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Hess Corp. v. Schlumberger Technology Corp.

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

November 7, 2019

HESS CORPORATION, Plaintiff,
v.
SCHLUMBERGER TECHNOLOGY CORPORATION, Defendant.

          MEMORANDUM OPINION AND ORDER

          SIM LAKE, SENIOR UNITED STATES DISTRICT JUDGE

         I. Motions to Exclude .................... 4

         II. Undisputed Facts and Procedural Background ........ 7

         III. Standard of Review...................15

         IV. Applicable Law.....................17

         V. Schlumberger's Motion for Summary Judgment .......21

         A. Schlumberger is Not Entitled to Summary Judgment on Hess's Breach of Contract Claims as to the Four Valves .........................22

         1. Hess Did Not Expressly Disclaim the Right to Challenge the Alleged Non-Conformities After a Year.......................22

         (a) The Court's Prior Ruling Does Not Foreclose Any Aspect of Schlumberger's MSJ .... 23

         (b) Whether Hess's Revocation Claims Are Time-Barred is a Fact Issue for Trial .... 24

         2. Schlumberger Is Entitled to Partial Summary Judgment Based on the MSC s Indemnity and Release Provisions ..................33

         (a) Replacement Valve Cost Is Not "Damage To or Loss of" Hess's Property........36

         (b) Costs to Retrieve and Replace the SSVs Is Not "Damage To or Loss of" Hess's Property . 38

         (c) Lost Profits Are Not "Damage to or Loss of" Hess's Property ............. 43

         (d) Methanol Contamination is "Damage to or Loss of" Hess's Property ...........44

         3. Whether Schlumberger Breached the Contract Presents Fact Issues for Trial............46

         (a) Whether Schlumberger Breached API 14A § 6.3.2.2 is a Fact Issue for Trial ... 47

         (b) Whether Schlumberger Breached API 14A § 7.6.2 is a Fact Issue for Trial ........50

         (c) Whether Schlumberger Breached API 14A § 7.6.3(c) is a Fact Issue for Trial . . 54

         (d) Hess Has Alleged Violations of the Eleventh Edition of API 14............56

         B. Schlumberger is Not Entitled to Summary Judgment on Hess's Breach of Contract Claim for the Well B(2) Valve .........................58

         1. Well B(2) Claim is a "Disputed Claim" under Clause

         (a) of the Bridging Agreement........59

         2. Well B(2) Claim is Not a "Disputed Claim" Pursuant to Clause (b) of the Bridging Agreement ... 61

         C. Schlumberger is Not Entitled to Summary Judgment because Hess has Failed to Satisfy the Appropriate Standard to Recover Incidental Damages ............ 62 VI. Hess's Motion for Partial Summary Judgment ....... 67

         A. The MSC's Indemnity-and-Release Provisions Encompass Hess's Breach of Contract Claims ......... 70

         B. Hess Is Entitled to Partial Summary Judgment on Schlumberger's Affirmative Defense of Release and Counterclaim for Indemnity ............ 77

         VII. Conclusions and Order.................78

         Pending before the court are Defendant Schlumberger Technology Corporation's Motion for Summary Judgment ("STC's MSJ") (Docket Entry No. 116), and Hess Corporation's Motion for Partial Summary Judgment on Schlumberger's Affirmative Defense of Release and Counterclaim for Indemnity ("Hess's MPSJ") (Docket Entry Nos. 117 (redacted) and 118 (unredacted)). For the reasons stated below, STC's MSJ will be granted in part and denied in part, and Hess's MPSJ will be granted in part and denied in part. Also pending are Hess Corporation's Motion to Exclude Expert Report of Lawyer Cary A. Moomjian (Docket Entry Nos. 119 (redacted) and 120 (unredacted)) and a number of motions seeking to exclude the testimony of expert witnesses: Schlumberger Technology Corporation's Motion to Exclude the Expert Testimony of Dennis Read (Docket Entry No. 121); Schlumberger Technology Corporation's Motion to Exclude the Expert Testimony of David Hirth (Docket Entry No. 122); Schlumberger Technology Corporation's Motion to Exclude the Expert Testimony of Peter Koopmans (Docket Entry No. 123); Schlumberger Technology Corporation's Motion to Exclude the Expert Testimony of Barry Pulliam (Docket Entry No. 124); and Schlumberger Technology Corporation's Motion to Exclude the Expert Testimony of Rolle Hogan (Docket Entry No. 125).

         I. Motions to Exclude

         Hess moves to exclude the Moomjian Report arguing that his "legal opinions interpreting the . . . indemnity-and-release provisions should be excluded because they are irrelevant and do not provide meaning to any specialized or scientific terms of art. "[1] On the first page of his report Lawyer Cary A. Moomj ian states: "I have been retained in relation to the Litigation for the sole purpose of providing my expert opinion on the applicability of the releases and indemnities between [Schlumberger] and Hess under the relevant contracts. I will limit this Report & Opinion to that issue and related matters."[2] Because the parties do not contend that the contract language at issue is ambiguous, the applicability of the contract's release and indemnity provisions present questions of law for the court to decide. See Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983) ("If the written instrument is so worded that it can be given a certain or definite legal meaning or interpretation, then it is not ambiguous and the court will construe the contract as a matter of law.").

         Under Rule 702 an expert must possess "specialized knowledge [that] will help the trier of fact to understand the evidence or to determine a fact in issue." Fed.R.Evid. 702(a). The Fifth Circuit has consistently held that legal opinions are not a proper subject of expert testimony because they do not assist the trier of fact in understanding the evidence, but instead merely tell the trier of fact what result to reach. See Estate of Sowell v. United States, 198 F.3d 169, 171-72 (5th Cir. 1999) (forbidding expert testimony as to whether a fiduciary was "acting reasonably"); Askanase v. Fatjo, 130 F.3d 657, 672-73 (5th Cir. 1997) (holding that the trial court properly excluded expert legal opinions as to whether defendants breached various fiduciary duties); Salas v. Carpenter, 980 F.2d 299, 305 (5th Cir. 1992) (noting that expert testimony must bring to the trier of facts more than the lawyers can offer in argument). Because the applicability of the releases and indemnities in the parties' contract presents questions of law for the court to decide, because the Moomjian Report offers only legal opinions, and because the legal questions at issue have been fully briefed by the parties, Hess's Motion to Exclude the Moomjian Report will be granted.

         Schlumberger moves to exclude the expert testimony of Rolle Hogan arguing that he is neither qualified nor able to opine on provisions of the parties' contract.[3] Hess responds that it "does not intend to offer Mr. Hogan to tell the Court how to interpret the unambiguous [contract]. That is for the Court to decide, which is the precise reason why Hess has moved to exclude the inadmissible legal opinions of Schlumberger's lawyer expert. "[4] Hess also states: "If the Court grants Hess's motion, then Schlumberger's becomes moot; Hess will de-designate Mr. Hogan as an expert witness, and call him instead only as a fact witness."[5]Because the court has decided to grant Hess's Motion to Exclude the Moomjian Report, Schlumberger's Motion to Exclude the Expert Testimony of Rolle Hogan will be denied as moot.

         The court's usual practice is to rule on motions to exclude expert testimony during the course of trial because experts frequently modify their opinions, and at trial counsel often establish more extensive predicates for experts' testimony. Moreover, the context in which an expert's opinion is offered is necessary to effectively rule on such issues. Accordingly, the remaining motions to exclude expert testimony, which deal with disputed fact issues concerning liability, causation, and damages, will all be denied without prejudice to being reurged during trial.

         II. Undisputed Facts and Procedural Background

         This is a breach of contract action arising from the failure of four Subsurface Safety Valves ("SSVs") that Hess purchased from Schlumberger for Wells B, C, and D in the Tubular Bells Field of the Mississippi Canyon on the Outer Continental Shelf of the Gulf of Mexico approximately 135 miles southeast of New Orleans, Louisiana.[6] Hess is the operator of the Tubular Bells Field, and Chevron is the non-operating working interest owner. The subsea wells are connected to the Gulfstar One production facility.[7]

         The contract consists of multiple agreements and project documents, including: Commercial Agreement Number 46000010410 ("Commercial Agreement") effective April 18, 2012; [8] Hess project document titled "GoM Tubular Bells & Llano 4 SCSSV Requirements Rev. 5" incorporated into the Commercial Agreement at Exhibit A -Scope of Work;[9] Schlumberger Quality Control Plan dated March 22, 2012, incorporated into the Commercial Agreement at Exhibit J;[10] American Petroleum Institute Specification 14A ("API 14A") incorporated into the Commercial Agreement at Exhibit J;[11] the Master Service Contract 7525 ("MSC") entered into by the parties in February of 2000 incorporated into the Commercial Agreement at ¶ 2;[12] Hess Drawings and Specifications incorporated into the Commercial Agreement at Exhibit K, p. 78;[13] and project Purchase Orders and Field Tickets incorporated into the Commercial Agreement at ¶ 2(a) of the MSC.[14]

         The SSVs were installed in April of 2014 in Well D, June of 2014 and February of 2016 in Well B, and April of 2015 in Well C.[15]Production on Well B began on December 14, 2014, and ceased on January 29, 2016, due to valve failure.[16] A Schlumberger replacement valve installed in Well B allowed production to resume on June 13, 2016, but in March of 2018 production ceased again due to the replacement valve's failure.[17] Production on Well D began on January 14, 2015, and ceased on August 10, 2015, due to valve failure.[18] Production on Well C began on July 21, 2015, and ceased due to valve failure on July 28, 2016.[19]

         Hess reported each valve failure to Schlumberger. Schlumberger investigated the failures and concluded that they were primarily caused by the quality of the Metal Spring Energized ("MSE") seals. On April 29, 2016, Schlumberger issued a report stating that it had identified an issue with the seals and had engaged in a recall of all SSVs manufactured from 2012 to 2015.[20]

         On May 17, 2016, Hess notified Schlumberger that it revoked acceptance of the SSVs used in Wells D and B pursuant to§ 2.608 of the Texas Business & Commerce Code.[21] On July 29, 2016, Hess notified Schlumberger that it revoked acceptance of the SSV used in Well C on the same basis.[22]

         On November 18, 2016, Hess filed this action alleging breach of contract under Texas Business and Commerce Code § 2.608 seeking "the cost of cover for each valve, incidental damages, consequential damages, attorney's fees and expenses, costs of suit, pre- and post-judgment interest at the maximum legal rate, and all such other and further relief, equitable and legal, to which Hess justly is entitled."[23] After Hess filed this action, the parties entered a Bridging Agreement that excepts "Disputed Claims," but otherwise amends the MSC "for contracts between the Parties entered into before, on or after" the effective date of January 1, 2017.[24]

         On December 8, 2016, Schlumberger moved to dismiss Hess's Original Complaint because the SSVs complied with the contract's time-limited warranties.[25] On January 27, 2017, the court entered a Memorandum Opinion and Order directing Hess to file an amended complaint identifying specific contractual obligations the SSVs failed to meet.[26]

         On February 15, 2017, Hess filed Plaintiff's First Amended Complaint, [27] and on March 1, 2017, Schlumberger filed Defendant's Motion to Dismiss First Amended Complaint under Rule 12 (b) (6) .[28]At the initial pretrial and scheduling conference held on March 3, 2017, the court ordered Hess to amend its complaint again, ordered Schlumberger to file an amended motion to dismiss, and directed the parties to identify legal criteria for distinguishing claims for breach of contract from claims for breach of warranty.[29]

         On March 17, 2017, Hess filed Plaintiff's Second Amended Complaint asserting claims for breach of contract under Texas common law and Texas Business and Commerce Code § 2.608.[30] Hess alleged that the SSVs containing the defective MSE seals were non-conforming goods and that the non-conformities substantially impaired the value of the SSVs to Hess. Hess reasserted the prayer for relief from its Original Complaint seeking the cost of cover, incidental damages, consequential damages, attorney's fees and expenses, costs of suit, pre- and post-judgment interest, and all other relief, equitable and legal, to which Hess is justly entitled.[31]

         Citing disclaimers contained in the parties' contract, and arguing that each of the installed SSVs functioned for a period of at least one year, Schlumberger moved to dismiss Plaintiff's Second Amended Complaint pursuant to Rule 12(b) (6) .[32] On June 29, 2017, the court entered a Memorandum Opinion and Order granting in part and denying in part Schlumberger's motion to dismiss upon concluding that the two breach of contract claims asserted in Hess's Second Amended Complaint were indistinguishable and that Chapter 2 of the Texas Business and Commerce Code provides the applicable law.[33] The court also concluded that Hess had alleged enough facts to support a viable revocation claim because

Schlumberger's argument is, in essence, that the SSVs were conforming. But that is for the trier of fact to determine. Hess may proceed with its claims based on the alleged non-conformity of the SSVs at the time of delivery. Hess may not proceed with its claims based on the failure of the SSVs to function after the warranty period had expired.[34]

         On July 13, 2017, Schlumberger filed Schlumberger Technology Corporation's Answer, Affirmative Defenses and Counterclaim to Hess's Second Amended Complaint.[35] Among the affirmative defenses that Schlumberger asserts is an affirmative defense of release alleging that the MSC released Schlumberger "from all claims brought by any party for any and all 'damage to or loss of property' . [MSC] § 13. "[36] Schlumberger also asserts a counterclaim for indemnity seeking to recover from Hess any judgment that Hess receives from Schlumberger on Hess's affirmative claim plus attorney's fees and costs.[37]

         On May 9, 2018, Hess filed the TAC asserting claims for breach of contract pursuant to Texas common law and Texas Business and Commerce Code § 2.608.[38] Hess alleges that the SSVs containing the defective MSE seals were non-conforming goods and that the non-conformities substantially impaired the value of the SSVs to Hess. Hess alleges that it "incurred substantial expense to retrieve and replace the non-conforming valves and restore the wells to production, and lost profits from deferred and lost production."[39] Hess also alleges:

Schlumberger's failure to perform its manufacturing and inspections according to the applicable contractual specifications and standards has resulted in significant damages to Hess, including but not limited to costs associated with retrieval and replacement of the failed Schlumberger Safety Valves and restoration of the wells, and lost profits from deferred and lost production.[40]

         Hess reasserts the prayer for relief from its Original Complaint seeking the cost of cover for each valve, incidental damages, consequential damages, attorney's fees and expenses, costs of suit, pre- and post-judgment interest, and all other relief, equitable and legal, to which Hess is justly entitled.[41] On April 8, 2019, the parties submitted a Joint Status Report Concerning Trial (Docket Entry No. 114), stating: "[T]he parties have agreed to try this case to the bench rather than a jury."

         III. Standard of Review

         Summary judgment is authorized if the movant establishes that there is no genuine dispute about any material fact and the law entitles it to judgment. Fed.R.Civ.P. 56. Disputes about material facts are "genuine" if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 106 S.Ct. 2505, 2511 (1986). A "party moving for summary judgment must 'demonstrate the absence of a genuine issue of material fact,' but need not negate the elements of the nonmovant's case." Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en bane) (per curiam) (quoting Celotex Corp. v. Catrett, 106 S.Ct. 2548, 2553 (1986)). "If the moving party fails to meet this initial burden, the motion must be denied, regardless of the nonmovant's response." Id. If, however, the moving party meets this burden, Rule 56 requires the nonmovant to go beyond the pleadings and show by admissible evidence that specific facts exist over which there is a genuine issue for trial. Id. "[T]he court must draw all reasonable inferences in favor of the nonmoving party, and it may not make credibility determinations or weigh the evidence." Reeves v. Sanderson Plumbing Products, Inc., 120 S.Ct. 2097, 2110 (2000). Factual controversies are to be resolved in favor of the nonmovant, "but only when there is an actual controversy, that is, when both parties have submitted evidence of contradictory facts." Little, 37 F.3d at 1075.

         "When parties file cross-motions for summary judgment, [courts] review 'each party's motion independently, viewing the evidence and inferences in the light most favorable to the nonmoving party."' Cooley v. Housing Authority of the City of Slidell, 747 F.3d 295, 298 (5th Cir. 2014) (quoting Ford Motor Co. v. Texas Department of Transportation, 264 F.3d 493, 498 (5th Cir. 2001)). See also Shaw Constructors v. ICF Kaiser Engineers, Inc., 395 F.3d 533, 538-39 (5th Cir. 2004), cert. denied sub nom. PCS Nitrogen Fertilizer, L.P. v. Shaw Constructors, Inc., 126 S.Ct. 342 (2005) ("Cross-motions must be considered separately, as each movant bears the burden of establishing that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law.").

         IV. Applicable Law

         Hess asserts claims for breach of contract pursuant to Texas common law and Texas Business and Commerce Code § 2. 608.[42] The court has already held that the two breach of contract claims Hess asserts are indistinguishable and that Chapter 2 of the Texas Business and Commerce Code provides the applicable law.[43] Under Texas law "[i]f the written instrument is so worded that it can be given a certain or definite legal meaning or interpretation, then it is not ambiguous and the court will construe the contract as a matter of law." Coker, 650 S.W.2d at 393. The parties do not dispute that Texas law applies to the contract, and neither party argues that any part of their contract is ambiguous.

         Section 2.608 of the Texas Business and Commerce Code describes the conditions necessary for revocation:

(a) The buyer may revoke his acceptance of a lot or commercial unit whose non-conformity substantially impairs its value to him if he has accepted it . . .
(2) without discovery of such non-conformity if his acceptance was reasonably induced either by the difficulty of discovery before acceptance or by the seller's assurances.
(b) Revocation of acceptance must occur within a reasonable time after the buyer discovers or should have discovered the ground for it and before any substantial change in condition of the goods which is not caused by their own defects. It is not effective until the buyer notifies the seller of it.
(c) A buyer who so revokes has the same rights and duties with regard to the goods involved as if he had rejected them.

Tex. Bus. & Com. Code § 2.608. A seller delivers conforming goods when the goods "are in accordance with the obligations under the contract." Tex. Bus. & Com. Code § 2 .106 (b) . Non-conformity includes any failure of the seller to perform according to his obligations under the contract, including breaches of warranties. See Tex. Bus. & Com. Code § 2.714, Comment 2. Breach of warranty is a subset of non-conformity. See Ford Motor Credit Co. v. Harper, 671 F.2d 1117, 1122 (8th Cir. 1982).

         A claim for "revocation seeks to put the buyer in the same position as if he had rejected the goods at the time of delivery." Neal v. SMC Corp., 99 S.W.3d 813, 816 (Tex. App. - Dallas 2003, no pet.). See also A.O. Smith Corp. v. Elbi S.P.A., 123 Fed.Appx. 617, 619 (5th Cir. 2005) (per curiam) ("[B]reach of contract damages are not available when a buyer accepts non-conforming goods. In that instance, breach of warranty is the remedy . . . Breach of contract remedies are available, however, to a buyer who, inter alia, properly revokes acceptance.") (citing Selectouch Corp. v. Perfect Starch, Inc., 111 S.W.3d 830, 834 (Tex. App. - Dallas 2003, no pet.) ("A buyer who . . . justifiably revokes his acceptance may recover breach of contract remedies for delivery of non-conforming goods under section 2.711. . ")).

         The remedies for breach of contract for a sale of goods are set forth in Tex. Bus. & Com. Code § 2.711-2.715. In pertinent part 2.711 governing "Buyer's Remedies in General" provides:

(a) Where the seller fails to make delivery or repudiates or the buyer rightfully rejects or justifiably revokes acceptance then with respect to any goods involved, and with respect to the whole if the breach goes to the whole contract (Section 2.612), the buyer may cancel and whether or not he has done so may in addition to recovering so much of the price as has been paid
(1) "cover" and have damages under the next section as to all the goods affected whether or not they have been identified to the contract; or
(2) recover damages for non-delivery as provided in this chapter (Section 2.713).

Tex. Bus. & Com. Code 2.711.

         Section 2.712 governing "Cover" provides:

(a) After a breach within the preceding section the buyer may "cover" by making in good faith and without unreasonable delay any reasonable purchase of or contract to purchase goods in substitution for those due from the seller.
(b) The buyer may recover from the seller as damages the difference between the cost of cover and the contract price together with any incidental or consequential damages as hereinafter defined (Section 2.715), but less expenses saved in consequence of the seller's breach.

Tex. Bus. & Com. Code § 2.712.

         Section 2.713 governing "Buyer's Damages for Non-Delivery or Repudiation" provides:

(a) Subject to the provisions of this chapter with respect to proof of market price (Section 2.723), the measure of damages for non-delivery or repudiation by the seller is the difference between the market price at the time when the buyer learned of the breach and the contract price together with any incidental and consequential damages provided in this chapter (Section 2.715), but less expenses saved in consequence of the seller's breach.
(b) Market price is to be determined as of the place for tender or, in cases of rejection after arrival or revocation of acceptance, as of the place of arrival.

Tex. Bus. & Com. Code § 2.713.

         Section 2.715 governing "Buyer's Incidental and Consequential Damages" provides:

(a) Incidental damages resulting from the seller's breach include expenses reasonably incurred in inspection, receipt, transportation and care and custody of goods rightfully rejected, any commercially reasonable charges, expenses or commissions in connection with effecting cover and any other reasonable expense incident to the delay or other breach.
(b) Consequential damages resulting from the seller's breach include
(1) any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise; and
(2) injury to person or property proximately resulting from any breach of warranty.

Tex. Bus. & Com. Code § 2.715. The effect of these provisions may be altered by agreement of the contracting parties. Tex. Bus. & Com. Code § 1.302(a) ("Except as otherwise provided . . . elsewhere in this title, the effect of provisions of this title may be varied by agreement.").

         V. Schlwerger's Motion for Suary Judgment

         Schlumberger argues that it is entitled to summary judgment on Hess's breach of contract claims as to all four of the failed valves because (1) Hess expressly disclaimed its right to challenge non-conformities after a year, (2) Hess released Schlumberger from all of the claims asserted in this action, and (3) the contract was not breached because it prescribes processes, not product specifications.[44] Alternatively, Schlumberger argues that it is entitled to judgment on the Well B(2) valve claims pursuant to the January 1, 2017, Bridging Agreement[45] and on Hess's claims for workover costs and any lost-opportunity costs because Hess provides no evidence using the proper measure of damages.[46]

         A. Schluerger is Not Entitled to Swary Judgment on Hess's Breach of Contract Claims as to the Four Valves

         1. Hess Did Not Expressly Disclaim the Right to Challenge the Alleged Non-Conformities After a Year

         Citing the one-year warranty provision contained in the MSC, and asserting that the MSC disclaims all "OTHER WARRNT [IES]" except those "EXPRESSLY STATED HEREIN," [47] Schlumberger argues that it is entitled to summary judgment on all of Hess's claims because Hess expressly disclaimed its right to challenge non-conformities after a year.[48] Hess argues in response that Schlumberger's warranty argument "is essentially a two-year old cut-and-paste job that the Court already said would be disallowed, "[49] and that "[t] hat alone is reason to deny Schlumberger's motion. "[50] Alternatively, Hess argues that

[o]n the merits, Schlumberger's argument has lost even further ground. Hess alleges that it properly revoked acceptance and therefore never finally accepted Schlumberger's tender of safety valves that failed to conform at delivery to the independent contractual obligations contained in the Commercial Agreement. Schlumberger's own documents repeatedly confirm this allegation as true. Because Hess has properly revoked acceptance, its claim sounds in contract and not warranty.[51]

Quoting Neal, 99 S.W.3d at 816, Hess argues that" [u]nder Texas law, Hess must be put 'in the same position as if [it] had rejected the goods at the time of delivery.'"[52]

         (a) The Court's Prior Ruling Does Not Foreclose Any Aspect of Schlumberger's MSJ

         Schlumberger argues that it is entitled to summary judgment on Hess's claims because the non-conformities for which Hess seeks relief are violations of express warranties and as such are subject to the MSC's one-year warranty provision. Although Schlumberger raised similar arguments in a previously denied motion to dismiss, see Hess, 2017 WL 2829697, at *6-*7, the court's prior ruling does not foreclose any aspect of Schlumberger's present motion for summary judgment. The court's prior ruling accepted Hess's allegations as true, viewed them in the light most favorable to Hess, and analyzed the facts alleged in Hess's complaint against the elements of a claim for revocation under Tex. Bus. & Com. Code § 2.608. Recognizing that "[t]he question before the court on a motion to dismiss is whether Hess has plausibly alleged that Schlumberger's SSVs were non-conforming at the time of delivery," id. at *6, the court concluded that "Hess's claim is plausible" because Hess alleged that Schlumberger's failure to fulfill its contractual obligations resulted in delivery of non-conforming SSVs, and that "Schlumberger's contractual obligation to deliver [conforming, i.e., ] parts ... is not time limited." Id. at *7. The court's prior ruling does not foreclose any aspect of STC's MSJ because that ruling was based on the Plaintiff's Second Amended Complaint, which has been superseded by the TAC, and was entered before the court had considered the summary judgment evidence.

         (b) Whether Hess's Revocation Claims Are Time-Barred is a Fact Issue for Trial

         Hess alleges that it justifiably revoked its initial acceptance of the four SSVs under Texas Business and Commerce Code § 2. 608 because the SSVs "failed to conform at delivery to the independent contractual obligations contained in the Commercial Agreement."[53] The elements of a revocation claim are:

(1) initial acceptance (. . . without discovery of the non-conforming item if acceptance was induced by difficulty of discovery or by seller's assurance); (2) of non-conforming item; (3) such non-conformity substantially impairs the value to the buyer; (4) and revocation occurs within a reasonable time; (5) in any event, the revocation must occur before a substantial change in the condition of the goods occurs (which change is not caused by defect of the goods).

Neily v. Aaron, 724 S.W.2d 908, 913-14 (Tex. App. - Fort Worth 1987, no writ). "The determination of each of these elements is a question of fact." Id. at 914 (citing Vista Chevrolet v. Lewis, 704 S.W.2d 363, 368 (Tex. App. - Corpus Christi 1985), rev'd on other grounds, 709 S.W.2d 176 (Tex. 1986)).

         Distinguishing the argument now being made in its MSJ from the argument advanced in its previous motion to dismiss, Schlumberger argues that "this Court thus far has construed only the MSC warranty's performance language and has not construed the nonconformity provision in the warranty."[54] Asserting that the MSC's warranty provision governs both performance and conformity, Schlumberger argues

Hess suggests that this Court has already ruled on the warranty argument Schlumberger asserts in Section I.A of its summary judgment motion, but Hess is mistaken. Tellingly, Hess does not dispute that this Court thus far has construed only the MSC warranty's performance language and has not construed the nonconformity provision in the warranty. At the pleading stage, the Court dismissed Hess's "allegations [that] involve the failure of the [valves] to perform as expected." ECF No. 4 O at 16." [A] s the disclaimers in the MSC make clear," the Court held, "Schlumberger did not warrant that the valves would do so indefinitely. Schlumberger explicitly warranted performance . . . for one year only." Id. Hess pressed the Court to construe only this part of the warranty, stating - incorrectly - that "[t]he MSC's warranty provision does not mention Schlumberger's specifications." ECF No. 34 at 29. Today, however, Hess does not dispute that the warranty does just that, promising that the valves would "be free from defects in design, materials, fabrication and other workmanship" and conform to [the] specifications, drawings or other descriptions contained in the applicable service agreement, purchase order, work order or other project document." . . . (emphasis added) . Hess does not dispute that it did not raise the alleged nonconformities within one year. That resolves all of Hess's claims.[55]

Citing Gasmark, Ltd. v. Kimball Energy Corp., 868 S.W.2d 925, 928 (Tex. App. - Fort Worth 1994, no writ), for its statement that "the effect of the UCC may be varied by agreement," Schlumberger argues "[t] hat is exactly what the parties' contract does here. Hess agreed not to bring nonconformity claims after a year, and promised that there were 'NO OTHER WARRANT [IES] . 1[56] Schlumberger's argument that Hess's revocation claims are precluded by the MSC warranty provision's one-year limitation challenges Hess's ability to establish element (4) of its revocations claims, i.e., that the revocation occurred within a reasonable time.[57]

         Hess argues that the SSVs "failed to conform at delivery to the independent contractual obligations contained in the Commercial Agreement, 1[58] specifically, that the SSVs would be manufactured, tested, and monogrammed to the latest edition of API 14A, and would conform to Hess's and Schlumberger's specifications and to industry standards.[59] Schlumberger's contractual obligation to provide Hess with SSVs that would be manufactured, tested, and monogrammed to the latest edition of API 14A, and would comply to Hess's and Schlumberger's specifications and to industry standards, are express warranties because they are affirmations of fact, promises, and/or descriptions related to the SSVs that became part of the basis of the parties' bargain. See Tex. Bus. & Com. Code § 2.313 and Comment 5.[60] The concept of non-conformity includes any failure of the seller to perform according to his obligations under the contract, including breaches of warranties. See Texas Business and Commerce Code § 2.714, Comment 2. See also Ford, 671 F.2d at 1122 (recognizing breach of warranty as a subset of non-conformity).

         Section 2. 316 (d) of the Texas Business and Commerce Code states that "[r]emedies for breach of warranty can be limited in accordance with the provisions of this chapter on liquidation or limitation of damages and on contractual modification of remedy (Section 2.718 and 2.719)." Schlumberger's obligation to deliver SSVs that conformed to express warranties is covered in the MSC s warranty provision, which provides in pertinent part:

Contractor warrants that all equipment, products, materials and other items furnished hereunder shall: (2) be free from defects in design, materials, fabrication and other workmanship; and (3) conform to AHC's [Amerada Hess Corporation's] specifications, drawings or other descriptions contained in the applicable service agreement, purchase order, work order or other project document.[61]

         The MSC's warranty provision also covers "all work and other services performed" by stating:

Contractor warrants that all work and other services performed hereunder (whether by Contractor, its subcontractors or other parties for whom it is responsible) shall be free from all faults and defects and of a quality consistent with the prevailing standards of workmanship for experienced contractors with expertise in the particular type of work or service being performed.[62]

         The MSC's warranty provision limits Schlumberger's warranties to a period of one year by stating:

         Contractor's foregoing warranties shall continue for a period of one (1) year after Contractor's delivery and/or installation (if performed by Contractor) of the equipment, product, materials or other item in question or performance of other applicable work or services, as the case may be. . .[63]

         The MSC's warranty provision expressly and conspicuously disclaims all other express or implied warranties:

[SCHLUMBERGER] MAKES NO OTHER WARRANTY AS TO PRODUCTS, WORKMANSHIP OR MERCHANTABILITY, WHETHER EXPRESSED OR IMPLIED (INCLUDING, WITHOUT LIMITATION, THAT THE PRODUCTS OR SERVICES SHALL BE FIT FOR ANY PARTICULAR PURPOSE), EXCEPT AS EXPRESSLY STATED HEREIN OR IN AN EXPRESS AMENDMENT HERETO .[64]

         Hess alleges that it "did not limit its rights of revocation under [§] 2.608 in its agreements with Schlumberger[; t]hose rights exist at law and are nowhere modified by any agreement with Schlumberger. "[65] But Hess neither alleges in its live complaint, nor argues in its summary judgment briefing that the MSC's warranty provision is unenforceable or unreasonable under § 2.316 or any other provision of the Texas Business and Commerce Code.

         Schlumberger argues that the MSC warranty provision represents the parties' agreement to limit to one year the time that Hess had to challenge non-conformity with the contract's express warranties.[66] Schlumberger's argument - that the MSC warranty provision's one-year limitation represents the time to which the parties agreed non-conformities could be challenged - does not preclude Hess from obtaining relief under § 2.608 merely because Hess failed to revoke within the one-year period.

         Comment 4 to§ 2.608 provides:

Subsection (2) requires notification of revocation of acceptance within a reasonable time after discovery of the grounds for such revocation. Since this remedy will be generally resorted to only after attempts at adjustment have failed, the reasonable time period should extend in most cases beyond the time in which notification of breach must be given, beyond the time for discovery of non-conformity after acceptance and beyond the time for rejection after tender. The parties may by their agreement limit the time for notification under this section, . . . (emphasis added).

         Accepting Schlumberger's contention that the MSC warranty provision's one-year limitation represents the time in which the parties agreed non-conformity with an express warranty could be challenged, pursuant to Comment 4 the "reasonable time period" that § 2.608 provides for revocation "should extend in most cases beyond the time in which notification of breach must be given, [and/or] beyond the time for discovery of non-conformity after acceptance." Under the facts of this case that means that § 2.608's "reasonable time period" may extend beyond the MSC warranty provision's one-year period. Al though Comment 4 recognizes that "[t] he parties may by their agreement limit the time for notification under this section . .," id., neither the MSC warranty provision nor any other provision of the parties' contract expressly limits the time for revocation under § 2.608. While Hess did disclaim the time to challenge non-conformities to one year, Hess did not disclaim the time to revoke under § 2.608 to one year. Accordingly, the court concludes that Hess was only obligated to notify Schlumberger of its revocation of the SSVs reasonably soon after the agreed-upon one-year period expired. Whether Hess can satisfy the fourth element of its revocation claims for the four SSVs by establishing that its revocations occurred within a reasonable time are questions of fact for trial. See Neily, 724 S.W.2d at 914 ("The determination of each . . . element [ of a § 2. 608 claim] is a question of fact.").

         If, as Hess alleges, Hess justifiably revoked acceptance of the SSVs, Hess would have the same rights as if it had rejected the SSVs at the time of delivery, including the right to damages for breach of contract. See Neal, 99 S.W.3d at 816 (citing Tex. Bus. & Com . Code § 2 . 608) . See also A.O. Smith, 123 Fed.Appx. at 619 ("Breach of contract remedies are available . . . to a buyer who . . properly revokes acceptance."). Whether Hess justifiably revoked acceptance of the SSVs is a fact issue for trial that precludes the court from granting Schlumberger's MSJ on Hess's breach of contract claims for the four valves. Neily, 724 S.W.2d at 914.

         2. Schlumberger Is Entitled to Partial Summary Judgment Based on the MSC's Indemnity and Release Provisions

         Citing § 13(c) of the MSC, Schlumberger argues that it is entitled to summary judgment because Hess released it from all claims for property damage. Schlumberger argues that

[a]s is "customary practice" in the oil-and-gas industry, Hess and Schlumberger agreed to release and indemnify each other for property damage claims tied to work performed under the [MSC] . . . This "knock-for-knock" agreement requires each party to assume responsibility for damage to its property, regardless of who caused the damage. In the MSC's knock-for-knock provision, Hess "fully release[d]" Schlumberger as follows:
[Hess] shall fully release [Schlumberger] . . . from . . . all claims brought by . . . any party or person, for any and all . . . damage to or loss of property of [Hess] . . . whether real or personal (including, without limitation, production and drilling equipment, wellbore, casing, subsurface reservoirs and any oil and gas or other hydrocarbon substances located therein) whenever and wherever occurring, arising directly or indirectly out of or in any way involving [Schlumberger's] work and other operations (including acts and omissions) . . . without limit and regardless of cause or fault ....

Ex. 1 at§ 13(c) (emphasis added; all-caps omitted).

Under this broadly worded provision, Schlumberger is released "without limit" for "loss of property" "whether real or personal." . . . Though not defined in the MSC, real property includes "[l]and and anything growing on, attached to, or erected on it." Black's Law Dictionary (10th ed. 2014) (entry for "property"). Personal property is "[a]ny moveable or intangible thing that is subject to ownership and not classified as real property" (id.); it includes money (San Antonio Area Found. v. Lang, 35 S.W.3d 636, 640 (Tex. 2000)).
Hess's alleged damages all constitute "damage to or loss of property." Ex. 1 at§ 13(c) (1) (iii) . According to Hess's expert, Hess's damages fall into four categories:
(1) costs "to purchase replacements for the failed [valves]";
(2) "costs for the retrieval and replacement of the [valves] ";
(3) "reduced revenues associated with work on the Gulfstar One facility"; and
(4) costs "due to methanol contamination." Ex. 7 at ¶ 9. "Costs" and "reduced revenues" are of course lost money, which, again, is intangible property. At the same time, each category also involves lost tangible property.[67]

         Citing Energy XXI, GoM, LLC v. New Tech Engineering, L.P., 787 F.Supp.2d 590 (S.D. Tex. 2011), and Valero Energy Corp. v. M.W. Kellogg Construction Co., 866 S.W.2d 252 (Tex. App. - Corpus Christi 1993, writ denied), Schlumberger argues that courts regularly enforce such releases.[68]

         Hess responds that Schlumberger is not entitled to summary judgment because its claims do not allege "damage to or loss of" Hess's property, and because it did not release Schlumberger from its breach of contract claim.[69] Arguing that the MSC's indemnity and release provisions do not apply to claims alleging breach of the underlying contract, [70] Hess has moved for partial summary judgment.[71]

         Section 13 of the MSC governs "Indemnities," and in pertinent part provides:

         (c) Company's Indemnity Obligations:

1. COMPANY SHALL FULLY RELEASE, DEFEND, INDEMNIFY AND HOLD CONTRACTOR GROUP HARMLESS FROM AND AGAINST ALL CLAIMS BROUGHT BY OR ON BEHALF OF ANY PARTY OR PERSON, FOR ANY AND ALL:
(iii) DAMAGE TO OR LOSS OF PROPERTY OF COMPANY AND ITS EMPLOYEES, WHETHER REAL OR PERSONAL (INCLUDING, WITHOUT LIMITATION, PRODUCTION AND DRILLING EQUIPMENT, WELLBORE, CASING, SUBSURFACE RESERVOIRS AND ANY OIL AND GAS OR OTHER HYDROCARBON SUBSTANCES LOCATED THEREIN) WHENEVER AND WHEREVER OCCURRING, ARISING DIRECTLY OR INDIRECTLY OUT OF OR IN ANY WAY INVOLVING CONTRACTOR'S WORK EQUIPMENT, TOOLS, MATERIALS, AND OTHER ITEMS WHATSOEVER FURNISHED, DELIVERED, STORED, OR OTHERWISE HANDLED BY CONTRCTOR . . . WITHOUT LIMIT AD REGARDLESS OF CAUSE OR FAULT, AS PARTICULARLY DESCRIBED IN SECTION 13 (b) ABOVE.[72]

         Section 13(c) is informed by§ 13(b), which provides:

IT IS THE SPECIFIC AND EXPRESSED INTENT AD AGREEMENT OF THE COMPAY AND THE CONTRACTOR THAT ALL RELEASE, DEFENSE,
HOLD HARMLESS AND INDEMNITY OBLIGATIONS AND OTHER LIABILITIES ASSUMED BY COMPANY AD CONTRACTOR RESPECTIVELY UNDER SECTIONS 13(c) AND (d) SHALL BE WITHOUT REGARD TO THE NEGLIGENCE (WHETHER SOLE, JOINT, OR CONCURRENT, ACTIVE OR PASSIVE), BREACH OF WARRNTY, STRICT LIABILITY, PREMISES LIABILITY, DEFECTIVE CONDITION (WHETHER PRE-EXISTING OR OTHERWISE) OF ANY FACILITIES, EQUIPMENT, MATERIALS, TOOLS, OR OTHER ITEM WHATSOEVER . OR ANY OTHER FAULT OF THE INDEMNIFIED PARTIES OR ANY OTHER ...

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