What could possibly go wrong when drill pipe and a delivery ticket are sent to a well location? Well …

The facts

In Knight Oil Tools v. Rippy Oil Company, Knight rented drill pipe to Rippy for an Eagle Ford well.  A delivery ticket represented that the pipe complied with API premium class standards. The pipe, marked with two white bands, was supposed to meet standards for API premium class pipe. Some of the pipe did not comply with the standards.

(The physical condition of used drill pipe is indicated by an industry-recognized system of colored bands, with each color representing a certain physical condition.)

The pipe broke in the hole because of what the parties agreed was fatigue. Rippy abandoned the well and an offset well was unsuccessful. Rippy sued Knight to recover damages for the lost well and Knight counterclaimed for unpaid invoices.

Partial summary judgment for the customer

Knight’s delivery ticket said on the front that the customer agreed to the fine print on the reverse side. If you’ve seen one of these tickets you know that the purpose is for the customer to release and indemnify the vendor for every claim the vendor’s crafty lawyers can think of, in the broadest language imaginable, Armageddon and invasion by hordes of swarthy, murderous Dothrakis included.

A lesson for vendors

The court rendered judgment for Rippy because the release and indemnity was not negotiated between the parties. Rippy’s consultants had authority to order equipment and accept delivery. But neither of them had apparent, implied or actual authority to bind Rippy to the indemnity, discharge and release provisions.

The court reasoned that contracts indemnifying against defective products are exceptions to usual business practices in the same manner as indemnifying one against his own negligence. Indemnities are not the kind of agreements ordinarily executed by superintendents on jobsites, said the court.

Vendors, you might want to be sure your drivers come away from a delivery with a ticket signed by the right person, and have processes to bolster enforcement. What if the company man signs the ticket? Do you have an MSA?

The trial

This case is a reminder of the futility of trying to reverse the findings of a jury. The jury is the sole judge of credibility of the witnesses and the weight given to testimony. Reviewing courts will not impose their own opinions to the contrary.

The jury found in favor of Rippy on negligent misrepresentation and breach of implied warranty of fitness for a particular purpose and found in favor of Knight on unpaid invoices. A $5.5 million jury verdict and judgment for Rippy was affirmed on appeal.  The jury found that the reasonable fair market value of the well immediately before the occurrence and immediately after was $5.9 million.

Knight argued that the evidence was legally and factually insufficient to support the jury’s findings on negligent misrepresentation and causation of the well failure. The appellate court held that a rational fact finder (the jury) could conclude that Knight made a false representation about the quality of the pipe, Knight didn’t use reasonable care in obtaining or communicating the information, on which Rippy justifiably relied.

Proximate cause

An essential question was the cause-in-fact component of proximate cause. Rippy satisfied this element with proof that the act was a substantial factor in bringing about the harm and absent the act the harm would not have occurred. There was sufficient evidence to support the jury’s conclusion.

The jury didn’t agree with Knight’s evidence of other problems that could have caused the failure of the well. C’est la vie!

Bonus interlude: Caamp, a band you probably havent heard of.