Total E&P USA, Inc. v. Marubeni Oil & Gas (USA), Inc. et al

REPLY in Support of 306 MOTION for Attorney Fees, 305 MOTION for Prejudgment and Post-Judgment Interest

S.D. Tex.March 12, 2019

1 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION TOTAL E&P USA, INC. * CIVIL ACTION NO. Plaintiff * 4:16-cv-02674 * v. * JUDGE VANESSA GILMORE * MARUBENI OIL & GAS (USA) INC. * Defendant * ******************************************* MOGUS’S REPLY IN SUPPORT OF MOTIONS FOR PREJUDGMENT AND POST-JUDGMENT INTEREST AND ATTORNEY’S FEES AND COSTS Marubeni Oil & Gas (USA) LLC (“MOGUS”) hereby responds to the arguments raised by Total E&P USA, Inc. (“Total”) in its omnibus opposition1 to MOGUS’s Motion for Prejudgment and Post-Judgment Interest2 and MOGUS’s Motion for Attorney’s Fees and Costs.3 The plain language of the MC 305 OA requires that the decommissioning costs unpaid by ATP and Total “shall bear interest . . . plus attorney’s fees, court costs, and other costs in connection with the collection of the unpaid amounts.” Such recovery was not made contingent on first obtaining an approved AFE or sending detailed billing statements to anyone other than ATP and Black Elk. Moreover, given the results obtained – a $21.6 million jury verdict – MOGUS’s requested attorney’s fees and costs are beyond reasonable. The Court should reject Total’s arguments and enter a judgment in favor of MOGUS inclusive of the full amount of interest, litigations costs, and attorney’s fees sought by MOGUS. 1 Dkt. 316 (“Total Opposition”). 2 Dkt. 305. 3 Dkt. 306. Case 4:16-cv-02674 Document 317 Filed on 03/12/19 in TXSD Page 1 of 10 2 A. The AFE Provision in Section I.3.B Does not Apply. In seeking to avoid liability for interest and attorney’s fees, Total argues that such amounts are not recoverable “when an AFE is not approved.”4 But the specific AFE provision on which Total relies speaks only to “non-payment or short payment of Joint Account billings” and does not address whether interest on such billings or attorney’s fees incurred to collect on those billings are recoverable.5 The Joint Account billings, or “JIBs,” to which this provision refers are the detailed bills for decommissioning costs incurred by MOGUS.6 These JIBs reflect the principal amounts of decommissioning costs incurred by MOGUS and do not include interest or attorney’s fees.7 Recovery of interest and attorney’s fees is instead addressed separately in the preceding paragraph of the accounting procedures. That provision does not tie the operator’s entitlement to interest or attorney’s fees to an approved AFE. Rather, the relevant provision simply states that “the unpaid balance shall bear interest . . . plus attorney’s fees, court costs, and other costs in connection with the collection of the unpaid amounts.”8 Moreover, the question of whether Total was justified in its “non-payment . . . of Joint Account billings” has already been resolved against Total. On September 17, 2018, the Court granted summary judgment in favor of MOGUS finding that Total is “liable for its proportionate share of the costs of decommissioning MC 305.”9 In opposing summary judgment, Total never 4 Total Opposition, Dkt. 316, at pp. 3-5. To be clear, Total never argues that MOGUS’s litigation costs are not recoverable on this basis. See id. at pp. 3-7. 5 MC 305 OA, MOGUS Trial Exhibit 1, at ¶ I.3.B of Exhibit C thereto (ECF p. 143) (emphasis added). 6 See Declaration of Oscar Hartman (“Hartman Declaration”), attached hereto as Exhibit A, at ¶ 4. 7 See id. at ¶ 5 (“The JIBs reflect only the principal amounts of decommissioning costs incurred by MOGUS and do not include any interest on those amounts. The JIBs also do not include MOGUS’s costs incurred in connection with this litigation, including any attorney’s fees.”). The JIBs sent to ATP are available at MOGUS Trial Exhibit 55. 8 MC 305 OA, MOGUS Trial Exhibit 1, at ¶ I.3.B of Exhibit C thereto (ECF p. 143). 9 Dkt. 230, at p. 19. Case 4:16-cv-02674 Document 317 Filed on 03/12/19 in TXSD Page 2 of 10 3 claimed that an approved AFE was required for the decommissioning work.10 It is only now – almost six months after Total has been found liable – that Total claims its “obligation to pay . . . do[es] not apply where the AFE in connection with the at-issue activity was ‘not approved.’”11 That issue was resolved long ago and cannot be revived now in the context of interest and attorney’s fees. Total did not raise this argument on summary judgment because it knows that AFE approval was not required for these operations.12 In the pretrial order, both parties stipulated that “[d]ecommissioning of the MC 305 wells was required under federal regulations.”13 As a government-mandated operation, approval of an AFE – an Authorization for Expenditure – was not required under the operating agreement.14 In fact, Total’s own accounting expert, Mike Cougevan, explicitly confirmed this in one of his expert reports: In such a situation [where decommissioning work is required by the government], a non-operator cannot “non-consent” or otherwise elect to not participate in the work, as it can certainly elect to do if the decommissioning work is not required by a governmental authority.15 10 Total argued only that MOGUS should have sent AFEs to Total – not that such AFEs needed to be approved. The Court rejected that argument, finding that “Plaintiff’s rights in the Operating Agreement were extinguished upon its assignment to ATP. However, its obligations were not extinguished and Plaintiff remains liable under the Operating Agreement . . . .” Dkt. 230, at pp. 10-11. This Court explained: “Because Plaintiff’s rights in the Operating Agreement were extinguished, it had no right to notice regarding the decommissioning. Therefore, its argument that it is not liable because Defendant breached the contract by failing to follow the Operating Agreement’s notice and other requirements with respect to decommissioning is wholly without merit.” Id. at p. 10. 11 Total Opposition, Dkt. 316, at p. 4. 12 Total’s position also ignores that an AFE was approved for the original drilling of the MC 305 wells. Total’s election to participate in that AFE bound Total not just to pay for any costs of drilling but also any costs associated with the ultimate decommissioning of the MC 305 wells. 13 Dkt. 254, at p. 19. 14 Additionally, it has been well-established that ATP, through the bankruptcy filings, approved of MOGUS becoming operator and performing the decommissioning work. Total itself approved of the work when it represented in a bankruptcy filing that it did not object to “[c]ompletion by MOGUS of plugging and abandonment and decommissioning work ordered by BOEM and BSEE.” MOGUS Trial Exhibit 4, at p. 2. Therefore, additional approval through an AFE was not required. 15 See October 27, 2017 Expert Report of Michael W. Cougevan attached hereto as Exhibit B, at ECF p. 10. Case 4:16-cv-02674 Document 317 Filed on 03/12/19 in TXSD Page 3 of 10 4 An AFE is for those operational activities in which the parties have an opportunity to vote on whether to participate. But, for decommissioning “required by a governmental authority,” there is no discretion for the parties to decide whether to participate. Rather, the agreement includes mandatory language providing that the operator “shall” complete the abandonment and that the non-operators “will” pay their share: 18.4 Abandonment Operations Required by Governmental Authority: The Operator shall conduct the abandonment and removal of any well, Production System or Facilities required by a governmental authority, and the Costs, risks and net proceeds will be shared by the Participating Parties in such well, Production System or Facilities according to their Participating Interest Share.16 Because there is no economic incentive for a non-operator to ever elect to participate in such operations, this mandatory language is essential to avoid a stalemate preventing the completion of a government-mandated abandonment due to a party’s refusal to participate.17 A similar issue was addressed in the Apache v. W&T case before Judge Hittner.18 In that case, the operator, Apache, sought to recover a share of government-mandated plugging and abandonment costs from the non-operator, W&T, pursuant to a joint operating agreement between the parties.19 Like the MC 305 OA, the operating agreement in Apache included an identical provision addressing government-mandated abandonment operations: 18.4 Abandonment Operations Required by Governmental Authority: The Operator shall conduct the abandonment and removal of any well, Production System or Facilities required by a governmental authority, and the Costs, risks and net proceeds will be shared by the Participating Parties 16 MC 305 OA, MOGUS Trial Exhibit 1, at ¶ 18.4 (ECF p. 115). 17 Although MOGUS did elect to send AFEs to ATP and Black Elk for informational purposes, the cover letters accompanying those AFEs make clear that “[t]he permanent abandonment is required by the Bureau of Safety and Environmental Enforcement and therefore does not require partner approval.” See MOGUS Trial Exhibits 29-35 (emphasis added). 18 Apache Deepwater, LLC v. W&T Offshore, Inc., 2017 WL 6326886 (S.D. Tex. Aug. 25, 2017). 19 Id. at *2. Case 4:16-cv-02674 Document 317 Filed on 03/12/19 in TXSD Page 4 of 10 5 in such well, Production System or Facilities according to their Participating Interest Share.20 After the jury returned a verdict in favor of Apache, W&T moved to have the verdict set aside because there was no signed AFE approving the abandonment operations conducted.21 Judge Hittner denied the motion and upheld the jury’s finding that an AFE is not required “when plugging and abandoning the well was required by section 18.4.”22 Similarly here, partner approval, through an AFE or otherwise, was not required for the decommissioning of the MC 305 wells – a fact acknowledged by Total’s own accounting expert. Therefore, the approval or non-approval of an AFE has no effect on MOGUS’s rights to recover interest and attorney’s fees from Total. B. MOGUS Fulfilled the Requirements of Section I.2.A when it Sent JIBs to the “Non- Operators” – ATP and Black Elk. Total does not contest that MOGUS sent “proper bills” to ATP and Black Elk beginning in June 2014.23 However, Total argues that MOGUS “did not meet the contractual requirement” until it also sent detailed billing statements to Total in March 2017.24 Total is wrong. Under Section 1.2.A of the accounting procedures, MOGUS’s responsibility as operator was to “bill Non-Operators . . . for their proportionate share of the Joint Account for the preceding month.”25 It is these bills to Non-Operators – not predecessors like Total – that must be 20 The operating agreement in that case is publicly available at Dkt. 40-2 in Apache Corp., et al. v. W&T Offshore, Inc., Case No. 4:15-cv-00063 (S.D. Tex.). A copy of the agreement is also attached hereto as Exhibit C. 21 Apache, 2017 WL 6326886, at *2. 22 Id. In an earlier ruling, Judge Hittner had also awarded interest, litigation costs, and attorney’s fees to Apache under accounting procedures that contain the same pertinent language as the procedures on which Total relies here (“Acceptable reasons for non-payment or short-payment of Joint Account billings are as follows . . . when an AFE is not approved.”). Apache Deepwater, LLC v. W&T Offshore, Inc., 2017 WL 6326141, at *5-8 (S.D. Tex. May 31, 2017); see also Exhibit C hereto, at ECF p. 103. 23 Total Opposition, Dkt. 316, at p. 5. 24 Id. at p. 6. 25 MC 305 OA, MOGUS Trial Exhibit 1, at ¶ I.2.A of Exhibit C thereto (ECF p. 143) (emphasis added). Case 4:16-cv-02674 Document 317 Filed on 03/12/19 in TXSD Page 5 of 10 6 “accompanied by statements which identify the authority for expenditure, lease or facility, and all charges and credits summarized by appropriate categories of investment and expenses” (i.e., the JIBs).26 It is undisputed that, beginning in June 2014, MOGUS sent proper JIBs to ATP and Black Elk, who were the only two “Non-Operators” at the time MOGUS performed the work.27 Thus, contrary to Total’s arguments, MOGUS appropriately sent the JIBs to the correct parties under the agreement. MOGUS was under no obligation to also send detailed JIBs to Total.28 It has been established in this case that Total had assigned its rights under the MC 305 OA to ATP in 2006. The Court recognized the legal effect of that assignment on summary judgment, finding that “Plaintiff’s rights in the Operating Agreement were extinguished upon its assignment to ATP” and that “its obligations were not extinguished and Plaintiff remains liable under the Operating Agreement . . . .”29 Even Total’s own operating agreement expert, Kirk Wardlaw, agreed in his deposition that the Canyon Express operating agreements did not require the sending of JIBs to Total.30 Total’s arguments to the contrary lack merit and do not support a reduction to the interest, costs, and attorney’s fees requested by MOGUS. 26 Id. 27 See Pretrial Order, Dkt. 254, at p. 8, ¶ 14 (“Since January 2010, record title in MC 305 has been held as follows: MOGUS 37.5%; ATP 50%; and Black Elk Energy Offshore Operations, LLC (“Black Elk”) 12.5%.”); see also excerpts of the deposition of Total’s operating agreement expert, Kirk Wardlaw (“Wardlaw Deposition”), attached hereto as Exhibit D, at 159:18-160:8 (Q: [I]s it true that [assignors] are also no longer a nonoperator, under the agreement? A: They are not a party to the operating agreement.). 28 Total’s attempt to resort to an equitable argument on this point is not credible. Since the ATP bankruptcy, Total has consistently refused to acknowledge any responsibility to pay for any share of the decommissioning costs. The lack of detailed JIBs provided to Total had absolutely no bearing on its refusal to pay. 29 Dkt. 230, at pp. 10-11. 30 See Wardlaw Deposition, Exhibit D hereto, at 160:21-162:13 (recognizing that a predecessor does not need to receive AFEs and JIB because it is “not a party to the operating agreement”). Case 4:16-cv-02674 Document 317 Filed on 03/12/19 in TXSD Page 6 of 10 7 C. MOGUS is Entitled to a Full Compensatory Attorney Fee and Cost Award. In its opposition, Total never questions the reasonableness of MOGUS’s lodestar calculation or MOGUS’s litigation costs. Rather, Total claims that MOGUS’s attorney’s fees and costs should be reduced by 35% given the “marginal” success MOGUS achieved at trial. Total’s argument does not support a reduction. MOGUS secured a jury verdict of over $21.6 million, which is in no way insignificant or “marginal” – particularly where Total claimed no liability throughout the entire case and argued at trial for a jury verdict of less than $1 million. A party that obtains an excellent result is entitled to a fully compensatory fee, and the law makes clear that “excellent results” do not require a party to win every issue or to gain all of the relief sought. In the Hensley v. Eckerhart case, which Total cites, the U.S. Supreme Court stated: “[w]here a plaintiff has obtained excellent results, his attorney should recover a fully compensatory fee” and “a plaintiff who has won substantial relief should not have his attorney’s fees reduced simply because the district court did not adopt each contention raised.”31 Furthermore, the Fifth Circuit has made clear that a party’s failure to obtain “every dollar sought . . . does not automatically mean that the modified lodestar amount should be reduced.”32 Where “plaintiffs have substantially prevailed in th[e] litigation . . . they are . . . entitled to all hours reasonably expended on the lawsuit—including those hours devoted to unsuccessful but related contentions.”33 It is further an “abuse of discretion for the district court to reduce [an] attorney’s 31 461 U.S. 424, 435, 440 (1983). 32 Saizan v. Delta Concrete Prods. Co., 448 F.3d 795, 799 (5th Cir. 2006). 33 Abrams v. Baylor Coll. of Med., 805 F.2d 528, 536 n.10 (5th Cir. 1986). Case 4:16-cv-02674 Document 317 Filed on 03/12/19 in TXSD Page 7 of 10 8 fee award solely on the basis of the amount of damages obtained.”34 While the amount of damages may be considered, “this factor alone should not lead the district court to reduce a fee award.”35 MOGUS undoubtedly achieved great success at trial, and Total provided no cases to support its position that the $21.6 million verdict is a “marginal” success meriting a reduction to MOGUS’s fee and cost award. Indeed, nearly all the cases cited by Total involved situations where the requested attorney’s fees substantially exceeded the amount of the verdict/judgment. For instance, the plaintiff in Farrar v. Hobby sought $17 million in damages and $280,000 in fees but only received a $1 judgment.36 The movant in U.S. Football League v. Nat’l Football League sought attorney’s fees in the amount of over $5.5 million but only received a $1 jury verdict.37 Plaintiffs requested similarly disproportionate attorney fee awards in May v. Nygard Holdings Ltd. ($150,000 in fees on a $1,000 damage award),38 Combs v. City of Huntington, Texas ($94,612.80 in fees on a $5,000 jury award),39 and Warranty Corp. v. Hans ($50,000 in fees on a $15,000 judgment).40 Unlike those cases, MOGUS’s requested attorney-fee award ($2,198,333.84) is nearly 10 times less than the jury verdict ($21,649,695.36). MOGUS obtained a jury verdict of over $21.6 million, and Total has not cited to any case involving a jury verdict near that amount.41 Given the successful result obtained, as well as each 34 Black v. SettlePou, P.C., 732 F.3d 492, 502 (5th Cir. 2013). 35 Singer v. City of Waco, Tex., 324 F.3d 813, 829-30 (5th Cir. 2003). 36 506 U.S. 103 (1992). 37 887 F.2d 408 (2d Cir. 1989). 38 2005 WL 2850318 (M.D. Fla. 2005). 39 829 F.3d 388 (5th Cir. 2016). 40 2000 WL 284261 (S.D. Ala. 2000). Although Total only cites cases where courts reduced fees due to a party’s minimal success, there are several other cases where courts chose not to reduce fees on that basis. See, e.g., Louisiana Power & Light Co. v. Kellstrom, 50 F.3d 319 (5th Cir. 1995) (holding that district court did not abuse its discretion when it refused to reduce the lodestar even though the plaintiff was awarded $500,000 rather than the $15–17 million it sought). 41 Total also cites to the distinguishable Devices, Inc. v. Senior Operations, Inc. case in which the plaintiff only obtained a judgment of $41,305. 2009 WL 5171746 (N.D. Tex. 2009). Total avers that Devices supports its argument Case 4:16-cv-02674 Document 317 Filed on 03/12/19 in TXSD Page 8 of 10 9 of the other eleven supportive Johnson factors (which Total does not challenge), MOGUS should be fully compensated for its fees and costs. CONCLUSION For these reasons, MOGUS requests that the Court grant MOGUS’s motions and enter judgment in favor of MOGUS finding that MOGUS is entitled to interest, costs, and attorney’s fees in the full amounts sought. Respectfully submitted, LOOPER GOODWINE P.C. /s/ Paul J. Goodwine Paul J. Goodwine (Attorney-in-Charge) LA Bar No. 23757; SDTX ID No. 437800 Holly O. Thompson LA Bar No. 31277; SDTX ID No. 2953818 Taylor P. Mouledoux LA Bar No. 31889; SDTX ID No. 1581156 Taylor P. Gay LA Bar No. 35140; SDTX ID No. 3251449 650 Poydras Street, Suite 2400 New Orleans, Louisiana 70130 Telephone: (504) 503-1500 Telecopier: (504) 503-1501 pgoodwine@loopergoodwine.com hthompson@loopergoodwine.com tmouledoux@loopergoodwine.com tgay@loopergoodwine.com -and- that “a meaningful reduction in success translates into a similar reduction on recovery of fees.” Dkt. 316, at p. 8. Total, however, fails to mention that, even though the jury had only awarded plaintiff 50% of the damages it sought, the Devices court refused to reduce the plaintiff’s award of attorney’s fees proportionately by 50%. The court determined that a 20% reduction would be more appropriate. Thus, contrary to Total’s request for a 35% reduction in fees, Devices does not support reducing fees to an amount proportionate to the reduction in the damage award. Case 4:16-cv-02674 Document 317 Filed on 03/12/19 in TXSD Page 9 of 10 10 SCHONEKAS, EVANS, McGOEY & McEACHIN, LLC Kyle Schonekas LA Bar No. 11817; SDTX ID No. 305350 Joelle F. Evans LA Bar No. 23730; SDTX ID No. 436275 Andrea V. Timpa LA Bar No. 29455; SDTX ID No. 3362943 909 Poydras Street, Suite 1600 New Orleans, LA 70112 Telephone: (504) 680-6050 Telecopier: (504) 680-6051 kyle@semmlaw.com joelle@semmlaw.com andrea@semmlaw.com Attorneys for Marubeni Oil & Gas (USA) LLC CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the above and foregoing pleading has been served on all counsel of record for the parties via e-mail, FedEx and/or by electronic filing in the Court’s electronic filing system on this 12th day of March 2019. /s/ Paul J. Goodwine Paul J. Goodwine Case 4:16-cv-02674 Document 317 Filed on 03/12/19 in TXSD Page 10 of 10