     Case: 17-10500      Document: 00514640943         Page: 1    Date Filed: 09/13/2018




           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT
                                                                     United States Court of Appeals
                                                                              Fifth Circuit
                                      No. 17-10500                          FILED
                                                                    September 13, 2018

SEISMIC WELLS, L.L.C.,                                                 Lyle W. Cayce
                                                                            Clerk
              Plaintiff - Appellee

v.

SINCLAIR OIL AND GAS COMPANY,

              Defendant - Appellant




                   Appeal from the United States District Court
                        for the Northern District of Texas
                              USDC No. 5:15-CV-148


Before REAVLEY, GRAVES, and COSTA, Circuit Judges.
PER CURIAM:*
       After the district court tossed out Seismic Wells, L.L.C.’s claims at trial,
Sinclair Oil & Gas Co. sought attorneys’ fees under a contractual prevailing
party provision. The district court denied that fee request. We AFFIRM.
                                             I.
       Years before these parties got together, Seismic agreed to a long term oil
and gas lease that made it the sole operator on the Miller Ranch in west Texas.



       * Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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                                      No. 17-10500
Under that arrangement, Seismic could partner with oil companies to drill
wells, but the right to operate would revert to Seismic when those companies
stopped drilling.
       In 2005, Seismic signed a participation agreement with Sinclair Oil
Corporation (a precursor to Sinclair Oil & Gas).                   Sinclair Corporation
purchased a 37.5% stake in the Miller Ranch lease and had the option to
assume operations; Seismic shared 3D seismic data for the lease with Sinclair;
and the parties both agreed to fund the drilling of certain wells and split other
expenses in proportion to their ownership interests.
       While the initial agreement was in effect, Sinclair Corporation conveyed
its interest in the lease to Sinclair Oil & Gas through the conduit entity
Sinclair Companies. 1 In 2006, Seismic and Sinclair entered into a replacement
participation agreement under which Sinclair assumed lease operations and
paid Seismic for an additional ownership interest of nearly 16%. At the same
time Seismic and Sinclair finalized a Joint Operating Agreement (JOA) that
provided additional detail regarding the responsibilities and liabilities of the
parties in developing the lease.
       After discovering that Sinclair was marketing its interest, including the
right to operate wells on the lease, Seismic sought assurances that Sinclair
would fulfill its obligations under the agreements. When those assurances
were not forthcoming, Seismic and its principal Barry Tranckino filed suit
against the three Sinclair entities and executive/director Ross Matthews. The
first amended complaint alleged 17 counts, including claims of fraud, breach of
contract, conspiracy, tortious interference, defamation/libel, and business
disparagement. 2 At the conclusion of the plaintiffs’ case at trial, the court


       1Going forward, we refer to Sinclair Oil & Gas as Sinclair.
       2The district court dismissed with prejudice Seismic’s promissory estoppel claim
(Count 9). And Sinclair did not seek to recover fees sustained defending against the tortious
                                             2
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                                     No. 17-10500
granted defendants’ motion for judgment as a matter of law.
       The Sinclair entities and Matthews then sought just over $1 million in
attorneys’ fees incurred defending against Seismic’s claims.                Defendants
contended they were entitled to fees pursuant to the JOA’s prevailing party
provision. That provision says, “In the event any party is required to bring
legal proceedings to enforce any financial obligation of a party hereunder, the
prevailing party in such action shall be entitled to recover . . . a reasonable
attorney’s fee.”
       The court denied the motion for three reasons: (1) the defendants failed
to properly plead under Federal Rule of Civil Procedure 9(g); (2) the prevailing
party provision does not apply because Seismic’s suit was not a legal
proceeding brought to enforce a “financial obligation under the JOA”; and (3)
Sinclair did not adequately segregate its fee to isolate the work performed
defending fee-eligible claims.
                                           II.
       Because we agree with the district court’s second reason—that the JOA’s
prevailing party provision does not support an award of fees—it is the only one
of the three issues we need to address. Of course, Sinclair prevailed when it
obtained a full dismissal of Seismic’s claims, a decision our court has now
affirmed. See Seismic Wells, L.L.C. v. Sinclair Cos., No. 17-10373, 2018 WL
4191020, at *4–8 (5th Cir. Aug. 31, 2018) (upholding that judgment). But
prevailing party status is not enough. The question it whether it prevailed in
a lawsuit seeking “to enforce any financial obligation of a party” under the
JOA.




interference, defamation/libel, and business disparagement claims (Counts 13–16). So those
claims are not relevant to this appeal.
                                            3
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                                     No. 17-10500
                                            A.
      We first address whether Seismic sued to “enforce” an obligation. Counts
1–3, 5, 7–8, and 10–11 of the amended complaint alleged fraud that induced
the plaintiffs to sign the replacement participation agreement and JOA. 3
Those claims sought to void the agreements, not enforce them. Because the
fraud claims sought to render the contracts unenforceable, they do not come
within the scope of the fee provision. Cf. Formosa Plastics Corp. USA v.
Presidio Eng’rs & Contractors, Inc., 960 S.W.2d 41, 46 (Tex. 1998) (reaffirming
“that the legal duty not to fraudulently procure a contract is separate and
independent from the duties established by the contract itself”).
      Seismic did allege, however, that Sinclair breached the initial
participation agreement (Count 6) and its replacement (Count 12). And claims
for breach of contract are the usual way parties look to enforce agreements in
litigation.   So those two claims at least clear the “enforce” hurdle to fee
recovery.
                                            B.
      But the fee provision provides more obstacles. It does not apply unless
the claims were brought to enforce the JOA. See Intercontinental Grp. P’ship
v. KB Home Lone Star L.P., 295 S.W.3d 650, 661 (Tex. 2009) (recognizing that
“hereunder” means under “this Contract”). That easily disposes of Count 6,
which alleged breach of the initial participation agreement signed over a year
before the JOA. See Fleet Oil & Gas, Ltd. v. EOG Res., Inc., 2014 WL 2159537,
at *6 (Tex. App.—Waco May 22, 2014) (denying fees under a nearly identical
provision because EOG asserted claims based on “an additional, separate




      3  There is no Count 4 in the first amended complaint, though Count 4 in the original
complaint alleged fraudulent concealment, which we address and reject as a basis for fees
like the other fraud counts.
                                            4
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                                       No. 17-10500
agreement,” never raising or prevailing on claims permitting recovery under
the JOA).
       That same problem also applies to Count 12, as it alleged breach and
anticipatory breach of the replacement participation agreement.                       Though
Seismic’s complaint indicated that the JOA was “expressly incorporated into
the Replacement Participation Agreement,” it was in reality attached to the
contract as “Exhibit ‘C’ to that certain first agreement dated November 1,
2006.” Exhibit “A,” by contrast, was “[a]ttached to and made part of that
certain Participation Agreement.” (emphasis added). Moreover, Exhibit “A”
lists the “[l]eases [s]ubject to the Participation Agreement and Joint Operating
Agreement,” suggesting their separateness. (emphasis added).                               The
replacement participation agreement and JOA are not one and the same. See
Seismic Wells, 2018 WL 4191020, at *2 (recognizing that in addition to the
replacement agreement the parties executed the JOA and an “Assignment and
Bill of Sale” the same day).
       It would seem then that Count 12, like all the others, cannot provide a
basis for recovering fees. But one wrinkle remains. Count 12 also alleges that
Sinclair breached the JOA by refusing to assign Seismic a leaky well or operate
that well on its terms. As a result of the leak, water corroded the well’s inner
casing. This portion of Count 12 thus did seek to enforce the JOA.
                                              C.
       But that is not enough to get Sinclair across the finish line.                      The
allegations must be seeking to enforce a “financial obligation.” 4



       4  Seismic’s contention that Sinclair only sought fees incurred defending against the
fraud claims is without merit. In its motion Sinclair did repeatedly ask for fees related to
the “fraud-based claims.” But in discussing those claims, Sinclair specifically pointed to
Seismic’s allegation in Count 12 about the well assignment. Moreover, while Sinclair
explicitly noted that it was not seeking fee recovery on the tortious interference or defamation
claims, it did no such thing with respect to breach.
                                               5
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                                  No. 17-10500
       One court has evaluated “financial obligation,” which the JOA does not
define, in the context of the same provision. It concluded that the term’s
ordinary meaning “requires some nexus to a monetary or pecuniary obligation
of the party.” In re WBH Energy, LP, 2016 WL 3049666, at *12–13 (W.D. Tex.
Bankr. May 20, 2016) (citing Black’s Law Dictionary). The defendant in that
case had a financial obligation under the JOA to pay its share of joint interest
billings as well as vendors and suppliers; if it had been sued for defaulting on
those obligations and lost, its counterparty could have recovered fees. Id. at
*13. But instead the primary remedy the plaintiff sought and the only one it
obtained was injunctive (removing defendant as an operator). Id. at *14. The
court held that preserving rights—including lien and operatorship ones—is a
“far, far cry” from enforcing a financial obligation, so the plaintiff could not
recover fees. Id. at *15; see also WBH Energy, L.P., 708 F. App’x 210, 211–12
(5th Cir. 2018) (affirming the bankruptcy court and agreeing with its analysis).
      Although Seismic sought monetary damages, that does not mean it was
enforcing a financial obligation. Damages are sought in lawsuits for various
types of injuries.    If, for example, water from a rainstorm damaged a
homeowner’s property, she could seek damages from a contractor who had
improperly fixed the leaky roof. But that does not make the contractor’s duty
to fix the roof financial in nature.
      Seismic believed the leaky but still-productive well should be repaired,
like many others in that area with casing leaks, whereas Sinclair thought that
it should be plugged and abandoned. Seismic sued after it had elected to take
over the well but Sinclair declined to reassign it. Turning over operatorship
rights and running the well on Seismic’s preferred terms are not financial
obligations. Sinclair did not refuse to make some payment specified in the
agreement. Because the purported obligation to turn over the well was not
financial, Sinclair cannot obtain fees on this remaining claim.
                                       6
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                           No. 17-10500
                                ***
 We AFFIRM the district court’s denial of attorneys’ fees.




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