Justia U.S. 10th Circuit Court of Appeals Opinion Summaries

This case involves a class action dispute over late payments of oil proceeds to royalty and working interest owners in Oklahoma. The plaintiff, an Oklahoma landowner with royalty interests in three oil wells, alleged that Sunoco, Inc. and Sunoco Partners Marketing & Terminals, L.P. failed to pay statutory interest on late payments as required by Oklahoma’s Production Revenue Standards Act (PRSA). The PRSA mandates that first purchasers of oil must pay proceeds within strict timeframes and include 12 percent interest on any late payments. The class was defined to include all owners who received late payments from Sunoco without the required interest.After Sunoco removed the case to the United States District Court for the Eastern District of Oklahoma, the court certified the class in 2019, finding common questions predominated, including whether Sunoco owed interest on untimely payments and whether a demand was required. The district court granted partial summary judgment on liability for the PRSA claim, and after a bench trial, awarded the class over $103 million in actual damages (including prejudgment interest) and $75 million in punitive damages. Sunoco appealed, challenging class certification, standing for certain class members, the calculation of prejudgment interest, and the punitive damages award. The Tenth Circuit previously remanded for clarification on damages allocation for unidentified owners, which the district court addressed.On appeal, the United States Court of Appeals for the Tenth Circuit affirmed the district court’s rulings on class certification, ascertainability, standing, and the award of actual damages including prejudgment interest. The court held that the PRSA requires automatic payment of statutory interest on late payments, and that prejudgment interest should be compounded until paid. However, the Tenth Circuit vacated the punitive damages award, holding that punitive damages are not available for breach of contract claims under Oklahoma law when the only claim proven was a PRSA violation. The case was remanded for amendment of the judgment consistent with this opinion. View "Cline v. Sunoco" on Justia Law

Plaintiffs, C&M Resources, LLC and Winter Oil, LLC, acting on behalf of a putative class of royalty owners, alleged that Extraction Oil and Gas, Inc. underpaid royalties owed under oil and natural gas production agreements. This case is the third attempt by the plaintiffs to pursue these claims, all arising from the same set of facts. In the two prior lawsuits filed in Colorado state court, the trial courts dismissed the complaints for lack of subject matter jurisdiction, finding that the plaintiffs had failed to exhaust administrative remedies before the Colorado Oil and Gas Conservation Commission, as required by statute. The plaintiffs did not appeal those dismissals.In the present case, originally filed in state court in 2019, proceedings were stayed pending the Colorado Supreme Court’s decision in Antero Resources Corp. v. Airport Land Partners, Ltd. After the stay was lifted in 2023 and discovery commenced, Extraction determined that the amount in controversy exceeded $5 million and removed the case to federal court under the Class Action Fairness Act. The plaintiffs moved to remand, arguing that removal was untimely and that Extraction had waived its right to remove by participating in state court litigation. The United States District Court for the District of Colorado denied the remand motion, finding that the removal was timely based on information obtained during discovery and that the bankruptcy proof of claim and other documents from prior cases did not trigger the removal clock.The United States Court of Appeals for the Tenth Circuit reviewed the district court’s decisions. It held that the district court properly denied remand and correctly applied collateral estoppel, precluding the plaintiffs from relitigating the exhaustion requirement. The Tenth Circuit affirmed the district court’s judgment on the pleadings in favor of Extraction, finding no error in the lower court’s rulings. View "C&M Resources v. Extraction Oil and Gas" on Justia Law

Phelps Oil and Gas, LLC, leased land to Noble Energy, Inc., which produces natural gas and pays royalties to Phelps. Phelps filed a class action lawsuit against Noble, alleging underpayment of royalties. The dispute centers on the interpretation of a prior settlement agreement, the Holman Settlement, which outlines the royalty calculation method. Phelps claims Noble failed to pay royalties on $34 million from a DCP Midstream, LP audit and $17.5 million that DCP promised to invest in infrastructure.The United States District Court for the District of Colorado granted summary judgment in favor of Noble. The court found that Noble was not obligated to pay royalties on the $34 million because DCP never returned those proceeds to Noble. Regarding the $17.5 million, the court held that Phelps failed to show that the promise had value to Noble beyond increased production and resulting revenues.The United States Court of Appeals for the Tenth Circuit reviewed the case. The court affirmed the district court's decision, agreeing that Phelps did not present evidence that DCP returned any proceeds to Noble related to the $34 million. The court also upheld the summary judgment on the $17.5 million claim, finding that Phelps could not demonstrate that the promise provided any additional benefit to Noble aside from increased production and revenues, which Noble had already accounted for in its royalty payments.The Tenth Circuit concluded that Phelps failed to create a genuine issue of material fact regarding Noble's obligation to pay additional royalties under the Holman Settlement. The court affirmed the district court's judgment in favor of Noble Energy, Inc. View "Phelps Oil and Gas v. Noble Energy" on Justia Law

The case originated as a class action dispute about the underpayment of oil and gas royalties due on wells in Oklahoma. The plaintiff, Chieftain Royalty Company, sued SM Energy Company, the operator of the wells, under various tort theories, including fraud, breach of contract, and breach of fiduciary duty. In 2015, the claims were settled for approximately $52 million. Following the settlement, Chieftain's counsel moved for attorneys’ fees, and Chieftain sought an incentive award for its CEO, Robert Abernathy. Two class members objected to the awards and appealed. The court affirmed the settlement but reversed the attorneys’ fees and incentive awards, remanding to the district court for further proceedings.On remand, the district court re-awarded the fees and incentive award. The class did not receive notice of the 2018 attorneys’ fees motion as required under Federal Rule of Civil Procedure 23(h)(1), so the court vacated the district court order awarding attorneys’ fees and remanded with instructions to direct class-wide notice of the 2018 attorneys’ fees motion and to re-open the period for objections. The court did not reach the merits of the appellate challenge to the re-awarded attorneys’ fees. The court affirmed the district court’s incentive award to Mr. Abernathy. View "Chieftain Royalty Company v. SM Energy Company" on Justia Law

In the case involving BP America Production Company and Debra Anne Haaland, the United States Court of Appeals for the Tenth Circuit affirmed the district court's ruling upholding the agency order requiring BP to pay nearly $700,000 in correctly assessed royalty underpayments. BP argued that the Federal Oil and Gas Royalty Simplification and Fairness Act shielded it from these payments. However, the court rejected BP's interpretation of the Act. The court found that BP's obligation was a single monetary obligation of $905,348.24, not each of the 443 constituent royalty obligations. Therefore, BP did not meet the statutory condition of less than $10,000 for relief from liability for payments. The court also rejected BP's argument that the Secretary's "deemed" final decision lacked a reasoned basis and thus violated the Administrative Procedure Act. The court found that the Secretary's deemed final decision adopted the ONRR Director's decision on the issues raised. View "BP America Production Company v. Davis, et al." on Justia Law

In 2016 Watchous Enterprises, LLC contracted with one of the five individual defendant companies, Pacific National Capital, paying it a $7,600 nonrefundable deposit to secure help finding a lender or a joint-venture partner. Pacific introduced Watchous to companies affiliated with Waterfall Mountain LLC (collectively referred to as "Waterfall"). Watchous and Waterfall eventually executed a letter of intent to enter into a joint venture to which Waterfall would contribute more than $80 million. As part of the arrangement, Watchous paid Waterfall a $175,000 refundable deposit. Waterfall said that it would fund the venture through proceeds of loans backed by billions of dollars in Venezuelan sovereign bonds in the name of Waterfall or its lender (RPB Company). But Waterfall never funded Watchous, and Watchous was never refunded the $175,000. Watchous then filed suit under the federal Racketeer Influenced and Corrupt Organizations Act (RICO) and common-law claims under Kansas law against Pacific and Waterfall as well as against the five Appellants sued individually. The district court granted partial summary judgment in favor of Watchous on its fraud claims (leaving damages for the jury to decide), essentially on the ground that Appellants misrepresented and failed to disclose “the historic and contemporary facts about Waterfall’s dubious finances, loan defaults, and consistent lack of success in funding similar projects.” Watchous’s remaining claims proceeded to trial, where a jury found that Appellants engaged in a civil conspiracy to defraud Watchous, and had violated RICO. Appellants appealed, but finding no reversible error, the Tenth Circuit affirmed. View "Watchous Enterprises v. Mournes, et al." on Justia Law

After the Department of the Interior amended regulations in 2016, the American Petroleum Institute (API) challenged several of the regulations that governed the calculation of royalties for oil and natural gas produced on federal lands. The district court rejected these challenges at summary judgment, and API appealed. Because API did not show that the agency acted arbitrarily and capriciously in enacting the challenged provisions of the 2016 regulations, the Tenth Circuit Court of Appeals affirmed. View "American Petroleum, et al. v. U.S. Department of Interior, et al." on Justia Law

Three conservation groups challenged the U.S. Bureau of Land Management’s approval of Jonah Energy’s development project on state and federal land in Wyoming. The project was designed to drill exploratory wells on land for which Jonah possessed development rights. The conservation groups argued the district court erred in upholding the BLM’s approval under the National Environmental Protection Act and the Federal Land Polocy and Management Act. Specifically, they contended the BLM inadequately considered the impact of the project on the sage-grouse and pronghorn antelope migration and grazing patterns. The Tenth Circuit concluded the BLM adequately collected and considered information on the sage-grouse and pronghorn, and selected a development plan that met statutory requirements. View "Western Watersheds Project, et al. v. United States Bureau of Land Management, et al." on Justia Law

Marvin and Mildred Bay (“the Bays”) challenged a court order dismissing their trespass claim against Anadarko E&P Onshore LLC and Anadarko Land Corporation (collectively, “Anadarko”). Anadarko, an oil and gas company, owned the mineral rights under the Bays’ farm. The Bays brought a putative class action along with other surface landowners against Anadarko, alleging that Anadarko’s mineral lessees had exceeded the scope of their mineral rights by drilling multiple vertical wells on the surface owners’ land when it was possible to drill fewer wells of the “directional” type. At the conclusion of the Bays’ presentation of evidence, the district court found that the Bays’ evidence failed as a matter of law to demonstrate that Anadarko’s activities amounted to a trespass and dismissed the case. Finding that the district court applied the wrong legal standard, the Tenth Circuit reversed the dismissal in "Bay I," finding that Colorado’s common law of trespass required the Bays to show that Anadarko’s lessees had “materially interfered” with the Bays’ farming operations. The appellate court questioned whether the record demonstrated that the Bays met this standard in their trial, but because Anadarko had not raised this specific issue, the case was remanded to the district court for further proceedings. On remand, the district court again granted judgment as a matter of law to Anadarko on the material interference issue. Specifically, the court first held that it was bound by the Tenth Circuit's interpretation in Bay I of the material interference standard, then found that the Bays showed only that Anadarko’s conduct inconvenienced them—which was insufficient to satisfy the material interference standard. The Bays again appealed, arguing that the Tenth Circuit's discussion of the material interference standard in Bay I was dictum; thus, the district court incorrectly determined that it was bound to apply that standard. They further argued the material interference standard applied by the district court was inconsistent with the Colorado standard for trespass outlined in Gerrity Oil & Gas Corp. v. Magness, 946 P.2d 913 (Colo. 1997), and that the evidence they presented in their trial established a prima facie case of material interference under Gerrity. The Tenth Circuit determined the district court did not err in its second dismissal and affirmed judgment. View "Bay, et al. v. Anadarko E&P Onshore, et al." on Justia Law

Plaintiffs-landowners alleged Anadarko Petroleum Corporation's intracompany practice of leasing its mineral interests to its affiliated operating company, including its 30% royalty rate, had the intent and effect of reducing the value of Plaintiffs’ mineral interests. Plaintiffs claimed Anadarko thereby maintained and furthered its dominant position in the market for leasing oil and gas mineral interests in violation of the Sherman Act § 2 and Wyoming antitrust laws. Plaintiffs sought treble damages and attorneys’ fees under § 4 of the Clayton Act. The federal district court certified a class action, for liability purposes only, comprised of “[a]ll persons . . . having ownership of Class Minerals during the Class Period.” Anadarko appealed the district court’s class certification pursuant to Federal Rule of Civil Procedure 23(f). The Tenth Circuit concluded the district court applied the correct legal standard in deciding whether the class satisfied the requirements of Rule 23, and it did not abuse its discretion in certifying the class. The Court therefore affirmed the district court’s class certification. View "Black, et al. v. Occidental Petroleum, et al." on Justia Law