Hayes Fund for First United Methodist Church of Welsh, LLC v. Kerr-McGee Rocky Mountain, LLC
149 So. 3d 280
La. Ct. App.2014Background
- Hayes Fund sues Kerr-McGee and others for damages claimed from imprudent drilling of Rice Acres No. 1 and Hayes Lumber No. 11-1 wells.
- Wells drilled in 1999 by H.S. Resources; later issues include water intrusions, sanding, and cementing/centralization practices alleged to cause reservoir damage.
- Hayes Fund asserts improper cementing and centralization left hydrocarbons unrecoverable, seeking lost royalties and damages.
- Trial spanned 2012 with expert testimony and lengthy post-trial briefing; Kerr-McGee prevailed at trial with a 6-page reasons for ruling.
- Appellate court reverses, renders damages in Hayes Fund’s favor in the amount of $13,437,895.00.
- The court addresses collateral attack on the Office of Conservation’s reservoir unit boundaries and interprets lease provisions as imposing absolute liability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Adequate zonal isolation around Rice Acres | Griffin shows cement around stuck pipe was insufficient for zonal isolation | Industry standards for cementing do not apply to cementing stuck pipe | Trial court manifestly erroneous; Hayes Fund prevails |
| Simultaneous packers in Hayes Lumber well | Triple-packering was imprudent and not reasonably planned | Design was reasonable given reservoir expectations | Trial court error; Hayes Fund prevails on impropriety of the configuration |
| Collateral attack on Commissioner’s reservoir unit boundaries | Collateral attack allowed; unit boundaries may be challenged | Collateral attack prohibited; units binding | Collateral attack doctrine applies; unit boundaries binding, trial court erred |
| Location of leaks below packer in Hayes Lumber lower zone | Evidence showed leaks above and below packer; location not required | No evidence of leaks; required proof of location | Trial court erred; leaks evidenced; Hayes Fund satisfied proof |
| Lease interpretation and absolute liability for damages | Lessee liable for all damages under contract language Exhibit EE | Liability limited by contract interpretation | Kerr-McGee absolutely liable; Exhibit A expands scope; trial court erred |
Key Cases Cited
- Detraz v. Lee, 950 So.2d 557 (La. 2007) (manifest-error standard; deference to trial court on facts)
- Vaughn v. Progressive Sec. Ins. Co., 896 So.2d 1207 (La.App. 3 Cir. 2005) (credibility and expert testimony within fact-finder’s discretion)
- Latiolais v. BellSouth Telecomms., Inc., 74 So.3d 872 (La.App. 3 Cir. 2011) (de novo review of legal conclusions)
- Corbello v. Iowa Prod., 850 So.2d 686 (La. 2003) (contract interpretation; plain meaning governs)
- Frankel v. Exxon Mobil Corp., 923 So.2d 55 (La.App. 1 Cir. 2005) (damages for lost profits must be proven to reasonable certainty)