of the day which is seismic wells versus sinclair oil and gas cause i'm a seventeen dash one zero five zero zero denial of sinclair's rule fifty four motion for attorney's fees the trial court denied that motion for three reasons and unless the court has any questions about the pleading issue that's addressed in the party's briefing i think the case l sufficiently clear on that point that i'm going to focus on the two most contested issues so the first issue is whether seismic wells asserted a claim against sinclair oil and gas company under the joint operating agreement to enforce a financial obligation and the second issue is whether the district court was permitted to outright deny same players recoverable attorneys fees to base its conclusion that the it did not agree with sinclair's method of segregation as for the first issue the joint operating agreements prevailing party provision according to that plain language states that a party who prevails on a claim can recover its attorney's fees as long as that claim needs to requirements first is that it has to in a legal proceeding and the second requirement is that the claim has to be to enforce a financial obligation under the jail way against another party in the deputy h energy case this court recently addressed that exact provision that is at issue in this case in that case the bankruptcy court and then subsequently the district court equated the term financial obligation with a lawsuit to assert monetary monetary damages as opposed to injunctive relief this court affirmed that decision recently and january twenty eighth team in that opinion this court explained that the four lawsuits that were subject to the prevailing party provision and that case did not meet the financial obligation requirement for two reasons the first reason was that several of the cases requested injunctive relief they did not ask for any monetary damages the second reason was that some of the claims tried to settle their own financial obligations rather than and force another parties financial obligations in our case this is very different than those four cases in our case seismic we sued sinclair three alleging that it breached the joint operating agreement whenever it decided to plug a well without seismic wells consent and then seismic well said that that decision cost seismic wells six hundred thousand dollars in monetary damages and as a result seismic well squarely put its breach of the jail a claim within the ambit of the prevailing party provision because it started a legal proceeding against sinclair three and it alleged that it had experienced six hundred thousand dollars in damages as a result of this alleged breach of the jail way now seismic wells response to this is that it's argued that it actually did not suit sinclair for a breach of the jail way it instead claims that it suits sinclair for a breach of section nine point five of the replacement participation agreement a contract that coincidentally does not have a prevailing party provision in it but that is simply not true if your honour's would turn to tab one of the notebook that we provided will see a portion of seismic wells first amended complaint it's a life pleading in this case in the highlighted language on the first page you'll see that seismic wells expressly stated that sinclair had allegedly breached the party's operating agreement it does not say that the party that sinclair breached the replacement participation agreement and that's for good reason and the reason is because the replacement participation agreement has no up like ability to this client if you'll take a look intent to at the top is the joint operating agreement and what that provision states is that if a party wants to plug a well it has to get the consent of the other parts and if a party does not consent then the party wanting to plug the well has to either assign the well to the other party or it has to operate that well on the other party's behalf subject to certain pre specified rates that's exactly what seismic wells claimed sinclair three did not do in this case you'll see underneath that the language from section nine point five of the replacement participation agreement and that provision all it says is that if a party transfers operations to another party then the transferring party has to provide a two page long form called a change of operator form from the texas railroad commission seismic wells is not claiming that it experienced six hundred thousand dollars in damages because sinclair did not give it a form it's claiming that experience six hundred thousand seismic wells first amid a complaint seismic was expressly said that it was suing for six hundred thousand dollars in damages and it didn't only plead that in its pleading at trial and then again want to appeal to a different  panel for this court seismic wells claimed that it had proven a quote amount certain in actual damages and it linked that amount certain to the joint interest billing statements that sinclair had sent to seismic wells person to the joint operating agreement so what you have is you have a claim that seismic was asserted against inclosure three alleging that it had breached the joint operating agreement and cause monetary damages that's the exactly what the prevailing party provision in the jail way was operating expenses collected under the jail today yes so there is that was that your claim yes your honor so there's actually there were two issues kind of at the district court so the district court there was a claim for a breach of the joint operating agreement and then we also had argued that some yes your honor and so in our rule fifty four motion we had argued that seismic wells had alleged this breach of the joint operating agreement and in according to that breach it requested six hundred thousand dollars in damages they needed also sued for fraud telling me though is that the claims need to be financial obligations covered by the g a o way which is different from relate it to the jail with me yes or so i believe that there is we provided legal services that related to breach of contract times for some other breaches alleged breaches for the contract called the initial participation agreement and the replacement participation agreement then there was also another claim that allege that we had breached that syfy joint operating agreement by plugging this well with outside the wells consent though some of the legal services for those two claims were an extra cleaners one so for example seismic wells claimed that the damages for this breach of the jail a claim was some of the administrative fees you would get for operating a well it made that same allegation for its fraud claims and so therefore the legal services we but in connection with the administrative fee when you make the claim you opening  if you look at the record then that just goes back to some testimony from the economic damages expert sydney thompson in that right yes right that's what you tie back to well his testimony he says he calculated those damages based on the breach placement agreement but in actuality what it claims is that same player breach to replace an agreement by allegedly plugging this well without seismic wells and sent and then it points to the replacement agreement but the replacement agreement doesn't have any terms in it that say you can't plug a well without anyone's consent that's a term that's in the joint operating agreement so it's suing us for an action saying it's part of a different contract that doesn't have a prevailing party provision but in reality the claim is based on the joint operating agreement and that's what sized it well said well who was in the talks and testifying for he's testifying for the plans for size and wells or so what we have is we have a situation where they're they're saying on the one hand this is a claim based on the replacement agreement but in reality it's a claim about the joint i'll bring bring that premised on a specific provision in the joint operating agreement so if a step i'm sorry except when you made the claim that you were talking about financial obligations under the jail way then you referenced his testimony yes your honor so that because and his reference when he says that is to the replacement agreement not the  agreement so one of the issues here is that i agree that sinclair should not be entitled to recover its attorney's fees for work it soley did relating to a alleged breach of the replacement agreement here we have a claim of alleging a specific breach on the financial obligation to the joint operating agreement and so i am not suggesting that the prevailing party provision of the jail ag so for this one claim you're saying relates to the j x explained to me why it was  and you call in that a financial obligation will size it was called a financial obligations i don't know i said these are the damages we're entitled to cause you didn't meet an obligation so what else were in the contract they used the word obligation so for example in article thirteen it says expenses liability or other obligations and so by saying using the word other to give that it's plain meaning that expenses and liabilities would be part of obligations and so here you have a financial obligation which is the same as a financial liability and that's exactly what seismic wells argued it had was it had experienced financial or monetary lie or that sinclair was financially or monetary ali attorney's fees the following three reasons first seismic was never sued to enforce a financial obligation under the joint operating agreement so i can't size second appellant failed to segregated species as required by the wall and third appellant failed to actually pleaded species is required by federal rule of civil procedure nine g i'll be addressing the first two issues mr sword will be addressing what's important to keep in mind while we're just in these issues is that all three grounds provide an independent basis on which the court denied appellants motion and so in order for appellate succeed here today they have to succeed on all three issues i think that we should also wait to see there was an appeal argued a few months ago right on the underlying merits of the case it's absolutely correct or we shouldn't we wait to rule to see if there's still a prevailing party this court should wait to rule to see if there's still a prevailing party if the cases  enforce a financial obligation under the joint operating agreement now what's important keep in mind is there's all sorts of different obligations under the joint operating agreement not all of those obligations are financial obligations for example obligation to turn over a well when someone non consensual the plugging of that well is not a financial obligation that is seeking a transfer of operations which is exactly what happened in the in rate of e h case it was before this court  affirmed the district courts of permits of the bankruptcy court finding that a suit over a transfer of operations was not a financial obligation is contemplated under the joint operating agreement and more importantly and clear asks this court to award its attorneys fees it incurred in defending against seismic wells fraud claims this on the record page two five four two in fact in their original motion to the district court they never even mentioned financial obligation they never even cited the full text of this attorney's provision and in the evidence they provided to the court on which it asked the court to find their attorney's fees the affidavit actually stated with its defense of the remaining fraud claims the entire affidavit that is the basis for their requests for attorney's fees talks about defending against fraud claims and defending against other claims that are allegedly extra complete intertwined with fraud claims they haven't even offered an evidentiary basis on which the district court could find that there were any fees incurred in defending against a suit on a financial obligation of interest is that a review of the billing records that were attached to our application on my review i was actually only able to find three references to the operating agreement and that's on page two nine seven zero of the record and in each of these instances the billing records actually indicate that appellant was reviewing the operating agreement and order to consider what kind of claims it could sue seismic wells for under the joint remit that it said it was preparing a complaint out of the joint operating agreement those are certainly not fees that are in connection with the finning against a lawsuit to bring fine it to enforce a financial obligation of the joint operating room and this court is absolutely correct in noting that i guess is an initial matter they never presented to the district court any arguments about this one point two seven eight million this three hundred ninety nine thousand or the six hundred thousand so that was simply not before the district court at that time and in any event as explained in the testimony through trial what seismic was contending is that the one point two seven eight and lease operating expenses it had paid sinclair it should get paid back as part of restoring the parties to the position they would be in prior to the replacement op or replacement participation agreement all of the damages models in this case are about restoring the parties to the place they would be in prior to the entry of these agreements this is not a collections case it's not a case where someone is seeking monetary amount that they are owed it's a case where people are seeking to return to the position they were in prior to these things happening district court was actually the fact finder in this case the fees were not submitted to a jury and because the district court was the fact finder the district court factual findings related to the fees are entitled to an abuse of discretion review now i will i will will submit that the determination of whether he should be segregated is a matter of law but the ultimate finding of the reasonableness of those fees is a question of fact and the district court is the fact finder in this case found that they should be segregated and our interpretation of the order is that having reviewed the material they presented was insufficient on those grounds with that of well what one more one more had been decided between the time that the district court originally determined fees and the appeal and in view of that because chapa changed the standard for intertwining fees to require that a discreet legal service hundred six this circuit said that it must ordinarily be pled as a matter of special damages and also you must follow tom the motion to be clear there was a tally motion filed in fourteen days now the fist circuit also in industrial industries is the same issue one it wasn't timely but also the court noted this court noted that while it's not a strict if you don't plead it you don't get it there must be some notice a while here so in this case is done the pretrial  there's also one thing i want to address that came up regarding administrative overhead fees and it turns of a joint operating agreement there's really only four circumstances that create a financial obligation number one if oil and gas is produced the operator sinclair must pay out that the oil and gas months here amounts to the interest owners like seismic wells number two they must pay vendors right for the development of the well and the oil and gas so pumper truck six other may they must pay that that's not the issue here either it's also an issue they  a fact that they didn't do something that owed us money which is the only reason under the jail way that would be the case is that they did not pay as the percent of proceeds of the owing gas development of this well  expenses that's an obligation it's done a fine not a financial obligation in fact no party in this lawsuit sued and said for example seismic didn't say sinclair you didn't pay my oil and gas money under under our agreement you owe me money they that we didn't pay our lease operating expense or the overhead expenses more importantly a non operative working interest owner lifesize of wells can never charge overhead expenses that one we're asserting a financial obligation they owe jail way we did assert that i have an obligation to turn over the well because they want to plug it but that's not a you owe us money other than jail way and again the fi there is a cause of bashing here related to a financial obligation in this case and so based upon the physical precedent this is a court i don't believe erred and claiming they should have put either one of us on notice or made a a pleading or something some very meant in their personal order regarding the request for the attorney's fees because that would also indicate there's actually a cause of action for a financial obligation which would lead to i imagine a approved fair rebuttal to address the pleading issue real quick the a lot of talk there was a lot of talk about whether or not sinclair provided notice to the opposing party the that's not really at issue here what's at issue here is whether or not it was for cost it's not fees for damages the way you draw that distinction is if it's a part of the fees or part of an affirmative element of a cause of action that sinclair could not have pled that it was a prevailing party because it had prevailed those you only have to do is file a motion within fourteen days after the judgment that's exactly what sinclair did in this case as for the segregation issue that this is not as under naviga that district court could outright reject and attorneys fees award but those situations was whenever there was improper evidence of the exist there was not sufficient evidence of the existence of fees or those fees reasonable and that's not what we have here the court not make a decision that there was not evidence of fees incurred the court said it made a legal conclusion that the fees had not been appropriately segregated under chappell and under navigant consulting that requires a re and to go to the district court for the district court then to make its a factual determination about what amount is recoverable and what amount is not recoverable which your response i think he was arguing that you didn't make this financial obligation argument focusing on this particular claim in your district court attorney's fees request what's your response to that we in our district court requests right we asked for fees for basically two different reasons one there were financial or there were claims that dealt with the jail way that we were fraud claims and we argued those were inextricably intertwined with our breach of the jail a crime for our breach of the jail way we expose specifically stated that of the claims that existed was this alleged failure to plug a well that's in our before motion and so then that is what are we're currently up on appeal on is whether or not that claim under the jail way constitutes a financial obligation i would say that based on w b age energy that financial obligation is the equivalent of suits for monetary damages not for injunctive relief i think that's where you have to draw the  line and this was a suit that requested six hundred thousand dollars in monetary damages based on this alleged bridge of the jail way and therefore it was a suit to enforce a financial obligation of the jail unless the court has any questions i'll see the rest of the time thank you