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Shephard v. AIX Energy, Inc.

Court of Appeals of Louisiana, Second Circuit

May 23, 2018


          Appealed from the First Judicial District Court for the Parish of Caddo, Louisiana Trial Court No. 577, 546 Honorable Craig Marcotte, Judge

          COOK, YANCEY, KING & GALLOWAY By: Sidney E. Cook, Jr. Lisa C. Cronin John T. Kalmbach David J. Hemken Counsel for Defendants- Appellants AIX Energy, Inc. and St. Paul Fire & Marine Ins.

          MAHTOOK & LAFLEUR By: Ward F. LaFleur Richard J. Hymel GREGORIO, CHAFIN, JOHNSON, POOLSON & TABOR, LLC By: Scott Chafin, Jr. Julie Payne Johnson Counsel for Plaintiffs- Appellees Jeremy Shephard and Emily Shephard, and Michael Jackson & Tamisia Jackson

          ROBERT L. SIEGEL RACHEL G. WEBRE JAMESON MICHAEL TAYLOR Counsel for Defendants- Appellees National Union Fire Ins. Co., AIG Specialty Ins. Co. a/k/a Chartis Ins. Co.

          LUNN, IRION, SALLEY, ET AL. By: Gerald M. Johnson, Jr. Counsel for Defendants- Appellees Bear Creek Services, LLC and Avery Graves, IV

          JOHNSON, RAHMAN & THOMAS By: Patricia Jackson Delpit Counsel for LWCC Intervener-Appellee

          Before WILLIAMS, MOORE, and McCALLUM, JJ.

          MOORE, J.

         AIX Energy Inc. and its insurer, St. Paul Fire & Marine Insurance Company, appeal a jury verdict that awarded the plaintiffs, Jeremy Shephard and Michael Jackson, a total of $22.45 million for burns and other losses sustained in a natural gas fire that occurred on an oil well where they were working. AIX and St. Paul also contest several of the district court's pretrial and posttrial rulings. We affirm in part, but amend the judgment to make certain elements of the damage award conform to the trial evidence and to limit St. Paul's postjudgment interest to the final amount of the judgment, and render.


         AIX was an owner/operator of the Bud Meadors No. 3 well, in Claiborne Parish. AIX spudded the well in January 2013 and ran it down through the Haynesville Shale and into the Smackover formation, over 10, 000 feet deep. AIX cased the well and perforated it in the Smackover, but it did not produce at a commercial rate. In this time frame, AIX used drilling mud solutions that weighed between 9.9 and 10.3 pounds per gallon ("PPG") to maintain equal pressure between the well bore and the surrounding formation.

         In late June AIX performed a frac job and hired a contractor, Republic Well Testing, to measure the flowback; at this time, Republic installed a closed flowback tank some 50 feet from the well. The frac job did not help production, so AIC decided to do a workover on the well. It hired Baker-Hughes Inc. to set a "packer" and try to produce through smaller tubing; Dykes Well Service to provide a workover rig and crew; State Line Vacuum to supply the standard (2% KCL) completion fluid; and Avery Graves (who was under contract to Bear Creek Services) as a completion consultant. The plaintiffs, Jackson and Shephard, worked for Dykes, as toolpusher and floor hand, respectively.

         Dykes's crew arrived on June 27, and installed a flowback tank and pump about 6-8 feet from the well. Baker Hughes had to shut in the well that afternoon, finding sand in the production casing; however, slow production continued overnight, running into Republic's flowback tank.

         The next day, June 28, Baker Hughes could not get the packer down to the desired depth because of sand; AIX directed Graves, the consultant, to run a "cleanout operation." Late that morning, the well was shut in again, and Republic disconnected its flowback tank (some 50 feet away), and Dykes connected its own tank (6-8 feet away). At AIX's direction, State Line delivered the 2% KCL completion fluid and pumped 60 barrels of this into the well from its flowback tank.

         The Dykes crew then ran a bit and length of narrow tubing down the well in an effort to circulate the sand out of the casing. Gas bubbles started to rise to the surface, so Jackson (Dykes's toolpusher) shut in the well again. Graves (the completion consultant) directed Jackson to "circulate" the gas out of the well; the Dykes crew used its own flowback tank, instead of the Republic tank that was farther away. This went on for 30-45 minutes, when, suddenly, there was an explosion.

         Shephard and Jackson, who were standing nearest the well, were knocked over by a wall of flame and seriously burned. Shephard described it as a huge eruption of gas from the completion fluid; Jackson said it "hit and blew with no warning."

         Shephard was airlifted to the LSU burn center, in Shreveport, where he stayed one month; he was then transferred to Life Care. He had second-degree burns over 33-49% of his body, including his face, neck, flank, shoulders, forearms and legs; he has had four surgeries, including facial reconstruction to give him a "new lip, " but he is afraid he will lose his ears. He has also complained of chronic pain, low back pain, traumatic brain injury, and seizures. Jackson sustained burns to 20% of his body, with second-degree burns to his face, head, ears and arms; he has also complained of pulmonary collapse and hearing loss.


         Shephard, Jackson and their wives filed this personal injury action in June 2014 in Caddo Parish. Defendants included AIX Energy Inc., AIX Operating Co., Bear Creek, National Union (Bear Creek's insurer), Graves, and Republic Well Testing. A multiplicity of responsive pleadings followed. Germane to this appeal, in March 2015 the plaintiffs added St. Paul, AIX's liability carrier. The plaintiffs ultimately settled with Bear Creek and Graves, in his individual capacity, reserving their rights against National Union (Bear Creek's insurer), subject to a credit of $832, 611.

         In October 2015, AIX Energy and AIX Operating Co. filed for bankruptcy protection. Pursuant to an agreement, the bankruptcy court lifted the stay to allow Shephard and Jackson to proceed against AIX's liability insurance policies and proceeds, with the proviso that they would file no claim against the bankrupt's estate.

         Among many other pretrial motions filed by the parties, AIX filed a Daubert motion to exclude the plaintiffs' expert, William D. Griffin, a chemical engineer, from testifying in the field of petroleum engineering. After an extensive hearing in early December 2016, the district court denied the defense motion and allowed Griffin to testify as tendered.


         The matter came to trial over nine days, December 5-15, 2016, against the remaining defendants, AIX Energy (subject to the bankruptcy court ruling), Graves (the completion consultant), Bear Creek (for any actions independent of Graves's), Republic Well Testing, State Line Vacuum and Dykes Oil Co. Presentation of the evidence was tedious and technical, focusing on the mechanics of a workover operation, the conduct of all the persons at the Bud Meadors No. 3 site on the day of the accident, the course of treatment each plaintiff received, medical opinions as to their injuries and economists' opinion as to their projected losses.

         On the critical question of how the accident occurred, the plaintiffs' expert, Griffin, felt that the completion fluid ordered by AIX to circulate the well, 2% KCL, which weighs 8.4 PPG (only slightly heavier than pure water), was simply too light to keep down the gas bubbles entering the well at Smackover depth. He calculated, using data from the frac, that the fluid should have weighed about 10.5 PPG, and this would have controlled the escaping gas. He also faulted AIX for not writing a "completion plan" and giving it to all parties on the site.

         AIX's expert, David Watson, disagreed, testifying that 8.4 PPG is standard for completion fluid and for circulating a well during workover. In Watson's view, Griffin was hopelessly wrong to recommend an extremely heavy "drilling mud" during the completion process. Watson felt that the amount of gas that escaped on June 28 was modest and normal, and that the plaintiffs were at fault for not noticing the normal accumulation around the wellhead, for using a flowback tank and pump much too close to the well, and for failing to shut in the well. Watson also thought that other persons around the well site were at fault for causing, or failing to prevent, sparks.

         After the plaintiffs rested, AIX moved to amend the jury instructions from referring to "a cause" to "proximate cause." The court did not explicitly rule on this; the instructions ultimately stated, "The burden of proving both the existence of the injuries and the causal connection between them and the accident rests with the Plaintiff."

         After 2 hours and 40 minutes' deliberation, the jury returned a verdict that accepted Griffin's analysis of the accident, and rejected Watson's. It found AIX was negligent, and its negligence was "a cause" of the plaintiffs' injuries; Graves and Bear Creek were also negligent, and "a cause" of the plaintiff's injuries; Republic Well Testing, State Line Vacuum, Dykes Oil Co., and the plaintiffs themselves, were not negligent. The jury allocated fault 97.5% to AIX, 0.5% to Graves and 2% to Bear Creek. It awarded damages as follows:

Jeremy Shephard

Past & future physical pain & suffering, mental anguish, loss of enjoyment of life

$ 7, 500, 000.00

Past medical expenses

235, 438.03

Future medical expenses

7, 500, 000.00

Past lost wages

245, 000.00

Future lost wages

2, 000, 000.00

Emily Shephard

Loss of consortium

500, 000.00

Michael Jackson[1]

Past & future physical pain & suffering, mental anguish, loss of enjoyment of life

3, 000, 000.00

Past medical expenses

45, 747.16

Future medical expenses

1, 000, 000.00

Loss of future earning capacity

1, 500, 000.00

         AIX filed several posttrial motions. One was an exception of no right of action or, alternatively, motion to reopen or supplement the record, asserting that the plaintiffs were AIX's statutory employees under the two-contract theory, La. R.S. 23:1601 A(2). Another was a motion to nullify the verdict on grounds that one juror, Halie Moore, did not live in Caddo Parish at the time of her service on the jury. The third was a motion for new trial or JNOV asserting, among other things, that the damages were not based on, or consistent with, the trial evidence. The court denied all motions, noting, however, that the damages were "extremely high."

         The court rendered judgment in favor of Shephard and against AIX, "pursuant to the ruling" of the bankruptcy court, for the full total (less the 2.5% fault ascribed to Graves and Bear Creek), or $17, 043.427, "limited to" AIX's insurance proceeds, and against St. Paul for $8, 146, 995 (stated as 74.3% of the policy limit available), plus prejudgment interest on the reduced amount ($8.1 million) and postjudgment interest on the full ($17 million); and in favor of Jackson, also "pursuant to the ruling" of the bankruptcy court, for the full total (less the 2.5%), $5, 407, 103, and against St. Paul for $2, 584, 450 (stated as 23.7% of the policy limit available), plus prejudgment interest on the reduced ($2.58 million) and postjudgment interest on the full ($5.4 million) amount.[2]

         AIX has appealed, raising eight assignments of error.


         Assignment 1: ...

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