Line Finders v. Devon Energy Production ( 2023 )

Appellate Case: 22-8013 Document: 010110810042 Date Filed: 02/08/2023 Page: 1
FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT February 8, 2023
_________________________________
Christopher M. Wolpert
Clerk of Court
LINE FINDERS, LLC,
a Wyoming limited liability company,
Plaintiff - Appellant,
v. No. 22-8013
(D.C. No. 2:21-CV-00237-ABJ)
DEVON ENERGY PRODUCTION (D. Wyo.)
COMPANY, L.P., an Oklahoma limited
partnership,
Defendant - Appellee.
_________________________________
ORDER AND JUDGMENT*
_________________________________
Before HARTZ, TYMKOVICH, and MATHESON, Circuit Judges.
_________________________________
Plaintiff Line Finders, LLC entered into a contract with Defendant Devon
Energy Production Company, L.P. to perform services on oil wells. After two Line
Finders employees were injured in an accident while working on one of Devon
Energy’s oil wells, Line Finders filed a declaratory-judgment action against Devon
Energy seeking to invalidate certain portions of the contract as void and
*
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist in the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral
estoppel. It may be cited, however, for its persuasive value consistent with
Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
Appellate Case: 22-8013 Document: 010110810042 Date Filed: 02/08/2023 Page: 2
unenforceable under Wyoming law. The district court dismissed the claim under the
doctrine of res judicata, concluding that the matter had been fully litigated to a final
judgment in federal district court in Oklahoma, and Line Finders therefore could not
pursue the same claim in another court. Line Finders appeals the district court’s
conclusion that res judicata applies. Exercising jurisdiction under 28 U.S.C. § 1291,
we affirm.
I. Background
The following recitation of facts comes from the allegations in Line Finders’
complaint, which we accept as true for purposes of reviewing a dismissal under Fed.
R. Civ. P. 12(b)(6). See Safe Streets All. v. Hickenlooper, 859 F.3d 865, 878 (10th
Cir. 2017). Line Finders provides services to companies, such as Devon Energy, in
the oil-and-gas industry in Wyoming. Devon Energy and Line Finders entered into a
Master Service and Supply Agreement (MSSA) in which Line Finders agreed:
to defend, indemnify, hold harmless, and release [Devon Energy] from
and against all claims, losses, damages, demands, causes of action,
suits, judgments, and liabilities of every kind (including all expenses of
litigation, court costs, and reasonable attorneys’ fees), brought or
asserted against [Devon Energy] by any party . . . , directly or indirectly
arising out of or related to this Agreement . . . and resulting from any
claim of loss, damage, injury, illness, or death . . . regardless . . . of who
may be at fault or otherwise responsible under any other contract, or any
other statute, rule, or theory of law . . . , and even though the subject
loss, damage, injury, illness, or death may have been caused in whole or
in part by . . . the sole, concurrent, active, or passive negligence of
[Devon Energy] or a third party.
Aplt. App. at 23. The MSSA further stated these obligations apply to “[p]ersonal
injury to, bodily injury to, emotional or psychological injury to, property or wage
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loss, benefits loss, illness, or death of [Line Finders’] employees . . . .” Id. The
MSSA also contained a forum-selection clause identifying Oklahoma as the exclusive
venue for the resolution of any dispute arising from the contract.
In October 2018, Line Finders employees Marcus Murschel and Michael
Elsasser were injured while providing services under the MSSA. Mr. Murschel later
sent a letter through counsel to Devon Energy demanding compensation for his
injuries. Devon Energy denied Mr. Murschel’s demand and invoked the provision of
the MSSA requiring Line Finders to defend and indemnify Devon Energy. Line
Finders refused to do so.
Devon Energy then filed a declaratory-judgment action against Line Finders in
the United States District Court for the Western District of Oklahoma, claiming that
Line Finders breached the MSSA by failing to defend and indemnify it from the
claims asserted by Mr. Murschel.
Eventually Line Finders and Devon Energy engaged in settlement discussions,
culminating in an agreement that was memorialized in a written settlement
agreement. The agreement stated that if Mr. Murschel or Mr. Elsasser made claims
against Devon Energy, the parties would jointly submit a claim to Arch Insurance
Company to defend and indemnify Devon Energy, and that if Arch did not agree to
do so, then Line Finders would do so under the MSSA. Before Line Finders signed
the settlement agreement, however, Mr. Elsasser submitted a demand to Devon
Energy. Claiming that Mr. Elsasser’s demand changed the circumstances, Line
Finders declined to sign the settlement agreement.
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Devon Energy moved to enforce the settlement agreement, and the district
court granted the motion. The court then entered a judgment, the substance of which
the parties had agreed to as part of the settlement agreement. The judgment noted
Line Finders’ indemnity and defense obligations under the MSSA and concluded that
in accordance with those provisions, Line Finders was obligated to defend Devon
Energy against the claims in Mr. Murschel’s demand letter. Line Finders appealed,
arguing among other things that the district court erred in enforcing the settlement
agreement. We affirmed in an unpublished opinion. See Devon Energy Prod. Co. v.
Line Finders, LLC, Nos. 21-6119 & 21-6162, 2022 WL 4232404 (10th Cir. Sept. 14,
2022).
While its appeal from the Western District of Oklahoma was still pending in
this court, Line Finders filed a declaratory-judgment action in Wyoming state court,
claiming the defense and indemnity provisions of the MSSA violated Wyoming
public policy. Devon Energy removed the case to the United States District Court for
the District of Wyoming, then moved to dismiss on several grounds, including res
judicata. The district court granted the motion to dismiss on the ground of res
judicata, concluding that the matter of Line Finders’ defense and indemnity
obligations had been fully litigated to a final judgment in Oklahoma federal district
court, and Line Finders was therefore precluded from pursuing the same claim in
another court.
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II. Discussion
Line Finders argues the district court erred in dismissing its complaint based
on res judicata. “A district court’s conclusions as to res judicata are conclusions of
law and reviewable de novo.” Clark v. Haas Grp., Inc., 953 F.2d 1235, 1237
(10th Cir. 1992) (italics omitted). The parties do not disagree on the fundamentals of
res judicata. “Under res judicata, or claim preclusion, a final judgment on the merits
of an action precludes the parties or their privies from relitigating issues that were or
could have been raised in the prior action.” Wilkes v. Wyo. Dep’t of Emp. Div. of
Lab. Standards, 314 F.3d 501, 503-04 (10th Cir. 2002). Three elements must exist
for the doctrine of res judicata to apply: “(1) a final judgment on the merits in an
earlier action; (2) identity of parties or privies in the two suits; and (3) identity of the
cause of action in both suits.” Id. at 504 (brackets & internal quotation marks
omitted). Even if all the elements are satisfied, the doctrine does not apply if the
party opposing its application “did not have a full and fair opportunity to litigate the
claim in the prior action.” Johnson v. Spencer, 950 F.3d 680, 693 (10th Cir. 2020)
(internal quotation marks omitted).
Line Finders argues that (1) it did not have a full and fair opportunity to
litigate the issues, and (2) there was no identity of claims because the Oklahoma case
did not address the issue of indemnification or the demand by Mr. Elsasser. We
reject both arguments.
The first argument is based on the observation that the Oklahoma district
court’s judgment makes no mention of Mr. Elsasser and only addresses Line Finders’
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duty to defend, not its duty to indemnify. But this argument artificially confines the
preclusion analysis to the judgment, ignoring the settlement agreement on which it is
based. “Under federal law, settlements have claim-preclusive effect between parties
to the settlement.” Denver Homeless Out Loud v. Denver, 32 F.4th 1259, 1271 (10th
Cir. 2022) (brackets and internal quotation marks omitted); see also Hoxworth v.
Blinder, 74 F.3d 205, 208 (10th Cir. 1996) (“Generally, court-approved settlements
receive the same res judicata effect as litigated judgments.”). A settlement
agreement “can supplant traditional preclusion principles if it is clear that the parties
intended preclusion as part of their agreement.” Denver Homeless, 32 F.4th at 1271
(internal quotation marks omitted).
The settlement agreement states in pertinent part:
In the event Marcus Murschel or Michael El[s]asser takes any
action to advance his claim against Devon, the Parties will jointly
submit a claim to Arch Insurance Company to defend, indemnify, and
hold harmless Devon against such claim. If Arch Insurance Company
does not promptly and unequivocally assume the defense and agree to
indemnify Devon within an agreed period of time, then [Line Finders]
promptly will defend and indemnify Devon with defense counsel of
Devon’s choosing in accordance with the MSSA and the Judgment.
[Line Finders] will not seek to negate or avoid its defense or indemnity
obligations to Devon under the MSSA and the terms and conditions of
this Agreement by asserting defenses including but not limited to public
policy, the workers’ compensation laws of Wyoming and rules of the
Wyoming Workers’ Compensation Division, and Wyoming Statutes
Annotated section 30-1-131 et seq.
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Compromise & Settlement Agreement, No. 5:20-cv-00636-F, ECF No. 41-1, at 2.1
This language plainly prevents either party from relitigating any disputes regarding
Line Finders’ defense and indemnity obligations arising from demands made by
either Mr. Murschel or Mr. Elsasser. We therefore reject Line Finders’ argument that
it did not have a full and fair opportunity to litigate the issues. Line Finders cannot
knowingly enter into a settlement ending litigation over its obligations under the
MSSA only to later claim it did not have an opportunity to litigate the scope of those
obligations.
Our conclusion is buttressed by our recent decision in Denver Homeless, 32
F.4th 1259. There, Denver officials had authorized sweeps of homeless
encampments, which gave rise to a class action that was resolved in a settlement
agreement. See id. at 1264. The agreement provided that anyone in Denver whose
belongings may in the future be taken without due process as the result of such
sweeps forever released the City from any liability related to the class action or to the
City’s custom of sweeping homeless encampments. See id. It further provided that
the plaintiffs in the class action “shall not, under any circumstances, seek to present
further claims on behalf of themselves or others” against the defendants. Id.(emphasis and internal quotation marks omitted). The district court then entered a
final judgment dismissing the class action as settled. See id.1
Although this document was not included in the appendix, we take judicial
notice of it because it is a publicly filed document in our court “concerning matters
that bear directly upon the disposition of the case at hand,” United States v. Ahidley,
486 F.3d 1184, 1192 n.5 (10th Cir. 2007).
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Later, Denver Homeless Out Loud and several individual plaintiffs filed a new
lawsuit against Denver to enforce the settlement and to assert new civil-rights claims
based on sweeps conducted after the settlement agreement was executed. See id. at
1267. We held that the “plain text of the . . . settlement agreement makes clear the
parties intended it to have preclusive effect.” Id. at 1271. Accordingly, the
plaintiffs’ new constitutional claims were barred by res judicata. See id. at 1277.
As in Denver Homeless, the Wyoming district court did not limit its analysis to
the judgment entered in the Oklahoma lawsuit. Instead, it examined the underlying
settlement agreement and concluded that the parties clearly intended it to have
preclusive effect concerning Line Finders’ defense and indemnity obligations arising
from claims by Mr. Murschel and Mr. Elsasser. The district court committed no error
in doing so.
Line Finders’ second argument is a variation of the first. It argues there is no
identity of claims because Mr. Elsasser’s demand was not part of Devon Energy’s
Oklahoma lawsuit and was not mentioned in the judgment. But “contractual
provisions can supplant traditional preclusion principles if it is clear that the parties
intended preclusion as part of their agreement.” Denver Homeless, 32 F.4th at 1271
(internal quotation marks omitted). And as we noted in rejecting Line Finders’ prior
appeal, the settlement agreement “expressly recognized the possibility that Mr.
Elsasser could make a demand, and the agreement set forth the parties’ obligations if
he did.” Devon Energy Prod. Co., 2022 WL 4232404, at *3. The settlement
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agreement clearly intended to bar Line Finders from litigating its defense and
indemnity obligations arising from future demands by Mr. Elsasser.2
III. Conclusion
We affirm the judgment of the district court.
Entered for the Court
Harris L Hartz
Circuit Judge
2
Devon Energy identified two other grounds for affirming: the “first to file”
rule and the mandatory forum-selection clause in the MSSA. We need not address
those arguments in light of the foregoing analysis.
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