Wildcat Drilling, L.L.C. v. Discovery Oil & Gas, L.L.C.

172 Ohio St.3d 160

222 N.E.3d 621

WILDCAT DRILLING, L.L.C., Appellee,

v.DISCOVERY OIL AND GAS, L.L.C., Appellant.

No. 2022-0596

Supreme Court of Ohio.

Submitted March 1, 2023

Decided September 27, 2023

Johnson & Johnson Law Firm and Molly K. Johnson, Canfield, Mahoning County, for appellee.

Manchester Newman & Bennett, L.P.A., David A. Detec, Thomas F. Hull II, Youngstown, and Karly B. Johnson, for appellant.

Fischer, J.{¶ 1} For the second time, we have accepted a discretionary appeal filed by appellant, Discovery Oil and Gas, L.L.C. ("Discovery"), to determine whether an express indemnification provision in its contract with appellee, Wildcat Drilling, L.L.C. ("Wildcat"), evinces a clear intent by the parties to abrogate the common-law notice requirements for indemnification set forth in Globe Indemn. Co. v. Schmitt , 142 Ohio St. 595, 53 N.E.2d 790 (1944). We hold that when the parties have entered into a contract containing an express indemnification provision, the common-law notice requirements set forth in Globe Indemn. Co. do not apply and the parties are bound by the terms of their contract. In so holding, we reject the lead opinion of this court in Wildcat Drilling, L.L.C. v. Discovery Oil & Gas, L.L.C. , 164 Ohio St.3d 480, 2020-Ohio-6821, 173 N.E.3d 1156, ¶ 17 (" Wildcat II "). We therefore reverse the judgment of the Seventh District Court of Appeals, vacate the trial court's judgment that was issued following this court's decision in Wildcat II , and reinstate the trial court's original determination of the indemnification issue that was issued prior to this court's decision in Wildcat II .

I. Background

A. Discovery demands indemnification from Wildcat for its payment of a $50,000 fine

{¶ 2} Discovery entered into a contract with Wildcat in which Wildcat agreed to drill an oil and gas well for Discovery. Under the contract, Wildcat was required to indemnify Discovery for its payment of any fine or penalty imposed as a result of pollution or contamination related to the well-drilling operations:

17. Responsibility for Loss or Damage.

* * *

17.9. Pollution and Contamination – Notwithstanding anything in this Contract to the contrary, excepting only Paragraph 13, it is understood and agreed by and between [Wildcat] and [Discovery] that the responsibility for pollution and contamination shall be as follows:

17.9.1[Wildcat's] Liability – [Wildcat] shall assume full responsibility for and shall defend, indemnify, and hold [Discovery] and its joint owners harmless from and against any loss, damage, expense, claim, fine and penalty, demand, or liability for pollution or contamination, including control and removal thereof, that originates on or above the surface of the land or water from spills, leaks, or discharges of motor fuels, lubricants, and oils; pipe dope; paints and solvents; ballast, bilge, sludge, and garbage; and other liquids or solids in possession and control of [Wildcat]. These obligations are assumed without regard to the negligence of any party or parties.

* * *

17.11. Indemnity Obligations – Except as otherwise expressly limited in this Contract, it is the intent of the parties hereto that all indemnity obligations and/or liabilities assumed by such parties under the terms of this Contract be without limit and without regard to the cause or causes thereof (including pre-existing conditions), strict liability, or the negligence of any party or parties, whether such negligence be sole, joint or concurrent, active or passive. The terms and provisions of Paragraphs 17.1 through 17.10, however, shall have no application to the claims or causes of action asserted against [Discovery] or [Wildcat] by a person or entity not a party hereto by reason of any agreement of indemnity with such person or entity.

(Boldface and underlining sic.) Wildcat began drilling an oil and gas well for Discovery in late 2014.

{¶ 3} The Ohio Department of Natural Resources, Division of Oil & Gas Resources Management ("ODNR") notified Discovery that Wildcat had violated Ohio law by improperly using brine in its drilling operations. Discovery negotiated with ODNR and agreed to pay a $50,000 fine. Discovery then demanded that Wildcat indemnify it under the terms of their contract for its payment of the fine. Wildcat refused.

{¶ 4} The parties sued each other for breach of contract and filed competing motions for summary judgment. Discovery argued that Wildcat was required under the terms of the contract to indemnify it for its satisfaction of the fine imposed by ODNR. Wildcat maintained that it was not required to indemnify Discovery, because it never received notice of the ODNR claim as required by Globe Indemn. Co. , 142 Ohio St. 595, 53 N.E.2d 790, before Discovery agreed to settle the claim.

{¶ 5} The trial court determined that no genuine issues of material fact existed, and it granted summary judgment on the indemnification issue in Discovery's favor. The trial court determined that Wildcat had breached the terms of the contract by causing Discovery to pay a fine to ODNR as a result of Wildcat's drilling practices. The trial court further determined that Wildcat had known about the compliance issues with ODNR and therefore could not claim it did not have an opportunity to challenge the ODNR claim before Discovery's payment of the fine. Finally, the trial court determined that Wildcat had produced no evidence to dispute ODNR's findings that it had illegally used brine in its drilling practices. The trial court thus held that Discovery was entitled to indemnification from Wildcat.

B. The parties appeal to the Seventh District Court of Appeals

{¶ 6} Both Discovery and Wildcat appealed the trial court's judgment to the Seventh District. On the indemnification issue, Wildcat asserted that the trial court erred in determining that it was required to indemnify Discovery, because Discovery had not provided notice of the ODNR claim to Wildcat and the fine paid by Discovery was grossly excessive. Discovery emphasized that the parties’ rights were governed by their contract and that the cases cited by Wildcat— Globe Indemn. Co. and its progeny—were inapplicable.

{¶ 7} The Seventh District found that the common-law notice requirements for indemnification set forth in Globe Indemn. Co. , 142 Ohio St. 595, 53 N.E.2d 790, applied and determined that Discovery could be entitled to indemnification only if (1) it had given proper and timely notice to Wildcat of the ODNR claim, (2) it was legally liable to respond to the settled claim, and (3) the settlement was fair and reasonable. Wildcat Drilling, L.L.C. v. Discovery Oil & Gas, L.L.C. , 2018-Ohio-4015, 121 N.E.3d 65, ¶ 61, 69 (7th Dist.) (" Wildcat I "). Because Discovery had not notified Wildcat of the ODNR claim or of its intent to settle the claim, the court of appeals held that Discovery was not entitled to indemnification, and it reversed the trial court's judgment on that issue. Id. at ¶ 69-71.

C. Discovery appeals to this court

{¶ 8} Discovery appealed to this court. See 155 Ohio St.3d 1463, 2019-Ohio-1817, 122 N.E.3d 1285. In a fractured decision, a plurality of this court determined that the common-law notice requirements for indemnification set forth in Globe Indemn. Co. are inapplicable only when the parties "evince[ ] a clear intent" to deviate from those requirements. Wildcat II , 164 Ohio St.3d 480, 2020-Ohio-6821, 173 N.E.3d 1156, at ¶ 15. The lead opinion explained that a clear intent to abrogate the common-law notice requirements set forth in Globe Indemn. Co. does not require "talismanic or magical language," but it does require more than simply including an indemnity clause in the contract. Wildcat II at ¶ 15-18. The court reversed the Seventh District's decision in Wildcat I and remanded the matter to the trial court to consider whether under the plain language of the contract, the parties expressed a "clear intent" to abrogate the common-law notice requirements. Wildcat II at ¶ 18.

D. On remand, the lower courts conclude that the contract language does not express a clear intent by the parties to abrogate the common-law notice requirements for indemnification

{¶ 9} On remand, Wildcat moved for summary judgment in the trial court, claiming that the contract's language did not express a clear intent by the parties to abrogate the common-law notification requirements for indemnification. Thus, Wildcat argued that Discovery was required to give Wildcat notice of the ODNR claim before settling the claim and that because it did not do so, Discovery's claim for indemnity must be dismissed.

{¶ 10} Discovery opposed Wildcat's motion for summary judgment. It argued that a genuine issue of material fact existed regarding whether the parties intended to abrogate the common-law notice requirements and whether Discovery had satisfied those requirements. Discovery maintained that its contract with Wildcat did not need to contain an explicit rejection of the common-law notice requirements to abrogate the common law.

{¶ 11} After reviewing the contract between Discovery and Wildcat, the trial court found no indication that the parties unequivocally stated that they intended to abrogate Ohio's common-law notice requirements for indemnification. The court further found that because the parties made no reference to Globe Indemn. Co. , 142 Ohio St. 595, 53 N.E.2d 790, in the contract, it was unclear whether the parties had intended to waive those requirements. The court granted Wildcat's motion for summary judgment.

{¶ 12} On appeal, the Seventh District affirmed the trial court's judgment. 2022-Ohio-1125, 2022 WL 985785, ¶ 2 (" Wildcat III "). The appellate court determined that the contract between Wildcat and Discovery contained no reference concerning the parties’ rights to settle disputes without first providing notice of the claim to the other party. Id. at ¶ 38. It noted that the "without limit" language in paragraph 17.11 of the contract did not clearly indicate that indemnification would...