Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-15-03242/USCOURTS-ca10-15-03242-0/pdf.json

Parties Involved:
David R. Steerman
Appellee
Vernon L. Smith & Associates, Inc.
Appellee
Zenith Petroleum Corporation
Appellant

Document Text:

UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

_________________________________ 

ZENITH PETROLEUM CORPORATION, 

 Plaintiff - Appellant, 

v. 

DAVID R. STEERMAN, Executor for the 

Deceased Earlene H. Steerman, 

 Defendant Third-Party Plaintiff - 

 Appellee, 

v. 

VERNON L. SMITH & ASSOCIATES, 

INC., 

 Third-Party Defendant - Appellee. 

No. 15-3242 

(D.C. No. 6:13-CV-01175-JTM) 

(D. Kan.) 

_________________________________ 

ORDER AND JUDGMENT*

_________________________________ 

Before TYMKOVICH, Chief Judge, BACHARACH and MORITZ, Circuit Judges. 

_________________________________ 

Zenith Petroleum Corporation appeals the district court’s grant of summary 

judgment in favor of David Steerman and Vernon L. Smith & Associates on its 

 *

 After examining the briefs and appellate record, this panel has determined 

unanimously that oral argument would not materially assist in the determination of 

this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore 

ordered submitted without oral argument. This order and judgment is not binding 

precedent, except under the doctrines of law of the case, res judicata, and collateral 

estoppel. It may be cited, however, for its persuasive value consistent with 

Fed. R. App. P. 32.1 and 10th Cir. R. 32.1. 

FILED 

United States Court of Appeals

Tenth Circuit 

July 11, 2016

Elisabeth A. Shumaker 

Clerk of Court

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complaint arising out of an oil-and-gas-lease title dispute. Zenith contends the 

district court abused its discretion in ruling Zenith had not alleged a breach-ofcontract claim in the Pretrial Order. We exercise jurisdiction under 28 U.S.C. § 1291 

and find no abuse of discretion. 

I. 

Earlene Steerman, a retired schoolteacher, entered into an oil-and-gas lease 

with Explore Energy Corporation, who recorded the lease and later assigned it to 

Zenith. That lease agreement (the Zenith Lease) included a warranty-of-title 

provision. Shortly before the Zenith Lease expired, Ms. Steerman and Zenith agreed 

to a two-year extension, but Zenith did not record the extension. A year and a half 

later, Ms. Steerman entered into an oil-and-gas lease on the same tract of land to 

Smith. Zenith eventually learned of this second lease when trying to sell the Zenith 

Lease. 

Zenith filed a complaint against Ms. Steerman alleging slander of title and 

breach of the Zenith Lease’s warranty-of-title provision. It is undisputed that 

Zenith’s complaint did not allege any breach of the Zenith Lease as a whole, merely a 

breach of its warranty-of-title provision. Ms. Steerman passed away and her son and 

executor, David Steerman, was substituted as the defendant. Steerman filed a 

third-party complaint against Smith alleging an agent of Smith made negligent 

misrepresentations that caused Ms. Steerman to mistakenly grant a second lease to 

Smith. 

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The parties prepared a Pretrial Order in accordance with Fed. R. Civ. P. 16(d) 

and D. Kan. R. 16.2, which set forth both parties’ factual contentions, legal claims, 

and defenses. Zenith listed its legal claims as “Breach of Warranty/Contract” and 

“Slander of title/Cloud on title.” Aplt. App. at 134. Smith then moved for summary 

judgment against Steerman, arguing it could not be liable to Steerman for negligent 

misrepresentation because Steerman was not liable to Zenith for breach of warranty 

or slander of title. Smith argued Steerman could only be liable under the 

warranty-of-title provision if its interest was superior to Zenith’s, which it was not. 

Zenith conceded Ms. Steerman had not breached the warranty-of-title 

provision. It argued, however, it still had an outstanding breach-of-contract claim 

separate from its breach-of-warranty claim. Zenith claimed the Zenith Lease granted 

it an exclusive lease, which Ms. Steerman violated by entering into the Smith lease. 

The district court ruled that Zenith had waived any general breach-of-contract claim 

by not asserting such claim in the Pretrial Order. It granted partial summary 

judgment against Zenith on the warranty-of-title claim, and granted Steerman’s 

motion for summary judgment. After Zenith dismissed its slander-of-title claim, the 

district court entered final judgment, from which Zenith appeals. 

II. 

Zenith argues the district court erred in refusing to consider a 

breach-of-contract claim. The district court, it argues, should not have sua sponte 

excluded that claim and failed to liberally construe the Pretrial Order. We review a 

district court’s decision to exclude issues and claim not asserted in the Pretrial Order 

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for abuse of discretion. Rios v. Bigler, 67 F.3d 1543, 1549 (10th Cir. 1995) (“The 

district court has discretion to exclude from trial issues and claims not set forth in the 

pretrial order.”) 

“The . . . pretrial order measures the dimensions of the lawsuit, both in the trial 

court and on appeal.” Youren v. Tintic Sch. Dist., 343 F.3d 1296, 1304 (10th Cir. 

2003) (internal quotation marks omitted); see also Fed. R. Civ. P. 16(d) (stating the 

pretrial order “controls the course of the action” unless modified by the court). 

“Claims, issues, defenses, or theories of damages not included in the pretrial order 

are waived.” Cortez v. Wal-Mart Stores, Inc., 460 F.3d 1268, 1276-77 (10th Cir. 

2006) (internal quotation marks omitted). 

Zenith is correct that pretrial orders are to be “liberally construed to cover any 

of the legal or factual theories that might be embraced by their language.” Trujillo v. 

Uniroyal Corp., 608 F.2d 815, 818 (10th Cir. 1979) (internal quotations marks 

omitted). But the primary purpose of pretrial orders is to avoid surprise by requiring 

parties to “fully and fairly disclose their views as to what the real issues of the trial 

will be.” Cortez, 460 F.3d at 1276 (internal quotation marks omitted). 

Here, Zenith’s factual allegations in the Pretrial Order alleged only that 

Ms. Steerman violated the warranty-of-title provision, citing only Paragraph 5 of the 

Zenith Lease, the warranty-of-title provision. Aplt. App. at 132. After Smith moved 

for summary judgment, Zenith argued for the first time that Ms. Steerman also 

breached Paragraph 1 of the Zenith Lease, in which the lease was granted 

“exclusively” to the lessee. But that factual allegation and legal theory were never 

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mentioned in the Pretrial Order; there is no mention of a contract theory based on this 

exclusivity language, nor did Zenith cite to or mention the provisions of Paragraph 1. 

Zenith strenuously argues that its sole use of the word “contract” in its listing 

of legal claims as “Breach of Warranty/Contract,” is sufficient to preserve its claim 

under a liberal construction. But as that heading is followed only by a discussion of 

the Paragraph 5 warranty provision, and makes no mention of either exclusivity or 

Paragraph 1, there is no reasonable construction of this “Breach of 

Warranty/Contract” heading that is so liberal as to include a claim for breach of the 

Paragraph 1 exclusivity provision. Zenith’s newly-asserted claim based on Paragraph 

1 is a wholly different theory of recovery based on a contract provision that was not 

mentioned in the Pretrial Order. We conclude the “Breach of Warranty/Contract” 

heading was wholly insufficient to alert Smith, Steerman or the district court that 

Zenith would be asserting any breach-of-contract claim other than a breach of the 

warranty-of-title provision in Paragraph 5. 

Zenith complains that the district court acted sua sponte in rejecting its breachof-contract claim. But a district court has authority to sua sponte confine the 

litigation to the claims and issues identified in the pretrial order. See, e.g., Hunt v. 

Cty. of Orange, 672 F.3d 606, 617 (9th Cir. 2012). Given that the Pretrial Order did 

not include a breach-of-contract claim, and that Zenith first raised its exclusivity 

theory in response to Smith’s motion for summary judgment, the district court was 

well within its discretion to sua sponte reject the claim. Finally, Zenith argues it was 

not obligated under the rules of civil procedure to allege a precise breach-of-contract 

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claim in its complaint. The absence of the breach-of-contract claim was not, 

however, the basis of the district court’s ruling, which was properly based on the 

absence of such a claim in the Pretrial Order. It is the pretrial order, and not the 

complaint, that defines the scope of litigation. See Tyler v. City of Manhattan, 

118 F.3d 1400, 1403 (10th Cir. 1997). 

Accordingly, we find no abuse of discretion in the district court’s 

determination that the Pretrial Order did not set forth a breach-of-contract claim. 

See Hullman v. Bd. of Trs. of Pratt Cmty. Coll., 950 F.2d 665, 667 (10th Cir. 1991) 

(“A plaintiff cannot escape the binding effect of the pretrial order by raising new 

issues in a response to the defendant's motion for summary judgment.”). 

Judgment Affirmed. 

Entered for the Court 

Timothy M. Tymkovich 

Chief Judge 

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