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Shuler Drilling Company, Inc. v. Southern Management Services, Inc.

United States District Court, W.D. Arkansas, El Dorado Division

November 25, 2014

SHULER DRILLING COMPANY, INC., Plaintiff,
v.
SOUTHERN MANAGEMENT SERVICES, INC., Defendant.
v.
SUPERIOR WELL DRILLING, LLC, Third Party Defendant.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

SUSAN O. HICKEY, District Judge.

Before the Court is a complaint filed by Shuler Drilling Company, Inc. ("Shuler") against Southern Management Services, Inc. ("Southern") claiming that Southern owes Shuler for services that it performed. ECF No. 3. Also before the Court is a counterclaim and third-party complaint filed by Southern. ECF No. 22. In its third-party complaint, Southern seeks a $1, 000, 000 judgment against Superior Well Drilling, LLC ("Superior") for the alleged unauthorized purchase of certain drilling rig components. Southern alleges in its counterclaim against Shuler that Superior is the alter ego of Shuler, and Southern seeks a set-off in the amount of $1, 000, 000 against Shuler's unpaid invoices.

On September 29, 2014, the Court held a bench trial to address the parties' claims. As requested by the Court, the parties filed post-trial briefs. ECF Nos. 42 and 43. After review of the record and evidence presented at trial, the Court makes the following findings of fact and conclusions of law.[1]

I. FINDINGS OF FACT

This case revolves around the complicated and poorly documented business dealings of three separate entities: Shuler;[2] Southern;[3] and Superior.[4] Any agreements between the parties dealing with the disputes at issue in this case are oral agreements or contracts. There are no written contracts at issue. The parties worked together on several projects during a certain time period, and some of these projects have given rise to three specific disputes. The Court's findings of fact regarding each dispute are as follows:

A. Unpaid Invoices for Services Rendered by Shuler (Shuler v. Southern and Southern's Counterclaim)

1. In 2008 and 2009 Shuler and Southern agreed that Shuler would be the operator of certain oil wells for Southern.[5] As the operator of the wells, it was Shuler's job to obtain third parties to provide services for the wells. Southern agreed to reimburse Shuler for the operating expenses.

2. Shuler paid these third parties $906, 451.17 for various services. Shuler submitted invoices for these services to Southern, and Southern has not paid these invoices.

3. Southern admits that it owes Shuler for the services performed on the wells. Southern, however, refuses to pay Shuler because of unresolved issues in an unrelated business matter in which Southern claims that Superior owes it $1 million. Southern argues that Shuler and Superior are acting as one business operation, and therefore Southern is entitled to a $1 million setoff against the amount that it owes Shuler for unpaid invoices. Southern's reason for refusing to pay the unpaid invoices is the subject matter of its counterclaim against Shuler.

4. One issue that all parties agree on involves the Dumas #1 well. When Shuler filed its lawsuit against Southern, a lis pendens was filed on the production of Dumas #1. This well has now been plugged and abandoned. Lion Oil is holding $60, 409.86 for Southern for oil runs on Dumas #1. Southern owes Shuler $53, 672.45 for operating and plugging expenses related to Dumas #1. The parties agree that the money being held by Lion Oil should be disbursed as follows: $53, 672.45 to Shuler and $6, 737.41 to Southern.

B. 1, 000 Horsepower Drilling Rig (Southern v. Superior)

5. In November 2008, at a meeting in Dallas, Texas, Loadcraft Industries ("Loadcraft")[6], Superior, and Southern agreed to build a 1, 000 horsepower drilling rig. Ownership in the rig would be as follows: Superior 50%, Loadcraft 25%, and Southern 25%. Loadcraft agreed to supply certain equipment. Southern agreed to pay an initial payment of $1, 000, 000 to be used to purchase needed equipment. Southern also agreed to contribute more money (not to exceed $1 million) as needed to purchase necessary equipment. Superior was to supply the labor needed to assemble the rig and commission it.

6. On December 3, 2008, Southern sent $1, 000, 000 to Superior. Superior purchased the following equipment with the money: two Weatherford pumps ($311, 750), 10, 000 feet of drill pipe ($550, 000); twenty drill collars ($100, 000); and a hex kelly ($15, 000). Superior incurred a trucking fee expense of $5, 632 associated with the purchase of the equipment. This equipment was delivered to Superior.

7. Superior requested a second payment of $1, 000, 000 from Southern to buy necessary equipment for the drilling rig. Southern did not provide the second payment, and the 1, ...


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