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EEOC issues 2017 performance report

Published on November 16, 2017 

WASHINGTON — The U.S. Equal Employment Opportunity Commission (EEOC) made significant progress in managing the pending inventory of charges during fiscal year 2017, which ended Sept. 30, the agency reported in its annual Performance and Accountability Report published on Nov. 15.

EEOC offices deployed new strategies to more efficiently prioritize charges with merit and more quickly resolve investigations once the agency had sufficient information. Together with improvements in the agency’s digital systems, these strategies produced an increase in charge resolutions and a significant decrease in charge inventory.  As a result, in fiscal year 2017 the EEOC resolved 99,109 charges and reduced the charge workload by 16.2 percent to 61,621, the lowest level of inventory in 10 years.  Additionally, during the fiscal year, the EEOC handled over 540,000 calls to the toll-free number and more than 155,000 contacts about possible charge filing in field offices, resulting in 84,254 charges being filed.

“The pending inventory of private sector charges (the backlog) has been a longstanding issue for the EEOC and the public it serves,” said EEOC Acting Chair Victoria A. Lipnic. “Early in the calendar year, we made addressing the backlog a priority. A primary point of this effort was to share strategies among our offices that have been particularly effective in dealing with the pending inventory, while ensuring we are capturing charges with merit. I thank EEOC’s employees for their work and congratulate them on this progress.”

Other fiscal year 2017 highlights include:

The EEOC secured approximately $484 million for victims of discrimination in the workplace. This includes $355.6 million in monetary relief for those who work in the private sector and state and local government workplaces through mediation, conciliation and other administrative enforcement, and $42.4 million in monetary relief for charging parties through litigation. The EEOC also secured $86 million in monetary relief for federal employees and applicants.  Importantly, in each of these categories, the agency obtained substantial changes to discriminatory practices to remedy violations of equal employment opportunity laws and prevent future discriminatory conduct.

In fiscal year 2017, the EEOC filed 184 merits lawsuits, including 124 suits on behalf of individuals, 30 non-systemic suits with multiple victims, and 30 systemic suits. This is more than double the number of suits filed in fiscal year 2016. Additionally, EEOC’s legal staff resolved 109 merits lawsuits for a total monetary recovery of $42.4 million and achieved a favorable result in 91 percent of all district court resolutions.  In addition, a number of very significant suits were successfully resolved.

The agency’s outreach programs reached 317,000 people during the year through participation in more than 4,000 no-cost educational, training and outreach events. The EEOC continued to promote the online Small Business Resource Center to provide a one-stop shop to help small businesses easily access information about employer responsibilities. The Small Business Administration Ombudsman’s Report again gave EEOC an “A” rating for responsiveness to small business concerns.

On the technology front, the agency further enhanced its online capabilities for the public and made internal operational improvements. For the public, the EEOC advanced its online services by way of a pilot program which allowed individuals in five EEOC offices to submit inquiries online, schedule interviews, and submit and receive charge information.  This pilot led to the nationwide launch of the EEOC Public Portalin November 2017. Internally, the agency replaced many paper procedures with more efficient online tools.

In our federal sector program, the agency resolved 6,661 hearings complaints and secured more than $72.7 million in relief for federal employees. EEOC also resolved 4,284 appeals of agency decisions on federal sector complaints, a 14 percent increase over the previous year, including 47.3 percent of them within 180 days of receipt, and secured more than $13.3 million in relief. Our federal program also reduced its pending inventory of appeals by 11 percent to 3,658 the lowest level in nine years.

EEOC’s fiscal year 2017 Performance and Accountability Report is posted on the agency’s web site at https://www.eeoc.gov/eeoc/plan/upload/2017par.pdf. Comprehensive enforcement and litigation statistics for fiscal year 2017 will be available on the agency’s website in January 2018.

The EEOC advances opportunity in the workplace by enforcing federal laws prohibiting employment discrimination. More information is available at www.eeoc.gov. Stay connected with the latest EEOC news by subscribing to our email updates.

Disclaimer: This website post is intended for informational purposes only and does not constitute legal advice. Readers should not rely upon this information as a substitute for personal legal advice. If you have a legal concern, you should seek legal advice from an attorney.

Lincoln Cemetery sued by EEOC for retaliation

Published on September 22, 2017

ATLANTA – Lincoln Cemetery, Inc., an Atlanta corporation specializing in interment arrangements, violated federal law when it fired an employee because she participated in an EEOC investigation, the U.S. Equal Employment Opportunity Commission (EEOC) charged in a lawsuit it recently filed.

According to the EEOC’s lawsuit, Peggy Knox had worked for Lincoln Cemetery as an adminis-trative assistant since October 1983. In July 2015, Knox was interviewed by the EEOC during its investi-gation into an EEOC charge filed against Lincoln Cemetery by another employee. On Sept. 17, 2015, Lincoln Cemetery’s owner and president attended a conference at the EEOC’s Atlanta District Office related to the same EEOC investigation. Within hours of attending the conference, Knox was fired be-cause of her cooperation with the EEOC.

Such alleged conduct violates Title VII of the Civil Rights Act of 1964. The EEOC filed suit in U.S. District Court for the Northern District of Georgia, Atlanta Division (Civil Action No. 1:17-cv-3165-ELR-AJB) after first attempting to reach a pre-litigation settlement through its conciliation process. The federal agency seeks back pay, compensatory damages and punitive damages for Knox, as well as injunctive relief designed to prevent such discrimination in the future.

“This suit sends a message that employees should never be punished for speaking to government officials when they investigate discrimination claims,” said Bernice Williams-Kimbrough, director of the EEOC’s Atlanta District Office.

Antonette Sewell, regional attorney for the Atlanta District Office, added, “Trying to take revenge against employees for speaking to government investigators and engaging in protected activity is a clear violation of the anti-retaliation provisions of Title VII and hinders an employee’s ability to work in a discrimination-free environment as well as the government’s ability to do its job.”

The EEOC advances opportunity in the workplace by enforcing federal laws prohibiting employment discrimination.

For more information on the EEOC, click here.

Disclaimer: This website post is intended for informational purposes only and does not constitute legal advice. Readers should not rely upon this information as a substitute for personal legal advice. If you have a legal concern, you should seek legal advice from an attorney.

EEOC sues Maritime Autowash for race and national origin discrimination, retaliation

Published on September 22, 2017

BALTIMORE – Maritime Autowash, Inc. violated federal law when it subjected a class of workers to a hostile work environment and disparate treatment based on their race and national origin (Hispanic) at its Edgewater, Md., facilities, the U.S. Equal Employment Opportunity Commission (EEOC) charged in a lawsuit it announced Aug. 28.

According to the EEOC’s lawsuit, Maritime segregated a class of Hispanic workers into lower-paying jobs as laborers or detailers because of their race and national origin, and did not offer them promotion or advancement opportunities to key employee or cashier positions, despite their tenure and outstanding job performance. Maritime paid many class members only the minimum wage despite years of service, but paid non-Hispanic workers higher wages or promoted them to key employee positions.

The EEOC also charged that Maritime discriminated against the Hispanic class members in their terms and conditions of employment. These discriminatory practices included forcing them to perform other duties without additional compensation and denying them proper safety equipment or clothing. Maritime also required Hispanic workers to perform personal tasks for the owner and managers, such as routinely assigning the female Hispanic class members to clean the houses of the owner or manager and assigning the male Hispanics to perform duties at their homes, such as landscaping, cleaning the pool, picking up dog excrement, painting or helping with moves.

In addition, the EEOC charged that Maritime further violated the law by firing class members for complaining about the harassment and discriminatory working conditions.  In the course of the EEOC’s investigation of this matter, the U.S. Circuit Court of Appeals for the Fourth Circuit enforced the agency’s authority to subpoena evidence, in a published opinion available at:  http://www.ca4.uscourts.gov/Opinions/Published/151947.P.pdf.

All this alleged conduct violates Title VII of the Civil Rights Act of 1964, which prohibits discrimination and harassment based on race and national origin. The EEOC filed suit (EEOC v. Phase II Investments, Inc., formerly known as Maritime Autowash, Inc. and Maritime Autowash, II, et. al, Civil Action No. 1:17-cv-02463) in U.S. District Court for the District of Maryland, Northern Division, after first attempting to reach a pre-litigation settlement through its conciliation process. The EEOC is seeking compensatory and punitive damages on behalf of the class members, as well as broad injunctive relief to prevent discrimination in the future.

“Sadly, more than 50 years after the passage of the Civil Rights Act, this employer thought it could get away with subjecting Hispanic workers to separate and unequal pay, job opportunities and working conditions,” said EEOC Regional Attorney Debra M. Lawrence. “The EEOC is dedicated to protecting vulnerable workers from such discrimination and harassment and ensuring that all employees receive equal pay for equal work.”

Spencer H. Lewis, Jr., district director of the EEOC’s Philadelphia District Office, added, “Exploiting workers based on national origin and race is despicable and unlawful. The class members courageously opposed the harassment and discrimination. Unfortunately, Maritime again failed to do the right thing and made a bad situation worse by firing the discrimination victims. Now the EEOC will take vigorous action to rectify this situation.”

The EEOC’s Baltimore Field Office is one of four offices in the Philadelphia District Office, which has jurisdiction over Pennsylvania, Maryland, Delaware, West Virginia and parts of New Jersey and Ohio. Attorneys in the Philadelphia District Office also prosecute discrimination cases in Washington, D.C. and parts of Virginia.

Eliminating discriminatory practices affecting vulnerable workers who may be unaware of their rights under equal employment laws or reluctant or unable to exercise them, is one of six national priorities identified by the Commission’s Strategic Enforcement Plan (SEP). These practices can include disparate pay, job segregation, harassment and human trafficking. Enforcing equal pay laws, including addressing discriminatory compensation systems and practices, is another SEP priority.

The EEOC advances opportunity in the workplace by enforcing federal laws prohibiting employment discrimination.

For more information on the EEOC, click here.

Disclaimer: This website post is intended for informational purposes only and does not constitute legal advice. Readers should not rely upon this information as a substitute for personal legal advice. If you have a legal concern, you should seek legal advice from an attorney.

EEOC sues Estee Lauder for sex discrimination

Published on September 22, 2017

PHILADELPHIA—Estee Lauder Companies, Inc., one of the world’s leading manufacturers and marketers of skin care, makeup, fragrance and hair care products, violated federal law when it implemented and administered a paid parental leave program that automatically provides male employees who are new fathers lesser parental leave benefits than are provided to female employees who are new mothers, the Equal Employment Opportunity Commission (EEOC) alleged in a lawsuit it announced Aug. 30.

According to the suit, in 2013 Estee Lauder adopted a new parental leave program to provide employees with paid leave for purposes of bonding with a new child, as well as flexible return-to-work benefits when the child bonding leave expired. Under its parental leave program, in addition to paid leave already provided to new mothers to recover from childbirth, Estee Lauder also provides eligible new mothers an additional six weeks of paid parental leave for child bonding.  Estee Lauder only offers new fathers whose partners have given birth two weeks of paid leave for child bonding.  The suit also alleges that new mothers are provided with flexible return-to-work benefits upon expiration of child bonding leave that are not similarly provided to new fathers.

The case arose when a male employee working as a stock person in an Estee Lauder store in Maryland sought parental leave benefits after his child was born.  He requested, and was denied, the six weeks of child-bonding leave that biological mothers automatically receive, and was allowed only two weeks of leave to bond with his newborn child.  Such conduct violates Title VII of the Civil Rights Act of 1964 (Title VII) and the Equal Pay Act of 1963, which prohibit discrimination in pay or benefits based on sex.  The suit seeks relief for the affected employee, and other male employees who were denied equal parental leave benefits because of their sex.

The EEOC’s Washington Field Office investigated the charge of discrimination that led to this suit. The EEOC filed suit (EEOC v. Estee Lauder Companies, Inc., Civil Action No. —) in U.S. District Court for the Eastern District of Pennsylvania after first attempting to reach a pre-litigation settlement through its conciliation process. As part of the suit, the EEOC is seeking back pay and compensatory and punitive damages on behalf of the aggrieved class members, as well as injunctive relief.

“It is wonderful when employers provide paid parental leave and flexible work arrangements, but federal law requires equal pay, including benefits, for equal work, and that applies to men as well as women,” said EEOC Washington Field Office Acting Director Mindy Weinstein.

EEOC Philadelphia District Office Regional Attorney Debra M. Lawrence added, “Addressing sex-based pay discrimination, including in benefits such as paid leave, is a priority issue for the Commission.”

Enforcement of equal pay laws, including targeting compensation systems and practices that discriminate based on gender, is of one of six national priorities identified by the Commission’s Strategic Enforcement Plan.

The EEOC Philadelphia District Office has jurisdiction over Pennsylvania, Maryland, Delaware, West Virginia and parts of New Jersey and Ohio.  Attorneys in the EEOC Philadelphia District Office also prosecute discrimination cases arising from Washington, D.C. and parts of Virginia.

The EEOC advances opportunity in the workplace by enforcing federal laws prohibiting employment discrimination.

For more information on the EEOC, click here.

Disclaimer: This website post is intended for informational purposes only and does not constitute legal advice. Readers should not rely upon this information as a substitute for personal legal advice. If you have a legal concern, you should seek legal advice from an attorney.

EEOC sues Tarr and Zenith for pregnancy discrimination

Published on September 22, 2017

SAN DIEGO — Tarr, Inc. and Zenith, LLC, a San Diego-based company that sells dietary supplements, violated federal law when it fired an employee within days of learning of her pregnancy, the U.S. Equal Employment Opportunity Commission (EEOC) charged in a pregnancy discrimination lawsuit filed Sept. 7.

According to EEOC’s lawsuit, an employee who worked at Tarr, Inc. in San Diego informed the company of her pregnancy and was terminated ten days later. The EEOC also contends that the com­pany discharged other pregnant employees or refused their requests to return to work after taking maternity leave. Tarr, Inc. merged with Zenith, LLC in 2016.

Such alleged conduct violates Title VII of the Civil Rights Act of 1964, as amended by the Pregnancy Discrimination Act. The EEOC filed suit in U.S. District Court for the Southern District of California (EEOC v. Tarr, Inc., and Zenith, LLC, Case No. 3:17-cv-01660-W-WVG) after first attempting to reach a pre-litigation settlement through its conciliation process. The EEOC’s suit seeks back pay, compensa­tory and punitive damages for the female employee and a class of similarly affected employees, as well as injunctive relief intended to prevent further discrimination at the business.

“Pregnancy discrimination continues to be a persistent problem,” said Anna Park, regional attorney for the EEOC’s Los Angeles District, whose jurisdiction includes San Diego County. “Employers should be cognizant of their obligations under federal law to maintain a workplace free of discrim­ination.”

Christopher Green, director of the EEOC’s San Diego local office, added, “Women should not have to choose between their job or having children. Employers need to be aware that the EEOC takes pregnancy discrimination seriously and the agency will continue to protect the rights of pregnant employees.”

The EEOC advances opportunity in the workplace by enforcing federal laws prohibiting employment discrimination.

For more information on the EEOC, click here.

Disclaimer: This website post is intended for informational purposes only and does not constitute legal advice. Readers should not rely upon this information as a substitute for personal legal advice. If you have a legal concern, you should seek legal advice from an attorney.

Massimo Zanetti sued by EEOC for sexual harassment, retaliation

Published on September 22, 2017

ORFOLK, Va. —Massimo Zanetti Beverage USA, Inc. violated federal civil rights law when it failed to stop sexual harassment of a female employee and then fired her because she complained about the harassment, the U.S. Equal Employment Opportunity Commission (EEOC) charged in a lawsuit filed on Sept. 19.

According to the EEOC’s complaint, LaToya Young had been employed at Massimo Zanetti’s roasting facility in Suffolk, Va., about two weeks when a male co-worker began sexually harassing her in February 2015. The harassment included requests for sex and sexual favors, as well as other crude sexual comments and gestures. According to the EEOC, Young reported the harassment to her supervisor on at least three occasions. Despite her complaints, the harassment continued. Shortly after her third complaint about the sexual harassment, Young was fired for an alleged performance issue. The EEOC contends that Young’s performance was not the reason for her discharge, but rather was in retaliation for her complaints about sexual harassment.

The EEOC brought the suit under Title VII of the Civil Rights Act of 1964, which prohibits sexual harassment and retaliation against employees who complain about it. The EEOC sued after first attempting to reach a pre-litigation settlement through its conciliation process. The case (EEOC v. Massimo Zanetti Beverage USA, Inc., Civil Action No. 2:17-CV-00499-HCM-DEM) was filed in U.S. District Court for the Eastern District of Virginia, Norfolk Division on September 18, 2017.

The EEOC is seeking full relief, including back pay, reinstatement, compensatory damages, punitive damages and injunctive relief.

“Employers must remember they are obligated to take prompt remedial action when they learn about sexual harassment in the workplace,” said Lynette A. Barnes, regional attorney for the EEOC’s Charlotte District Office. “This case is also a reminder that a company must not retaliate after receiving a sexual harassment complaint.”

According to publicly available information, Massimo Zanetti, which is headquartered in Portsmouth, Va., is part of the Massimo Zanetti Beverage Group, which does over $1 billion of business annually and claims to be the largest private company in the coffee industry.

The EEOC advances opportunity in the workplace by enforcing federal laws prohibiting employment discrimination.

For more information on the EEOC, click here.

Disclaimer: This website post is intended for informational purposes only and does not constitute legal advice. Readers should not rely upon this information as a substitute for personal legal advice. If you have a legal concern, you should seek legal advice from an attorney.

Judge orders plaintiff to produce Facebook file

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on June 23, 2016.


Cody J. Cooper is an attorney whose practice is concentrated in commercial litigation, product liability, and intellectual property.

By Phillips Murrah Attorney Cody J. Cooper

The prevalence of social media continues to change litigation practices. As the availability of data about individuals related to social media continues to increase, so do the requests by opposing parties for this information. This necessarily requires analysis by the courts.

In an April order, the U.S. District Court for the Eastern District of Missouri wrestled with this very issue when it ordered a plaintiff to provide the defendant with her “Download Your Info” report from Facebook. See Rhone v. Schneider Nat’l Carriers, Inc., et al., No. 15-cv-01096 (E.D. Mo. 2015).

That lawsuit arose from a car accident and the plaintiff claimed severe, permanent and progressive physical and mental injuries that affected her lifestyle and ability to work.

During discovery, the defendant requested all of the plaintiff’s social media posts made since the date of the accident. The plaintiff simply responded “none.” The defendant then conducted an independent investigation and discovered substantial activity on the plaintiff’s Facebook profile, including posts about dancing and socializing. The defendant contended this was directly relevant to the plaintiff’s injuries.

The parties failed to reach an agreement on production of the information, so the defendant filed a motion to compel plaintiff to produce her Facebook data file. The court found that the plaintiff had failed to comply with her discovery obligations and ordered the plaintiff to download and produce to the defendant the Facebook data file, which includes all active posts, photos, videos and check-ins. The defendant claimed information had already been deleted and requested sanctions against the plaintiff, but the court decided to wait to determine whether the data file would show the alleged deleted information.

The case is still active, and it demonstrates the continued developing trend on treatment of social media. Particularly in case of personal injuries, but even in purely business disputes, postings by either party can become relevant and will likely be subject to discovery; efforts to delete or hide this information will typically result in severe penalties.

If you want to download your Facebook data file, go to settings, then the general tab, and click the link on the bottom – “Download a copy of your Facebook data” – and follow the instructions.

Limiting Liability in the Oilfield

By Catherine L. Campbell and Thomas G. Wolfe.
This scholarly article is originally published in the Oklahoma Bar Journal– Jan. 16, 2016– Vol. 87 No. 2.


Parties are free to contract in any way they see fit so long as their contract does not violate public policy. Likewise, the parties to a contract may agree to allocate the risks of loss between them — including pre-performance exoneration of a negligent service provider from the consequences of its own negligence — if their consent to such risk allocation is mutual.

Limiting Liability in the Oilfield

Click to read full article @ okbar.org

Oklahoma courts judge the existence of mutuality of consent, in part, by determining whether the parties enjoy sufficiently-equal bargaining power. This inquiry depends on the importance of the requested service to the economic well-being of the party seeking the service, and the nature of the market providing that service. On the one hand, courts are more likely to conclude that a customer seeking a service it wants but does not need in a market with numerous providers is on equal footing with the service provider. On the other, a customer seeking a necessary service offered by few providers, or offered by many providers that demand similarly onerous contract terms, has no power to allocate risks in a way more beneficial to it. The choice between accepting unfavorable terms hoping nothing goes wrong or declining the necessary service altogether is no choice at all.

These principles apply to oilfield service contracts. Undoubtedly, the economic risks in the oilfield are high. Although pre-service allocation of the risks is preferable, only a negotiated — and thus mutually agreed allocation of risks based upon equality of bargaining power — will pass judicial muster.

THE OKLAHOMA LAW IN GENERAL

A basic premise of Oklahoma law, and indeed contract law in general, is that parties are free to contract as they see fit,1 as long as the contract is not contrary to law or violative of public policy.2 However, Oklahoma prohibits contracts that attempt to exempt a contracting party from responsibility for its own fraud, willful injury to persons or property, gross negligence or that otherwise violate public policy.3

Oklahoma distinguishes between various risk-shifting tools — broadly characterized as “exculpatory provisions,”4 — including limitation of liability clauses, indemnity provisions and exculpatory clauses. Because under certain circumstances exculpatory provisions are valid and enforceable, they are ubiquitous in modern commercial life. Oklahoma courts enforce exculpatory clauses only if: 1) they “clearly and unambiguously” exonerate the defendant with respect to the claim; 2) there exists no significant difference in the bargaining power between the contracting parties; and 3) enforcement will not otherwise violate public policy.5 While an exculpatory provision need not mention the word “negligence” to be valid,6 the agreement to exculpate must be clear from an examination of the entire contract.7 An exculpatory clause is sufficiently clear and unambiguous when it identifies the party to be indemnified and the nature and extent of damages.8

As for equality in bargaining, courts have traditionally concluded that public policy forbids enforcement of exculpatory provisions in 1) bailment contracts, 2) employment contracts, 3) contracts with common carriers, 4) contracts with innkeepers and 5) utilities contracts.9 In these instances, courts perceive that the service provider enjoys vastly superior bargaining power over the consumer. Not incidentally, these service providers often use adhesion contracts — “standardized contract[s] prepared entirely by one party to the transaction for the acceptance of the other.”10 Adhesion contracts are take-it-or-leave-it since “the services that are the subject of the contract cannot be obtained except by acquiescing to the form agreement.”11 By definition, the parties to an adhesion contract do not share equal bargaining positions.12

That a contract is one of adhesion (with the consequent presumption of lack of equal bargaining power) is not sufficient, standing alone, to invalidate an exculpatory provision. Instead, Oklahoma courts require evidence of something more than a slight disparity in bargaining power between the parties to nullify an exculpatory provision. When the disparity of bargaining power renders the freedom to contract illusory, an exculpatory clause is unenforceable.

In Trumbower v. Sports Car Club of America, Inc.,13 the court recognized guidelines for determining whether the contracting parties enjoy relatively equal bargaining positions. First, courts should “generally consider categories of individuals rather than a particular individual.”14 Second, courts must weigh “the importance which the subject matter of the contract has for the physical or economic well-being of the party agreeing to release the other party.”15 And, the court must consider “the existence and extent of competition among [service providers] measured by the amount of free choice the [consumer].”16

Applying Trumbower, Oklahoma courts have enforced exculpatory provisions when the activity at issue is a hobby or sport.17 Moreover, the releasing party is not forced to use a particular vendor or, ultimately, to engage in the activity.18 Correspondingly, Oklahoma courts have approved exculpatory provisions where the contracting party presumably had wide choice in service providers.19

Some jurisdictions presume that commercial parties generally enjoy equal bargaining power while assuming that ordinary consumers do not.20 However, Oklahoma law mandates that courts consider the economic realities of the transaction, not the parties’ relative sophistication. Each case stands on its own facts.21

OKLAHOMA LAW AS APPLIED TO OILFIELD SERVICE CONTRACTS
All or some variation of the recognized risk-shifting mechanisms — releases, limitation of liability clauses, and indemnity provisions — “are widespread in oilfield contracts” since, like most businesses, providers and consumers of oilfield services benefit from assuring clear allocation of risks at the outset of the contractual relationship.22 Some oilfield contracts contain indemnity provisions (also known as knock-for-knock provisions) that require each party to assume all risk associated with its equipment and personnel regardless of fault.23  Often, the parties contemplate that they will insure their respective contractual obligations.24  Other oilfield contracts treat service providers more favorably.25 Finally, operators may use master service agreements with contractual terms favorable to them and which allow them to contract with service providers before any work is performed, ideally permitting the parties to negotiate terms in a lower pressure environment.26

Oilfield exculpatory clauses are typically clearly delineated and, in any case, are well known in the industry.27 Therefore, courts may conclude that such agreements “clearly and unambiguously” exonerate the intended party. Nonetheless, as three cases applying Oklahoma law demonstrate, because pre-work risk allocation in the oilfield is legally appropriate only when it results from relative arm’s length bargaining, the economic reality of the bargaining positions between the parties is the paramount consideration.

In Mohawk Drilling Co. v. McCullough Tool Co.,28 while performing “specialized” work on Mohawk’s well, McCullough lost equipment downhole requiring Mohawk to rework the well. The purchase order stated that McCullough “shall not be held liable or responsible for any loss, damage or injury” to the well resulting from the work it performed.29 The evidence showed that, because other companies that could have performed the same specialized work used contracts containing similar exculpatory language, the well owner could not obtain the necessary service without exculpating the service provider.30 Although Mohawk predates Schmidt,31 the Mohawkcourt employed the same factors — economic necessity of the requested service and availability of the service in the market free of exculpatory provisions — in determining that McCullough “enjoyed much greater bargaining strength” so that the exculpatory contract was “against [Oklahoma] public policy.”32

More than 30 years later, in Kinkead v. W. Atlas Int’l, Inc.,33 Kinkead orally contracted with Western to remove the drill string when it became impacted in the borehole. Before Kinkead executed a written work order, Western lost the drill string in the casing which ultimately resulted in abandonment of the well. First, since the evidence showed that the exculpatory language at issue was common in the industry, the court rejected Kinkead’s argument that the oral agreement with Western did not contain the same exculpatory language as the written agreement.34 Second, Western offered evidence that Kinkead could have contracted with other companies that either did not require, or would have negotiated to remove or modify, similar exculpatory language. Consequently, impliedly weighing the same factors as the Mohawk court, the court concluded that the evidence was sufficient to sustain the jury verdict for Western.35

Finally, in Arnold Oil Props., LLC v. Schlumberger Tech. Corp.,36 Arnold contracted with Schlumberger, whose contract contained both a knock-for-knock indemnity provision and a limitation of liability clause. The court concluded that the evidence at trial was sufficient to support the jury’s determination that Arnold and Schlumberger were in unequal bargaining positions because: 1) the service was “critical” to Arnold’s operations; 2) a limited number of providers could perform the services and/or most if not all providers used similar exculpatory language; and 3) the exculpatory terms of three other providers’ contracts were non-negotiable.37 The court further noted that Schlumberger’s contract did not permit the customer to bargain for a higher limit on liability.38

A review of cases applying Oklahoma law reveals that chief among the factors to be resolved in determining whether to enforce an exculpatory provision in an oilfield contract is the number of service providers and whether most, if not all, service providers demand inclusion of similarly burdensome exculpatory provisions. If providers in the market insist on the same contractual provisions, without meaningful negotiation and as a pre-condition to performing economically essential services, the contract clause is unenforceable. The size and sophistication of the provider relative to the customer is not pertinent to the inquiry. Though the customer may eventually opt to accept the offered terms from the provider rather than pay a higher contract price, it must be given a meaningful opportunity to do so. In the absence of the opportunity to negotiate terms, there is no mutual consent.

Oklahoma is not alone in recognizing the fundamental importance of economic reality in oilfield risk allocation. According to USA Today, as of Dec. 31, 2011, Texas had the most oil reserves of any state in the country while Louisiana had the 10th highest.39 To level the playing field between powerful producers and the less powerful contractors who, though forced to indemnify the producers against their own negligence could not procure insurance to adequately cover the risk, both states enacted statutes that generally void oilfield indemnity clauses.40 Louisiana and Texas made public policy choices based not on the contracting parties’ knowledge and sophistication, but on the perceived inequality of bargaining between equally sophisticated commercial entities. Though not codified in statute, Oklahoma law is similar.

CONCLUSION
Undoubtedly, form contracts and industry custom reflect past economic conditions in the oilfield; but, the market for oilfield services is far from static. In recent years, oil and gas production in the United States has markedly increased. During periods of lower production service providers may be more willing to compete for work and more willing to accept greater risk. It is equally true that, during periods of higher production, demand for services outstrips supply, increasing competition for scarce resources. These market factors are magnified when the services provided are highly specialized — which means a decreased number of available service providers.

Oklahoma case law prudently elevates economic realities over industry custom. Where the service purchaser’s ability to obtain an essential service is limited either because there are few providers and/or because most providers require acceptance of the same non-negotiable exculpatory language, exculpatory agreements may be unenforceable. Thus, in terms of commercial entities, knowledgeable in the field, the decisive factor is not whether the exculpatory language is unequivocally clear. Instead, at issue is the economic reality underlying the presumed freedom of the parties to strike a deal.

In Oklahoma no party is forced to insure against risks for which it was not afforded a chance to bargain. It is unfair to shift the burden of loss to the operator when it has no power to protect itself. Oklahoma case law is clear: each party to a contract must be allowed to balance the risks against the cost of the service provided. A contract which deprives the party of its freedom to negotiate risk allocation likely violates Oklahoma law.

1. E. Cent. Elec. Coop. v. Pub. Serv. Co., 1970 OK 80, 469 P.2d 662, 664.
2. Ball v. Wilshire Ins. Co., 2009 OK 38, 221 P.3d 717, 724, 726.
3. OKLA. STAT. tit. 15, §212.
4. Schmidt v. United States, 1996 OK 29, 912 P.2d 871, 874.
5. Kinkead v. W. Alliance Int’l, 1993 OK CIV APP 132, 894 P.2d 1123, 1128.
6. See Estate of King v. Wagoner County Bd. of County Comm’rs, 2006 OK CIV APP 118, 146 P.3d 833, 844.
7. Otis Elevator Co. v. Midland Red Oak Realty, Inc., 483 F.3d 1095, 1105 (10th Cir. 2007).
8. Mercury Inv. Co. v. F.W. Woolworth Co., 1985 OK 38, 706 P.2d 523, 530.
9. Stacy A. Silkworth, Note: The Pilotage Clause: Albatross of Admiralty Law, 64 B.U. L. Rev. 823, 848-49 (July 1984); see, e.g., Sun Oil Co. v. Dalzell Towing Co., 287 U.S. 291, 294 (1932); Bisso v. Island Waterways Corp., 349 U.S. 85, 90-91 (1955).
10. Bilbrey v. Cingular Wireless, L.L.C., 2007 OK 54, 164 P.3d 131, 135.
11. Wilson v. Travelers Ins. Co., 1980 OK 9, 605 P.2d 1327, 1329.
12. See, e.g., Max True Plastering Co. v. U.S. Fid. & Guar. Co., 1996 OK 28, 912 P.2d 861, 864.
13. 428 F. Supp. 1113, 1117 (W.D. Okla. 1976).
14. Id. (citation omitted).
15. Id. See also 57A Am. Jur. 2d Negligence §62 (noting that “a seller must offer a service that is usually deemed essential in nature”).
16. Id. See also Allen v. Michigan Bell Tele. Co., 171 S.W.2d 689, 692 (Mich. App. 1969) (“[W]here goods and services can only be obtained from one source, or several sources on non-competitive terms, the choices of one who desires to purchase are limited to acceptance of the terms offered or doing without. Depending on that nature of the goods or services and the purchaser’s needs, doing without may or may not be a realistic alternative.”).
Additionally, the Trombower approach is consistent with the RESTATEMENT (SECOND) OF TORTS §496B. Comment j states that “disparity in bargaining power may arise from the defendant’s monopoly of a particular field of service, from the generality of the use of contract clauses insisting upon assumption of the risk by all those engaged in such a field, so that the plaintiff has no alternative possibility of obtaining the service without the clause; or it may arise from the exigencies of the needs of the plaintiff himself, which leave him no reasonable alternative to the acceptance of the offered term.”
17. See Schmidt, supra at n. 4, 912 P.2d at 873 n. 7, 874 n. 18 (recreational horseback riding); Manning v. Brannon, 1998 OK CIV APP 17, 956 P.2d 156, 159 (parachuting); Martin v. A.C.G., Inc., 1998 OK CIV APP 148, 965 P.2d 995, 997 (health club). These activities are not “necessary or important to [the contracting party’s] physical or emotional well-being,”Manning, 956 P.2d at 159.
18. Martin, 965 P.2d at 997.
19. Rodgers v. Tecumseh Bank, 1988 OK 36, 756 P.2d 1223, 1226 (noting that a commercial loan agreement was not an adhesion contract since borrowers have a choice of loan providers, and the evidence showed that the parties actually negotiated the terms of the agreement in an arms-length transaction).
20. See, e.g., Henry Heide, Inc. v. WRH Prods. Co., Inc., 766 F.2d 105, 109 (3d Cir. 1985).
21. Elsken v. Network Multi-Family Security Corp., 1992 OK 136, 838 P.2d 1007, 1010; Thompson v. Peters, 1994 OK CIV APP 97, 885 P.2d 686, 688; Trumbower, supra at n. 13, 428 F. Supp. at 1117; Kinkead, supra at n. 5, 894 P.2d at 1128.
22. Chesapeake Operating, Inc. v. Nabors Indus., USA, Inc., 94 S.W.3d 163, 167-68, 180 (Tex. App. 2002).
23. Id. at 167. The Association of International Petroleum Negotiators (AIPN) 2002 International Model Well Services Contract indemnity provisions state that the indemnities are non-fault. See Chidi Egbochue & Herbert Smith, “Reviewing ‘Knock for Knock’ Indemnities Following the Macondo Well Blowout,” http://goo.gl/yJY9SG.
24. The AIPN 2002 International Model Well Services Contract allows the parties to arrange for self-insurance or insurance.See Egbochue & Smith, supra n. 23. Similarly, the IADC form drilling contract recognizes that the parties may allocate risk via the purchase of insurance; Andrew R. Thomas, “Service Contracts in the Oil and Gas Industry,” Energy Policy Center, Levin College of Urban Affairs Cleveland State University, December 2013, at 4. http://goo.gl/1be1EN.
As the court, in Appalachian Ins. Co. v. McDonnell Douglas Corp., 262 Cal. Rptr. 716, 731 (Cal. Ct. App. 1989), noted in a complex commercial case:
[I]t was not commercially unreasonable for the parties to agree [Customer] would obtain insurance to protect it against the risk of loss rather than to have [Contractor] warrant performance….As a practical matter, it was a question of whether [Customer] wanted to directly pay for insurance by obtaining insurance itself or indirectly pay for insurance by requiring [Contractor] obtain the insurance and give a warranty.
In Appalachian Ins. Co., Western Union hired McDonnell Douglas, one of two companies providing the service, to launch a communications satellite. Western Union chose McDonnell Douglas as the cheaper and more reliable option though both companies were available to launch on Western Union’s schedule. Id. at 729. Importantly, despite the limited number of service providers in the highly specialized market, the parties negotiated the terms of their contract including the exculpatory language. Id. The evidence showed that the contract resulted from an arms-length transaction between equals. See also Chi. Steel Rule & Die Fabricators Co. v. ADT Security Sys., 763 N.E.2d 839, 845 (Ill. Ct. App. 2002) (observing that there existed no evidence of disparate bargaining power between the commercial entities when 1) the provider was not the only alarm system provider in the market, and 2) the parties’ contract allowed the customer to pay more so that the provider would assume more risk indicating that the customer had the opportunity to negotiate to shift the risk).
25. See Thomas, supra at n. 24, at 4 (noting that the International Association of Drilling Contractors form drilling contract generally favors drillers by placing responsibility for damages to the rig on the operator).
26. See William W. Pugh & Harold J. Flanagan, “Master Service Agreements and Risk Allocation: In Whose Good Hands Are You?” https://goo.gl/2QW901; Thomas, supra at n. 24, at 1.
27. Kinkead, supra at n. 5, 894 P.2d at 1126.
28. 271 F.2d 627, 632 (10th Cir. 1959).
29. Id. at 629.
30. Id. at 632.
31. Schmidt, supra at n. 4, 912 P.2d at 874.
32. Id. (citing an unpublished Oklahoma Supreme Court case in predicting how the Oklahoma courts would rule on the issue).
33. 1993 OK CIV APP 132, 894 P.2d 1123.
34. Id. at 1127-28.
35. Id. at 1128.
36. 672 F.3d 1202 (10th Cir. 2012).
37. Id. at 1208.
38. Id. at 1209.
39. Paul Ausick & Michael B. Sauter, “The 10 Most Oil-Rich States,” USA Today, Aug. 3, 2013, http://goo.gl/zBHfTW.
40. See Louisiana Oilfield Indemnity Act, LA REV. STAT. ANN. §9:2780 and Texas Oilfield Anti-Indemnity Act, TEX CIV. PRAC. & REM. CODE ANN. §127.001. et seq. See also Fontenot v. Chevron U.S.A., 676 So.2d 557, 562 (La. 1996) andKen Petroleum Corp. v. Questor Drilling Corp., 24 S.W.3d 344, 348 (Tex. 2000). While top-10 producers New Mexico and Wyoming also enacted similar statutes (New Mexico Oilfield Anti-Indemnity Act, N.M. STAT ANN. §56-7-2 and Wyoming Oilfield Anti-Indemnity Act, WYO STAT. §30-1-131 et seq.), both did so to promote worker safety. Pina v. Gruy Petroleum Mgmt. Co., 136 P.3d 1029, 1033 (N.M. 2006) Union Pac. Res. Co. v. Dolenc, 86 P.3d 1287, 1292 (Wyo. 2004).

ABOUT THE AUTHORS
Thomas G. Wolfe is the managing partner at Phillips Murrah law firm in Oklahoma City, where his litigation practice is focused on complex business cases including product liability, oil and gas, mass tort and class action defense. He has served on the Oklahoma Association of Defense Counsel Board of Directors and is a master of the William J. Holloway Jr. American Inn of Court.

Catherine L. Campbell is a director and shareholder at Phillips Murrah law firm in Oklahoma City. She is an experienced appellate attorney whose practice is focused on commercial litigation and labor and employment matters. She has represented clients in state and federal courts of appeal in more than 100 cases including representing law enforcement agencies in civil rights actions.