c) "because it
is the manufacturer,

and it did not have written,

dimensional tolerances for the seal components."n 5
of

the

API

14A,

Eleventh

Edition,

specified

Citing§ 3.14

Schlumberger

argues

that

"manufacturer" means "principal agent in the design, fabrication
and furnishing of equipment,
International Standard." 116

who chooses to comply with this

Citing the Mccalvin Rebuttal Report

Schlumberger argues that
11

4

5
11

TAC, Docket Entry No. 71, p. 24

1 74.

STC's MSJ, p. 20, Docket Entry No. 116, p. 26.

ll6Id.

-54-

[a]s for "written specifications," Section 7.6.3 does not
require the manufacturer
here, Schlumberger
to
include dimensional tolerances in its specifications,
particularly when its vendor, Greene Tweed, generated its
own, internal written specifications with dimensions and
dimensional tolerances for components of its proprietary
design.
Ex. 11 at 167-72.
It is not unusual for a
supplier such as Greene Tweed to keep its written
specifications for its designs as trade secrets. Id. at
168.
Moreover, measuring seal components would have
required Schlumberger to disassemble, inspect, and
reassemble the seals. Id. That would have damaged the
seals, which are not designed to be disassembled. Id. at
46-47. Section 7.6.3 was not breached, either.117
Citing the Mccalvin Deposition Hess argues that whether the
manufacturer of the SSVs for purposes of complying with§ 7.6.3(c)
was Schlumberger or Greene Tweed is a fact issue for trial.

In

support of this argument Hess asserts Mccalvin testified that the
term "manufacturer" can refer to different entities depending on
the

context,118

manufacturer?,"

that

when

Mccalvin

initially

answered

asked,

"Greene

"who

Tweed," 119

is

the

but

that

Mccalvin subsequently changed his mind and identified Schlumberger
as the "manufacturer" for purposes of § 7. 6.3(c). 120

McCalvin's

conflicting testimony shows that whether Schlumberger or Greene
Tweed was the "manufacturer" and whether Schlumberger breached
Id. (citing Exhibit 11 to STC's MSJ, Mccalvin Rebuttal
Report, pp. 167-72, Docket Entry No. 116-11, pp. 13-18).
11

7

Hess's Response in Opposition to STC's MSJ, p. 18, Docket
Entry No. 127, p. 26 (citing Exhibit 34 to Schlumberger's MSJ,
Mccalvin Deposition, p. 68:10-14, Docket Entry No. 127-35, p. 9).
11

8

Id. (citing Exhibit 34 to STC's MSJ, Mccalvin Deposition,
p. 66:22-24, Docket Entry No. 127-35, p. 8).
11

9

Id. & n.19 (citing Exhibit 34 to STC's MSJ, Mccalvin
Deposition, p. 119:12-19, Docket Entry No. 127-35, p. 13).
120

-55-

§

7. 6. 3 (c) by failing to provide Hess with SSVs whose sealing

elements met dimensional tolerances of the manufacturer's written
specifications are fact issues for trial.
(d)

Hess Has Alleged Violations of the Eleventh Edition
of API 14

Asserting that "Schlumberger agreed to provide safety valves

conforming to 'the latest edition of' API 14A,"121 Hess argues that
Schlumberger retrofitted - that is, manufactured - the
Well B2 safety valve in late January 2016 and delivered
that valve to Hess in the spring of 2016.
. At that
time, the Twelfth Edition was the "latest edition" of API
14A
. , that's why Schlumberger and its clients
applied the Twelfth Edition of API 14A to the retrofitted
safety valves rather than the Eleventh Edition.
Schlumberger itself identified compliance "gaps" with the
Twelfth Edition of API 14A. . . Schlumberger's API expert
agrees that the Well B2 safety valve does not conform to
the Twelfth Edition of API 14A.122

In support of this argument Hess submits the title page of the
Twelfth Edition of API 14A showing an effective date of January 15,

2016,123 and a document titled TRC-II MSE Seal Qualified and

Reproduction Bridging Document prepared by Schlumberger for another
client, i.e., BP, that contains a "Gap Analysis" for API 14A
Twelfth Edition requirements. 124

121rd. at 18-19, Docket Entry No. 127, pp. 26-27.
122Id. at 19, Docket Entry No. 127, p. 27.

123rd. (citing Exhibit 24 to Hess Response in Opposition to
STC's MSJ, Docket Entry No. 127-25).
124Id. (citing Exhibit 41 to Hess Response in Opposition to
STC's MSJ, Docket Entry No. 127-42, pp. 16-17).
-56-

Schlumberger responds that the Twelfth Edition does not apply
to Hess's claims because the Well B(2) valve work was a repair, 125
§

7.1 of the Twelfth Edition provides that "[r]epair operations for

SSSVs . . . shall include the return of the product to a condition
meeting all requirements stated in this specification or the
edition of this specification in effect at the time of original
manufacture," 126 and the Certificate and Shipping Report for the
Well B(2) valve stating that it was certified to the Eleventh
Edition of API 14A. 127
Hess filed it's TAC on May 9, 2018, alleging, inter alia,
"[d]espite Schlumberger's contractual obligations and assurances,
the Schlumberger Safety Valves were not manufactured and tested in
accordance with the Eleventh Edition of API 14A, which was the
latest edition of API 14A published at the time the Commercial
Agreement was entered." 128
violations

of

the

API

Hess's TAC does not allege any specific
14A

Twelfth

Edition.

Moreover,

the

Certificate and Shipping Report for the Well B(2) valve clearly
states that it was certified to the Eleventh Edition of API 14A. 129
STC's Reply in Support of MSJ,
pp. 21-22.
125

Docket Entry No.

144,

Id. (citing Exhibit 31 to STC's Reply in Support of MSJ,
Docket Entry No. 144-7, p. 58).
126

Id. at 21 (citing Exhibit 32 to STC's Reply in Support of
MSJ, Docket Entry No. 144-9).
127

128

TAC, Docket Entry No. 71, p. 23

1 71.

Exhibit 32 to STC's Reply in Support of MSJ, Docket Entry
No. 144-9.
129

-57-

The court concludes therefore that the Eleventh Edition of API 14A
applies to the claims that Hess has asserted in this action.
B.

Schlumberger is Not Entitled to Summary Judgment on Hess's
Breach of Contract Claim for the Well B(2) Valve

Schlumberger argues that it is entitled to summary judgment on
Hess's claims as to the Well B(2) valve pursuant to the January 1,
2017, Bridging Agreement because "the Well B(2) valve claims are
not 'Disputed Claims'" thereunder. 130

Schlumberger argues that

"[e]ven if the Well B(2) valve claims somehow survived,

Hess's

damages on the claims are capped" at "one hundred fifty percent
(150%) of the invoiced amount."
Well B(2)

Hess argues in response that its

valve claims are neither waived nor limited by the

Bridging Agreement. 131
The Bridging Agreement is an "amendment to the [MSC], " 132 which
in pertinent part provides:
a.

Except for the performance by either Party under
the Contract related to the Disputed Claims as
defined below, Section 13 of the [MSC] is hereby
amended for contracts between the Parties entered
into before, on or after the Bridging Agreement
Effective Date by adding the following new Section
13 (k) :

The term "Disputed Claims" means any and all claims
whether asserted or unasserted, known or unknown, related
0

13

STC's MSJ, p. 21, Docket Entry No. 116, p. 27.

Hess's Response in Opposition to STC's MSJ, p. 19, Docket
Entry No. 127, p. 27.
131

Exhibit 4 to STC's MSJ, Bridging Agreement, p. 1, Docket
Entry No. 116-4, p. 2.
132

-58-

to or arising out of (a) the facts as described in the
complaint filed by [Hess] on November 18, 2016 (Case
4: 16-cv-03415) against [Schlumberger] in the United States
District Court for the Southern District of Texas,
Houston Division, or (b) the performance expectations of
the replacement Surface Controlled Subsurface Safety
Valves ("SCSSV" or "Valves") for Wells B and D, as well
as the original Valve for Well A at the Tubular Bells
Lease.133
1.

Well B(2) Claim is a "Disputed Claim" under Clause (a) of
the Bridging Agreement

Schlumberger argues that it is entitled to summary judgment on
Hess's Well B(2) claim under clause (a) of the Disputed Claims
provision because the Well B(2) claim is not "related to," and does
not "aris[e] out of," "the facts described in the complaint filed
by [Hess] on November 18, 2016."134 Schlumberger argues that the
complaint filed on November 18, 2016 (Docket Entry No. 1),
never mentions the Well B(2) valve, except to say that it
was replaced by a valve with "components qualified and
verified as per design." ECF No. 1 at 1 34. Hess added
no claims concerning Well B(2) until its [TAC]. See ECF
No. 71 at 11 53-56. Those claims are not covered by
section (a).135
Hess responds that its
original complaint alleged revocation of acceptance based
on Schlumberger's delivery of non-conforming safety
valves containing non-conforming MSE seals that caused
their ultimate failure. ECF No. 1, at 8-10. Hess's Well
B(2) claim alleges the same. ECF No. 71, at 29-31. Were
that not enough, Hess's Well B(2) claim flows directly
from allegations in Hess's original complaint: had the
133Id.
134

STC's MSJ, p. 21, Docket Entry No. 116, p. 27.
-59-

Well B safety valve not failed, Hess would not have been
forced to install the Well B(2) safety valve. Indeed,
Schlumberger already implicitly acknowledged this close
relationship when the parties jointly requested to extend
the scheduling order, suggesting that amending Hess's
complaint to include Well B(2) would "save the time and
resources of the parties and the Court."
ECF No. 67,
at 1. Because the Well B(2) claim has some nexus to
facts described in the November 2016 complaint, it
"relate[s] to or aris[es] out of" those facts. Exh. 30,
at 1. 136
The court is not persuaded by Schlumberger's argument that
Hess's Well B(2)

claim is not covered by the Disputed Claims

provision because Hess "added no claims concerning Well B(2) until
its third amended complaint." 137

The Disputed Claims provision

expressly states that "[t]he term 'Disputed Claims' means any and
all claims whether asserted or unasserted, known or unknown." 138
Schlumberger's argument that the Disputed Claims provision only
applies to asserted, known claims violates the accepted rule of
contract construction that the court must examine the entire
writing in an effort to harmonize and give effect to all the
provisions

of

meaningless.

the

contract

so

that

none

will

See Coker, 650 S.W.2d at 393.

be

rendered

Schlumberger's

argument that the Well B(2) claim falls outside the Disputed Claims
provision because it does not "relate to," or "aris[e] out of,"
Hess Response in Opposition to STC's MSJ, p. 21, Docket
Entry No. 127, p. 29.
13

6

7
13

STC's MSJ, p. 21, Docket Entry No. 116, p. 27.

Exhibit 4 to STC's MSJ, Bridging Agreement, p. 1, Docket
Entry No. 116-4, p. 2.
8
13

-60-

"the

facts

November 18,

described

in

the

complaint

filed

by

[Hess]

on

2016, "139 lacks merit because those broad phrases

require only a "causal connection or relation" to the facts alleged
in the November 18, 2016, complaint. See Crimson Exploration, Inc.
v. Intermarket Management, LLC, 341 S.W.3d 432, 443 (Tex. App. Houston [1st Dist.] 2010, no pet.) (citing E.I. Du Pont De Nemours
and Co. v. Shell Oil Co., 259 S.W.3d 800, 806 (Tex. App. - Houston
[1st Dist.] 2007, pet. denied)).
Because Hess alleges that the Well B(2) claim involves the
same non-conforming MSE seal (albeit with slightly different
dimensions) as the claims asserted in the November 18,

2016,

complaint, the court concludes that Hess's Well B(2) Claim is a
"Disputed Claim"

under Clause (a) of the Bridging Agreement's

Disputed Claims provision, and therefore that Hess's damages on the
claim are not subject to the caps otherwise imposed by the Bridging
Agreement's

amendments

to

the

MSC.

Accordingly,

the

court

concludes that Schlumberger is not entitled to summary judgment on
Hess's Well B(2) claim because that claim is "related to" or
"aris[es] out of" the facts described in Hess's November 18, 2016,
complaint.
2.

Well B(2) Claim is Not a "Disputed Claim" Pursuant to
Clause (b) of the Bridging Agreement

Asserting that "the parties defined 'Disputed Claims' to cover
'the performance expectations of the replacement [valves]
1 39

. for

Schlumberger's MSJ, p. 21, Docket Entry No. 116, p. 27.
-61-

Wells B and D,'" 140 Schlumberger argues that it is entitled to
summary judgment on Hess's Well B(2) claim pursuant to clause (b)
of the Disputed Claims provision because the court's June 29, 2017,
Memorandum Opinion and Order dismissed all of Hess's performance­
expectation claims.141

Hess's Response in Opposition to STC's MSJ

on its Well B(2) claim does not mention clause (b)'s reference to
"the performance expectations of the replacement [valves]," and is
instead

based

on

language

from

clause

Agreement's "Disputed Claims" provision.

(a)

of

the

Bridging

The court concludes that

any Well B(2) claim that Hess has asserted or attempted to assert
based on performance expectations of the replacement valve is
precluded by the holding in the court's June 29, 2017, Memorandum
Opinion and Order that "Hess may not proceed with its claims based
on the failure of the
period."
C.

[valves] to function after the warranty

Hess, 2017 WL 2829697, at *7.

Schlumberger is Not Entitled to Summary Judgment Because Hess
Has Failed to Satisfy the Appropriate Standard to Recover
Incidental Damages

Recognizing that under the Texas Business and Commerce Code a
buyer may recover incidental damages "resulting from" a seller's
breach of contract, Schlumberger asserts that Hess must satisfy a
STC's MSJ, p. 21, Docket Entry No. 116, p. 27 (citing
Exhibit 4 to Schlumberger's MSJ, Bridging Agreement, p. 1, Docket
Entry No. 116-4, p. 2)
140

STC's MSJ, p. 21, Docket Entry No. 116, p. 27 (citing
Memorandum Opinion and Order, Docket Entry No. 40, p. 16. See also
Hess, 2017 WL 2829697, at *7).
141

-62-

but-for standard to recover incidental damages, and argues that
Hess

has

damages. 142

failed

to

provide

Citing Delhomme,

evidence

using

that

735 F.2d at 185-86,

measure

of

Schlumberger

argues that it is entitled to summary judgment on workover costs
and lost-opportunity costs because a majority of the costs Hess
seeks, about $177 million, stem from workovers performed by the
Stena Forth drillship, which Hess had under contract and would have

paid even if the SSVs had not failed. 143

Citing Eni US Operating

Co., Inc. v. Transocean Offshore Deepwater Drilling, Inc., 919 F.3d
931, 941 (5th Cir. 2019), Schlumberger argues that
Hess cannot recover these costs, which it would have
Instead, Hess
incurred in a "non-breach world."
should have attempted to quantify how much it lost by
using the Stena Forth to perform workovers instead of
drilling new wells. Hess did not do so. As a result,
its claims for Well B, C, and D workover costs should be
dismissed. 144
Asserting that it is not seeking lost-opportunity costs, Hess
responds that "[m]ost incidental damages do not require some overly
complex (and almost certainly speculative) cash inflow and outflow
projection; rather, the buyer simply must set forth some evidence
showing that the claimed damages, in whatever form they take, would
not have been incurred absent the non-conformity." 145
14

2

143

Citing

STC' s MSJ, pp. 22-25, Docket Entry No. 116, pp. 28-31.
Id. at 22, Docket Entry No. 116, p. 28.

Hess Response in Opposition to STC' s MSJ, p. 22, Docket
Entry No. 127, p. 30.
145

-63-

Leggett

&

Platt, Inc. v. Yankee Candle Co., Civil Action No. 4:06-

CV-366-Y, 2008 WL 723582, at *1-2 (N.D. Tex. March 18, 2008), Hess
argues that incidental damages are available when the seller's
breach forces the buyer to divert resources it allocated from one
task to another resulting in additional costs.
In Leggett

&

Platt a buyer purchased and installed hundreds of

shelves that failed to conform to its contract with the seller.
Although the seller provided replacement shelves at no cost, the
buyer sought to recover as incidental damages the additional
expense and "work-hours to have its employees replace the shelves
in all of its stores."

Id. at *11.

The seller argued that those

damages were not caused by its breach because the buyer would have
to pay its employees for their duties regardless of the replacement
of the defective shelves.

The court rejected the seller's argument

stating, "[i]t's irrelevant that [the buyer] would be paying its
employees regardless, what's relevant is that instead of performing
their regular duties,

they now have to reinstall new shelving

because of [the] breach.

That is a cognizable harm."

Id.

Texas Business and Commerce Code§ 2.715(a) entitles aggrieved
buyers who properly revoke acceptance to recover
[i]ncidental damages resulting from the seller's breach
includ[ing] expenses reasonably incurred in inspection,
receipt, transportation and care and custody of goods
rightfully rejected, any commercially reasonable charges,
expenses or commissions in connection with effecting
cover and any other reasonable expense incident to the
delay or other breach.
-64-

Although the Texas Business and Commerce Code does not define the
term "resulting from," neither party disputes that in this context
the term means "because."

Indeed, both parties cite Carbontek

Trading Co., Ltd. v. Phibro Energy, Inc., 910 F.2d 302, 308 (5th
Cir.

1990),

for

its

conclusion

that

incidental

damages

are

available when the buyer incurred them because the product was nonconforming.

Id. ("Phibro incurred the enumerated expenses only

because Carbontek's coal was nonconforming."). See also Indust-Ri­
Chem Laboratory, Inc. v. Par-Pak Company, Inc., 602 S.W.2d 282, 291
n.2 (Tex. App. - Dallas 1980, no writ) ("The term 'caused' is used
here rather than 'proximately caused' because we are not sure that
'proximately caused' is the appropriate standard."). Accordingly,
the court concludes that the proper standard for analyzing Hess's
claim for incidental damages for removing and replacing the SSVs is
that stated in

Carbonteck, i.e., whether those damages were

incurred because Schlumberger's SSVs were non-conforming.
The court is not persuaded that either Delhomme, 735 F.2d at
185-86, or Eni, 919 F.3d at 941, prohibits recovery of the
incidental damages that Hess seeks for retrieving and replacing the
non-conforming SSVs. Eni is inapposite because, unlike the present
case, it involved a common law breach of contract claim arising
from a contract for services in which the court held that the non­
breaching party was entitled to expectation damages that were not
properly calculated.

Delhomme is inapposite because, unlike the

present case, it involved a breach of warranty action in which the
-65-

court noted that the buyer of an aircraft would have incurred the
insurance and finance charges even if the aircraft had been as
warranted.

The insurance and finance payments in Delhomme were

held to be incident to the buyer's owning, maintaining, and using
the aircraft and not to the seller's breach.

The facts in the

present case are distinguishable from the facts in Delhomme because
the costs Hess incurred employing the Stena Forth drillship were
not incident to Hess's owning, maintaining, or using the SSVs; and
if the ssvs had been conforming, Hess would not have had to pay the
Stena Forth drillship to remove and replace them.

The facts of the present case are analogous to the facts in
Leggett & Platt, 2008 WL 723582,

where the court rejected the

breaching seller's argument that the buyer should not be able to
recover as incidental damages the work-hours to have its employees
replace the shelves in all of its stores because the buyer would be
paying its employee's anyway.

Id. at *11.

The court concludes

that it is irrelevant that Hess would be paying for the Stena Forth
regardless of Schlumberger's breach;

what is relevant is that

instead of paying the Stena Forth to drill new wells, Hess had to
pay the Stena Forth to remove and replace the non-conforming SSVs.
That is a cognizable harm.

Accordingly, the court concludes that

Schlumberger is not entitled to summary judgment on Hess's claims
for workover costs, i.e., costs incurred to retrieve and replace
the non-conforming SSVs.
-66-

VI.

Hess's Motion for Partial Summary Judgment

Schlumberger asserts multiple affirmative defenses, including
the affirmative defense of release, by alleging:
Hess's claims are barred by release. The [MSC] released
[Schlumberger] from all claims brought by any party for
any and all "damage to or loss of property".
Master
146
Service Contract No. 7525 .
. Art. 13(c)(1).
Citing

the

indemnity

provision

in

Article

13

of

the

MSC,

Schlumberger asserts a single counterclaim for indemnity alleging:
8.

On November 18, 2016 Hess filed this action in the
United States District Court for the Southern
District of Texas asserting a claim against
Schlumberger for breach of contract.

9.

Hess's lawsuit asserts claims for damage to and
loss of Hess's property, including subsurface
safety valves provided by [Schlumberger] to Hess.

10.

Hess's lawsuit asserts claims on account of loss of
or damage to [Schlumberger's] property, equipment,
materials, or products, including subsurface safety
valves provided by [Schlumberger] to Hess.

11.

By filing a lawsuit, Hess has breached its
obligation
to
defend
and
hold
harmless
[Schlumberger] against these claims.

12.

Hess's indemnity obligations require Hess to
indemnify [Schlumberger] for the attorney's fees
already incurred in defending against the claims
asserted by Hess.

13.

In the event that Hess receives a judgment against
[Schlumberger], Hess's indemnity obligations would
require Hess to indemnify [Schlumberger] for the
amount of any judgment awarded to Hess. 147

146

Defendants' Answer and Affirmative Defenses and Counter­
claims to Hess's Third Amended Complaint, Docket Entry No. 72,
p. 19 (Sixth Affirmative Defense)
7
14

Id. at 21 11 8-13.
-67-

Hess argues that it is entitled to summary judgment on
Schlumberger's affirmative defense of release and counterclaim for
indemnity because " (I) Hess's claims do not seek recovery for
'damage to or loss' of Hess's property and (II) more broadly, the
MSA's indemnity-and-release provisions do not apply to a breach of
contract under the Commercial Agreement." 148

Schlumberger responds

that "[e] very category of damage described by Hess is property
damage, meaning all of its claims were released in the knock-for­
knock provision," 149 and that "[b] y covering all claims for property
damage arising out of Schlumberger's 'work,' the knock-for-knock
provision covers breach-of-contract claims." 150
Hess's

for

motion

summary

judgment

on

Schlumberger's

affirmative defense of release and counterclaim for indemnity
depends

on

§

13

of the

MSC

("Indemnity

Provision")

"The

interpretation of a contractual indemnity provision is a question
of law .

II

Cir. 2009).
13.

Becker v. Tidewater, Inc., 586 F.3d 358, 369 (5th

In pertinent part the Indemnity Provision states:

INDEMNITIES
(a)

Definitions
3.

148

"CLAIMS" shall include all claims,
demands, suits, causes of action, losses,

Hess's MPSJ, Docket Entry No. 118, p. 15.

Defendant Schlumberger Technology Corporation's Opposition
to Hess Corporation's Motion for Partial Summary Judgment ("STC's
Opposition to Hess's MPSJ"), p. 6, Docket Entry No. 136, p. 11.
149

150

Id. at 13, Docket Entry No. 136, p. 18.
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liabilities, damages (including, without
limitation, compensatory, and exemplary),
judgments, awards, obligations to defend
or indemnify others, and other costs of
every kind and character (including,
without limitation, court costs, attor­
neys' fees, debts and interest), known or
unknown, whether the underlying claim,
demand, or suit is groundless, false or
fraudulent.
(b)

IT IS THE SPECIFIC AND EXPRESSED INTENT AND
AGREEMENT OF THE COMPANY AND THE CONTRACTOR
THAT ALL RELEASE, DEFENSE, HOLD HARMLESS AND
INDEMNITY OBLIGATIONS AND OTHER LIABILITIES
ASSUMED BY COMPANY AND CONTRACTOR RESPECTIVELY
UNDER SECTIONS 13(c) AND (d) SHALL BE WITHOUT
REGARD TO THE NEGLIGENCE (WHETHER SOLE, JOINT,
OR CONCURRENT, ACTIVE OR PASSIVE), BREACH OF
WARRANTY, STRICT LIABILITY, PREMISES LIABILITY,
DEFECTIVE CONDITION (WHETHER PRE-EXISTING OR
OTHERWISE) OF ANY FACILITIES,
EQUIPMENT,
MATERIALS, TOOLS, OR OTHER ITEM WHATSOEVER
. OR ANY OTHER FAULT OF THE INDEMNIFIED
PARTIES OR ANY OTHER PARTY EXCEPTING ONLY THE
GROSS NEGLIGENCE, RECKLESSNESS OR WILLFUL
MISCONDUCT OF COMPANY GROUP OR CONTRACTOR
GROUP.

(c)

Company's Indemnity Obligations:
1.

COMPANY SHALL FULLY RELEASE, DEFEND,
INDEMNIFY AND HOLD CONTRACTOR GROUP
HARMLESS FROM AND AGAINST ALL CLAIMS
BROUGHT BY OR ON BEHALF OF ANY PARTY OR
PERSON, FOR ANY AND ALL:
(i)

PERSONAL INJURY OF COMPANY AND ITS
EMPLOYEES;

(ii)

WORKMEN'S COMPENSATION CLAIMS UNDER
THE STATUTORY EMPLOYER DOCTRINE;
AND

(iii) DAMAGE TO OR LOSS OF PROPERTY OF
COMPANY AND ITS EMPLOYEES, WHETHER
REAL OR PERSONAL (INCLUDING, WITH­
PRODUCTION AND
OUT LIMITATION,
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WELLBORE,
EQUIPMENT,
DRILLING
CASING, SUBSURFACE RESERVOIRS AND
ANY OIL AND GAS OR OTHER HYDRO­
CARBON SUBSTANCES LOCATED THEREIN)
WHENEVER AND WHEREVER OCCURRING,
ARISING DIRECTLY OR INDIRECTLY OUT
OF OR IN ANY WAY INVOLVING
CONTRACTOR'S WORK . . . EQUIPMENT,
TOOLS, MATERIALS, AND OTHER ITEMS
WHATSOEVER FURNISHED, DELIVERED,
STORED, OR OTHERWISE HANDLED BY
CONTRACTOR . . . WITHOUT LIMIT AND
REGARDLESS OF CAUSE OR FAULT, AS
PARTICULARLY DESCRIBED IN SECTION
13 (b) ABOVE.151
A.

The MSC's Indemnity-and-Release Provisions Encompass Hess's
Breach of Contract Claims

Hess argues that it is entitled to summary

judgment on

Schlumberger's affirmative defense of release and counterclaim for
indemnity because "by its terms, the MS[C] 's indemnity-and-release
provisions do not apply to breach-of-contract claims and certainly
do not apply to claims between the parties alleging breach of the
precise

agreement

incorporating

those

provisions." 152

Citing

Corbitt v. Diamond M. Drilling Co., 654 F.2d 329, 333-34 (5th Cir.
1981), and Sumrall v. Ensco Offshore Co., 291 F.3d 316, 318-20 &
n.4

(5th Cir. 2 O 02)

(per curiam),

Hess argues that indemnity

provisions like the one at issue here that do not specifically
indemnify for contractual liability do not apply to claims for
breach of contract.

Citing Mobil Chemical Co. v. Blount Brothers

Corp., 809 F.2d 1175 (5th Cir. 1987), and quoting CompuCom Systems,
13, Docket Entry No. 25-3, pp. 6-8.

151

MSC,

152

Hess's MPSJ, p. 15, Docket Entry No. 118, p. 22.

§

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Inc. v. WJ Global,

LLC, Civil Action No. 3:14-CV-3625-L, 2017

WL 1190492, at *5 (N.D. Tex. March 31, 2017), Hess argues that
interpretation of

the MSC's

indemnity

provision

to

apply

to

Schlumberger's own breach of the underlying contract
"would lead to the absurd result whereby [Schlumberger]
could materially breach the [Commercial Agreement] with
impunity" by, for instance, delivering SCSSVs riddled
with holes such that the valves could never be held open
to allow for production, but still be entitled to
indemnity or release from Hess.153
Schlumberger responds that

"[b] y covering all claims for

property damage arising out of Schlumberger's 'work,' the knock­
for-knock provision covers breach-of-contract claims,"154 and that
"the Fifth Circuit has repeatedly distinguished Corbitt and held
that indemnity provisions cover breach-of-contract claims even
where such claims are not expressly included."155

Asserting that

the MSC not only provided Hess "a menu of remedies" in the event
that Schlumberger breached its promises, but also "excludes willful
misconduct," Schlumberger argues that it could not "materially
breach the [Commercial Agreement] with impunity. "156
Citing Corbitt, 654 F.2d at 329, and Sumrall, 291 F.3d at 316,
Hess

argues

that

interpreting

the

language

of

the

Indemnity

153Id. at 18, Docket Entry No. 118, p. 25.

154STC's Opposition
No. 136, p. 18.

to

Hess's MPSJ,

p.

155Id. at 14, Docket Entry No. 136, p. 19.

156Id. at 15, Docket Entry No. 136, p. 20.
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13,

Docket

Entry

Provision to cover claims for breach of contract would conflict
with Fifth Circuit precedent indicating that a broad indemnity
clause

covering

obligations.

"all

claims"

does

not

include

contractual

In Corbitt the Fifth Circuit held that contractual

language creating an indemnity obligation "for injury to or death
or illness of persons" gave express notice only of claims based on
tortious injuries but not contractual claims. Corbitt, 654 F.2d at
333-34.

Shell Oil contracted with Diamond M. and Sladco to work on

a drilling operation.

Id. at 331.

sued Diamond M. in tort.

Corbitt, an employee of Sladco,

Diamond M. then sought indemnification

from Shell pursuant to their contract.

Id.

Shell subsequently

filed a third-party action seeking indemnification from Sladco
pursuant to their contract, which provided that "[Sladco] shall
against all claims,

indemnify and defend [Shell]

suits,

liabilities and expenses on account of injury or death of
arising out of or in

employees of Shell or [Sladco]

connection with performance of this [contract]."

Id.

The Fifth

Circuit held that Shell was not entitled to indemnification from
its contractor, Sladco, because the indemnification provision in
the Shell/Sladco contract restricted Sladco's duty to indemnify
solely to tortious obligations.

Id. at 333.

The Fifth Circuit

refused to read the phrase "all claims" to include contractual
obligations because the Shell/Sladco contract did not specifically
provide that Sladco assumed claims arising from Shell's own
separate contractual obligations.
-72-

Id.

In contrast,

the Fifth Circuit in Sumrall held that an

indemnitor had notice of contractual liabilities where a contract
provided indemnity "from and against all claims, losses, costs,
demands, damages, suits,
nature or character .

. and causes of action of whatsoever
and whether arising out of contract,

tort, strict liability,
F.3d at 318-19 n.4.

. and/or any cause whatsoever."

291

The Fifth Circuit reasoned that, unlike the

narrowly drawn language in Corbitt, the indemnity provisions in the
contract at issue contained expansive language that broadened the
indemnitor's right to indemnification for "all claims
whatsoever nature or character .
. legal duty of [Santa Fe]."

of

whether or not caused by the
Id.

The Court also stressed that

the contract specifically provided indemnity against liability
arising out of the contract.

Id.

Although Hess argues that the

MSC's Indemnity Provision is comparable to the indemnity provision
at issue in Corbitt and not comparable to the indemnity provision
at issue in Sumrall because it does not expressly provide for
indemnity against liability arising out of contract,

the court

concludes that the Indemnity Provision and facts at issue in this
case are distinguishable from those at issue in Corbitt and
comparable to those at issue in Sumrall.
In Corbitt the Fifth Circuit stated that "[t]he contract need
not contain any special words to evince an intention to create a
right of

indemnity

for

independent
-73-

contractual

liabilities."

Corbitt, 654 F.2d at 334. Instead, the contract need only "clearly
express such a purpose."

Id.

As in Corbitt the MSC's Indemnity

Provision does not contain the words "breach of contract," but as
in Sumrall it defines the term "claims" broadly by stating:
"CLAIMS" shall include all claims, demands, suits, causes
of action, losses, liabilities, damages (including,
without limitation, compensatory, and exemplary),
judgments, awards, obligations to defend or indemnify
others, and other costs of every kind and character
(including, without limitation, court costs, attorneys'
fees, debts and interest), known or unknown, whether the
underlying claim, demand, or suit is groundless, false or
fraudulent. 157
In Corbitt Shell's liability was not based on personal injury,
which was the type of injury for which the
provision expressly provided.

indemnification

But in this case, for the reasons

stated in§ IV.A.l(b), above, the court has already concluded that
the injuries underlying Hess's breach of contract claims - the non­
conformities for which Hess revoked the SSVs - constitute breaches
of warranty.

The Indemnity Provision expressly references breach

of warranty by stating that
all release . . . and indemnity obligations . . . assumed
by [Hess] and [Schlumberger] respectively under sections
the
13(c) and (d) shall be without regard to
breach of warranty .
defective condition (whether
pre-existing or otherwise) of any .
. equipment .
or other item whatsoever, . . . or any other fault of the
indemnified parties or any other party excepting only the
gross negligence, recklessness or willful misconduct of
[Hess] or [Schlumberger] , 158

157

MSC, § 13(a)(3), Docket Entry No. 25-3, p. 7.

Id. at §
added).
158

13(b), Docket Entry No.
-74-

25-3,

p. 7 (emphasis

and expressly states that it applies to "all claims brought by
. any party or person, for any and all
of property of [Hess]

. damage to or loss
. whenever

whether real or personal .

and wherever occurring, arising directly or indirectly out of or in
any way involving [Schlumberger's] work." 159

Because the Indemnity

Provision broadly defines "claims" to include "all .

causes of

action," because Hess's breach of contract claims are based on
allegations that Schlumberger breached express warranties, and
because Hess's breach of contract claims arise from work performed
by Schlumberger, the court concludes that the language in the
Indemnity Provision is broad enough to clearly express the purpose
of including such claims within the indemnity coverage.

See

Corbitt, 654 F.2d at 334.
Finally, Hess argues that interpreting the Indemnity Provision
to encompass Hess's breach of contract claims would lead to an
absurd result whereby Schlumberger could materially breach the
parties' contract with impunity, but still be entitled to indemnity
or

release

from

Hess. 160

A

basic

principle

of

contract

interpretation is to interpret, to the extent possible, all the
terms in a contract without rendering any of them meaningless or
Chembulk Trading LLC v. Chemex Ltd., 393 F.3d 550,

superfluous.
555

(5th Cir.

2004).

Interpreting

the

contract

to require

159

Id. at

160

Hess's MPSJ, p. 18, Docket Entry No. 118, p. 25.

§

13 (c), Docket Entry No. 25-3, p. 7.
-75-

indemnity for breach of contract in this case would therefore be
contrary to the rules of contract interpretation if doing so
rendered meaningless the requirements that Schlumberger furnish
items that are "free from defects in design, materials, fabrication
and other workmanship,"

and "conform to AHC's specifications,

drawings or other descriptions contained in the applicable service
agreement, purchase order, work order or other project document." 161
Although Schlumberger argues that the injuries associated with
Hess's alleged breaches of contract are property damages, Hess
argues that they are not property damages but, instead, economic
damages.

Thus, even according to Hess there are scenarios in which

Schlumberger could breach the parties' contract that do not fall
under the indemnity provision.

See Energy XXI, 787 F. Supp. 2d at

608 (recognizing that a similarly worded indemnity clause did not
render a good and workmanlike manner clause meaningless in all
cases)

The court's conclusion that the Indemnity Provision is

broad enough to encompass Hess's claims for breach of contract does
not

necessarily

render

meaningless

the

requirements

that

Schlumberger furnish items that are "free from defects in design,
materials, fabrication and other workmanship," and "conform to
AHC's specifications, drawings or other descriptions contained in
the applicable service agreement, purchase order, work order or

161

MSC,

§

2(a), Docket Entry No. 25-3, p. 3.
-76-

other project document." 162

Accordingly, the court concludes that

Hess is not entitled to summary judgment that the MSC's indemnity­
and-release provisions do not apply to breach-of-contract claims. 163
B.

Hess Is Entitled to Partial Summary Judgment on Schlumberger's
Affirmative Defense of Release and Counterclaim for Indemnity

Hess argues that it is entitled to summary judgment on
Schlumberger's affirmative defense of release and counterclaim for
indemnity because the claims that it has asserted in this action do
not seek recovery for "damage to or loss of" Hess's property. 164
For the reasons stated in § V.A.2, above, the court has already
concluded that Hess's claims for costs to purchase replacements for
the failed valves, costs to retrieve and replace the failed valves,
and lost profits from the Gulfstar One facility are not claims for
damage to or loss of Hess's property, but that Hess's claims for
methanol contamination are claims for damage to or loss of Hess's
property.
to

summary

Accordingly, the court concludes that Hess is entitled
judgment

that

its

claims

for

costs

to

purchase

replacements for the failed SSVs, for costs to retrieve and replace
the failed SSVs, and for lost profits from Gulfstar One are not
claims for "damage to or loss of" Hess's property, but that its
claim for costs due to methanol contamination is a claim for damage
to Hess's property that Hess has released.
1 62

MSC, § 2(a), Docket Entry No. 25-3, p. 3.

163 rd.
164

Hess' s MPSJ, Docket Entry No. 118, p. 15.
-77-

VII.

Conclusions and Order

For the reasons stated in§ V, above, the court concludes that
Schlumberger is entitled to summary judgment on Hess's claim for
methanol contamination because that is a claim for damage to or
loss of Hess's property that Hess released pursuant to § 13(c) of
the MSC - but that Schlumberger is not otherwise entitled to
summary judgment.

Accordingly, Defendant Schlumberger Technology

Corporation's Motion for Summary Judgment (Docket Entry No. 116) is
GRANTED IN PART and DENIED IN PART.

For the reasons stated in § VI, above, the court concludes
that Hess is entitled to summary

judgment on Schlumberger's

affirmative defense of release and counterclaim for indemnity with
respect to Hess's claims for costs to purchase replacements for the
failed valves, costs to retrieve and replace the failed valves, and
lost profits from Gulfstar One because those are not claims for
damage to or loss of Hess's property - but that Hess is not
otherwise

entitled

to

summary

judgment.

Accordingly,

Hess

Corporation's Motion for Partial Summary Judgment on Schlumberger's
Affirmative Defense of Release and Counterclaim for Indemnity
(Docket Entry Nos. 117 (redacted) and 118 (unredacted)) is GRANTED
IN PART and DENIED IN PART. 165

The court has allowed the parties extraordinary leeway in
submitting lengthy briefs and other written materials in connection
with the pending motions. As the length of this Memorandum Opinion
and Order indicates, the court has expended considerable time
(continued...)
165

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For the reasons stated at the beginning of this Memorandum
Opinion and Order, Hess Corporation's Motion to Exclude Expert
Report of Lawyer Cary A. Moomjian (Docket Entry Nos. 119 and 120)
is GRANTED; Schlumberger Technology Corporation's Motion to Exclude
the Expert Testimony of Dennis Read
DENIED WITHOUT PREJUDICE;

(Docket Entry No. 121)

is

Schlumberger Technology Corporation's

Motion to Exclude the Expert Testimony of David Hirth (Docket Entry
No. 122)

is DENIED WITHOUT PREJUDICE;

Schlumberger Technology

Corporation's Motion to Exclude the Expert Testimony of Peter
Koopmans

(Docket Entry No.

123)

is DENIED WITHOUT PREJUDICE;

Schlumberger Technology Corporation's Motion to Exclude the Expert
Testimony of Barry Pulliam (Docket Entry No. 124) is DENIED WITHOUT
PREJUDICE;

and Schlumberger Technology Corporation's Motion to

Exclude the Expert Testimony of Rolle Hogan (Docket Entry No. 125)
is DENIED AS MOOT.
Docket Call will be held on December 11, 2019, at 11:30 a.m.,
in Courtroom 9-B, 9th Floor, United States Courthouse, 515 Rusk
Street, Houston, Texas 77002.
continued)
reading these papers and performing a significant amount of
independent research to be as fully informed as possible when
addressing the parties' arguments.
While, because of the sheer
volume of information presented, it is not impossible that some
arguments were overlooked, the parties should assume that failure
to expressly address a particular argument in this Memorandum
Opinion and Order reflects the court's judgment that the argument
lacked sufficient merit to warrant discussion. Accordingly, the
court strongly discourages the parties from seeking reconsideration
based on arguments they have previously raised or that they could
have raised.
165 ( •••

-79-

Hess and Schlumberger have each submitted lengthy proposed
findings of fact and conclusions of law. 166

Many of the proposed

findings of fact could be agreed to or may not be necessary.
Moreover, the proposed findings of fact and conclusions of law do
not follow the same format.

The parties are ORDERED to submit a

Revised Joint Pretrial Order by December 4, 2019, that includes a
joint submission of agreed and disputed facts presented in chart

The chart should be arranged in some logical order, either

form.

by date, by subject matter, or following some other organizational
format that will assist the court to follow and consider the
evidence at trial. The chart should include a column for the court
to make notes during trial, and the text should be color-coded to
show findings of fact to which the parties agree in one color,
i.e., black, and proposed findings of fact for which no agreement
can be reached in different colors, with one color for

Hess's

proposed findings of fact, and another color for Schlumberger's
proposed findings of fact.

An example of such a chart follows:

Proposed Findings of Fact

Agreed findings of fact in black.

2

□
□

3

□

Comments

Disputed findings of fact
proposed by Schlumberger in a
different color other than black.

1

Disputed findings of fact
proposed by Hess in a color other
than black.

Exhibits M and N to Joint Pretrial Order,
Nos. 151-13 and 151-14.
166

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Docket Entry

The parties shall deliver two hard-copies of the chart to chambers
printed on large format ( 11"xl 7")

paper with the Revised Joint

Pretrial Order.
SIGNED at Houston, Texas, on this 7th day of November, 2019.

SIM LAKE
SENIOR UNITED STATES DISTRICT JUDGE

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