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Langen v. Sanchez Oil & Gas Corp.

United States District Court, S.D. Texas, Houston Division

April 17, 2019

KEVIN LANGEN, Individually and on behalf of all others similarly situated, Plaintiff,
v.
SANCHEZ OIL & GAS CORPORATION, Defendant and Third-Party Plaintiff, and CRESCENT DRILLING & PRODUCTION, INC., Third-Party Defendant.

          MEMORANDUM AND ORDER

          NANCY F. ATLAS SENIOR UNITEJ2 STATES DISTRICT JUDGE

         Before the Court is Third-Party Plaintiff Sanchez Oil & Gas Corporation's (“SOG”) Motion to Dismiss Crescent Drilling & Production, Inc.'s (“Crescent”) Counterclaims (“Motion to Dismiss” or “Motion”) [Doc. # 76]. Third-Party Defendant Crescent filed a response, [1] and SOG replied.[2] The Motion is now ripe for decision. Based on the parties' briefing, relevant matters of record, and pertinent legal authority, the Court grants SOG's Motion.

         I. BACKGROUND

         This lawsuit began as a putative Fair Labor Standards Act (“FLSA”) collective action against SOG filed by Kevin Langen, a former consultant engaged by SOG through Crescent. Original Complaint [Doc. # 1].

         After answering Langen's complaint, SOG filed a third-party complaint against Crescent containing claims for indemnification and breach of contract under a Master Service Agreement (“MSA”) [Doc. # 14-1] between the SOG and Crescent. Third-Party Complaint [Doc. # 14]. SOG alleges that it did not contract directly with Langen for his services, but instead contracted with Crescent for Langen's services pursuant to the MSA. Under the MSA, Crescent agreed to comply with the FLSA with respect to services they provided to SOG and agreed “to protect, defend, indemnify, and hold harmless [SOG] from any and all claims resulting from [Crescent's] breach” of its covenant. MSA § 13.2. SOG alleges that Crescent breached the MSA by not complying with the FLSA with respect to Langen's compensation and must indemnify SOG against Langen's FLSA claim.

         On January 7, 2019, Langen and SOG agreed in principle to a confidential settlement of Langen's individual claim and notified the Court of the agreement. Joint Notice of Partial Resolution [Doc. # 55]. On January 30, 2019, Langen and SOG moved for Court approval of their settlement. Agreed Motion for Approval of Settlement and Dismissal of Claims with Prejudice [Doc. # 61]. On February 1, 2019, the Court approved a settlement between SOG and Langen, dismissing Langen's claim with prejudice and dismissing Langen from the lawsuit. Order dated February 1, 2019 [Doc. # 64].

         On February 14, 2019, Crescent answered SOG's third-party complaint and asserted two breach of contract counterclaims. Crescent Drilling & Production, Inc.'s Answer to Third-Party Complaint and Counterclaim Against Sanchez Oil & Gas Corporation (“Crescent's Answer & Counterclaims”) [Doc. # 71].

         Crescent labels Count 1 as its “Prevailing Party Status” claim. Crescent asserts that SOG owes Crescent attorneys' fees under Section 18.1 of the parties' MSA. Section 18.1 of the MSA states:

In the event the Parties become involved in mediation or litigation arising out of or related to the Agreement in which services of an attorney or other expert are reasonably required, the prevailing Party will be fully compensated for the cost of its participation is such proceedings, including court costs, expenses and the reasonable costs incurred for attorneys' fees and experts' fees. Unless judgment goes by default, the attorneys' fee award will not be computed in accordance with any other court schedule, but will be such as to fully reimburse all reasonable attorneys' fees actually incurred by the prevailing Party, regardless of the size of the judgment and regardless of whether the payment of all or a portion of such fees was contingent upon the outcome of the mediation or litigation.

MSA § 18.1. Crescent contends that SOG's indemnification claim under the MSA is meritless because it did not violate the FLSA. Accordingly, Crescent alleges it will be a “prevailing Party” on an action “arising out of” the MSA and thus entitled to attorney's fees under Section 18.1.

         Crescent labels Count 2 as “Sanchez's Breach of Contract.” Crescent asserts that SOG breached Section 11.10.3 of the MSA by settling with Langen without Crescent's prior written consent. Section 11.10.3 of the MSA states:

         Each Indemnified Party agrees that it will not settle or otherwise compromise any claims to be indemnified under this Agreement without the prior written consent of the Indemnifying Party, which consent shall not be unreasonably withheld or delayed. If the Indemnifying Party unreasonably withholds or delays its consent (including as a result of the Indemnifying Party's belief that it has no indemnification obligations under this Agreement), then the Indemnified Party may settle or otherwise compromise the applicable claims in its sole discretion, and the Indemnified Party shall be entitled to initiate litigation against the Indemnifying Party to determine whether the Indemnifying Party unreasonably withheld consent to the proposed compromise or settlement.

         MSA § 11.10.3. Crescent alleges that SOG never informed it that Langen and SOG were negotiating, and that Crescent's first notice of settlement negotiations was the Joint Notice of Partial Resolution filed on January 7, 2019. Crescent further alleges that SOG refused Crescent's demands for documents pertinent to settlement negotiations and SOG never obtained Crescent's approval of the settlement agreement. With respect to damages, Crescent contends that SOG's refusal to communicate settlement terms or obtain Crescent's approval caused Crescent to lose the ability to determine whether the settlement agreement was reasonable, appropriate, or justified, causing Crescent damages “in an amount to be proven at trial.”

         II. ...


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