603 F. App'x 289
5th Cir.2015Background
- Zenergy (operator) hired Performance (drilling contractor) under an IADC onshore daywork drilling contract to drill a vertical well to ~11,800 ft. Zenergy supplied the drilling program and controlled key operational decisions.
- Performance provided a conventional drift indicator (“Sure Shot”) and conducted deviation surveys; early Sure Shot readings showed minimal deviation, but later surveys indicated large deviation. Performance replaced the tool after a technician noted a bent pendulum.
- Zenergy independently ordered gyroscopic surveys (Multi‑Shot, Schlumberger); initial Multi‑Shot download error understated deviation, a later correct Multi‑Shot showed ~20° deviation and ~1,145 ft horizontal displacement. Zenergy cemented off the deviated section and redrilled vertical.
- Zenergy paid only for days with ≤5° deviation and sued for declaratory relief arguing Performance breached multiple contract provisions (failed to drill vertical, failed to provide working drift indicator, failed to keep accurate reports, violated Louisiana‑law covenant, and failed to act in workmanlike manner). Performance counterclaimed for unpaid days.
- District court granted Performance’s motion for judgment as a matter of law (directed verdict), holding the daywork contract placed the risk of a deviated well on the operator (Zenergy). The court nevertheless instructed the jury on an intentional‑misrepresentation theory (not pleaded); jury found Performance not liable. Zenergy’s post‑judgment motion to deduct $9,000 in deviation surcharges was denied. Appeal followed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Performance breached the contract by drilling a deviated well and thus forfeited payment | Performance breached express and implied obligations (drill vertical, provide working drift indicator, accurate reports, comply with law, workmanlike performance) so Zenergy owes no further payment | Under an IADC daywork contract the operator controls operations and bears general risk (including deviated hole); Performance only assumed specified liabilities | Held for Performance: daywork contract allocation places risk of deviation on operator; directed verdict for Performance affirmed |
| Whether the court erred by instructing jury on intentional misrepresentation (unpleaded theory) | District court erred and prejudiced Zenergy | Any error was harmless because jury found no liability on that theory | Harmless error — no reversal; outcome unchanged |
| Whether Performance was entitled to $500/day surcharge for >7.5° deviation despite not invoicing timely | Zenergy argued no surcharge because Performance never sent invoice | Performance showed it could not reasonably invoice earlier because Zenergy withheld correct deviation data; Contract ¶5.1 permits invoice presentation timing tied to receipt of info | Denial of Zenergy’s motion to amend judgment upheld; district court did not abuse discretion in allowing surcharge given evidence that Zenergy impeded timely invoicing |
| Standard for JMOL and contract interpretation applied on review | N/A (procedural) | N/A | Court reviewed Rule 50 de novo, viewing evidence in light most favorable to non‑movant; applied Louisiana contract interpretation principles to conclude parties’ intent and industry usage allocate risk to operator |
Key Cases Cited
- Flowers v. S. Reg’l Physician Servs., 247 F.3d 229 (5th Cir. 2001) (standard for reviewing Rule 50 motions)
- Hagan v. Echostar Satellite, L.L.C., 529 F.3d 617 (5th Cir. 2008) (view evidence favorably to non‑movant on JMOL review)
- Martinez v. Johnson, 104 F.3d 769 (5th Cir. 1997) (abuse of discretion standard for motions to alter or amend judgment)
- Perez v. Stephens, 745 F.3d 174 (5th Cir. 2014) (abuse of discretion requires legal error or clearly erroneous factual assessment)
- United States v. Trujillo, 502 F.3d 353 (5th Cir. 2007) (appellate deference to district court credibility findings)