Ark. Okla. Gas Corp. v. BP Energy Co.

684 F.Supp.3d 911

ARKANSAS OKLAHOMA GAS CORPORATION, Plaintiff v. BP ENERGY COMPANY, Defendant

No. 2:21-CV-02073

United States District Court, W.D. Arkansas, Fort Smith Division

Signed July 31, 2023

Kyle Ray Wilson, N. M. Norton, Jr., Wright, Lindsey & Jennings LLP, Little Rock, AR, Zachary Trail, Wright, Lindsey & Jennings LLP, Rogers, AR, Creighton Magid, Erica F. Andrews, Steven Weiler, Dorsey & Whitney LLP, Washington, DC, for Plaintiff.

James D. Rankin, III, Julie DeWoody Greathouse, PPGMR Law, PLLC, Little Rock, AR, Amanda F. Davidoff, Jordan L. Gary, Sullivan & Cromwell LLP, Washington, DC, Michael Devlin, Richard C. Pepperman, II, Sullivan & Cromwell LLP, New York, NY, for Defendant.

OPINION AND ORDER

P.K. HOLMES, III, UNITED STATES DISTRICT JUDGE

Before the Court are Plaintiff Arkansas Oklahoma Gas Corporation's ("AOG") motion to amend judgment to include prejudgment interest (Doc. 139) and brief in support (Doc. 140), Defendant BP Energy Company's ("BP") response in opposition (Doc. 145), and AOG's reply in support (Doc. 149). Also before the Court are AOG's petition for attorney's fees and costs (Doc. 137) and brief in support (Doc. 138), BP's response in opposition (Doc. 141), and AOG's reply in support (Doc. 144). For the reasons given below, AOG's motion to amend judgment will be GRANTED, and AOG's petition for attorney's fees and costs will be GRANTED IN PART AND DENIED IN PART.

I. Background

AOG, a utility company, brought this lawsuit for breach of contract against BP, a natural-gas supplier. AOG alleged that during Winter Storm Uri, from February 15 through 19, 2021, BP failed to provide AOG with the full 30,000 MMBtu of natural gas per day to which AOG was contractually entitled. BP contended that its failure to perform was excused by force majeure. The Court conducted a four-day bench trial in December 2022. On May 24, 2023, the Court issued extensive findings of fact and conclusions of law (Doc. 133) based on the evidence received at trial. That same day, the Court entered judgment (Doc. 134) in favor of AOG, awarding it $18,033,617.90 in damages on its claim for breach of contract, and post-judgment interest at the annual rate of 4.91%. AOG filed its petition for attorney's fees and costs on June 20, and its motion to amend judgment to include prejudgment interest on July 5. Both of these requests have been fully briefed and are now ripe for decision.

II. Discussion

A. Motion to Amend Judgment

The Court's judgment did not include an award of prejudgment interest. This omission was not the result of any deliberation on the Court's part. AOG never requested prejudgment interest during the trial, nor in pre-trial or post-trial briefing. Accordingly, the Court simply never considered whether to award prejudgment interest. AOG has now moved under Federal Rule of Civil Procedure 59(e) for the judgment to be amended to include a prejudgment interest award. BP opposes this request.

The parties agree that if the Court were to award prejudgment interest, then the rate should be the one set forth in the contract that was the subject of this litigation.¹ That rate is the "then-effective prime rate" published in the Wall Street Journal plus two percent, accruing from the date payment was due on AOG's final invoice (April 5, 2021) until the date judgment was entered in this case (May 24, 2023). See Doc 2-1, p. 8, § 7.5. The Wall Street Journal prime rate varied throughout this time period, see Doc. 145-1, but if each day's prejudgment interest accrual were calculated in accordance with the rate that was in effect on that day,² then that would result in a total prejudgment interest award of $2,640,567.53. See Doc. 145, p. 11 (internally numbered p. 10).

However, the parties disagree on whether the Court should award prejudgment interest at all now. BP argues that although AOG's pleadings contained a demand for prejudgment interest, see Doc. 50, p. 8, AOG effectively waived this demand by failing to renew or brief it at any point between the filing of its operative complaint and the entry of judgment. In particular, BP insists that the issue of prejudgment interest is not properly the subject of Rule 59(e) motion when that issue was never briefed at any time before the entry of judgment. This is because "Rule 59(e) motions serve a limited function of correcting manifest errors of law or fact or to present newly discovered evidence," and "cannot be used to introduce new evidence, tender new legal theories, or raise arguments which could have been offered or raised prior to entry of judgment." See Innovative Home Health Care, Inc. v. P.T.-O.T. Assocs. of the Black Hills, 141 F.3d 1284, 1286 (8th Cir. 1998). However, notwithstanding this general principle, the Eighth Circuit explicitly held in Continental Indemnity Co. v. IPFS of New York, LLC, that a district court has discretion to consider a request for prejudgment interest that is briefed for the first time in a Rule 59(e) motion. See 7 F.4th 713, 718-19 (8th Cir. 2021).

Under Texas law, the decision whether to award prejudgment interest on a breach of contract claim is committed to the Court's discretion, which should be guided by equitable principles and public policy. See Whitlock v. CSI Risk Mgmt., LLC, 2021 WL 1712215, at *15 (Tex. App. Apr. 30, 2021). However, the precise scope of that discretion is unclear, to say the least.

Under an older statutory regime (Tex. Rev. Civ. Stat. Ann. Art. 5069-1.03), which was repealed in 1997, prejudgment interest was mandatory in contract cases when an ascertainable sum was due at a definite date prior to judgment. See Am. Int'l Trading Corp. v. Petroleos Mexicanos, 835 F.2d 536, 540-41 (5th Cir. 1987). Texas caselaw also provided courts with discretion to make equitable awards of prejudgment interest in contract cases where such awards were not statutorily required. See id. at 541. The Fifth Circuit, which geographically embraces Texas, interpreted these cases to require that "an equitable award of prejudgment interest should be granted to a prevailing plaintiff in all but exceptional circumstances."³ Id.; see also Concorde Limousines, Inc. v. Moloney Coachbuilders, Inc., 835 F.2d 541, 548-49 (5th Cir. 1987). Although the old statutory regime was eventually repealed, making equity the only basis for awards of prejudgment interest in contract cases, the Fifth Circuit has continued to hold that if a district court exercises its discretion to deny prejudgment interest to a prevailing party on a contract claim, then the district court must explain the exceptional circumstances that justify its decision. See, e.g., Joy Pipe, USA, L.P. v. ISMT Ltd., 703 Fed. App'x 253, 257-58 (5th Cir. 2017).

This Court has been unable to find any Texas cases that employ the Fifth Circuit's "exceptional circumstances" language when discussing equitable prejudgment interest on contract claims. However, the Fifth Circuit's characterization of Texas caselaw appears substantively consistent with Texas courts' interpretation of the equitable rule.

For example, in the unpublished 2022 case of Ellison v. Three Rivers Acquisition LLC, a victorious contract claimant argued on appeal that "the trial court erred in failing to include prejudgment interest in the judgment," and that "an award of prejudgment interest on past damages is mandatory." See 2022 WL 17663839, at *14 (Tex. App. Dec. 15, 2022). The Court of Appeals did not directly endorse or reject the claimant's "mandatory" language, but its recital of the legal standard included the traditional permissive vocabulary. See id. ("Prejudgment interest may be awarded on a breach of contract claim under common law equitable principles . . . . (emphasis added)"). The Court of Appeals then observed that the claimant "is entitled to recover on its breach of contract claim," and that "[t]herefore, any award of prejudgment interest is governed by the common law." Id. Next, it simply identified the date on which prejudgment interest began to run and the applicable interest rate, noted its own authority to determine these things and to "reform a trial court's judgment accordingly," and then held that "the trial court erred in failing to award prejudgment interest and calculate the prejudgment interest at five percent simple interest." Id. Notably, the opinion never explained what the trial court's error was, other than that an award of prejudgment interest was not given to a prevailing contract claimant. See id.

A similar reversal occurred in the 2018 case of Fortitude Energy, LLC v. Sooner Pipe LLC, after the trial court awarded the plaintiff summary judgment on its breach-of-contract claim but did not award prejudgment interest. See 564 S.W.3d 167, 173 (Tex. App. 2018). The Court of Appeals' analysis was rather perfunctory: after reciting the applicable standard, it simply observed that the plaintiff had repeatedly requested prejudgment interest in the proceedings below, and that "[n]o evidence in the record supports the trial court's failure to award prejudgment interest." See id. at 188-89. The Court then "agree[d] with [the plaintiff] that it was entitled to prejudgment interest and that the trial court erred by failing to award prejudgment interest in its final judgment." Id. at 189. As in Ellison, the Court of Appeals never explained why the trial court's failure to award prejudgment interest was erroneous; apparently reversal was warranted simply because no explanation for the failure to award interest had ever been given.

Likewise, in the 2017 case of Trevino v. City of Portland, the Texas Court of Appeals reversed the trial court's decision not to award prejudgment interest to plaintiffs who had prevailed on a breach-of-contract claim. See 531 S.W.3d 290, 297-98 (Tex. App. 2017). After quickly describing the lawsuit as a breach-of-contract claim arising from a dispute over the amount owed, the Court stated: "Given this dispute over the amount . . . the [defendant] agreed to pay the [plaintif...