NOT RECOMMENDED FOR FULL-TEXT PUBLICATION

File Name: 19a0183n.06

Case Nos. 18-5372/5388

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

EQT PRODUCTION COMPANY,

Plaintiff-Appellant/Cross-Appellee,

v.

MAGNUM HUNTER PRODUCTION, INC.,

Defendant-Appellee/Cross-Appellant.

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ON APPEAL FROM THE UNITED 

STATES DISTRICT COURT FOR 

THE EASTERN DISTRICT OF 

KENTUCKY

Before: KEITH, STRANCH, and DONALD, Circuit Judges.

DAMON J. Keith, Circuit Judge. EQT Production Company (“EQT”) and Magnum 

Hunter Production, Inc. (“Magnum Hunter”) are in the business of oil and gas production. Over 

the years, the two entities entered into eleven Farmout Agreements (“FOAs”), where EQT allowed 

Magnum Hunter to drill and sell oil and gas on EQT’s land in exchange for royalty payments. 

After disagreements arose, EQT audited Magnum Hunter’s records, finding that Magnum Hunter 

failed to make various payments as required by the FOAs. EQT filed suit against Magnum Hunter 

to recoup some of these missing payments. After conducting a bench trial, the district court 

awarded damages on some, but not all, of EQT’s claims. 

EQT and Magnum Hunter filed cross-appeals. For the reasons that follow, the district 

court’s judgment is REVERSED and REMANDED in part, and AFFIRMED in part.
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I.

Between 1996 and 2004, EQT and Magnum Hunter, or their predecessors in interest, 

entered into eleven FOAs. Under these agreements, Magnum Hunter sold the oil and gas it drilled 

from wells on property owned or leased by EQT. In exchange, Magnum Hunter paid EQT a 

royalty on the gross proceeds received from the sale of oil and gas. The amount of royalty owed 

escalated under certain circumstances. The FOAs also required Magnum Hunter to pay EQT a 

shut-in fee on wells capable of production that are closed for a predetermined amount of time.

In 2008, to comply with new requirements issued by the Federal Energy Regulatory 

Commission, Magnum Hunter built a processing plant, and began transporting gas from EQT’s 

wells to the plant to remove natural gas liquids (“NGLs”) from the gas. Magnum Hunter paid

EQT royalties on the NGLs it sold, but deducted post-production costs, including transportation 

and processing costs, from these royalties.

Over time, the parties began to disagree on their respective rights, responsibilities, and 

required payments under the FOAs. In 2013, EQT exercised its contractual rights and hired 

Mercadante & Company, P.C. (“Mercadante”) to audit Magnum Hunter’s records from 2011 to 

2013. The audit report contained specific written “exceptions” indicating that Magnum Hunter 

had failed to pay certain shut-in fees, royalties, and escalation fees, and that it made unauthorized 

deductions when calculating royalty payments owed to EQT. The audit identified net exceptions 

of $2,367,307 owed to EQT for the 2011 to 2013 period. After making adjustments, the parties 

agreed that Magnum Hunter would pay EQT $1,833,780 (the “Cash Payment”) for certain audit 

exceptions, some of which were extended through August 2015. Magnum Hunter placed EQT’s 

accounts in suspense after the audit.
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In December 2015, Magnum Hunter filed for bankruptcy. In response, EQT filed a Proof 

of Claim in the amount of $5,896,907 for, inter alia, unpaid shut-in fees and royalties, 

underpayment for the sale of NGLs, and improper post-production deductions from royalties. The 

Proof of Claim sought amounts related to claims from 2002 to 2010, from the Mercadante Audit 

period (2011 to 2013), and from the post-audit period (2013 to 2015). In April 2016, Magnum 

Hunter emerged from bankruptcy and honored the previously agreed upon Cash Payment to EQT.

The Cash Payment did not include any amounts related to NGLs or claims from 2002 to 2010.

EQT reserved the right to pursue the remainder of its claims in a separate proceeding.

In May 2016, EQT filed a complaint in the Eastern District of Kentucky. EQT asserted the 

following claims: Count I – breach of contract for failure to render payment for wells in production; 

Count II – breach of contract for failure to render shut-in fee payments; Count III – breach of 

contract for failure to escalate royalty or overriding royalty percentages after the specified time 

period; Count IV – breach of contract for failure to escalate royalty or overriding royalty 

percentages after proceeds from production exceed costs; Count V – breach of contract for 

improper royalty and overriding royalty deductions; Count VI – prejudgment interest on the Cash 

Payment; Count VII – unjust enrichment; Count VIII – accounting; Count IX – declaratory relief, 

and Count X – injunctive relief.

The parties had several disputes throughout the course of litigation. For instance, at the 

close of discovery, Magnum Hunter claimed it had repeatedly asked EQT to provide evidence 

detailing how it calculated damages but received only the audit materials. When Magnum Hunter 

deposed EQT’s corporate representative, he could not explain how EQT calculated damages 

without referring to figures from EQT’s internal database. EQT had not provided Magnum Hunter 

with this data. As a sanction for this violation of discovery rules, the district court precluded EQT 
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from introducing any evidence at trial on damage calculations it had not provided to Magnum 

Hunter.

The parties filed cross-motions for summary judgment. In July 2017, the district court, 

finding that NGLs were not covered by the FOAs, granted partial summary judgment for Magnum 

Hunter on Count V, to the extent it stated a claim for improper deductions from NGL royalty 

calculations. The district court also granted summary judgment for Magnum Hunter on the unjust 

enrichment claim in Count VII, and the requests in Counts VI, VIII, IX, and X for prejudgment 

interest, declaratory relief, and injunctive relief arising from the unjust enrichment claim. Magnum 

Hunter’s motion for summary judgment for accounting in Count VIII was also granted. The 

district court granted EQT’s motion for partial summary judgment on its breach of contract claim 

from 2015 to present in Count I, and the corresponding request for prejudgment interest in Count 

VI.

During the final pretrial conference, the parties agreed to split EQT’s claims into three 

categories: (1) claims arising between 2002 and 2010; (2) claims arising during the audit period of 

2011 to 2013; and (3) claims after the audit period. As trial neared, the parties filed objections to 

each other’s list of proposed exhibits. EQT argued that the district court should exclude any of 

Magnum Hunter’s evidence pertaining to its defense that EQT’s claims are time-barred by some 

of the FOAs. The district court ultimately ruled that some of EQT’s 2002 to 2010 claims were 

time-barred by addenda to certain FOAs requiring EQT to raise payment disputes within twentyfour months.

After a two-day bench trial, the district court awarded EQT $454,537 in damages for Count 

I and $15,537 for Count II, but found that EQT failed to prove it was entitled to damages under 

Count V. It granted EQT’s Count VI claim for prejudgment interest as to Counts I and II at a rate 
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of 8 percent per annum, and denied EQT’s claim for prejudgment interest as to Count V. EQT’s 

claim for declaratory relief under Count IX was also denied. Following these rulings, EQT filed 

a motion for relief from judgment, which the district court denied.

II.

On appeal, EQT argues that the district court: (1) erred in denying EQT’s claim for 

additional royalties on the sale of NGLs; (2) erred in allowing Magnum Hunter to deduct NGL 

processing costs from royalty payments; (3) abused its discretion in freezing EQT’s proof of 

damages; (4) erred in holding that some of EQT’s breach of contract claims for the 2002 to 2010 

period were time-barred; and (5) erred in denying EQT’s claim for prejudgment interest on the 

Cash Payment. Magnum Hunter argues on cross-appeal that the district court: (1) erred in 

awarding EQT damages for unpaid shut-in fees; (2) erred in rejecting Magnum Hunter’s claim for 

a $454,753 credit; and (3) abused its discretion in awarding EQT prejudgment interest.

A. NGL Royalties

Before discovery closed, Magnum Hunter moved for partial summary judgment on EQT’s 

claim for unauthorized deductions relating to NGL royalties, arguing that the FOAs are silent on 

NGLs. Magnum Hunter argued in part that it did not have to pay EQT royalties on NGLs 

produced. However, this argument does not advance the parties’ intent in entering into the 

contracts and is meritless. 

All the FOAs state that Magnum Hunter is to pay EQT a royalty on the gross proceeds 

Magnum Hunter receives from the sale of “oil and/or gas” drilled from wells, without deductions 

of any kind. Seven of the FOAs incorporate by reference a Model Form Operating Agreement 

(“MOA”), which says “[t]he term ‘Oil and Gas’ shall mean oil, gas, casinghead gas, gas 

condensate, and/or all other liquid or gaseous hydrocarbons and other marketable substances 
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produced therewith, unless an intent to limit the inclusiveness of this term is specifically stated.”

Eight of the FOAs define “oil well” to mean “oil well as defined by Kentucky Revised Statute 

Number KRS 353.010,” and “gas well” to mean “gas well as defined by Kentucky Revised Statute 

Number KRS 353.010.” Section 353.010 defines “gas well” as any well that “(a) Produces natural 

gas not associated or blended with crude petroleum oil any time during production; or (b) Produces 

more than ten thousand (10,000) cubic feet of natural gas to each barrel of crude petroleum oil 

from the same producing horizon.” KY. REV. STAT. ANN. § 353.010(10) (West 2009). “‘Oil well’ 

means any well which produces one (1) barrel or more of oil to each ten thousand (10,000) cubic 

feet of natural gas.” Id. § 353.010(14).

In ruling on Magnum Hunter’s motion for summary judgment, the district court divided 

the FOAs into three subsets: “(1) FOAs that define ‘oil well’ and ‘gas well’ and attach and 

incorporate an MOA defining ‘oil and gas’; (2) FOAs that define ‘oil well’ and ‘gas well’ but do 

not attach and incorporate an MOA defining ‘oil and gas’; and (3) FOAs that do not define ‘oil 

well’ and ‘gas well’ and do not attach and incorporate an MOA defining ‘oil and gas.’” R. 77, 

Summary Judgment Order, Page ID 4552. For the first category, the district court observed that 

“[w]hile the terms ‘oil well’ and ‘gas well’ are not synonymous with the phrase ‘oil and/or gas,’ 

they are closely related.” Id. at Page ID 4553. The district court found a conflict between the 

FOAs and the attached MOAs “[b]ecause the MOA definition embraces all types of substances 

produced as [a] result of oil and gas exploration, while the FOAs contemplate only the production 

of natural gas and petroleum.” Id. at Page ID 4553–54. The FOAs state that in the event of a 

conflict between the terms of the FOA and any attachment, the terms of the FOA control. Because

the statutory definitions of wells referenced in the FOAs mention only “natural gas,” the district 

court found that NGLs were not included within the phrase “oil and/or gas.” The district court 
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used the same rationale to find that FOAs within the second category also exclude NGLs. For the 

third category, the district court used the dictionary definitions of “gas” and “liquid” to exclude 

NGLs. The district court granted partial summary judgment for Mangum Hunter on this claim.

“We review de novo a district court’s order granting summary judgment . . . .” Keller v. 

Miri Microsystems LLC, 781 F.3d 799, 806 (6th Cir. 2015). In diversity cases, federal courts apply 

the substantive law of the forum state. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938); Wahl 

v. GE, 786 F.3d 491, 494–95 (6th Cir. 2015). The parties agree that the FOAs are governed by 

Kentucky law. “[T]he interpretation of a contract ... is a question of law for the courts and is 

subject to de novo review.” Cantrell Supply, Inc. v. Liberty Mut. Ins. Co., 94 S.W.3d 381, 385 

(Ky. Ct. App. 2002). 

When interpreting a contract, “[t]he primary objective is to effectuate the intentions of the 

parties.” 3D Enters. Contracting Corp. v. Louisville & Jefferson Cty. Metro. Sewer Dist., 

174 S.W.3d 440, 448 (Ky. 2005). “Any contract or agreement must be construed as a whole, 

giving effect to all parts and every word in it if possible.” Louisa v. Newland, 705 S.W.2d 916, 

919 (Ky. 1986). A contract is ambiguous when it is susceptible to inconsistent interpretations. 

Transp. Ins. Co. v. Ford, 886 S.W.2d 901, 905 (Ky. Ct. App. 1994). “Where a contract is 

ambiguous or silent on a vital matter, a court may consider parol and extrinsic evidence involving 

the circumstances surrounding execution of the contract, the subject matter of the contract, the 

objects to be accomplished, and the conduct of the parties.” Cantrell Supply, 94 S.W.3d at 385. 

Where no ambiguity exists, the parties’ intentions must be discerned from the four corners of the 

contract. Id.

On appeal, EQT argues that the district court’s interpretation of the FOAs with attached 

MOAs rendered the definition of “oil and/or gas” meaningless. We agree. The MOAs define “oil 
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and gas,” and as the district court noted, this definition covers all liquid and gaseous substances 

produced within the wells, which would include NGLs. However, the district court chose not to 

give effect to this definition, and instead considered the statutory definition for “oil well” and “gas 

well,” even though it said these terms are not synonymous with the phrase “oil and/or gas.” The 

FOAs that incorporate the MOAs are not silent on the definition of “oil and/or gas” and are not 

ambiguous. Nor does the MOA definition of “Oil and Gas” contradict the incorporated statutory 

definition of wells. A well matches the statutory definitions if it produces natural gas and crude 

oil in certain proportions. Refining some of the natural gas produced at a covered well to create 

NGLs does not change the nature of the well. As EQT argues, the district court’s ruling creates 

inconsistency in the contract terms where none existed and should be reversed. 

The FOAs that do not incorporate the MOAs are silent on the definition of “oil and/or gas.” 

We therefore presume that the contracts reference the ordinary meanings of the term. In this 

context, there is no dispute that “gas” means “natural gas.” NGLs are produced from natural gas. 

To the extent the FOAs are silent or ambiguous as to whether components or byproducts of natural 

gas are included within the term “gas,” the court can look to extrinsic evidence, such as the subject 

matter of the contract and the parties’ conduct, to interpret those FOAs. The parties entered into 

an agreement with the purpose of producing and selling oil and gas. EQT allowed Magnum Hunter 

to drill wells on its lands, and sell oil and gas produced from those wells. In exchange, Magnum 

Hunter was to pay a royalty on the gross proceeds from these sales. This purpose was not lost to 

Magnum Hunter, who for nearly six years, paid royalties to EQT on NGLs it extracted from the 

wells and sold. At one time, the parties had an understanding that NGLs were covered under the 

FOAs, and such an understanding upholds the purpose of the contract. Indeed, if NGLs were not 

covered by the FOAs, it is unclear what authority Magnum Hunter would have had to extract them 
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from EQT’s property. The district court’s ruling defeats the parties’ intended purpose for 

contracting with each other, and we reverse the district court’s determination that NGLs are not 

included in the FOAs.

B. NGL Post-Production Costs

Magnum Hunter subtracted NGL post-production costs from the NGL sale price and then 

calculated the total oil and gas royalty it owed EQT based on that reduced figure. The district 

court found that these deductions did not violate the FOAs since NGLs are not subject to the FOAs. 

On appeal, EQT argues that the district court erred in its holding. Given the language of the FOAs 

and market practice, we conclude that these deductions were indeed proper, though not for the 

reasons articulated by the district court. 

Magnum Hunter argues that Kentucky law allows for the deduction of post-production 

expenses on royalty payments. “If the gas is not sold at the well-head, but is refined or processed 

in some way and moved to a place of sale downstream from the well, ... in calculating ‘royalty,’ 

the lessee may deduct from its downstream receipts any ‘post-production’ costs incurred to market 

the gas.” Baker v. Magnum Hunter Prod., Inc., 473 S.W.3d 588, 592 (Ky. 2015). In other words, 

“‘at-the-well’ refers to gas in its natural state, before the gas has been processed or transported

from the well.” Poplar Creek Dev. Co. v. Chesapeake Appalachia, L.L.C., 636 F.3d 235, 244 (6th 

Cir. 2011). In Kentucky, when an agreement is “silent as to the place of market and the price of 

the gas,” the default royalty calculation is the “at the well” rule, which allows deductions for postproduction costs. Baker, 473 S.W.3d at 593 (first quote quoting Reed v. Hackworth, 287 S.W.2d 

912, 913 (Ky. 1956); see also Reed, 287 S.W.2d at 913–14 (“We conclude that where, as here, the 

lease is silent concerning the place of market and the price, the royalty should be applied to the 

fair market value of gas at the well.”). Post-production costs are expenses Magnum Hunter incurs
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“after the gas leaves the wellhead,” including “gathering, compression, and treatment costs.” 

Poplar Creek, 636 F.3d at 238–39 (call numbers omitted). 

Therefore, the key question is whether the FOAs are silent about the place of market and 

price of gas. The relevant contractual language provides that EQT is entitled to a set percentage 

“of the gross proceeds received from the sale of oil and/or gas” drilled from wells “without 

deductions of any kind.” This language does not set the place of market or the price, so the 

application of the at-the-well rule is appropriate.

EQT, however, points to the prohibition on “deductions of any kind” and submits that the 

contracts are not silent. There is some intuitive appeal to this position. But a prohibition on 

deductions simply does not explain where gas is to be sold or for how much—the two pieces of 

information Kentucky courts have explained could halt application of the at-the-well rule. Further, 

application of the at-the-well rule does not render the prohibition on deductions meaningless. 

Magnum Hunter remains unable to deduct “production costs, like those incurred drilling, operating 

and maintaining a well, as well as other costs incurred in order to extract gas from the earth and 

bring it up to the wellhead.” Poplar Creek, 636 F.3d at 239 (brackets and citation omitted).

Interpreting this contractual language to permit application of the at-the-well rule is also 

consistent with precedent. This court’s recent decision in Poplar Creek cited favorably to a much 

older decision, Lafitte Co. v. United Fuel Gas Co., 284 F.2d 845 (6th Cir. 1960). There, the 

relevant contractual language—similar to the FOAs’ language—provided for a royalty that was 

“one-eighth (1/8) of the gross income received by the Lessee from the sale ... of gas produced and 

sold ... from the demised premises.” Poplar Creek, 636 F.3d at 241 (quoting Lafitte Co. v. United 

Fuel Gas Co., 177 F. Supp. 52, 56 (E.D. Ky. 1959)). The Lafitte court upheld the district court’s 

finding that the lease was silent with respect to the market place and price and so allowed for 
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deduction of post-production transportation costs. 284 F.2d at 849. Because “gross” means 

“undiminished by deduction,” Gross, Black’s Law Dictionary (10th ed. 2014), we find no 

meaningful distinction between the contractual language in Lafitte and the contractual language 

here. 

Because the FOAs are silent as to the market place or price, and because the parties have

not specifically contracted against application of Kentucky’s default at-the-well rule, Magnum 

Hunter may properly deduct post-production costs from the royalties it pays on NGLs. On remand, 

the district court should determine EQT’s damages, if any, on unpaid NGL royalties, calculated 

after deducting post-production costs.

C. Discovery Sanction

EQT argues that the district court abused its discretion when it prohibited EQT from 

introducing evidence of its damages. The district court referred discovery matters to a magistrate 

judge. After discovery closed, the parties contacted the magistrate judge to resolve a dispute. EQT 

had not timely produced to Magnum Hunter information from its internal database called “Enertia”

which EQT used to make or support its damages calculation. Magnum Hunter deposed EQT 

representative John Bergonzi (“Bergonzi”), who said that to calculate damages EQT supplemented 

the Mercadante Audit with data from a query in the Enertia system. This Enertia data, downloaded 

into spreadsheets, is integral to understanding how EQT calculated its damages. Only after 

Magnum Hunter deposed Bergonzi, and after the discovery cutoff, did EQT provide Magnum 

Hunter with an Enertia data report that supported its calculations. Subsequently, the magistrate 

judge, under Fed. R. Civ. P. 37(c)–(d), provisionally prohibited EQT from using any damage proof 

in further proceedings it had not already provided to Magnum Hunter as of the Bergonzi 

deposition. EQT then filed objections, which the district court overruled.
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During the bench trial, the district court allowed Plaintiff’s Exhibit 52 (“P-52”) to be 

presented by avowal only, finding that the exhibit, allegedly showing that Magnum Hunter made 

improper deductions on EQT’s royalties prior to 2010, was precluded by the district court’s prior 

discovery order freezing EQT’s proof. EQT filed a motion for relief from judgment, challenging 

the district court’s ruling on P-52, which the district court denied. EQT challenges this ruling 

again on appeal.

We review discovery orders for an abuse of discretion. Bill Call Ford, Inc. v. Ford Motor 

Co., 48 F.3d 201, 209 (6th Cir. 1995). “A district court abuses its discretion when it relies on 

erroneous findings of fact, applies the wrong legal standard, misapplies the correct legal standard 

when reaching a conclusion, or makes a clear error of judgment.” Ondo v. City of Cleveland, 795 

F.3d 597, 603 (6th Cir. 2015) (citation and internal quotation marks omitted). Under the rules 

governing discovery, a party seeking damages is required to provide to the other party a 

“computation of each category of damages,” and to “make available for inspection and copying 

... the documents or other evidentiary material ... on which each computation is based.” Fed. R. 

Civ. P. 26(a)(1)(A)(iii). “If a party fails to provide information ... as required by Rule 26(a) or 

(e), the party is not allowed to use that information ... to supply evidence on a motion, at a hearing, 

or at a trial, unless the failure was substantially justified or is harmless.” Fed. R. Civ. P. 37(c)(1).

“A noncompliant party may avoid sanction if there is a reasonable explanation of why Rule 

26 was not complied with or the mistake was harmless.” Howe v. City of Akron, 801 F.3d 718, 

747 (6th Cir. 2015) (citation and internal quotation marks omitted). We adopted the following 

factors from the Fourth Circuit in assessing whether a party’s omitted or late disclosure is 

“substantially justified” or “harmless”:

(1) the surprise to the party against whom the evidence would be offered; (2) the 

ability of that party to cure the surprise; (3) the extent to which allowing the 
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evidence would disrupt the trial; (4) the importance of the evidence; and (5) the 

nondisclosing party’s explanation for its failure to disclose the evidence.

Id. at 748 (quoting Russell v. Absolute Collection Servs., Inc., 763 F.3d 385, 396–97 (4th Cir. 

2014)). In that seminal case on the issue of discovery sanctions, we explained that all five factors 

suggested that plaintiffs’ late disclosure of their backpay calculations was harmless and so reversed 

the district court’s exclusion of those calculations as an abuse of discretion. Id. at 748–50. 

EQT argues, as it did before the magistrate judge, that the Howe factors weigh in its favor.

The magistrate judge extensively analyzed EQT’s arguments under the Howe factors in finding 

that EQT’s late disclosure was not substantially justified or harmless. We address each of these 

factors in turn. 

First, EQT argues that Magnum Hunter did not suffer genuine surprise by EQT’s belated 

Enertia data disclosure because Magnum Hunter possessed the same data EQT used to develop its 

Enertia worksheets. But as the magistrate judge observed, while the raw data may have originated 

from Magnum Hunter, because EQT failed to disclose the worksheets, Magnum Hunter was not 

aware of how Enertia processed the raw data, which of the charges from a thirteen-year period 

EQT took issue with, or how EQT otherwise used Enertia to calculate damages. This complex 

commercial dispute between sophisticated businesses is not analogous to the situation we 

confronted in Howe. There, employees were not penalized for late disclosures because their 

calculations depended on salary rates and work schedules that, of necessity and by law, were kept 

by the defendant employer until their belated disclosure. Id. at 748. EQT further argues that 

Magnum Hunter knew the method EQT used to calculate damages because it was set out in the 

FOAs and audit report, and Magnum Hunter used this same method to develop P-52 shortly before 

trial. However, this argument is refuted by EQT’s own witness, Bergonzi, who testified at his 

deposition that EQT supplemented the Mercadante Audit with Enertia-generated data to calculate 
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damages. This method is not set out in the FOAs. EQT also argues that Magnum Hunter had 

ample opportunity to question Bergonzi about EQT’s damage calculation method. But as the 

magistrate judge observed, Bergonzi did not have the Enertia data at the time of his deposition, so 

Magnum Hunter did not have a meaningful opportunity to question him on EQT’s methodology. 

The district court correctly adopted the magistrate judge’s finding that there was surprise in EQT’s 

late disclosure.

The second and third factors are a party’s ability to cure the surprise and potential 

disruption to the trial. EQT argues that any surprise was curable because Magnum Hunter could 

have questioned EQT’s witnesses about the Enertia data through additional depositions or at trial.

It also argues that that the introduction of the Enertia data would not have disrupted trial because 

it provided Magnum Hunter with the data months before trial. In considering these two factors, 

the magistrate judge reasonably observed that EQT’s late disclosure would have been disruptive 

to Magnum Hunter at trial, as Magnum Hunter would have had to spend the months leading up to 

trial reviewing the belated Enertia data and re-deposing Bergonzi rather than preparing for trial.

EQT’s proposed solution would require Magnum Hunter, the non-defaulting party, to bear the 

effort and expense necessary to cure EQT’s failure to disclose. This would arguably reward EQT 

for its untimeliness and does nothing to deter similar conduct from future litigants. See NHL v. 

Metro. Hockey Club, 427 U.S. 639, 643 (1976). On the other hand, we have held that the ability 

to cross-examine witnesses about late disclosures during trial both provided an opportunity to 

remedy surprise and minimized impact on the trial. See Howe, 801 F.3d at 749 (finding an 

opportunity to remedy surprise in part because “Akron could have explored the problems with 

Carr’s method for calculating back pay by cross-examining Carr and the other twenty-two 

Plaintiffs during the retrial,” and holding trial was not significantly disrupted because, “[w]hen the 
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Plaintiffs disclosed Exhibit 208, the retrial had not commenced, and therefore Akron still had an 

opportunity to cross-examine Carr, Snyder, and the other twenty-one Plaintiffs”). These two 

factors therefore seem to be neutral, not pulling clearly in favor of or against imposition of the 

discovery sanction.

Fourth, EQT argues that the importance of the evidence weighs in its favor because the 

district court’s sanction effectively dismissed a substantial portion of one of its claims. According 

to EQT, because it was barred from introducing any evidence on its damages from 2002 to 2010, 

the district court dismissed that subset of Count V. The district court ultimately ruled that EQT 

“failed to prove damages from alleged improper deductions [from 2002 to 2010] . . . and thus 

cannot prevail on a breach of contract claim under Kentucky law.” R. 122, Findings of Fact, Page 

ID 5572. The court stated in a footnote that it had previously “held that contractual language 

requiring certain claims to be brought in a 24-month period barred EQT from pursuing some claims 

in this case,” but explained that “because the Court finds that EQT has failed to prove damages on 

these claims the Court sees no reason to revisit or further examine [EQT’s other] arguments.” Id. 

The district court seems to have relied exclusively on the lack of admissible evidence to support 

its dismissal of the 2002 to 2010 claims. Because of the discovery sanction, EQT lost on a 

substantial portion of its claim. The excluded evidence was therefore highly important.

Finally, EQT argues that its conduct was justified because it reasonably believed it had 

provided Magnum Hunter sufficient information, since the Proof of Claim and its complaint set 

forth the category, methodology, and amount claimed in Count V. Again, Bergonzi stated at his

deposition that EQT used Enertia data to calculate its claim for damages. As the magistrate judge 

observed, EQT, as the “master of its claim,” should have been aware of the basis of its calculation.

Consequently, EQT’s purported excuse is unavailing, as it should have known that the 
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methodology described in its complaint did not fully disclose its damage computations, as required 

by Rule 26. And unlike in Howe, EQT was not forced to wait for belated disclosuresfrom Magnum 

Hunter before it could perform its calculation. See Howe, 801 F.3d at 749 (“Akron refused to 

provide [the actual hours and payrates of the suing employees] until the last possible day, but 

insisted that the Plaintiffs provide their back-pay calculations before that time.”). Thus, the district 

court did not abuse its discretion in upholding the magistrate judge’s conclusion that EQT’s failure 

to disclose was not substantially justified or harmless.

According to the above analysis, two factors favor barring the evidence, one disfavors

barring it, and two are neutral. Balancing marginal cases is a classic exercise of discretion. Even 

though another court might have struck a different balance, the district court did not rely on 

erroneous findings of fact or apply an incorrect legal standard, and thus did not abuse its discretion 

in proceeding as it did.

EQT also argues that during trial, the district court erroneously expanded the scope of its 

discovery order when it excluded P-52 from evidence. A week before trial, the district court 

ordered Magnum Hunter to supply data on some FOAs from 2002 to 2010. EQT provided this 

data as an exhibit, which the district court allowed to come in only by avowal, finding that it was 

covered under its prior discovery order freezing EQT’s proof. Specifically, EQT argues that P-52 

was not subject to the district court’s discovery order because it was data in Magnum Hunter’s 

possession that it refused to disclose before the eve of trial. In effect, EQT challenges the district 

court’s evidentiary ruling.

We review evidentiary rulings by the district court for abuse of discretion. Biegas v. 

Quickway Carriers, Inc., 573 F.3d 365, 378 (6th Cir. 2009). Additionally, “[t]his court typically 

defers to a district court’s interpretation of its order and reviews for abuse of discretion because 
Case Nos. 18-5372/5388, EQT v. Magnum Hunter

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the district court is obviously in the best position to interpret its own order.” Satyam Comput.

Servs. v. Venture Global Eng’g, LLC, 323 F. App’x 421, 430 (6th Cir. 2009) (citation and internal 

quotation marks omitted). 

EQT raised these same arguments in its motion for relief from judgment. In rejecting 

EQT’s arguments, the district court said EQT failed to fully grasp the district court’s order. 

In explaining its discovery order, the district court said that it

froze EQT’s proof to what it had offered at the time of the Bergonzi deposition 

because EQT failed to turn over Enertia data. As such, the [district court] precluded 

EQT from offering any additional damages proof, regardless of whether EQT had 

the information at the time of the Bergonzi deposition or not. The [district court] 

did not provide an exception for things not yet produced or created. 

R. 128, Motion for Relief from Judgment Order, Page ID 5715. “The [d]istrict [c]ourt’s 

interpretation of its own order is certainly entitled to great deference.” Kendrick v. Bland, 931

F.2d 421, 423 (6th Cir. 1991). The district court imposed the sanction because EQT did not 

disclose data that it should have. Allowing EQT to offer P-52 as damage proof would, as the 

district court recognized, permit it to circumvent the sanction “by introducing new documents it 

did not have prior to the Bergonzi deposition.” R. 128, Page ID 5715.

The district court did not commit a clear error of judgment, and we affirm the discovery 

sanction and evidentiary ruling.

D. Contractual Time Bar

EQT brought claims alleging that Magnum Hunter violated the parties’ contracts during 

the 2002 to 2010 period. EQT argues that the district court erroneously found that provisions—

adopted from the Council of Petroleum Accountants Societies (“COPAS”)—attached to some of 

the FOAs barred EQT from bringing claims from 2002 to 2010. Five of these FOAs contain 

language requiring EQT to take written exception to payments received by Magnum Hunter within 
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twenty-four months. Prior to trial, Magnum Hunter argued that the COPAS provision barred EQT 

from bringing the 2002 to 2010 claims because EQT did not take written exception to payments 

in this period within twenty-four months, as required. The district court prohibited EQT from 

seeking damages on the five FOAs that limit the time to bring claims.

Because we ruled that the district court properly imposed discovery sanctions on EQT’s 

claims, which effectively dismissed its 2002 to 2010 claims, we need not discuss whether the 

district court erred in alternatively dismissing these claims under a contractual time bar. 

E. Prejudgment Interest on Cash Payment

EQT argues that it was entitled to prejudgment interest on the $1,833,780 pre-trial Cash 

Payment. It sought this prejudgment interest in Count VI of its complaint. The district court did 

not rule on this issue in its Findings of Fact and Conclusions of Law, and EQT made the request 

again in its motion for relief from judgment. The district court ultimately denied EQT’s request 

for prejudgment interest on the Cash Payment. We agree. 

We review a district court’s denial to award prejudgment interest for an abuse of discretion.

Howe, 801 F.3d at 750. Because this is a diversity case, this decision is governed by Kentucky 

law. See Conte v. Gen. Housewares Corp., 215 F.3d 628, 633 (6th Cir. 2000). “The longstanding 

rule in [Kentucky] is that prejudgment interest is awarded as a matter of right on a liquidated 

demand, and is a matter within the discretion of the trial court or jury on unliquidated demands.” 

3D Enters., 174 S.W.3d at 450. “Liquidated claims are of such a nature that the amount is capable 

of ascertainment by mere computation, can be established with reasonable certainty, can be 

ascertained in accordance with fixed rules of evidence and known standards of value, or can be 

determined by reference to well-established market values.” Id. (citation and internal quotation 

marks omitted). “Absent a contractually agreed upon rate, the appropriate rate of interest is 
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governed by statute. KRS 360.010 ... provides that the legal rate of interest is eight (8%) percent 

per annum.” Reliable Mech., Inc. v. Naylor Indus. Servs., Inc., 125 S.W.3d 856, 857 (Ky. Ct. App. 

2003) (internal quotation marks omitted). 

EQT argues that the Cash Payment was liquidated because it was a definite sum determined 

by mere computation. It also claims that the Bankruptcy Court’s order preserved its right to seek 

prejudgment interest on the Cash Payment. However, as the district court noted, Magnum Hunter 

made the Cash Payment to EQT after the two parties came to an agreement in private negotiations, 

not because the district court ordered Magnum Hunter to do so. The Cash Payment was not a part 

of this dispute, so there was no “liquidated demand” for the district court to award prejudgment 

interest on. In private negotiations, EQT could have sought interest, and we will not change the 

terms of the settlement the parties reached. Accordingly, the district court did not abuse its 

discretion in denying EQT prejudgment interest on the Cash Payment.

F. Shut-in Fees

Magnum Hunter on cross-appeal argues that the district court erred in awarding EQT 

damages for unpaid shut-in fees, which EQT sought in Count II of its complaint. The FOAs 

contain language requiring Magnum Hunter to pay EQT either $500 or $600 in fees per year, per 

well not in production. The Mercadante Audit found that Magnum Hunter failed to pay shut-in 

fees on multiple wells for which EQT did not receive production payments. The Cash Payment 

covered the shut-in fees for the 2011 to 2013 audit period, in the amount of $15,537, but did not 

cover any unpaid shut-in fees after the audit period. EQT contacted Mercadante for advice 

regarding damage calculations for the 2013 to 2015 period, and Mercadante suggested 

extrapolating the 2011 to 2013 calculation as an estimate for 2013 to 2015. Magnum Hunter 

objected to this extrapolation, but the district court found it “logical that the amount of fees and 
Case Nos. 18-5372/5388, EQT v. Magnum Hunter

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royalties owed on the FOA wells for the 2011 to 2013 period would be close to the amounts owed 

on the same wells for the subsequent two-year period.” R. 77, Page ID 4566. “Using the 

extrapolation method, the [district court found] that Magnum Hunter owes EQT $15,537 for 

unpaid shut-in fees from 2013-present.” R. 122, Findings of Fact, Page ID 5568. 

This court reviews the district court’s calculation of damages for clear error because 

“questions raised concerning damages are essentially questions of fact.” Canderm Pharmacal, 

Ltd. v. Elder Pharms., Inc., 862 F.2d 597, 606 (6th Cir. 1988); see also Eagle Supply & Mfg., L.P. 

v. Bechtel Jacobs Co., 868 F.3d 423, 431 (6th Cir. 2017). “A finding is clearly erroneous when 

although there is evidence to support it, the reviewing court on the entire evidence is left with the 

definite and firm conviction that a mistake has been committed.” United States v. Atkins, 843 F.3d 

625, 632 (6th Cir. 2016) (citation and internal quotation marks omitted). “Where it is reasonably 

certain that damage has resulted, mere uncertainty as to the amount does not preclude one’s right 

of recovery or prevent a jury decision awarding damages.” Johnson v. Cormney, 596 S.W.2d 23, 

27 (Ky. Ct. App. 1979), overruled on other grounds by Marshall v. Paducah, 618 S.W.2d 433 

(Ky. Ct. App. 1981). “Kentucky law does not require [a claimant] to provide exact calculations of 

its damage—an estimation may suffice if it proves damages with reasonable certainty.” Gibson v. 

Ky. Farm Bureau Mut. Ins. Co., 328 S.W.3d 195, 205 (Ky. Ct. App. 2010) (internal quotations 

marks omitted). 

Magnum Hunter argues that an EQT representative testified at trial that all the Mercadante 

Audit exceptions were brought forward through August 2015, so the extrapolation should not have 

been from 2013 to the present, but only from August 2015 forward. However, the audit report

clearly states that the audit covers 2011 to 2013, and the district court found that the Cash Payment 

did not include shut-in fees for the post-audit period. Neither party disputes that EQT was 
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damaged by Magnum Hunter’s continued failure to pay shut-in fees after 2013. Thus, EQT’s 

reasonably certain estimate of its 2013 to 2015 damages, by extrapolating from its 2011 to 2013 

damages, was sufficient. See Gibson, 328 S.W.3d at 205 (rejecting plaintiff’s argument that an 

award was not supported by specific evidence, claiming that “[t]here was no itemization, no 

definitive numbers, just a series of ... estimates” (alterations in original)). Magnum Hunter had 

the opportunity to cast doubt on the estimate by, for example, proving that certain wells were no 

longer shut-in. It did not do so. The district court did not err in awarding EQT damages for unpaid 

shut-in fees for Count II.

G. Credit Claim

Magnum Hunter argues that the district court erred in denying its claim for a $454,753 

credit. At trial and in post-trial filings, Magnum Hunter claimed that after making the Cash 

Payment of $1,833,780 to satisfy the Mercadante Audit claims—which, according to Magnum 

Hunter, should have been reduced to $1,379,027 after the district court dismissed the NGL-related 

claims and after EQT did not pursue an audit exception in its complaint—it was entitled to a credit. 

However, as the district court observed, evidence at trial, including Magnum Hunter’s own witness 

report, shows that only $1,232,597 of the Cash Payment went towards satisfying the 2011 to 2013 

audit claims. The district court also found that none of the Cash Payment covered NGL royalties. 

The rest of the Cash Payment went towards satisfying audit exceptions that had been rolled through 

2015, and other claims. The district court rightfully denied Magnum Hunter’s claim for a credit.

Magnum Hunter argues that conflicting accounts between EQT’s pleadings and its trial 

testimony creates confusion on this issue. However, the evidence shows that only a portion of the 

Cash Payment was used to satisfy the Mercadante Audit claims and that no portion of it was for 
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NGLs, meaning Magnum Hunter did not overpay. There is no confusion, and the evidence 

supports the district court’s denial of Magnum Hunter’s credit claim.

H. Prejudgment Interest on Unpaid Royalties and Shut-in Fees

EQT sought prejudgment interest on damages for unpaid royalties and shut-in fees, which 

Magnum Hunter also challenges on cross-appeal. The district court granted summary judgment 

on Count I of EQT’s complaint for unpaid royalties from 2015 to 2017. “In particular, the [district 

court] found Magnum Hunter breached the FOAs when ‘Magnum Hunter suspended payments to 

EQT, resulting in a cessation of payments required by the FOAs.’” R. 122, Page ID 5564. The 

district court awarded EQT a $454,537 judgment on Count I, as well as prejudgment interest. As 

stated above, the district court awarded a $15,537 judgment for unpaid shut-in fees on Count II, 

with prejudgment interest. 

Magnum Hunter argues that the district court abused its discretion in awarding 

prejudgment interest on these claims, characterizing them as unliquidated. However, the district 

court used trial and post-trial evidence to reasonably calculate damages on unpaid royalties. The

district court reasonably calculated damages on unpaid shut-in fees, as detailed above. As the 

district court held and demonstrated, EQT’s claims for unpaid royalties and shut-in fees are capable 

of ascertainment by mere computation, and are thus liquidated. 3D Enters., 174 S.W.3d at 450; 

see also Friction Materials Co. v. Stinson, 833 S.W.2d 388, 392 (Ky. Ct. App. 1992) (“This is a 

breach of contract case, and although the amount claimed was vigorously disputed, the amount 

was readily ascertainable. Interest should follow as a matter of course for what in substance is an 

unpaid debt.”). The district court did not abuse its discretion in awarding EQT prejudgment 

interest.
Case Nos. 18-5372/5388, EQT v. Magnum Hunter

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III.

For the foregoing reasons, the district court’s judgment with respect to the NGL royalties

in Count V is REVERSED in part, and the remainder of its judgment is AFFIRMED. The case 

is REMANDED for the limited purpose of determining what royalties, if any, EQT is owed on 

NGLs, where the royalty is calculated after deducting post-production costs.