Cont'l Res., Inc. v. Fisher

102 F.4th 918

CONTINENTAL RESOURCES, INC., an Oklahoma corporation, Plaintiff - Appellant v. Rick FISHER; Rosella Fisher, Defendants - Appellees

No. 23-1147

United States Court of Appeals, Eighth Circuit

Submitted: October 18, 2023

Filed: May 24, 2024

Appeal from United States District Court for the District of North Dakota - Western

Counsel who presented argument on behalf of the appellant was Andrew Michael Grossman, of Washington, DC. The following attorney(s) appeared on the appellant brief; Lawrence Bender, of Bismarck, ND., Andrew Michael Grossman, of Washington DC., Renee M. Knudsen, of Washington, DC., William Ray Whitman, of Houston, TX., and Lyle Poe Leggette, of Houston, TX.

Counsel who presented argument on behalf of the appellee and appeared on the appellee brief was Derrick Braaten, of Bismarck, ND.

Before SMITH, Chief Judge,¹ LOKEN and COLLOTON,² Circuit Judges.

SMITH, Chief Judge.

Continental Resources, Inc., (Continental) brought a declaratory judgment action against Rick and Rosella Fisher (the Fishers), claiming it was not liable to the Fishers for injecting saltwater into the pore space beneath the Fishers' farm. The Fishers counterclaimed for damages from Continental's use of their pore space. At trial, Continental moved for judgment as a matter of law. The district court³ denied the motion. The jury returned a verdict for the Fishers and awarded them $22,440.25. Continental then renewed its motion for judgment as a matter of law and, in the alternative, moved for a new trial. The Fishers moved for an award of attorneys' fees and costs. The district court denied Continental's motion and awarded the Fishers $249,243.60 in attorneys' fees and $87,639.89 in costs. Continental appeals. We affirm.

I. Background

The Fishers reside in Montana but own the surface estate of and partial mineral rights to a farm in North Dakota. The farm is part of a unitized oil and gas operation, the Cedar Hills North Red River "B" Unit. Continental, an Oklahoma oil and gas company, operates the unit.

In 2013, Continental drilled a horizontal disposal well on the Fishers' property to inject saltwater waste into the pore space⁴ of a rock formation known as the Lodgepole. This pore space is located a mile and a half below the surface of the earth. Because water in the Lodgepole met drinking-water standards, Continental was legally required to obtain an aquifer exemption before injecting saltwater. The Environmental Protection Agency and the North Dakota Industrial Commission granted Continental this exemption, allowing it to pump up to 38,813,976 barrels of saltwater into the pore space within a quarter mile of the horizontal wellbore.

The Fishers sued Continental, contending that Continental had no right to drill the well. That action resulted in a ruling that Continental did indeed have the right to proceed with drilling and using the well as long as the use was reasonable. The district court also ruled, however, that the Fishers were entitled to compensation for any proven damage to their pore space. See Fisher v. Cont'l Res., Inc. (Fisher I), No. 1:13-cv-097, 2015 WL 11400124, at *6 (D.N.D. Oct. 8, 2015). Thereafter, the Fishers settled their claim for surface damages from construction of the well. Because Continental had not yet begun to use the well, the parties left for another day whether the Fishers were entitled to damages for the injection of saltwater into their pore space.

That day came in 2018, when Continental began injecting saltwater. Continental sued the Fishers, seeking a declaratory judgment that the Fishers were not entitled to further compensation. The Fishers counterclaimed, seeking a declaratory judgment and compensation for the use of their pore space. Both parties moved for summary judgment. The district court granted both motions in part, holding that the Fishers own the pore space but dismissing "[a]ny claim by the Fishers that Continental has failed to reasonably accommodate uses of their property." Cont'l Res., Inc. v. Fisher, No. 1:18-cv-181, 2021 WL 665102, at *7 (D.N.D. Feb. 19, 2021).

On November 29, 2021, the district court granted summary judgment to Continental on the Fishers' claim for future damages, holding that future damages were then too speculative but noting that the Fishers could bring future claims at the appropriate time. The court also limited the Fishers' recovery to payment "for injections of saltwater that reasonably [could] be shown to occupy their pore space." Cont'l Res., Inc. v. Fisher, No. 1:18-cv-181, 2021 WL 5567303, at *15 (D.N.D. Nov. 29, 2021). The court noted that the evidence showed that saltwater was injected along the entire length of the wellbore and that, although the wellhead was on the Fishers' property, only about a third of the wellbore occupied their pore space.

In October 2022, the district court held a jury trial. Both sides presented expert testimony. Continental presented evidence that it had withdrawn about 728 million barrels of water from the Lodgepole, while it had injected about 97 million barrels of saltwater. Of the 97 million barrels, only about 1,339,317 were injected into the well at issue, and only about 448,805 were injected into the Fishers' pore space. Continental's expert testified that when the injections cease, "the pressure drops immediately to zero," showing "that the reservoir is taking fluid readily," so "there's still very good access to the pore space and there's been no loss of use." R. Doc. 201, at 103. Thus, Continental argued that, rather than diminish the Fishers' pore space, it had created a net gain of pore space.

To prove damages, the Fishers offered evidence of Continental's payments to other landowners for the use of their pore space. They also introduced the amounts North Dakota collects for the use of its pore space. Specifically, the Fishers introduced numerous contracts between the North Dakota Board of University and School Lands and third parties and between Continental and third parties. These contracts reflected per-barrel payments of between $0.05 and $0.10. Continental objected that these contracts covered rights in addition to the right to use pore space, such as the right to use the surface. Because Continental had already compensated the Fishers for surface damages, Continental argued that these contracts were not probative of the Fishers' pore space damages. The district court, nonetheless, admitted the contracts. Additionally, the district court allowed Rick Fisher to testify, over Continental's objection, that he thought $0.10 per barrel would be a fair rental value for the use of the Fishers' pore space.

At trial, Continental moved for judgment as a matter of law, arguing that the Fishers had not proved that they had lost use of or access to their pore space. The court denied that motion. The jury returned a verdict for the Fishers and awarded them $22,440.25, which represented $0.05 per barrel of saltwater injected into the Fishers' pore space. Continental renewed its motion for judgment as a matter of law and alternatively moved for a new trial. The court denied both motions.

Post trial, the Fishers moved for an award of $491,957.42 in attorneys' fees and costs and provided an affidavit and exhibits showing hours worked. Continental argued that some of these hours were excessive, redundant, or unnecessary and that the court should reduce any award for lack of success. The court divided the attorneys' fees into those incurred prior to its November 29 order granting summary judgment and those incurred afterward. The court applied a 25-percent reduction for lack of success and a 15-percent reduction for duplicative, non-productive, or unnecessary work to fees incurred before the November 29 order. The court applied a 20-percent reduction for unnecessary work to fees incurred after that order.

The court also disallowed a portion of the Fishers' expert witness fees, as part of its award of costs, because some of the experts' work pertained to a claim for future injections. The court did enable recovery of 90 percent of the fee for the Fishers' geological expert, Gary Hughes. In doing so, the court noted that "given the arguments advanced by Continental . . . , obtaining the technical assistance of these experts was reasonable even if all of their work was not the subject of their trial testimony," as the experts assisted in "obtaining an understanding of the geology . . . and the characteristics of the formation, including its porosity." Cont'l Res., Inc. v. Fisher, No. 1:18-cv-181, 2022 WL 17960531, at *18 (D.N.D. Dec. 27, 2022). Continental appeals.

II. Discussion

We have jurisdiction pursuant to 28 U.S.C. §§ 1291 and 1332. State law controls some of the issues on appeal, but federal law controls our standard of review. Kramer v. Cash Link Sys., 715 F.3d 1082, 1086 (8th Cir. 2013).

Continental raises three issues. First, it argues that there was insufficient evidence to support the jury's verdict that the Fishers lost access to or use of their pore space. Second, it argues that the district court erred in admitting Rick Fisher's opinion testimony as to the value of his pore space and in admitting, as evidence of damages, contracts between Continental and third parties and between North Dakota and third parties. Third, Continental argues that the district court abused its discretion in awarding attorneys' fees and costs. None of these arguments prevail.

A. Lost Use or Access

We review de novo a district court's denial of a motion for judgment as a matter of law. Racicky v. Farmland Indus., Inc., 328 F.3d 389, 393 (8th Cir. 2003). But we view "the record in a light most favorable to the verdict." Ryan Data Exch., Ltd. v. Graco, Inc., 913 F.3d 726, 732 (8th Cir. 2019). "[T]he law places a high standard on overturning a jury verdict because of the danger that the jury's rightful province will be invaded when judgment as a matter of law is misused." Id. (alteration in original) (quoting Washington v....