Calpetco 1981 v. Marshall Exploration, Inc. ( 1993 )

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_________________________________________
No. 92-4274
_________________________________________
CALPETCO 1981, a Limited Partnership, ET AL.,
Plaintiffs-Appellants,
VERSUS
MARSHALL EXPLORATION, INC., ET AL.,
Defendants-Appellees.
_________________________________________________________________
Appeal from the United States District Court
for the Eastern District of Texas
_________________________________________________________________
April 26, 1993
Before WILLIAMS, HIGGINBOTHAM, and BARKSDALE, Circuit Judges.
BARKSDALE, Circuit Judge:
The instant dispute between the non-operator and operator in
a series of oil and gas drilling ventures turns for the most part
on the burdens of proof and standard for summary judgment. Also in
issue are bench trial findings of fact. We AFFIRM.
I.
James Michael began oil and gas investments for himself and
his law partners in 1967. He developed a structure for the
investments, whereby he would form a business entity to serve as
the general partner in a series of limited partnerships, with the
investors as the limited partners. Those partnerships, some
bearing the name "Calpetco" (the prior Calpetco entities), invested
with numerous oil and gas operators.
In 1979, Michael met Quinton Carlile, President and CEO of
Marshall Exploration, Inc.; and, after some discussion, the prior
Calpetco entities began investing with Marshall. These investments
were quite successful, and continued until 1981. That year,
Michael incorporated Calpetco Enterprises, which was wholly owned
by him. Calpetco Enterprises and Michael became the general
partners in a series of limited partnerships (the Calpetco
partnerships) formed to invest in the drilling, development, and
operation of oil and gas wells. It was Michael's intention that a
major portion of the partnership funds would be invested with
Marshall, and he again engaged in discussions with Carlile
regarding Marshall's drilling program and billing practices.
In June 1981, Marshall and Calpetco 1981 (one of five Calpetco
partnerships in this litigation) entered into an operating
agreement, which was to be read in conjunction with investment-
specific letter agreements to govern the drilling, completion, and
production of each well or group of wells. Exhibit "C" to the
Operating Agreement is standard accounting procedures,1 which
provide that Calpetco may pay charges from Marshall without
prejudice to its right to later contest their validity. However,
all bills and statements issued in the course of a calendar year
are "conclusively ... presumed to be true and correct" 24 months
1
The procedures are virtually identical to those promulgated by
the Council of Petroleum Accountants Societies, and are standard in
the oil and gas industry.
2
after the end of the calendar year in which they were rendered
unless, within those 24 months, the non-operator (Calpetco) "takes
written exception thereto and makes claim on Operator [Marshall]
for adjustment".
The accounting procedures also allowed Calpetco to audit
Marshall's accounts and records within the 24-month adjustment
period. Audits were to be conducted at Calpetco's expense, and did
not extend the time for filing written exceptions and demands for
adjustment. In case of conflict between the terms of any of these
documents, the Operating Agreement controlled the accounting
procedures, and both were controlled by the applicable letter
agreement.
The Calpetco partnerships entered into 73 letter agreements
with Marshall, representing investment in 55 wells. Some of these
wells enjoyed less success than Michael's earlier investments with
Marshall; and in September 1982, Michael began to express his
concerns to Carlile. Michael (also a party to this litigation, see
note 2 infra) contends that, by early 1985, he began to seriously
question representations Marshall had made to him between 1981 and
1984, which he contends induced his participation in the various
ventures. That April, he began to review certain charges and
request documentation from Marshall. Extensive communication
continued for almost two years, with Calpetco asserting overcharges
by Marshall, and Marshall asserting that some of the Calpetco
partnerships had not paid amounts due. Marshall did conduct at
3
least a partial review of the Calpetco accounts and some
adjustments were made.
After unsuccessful attempts at settlement, Marshall filed this
action in April 1987 against five Calpetco partnerships,2 seeking,
inter alia, a declaration that charges questioned by Calpetco were
conclusively presumed correct. Calpetco responded with 16
counterclaims3 against Marshall and five additional third party
defendants,4 based primarily on alleged misrepresentations and
overcharges.
Following more than three years of extensive discovery,
Marshall moved for partial summary judgment in January 1991, on the
grounds that many of Calpetco's claims were barred by either the
contractual 24-month adjustment period or the Texas four year
statute of limitations for breach of contract claims. In response,
2
In June 1989, all of the Calpetco partnerships, represented by
retained counsel, transferred their interest in this litigation to
Michael, who thereafter proceeded pro se. We continue to refer to
the appellants as "Calpetco".
3
Included were claims for breach of contract, rescission,
intentional and negligent misrepresentation, fraud, negligence,
gross negligence, and breach of fiduciary duty. Statutory claims
included the Securities Act of 1933, Securities Exchange Act of
1934, RICO, Texas Deceptive Trade Practices Act (DTPA), California
Unfair Practices Act, Texas Blue Sky Law ("The Securities Act"),
California Corporate Securities Law, and Louisiana Securities Law.
4
Third party defendants included Martex Drilling Co., which
performs Marshall's drilling, completion, and production
operations; Carlile & Howell, Inc., which handles Marshall's
financial and accounting services; H & C Well Service, Inc., which
conducts Marshall's site preparation; Quinton B. Carlile, President
and CEO of Carlile and Howell, Inc., Marshall, and Martex, and Vice
President of H & C ; and Carlile's partner, T.D. Howell, President
of H & C and Vice President of the other three entities. All of
the counter-defendants are referred to as "Marshall".
4
Calpetco contended that (1) the contractual and statutory
limitation periods should be tolled because Marshall had
fraudulently concealed its overcharges, preventing Calpetco from
discovering its claims in a timely manner; (2) there were genuine
issues of material fact on whether Marshall waived, or was estopped
from asserting, the 24-month limitation; and (3) in any event, the
accounting procedures did not apply to costs incurred before a well
reached contract depth. A conclusory affidavit by Michael was
filed with the response.5 After a hearing at the end of February,6
the district court granted the motion in mid-March 1991, concluding
that the accounting procedures were "clear and unambiguous" and
governed "the procedures for charges and credits for the entire
project", and that Calpetco failed to produce sufficient evidence
to show a genuine issue of material fact on its claims of
fraudulent concealment, waiver and estoppel.
In April 1991, Calpetco moved for reconsideration or
clarification, or in the alternative, certification for
interlocutory appeal. In support, it submitted a second affidavit
by Michael, with 37 attachments, chronicling the 1982 through 1987
5
Calpetco also submitted the affidavit of Robert P. Malone, an
auditor of oil and gas operations. Malone, an active member of the
Council of Petroleum Accountants Societies, helped write a later
version of the accounting procedures. He stated that the 24-month
limitation period was never intended as "an outright bar against
protests and objections after the expiration of the 24-month
period".
6
At the hearing, the court also heard, and later denied,
Marshall's second motion for partial summary judgment, which
asserted that it did not owe Calpetco a fiduciary duty and that
Calpetco was not a DTPA consumer.
5
correspondence between Marshall and Calpetco. Shortly thereafter,
Marshall filed a fourth motion for partial summary judgment,7
seeking rulings (1) that Calpetco did not timely object to any of
the challenged charges (alleged overcharges), and (2) that
therefore, all are "conclusively presumed true and correct", and at
trial, Calpetco could not challenge those charges for any purpose.
Because the court considered both motions "really ... one in the
same", they were heard together. Marshall's was granted;
Calpetco's, denied.
All remaining claims (including negligence, gross negligence,
and over 30 alleged misrepresentations8) were heard in a four-day
bench trial in December 1991. In accordance with the partial
summary judgment on the fourth motion, the court excluded all
evidence of overcharges. At the close of Calpetco's (the
plaintiff's) case,9 and on motion by Marshall, the court, pursuant
to newly-amended Fed. R. Civ. P. 52(c), made a series of findings
and ruled against Calpetco on several of its claims.10 Following
7
The third motion, filed in February 1991, was not contested.
The district court ruled that Texas law would govern all claims,
except those brought under federal law, and granted judgment
against Calpetco's claims under Louisiana and California law.
8
These alleged misrepresentations formed the basis of
Calpetco's remaining claims of intentional misrepresentation,
negligent misrepresentation, breach of fiduciary duty, and fraud,
as well as violations of the 1933 and 1934 Federal Securities Acts,
RICO, and the Texas Blue Sky Law and DTPA.
9
The court had realigned the parties.
10
It ruled that Calpetco had failed to establish a RICO
violation or the existence of a fiduciary relationship, and
disposed of some, but not all, of the alleged misrepresentations.
The court also noted that Calpetco had conceded that its federal
6
trial, and pursuant to findings of fact and conclusions of law, the
court ruled against Calpetco on all remaining claims.11
II.
Calpetco raises numerous points of error, including the
partial summary judgments, denial of its motion for reconsid-
eration, and rulings on several of its Texas DTPA and Securities
Act claims.
A.
In challenging the first partial summary judgment, Calpetco
asserts, inter alia, error in the district court's interpretation
of the contractual language, and its refusal to toll the 24-month
adjustment period and statute of limitations on the basis of
fraudulent concealment, or bar reliance on the accounting
procedures under the doctrines of waiver or estoppel.12 Of course,
we review a summary judgment de novo, applying the same standard
used by the district court. E.g., Skotak v. Tenneco Resins, Inc.,
securities claims were time-barred.
11
The court held that Marshall was not negligent or grossly
negligent in drilling or completing any of the wells, that Marshall
had not made negligent, intentional, or fraudulent
misrepresentations to Calpetco, and that Calpetco had failed to
establish its claims of fraud or violation of the Texas Blue Sky
Law or DTPA.
12
Calpetco also challenges the district court's conclusion that
the four year statute of limitations for breach of contract actions
began to run when the payment of each invoice became due. But, in
granting the fourth motion for partial summary judgment, the court
disposed of Calpetco's breach of contract claim solely on the basis
that no written objection was filed within the contractual adjust-
ment period. Because none of Calpetco's claims were ultimately
held barred by the statute of limitations, and because we agree
with the adjustment period ruling, we need not reach this issue.
7
953 F.2d 909 (5th Cir.), cert. denied, __ U.S. __, 113 S. Ct. 98
(1992).
1.
The agreement between Calpetco and Marshall consists of two
documents: the letter agreement for each investment and the
Operating Agreement (with its accounting procedures), adopted by
each letter agreement. As with any set of documents executed at
the same time, with the same purpose and in the course of the same
transaction, we construe the agreements together. Jim Walter
Homes, Inc. v. Schuenemann, 668 S.W.2d 324, 327 (Tex. 1984). In
doing so, we find no ambiguity, and agree with the district court's
ruling that the accounting procedures "govern the procedures for
charges and credits for the entire project".
Calpetco contends that, under the controlling letter
agreement, the Operating Agreement applies only after each well is
drilled to contract depth, and therefore, any invoices submitted
for costs incurred in the drilling phase are not governed by the
accounting procedures. This interpretation is reasonable, Calpetco
says, because in most cases the drilling costs were turnkeyed13 and,
in others, the letter agreements explain the costs to contract
depth. Thus, there is no need for an accounting procedure at the
drilling stage.
13
Under the turnkey arrangement, Calpetco paid Marshall a fixed
price to drill a test well to a particular contract depth. Once a
well reached "casing point", or contract depth, a decision was made
to either complete or abandon it.
8
The letter agreement language on which Calpetco relies states,
however, that the Operating Agreement "shall govern operations on
the Subject Leases after the test well has been drilled to contract
depth". (Emphasis added.) This is distinctly different from
stating that it does not even take effect until that time. To the
contrary, it is clear that the Operating Agreement is applicable
from the time each letter agreement is signed. The Operating
Agreement states that it "shall be retroactive to date of first
operations, including drilling and first production". The
accounting procedures specifically address billing for overhead at
the drilling stage. Under Calpetco's interpretation, this
provision would be rendered completely meaningless, in defiance of
a basic rule of contract interpretation -- every clause is intended
to have some effect. Westwind Exploration, Inc. v. Homestate Sav.
Ass'n, 696 S.W.2d 378 (Tex. 1985).
Needless to say, interpretation of an unambiguous contract is
a question of law. E.g., Technical Consultant Services, Inc. v.
Lakewood Pipe, 861 F.2d 1357 (5th Cir. 1988). As stated, we reach
the same conclusion as did the district court, and hold that the
accounting procedures, with their 24-month adjustment period,
governed all billing and payment between Marshall and Calpetco
throughout their drilling ventures. Therefore, we turn to whether
the application of that adjustment period is foreclosed by
fraudulent concealment, waiver, or estoppel.
9
2.
Summary judgment was appropriately granted against the
fraudulent concealment, waiver, and estoppel claims if the record
as of the ruling14 revealed no genuine issue of material fact, and
if Marshall was entitled to judgment as a matter of law. Fed. R.
Civ. P. 56(c). We look to the applicable substantive law to
determine what facts are material, Lavespere v. Niagara Mach. &
Tool Works, Inc., 910 F.2d 167 (5th Cir. 1990), and then decide
whether there are any genuine disputes about those facts. Mere
disagreement is not enough; a dispute is "genuine" only "if the
evidence is such that a reasonable jury could return a verdict for
the nonmoving party". Anderson v. Liberty Lobby, 477 U.S. 242, 248
(1986). This analysis also requires close attention to the burden
of proof. Of course, the movant bears the initial burden of
showing the district court the absence of a genuine issue of
material fact. Once the movant does so, and if the issue is one
for which the nonmovant bears the burden of proof at trial, the
nonmovant must then "go beyond the pleadings and ... designate
`specific facts showing that there is a genuine issue for trial'".
Celotex Corp. v. Catrett, 477 U.S. 316, 324 (1986).15
14
For example, as discussed in note 15, infra, Michael contended
that he need not support his opposition to summary judgment with
documents he knew to be in Marshall's possession. The district
court correctly instructed: "Well, Mr. Michael, I'll say this: If
you're relying on a document for purposes of summary judgement
[sic] evidence, in order for the Court to rely on it, I've got to
have it in the record and not in opposing counsel's file."
15
At the joint hearing in February 1991 on the first and second
motions for partial summary judgment, Michael was steadfast in his
position that Marshall had the "absolute burden of proof" to show
10
a.
To establish fraudulent concealment, Calpetco has the burden
of proving that (1) Marshall had actual knowledge of the facts it
allegedly concealed (the overcharges), and (2) it was Marshall's
"fixed purpose" to conceal them. See Dotson v. Alamo Funeral Home,
577 S.W.2d 308, 311-12 (Tex. Civ. App.--San Antonio 1979, no writ).
Thus, once Marshall pointed to the absence of a factual issue for
trial, Calpetco was obligated to point to specific evidence showing
such an issue. Celotex, 477 U.S. at 324. All Calpetco could point
to were conclusory statements in Michael's affidavit (filed in
response to the motion) that Marshall "employed delaying tactics"
in response to Calpetco's requests for information, and "actively
misled Calpetco ... [and] effectively precluded Calpetco from
the absence of a genuine issue of material fact. When the court
pointed out that Michael's position did not "quite conform[]" to
the federal standard as set forth in the Supreme Court's trilogy,
Anderson v. Liberty Lobby, 477 U.S. 242 (1986); Celotex Corp. v.
Catrett, 477 U.S. 317 (1986); Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574 (1986), he retorted, "Well, that's the
law in Texas, Your Honor." Perhaps this misunderstanding of the
federal summary judgment standard explains Michael's failure to
submit documentation to support his conclusory affidavit filed with
the initial opposition to Marshall's first motion for partial
summary judgment.
In any event, it seems that, on the morning of the hearing on
the first summary judgment motion, Michael attempted to offer
documentation to support his affidavit filed three weeks earlier.
(Five days before the hearing, Marshall filed a motion to strike
Calpetco's affidavits, in part because Michael's was conclusory.)
When Marshall objected to this belated submission, Michael
explained that he did not submit the documents earlier, because he
knew they were in Marshall's file. Michael apparently saw no need
to reveal the documents to Marshall, but as noted supra, the court
explained, "If you're relying on a document for purposes of summary
judgement [sic] evidence, in order for the Court to rely on it,
I've got to have it in the record and not in opposing counsel's
file."
11
discovering in a timely manner the invalidity of the charges and
overcharges". But, no documents or other proof evidencing those
"delaying tactics" were submitted. Likewise, the statement as to
Marshall's intent or purpose to "actively mislead" came not from
one who might have knowledge of such purpose, but from the opposing
party, Michael. In sum, this is not evidence which could cause "a
reasonable jury [to] return a verdict for [Calpetco]". Liberty
Lobby, 477 U.S. at 246.
b.
Calpetco also failed to point to genuine issues of material
fact regarding Marshall's alleged waiver of its right to assert the
24-month limitation or its being estopped from doing so (discussed
infra). Waiver requires evidence that (1) Marshall was aware of
its right to assert the contractual limitation period, and (2)
expressly relinquished it or acted in a manner inconsistent with
it. See Alford, Meroney & Co. v. Rowe, 619 S.W.2d 210, 213-14
(Tex. Civ. App.--Amarillo 1981, writ ref'd n.r.e.).
First, there is no evidence that Marshall expressly
relinquished its right to assert the limitations period.
Second, and in any event, Calpetco apparently contends that
Marshall acted in a manner inconsistent with that right, by
entering into negotiations and making some adjustments in
Calpetco's account;16 but, we do not agree. The accounting
16
In its brief opposing the first summary judgment motion,
Calpetco contended that these negotiations resulted in adjustments
to charges rendered more than 24 months before. Thus, because
Marshall did not assert the 24-month adjustment period as a bar to
such negotiation, it could not assert that bar in the future. The
12
procedure states that the time for making written exception is not
extended by commencing an audit. It is clear that a non-operator
(Calpetco) who questions the accuracy of charges cannot hold its
right to file a written exception in abeyance while awaiting the
outcome of an audit. Likewise, Calpetco had no reason to believe
that it need not act within the 24-month period while awaiting the
outcome of negotiations. Marshall's attempts to reach agreement
with Calpetco cannot, as a matter of law, be interpreted as an act
inconsistent with its right to hold Calpetco to the contractual
limitations period in the event those attempts failed.
c.
Finally, to establish equitable estoppel, Calpetco is required
to show that Marshall's actions induced it to refrain from making
a claim for adjustment within the 24-month period. Gibbs v. Main
Bank, 666 S.W.2d 554, 558-59 (Tex.App.--Houston [1st Dist.] 1984,
no writ). For the reasons just noted, we hold that no genuine
factual issue on this matter was presented to the district court.
B.
Calpetco next challenges the district court's denial of its
motion to reconsider the first partial summary judgment. Because
a partial summary judgment is interlocutory in nature, the district
court retains the discretion to revise it; and we review only for
district court did not reach the merits of that legal position,
however, and we, too, decline to do so. Other than Michael's
conclusory affidavit, there was no evidence before the district
court which would tend to prove that such post-24 month adjustments
were, in fact, made.
13
abuse of that discretion. See Avondale Shipyards, Inc. v. Insured
Lloyd's, 786 F.2d 1265, 1269 (5th Cir. 1986). We find none.
The motion to reconsider was filed approximately two weeks
after the first partial summary judgment. It challenged the
district court's application of the summary judgment standard; but,
it did not point to genuine issues of material fact in the record
as it existed when the court rendered the judgment. Instead, as
noted, Calpetco submitted, for the first time, 37 documents
evidencing communication between Marshall and Calpetco about
various charges and billing practices. Calpetco offered no
explanation for its failure to earlier (timely) submit the
documents in opposition to Marshall's first motion. At the
hearing, the district court found Calpetco's argument "very
persuasive", but stated that Calpetco "had a fair opportunity to
present to this Court summary judgment evidence that would have
demonstrated that there was a material fact issue for trial on the
question of fraudulent concealment ... and the Court has considered
the evidence and has ruled on that issue. I am not persuaded by
the arguments in the Motion for Reconsideration". The court did
not consider the newly offered documents to determine whether they
raised a triable fact issue on the points covered by the first
partial summary judgment. (As discussed infra, the district court
did, however, consider the documents in ruling on Marshall's fourth
partial summary judgment motion.)
As stated, although we gave plenary consideration to the
initial partial summary judgment, we review the court's refusal to
14
reconsider that judgment only for abuse of discretion. Whether we
would consider the new documents -- or whether we would find they
show a genuine issue of material fact -- is not the inquiry.
Rather, on this record, we consider whether the district court was
required to reconsider a summary judgment simply because Calpetco
belatedly came forward with evidence not submitted prior to the
ruling.
The answer must be no. Otherwise, the cycle of reconsidera-
tion would be never-ending. Seven years have passed since the
famous Supreme Court trilogy17 breathed life into the use of summary
judgment. It has an important, and ever increasing, role in
stemming the tide of explosive litigation, greatly congested
dockets, increasing delay in claims being adjudicated, and
spiraling -- indeed, unimaginable -- litigation costs. In short,
it is one of the primary weapons in the Federal Rules of Civil
Procedure arsenal, all of which are to "be construed to secure the
just, speedy, and inexpensive determination of every action." Fed.
R. Civ. P. 1.
Summary judgment, pursuant to the simple procedures
established by Rule 56, serves, among other ways, to root out,
narrow, and focus the issues, if not resolve them completely.
Where, as here, partial summary judgment is granted, the length and
complexity of trial on the remaining issues are lessened, all to
the advantage of the litigants, the courts, those waiting in line
17
Anderson v. Liberty Lobby, 477 U.S. 242 (1986); Celotex Corp.
v. Catrett, 477 U.S. 316 (1986); Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574 (1986). See note 15, supra.
15
for trial, and the American public in general. These are interests
of great import, and if they are to be served, the Rules designed
to sponsor and secure them must be followed and enforced. In
short, a district judge must have considerable discretion in
determining when enough is enough. The district court did not
abuse that discretion.
C.
The accounting procedures bound Calpetco to the validity of
all of Marshall's charges unless it had "take[n] written exception
thereto and ma[de] claim on [Marshall] for adjustment ... within
the ... [24-month] period". In its fourth motion for partial
summary judgment, Marshall sought (1) a determination that the
Waterman audit report, not completed until February 15, 1991 (two
weeks before the first summary judgment hearing), constituted
Calpetco's first written exception and claim for adjustment, and,
therefore, all charges at issue in the case were conclusively
presumed true and correct, and (2) a ruling that no evidence of
overcharges would be admissible at trial for any purpose. Calpetco
challenges the partial summary judgment on both issues.
1.
The record before the district court in considering the fourth
motion consisted of at least five volumes of pleadings and other
papers, affidavits, and exhibits, including the documentation
Calpetco submitted with its earlier motion to reconsider.18 In its
18
For example, the earlier referenced Waterman audit report is
one of the 37 documents submitted by Calpetco in support of that
motion.
16
motion, Marshall carried its burden of "identifying those portions
of [the record] which it believe[d] demonstrate[d] the absence of
a genuine issue of material fact". Celotex, 477 U.S. at 323.
Marshall specifically referenced a letter written by Michael in
which he identified April 17, 1987 (the date he claims Calpetco
filed its counterclaims19), as the date of the first written
exception and claim for adjustment. Marshall correctly pointed out
that those counterclaims could not, as a matter of law, constitute
a written claim for adjustment: they do not point to specific
charges or specific invoices. In fact, they do not even specify
which partnerships or wells were saddled with the alleged
overcharges.
Because Calpetco would bear the ultimate burden of proving
which alleged overcharges were timely and properly challenged, it
then was required to "go beyond the pleadings and ... designate
`specific facts showing that there is a genuine issue for trial'".
Id. at 324. Calpetco failed to meet this burden, and we conclude
that Marshall's fourth motion for partial summary judgment was
properly granted.
In its opposition to the fourth summary judgment motion,
Calpetco contended that the "two year history of ... claims"
submitted with its motion to reconsider evidenced the series of
19
Calpetco's counterclaims were not filed until May 20, 1987.
However, this difference of one month would not affect the invoices
which would otherwise be protected by Calpetco's objection. The
24-month adjustment period runs from the end of the calendar year
in which the bill was issued. Thus, an objection made anytime in
1987 would be effective as to any charges in issue rendered on or
after January 1, 1985.
17
what it labelled "pre-complaint" (April 1987) claims for
adjustment.20 It re-asserted its previously rejected position on
fraudulent concealment as an explanation for its failure to timely
make all "post-complaint" claims. At the hearing, Calpetco again
stated: "We don't have to rely on the counter-claim. We had two
years of negotiations with Marshall with written documentation
going back and forth". The lengthy communications to which
Calpetco refers certainly convey discontent with Marshall's billing
practices. But, they lack sufficient specificity to constitute the
requisite exceptions and claims for adjustment. Moreover,
Calpetco's reference to them in its summary judgment brief and its
argument before the district court is a far cry from the
designation of specific facts contemplated by Rule 56(e), the
Celotex Court, and this court, see Nissho-Iwai American Corp. v.
Kline, 845 F.2d 1300, 1307 (5th Cir. 1988).
2.
In granting the fourth partial summary judgment motion, the
district court held that all charges at issue in the case were
conclusively presumed true and correct. It seems self-evident that
a fact which is "conclusively ... presumed to be true and correct"
is "true and correct" for all purposes. Calpetco contends,
however, that in rendering the first partial summary judgment, the
district court presumed the accuracy of Marshall's charges only for
20
This is an about face from the position taken by Michael only
three weeks earlier, when he indicated in the earlier referenced
letter to Marshall, that Calpetco's original counterclaim
constituted its written exception and claim for adjustment.
18
purposes of Calpetco's breach of contract counterclaim. In
rendering partial summary judgment on the fourth motion, the
district court, of course, applied the earlier judgment on the
first motion and reached a contrary result to that urged by
Calpetco. Calpetco asserts error in this application, offering
little legal support,21 but rather by noting the devastating effect
the presumption had on its case. We look, instead, to Rule 56(d),
which squarely dictates the result reached by the district court.
The Rule provides that when some facts are preliminarily determined
by virtue of partial summary judgment, "[u]pon the trial of the
action the facts so specified shall be deemed established, and the
trial shall be conducted accordingly". The validity of Marshall's
charges were deemed established, and the district court properly
excluded any evidence to the contrary.
D.
Finally, Calpetco challenges the district court's bench trial
rulings on several of its Texas DTPA and Securities Act claims.
Calpetco alleged that several statements or representations made by
Marshall violated §§ 17.50 and 17.46(b)(5) or (7) of the Texas DTPA
and Art. 581-33.A.(2) of the Texas Securities Act. Calpetco
21
The offered legal support is in the form of a policy argument
against waiver of Texas DTPA and Securities Act claims. Calpetco
asserts that the accounting procedures amount to an invalid waiver
of its right to bring claims under those statutes. To the
contrary, the accounting procedures resulted in Calpetco's
inability to offer proof of certain facts, i.e., the alleged
overcharges. However, the district court made it quite clear that
Calpetco could, for example, offer certain invoices "for [the]
limited purpose" of establishing Marshall's profit, but not to
establish that Calpetco was overcharged.
19
asserts that the district court erroneously applied the common law
fraud standard to these statutory claims. However, we interpret
the district court's disposition of each of the alleged deceptive
statements as a finding of fact. Finding no clear error, we affirm
as to each.
1.
Section 17.50 of the DTPA provides that a "consumer22 may
maintain an action where [the use or employment by any person of a
false, misleading or deceptive act or practice] constitute[s] a
producing cause of actual damages". "[F]alse, misleading, or
deceptive acts or practices" are enumerated in § 17.46(b), and
include:
(5) representing that goods or services have
... characteristics, ingredients, uses, benefits,
or quantities which they do not have ....
* * *
(7) representing that goods or services are of
a particular standard, quality, or grade, ... if
they are of another.
Tex. Bus. & Com. Code Ann. §§ 17.46(b)(5), (7) (1987).
a.
Marshall's promotional materials stated that its drilling
program concentrated on "development wells" and did not include
22
Despite the prior holding of this court, MBank Forth Worth v.
Trans Meridian, Inc., 820 F.2d 716 (5th Cir. 1987), recent
decisions of the Texas courts of appeal indicate that Calpetco may
not qualify as a "consumer" under the DTPA. See Johnston v.
American Cometra, Inc., 837 S.W.2d 711 (Tex. App.--Austin 1992,
writ denied); Anderson v. Vinson Exploration, Inc., 832 S.W.2d 657
(Tex. App.--El Paso 1992, writ denied). However, for our analysis,
we assume, without deciding, that Calpetco is a DTPA consumer.
20
highly speculative "wildcat wells". Calpetco's only evidence to
the contrary was a regulatory form in which Marshall designated
some wells as "wildcat", yet Michael's own testimony established
that the form required such a designation for many wells which
Michael himself would not call "wildcat". Therefore, the district
court did not err in finding, in essence, that the record would not
support the contention that this was a false statement.
b.
Next, Calpetco contends that Marshall represented that 75% to
90% of the wells would be completed as "successful, commercially
productive wells". This is an apparent reference to the statement
in Marshall's brochure that its management and organization "have
yielded annual percentages of successful wells var[y]ing from
seventy-five to ninety percent". The next sentence in the
brochure, however, points out that "these reasons are no guarantees
of reward". Thus, contrary to Calpetco's contention, the court's
determination that this statement was not "false when made" was not
an erroneous application of the common law fraud standard to the
statutory claim. It was, rather, a finding that the statement was
not a representation about the quantity of goods, but was, instead,
an accurate description of past performance, complete with a
warning that similar success could not be guaranteed for the
future.
c.
Calpetco also asserts that it was assured a three-to-one or
four-to-one return on its investment with Marshall. This alleged
21
assurance seems to be taken from a 1983 letter from Carlile to
Michael, which explained Marshall's internal procedure for choosing
drilling prospects: only wells with the prospect of a return of at
least "$3.00 for each $1.00 invested" would be drilled. Again, the
warning: "but there can never be any guarantees as to the
performance of a well or wells". The district court held, "[b]ased
upon the credible evidence", that no such guarantee was made.
Again, Calpetco contends that an erroneous legal standard was
applied.23 However, we read the district court's opinion as a
finding that the alleged misrepresentation of guaranteed returns
was not made. The finding is not clearly erroneous.
d.
Calpetco also contends that Marshall deceptively represented
that its wells would have average productive lives of 10 to 20
years. In dismissing this claim, the district court found that
Michael was a sophisticated investor and stated that "a
sophisticated investor should not be able to rely on somebody
telling them how long an oil well is going to produce, if it does
produce". Given Michael's testimony about his experience in the
oil and gas industry, that finding cannot be clearly erroneous.
Thus, the district court's statement regarding reliance is
23
In its brief to this court, Calpetco contends that it never
claimed that Marshall guaranteed such a return, only that such a
return could be expected. Michael so testified at trial; but in
its answers to interrogatories, made a part of the record through
Marshall's trial brief, and obviously relied upon by the district
court, Calpetco represented that it was "assured a three-for-one
return on investments with ... the good possibility of four-for-one
returns." In any event, we consider Calpetco's distinction to be
one without a difference.
22
essentially a determination that the statement, if made, could not
have been a requisite DTPA § 17.50 "producing cause" of any damage
suffered by Calpetco. See Texas Bus. & Com. Code Ann. § 17.50(a).
We agree.
e.
Finally, Calpetco asserts that Marshall represented that it
would not make a profit on certain aspects of the drilling venture.
The district court found that no such representation was made, and,
indeed, pointed to evidence that Calpetco knew about Marshall's
profits. Our review of the record reveals no evidence of this
alleged representation, but rather confirms the district court's
position that Calpetco had actual knowledge of Marshall's profits.
In sum, it has been noted that the objective of DTPA §§
17.46(b)(5) and (7) "is to ensure that descriptions of goods or
services offered for sale are accurate". Pennington v. Singleton,
606 S.W.2d 682, 687 (Tex. 1980). We see no clear error in the
district court's findings. Therefore, Calpetco's DTPA claims were
properly dismissed.
2.
Calpetco bases its Texas Securities Act claim on the alleged
misrepresentations discussed above. Article 581-33A.(2) states
that the seller of a security is liable to the purchaser if he
"offers or sells a security ... by means of an untrue statement of
a material fact or an omission to state a material fact necessary
in order to make the statements made, in light of the circumstances
23
under which they are made, not misleading". Tex. Rev. Civ. Stat.
Ann. art. 581-33A.(2) (Supp. 1993).
We have already concluded that the district court found that
the alleged statements were either not made, or not untrue, and
have held that those findings are not clearly erroneous. Calpetco
could not have shown, then, that securities were sold "by means of
an untrue statement".24 Its claims under the Texas Securities Act
were likewise properly dismissed.
III.
Accordingly, the judgment is
AFFIRMED.
24
As noted, in dismissing Calpetco's claim that Marshall
misrepresented the productive lives of the wells, the district
court found that Michael was a sophisticated investor and,
therefore, did not rely on any such representation. This, too,
means that the security was not offered or sold "by means of an
untrue statement of a material fact." Article 581-33A.(2) has been
construed to mean that the alleged misrepresentation must relate to
the security and "induce[] the purchase thereof". Nicholas v.
Crocker, 687 S.W.2d 365, 368 (Tex. App.--Tyler 1984, writ ref'd
n.r.e.). The district court's factual finding is essentially a
determination that Marshall's statement -- if made at all -- did
not induce Calpetco's investment.
24