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```
[Cite as Talbott v. Condevco, Inc.,
```
2020-Ohio-3130
```
.]
IN THE COURT OF APPEALS OF OHIO
SEVENTH APPELLATE DISTRICT
MONROE COUNTY
PHYLLIS H. TALBOTT SUBSTITUTED BY LINDA CHRISTMAN,
EXECUTOR OF THE ESTATE OF PHYLLIS H. TALBOTT,
Plaintiff-Appellant,
v.
CONDEVCO, INC. et al.,
Defendants-Appellees.
OPINION AND JUDGMENT ENTRY
Case No. 19 MO 0007
Civil Appeal from the
Court of Court of Common Pleas of Monroe County, Ohio
Case No. 2016-132
BEFORE:
Carol Ann Robb, Cheryl L. Waite, David A. D'Apolito, Judges.
JUDGMENT:
Affirmed.
Atty. David Wigham, Atty. Leighann Fink, Roetzel & Andress, LPA, 222 South Main
Street, Suite 400, Akron, Ohio for Plaintiff-Appellant and
Atty. Daniel P. Corcoran, Atty. Kristopher O. Justice, Atty. Adam J. Schwendeman,
Theisen Brook, 424 Second Street, Marietta, Ohio 45750, for Defendants-Appellees
–2–
Dated: May 4, 2020
Robb, J.
{¶1} The decision of the Monroe County Common Pleas Court granting summary
judgment in favor of Defendant-Appellee Condevco Inc. (et al.) was appealed by Plaintiff-
Appellant Phyllis Talbott. Appellant contends Condevco did not properly exercise its
option to adopt the orphan well on her property under the terms of the oil and gas lease
because, although Condevco reworked an abandoned well, it did not register the well and
the related entity who did register the well did not do so until after the primary term
expired. This argument lacks merit.
{¶2} Appellant alternatively argues the well failed to produce in paying quantities.
We find the trial court properly stopped the base period for evaluating production when
the lawsuit was filed. Regarding which operating expenses to subtract from the revenue,
we agree with the decision to exclude the initial swabbing events that were part of
evaluating and reopening the abandoned well. As for subsequent production by
swabbing, a rental rate for the swab rig need not be imputed where no rental was charged
by an affiliated company. Although the trial court should have included the labor rate
earned by Condevco's employees as an operating expense, the well still showed a profit.
In accordance, the lease was maintained by production in paying quantities. The trial
court's judgment is affirmed.
STATEMENT OF THE CASE
{¶3} On July 2, 2009, Phyllis Talbott executed an oil and gas lease, dated June
20, 2009, which provided Condevco Inc. drilling and production rights over her 81 acres
of land in Monroe County. (Recorded 12/29/11, Vol. 212, P. 185). The term of the lease
was three years and thereafter as long as oil or gas is produced (from this land or pooled
land) or drilling operations are continually prosecuted.1 Noting the existence of orphan
wells on the leasehold, the lease provided Condevco "the option to evaluate existing wells
and utilize these wells at its discretion and, if Lessee decided to 'adopt' an orphan well
1 The clause also said the lease would be maintained if the land was used for gas storage or substance
injection, but the "Additional Terms" thereafter stated the premises will not be used for storage or injection
(except to enhance recovery).
Case No. 19 MO 0007
–3–
and return it to production, any royalty income will be considered to have the same effect
as a newly drilled well for purposes of this Lease."
{¶4} Delay rentals of $5 per acre were paid each year during the primary term.
Before the end of the primary term, Condevco reworked one orphan well, which is the
well at issue in this case (called the Talbott Well by Appellees but officially called the Van
Schwaben Well 3, API number 341116 0202 0000).
{¶5} According to the deposition testimony of its vice-president, Condevco
evaluated the well through "trial and error" to ascertain that the well would be operated
as a swabbing well, instead of a pumping well. He said the process of swabbing involves
the use of a swab rig to lower a tool carrying rubber cups into the hole; as the cups are
pulled up through the fluid in the hole, the fluid is dragged to the surface where the oil
separates from the brine. A cycle was explained: drawing fluid from the well can result
in oil collection; it can also free any gas which is clogged by the fluid; and then, as gas is
produced, a return of fluid may bring oil but slow the gas. (B. Chavez Depo. 281).
{¶6} On May 7, 9, and 10, 2012, Condevco pulled the old rods and pump from
the well bore, replaced them, and attempted to pump the well. On May 14 and 15, the
rods were pulled again, and the well was swabbed. On the last three days of May,
Condevco used a bailer to clean sand and debris from the bottom of the hole (after pulling
the tubing from the well). On June 4, Condevco replaced the tubing.
{¶7} Thereafter, the well was swabbed nine days in June 2012, all before the
end of the primary term. These swabbing events produced a total of 83.64 barrels of fluid
which contained 15.4 barrels of oil. This oil was sold for $1,335.80. Condevco paid the
corresponding 12.5% royalty to Talbott in August 2012.
{¶8} In 2013, the well was swabbed twice (one day in April and one day in June),
resulting in the collection of 32 barrels of fluid containing 15 barrels of oil (almost 47% of
the fluid was oil, compared to the June 2012 swabbing where only 18% of the fluid was
oil). Condevco's vice-president explained that the increased percentage of oil in the fluid
was expected as the well was shut for years, and he noted the 2012 swabbing helped
flush out the production. (B. Chavez Depo. 280).
{¶9} In 2014, the well was swabbed once in June, producing 15.58 barrels of
fluid. A gas line was installed in November 2014, connecting the well to the main line
1,600 feet away where a compressor was used to assist in gas production. Condevco
Case No. 19 MO 0007
–4–
reported gas production of 25 mcf in the last two months of 2014 and 312 mcf in 2015.
The compressor was down for two months in 2015, and no gas was attributed to those
months. The meter was replaced more than once in the first year due to issues with
pressure. In 2015, Condevco swabbed the well two days in a row in August and two days
in a row in December, producing 28 barrels of fluid. Combined with the fluid collected in
2014, 18.47 barrels of oil were produced.
{¶10} On January 11, 2016, Phyllis Talbott filed suit against Condevco, alleging
the lease terminated for lack of production and setting forth claims for declaratory
judgment, quiet title, trespass, ejectment with a request for a permanent injunction, and
conversion with a request for an accounting. The following defendants were named as
they were partially assigned various lease rights: Deep Rock Investments LLC; Flat Rock
Development LLC; Flat Rock Orion LLC; Hartz Buckeye Energy LLC; and Hartz Energy
Capital LLC. The second amended complaint (filed on July 9, 2018) added Heinrich
Enterprises Inc. as a defendant because this company was registered as the owner of
the well in the records of the Ohio Department of Natural Resources (ODNR). A
counterclaim sought a declaration that the lease was in full force due to the orphan well's
production (and alternatively claimed the landowner was unjustly enriched and sought the
cost of improvements and any plugging cost).
{¶11} Both sides filed motions for summary judgment. The plaintiff alleged:
returning an orphan well to production was only one step; the well was not adopted by
Condevco as they did not file a Form 7 with ODNR to transfer ownership of the orphan
well; this act was performed only by Heinrich Enterprises but that company was not listed
as the owner by ODNR until four years after the primary term expired; and the well did
not produce in paying quantities due to the operating expenses exceeding the revenue.
As to operating expenses, the plaintiff's arguments included: the June 2012 swabbing
was an operating expense rather than a capital expense; a fair swab rig rental rate should
be imputed; and labor costs should not be ignored merely because the company has
employees who perform the work. An expert's affidavit and report was filed in support;
he valued certain items as operating expenses and opined the production was not in
paying quantities.
{¶12} The defense argued: the well was adopted when Condevco reworked and
produced from it; the lease did not require a form to be filed; Heinrich Enterprises was an
Case No. 19 MO 0007
–5–
affiliated company with the same owners and was the regulatory bondholder for all
Condevco wells under an internal agreement; and the duty to register a well can be
delegated and is not personal. It was noted that an affidavit to transfer ownership of the
orphan well was filed in 2013, but they did not realize they misidentified the well number
until speaking with ODNR in 2016, when ODNR registered Heinrich Enterprises as the
owner in its records.
{¶13} On paying quantities, the defense said: the swab rig was not an operating
expense as there was no direct expenditure for it since it was owned by Heinrich
Enterprises; assuming it was an operating expense, the imputed rental rate was too high;
the labor of their own employees was not an operating expense; and the production data
after the suit was filed should not be included in the calculation as they had no incentive
to stimulate production or drill a new well considering the allegations in the lawsuit. They
urged deference to the lessee's good faith judgment, noting the substantial capital
investment which Condevco had the right to recoup through profit over time.
{¶14} On January 14, 2019, the trial court granted summary judgment in favor of
the defense. The court found the unambiguous lease language granted the right to adopt
an orphan well by returning it to production, thereby maintaining the lease. The court
noted the testimony of the plaintiff's expert admitting that once Condevco worked on the
well, ODNR would hold it responsible for plugging the well regardless of whether Form 7
was on file. The court held the cost of swabbing in June 2012 was a one-time capital
expense rather than an operating expense. The court also found the use of the
company's own employees and swab rig did not result in a direct expenditure to
categorize as an operating expense; the court also noted the plaintiff's expert used a labor
cost that was not what employees were paid and a rig rental rate that was not relevant.
{¶15} The trial court concluded Condevco restored an orphan well to production
before the expiration of the primary term and the well has continuously produced in paying
quantities. The plaintiff (hereinafter Appellant) filed a timely notice of appeal. The appeal
was held in abeyance on suggestion of Appellant's death, and the executor of her estate,
Linda Christman, was thereafter substituted as the appellant.
STANDARD OF REVIEW
{¶16} We review the granting of summary judgment under a de novo standard of
review. Comer v. Risko,
```
[106 Ohio St.3d 185](/opinion/6894081/comer-v-risko/)
```
,
```
2005-Ohio-4559
```
,
```
833 N.E.2d 712
```
, ¶ 8. We
Case No. 19 MO 0007
–6–
therefore apply the same standard as the trial court to ascertain if summary judgment was
warranted. Pursuant to Civ.R. 56(C), summary judgment shall be granted when the
evidence shows there is no genuine issue of material fact and the movant is entitled to
judgment as a matter of law. Summary judgment is appropriate if reasonable minds can
only find in favor of movant after considering the evidence in the light most favorable to
the non-movant. Civ.R. 56(C).
{¶17} A summary judgment movant has the initial burden of stating why the
movant is entitled to judgment as a matter of law and showing there is no genuine issue
of material fact. Byrd v. Smith,
```
[110 Ohio St.3d 24](/opinion/6894754/byrd-v-smith/)
```
,
```
2006-Ohio-3455
```
,
```
850 N.E.2d 47
```
, ¶ 10,
citing Dresher v. Burt,
```
[75 Ohio St.3d 280, 292-294](/opinion/6880738/dresher-v-burt/#292)
```
,
```
[662 N.E.2d 264](/opinion/6880738/dresher-v-burt/)
```
(1996). The non-
movant then has a reciprocal burden.
```
[Id.](/opinion/6880738/dresher-v-burt/)
```
The non-movant's response, by affidavit or as
otherwise provided in Civ.R. 56, must set forth specific facts showing there is a genuine
issue of material fact for trial and may not rest upon mere allegations or denials in the
pleadings. Civ.R. 56(E).
{¶18} The material issues in a given case depend on the applicable substantive
law. Byrd,
```
[110 Ohio St.3d 24 at ¶ 12](/opinion/6894754/byrd-v-smith/#12)
```
. "Only disputes over facts that might affect the
outcome of the suit under the governing law will properly preclude the entry of summary
judgment."
```
[Id.](/opinion/6894754/byrd-v-smith/)
```
As such, if a genuine issue of fact is alleged on several minor items that
together would not be dispositive in a calculation, a summary judgment would not need
to be reversed and those items would not need to be addressed on their merits.
ADOPTION OF THE ORPHAN WELL
{¶19} Appellant's sole assignment of error lists three issues; two on adoption of
an orphan well and one on paying quantities. Appellant initially contends:
"THE TRIAL COURT ERRED AS MATTER OF LAW IN GRANTING SUMMARY
JUDGMENT TO APPELLEES, INSTEAD OF TO APPELLANT, BECAUSE NO GENUINE
ISSUES OF MATERIAL FACT REMAIN AS TO WHETHER: (1) CONDEVCO EVER
ADOPTED THE VAN SCHWABEN WELL UNDER THE TERMS OF THE LEASE; [or] (2)
HEINRICH ENTERPRISES ADOPTED THE VAN SCHAWBEN WELL ON JUNE 9, 2016,
ALMOST FOUR (4) YEARS AFTER THE PRIMARY TERM OF THE LEASE EXPIRED *
* *."
{¶20} Appellant argues the only party who adopted the well was Heinrich
Enterprises, when it was registered as the owner in ODNR records. Appellant
Case No. 19 MO 0007
–7–
emphasizes: the lease names Condevco as the lessee; the lease allows the lessee to
adopt an orphan well; there was no evidence that Condevco assigned its rights as the
lessee to Heinrich Enterprises; and in any event, Heinrich Enterprises was not listed as
the owner of this well in ODNR records until June 9, 2016, nearly 4 years after the primary
term expired. Appellant states that in order to hold the lease, Condevco had to engage
in two steps before the end of the primary term: adopt the orphan well through the ODNR
registration process and return it to production. It is urged that Condevco's production is
irrelevant if the well was never adopted by Condevco and Condevco was the entity
required to file a Form 7 in order to adopt an orphan well, citing R.C. 1509.31(A).
{¶21} Appellees respond that the holding of the lease was dependent on
production from the orphan well it reworked, not an official transfer in ODNR records. The
language merely said if the lessee "decides" to adopt a well and return it to production,
then the income would be subject to the same test as a new well (thus, production would
preserve the well into the secondary term pursuant to the lease's habendum clause). The
lease did not say that, in addition to returning the well to production, the lessee must
complete a transfer of ownership of the well within ODNR records by using Form 7 or
pursuant to the Ohio Revised Code or the Ohio Administrative Code before the end of the
primary term.
{¶22} Appellees note that even if Chapter 1509 were relevant to lease terminology
on deciding to adopt a well or an assumption of ownership was required, ODNR would
consider Condevco the owner of the well due to its right to produce and its production
from the well regardless of any failure to file Form 7. They cite R.C. 1509.01(K) and
conclude they became the owner under chapter 1509 by having the right to drill and
produce and by attempting to produce and producing, all of which occurred before the
end of the primary term. They also cite the deposition testimony of Appellant's expert,
who opined ODNR would hold an operator responsible for the future plugging of the well
once they attempted to produce from it. Appellees additionally say they can delegate
responsibility for bonding and holding the well in ODNR records to Heinrich Enterprises
absent a lease clause making such delegation ineffective.
{¶23} ODNR Form 7 is entitled "Request for Change of Owner" and contains an
affidavit for the assignor and the assignee. The affidavit of Christy Chavez said an
affidavit was filed with ODNR in 2013 to place the well on its bond with Heinrich
Case No. 19 MO 0007
–8–
Enterprises, but it used an incorrect well number (for a well permitted by an unrelated
entity and never drilled). This resulted in production being reported under the wrong well
number.2 Appellant's own summary judgment evidence shows: Brian Chavez reported
to ODNR that his company previously filed Form 7 to register the well but listed the wrong
well number; the error was corrected by ODNR in 2016; and the correction was
accomplished through internal emails, suggesting ODNR did not require the submission
of a new form (as they had the form listing the incorrect well number). Appellant argues
that using the 2013 filing date claimed by the defense, this official registration occurred
after the primary term expired (on June 20, 2012) and was a transfer of ownership to
Heinrich Enterprises, not to Condevco.
{¶24} The lease does not prohibit an assignment of the lease or a delegation of
the lessee's duties. To prevent assignment of an oil and gas lease by the lessee there
generally must be clear contractual language prohibiting an assignment. See Harding v.
Viking Internatl. Resources Co.,
```
[2013-Ohio-5236](/opinion/2697320/harding-v-viking-internatl-resources-co-inc/)
```
,
```
1 N.E.3d 872
```
, ¶ 13-14 (4th Dist.), citing
J.G. Wentworth LLC v. Christian, 7th Dist. Mahoning No. 07MA113,
```
[2008-Ohio-3089](/opinion/3947274/jg-wentworth-llc-v-christian-07-ma-113-6-17-2008/)
```
, ¶
40 and Pilkington N. Am. Inc. v. Travelers Cas. & Sur. Co.,
```
[112 Ohio St.3d 482, 488](/opinion/6895342/pilkington-north-america-inc-v-travelers-casualty-surety-co/#488)
```
,
```
[861
N.E.2d 121](/opinion/6895342/pilkington-north-america-inc-v-travelers-casualty-surety-co/)
```
(2006) (assignment is permitted unless it is prohibited by contract, it materially
decreases the value or increases the risk, or it is prohibited by statute). See also
McWreath v. Maiorca,
```
[2015-Ohio-4319](/opinion/3132541/mcwreath-v-maiorca/)
```
,
```
46 N.E.3d 156
```
, ¶ 39-45 (11th Dist.) (where ODNR
was not notified about the assignment of a lease with a well as required by statute, this
does not affect continuation of lease). "Absent a clause making delegation ineffective, a
party may generally delegate his or her duties under a contract." Kuhens v. Weaver, 7th
Dist. Carroll No. 643 (Apr. 5, 1996). See also Harding,
```
[2013-Ohio-5236 at ¶ 13](/opinion/2697320/harding-v-viking-internatl-resources-co-inc/#13)
```
(where
the Fourth District spoke of whether the lease clearly prohibited the delegation of duties
and the assignment of rights).
2 We note that production from June 2012 would not be reported until the end of March 2013. See R.C.
1509.11(A) ("The owner of any well * * * that is producing or capable of producing oil or gas shall file with
the chief of the division of oil and gas resources management, on or before the thirty-first day of March, a
statement of production of oil, gas, and brine for the last preceding calendar year in such form as the chief
may prescribe."). The evidence shows ODNR transferred 2014 and 2015 production from the misidentified
well number but does not show production for 2012 and 2013. The defense affidavit said production was
reported when they registered the wrong well number in 2013. In any event, it is not claimed there was no
production in 2012 and 2013 (just that the production was not in paying quantities). And, as explained infra,
missing production reports do not mean there was no production.
Case No. 19 MO 0007
–9–
{¶25} Condevco said it delegated to its affiliated company, Heinrich Enterprises,
any legal duty to carry a bond and register as owner with ODNR. Both entities are owned
by the same four family members (Christy Chavez, her husband Brian, and her parents).
Christy testified the affiliated companies had an agreement that Heinrich Enterprises
would be the bondholder for all of Condevco's wells (estimated at over 400). As confirmed
in an affidavit, all of Condevco's wells are on the bond for Heinrich Enterprises. ODNR
did not take issue with the registration of the well owner in the name of an entity who was
different than the name on the lease providing the right to drill and/or produce. The
defense expert opined it was common in the oil and gas industry "for a well to be held in
the name of an operator with ODNR and for the name of the operator to differ from the
actual owner of the working interest under the lease."
{¶26} According to the statute cited by Appellant, if the entire interest in an oil and
gas lease was assigned or otherwise transferred, then the assignor or transferor must
notify the royalty holders, and if a well exists on that lease, then the assignor or transferor
must notify ODNR of the name and address of the assignee or transferee; this is to be
done within 30 days on a form provided by ODNR and verified by both parties. R.C
1509.31(A), now (A)(2). To the extent Appellant suggests this statute imposed an
obligation on Condevco to register itself as the owner of the well (in order to exercise its
lease option to adopt the well), we note the statute placed the obligation on the transferor.
(See Reply Brief at 2). It was after this lawsuit was filed that the statute was amended to
add that if the transferor failed to notify ODNR, then the transferee shall do so. R.C.
1509.31(A)(3)(a) (eff. 10/17/19). Moreover, the statute refers to existing leases by
speaking of an entire interest in a lease being assigned or otherwise transferred, rather
than an interest in oil and gas being granted or leased (and by speaking of notice to
royalty holders). Here, the transaction between Appellant and Condevco was not an
interest in an oil and gas lease being assigned or otherwise transferred; rather, it was the
grant of a new lease. And, Condevco's arrangement with Heinrich Enterprises was not
the assignment of the entire interest in the lease but was a bonding and holding
agreement.
{¶27} Although Appellant claimed the well was previously in the state's orphan
well program, she never cited or discussed the statute on transferring the registration of
such a well in ODNR records. R.C. 1509.071 discusses the state's program for plugging
Case No. 19 MO 0007
– 10 –
"idle and orphaned wells" which may result in a notice declaring the well an idle and
orphaned well and advising to remove equipment as the well is to be plugged. The
transfer of an idle and orphaned well places any future responsibility for plugging the well
on the bonded entity registered with ODNR; prior to this occurring, a landowner is not
responsible for plugging such a well and funds are occasionally allocated by the state to
pay for plugging.
{¶28} The statute explains: the owner of land on which a well is located who
received notice can transfer ownership of the well to an owner meeting financial
responsibility requirements, subject to approval of the chief at ODNR. R.C. 1509.071(H)
(if the chief approves the transfer, then "the owner" is responsible for operating the well
in accordance with chapter 1509 and corresponding rules, including those on well
plugging). Notably, this transfer of ownership is subject to "the landowner's filing of the
appropriate forms required under [R.C. 1509.31]." (Emphasis added.) R.C. 1509.071(H),
citing R.C. 1509.31.
{¶29} Moreover, Appellant assumed the well was in ODNR's orphan well program
because "Historic Owner" was listed in ODNR's records before the owner was changed
to Heinrich Enterprises (and the well's status was listed as a historical production well
before ODNR changed the status to a producing well). However, it is difficult to presume
the landowner received notice under the statute and the well was on the state's list where
the evidence submitted by Appellant shows the well status was not categorized as an
orphan well by ODNR.
{¶30} In any event, the plain language of the lease governs. "The rights and
remedies of the parties to an oil or gas lease must be determined by the terms of the
written instrument * * *." Harris v. Ohio Oil Co.,
```
57 Ohio St. 118
```
, 129,
```
48 N.E. 502
```
(1897).
The purpose of contract construction is to ascertain the intent of the parties which is
presumed to reside in the language they chose to use in their agreement. Graham v.
Drydock Coal Co.,
```
[76 Ohio St.3d 311, 313](/opinion/6881522/graham-v-drydock-coal-co/#313)
```
,
```
[667 N.E.2d 949](/opinion/6881522/graham-v-drydock-coal-co/)
```
(1996). "If [the court is] able
to determine the intent of the parties from the plain language of the agreement, then there
is no need to interpret the contract." Saunders v. Mortensen,
```
[101 Ohio St.3d 86](/opinion/6892678/saunders-v-mortensen/)
```
, 2004-
Ohio-24,
```
[801 N.E.2d 452, ¶ 9](/opinion/6892678/saunders-v-mortensen/#9)
```
.
{¶31} The lease continues after the primary term while "oil or gas is produced from
[the] leased premises" and "if the lessee decides to 'adopt' an orphan well and return it to
Case No. 19 MO 0007
– 11 –
production, any royalty income will be considered to have the same effect as a newly
drilled well for purposes of this lease." It is the production that holds the lease, not the
mere decision to adopt the well. Although the lease places the word "adopt" in quotation
marks, it is not a statutory term. Regardless, the lease does not expressly incorporate
statutory or regulatory well registration requirements into its terms or define adoption of a
well as involving the filing of Form 7. The phraseology of the lease does not impose an
obligation on the lessee to institute a statutory transfer of an idle and orphaned well before
the end of the primary term, which transfer was to be performed by the landowner's filing
of forms under R.C. 1509.071. See also R.C. 1509.31 (imposing the obligation on an
assignor or transferor of a lease interest).
{¶32} The use of the word "and" between the decision to adopt an orphan well
and the returning of the well to production, even if suggesting two steps, does not impose
a requirement to comply with ODNR notifications in order to maintain the lease. The mere
adoption of the well (by attempting production or by a statutory transfer of the well in
ODNR records) will not hold the lease as the well must be returned to production under
the standard for a newly drilled well in order for that well to hold the lease.
{¶33} Appellant suggests Condevco had to become the well owner under Chapter
1509 before the end of the primary term. As emphasized by Appellees, R.C. 1509.01(K)
includes in its definition of owner: a person with the right to drill and to appropriate the oil
or gas produced, unless the person obtains an oil and gas lease but does not produce or
attempt to produce oil or gas from a well. It is not disputed that Condevco attempted to
produce and did produce under the terms of an oil and gas lease.
{¶34} Additionally, we point to the case law on the effect of non-compliance with
the provisions in Chapter 1509 on ascertaining compliance with lease terms. For
instance, this court has concluded that a failure to file statutorily-required production
reports with ODNR does not demonstrate that a well is not producing under the terms of
a lease. Burkhart v. Miley,
```
[2017-Ohio-9006](/opinion/4451453/burkhart-v-miley/)
```
,
```
[101 N.E.3d 563, ¶ 48](/opinion/4451453/burkhart-v-miley/#48)
```
(7th Dist.); Burkhart
Family Trust v. Antero Resources Corp.,
```
2016-Ohio-4817
```
,
```
68 N.E.3d 142
```
, ¶ 23 (7th Dist.);
Mobberly v. Wade,
```
[2015-Ohio-5287](/opinion/3164078/mobberly-v-wade/)
```
,
```
44 N.E.3d 313
```
, ¶ 16 (7th Dist.). The Eleventh District
has specifically concluded the "lack of compliance with R.C. 1509.31 had no effect upon
the continuing validity of the oil and gas lease." McWreath,
```
[2015-Ohio-4319 at ¶ 40-41](/opinion/3132541/mcwreath-v-maiorca/#40)
```
(the failure to comply with the notification requirement means that the assignment is not
Case No. 19 MO 0007
– 12 –
official, but there is no language in the statute indicating that, by failing to satisfy the
statute, the lessee loses the ability to assign its rights under the lease). In that case,
although an assignment of a lease with an existing well was not registered under R.C.
1509.31, production did not cease, and the court held that the fact that there may be a
dispute as to which entity is the lessee does not nullify the fact that the rights under the
lease are still being exercised. Id. at ¶ 44.
{¶35} As compliance with any notice to ODNR under Chapter 1509 (including the
associated Form 7) is not a lease term, the failure to file a change of ownership form
before the primary term expired did not result in lease termination. Therefore, the identity
of the entity who eventually claimed responsibility for the well to ODNR would not
determine whether a lease is still valid. ODNR reporting and registration (including the
timing of the name transfer and the name used) were not terms of the lease. Condevco
(as the original lessee) exercised it rights granted by the lease by reopening an
abandoned well, obtaining production before the primary term expired, paying royalties
to Appellant, tending the well, and achieving additional production thereafter. (Whether
that production was in paying quantities is the next question.) Appellant's first two
arguments are overruled.
PAYING QUANTITIES
{¶36} The third part of Appellant's sole assignment of error contends she was
entitled to summary judgment and the court erred in granting summary judgment to the
defense because:
" * * * THE VAN SCHWABEN WELL IS NOT PRODUCING OIL AND/OR GAS IN
PAYING QUANTITIES."
{¶37} The parties dispute whether the lease terminated because the well failed to
produce oil or gas in paying quantities. The lease provides that it extends into the
secondary term upon expiration of the three-year primary term as long as oil or gas is
"produced from said leased premises" (or from pooled land or drilling operations are
continually prosecuted). Although the term "produced" is not followed by the descriptor
"in paying quantities," the requirement of "production" in the habendum clause in an oil
and gas lease is evaluated under a paying quantities analysis. In other words, the term
"produced" in a habendum clause means "produced in paying quantities." Victor v. Big
Sky Energy Inc.,
```
[2018-Ohio-4666](/opinion/4565693/victor-v-big-sky-energy-inc/)
```
,
```
[124 N.E.3d 283, ¶ 55](/opinion/4565693/victor-v-big-sky-energy-inc/#55)
```
(11th Dist.), citing Tisdale v.
Case No. 19 MO 0007
– 13 –
Walla, 11th Dist. Ashtabula No. 94-A-0008 (Dec. 23, 1994) (as the term "produced"
means "produced in paying quantities," mere domestic use is insufficient3); Barclay
Petroleum Inc. v. Bailey,
```
[2017-Ohio-7547](/opinion/8641795/barclay-petroleum-inc-v-bailey/)
```
,
```
[96 N.E.3d 811, ¶ 20](/opinion/8641795/barclay-petroleum-inc-v-bailey/#20)
```
(4th Dist.), citing Morrison
v. Petro Evaluation Servs. Inc., 5th Dist. Morrow No. 2004CA0004,
```
[2005-Ohio-5640, ¶
39](/opinion/3940782/morrison-v-petro-evaluation-unpublished-decision-10-21-2005/#39)
```
. Appellees agree Condevco's production must meet the paying quantities test.
{¶38} The Ohio Supreme Court uses a mathematical formula to define paying
quantities as those "quantities of oil or gas sufficient to yield a profit, even small, to the
lessee over operating expenses, even though the drilling costs, or equipping costs, are
not recovered, and even though the undertaking as a whole may thus result in a loss."
Blausey v. Stein,
```
[61 Ohio St.2d 264, 265-266](/opinion/6866456/blausey-v-stein/#265)
```
,
```
[400 N.E.2d 408](/opinion/6866456/blausey-v-stein/)
```
(1980) (a profit of less than
$1,400 over a six-year base period preserved the lease even though production was
intermittent). "Because an oil and gas lessee bears the risk of nonproduction in a lease
of this kind, we believe that appellee should be allowed to attempt to recoup his initial
investment for as long as he continues to derive any financial benefit from production."
```
[Id. at 266](/opinion/6866456/blausey-v-stein/#266)
```
. Therefore, if there is even a small profit over the chosen period, the lease is
maintained. See
```
[id.](/opinion/6866456/blausey-v-stein/)
```
(noting the base period was uncontested).
{¶39} Initially, we address Appellees' attempt to eliminate all consideration of the
report presented by Appellant's expert. Appellees claim the affidavit and report were
struck by the trial court and thus Appellant did not meet the burden to set forth evidence
showing a lack of paying quantities. Appellees suggest the trial court excluded the opinion
of Appellant's expert because he was unreliable, noting such a decision would be
reviewed only for an abuse of discretion. We note their supplement in support of summary
judgment characterized Appellant's expert report as "useless" due to certain "baseless
assumptions" and cited that expert's deposition testimony. Yet, their actual motion to
strike was an earlier filing unrelated to this argument; it was based on the inability to
depose the expert, which deposition thereafter occurred. Although there is no indication
the trial court struck the expert's entire affidavit and report, some items within it may have
been considered unreliable or legally incorrect. For instance, some figures were recanted
by the expert or admitted to be unrelated to the particular well. The trial court could
3 Although a lessor's mere domestic use is generally not paying quantities, Talbott's lease specified as to
her use of free gas: "As long as this use of gas continues to the benefit of the lessor the well will be
considered as being in production for purposes of this lease." Condevco ran a gas line to Talbott's house
in May 2012, but she refused to use it. (B. Chavez Aff.; B. Chavez Depo. 150, 229, Ex. 11).
Case No. 19 MO 0007
– 14 –
properly find those figures unreliable. Other figures were not used by the court because
the court held they were not legally attributable to operating expenses, and the
correctness of these holdings are reviewed below if dispositive.
{¶40} In making the unreliability argument, Appellees say the expert's opinion
essentially imposed an unrealistic minimum volume of gas required for profitable
operation. This was based on what he viewed as high operating costs incurred by
Condevco. Appellees complain that Appellant's expert accused Condevco of overstating
gas production by a factor of 10 based on his viewing of a meter that was not installed
until the end of 2015. He acknowledged he had no knowledge of the prior meter, but his
opinion also included the period after 2015. We note that some factual issues contested
by the parties do not end up being relevant due to the legal analysis infra (on the base
period, tolling, and costs includible as operating expenses).
{¶41} Appellees also believe the expert was unreliable due to the following
allocations to operating expenses: over $7,000 for the nine days of swabbing in June
2012, instead of recognizing this should be treated as a capital expenditure; $25 as a
monthly well tending fee for ten months in 2015 (where well tending was encompassed
in compression fees, which were already deducted from the revenue figure); $30 as the
labor rate for swabbing (merely because Condevco would charge this amount to other
companies), which was not the actual cost of its own employees' labor; $45 per hour for
a swab rig rental based on a rate charged to Condevco for another well by an unrelated
company, where the rate charged by the affiliated company to unrelated companies was
$37.50 per hour in 2013-2014 and $40 per hour in 2015, but the affiliated company (who
was the bondholder on the well) did not charge Condevco at all; $133 per year for
equipment depreciation (the steel stock oil tank) which was a capital expenditure; $100
per year for liability insurance (where Condevco claimed their insurance did not increase
for each well and was thus an indirect cost, but where Appellant's expert said his own
company was charged a direct cost of $100 per well in addition to the annual premium);
$858 for disposal of the 141 barrels of brine produced when Condevco only paid for
disposal of 75 barrels of brine for which it incurred $153 in disposal fees after using its
own truck and driver; and the landowners' portion of the severance tax (where the expert
admitted he mistakenly attributed to Condevco the entire severance tax when a small
amount was the landowner's expense).
Case No. 19 MO 0007
– 15 –
{¶42} We will address these items under the applicable law and evidence
presented, if dispositive. We note that Appellant does not take issue with the lack of
production between swabbings (before the gas line was installed) but uses the production
and operating expenses over a certain base period in urging there was a lack of paying
quantities.
{¶43} First, we discuss the effect of production numbers after the lawsuit was filed
or the end date of the base period. The parties use different dates for the end of the base
period for calculating profitability. Appellant's expert included 2016, 2017, and the first
quarter of 2018. As the well was not swabbed in 2016, no oil was produced. The well
was swabbed in 2017 where two employees worked 7.5 hours each and attained only 2.4
barrels of fluid. The gas revenue for these two years appears to be less than $300.
{¶44} Appellees moved to stop the base period at the end of 2015 as their lease
obligations should be tolled after the lawsuit was filed on January 11, 2016. They argued
the time after the complaint was filed should not be utilized in the analysis because they
could not be expected to expend money to stimulate production of the existing well or to
proceed with plans to drill a well (on this property or pooled property) when they were
facing Appellant's request for forfeiture of their investment and the profits. They point to
the various allegations made against them in the lawsuit, including lease termination,
trespass, accounting, and conversion.
{¶45} The trial court adopted Appellees' position, issuing a judgment which only
addressed production through December 2015. Appellees' say the lessor's active
assertion of lease termination suspended its obligations, allowing the lease to be tolled in
equity to preserve the status quo. They cite this court's statements, such as: "Equitable
tolling of the terms of oil and gas leases may be employed by courts to preserve the status
quo where the validity of those leases is challenged. * * * The remedy prevents leases
from expiring on their own terms while the outcome of litigation challenging the lease is
decided by the courts." Summitcrest Inc. v. Eric Petroleum Corp.,
```
[2016-Ohio-888](/opinion/3183192/summitcrest-inc-v-eric-petroleum-corp/)
```
,
```
60
N.E.3d 807
```
, ¶ 44 (7th Dist.) (the trial court abused its discretion in refusing to toll the
lease), citing Jicarilla Apache Tribe v. Andrus,
```
[687 F.2d 1324, 1341](/opinion/8926086/jicarilla-apache-tribe-v-andrus/#1341)
```
(10th Cir.1982).
{¶46} We recently reiterated: "When a lessor actively asserts to a lessee that his
lease is terminated or subject to cancellation, the obligations of the lessee to lessor are
suspended during the time such claims of forfeiture are being asserted." Shutway v.
Case No. 19 MO 0007
– 16 –
Chesapeake Expl. LLC,
```
2019-Ohio-1233
```
,
```
134 N.E.3d 721
```
, ¶ 69 (7th Dist.) (interference
by the lessor which justifies extension of the lease includes repudiation by clearly
challenging the lessee's right to continue after the primary term in a lease with a drilling
operations savings clause), quoting Yoskey v. Eric Petroleum Corp., 7th Dist. No.
```
13 CO
42
```
,
```
[2014-Ohio-3790, ¶ 46](/opinion/2722743/yoskey-v-eric-petroleum-corp/#46)
```
, quoting Jicarilla Apache Tribe,
```
[687 F.2d 1324](/opinion/8926086/jicarilla-apache-tribe-v-andrus/)
```
(the purpose is
not to punish the landowner for asserting lease invalidity but to suspend obligations in the
face of a clear repudiation).
{¶47} Although the chart copied into Appellant's brief from the expert's report
covers a longer period, Appellant does not specify an argument that it was erroneous to
toll the obligation under the lease by considering only the time prior to the filing of the
lawsuit. Nor does Appellant frame the issues as involving the length of the base period.
We recognize that production and expenses after a lawsuit is filed are not automatically
excluded from consideration in the paying quantities analysis, and this court has
evaluated post-filing evidence where tolling was not sought or was inappropriate.
However, Appellees requested tolling in its summary judgment motion. It is noted that this
case involves a new lease without the drilling of a new well where the lease entered the
secondary term through the adoption of an old, abandoned well which was reopened as
a swab well.
{¶48} In this case: this lease could be maintained by production from a reopened
orphan well; the adopted well was a swabbed well as this method was found to be
required for its future production; the lease also provided the right to drill a new well and
the right to preserve the lease by continuously prosecuting drilling operations on a new
well; Appellant acknowledged in her deposition testimony that a representative from one
of the defendants (Flatrock) approached her about his company's plans to drill a well on
her property; she disclosed that she did not want a well on her property; she filed this
lawsuit setting forth claims that included lease termination, trespass, conversion,
accounting, and ejectment; and the lessee asked the court to use the date of the
complaint in this lawsuit as the end date of the base period or as the date of the lessor's
repudiation, akin to a tolling order. The facts presented in this case warranted tolling the
lease obligations and thus ending the base period for the paying quantities analysis as of
the date the lawsuit was filed rather than holding against the lessee any post-lawsuit
failure to produce from the orphan well (or failure to prosecute new drilling operations).
Case No. 19 MO 0007
– 17 –
{¶49} As for the beginning of the base period, both sides utilize the production
obtained from the June 2012 swabbing for revenues. The chart in Appellant's brief from
her expert's report contains high operating expenses in 2012 due to the expert's
assignment of labor and swab rigs costs for the nine days spent swabbing the well in
June 2012. The report estimated Condevco incurred $7,000 in operating costs for these
nine days of swabbing. Below, Appellees argued those expenses should be considered
capital expenses as they were part of reopening an old well (abandoned by others). They
equated the initial work (of stimulating and evaluating production) to a drilling or equipping
cost, which is not an operating expense, or to reworking a well (such as by replacing a
pump), which is also not an operating expense. See Blausey,
```
[61 Ohio St.2d at 265-266](/opinion/6866456/blausey-v-stein/#265)
```
(the capital investment is not an operating expense in the paying quantities equation);
Paulus,
```
[2017-Ohio-5716 at ¶ 61](/opinion/8641754/paulus-v-beck-energy-corp/#61)
```
(recurring production costs are operating expenses, but
the cost to rework a well, by replacing the downhole pump and rebuilding the wellhead,
was a non-recurring, capital investment to be excluded from operating expenses as an
equipping cost).
{¶50} Appellant did exclude from operating expenses the initial reopening costs
incurred in May 2012 (such as pump removal and replacement, unsuccessful swabbing
attempts followed by bailing of the well bore, and the pulling and replacement of the
tubing) and the costs incurred in the November 2014 equipping of the well with a gas line
running to a combined line with a compressor, apparently recognizing these were
equipment or capital expenses rather than operating expenses. See Paulus, 2017-Ohio-
5716 at ¶ 56 ("The definition of paying quantities set forth in Blausey excludes drilling and
equipping costs from operating expenses."). Yet, Appellant believed that the June 2012
swabbing (after the bailing) should be treated as an operating expense because it
resulted in the very production used to maintain the lease past the primary term.
{¶51} The trial court disagreed. In June 2012, Condevco was still evaluating the
well to ascertain if it could even be used as a swab well. As the trial court pointed out,
the well was swabbed one or two times a year after the initial production, supporting a
conclusion that the nine days of swabbing in June 2012 were still part of the initial
expenditure to clear and stimulate the well and ascertain its future. The swabbing of fluid
from an old well was said to stimulate not only future oil and increase the percentage of
oil in the fluid but also to clear the path for gas (which may cyclically be blocked by rising
Case No. 19 MO 0007
– 18 –
fluid, calling for the next swabbing). The fact that the stimulation of an abandoned well
by heavy swabbing (after the bailing of the debris from the hole) resulted in production of
oil does not eliminate the initial capital expense, just as the capital expenditure of drilling
that produces oil does not turn the capital expenditure into a production cost. Where a
lessee who is in the process of adopting and reopening an abandoned well repeatedly
performs swabbing over a two-week period in order to ascertain if production was
possible, any direct expenditures incurred in swabbing during these days were not
operating costs but were part of the initial reopening cost.
{¶52} We also note the issue was not specifically briefed as an error. Besides
using the chart of her expert in her brief, Appellant does not express disagreement with
the explicit holding related to the categorization of the June 2012 swabbing events.
Appellant does not specifically argue the trial court erred in refusing to classify the June
2012 swabbing as an operating expense or cite law on operating expenses as it relates
to reopening and stimulating a well abandoned by another. Appellant refers to swabbing
logs and costs, but this is in the context of her specific argument that internal employee
costs are operating expenses as are the costs for use of the swab rig. We now turn to
these issues.
{¶53} On the swab rig used from 2013 through 2015, the affidavit of Brian Chavez
said Condevco used its own swab rig and had no overhead traceable to the expense of
producing the well. It was thereafter explained that the swab rig was actually owned by
Heinrich Enterprises. Christy Chavez testified at deposition that both companies were
owned by the same four people (her, her husband, and her parents). Her second affidavit
said the normal rate charged by Heinrich Enterprises for the rig was $37.50 per hour in
2013-2014 and $40 per hour in 2015. This was to contest the $45 per hour rate used by
Appellant's expert based on his viewing of a receipt for a rig rental of a different type paid
to a different company (which was not owned by her or her husband). At deposition, the
expert acknowledged his report for the well on Talbott's property used this figure even
though the receipt was for a different well on another landowner's property.4
4 A lawsuit was filed by that other landowner against Condevco where: that plaintiff retained the same
attorney and expert as the plaintiff in this case; discovery was simultaneously conducted; and the
depositions filed in this case contain testimony on the wells in both cases. See Christman v. Condevco
Inc., 7th Dist. No. 19 MO 0008,
```
[2020-Ohio-\_\_\_](/opinion/4735320/christman-v-condevco-inc/)
```
(not involving a swab well).
Case No. 19 MO 0007
– 19 –
{¶54} The trial court opined that by "using their own swab rig * * * [the defendants]
have not incurred any 'direct expenditures from gross receipts' that would be included in
their operating costs." The trial court also noted the swab rig rate of $45 per hour used
by Appellant's expert was not relevant to the rig used in this case.
{¶55} Appellees do not dispute that if a company rents a piece of equipment for
episodic production or regular maintenance, the rental cost would be a direct operating
expense. They acknowledge, "When the Talbott Well is swabbed in the ordinary manner
(once or twice a year) in order to maintain production, it is an operating expense."
(Appellee Brief 30). However, they say the trial court correctly refused to impute an
operating expense for the use of the swab rig because: a company using its own rig does
not incur a direct operating cost in the form of a rental fee when maintaining production
by swabbing (in place of pumping); the swab rig was owned by an affiliated company,
Heinrich Enterprises, which had the same owners as Condevco and which held the bond
on the well; and Heinrich Enterprises did not charge Condevco for using the rig.5
{¶56} Where a company used its own rig to assist in the regular servicing of a
well, a California court concluded that a fair rental value for its use need not be assigned
as an operating expense in the paying quantities analysis. West v. Russell,
```
[12 Cal.App.3d
638, 644](/opinion/2129870/west-v-russell/#644)
```
,
```
[90 Cal.Rptr. 772](/opinion/2129870/west-v-russell/)
```
(1970).
{¶57} We have explained that operating expenses can be direct and indirect but
only direct operating expenses are part of the paying quantities formula. "[I]n a 'paying
quantities' analysis, we look to direct operating costs and exclude any indirect costs that
do not contribute to the production of oil or gas." Hogue v. Whitacre,
```
[2017-Ohio-9377](/opinion/8641902/hogue-v-whitacre/)
```
,
```
[103 N.E.3d 314, ¶ 27, 31](/opinion/8641902/hogue-v-whitacre/#27)
```
(7th Dist.), citing Paulus,
```
[2017-Ohio-5716 at ¶ 54](/opinion/8641754/paulus-v-beck-energy-corp/#54)
```
, citing 6
William & Myers, Oil and Gas Law, Section 604.5 (2012), fn. 4 (federal interpretation of
operating expenses includes only "direct" lease operating costs). The indirect costs of
generally operating a company are not included as operating expenses for a particular
well. See Hogue,
```
[2017-Ohio-9377 at ¶ 28](/opinion/8641902/hogue-v-whitacre/#28)
```
(overhead or administrative expenses are
indirect expenses).
5 Appellees alternatively state that even if Heinrich Enterprises's normal swab rig rental rates are imputed
to operating costs for this well, they still made a profit from June 2012 through the end of 2015. However,
this contention depended on the trial court's incorrect decision excluding all labor costs from the calculation
(which is the last topic discussed infra).
Case No. 19 MO 0007
– 20 –
{¶58} Although a piece of machinery brought to the site as a regular method of
producing oil and releasing gas will contribute to the production of the well, the purchase
of the machinery is a one-time, capital expense. This is distinct from any disposable items
used in the swabbing. As Appellee recognizes, Appellant's expert properly included as
operating expenses the cost of the swab cups from 2013-2015 (53 cups at $4.35 each).
The cost of the cups was a direct expenditure used for this one well.6 To the contrary, as
a matter of law, the ownership of the swab rig was a capital expense for an entire
business.
{¶59} The rig was attributable to many wells over time and was not purchased for
just this well. Since Blausey instructs that we not consider the capital investment, we
would not consider depreciation on equipment that was part of that investment. Thus,
depreciation on an oil holding tank should not be included as an operating expense, just
as depreciation on corporate-owned machinery such as a swab rig or a truck would not
be included.
{¶60} In sum, where a lessee owns its own swab rig (which is used a few times a
year at a planned swab well) a fair market rental rate for the rig is irrelevant and need not
be attributed to operating expenses in the paying quantities analysis. This premise
extends to cases where the same four individuals own both the company who used the
rig and the company who owned the rig and the latter company did not charge for the use
of the rig.
{¶61} Excluding the swab rig rental rate from operating expenses leaves the value
of labor as a dispositive question. The gross revenue figure used by the parties from
2012-2015 was $3,956.90, with marketing and compression fees already subtracted from
this figure (with Condevco's acquiescence). Appellees acknowledge Condevco's
operating expenses include: $434 in royalties; $231 for swab cups; $230 in severance
tax ($240 minus $10 for the landowner's share); and $154 in brine disposal.
{¶62} Appellant's main argument is that the trial court incorrectly excluded from
operating expenses the cost of Condevco's own employees during swabbing. Appellant
contends this exclusion of labor from operating expenses violated the precedent set forth
by this court in Paulus. In that case, Beck Energy previously reported operating costs for
6 A fuel cost attributable to the use of the swab rig was not estimated by Appellant's expert.
Case No. 19 MO 0007
– 21 –
a well by including the time a salaried employee spent at the well but stopped accounting
for this time when the price of oil and gas fell. Paulus,
```
[2017-Ohio-5716 at ¶ 62](/opinion/8641754/paulus-v-beck-energy-corp/#62)
```
. We
observed: "It was treated as a direct expense attributable to production from this well,
just as it would have been if an independent contractor performed the service. We agree
Appellant artificially deflated its operating expenses, which was a relevant consideration
in the paying quantities analysis." Id. at ¶ 64.
{¶63} We recognized that the Supreme Court found an individual lessee's own
free labor was not an operating expense because he personally performed all the labor
necessary to produce oil from the leasehold and made no direct expenditures from gross
receipts for labor. Id., citing Blausey,
```
[61 Ohio St.2d at 266](/opinion/6866456/blausey-v-stein/#266)
```
. The Supreme Court said,
"The fact that a lessee can keep operating costs at a minimum should inure to his benefit
in a determination of whether a well produces in paying quantities."
```
[Id.,](/opinion/6866456/blausey-v-stein/)
```
citing Weisant v.
Follett,
```
[17 Ohio App. 371](/opinion/6790406/weisant-v-follett/)
```
(7th Dist. 1922). However, we refused to extend the Blausey
principle to a corporation's employee who received payment for his work on the well.
{¶64} Appellees claim: Blausey excludes the lessee's own labor from the
operating expenses; Condevco's internal employee's labor is akin to the lessee's own
labor; Condevco never treated its employee's labor as an operating cost; and our Paulus
holding was limited to a case where the lessee previously treated its employee's labor as
an operating cost. However, the Paulus case went to trial. Our discussion of the prior
accounting for employee labor on the well had to do with the reasonableness of the fact-
finder's assignment of value for the calculation; the past recorded internal cost of labor to
operate the well was a consideration in adjudicating the actual cost where other evidence
was not before the court. The point was: where a paid employee spent time maintaining
the well (other than drilling, equipping, or reworking), some labor cost was incurred
regardless of whether the bookkeeping department decided to stop charging the well for
the labor for accounting purposes.
{¶65} This court essentially concluded that when a corporation hires an employee
to perform tasks related to recurring well production activities (such as pumping), the cost
for that employee's labor is a direct expenditure from gross receipts and not akin to free
personal labor performed by an individual lessee. Paulus,
```
[2017-Ohio-5716 at ¶ 63](/opinion/8641754/paulus-v-beck-energy-corp/#63)
```
(distinguishing Blausey where the individual lessee physically performed the work at the
well). Although we also emphasized that even the lessee previously labeled its employee
Case No. 19 MO 0007
– 22 –
costs as operating expenses, we specifically held: "Labor directly related to production
is considered an operating expense; the portion of labor incurred for lifting costs
represents a periodic cash expenditure incurred in the daily operation of the well."
```
[Id.](/opinion/8641754/paulus-v-beck-energy-corp/)
```
{¶66} The trial court therefore erred in refusing to attribute to Condevco's
operating expenses the hours of swabbing labor in 2013-2015, which was used as the
recurring method to produce oil and gas. After the initial opening of a well that was
abandoned by others, Condevco paid its employees to conduct planned well swabbings
once or twice a year (to decrease fluids in the hole, obtain the only source of oil, and
release gas). The employees tracked their hours at the well during the swabbing. This
was an expenditure that was directly related to production.
{¶67} Nevertheless, this does not mean the labor rate used in the report of
Appellant's expert was legally justifiable. Christy Chavez testified that the rate Condevco
charges to other companies for an employee's labor was $30 per hour. (C. Chavez Depo
22-24). She agreed this figure accounts for items including the employee's pay, health
insurance, use of a company truck, payroll taxes, and optional retirement contributions
with an employer match. (C. Chavez Depo. 72-75). In a subsequent affidavit, Christy
Chavez noted that the $30 labor rate also included profit, stating: "Like any other
business, the rates charged to third parties exceed Condevco's actual cost so Condevco
can earn a profit for its services." Appellants's expert used $30 because this was the
labor rate charged by Condevco (to its affiliates and to other companies), and he noted
this rate was within industry standards. However, Condevco was not charged this rate
for the work at issue as Condevco used its own employees to swab the well (and for other
labor on the well).
{¶68} Although Appellant is correct that labor is an operating expense, Appellant
is incorrect that the law requires the labor rate for a company's own employees to be
imputed at the fair market rate for outside workers. As a matter of law, it is only the actual,
direct (and non-capital) expenditures for producing the well that we evaluate in arriving at
a figure for operating expenses related to labor.
{¶69} Certain benefits such as health insurance and retirement programs are akin
to overhead expenses involved in running a business. As for an employee's use of a
company truck, the cost of the truck would involve a capital or depreciation type of
expense. See analysis supra. And, the insurance on the truck would be an indirect or
Case No. 19 MO 0007
– 23 –
overhead expense. See Hogue,
```
[2017-Ohio-9377 at ¶ 24-25](/opinion/8641902/hogue-v-whitacre/#24)
```
. Any direct fuel cost
attributable to driving the company truck to this one well to participate in the 2013-2015
swabbings was not itemized by Appellant's expert.
{¶70} An employee who worked on the subject well testified he earned $10.50 or
$11 per hour in 2012. In 2015, he was paid $14.50 per hour at the beginning year,
received a raise to $15 an hour in the middle of the year, and received a raise to $15.50
an hour in December of that year. (McKnight Depo. 41). Even if we were to assume that
his rate of pay was the same in 2013 and 2014 as at the beginning of 2015, the deduction
for actual labor for the 2013-2015 swabbing events would be $1603.7
{¶71} If we conduct a calculation on other figures and assume certain contested
categories should be included, the well still shows some profit. For this projection and to
ascertain the legal effect of certain contested figures, we have generally used some of
the figures urged by Appellant without deciding the propriety of using such figures. As
stated above, if a collection of minor items would not be dispositive in a calculation, we
need not rule on the merits of each item. Beyond the items we specifically ruled on above,
Appellant would have us add the following items to operating expenses: an additional
brine disposal fee of $137 (due to tank measurements showing an additional trip must
have been made); the labor for brine hauling in Condevco's vehicle (but only Condevco's
actual labor rate paid to the employee could be used, not the cost of hiring an outside
truck and driver); well tender fees8 to read the gas meter ten times before the lawsuit was
filed; an annual insurance premium9 of $100; and the employer's portion of payroll taxes
7 The report of Appellant's expert relied on tables he attached. In attachment 2, he listed the swab rig as
being used for 8 hours one day in April 2013; he then used 24 hours for swab rig labor after multiplying the
rig hours by the number of employees. However, attachment 6, which he used to obtain the number of
employees working at the site, shows only two employees were present that day, meaning only 16 labor
hours were attributable to the April 2013 swabbing.
8 The rate of $25 per visit imputed by Appellant's expert was based on what he pays an independent
contractor to visit a well and read the gas meter. However, as set forth supra, such a rate is not legally
justified where an employee was utilized for the well tending and his maximum hourly rate is known. The
well was tended by a Condevco employee who spent ten minutes or less at the well for this type of visit and
whose hourly rate was much less than the contract rate paid by the expert. Moreover, Appellant does not
discuss Condevco's affidavit saying the well tender fees were included in the compression costs, which
were already subtracted from revenues.
9 Contrary to Appellee's suggestion Appellant's expert did not attempt to attribute the indirect cost of general
liability insurance to the well. Rather, he said liability insurance on the well was required and he is charged
$100 per well charge in addition to general liability insurance. Condevco says it does not pay an additional
Case No. 19 MO 0007
– 24 –
attributable to employees for the hours spent swabbing this well. (Again, we are not
expressing agreement with the figures or categories.)
{¶72} Even using these figures, there would still be a small profit. The Blausey
test instructs that a well is in paying quantities regardless of how small the profit is.
Blausey,
```
[61 Ohio St.2d at 265-266](/opinion/6866456/blausey-v-stein/#265)
```
(quantities of oil or gas sufficient to yield the lessee a
profit, no matter how small, over operating expenses, even though drilling or equipping
costs are not recovered and the undertaking as a whole thus results in a loss). In
conclusion, we find the well was adopted under the terms of the lease and the well was
producing in paying quantities. Accordingly, we affirm the entry of summary judgment.
Waite, P.J., concurs.
D'Apolito, J., concurs.
premium per well, but Heinrich Enterprises is the bondholder. We note the first of the four years was a
partial year.
Case No. 19 MO 0007
[Cite as Talbott v. Condevco, Inc.,
```
2020-Ohio-3130
```
.]
For the reasons stated in the Opinion rendered herein, the assignment of error
is overruled and it is the final judgment and order of this Court that the judgment of
the Court of Common Pleas of Monroe County, Ohio, is affirmed. Costs to be taxed
against the Appellant.
A certified copy of this opinion and judgment entry shall constitute the mandate
in this case pursuant to Rule 27 of the Rules of Appellate Procedure. It is ordered that
a certified copy be sent by the clerk to the trial court to carry this judgment into
execution.
NOTICE TO COUNSEL
This document constitutes a final judgment entry.
```
|
affiliated company
| 2
|
BECTON, Judge.
The plaintiff, Newton Walton ("Walton"), brought this action against his former employer, defendant Carolina Telephone and Telegraph ("CTT"), alleging fraud and misrepresentation in connection with his transfer to CTT from North Electric Company ("NEC"). The gist of Walton's complaint is that CTT induced his transfer by promising him that, upon completion of five years' work at CTT, Walton's period of employment (important for purposes of determining seniority and entitlement to other benefits) would be measured from the time he began at NEC (1970), rather than the time he started at CTT (1978). CTT later refused to "bridge" Walton's prior NEC service for all purposes, explaining that it was prohibited from doing so by an existing collective-bargaining agreement between CTT and its unionized employees. As a result, in 1983, after five and a half years of employment at CTT, Walton had earned insufficient CTT seniority to withstand a layoff.
The central questions before us on appeal are (1) whether Walton's state-law tort claim is pre-empted by federal law, and (2) whether Walton's claim is barred by the statute of limitations. We hold that Walton's claim is neither federally pre-empted nor time-barred.
I
A. Facts
Late in 1977, Walton, a telephone installer at NEC, began negotiating with CTT regarding a transfer from NEC's plant in
\*370
Gabon, Ohio, to CTT's plant in Siler City, North Carolina. Critical to these negotiations, according to Walton, was the promise he obtained from CTT that his seniority and service benefits, acquired by virtue of his continuous employment with NEC since 1970, would carry over to his employment with CTT upon completion of five years of work at CTT. Walton alleged that he agreed to transfer based on these representations.
At the time Walton's negotiations began, NEC and CTT were subsidiaries of United Telecommunications, Inc. ("United Telecommunications"). However, on 1 January 1978, within days of Walton's planned transfer and while he was still employed at NEC, International Telephone and Telegraph ("ITT") fractured that relationship by purchasing NEC from United Telecommunications. Walton subsequently sought and received assurances from CTT that this transaction did not affect their agreement, and on 21 January 1978, Walton left NEC. Five days later, on 26 January 1978, he started work at CTT as a telephone installer and repairman.
Although Walton did not belong to a union, he was a member of a work group at CTT represented by Local Union 1912 of the International Brotherhood of Electrical Workers ("IBEW"). As the exclusive bargaining agent for Walton's work group, the IBEW entered into a series of contracts with CTT in 1977, 1978, 1980, and 1983. CTT alleged that these contracts set the terms and conditions of employment for all employees in Walton's work group and that the contracts implicitly prohibited bridging prior service at any company outside CTT.
Walton continued to work for CTT until July 1983, when he and other employees were laid off on the basis of seniority. Walton's seniority was measured from the time he started with CTT in January 1978; both parties agree that had his NEC seniority been bridged at CTT, Walton would not have been laid off. CTT paid Walton a $9,829.60 termination allowance, which included credit for his prior NEC service.
B. Procedural History
On 23 September 1983, Walton brought suit against United Telecommunications and CTT for breach of contract. On 2 February 1985, that complaint was voluntarily dismissed without prejudice. Walton filed a second complaint on 8 August 1985 against CTT, alleging fraud and misrepresentation. CTT answered and moved
\*371
for summary judgment. CTT's motion for summary judgment was granted 23 April 1987. However, on 22 July 1987, after reviewing this court's decision in
*Welsh v. Northern Telecom, Inc.*
(filed 21 April 1987), the trial judge vacated the summary judgment order, and denied CTT's motion for summary judgment. CTT appealed, and this court granted certiorari.
CTT contends on appeal that it was entitled to summary judgment for three reasons: (1) Walton's state-law claim was federally pre-empted under Section 301 of the Labor Management Relations Act; (2) Walton's claim for fraud and misrepresentation was barred by the statute of limitations; and (3) Walton's employment with CTT was governed by the employment at will doctrine. We address these contentions in order.
II
CTT contends that Walton's fraud claim was federally preempted because resolution of the claim would require analysis of the collective-bargaining agreement since that agreement addressed seniority, bridging of prior service, and layoffs. CTT further asserts that
*Welsh*
is inapposite to this case, and thus, that the trial judge erred by vacating the prior summary judgment order. Walton, on the other hand, contends that his fraud claim would not require interpretation of the collective-bargaining agreement and that
*Welsh*
controls. In addressing these contentions, we first examine general principles governing federal pre-emption.
Section 301 of the Labor Management Relations Act (also known as the Taft-Hartley Act), 29 U.S.C.A. Sec. 185(a), mandates federal adjudication of all claims -- including those ostensibly grounded in state law -- that require substantial interpretation of a collective-bargaining agreement for resolution.
*See, e.g., Teamsters v. Lucas Flour Co.,*
[369 U.S. 95](/opinion/106354/local-174-teamsters-chauffeurs-warehousemen-helpers-v-lucas-flour-co/), [7 L.Ed. 2d 593](/opinion/106354/local-174-teamsters-chauffeurs-warehousemen-helpers-v-lucas-flour-co/) (1962) (recognizing preemptive effect of Section 301);
*Allis-Chalmers Corp. v. Lueck,*
[471 U.S. 202, 213](/opinion/111412/allis-chalmers-corp-v-lueck/#213), [85 L.Ed. 2d 206, 216](/opinion/111412/allis-chalmers-corp-v-lueck/#216) (1985) (Section 301 pre-empts any state-law "tort claim . . . inextricably intertwined with consideration of the terms of [a] labor contract"). The rationale behind pre-emption is that uniform federal interpretation of the terms of collective-bargaining agreements will "promote the peaceable, consistent resolution of labor-management disputes."
*Lingle v. Norge Div. of Magic Chef, Inc.,*
486 U.S. ---,[100 L.Ed. 2d 410, 417](/opinion/112086/lingle-v-norge-division-of-magic-chef-inc/#417) (1988). Of course, pre-emption does not mean that a plaintiff is without
\*372
a remedy; it simply means that the remedy must be sought in federal court.
A leading case on the pre-emptive effect of Section 301 on state-law claims is
*Allis-Chalmers Corp. v. Lueck,*
upon which both parties rely. In
*[Lueck](/opinion/111412/allis-chalmers-corp-v-lueck/),*
an employee brought a state-law tort claim for bad faith handling of disability benefit payments due under a collective-bargaining agreement. Because the claim was rooted in the collective-bargaining contract and required interpretation of the contract's provisions, the Court held that the claim was federally pre-empted. The Court set out the following rule: "when resolution of a state-law claim is
*substantially dependent upon analysis of the terms of [a collective-bargaining] agreement . . . , that claim must either be treated as a [Section] SOI claim .*
. .
*or dismissed as pre-empted*
by federal labor-contract law." [471 U.S. at 220](/opinion/111412/allis-chalmers-corp-v-lueck/#220), [85 L.Ed. 2d at 221](/opinion/111412/allis-chalmers-corp-v-lueck/#221) (emphasis added) (citations omitted).
However, the Court limited its holding:
> Of course,
> *not every dispute*
> concerning employment, or
> *tangentially involving a provision of a collective-bargaining agreement, is pre-empted by [Section] 301*
> or other provisions of the federal labor law. ... In extending the pre-emptive effect of [Section] 301 beyond suits for breach of contract, it would be inconsistent with congressional intent under that section to pre-empt
> *state rules that proscribe conduct, or establish rights and obligations, independent of a labor contract.*
[*Id.*
at 211-12](/opinion/111412/allis-chalmers-corp-v-lueck/#211), [85 L.Ed. 2d at 215-16](/opinion/111412/allis-chalmers-corp-v-lueck/#215) (emphasis added). The Court continued, explicitly "emphasizing the narrow focus of [its] conclusion":
> *[We do not] hold that every state-law suit asserting a right that relates in some way to a provision in a collective-bargaining agreement, or more generally to the parties to such an agreement, necessarily is pre-empted by [Section] SOI.*
> The full scope of the pre-emptive effect of federal labor-contract law remains to be fleshed out on a case-by-case basis.
[*Id.*
at 220](/opinion/111412/allis-chalmers-corp-v-lueck/#220), [85 L.Ed. 2d at 221](/opinion/111412/allis-chalmers-corp-v-lueck/#221) (emphasis added).
*[Lueck](/opinion/111412/allis-chalmers-corp-v-lueck/)*
was "fleshed out" in
*Caterpillar, Inc. v. Williams,*
[482 U.S. 386](/opinion/111915/caterpillar-inc-v-williams/), [96 L.Ed. 2d 318](/opinion/111915/caterpillar-inc-v-williams/) (1987).
*Caterpillar,*
factually similar to the case before us, involved employees covered by a collective-bargaining agreement who were laid off even though their employer
\*373
had allegedly made representations assuring them job security. The employees sued for breach of their individual employment contracts, fraud, and other tortious conduct. The unanimous Court held that the state-law claims were not "completely pre-empted" by Section 301 since that section controls only "[1] claims founded
*directly on rights created by collective-bargaining agreements,*
and ... [2] claims
*'substantially dependent on analysis of a collective-bargaining agreement.'" [Id.](/opinion/111915/caterpillar-inc-v-williams/)*
at --, [96 L.Ed. 2d at 328](/opinion/111915/caterpillar-inc-v-williams/#328) (emphasis added) (citations omitted).
The Court explained that the employees' power to assert claims based upon pre-existing oral contracts with their employer was not abrogated simply because they were also covered by a collective-bargaining agreement at the time of the layoff:
> . . . [Individual employment contracts are not inevitably superseded by any subsequent collective agreement covering an individual employee, and claims based upon them may arise under state law. . . . [A] plaintiff covered by a collective-bargaining agreement is permitted to assert legal rights
> *independent*
> of that agreement, including state-law contract rights, so long as the contract relied upon is
> *not*
> a collective-bargaining agreement.
*[Id.](/opinion/111915/caterpillar-inc-v-williams/)*
at ---, [96 L.Ed. 2d at 329-30](/opinion/111915/caterpillar-inc-v-williams/#329) (emphasis supplied).
*Cf. Lingle,*
486 U.S. at ---, [100 L.Ed. 2d at 419](/opinion/112086/lingle-v-norge-division-of-magic-chef-inc/#419) (Court unanimously held that employee's state-law claim for retaliatory discharge was not preempted by Section 301 because it was not necessary to interpret terms of collective-bargaining agreement to establish elements of state-law tort);
*Electrical Workers v. Hechler,*
[481 U.S. 851](/opinion/111895/international-brotherhood-of-electrical-workers-v-hechler/), [95 L.Ed. 2d 791, 803](/opinion/111895/international-brotherhood-of-electrical-workers-v-hechler/#803) (1987) (employee's state-law tort claim held clearly pre-empted by Section 301 because claim was based directly upon violations of collective-bargaining agreement and resolution required interpretation of agreement's terms).
A number of lower courts have considered the question now before us, that is, whether a state-law tort claim for misrepresentation and fraud, brought by an employee covered by a collective-bargaining agreement, was pre-empted by Section 301. Many courts have held that the claims were not pre-empted because the representations sued upon were independent of the collective-bargaining agreement, and resolution of the claims required no interpretation of the agreement.
*See, e.g., Varnum v. Nu-Car Carriers, Inc.,*
[804 F. 2d 638](/opinion/478836/larry-t-varnum-v-nu-car-carriers-inc/) (11th Cir. 1986),
*cert. denied,*
[481 U.S. 1049](/c/U.S./481/1049/), 95 L.Ed.
\*374
2d 838 (1987) (representations made regarding seniority);
*Andersen v. Ford Motor Co.,*
[803 F. 2d 953](/c/F.%202d/803/953/) (8th Cir. 1986),
*cert. denied,*
--- U.S. ---, [97 L.Ed. 2d 747](/opinion/9069732/ford-motor-co-v-andersen/) (1987) (representations regarding "bumping" or layoffs);
*Malia v. RCA Corp.,*
[794 F. 2d 909](/opinion/472575/sam-malia-and-ingrid-malia-v-rca-corporation/) (3d Cir. 1986),
*cert. denied,*
--- U.S. ---,[96 L.Ed. 2d 696](/opinion/9069403/united-transportation-union-v-interstate-commerce-commission/) (1987) (representations regarding promotion);
*Miller v. Fairchild Indus., Inc.,*
[668 F. Supp. 461](/opinion/1403926/miller-v-fairchild-industries-inc/) (D. Md. 1987) (representations regarding job security);
*Paradis v. United Technologies,*
[672 F. Supp. 67](/opinion/2091486/paradis-v-united-technologies-pratt-whitney-division/) (D. Conn. 1987) (representations regarding termination);
*Muenchow v. Parker Pen Co.,*
[615 F. Supp. 1405](/opinion/1515048/muenchow-v-parker-pen-co/) (W.D. Wis. 1985) (representation that severance benefits would be exchanged for seniority rights).
*Contra Bale v. Gen. Tel. Co. of Calif.,*
[795 F. 2d 775](/opinion/473085/elizabeth-bale-and-jennifer-fife-v-general-telephone-company-of/) (9th Cir. 1986);
*Martin v. Associated Truck Lines, Inc.,*
[801 F. 2d 246](/opinion/8953323/martin-v-associated-truck-lines-inc/) (6th Cir. 1986) (fraud and misrepresentation claims pre-empted because adjudication would require reference to and interpretation of terms of collective-bargaining agreement) (both cases decided before
*Caterpillar).*
Until now, this state has not addressed the question of Section 301 pre-emption of state-law actions. However, this court has twice considered whether employees' state-law claims were federally preempted under "ERISA," 29 U.S.C.A. Secs. 1001,
*et seq. See Welsh v. Northern Telecom, Inc.,*
[85 N.C. App. 281](/opinion/1206223/welsh-v-northern-telecom-inc/), [354 S.E. 2d 746](/opinion/1206223/welsh-v-northern-telecom-inc/) (1987),
*disc. rev. denied,*
[320 N.C. 638](/c/N.C./320/638/), [360 S.E. 2d 107](/c/S.E.%202d/360/107/),
*reconsideration dismissed,*
[320 N.C. 798](/c/N.C./320/798/), [361 S.E. 2d 90](/c/S.E.%202d/361/90/) (1987);
*Shaver v. Monroe Construction Co.,*
[63 N.C. App. 605](/opinion/1289627/shaver-v-n-c-monroe-construction-co/), [306 S.E. 2d 519](/opinion/1289627/shaver-v-n-c-monroe-construction-co/) (1983),
*disc. rev. denied,*
[310 N.C. 154](/c/N.C./310/154/), [311 S.E. 2d 294](/c/S.E.%202d/311/294/) (1984). Because Section 301 "closely parallels" the pre-emption provisions of ERISA,
*Metropolitan Life Ins. Co. v. Taylor,*
[481 U.S. 58](/opinion/111859/metropolitan-life-insurance-v-taylor/), [95 L.Ed. 2d 55](/opinion/111859/metropolitan-life-insurance-v-taylor/) (1987), we consider
*Welsh*
and
*Shaver*
instructive in deciding the case before us.
*Accord Tener v. Hoag,*
[697 F. Supp. 196](/opinion/2128107/tener-v-hoag/) (W.D. Pa. 1988).
In
*[Shaver](/opinion/1289627/shaver-v-n-c-monroe-construction-co/),*
an employee brought an action against his employer alleging that the employer misrepresented that the employee's pension benefits would continue in order to induce the employee to remain with the employer and to forego salary increases and bonuses. The fraudulent misrepresentation claim was held not pre-empted by ERISA because, among other things, the claim only incidentally or tangentially involved a pension plan, and did not concern the plan's substance or regulation. [63 N.C. App. at 610](/opinion/1289627/shaver-v-n-c-monroe-construction-co/#610), [306 S.E. 2d at 523](/opinion/1289627/shaver-v-n-c-monroe-construction-co/#523).
*Welsh,*
upon which the trial judge relied in vacating his prior summary judgment order, involved facts similar to those in the present case. There, an employee alleged that a Northern Telecom
\*375
representative promised him that "if [he] came to work with Northern Telecom and worked there five years, [his] previous Bell System service would be bridged" for purposes of establishing entitlement to certain benefits. [85 N.C. App. at 283-84](/opinion/1206223/welsh-v-northern-telecom-inc/#283), [354 S.E. 2d at 747](/opinion/1206223/welsh-v-northern-telecom-inc/#747). The employee brought a breach of contract action when the employer later refused to bridge his prior service. The employer appealed from a jury verdict in favor of the employee, contending that the claim "related to" the employer's pension plan, and therefore was pre-empted under ERISA. Guided by
*[Shaver](/opinion/1289627/shaver-v-n-c-monroe-construction-co/),*
this Court rejected the employer's contention:
> *[Plaintiff's] action is not against the plan.*
> Rather, his action is against the defendant for failing to uphold its promise to provide benefits. . . . His claim neither concerns the substance of the pension plan nor the plan's regulation. The plan is only incidentally or tangentially involved.
> *Because plaintiff's claim is only tangential to the plan, his claim is not pre-empted by ERISA.*
*Id.*
at 289, [354 S.E. 2d at 751](/opinion/1206223/welsh-v-northern-telecom-inc/#751) (emphasis added).
Applying the foregoing principles to the case before us, we hold that Walton's fraud and misrepresentation claim was not preempted by Section 301 of the Labor Management Relations Act. Walton's claim was neither "founded directly on rights created by [the] collective-bargaining agreement[ ]," nor will resolution of it be "substantially dependent on analysis of [the terms of the] collective-bargaining agreement."
*Caterpillar,*
482 U.S. at ----, 96 L.Ed. 2d at 328 (quoting
*Lueck).*
Walton's fraud claim at most only tangentially concerns provisions of that agreement.
*See Lueck,*
[471 U.S. at 211-12](/opinion/111412/allis-chalmers-corp-v-lueck/#211), [85 L.Ed. 2d at 215-16](/opinion/111412/allis-chalmers-corp-v-lueck/#215);
*Welsh; Shaver.*
Our holding does not undermine the principle honoring the sanctity of collective-bargaining agreements. It merely allows an employee to bring a state-law claim in state court if the claim is not founded directly upon the terms of a collective-bargaining agreement.
*Accord Caterpillar,*
482 U.S. at ---, 96 L.Ed. 2d at 329-30 ("individual employment contracts are not inevitably superseded by any subsequent collective-bargaining agreement") (distinguishing
*J.I. Case Co. v. NLRB,*
[321 U.S. 332, 339](/opinion/103945/j-i-case-co-v-national-labor-relations-board/#339), [88 L.Ed. 762, 768](/opinion/103945/j-i-case-co-v-national-labor-relations-board/#768) (1944)). Here, there is no direct challenge to the collective-bargaining agreement.
*See [id.](/opinion/103945/j-i-case-co-v-national-labor-relations-board/)*
The alleged representations about which Walton complains were made independently of the collective-bargaining agreement.
*See [id.](/opinion/103945/j-i-case-co-v-national-labor-relations-board/)*
Any other result might suggest that
\*376
an employer could flout with impunity the restrictive provisions of a collective-bargaining agreement by making individual, independent promises to an employee, and then raise the collective-bargaining agreement as a defense when the employee seeks to have those promises fulfilled. In our view, an employee should be entitled to sue in state court for allegedly fraudulent promises made by an employer, even if those promises contravene the terms of a collective-bargaining agreement, so long as resolution of the claim does not require interpretation of that agreement.
*See [id.](/opinion/103945/j-i-case-co-v-national-labor-relations-board/)*
at --, 96 L.Ed. 2d at 331.
This assignment of error is overruled.
Ill
CTT contends that it was entitled to summary judgment as a matter of law because Walton's 1985 fraud claim was barred by the three-year statute of limitations. CTT argues that Walton knew of or should have known of the alleged fraud (1) in December 1978, when the first IBEW contract was renewed, or (2) in January 1981, when a grievance brought by the union on Walton's behalf was denied. Walton asserts that it was not until 1983, when CTT began laying off employees, that he first realized that CTT was not going to honor its promise that his seniority would be bridged for all purposes after five years of work.
In light of
*Caterpillar's*
holding that an employee's independent contract is "not inevitably superseded by any subsequent collective-bargaining agreement," we do not discuss whether Walton knew or should have known of the alleged fraud at the time the IBEW contract was renewed. Instead, we examine the notice issue in connection with Walton's grievance.
A. Walton's Grievance
Sometime in 1980, Walton contacted United Telecommunications, CTT's parent company, regarding the credit he expected to receive for his prior NEC service. (It is not clear from the record why Walton made this inquiry after only two years of employment with CTT.) In response to Walton's communication, a United Telecommunications representative sent a letter to CTT's plant manager. The letter stated:
> We recently received an inquiry from Newton Walton . . . concerning credit for service with [NEC] prior to merger of
> \*377
> that company with ITT. . . .
> *[SJuch service is creditable for all purposes except pension computation.*
> This would include such things as eligibility for sickness payments and vacations, choice of work schedules, as well as pension eligibility. . . . [I]f Mr. Walton will provide us with evidence of his previous employment with [NEC], we will make a special annotation on his personnel record card indicating that
> *his service for all purposes except pension computation has been bridged to include his service with that company.*
(Emphasis added.) CTT representatives then discussed the letter with Walton, and --even though Walton had not yet worked at CTT for five years --acted to extend his CTT "net credited service" date to his starting date at NEC.
In December 1980, Walton filed a formal grievance against CTT regarding denial of certain privileges he believed accompanied the extension of his net credited service date. The basis of the grievance was that Walton had not been permitted to exercise work schedule privileges or preferential vacation selection. Walton's grievance did not concern that aspect of seniority which determines layoff status.
In January 1981, CTT made the following disposition of Walton's grievance:
> Mr. Walton's "Net Credited Service" date was changed to include the period from 9-8-1970 to 1-21-1978 that he was employed by [NEC]. . . . This
> *"Net Credited Service" date is used,*
> as outlined in the definitions for the IBEW contract,
> *for computing eligibility for pension and benefits. Seniority for selection of work tours and vacation schedules along with determining layoff status is defined*
> in Article 11, paragraph 11.01 [of the IBEW contract]
> *as continuous work with the company*
> at the specified locations.
> *The contract does not permit using "Net Credited Service" for these selections.*
(Emphasis added.) Walton's grievance was denied on the ground that IBEW contract provisions had not been violated. The union chose not to pursue Walton's grievance further.
Walton then wrote to United Telecommunications, again complaining about his work and vacation selections. Walton claimed that he was being denied his "full Seniority rights, including Schedule Selection Privileges," stating that ". . . in a Grievance meeting
\*378
with the Company I was told ... I would not be allowed Schedule or Vacation Selection according to my Seniority Status because of a term in the [IBEW] Contract denying me of these rights." Walton did not raise an issue about the effect his seniority had on his layoff status. In April 1981, a company representative responded, explaining to Walton that
> ... an error had been made when you were mistakenly told that full seniority rights would be extended to you upon employment with Carolina Telephone. . . . While the rule prevents you from exercising competitive seniority rights using your total service within United Telecommunications, Inc., most employees prefer to have protection in the contract which prevents more senior employees from being transferred into their company and exercising seniority over them. ... We understand your dissatisfaction, particularly after having been given erroneous information, but nonetheless we must abide by the provisions of a legal and binding [IBEW] contract.
This letter did not specifically address Walton's seniority as it pertained to layoffs. Walton contends that he continued to believe, based on the representations made to him before he transferred to CTT, that his seniority would be bridged for that and all other purposes after five years of work with CTT.
B. Appropriateness of Summary Judgment in Fraud Actions
Summary judgment in a fraud action, as in other cases, should be granted when the pleadings, depositions, interrogatories, admissions on file, and affidavits, if any, demonstrate that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.
*See*
N.C. Gen. Stat. Sec. 1A-1, R. Civ. P. 56 (1983);
*Johnson v. Phoenix Mut. Life Ins. Co.,*
[300 N.C. 247](/opinion/1265360/johnson-v-phoenix-mutual-life-insurance/), [266 S.E. 2d 610](/opinion/1265360/johnson-v-phoenix-mutual-life-insurance/) (1980). While "[Allegations of fraud do not readily lend themselves to resolution by way of summary judgment,"
*Johnson,*
[300 N.C. at 260](/opinion/1265360/johnson-v-phoenix-mutual-life-insurance/#260), [266 S.E. 2d at 619](/opinion/1265360/johnson-v-phoenix-mutual-life-insurance/#619), it is also true that summary judgment is proper when it appears as a matter of law that the statute of limitations on the fraud action has expired.
*See, e.g., Hiatt v. Burlington Indus., Inc.,*
[55 N.C. App. 523](/opinion/1282128/hiatt-v-burlington-industries-inc/), [286 S.E. 2d 566](/opinion/1282128/hiatt-v-burlington-industries-inc/) (1982),
*disc. rev. denied,*
[305 N.C. 395](/c/N.C./305/395/), [290 S.E. 2d 566](/opinion/1356023/state-v-brock/) (1982).
The statute of limitations for fraud is three years from the date the fraud was, or reasonably should have been, discovered.
\*379
N.C. Gen. Stat. Sec. 1-52(9) (1983);
*Feibus & Co., Inc. v. Godley Constr. Co., Inc.,*
[301 N.C. 294, 304](/opinion/1308520/feibus-co-inc-v-godley-const-co-inc/#304), [271 S.E. 2d 385, 391](/opinion/1308520/feibus-co-inc-v-godley-const-co-inc/#391) (1980),
*reh'g denied,*
[301 N.C. 727](/c/N.C./301/727/), [274 S.E. 2d 228](/c/S.E.%202d/274/228/) (1981). "Because fraud is difficult to define, it is likewise difficult to establish with certainty when the statute of limitations on a claim of fraud begins to run."
*Jennings v. Lindsey,*
[68 N.C. App. 710, 715](/opinion/1408466/leggett-v-thomas-howard-co-inc/#715), [318 S.E. 2d 318, 321](/opinion/1261219/jennings-v-lindsey/#321) (1984). Thus, whether a plaintiff should have discovered the facts constituting the fraud more than three years before the action was filed ordinarily is a
*question of fact for the jury. Feibus,*
[301 N.C. at 305](/opinion/1308520/feibus-co-inc-v-godley-const-co-inc/#305), [271 S.E. 2d at 392](/opinion/1308520/feibus-co-inc-v-godley-const-co-inc/#392);
*see, e.g., Cowart v. Whitley,*
[39 N.C. App. 662, 664](/opinion/1369907/cowart-v-whitley/#664), [251 S.E. 2d 627, 629](/opinion/1369907/cowart-v-whitley/#629) (1979). Only when "it clearly appears that plaintiff's claim is barred by the running of the statute of limitations," may that question be determined as a
*matter of law. Poston v. Morgan-Schultheiss, Inc.,*
[46 N.C. App. 321, 323](/opinion/1246638/poston-v-morgan-schultheiss-inc/#323), [265 S.E. 2d 615](/opinion/1246638/poston-v-morgan-schultheiss-inc/) (1980),
*cert. denied,*
[301 N.C. 95](/c/N.C./301/95/) (1980).
*See, e.g., Hiatt,*
[55 N.C. App. at 527-29](/opinion/1282128/hiatt-v-burlington-industries-inc/#527), [286 S.E. 2d at 568-70](/opinion/1282128/hiatt-v-burlington-industries-inc/#568) (deposition testimony clearly showed plaintiff's knowledge of matters allegedly constituting fraud; case provided "an example of inexcusable procrastination even after discovery of the facts which plaintiff contends constituted fraud");
*Brown v. Vick,*
[23 N.C. App. 404, 407-09](/opinion/6844830/brown-v-vick/#407), [209 S.E. 2d 342, 344-45](/opinion/6844830/brown-v-vick/#344) (1974),
*cert, denied,*
[286 N.C. 412](/c/N.C./286/412/), [211 S.E. 2d 216](/opinion/1323543/todd-v-creech/) (1975) (clear that party had knowledge of all the facts and circumstances surrounding the alleged fraud). However, "summary judgment [is] inappropriate in a fraud case [whenever] the court is called upon to draw a factual inference in favor of the moving party. . . ."
*Johnson,*
[300 N.C. at 260](/opinion/1265360/johnson-v-phoenix-mutual-life-insurance/#260), [266 S.E. 2d at 619](/opinion/1265360/johnson-v-phoenix-mutual-life-insurance/#619).
C. Jury Question Whether Statute of Limitations Expired
With the foregoing principles in mind, we cannot say that the 1981 disposition of Walton's grievance or the subsequent letter should have,
*as a matter of law,*
put Walton on notice that his seniority would not be bridged for any purpose, including layoff status, after five years of employment. Viewing the evidence in a light most favorable to Walton,
*see Cowart,*
[39 N.C. App. at 664](/opinion/1369907/cowart-v-whitley/#664), [251 S.E. 2d at 629](/opinion/1369907/cowart-v-whitley/#629), it appears that the focus of the grievance was whether Walton's net credited service entitled him to preferential selection of work schedules and vacation times; the disposition merely informed him that the term "net credited service" did not apply to those privileges or to layoffs. In our view, it is a question for the jury whether, at that point, three years into his CTT employment, Walton should have known of the alleged fraud, or whether
\*380
he reasonably continued to rely upon CTT's earlier representations until 1983, when, after five years of work, he was laid off.
Although we express no opinion whether the evidence is sufficient to support an ultimate finding in Walton's favor, "we do consider [the evidence] sufficient to create an issue of fact for the jury. . .
*Feibus,*
[301 N.C. at 305](/opinion/1308520/feibus-co-inc-v-godley-const-co-inc/#305), [271 S.E. 2d at 392](/opinion/1308520/feibus-co-inc-v-godley-const-co-inc/#392). Accordingly, this assignment of error is overruled.
IV
CTT's contention that Walton's action is barred by the employment at will doctrine is without merit. Walton is not suing for wrongful discharge; his complaint asserts that he was fraudulently induced to come to work for CTT.
V
We hold that the trial judge properly denied CTT's motion for summary judgment because Walton's claim was neither federally pre-empted nor time-barred, and we order that the trial proceed.
Affirmed.
Judges Wells and Johnson concur.
|
affiliated company
| 3
|
OPINION OF THE COURT
VANASKIE, Circuit Judge.
Retirement plans can be complex documents that span hundreds of pages with numerous peculiarities. But when do a plan's terms move from merely complex to ambiguous? That is the question in this pension plan dispute. Former Union Pacific employee John Dowling is covered by a 277-page retirement plan composed of introductory material, 19 articles of content, and various appendices--none of which explicitly address Dowling's precise situation. When Dowling retired, the plan administrator interpreted the plan to provide Dowling with a lower monthly payment than he expected. Dowling challenged the administrator's decision as contradicting the plan's plain language, but' the District Court found the plan ambiguous and the administrator's interpretation reasonable. Dowling appealed, and the dispute now centers on three issues: the text of the plan, our standard of review, and whether a conflict of interest alters the outcome. Because the plan's terminology, silence, and structure render it ambiguous, the plan accords the plan administrator discretion to interpret ambiguous plan terms, and the mere existence of a conflict of interest is alone insufficient to raise skepticism of the plan administrator's decision, we will grant deference to the plan administrator and affirm.
I.
Dowling was hired at age 41 by Appellee Union Pacific Corporation in 1988, where he served in the high-ranking position of Vice President for Corporate Development. Just seven years later, Dowling's life was dealt a severe blow when he was diagnosed with multiple sclerosis.
By 1997, Union Pacific had determined that Dowling possessed a "Total Disability," because he was "unable to work at any job." (App. 153, 520.) That decision made Dowling eligible for long-term disability benefits that he could receive for the duration of his disability or until he reached age 65 in 2012, whichever came first.
When Dowling turned 65 in 2012, the long-term disability benefits stopped, and he began to draw on his Union Pacific retirement. His credited years of service for purposes of calculating his pension benefit included the 15 years he. received disability benefits. Union Pacific's plan administrator interpreted the plan to require that Dowling's pension be calculated in accordance with what the administrator saw as applicable to disabled plan participants: Instead of calculating Dowling's pension based on Dowling's last ten years of actual work--ending in 1997--the administrator operated as if Dowling had worked and been paid his final base salary--$208,000 per year-- for his credited years of service, up until his retirement in 2012, even though Dowling had not in reality worked during that period. Under the administrator's interpretation, Dowling was entitled to a monthly pension payment of $7,006.96.
Dowling objected to the calculation and filed a claim via the plan's administrative procedures, asking for a benefit increase. He argued the plan required his pension payment to be based on his ten years of income prior to 1997, when he became disabled and stopped working, and not. a hypothetical income stream for the ten years prior to his 2012 formal retirement date. If Dowling's theory about the 1987 to 1997 window were correct, then Union Pacific would owe Dowling a much higher monthly payment because during that earlier period Dowling received significant performance bonuses on top of his base salary.
Dowling lost his administrative claim, exhausted his administrative remedies, and filed this action against Union Pacific and the other Appellees in the Eastern District of Pennsylvania. Dowling sought a declaratory judgment stating his rights and liabilities, pursuant to ERISA. 29 U.S.C. § 1132(a)(1)(B). The District Court granted summary judgment to Union Pacific, holding that the plan administrator's interpretation of the plan was not unreasonable, and Dowling appealed.
II.
Dowling's retirement is governed by Union Pacific's "Pension Plan for Salaried Employees." The plan is a substantial legal document: it opens with seven pages of preliminary information, then continues across 133 pages of content divided into 19 articles. At the back are 137 pages of appendices, schedules, exhibits, and tables.
Out of all this material, two key factors largely determine the amount of a plan participant's pension payment: compensation and service. The compensation factor is called "Final Average Compensation" and is defined as a plan participant's average monthly salary during his or her three highest-earning years--the "high-three"-- during the ten years "immediately preceding ... the last date on which [the plan participant] is a Covered Employee." (Plan § 2.35, App. 144.1) The service factor is the participant's "Credited Service," which refers to the amount of time a plan participant spent as a "Covered Employee." Thus, for the run-of-the-mill plan participant, pension calculation is easy: it is based on the years the individual spent at work, and his average paycheck during his three highest-earning years of his final ten years of employment.
But the plan treats a disabled participant differently. For Credited Service, instead of stopping the accumulation of service when the disabled participant stops work, as is the case with the typical participant, the plan permits disabled participants to accumulate service during their pre-retirement, post-disability years, "as if' they remained Covered Employees until their date of retirement--even though they may have stopped working years earlier. (Plan §§ 4.02(c)(2), 6.05, App. 157, 178; see also Plan § 2.40(a)(5), App. 148 (noting the "Hours of Service" credited to not-working disabled participants).2)
For Final Average Compensation, the plan's application to disabled participants is less clear, with the confusion largely centering on the plan's use of the term "absence." During an "absence" from work, a plan participant- is "deemed to have received" for the duration of their absence "Compensation at the base pay rate in effect" prior to the absence. (Plan § 2.18(a)(8)(C), App. 139.3) Thus, for purposes of pension calculation, the rate of pay during an employee's unpaid absence is deemed to be their pay prior to the absence. But does the definition of "absence" extend to time away from work due to disability? The plan is not clear. The lengthy definitions section does not define "absence." (See Plan § 2.01-2.76, App. 131-54 (defining 76 terms, over 23 pages, but providing no definition for "absence").) The plan does define two particular types of absences--absences for temporary family medical leave, and temporary approved absences, (Plan § 2.10, App. 134-35 (defining "Approved Absence"); Plan § 2.10B, App. 135 (defining "Approved Non-HCE Absence")4)--and it references two more types of "absences" in the "Hours of Service" section, which details how much time should be credited in various scenarios. (Plan § 2.40(a)(4), App. 147-48 (listing as examples Approved Absences, temporary lay-offs, military leave, and Approved Non-HCE Absences)5). A departure from work due to disability is not one of the four examples of "absehce" listed. Additionally, a different subsection in the "Hours of Service" section addresses the hours credited during "Total Disability"; that subsection is directly below the "absences" subsection, and does not mention "absences." (Plan § 2.40(a)(5), App. 148.)
More generally, the plan grants the plan administrator the authority "to determine all questions of ... eligibility, ... to make factual determinations, ... to construe and interpret the provisions of the Plan, to correct defects and resolve ambiguities therein, and to supply omissions thereto." (Plan § 13.02(f), App. 242.6) The plan is funded entirely by Union Pacific; contributions are neither required nor accepted from plan participants. (Plan § 12.01-03, App. 232.7)
During the times relevant here, the plan's designated administrators, including Barbara Schaefer [Schaefer isn't listed as an Appellee], Roy Schroer, and Edwin A. Willis, were also Union Pacific employees or officers. Schaefer and Schroer each held the title of Vice President for Human Resources, and Willis was Assistant Vice President for Compensation and Benefits.
III.
The District Court had jurisdiction under 28 U.S.C. § 1331 and 29 U.S.C. § 1132(e). We have jurisdiction under 28 U.S.C. § 1291.
IV.
Federal courts review the decisions of ERISA plan administrators under standards derived from "principles of trust law," fin that the plan document itself determines the appropriate level of review. Conkright v. Frommert, [559 U.S. 506, 512](/opinion/2359/conkright-v-frommert/#512), [130 S.Ct. 1640](/opinion/2359/conkright-v-frommert/), [176 L.Ed.2d 469](/opinion/2359/conkright-v-frommert/) (2010) (quoting Firestone Tire & Rubber Co. v. Bruch, [489 U.S. 101, 111](/opinion/112197/firestone-tire-rubber-co-v-bruch/#111), [109 S.Ct. 948](/opinion/112197/firestone-tire-rubber-co-v-bruch/), [103 L.Ed.2d 80](/opinion/112197/firestone-tire-rubber-co-v-bruch/) (1989)). In the default scenario, a plan administrator's "denial of benefits ... is to be reviewed under a de novo standard." [Id.](/opinion/112197/firestone-tire-rubber-co-v-bruch/) (quoting Firestone, [489 U.S. at 115](/opinion/112197/firestone-tire-rubber-co-v-bruch/#115), [109 S.Ct. 948](/opinion/112197/firestone-tire-rubber-co-v-bruch/)). But if the plan document "gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan," then the Court reviews the administrator's decision on a more deferential basis. [Id.](/opinion/112197/firestone-tire-rubber-co-v-bruch/) (quoting Firestone, [489 U.S. at 115](/opinion/112197/firestone-tire-rubber-co-v-bruch/#115), [109 S.Ct. 948](/opinion/112197/firestone-tire-rubber-co-v-bruch/)).
This case falls in the latter scenario, because the Union Pacific plan explicitly grants the administrator the ability to determine benefit eligibility and to "construe and interpret" the plan's provisions. (Plan § 13.02(f), App. 242.) In such circumstances, we will not set aside the administrator's interpretations of "unambiguous plan language" as long as those interpretations are "reasonably consistent" with the plan's text, Fleisher v. Standard Ins. Co., [679 F.3d 116, 121](/opinion/800036/fleisher-v-standard-insurance/#121) (3d Cir. 2012) (quoting Bill Gray Enters. v. Gourley, [248 F.3d 206, 218](/opinion/773019/bill-gray-enterprises-incorporated-employee-health-and-welfare-plan-by/#218) (3d Cir. 2001)), and we will only disturb the administrator's interpretations of ambiguous plan language when those interpretations are "arbitrary and capricious," [id.](/opinion/773019/bill-gray-enterprises-incorporated-employee-health-and-welfare-plan-by/) (quoting McElroy v. SmithKline Beecham Health & Welfare Benefits Tr. Plan, [340 F.3d 139, 143](/opinion/783169/paul-f-mcelroy-v-smithkline-beecham-health-welfare-benefits-trust-plan/#143) (3d Cir. 2003)). Whether plan language is ambiguous or unambiguous is itself a question of law subject to our de novo review, with the definition of ambiguity being language that is "subject to reasonable alternative interpretations." [Id.](/opinion/783169/paul-f-mcelroy-v-smithkline-beecham-health-welfare-benefits-trust-plan/) (quoting Taylor v. Cont'l Grp. Change in Control Severance Pay Plan, [933 F.2d 1227](/c/F.2d/933/1227/), 1233 (3d Cir. 1991)). Many cases will therefore turn, as this one does, on whether a proffered interpretation of plan language is "reasonable."
Courts apply this deferential standard for at least two good reasons. First, courts have an obligation to give effect to the plan-drafter's intentions, because "ERISA abounds with the language and terminology of trust law," Firestone, [489 U.S. at 110](/opinion/112197/firestone-tire-rubber-co-v-bruch/#110), [109 S.Ct. 948](/opinion/112197/firestone-tire-rubber-co-v-bruch/), and the hallmark purpose of trust law is "to accomplish the settlor's intentions," Restatement (Third) of Trusts, Foreword (Am. Law Inst. 2003). Here, since the plan-drafter explicitly specified that the plan administrator should possess the ability to interpret terms, we must be deferential because the de novo alternative--examining each of the plan administrator's legal decisions anew--would undermine rather than give effect to the drafter's wishes.
Second, giving deference pays heed to Congress's concern for not discouraging employers in their adoption of ERISA plans. Existing federal statutes do not require employers to offer employee-retirement plans, and when Congress passed ERISA to make retirement programs fairer, it also worked to reduce the burdens of its new regulations and to keep in check disincentives that might discourage an employer from offering a retirement plan at all--disincentives such as high "administrative costs" and "litigation expenses." Conkright, [559 U.S. at 517](/opinion/2359/conkright-v-frommert/#517), [130 S.Ct. 1640](/opinion/2359/conkright-v-frommert/) (quoting Varity Corp. v. Howe, [516 U.S. 489, 497](/opinion/118008/varity-corp-v-howe/#497), [116 S.Ct. 1065](/opinion/118008/varity-corp-v-howe/), [134 L.Ed.2d 130](/opinion/118008/varity-corp-v-howe/) (1996)). To that end, the Supreme Court has recognized that employers often commit the power of interpretation to a plan administrator because doing so serves the employer's interests of efficiency, predictability, and uniformity--interests ERISA seeks to protect. [Id.](/opinion/118008/varity-corp-v-howe/) Thus, when a court pays deference to the administrator at the request of the plan-drafter, the court acts in congruence with Congress's wishes.
y.
We now turn to the debate over the meaning of the plan's terms. Union Pacific argues the plan requires the administrator, in light of Dowling's status as a disabled participant, to "deem" Dowling to have been paid his final base salary from the moment he became totally disabled in 1997 until he retired in 2012, and then calculate his Final Average Compensation from those deemed earnings based on the ten-year window from 2002 to 2012. That is the approach the plan administrator took and the District Court found reasonable. Dowl-ing, on the other hand, argues Union Pacific's interpretation involves too many interpretive gymnastics: Dowling stopped working and earning a salary in 1997 and his ten-year window must accordingly look backward from 1997, even though he continued to accrue credited service until 2012.
We pass no judgment as to which proffered interpretation is best, because at least three aspects of the plan combine to make it ambiguous and each party's interpretation reasonable. The first aspect is the plan's use of the word "absence." Is & person who is not at work due to a disability "absent"? Union Pacific says yes; Dowl-ing says no. If yes, then Plan § 2.18(a)(3)(C)--which "deems" a participant to have been paid during an "absence"--can reasonably be read as requiring the administrator to deem disabled persons to be paid their base salaries for the duration of their disability, up until their retirement date, for purposes of calculating Final Average Compensation. That would mean that Dowling should be counted as earning his base salary up until 2012, as the administrator found. But on the other hand, if time spent not working due to disability is not an "absence," then the plan's language favors Dowling and disabled participants are not "deemed" to receive any pay at all after they leave work, and the only reasonable approach would be to calculate Final Average Compensation by looking backward from the date the person became totally disabled and stopped working--1997 in Dowling's case.
The plan administrator adopted the former approach, that missing work due to disability does in fact constitute an "absence." Dowling argues that the administrator went too far in extending the definition of "absence" to cover indefinite departures from work, and that only more limited short-term departures should count.
Because "absence" is given no specialized meaning in the plan's definitions section, the word must be interpreted in accordance with its generally prevailing meaning, Restatement (Second) of Contracts § 202(3)(a) (Am. Law Inst. 1981) ("Rules in Aid of Interpretation"),8 and its generally preváiling meaning is broad--it means nothing more specific than the state of being "[n]ot present," Absent, Oxford English Dictionary (3d ed. 2009). While a person who misses one day of work can surely be said to be "not present," and thereby "absent," so can a person who endures an indefinite departure from work, whether due to disability or some other reason. Michael Jordan's three-year hiatus from basketball was an "absence," according to the New York Times9 Rick Moranis's 18-year disappearance from film was an "absence" in the eyes of the Hollywood Reporter.10 And Miles Davis's five-year departure from music in the 1970's was an "absence" as well, as told by National Public Radio.11 Thus, given that the generally prevailing meaning of "absence" permits the word to be used to refer to indefinite departures from the workplace, we find the administrator's use of the same word in the same manner to be reasonable.
Dowling argues we must reject the administrator's interpretation of the word "absence," because the plan requires a specialized, narrower interpretation that applies only to shorter departures from work. For authority, Dowling points to Plan § 2.40. That section has separate subsections for time spent in "Total Disability" and time spent in four specific types of "absences." (Plan § 2.40(4), (5), App. 148.) Dowling suggests this separate treatment indicates the two terms are mutually exclusive--time spent in "Total Disability" is not an "absence," and vice versa. But the plan's text does not go so far. Section 2.40 does not purport to define "absence"; it just lays out four nonexclusive scenarios that fit the definition of "absence." Dowl-ing's argument is not without persuasive force--to the contrary, it is a reasonable one. But it would be a stretch to say his interpretation is the only reasonable approach, to the exclusion of the plan administrator's.
The second aspect that contributes to the plan's ambiguity is its silence on how to calculate Final Average Compensation specifically for disabled participants. The plan has a default method of pension-plan calculation and an exception to that default for disabled participants, in two relevant respects: (1) the availability of a pension, and (2) the calculation of credited service. Compare Plan § 4.02(a), App. 155 (laying out the "General Rule" for "Credited Service"), and Plan § 6.01-03, App. 173-74 (laying out general rules for retirement benefits), with Plan § 4.02(c)(2), App. 157 (providing special rules for disabled participants' credited service), and Plan § 6.05, App. 178 (providing special rules for disability retirement benefits). The plan, however, leaves a gaping hole as to whether the default-and-exeeption pattern continues for calculation of the Final Average Compensation for disabled participants. Given this gap, the plan administrator faced a choice: (a) calculate Dowling's Final Average Compensation in line with the default scheme, even though disabled participants are explicitly treated as sui gen-eris with respect to pension-availability and credited service, or (b) calculate Dowl-ing's Final Average Compensation in line with the two disabled-participant exceptions that treat his formal retirement date like his' final day of work, even though nothing in the plan says to do as much. Given the silence, we cannot say that either approach is unreasonable.
Dowling, however, argues the silence can only be read in one way, to foreclose any deviation from the default scheme of determining Final Average Compensation, because of the expressio unius canon of construction: since the plan explicitly provides an exception for disabled participants in two respects, and says nothing explicit for the Final Average Compensation, we must assume that the lack of explicit terms for the latter scenario indicates that no such exception exists. That argument might win the day if we were reviewing the plan de novo, but the expressio unius canon cuts the opposite way when we are paying deference to a plan administrator, because when a plan administrator interprets a text that contains a "mandate in one section and silence in another," the silence "often suggests ... simply a decision not to mandate any solution ..., i.e., to leave the question" open to the reasonable interpretation of the administrative decisionmaker. Van Hollen, Jr. v. FEC, [811 F.3d 486, 493-95](/opinion/3171275/van-hollen-v-federal-election-commission/#493) (D.C. Cir. 2016) (quoting Catawba Cty. v. EPA, [571 F.3d 20, 36](/opinion/187435/catawba-county-v-environmental-protection-agency/#36) (D.C. Cir. 2009) (finding in the context of Chevron deference that the expressio uni-us canon counsels against the court disturbing an agency's interpretation)). Such is the case here. Dowling's criticism of the plan administrator's approach is again not necessarily without merit, but when granting deference "we do not demand the best interpretation, only a reasonable one," id. at 494, and the plan's silence suggests the plan administrator's approach is not unreasonable.
The third aspect that renders the plan ambiguous is its structure. See Zheng v. Gonzales, [422 F.3d 98, 114-16](/opinion/791779/zheng-zheng-v-alberto-gonzales-attorney-general-of-the-united-states/#114) (3d Cir. 2005) (looking to "text and structure" to determine ambiguity). Here, the relevant plan terms are structured into several "Articles," three of which are relevant here: Article II provides "Definitions," Article IV describes the "Crediting of Service," and Article VI lays out "Retirement Benefits." Across these articles, the plan effectively provides two sets of rules, as noted above: a default scheme for the typical participant, and exceptions for disabled participants. The default scheme and its exceptions are not neatly laid out in one article; they are scattered across all three articles, with bits and pieces in various sections and subsections, and the operation of it all must be determined by cross-referencing the various articles, sections, and subsections, and reading them together. It is quite the legal task. This buckshot distribution of relevant terms does little to clarify the disputes over the text and contributes to our finding that the at-issue provisions are ambiguous.
We also take pause to note two counter-intuitive aspects of Dowling's proposed interpretation. First, Dowling wants all the benefits and none of the detriments of an artificial delay in the date he left work. When it comes to Credited Service, he is content that the administrator deemed him to have worked an extra fifteen years of time, from 1997 to 2012, even though he did not, but when it comes Final Average Compensation, he disapproves of the administrator taking the same approach and deeming him to have received a fictional salary over the same unworked period. It should not be minimized how beneficial the first aspect of this scheme was for Dowl-ing: if he had not received Credited Service for the same post-disability pre-retirement period that he does not want to be deemed to have been paid a salary, one estimate suggests his monthly payment would be only about 75% of the current payment--an amount that Dowling believes already too low. (App. 118-19 (Willis's 1997 estimates of various scenarios).) The point is that Dowling likes the fictional delay when it benefits him for purposes of Credited Service, but dislikes it when it hurts him on Final Average Compensation. In other words, Dowling suggests that we read one provision two different ways, both to his advantage. But there is nothing unreasonable about harmonizing Credited Service with the calculation of Final Average Compensation.
Additionally, for the typical disabled participant, Dowling's position is likely worse and the administrator's better. For an employee whose base salary is the near-total source of income, the salary that employee receives in his or her final year of work may often be the highest of his or her career. For Dowling, however, that was not the case, due to his high-ranking status and incentive bonuses that made up a hefty portion of his overall compensation. Thus, by deeming him to receive only his base salary and no bonus over the final ten years of his Credited Service, Dowling was deprived of his three actual highest-earning years. But for the typical employee whose pay comes mainly or exclusively from salary, with raises arriving in yearly step increases, it is Union Pacific's interpretation that is best. To illustrate, imagine an employee who is paid a base salary, no bonus, and receives a step-salary, increase every year from Year 1 to Year 10. In Year 10, the employee becomes totally disabled and leaves work. In Year 20, he begins to draw on his pension. Under Union Pacific's theory, he should be deemed to have been paid his Year 10 salary--his highest salary ever--from Years 10 to 20, his high-three will necessarily be equivalent to his Year 10 salary, and his pension payment will increase accordingly. But under Dowling's theory, the employee's ten-year window should be based off Years 1 through 10, and his high-three will be Years 8, 9, and 10, resulting in an average salary that is inevitably lower than what he was paid in Year 10, and what he would have received' under Union Pacific's approach. We suspect most employees are in situations closer to our hypothetical employee's than to Dowling's, and would benefit less from Dowling's approach than the administrator's. While these counterintui-tive aspects of Dowling's position do not on their own render it unreasonable, they lend support to the reasonableness of the administrator's interpretation.
VI.
Finally, Dowling makes an argument that a conflict of interest requires us to look more skeptically at the administrator's decision. ERISA plan administrators are fiduciaries, and "if a benefit plan gives discretion to an administrator or fiduciary who is operating under a conflict of interest, that conflict must be weighed as a 'facto[r] in determining whether' " the administrator's benefits decision should stand'. Firestone, [489 U.S. at 115](/opinion/112197/firestone-tire-rubber-co-v-bruch/#115), [109 S.Ct. 948](/opinion/112197/firestone-tire-rubber-co-v-bruch/) (quoting Restatement (Second) of Trusts § 187, cmt. d (Am. Law. Inst. 1959)). A conflict "clear[ly]" exists when the employer "both funds the plan and evaluates the claims," because "[i]n such a circumstance, 'every dollar provided in benefits is a dollar spent by ... the employer; and every dollar saved .... is a dollar in [the employer's] pocket.' " Metro. Life Ins. Co. v. Glenn, [554 U.S. 105, 112](/opinion/145788/metropolitan-life-insurance-v-glenn/#112), [128 S.Ct. 2343](/opinion/145788/metropolitan-life-insurance-v-glenn/), [171 L.Ed.2d 299](/opinion/145788/metropolitan-life-insurance-v-glenn/) (2008) (quoting Bruch v. Firestone Tire & Rubber Co., [828 F.2d 134, 144](/opinion/8962251/bruch-v-firestone-tire-rubber-co/#144) (3d Cir. 1987), affd in part, rev'd in part on other grounds, [489 U.S. 101](/opinion/112197/firestone-tire-rubber-co-v-bruch/), [109 S.Ct. 948](/opinion/112197/firestone-tire-rubber-co-v-bruch/), [103 L.Ed.2d 80](/opinion/112197/firestone-tire-rubber-co-v-bruch/) (1989)).
The mere existence of a conflict is not determinative, however, and a conflict on its own does not change our standard of review "from deferential to de novo." [Id. at 115](/opinion/112197/firestone-tire-rubber-co-v-bruch/#115),[128 S.Ct. 2343](/opinion/145788/metropolitan-life-insurance-v-glenn/). A conflict is just another "factor," and "Firestone means what the word 'factor' implies, namely, that when judges review the lawfulness of benefit denials, they will often take account of several different considerations of which a conflict of interest is one." [Id. at 117](/opinion/145788/metropolitan-life-insurance-v-glenn/#117), [128 S.Ct. 2343](/opinion/145788/metropolitan-life-insurance-v-glenn/). The conflict may "act as a tiebreaker when the other factors are closely balanced," or it may mean little at all, depending on the other factors at play. [Id.](/opinion/145788/metropolitan-life-insurance-v-glenn/) Also, the circumstances of the conflict itself may render it more or less significant, depending on whether those "circumstances suggest a higher likelihood" that the conflict actually affected the benefits decision. [Id.](/opinion/145788/metropolitan-life-insurance-v-glenn/) For example, if "an insurance company administrator has a history of biased claims administration," then it is more likely the conflict affected the benefits decision, and .the court may grant less deference to the plan administrator. [Id.](/opinion/145788/metropolitan-life-insurance-v-glenn/) On the other hand, if "the administrator has taken active steps to reduce potential bias and to promote accuracy ... by walling off claims administrators from those interested in firm finances, or by imposing management checks that penalize inaccurate decision-making irrespective of whom the inaccuracy benefits," then the conflict may be said to have been unlikely to infect the administrator's decision, and may be of "vanishing" significance. [Id.](/opinion/145788/metropolitan-life-insurance-v-glenn/)
The Supreme Court exemplified this only-a-factor approach in the Glenn case. [Id. at 118](/opinion/145788/metropolitan-life-insurance-v-glenn/#118), [128 S.Ct. 2343](/opinion/145788/metropolitan-life-insurance-v-glenn/). The Glenn administrator-company was subject to a conflict, and evidence also showed it (1) refused to honor the government's findings as to disability while encouraging the plan participant to pursue government disability benefits, (2) emphasized medical reports that disfavored the claimant while deem-phasizing reports cutting in the claimant's favor, and (3) failed to provide the pro-claimant reports to medical experts. [Id.](/opinion/145788/metropolitan-life-insurance-v-glenn/) On these facts the Sixth Circuit refused to enforce the administrator's decision and the Supreme Court affirmed--yet the Court took care to note that the conflict of interest alone probably would not have warranted overriding the administrator's decision, and that the additional bad facts were crucial. [Id.](/opinion/145788/metropolitan-life-insurance-v-glenn/) (suggesting the Sixth Circuit "would not have found the conflict alone determinative").
Since Glenn, we have only been willing to disturb an administrator's decision based on a conflict of interest if'evidence either suggests the conflict actually infected the decisionmaking or if the conflict is one last straw that calls a benefits determination into question. For an example of the last-straw scenario, in Miller v. American Airlines, Inc., we refused to uphold a benefits determination where the airline operated under a conflict of interest and also (1) doubled back on an initial factual finding that the plan participant was disabled, (2) considered extra factors not called for in the plan, (3) failed to comply with ERISA's notice requirements, and (4) failed to fully evaluate an earlier diagnosis. [632 F.3d 837, 855-56](/opinion/183519/miller-v-american-airlines-inc/#855) (3d Cir. 2011). We gave "significant weight" to the four factors other than the conflict and only "slight weight" to the conflict itself. [Id. at 855-56](/opinion/183519/miller-v-american-airlines-inc/#855). By comparison, in Fleisher v. Standard Insurance Co., there was a conflict, but the plan-beneficiary presented no evidence at all that the conflict actually infected the administrator's decisionmak-ing, and we were still willing to apply deference and affirm, without requesting additional factfinding. [679 F.3d at 122](/opinion/800036/fleisher-v-standard-insurance/) n.3 (3d Cir. 2012) (finding no evidence the conflict "affect[ed] the analysis of [the] claim"); cf. [id. at 130](/opinion/800036/fleisher-v-standard-insurance/#130) (Garth, J., dissenting) (noting that the majority found no need to remand for additional factfinding).
Dowling's case is more like Fleisher than Miller or Glenn, because we know very little about the Union Pacific administrator's conflict. A conflict does exist-- Union Pacific both funds and administers the plan--but that is about all we know. Dowling has highlighted no evidence suggesting Union Pacific has any sort of negative history of failing to properly exercise its fiduciary responsibilities, and Union Pacific has put forward nothing indicating that it took steps to wall off the plan administrator from the company's financial decisionmaking or incentivize its staff to make accurate benefits determinations instead of reducing costs. We do have the job titles of the relevant individuals--Willis worked in "Compensation and Benefits" and Schroer and Schaefer were in "Human Resources"--but titles alone do not tell us much.
The one fact that Dowling says cuts in his favor is an early flip-flop by Union Pacific that he analogizes to the problematic reversal in Miller. In 1995, Willis and Dowling corresponded, and Willis told Dowling that Union Pacific would calculate Dowling's Final Average Compensation the way Dowling now believes to be correct. Then • a year later, in 1996, Willis wrote Dowling again and reversed his initial position, calculating that Dowling's pension should be what Union Pacific later finally adopted in 2013. But again, Dowling has presented the Court with nothing more than the bare fact of this reversal; no evidence suggests Willis's motivation was ulterior, or anything other than a desire to correct what he saw as an errant calculation.
Comparing Willis's reversal to the problematic reversal in Miller also shows just how far Willis's reversal is from warranting a skeptical take on Union Pacific's conflict. Three factors in Miller suggested the reversal was motivated not by a desire to correct an error, but instead by an ulterior cost-cutting motivation that might be attributed to the conflict: First, the Miller reversal came on a factual question--whether the claimant was disabled--even though no new evidence had been received. [632 F.3d at 841-42, 855-56](/opinion/183519/miller-v-american-airlines-inc/#841). Here the reversal was on a purely legal question--how the plan's complex terms should be properly interpreted. Second, in Miller the initial decision resulted in the claimant actually receiving benefits, and the reversal cut off the flow of those benefits. [Id.](/opinion/183519/miller-v-american-airlines-inc/) Here, the initial determination was preliminary and advisory, the reversal came a year later, and no benefits flowed for another 17 years. Third, in Miller the reversal was one of four factors, not including the conflict, that together undermined the Court's trust in the administrator, the most notable factor being the administrator's consideration of information not permitted by the plan document, which may have on its own been evidence of an arbitrary and capricious benefits determination. [Id. at 855-56](/opinion/183519/miller-v-american-airlines-inc/#855), 856 n.5. Here, by comparison, Willis's reversal is the only factor--not one of four--that Dowling has marshaled to support his argument that the conflict affected the administrator's determination. Without more, there is little indication that the' conflict played a role, and its bare existence is not enough to justify disturbing the plan administrator's otherwise reasonable decision.
VII.
For the foregoing reasons we will affirm the District Court's decision sustaining the plan administrator's calculation of Dowl-ing's pension benefit.
. Plan § 2.'35 states in pertinent part, " 'Final Average Compensation' shall mean the average of the Participant's monthly Compensation for the 36 consecutive calendar months of highest Compensation within the 120-cal-endar month period immediately preceding ... the last date on which he is a Covered Employee." (Plan § 2.35, App. 144.)
.Plan § 4.02(c)(2) states, "A Disabled Participant who is a Covered Employee on his Disability Date shall be credited with years of Credited Service as if he were a Covered Employee from his Disability Date to the date on which he ceases to be a Disabled Participant as set forth in Section 6.05." (Plan § 4.02(c)(2), App. 157.)
Plan § 6.05 states in pertinent part,
> [A] Participant who has a Disability Date shall continue to be credited with years of Vesting Service and Credited Service (to the extent provided in Section 4.02(c)(2)) while he remains a Disabled Participant. A Disabled Participant shall cease to be such if and when:
> (a) he ceases to suffer from a Total Disability;
> (b) he ceases to receive benefits under the Long Term Disability Plan of Union Pacific Corporation;
> (c) he dies; or
> (d) he elects a' Benefit Payment Date.
> [[Image here]]
> When a Disabled Participant ceases to 'be such, he shall cease 'to be credited with years of Vesting Service and Credited Service, and he shall be entitled to a pension under the other provisions of this Article (or Article VII), applied as if his Separation from Service occurred on the date he ceased to be a Disabled Participant ....
(Plan § 6.05, App. 178.)
. Plan § 2.18(a)(3)(C) states in pertinent part,
> (C) During a period when an Employee receives credit for Hours of Service under Section 2.40 for a period of absence immediately prior to which- he is a Covered Employee and which Hours of Service are counted in determining his Credited Service under Section 4.02:
> (i) the Employee, if employed on a full-time basis at the start of the absence, shall be deemed to have received Compensation at the base pay rate in effect for him as of the first day of the month in which such period begins and shall also be credited with any Compensation described in (3)(A)(ii) through (iv), above, that is actually paid to him during that period; ....
(Plan § 2.18(a)(3)(C), App. 139.)
. Plan § 2.10 states,
> "Approved Absence" shall mean the period during which an Employee absents himself from work without compensation (to the extent evident in personnel records of the Employer or the Affiliated Company), by reason of:
> (a) a period of absence for personal or other reasons, provided that such person returns to work for the Employer or such Affiliated Company at such time as the Employer or such Affiliated Company may reasonably require, or
> (b) a family or medical leave within the meaning of the Family and Medical Leave Act of 1993, provided, however, that effective for leaves of absence beginning on or after January 1, 1999, such person returns to work after the family and medical leave at such time as the Employer or Affiliated Company may reasonably require. In the authorization of an Approved Absence under subsection (a) and in the requirements set forth with respect to assuring the return of the Employee to work within a reasonable time, the Employer or an Affiliated Company shall treat all Employees under similar circumstances in a like manner.
(Plan § 2.10, App. 134-35.) •
> Plan § 2.1 OB states,
> "Approved Non-HCE Absence" shall mean, effective January 1, 2008, the period during which an Employee who is not a Highly Compensated Employee absents himself from work without compensation (to the extent evident in personnel records of the Employer or Affiliated Company), by reason of a period of absence for a purpose described in a leave of absence policy of the Employer or an Affiliated Company, but the duration of which is longer than otherwise permitted under such policy, and with the approval or at the requirement of the Employer or such Affiliated Company, provided that such person returns to work for the Employer or such Affiliated Company at such time as the Employer or such Affiliated Company may reasonably require.
(Plan § 2.10B, App. 135.)
. Plan § 2.40 states in pertinent part,
> "Hour of Service1' shall mean, ...
> (a) With respect to a Participant (other than a Disabled Participant) whose Separation from Service occurs prior to January 1, 1999 and with respect to a Disabled Participant who ceases to be such prior to January 1, 1999:
[[Image here]]
> (4) 10 Hours of Service for each day on which the Employee is absent (A) on an Approved Absence, (B) for temporary layoff on account of reduction in force provided there is a return to work at the first available opportunity, (C) for military service under leave granted by the Employer or Affiliated Company or required by law provided the Employee returns to service with the Employer or Affiliated Company within such period as his right to reemployment is protected by law, or (D) effective January 1, 2008, on an Approved Non-HCE Absence.
> (5) 10 Hours of Service for each day of an Employee's Total Disability.
(Plan § 2.40(a)(4)-(5), App. 147-48.)
. Plan § 13.02 states in pertinent part,
> Authority and Responsibility of the Named Fiduciary-Plan Administration. The Named Fiduciary-Plan Administration shall be the Plan "administrator" as such term is defined in section 3(16) of ERISA, and as such shall have the following duties and responsibilities:
[[Image here]]
> (f) to determine all questions of the eligibility of Employees and of the' status of rights of Participants, Surviving Spouses, Beneficiaries and Alternate Payees, to make factual determinations, to construe and interpret the provisions of the Plan, to correct defects and resolve ambiguities therein, and to supply omissions thereto; ....
(Plan § 13.02, App. 242.)
. Plan §§ 12.01-03 states in pertinent part, Sec. 12.01 Employer Contributions. Subject to Section 12.06, the Employer shall contribute such amounts as are necessary to satisfy the minimum funding standards required pursuant to ERISA and section 412 of the Code, as from time to time amended.
> ... The Employer shall have the right, but not the obligation, to contribute such additional amounts as it, in its sole discretion, deems desirable in any year. All Employer contributions shall be paid to the Trustee.
> [[Image here]]
> Sec. 12.02 Mandatory Participant Contributions. No contributions shall be required of Participants under the Plan. Sec. 12.03 Voluntary Participant Contributions. No contributions shall be accepted from any Participant under the Plan.
(Plan §§ 12.01-03, App. 232.)
. A similar rule of construction is advisable under the Restatement (Third) of Property, the recommended restatement for trust-document interpretation. It recommends that for courts seeking the drafter's meaning of text in a trust document, "words and phrases" should be "presumed to bear their customary legal terminology" if the "drafter is a legal professional or other person experienced in the use of legal terminology" and there is no "[e]xtrinsic evidence" going to the drafter's subjective intention. Restatement (Third) of Property: Wills and Other Donative Transfers § 10.2 cmt. e (2003); see also Restatement (Third) of Trusts, Ch. 1 intro, note (referring readers to the Restatement (Third) of Property for "general rules of interpretation and construction").
. Harvey Araton, Sports of the Times; Jordan, a Bit Older, Comes Up Short, N.Y. Times (Oct. 31, 2001), http://www.nytimes.com/2001/10/ 31/sports/sports-of-thetimes-jordan-a-bit-older-comes-up-short.html.
. Ryan Parker, Rick Moranis Reveals Why He Turned Down "Ghostbusters" Reboot: "It Makes No Sense to Me," Hollywood Reporter (Oct. 7, 2015), http://www.hollywoodreporter. com/features/rick-moranisreveals-why-he-829779.
. Fresh Air (NPR radio broadcast Apr. 1, 2016), transcript excerpt available at http:// www.npr.org/2016/04/01/472580940/-miles-aheadshows-a-dissipated-davis-who-s-still-burning-hot.
. Union Pacific's Pension Plan capitalizes defined terms. In order to keep better track of them, I adopt that convention as well. See, e.g., Plan § 2.54 (defining "Participant"). There's no dispute that Dowling is a Participant.
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| "The opinion of the court was delivered by\n\nFISHER, P.J.A.D.\n\nIn this appeal, we examine clauses(...TRUNCATED)
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| "John J. McConnell, Jr., United States District Judge\n\nBefore the Court is Plaintiff DHLNH, LLC's (...TRUNCATED)
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| "Judgment, Supreme Court, New York County (Ira Gammerman, J.H.O.), entered March 7, 2013, in plainti(...TRUNCATED)
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| "Judgment, Supreme Court, New York County (Ira Gammerman, J.H.O.), entered March 7, 2013, in plainti(...TRUNCATED)
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| "```\nReason: I attest to the Cite as\n```\n\n2020 Ark. App. 260\n(...TRUNCATED)
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| "MERRITT, Circuit Judge,\n\nconcurring in\n\npart and dissenting in part.\n\nI agree that the judgme(...TRUNCATED)
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