Blame Game Fails Louisiana Casing Vendor

Originally published by Charles Sartain.

There’s no better place in the oil patch to play the blame game than 10,000 feet of leaky wellbore.

What went wrong?

In Justiss v. Oil Country Tubular Corporation, Justiss, a drilling contractor, entered into an IADC model turnkey drilling contract for a well in Beauregard Parish. The contract specified 12,500 feet of intermediate casing to be LTC pipe with buttress threads. The contract depth was 15,000 feet. Justiss purchased the casing from OCTC.

The operation was star-crossed. Justiss discovered a hole in the surface casing, which it repaired by cementing the casing in place. This made it impossible to remove the intermediate casing string when things got bad. Beginning at 3,500 feet the casing wouldn’t maintain adequate pressure and Justiss performed 13 squeeze jobs in an effort to remedy the problem. These and other efforts to fix the leaks lasted five weeks and cost millions of dollars.  At 13,596 feet the casing would not maintain pressure and, for fear of losing well control, the operation was terminated.

Read this if you sell a product or a service

During the operation Justiss offered OCTC the opportunity to go to the location and find out for itself what the problem was. They declined, electing rather to stay way and let Justiss figure it out for itself. Suggestion: Hiding from a problem with your product or service is likely to be the wrong solution, both in law and in customer relations. This applies to landmen, engineers and lawyers as well.

The excuses

Justiss sued OCTC in redhibition for the defective pipe. At trial, experts on both sides agreed that the pipe was defective. OCTC offered many reasons why it was Justisss’ fault. Justiss:

• should not have used this type of pipe in the well,
• should not have cemented the surface casing,
• should have stopped repairs sooner and not spent all that money getting the well down, and
• there must have been another (unspecified) reason for mud loss into the formation.

The law

The question for the jury was whether the redhibitory defect in the casing proximately caused Justiss’s damages and to what extent Justiss’s negligence contributed to its damages. The jury tagged Justiss for 90 percent of the fault. On appeal Justiss complained about the jury charge.

The court of appeal awarded Justiss damages of $2,445,682 for the purchase price and costs of repairs and made these findings:

• In Louisiana, recovery for redhibition does not require the plaintiff to prove causation.
• The plaintiff’s comparative fault under Civil Code Art. 2323 does to not apply to redhibition as it does to torts. The trial court erred in applying comparative fault to reduce the consequential damage award. (The circuits are split on this point.)
• Mitigation of damages will not restrict an injured party’s recovery when he is required to make substantial expenditures of its own funds and incur substantial risks in order to avoid the consequences of a breach of contract (Remember, in the turnkey contract Justisss owed the operator a well down to 15,000).
• No negligence was ascribed to Justiss for engaging in its good-faith effort to make the defective pipe work.
• OCTC failed to prove any cause other than the defective pipe was a reason for Justiss’s failure to reach the contract depth.
• OCTC’s election not to visit the site was an election to operate solely on speculation about the cause of the problems. (I told you this would happen.)

Perhaps OCTC will ask the supreme court to review so the comparative fault question can be resolved.

A musical interlude

Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.

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