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From Products Liability Law Daily, August 12, 2016

$12.7M verdict for oil well owners against fracking equipment company reversed

By John W. Scanlan, J.D.

An oil and gas industry equipment company that rented a frack stack to the owners of an oil well that was damaged in a blowout while the equipment was in use should have been allowed to present an instruction to the jury about the repairability of the well, a Texas court of appeals ruled in reversing a $12.7 million verdict for the oil well owners and ordering a new trial (Premium Valve Services, LLC v. Comstock Oil & Gas-Louisiana LLC, August 11, 2016, Lloyd, R.).

The oil well owners rented a "frack stack" from Premium Valve Services, LLC (PVS) for use with their "Collins #1" well. A flow cross is one of the parts of a frack stack. While operating on this well, the flow cross failed, causing the frack stack to explode and resulting in a well blowout. The owners brought claims for negligence and products liability against PVS, alleging that the frack stack was defective because the flow cross contained a crack, and that that the well was damaged as a result of the defect and had to be abandoned and re-drilled despite their attempts to save the well. PVS argued that most of the damage was caused by the owners’ negligent remedial efforts that caused a tool to be lodged in the well, and that it was their inability to retrieve this tool that caused the well to be abandoned.

At trial, the parties disputed whether Collins #1 was capable of being repaired, the reasonableness of the repair efforts, and whether Collins #2 was a replacement for Collins #1. The court refused PVS’s request to submit to the jury a question regarding whether the well was "damaged to such an extent as a result of the occurrence that it could not be reasonably repaired?" The jury determined that the blowout was proximately caused by PVS’s negligence and awarded the owners $12.7 million in damages. PVS appealed.

Jury instruction/new trial. The appellate court ordered a new trial because the failure to submit the proposed question to the jury was harmful. Damages for a temporary injury to real property usually is measured as the cost to repair or restore the property, but damages for a permanent injury as the difference in fair market value before and after the injury. The question of whether an injury is temporary or permanent is an issue of law, but disputed facts underlying this question must be submitted to the finder of fact. In this case, the question was supported by the written pleadings and the parties had presented "more than a mere scintilla of evidence" regarding the repairability of the well. The jury’s answer to the factual question in the proposed jury instruction would have given the court a factual basis from which it could have determined whether the damage was temporary or permanent, and the court’s answer to the legal question would have determined the proper level of damages. As the instruction related to a critical issue, the failure to submit it to the jury was harmful.

The case is No. 01-15-00108-CV.

Attorneys: H. Dwayne Newton (Newton & Associates) for Premium Valve Services, LLC. Julia M. Palmer (Northrop Grumman Corp.) for Comstock Oil & Gas, LP, Comstock Oil & Gas-Louisiana, LLC and Certain Underwriters.

Companies: Premium Valve Services, LLC; Comstock Oil & Gas, LP; Comstock Oil & Gas-Louisiana, LLC; Certain Underwriters

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