TOTAL E&P USA, Inc. v. Marubeni Oil & Gas (USA), Inc.RESPONSE in Opposition to 231 MOTION for Attorney Fees, 234 Corrected MOTION for Prejudgment and Post-Judgment InterestS.D. Tex.March 12, 2019 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION TOTAL E&P USA, INC. Plaintiff/Counter-Defendant v. MARUBENI OIL & GAS (USA) INC. Defendant/Counter-Claimant § § § § § § § § § CIVIL ACTION NO. 4:16-CV-2671 JUDGE NANCY ATLAS Total’s Omnibus Response in Opposition to MOGUS’s Motions for Prejudgment Interest and Attorney’s Fees TOTAL E&P USA, INC. (“Total”) files this omnibus response in opposition to the Motion for Prejudgment and Post-Judgment Interest (Dkt. 234) and the Motion for Attorney’s Fees and Costs (Dkt. 231) filed by Marubeni Oil & Gas (USA) Inc. (“MOGUS”). MOGUS is not entitled to prejudgment interest or attorney’s fees because it did not fulfill the contractual requisites to obtain them. Even if entitled to some aspect of either, it inflates its demand by requesting interest and fees before it had even presented Total a proper bill. Nature and Stage of Proceedings The Court has entered judgment in favor of MOGUS in the principal amount of $12,677,584 for costs incurred by MOGUS as of June 30, 2017. MOGUS now seeks to recover interest on that amount, in addition to attorney’s fees and costs. Case 4:16-cv-02671 Document 239 Filed on 03/12/19 in TXSD Page 1 of 10 2 Statement of Issues First, the Canyon Express Pipeline System Operating Agreement (“CEPS OA”) excludes recovery of interest or attorney’s fees where the Operator proceeds without an approved Authorization for Expenditure (“AFE”). Having obtained no approval of AFEs with respect to decommissioning operations, can MOGUS recover interest and attorney’s fees? Second, MOGUS never presented a bill meeting the contractual requirements of the CEPS OA to Total until March 2017, and yet it seeks interest from June 2014, when it first presented an invoice to ATP, and attorney’s fees from the date of April 20, 2016 forward. If MOGUS is entitled to interest and attorney’s fees, should the recoverable amount be reduced to account for the fact that MOGUS substantially delayed presenting a bill to Total? Standard A district court’s award of prejudgment interest and/or attorney’s fees pursuant to a contract is reviewed for abuse of discretion. Fisk Electric Co. v. DQSI, L.L.C., 740 F. App’x 399, 401 (5th Cir. 2018); Matter of Coxson, 43 F.3d 189, 192 (5th Cir. 1995). Argument I. MOGUS’s demand for interest and attorney’s fees should be denied or limited because it did not fulfill the contractual requisites to obtain them. A. The prejudgment interest and attorney’s fee provisions on which MOGUS relies are tied to receipt of a “bill” on an “approved” AFE. MOGUS asserts that the CEPS OA governs this dispute, and MOGUS relies on the Accounting Procedure of the CEPS OA to justify its claim for prejudgment interest Case 4:16-cv-02671 Document 239 Filed on 03/12/19 in TXSD Page 2 of 10 3 and attorney’s fees. Dkt. 231 at 2–3; Dkt. 234 at 2–3. Yet MOGUS fails to quote the entire applicable provision, which on its face contains both strict requirements and flat limitations as to such claims: 2.A. The Operator shall bill Non-Operators on or before the last day of the month for their proportionate share of the Joint Account for the preceding month. Such bills shall be accompanied by statements which identify the authority for expenditure, lease or facility, and all charges and credits summarized by appropriate categories of investment and expense. . . . 3.B. Except as provided below, each Party shall pay its proportion of all bills within thirty (30) days of receipt date. If payment is not made within such time, the unpaid balance shall bear interest compounded monthly using the U.S. Treasury Bill three month rate plus 3% in effect on the first day of the month for each month that the payment is delinquent . . . plus attorney’s fees, court costs, and other costs in connection with the collection of unpaid amounts. Interest shall begin accruing on the first day of the month in which the payment was due. Applicable reasons for non-payment or short payment of Joint Account billings are as follows: when the Party is a Non-participating Party in the Operations; When the Party’s working interest in incorrect; when an AFE is not approved; when charges are outside of the 24-month period (except as stated in paragraph 4.B below). See Ex. A-1 (“CEPS OA Accounting Procedure”) §§ 2A, 3B (emphasis added). B. The AFEs for the CEPS decommissioning were never approved, so MOGUS should not be permitted to collect any interest or fees. The CEPS OA is clear: The obligation to pay, and the accompanying provisions for interest and attorney’s fees in connection with recovery on unpaid amounts, do not Case 4:16-cv-02671 Document 239 Filed on 03/12/19 in TXSD Page 3 of 10 4 apply where the AFE in connection with the at-issue activity was “not approved.” CEPS OA Accounting Procedure § 3B. MOGUS’s contention that the requirement of AFE approval excuses non-payment on billings, but not interest on such unpaid amounts, is nonsensical. Dkt. 238 at 2. The Accounting Procedure, by its terms, only permits recovery of interest in the event of non-payment. CEPS OA Accounting Procedure § 3B. Here, the AFEs that MOGUS issued in connection with the decommissioning of the Canyon Express Pipeline System (“CEPS”) were never approved. MOGUS did not obtain signatures to the AFEs from either of its partners in CEPS at the time of decommissioning. See Ex. A-2 (CEPS AFEs). Perry Murphree, MOGUS’s chief operating officer, conceded that MOGUS sent AFEs only to its bankrupt partners but (as MOGUS fully expected) never received approval from ATP. Ex. A-3 at 219:23–220:5, 240:10–16 (Murphree Dep.); see also Ex. A-4 at 113:17–22, 114:11–19 (MOGUS 30(b)(6) Dep.). Murphree also confirmed that MOGUS never even sought Total’s approval for the AFEs, although it was planning to bill Total for those charges. Ex. A-3 at 220:3–5, 228:25–229:8 (Murphree Dep.); see also Ex. A-4 at 115:2–6, 139:20–140:10 (MOGUS 30(b)(6) Dep.).1 In short, MOGUS made a deliberate choice to complete the work without approval from either its partner (ATP) or the party that it actually intended to charge (Total). Because MOGUS never obtained approval of the AFEs associated with the CEPS 1 During the trial on the related MC 305 matter, MOGUS’s witnesses likewise conceded that MOGUS only sent AFEs to ATP and Black Elk (despite planning to bill Total), and that ATP never approved the AFEs. See Case No. 4:16-cv-2674, Dkt. 316 at 4. Case 4:16-cv-02671 Document 239 Filed on 03/12/19 in TXSD Page 4 of 10 5 decommissioning work, MOGUS has not met the express and plain contractual requisites to recover prejudgment interest and attorney’s fees under the CEPS OA. Total recognizes that this Court has held, as a contractual matter, that Total must pay ATP’s proportionate share because ATP cannot. It would be unnecessarily punitive, and quite outside the contract, to hold that Total must pay attorney’s fees and costs where MOGUS in no way fulfilled the contractual requisites to obtain them. MOGUS does not cite any provision of the CEPS OA in urging that “AFE approval was not required for these operations.” See Dkt. 238 at 3. Consistent with the fact that an AFE was actually required, MOGUS sent CEPS decommissioning-related AFEs to ATP and Black Elk, and in doing so, “follow[ed] what we thought was required of us ... in the operating agreement.” Ex. A-4 at 114:20–115:1 (MOGUS 30(b)(6) Dep.). The fact that a jury considered a similar question in Apache Deepwater, LLC v. W&T Offshore, Inc. does not help MOGUS. The issue was tried specifically because Judge Hittner found the at-issue operating agreement to be ambiguous on that point. 2017 WL 6326886, at *2 (S.D. Tex. 2017). The jury reached its verdict based on parol evidence regarding the parties’ intent. Id. That evidence is not relevant in this action, which involves a different contract between two entirely different parties. To be clear, MOGUS can recover prejudgment interest and attorney’s fees only under the CEPS OA. First, Alabama law does not provide for attorney’s fees unless specified by contract. Jones v. Regions Bank, 25 So.3d 427, 441 (Ala. 2009). Once MOGUS’s conduct put it outside the requirements of the CEPS OA, its entitlement to seek attorney’s fees ended. Second, while MOGUS cites Alabama’s prejudgment interest Case 4:16-cv-02671 Document 239 Filed on 03/12/19 in TXSD Page 5 of 10 6 statute, see Dkt. 305 at 3, that statute sets the prejudgment interest rate only where it is not otherwise specified by contract. Lapeyrouse Grain Corp. v. Tallant, 439 So.2d 105, 112 (Ala. 1983). But the CEPS OA does address prejudgment interest and the applicable rate, which thus controls the conduct at issue. Because MOGUS failed the contractual prerequisite under the CEPS OA, there is no basis for MOGUS to recover interest and attorney’s fees. C. In the alternative, MOGUS is not entitled to interest and attorney’s fees accrued before it provided Total a bill that complied with the requirements of the CEPS OA in March 2017. Even if MOGUS could properly charge Total interest and attorney’s fees for work pursuant to AFEs that were never approved, the plain language of the CEPS OA makes clear that Total’s obligation to pay these items would only be triggered by receipt of a “bill” accompanied by a statement of “all charges and credits summarized by appropriate categories of investment and expense.” CEPS OA Accounting Procedure § 2A. MOGUS contends that its right to collect interest and attorney’s fees from Total was triggered when MOGUS sent proper bills to ATP in 2014—despite the fact that MOGUS never sent a proper bill to Total until years later. Dkt. 234 at 3. This is wrong as a contractual matter. The Accounting Procedure on which MOGUS relies permits assessment of interest and fees only from the time that a party receives a “bill,” fails to pay within 15 days, and has an “unpaid balance.” CEPS OA Accounting Procedure § 3B. MOGUS never attempts to explain how Total could have an “unpaid balance” years before it even received a “bill.” Case 4:16-cv-02671 Document 239 Filed on 03/12/19 in TXSD Page 6 of 10 7 MOGUS’s claim for interest and fees accruing before a bill was sent to Total is also grossly inequitable. First, even as it sent bills to Total’s predecessor ATP, MOGUS knew that ATP could not and would not pay them. See Ex. A-3 at 35:19–36:1, 226:25– 227:12 (Murphree Dep.). Second, at all times that it was billing ATP, MOGUS fully intended to charge Total for ATP’s share. See id. at 229:4–8. And third, as with the AFEs, there was nothing to stop MOGUS from sending bills to Total as it sent them to ATP, yet MOGUS deliberately chose not to do so. See id. at 230:6–20.2 Underscoring the fact that MOGUS lacks any contractual or equitable support for its request, MOGUS has cited no case where a predecessor was charged prejudgment interest and attorney’s fees on charges that accrued before the predecessor received a bill. In the alternative, MOGUS contends that its right to collect interest and attorney’s fees from Total under the Accounting Procedures of the CEPS OA was triggered when it sent a mere one-page “invoice” to Total of charges through June 30, 2016. Dkt. 234 at 3. This, too, is improper. MOGUS’s accounting expert agrees that this “invoice,” a copy of which is attached hereto as Exhibit A-5, did not meet the contractual requirements for a “bill,” commonly referred to as a “joint interest billing,” under the Accounting Procedures of the CEPS OA. Ex. A-6 at 89:19–90:15 (Hartman Dep.). Total did not receive a statement of “all charges and credits summarized by appropriate categories of 2 Again, similar testimony was adduced at trial in the MC 305 matter. See Case No. 4:16-cv-2674, Dkt. 316 at 6. Case 4:16-cv-02671 Document 239 Filed on 03/12/19 in TXSD Page 7 of 10 8 investment and expense” as the CEPS OA requires until March 2017—well after this lawsuit was underway.3 If this Court were inclined to award any interest or attorney’s fees in this matter, Total respectfully submits that this Court should award such amounts accruing only after March 2017, when Total finally received an explanation from MOGUS of “all charges and credits summarized by appropriate categories of investment and expense.” CEPS OA § 2.A. Accrued interest on the amount of the Court’s judgment since March 2017 would be $1,121,728.00. See Ex. B (Cougevan Decl.) ¶ 5. MOGUS’s claimed attorney’s fees since March 2017 are $2,287,087.39, and its claimed costs since March 2017 are $598,359.33. Ex. A (Shih Decl.) ¶¶ 4-5. Conclusion Total respectfully requests that MOGUS’s motions for prejudgment interest and attorney’s fees be denied in their entirety. Where MOGUS sought recovery from Total under the CEPS OA, its recovery should be scrupulously limited to only amounts specifically recoverable under the contract. In the alternative, the amounts sought by MOGUS should be reduced to reflect that Total did not receive a bill until March 2017. 3 MOGUS first provided a statement of “all charges and credits” when it produced a Joint Interest Data Exchange, or “JADE,” reflecting charges through February 2017. See Ex. A-7 (reflecting production of JADE with charges through February 2017). Case 4:16-cv-02671 Document 239 Filed on 03/12/19 in TXSD Page 8 of 10 9 Dated: March 12, 2019. Respectfully submitted, /s/ Charles Eskridge Charles Eskridge Texas Bar No. 06666350 charleseskridge@quinnemanuel.com Karl Stern Texas Bar No. 19175665 karlstern@quinnemanuel.com Christopher Porter chrisporter@quinnemanuel.com Texas Bar No. 24070437 Kate Kaufmann Shih Texas Bar No. 24066056 kateshih@quinnemanuel.com Carl Hennies Texas Bar No. 24104029 carlhennies@quinnemanuel.com QUINN EMANUEL URQUHART & SULLIVAN, LLP 711 Louisiana St., Suite 500 Houston, Texas 77002 713.221.7000 – Telephone 713.221.7100 – Facsimile Case 4:16-cv-02671 Document 239 Filed on 03/12/19 in TXSD Page 9 of 10 10 Philip G. Eisenberg Texas Bar No. 24033923 peisenberg@lockelord.com Alicia Castro acastro@lockelord.com Texas Bar No. 24033923 LOCKE LORD LLP 600 Travis St., Suite 2800 Houston, Texas 77002 713.226.1200 – Telephone 713.223.3717 – Facsimile ATTORNEYS FOR PLAINTIFF/COUNTER-DEFENDANT TOTAL E&P USA, INC. CERTIFICATE OF SERVICE A copy of the foregoing response was served on all counsel of record via CM/ECF on March 12, 2019. /s/ Carl Hennies Carl Hennies Case 4:16-cv-02671 Document 239 Filed on 03/12/19 in TXSD Page 10 of 10
