W T OFFSHORE, INC. v. CHEVRON USA, INC., (E.D.La. 2001)

ROBY, Judge

On October 2, 2001, the defendant, Chevron USA, Inc. ("Chevron"), filed a Motion for Leave to Amend (Doc. #65). Claiming to have recently discovered a new defense, Chevron requests that it be allowed to amend its answer and counterclaim to assert a claim for recoupment and/or set off. The plaintiff opposes the motion contending that the amendment is an attempt to gain a tactical advantage and would cause undue delay.

I. Factual Summary

This suit arises out of a July 15, 1997 Lease Development and Farmout Agreement between the plaintiff, W T Offshore, Inc. ("WT"), and Chevron. The call-on oil provisions of the farmout agreements allow Chevron to purchase the plaintiff's share of crude oil produced from the farmout areas. In March 1999, the parties amended certain terms of the original agreement. Thereafter, WT performed a workover on a lease line well it drilled pursuant to the agreement and sought compensation from Chevron. Chevron refused to pay, contending that pursuant to their agreement, WT was to incur these costs. WT brought suit seeking to recover these costs. WT seeks an "accounting that reflects the method that it used to determine the price paid for crude oil purchased from WT and the average of the three highest prices paid in the area by crude oil purchases for crude oil of like quantity and quality." WT also seeks "past under-payments by Chevron for crude oil purchased from WT."

The instant case had an original trial date of November 13, 2001. However, Chevron filed a Motion to Continue the Trial which was granted on September 24, 2001. The trial date was reset on October 29, 2001 for January 22, 2001.

On October 2, 2001, Chevron filed the instant motion seeking to amend its counterclaim. Chevron claims that recently, while conducting accounting with its financial and accounting expert, William Abington, it determined that it had paid royalties on behalf of WT to the Minerals Management Service. Chevron also claims to have determined that it had not always deducted such royalties from the payments made to WT. Chevron now contends that pursuant to the farmout agreements, WT is obligated to reimburse Chevron for the royalties it paid on WT's behalf. Chevron seeks reimbursement of $520,773.00.

WT opposes the motion contending that Chevron is dilatory in its attempt to pursue this claim. WT further contends that given the context in which the claim was asserted, the request was made to obtain a tactical advantage by further delaying the trial or by requiring WT to prepare rapidly for a claim that Chevron's own expert reports have not quantified. They also contend that Chevron has never informed WT that it owes them the money suggested by the proposed amendment. Finally, WT contends that the proposed claim is not based on the same provisions of the contracts as WT's original claim is based and thus should be brought as a separate and distinct claim in a separate proceeding.

II Analysis

Federal Rules of Civil Procedure 15(a), which governs the amendment of pleadings, provides that leave to amend pleadings "shall be freely given when justice so requires." Fed.R.Civ.P. 15(a). This, and other federal rules "reject the approach that pleading is a game of skill in which one misstep by counsel may be decisive to the outcome and accept the principle that the purpose of pleading is to facilitate a proper decision on the merits." Conley v Gibson, 355 U.S. 41, 48 (1957).

However, leave to amend is by no means automatic. Addington v. Farmer's Elevator Mut. Ins. Co., 650 F.2d 663, 666 (5^th Cir. 1981). The decision to grant or deny a motion for leave to amend lies within the sound discretion of the trial court. Id. In exercising its discretion, the trial court may consider such factors as "undue delay, bad faith, or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, and futility of the amendment." Gregory v. Mitchell, 634 F.2d 199, 203 (5^th Cir. 1981). Nonetheless, Rule 15(a) evinces a liberal amendment policy and a motion to amend should not be denied absent a substantial reason to do so. See Jacobsen v. Osborne, 133 F.3d 315, 318 (5^th Cir. 1998).

Applying the Gregory factors to the instant case, Chevron should not be allowed to amend its answer. Chevron has failed to provide sufficient explanation for its delay in asserting the proposed claim.

According to the record, WT filed the initial complaint on November 13, 2000. A trial date was originally set for November 13, 2001. However, on September 24, 2001, Chevron had the trial date continued so that all issues concerning payments allegedly due by Chevron to WT with regard to both price and allocation of production could be tried at one time rather than on a piecemeal basis. Nearly one year after the filing of the complaint and after the trial date had been continued, Chevron seeks to amend its answer.

Chevron contends that it only "recently, while conducting the accounting, together with its financial and accounting expert, William Abington" determined that it had made overpayments. Chevron however, fails to provide the Court with information regarding the actual date it determined it might have a set off claim. Chevron also contends that during the course of their relationship, Chevron paid about $67 million to WT, thus Chevron suggests that the fact it overlooked $520,773.00 is understandable. They further contend that they may have never discovered the error had WT not demanded an "accounting."

Interestingly, Chevron also states that the "accounting" was demanded by WT in its complaint. Thus, Chevron unexplainably waited ten months after the filing of the complaint to perform the accounting and now, with the trial date fast approaching, seeks to amend its answer based on information obtained as a result of their having conducted the accounting. It is settled that if the delay in filing a motion for leave to amend is particularly egregious and is raised late in the pretrial life of a lawsuit, the burden shifts to the movant to show that the delay was "due to oversight, inadvertence, or excusable neglect." Little v. Liquid Air Corporation, 952 F.2d 841, 846 (5th Cir. 1992). Chevron has not met this burden.

Chevron has failed to submit adequate proof that its failure to allege set off was the result of oversight. It simply suggests that it recently acquired the information. The Court further finds that to grant an amendment at this late date would prejudice Chevron. The trial date is set for January 22, 2001, and no discovery has occurred regarding the issues raised in the proposed amended answer. Further, because Chevron has made a number of payments totaling over $67 million dollars to WT, the proposed amendment will call for more discovery consisting of additional observations, calculations, computations and estimates which WT may find difficult to challenge because it has so little time to prepare.

IT IS THEREFORE ORDERED that the Motion for leave to Amend (Doc. #65) is DENIED.