William Perlman (Perlman) filed this diversity suit for a declaratory judgment against Pioneer Limited Partnership (Pioneer) and Kendrick Cattle Company (Kendrick) seeking to have an oil and gas lease and a surface lease declared unenforceable due to an alleged occurrence of a force majeure. He claimed that his performance of the contract had been hindered by state regulations in Wyoming and Montana. Pioneer
Pioneer entered into an Oil and Gas Lease (the Lease) with Perlman to "explore, drill, prospect and operate" for oil and gas on acreage located in Montana and Wyoming. In return for these rights, Perlman agreed to (1) pay Pioneer $137,676.65 in initial rent, and (2) spend $1,500,000 in exploring and developing the acreage or, alternatively, to pay Pioneer the difference between $1,500,000 and the amount he spent. Perlman also obtained from Kendrick the right of access to and use of land in Wyoming and Montana overlying and adjoining Pioneer's acreage (the Surface Agreement) and in exchange, agreed to pay Kendrick $60,000. Incorporated into the Lease was a "force majeure" clause which states in pertinent part:
Perlman obtained the right to produce oil and gas from all the depths and horizons subject to the lease. No one particular method to produce oil and gas was designated in the lease; however, Perlman anticipated using his patented "Perlman Process" to produce coal seam gas.
After the Lease was signed, the Taylor 24 well in Wyoming was completed using the Perlman process.
The primary focus of this meeting between the Perlman representatives and the Wyoming officials was the problems associated
After hearing the results of the meeting, Perlman concluded unilaterally that the actions of the Wyoming regulators hindered his performance under the contract. He also unilaterally concluded that because Montana regulated its water similarly or more stringently than Wyoming, he would also be hindered there. On the basis of such unilateral decisions, Perlman invoked the force majeure clause taking the position that he was no longer bound to perform under the Lease or the Surface Agreement. He notified Pioneer and Kendrick in December 1987 of the purported occurrence of the force majeure and filed this suit for declaratory judgment in April 1988.
At trial the district court rejected Perlman's force majeure argument on findings that Perlman made no effort whatsoever to drill on the lease even though he may not have encountered the same quantity of water as he did on the Taylor 24, and that Perlman failed to give timely notice of the force majeure. The court also found that, as a matter of law, the doctrine of force majeure did not excuse Perlman's failure to perform under the Lease because the circumstances alleged did not constitute force majeure and the event complained of was foreseeable to Perlman and within his control. The district court also found as a matter of law that Section 8 of the Lease was not unenforceable as a penalty.
Perlman appeals claiming that the district court erred in finding that his performance was not excused by force majeure under the terms of the contract.
Standard of Review
We uphold the trial court's finding of fact unless clearly erroneous giving due regard to the district court's credibility determinations. Anderson v. Bessemer City, 470 U.S. 564, 573, 105 S.Ct. 1504, 1511, 84 L.Ed.2d 518 (1985). Even though we might have weighed the evidence differently had we been sitting as trier of fact, we must accept the district court's findings as long as they are plausible in light of the record viewed in its entirety. Id. The trial court's conclusions of law we review de novo. United States, Small Business Admin. v. Bridges, 894 F.2d 108, 111 (5th Cir.1990); Halloran v. Veterans Admin., 874 F.2d 315, 320 (5th Cir.1989).
At trial, the district court held that under the doctrine of force majeure Perlman's performance was not excused because the event complained of was within Perlman's control and was entirely foreseeable. The court also determined that Perlman could have performed because performance had not been rendered impossible or untenable. The district court rested its holding on the general principle that "a force majeure clause is to relieve [a] lessee from harsh termination due to circumstances beyond [his] control that would make performance untenable or impossible." Edington v. Creek Oil Co., 213 Mont. 112, 690 P.2d 970 (1984). As Perlman aptly argues, however, the district court erred in using the "doctrine of force majeure"
Perlman is correct that this case is essentially one of contract interpretation. The language in the force majeure clause in the Lease is unambiguous and its terms were specifically bargained for by both parties. Therefore, the "doctrine" of force majeure should not supersede the specific terms bargained for in the contract.
Perlman argues that because the Wyoming officials refused to commit to permitting a gas well using Perlman's process once they received the hydrology and other expensive studies, and because the regulatory process itself might prevent his meeting the six-month drilling deadline, he was "hindered" by his "inability to obtain governmental permits or approvals necessary or convenient to [his] operations." Perlman's sole basis for this argument is his interpretation of the October 26 meeting between his representative and the officials from the Wyoming Gas and Water
From the evidence it is clear that no actual hindrance resulted from the regulations or the regulators in Wyoming because Perlman made no effort whatsoever to obtain the appropriate permits or to begin drilling the wells. Consequently, Perlman's self-serving conclusion that a force majeure condition existed was at best merely speculation as to what might have happened had he attempted to drill the wells as planned.
Perlman's reliance on supposition and speculation derived from his interpretation of the October 26 meeting is inadequate to support his argument that he was hindered by the regulatory process in Wyoming.
Furthermore, under the terms of the contract Perlman had a duty to make a reasonable effort to remove the force majeure condition should one occur. Perlman could have accomplished this either by beginning the permitting process or by using an alternative method of drilling for coal seam gas that would not produce as much water as his process and thus would not be subject to such strict regulation. That Perlman failed even to attempt to remove or overcome the purported force majeure defeats his claim under the contract. See Phillips Puerto Rico Core, Inc. v. Tradax Petroleum, Ltd., 782 F.2d 314, 319 (2d Cir.1985); see also Edington, 213 Mont. at 120, 690 P.2d at 974 ("the force majeure clause is not an escape way for those interruptions of production that could be prevented by the exercise of prudence, diligence, care, and the use of those appliances that the situation or party renders it reasonable that he should employ"). We therefore uphold the district court's conclusion that Perlman's obligation under the Lease and Surface Agreement was not excused by a force majeure, albeit for reasons other than those expressed by the district court.
The Lease's force majeure provision also included a fifteen day notice requirement. We need not address the adequacy of Perlman's notice, however, because we find that no event of force majeure in fact took place within the clear meaning of the contract.
Section 8 as a penalty
To establish the enforceability of liquidated damages under Wyoming law, the claimant must prove that (a) the amount fixed is a reasonable forecast of just compensation, (b) the harm caused by the breach would be difficult to estimate, and (c) the intent of the parties to provide
Perlman's penalty argument fails for at least three reasons. First, under Wyoming law, the measure of damages for a breach of contract is the amount that will compensate the injured party for the loss that full performance of the contract would have prevented. Zitterkopf v. Roussalis, 546 P.2d 436, 438 (Wyo.1976). Pioneer bargained for $1.5 million worth of drilling and exploration in exchange for charging Perlman a dramatically low rent. Thus, under Wyoming law the $1.5 million represents Pioneer's actual loss and bargained for damages.
Second, Section 8 of the Lease is enforceable as an alternative means of performance. Under the Lease, Perlman had the option to spend the $1.5 million on drilling and exploration or to pay that amount directly to Pioneer less only sums actually expended. Such an alternative obligation is enforceable. See Universal Resources Corp. v. Panhandle Eastern Pipe Line Co., 813 F.2d 77, 80 n. 4 (5th Cir.1987).
Third, any other measure of actual damages in this case would be difficult if not impossible to ascertain because it would involve speculative efforts to measure royalties lost by Pioneer. See 5 Corbin, supra, § 1064 (1964). The evidence adequately supports the district court's conclusion that Section 8 of the Lease is not a penalty provision, but a liquidated damages clause.
Perlman correctly states that Wyoming does not permit a prevailing party to obtain attorney's fees in the absence of statutory authority or an express contractual provision for an award of such fees. See United States ex rel. Farmers Home Admin. v. Redland, 695 P.2d 1031, 1039 (Wyo.1985). Therefore, the only other authority the district court might have had to award attorney fees to Pioneer and Kendrick would be as sanctions for filing frivolous claims in a lawsuit under Fed.R.Civ.P. 11 or Wyo.Stat. Ann. § 1-14-128.
In the instant case, the district court did not make a specific finding that Perlman's claims were frivolous thereby requiring the imposition of sanctions in the form of attorney's fees.
We therefore reverse the district court's award of $75,000 attorney's fees to Pioneer and Kendrick. For the same reasons, Pioneer and Kendrick are not entitled to an award of attorney's fees for this appeal. The award of attorney's fees under Mont.Code Ann. § 82-1-202, however, is affirmed as a statutory attorney's fee as stipulated to by both parties.
For the foregoing reasons, the judgement of the district court is AFFIRMED in