Wildcat Drilling, L.L.C. v. Discovery Oil & Gas, L.L.C.

[Cite as Wildcat Drilling, L.L.C. v. Discovery Oil & Gas, L.L.C., 2018-Ohio-4015.]

IN THE COURT OF APPEALS OF OHIO

SEVENTH APPELLATE DISTRICT

MAHONING COUNTY

WILDCAT DRILLING, LLC,

Plaintiff-Appellee/Cross-Appellant,

v.

DISCOVERY OIL AND GAS, LLC,

Defendant-Appellant/Cross-Appellee.

OPINION AND JUDGMENT ENTRY

Case No. 17 MA 0018

Civil Appeal from the

Court of Common Pleas of Mahoning County, Ohio

Case No. 15 CV 1959

BEFORE:

Gene Donofrio, Carol Ann Robb, Kathleen Bartlett, Judges.

JUDGMENT:

Affirmed in part and Reversed in part.

Atty. Molly Johnson, Johnson & Johnson Law Firm, 12 West Main Street, Canfield, Ohio

44406, for Plaintiff-Appellee/Cross Appellant, and

Atty. David Detec and Atty. Thomas Hull II, Manchester Newman & Bennett, LPA,

Atrium Level Two, The Commerce Building, 201 East Commerce Street, Youngstown,

Ohio 44503, for Defendant-Appellant/Cross-Appellee.

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Dated:

September 28, 2018

Donofrio, J.

{¶1} Defendant-appellant/cross-appellee, Discovery Oil and Gas, LLC,

(Discovery) appeals the judgment of the Mahoning County Common Pleas Court

granting summary judgment on a breach of contract claim by plaintiff-appellee/cross-

appellant Wildcat Drilling, LLC, (Wildcat). Wildcat appeals the trial court’s award of

damages.

{¶2} On December 19, 2014, Discovery and Wildcat entered into a contract.

Discovery hired Wildcat to drill the J. Klick #2 well (the well) in Stark County, Ohio. In

return, Discovery agreed to pay Wildcat $13.85 per foot drilled and $11,000.00 per day

of work on the well. The drilling was to commence on December 31, 2014. Pursuant to

the contract, Discovery was required to pay any invoices submitted by Wildcat within ten

days. If Discovery disputed any item on any invoice, it was required to notify Wildcat

about the dispute within five days of receiving the invoice. In addition, the contract

specified that Discovery was required to timely pay any undisputed portion of the

invoice.

{¶3} The contract contained multiple indemnification clauses. One such

clause, section 17.9.1 of the contract, provides:

[Wildcat] shall assume full responsibility for and shall defend, indemnify,

and hold [Discovery] and its joint owners harmless from and against any

loss, damage, expense, claim, fine and penalty, demand, or liability for

pollution or contamination, including control and removal thereof, that

originates on or above the surface of the land or water from spills, leaks,

or discharges of motor fuels, lubricants, and oils; pipe dope; paints and

solvents; ballast, bilge, sludge, and garbage; and other liquids or solids in

possession and control of [Wildcat]. These obligations are assumed

without regard to the negligence of any party or parties.

Complaint Exhibit A.

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{¶4} Wildcat completed drilling the well. On February 13, 2015, Wildcat sent

Discovery an invoice for the drilling services provided. The invoice charged Discovery

$190,350.37. At no point did Discovery pay any portion of the invoice amount.

{¶5} The reason Discovery did not pay was because it was fined by the Ohio

Department of Natural Resources (ODNR) for Wildcat’s drilling practices. On January 7,

2015, an inspector from the ODNR was on the site where Wildcat was drilling the well.

The inspector tested the water on the well site and determined that Wildcat was illegally

using brine water in its drilling operation. Discovery was fined by the ODNR for Wildcat’s

supposed use of brine water while drilling the surface casing. The ODNR issued a

compliance notice to Discovery and Discovery paid $50,000.00 in fines for the brine

water issue. Discovery paid the ODNR in March of 2015.

{¶6} After Discovery paid the ODNR fine, Discovery requested that Wildcat

indemnify it fully for the fine. Wildcat refused. In return, Discovery refused to pay any

portion of the invoice until Wildcat agreed to fully indemnify it for the ODNR fine.

{¶7} Wildcat brought an action against Discovery asserting a breach of contract

claim. Wildcat’s claim is based on the fact that Discovery never timely paid the invoice.

Discovery filed a counterclaim asserting breach of contract and a claim for civil liability

for criminal conduct. Discovery’s breach of contract claim was based on the fact that

Wildcat refused to indemnify Discovery for the ODNR fine. Discovery’s civil liability for

criminal conduct claim stemmed from Wildcat’s usage of brine water while drilling the

surface casing of the well.

{¶8} After discovery was completed, Discovery filed a motion for partial

summary judgment and Wildcat filed a motion for summary judgment. Discovery’s

motion sought summary judgment on liability only and requested a separate hearing on

damages. Discovery argued that Wildcat breached the contract by using brine water

during its drilling process, which is a crime under Ohio law. Discovery also argued that

Wildcat breached the contract when it failed to later indemnify Discovery pursuant to

section 17.9.1 for the fine Discovery paid to the ODNR.

{¶9} Wildcat’s motion argued that Discovery breached the contract when it did

not timely pay or timely dispute any portion of the invoice. Wildcat also argued that it

was unaware of any fine issued by the ODNR for its practices and should not be

Case No. 17 MA 0018

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required to indemnify Discovery for a fine based on an alleged offense that Wildcat

could not challenge or defend against.

{¶10} The trial court granted both parties’ motions for summary judgment finding

that both parties were in breach of the contract. The trial court found that Discovery was

in breach for not timely paying the invoice and Wildcat was in breach for not

indemnifying Discovery for the ODNR fine. The trial court ordered Discovery to pay

Wildcat $190,350.37 less the $50,000.00 fine and expenses of $14,150.09 that

Discovery incurred as a result of the fine. This came to a total of $126,200.28 that

Discovery was to pay Wildcat. The trial court also ordered Discovery to pay

prejudgment interest starting from February 23, 2015. Discovery timely filed this appeal

on February 6, 2017. Wildcat cross appealed. Discovery now raises four assignments

of error.

{¶11} Discovery’s first assignment of error states:

THE TRIAL COURT ERRED IN AWARDING WILDCAT

PREJUDGMENT INTEREST.

{¶12} Discovery makes three arguments pertaining to this assignment of error.

First, Discovery argues that prejudgment interest was inappropriate due to a good faith

dispute regarding the indemnification issue. Second, Discovery argues that Wildcat is

not entitled to prejudgment interest because it is not an “aggrieved party” under R.C.

1347.03. Third, Discovery argues, in the alternative, that the trial court’s award of 18%

prejudgment interest is inappropriate.

{¶13} An appellate court reviews a trial court’s summary judgment decision de

novo, applying the same standard used by the trial court. Ohio Govt. Risk Mgt. Plan v.

Harrison, 115 Ohio St.3d 241, 2007-Ohio-4948, 874 N.E.2d 1155, ¶ 5. A motion for

summary judgment is properly granted if the court, upon viewing the evidence in a light

most favorable to the nonmoving party, determines that: (1) there are no genuine

issues as to any material facts; (2) the movant is entitled to judgment as a matter of

law, and (3) the evidence is such that reasonable minds can come to but one

conclusion and that conclusion is adverse to the opposing party. Civ. R. 56(C); Byrd v.

Smith, 110 Ohio St. 3d 24, 2006-Ohio-3455, 850 N.E.2d 47, ¶ 10.

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{¶14} “[T]he moving party bears the initial responsibility of informing the trial

court of the basis for the motion, and identifying those portions of the record which

demonstrate the absence of a genuine issue of fact on a material element of the

nonmoving party’s claim.” Dresher v. Burt, 75 Ohio St.3d 280, 296, 662 N.E.2d 264

(1996). The trial court’s decision must be based upon “the pleadings, depositions,

answers to interrogatories, written admissions, affidavits, transcripts of evidence and

written stipulations of fact, if any, timely filed in the action.” Civ.R. 56(C). The

nonmoving party has the reciprocal burden of specificity and cannot rest on the mere

allegations or denials in the pleadings. Id. at 293.

{¶15} In Dresher, the Ohio Supreme Court held that a party who moves for

summary judgment need not support its motion with affidavits provided that the party

does not bear the burden of proof on the issues contained in the motion. Dresher at

277. Further, there is no requirement in Civ.R 56 that any party submit affidavits to

support a motion for summary judgment. See, e.g., Civ.R. 56(A) and (B). Id. However,

there is a requirement that a moving party, in support of a summary judgment motion,

specifically point to something in the record that comports with the evidentiary materials

set forth in Civ.R. 56(C). Id.

{¶16} Summary judgment is appropriate when there is no genuine issue as to

any material fact. A “material fact” depends on the substantive law of the claim being

litigated. Hoyt, Inc. v. Gordon & Assoc., Inc., 104 Ohio App.3d, 598, 603, 662 N.E.2d

1088 (8th Dist. 1995), citing Anderson v. Liberty Lobby, Inc. 477 U.S. 242, 247-248, 106

S.Ct. 2505, 91 L.Ed.2d 202 (1986).

{¶17} Analyzing Discovery’s good faith dispute argument, Discovery relies on

Dickerson v. Thompson, 89 Ohio App.3d 399, 624 N.E.2d 784 (8th Dist.1993). In

Dickerson, the Eighth District held that an award of prejudgment interest is not

appropriate where “liability was in dispute and the amount of potential liability was not

readily ascertainable because allowance of a setoff was disputed by the parties.” Id. at

405. Discovery argues that this entire litigation concerns whether Discovery was entitled

to indemnification and a setoff against Wildcat’s invoice.

{¶18} In response, Wildcat cites article 5 of the contract. Article 5 states, in

relevant part:

Case No. 17 MA 0018

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[Discovery] shall pay all invoices within ten (10) days after the receiving of

an invoice. If [Discovery] disputes an invoice or any part thereof,

[Discovery] shall, within five days of receiving an invoice, notify [Wildcat] of

the disputed item, specifying the reason therefore, and payment of the

disputed item may be withheld until resolution of the dispute. But timely

payment shall be made on the undisputed portion of all invoices. Any

sums * * * not paid within the above specified time shall bear interest at

the rate of 18 percent per annum, or the maximum legal rate, whichever is

higher, from the date due until paid.

Complaint, Exhibit A.

{¶19} Wildcat argues that the interest the trial court ordered Discovery to pay

was the interest that was stated in the contract, 18 percent per annum.

{¶20} R.C. 1343.03(A) provides when money becomes due and payable upon,

among other items, “other instrument of writing,” the creditor is entitled to the federal

short term rate of interest unless a contract provides for a different rate of interest. If a

contract does specify a rate of interest, the creditor is entitled to the rate of interest

expressed in the contract. The contract states that Wildcat was entitled to 18 percent

interest per annum on any balance that was not timely paid. Because of the interest

provision in the contract, appellant’s first argument lacks merit.

{¶21} Addressing Discovery’s aggrieved party argument, Discovery argues that

because Wildcat breached the contract first by not indemnifying Discovery for the

ODNR fine, Wildcat is not an “aggrieved party” entitled to prejudgment interest.

Discovery relies on two cases for this argument.

{¶22} The first case is the Eleventh District’s decision in Gray v. Petronelli, 11th

Dist. No. 2016-T-0030, 2017-Ohio-2601. In Gray, Petronelli was a contractor hired to

perform construction work for the Grays. Id. at ¶ 2-3. The Grays terminated Petronelli

from the job due to Petronelli’s deviations from the construction plans. Id. at ¶ 4-6. After

a trial, the trial court awarded Petronelli $6,323.08. Id. at ¶ 14.

{¶23} Petronelli appealed arguing, among other things, that he was entitled to

prejudgment interest. Id. at ¶ 51-53. The Eleventh District held that because Petronelli

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breached the contract, Petronelli was not entitled to prejudgment interest and was only

entitled to the quantum meruit amount the trial court ordered. Id. at ¶ 56-57. But the

contracts in this case do not include anything about interest on unpaid sums.

{¶24} The second case is Protek, Ltd. v. Lake Erie Screw Corporation, 5th Dist.

No. 2005CA00018, 2005-Ohio-5958. In Protek, the Fifth District held that a

manufacturer was not entitled to prejudgment interest pursuant to R.C. 1343.03 where

the manufacturer materially breached the contract. Id. at ¶ 172-175. But this case does

not involve a contract which provides for interest on unpaid sums.

{¶25} Interest rates that are a part of a contract, even if the interest rate is above

what is specified in R.C. 1343.03, have been upheld. See Ohio Valley Mall Co. v.

Fashion Gallery, Inc., 129 Ohio App.3d 700, 719 N.E.2d 8 (7th Dist.1998), see also

Ohio Neighborhood Fin., Inc. v. Adkins, 7th Dist. No. 09-CO-38, 2010-Ohio-3164.

Furthermore, as Discovery did breach the contract, awarding prejudgment interest to

Wildcat was proper pursuant to R.C. 1343.03. Rudy v. Carter, 8th Dist. No. 92247,

2009-Ohio-2729.

{¶26} Once a plaintiff prevails on a contract claim and requests prejudgment

interest, the plaintiff is entitled to prejudgment interest pursuant to R.C. 1343.03(A).

Cantwell Mach. Co. v. Chicago Mach. Co., 184 Ohio App.3d 287, 2009-Ohio-4548, 920

N.E.2d 994 (10th Dist.). Moreover, as previously stated, the contract did provide for

Wildcat to receive 18 percent interest on any unpaid sums. This is what the trial court

awarded. As such, Discovery’s second argument is without merit.

{¶27} Addressing Discovery’s argument that 18 percent interest is inappropriate,

Discovery argues that the trial court’s judgment entry did not specify what rate of

interest Wildcat is entitled to. Discovery also argues that it was entitled to withhold any

disputed amounts under the contract.

{¶28} Article 5 of the contract specifically provides that Wildcat is entitled to 18

percent interest on all unpaid sums. It also provides that “[i]f [Discovery] disputes an

invoice or any part thereof, [Discovery] shall, within five days of receiving an invoice,

notify [Wildcat] of the disputed item, specifying the reason therefore, and payment of the

disputed item may be withheld until resolution of the dispute.”

Case No. 17 MA 0018

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{¶29} Discovery’s argument in summation is that the entire amount of the

invoice is essentially disputed because the issue of brine water contaminating the

ground water could potentially subject Discovery to future damages. With future

damages that Discovery may be subject to being unascertainable, the entire invoice is

essentially in dispute.

{¶30} This argument lacks merit. Article five required Discovery to dispute any

portion of the invoice within five days of receiving the invoice. According to the affidavit

of Richard Liddle, a Wildcat employee, Wildcat did not receive any notice about

disputes regarding the invoice until April 23, 2015. (Aff. of R. Liddle ¶ J). As the invoice

is dated February 13, 2015, disputes should have been conveyed to Wildcat by

February 18, 2015. Furthermore, Michael Ellenis, Discovery’s vice president of

operations, testified that he had no knowledge of anyone from Discovery contacting

Wildcat about the brine issue until two or three months after the ODNR inspection on

January 7, 2015. (Dep. of M. Ellenis 39-40).

{¶31} But Discovery argues that Wildcat’s award of interest is inappropriate

because Discovery was excused from performing on the contract due to Wildcat’s

breach by not indemnifying Discovery. In support of this argument, Discovery cites

Sanders v. Ohio Edison Co., 69 Ohio St.3d 582, 635 N.E.2d 19 (1994).

{¶32} In Sanders, an insurance company was bound by its policy with an

insured to defend any action against the insured seeking damages payable under the

policy “even if any of the allegations of the suit are groundless, false, or fraudulent”. Id.

at 586. The insurer refused to defend an action against its insured arguing that the

accident that the insured caused was not covered by the policy. Id. at 583. The insured

then settled the action and sought damages from the insurer. Id. at 583-584.

{¶33} The insurer argued, among other things, that the insured breached the

policy by settling without insurer’s assent. Id. at 585. The Ohio Supreme Court held that

the accident was covered by the policy and the insured did not have to comply with the

policy because the insurer breached the policy first. Id. at 585-586.

{¶34} Discovery’s reliance on Sanders depends on when the parties breached

the contract. In order for Sanders to apply as Discovery argues, Wildcat would need to

have breached the contract first. But Discovery breached the contract first. As

Case No. 17 MA 0018

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previously stated, article five of the contract required Discovery to pay all invoices within

10 days of receipt or dispute any portion an invoice within 5 days. Because the invoice

was issued on February 13, 2015 and Discovery never paid any portion nor disputed

the invoice, Discovery breached the contract February 23, 2015.

{¶35} Wildcat’s claimed breach was the failure to indemnify Discovery for the

ODNR fine. But Discovery was not officially fined until March of 2015 and the failure to

indemnify occurred after Discovery paid the fine. Because Discovery breached the

contract first, Discovery’s third argument lacks merit.

{¶36} Accordingly, Discovery’s first assignment of error lacks merit and is

overruled.

{¶37} Discovery’s second assignment of error states:

THE TRIAL COURT ERRED IN GRANTING SUMMARY

JUDGMENT TO WILDCAT ON THE ISSUE OF WHETHER OR NOT

DISCOVERY OIL WAS ENTITLED TO STATUTORY DAMAGES UNDER

O.R.C. §§ 2307.60 AND 2307.61.

{¶38} Discovery argues that Wildcat’s use of brine water at the drilling site was a

crime. As a crime, Discovery argues that it is entitled to punitive damages, attorney’s

fees, and costs pursuant to R.C. 2307.60. In the alternative, Discovery argues that it is

entitled to triple damages pursuant to R.C. 2307.61.

{¶39} This assignment of error is also reviewed under the same standard of

review for summary judgment set forth in the first assignment of error.

{¶40} In addressing R.C. 2307.61, subsection (A) of this statute allows property

owners to pursue civil actions for damages from any person who damages the owner’s

property or who commits a theft offense. But recovery under R.C. 2307.61 is limited to

claims of property damage or theft offenses. CitiMortgage, Inc. v. Rudzik, 7th Dist. No.

13 MA 20, 2014-Ohio-1472.

{¶41} Discovery’s claims against Wildcat are not premised on damage to

Discovery’s property or on theft, they are based on breach of contract and brine water

contamination. As such, Discovery is not entitled to damages pursuant to R.C. 2307.61.

{¶42} Addressing R.C. 2307.60, this statute provides:

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Anyone injured in person or property by a criminal act has, and may

recover full damages in, a civil action unless specifically excepted by law,

may recover the costs of maintaining the civil action and attorney's fees if

authorized by any provision of the Rules of Civil Procedure or another

section of the Revised Code or under the common law of this state, and

may recover punitive or exemplary damages if authorized by section

2315.21 or another section of the Revised Code.

R.C. 2307.60(A)(1).

{¶43} R.C. 2307.60 allows recovery in civil actions for criminal acts that injure

person or property. Discovery’s action against Wildcat is not premised on a criminal act

that injured Discovery in person or property. Discovery’s claims are based on Wildcat

allegedly breaching the contract, failure to identify, and brine water contamination. In

this case, Discovery met with the ODNR and paid the fine after an ODNR inspector

alleged Wildcat illegally used brine water in its drilling operation. Wildcat was not

notified of the ODNR’s allegations in time for it to challenge the allegation nor was

Wildcat given the opportunity to defend against the ODNR’s charge. Thus, there is no

evidence that a criminal act was ever proved in this case. As such, R.C. 2307.60 is

inapplicable.

{¶44} Accordingly, Discovery’s second assignment of error lacks merit and is

overruled.

{¶45} Discovery’s third assignment of error states:

THE TRIAL COURT ERRED IN FAILING TO SET A HEARING

FOR FURTHER INDEMNIFICATION DAMAGES OWED TO DISCOVERY

OIL OVER AND ABOVE THAT WHICH WAS ALREADY ASSESSED

AGAINST WILDCAT.

{¶46} Discovery argues that the trial court should have held a hearing to account

for R.C. 2307.60 and R.C. 2307.61 damages. Discovery also argues that it faces the

possibility of even more damages if it is discovered that Wildcat’s drilling practices

affected the surrounding environment.

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{¶47} Whether to grant a party's request for oral hearing on a summary

judgment motion is a decision within the trial court's discretion. Hooten v. Safe Auto Ins.

Co., 100 Ohio St.3d 8, 2003-Ohio-4829, 795 N.E.2d 648, ¶ 14. Abuse of discretion

implies that the court acted in an unreasonable, arbitrary, or unconscionable manner.

State ex rel. Sartini v. Yost, 96 Ohio St. 3d 37, 2002-Ohio-3317, 770 N.E.2d 584.

{¶48} In its motion for summary judgment, Discovery put forth evidence that it

paid the ODNR a $50,000.00 fine and incurred expenses of $14,150.09 related to the

fine. This was the amount the trial court deducted from its ultimate award in favor of

Wildcat. There is no indication in the record that Discovery faces any other action as a

result of the ODNR fine or the brine issue. With no other evidence of any other

damages, the trial court’s lack of a hearing on damages was not an abuse of discretion.

{¶49} Moreover, to the extent Discovery would face additional liability for the

brine water issue, there is nothing in the record that indicates Discovery is precluded

from seeking reimbursement from Wildcat for that issue at a later date. To the contrary,

section 17.9.1 of the contract requires Wildcat to indemnify Discovery for any pollution

or contamination that Wildcat causes.

{¶50} Accordingly, Discovery’s third assignment of error lacks merit and is

overruled.

{¶51} Discovery’s fourth assignment of error states:

THE TRIAL COURT ERRED IN GRANTING SUMMARY

JUDGMENT IN FAVOR OF WILDCAT ON ITS INVOICE.

{¶52} Discovery argues that Wildcat should only be entitled to quantum meruit

damages and not prejudgment interest. Discovery also argues that it is entitled to set-off

any and all other damages caused by Wildcat’s use of brine.

{¶53} This assignment of error restates arguments Discovery already made in its

previous assignments of error. As such, this assignment of error does not require any

additional analysis.

{¶54} Accordingly, Discovery’s fourth assignment of error is overruled as moot.

{¶55} Wildcat filed a cross-appeal in which it raises one assignment of error.

Wildcat’s sole assignment of error states:

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THE TRIAL COURT ERRED BY RULING THAT PLAINTIFF WAS

REQUIRED TO INDEMNIFY DEFENDANT.

{¶56} Wildcat argues that Discovery’s failure to notify it of the fine and provide

Wildcat an opportunity to defend against the fine invalidates Discovery’s ability to claim

indemnification. Wildcat also argues that it should not be required to indemnify

Discovery for the full ODNR fine because the fine greatly exceeded what is permitted

under Ohio law.

{¶57} As this assignment of error challenges the trial court’s award of summary

judgment in favor of Discovery on its claim for indemnification, it is subject to the same

summary judgment standard of review set forth earlier.

{¶58} Wildcat argues that Discovery intentionally did not inform it of the ODNR

meeting where Discovery agreed to pay the fine. Wildcat argues that because it was

unaware of the meeting, it was not able to defend itself and mitigate the damages and

therefore should not be required to indemnify Discovery

{¶59} In support of this argument, Wildcat cites the Fourth District’s decision in

Brown v. Gallagher, 4th Dist. No. 12CA3332, 2013-Ohio-2323. In Brown, Brown caused

an automobile accident which resulted in injuries to Gallagher, a deputy with the Ross

County Sheriff’s Department. Id. at ¶ 2. Gallagher brought a civil action against Brown

for damages sustained as a result of the accident. Id. Prior to trial, the parties settled. Id.

The settlement provided that Brown would pay Gallagher $87,500.00, Gallagher would

release all claims against Brown, and Gallagher would indemnify Brown for “any and all

claims, liability, and expense, including attorney fees, for any claim or demand of any

party, and any claim or demand of any third party” resulting from the auto collision. Id.

{¶60} After the civil suit, Brown was criminally charged with vehicular assault for

the crash where he injured Gallagher. Id. at ¶ 3. Brown was convicted and sentenced to

17 months in prison and ordered to pay $7,923.44 in restitution to the Ross County

Sheriff’s Department for payments the sheriff’s department made to Gallagher. Id.

Brown then filed a complaint against Gallagher seeking indemnification of the restitution

Brown was ordered to pay. Id. at ¶ 4. Eventually, the parties submitted a stipulation of

facts before the trial court for a full adjudication on the merits. Id. at ¶ 6. The trial court

held that Gallagher was not required to indemnify Brown because (1) Brown failed to

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provide Gallagher with notice of the claim for restitution and (2) Brown failed to provide

Gallagher with an opportunity to defend against the claim for restitution. Id. Brown

appealed.

{¶61} In affirming the trial court’s judgment, the Fourth District relied on the

requirements set out by the Ohio Supreme Court:

[W]hen an indemnitee settles a claim, instead of litigating it, the indemnitee is

entitled to indemnification if the indemnitee shows (1) that the indemnitee has

given proper and timely notice to the party from whom indemnity is sought, (2)

that the indemnitee was legally liable to respond to the settled claim, and (3) that

the settlement was fair and reasonable.

Id. at ¶ 13, citing Portsmouth Ins. Agency v. Med Hut of Ohio, 188 Ohio App.3d 111,

2009-Ohio-941, ¶ 19, citing Globe Indemn. Co. v. Schmitt, 142 Ohio St. 595, 53 N.E.2d

790 (1944).

{¶62} The Fourth District held that Brown had a valid indemnification clause. Id.

But Brown was not allowed to enforce it because he did not provide Gallagher notice of

the restitution hearing. Id.

{¶63} Brown is based in large part on Globe, 142 Ohio St. 595. In Globe, the

Ohio Supreme Court held that “the one seeking indemnity, after making voluntary

settlement, must prove that he has given proper and timely notice to the one from whom

it is sought, that he was legally liable to respond and that the settlement effected was

fair and reasonable”. Id. at 604.

{¶64} Attached to Discovery’s motion for partial summary judgment is the

affidavit of Emmanual Ellenis, Discovery’s vice president of operations. This affidavit

explains that Discovery felt having Wildcat present during the ODNR negotiations as a

result of the fine “would only escalate tensions with [ODNR] and it would be counter-

productive to negotiating a favorable settlement”. (Aff. E. Ellenis ¶ 6). This indicates

that Discovery intentionally did not inform Wildcat about meeting with the ODNR to

settle the fine.

{¶65} Discovery argues that Globe and its progeny are based on common law

indemnification and not contractual indemnification. Discovery cites Shelly Co. v. Karas

Properties, Inc., 8th Dist. No., 98039, 2012-Ohio-5416 in support of its argument. In

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Shelly, Shelly leased property from Karas. Id. at ¶ 3. The lease contained an

indemnification clause where Karas agreed to indemnify Shelly “from any and all fines,

costs of cleanup or any costs incidental to or a consequence of any environmental

violations arising out of Lessor's or any or all of its predecessor's prior use or ownership

of the premises, without limitation”. Id. at ¶ 4. Shelly and Karas were both fined by the

City of Cleveland for illegally placed culverts on the property. Id. at ¶ 5. After

negotiations, Shelly and Karas each paid $10,650.00 in fines. Id. at ¶ 6-7.

{¶66} Shelly then brought an action against Karas seeking indemnification

pursuant to the lease agreement. Id. at ¶ 8. The trial court eventually granted summary

judgment to Shelly on the indemnification issue and a trial was held on Shelly’s other

counts. Id. at ¶ 9-11. Karas appealed.

{¶67} On appeal, Karas argued that Shelly did not comply with the Globe

requirements. Id. at ¶ 24. The Eighth District held that Globe did not apply in a landlord

tenant dispute regarding a commercial lease because Globe “involved an insurance

company's right to subrogation after adjusting claims brought against its insured and its

insured's codefendant, who was jointly liable to an injured third party”. Id. at ¶ 24. The

Eighth District went on to say that Karas’ failure to indemnify Shelly was a breach of the

lease. Id. at ¶ 25.

{¶68} Shelly is distinguishable from the case at bar. In Shelly, both parties were

fined by the City for violations. Both parties were likewise included in the settlement

negotiations. In the present case, however, Wildcat was not fined by the ODNR and

was not privy to the meeting between Discovery and the ODNR regarding the fine.

{¶69} We find Brown and Globe applicable to the case at bar. Like Brown, there

was a written indemnification agreement between Discovery and Wildcat, Discovery met

with the ODNR to discuss the fine regarding Wildcat’s drilling practices, Discovery

agreed to a fine, and then Discovery sought indemnification from Wildcat. Because

Wildcat was not notified of the ODNR meeting or given the opportunity to appear at the

meeting, Discovery is not entitled to indemnification.

{¶70} Accordingly, Wildcat’s sole assignment of error has merit and is sustained.

{¶71} For the reasons stated above, the trial court’s judgment granting Wildcat’s

motion for summary judgment is hereby affirmed. The trial court’s judgment granting

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Discovery’s motion for summary judgment is reversed. The trial court’s award of

damages is modified. Discovery is ordered to pay Wildcat the amount of the invoice,

which is $190,350.37, plus 18 percent interest from February 23, 2015.

Robb, P. J., concurs

Bartlett, J., concurs

Case No. 17 MA 0018

[Cite as Wildcat Drilling, L.L.C. v. Discovery Oil & Gas, L.L.C., 2018-Ohio-4015.]

For the reasons stated in the Opinion rendered herein, Discovery’s four

assignments of error are without merit and are overruled. Wildcat’s sole assignment of

error has merit and is sustained. It is the final judgment and order of this Court that the

judgment of the Court of Common Pleas of Mahoning County, Ohio granting Wildcat’s

motion for summary judgment is hereby affirmed. The judgment granting Discovery’s

motion for summary judgment is hereby reversed. Discovery is ordered to pay the full

amount of the invoice, which is $190,350.37, plus prejudgment interest at 18 percent

from February 23, 2015. Costs to be taxed against Discovery.

A certified copy of this opinion and judgment entry shall constitute the mandate in

this case pursuant to Rule 27 of the Rules of Appellate Procedure. It is ordered that a

certified copy be sent by the clerk to the trial court to carry this judgment into execution.

NOTICE TO COUNSEL

This document constitutes a final judgment entry.