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Bear Peak Resources, LLC v. Peak Powder River Resources, LLC

Supreme Court of Wyoming

October 13, 2017

BEAR PEAK RESOURCES, LLC, a Texas limited liability company, Appellant (Plaintiff),
v.
PEAK POWDER RIVER RESOURCES, LLC, a Wyoming limited liability company, Appellee (Defendant).

         Appeal from the District Court of Campbell County The Honorable John R. Perry, Judge

          Representing Appellant: Jackie S. Shields and A. Clifford Edwards of Edwards, Frickle & Culver, Billings, Montana; William L. Simpson and Larry B. Jones of Burg, Simpson, Eldredge, Hersh & Jardin, P.C., Cody, Wyoming. Argument by A. Clifford Edwards and Jackie S. Shields.

          Representing Appellee: Neil S. Cohen of Fox Rothschild, LLP, Denver, Colorado; Patrick J. Murphy of Williams, Porter, Day & Neville, P.C., Casper, Wyoming. Argument by Mr. Cohen.

          Before BURKE, C.J., and HILL, DAVIS, FOX, and KAUTZ, JJ.

          KAUTZ, Justice.

         [¶1] Bear Peak Resources, LLC (Bear) and Peak Powder River Resources, LLC (Peak) agreed to work together in acquiring mineral interests for development. Their relationship deteriorated, Peak obtained some mineral interests without compensating Bear, and terminated the parties' agreement. Bear sued Peak, claiming breach of contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, negligent misrepresentation, and unjust enrichment. Bear also requested an accounting and asserted a claim for punitive damages. Peak moved for summary judgment which the district court granted, dismissing all of Bear's claims. Bear appealed the district court's decision. We affirm in part, and reverse and remand in part.

         ISSUES

         [¶2] Bear raises the following issues in this appeal:

1. Whether the district court misinterpreted the contract and erroneously granted summary judgment dismissing Bear's claim for breach of contract, because genuine issues of material fact exist regarding Peak's wrongful termination of the contract and acquisition of interests in the AMI [area of mutual interest] for its sole benefit in a manner that was contrary to the parties' intent and the terms of the contract.
2. Whether the district court erroneously granted summary judgment dismissing Bear's claim for breach of the implied covenant of good faith and fair dealing, given the evidence that Peak took actions that interfered with Bear's performance of the PSA [purchase and sale agreement] and were inconsistent with the agreed upon purpose of the contract and Bear's justified expectations.
3. Whether the district court erroneously determined Peak had no fiduciary duty and inappropriately granted summary judgment dismissing Bear's claim for breach of fiduciary duty.
4. Whether the district court erroneously granted summary judgment and dismissed Bear's claim for an accounting when Bear has viable claims for relief.

         FACTS

          [¶3] Bear is in the business of acquiring and selling mineral interests and leases, while Peak is in the business of developing oil and gas interests, including the drilling of oil and gas wells. On June 19, 2012, the two entered into a Purchase and Sale Agreement (PSA) wherein Peak agreed to purchase certain oil and gas interests owned by Bear. The PSA included a section which outlined the parties' agreement for procurement of additional mineral interests within an Area of Mutual Interest (AMI) over a two-year term. The agreement contemplated that Bear would acquire oil and gas interests in the AMI, and Bear would then offer Peak the opportunity to purchase the interests from Bear.

         [¶4] Although lengthy, recitation of the contract provisions at issue in this appeal will be helpful in putting Bear's claims into context. Specifically at issue is Section 11.3 of the contract, which states in relevant part:

Acquisitions in the AMI. If during the term of the AMI, any Bear Party acquires or has the binding opportunity to acquire any oil and gas leasehold interests, fee title to oil and/or gas interests, royalty interests, overriding royalty interests (other than those contemplated to be reserved by or assigned to Bear under this Agreement), or other interests covering lands within the AMI (hereinafter the "Interests") including, but not limited to, farmout agreements, participation agreements or any other agreements or force pooling notices, actions or ruling through which such Bear Party might acquire (or obtain rights to acquire) an interest in lands within the AMI, such Bear Party shall notify Peak in writing of such acquisition or binding opportunity within thirty (30) business days after the acquisition or binding opportunity arises.
. . . .
Peak shall have a period of thirty (30) days after receipt of such written notice in which to notify the Bear Party, in writing, as to whether it elects to acquire one hundred percent (100%) of the Interest (Peak if it elects to acquire must acquire 100%) under the same terms and conditions as those specified in the written notice related thereto (subject to Section 11.5) for payment of consideration to the Bear Party in the amount of $2, 350.00 per net mineral acre covered by the Interest. Peak shall thereafter be entitled to receive, upon payment of $2, 350.00 per net mineral acre covered by the Interest which Peak elects to acquire, an assignment of one hundred percent (100%) of the Interest. . . .
Notwithstanding the foregoing, from and after the Effective Date, prior to any Bear Party acquiring Interests in the AMI, such Bear Party shall consult with Peak and cooperate in good faith with Peak as to (i) the area/lands within the AMI where such Interests are to be acquired; (ii) the terms and conditions pursuant to which such Interests shall be acquired; (iii) the terms and conditions of the oil and gas lease(s)/term assignments covering such Interests, including, but not limited to, the royalties and/or overriding royalties and rentals paid thereunder; (iv) any changes or modifications proposed to the terms of the oil and gas lease/term assignment forms provided by Peak; and (v) the form and substance of all oil and gas leases/term assignments executed covering such Interests. In the event that Peak and Bear cannot agree as to any of the foregoing, after good faith cooperation with one another with regard to the same, Bear and/or Peak may proceed with the acquisition of such Interest provided that Bear shall offer any such Interests to Peak in accordance with the immediately preceding paragraph.
It is intended that Bear primarily be the acquiring party in the AMI; however, if Peak feels Bear is not performing as expected (such expectations to be on the basis of reasonably [sic] industry standards with respect to the performance Bear is to perform under this article), it shall notify Bear of such lack of performance and the specific details regarding what is expected. Thereafter the parties shall meet to attempt to resolve any issues. If after a reasonable time (not less than thirty days) after such meeting the performance is not to Peak's satisfaction, reasonably determined, then on not less that fifteen (15) days further notice to Bear (and Bear's continued failure to perform to stated expectations during such notice period), Peak may further notify Bear that Peak may start making acquisitions for its own account in the AMI whereupon, at the expiration of such notice period (and provided Bear is not then performing to Peak's reasonable expectations) (i) Bear shall have no further obligation to make efforts to make acquisitions in the AMI during the AMI Term (but if it does, such acquisitions shall be subject hereto) and (ii) thereafter Peak and/or its officers, employees, agents or affiliates may acquire any leasehold interests, mineral interests or other oil, gas or mineral interests or rights of whatsoever nature or kind within the AMI for Peak's sole account and benefit and Bear shall have no claims, rights or interests of any kind in or to any such Interests acquired by Peak through Peak's efforts. Notwithstanding the foregoing in the event Peak has proposed a well and one or more of the other working interest owners in the proposed pool or unit (who has not been identified and who is not in current conversations with Bear about the interest) contacts Peak directly about entering into a transaction with Peak regarding transferring to Peak some or all of their working interest in the pool or unit, whether through farmout, direct acquisition or otherwise, such interest if acquired by Peak shall be for Peak's sole account and benefit, free of any rights of Bear hereunder. Similarly, if Bear has identified and is under negotiations with, a similarly situated third party, the acquisition, even if made by Peak, shall be deemed an acquisition through Bear for which Bear is entitled to its full compensation as set out in the Section 11.3.

         [¶5] During the term identified in the PSA, Peak acquired several mineral interests in the AMI without Bear's assistance and Peak did not compensate Bear for those interests. Additionally, before the term would have expired on its own, Peak took steps to terminate the AMI provision in the PSA. On May 1, 2013, Peak issued a Notice of Non-Performance letter to Bear, wherein Peak notified Bear it was not performing its obligations in the PSA based on reasonable industry standards. The parties met to discuss the issue on May 21, 2013, and on June 18, 2013, Peak sent Bear a letter stating that Bear's performance continued to fail to meet the terms of the PSA and reasonable industry standards. On July 11, 2013, Peak notified Bear that Bear continued to fail to perform and, therefore, based on the terms of the PSA, Peak was entirely free to obtain leases or other interests without paying Bear.

         [¶6] Bear filed a complaint against Peak alleging breach of contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, negligent misrepresentation, and unjust enrichment. Bear also sought an accounting and punitive damages. Peak moved for summary judgment and argued that all of the mineral interests it acquired without the assistance of Bear were permitted by the terms of the PSA and, therefore, it did not breach the terms of the agreement or the implied covenant of good faith and fair dealing, nor did it engage in negligent misrepresentation or benefit from unjust enrichment. Further, Peak argued that the PSA did not create a fiduciary relationship between the parties, thus, Peak could not have breached any fiduciary duties to Bear. In support of its motion, Peak attached a copy of the PSA, a list of mineral interest acquisitions and how much Bear was owed for each acquisition, and some witness affidavits.

          [¶7] In response, Bear requested that the district court strike the majority of Peak's affidavits, claiming they contained inadmissible information and conclusory statements. Bear argued that, because the affidavits were deficient, Peak had failed to submit materials to support a prima facie showing that it was entitled to summary judgment. Bear also submitted interrogatory responses which it claimed demonstrated a genuine issue of material fact, precluding summary judgment in favor of Peak.

         [¶8] Peak responded with additional affidavits and documents, which Bear also moved to strike. The district court determined all the affidavits submitted by Peak were generally proper for consideration; however, the court determined that limited portions of the affidavits were conclusory in nature or based on hearsay statements and stated that it would not consider those paragraphs when considering Peak's motion.

         [¶9] The district court then determined Peak was entitled to summary judgment. It first concluded that the PSA was unambiguous, and to the extent certain sections of the PSA may have been ambiguous, that ambiguity did not affect the issues before the court. The court then analyzed whether each of Peak's interest acquisitions was permissible under the terms of the PSA, and determined that Peak was entitled to summary judgment on each of those claims. The court also determined Peak was entitled to summary judgment on the breach of the implied covenant of good faith and fair dealing claim, and, as a matter of law, Peak did not have a fiduciary relationship with Bear. Finally, the court entered summary judgment on the negligent misrepresentation and unjust enrichment claims because Bear did not provide a response in opposition to Peak's request for summary judgment on those claims, and the court concluded that Bear was not entitled to an accounting. Bear filed a timely notice of appeal.

         STANDARD OF REVIEW

         [¶10] This Court reviews a district court's order granting summary judgment de novo.

[W]e review a summary judgment in the same light as the district court, using the same materials and following the same standards. Snyder v. Lovercheck, 992 P.2d 1079, 1083 (Wyo. 1999); 40 North Corp. v. Morrell, 964 P.2d 423, 426 (Wyo. 1998). We examine the record from the vantage point most favorable to the party opposing the motion, and we give that party the benefit of all favorable inferences that may fairly be drawn from the record. Id. A material fact is one which, if proved, would have the effect of establishing or refuting an essential element of the cause of action or defense asserted by the parties. Id. If the moving party presents supporting summary judgment materials demonstrating no genuine issue of material fact exists, the burden is shifted to the non-moving party to present appropriate supporting materials posing a genuine issue of material fact for trial. Roberts v. Klinkosh, 986 P.2d 153, 155 (Wyo. 1999); Downen v. Sinclair Oil Corp., 887 P.2d 515, 519 (Wyo. 1994).

Rogers v. Wright, 2016 WY 10, ¶ 7, 366 P.3d 1264, 1269 (Wyo. 2016) (quoting Inman v. Boykin, 2014 WY 94, ¶ 20, 330 P.3d 275, 281 (Wyo. 2014)).

         DISCUSSION

         Contract Ambiguity

         [¶11] Bear argues the district court erroneously concluded the PSA was unambiguous and then misapplied the terms of the PSA to the facts and circumstances presented by the parties. Bear argues that, while the PSA specifies certain instances in which Peak may acquire interests for its sole benefit without compensating Bear, the PSA is silent regarding Peak's acquisition of interests that fall outside of the specified instances, rendering the PSA ambiguous. Bear also claims the phrase "proposed a well" found in the final paragraph of section 11.3 renders the PSA ambiguous because that phrase is a term of art in the oil and gas industry and, thus, the court should have relied on extrinsic evidence to define it. According to Bear, the district court's interpretation of that phrase gave Peak unfettered opportunities to acquire interests for its sole benefit, despite the limitations the parties had agreed to and included in the PSA.

         [¶12] When reviewing a contract, we begin by looking at the plain language of the document. Thornock v. PacifiCorp, 2016 WY 93, ¶ 13, 379 P.3d 175, 180 (Wyo. 2016).

[T]he words used in the contract are afforded the plain meaning that a reasonable person would give to them. Doctors' Co. v. Insurance Corp. of America, 864 P.2d 1018, 1023 (Wyo. 1993). When the provisions in the contract are clear and unambiguous, the court looks only to the "four corners" of the document in arriving at the intent of the parties. Union Pacific Resources Co. [v. Texaco], 882 P.2d [212, ] 220 [(Wyo. 1994)]; Prudential Preferred Properties [v. J and J Ventures], 859 P.2d [1267, ] 1271 [(Wyo. 1993)]. In the absence of any ambiguity, the contract will be enforced according to its terms because no construction is appropriate. Sinclair Oil Corp. v. Republic Ins. Co., 929 P.2d 535, 539 (Wyo. 1996).

Id. (quoting Claman v. Popp, 2012 WY 92, ¶ 26, 279 P.3d 1003, 1013 (Wyo. 2012)) (brackets in original). Only if a contract is ambiguous and its meaning is doubtful or uncertain will courts turn to extrinsic evidence and the rules of contract construction. Wolter v. Equitable Resources Energy Co., Western Region, 979 P.2d 948, 952 (Wyo. 1999). The fact that the parties disagree about the meaning of a term in the contract does not render the agreement ambiguous or justify the use of extrinsic evidence. Id.; Claman, ¶ 27, 279 P.3d at 1013.

         [¶13] A review of the PSA makes it clear that the terms in Section 11.3 allowed Peak to acquire interests without any obligation to Bear only in three specific circumstances. First, Section 11.3 permits Peak to acquire leases or other interests directly from owners if Peak and Bear cannot agree, in good faith, on necessary terms of the leases or other interests. The PSA requires that, before acquiring interests in the AMI, Bear consult with and cooperate in good faith with Peak about those terms. However, "[i]n the event that Peak and Bear cannot agree as to any of the foregoing [lease or other interest terms], after good faith cooperation with one another with regard to the same, Bear and/or Peak may proceed with the acquisition of such Interest provided that Bear shall offer any such Interests to Peak in accordance with the immediately preceding paragraph." This plain language allows Peak to acquire an interest without the assistance of Bear if the parties had first cooperated with each other in good faith and still failed to agree on the necessary conditions.

         [¶14] Next, the PSA states that Peak can acquire a lease or other mineral interest directly from the interest owner, without involving Bear, if the AMI agreement is "terminated". The third paragraph of Section 11.3 explains the basis and process for "termination." Once Peak properly invokes and follows the termination procedure, "Peak and/or its officers, employees, agents or affiliates may acquire any leasehold interests, mineral interests or other oil, gas or mineral interests or rights of whatsoever nature or kind within the AMI for Peak's sole account and benefit and Bear shall have no claims, rights or interests of any kind in or to any such Interests acquired by Peak through Peak's efforts." This portion of the PSA is clear that, once the termination procedure has taken place, Peak is at liberty to acquire any interests whatsoever and that Bear would receive no benefit or payment from the acquisition.

         [¶15] Finally, Peak may, in some instances, acquire interests without involving Bear if Peak has "proposed a well." Section 11.3 states that if Peak has "proposed a well" and a working interest owner in the proposed pool or unit for that well (who has not been identified by Bear and is not in current conversations with Bear about the interest) contacts Peak directly about entering into a transaction, Peak can acquire that owner's interest for its sole account and benefit, and Bear is not entitled to any compensation. However, the PSA is equally clear that, if Bear had identified and was in negotiations about the interest with the working interest owner, then Bear is entitled to full compensation under the terms of the PSA, even if Peak acquired the interest directly.

          [¶16] While each of these instances is clearly stated in the PSA, Bear nonetheless argues the agreement is ambiguous because it is silent with regard to whether Peak is at liberty to acquire interests without Bear's involvement in circumstances other than those stated in the PSA. Bear seems to believe that without further definition, the agreement is ambiguous because Peak could acquire any interests it desires. We disagree.

         [¶17] When considering the terms of the agreement, we read the contract as a whole to find the plain meaning of all the provisions, and we avoid interpreting provisions in a way that would render any other portion of the agreement inconsistent or meaningless. Thornock, ¶ 13, 379 P.3d at 180. Here, the agreement explicitly states the parties intend "that Bear primarily be the acquiring party in the AMI[.]" The fact that the agreement contains limited and specific circumstances in which it is appropriate for Peak to seek interests without the assistance of Bear is consistent with the overall intent of the agreement-that Bear will be securing the interests for Peak to purchase, except in the three situations described in 11.3.

         [¶18] Bear cites Sheridan Fire Fighters Local No. 276 v. City of Sheridan, 2013 WY 36, ¶ 23, 303 P.3d 1110, 1117 (Wyo. 2013), to support its argument that the contract's silence on this issue results in ambiguity. In Sheridan Fire Fighters, the collective bargaining agreement included a grade and step system that established pay grades, but was silent as to how an employee would move up a step. Id., ¶ 12, 303 P.3d at 1115. We recognized that "where a contract is 'silent' on some significant point, 'the terms of the contract are obviously unclear.'" Id., ¶ 23, 303 P.3d at 1117. However, the failure to include terms explaining how the grade and step system is designed to work in Sheridan Fire Fighters is quite different than what Bear claims is silence in the PSA.

         [¶19] Bear claims that Section 11.3 is ambiguous because it does not explicitly prohibit Peak from directly acquiring mineral interests except in the three circumstances described above. That "silence, " according to Bear, could result in an interpretation that Peak can acquire mineral interests in any other situation without compensating Bear. Such an interpretation is unreasonable because it would render the entirety of Section 11.3 meaningless. See Thornock, ¶ 13, 379 P.3d at 180. If Peak could acquire any mineral interests in the AMI under any circumstances, without any obligation to compensate Bear, there would have been no reason for the parties to include the three specific circumstances in the PSA. Section 11.3 is unambiguous on this point. Under the contract, the only circumstances in which Peak could acquire interests in the AMI without an obligation to pay Bear are the three specified circumstances discussed above.

         [¶20] Bear also argues that the agreement is ambiguous because it uses the phrase "proposed a well." Bear claims that phrase has a specialized meaning within the oil and gas industry that is different from its ordinary meaning. For that reason, Bear claims, the district court should not have granted summary judgment. Instead, it should have considered extrinsic evidence to determine the proper definition of the phrase See generally Hickman v. Groves, 2003 WY 76, 71 P.3d 256 (Wyo. 2003); Caballo Coal Co. v. Fidelity Exploration & Production Co., 2004 WY 6, 84 P.3d 311 (Wyo. 2004); Mullinnix LLC v. HKB Royalty Trust, 2006 WY 14, 126 P.3d 909 (Wyo. 2006); Ultra Resources, Inc. v. Hartman, 2010 WY 36, 226 P.3d 889 (Wyo. 2010); Ecosystem Resources, L.C. v. Broadbent Land & Resources, LLC, 2012 WY 49, 275 P.3d 413 (Wyo. 2012); Berthel Land and Livestock v. Rockies Exp. Pipeline LLC, 2012 WY 52, 275 P.3d 423 (Wyo. 2012). However, Bear has not provided any evidence that supports its assertion that "proposed a well" has a specialized or technical meaning. Unsupported assertions in a responsive pleading are insufficient to establish that a material fact is in dispute:

W.R.C.P. 56(d) provides that "[w]hen a motion for summary judgment is made and supported as provided in this rule an adverse party may not rest upon the mere allegations or denials of the adverse party's pleading, but . . . must set forth specific facts showing that there is a genuine issue for trial." Further, we have held that conclusory statements, mere opinions, or categorical assertions of ultimate facts without supporting evidence are insufficient to establish some disputed issue of material fact." Clark v. Industrial Co. of Steamboat Springs, Inc., 818 P.2d 626, 628 (Wyo. 1991) (quoting TZ Land & Cattle Co. v. Condict, 795 P.2d 1204, 1208 (Wyo. 1990) and Boehm v. Cody Country Chamber of Commerce, 748 P.2d 704, 710 (Wyo. 1987)); Seamster v. Rumph, 698 P.2d 103, 106 (Wyo. 1985). Any evidence relied upon to "sustain or defeat a motion for summary judgment must be such as would be admissible at trial and that it should be as carefully tailored and professionally correct as any evidence which would be presented to the court at the time of trial." Equality Bank of Evansville, Wyo. v. Suomi, 836 P.2d 325, 330 (Wyo. 1992).

In re Estate of McLean, 2004 WY 126, ¶ 15, 99 P.3d 999, 1004-05 (Wyo. 2004); see also Loredo v. Solvay America, Inc., 2009 WY 93, ¶ 10, 212 P.3d ...


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