Total E&P U.S., Inc. v. Marubeni Oil & Gas (U.S.), Inc.

Full title: TOTAL E&P USA, INC., Plaintiff, v. MARUBENI OIL & GAS (USA), INC.…

Court: UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

Date published: Aug 24, 2018

393 F. Supp. 3d 515 (S.D. Tex. 2018)

Opinion

CIVIL ACTION NO. H-16-2671

2018-08-24

TOTAL E&P USA, INC., Plaintiff, v. MARUBENI OIL & GAS (USA), INC., Defendant.

NANCY F. ATLAS, SENIOR UNITED STATES DISTRICT JUDGE

MEMORANDUM AND ORDER

By Order [Doc. # 71] entered November 1, 2017, motions and other pretrial matters in this case were referred to United States Magistrate Judge Dena Palermo pursuant to 28 U.S.C. § 636(b)(1)(A) and (B). On June 28, 2018, Magistrate Judge Palermo issued a Report and Recommendation [Doc. # 163], recommending that this Court grant the Motion for Partial Summary Judgment filed by Defendant Marubeni Oil & Gas (USA), Inc. ("MOGUS") [Doc. # 92], grant the Motion for Summary Judgment filed by Plaintiff Total E&P USA, Inc. ("Total") as to MOGUS's unjust enrichment claim, and deny Total's Motion for Summary Judgment Regarding Contract Claims [Doc. # 97] and Motion for Summary Judgment Due to Prior and Complete Satisfaction of Decommissioning Obligations [Doc. # 98] in all other respects.

Total filed timely Objections [Doc. # 172] to the Magistrate Judge's Report and Recommendation, to which MOGUS filed a Response [Doc. # 178], and Total filed a Reply [Doc. # 179]. The Court has reviewed the Report and Recommendation, the evidence submitted in connection with the summary judgment motions,¹ and the parties' briefing in connection with the summary judgment motions and with Total's Objections. The Court has also reviewed the applicable legal authorities. The Court's review of the Report and Recommendation is de novo . See FED. R. CIV. P. 72(b) ; 28 U.S.C. § 636(b)(1) ; Funeral Consumers Alliance, Inc. v. Serv. Corp. Int'l , 695 F.3d 330, 347 (5th Cir. 2012).

1 Total submitted evidence with its Reply in support of its Objections [Doc. # 179]. MOGUS has moved to strike the exhibits as untimely, noting that the evidence was not presented to Magistrate Judge Palermo during the summary judgment process. The Court declines to consider evidence not presented to the Magistrate Judge. As a result, the Motion to Strike [Doc. # 180] is GRANTED .

Total's Objections regarding its contractual and subrogation liability for a share of decommissioning costs involve arguments presented to and rejected by the Magistrate Judge. Contrary to Total's arguments, the express terms of the CEPS Operating Agreement, settled legal principles concerning a party's retention of its obligations following an assignment, and the extensive body of case law involving predecessor decommissioning liability all demonstrate that Magistrate Judge Palermo's analysis and recommendation are well-reasoned and correct. Indeed, all relevant legal authority – as cited and fully discussed by Magistrate Judge Palermo in her Report and Recommendation – is contrary to Total's arguments regarding its liability for a share of the decommissioning costs.

Similarly, Magistrate Judge Palermo correctly analyzed the effect of the ATP bankruptcy on Total's obligation for a share of the decommissioning costs for the CEPS. The relevant documents in the bankruptcy proceeding, including the Bankruptcy Court's Final Order, demonstrate that MOGUS preserved and retained its rights against Total for a share of decommissioning costs. Agreements between ATP and MOGUS, limited to "as between themselves only," did not eliminate or otherwise restrict MOGUS's retained rights as to Total.

Total argues also in its Objections that there are issues that need to be resolved by a jury. Contrary to Total's position throughout the summary judgment briefing and argument, Total now suggests that the language in the CEPS Operating Agreement is ambiguous and needs to be construed by a jury. Total cannot in Objections to a Report and Recommendation dramatically change its position. Moreover, as discussed in the Report and Recommendation, the language in the CEPS Operating Agreement is clear and unambiguous.

Total argues that the value of the overriding royalty interest MOGUS received as part of the ATP bankruptcy settlement is a fact to be decided by the jury. As the Magistrate Judge noted, Total failed to present evidence in the summary judgment process to raise a genuine issue of material fact beyond mere speculation regarding the value of the royalty interest. Total had a full and fair opportunity to present evidence on this issue to the Magistrate Judge, but presented only evidence that was highly speculative and insufficient to raise a genuine issue of material fact to be submitted to a jury.

Total argues that if it retained obligations under the CEPS Operating Agreement, it also retained corresponding rights of notice and participation that MOGUS failed to observe. As explained fully and accurately by Magistrate Judge Palermo, Total's rights – unlike its obligations – under the CEPS Operating Agreement were extinguished upon its assignment of the agreement to ATP. Total had no rights to notice and participation, having assigned those rights to ATP.

The Court, based on its de novo review, agrees fully with Magistrate Judge Palermo's Report and Recommendation. The Report and Recommendation will be adopted as this Court's Memorandum and Order. Accordingly, it is hereby

ORDERED that Total's Objections [Doc. # 172] to the Report and Recommendation are OVERRULED . It is further

ORDERED that the Magistrate Judge's Report and Recommendation [Doc. # 163] is hereby ADOPTED as the Court's Memorandum and Order. It is further

ORDERED that MOGUS's Motion for Partial Summary Judgment [Doc. # 92] is GRANTED . It is further

ORDERED that Total's Motion for Summary Judgment Regarding Contract Claims [Doc. # 97] and Motion for Summary Judgement Due to Prior and Complete Satisfaction of Decommissioning Obligations [Doc. # 98] are GRANTED only as to MOGUS's unjust enrichment claim and DENIED in all other respects. It is further

ORDERED that MOGUS's Motion to Strike Untimely Exhibits [Doc. # 180] is GRANTED . It is further

ORDERED that the docket call on September 10, 2018, is CONVERTED to a status conference.

REPORT AND RECOMMENDATION ON CROSS MOTIONS FOR SUMMARY JUDGMENT

Dena Hanovice Palermo, United States Magistrate Judge

Before the Court are the Parties' cross motions for summary judgment.¹ Defendant Marubeni Oil & Gas USA, Inc. ("MOGUS") filed a Motion for Partial Summary Judgment. ECF No. 92.² Plaintiff Total E&P USA, Inc. ("Total") filed a Motion for Summary Judgment Regarding Contract Claims, ECF No. 97,³ and a Motion for Summary Judgment Due to Prior and Complete Satisfaction of Decommissioning Obligations, ECF No. 98.⁴ The Parties agreed the essential facts to resolve these motions are not disputed and that the motions are ripe for decision. ECF No. 92 at 10-24; Pl.'s Resp. to Def.'s Statement of Undisputed Facts at 2-7, Ex. 2, ECF No. 120-2; ECF No. 97 at 9-17; Def.'s Resp. to Pl.'s Statement of Undisputed Facts at 1-6, Ex. A, ECF No. 102-1; ECF No. 98 at 11-16; Def.'s Resp. to Pl.'s Statement of Undisputed Facts at 1-5, Ex. 1, ECF No. 104-1. The Parties appeared before the Court on April 6 and 10, 2018, to argue these motions. Having considered the arguments of counsel and the exhaustive record, which contains both factual evidence and applicable legal authorities, the Court recommends that MOGUS' motion should be granted and one of Total's motions should granted in part.

1 On November 1, 2017, the District Judge referred this case for all pretrial purposes. Order, ECF No. 71.

2 Total filed a response, ECF No. 120, and MOGUS filed a reply, ECF No. 127. MOGUS had previously filed a summary judgment motion. ECF No. 28. On Total's Rule 56(d) motion, ECF No. 40, the Court denied MOGUS' motion without prejudice so that the Parties could engage in discovery, ECF No. 43.

3 MOGUS filed a response, ECF No. 102, and Total filed a reply, ECF No. 131.

4 MOGUS filed a response, ECF No. 104, and Total filed a reply, ECF No. 132.

I.

FACTUAL OVERVIEW

This dispute arises out of the liability for the decommissioning of three properties located in the Outer Continental Shelf ("OCS") in the Gulf of Mexico. This includes two oil and gas fields—Mississippi Canyon Block 305 ("MC 305") and Mississippi Canyon Block 348 ("MC 348")—and the Canyon Express Pipeline System ("CEPS") (collectively "the Assets") that connects these fields and others. Total filed a separate action as to each MC 305, MC 348, and CEPS. Total's action concerning CEPS is pending before this Court.⁵ MOGUS filed identical counterclaims in each case relating to all three properties.⁶

5 Total's other two actions concerning MC 305 and MC 348 are pending before other courts in the Southern District of Texas. The action regarding MC 305 is pending before Judge Gilmore (No. 4:16-CV-02674), and the action regarding MC 348 is pending before Judge Hughes (No. 4:16-CV-02678). While the action concerning MC 348 is stayed, the Parties filed similar cross motions in the MC 305 action.

6 Although it has not moved for summary judgment on the MC 305 and MC 348 properties in this case, MOGUS requested that this Court enter judgment in its favor, under Fed. R. Civ. P. 56(f)(1). ECF No. 102 at 25-26. Even though it filed separate actions for each property, because of the counterclaims, Total moved for summary judgment on all three properties. ECF No. 97 at 30-32. In the MC 305 case, Judge Gilmore entered an order severing MOGUS' counterclaims on all three properties, and holding in abeyance ruling on the claims related to MC 348 and CEPS pending resolution of those disputes in the respective cases before Judge Hughes and Judge Atlas. Order, ECF No. 225 (No. 4:16-CV-2674). Judge Atlas entered a similar order in this case, limiting resolution of these cross-motions to CEPS and dismissing without prejudice the claims related to MC 305 and MC 348 as duplicative of the claims pending before the other two judges. Order, ECF No. 160. This opinion discusses the terms of the agreements for the other properties only as necessary to analyze the claims at issue regarding CEPS.

MOGUS asserts that Total is liable for its share of decommissioning costs incurred with respect to the Assets, and MOGUS seeks reimbursement of Total's share of the costs pertaining to CEPS in this case. Total has refused to pay, claiming that it is not liable under the respective Operating Agreements ("OAs") because it was no longer an owner at the time of abandonment and MOGUS already has been fully satisfied for any such costs from the third party who acquired Total's interests in the Assets. The following are the pertinent undisputed facts:

A. Ownership.

From 1998 through 2006, Total owned interests in the three Assets: the MC 305, MC 348, and CEPS. ECF No. 97 at 9-10. The CEPS was constructed in 2002 to gather production from the Canyon Express fields (including MC 305 and MC 348) and deliver it to the Canyon Station production facility. ECF No. 92 at 10; CEPS OA, Ex. B-1 at 8, ECF No. 92-4; Ex. 2 at 3, ECF No. 120-2. The various Canyon Express lease owners agreed to jointly participate in the "ownership, operation, maintenance, use and abandonment" of CEPS. Ex. B-1 at 7, ECF No. 92-4. Total was one of the original owners of CEPS. Id. ⁷ Total also was the original operator of CEPS and installed the entire pipeline system infrastructure. Ex. B-1 at ¶ 3.1, ECF No. 92-4.

7 The other original CEPS owners were Mariner Energy, Inc.; Pioneer Natural Resources USA, Inc., on behalf of itself and as successor in interest to Baker Hughes International Branches, Inc., as successor to WI, Inc.; Amoco Production Company (which later became BP Exploration and Production, Inc. ("BP")), and Marathon Oil Company ("Marathon").

Ownership in the Assets changed over time. ECF No. 92 at 11; ECF No. 97 at 10. In early 2006, MOGUS acquired its interests in the Assets while Total was the operator. ECF No. 92 at 12; ECF No. 97 at 9-10. A few months later, in July 2006, Total assigned its interests in the Assets to another energy company, ATP Oil & Gas Corporation ("ATP"). ECF No. 97 at 10. ATP replaced Total as the operator of CEPS. Id. The present owners of the Assets are MOGUS, ATP, and Black Elk Energy Offshore Operations, LLC ("Black Elk"). Id. Since its assignment to ATP, Total has not participated in the operation of the Assets. Id. at 11. In August 2012, ATP filed a petition under Chapter 11 of the United States Bankruptcy Code. Petition, No. 12-36187 (Bankr. S.D. Tex. Aug. 17, 2012), ECF No. 1. In February 2014, the bankruptcy court entered a Final Order approving the transfer to MOGUS of certain interests in the Assets ATP had acquired from Total. Ex. M, M-1, M-2, ECF Nos. 98-35, 98-36, 98-37.

B. Abandonment Operations/Decommissioning.

The government required MOGUS to decommission the Assets. ECF No. 97 at 14. MOGUS performed the government-ordered decommissioning of the Assets, which has been completed pending final government approval. See ECF No. 92 at 23; ECF No. 120-2 at 7 ¶ 12. MOGUS has spent more than $215 million completing the decommissioning for all of the Canyon Express Assets, and $59.9 million for CEPS in particular. ECF No. 92 at 23-24; ECF No. 120-2 at ¶ 12.

C. The Operating Agreements.

The Parties entered three separate OAs, one for each Asset: (1) the Operating Agreement covering the Aconcagua Prospect Mississippi Canyon Area Block 305, dated effective May 1, 1998 ("MC 305 OA"); (2) the Offshore Operating Agreement covering Mississippi Canyon Area Block 348, dated effective May 1, 1998 ("MC 348 OA"); and (3) the Canyon Express Pipeline System Operating Agreement, dated effective June 1, 2000 ("CEPS OA"). ECF No. 97 at 12.⁸ As one of the original owners, Total participated in the drafting of the CEPS OA. Hr'g Tr. Day 1 (Apr. 6, 2018) ("Tr. I") 21:2-4, 88:7-12, ECF No. 147.

8 The Parties agree that the relevant portions of the three OAs are substantially identical. ECF No. 97 at 30; ECF No. 102 at 25.

Total and the other original owners of the Canyon Express leases entered into the OAs to govern the parties' rights and obligations. E.g. , Ex. B-1, ECF No. 92-4. In the CEPS OA, each of the owners is defined as a "Common System Owner." Id. at 7. The owners' "Equity Interest" in CEPS is weighted based on their respective ownership in the three Canyon Express fields, including MC 305 and MC 348. Id. at ¶ 1.11 & at Ex. B, ECF No. 92-4.⁹

9 In the MC 305 and MC 348 OAs, the relevant owner is defined as a "Party" or "Participating Party." ECF No. 97 at 30-31; Ex. DD at 2, ECF No. 97-53. The owners' equity interest is defined as their Working Interest and Participating Interest (Share). Ex. DD at 2-3, ECF No. 97-53.

When MOGUS acquired its interests in the Assets, it likewise entered into these OAs. The Parties agree that they are both subject to the terms of these OAs, which govern their contractual relationship. ECF No. 97 at 12; ECF No. 102-1 at 3.

D. ATP's Bankruptcy Settlement With MOGUS.

On January 31, 2014, more than a year after ATP filed for bankruptcy, MOGUS and ATP filed a Joint Motion,¹⁰ seeking approval of their settlement agreement. ECF No. 98 at 13 ¶ 6; ECF No. 104 at 9. On February 27, 2014, the bankruptcy court entered its Final Order¹¹ approving the settlement, whereby ATP transferred certain rights to MOGUS, including the Rights-of-Way ("ROW") for CEPS, and in exchange MOGUS agreed to perform decommissioning operations and withdraw its decommissioning claims against the debtor's estate. ECF No. 92 at 16-18; ECF No. 98 at 13-14.¹²

10 Joint Motion and Incorporated Memorandum Pursuant to Fed. R. Bankr. P. 9019, 2002, 6004 and 11 U.S.C. §§ 105, 363, and 365 for Orders: (I) Approving Compromises and Settlements Between Debtor, Marubeni Oil & Gas USA Inc., and the Williams Companies, Inc.; (II) Approving the Sale of Debtor's Interest in Certain Inventory Free and Clear of Liens, Claims and Encumbrances; (III) Approving Assumption and Assignment of Certain Rights of Way Free and Clear of Liens, Claims and Encumbrances; (IV) Approving Certain Procedures Related to the Assumption and the Assumption and Assignment of Certain Executory Contracts; (V) Approving Rejection of Certain Executory Contracts and Incorporating Procedures Relating Thereto; (VI) Approving the Form and Manner of the Notice of the Sale and Hearing Thereon; and (VII) for Additional Relief Consistent Therewith ("Joint Motion"). Ex. I, I-1, I-2, I-3, I-4, I-5, I-6, ECF Nos. 98-24, 98-25, 98-26, 98-27, 98-28, 98-29, 98-30.

11 Final Order Approving: (I) Compromises and Settlements Between the Debtor and Marubeni Oil & Gas (USA), Inc.; (II) Sale of Debtor's Interest in Certain Inventory Free and Clear of Liens, Claims, and Encumbrances; (III) Assumption and Assignment of Certain Rights of Way Free and Clear of Liens, Claims and Encumbrances; (IV) Approving Certain Procedures Related to the Assumption and the Assumption and Assignment of Certain Executory Contracts and/or Unexpired Leases; (V) Rejection of Certain Executory Contracts and Incorporating Procedures Relating Thereto; (VI) Form and Manner of the Sale and the Sale Hearing; and (VI) Granting Related Relief Consistent Therewith ("Final Order"). Ex. M, M-1, M-2, ECF Nos. 98-35, 98-36, 98-37.

12 ATP assigned the ROW for CEPS to MOGUS so that MOGUS could become the operator and would be legally permitted to perform decommissioning. Tr. I 47:9-49:25, 52:6-12, ECF No. 147. ATP retained its 25.834% interest in CEPS. ECF No. 92 at 17; ECF No. 104 at 26; Ex. 3 to Ex. M-2 at 19, ECF No. 98-37.

In the Final Order, ATP and MOGUS agreed to establish an "Abandonment Fund." See Ex. 1 to Ex. M, M-1, ECF Nos. 98-35, 98-36. Funds deposited to the Abandonment Fund would be used to offset ATP's proportionate share of decommissioning costs.¹³ ECF No. 104 at 11, 14; Schiff Dep. 3:13-23, Ex. 3, ECF No. 104-8; Ex. M at 19 ¶ 27, ECF No. 98-35. The Abandonment Fund Agreement attached to the Final Order provides that the following would be contributed to the Abandonment Fund:

13 The Abandonment Fund would be "used and/or utilized by MOGUS to offset any decommissioning costs, expenses and/or liabilities attributable to Debtor's obligation for plugging, abandonment and/or decommissioning costs and expenses associated with the Canyon Express Assets...." Ex. M at 19 ¶ 27, ECF No. 98-35.

• ATP's rights to a $12.5 million contract claim that it had against Marathon for the decommissioning of CEPS;¹⁴

• Proceeds from the sale of any CEPS scrap, equipment, etc. collected during the decommissioning operations, including any potential sale of CEPS itself ("CE Inventory");¹⁵ and

• Half of an overriding royalty interest ("ORRI") in MC 348 from Bennu Oil & Gas LLC ("Bennu"), an entity ATP's lenders created to purchase certain of ATP's non-Canyon Express properties.¹⁶

14 Ex. 1 to Ex. M at 38 ¶ 12, 39 ¶ 18, ECF No. 98-35.

15 Id. at 39 ¶ 17.

16 Id. at 39 ¶ 16.

ECF No. 104 at 12. In addition, "Bennu agreed to provide the other half of the ORRI directly to MOGUS."¹⁷ Id .

17 Id. at 37 ¶ 6.

II.

SUMMARY JUDGMENT STANDARD

Rule 56 of the Federal Rules of Civil Procedure provides for the entry of summary judgment against a party who fails to make a sufficient showing of the existence of an element essential to its case and on which it will bear the burden at trial. Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; Curtis v. Anthony , 710 F.3d 587, 594 (5th Cir. 2013) ; Little v. Liquid Air Corp. , 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc). Summary judgment "should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a) ; Celotex , 477 U.S. at 322-23, 106 S.Ct. 2548.

"Initially, the movant bears the burden of presenting the basis for the motion and the elements of the causes of action upon which the nonmovant will be unable to establish a genuine dispute of material fact." Stewart v. U.S. Bank Nat. Ass'n , 107 F. Supp. 3d 705, 707 (S.D. Tex. 2015). "The burden then shifts to the nonmovant to come forward with specific facts showing there is a genuine dispute for trial. Id. "A dispute about a material fact is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. (internal quotation marks and citation omitted). The Court is not required to accept the nonmovant's conclusory allegations, speculation, and unsubstantiated assertions which are either entirely unsupported, or supported by a mere scintilla of evidence. Chaney v. Dreyfus Serv. Corp. , 595 F.3d 219, 229 (5th Cir. 2010) (citing Reaves Brokerage Co. v. Sunbelt Fruit & Vegetable Co. , 336 F.3d 410, 413 (5th Cir. 2003) ); accord Little , 37 F.3d at 1075. " ‘[A] complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial,’ and summary judgment as a matter of law must be granted." Brown v. United States Postal Inspection Serv. , 206 F. Supp. 3d 1234, 1242 (S.D. Tex. 2016) (quoting Celotex , 477 U.S. at 322–23, 106 S.Ct. 2548 ).

III.

BOTH PARTIES SEEK SUMMARY JUDGMENT ON BREACH OF CONTRACT LIABILITY

Both Parties moved for summary judgment on the breach of contract claim. Total asserts that it is entitled to summary judgment in its favor because MOGUS cannot establish the existence of contractual obligations, an essential element of the claim. MOGUS seeks summary judgment, arguing that the OA is a valid contract, and Total is obligated to, but failed to pay for its share of the decommissioning costs. The Parties agree that the essential facts are not in dispute and that the Court can decide the contract issue as a matter of law. See, e.g. , Boudreaux v. Unionmutual Stock Life Ins. Co. of Am. , 835 F.2d 121, 123 (5th Cir. 1988) (the interpretation of an unambiguous contract presents a purely legal issue, well-suited for summary judgment); Steward v. Champion Int'l Corp. , 987 F.2d 732, 734 (11th Cir. 1993) (citing Terry Cove North, Inc. v. Baldwin County Sewer Auth., Inc. , 480 So. 2d 1171, 1173 (Ala. 1985) ) (construction of unambiguous contract is a question for the court).

Under general Alabama¹⁸ rules of contract interpretation,

18 The Parties filed cross motions on the choice of law issue, but agreed that, for purposes of these cross motions for summary judgment, the laws of Alabama and Louisiana were essentially the same. ECF No. 97 at 18. This Court issued a Report and Recommendation, holding that, under the Outer Continental Shelf Lands Act ("OCSLA"), Alabama is the adjacent state and its law applies to fill the gaps in federal law. R&R, ECF No. 159. The Court relies on Alabama law for the contract dispute here but, since the law is essentially the same, also relies on cases decided under Texas and Louisiana law.

the intent of the contracting parties is discerned from the whole of the contract. ... If the court determines that the terms are unambiguous (susceptible of only one reasonable meaning), then the court will presume that the parties intended what they stated and will enforce the contract as written. On the other hand, if the court determines that the terms are ambiguous (susceptible of more than one reasonable meaning), then the court must use established rules of contract construction to resolve the ambiguity. ... Under those established rules of contract construction, where there is a choice between a valid construction and an invalid construction the court has a duty to accept the construction that will uphold, rather than destroy, the contract and that will give effect and meaning to all of its terms.

Once Upon a Time, LLC v. Chappelle Properties, LLC, 209 So. 3d 1094, 1097 (Ala. 2016) (citing Homes of Legend, Inc. v. McCollough, 776 So. 2d 741, 746 (Ala. 2000) ). If there is any ambiguity, a contract is to be construed against the party who drafted it. Daphne Auto., LLC v. E. Shore Neurology Clinic, Inc. , 245 So.3d 599, 605-06 (Ala. 2017).¹⁹

19 Total, as one of the original owners, participated in the drafting of the CEPS OA. Tr. I 21:2-4, 88:7-12, ECF No. 147. MOGUS was not one of the original owners.

Under Alabama law, to prevail on a breach of contract claim, a party must prove: the existence of a valid contract, the party's performance, the other party's failure to perform, and resulting damages. Sloan v. Cunningham, No. 1:16-00202-KD-C, 2017 WL 5894541, at *8 (S.D. Ala. Nov. 29, 2017) (citing Jones v. Alfa Mut. Ins. Co. , 875 So. 2d 1189, 1195 (Ala. 2003) ). It is essentially the same under Louisiana law. E.g. , Favrot v. Favrot , 68 So. 3d 1099, 1108–09 (La. Ct. App. 2011) (elements of breach of contract claim are: (1) the existence of a contractual obligation; (2) breach of that obligation; and (3) damages).

The Parties agree that the OA is a valid contract that controls this dispute. There is no dispute that MOGUS paid for decommissioning. The only dispute is whether Total breached any contractual obligations to pay for decommissioning and, if so, whether MOGUS suffered any damages.

A. Total Is Liable For Decommissioning Under the OA.

At issue in this case are two provisions in the CEPS OA, one governing abandonment operations—or decommissioning—and one governing assignment.²⁰ Total asserts that it is not liable under the OA for decommissioning costs because it was no longer an owner at the time of the abandonment operations and had assigned its interest in CEPS to ATP. MOGUS asserts that the common law and OA provide that assignment does not release a party from liability for the cost of abandonment and Total remains liable for its share.

20 Total argues that the essential terms are similar and the undisputed facts apply in the same way for all three Assets. ECF No. 97 at 25-28.

1. The general common law rule: an assignment does not relieve the assignor of liability.

Total asserts that there are no outstanding contractual obligations because it assigned its rights and obligations under the OA to ATP. Under the common law, the assignment of a contractual obligation does not relieve the assignor (Total) of that obligation unless there is a novation or an express release by the obligee (MOGUS) under the assigned contract (the CEPS OA). Indus. Dev. Bd. v. Russell , 124 So. 3d 127, 135 (Ala. 2013). The Alabama Supreme Court had declared that, "upon assignment of a right, the assignor's interest in that right is extinguished; however upon the delegation of a contractual duty, the delegating party remains liable under the contract , unless the contract provides otherwise or there is a novation." Id. (emphasis added).

Under this general rule, Total's rights in the OA were extinguished upon its assignment to ATP.²¹ However, its obligations were not extinguished and Total remains liable under the OA unless there was a novation between ATP and the other parties to the CEPS OA, an express release from the other parties to the CEPS OA to Total, or the contract provides otherwise.

21 Because Total's rights in the OA were extinguished, it had no right to notice regarding the decommissioning. Therefore, its argument that it is not liable because MOGUS breached the contract by failing to follow the OA's notice and other requirements with respect to decommissioning is wholly without merit. See ECF No. 102 at 22-23.

a. There is no summary judgment proof of a novation or release.

There is no proof in the record that there was a novation, i.e. , MOGUS and ATP entered into a new contract. Total does not argue there was a novation. To the contrary, Total points to evidence between it and ATP, showing that Total assigned its interest in CEPS to ATP and ATP agreed to assume Total's obligations for abandonment. ECF No. 97 at 10; Assignment, Ex. C at 6, ECF No. 97-5. MOGUS was not a party to these agreements. ECF No. 97 at 10; Ex. C at 6, ECF No. 97-5; ECF No. 92 at 29.

Likewise, there is no proof in the record of an express release from MOGUS to Total. Total does not point to any release or argue that it obtained a release. In fact, MOGUS cites Total's corporate representative's deposition where he admits Total never asked for or obtained a release from MOGUS. ECF No. 92 at 29 (citing DeRidder Dep. 33:8-34:12, Ex. C, ECF No. 92-14).

b. Total argues the contract provides otherwise.

Instead, Total argues in essence that the contract provides otherwise. Total argues that Article 11.3 controls government-mandated decommissioning and it allocates costs to the owners at the time of abandonment. Since it was no longer an owner at that time, having assigned its interest to ATP, Total claims it had no obligations to pay for decommissioning costs. ECF No. 97 at 26-27. MOGUS argues that Article 14.1 controls and expressly states that assignment does not relieve Total of its decommissioning obligations.

Absent a release or novation, Total remains liable for its contractual obligations after an assignment, unless the OA provides otherwise. Thus, the Court must construe the terms of that agreement.

2. The Abandonment provision vs. the Assignment provision.

Total relies on Article 11.3 of the CEPS OA, which provides:

Abandonment Operations Required by Governmental Authority. The Operator shall conduct the abandonment of the Common System as required by law and any governmental authority, and the Abandonment Costs, risks and net proceeds will be shared by the Common System Owners based on the Common System Owner's Equity Interest at the time of abandonment.

Ex. K-1, ECF No. 97-25 (emphasis added); Ex. B-1, ECF No. 92-4.

Total asserts that MOGUS cannot establish an essential element of a breach of contract claim that contractual obligations exist under the OA. ECF No. 97 at 19. Total argues that the government ordered MOGUS to decommission the Assets and Article 11.3 controls government-mandated decommissioning of CEPS.²² The crux of Total's argument is that, for decommissioning obligations to exist, it had to be an owner of the property at the time of abandonment . Id. at 21-22. When the government ordered decommissioning on April 17, 2014, Total was not a Common System Owner. Id. at 21. Because it assigned its interests in the Assets to ATP in 2006, Total held no interests in CEPS at the time of abandonment as Article 11.3 requires. Id. ²³ Thus, it asserts that it is not contractually obligated to share in the costs of the government mandated abandonment. Id. at 23. In essence, Total argues that there were no decommissioning obligations under the OA until after it had assigned its interest to ATP. The timing of the decommissioning obligations is significant because of the language in Article 14.1.

22 The three OAs have similar provisions. ECF No. 97 at 31 (quoting the CEPS OA, Art. 11, Ex. K-1, ECF No. 97-25; MC 305 OA, Art. 18, Ex. I-2, ECF No. 97-15; MC 348 OA, Art. 18, Ex. J-2, ECF No. 97-21).
Article 18.4 of the MC 305 OA provides:

Abandonment Operations Required by Governmental Authority. The Operator shall conduct the abandonment and removal of any well ... required by a governmental authority, and the Costs, risks and net proceeds will be shared by the Participating Parties in such well ... according to their Participating Interest Share .

Ex. I-2, ECF No. 97-15 (emphasis added).
Article 18.5 of the MC 348 OA provides:

Abandonment Operations Required by Governmental Authority. Any wellbore abandonment ... required by a governmental authority shall be accomplished by Operator with the Costs ... to be shared by the Parties owning such wellbore ... in proportion to their Participating Interest .

Ex. J-2, ECF No. 97-21 (emphasis added).

23 In the contracts for the other Assets, MC 305 and MC 348, the "OAs contain similar provisions requiring ‘Participating Parties’ or ‘Parties’ to share in the costs of government mandated decommissioning according to their ‘Participating Interest’ in the asset." ECF No. 97 at 21 n.7. Total further argues that it was not a Participating Party at the time of abandonment for the other Assets and therefore under the same analysis, it is not liable for the decommissioning costs associated with those Assets either. ECF No. 97 at 30-33.

MOGUS relies on Article 14.1 of the OA, which provides:

Assignment. ... No Common System Owner assigning all or a part of its Equity Interest in the Common System is released from its obligations and liabilities created under this Agreement attributable to the period prior to the date of execution of the assignment (which obligations include liability for abandonment of the Common System, or that portion of the Common System in existence as of the date of execution of the assignment).

Ex. K-1, ECF No. 97-25 (emphasis added); Ex. B-1, ECF No. 92-4 (emphasis added).²⁴

24 The MC 305 and MC 348 OAs have similar provisions.
Article 24.1.4 of the MC 305 OA provides:

No Party assigning all or part of its Working Interest is released from its obligations and liabilities created under this Agreement prior to the effective date of this Assignment.

Ex. I-3, ECF No. 97-16.
Article 24.1.1 of the MC 348 provides:

Consent granted ... to any assignment shall not relieve assignor (or any assignee) from any rights and obligations under this Agreement which accrued prior to the effective date of the assignment or from the future timely and proper performance of any of assignor's obligations under this Agreement.

Ex. J-3, ECF No. 97-22.

The express terms of Article 14.1 of the CEPS OA provide that a Common System Owner who assigns its interest remains liable for contractual obligations attributable to the period before the assignment, which include abandonment. Ex. B-1 at 56-57, ECF No. 92-4, Ex. K-1 at 17-18, ECF No. 97-25. This language appears to limit the common law rule which provides that the assignor remains liable for its obligations under the contract, apparently without respect to timing. This is significant for Total because the issue here turns on when the obligations for decommissioning arose under the contract. If the obligations did not arise before Total assigned its interest, under the OA it is not liable for decommissioning costs. If the obligations arose before the assignment, then Total is liable for decommissioning costs.

Total contends that the obligations did not occur until the government mandated decommissioning in 2014 and therefore the obligations had not arisen prior to the date it assigned its interest to ATP in 2006. ECF No. 97 at 21. Thus, Total argues that, because the obligations were not created under the OA before the assignment, it is not liable under Article 14.1, which does not in and of itself create any liability. Id. at 25-26.

In contrast, MOGUS asserts that the legal effect of Total's assignment was that Total's "rights under the CEPS OA were extinguished, but its duties owed under the contract were preserved." ECF No. 92 at 27. It argues that Total remains liable as an assignor of its oil and gas interests because the obligations existed before Total assigned its interest to ATP. Id. at 30-32. MOGUS relies on a series of oil and gas cases, including one that involved ATP on another Gulf property, with similar language to the language at issue here. See id. at 6 n.2 (citing Chieftain Int'l (U.S.), Inc. v. Southeast Offshore, Inc. , 553 F.3d 817, 819-20 (5th Cir. 2008) ; LLOG Expl. Offshore, LLC v. Newfield Expl. Co. , No. 15-1746, 2016 WL 98618, at *6-7 (E.D. La. Jan. 8, 2016) ; Nippon Oil Expl. v. Murphy Expl. & Prod. Co. , No. 10-2850, 2011 WL 2456358, at *4 (E.D. La. Jun. 15, 2011) ; GOM Shelf, LLC v. Sun Operating Ltd. P'ship , No. 4:06-CV-3444, 2008 WL 901482, at *9-10 (S.D. Tex. 2008) ; Seagull Energy E & P, Inc. v. Eland Energy, Inc. , 207 S.W. 3d 342, 345-47 (Tex. 2006) ). In every case, the court found the assignor remained liable after assignment for the decommissioning costs absent a release or specific language in the contract to the contrary. See infra at 530–33 (discussing holdings of these cases).

Although Total argues that no decommissioning obligations under the OA arose prior to it assignment, i.e. , the obligations did not arise until the government ordered decommissioning, it does not have any legal authority to support that position. See ECF No. 92 at 6 n.2 (stating that no cases hold to the contrary of MOGUS' position). Instead, Total attempts to distinguish the regulatory obligations to the government from the contractual obligations to the co-owners. It cites to Fifth Circuit precedent for the proposition that the regulations create liability to the government and not to private parties. ECF No. 97 at 28 (citing Fruge ex rel. Fruge v. Parker Drilling Co. , 337 F.3d 558, 563 (5th Cir. 2003) ("The regulations govern the parties' joint and several liabilities vis-à-vis the Government, not amongst themselves.")). The government has stated in the regulations and comments that, regardless of what the parties agree to in their contract, they remain liable to the government. Fruge , 337 F.3d at 563 n.5 & 6. Thus, parties will always be jointly and severally liable to the government for the cost of decommissioning, no matter what their contract provides, but they are free to reallocate the sharing of costs among themselves in their contract. Id. Total argues that Article 11.3 reallocated that sharing, limiting the obligations to owners at the time of decommissioning, which is when the contractual obligations arise.

c. The contractual decommissioning obligations accrued consistent with the obligations under the regulations.

The fallacy of Total's argument is that the government order to decommission the Assets did not create the obligations; it merely triggered them. Courts faced with this issue have found, implicitly or explicitly, that the decommissioning obligations arose when the well was spud or the pipeline was installed, which is consistent with when the obligations arise under the regulations.

In fact, recognizing the Fifth Circuit's holding in Fruge, one district court explained that "the regulations provide definitions regarding when obligations accrue." Nippon Oil , 2011 WL 2456358, at *4. Under the relevant regulations, the decommissioning obligations accrued "when [the party] drills a well; installs a platform, pipeline, or other facility...." Id. (discussing leasing regulations). Furthermore, the party jointly and severally retained decommissioning obligations to the government—with each current and prior owner holding an interest at the time the obligations accrued—regardless of its transfer of its interest or when the decommissioning occurred. Id. Recognizing that the parties could reallocate the obligations under their contract, the court found that, under the terms of the parties' operating agreement, the assignor retained its obligations that accrued prior to the assignment, including its share of decommissioning expenses for the wells and platforms on the lease prior to the assignment . Id. ; accord LLOG , 2016 WL 98618, at *6-7 (court considered that the well was spudded and completed before the assignment in holding prior owner liable for decommissioning costs); GOM Shelf , 2008 WL 901482, at *9-10 (court considered the regulations to define when the decommissioning obligations accrued under the contract); see also Anadarko Petroleum Corp. , 187 IBLA 77, 89-90, 2016 WL 590033, at *9 (Feb. 2, 2016) (relying on regulations—and contract provision that refers to removing structures in accordance with applicable regulations—to find prior owner incurred decommissioning obligations for platforms in existence during time it was lessee).

In fact, as in the Anadarko case, Article 11.3 specifically refers to the decommissioning obligations as are required by law, not the OA: "The Operator shall conduct the abandonment of the Common System as required by law ...." Ex. B-1 at 54, ECF No. 92-4 (emphasis added).²⁵ Likewise, the language in Article 14.4 provides that decommissioning liability includes "that portion of the Common System in existence as of the date of execution of the assignment." Id. at 57 (emphasis added). This provision implicitly recognizes that the liability arises when the pipeline is installed, which is consistent with the regulations. See 30 C.F.R. 250.1702(b). This construction is consistent with the other provisions throughout the OA that recognize the owners' obligations for abandonment.²⁶

25 Absent regulation, few companies would agree or contract to spend the money—usually in the hundreds of thousands of dollars—required to decommission an oil producing property once its useful life is over. See Kelsi Maree Borland, CA Has a Problem With Abandoned Wells, GlobeSt.com (Mar. 19, 2018), www.globest.com/2018/03/19/ca-has-a-problem-with-abandoned-wells/?slreturn=20180525132511 (Los Angeles is facing issues with old wells because, in the early part of the 20th century, there were no regulations on abandonment methods, so well owners and operators did what they wanted). Even with regulation, states are facing a growing problem with abandoned wells. See, e.g. , Jim Malewitz, Abandoned Texas oil wells seen as "ticking time bombs" of contamination, Texas Tribune (Dec. 21, 2016, 12 PM), www.texastribune.org/2016/12/21/texas-abandoned-oil-wells-seen-ticking-time-bombs-/ (Texas, grappling with thousands of abandoned wells, can order companies to plug abandoned wells and levy penalties if they do not, but the responsible party is often long gone); John McFarland, The Problem of Abandoned Wells, Oil and Gas Lawyer Blog (Dec. 19, 2016), www.oilandgaslawyerblog.com/2016/12/problem-abandoned-wells.html (problems arise when wells are sold down the line to parties who cannot afford the cost to abandon the well, often more costly than the value of their property interests).

26 For example, one of the listed purposes of the owners' joint participation in the OA was to abandon the property. See, e.g. , Ex. B-1 at ¶ 15.2, ECF No. 92-4 ("The sole and exclusive purpose of the joint participation of the Common System Owners in this Operating Agreement is to own, operate, maintain, use, and abandon the Common System...."); accord id. at 7 ("[T]he Common System Owners desire to enter into an agreement concerning their joint participation in the ownership, operation, maintenance, use and abandonment of a common pipeline system...."); id. at 8 ("[T]he Common System owners desire that [Total] manage, operate, maintain, and repair the Common System ... and ... modify, replace, improve, enhance, dismantle, dispose and abandon the Common System....").

d. The contract must be specific to relieve a party of its obligations.

Total in effect argues that Article 11.3 limited the abandonment liability to the parties who were owners at the time of abandonment. For the Court to hold that a party is contractually relieved of its obligations, however, the contract language must be express.

This issue has arisen repeatedly in oil and gas contract disputes and the courts have consistently construed contracts with similar language to the OA at issue as not going as far as Total contends. See, e.g., Seagull, 207 S.W.3d at 345-47 (where contract provided that costs for abandonment would be shared according to owners' participating interest, but made no mention of release of the obligations after assignment, the general rule applies that assignor remains liable unless released by other parties to the contract).

Numerous courts have found that assignment, without consent to be relieved of liability, did not relieve the assignor of its liability for later incurred decommissioning costs. Id. ; accord Chieftain Int'l , 553 F.3d at 819-20 (assignment of rights under oil and gas lease did not release obligations to pay portion of decommissioning costs to party who paid 100% of decommissioning costs) (Louisiana law); LLOG , 2016 WL 98618, at *6-7 (contract provided abandonment costs were to be shared according to the parties' participating interest and ownership transfers do not release a party from its obligations under the agreement; held prior owner, who had transferred rights to ATP, was responsible for decommissioning costs and transfer did not relieve it of its obligations under the operating agreement); Nippon Oil , 2011 WL 2456358, at *4 (assignor had continuing obligations to pay share of abandonment expenses that accrued prior to assignment) (Louisiana law); GOM Shelf, 2008 WL 901482, at *9-10 (contract provided assignor was not relieved of liabilities accruing prior to assignment without consent; held assignors had continuing obligations to pay share of abandonment expenses that accrued prior to assignment where there was no express or implied release of assignors' obligations) (Texas law).

In Seagull, the issue before the Texas Supreme Court was whether the sale of an oil and gas working interest, subject to an operating agreement, released the seller from any further obligations to the operator. The Texas Supreme Court concluded that the seller remained liable unless released by the operator or the terms of the operating agreement. 207 S.W.3d at 344. Because neither the operator nor the agreement expressly released the seller, the Texas Supreme Court found it was still liable. The language at issue in Seagull was virtually identical to the language in the MC 305 OA, which Total has admitted is similar to the CEPS OA. ECF No. 97 at 30-33. The key language there defined ownership in the lease the same way ownership is defined in the OAs for the Assets:

2.10 Participating Interest. The respective percentage of participation of each Party electing to participate in each of the operations conducted hereunder, including the production of Oil and Gas, based on ownership in the Lease .

Seagull, 207 S.W.3d at 345. Likewise, the article governing abandonment imposed the sharing of costs based on the owners' Participating Interests:

14.1 Platform Salvage and Removal Costs. When the Parties owning a platform mutually agree to dispose of such platform ... costs ... shall be shared by such Parties in proportion to their Participating Interests.

* * *

14.4 Abandonment Operations Required by Governmental Authority. Any well abandonment or platform removal required by governmental authority ... costs ... to be shared by the Parties

owning such well or platform in proportion to their Participating Interests.

Id. at 346. Like Total, the owner there argued that its obligations to reimburse the operator continued only so long as it owned an interest in the property. Because the owner had assigned its interest, it argued that it was released from any continuing obligations for future costs and expenses. The Supreme Court found that the owner "reads far too much into these provisions . Nowhere do they mention the subject of release or the consequences which are to follow the assignment of a working interest." Id. (emphasis added). After reviewing relevant provisions, the court found that the operating agreement did not explain the consequences of an assignment and applied the general rule that "a party cannot escape its obligations under a contract merely by assigning the contract to a third party." Id. at 346-47. Thus, the Texas Supreme Court found that language in the abandonment provision to the provision, virtually identical to Article 11.3, did not expressly release the assignor of its decommissioning obligations. See id. at 347.

Here, Total's position is even more tenuous because the OA does explain the consequences of an assignment. The OA, in Article 14.1, relieves the assignor of future liabilities, but not of those liabilities existing prior to assignment. Based on the contract language and this precedent, the Court concludes that the language in Article 11.3 providing for cost sharing based on the ownership interests at the time of abandonment does not expressly negate—or release—the obligations that arose for decommissioning at the time the pipeline was installed. Therefore, as required under Article 14.1, the Court holds that Total remains liable for its proportionate share of the costs of decommissioning CEPS, and its assignment to ATP did not relieve it of those obligations.

IV.

TOTAL SEEKS SUMMARY JUDGMENT ON DAMAGES DUE TO PRIOR AND COMPLETE SATISFACTION OF DECOMMISSIONING OBLIGATIONS

With regard to MOGUS' damages, Total filed a separate motion for summary judgment, asserting that, even if Total did have contractual obligations to contribute to decommissioning costs, ATP's settlement in bankruptcy with MOGUS fully satisfied and extinguished Total's obligations. ECF No. 98; Tr. I 155:17-25, ECF No. 147; Hr'g Tr. Day 2 (Apr. 10, 2018) ("Tr. II") 40:10-13, ECF No. 149. Total further argues that, because ATP assumed—rather than rejected—the CEPS OA in bankruptcy, it agreed to continue performance and fully satisfied its decommissioning obligations. ECF No. 98 at 18. Total claims that ATP satisfied its decommissioning obligations, providing consideration valued in excess of $393 million, and MOGUS agreed to conduct the decommissioning operations. Id. at 23; Tr. II 39:8-13, ECF No. 149. This satisfied ATP's own regulatory and contractual obligations in full, and by operation of assignment, any obligations Total may have had. ECF No. 98 at 23-24.²⁷ Total further argues in the alternative, that even if the consideration MOGUS received constituted less than full performance, because MOGUS accepted it in full satisfaction of ATP's contractual obligations, Total's obligations are nevertheless discharged. ECF No. 98 at 25-26. Total contends the Final Order's reservation of rights does not entitle MOGUS to seek compensation from ATP's predecessors. Pl.'s Reply at 24-26, ECF No. 132.

27 Total also contends that ATP assigned the CEPS OA to MOGUS, and MOGUS became directly liable for any decommissioning obligations, which it satisfied and thereby extinguished any obligations Total may have had for the same obligations. Id. at 19 n.7, 27, 29; Tr. I 59:22-23, ECF No. 147. Total makes this argument on the basis that the original version of Exhibit 10 attached to the Joint Motion included the CEPS OA among the "Canyon Express Contracts to be Assumed and Assigned to MOGUS." ECF No. 98 at 27-28; Ex. BB, ECF No. 98-56. However, ATP and MOGUS twice amended Exhibit 10 before the Final Order was entered, and both amended versions reclassified the CEPS OA as among those "Canyon Express Contracts to be Assumed but not Assigned to MOGUS." Ex. 2-C at 93, 101, ECF No. 104-5; Ex. 2-D at 45, 53, ECF No. 104-6. Moreover, Total took the opposite position in bankruptcy, acknowledging this change in its Limited Objection to the Joint Motion, stating: "None of these assumed agreements are being assigned to MOGUS: ... Operating Agreement for the Canyon Express Pipeline System." Ex. 2-A at 6, ECF No. 104-3; Tr. I 54:11-55:4, ECF No. 147; see also Ex. 2-A at 14, ECF No. 104-3 (Total citing to and relying on amended Exhibit 10); see also Ex. 2-E at 5 ¶ 15, ECF No. 104-7 (Total acknowledging amended Exhibit 10 which "added five new oil and gas leases to the list of proposed leases to be assumed by ATP (but not assigned to MOGUS")). The bankruptcy court approved the revised version of the Order and Exhibit 10. There is nothing in the record to suggest that the court intended references in the Order to Exhibit 10 to refer to the original version instead of the amended version. Total's argument that the original version of Exhibit 10 remained the operative version is without merit. The bankruptcy court record, including Total's position before that court, reflects that the CEPS OA was not assigned to MOGUS. Accordingly, Total's argument that the CEPS OA was assigned to MOGUS, and on that basis MOGUS' satisfaction of its own decommissioning obligations extinguished Total's decommissioning obligations, is also without merit.

MOGUS responds that neither ATP nor Total performed their obligations to pay a share of decommissioning costs, and that Total conflates the regulatory obligations to perform the decommissioning operations with the contractual obligations under the OA to pay a proportionate share of the decommissioning costs. ECF No. 104 at 6, 17. MOGUS argues that the Final Order did not extinguish MOGUS' claims against Total and it explicitly reserved MOGUS' rights against Total. Id. at 6. MOGUS contends Total's assignment to ATP, and ATP's assumption of the OA in bankruptcy, are immaterial. Id. at 26-28.

A. ATP Assumed The CEPS OA In Its Bankruptcy Proceeding.

In bankruptcy, under 11 U.S.C. § 365, the debtor "may assume or reject any executory contract or unexpired lease" before the confirmation of a plan.

Assumption is in effect a decision to continue performance . It requires the debtor to cure most defaults and continues the parties' rights to future performance under the contract or lease . Rejection is in effect a decision to breach the contract or lease. ... In the event of rejection, the non-debtor party is generally relegated to pursuing an unsecured prepetition claim against the estate. ... Where assets of the estate are insufficient to pay unsecured creditors in full, the non-debtor party to a rejected executory contract, like other unsecured creditors of the estate, may receive only a fraction of the value of its claim. ... [A]n executory contract [i]s one "on which performance remains due to some extent on both sides[.]"

In re Penn Traffic Co. , 524 F.3d 373, 378-79 (2d Cir. 2008) (citations omitted) (emphasis added).

[T]he main purpose of Section 365 is to allow a debtor to reject executory contracts in order to relieve the estate of burdensome obligations while at the same time providing "a means whereby a debtor can force others to continue to do business with it when the bankruptcy

filing might otherwise make them reluctant to do so." ... "In short, § 365 permits the trustee or debtor-in-possession, subject to the approval of the bankruptcy court, to go through the inventory of executory contracts of the debtor and decide which ones it would be beneficial to adhere to and which ones it would be beneficial to reject."

Id. at 382 (citations omitted). "The Code provisions permitting a debtor to accept or reject an executory contract do not alter the parties' contractual rights. The terms of the contract are unchanged...." Id. at 383.

In this case, ATP assumed the CEPS OA. ECF No. 104 at 25. Accordingly, the contractual rights under the OA remain the same as they were before the bankruptcy.

B. Total Fails To Prove Its Contractual Obligations Were Extinguished As A Matter Of Law.

As the moving party asserting an affirmative defense, Total has the burden to show that ATP fully paid the obligations.²⁸ Total argues that (1) ATP's performance constituted full performance, and (2) that MOGUS accepted the consideration in full satisfaction of the decommissioning obligations. Total has not met its burden.

28 While Total frames its argument under Louisiana law as the affirmative defense of "extinguishment," the equivalent affirmative defense of "payment" applies under Alabama and federal law. Compare La. Code Civ. Proc. Art. 1005 (affirmative defense of extinguishment), with Fed. R. Civ. P. 8(c)(1) (payment is affirmative defense); Ala. R. Civ. P. 8(c) (same); and Lovelace v. Webster , 656 So. 2d 862, 863 (Ala. Civ. App. 1995) ("Payment is an affirmative defense that must be pled and proved."). "Release" and "accord and satisfaction" are also affirmative defenses. Fed. R. Civ. P. 8(c)(1) ; Ala. R. Civ. P. 8(c).

In principle, MOGUS does not dispute that "[p]erformance by the obligor extinguishes the obligation." La. Civ. Code Art. 1854 ; see ECF No. 104 at 17. However, MOGUS disputes that the consideration it received from ATP constituted full performance, and that the settlement discharged any contractual obligations Total may have had because MOGUS expressly reserved its right to seek reimbursement. ECF No. 104 at 17, 20-21.

1. Total has not shown as a matter of law that the settlement between ATP and MOGUS constituted full payment of the decommissioning costs.

a. The value of the ORRI is too speculative to establish that it is worth $381 million.

Total contends the consideration MOGUS received in the bankruptcy settlement should be valued at the time of settlement²⁹ and was worth approximately $393 million, primarily comprised of the ORRI worth approximately $381 million.³⁰ ECF No. 98 at 10, 17, 20, 23, 25. Therefore, Total argues, the consideration MOGUS received exceeded the costs it incurred in decommissioning operations and constituted full performance of the contractual obligations. Id. at 19, 23. MOGUS disputes that the consideration received constituted full performance by ATP,³¹ or on behalf of Total, because the valuation of the ORRI was speculative.³² ECF No. 104 at 15, 17.

29 Total claims the value of consideration MOGUS received in the bankruptcy settlement should be valued at the time the agreement was reached. ECF No. 132 at 13; see In re Texas Research, Inc. , 862 F.2d 1161, 1163 (5th Cir. 1989) ("the value of ... transfers should be measured at the time they occur."); ASARCO LLC v. Ams. Mining Corp. , 396 B.R. 278, 336-37 (S.D. Tex. 2008) ("All jurisdictions agree that courts should measure the value of ... the consideration received at the time of the transfer.").

30 Total exclusively relies on a report MOGUS produced in which its parent company estimated the projected value of the ORRI:

Assuming the reserves attributable to the mining area to be 68 million barrels, which is around 13.5% of the total, oil price at 90 US dollars per barrel, natural gas price at 4 US dollars per million heating units, the ORRI (100%) cumulative pre-tax cash flow before discount is expected to be US $381 million. Half of this US $381 million is collateral for the well-abandonment costs for ATP, and half is the revenue of our company.

Ex. V. at 9, ECF No. 98-50. MOGUS objects to Total's reliance on the report as hearsay. ECF No. 104 at 15 n.37. Total contends it is admissible as a party admission. ECF No. 132 at 14 n.18. The Court need not rule on its admissibility because the report is insufficient evidence as a matter of law.

31 MOGUS has established that, as of October 31, 2017, the only revenue contributed to the Abandonment Fund came from the sale of CE Inventory in the amount of $238,912.13. Kuykendall Dep. 3:16-6:24, Ex. 5, ECF No. 104-10. No funds from Marathon were ever contributed to the Abandonment Fund because Marathon instead agreed to pay $18.8 million directly to MOGUS, constituting its full share of decommissioning costs and exceeding the $12.5 million that were supposed to be deposited into the Abandonment Fund. ECF No. 104 at 12 n.21; Kuykendall Dep. 5:1-25, 6:15-24, Ex. 5, ECF No. 104-10; Kuykendall Dep. 20:4-14, Ex. O, ECF No. 98-39; Kuykendall Dep. 2:6-25, Ex. F, ECF No. 92-29; Tr. II 49:17-50:12, 84:22-87-8, ECF No. 149. In addition, CEPS was never sold and there has been no revenue from the ORRI. ECF No. 104 at 14 n.28.

32 MOGUS claims Total's proportionate share of decommissioning costs for all three of the Assets is over $55 million, including approximately $15.5 million for CEPS alone. Ex. B at 5 ¶ 19, ECF No. 92-3; Ex. B-10 at 3, ECF No. 92-13.

This Court holds as a matter of law that the value of the ORRI is too speculative for a determination that it is in fact worth $381 million.³³ The Fifth Circuit has recognized that purchasing a royalty is a "gamble." Tidelands Royalty B Corp. v. Gulf Oil Corp. , 804 F.2d 1344, 1350 (5th Cir. 1986). "The royalty owner's interest is speculative: a hope that the grantor's own interest in securing production will, in fact, result in production from the tract burdened by the royalty." Id. at 1352. MOGUS' valuation was based on assumptions that if oil or gas were ever produced from the mining area in question, and if the oil and gas prices remained at $90 per barrel and $4 per million heating units, respectively, as assumed in the report, MOGUS would receive $381 million in undiscounted pretax cash flow.³⁴ The valuation of the ORRI is thus based on assumptions, speculation, and "hope." MOGUS might not ever see a penny from the ORRI, and indeed to date, it has not. ECF No. 104 at 13; Kuykendall Dep. 6:1-24, Ex. 5, ECF No. 104-10. "It is also well settled that this [mineral royalty] right is merely one to share in the production of oil, gas, and other minerals if and when they are produced from the property subject to the right. It is passive in its nature, and there is no obligation on the royalty owner to develop the property...." In re ATP Oil & Gas Corp. , Bankr. No. 12-36187, 2014 WL 61408, at *12 n.14 (Bankr. S.D. Tex. Jan. 6, 2014) (quoting Continental Oil Co. v. Landry , 215 La. 518, 41 So. 2d 73, 75 (1949) ) (emphasis added); see also Spiner v. Phillips Petroleum Co. , 94 F. Supp. 273, 277 (W.D. La. 1950) (same).

33 Total also argues that MOGUS was engaged in negotiations with Shell for the sale of CEPS, and that the potential sale of CEPS was one of the benefits MOGUS received in the settlement agreement. Tr. II 40:25-41:6, ECF No. 149. However, the Court concludes that a potential sale is likewise too speculative to value. Total has presented no evidence of what the value of such a sale would be and did not include this in its valuation of the $393 million in consideration MOGUS allegedly received.

34 One of MOGUS' employees, Hiroki Shima, also testified that the valuation of the ORRI was speculative and based on assumptions. Shima Dep. 5:3-20, Ex. 6, ECF No. 104-11.

While case law valuing oil and gas royalties is scant, the Louisiana Third Circuit Court of Appeal has found valuation of prospective royalties to be too speculative to prove a claim for damages. Weaver v. Florida Expl. Co. , 608 So. 2d 1034, 1040 (La. Ct. App. 1992), writ denied , 612 So. 2d 99 (La. 1993). In Weaver , the plaintiff sought reacquisition of oil, gas, and mineral leases it had assigned to Florida Exploration Company, which failed to develop the land as required under the leases. Id. at 1036-37. After succeeding on the merits, the plaintiff sought damages for an overriding royalty that had not materialized due to the defendant's failure to develop the land. Id. at 1040. The Louisiana Third Circuit Court of Appeal affirmed the district court's finding that the "overriding royalties have not been proven. There has been no offer to buy or sell, only the Petitioner's own estimate of what the royalty interest is worth. The value of such interest is thus speculative and uncertain." Id. Likewise here, Total's reliance on MOGUS' "estimate of what the royalty interest is worth" is speculative and uncertain, and therefore is insufficient to prove the ORRI was actually worth $381 million. Id. ³⁵

35 The other cases Total cited yield the same result. In In re Texas Research , the Fifth Circuit determined the value of consideration exchanged in a bankruptcy settlement to determine the validity of a post-petition transfer pursuant to 11 U.S.C. § 549(b), finding the creditor "exchanged old security of speculative value for new security of speculative value...." 862 F.2d at 1163-64. This case does not support Total's argument that the value of the ORRI at the time of the settlement was $381 million, rather than a speculative, indeterminable amount. In addition, ASARCO LLC is distinguishable because it involved valuation of cash, promissory notes, debt cancellation, and stock prices, which all are far less speculative than the ORRI in this case. 396 B.R. at 339-64.

In the damages context, "[o]ne of the fundamental rules of damages is that to be compensable they must be direct and reasonably certain, not remote and speculative." Deng v. Scroggins , 169 So. 3d 1015, 1026 (Ala. 2014) (quoting Alabama Power Co. v. Alabama Public Serv. Comm'n , 267 Ala. 474, 478, 103 So.2d 14 (1958) ). As applied here, whether the ORRI will ever yield income is not "reasonably certain," and the possibility that it will yield income in the future is too "remote" to establish that the actual value of the ORRI is $381 million.³⁶ Therefore, Total has failed to meet its burden to show the actual value of the ORRI at the time of the settlement was $381 million.

36 In support of its argument, Total contends that MOGUS did not expect the ORRI to yield any income until 2020. Tr. II 32:9-17, 42:11-15, 62:18-63:2, ECF No. 149. However, the remoteness of the possibility of future income only provides further evidence that the ORRI is speculative.

b. The authorities Total relies on do not support its argument that its contractual obligations were extinguished.

In the cases Total cites to support its argument that ATP's performance extinguished its contractual obligations, there was full performance. See Rip Tide Inv'rs, Inc. v. W & T Offshore, Inc. , No. 15-1656, 2017 WL 5472545, at *7 (W.D. La. Nov. 13, 2017) (full performance by sublessee extinguished obligations of sublessor); La. Farm Bureau Mut. Ins. Co. v. Thompson , 719 So. 2d 427, 428 (La. 1998) (lessee's full performance under lease extinguished his own obligations as to both his lessor and lessor's insurer, but did not extinguish lessor's obligations to insurer), reh'g denied , Nov. 20, 1998; Turner v. Wexler , 14 Wash. App. 143, 144, 538 P.2d 877 (1975) (full performance by one co-obligor extinguished joint and several obligations on behalf of all co-obligors). Each of these cases is distinguishable on the basis that here, Total failed to prove that ATP fully performed. La. Farm Bureau is further distinguishable because the tenant's full performance only extinguished his own obligations—it did not extinguish any joint and several obligations shared with another, or the obligations of his lessor to the insurer.

Total cites to two Restatement provisions that also do not support a ruling in Total's favor. Section 293 of the Restatement provides:

Full or partial performance or other satisfaction of the contractual duty of a promisor discharges the duty to the obligee of each other promisor of the same performance to the extent of the amount or value applied to the discharge of the duty of the promisor who renders it.

Restatement (Second) of Contracts § 293 (emphasis added); see also id . at § 295(3) ("Any consideration received by the obligee for a contract not to sue one promisor discharges the duty of each other promisor of the same performance to the extent of the amount or value received. ") (emphasis added). The Restatement establishes only that Total's contractual obligations would be extinguished if ATP fully performed. Since the Court holds as a matter of law that the consideration received was too speculative to value, Total has not established that ATP fully performed. The Restatement supports reducing, but not extinguishing, the amount Total owes.

Total also cites to an excerpt of Section 318 of the Restatement:

A contracts to build a building for B in accordance with specifications, and delegates the plumbing work to C. Performance by C has the effect of performance by A.

See ECF No. 98 at 24 n.13 (citing Restatement (Second) of Contracts § 318 ). Again, Total has failed to prove that ATP fully performed. Therefore, the Court concludes that Total has failed to establish that ATP's performance extinguished Total's contractual obligations.

2. Total has not shown as a matter of law that MOGUS accepted consideration from ATP in full satisfaction of ATP's or Total's decommissioning obligations.

a. The Final Order preserved MOGUS' rights against Total.

Total argues in the alternative that, even if the consideration MOGUS received was not full performance, MOGUS accepted the consideration in full satisfaction of ATP's obligations and this extinguished any contractual obligations Total had. ECF No. 98 at 25-26; Tr. II 39:18-24, ECF No. 149. Total relies heavily on language in the Final Order that ATP "satisfied" or was able to fully comply with its decommissioning obligations,³⁷ including both its regulatory obligations and any contractual obligations to contribute to decommissioning costs.³⁸ Tr. I 93:23-94:3, ECF No. 147; Tr. II 37:8-11, 38:7-14, 38:25-39:7, 39:14-17, 44:9-19, 45:22-25, 53:19-54:1, 64:25-65:3, 66:16-25, 73:5-11, 139:8-24, ECF No. 149. However, MOGUS argues that it released ATP from liability, but did not accept the consideration in "full satisfaction" of ATP's obligations, and it also expressly reserved its rights against Total and other predecessors. ECF No. 104 at 6.

37 Total's only authority for its argument that the presence of the word "satisfied" in the Final Order means MOGUS accepted any consideration in full satisfaction of ATP's obligations is Black's Law Dictionary. Tr. II 38:25-39:7, 139:25-140:22, ECF No. 149.

38 Total argues that the Final Order, Abandonment Agreement, and Contribution Agreement satisfied both ATP's regulatory obligations and contractual obligations to contribute to decommissioning costs according to the definitions of decommissioning obligations and ATP's obligations. Id. at 46:20-48:24, 53:10-14; see Abandonment Fund Agreement, Ex. 1 to Ex. M at 35-36, ECF No. 98-35.

Consent orders, like the agreed Final Order, are to be construed as contracts. Frew v. Janek , 780 F.3d 320, 327 (5th Cir. 2015) ; State ex rel. O'Dell v. Coker , 59 So. 3d 670, 672 (Ala. 2010) ; see also Tr. II 117:5-8, ECF No. 149. "The legal effect of judgments or orders should be determined in the light of the literal meaning of the language used. Where that language is not ambiguous, it must be given its usual and ordinary meaning." Id . Additionally, courts should interpret a contract "to give effect and meaning to all of its terms." Once Upon a Time, LLC , 209 So. 3d at 1097 (internal citations omitted).

Here, the Final Order expressly states that the consideration ATP paid constituted partial performance:

MOGUS and ATP acknowledge and agree that all sums that are (i) expended by the Fund (as defined in the Agreements), (ii) paid as reimbursement by the Fund to MOGUS under the Agreements, and/or (iii) received by MOGUS on the account of the Camden Hills DOR ORRI (as defined in the Agreements), shall be deemed and considered for all purposes to be expenditures made by ATP and/or on behalf of ATP, and shall constitute payment of a portion of ATP's share of Decommissioning .

Ex. M at 32 ¶ 64, ECF No. 98-35 (emphasis added).³⁹

39 See also, e.g. , Joint Motion, Ex. I at 20 ¶ 35, ECF No. 98-24 ("[D]isposition of the Debtor's interest in the CE Inventory to MOGUS is acceptable partial consideration for such compromise.") (emphasis added).

In addition, the Final Order,⁴⁰ Abandonment Fund Agreement,⁴¹ and Contribution Agreement⁴² each contain express reservation language. "[I]f the release shows on its face a reservation of the right of action against another, it is apparent that it is not really a release of it and will be given effect as a covenant not to sue." Sw. Gas & Elec. Co. v. Williams , 76 F.2d 49, 54 (5th Cir. 1935), cert. denied , 295 U.S. 749, 55 S.Ct. 827, 79 L.Ed. 1693 (1935) ; accord Restatement (Second) of Contracts § 295(2) ;⁴³ 12 Williston on Contracts § 36:25.⁴⁴

40 "[The Final Order] ... is not meant to and does not in any way operate to deter, detract, diminish, waive, relinquish, cancel, extinguish, or affect any and all rights and claims of MOGUS to seek and/or assert rights of and claims for subrogation, contribution, reimbursement, demand, compensation and/or payment against any person and/or entity other than directly against the ATP Released Parties for any and all sums incurred by MOGUS in connection with any decommissioning obligations arising in, related to or in connection with the Canyon Express Assets." Ex. M at 29 ¶ 57, ECF No. 98-35.
"Moreover, nothing contained in this [Final Order] shall: (a) alter, define, diminish, waive, relinquish, amend, bind, restrict, impair, enjoin or adjudicate the rights, including but not limited to the rights to seek reimbursement, contribution and/or subrogation, claims, actions, defenses, remedies, or interest of MOGUS, BP and/or Total under the Kings Peak Leases and the MC 305 and MC 348 leases, the Operating Agreements, or any related contracts, whether at law or in equity including, but not limited to, responsibility for claims regarding ATP's share of lease obligations including Decommissioning expenses, .... All such rights as between MOGUS, BP and Total are expressly reserved, preserved and/or maintained without prejudice." Id. at 31 ¶ 63.
"MOGUS and ATP acknowledge and agree that this MOGUS order and the Agreements are without prejudice as to any of the respective rights, claims, actions, defenses, remedies, and responsibilities of and will not impair BP's or Total's including to the extent they may be Third Party Obligors, ability to complete or perform any Decommissioning ordered by BSEE [the Bureau of Safety and Environmental Enforcement], with all such rights, actions, claims, defenses, remedies, and interests being fully reserved." Id. at 32 ¶ 65.

41 "Nothing contained in this Agreement shall be deemed or construed to be an admission or release as to the respective liability or obligations of any of the Third Party Obligors or any other Person as to the Decommissioning Obligations, and this Agreement shall be without prejudice to the respective rights of the Parties as to such Third Party Obligors or other Persons. In particular, Marubeni reserves any and all rights, claims or defenses that Marubeni may have as against any Third Party Obligor or other Person, except Bennu, as to the Decommissioning Obligations as such may be due to BOEM [the Bureau of Ocean Energy Management], BSEE, or otherwise, including but not limited to those claims or defenses to which Marubeni may be subrogated by, through or under ATP." Ex. 1 to Ex. M at 40 ¶ 24, ECF No. 98-35; Ex. 1 (cont.) to Ex. M-1 at 2 ¶ 24, ECF No. 98-36.

42 "Nothing contained in this Agreement shall be deemed or construed to be an admission or release as to the respective liability or obligations of any of the Third Party Obligors or any other Person as to the Decommissioning Obligations, and this Agreement shall be without prejudice to the respective rights of the Parties as to such Third Party Obligors or other Persons, subject only to the provisions of Paragraph (20) of the Abandonment Fund Agreement. In particular, Marubeni reserves any and all rights, claims or defenses that Marubeni may have as against any Third Party Obligor or other Person, except Bennu, as to the Decommissioning Obligations as such may be due to BOEM, BSEE, or otherwise, including but not limited to those claims or defense to which Marubeni may be subrogated, by, through or under ATP." Ex. 2 to Ex. M-1 at 37 ¶ 20, ECF No. 98-36.

43 "Words which purport to release or discharge a promisor and also to reserve rights against other promisors of the same performance have the effect of a contract not to sue rather than a release or discharge."

44 "[A] release by the creditor that contains an express reservation of rights against other joint debtors does not release the other debtors. ... [A] release with a reservation of rights is in legal effect not a release at all, but rather a covenant or contract not to sue. Thus, in the case of joint and several liabilities, if the creditor, while discharging the several liability, expressly reserves the joint right, then the joint liability is not discharged." (emphasis added).

It is well established, including in Alabama, that a settlement with one party does not settle a dispute as to all parties where there has been a reservation of rights. See Johnson By and Through McGraw v. Collier , 567 So. 2d 1311, 1312 (Ala. 1990) (a settlement agreement that expressly reserves one party's rights against a third party does not preclude that settling party from pursuing an action against the third party); Coleman v. Coleman , 566 So. 2d 482, 485 (Ala. 1990) ("[I]f a [person] does not intend a release of all known claims, he or she could expressly reserve a ... claim from the settlement...."); Daugherty v. M-Earth of Alabama , Inc., 519 So. 2d 467, 469 (Ala. 1987) (a settlement agreement that expressly reserves one party's rights against a third party does not preclude that settling party from pursuing an action against the third party); Am. Pioneer Life Ins. Co. v. Sandlin , 470 So. 2d 657, 661-62 (Ala. 1985) ("[I]t is the right of the injured party to accept satisfaction in part from one tortfeasor, release him, and proceed against the other. Such release operates in favor of such other only as satisfaction pro tanto."⁴⁵ ); Hathcock Roofing & Remodeling Co., Inc. v. Compass Bank , 50 So. 3d 1097, 1100-01 (Ala. Civ. App. 2010) (a settlement agreement that includes express reservation of rights language preserves a claim against a third party and "does not extinguish that claim").

45 Pro tanto means only to that extent, and typically refers to a partial payment. Legal Information Institute, https://www.law.cornell.edu/wex/pro_tanto (last visited June 28, 2018).

Thus, contrary to Total's argument that MOGUS accepted ATP's performance as full satisfaction, the lengthy reservation of rights language demonstrates the consideration MOGUS received was not in full satisfaction of ATP's obligations. To conclude that MOGUS accepted the consideration in full satisfaction of ATP's decommissioning obligations would render numerous provisions of the Final Order meaningless, contrary to general contract construction principles. The Final Order must be read as a whole, and the provisions must be read together. Stericycle, Inc. v. Patterson , 161 So. 3d 1170, 1182-83 (Ala. Civ. App. 2013) ("Separate provisions of judgments, like provisions of contracts, should be construed in pari materia,⁴⁶ and the entire judgment—all provisions considered—should be read as a whole....") (citation omitted), cert. denied , 161 So. 3d 1186 (2014) ; accord Hanover Ins. Co. v. Kiva Lodge Condominium Owners' Assoc., Inc. , 221 So. 3d 446, 452 (Ala. 2016) ("[A]ll the provisions of a contract must be construed together so as to give harmonious operation to each of them....") (citation omitted). Language suggesting that ATP satisfied or fully complied with its decommissioning obligations cannot be read in isolation apart from the Final Order's language regarding the reservation of rights or that the payment was for a portion of ATP's share of decommissioning.

46 Pari materia means that these materials must be construed with reference to each other. The Law Dictionary, https://thelawdictionary.org/pari-materia/ (last visited June 28, 2018).

In its reply, Total contends the reservation provisions only preserved MOGUS' "rights to seek reimbursement;" they did not substantively preserve any rights MOGUS may have because the bankruptcy court had no jurisdiction to adjudicate such issues. ECF No. 132 at 24. The Final Order provided that it did not substantively determine any such rights;⁴⁷ however, the reservation of rights language was included to preserve any substantive rights that were created elsewhere, for example, under the OA. Feb. 27, 2014 Hr'g Tr. 20:22-21:4, 23:3-18, 24:3-26:12, 29:3-7, 30:23-31:25, 40:17-22, Ex. L, ECF No. 98-33; Feb. 27, 2014 Tr. (cont.) 2:6-8, 3:6-7, Ex. L-1, ECF No. 98-34. Indeed, the Final Order also preserved any defenses Total may have.⁴⁸ Feb. 27, 2014 Tr. 23:3-18, 24:3-26:12, Ex. L, ECF No. 98-33. Total failed to cite any case where a settlement in a bankruptcy context (or any other context) with one party has the effect of relieving other parties of their liability, particularly where there has been an express reservation of rights. Absent such authority, Total has not shown as a matter of law that the settlement excused it from its contractual obligations. In accordance with applicable law, the reservation of rights language rendered the agreement a covenant not to sue, rather than a full release, and expressly did not extinguish MOGUS' right to reimbursement from Total. Thus, the Court concludes that Total failed to establish that ATP's settlement in bankruptcy with MOGUS extinguished Total's contractual obligations.

47 "[N]othing contained in this [Final Order] shall constitute a finding of fact, conclusion of law, or otherwise constitute an adjudication, injunction, release, comment upon, ruling or opinion by this Court: (a) with respect to the rights and claims (including filed Proof of Claims or Administrative Claims) of BP and Total including to the extent BP or Total may be Third Party Obligors (as that term is defined under the Agreements) or the rights of MOGUS vis-à-vis any Third Party Obligors including to the extent BP or Total.... Furthermore, this [Final Order] ... shall not be binding on or otherwise probative of any contract claims, proofs of claim or rights of BP or Total including to the extent BP or Total may be Third Party Obligors or MOGUS vis-à-vis any Third Party Obligors including to the extent BP and Total." Ex. M at 30-31 ¶ 62, ECF No. 98-35; see also Tr. II 56:6-13, 56:21-57:2, ECF No. 149.

48 Even Total's retained bankruptcy expert, Judge Gerald Schiff, agreed in his deposition that the impact of the Final Order was that "Marubeni's rights against Total and Total's defenses or any Total rights against Marubeni, whatever those may be, were preserved and passed through bankruptcy." Schiff Dep. 65:25-66:8, Ex. 3, ECF No. 104-8. MOGUS objected to Judge Schiff's expert report (Ex. T, T-1, T-2, T-3, ECF Nos. 98-44, 98-45, 98-46, 98-47) on the basis that it is unsworn and inadmissible summary judgment evidence. ECF No. 104 at 11 n.17. However, the Court need not rule on its admissibility because the Court did not rely on this report.

b. ATP, MOGUS, and Total intended the Final Order to preserve their contractual rights and Total agreed to the final order.

To the extent there is any ambiguity as to whether MOGUS reserved its rights against Total in the Final Order—which there is not—the Court may consider the circumstances of the agreement to the Final Order and extrinsic evidence. Under Alabama law, "[t]he true rule of interpretation of contracts is to make them speak the intention of the parties as at the time they were made ." Once Upon a Time, LLC , 209 So. 3d at 1099 (citation omitted) (emphasis in original). If contract terms are ambiguous, the court may consider "parol evidence to determine the intention of the parties." Seymour v. Seymour , 241 So. 3d 733, 744 (Ala. Civ. App. 2017). "When the examination ‘must go beyond the four corners of the agreement in construing an ambiguous agreement, the surrounding circumstances, including the practical construction put on the language of the agreement by the parties to the agreement, are controlling in resolving the ambiguity.’ " ADTRAV Corp. v. Duluth Travel, Inc. , No. 2:14-CV-56, 2016 WL 4614842, at *18 (N.D. Ala. Sept. 6, 2016) (quoting Voyager Life Ins. Co., Inc. v. Whitson , 703 So.2d 944, 949 (Ala. 1997)) (applying Alabama law).

In addition, "releases ... and all judgments entered pursuant to pro tanto settlements, must have effect according to their terms and the intentions of the parties thereto." Ala. Code § 12-21-109. The Supreme Court of Alabama has affirmed that express reservations of rights are to be given effect.⁴⁹

49 See also, e.g., Soileau v. Smith True Value and Rental , 144 So. 3d 771, 786 (La. 2013) ("[T]he present law provides that when partial payment is received, solidary liability is preserved unless it is expressly renounced. Louisiana law no longer requires a reservation of rights be included in a release to protect a settling plaintiff's right to pursue his or her claims against non-settling solidary obligors."), reh'g denied , 144 So. 3d 771 (La. 2013).

Such reservation is not essential, nor need the release take the form of a covenant not to sue. The true inquiry is, did the parties intend to limit the release to the parties named, with no intent that the cause of action be satisfied in full?

Am. Pioneer Life Ins. Co. , 470 So. 2d at 661 (quoting Steenhuis v. Holland , 217 Ala. 105, 107, 115 So. 2, 3 (1927) ); see also Irvin v. Griffin Corp. , 808 F.2d 802, 804-05 (11th Cir. 1987) (applying Alabama law) ("[A] release, which has as its intent the discharge from liability of only named parties to the release, need not discharge all potential parties then or later known."), reh'g denied , 814 F.2d 662 (11th Cir. 1987).

The reservation of rights language in the Final Order was unambiguous and the Court need not go beyond the four corners of the Final Order to conclude it preserved MOGUS' rights against Total. However, even if the reservation of rights language in the Final Order was ambiguous, evidence of the circumstances of negotiation of the Final Order provides further support that the parties intended to preserve their pre-existing contractual obligations and compels the same outcome.⁵⁰ Total itself was actively involved in ATP's bankruptcy proceeding and agreed to the Final Order including the reservation of rights language, of which paragraphs 63 and 65⁵¹ were added at its insistence.

50 For example, email communications between counsel for MOGUS and ATP regarding their negotiations of the settlement reflect that MOGUS specifically intended to preserve its right to seek contribution from ATP's predecessors for decommissioning costs. Ex. HH to Pl.'s Reply, ECF No. 132-5; Tr. II 155:19-156:6, ECF No. 149. In addition, the Abandonment Fund recognizes: "parties other than ATP and Marubeni may also have their respective proportionate share of the Decommissioning obligations, whether as a co-owner of interests in the some or all of the Properties or as a predecessor in interest." Ex. 1 to Ex. M at 35, ECF No. 98-35.

51 See supra , n.40.

• On August 29, 2012 , only 12 days after ATP filed for bankruptcy, Total made its first appearance on the record. See Notice of Appearance filed on behalf of Total E&P USA, Inc., No. 12-36187 (Bankr. S.D. Tex. Aug. 29, 2012), ECF No. 235.

• On January 31, 2014 , ATP and MOGUS filed a Joint Motion during the bankruptcy proceedings, seeking court approval of their settlement agreement, whereby ATP transferred certain rights and obligations to MOGUS, including the ROW for CEPS, and in exchange MOGUS agreed to perform decommissioning operations and withdraw its decommissioning claims against the debtor's estate.⁵² Ex. I, I-1, I-2, I-3, I-4, I-5, I-6, ECF Nos. 98-24, 98-25, 98-26, 98-27, 98-28, 98-29, 98-30. The Joint Motion included reservation of rights language.

• On February 13, 2014 , ATP and MOGUS filed a Proposed Order. Ex. 2-D, ECF No. 104-6.

• On February 21, 2014 , Total and BP jointly filed a limited objection to ATP and MOGUS' Joint Motion. Ex. 2-A, ECF No. 104-3. Among other objections, Total expressed particular concern that the settlement would "impact and impair the rights of third parties including Total and BP." Id. at 2 ¶ 2, 10 ¶ 18, 11 ¶ 19, 16-17 ¶ 38. Total specifically objected that "this Court cannot enter an order with the effect of impairing or extinguishing the contractual rights of third parties who are not parties to the settlement" or which would alter "contractual obligations under the operating agreements or other contractual arrangements between the parties." Id. at 17-18 ¶ 38, 18-19 ¶ 42 (emphasis added).⁵³

• On February 25, 2014 , Total and BP filed an emergency motion to continue the hearing on ATP and MOGUS'

52 Ex. I at 5-6 ¶ 6, 13 ¶ 16(p), ECF No. 98-24.

53 Total did not object to the "[c]reation and funding of the decommissioning escrow, to be used to pay what would otherwise be ATP's proportionate share of decommissioning expense...." Ex. 2-A at 2 ¶ 1, ECF No. 104-3.

Joint Motion, reiterating their objections. Ex. 2-E, ECF No. 104-7. Total and BP represented to the court that they had "commenced a dialogue with counsel for MOGUS and ATP in an effort to resolve the disagreements under the proposed order. Total and BP [were] attempting to work on language and amended provisions for the order in a way that may satisfy both sides." Id. at 3 ¶ 8.

• On February 26, 2014 , ATP and MOGUS filed a Revised Proposed Order to their Joint Motion. Ex. 2-C, ECF No. 104-5. The revisions constituted much of the reservation of rights language (including paragraphs 63 and 65 in the Final Order⁵⁴ ) and were added specifically to address Total's Limited Objection to avoid "impairing or extinguishing" any pre-existing contractual obligations. Ex. 2-A at 17 ¶ 38, ECF No. 104-3.

• On February 27, 2014 , ATP and MOGUS filed a further Revised Proposed Order, which became the Final Order the bankruptcy court entered later the same day. Compare Notice of Filing of Revised Final Order to Rule 9019 Motion, No. 12-36187 (Bankr. S.D. Tex. Feb. 27, 2014), ECF No. 2985, with Ex. M, M-1, M-2, ECF Nos. 98-35, 98-36, 98-37. Also on February 27, 2014, the court held a hearing on the Joint Motion. Ex. L, L-1, ECF Nos. 98-33, 98-34. The Revised Proposed Order was an agreed order.⁵⁵ Feb. 27, 2014 Tr. 14:9-14, 15:7-10, 31:2-7, Ex. L, ECF No. 98-33. Counsel for ATP, MOGUS, and Total informed the court at the hearing that the Final Order was not to extinguish or affect any rights as between MOGUS, Total, and other parties (other than between MOGUS, ATP, and Bennu), and that the bankruptcy court was not substantively deciding any such rights. Id. at 21:25-23:18, 26:3-12, 29:3-7, 31:17-25; Feb. 27, 2014 Tr. (cont.) 2:11-41:8, Ex. L-1, ECF No. 98-34.

54 See supra , n.40.

55 Counsel for Total: "We did work out an agreed order[.]"

At the time the Final Order was entered, the government had not yet ordered decommissioning for CEPS.⁵⁶ Consequently, at the time of the settlement, MOGUS, Black Elk, or ATP's predecessors-in-interest, including Total, could have been ordered to undertake the decommissioning operations.⁵⁷ Total agreed to and benefited from the reservation of rights in case the government ordered it to perform decommissioning.⁵⁸ Contrary to its current position, in the bankruptcy court, Total acknowledged that ATP lacked the resources to pay for its share of decommissioning costs. Total also recognized that someone else would have to bear that cost and may be required to seek reimbursement from third parties.⁵⁹ Ex. 2-A at 2 ¶ 1, ECF No. 104-3. Total even filed its own proofs of claim, containing estimated amounts for decommissioning—including pursuant to the CEPS OA—in the event the government ordered it to perform decommissioning operations.⁶⁰ Id . at 15 ¶ 30; Ex. E-4, ECF No. 92-20; Tr. II 11:17-12:20, ECF No. 149. It is only now that MOGUS decommissioned the Assets, including CEPS, that Total claims it has no liability. There is no basis to support Total's current position that the bankruptcy order does not preserve the parties' rights against each other, or specifically MOGUS' rights against Total. Thus, the Court concludes that Total has failed to prove as a matter of law that its contractual obligations have been extinguished.

56 Two months later, on April 17, 2014, the BSEE sent the first demand letter regarding any of the Assets to MOGUS and Black Elk, ordering them to decommission MC 305. Ex. N, ECF No. 98-38.

57 In fact, the BSEE had already sent a letter to BP on August 3, 2013, ordering it to decommission MC 217, as the predecessor of ATP for that block. Ex. FF, ECF No. 132-3.

58 If the government had ordered Total to conduct decommissioning, Total too would have sought reimbursement from MOGUS or other parties for their proportionate share of these costs. In fact, years before it assigned its interest in the Assets to ATP, Total sued a predecessor-in-interest in another case, Total E&P USA, Inc. v. Three R. Limited Partnership , asserting the predecessor assignor was not relieved of liability through its assignment of its interest to a third party, and asserting a right to contribution under the theory of subrogation. See ECF No. 102 at 15-16; Ex. E-11, ECF No. 92-27.

59 See Total and BP's Limited Objection to Joint Motion, Ex. 2-A at 13-14 ¶ 26, ECF No. 104-3 ("It is undisputed that the bankruptcy estate has no resources available to assume and pay these [decommissioning costs], to cure defaults or provide for adequate assurance."); id. at 17 ¶¶ 36-37 ("As all parties to this bankruptcy process are now aware, ATP will not perform its substantial obligations to conduct decommissioning of leases, wells, and facilities.... At a later time and in a later proceeding to be held in another court, there may be a dispute and litigation as to the respective liability of different parties as to paying ATP's share of its decommissioning obligations."); see also Total and BP's Emergency Motion for Continuance of February 27, 2014 Hearing on Joint Motion, Ex. 2-E at 3 ¶ 7, ECF No. 104-7 (expressing concern about "the basic problem that ATP cannot establish adequate assurance of cure and future performance for its default for hundreds of millions of dollars in decommissioning expense.").

60 Total admits it had filed proofs of claim because it did not know at the time ATP filed bankruptcy whether the government would order Total to perform decommissioning. Tr. I 145:14-146:22, ECF No. 147; Tr. II 22:9-23:6, ECF No. 149.

V.

BOTH PARTIES SEEK SUMMARY JUDGMENT ON MOGUS' SUBROGATION CLAIM

Both parties moved for summary judgment on MOGUS' claim for subrogation. Total argues, under the theory of subrogation, that ATP satisfied its own regulatory obligations for MC 305 and MC 348, and MOGUS voluntarily satisfied its regulatory obligations for CEPS.⁶¹ ECF No. 98 at 29. Total argues after it assigned its rights in the Assets to ATP, ATP accrued regulatory decommissioning obligations to the government; and when ATP assigned the CEPS ROW to MOGUS in bankruptcy, MOGUS accrued its own regulatory decommissioning obligations. Id. at 29-31. Accordingly, Total asserts that MOGUS has no subrogation rights against Total because MOGUS was not performing the "obligation of another;" it performed its own obligations. Id. at 33.

61 Total further argues that the government could have required Total to decommission the Assets if ATP had failed to do so, but did not because ATP satisfied its obligation. ECF No. 98 at 35. Total has no evidentiary support for this argument. Tr. I 95:3-99:22, ECF No. 147.

MOGUS argues that MOGUS, ATP, and TOTAL were all jointly and severally liable to the government for decommissioning, and MOGUS was the sole party to perform those operations. ECF No. 92 at 34; ECF No. 104 at 28, 31. MOGUS further asserts that its satisfaction of this common liability entitles it to recover contribution from Total. ECF No. 92 at 35; ECF No. 104 at 28. In addition, it argues that the bankruptcy did not affect MOGUS' claims against Total and these were expressly reserved in the Final Order. ECF No. 104 at 6. MOGUS alleges that, under a theory of contribution, Total must reimburse MOGUS for its 25.834% share of decommissioning expenses for CEPS. ECF No. 92 at 36.

Under Alabama law, "[t]he right of contribution arises, as against noncontributing co-obligors, when one or more of the co-obligors satisfies and procures a discharge of the common obligation."⁶² Ex Parte Diamond , 596 So. 2d 423, 425 (Ala. 1992). Total does not dispute that MOGUS satisfied the decommissioning obligations. It disputes whether MOGUS was satisfying its own obligations or common obligations. As previously stated, MOGUS and Total were jointly and severally liable to the government for decommissioning CEPS. See supra, § III. Thus, they were co-obligors. It is undisputed that MOGUS conducted and paid for the decommissioning operations. ECF No. 92 at 6; ECF No. 120-2 at 7 ¶ 12; Tr. I 45:4-6, ECF No. 147; Tr. II 38:22-23, ECF No. 149. MOGUS' right to contribution arises because it alone satisfied and procured a discharge of the common obligations.

62 While the parties primarily cite Louisiana law, MOGUS contends the same principles apply in both Louisiana and Alabama. ECF No. 104 at 28. The Louisiana law the parties cited dictates the same result.

A. MOGUS Satisfied ATP's And Total's Obligations.

Total contends that MOGUS is not entitled to subrogation because it fulfilled its own decommissioning obligations rather than "stand[ing] in the[ ] shoes" of another, Perkins v. Scaffolding Rental & Erection Serv., Inc. , 568 So. 2d 549, 551 (La. 1990), and "perform[ing] the obligation of another," La. Civ. Code Art. 1826. Total's argument that MOGUS was conducting its own decommissioning obligations because it assumed the CEPS ROW from ATP ignores the fact that ATP did not assign its contract rights in CEPS to MOGUS. ATP retained its 25.834% interest in CEPS. ECF No. 92 at 17; ECF No. 104 at 26; Ex. 3 to Ex. M-2 at 19, ECF No. 98-37. Therefore, because ATP retained its ownership interest in CEPS, MOGUS performed ATP's decommissioning obligations.

All parties who accrue decommissioning obligations to the government remain liable to the government. See supra, § III.A.2. While MOGUS may have extinguished all of their regulatory obligations to the government to conduct decommissioning operations, Tr. II 54:10-19, 55:21-23, ECF No. 149, there still remained separate contractual obligations to contribute to the decommissioning costs. Under the case law and OA, Total's assignment to ATP did not relieve it of the contractual decommissioning obligations because they accrued before the assignment, when the pipeline was installed. Because the consideration MOGUS received from ATP did not constitute full performance, or otherwise extinguish those contractual obligations, MOGUS' motion for summary judgment on subrogation from Total should be granted.

B. MOGUS Has A Contractual Basis For Contribution.

The OA provides MOGUS with an independent basis for contribution.⁶³ The case Total cited, Ex Parte Diamond , does not support its position that MOGUS is not entitled to contribution. To the contrary, it establishes that MOGUS has a contractual basis for contribution. In Ex Parte Diamond , a venue case, the court explained that the case involved a breach of contract claim where the contract required three partners to share costs equally. 596 So. 2d at 423, 425. Likewise here, the OA created obligations for all co-owners of CEPS to share in the cost of decommissioning. See supra, § III.A.2.

63 MOGUS also makes the argument that the reservation of rights language in the Final Order created the subrogation right. Tr. II 92:10-93:3, ECF No. 149.

Contribution is primarily of equitable origin, but is also available at law on the theory of an implied promise. There is no need to resort to an implied promise in the present case, however, because the [Operating] [A]greement expressly provides that the [co-owners] will each pay [a proportionate share of the decommissioning] expenses. Furthermore, [the claim for subrogation] need not be construed as an equitable claim for contribution, because [Total] has a contractual obligation to contribute [to the decommissioning costs.]

Ex Parte Diamond , 596 So. 2d at 425-26 (internal citations omitted).

Total further argues that since MOGUS received "substantial consideration ... valued at more than $393 million, far in excess of actual decommissioning costs—ATP can hardly be considered a ‘non-contributing co-obligor.’ " ECF No. 98 at 35 n.23. However, Total's argument fails since, as established above, the value of the ORRI MOGUS received was speculative. Although BP and Marathon (ATP's predecessors) and Nippon (Black Elk's predecessor) have paid MOGUS their proportionate shares of ATP's and Black Elk's proportionate share of decommissioning costs for CEPS,⁶⁴ ATP's and Total's proportionate share has not yet been satisfied.⁶⁵ Ex Parte Diamond supports MOGUS' argument that, when multiple entities have joint and several obligations to share in an expense, one who undertakes the full expense may seek contribution from the others. Accordingly, MOGUS' motion for summary judgment on its subrogation claim should be granted and Total's motion should be denied.

64 ECF No. 104 at 16 n.38; Ex. B at 4-5 ¶¶ 12, 14, 16, ECF No. 92-3; Tr. I 28:24-29:2, 45:7-8, ECF No. 147.

65 Ex. B at 3-4 ¶ 8, 4-5 ¶¶ 10-18, ECF No. 92-3.

VI.

TOTAL SEEKS SUMMARY JUDGMENT ON MOGUS' UNJUST ENRICHMENT CLAIM

Total moved for summary judgment on MOGUS' unjust enrichment claim, arguing that MOGUS' unjust enrichment claim fails as a matter of law because a contract governs the parties' dispute. ECF No. 98 at 36-37. Under Alabama law, "[t]he existence of an express contract extinguishes an unjust enrichment claim altogether because unjust enrichment is an equitable remedy which issues only where there is no adequate remedy at law," e.g. , no express contract exists. See Univalor Tr., SA v. Columbia Petroleum, LLC , 315 F.R.D. 374, 382 (S.D. Ala. 2016). "The important question is whether another remedy is available, not whether the party seeking a remedy will be successful." Ferrara Fire Apparatus, Inc. v. JLG Indus. Inc. , 581 Fed. Appx. 440, 443-44 (5th Cir. 2014). "[I]t is not the success or failure of other causes of action, but rather the existence of other causes of action [at law], that determine whether unjust enrichment can be applied." Id. at 444 (quoting Garber v. Badon & Ranier , 981 So. 2d 92, 100 (La. Ct. App. 2008), writ denied , 992 So. 2d 943 (2008) ) (emphasis in original).⁶⁶ MOGUS concedes that if the court concludes that MOGUS has a legal remedy, it may not proceed on its unjust enrichment claim. ECF No. 104 at 32. MOGUS contends that if the court were to determine that MOGUS has no legal remedy or the OA did not apply, it would be entitled to proceed on its unjust enrichment claim in the alternative. Id.

66 The law on this issue is the same in both Alabama and Louisiana.

Certainly MOGUS is permitted to plead alternative theories. Bujalski v. Kozy's Restaurant, Inc. , No. 7:13-CV-1446, 2015 WL 12839231, at *7 n.8 (N.D. Ala. May 5, 2015) (denying a motion to dismiss alternatively plead unjust enrichment claim, but noting that "[i]f the plaintiffs prevail on their breach of contract claim, they cannot recover under ... unjust enrichment...."). The evidence demonstrates, however, that the OA governs the parties' dispute and dismissal on summary judgment is appropriate. Because a claim for unjust enrichment is not available where an express contract applies, Total's motion for summary judgment on MOGUS' unjust enrichment claim should be granted.

VII.

CONCLUSION

The Court recommends that:

• MOGUS' motion for partial summary judgment, ECF No. 92, should be GRANTED .

• Total's motion for summary judgment on contract claims, ECF No. 97, should be DENIED .

• Total's motion for summary judgment due to prior and complete satisfaction of decommissioning obligations, ECF No. 98, should be GRANTED in part as to MOGUS' unjust enrichment claim only, and MOGUS' unjust enrichment claim should be DISMISSED WITH PREJUDICE . The motion should be DENIED in all other respects .

The Parties have fourteen days from service of this Report and Recommendation to file written objections. 28 U.S.C. § 636(b)(1)(C) ; FED. R. CIV. P. 72(b). Failure to file timely objections will preclude review of factual findings or legal conclusions, except for plain error. Quinn v. Guerrero , 863 F.3d 353, 358 (5th Cir. 2017).

Signed at Houston, Texas, on June 28, 2018.