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CAUSE NO. 202006165
EAGLERIDGE OPERATING, LLC § IN THE DISTRICT COURT OF
Plaintiff,
VS. HARRIS COUNTY, TEXAS
USG PROPERTIES BARNETT II, LLC, §
Defendant. JUDICIAL DISTRICT
EAGLERIDGE OPERATING, LLC’S RESPONSE TO USG PROPERTIES BARNETT
II, LLC’S AMENDED TRADITIONAL MOTION FOR SUMMARY JUDGMENT
TO THE HONORABLE JUDGE OF SAID COURT:
COMES NOW, Plaintiff Eagleridge Operating, LLC (“Eagleridge”) and files this Response
to USG Properties Barnett II, LLC’s Amended Rule 166a(c) Motion for Summary Judgment, and
would respectfully show the Court the following:
SUMMARY OF RESPONSE
In its motion USG Properties Barnett II, LLC USG argues that Section 13.2 of the
COSA applies over Section 13.4 because Section 13.4 allegedly fails to meet the requirements of
TOAIA and J&C Energy, Inc. (“J&C) is allegedly affiliated with Eagleridge. USG’s arguments
regarding TOAIA are inapplicable and J&C is not an affiliate of Eagleridge.
First, Eagleridge, a small contractor, is seeking to obtain indemnity from USG, an affiliate
of a very large oil company. This is the exact opposite of the type of indemnification agreement
barred by TOAIA, which prohibits powerful oil companies from extracting indemnities from
powerless contractors. USG asks the Court to distort a statutory shield protecting small contractors
like Eagleridge into a sword for powerful owners like to avoid the express language of the
agreements they execute
Second and to the extent it applies, the COSA’s indemnification agreement falls squarely
within TOAIA’s “safe harbor” insurance provision. In the COSA, USG and Eagleridge agreed to
both indemnify each other and to purchase insurance to support those indemnities, and both
purchased the required insurance. TOAIA requires nothing more to enforce the COSA’s
indemnification agreement.
Third, TOAIA does not address or affect the COSA’s additional insured provision, which
is separate and independent from contractual indemnity provision . Thus, irrespective of
whether the contractual indemnity agreement is enforceable, USG is liable for its breach of the
COSA’s additional insured provision.
Finally, J&C’s owner, Jonathan Garza, testified J&C was a separate legal entity from
Eagleridge, was always a contractor, not employee or affiliate of Eagleridge, and had its own
employees. Further, J&C did not exclusively work for Eagleridge; rather, J&C worked for multiple
companies at the same time it worked as a contractor for Eagleridge.
Accordingly, USG’s summary judgment is not appropriate and should be in all things
deniedEagleridge currently has pending its Traditional Motion for Summary Judgment against
Defendant USG Properties Barnett II, LLC The Court should deny USC’s motion and grant
Eagleridge’s summary judgment motion, which was submitted to the Court on May 25, 2020.
SUMMARY JUDGMENT EVIDENCE
Pursuant to Texas Rule of Civil Procedure 166a(c) and McConathy v. McConathy
S.W.2d 341, 342 (Tex. 1994), Eagleridge hereby provides itsstatement of intent to rely on the
following exhibits as summary judgment evidence and incorporates same by reference as if fully
set forth herein:
August 1, 2016 COSA;
Notice of Deposition with Topics for J. Monro, USG corporate representative;
The arguments and exhibits to Eagleridge’s Traditional Motion for Summary Judgment are incorporated by reference
as if fully set forth herein. The foregoing motion was submitted on May 25, 2020 but no ruling has been issued to
date.
Excerpts from June 27, 2019 deposition Vol. I of USG corporate representative, J.
Monro;
Excerpts from August 5, 2019 deposition Vol. II of USG corporate representative,
J. Monro;
Excerpts from March 25, 2019 deposition of M. Grawe;
Tenders to USG;
Plaintiffs’ Fourth Amended Petition;
MSA between J&C and Eagleridge;
DWQ from J&C regarding Lovern;
Excerpts from March 28, 2019 deposition of Earmon Lovern;
Excerpts from June 25, 2019 deposition of Thomas Aston;
Excerpts from March 5, 2019 deposition of Jonathan Garza; and
Exhibit 36 to March 5, 2019 deposition of Jonathan Garza.
Eagleridge also requests this Court to take judicial notice of the pleadings on file in this matter,
pursuant to Rule 201 of the TEXAS ULES OF VIDENCE.
ARGUMENT AND AUTHORITIES
“A plaintiff moving for summary judgment must conclusively prove all essential elements
of its claim.” Wright v Young, 2012 WL 2106823, at *1 (Tex. App.—Houston [1 Dist.] 2012, no
pet.) (cited by USG at USG MSJ p. 5). USG’s summary judgment must fail because (1) it failed
to establish TOAIA applies to the facts of the case; (2) it failed to establish J&C was an “affiliated”
company of Eagleridge for the purposes of the work being conducted at the time of the accident;
and (3) Eagleridge established Section 13.4 applies and, as such, USG owes indemnity to
Eagleridge.
USG’s summary judgment must be denied because it failed to establish TOAIA
applies to the facts of this case.
The Texas Supreme Court has counseled that TOAIA must be strictly construed to permit
parties to contract freely on matters not expressly barred by the statute. Getty Oil Co. v. Ins. Co.
of N. Am., 845 S.W.2d 794, 805 (Tex. 1992). The COSA is not covered by TOAIA, and even if it
were, the parties have satisfied the requirements of TOAIA’s “safe harbor” insurance provision.
Consistent with Texas’s strong policy favoring freedom of contract, the Court should deny USG’s
motion and grant Eagleridge’s summary judgment.
The Legislature passed TOAIA because it found “that an inequity is fostered on certain
contractors by the indemnity provision in rtain agreements pertaining to wells for oil, gas, or
water.” RAC ODE § 127.002(a) (emphasis added). Specifically, before the
enactment of TOAIA, many oil companies had “hold harmless” agreements with their drilling and
service contractors. See Getty Oil Co., 845 S.W.2d at 803. These agreements required the
contractors to indemnify the oil companies for losses caused not only by the negligence of the
contractors, but also the negligence of the oil companies and third parties as well. Id. (emphasis
added). The Legislature found such agreements placed an undue financial burden on small
contractors with little bargaining power. Id. These small contractors were forced to indemnify
owners but were unable to obtain insurance at a reasonable cost to cover their obligations. See
Ken Petrol. Corp. v. Questor Drilling Corp., 24 S.W.3d 344, 348 (Tex. 2000). Therefore,
contractors were subjected to significant liability with no feasible means of insuring against those
obligations. Id.
The COSA generally, and Section 13.4 (sometimes mislabeled Section 13.5) specifically,
is not the type of indemnification agreement with which TOAIA is concerned. In pertinent part,
Section 13.4 requires the oil company, USG, to indemnify the contractor, Eagleridge, from claims
arising out of, in connection with, or resulting from the performance of services by third parties
under contracts held for USG’s benefit in Eagleridge’s name, unless such claims are attributable
to Eagleridge’s gross negligence or willful misconduct (Ex. A, § 13.4). Neither the text nor
purpose of TOAIA support USG’s position that Section 13.4 of the indemnity agreement is void
as a matter of law. TOAIA “is for [the contractor’s] protection,” and “[the oil company] cannot
now claim that its own indemnity obligation is void.” Ken Petrol. Corp., 24 S.W.3d at 353.
In its current form, TOAIA provides that “an agreement pertaining to a well for oil, gas, or
water” is void as a matter of public policy if it purports to indemnify an entity against liability
caused by the “negligence of the indemnitee, his agent or employee, or an individual contractor
directly responsible to the indemnitee.” RAC ODE § 127.003(a). Notably,
TOAIA limits the scope of its application by exempting various contractual arrangements and
activities. E.g. id. §§ 127.001(4)(B), 127.002(c), 127.004. Thus, even though a contract may
relate to the provision of some well or mine services, TOAIA is inapplicable if those services may
also be interpreted to fall within one of the statute’s exclusions or exemptions. See, e.g. Phillips
Petroleum Co. v. Brad & Sons Const. Inc., 841 F. Supp. 791, 79596 (S.D. Tex. 1993) (holding
TOAIA did not apply to work done on a pipeline, even though such work was related to the
production of oil and gas). For instance, TOAIA does not apply to “joint operating agreement
provisions for the sharing of costs or losses arising from joint activities, including costs or losses
attributable to the negligent acts or omissions of any party conducting the joint activity.”
RAC ODE § 127.002(c). Nor does it apply to “purchasing, selling, gathering,
storing, or transporting gas or natural gas liquids, or gas pipeline or fixed associated facilities,” or
the “construction, maintenance, or repair of oil, natural gas liquids, or gas pipelines or fixed
associated facilities.” Id. §127.001(4)(B).
Here, TOAIA’s provisions and purpose make clear that it is inapplicable. USG owns
working interests in numerous oil and gas leases, and “is sophisticated in the ownership,
evaluation, and operation of oil and gas properties” (Ex. A § 4.1; Ex. D, p. 285:15 20). Under the
COSA, USG designated and appointed Eagleridge “as its true and lawful agent and attorney
fact” to take the steps necessary to hold those leases (Ex. A § 4.1). The COSA provided that, while
Eagleridge would execute and hold in its name various contracts with third parties for the benefit
of USG, USG would be solely responsible for the costs, expenses, and liability associated with
those contracts (Id. 1.3(r), 1.5). Any contractors who executed agreements with Eagleridge
were directly liable to USG, as Eagleridge’s principal and as a third party beneficiary of those
agreements (Id.). As required by the COSA, the MSA specified USG was a third party beneficiary
of the indemnity provisions contained therein (Ex. H, § 8.1). Accordingly, J&C was directly
responsible to the indemnitor in this case (USG), which, again, is the opposite of the situation
contemplated by TOAIA. RAC ODE § 127.003(a). Moreover, Eagleridge
was only responsible for liability arising from its own gross negligence or willful misconduct
Id.
In all of these regards, the COSA perfectly mirrors the model form operating agreement,
which provides that an operator, in its capacity as such, is to have no liability to the other parties
for losses or liabilities, unless such losses or liabilities result from the operator’s gross negligence
or willful misconduct. See, e.g., Reeder v. Wood Cty. Energy, LLC, 395 S.W.3d 789, 79495 (Tex.
2012). As the Legislature found, this type of risk sharing agreement is “commonly understood,
accepted, and desired,” encourages “mineral development,” is “not against the public policy of
this state,” and is “enforceable.” RAC ODE § 127.002(c). Because the
COSA’s indemnification agreement allocates risks identically to the model form joint operating
agreement, it is not covered by TOAIA. Indeed, the very subject matter and purpose of the COSA
This provision is inapplicable here. In Section IV.D of its summary judgment motion, Eagleridge brought forth
competent evidence negating the application of this provision. Specifically, it provided the testimony of USG’s own
corporate representative judicially admitting Eagleridge neither acted grossly negligent nor engaged in willful
misconduct (Ex. C, p. 197/8 14; p. 198/20 22; p. 202/20 203/5)See Holy Cross Church of God in Christ v. Wolf, 44
S.W.3d 562, 568 (Tex. 2001) (explaining a judicial admission bars admitting party from later disputing the admitted
fact).
was to give Eagleridge “operating rights,” as contemplated by TOAIA’s operating agreement
carveout. T RAC ODE § 127.001(2).
oreover, the services contemplated by the COSAand those from which the claims in
the Lovern suit ariseinvolve maintaining and repairing natural gas pipelines and fixed associated
facilities for the purpose of gathering and transporting gas for sale, which are not covered by
TOAIA. (Ex. A; Ex. B, p. 197:1 7, 202:20 203:25; Ex. G). Lovern’s allegations in the underlying
lawsuit are that he was checking the valves on a “hot gas pipeline” as part of this work at the time
of the accident (Ex. G). All of this reinforces that the “statute was not intended to cover a contract”
like the one in this case. Transworld Drilling Co. v. Levingston Shipbuilding Co., 693 S.W.2d 19,
23 (Tex. App.Beaumont 1985, no writ.). Because TOAIA does not apply, USG has failed to
establish that Section 13.4 is invalid, failed to meet its burden, and its summary judgment should
be denied.
USG’s summary judgment must be denied and Eagleridge’s summary judgment must
be granted because COSA Section 13.4 was in effect and obligates USG to indemnify
Eagleridge.
Assuming arguendo TOAIA applies to this case, which is denied, then Section 13.4 meets
the safe harbor clause of the Act. USG claims that Section 13.4 establishes a unilateral indemnity
obligation, which is unsupported by insurance (USG MSJ p. 8). Neither point is availing.
Both USG and Eagleridge agreed to, and did, purchase the insurance specified in Exhibit
C to the COSA (Ex A § 6.1; Ex. E, p. 232:20 236:22). There is no dispute that USG and Eagleridge
agreed, in writing, that they both would purchase insurance (USG MSJ p. 3). The COSA details
the type, amounts, and limits of the insurance coverage in its Exhibit C (USG MSJ p. 3). Mark
Grawe, Vice President of Operations at Eagleridge, testified:
It is an undisputed fact of public record that Eagleridge was designated as the contract operator with the Texas Railroad
Commission through the COSA and, therefore, was given the referenced “operating rights.” (Ex. G).
Q. (By Mr. Stephens) The Exhibit 1 had a requirement for for both the
owner and the
A. THE WITNESS: You said Exhibit 1. I don’t see an Exhibit 1.
Q. (By Mr. Stephens) This is Exhibit 1, the operating agreement between USG
and and EagleRidge, page 12, Article 6.1. . . .
A. So Article VI, Insurance, where it says we will maintain insurance in the
amounts and the limits set forth in Exhibit C, yes.
(Ex. E, p. 232/20 233/12) (objections omitted). In addition to requiring insurance, Grawe testified
Eagleridge actually procured insurance:
Q. (By Mr. Stephens) Okay. To the best of your knowledge, was the insurance
that at least that your company was supposed to secure per this agreement,
was it secured?
A. THE WITNESS: To the best of my knowledge, this was secured, yes.
(Ex. E, p. 236/16 22) (objections omitted). Thus, Eagleridge complied with its requirements under
the COSA, which is all that TOAIA required. See T RAC ODE § 127.005; see
also Ken Petrol., 24 S.W.3d at 351; Nabors Corp. Servs., Inc. v. Northfield Ins. Co., 132 S.W.3d
90, 96 (Tex. App.—Houston [14th Dist.] 2004, no pet.).
USG acknowledges the indemnities established by Section 13.2 and 13.3 of the COSA are
supported by this insurance but claims Section 13.4 is somehow not supported by any insurance
(USG MSJ p. 3, p. 7 8). The COSA rejects this notion by addressing how the insurance required
by it relates to all three indemnity provisions together and, additionally, by requiring all three
indemnity provisions to be liberally construed in favor of enforceability (Ex. A § 13.6).
Specifically, Section 13.6 of the COSA provides that “the defense and indemnity obligation in
section 13.2 through 13.5 shall be primary . . . to any insurance which any contractor indemnified
USG relies upon federal cases out of Louisiana and the Fifth Circuit that are inapposite. In fact, Greene’s Pressure
Testing & Rentals, Inc. v. Flourney Drilling Co., 113 F.3d 47, 51 (5 Cir. 1997) has been noted by multiple courts to
be distinguishable because it is based upon the pre 1989 TOAIA. See, e.g., Ranger Ins. Co. v.. Am. Int’l Specialty
Lines Ins. Co., 78 S.W.3d 659, 664 (Tex. App.Houston [1 Dist.] 2002, no pet.); Certain Underwriters at Lloyd’s
London v. Oryx Energy Co., 142 F.3d 255, 258 59 (5 Cir. 1998). USG has failed to bring forth any competent Texas
case with precedential value to support its argument.
party or owner indemnified party is named as an additional insured, including that insurance
required by section 6.1.” In other words, the parties agreed the indemnitor was responsible for
obtaining the extent of the coverage and dollar limits of insurance specified in Exhibit C for the
benefit of the indemnitee under its own policies, irrespective of whether the indemnitee could also
obtain those benefits as an additional insured under the policies. If the indemnity obligation
established by Section 13.4 were not supported by insurance, the reference to Section 13.4 in
Section 13.6 would be completely superfluous. Thus, reading the COSA as a whole, it
memorializes the parties’ agreement that each party as indemnitor has agreed to obtain insurance
to support its respective indemnity obligations.
Further, Section 13.4 does not merely provide USG will indemnify Eagleridge. It also
provides Eagleridge will indemnify USG for claims determined to be the direct result of
Eagleridge’s gross negligence or willful misconduct. Accordingly, to the extent subsection (b)
and (c) of Section 127.005 of the Texas Civil Practice and Remedies Code apply at all, the
indemnity obligations established by Section 13.4 of the COSA best fit within subsection (b)
concerning a “mutual indemnity obligation,” rather than subsection (c) concerning a “unliteral
indemnity obligation.” Indeed, the parties’ stated intention for the indemnity obligations in
“section 13.2 through 13.5” was that they be “without lim which, under TOAIA, only
describes a mutual indemnity obligation (as a unilateral indemnity obligation is limited to
$500,000). (Ex. A, § 13.6). And, consistent with their intention, Exhibit C of the COSA requires
Such a reading would be inappropriate as courts should examine and consider the entire writing in an effort to
harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless. Coker v.
Coker, 650 S.W.2d 391, 393 (Tex. 1983). In “case of a reasonable doubt as to which of two constructions best accords
with the intent of the parties, that construction should prevail which is least favorable to the party who prepared the
instrument. Ervay, Inc. v. Wood, 373 S.W.2d 380, 384 (Tex. Civ. App.Dallas 1963, writ ref’d n.r.e.); Goldman v.
Alkek, 850 S.W.2d 568, 576 (Tex. App.Corpus Christi 1993, no writ)(lease construed “against its writer”). It is
undisputed the COSA was promulgated by USG.
USG and Eagleridge to procure equal amounts of insurance. Because the indemnity agreement
required the parties to indemnify one another reciprocally and required the parties to support their
indemnity obligations with insurance in equal amounts, the parties’ indemnity agreement qualifies
a “mutual indemnity obligation.” See RAC ODE § 127.001(3).
Under USG’s present interpretation of TOAIA, Eagleridge obtained nothing from their
indemnification agreement. But the COSA itself reflects USG’s (correct) understanding at the
time of drafting that TOAIA did not apply, and to the extent it might, the indemnification
agreement fitwithin TOAIA’s “safe harbor” insurance provision. USG should be held to the
express terms of the contract it drafted. Not the nugatory reading it now offers. Therefore, USG’s
summary judgment should be denied and the Court should in all things grant Eagleridge’s motion.
C. TOAIA does not address or affect the additional insured agreement.
Section 6.1 of the COSA requires USG to name Eagleridge as an additional insured under
each of its insurance policies. This obligation is not limited to the liability USG contractually
assumed in the COSA (or by the terms and conditions of any of the insurance policies). Since the
additional insured obligation is separate from any contractual indemnity obligation, it is
enforceable without regard to the scope or enforceability of the indemnity provisions under
TOAIA. See Evanston Ins. Co. v. ATOFINA Petrochemicals, Inc., 256 S.W.3d 660, 670 (Tex.
2008);Getty Oil Co. , 845 S.W.2d at 803–04; see also, e.g., ExxonMobil Corp. v. Elec. Reliability
Servs., Inc., 868 F.3d 408, 419 (5th Cir. 2017); Mid Continent Cas. Co. v. Swift Energy Co
F.3d 487, 494 n.8 (5th Cir. 2000).
In Getty Oil Company v. Insurance Co. of North America, the Texas Supreme Court held
that TOAIA “applies exclusively to indemnity agreements.” 845 S.W.2d at 804. As the Supreme
Court explained, an additional insured agreement is treated differently than an indemnity
agreement by TOAIA:
Prohibited indemnity provisions make the indemnitor (NL) liable for the
indemnitee’s (Getty’s) negligence. Additional insured provisions, on the other
hand, make the insurance-purchaser’s insurers (INA and Youell) liable for the loss
caused by the insured’s (Getty’s) negligence. The insurance purchaser is
responsible only for paying the insurance premiums, presumably far less than the
actual loss. Moreover, the cost of premiums is certain and exact. Thus, contractors
are still protected by the AntiIndemnity Statute from large and uncertain liabilities
caused by an indemnitee’s negligence.
Id. at 803. In short, even where TOAIA invalidates a contractual indemnity obligation, it does not
affect a second, separate obligation to name the indemnitee as an additional insured.
The Supreme Court’s subsequent decision in Evanston Insurance Co. v. ATOFINA
Petrochemicals, Inc., makes clear that the additional insured agreement in Section 6.1 of the COSA
is independent from the contractual indemnity agreement in Section 13.4:
Although the service contract in this case does not include an insurance requirement
quite as clear as the one in Getty, itis clear enoughit requires that ATOFINA
“shall be named as additional insured in each of [Triple S’s] policies.” Evanston
argues that this “brief statement” in the contract is insufficient to extend insured
status to ATOFINA for its own negligence because the insurance requirement and
certificates of insurance cannot expand coverage beyond the language of the policy.
While we agree that an insurance certificate merely evinces the holder’s status as
an insured and does not create coverage, it is unmistakable that the agreement in
this case to extend direct insured status to ATOFINA as an additional insured is
separate and independent from ATOFINA’s agreement to forego contractual
indemnity for its own negligence. We disapprove the view that this kind of
additional insured requirement fails to establish a separate and independent
obligation for insuring liability.
256 S.W.3d at 670 (internal citations omitted) (alterations in original).
Here, USG was obligated to name Eagleridge as an additional insured on its insurance
policies as a “belt and suspenders” level of protection. Yet, USG’s insurers have refused
Eagleridge’s tender as an additional insured, proving USG’s breach of its contractual obligation.
(Ex. F). TOAIA does not save USG from this breach or its resulting liability. See In re Deepwater
Horizon, 470 S.W.3d 452, 468 (Tex. 2015) (recognizing “the contractual duties to indemnify and
to maintain insurance [are] separate and independent,” and “a statute invalidating an
indemnification clause does not relieve a party of a separate duty to obtain insurance”).
D. USG’s summary judgment must be denied because it failed to establish that J&C was
an “affiliated” company to Eagleridge.
In this case, USG must conclusively prove that the specific indemnity clause (Section 13.2)
applies to the facts of this case; however, USG fails to establish this lynchpin element. USG argues
that Section 13.2 of the COSA, not Section 13.4, is the effective clause such that Eagleridge owes
indemnity to USG (USG MSJ p. 7 9). To obtain this tortured result, USG argues J&C was an
“affiliated company” because its owner, Jonathan Garza, is currently an employee of Eagleridge
and “since 2006 he has been a captive company of Eagleridge, providing his pumping services,
and those like Mr. Lovern operating through J&C, exclusive work for Eagleridge” (USG MSJ p.
11). USG failed to direct the Court to Garza’s testimony that from 2006 until 2018, he refused to
become a direct employee of Eagleridge even though he was asked on numerous occasions (Garza
depo p. 71/4 13; p. 71/21-72/4). USG’s “affiliated company” argument also fails for numerous
other reasons.
The competent evidence establishes that J&C and Eagleridge were in an arm’s length
transaction as evidence by the agreement between J&C and Eagleridge (Ex. H). Further, J&C had
three of its own employees as pumpers as early as 2013 through the date of the accident (Garza
depo p. 63/10 18). By contrast, Eagleridge had no employees working for them as pumpers during
this time period (Grawe depo p. 387/23-25).
It is undisputed that Garza did not become a direct employee of Eagleridge until February 2018six months after
the subject accident.
Note, the subject accident occurred on August 24, 2017 (USG MSJ p. 4).
J&C invoiced Eagleridge $53,380.00 per month for the work its pumpers, like Lovern, did
on Eagleridge well sites (Garza depo p. 218/17 21; p. 221/14 17). J&C then paid its pumpers
individually between $5,000 $7,000 once per month based upon the number of wells each pumper
oversaw (Garza depo p. 221/18 222/21). Earmon Lovern testified he was paid $6,800.00 per
month by J&C for the work he was completing at the time of the accident (Lovern depo p. 54/15-
17). Lovern’s testimony is supported by the cancelled checks from J&C to Lovern paying him for
his work beginning in May 2017 and running through August 2017 (Ex. I, p. 24 29). Moreover,
J&C provided Lovern with Workers’ Compensation benefits and he was considered an employee
of J&C by the State of Texas (Ex. I p. 1 7). The foregoing documents comport with the testimony
of Mark Grawe, who stated Eagleridge did not provide Lovern with any job descriptions because
he was not an Eagleridge employee, and gleridge did not report the accident to OSHA because
Lovern was an employee of J&C (Grawe depo p. 151/6-9; p. 219/6-11; p. 366/18-20).
In addition, Garza testified he worked with Eagleridge and numerous other companies
between 2001 and 2018, when he became a direct employee of Eagleridge (Ex. M). For instance,
J&C worked with Eagleridge, Carrizo Oil & Gas, Aruba Petroleum, Wolsey Well Services, G&F
Oil, and Eagle Oil as a contract lease operator (Garza p. 66/17 67/1). From 2009 until February
2018, J&C and Garza worked with Eagleridge and Canyon Operating, LLC as a contract
consultant (Ex. M; Garza depo p. 26/6 27/18; p. 28/19 25). Both Canyon and Eagleridge paid
J&C for the work it completed as a 1099 and not W 2 worker (Garza depo p. 31/2-25). Because
J&C was not an affiliate of Eagleridge, Section 13.2 does not apply and USG’s summary judgment
must be denied. Further, because Section 13.2 does not apply, Section 13.4 applies as a matter of
It is undisputed that Canyon Operating is not affiliated with Eagleridge.
law and this Court should grant Eagleridge’s motion for summary judgment submitted on May 25,
IV. CONCLUSION
For all of the foregoing reasons, and those contained Eagleridge’s Traditional Motion
for Summary Judgment, USG’s motion should be in all things denied, and Eagleridge is entitled
to summary judgment on its declaratory judgment and breach of contract claims related to the
failure of USG to defend, indemnify, and insure Eagleridge as a matter of law.
RespectfullySubmitted,
ILLER NAUFF AW IRM
BY: /s/ J.J. Knauff
J.J. KNAUFF
State Bar No. 24032517
12221 Merit Drive, Suite 1210
Dallas, Texas 75251
(469) 916-2552
COUNSEL FOR EAGLERIDGE
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the foregoing instrument has been forwarded
to all known counsel of record on this 22nd day of February 2021, in accordance with the Texas
Rules of Civil Procedure via E-Service.
/s/ J.J. Knauff
J.J. KNAUFF
Preview
CAUSE NO. 202006165 EAGLERIDGE OPERATING, LLC § IN THE DISTRICT COURT OF Plaintiff, VS. HARRIS COUNTY, TEXAS USG PROPERTIES BARNETT II, LLC, § Defendant. JUDICIAL DISTRICT EAGLERIDGE OPERATING, LLC’S RESPONSE TO USG PROPERTIES BARNETT II, LLC’S AMENDED TRADITIONAL MOTION FOR SUMMARY JUDGMENT TO THE HONORABLE JUDGE OF SAID COURT: COMES NOW, Plaintiff Eagleridge Operating, LLC (“Eagleridge”) and files this Response to USG Properties Barnett II, LLC’s Amended Rule 166a(c) Motion for Summary Judgment, and would respectfully show the Court the following: SUMMARY OF RESPONSE In its motion USG Properties Barnett II, LLC USG argues that Section 13.2 of the COSA applies over Section 13.4 because Section 13.4 allegedly fails to meet the requirements of TOAIA and J&C Energy, Inc. (“J&C) is allegedly affiliated with Eagleridge. USG’s arguments regarding TOAIA are inapplicable and J&C is not an affiliate of Eagleridge. First, Eagleridge, a small contractor, is seeking to obtain indemnity from USG, an affiliate of a very large oil company. This is the exact opposite of the type of indemnification agreement barred by TOAIA, which prohibits powerful oil companies from extracting indemnities from powerless contractors. USG asks the Court to distort a statutory shield protecting small contractors like Eagleridge into a sword for powerful owners like to avoid the express language of the agreements they execute Second and to the extent it applies, the COSA’s indemnification agreement falls squarely within TOAIA’s “safe harbor” insurance provision. In the COSA, USG and Eagleridge agreed to both indemnify each other and to purchase insurance to support those indemnities, and both purchased the required insurance. TOAIA requires nothing more to enforce the COSA’s indemnification agreement. Third, TOAIA does not address or affect the COSA’s additional insured provision, which is separate and independent from contractual indemnity provision . Thus, irrespective of whether the contractual indemnity agreement is enforceable, USG is liable for its breach of the COSA’s additional insured provision. Finally, J&C’s owner, Jonathan Garza, testified J&C was a separate legal entity from Eagleridge, was always a contractor, not employee or affiliate of Eagleridge, and had its own employees. Further, J&C did not exclusively work for Eagleridge; rather, J&C worked for multiple companies at the same time it worked as a contractor for Eagleridge. Accordingly, USG’s summary judgment is not appropriate and should be in all things deniedEagleridge currently has pending its Traditional Motion for Summary Judgment against Defendant USG Properties Barnett II, LLC The Court should deny USC’s motion and grant Eagleridge’s summary judgment motion, which was submitted to the Court on May 25, 2020. SUMMARY JUDGMENT EVIDENCE Pursuant to Texas Rule of Civil Procedure 166a(c) and McConathy v. McConathy S.W.2d 341, 342 (Tex. 1994), Eagleridge hereby provides itsstatement of intent to rely on the following exhibits as summary judgment evidence and incorporates same by reference as if fully set forth herein: August 1, 2016 COSA; Notice of Deposition with Topics for J. Monro, USG corporate representative; The arguments and exhibits to Eagleridge’s Traditional Motion for Summary Judgment are incorporated by reference as if fully set forth herein. The foregoing motion was submitted on May 25, 2020 but no ruling has been issued to date. Excerpts from June 27, 2019 deposition Vol. I of USG corporate representative, J. Monro; Excerpts from August 5, 2019 deposition Vol. II of USG corporate representative, J. Monro; Excerpts from March 25, 2019 deposition of M. Grawe; Tenders to USG; Plaintiffs’ Fourth Amended Petition; MSA between J&C and Eagleridge; DWQ from J&C regarding Lovern; Excerpts from March 28, 2019 deposition of Earmon Lovern; Excerpts from June 25, 2019 deposition of Thomas Aston; Excerpts from March 5, 2019 deposition of Jonathan Garza; and Exhibit 36 to March 5, 2019 deposition of Jonathan Garza. Eagleridge also requests this Court to take judicial notice of the pleadings on file in this matter, pursuant to Rule 201 of the TEXAS ULES OF VIDENCE. ARGUMENT AND AUTHORITIES “A plaintiff moving for summary judgment must conclusively prove all essential elements of its claim.” Wright v Young, 2012 WL 2106823, at *1 (Tex. App.—Houston [1 Dist.] 2012, no pet.) (cited by USG at USG MSJ p. 5). USG’s summary judgment must fail because (1) it failed to establish TOAIA applies to the facts of the case; (2) it failed to establish J&C was an “affiliated” company of Eagleridge for the purposes of the work being conducted at the time of the accident; and (3) Eagleridge established Section 13.4 applies and, as such, USG owes indemnity to Eagleridge. USG’s summary judgment must be denied because it failed to establish TOAIA applies to the facts of this case. The Texas Supreme Court has counseled that TOAIA must be strictly construed to permit parties to contract freely on matters not expressly barred by the statute. Getty Oil Co. v. Ins. Co. of N. Am., 845 S.W.2d 794, 805 (Tex. 1992). The COSA is not covered by TOAIA, and even if it were, the parties have satisfied the requirements of TOAIA’s “safe harbor” insurance provision. Consistent with Texas’s strong policy favoring freedom of contract, the Court should deny USG’s motion and grant Eagleridge’s summary judgment. The Legislature passed TOAIA because it found “that an inequity is fostered on certain contractors by the indemnity provision in rtain agreements pertaining to wells for oil, gas, or water.” RAC ODE § 127.002(a) (emphasis added). Specifically, before the enactment of TOAIA, many oil companies had “hold harmless” agreements with their drilling and service contractors. See Getty Oil Co., 845 S.W.2d at 803. These agreements required the contractors to indemnify the oil companies for losses caused not only by the negligence of the contractors, but also the negligence of the oil companies and third parties as well. Id. (emphasis added). The Legislature found such agreements placed an undue financial burden on small contractors with little bargaining power. Id. These small contractors were forced to indemnify owners but were unable to obtain insurance at a reasonable cost to cover their obligations. See Ken Petrol. Corp. v. Questor Drilling Corp., 24 S.W.3d 344, 348 (Tex. 2000). Therefore, contractors were subjected to significant liability with no feasible means of insuring against those obligations. Id. The COSA generally, and Section 13.4 (sometimes mislabeled Section 13.5) specifically, is not the type of indemnification agreement with which TOAIA is concerned. In pertinent part, Section 13.4 requires the oil company, USG, to indemnify the contractor, Eagleridge, from claims arising out of, in connection with, or resulting from the performance of services by third parties under contracts held for USG’s benefit in Eagleridge’s name, unless such claims are attributable to Eagleridge’s gross negligence or willful misconduct (Ex. A, § 13.4). Neither the text nor purpose of TOAIA support USG’s position that Section 13.4 of the indemnity agreement is void as a matter of law. TOAIA “is for [the contractor’s] protection,” and “[the oil company] cannot now claim that its own indemnity obligation is void.” Ken Petrol. Corp., 24 S.W.3d at 353. In its current form, TOAIA provides that “an agreement pertaining to a well for oil, gas, or water” is void as a matter of public policy if it purports to indemnify an entity against liability caused by the “negligence of the indemnitee, his agent or employee, or an individual contractor directly responsible to the indemnitee.” RAC ODE § 127.003(a). Notably, TOAIA limits the scope of its application by exempting various contractual arrangements and activities. E.g. id. §§ 127.001(4)(B), 127.002(c), 127.004. Thus, even though a contract may relate to the provision of some well or mine services, TOAIA is inapplicable if those services may also be interpreted to fall within one of the statute’s exclusions or exemptions. See, e.g. Phillips Petroleum Co. v. Brad & Sons Const. Inc., 841 F. Supp. 791, 79596 (S.D. Tex. 1993) (holding TOAIA did not apply to work done on a pipeline, even though such work was related to the production of oil and gas). For instance, TOAIA does not apply to “joint operating agreement provisions for the sharing of costs or losses arising from joint activities, including costs or losses attributable to the negligent acts or omissions of any party conducting the joint activity.” RAC ODE § 127.002(c). Nor does it apply to “purchasing, selling, gathering, storing, or transporting gas or natural gas liquids, or gas pipeline or fixed associated facilities,” or the “construction, maintenance, or repair of oil, natural gas liquids, or gas pipelines or fixed associated facilities.” Id. §127.001(4)(B). Here, TOAIA’s provisions and purpose make clear that it is inapplicable. USG owns working interests in numerous oil and gas leases, and “is sophisticated in the ownership, evaluation, and operation of oil and gas properties” (Ex. A § 4.1; Ex. D, p. 285:15 20). Under the COSA, USG designated and appointed Eagleridge “as its true and lawful agent and attorney fact” to take the steps necessary to hold those leases (Ex. A § 4.1). The COSA provided that, while Eagleridge would execute and hold in its name various contracts with third parties for the benefit of USG, USG would be solely responsible for the costs, expenses, and liability associated with those contracts (Id. 1.3(r), 1.5). Any contractors who executed agreements with Eagleridge were directly liable to USG, as Eagleridge’s principal and as a third party beneficiary of those agreements (Id.). As required by the COSA, the MSA specified USG was a third party beneficiary of the indemnity provisions contained therein (Ex. H, § 8.1). Accordingly, J&C was directly responsible to the indemnitor in this case (USG), which, again, is the opposite of the situation contemplated by TOAIA. RAC ODE § 127.003(a). Moreover, Eagleridge was only responsible for liability arising from its own gross negligence or willful misconduct Id. In all of these regards, the COSA perfectly mirrors the model form operating agreement, which provides that an operator, in its capacity as such, is to have no liability to the other parties for losses or liabilities, unless such losses or liabilities result from the operator’s gross negligence or willful misconduct. See, e.g., Reeder v. Wood Cty. Energy, LLC, 395 S.W.3d 789, 79495 (Tex. 2012). As the Legislature found, this type of risk sharing agreement is “commonly understood, accepted, and desired,” encourages “mineral development,” is “not against the public policy of this state,” and is “enforceable.” RAC ODE § 127.002(c). Because the COSA’s indemnification agreement allocates risks identically to the model form joint operating agreement, it is not covered by TOAIA. Indeed, the very subject matter and purpose of the COSA This provision is inapplicable here. In Section IV.D of its summary judgment motion, Eagleridge brought forth competent evidence negating the application of this provision. Specifically, it provided the testimony of USG’s own corporate representative judicially admitting Eagleridge neither acted grossly negligent nor engaged in willful misconduct (Ex. C, p. 197/8 14; p. 198/20 22; p. 202/20 203/5)See Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562, 568 (Tex. 2001) (explaining a judicial admission bars admitting party from later disputing the admitted fact). was to give Eagleridge “operating rights,” as contemplated by TOAIA’s operating agreement carveout. T RAC ODE § 127.001(2). oreover, the services contemplated by the COSAand those from which the claims in the Lovern suit ariseinvolve maintaining and repairing natural gas pipelines and fixed associated facilities for the purpose of gathering and transporting gas for sale, which are not covered by TOAIA. (Ex. A; Ex. B, p. 197:1 7, 202:20 203:25; Ex. G). Lovern’s allegations in the underlying lawsuit are that he was checking the valves on a “hot gas pipeline” as part of this work at the time of the accident (Ex. G). All of this reinforces that the “statute was not intended to cover a contract” like the one in this case. Transworld Drilling Co. v. Levingston Shipbuilding Co., 693 S.W.2d 19, 23 (Tex. App.Beaumont 1985, no writ.). Because TOAIA does not apply, USG has failed to establish that Section 13.4 is invalid, failed to meet its burden, and its summary judgment should be denied. USG’s summary judgment must be denied and Eagleridge’s summary judgment must be granted because COSA Section 13.4 was in effect and obligates USG to indemnify Eagleridge. Assuming arguendo TOAIA applies to this case, which is denied, then Section 13.4 meets the safe harbor clause of the Act. USG claims that Section 13.4 establishes a unilateral indemnity obligation, which is unsupported by insurance (USG MSJ p. 8). Neither point is availing. Both USG and Eagleridge agreed to, and did, purchase the insurance specified in Exhibit C to the COSA (Ex A § 6.1; Ex. E, p. 232:20 236:22). There is no dispute that USG and Eagleridge agreed, in writing, that they both would purchase insurance (USG MSJ p. 3). The COSA details the type, amounts, and limits of the insurance coverage in its Exhibit C (USG MSJ p. 3). Mark Grawe, Vice President of Operations at Eagleridge, testified: It is an undisputed fact of public record that Eagleridge was designated as the contract operator with the Texas Railroad Commission through the COSA and, therefore, was given the referenced “operating rights.” (Ex. G). Q. (By Mr. Stephens) The Exhibit 1 had a requirement for for both the owner and the A. THE WITNESS: You said Exhibit 1. I don’t see an Exhibit 1. Q. (By Mr. Stephens) This is Exhibit 1, the operating agreement between USG and and EagleRidge, page 12, Article 6.1. . . . A. So Article VI, Insurance, where it says we will maintain insurance in the amounts and the limits set forth in Exhibit C, yes. (Ex. E, p. 232/20 233/12) (objections omitted). In addition to requiring insurance, Grawe testified Eagleridge actually procured insurance: Q. (By Mr. Stephens) Okay. To the best of your knowledge, was the insurance that at least that your company was supposed to secure per this agreement, was it secured? A. THE WITNESS: To the best of my knowledge, this was secured, yes. (Ex. E, p. 236/16 22) (objections omitted). Thus, Eagleridge complied with its requirements under the COSA, which is all that TOAIA required. See T RAC ODE § 127.005; see also Ken Petrol., 24 S.W.3d at 351; Nabors Corp. Servs., Inc. v. Northfield Ins. Co., 132 S.W.3d 90, 96 (Tex. App.—Houston [14th Dist.] 2004, no pet.). USG acknowledges the indemnities established by Section 13.2 and 13.3 of the COSA are supported by this insurance but claims Section 13.4 is somehow not supported by any insurance (USG MSJ p. 3, p. 7 8). The COSA rejects this notion by addressing how the insurance required by it relates to all three indemnity provisions together and, additionally, by requiring all three indemnity provisions to be liberally construed in favor of enforceability (Ex. A § 13.6). Specifically, Section 13.6 of the COSA provides that “the defense and indemnity obligation in section 13.2 through 13.5 shall be primary . . . to any insurance which any contractor indemnified USG relies upon federal cases out of Louisiana and the Fifth Circuit that are inapposite. In fact, Greene’s Pressure Testing & Rentals, Inc. v. Flourney Drilling Co., 113 F.3d 47, 51 (5 Cir. 1997) has been noted by multiple courts to be distinguishable because it is based upon the pre 1989 TOAIA. See, e.g., Ranger Ins. Co. v.. Am. Int’l Specialty Lines Ins. Co., 78 S.W.3d 659, 664 (Tex. App.Houston [1 Dist.] 2002, no pet.); Certain Underwriters at Lloyd’s London v. Oryx Energy Co., 142 F.3d 255, 258 59 (5 Cir. 1998). USG has failed to bring forth any competent Texas case with precedential value to support its argument. party or owner indemnified party is named as an additional insured, including that insurance required by section 6.1.” In other words, the parties agreed the indemnitor was responsible for obtaining the extent of the coverage and dollar limits of insurance specified in Exhibit C for the benefit of the indemnitee under its own policies, irrespective of whether the indemnitee could also obtain those benefits as an additional insured under the policies. If the indemnity obligation established by Section 13.4 were not supported by insurance, the reference to Section 13.4 in Section 13.6 would be completely superfluous. Thus, reading the COSA as a whole, it memorializes the parties’ agreement that each party as indemnitor has agreed to obtain insurance to support its respective indemnity obligations. Further, Section 13.4 does not merely provide USG will indemnify Eagleridge. It also provides Eagleridge will indemnify USG for claims determined to be the direct result of Eagleridge’s gross negligence or willful misconduct. Accordingly, to the extent subsection (b) and (c) of Section 127.005 of the Texas Civil Practice and Remedies Code apply at all, the indemnity obligations established by Section 13.4 of the COSA best fit within subsection (b) concerning a “mutual indemnity obligation,” rather than subsection (c) concerning a “unliteral indemnity obligation.” Indeed, the parties’ stated intention for the indemnity obligations in “section 13.2 through 13.5” was that they be “without lim which, under TOAIA, only describes a mutual indemnity obligation (as a unilateral indemnity obligation is limited to $500,000). (Ex. A, § 13.6). And, consistent with their intention, Exhibit C of the COSA requires Such a reading would be inappropriate as courts should examine and consider the entire writing in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless. Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983). In “case of a reasonable doubt as to which of two constructions best accords with the intent of the parties, that construction should prevail which is least favorable to the party who prepared the instrument. Ervay, Inc. v. Wood, 373 S.W.2d 380, 384 (Tex. Civ. App.Dallas 1963, writ ref’d n.r.e.); Goldman v. Alkek, 850 S.W.2d 568, 576 (Tex. App.Corpus Christi 1993, no writ)(lease construed “against its writer”). It is undisputed the COSA was promulgated by USG. USG and Eagleridge to procure equal amounts of insurance. Because the indemnity agreement required the parties to indemnify one another reciprocally and required the parties to support their indemnity obligations with insurance in equal amounts, the parties’ indemnity agreement qualifies a “mutual indemnity obligation.” See RAC ODE § 127.001(3). Under USG’s present interpretation of TOAIA, Eagleridge obtained nothing from their indemnification agreement. But the COSA itself reflects USG’s (correct) understanding at the time of drafting that TOAIA did not apply, and to the extent it might, the indemnification agreement fitwithin TOAIA’s “safe harbor” insurance provision. USG should be held to the express terms of the contract it drafted. Not the nugatory reading it now offers. Therefore, USG’s summary judgment should be denied and the Court should in all things grant Eagleridge’s motion. C. TOAIA does not address or affect the additional insured agreement. Section 6.1 of the COSA requires USG to name Eagleridge as an additional insured under each of its insurance policies. This obligation is not limited to the liability USG contractually assumed in the COSA (or by the terms and conditions of any of the insurance policies). Since the additional insured obligation is separate from any contractual indemnity obligation, it is enforceable without regard to the scope or enforceability of the indemnity provisions under TOAIA. See Evanston Ins. Co. v. ATOFINA Petrochemicals, Inc., 256 S.W.3d 660, 670 (Tex. 2008);Getty Oil Co. , 845 S.W.2d at 803–04; see also, e.g., ExxonMobil Corp. v. Elec. Reliability Servs., Inc., 868 F.3d 408, 419 (5th Cir. 2017); Mid Continent Cas. Co. v. Swift Energy Co F.3d 487, 494 n.8 (5th Cir. 2000). In Getty Oil Company v. Insurance Co. of North America, the Texas Supreme Court held that TOAIA “applies exclusively to indemnity agreements.” 845 S.W.2d at 804. As the Supreme Court explained, an additional insured agreement is treated differently than an indemnity agreement by TOAIA: Prohibited indemnity provisions make the indemnitor (NL) liable for the indemnitee’s (Getty’s) negligence. Additional insured provisions, on the other hand, make the insurance-purchaser’s insurers (INA and Youell) liable for the loss caused by the insured’s (Getty’s) negligence. The insurance purchaser is responsible only for paying the insurance premiums, presumably far less than the actual loss. Moreover, the cost of premiums is certain and exact. Thus, contractors are still protected by the AntiIndemnity Statute from large and uncertain liabilities caused by an indemnitee’s negligence. Id. at 803. In short, even where TOAIA invalidates a contractual indemnity obligation, it does not affect a second, separate obligation to name the indemnitee as an additional insured. The Supreme Court’s subsequent decision in Evanston Insurance Co. v. ATOFINA Petrochemicals, Inc., makes clear that the additional insured agreement in Section 6.1 of the COSA is independent from the contractual indemnity agreement in Section 13.4: Although the service contract in this case does not include an insurance requirement quite as clear as the one in Getty, itis clear enoughit requires that ATOFINA “shall be named as additional insured in each of [Triple S’s] policies.” Evanston argues that this “brief statement” in the contract is insufficient to extend insured status to ATOFINA for its own negligence because the insurance requirement and certificates of insurance cannot expand coverage beyond the language of the policy. While we agree that an insurance certificate merely evinces the holder’s status as an insured and does not create coverage, it is unmistakable that the agreement in this case to extend direct insured status to ATOFINA as an additional insured is separate and independent from ATOFINA’s agreement to forego contractual indemnity for its own negligence. We disapprove the view that this kind of additional insured requirement fails to establish a separate and independent obligation for insuring liability. 256 S.W.3d at 670 (internal citations omitted) (alterations in original). Here, USG was obligated to name Eagleridge as an additional insured on its insurance policies as a “belt and suspenders” level of protection. Yet, USG’s insurers have refused Eagleridge’s tender as an additional insured, proving USG’s breach of its contractual obligation. (Ex. F). TOAIA does not save USG from this breach or its resulting liability. See In re Deepwater Horizon, 470 S.W.3d 452, 468 (Tex. 2015) (recognizing “the contractual duties to indemnify and to maintain insurance [are] separate and independent,” and “a statute invalidating an indemnification clause does not relieve a party of a separate duty to obtain insurance”). D. USG’s summary judgment must be denied because it failed to establish that J&C was an “affiliated” company to Eagleridge. In this case, USG must conclusively prove that the specific indemnity clause (Section 13.2) applies to the facts of this case; however, USG fails to establish this lynchpin element. USG argues that Section 13.2 of the COSA, not Section 13.4, is the effective clause such that Eagleridge owes indemnity to USG (USG MSJ p. 7 9). To obtain this tortured result, USG argues J&C was an “affiliated company” because its owner, Jonathan Garza, is currently an employee of Eagleridge and “since 2006 he has been a captive company of Eagleridge, providing his pumping services, and those like Mr. Lovern operating through J&C, exclusive work for Eagleridge” (USG MSJ p. 11). USG failed to direct the Court to Garza’s testimony that from 2006 until 2018, he refused to become a direct employee of Eagleridge even though he was asked on numerous occasions (Garza depo p. 71/4 13; p. 71/21-72/4). USG’s “affiliated company” argument also fails for numerous other reasons. The competent evidence establishes that J&C and Eagleridge were in an arm’s length transaction as evidence by the agreement between J&C and Eagleridge (Ex. H). Further, J&C had three of its own employees as pumpers as early as 2013 through the date of the accident (Garza depo p. 63/10 18). By contrast, Eagleridge had no employees working for them as pumpers during this time period (Grawe depo p. 387/23-25). It is undisputed that Garza did not become a direct employee of Eagleridge until February 2018six months after the subject accident. Note, the subject accident occurred on August 24, 2017 (USG MSJ p. 4). J&C invoiced Eagleridge $53,380.00 per month for the work its pumpers, like Lovern, did on Eagleridge well sites (Garza depo p. 218/17 21; p. 221/14 17). J&C then paid its pumpers individually between $5,000 $7,000 once per month based upon the number of wells each pumper oversaw (Garza depo p. 221/18 222/21). Earmon Lovern testified he was paid $6,800.00 per month by J&C for the work he was completing at the time of the accident (Lovern depo p. 54/15- 17). Lovern’s testimony is supported by the cancelled checks from J&C to Lovern paying him for his work beginning in May 2017 and running through August 2017 (Ex. I, p. 24 29). Moreover, J&C provided Lovern with Workers’ Compensation benefits and he was considered an employee of J&C by the State of Texas (Ex. I p. 1 7). The foregoing documents comport with the testimony of Mark Grawe, who stated Eagleridge did not provide Lovern with any job descriptions because he was not an Eagleridge employee, and gleridge did not report the accident to OSHA because Lovern was an employee of J&C (Grawe depo p. 151/6-9; p. 219/6-11; p. 366/18-20). In addition, Garza testified he worked with Eagleridge and numerous other companies between 2001 and 2018, when he became a direct employee of Eagleridge (Ex. M). For instance, J&C worked with Eagleridge, Carrizo Oil & Gas, Aruba Petroleum, Wolsey Well Services, G&F Oil, and Eagle Oil as a contract lease operator (Garza p. 66/17 67/1). From 2009 until February 2018, J&C and Garza worked with Eagleridge and Canyon Operating, LLC as a contract consultant (Ex. M; Garza depo p. 26/6 27/18; p. 28/19 25). Both Canyon and Eagleridge paid J&C for the work it completed as a 1099 and not W 2 worker (Garza depo p. 31/2-25). Because J&C was not an affiliate of Eagleridge, Section 13.2 does not apply and USG’s summary judgment must be denied. Further, because Section 13.2 does not apply, Section 13.4 applies as a matter of It is undisputed that Canyon Operating is not affiliated with Eagleridge. law and this Court should grant Eagleridge’s motion for summary judgment submitted on May 25, IV. CONCLUSION For all of the foregoing reasons, and those contained Eagleridge’s Traditional Motion for Summary Judgment, USG’s motion should be in all things denied, and Eagleridge is entitled to summary judgment on its declaratory judgment and breach of contract claims related to the failure of USG to defend, indemnify, and insure Eagleridge as a matter of law. RespectfullySubmitted, ILLER NAUFF AW IRM BY: /s/ J.J. Knauff J.J. KNAUFF State Bar No. 24032517 12221 Merit Drive, Suite 1210 Dallas, Texas 75251 (469) 916-2552 COUNSEL FOR EAGLERIDGE CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the foregoing instrument has been forwarded to all known counsel of record on this 22nd day of February 2021, in accordance with the Texas Rules of Civil Procedure via E-Service. /s/ J.J. Knauff J.J. KNAUFF