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Ensign United States Drilling, Inc. v. Weatherford U.S. Limited Partnership

United States District Court, D. Colorado

June 25, 2015

ENSIGN UNITED STATES DRILLING, INC., and ENSIGN UNITED STATES DRILLING (CALIFORNIA) INC., Plaintiffs,
v.
WEATHERFORD U.S. LIMITED PARTNERSHIP, Defendants.

ORDER

LEWIS T. BABCOCK, District Judge.

This matter is before me on the following motions filed by Defendant Weatherford U.S. Limited Partnership ("Weatherford"): 1) Defendant Weatherford's Motion for Leave to Amend Answer [Doc #80]; and 2) Defendant Weatherford's Motion for Partial Summary Judgment [Doc #90]. Plaintiffs Ensign United States Drilling, Inc. and Ensign United States Drilling (California) Inc. (collectively, "Ensign") opposed the relief requested. Oral arguments would not materially assist me in my determination. After consideration of the parties' briefs and attachments, and for the reason stated, I DENY Weatherford's Motion to Amend, but I GRANT Weatherford's Motion for Partial Summary Judgment as follows.

I. BACKGROUND

Ensign is an oil well service contractor. As part of Master Service Agreement ("MSA") with a land lease operator, Vintage Production California LLC ("Vintage"), Ensign provided service rigs (and all related equipment, tools, materials, and labor) for servicing wells located in Ventura, California. Ensign's Rig No. 333 contained a rod elevator that Ensign had purchased from B&H Rig and Tong Sales. The rod elevator had a safety hook, known as an "RH-35 rod hook, " that had been manufactured by Weatherford. On May 20, 2011, Ensign employee Ryan Bolton was severely injured when the rod elevator on Rig. No. 333 fell on him during an industrial accident. Ensign asserts that the accident was caused by the failure of the RH-35 rod hook due to a manufacturing defect. Following the accident, Ensign filed this lawsuit against Weatherford in which it asserts claims of: 1) Negligence; 2) Strict Liability; 3) Breach of Express Warranty; and 4) Breach of Implied Warranty. [Doc #4]

II. MOTION TO AMEND

I first address Weatherford's motion to amend its answer pursuant to Fed.R.Civ.P. 15(a)(2) and Fed.R.Civ.P. 16(b)(4).

Ensign filed its complaint against Weatherford on February 11, 2013, in the District Court for the City and County of Denver. It was subsequently removed to this Court based on diversity jurisdiction on March 19, 2013. Weatherford filed its answer to the complaint on July 15, 2013. [Doc #39] The deadline for amending pleadings was January 6, 2014. [Doc #50] Weatherford filed its motion seeking to amend its answer, almost a year out of time, on December 31, 2014. [Doc #80] In this motion, Weatherford seeks leave to amend to: 1) admit the existence of an express warranty; and 2) assert a defense to the damages sought by Ensign based on the economic loss doctrine. [Doc #88]

First, Weatherford requests to admit that an express warranty governs (and limits) its liability for the alleged defective manufacture of the RH-35 rod hook in this case based on the terms and conditions found on the back of its form credit application. Weatherford argues that the terms and conditions on its credit application specifically provides that it "warrants equipment sold pursuant hereto to be free of defects in material and workmanship for a period of one (1) year after the date equipment is delivered, " and that its "liability for breach of this warranty is expressly limited to the repair or replacement... of any equipment or parts of equipment which prove to be defective during the warranty period." The terms also contain limitations on any consequential or incidental damages. [Doc #90-2]

In response, Ensign asserts that the terms and conditions on the back of Weatherford's blank credit application are clearly inapplicable to this case because Ensign did not execute any such document, as it did not apply for credit with Weatherford, and the form was never presented to, disclosed to or received by Ensign before now. Ensign supports this factual assertion by affidavit. Specifically, Plaintiff's former Assistant District Manager of Well Servicing in California, Richard Green, avers that:

We did not fill out or agree with any sort of credit application with Weatherford. I have never received or seen the blank Weatherford credit application attached to Weatherford's Motion for Summary Judgment, and its terms were never a part of any contract I am aware of. I obviously did not in any way rely on the blank credit application in my purchase of the Rod Hook [for Plaintiff]. [Doc #94-2, ¶7]

Mr. Green also avers that the only documents Ensign received as part of their purchase of the RH-35 rod hook were the sales materials and the user manual. [Doc #94-2, ¶7]

Weatherford does not dispute that Ensign never contracted or agreed to the terms and conditions by signing or even being aware of Weatherford's credit application. And, Weatherford does not allege that Ensign received, completed, or signed the credit application containing the limited warranty terms. Furthermore, Ensign's express warranty claim raised in this case is not premised on any written agreement between the parties - including the blank credit agreement - but rather is based on the representations made by Weatherford in its marketing materials/documents and operating manuals related to the performance of its RH-35 rod hook. Ensign's complaint clearly alleges that Weatherford "utilized advertising, marketing and direct conversations to encourage Ensign's purchase and use of the... RH-35 rod hook, and expressly warranted to Ensign that this product was effective, proper and safe for Ensign's intended use." [Doc #4, ¶53] And, Weatherford "breached their express warranties regarding the merchantability and fitness of the RH-35 rod hook by designing, testing, distributing, manufacturing, advertising, marketing, and selling the RH-35 rod hook with an unreasonably and inherently dangerous and defective latch." [Doc #4, ¶56]

It is undisputed that the express warranty is inapplicable to this case. Weatherford has not rebutted Ensign's supported claim that it is not subject to the terms and conditions contained on the back of Weatherford's credit application, as well as Ensign's allegations in the complaint that its breach of express warranty claim is grounded in Weatherford's marketing and operating materials for the RH-35 rod hook at issue.

A motion to amend may be denied based on "futility of amendment." Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962). A proposed amendment is futile if the complaint, as amended, would be subject to dismissal. Jefferson County School District No. R-1 v. Moody's Investor's Services, Inc., 175 F.3d 848, 859 (10th Cir. 1999).

Therefore, Weatherford's request to amend its answer to admit that "a limited express warranty exists and applied to the RH-35 rod hook... as outlined in the written terms and conditions governing its sale..." based on the written warranties on the back of its blank, form credit application is denied as futile. [Doc #88-1, ¶53]

As to its request to amend in order to assert its "Twenty-First Separate Defense" that "Plaintiffs' tort claims are barred by the economic loss rule, " I agree with Weatherford's contention that the economic loss rule is applicable here as a matter of law as discussed below and, as such, ...


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