FERDIG OIL CO., INC., a Montana corporation, and SOMONT OIL COMPANY, INC., a Montana corporation, Plaintiffs and Appellants,
ROC GATHERING, LLP, a Montana Limited Liability Partnership, RANCK OIL COMPANY, INC., a Montana corporation, and COMMERCIAL ENERGY OF MONTANA, INC., a Montana corporation, Defendants and Appellees.
Submitted on Briefs: December 12, 2018
District Court of the Ninth Judicial District, In and For the
County of Toole, Cause No. DV-12-039 Honorable David
Cybulski, Presiding Judge.
Appellants: Gregory J. Hatley, Tyler C. Smith, Davis, Hatley,
Haffeman & Tighe, P.C., Great Falls, Montana
Appellees: Thane P. Johnson, Johnson, Berg & Saxby, PLLP,
Clement L. Glynn, Jonathan A. Eldredge, Glynn & Finley,
LLP, Walnut Creek, California
The Ninth Judicial District Court, Toole County, granted
summary judgment in favor of ROC Gathering, LLP, Ranck Oil
Company, Inc., and Commercial Energy of Montana, Inc.,
(collectively, "ROC" or "Defendants")
after determining that those parties had not breached their
contract with Ferdig Oil Co., Inc. and Somont Oil Company,
Inc. (collectively, "Ferdig Oil"). The District
Court entered a separate order awarding ROC attorney fees and
costs in the action. Ferdig Oil appeals both orders. We
consider the following issues on appeal:
1. Whether the District Court properly held on
summary judgment that ROC did not breach or repudiate the
parties' 2006 Settlement Agreement;
2. Whether the District Court abused its
discretion in fixing the amount of attorney fees and costs to
which ROC was entitled as the prevailing party.
affirm the summary judgment order and reverse for
modification of the fees and costs.
AND FACTUAL BACKGROUND
The parties to this case are engaged in the business of
gathering, processing, and marketing oil and natural gas in
northern Toole County, Montana. Barbara Ranck Perry and Ron
Perry have ownership interests in each of the three
Appellees: ROC Gathering, Ranck Oil, and Commercial Energy.
Charles Jansky owns Appellants: Ferdig Oil and Somont Oil.
All five companies were signatories to a Settlement Agreement
in 2006 ("2006 Agreement") to resolve multiple
commercial disputes arising from their various business
relationships. At issue in this case is the provision of the
2006 Agreement that allowed Ferdig Oil to tap into a delivery
line owned and operated by ROC Gathering.
The delivery line at issue runs from ROC Gathering's
natural gas processing facility near Oilmont, Montana (the
"Oilmont Plant") to Northwestern Energy's
transmission system. Ferdig Oil owns a nearby plant (the
"Morton Plant") that processes natural gas
containing hydrogen sulfide, called "sour gas." Per
the 2006 Agreement, Ferdig Oil paid for the construction of a
pipeline from its Morton Plant directly to ROC
Gathering's delivery line. The interconnection of this
pipeline from the Morton Plant into ROC Gathering's
delivery line is physically located in a locked meter house
on ROC Gathering's property, along with a block valve
that can close the interconnection. Ferdig Oil does not have
access to the interconnection or block valve without a ROC
Gathering employee unlocking the meter house for it.
Ferdig Oil began using the interconnection into ROC
Gathering's delivery line in April 2008. Ferdig Oil shut
down the Morton Plant on a number of occasions over the years
for maintenance or repairs. The block valve would be closed
during these occasions, but Ferdig Oil otherwise consistently
used the interconnection until 2014.
On September 30, 2010, counsel for ROC Gathering sent Ferdig
Oil a notice of termination, stating that it was terminating
Ferdig Oil's right to tap into ROC Gathering's
delivery line because Ferdig Oil had breached its obligations
under the agreement by allowing sour gas into the pipeline.
ROC Gathering took no steps to close Ferdig Oil's
interconnection at that time, however, and Ferdig Oil
continued using the tap. In July 2012, Ferdig Oil filed a
declaratory action against ROC seeking to determine its
rights under the 2006 Agreement and injunctive relief to
enjoin ROC Gathering from disabling the tap in the future.
Ferdig Oil did not prosecute or serve the Defendants with the
Ferdig Oil shut down the Morton Plant in early January 2014
for repairs to its reboiler. ROC Gathering closed the block
valve to allow for the repairs. While repairs on the Morton
Plant were ongoing, Ferdig Oil served each Defendant with the
suit it had filed in 2012. The Defendants answered and
brought counterclaims in May 2014.
On July 9, 2014, Jansky e-mailed Ranck Perry that Ferdig Oil
had completed reboiler repairs at the Morton Plant, but
explained, "[W]e noted a leak in our delivery line,
which we are in the process of repairing with a replacement
line. And so at this point we are still shut down, hoping to
be back up shortly." On July 14, Joe Alborano, an
employee at Ferdig Oil, e-mailed Ranck Perry informing her
that Ferdig Oil had "a bad sales gas line from the
Morton plant over to the old meter shack at your plant"
and would "need to dig back from the shack 100 feet or
so to tie into" a replacement line. He asked whether an
employee from ROC Gathering would be available to unlock the
meter house for Ferdig Oil to complete the work. Ranck Perry
replied that, because of the pending legal action, she had
forwarded the request to ROC Gathering's legal team. She
denied Ferdig Oil access to ROC Gathering's property in
the interim. While waiting for a response from ROC
Gathering's legal team, Ferdig Oil abandoned its plan to
tie into a replacement line, because it isolated a leak in
the original pipeline on its own property. It repaired the
leak by replacing a section of the original pipeline. Ferdig
Oil informed ROC Gathering that it had repaired the pipeline.
After discussions between the parties' lawyers, ROC
Gathering's counsel sent an e-mail to Ferdig Oil's
counsel on July 24, 2014. In the e-mail, ROC Gathering
requested verification that the leak in Ferdig Oil's line
had been fixed. ROC Gathering's counsel wrote, "We
are not at all comfortable that the sole source of the leak
has been discovered or that the system is safe to start
operations." It requested details of the repairs,
including information about who had repaired the pipeline and
how it was done. ROC Gathering stated it wanted to inspect
the pipeline and have appropriate pressure testing done or to
review any data if Ferdig Oil already had completed testing
the pipeline. The e-mail explained that
apart from the issues in the pending litigation, we are too
concerned about the risk of a continuing leak and potential
explosion to agree to let Ferdig simply open the tap and
start producing, but we are willing to work with you to
determine that your system is safe to re-start.
The second paragraph of the e-mail turned to the ongoing
litigation between the parties, reiterating ROC
Gathering's position that the 2006 Agreement between the
parties was terminated or terminable and that Ferdig
Oil's operations were a proper basis for termination. ROC
Gathering's counsel sought a non-waiver,
non-admissibility agreement to prevent Ferdig Oil from using
continued production against ROC Gathering in the litigation.
After proposing the non-waiver, non-admissibility agreement,
counsel explained that ROC Gathering was "not saying
no" to Ferdig Oil's requests to open the tap. As an
alternative to the non-waiver, non-admissibility agreement,
counsel proposed that the parties attempt to negotiate a
global resolution of all of ...