XTO Energy, Inc. v. ATD, LLC

189 F.Supp.3d 1174

XTO Energy, Inc., Plaintiff,

v.ATD, LLC, Air Tech Drilling, Inc. and Zurich American Insurance Company, Defendants.

Zurich American Insurance Company, Third-Party Plaintiff,

v.Basic Energy Services, Inc., Weatherford Artificial Lift Systems, Inc., Weatherford International, Inc., and, Weatherford U.S., L.P., Third-Party Defendants.

No. CIV 14-1021 JB/SCY

United States District Court, D. New Mexico.

Filed May 31, 2016

Bradford C. Berge, Holland & Hart LLP, Santa Fe, New Mexico -- and-- Katie K. Custer, Holland & Hart LLP, Denver, Colorado --and-- Jose A. Ramirez, Holland & Hart LLP, Greenwood Village, Colorado, Attorneys for Plaintiff XTO Energy, Inc.

Sam L. Fadduol, Joshua K. Conaway, Fadduol, Cluff, Hardy & Conaway, P.C., Albuquerque, New Mexico --and-- Maureen A. Sanders, Sanders & Westbrook, P.C., Albuquerque, New Mexico, Attorneys for Plaintiffs-in-Intervention Scott Manley, Shanna Manley, Jose Betancur, and Virginia Betancur

Terry R. Guebert, Robert Gentile, Guebert Bruckner, P.C., Albuquerque, New Mexico, Attorneys for Defendant ATD, LLC

James H. Johansen, Shawn S. Cummings, Amy Elizabeth Headrick, Rheba Rutkowski, Butt, Thornton & Baehr, P.C., Albuquerque, New Mexico, Attorneys for Defendant and Third-Party Plaintiff Zurich American Insurance Company

AMENDED MEMORANDUM OPINION AND ORDER¹

James O. Browning, UNITED STATES DISTRICT JUDGE

THIS MATTER comes before the Court on Zurich American Insurance Company's Motion for Reconsideration; Alternatively, for Clarification and for Language Permitting Interlocutory Appeal or Certification to the New Mexico Supreme Court (re: Doc. 82), filed March 25, 2016 (Doc. 83)("Motion"). The primary issues are: (i) whether the Court should reconsider its earlier ruling that the insurance contract between Plaintiff XTO Energy, Inc. and Defendant Zurich American Insurance Company does not violate New Mexico's Oilfield Anti-Indemnity Statute, N.M. Stat. Ann. § 56–7–2 ; (ii) whether the Court should clarify Zurich Insurance's obligations under the insurance contract to explain that Zurich Insurance need only indemnify XTO Energy for liability arising from Air Tech's fault; (iii) whether the Court should amend its Memorandum Opinion and Order, filed March 25, 2016 (Doc. 83)("MSJ MOO"), to allow Zurich Insurance to file an interlocutory appeal under 28 U.S.C. § 1292(b) ; and (iv) whether the Court should certify the issue that the Court decided in its MSJ MOO to the Supreme Court of New Mexico pursuant to N.M. Stat. Ann. § 39–7–4. Because the Court, in its MSJ MOO, fully addressed the issues that Zurich Insurances now raises, and because the Court remains confident that its ruling in the MSJ MOO best adheres to New Mexico case law regarding New Mexico's Oilfield Anti-Indemnity Statute, the Court will not change its ruling. To more precisely define Zurich Insurance's obligations, however, the Court will clarify its order to state that Zurich Insurance must indemnify XTO Energy for liability arising from Air Tech's fault. Finally, as the Court has already thoroughly considered the issues that Zurich Insurance raises, the Court will not amend its MSJ MOO to allow an interlocutory appeal or to certify any legal questions to the Supreme Court of New Mexico. The Court therefore grants Zurich Insurance's Motion in part and denies it in part.

FACTUAL BACKGROUND

This case involves numerous parties who contracted with each other to provide services and insurance. Below, the Court describes the parties involved, their contracts, and the disputes that surround those contracts. The Court takes its facts from Defendant Zurich American Insurance Company's Motion for Summary Judgment, filed November 13, 2015 (Doc. 32)("MSJ"), Plaintiff XTO Energy Inc.'s Memorandum in Support of Response to Defendant Zurich American Insurance Company's Motion for Summary Judgment, filed December 21, 2015 (Doc. 44)("MSJ Response"), and the Defendant Zurich American Insurance Company's Reply in Support of Motion for Summary Judgment, filed February 1, 2016 (Doc. 59)("MSJ Reply"). The Court has previously described this case's facts in prior opinions. SeeXTO Energy, Inc. v. ATD, LLC, 2016 WL 1158073, at *1–5 (D.N.M. March 11, 2016) (Browning, J.)("MSJ MOO"); XTO Energy, Inc. v. ATD, LLC, 2016 WL 1730171, at *1–5 (D.N.M. April 1, 2016) (Browning, J.)("Motion to Intervene MOO").

1. The Parties.

XTO Energy is an oil-and-gas well operator that contracts with various contractors to perform well operations. See MSJ at 1; MSJ Response ¶ A, at 2.² Defendant Air Tech Drilling, Inc., a contractor, is a New Mexico corporation based in Bloomfield, New Mexico and formed on June 9, 2006. See MSJ ¶¶ 7, 10, at 4; MSJ Response ¶ A, at 2.³ Air Tech's corporate status was revoked on June 28, 2010. See MSJ ¶ 7, at 4. Defendant ATD, LLC is a New Mexico limited liability company based in Hobbs, New Mexico, originally formed as a New Mexico corporation on September 22, 2006, and converted into a limited liability company on August 27, 2009. See MSJ ¶ 8, at 4. Zurich American Insurance Co. is an insurance company that provides insurance for Air Tech. See MSJ ¶ 19, at 6. ATD, LLC employed Scott Manley and Jose Betancur, who were working at the XTO Energy Well site on November 8, 2012. See MSJ ¶ 9, at 4. Scott Manley and Shanna Manley ("the Manleys"), as well as Jose and Virginia Betancur ("the Betancurs"), individually and as Next Friend of Vanessa B. Betancur, Valerie Betancur, and Jose Betancur, minors, filed litigation in state court against XTO Energy, Weatherford Artificial Lift Systems, Inc., Weatherford International, Inc., Weatherford U.S., L.P., Basic Energy Services, Inc., BOS Roustabout Service, LLC, Gabriel Valdez, and Randy Green. See MSJ ¶¶ 1-2, at 2; Response ¶¶ M-N, at 4.

2. The Master Service Contract.

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On November 8, 2006, XTO Energy entered into a Master Service Contract ("Master Contract" or "MSC") with Air Tech. MSJ ¶¶ 7, 10, at 4; MSJ Response ¶ A, at 2. The Master Contract provides that Air Tech, "as ‘Contractor,’ would provide certain well-related services to XTO." MSJ ¶ 10, at 4; MSJ Response ¶ A, at 2. "The MSC defines ‘XTO Group’ as ‘XTO, its Affiliates, co-owners ... at the Site, joint venturers, partners, contractors and subcontractors other than Contractor or its Subcontractors and all of their respective directors, officers, employees, representatives, agents, licensees and invitees.’ " MSJ ¶ 11, at 4. The Master Contract defines "Contractor Group" as "Contractor, its Affiliates, any Subcontractor of Contractor, and their respective directors, officers, employees, representatives, agents, licensees and invitees." MSJ ¶ 13, at 4-5. XTO Energy's Complaint for Breach of Contract, Unfair Practices and Declaratory Relief, filed November 10, 2014 (Doc. 1)("XTO Complaint"), does not allege that "XTO or any defendants named in the Manley Complaint or the Betancur Complaint is a member of the ‘Contractor Group.’ " MSJ ¶ 14, at 5.

Master Contract § 10, entitled "RELEASE, DEFENSE, INDEMNITY, AND HOLD HARMLESS," states:

10.1.1 Contractor hereby agrees to release, defend, indemnify and hold the XTO Group harmless from and against any and all claims, demands, and causes of action of every kind and character (including without limitation, fines, penalties, remedial obligations, court costs and reasonable attorney's fees, including attorney's fees incurred in the enforcement of this indemnity) (hereinafter collectively referred to as the ‘Indemnifiable Claims') arising out of, without limitation bodily injury and/or death of any one or more members of the Contractor Group in any manner incident to, connected with or arising out of the performance of the Work. This obligation is without regard to the cause or causes of such bodily injury, death, loss of or damage to property and includes, but is not limited to, Indemnifiable Claims resulting from any sole, joint or concurrent negligence, strict liability, or other act and/or omission of any one or more members of the XTO Group .

10.1.2 To the extent not covered in Section 10.3, Contractor hereby further agrees to release, defend, indemnify and hold the XTO Group harmless from and against any and all Indemnifiable Claims arising out of the emission, discharge or negligence, strict liability, or other act and/or omission of any one or more members of the Contractor Group, which is in any manner incident to, connected with or arises out of the performance of the Work .

10.1.3 Contractor agrees that its indemnity obligations herein will be supported by insurance with at least the minimum amounts provided in Article XI, which insurance will be primary to any other insurance provided by or available to any one or more members of the XTO Group and shall provide waivers of subrogation against all members of the XTO Group . To the extent that applicable law prohibits the monetary limits of insurance required or the indemnities voluntarily assumed hereunder, the requirements will automatically be revised to conform, to the maximum extent permitted, with applicable law.

MSJ ¶ 15, at 5 (quoting Master Contract § 10.1 (emphases in MSJ)).

Master Contract § 11.4 provides that all Contractor's liability insurance policies must name "XTO Group" as an additional insured and must "contain a waiver on the part of the insurer, by subrogation or otherwise, of all rights against the XTO Group." MSJ ¶ 16, at 5-6. Master Contract § 10.4 also contains a savings clause, which states:

SPECIAL PROVISION FOR NEW MEXICO. THE FOLLOWING PROVISION APPLIES WHERE WORK IS TO BE PERFORMED IN NEW MEXICO, NOTWITHSTANDING ANY PROVISIONS IN THE CONTRACT TO THE CONTRARY. To the extent this Article X is governed by New Mexico law, then the provisions therein shall be read not to include indemnification for one's own negligence .

MSJ ¶ 17, at 6 (quoting MSC § 10.4 (emphasis in MSJ)). MSC § 14.8 provides that Texas law -- "excluding the Texas rules on conflict of law" -- governs the Master Contract. MSJ ¶ 18, at 6.

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