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Husky Ventures, Inc. v. B55 Investments, Ltd.

United States Court of Appeals, Tenth Circuit

December 18, 2018

HUSKY VENTURES, INC., Plaintiff Counterclaim Defendant - Appellee,
v.
B55 INVESTMENTS, LTD., Defendant Counterclaimant -Appellant, and CHRISTOPHER McARTHUR, an individual, Defendant-Appellant.

          Appeal from the United States District Court for the Western District of Oklahoma (D.C. No. 5:15-CV-00093-F)

          Stephen E. Csajaghy (Marisa Hudson-Arney with him on the briefs), Condit Csajaghy LLC, Denver, Colorado, for Defendants-Appellants.

          Shannon Wells Stevenson, Davis Graham & Stubbs LLP, Denver, Colorado, (Kyle W. Brenton and Daniel Rosales, Davis Graham & Stubbs LLP, Denver, Colorado, and Travis P. Brown, Brady L. Smith, John Paul Albert, Mahaffey & Gore, P.C., Oklahoma City, Oklahoma, with him on the briefs) for Plaintiff-Appellee.

          Before HOLMES, MATHESON, and MORITZ, Circuit Judges.

          HOLMES, CIRCUIT JUDGE.

         Husky Ventures, Inc. ("Husky") sued B55 Investments Ltd. ("B55") and its president, Christopher McArthur, for breach of contract and tortious interference under Oklahoma law. In response, B55 filed counterclaims against Husky.[1] After a trial, a jury reached a verdict in Husky's favor, awarding $4 million in compensatory damages against both B55 and Mr. McArthur and $2 million in punitive damages against just Mr. McArthur; the jury also rejected the counterclaims presented to it. In further proceedings, the district court entered a permanent injunction and a declaratory judgment in Husky's favor. After the court entered final judgment, B55 and Mr. McArthur filed a timely notice of appeal from that judgment. They also moved for a new trial under Federal Rule of Civil Procedure ("Rule") 59(a) or, in the alternative, to certify a question of state law to the Oklahoma Supreme Court. The court denied the motion in all respects.

         On appeal, B55 and Mr. McArthur contend that the district court erred in denying their motion for a new trial and again move to certify a question of state law to the Oklahoma Supreme Court. In addition, they appeal the permanent injunction and declaratory judgment and argue that the district court erred in refusing to grant leave to amend the counterclaims.

         We dismiss B55 and Mr. McArthur's claims relating to the motion for a new trial for lack of appellate jurisdiction and deny their motion to certify the state law question as moot. We affirm the district court's judgment on the remaining issues.

         I

         A

         Husky is an Oklahoma oil and gas company. In the early 2000s, Charles Long, Husky's CEO, became interested in using horizontal drilling techniques to extract oil and gas from geologic formations previously thought to be depleted. In 2008, Husky had success drilling wells at an ostensibly depleted formation called the "Cimarron" prospect.[2] Encouraged by this promising start, Husky created projects at other prospects, including "Chisholm Trail," "Prairie Grove," "Cherokee Ridge," and "Viking."

         But Husky lacked capital to develop each of these projects independently, so it entered into agreements to secure capital with other individuals and companies. Under these agreements, participating entities would contribute capital in exchange for a working interest in a particular project. Husky, for its part, was contractually designated as the projects' "operator." As the operator, Husky was responsible for making operational decisions regarding lease acquisitions and drilling services for each project. Such arrangements are common in mineral extractive industries. See Debra J. Villarreal & Lucas LaVoy, Participation Agreements, 31 E. Min. L. Found. § 10.03 (2010) ("Frequently, companies desiring to pursue an opportunity with other companies do not want to incur liability for the others' obligations. Industry participants, therefore, often prefer to enter into a contract to govern the joint exploration and development rather than form a joint venture."); see also id. § 10.03[11] ("Participants typically name one of the participants . . . as the operator for the exploration area. The party named as operator is also often named as the party with primary responsibility for lease acquisition and making development proposals.").

         In December 2013, Mr. Long and Mr. McArthur discussed a collaboration between Husky and B55 in a new oilfield "completion company." Aplts.' App., Vol. XII, at 3139 (Tr. of Jury Trial Proceedings, dated Nov. 14, 2016). Although that company never took form, Husky and B55 signed a Participation Agreement in March 2014 providing for B55's participation in the Viking project. Three months later, the parties executed a separate Participation Agreement for the Prairie Grove project. Under these agreements, B55 became a 15% participant in the Viking project and a 10% participant in the Prairie Grove project. B55 also invested $4.5 million in extant wells and received the right to acquire interests in future oil and gas leases developed by Husky within the project areas.

         Signs of trouble quickly emerged. First, Mr. McArthur began making extra-contractual requests that Husky declined to grant. For example, he asked Mr. Long both to make him Husky's CFO and to hire his son to lead Husky's drilling operations. Mr. McArthur also demanded a list of "the name[s], address[es], and phone number[s] of every participant [Husky] ha[d] in every well," which Husky refused to disclose because the information was confidential. Id. at 3239-40.

         And mere months after executing their 2014 Participation Agreements, B55 and Husky diverged over the meaning of the Agreements' terms. Mr. McArthur claimed that Husky had to offer newly-developed leases to B55 on a lease-by-lease basis and that B55 had the right to opt in to participating in individual leases so offered. Holding this view, Mr. McArthur purported to reject certain leases that Husky had acquired. Husky disagreed with Mr. McArthur's reading of the Participation Agreements and warned B55 that failure to pay its share of the costs for newly-developed leases would forfeit B55's right to participate in future leases.

         Around this time, Mr. McArthur demanded that Husky buy out his interests in Prairie Grove and Viking for $25.6 million, more than five times B55's original investment just a few months earlier. Mr. McArthur informed Mr. Long that, if Mr. Long did not agree, Mr. McArthur would cause problems for Husky with service providers and other participants in its projects.

         Mr. Long refused. True to his word, Mr. McArthur responded by causing problems for Husky. As a result of Mr. McArthur's efforts, several companies involved in Husky's projects took adverse legal actions against Husky. For example, Mr. McArthur contacted LaMunyon Drilling ("LaMunyon"), a Husky contractor that had drilled wells for Husky's Cimarron, Chisholm Trail, and Prairie Grove projects. At that time, Husky and LaMunyon were in talks to resolve a dispute over billing and the quality of a drilling job that LaMunyon had performed for Husky. Those talks ended, however, after Mr. McArthur convinced LaMunyon not to settle with Husky; instead, at Mr. McArthur's urging, LaMunyon filed liens against a number of Husky's wells.

         Under the Participation Agreements, contractors filing liens against Husky's wells could serve as grounds to remove Husky as operator. Mr. McArthur was well aware of this fact. Indeed, he had reached out to Gastar Exploration ("Gastar"), a participant in several of Husky's projects, and offered, in return for over $9 million, to precipitate LaMunyon's filing of liens against a number of Husky's wells so that Gastar could oust Husky as operator. The day after LaMunyon filed its liens, Mr. McArthur sued Husky to remove it as operator of the Prairie Grove project. Gastar, too, notified Husky that it intended to exercise its rights to remove Husky as the operator of the Chisholm Trail and Prairie Grove projects.

         Mr. McArthur then approached Torchlight Energy Resources, Inc. ("Torchlight"). He offered to sell Torchlight information that he claimed would prove Husky had engaged in misconduct with respect to its transactions with Torchlight. Torchlight agreed, and it later sued Husky in Texas.

         Mr. McArthur's actions had significant negative effects on Husky. Although Husky ultimately settled its differences with Gastar, it was forced to give up its interests in the entirety of Chisholm Trail and a section of Prairie Grove. In addition, all past agreements between Gastar and Husky were terminated, and Husky was deprived of the benefit of Gastar's participation in its other ventures. Together, Gastar's departure and the costs of defending the Gastar suit (as well as the LaMunyon and Torchlight suits) caused Husky to lose several leases and severely limited its ability to drill future wells.

         B

         Husky sued B55 and Mr. McArthur in state court, alleging breach of contract and tortious interference with contract or business relationships under Oklahoma law. Husky sought a declaratory judgment on the contract-interpretation dispute between it and B55 and to quiet title to leases affected by that dispute. It also sought a permanent injunction prohibiting B55 and Mr. McArthur from contacting several of its business partners. And for the harms arising from the interference and breach of contract claims, Husky requested damages. B55 counterclaimed for breach of contract, declaratory judgment, and fraud.

         After the suit was removed to federal court under diversity jurisdiction, a six-day trial ensued. The trial ended with a jury verdict in Husky's favor on its tortious interference claim. On this claim, the jury awarded Husky $4 million in compensatory damages against both B55 and Mr. McArthur and $2 million in punitive damages against Mr. McArthur individually. The jury rejected the fraud counterclaims presented to it.

         After the verdict, the district court held more proceedings concerning the requests for a declaratory judgment and a permanent injunction. The court granted Husky a declaratory judgment on the interpretation of the Participation Agreements and issued a permanent injunction prohibiting B55 and Mr. McArthur from contacting Husky's business partners and from further interfering with Husky's business. On January 17, 2017, the court entered final judgment.

         Later that month, B55 and Mr. McArthur filed a timely notice of appeal, which identified "the final judgment entered in this action on January 17, 2017," as the decision being appealed. Id., Vol. XXVII, at 6165 (Notice of Appeal, dated Jan. 31, 2017). B55 and Mr. McArthur also moved for a new trial under Rule 59(a) or, in the alternative, to certify a question of state law to the Oklahoma Supreme Court. Relevant to both requests, they argued that Oklahoma law requires individual apportionment of liability as between joint tortfeasors. Hence, B55 and Mr. McArthur claimed that the district court erred by instructing the jury to find a single sum of compensatory damages against them both. In April 2017, the district court denied the motion in all respects.

         II

         On appeal, B55 and Mr. McArthur's first three claims of error concern the district court's order denying their motion for a new trial. For example, in specifying the appellate issues, they ask: "Did the District Court err by denying B55's motion for new trial because of the errors in the verdict form and final judgment which awarded liability on a joint and several basis rather than a several basis?"[3] Aplts.' Opening Br. at 3 (emphasis added). Before we consider the merits of these claims, however, we must determine whether we have appellate jurisdiction to do so. Given that B55 and Mr. McArthur did not file a new or amended notice of appeal addressing this denial of relief, we conclude that we lack appellate jurisdiction over these claims.

         A

         It is well established that "[a] timely-filed notice of appeal is 'mandatory and jurisdictional.'" Yost v. Stout, 607 F.3d 1239, 1242 (10th Cir. 2010) (quoting Budinich v. Becton Dickinson & Co., 486 U.S. 196, 203 (1988)). Under Federal Rule of Appellate Procedure ("Appellate Rule") 3(c)(1)(B), the notice of appeal must "designate the judgment, order, or part thereof being appealed." And Appellate Rule 4(a)(4)(B)(ii) adds that, to challenge an order ruling on a timely Rule 59(a) motion for a new trial, a party must file a timely notice of appeal or amended notice of appeal "in compliance with [Appellate Rule] 3(c)."[4] Thus, we lack appellate jurisdiction over a challenge to an order denying a Rule 59(a) motion for a new trial unless the appellant designated that order "or parts thereof . . . in the notice of appeal." Cunico v. Pueblo Sch. Dist. No. 60, 917 F.2d 431, 444 (10th Cir. 1990); cf. Foote v. Spiegel, 118 F.3d 1416, 1422 (10th Cir. 1997) ("We have no jurisdiction to review the denial of qualified immunity . . . because it was not identified in the notice of appeal.").

         B

         B55 and Mr. McArthur did not file a new or amended notice of appeal with respect to the district court's ruling on their Rule 59(a) motion. Thus, Appellate Rule 4(a)(4)(B)(ii) and our caselaw interpreting it appear to bar any challenge to that ruling. See Breeden v. ABF Freight Sys., Inc., 115 F.3d 749, 752 (10th Cir. 1997) (holding that, "once the district court ruled on" a Rule 59(e) motion, a previously-filed notice of appeal "ripened" and became effective to appeal "the underlying case" and any orders specified in the notice of appeal, but failure to timely amend the earlier notice of appeal deprived this court of jurisdiction to review the Rule 59(e) ruling); accord Ysais v. Richardson, 603 F.3d 1175, 1179 (10th Cir. 2010); cf. Smith v. United States, 561 F.3d 1090, 1096 (10th Cir. 2009) (exercising jurisdiction over appeal of denial of Rule 59(e) motion because plaintiff filed separate notice of appeal relating specifically to that denial).

         B55 and Mr. McArthur argue that they were not required to file a new or amended notice of appeal because "no issues presented by B55 on appeal were presented solely in its motion for new trial." Aplts.' Suppl. Br. at 3; see also id. ("[I]n this case, there is nothing new in the order denying the motion for new trial that changes or alters the judgment or rulings made by the district court."). They cite Hopkins v. I.R.S., 318 Fed.Appx. 703 (10th Cir. 2009) (unpublished), for the proposition that Appellate Rule 4(a)(4)(B)(ii) does not apply because there were no issues unique to the denial of the Rule 59(a) motion. According to B55 and Mr. McArthur, "the district court's order denying [their Rule 59(a)] motion did not change or alter the status quo of the appealable issues," obviating the need for a new or amended notice of appeal. Aplts.' Suppl. Br. at 5.

         But that argument is untenable in light of the plain text of Appellate Rule 4(a)(4)(B)(ii), which speaks of the order being challenged, not the issues raised in the specified post-judgment motions. See Fed. R. App. P. 4(a)(4)(B)(ii) ("A party intending to challenge an order disposing of [a Rule 59(a) motion] . . ., must file a notice of appeal, or an amended notice of appeal . . . ." (emphasis added)). And the rule certainly does not speak to whether the issues presented in those motions might also have been properly the subject of an appeal from the final judgment. Having elected in their appellate briefing to frame three of their claims of error as challenges to the district court's order denying their Rule 59(a) motion for a new trial, B55 and Mr. McArthur must abide by the consequences of doing so. See also Aplts.' Reply Br. at 2 n.1 (reiterating that several arguments in this appeal challenge the district court's ruling on the Rule 59(a) motion).

         Our caselaw confirms the soundness of this conclusion. For example, in Breeden, the plaintiff's Rule 59(e) motion challenged the district court's failure to award pre-judgment interest, and we dismissed the plaintiff's appeal from the district court's order denying that motion for failure to file a new or amended notice of appeal. 115 F.3d at 752. We did not analyze whether this issue was unique to or solely appealable from the Rule 59(e) order; indeed, it seems that this issue could have been raised in a challenge to the final judgment. See, e.g., Cook v. Rockwell Intern. Corp., 618 F.3d 1127, 1134 (10th Cir. 2010) (observing that the district court's final judgment included an award of prejudgment interest); Xiong v. Knight Transp., Inc., 77 F.Supp.3d 1016, 1020, 1029 (D. Colo. 2014) (granting the plaintiff's request for entry of final judgment to include an award of ...


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