Key Points

  • The Fifth Circuit affirmed a bench-trial judgment that Winter Storm Uri was a force majeure event excusing Pioneer's incomplete gas deliveries to MIECO from Feb. 14 through Feb. 19, 2021.
  • The panel held that the district court complied with the mandate from Pioneer I, 109 F.4th 710 (5th Cir. 2024), by finding that Uri prevented Pioneer's performance and that Pioneer made reasonable efforts both to prepare for and to respond to the storm.
  • The panel held that the district court did not abuse its discretion in admitting testimony from Pioneer's expert Kris Terry on industry custom and practice, and it noted that the gatekeeper role is significantly diminished in a bench trial.
  • The panel held that the district court properly excluded testimony from MIECO's expert Richard Smead on what due diligence and reasonable efforts mean under the contract, because contract interpretation is a question of law for the court.

A federal appeals court on Oct. 8 upheld a judgment for Pioneer Natural Resources USA Inc. over natural gas it failed to deliver during Winter Storm Uri, defeating energy trader MIECO LLC's bid to recover more than $9 million it spent replacing the gas.

A Fifth Circuit panel held that a federal trial court in Texas followed the appeals court's 2024 instructions when it found, after a bench trial, that the February 2021 storm excused Pioneer's shortfall under the contract's force majeure clause. Circuit Judge Dana M. Douglas wrote for the panel, which also included Circuit Judges Clement and Oldham.

The ruling resolves the case's second appeal. In the first, known as Pioneer I, the Fifth Circuit reversed a summary judgment for Pioneer and held that the word "prevent" in the clause "does not mean that an event must render performance literally impossible to trigger force majeure." The new opinion holds that the trial court then made the findings Pioneer I required and properly barred MIECO's expert from testifying about what "due diligence" and "reasonable efforts" mean under the contract.

In September 2020, Pioneer agreed to sell MIECO 20,000 million British thermal units of gas a day through March 31, 2021, on a "Firm" basis, which allows interruption without liability only when force majeure prevents performance. The contract's examples of force majeure include "weather related events affecting an entire geographic region, such as low temperatures which cause freezing or failure of wells or lines of pipe." The contract also requires both sides to "make reasonable efforts to avoid the adverse impacts of a Force Majeure."

Uri brought low temperatures and ice storms to Texas in February 2021. Pioneer did not deliver the full contracted volume from Feb. 14 through Feb. 19, and early on Feb. 16 it sent MIECO a force majeure notice dated the day before. MIECO bought replacement gas on the spot market each day and in July 2021 sued Pioneer for the cost, which exceeded $9 million. Pioneer conceded that it had not fully performed but argued that the clause excused the shortfall.

The district court granted Pioneer summary judgment in February 2023. The 2024 panel reversed, finding genuine factual disputes over whether the storm actually prevented performance and whether Pioneer made reasonable efforts to avoid its effects. After a three-day bench trial on remand, the district court found that Uri prevented Pioneer's deliveries "because it rendered Pioneer's full performance impracticable," and that Pioneer had exercised due diligence.

On appeal, MIECO argued that the trial court violated the mandate rule, which requires a lower court on remand to carry out an appellate court's instructions, by failing to decide those two questions. Pioneer responded that the trial court made every finding Pioneer I required.

Douglas wrote that Pioneer I had faulted the trial court for deciding the case without those findings. "On remand, the district court did just that," Douglas wrote. Because prevention is a question of fact, the panel reviewed the finding only for clear error, a deferential standard that the opinion said does not allow reversal "because we are convinced that we would have decided the case differently."

"The record supports the district court's findings," Douglas wrote. The opinion said Uri caused well and pipeline freeze-offs at a level never before seen in Texas, and it noted that MIECO's own expert, Richard Smead, had called the storm's effects on the Texas gas market "truly cataclysmic."

On due diligence, the opinion said that before the storm Pioneer shifted more sales to interruptible agreements to free gas for firm customers, insulated wells and equipment, staged equipment and bought extra gas for the long weekend. During and after the storm, Pioneer sent teams to work on wells and sought help from third parties to keep them performing their obligations to the company. The panel held that the trial court made separate findings on preparation and response, as Pioneer I required.

The panel next rejected MIECO's argument that Pioneer's expert, Kris Terry, lacked a foundation for her testimony on industry custom and practice. Douglas cited Terry's natural gas work at Fina Oil and Chemical Company, her later consulting on gas purchases and sales, and her experience with the industry's response to severe weather.

Quoting a 2010 Fifth Circuit decision, the panel wrote that the "importance of the trial court's gatekeeper role is significantly diminished in bench trials." The trial court, Douglas wrote, "carefully circumscribed the scope of Terry's testimony" to fact questions about force majeure and severe weather, "rather than legal conclusions about the interpretation of specific contractual terms."

MIECO also challenged the exclusion of Smead's testimony that the industry has no custom or practice defining "due diligence" or "reasonable efforts." Pioneer argued that the testimony was an opinion of law, and the panel agreed. Contract interpretation is a question of law for the court, Douglas wrote, and "experts cannot render conclusions of law or provide opinions on legal issues," a principle the opinion drew from a 2020 Fifth Circuit decision.

"Smead's testimony regarding the interpretation of these contractual terms amounts to an opinion concerning legal conclusions," Douglas wrote. "The district court neither manifestly erred nor abused its discretion in excluding Smead's testimony."

The decision leaves in place the trial court's judgment for Pioneer on MIECO's breach-of-contract claim. Pioneer had asserted a counterclaim accusing MIECO of underpaying a March invoice but later voluntarily dismissed it. The case is MIECO, L.L.C. v. Pioneer Natural Resources USA, Inc., No. 25-11204.