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Richland Partners, LLC v. Cowry Enterprises, Ltd.

United States District Court, D. Montana, Billings Division

September 29, 2014

RICHLAND PARTNERS, LLC, JOHN PAYNE, and ROGER HALL, Plaintiffs,
v.
COWRY ENTERPRISES, LTD., Defendant.

ORDER AND OPINION

SUSAN P. WATTERS, District Judge.

Plaintiffs Richland Partners, LLC, John Payne and Roger Hall ("Richland Partners") filed this action against Defendant Cowry Enterprises, LTD, ("Cowry") for property damage, negligence, strict liability, negligent misrepresentation, constructive fraud, trespass, nuisance, and tortious interference. (Doc. 1-3). Richland Partners has moved to file an amended complaint to add "Phillips Petroleum Company a/k/a Conoco Phillips Company, Inc." as a party defendant. (Doc. 12). Cowry opposes the motion. (Doc. 13). For the reasons stated below, the motion is denied.

I. Background

In the early 1980s, a company named Aminoil drilled some oil wells in Eastern Montana. (Doc. 12 at 2). While drilling at least one of the wells, Aminoil reclaimed a reserve pit. (Doc. 13 at 4). A reserve pit is a storage area dug in the ground that acts as a small reserve for storing spare or waste mud, base oil, water or brine while drilling an oil well. (Id.) During the early 1980's, when the well was drilled, companies typically used a reserve pit while drilling a well. (Id.) At the end of the drilling operations, the reserve pit was drained and reclaimed by filling the pit and placing soil on top. (Id.) In 1981, Aminoil settled a claim for surface damages to the land resulting from "drilling and production operations." ( Payne Depo., Ex. 13, Doc. 13-3) ( see also Glymin Depo., Doc.13-5).

In approximately 1984, Phillips Petroleum Company purchased Aminoil and became owner/operator of the wells. (Doc. 12 at 2). In 1988, Conoco purchased ownership and operation of the wells from Phillips. (Id.) In 1993, Cowry assumed ownership and operation of the wells from Conoco. (Id. at 3). In the Purchase and Sale Agreement between Conoco and Cowry, Cowry and Conoco agreed that Cowry would not assume any liabilities of Phillips or indemnify Conoco on any claim for which Phillips was liable. ( Purchase and Sale Agmt, Doc. 12-3).

In 2012, Plaintiffs Roger Hall and John Payne purchased 37 acres of land to develop an RV and Industrial Park for employees and their families working in the Bakken oil fields. (Doc. 12 at 2). Two of Cowry's inactive oil pads and wells are located on the land and a third pad and well is adjacent to the land. ( See Doc. 8 at 2; see also Glymin Corr. (May 4, 2013), Doc. 3-C). Prior to the land purchase, Richland Partners discovered the existence of the oil pads and learned that Cowry had not performed oil exploration activities on the oil pads for many years. (Doc. 6 at if 12). At the time of the purchase, an "old reserve pit" was listed as a "soil problem" and "two oil wells" were listed on the seller's property disclosure statement, which Hall initialed and signed on February 10, 2012. ( Rice Depa., Ex. 4; Doc. 13-1). After the purchase, Hall and Payne formed Richland Partners to run the property. ( Payne Depa. 20:24-21:2, Doc. 13-3).

Richland Partners hired Territorial Landworks to conduct due diligence prior to the purchase and to assist with the subdivision approval process after purchasing the property. (Doc. 13 at 3). Territorial Landworks owner Jason Rice "found" the reserve pit on Richland Partners' land in 2012. ( Rice Depa. 100:2-6, Doc. 13-1). Territorial Landworks also discovered "the existence of oil waste at various levels" on Richland Partners' property after it was purchased. (Doc. 6 at if 30). Based on this discovery and subsequent events that occurred when Richland Partners attempted to get its subdivision approved, Richland Partners filed suit against Cowry, and accused Cowry, in relevant part, of contaminating Richland Partners' property with oil. (Doc. 1-3).

Cowry removed the action to federal court and filed its Answer on February 19, 2014, where it denied ever engaging in drilling operations on the subject property. (Doc. 3 at 6). Cowry also asserted as affirmative defenses that "any contamination on the plaintiffs property existed before they purchased it" and that Richland Partners' damages "were caused by the actions of persons or entities other than Cowry." ( Id. at 11, 12).

Both parties submitted preliminary pretrial statements on April 23, 2014. (Docs. 8, 10). Richland Partners asserted that "Cowry had damaged the real property located around the wells as oil from the Cowry wells had seeped throughout Plaintiffs' property." (Doc. 8 at 4). In contrast, Cowry asserted that the alleged contamination on the land at issue was "residue left in a historic reserve pit" from when the wells were originally drilled in the '80s. (Doc. 10 at 4). According to Cowry, "a number of companies including Aminoil" had an interest in the property when the pit was dug in 1980, but Cowry was "not involved in drilling and had no interest in [the wells] when they were drilled, " and was "never in control of the area where the reserve pit was located." Id. Cowry also asserted that Phillips acquired Aminoil after 1981 and it was not until 1993 that Phillips sold the production equipment to Cowry. Id. Consistent with the recitation of the facts, Cowry stated in its defense to Richland's negligence claim that, "Cowry was not involved when the historic reserve pit was reclaimed, never had an interest in the area where it was located, and owed no duty to Richland Partners with respect to it." Id. at 5. Similarly, in its defense to Richland's strict liability claim, Cowry stated, "a party cannot be held strictly liable for abnormally dangerous activity when a different defendant was responsible for what caused the injury." Id. at 6.

On May 1, 2014, this Court entered a scheduling order which set an August 1, 2014, deadline to amend pleadings, including joinder of parties. (Doc. 11 at ΒΆ 1). In June, a series of depositions occurred in this matter. On June 5, 2014, Territorial Landworks owner Jason Rice testified that the oil residue on Richland Partners' property was likely from the old reserve pit left over from when a well was initially drilled. ( Rice Depa. 100:2-22; Doc. 13-2). During his deposition, he was asked if he knew the reserve pit was listed on the seller's property disclosure statement to Richland Partners. ( Id. at 84:1-85:8). The disclosure statement was provided to Richland Partners' counsel and marked as an exhibit to his deposition. (Id.) The same day, Plaintiff John Payne agreed that the oil residue on the land was likely from the old reserve pit. ( Payne Depa. 38: 15-20, 40: 17-20; Doc. 13-3). He was also questioned about the sellers' disclosure statement and the fact that the pit was listed. (Id. at 15:14-16:16). He said he had not seen the disclosure but became aware of the pit in 2013. (Id.) . The disclosure statement was also marked as an exhibit to his deposition. (Id.) Payne testified that he had no reason to believe that the oil residue came from the Cowry property. ( Id. at 40:5-20). Approximately a week later, Cowry's founder, Derick Glyrnan testified in his deposition that Cowry had no liability for the reserve pit because, "one of the documents in our files is that the landowner was paid liquidated damages. He took the land back as is before we took it over." ( Glyman Depa. 57:18-58:17; Doc. 13-5).

On August 12, 2014, after the deadline to amend pleadings passed, Richland Partners filed a motion to amend its complaint to join "Phillips Petroleum Company a/k/a Conoco Phillips Company, Inc., " as a defendant in the suit. (Doc. 12). Cowry opposed Richland Partners' motion. (Doc. 13). In its reply, Richland Partners also requested to amend the scheduling order. (Doc. 14). It did not, however, file a separate motion.

II. Discussion

A. Motion to Amend

A timely motion to amend is governed by Rule 15(a) of the Federal Rules of Civil Procedure, which provides that "a party may amend its pleading only with the opposing party's written consent or the court's leave" and leave shall be given freely when justice so requires. Fed. R. Civ.P. 15(a)(2). Rule 15(a) does not govern Richland Partners' current request, however. Where, as here, the court has issued a scheduling order setting a deadline to amend the pleadings, a party must first move ...


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