TRC Operating Co., Inc. v. Chevron U.S.A., Inc.

322 Cal.Rptr.3d 353

TRC OPERATING COMPANY, INC., et al., Plaintiffs, Cross-defendants and Appellants,

v.CHEVRON USA, INC., Defendant, Cross-complainant and Appellant.

F083724

Court of Appeal, Fifth District.

Filed June 21, 2024

APPEAL from a judgment of the Superior Court of Fresno County. David R. Lampe, Judge. (Super. Ct. No. S1500-CV-282520_JEB)

Quinn Emanuel Urquhart & Sullivan, Sara L. Pollock, Redwood Shores, Kathleen M. Sullivan, Christopher Tayback, Scott L. Watson, B. Dylan Proctor, Valerie Lozano, Dylan C. Bonfigli, Los Angeles, for Plaintiffs, Cross-defendants and Appellants.

Horvitz & Levy, John F. Querio, Jeremy B. Rosen, Burbank, Andrea L. Russi, Christopher D. Hu, San Francisco; Gibson, Dunn & Crutcher, Theodore J. Boutrous, Jr., Marcellus A. McRae, Los Angeles, Thomas A. Manakides, Blaine H. Evanson, Irvine; Bright and Brown, James S. Bright, Maureen J. Bright, Glendale, and Kristin G. Taylor for Defendant, Cross-complainant and Appellant.

OPINION

FRANSON, J.

TRC Operating Co., Inc. and TRC Cypress Group, LLC (collectively TRC) and Chevron U.S.A., Inc. (Chevron) are oil producers operating adjacent well fields they own or lease in Kern County, west of Taft. Both companies pump from a shared underground oil reservoir, commonly known as Midway-Sunset oil field, and both engage in a process referred to as "cyclic steaming" to make the extraction process more efficient. This process involves injecting high-pressure steam down a wellbore, which then both fractures the surrounding rock and makes the oil contained in that rock less viscous, making the oil easier to pump out.

In 1999, a "surface expression" formed near a particular Chevron well, known as Well 20. A surface expression occurs when the steaming of the wells causes a lateral fracture from the wellbore, and thus allows oil and other effluent to escape from the wellbore and seep to the surface. Despite Chevron’s attempts at remediation, in the summer of 2011 an eruption occurred in the area of the Well 20 surface expression, shooting pressurized steam and oil into the air, like a geyser. This eruption also caused a sinkhole to form, which killed a Chevron employee. Similar eruptions followed over the succeeding months, and the state oil and gas regulator—the Division of Oil, Gas and Geothermal Resources (DOGGR)¹—issued various orders preventing steaming in the area of the Well 20 surface expression. These orders encompassed land that was leased or owned by Chevron as well as TRC. These shutdown orders lasted four years.

TRC sued Chevron, claiming Chevron’s negligent maintenance and operation of its property for many years led to dangerous conditions which made it unsafe to perform cyclic steaming operations. These conditions led to the DOGGR shut-down orders, and to TRC’s harm and damages. Chevron countersued, claiming TRC’s failure to adequately maintain its own wells was the cause of the surface expression, the 2011 eruptions, and damages suffered by Chevron.

The case proceeded to a jury trial in 2021. TRC argued Chevron was the sole cause of TRC’s cessation of steaming operations from 2011 to 2015. Chevron argued TRC stopped steaming operations solely because of the DOGGR shut-down orders, which were therefore a superseding cause of any harm suffered by TRC. Chevron also argued TRC was the cause of Chevron’s harm because it negligently maintained and operated its steaming processes over the years. The jury found in favor of TRC, awarding approximately $120 million in damages against Chevron. Nothing was awarded to Chevron.

Chevron filed motions for a new trial and for judgment notwithstanding the verdict (JNOV). The trial court denied the JNOV, but granted a new trial based on misconduct by Juror No. 10, because he failed to disclose (1) a 40-year-old criminal conviction which would have rendered him ineligible to serve as a juror, because he should have registered as a sex offender and (2) his status as a party to a personal injury lawsuit nine years earlier. TRC appeals the granting of this motion, arguing Juror No. 10 was not ineligible, because the criminal statute under which he was likely required to register as a sex offender was not listed in the juror eligibility statute. TRC also argues no prejudice resulted from the juror’s failure to disclose his prior criminal conviction or the previous civil lawsuit. We agree with both arguments.

We interpret the juror eligibility statute to mean that Juror No. 10’s out-of-state conviction did not make him ineligible. Also, on the question of prejudice to Chevron, we conclude the trial court used an improper definition of bias in determining prejudice was established. To remedy this legal error, we conduct a de novo review of the record and apply the appropriate, definition of bias. Under the circumstances, we conclude Juror No. 10’s failure to disclose the prior court cases in which he was involved did not show bias against Chevron or for TRC or bias as to any issue presented to the jury. Alternatively, assuming he was statutorily ineligible, we also would conclude his concealment of information was not prejudicial to Chevron. Accordingly, we reverse the grant of a new trial.

Chevron also filed a protective cross-appeal, in the event we found against it on TRC’s appeal. Chevron appealed the denial of its JNOV, arguing that both factually and as a matter of law, DOGGR’s orders to stop steaming were the superseding cause of any harm suffered by TRC and precludes it from bearing any liability. We conclude sufficient evidence was introduced to sustain the verdict, demonstrating TRC did not stop any of its steaming operations solely because of the DOGGR orders, which were therefore not a superseding cause. We also reject Chevron’s claims that (1) the jury instructions on causation were erroneous; (2) the damages awarded were excessive because TRC failed to prove or apportion the amount of damages attributable to Chevron, as distinguished from the amount attributable to the DOGGR orders; and (3) the verdict form lacked critical factual findings necessary for the jury to award prejudgment interest.

We reverse the trial court’s order granting a new trial, and remand with instructions to reinstate the judgment against Chevron.

FACTS

Much of this case relates to a surface expression near Chevron’s Well 20. Well 20 was located near the property line between Chevron and TRC, and was a non-operational well that was severely damaged. The first surface expressions formed around Well 20 in 1999, followed shortly thereafter by the first "high energy event"—Chevron’s expert explained this meant an eruption of pressurized steam "shoot[ing] up into the air 30, 40, 50 feet like a geyser"—which occurred in February 2000. The current Well 20 surface expression which formed much of the factual predicate for this case originated in July 2007.

Chevron first attempted to manage the Well 20 surface expression by using an earthen berm with netting over top of it, and a mechanical pump. Chevron also attempted to "reabandon"² Well 20 by pouring cement into it, which failed again to seal off Well 20. Additionally, because of the persistent nature of the Well 20 surface expression, Chevron adopted a policy of not steaming other wells within a 300-foot, and then 500-foot, radius in February 2008 and July 2010.

TRC introduced evidence that the cause of the surface expression was Chevron’s failure to appropriately abandon its nearby wells. In particular, TRC pointed to Well 20, which was known to be a damaged well that had to be reabandoned after initial attempts to abandon it failed, allowing steam and oil from other nearby wells to travel at least partially up the wellbore and into the surrounding upper layers of the earth. However, Chevron failed to perform the necessary work on Well 20 in the years prior to the June 2011 eruptions that formed the crisis point in this case. Additionally, Well 202 and Well H235, both owned by Chevron and in the immediate vicinity of Well 20, were inappropriately maintained and/or abandoned, and likely contributed to the Well 20 surface expression. Chevron also attempted to reabandon Wells 202 and H235 at various points, again indicating they were not appropriately abandoned initially.

In October 2010, DOGGR ordered Chevron to fix the Well 20 surface expression. In response, Chevron installed a "French drain" in April 2011, which aimed to eliminate the visibility of the surface expression by collecting the fluids and seep in an underground container which could then be pumped up and taken away. The French drain was not designed to eliminate the problems that caused the surface expression in the first place, but instead to capture the surface expression close to but below the surface, so that it could not be seen with the naked eye. While French drains often are used to dissipate fluid back into the ground, this one was designed to allow the fluid to be pumped out instead of dissipated.

The French drain did not apparently resolve the problems with Well 20.³ A few months after its installation, in June and July 2011, steaming in the area of Well 20 caused several explosions or eruptions in the vicinity of the Well 20 surface expression, as well as the opening of a sinkhole which killed one Chevron employee.⁴ Witnesses testified seeing a "volcano-like eruption" spewing hot steam out of the area. Chevron had begun steaming Well H235 immediately before these eruptions, which TRC linked to the eruptions because Well H235 was itself damaged and had up to this point been on an internal "do-not-steam" list maintained by Chevron.

Following these eruptions and the death on Chevron’s property, in July 2011, DOGGR began issuing orders to curtail the use of cyclical steaming in the vicinity of Well 20.⁵ In August 2011, two new surface expressions appeared in the vicinity of Well 20, and additional eruptions occurred, which caused TRC to stop steam injection on its property that was near Well 20 as well....