Court Opinion

ID: 4014571
Source: CourtListenerOpinion
Date Created: 2016-07-11 16:00:59.085086+00
Date Added: 2024-06-11T12:59:37.942070
License: Public Domain

FILED
                                                                    United States Court of Appeals
                      UNITED STATES COURT OF APPEALS                        Tenth Circuit

                             FOR THE TENTH CIRCUIT                          July 11, 2016
                         _________________________________
                                                                        Elisabeth A. Shumaker
                                                                            Clerk of Court
ZENITH PETROLEUM CORPORATION,

      Plaintiff - Appellant,

v.                                                        No. 15-3242
                                                 (D.C. No. 6:13-CV-01175-JTM)
DAVID R. STEERMAN, Executor for the                         (D. Kan.)
Deceased Earlene H. Steerman,

      Defendant Third-Party Plaintiff -
      Appellee,

v.

VERNON L. SMITH & ASSOCIATES,
INC.,

      Third-Party Defendant - Appellee.
                       _________________________________

                             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 This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral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.
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-of-

contract 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

                                             4
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 breach-

of-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

                                             5
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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