Beck v. Northern Natural Gas Co.
| Decision Date | 19 March 1999 |
| Docket Number | 97-3367,Nos. 97-3352,s. 97-3352 |
| Citation | 170 F.3d 1018 |
| Parties | 1999 CJ C.A.R. 2006 Clarence BECK, Trustee of the Clarence J. Beck Revocable Trust; James L. Prentice, Trustee of the CRJ Farm Trust; Darold D. Yates; Carol Lee Yates; Harold W. Nossaman; Mary Lou Nossaman; Mark A. Yates; Steven B. Yates; Gary S. Nossaman; Debra Nossaman; Andrew Oil & Gas Partnership; Harold Berends; Mark Betzen; Gwendolyn A. Betzen; John Chitwood; Dean Dyche; Dean Fitzsimmons; Gary Fitzsimmons; Dallas Glenn; Kenneth Glenn; Lester Goyen; Lloyd McClellen; Edith Gillen; Donald Smith; John Fitzsimmons; Marietta Gilmore; Sherry Freund; William Joseph Freund; Robert H. Withers; J. Layle Woodard; Georgia Lee Woodard, Plaintiffs-Appellees/Cross-Appellants, v. NORTHERN NATURAL GAS COMPANY, Defendant-Appellant/Cross-Appellee. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Jeff Kennedy (Ann T. Rider and Kathryn Gardner with him on the briefs), Martin, Pringle, Oliver, Wallace & Swartz, L.L.P., Wichita, Kansas, for Defendant-Appellant/Cross-Appellee.
Lee Thompson (John V. Black and Thomas V. Black, Black's Law Office, P.A., Pratt, Kansas, with him on the briefs), Triplett, Woolf & Garretson, L.L.C., Wichita, Kansas, for Plaintiffs-Appellees/Cross-Appellants.
Before KELLY, McKAY, and LUCERO, Circuit Judges.
In this diversity action, Defendant-Appellant Northern Natural Gas Company ("Northern") appeals from a jury verdict and an award of attorney fees and costs in favor of Plaintiffs-Appellees, numerous landowners ("landowners") in Pratt and Kingman counties, Kansas. The landowners cross-appeal the district court's decision to limit their recovery to fair rental value of their subsurface property, the court's determination of attorney fees, and the court's refusal to allow prejudgment interest. We have jurisdiction pursuant to 28 U.S.C. § 1291, and affirm.
This case involves the vertical migration of natural gas between two subsurface geological reservoirs, or formations, located in the Cunningham Field, once one of the most prolific production areas of oil and gas in Kansas. Such formations, once depleted of native natural gas, can be injected with natural gas for storage to enable pipeline companies to ensure supply of natural gas during times of peak demand. In 1977, Northern was authorized by the Kansas Corporation Commission ("KCC") and the Federal Power Commission to store gas in the Viola formation underlying 23,000 acres of the landowners' property. Under leases subsequently negotiated with the landowners, Northern obtained storage rights to this formation, and began injecting gas in August of 1978.
Sometime after Northern began storing gas, some of the gas vertically migrated from the Viola to the Simpson formation, a smaller formation directly beneath the Viola. In September of 1993, a well was drilled and completed in the Simpson formation, and composition and pressure data indicated that the gas produced was storage gas from the Viola formation. In response, Northern thoroughly evaluated the Simpson formation and determined that geological faults had allowed gas to migrate from the Viola into the Simpson formation. Northern then sought certification of the Simpson formation before the KCC. After a public hearing, the KCC determined that the formation was suitable for gas storage, and that such storage was in the public interest. Northern subsequently obtained lease agreements from approximately two-thirds of the affected landowners, and exercised its eminent domain rights against the remaining landowners, including the plaintiffs.
The landowners brought an action against Northern, asserting claims of trespass and unjust enrichment related to the migration of gas to the Simpson formation. The case was removed from state district court and tried before a jury in federal district court. The jury found in favor of the landowners on both claims and awarded $100.00 per acre as fair rental value of the property for the period in question. The district court subsequently assessed attorney fees, expenses, and costs in the amount of $139,554.10 against Northern.
On appeal, Northern raises three issues. First, insufficient evidence existed for the jury to find that Northern's storage gas trespassed onto all of the landowners' properties. Second, insufficient evidence existed for the jury to conclude that Northern was unjustly enriched due to the migration of storage gas onto the landowners' properties. Third, the district court erroneously interpreted Kan. Stat. Ann. § 55-1210(c)(3) (1994), allowing the landowners their attorney fees, expenses, and costs.
In their cross-appeal, the landowners raise three issues. First, the district court erred in limiting them to a single recovery, the fair rental value of their property. Second, the district court erred in calculating attorney fees based on the lode star method rather than on the contingency fee contract entered into by the landowners. Finally, the district court erred in not allowing the landowners to claim interest on the damages.
Northern contends that the landowners failed to meet their burden of proof as to their claim that Northern's storage gas trespassed onto their properties. When a jury verdict is challenged on appeal, our review is limited to determining whether that verdict is supported by substantial evidence when the record is viewed in the light most favorable to the prevailing party. See Western Gas Processors, Ltd. v. Woods Petroleum Corp., 15 F.3d 981, 987 (10th Cir.1994). " 'Substantial evidence, while something less than the weight of the evidence, is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion, even if different conclusions also might be supported by the evidence.' " Kenworthy v. Conoco, Inc., 979 F.2d 1462, 1468 (10th Cir.1992) (quoting Gibraltar Sav. v. LDBrinkman Corp., 860 F.2d 1275, 1297 (5th Cir.1988)). We Lamon v. City of Shawnee, 972 F.2d 1145, 1159 (10th Cir.1992).
Northern maintains that each of the landowners was required to prove that the storage gas had entered the Simpson formation underlying his or her property. Although conceding that some of the landowners met this burden, Northern contends that the jury verdict finding that a trespass had occurred as to all of the landowners was improper. Under the second element of the district court's instruction on trespass, a plaintiff was required to prove "[t]hat the defendant Northern caused an entry of storage gas on to the plaintiff's property." Aplt.App. at 212.
Applying the above standard of review, it was reasonable for the jury to infer from the evidence that the landowners sufficiently met their burden of proof. The district court reached the same conclusion. See Aple. Brief, app. C at 2. Northern is correct in its assertion that the landowners failed to directly prove that the storage gas was under each of their properties. However, the jury heard evidence related to the geological characteristics of the Simpson formation; specifically, that the formation is a blanket sand which is highly permeable, continuous, and interconnected. See Tr. at 91, 217-18. In addition, the jury heard that a saltwater buffer zone is necessary as part of an integrated system for storing gas in the formation, see Tr. at 86-87, 216, 244, 286-90, 310-11, 430, and that rentals are normally paid for the entire acreage, whether used for buffer or gas storage. See Tr. at 288. Most important, the jury heard evidence from the KCC proceedings, in which Northern sought to prove that the entire acreage was suitable for the storage of natural gas. In those proceedings, Northern introduced evidence showing that up to ten billion cubic feet of storage gas had migrated from the Viola to the Simpson formation, see Tr. at 85, 91, and that as much as twenty-three percent of the total volume capacity of the two formations was in the Simpson formation. See Tr. at 100. In his testimony before the KCC, introduced at trial, a Northern senior engineer stated that Northern had actually been storing gas in the Simpson formation under all of the landowners for the prior seventeen years. See Tr. at 98.
Northern attempts to characterize this prior testimony as being introduced solely for the purposes of impeachment. However, our reading of the transcript indicates that it was offered as substantive evidence. John Rose, Northern's senior engineer, was called by the landowners as an adverse witness for the purpose of showing the jury what evidence the KCC considered when deciding to certify all of the Simpson formation as suitable for storage. See Tr. at 98-99. The landowners could have made the nature of this evidence more clear both for the jury and for appellate review if they had identified, marked, and introduced into evidence the transcript from the KCC proceeding.
Finally, another of Northern's witnesses at trial testified that the entire Simpson formation provided aquifer support for the storage operation. See Tr. at 430. It seems clear that a jury could make a reasonable inference from this evidence that there was an entry of storage gas in each of the landowners' properties. See Sunward Corp. v. Dun & Bradstreet, Inc., 811 F.2d 511, 521 (10th Cir.1987) ().
Northern also argues that the landowners failed to meet their burden of proof as to their claim that Northern was unjustly enriched by storing its gas in the Simpson formation. Again, our review is limited to determining whether that verdict is supported by...
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