Krug v. Helmerich & Payne, Inc.

• Decision Date: 03 November 2015
• Docket Number: No. 113,092.,113,092.
• Citation: 362 P.3d 205
• Parties: H.B. KRUG, Kathryn Krug, and Bobbie Ruth Eubanks, on behalf of themselves and on behalf of a class of similarly situated owners, Plaintiffs/Appellants, v. HELMERICH & PAYNE, INC., a Delaware corporation, Defendant/Appellee.
• Court: Oklahoma Supreme Court

362 P.3d 205

H.B. KRUG, Kathryn Krug, and Bobbie Ruth Eubanks, on behalf of themselves and on behalf of a class of similarly situated owners, Plaintiffs/Appellants,

v.HELMERICH & PAYNE, INC., a Delaware corporation, Defendant/Appellee.

No. 113,092.

Supreme Court of Oklahoma.

Nov. 3, 2015.

Terry J. Barker, Joseph C. Woltz, Robert. N. Lawrence, Tulsa, Oklahoma, and

Allan DeVore, Oklahoma City, Oklahoma, for Plaintiffs/Appellants.

Tammy D. Barrett, Richard B. Noulles, Bradley W. Welsh, Tulsa, Oklahoma, and Eric Fischer, Denver, Colorado, for Defendant/Appellee.

KAUGER, J.:

¶ 1 This cause concerns another appeal in a litany of litigation regarding natural gas wells operated from 1978 to 1998 in Beckham County, Oklahoma.¹ The previous appeal was Krug v. Helmerich & Payne, Inc., 2013 OK 104, 320 P.3d 1012, wherein this Court affirmed a jury verdict for damages for failure to produce natural gas/drainage in the amount of $3,650,000, but reversed two other jury awards in the amount of $4,055,000.00 and $6,845,000.00.

¶ 2 We now address the issues of whether: 1) the settled-law-of-the-case doctrine precludes review of the issue of prejudgment interest; 2) the royalty owners' share of the proceeds was subject to the Production Revenue Standards Act, 52 O.S. 2011 § 570.1 et seq.² (the Act); and 3) prejudgment interest may be awarded pursuant to 23 O.S. 2011 § 6.³ We hold that the settled-law-of-the-case doctrine does not preclude determination of the issue of prejudgement interest. We also determine that the royalty owners are not entitled to prejudgment interest pursuant to either the Act or 23 O.S. 2011 § 6.

FACTS

¶ 3 The facts preceding this cause are extensively detailed in Krug v. Helmerich & Payne, Inc., 2013 OK 104, 320 P.3d 1012. The plaintiff/appellants, H.B. Krug, Kathryn Krug, and Bobbie Ruth Eubanks (collectively the royalty owners/Krugs), represent a class of oil and gas royalty owners. The class consists of mineral owners underlying two 640–acre sections of land in Beckham County, Oklahoma. The royalty owners leased the two sections to the defendant/appellees, Helmerich & Payne, Inc., (H & P), which operated natural gas wells on those sections from 1978 to 1998, when H & P sold its interests to a third party.

¶ 4 On December 22, 1998, the royalty owners brought a class action lawsuit against H & P seeking actual and punitive damages in the district court in Tulsa County, Oklahoma. The claims related to payment for uncompensated drainage of natural gas which they alleged occurred from January 1, 1982, until December 31, 1989. The royalty owners alleged that H & P: 1) breached its duties to them to act as a reasonably prudent operator; 2) received payment for uncompensated drainage from a settlement it secured from another pipeline (ANR Pipeline); 3) concealed the settlement when the royalty owners were entitled to a share of the settlement; and 4) engaged in fraud resulting in unjust enrichment. Eventually, the cause went to trial and the jury, in alternative claims returned its verdict in favor of the royalty owners. The jury awarded: $3,650,000.00 for breach of the implied duty to prevent uncompensated damages; $4,055,000.00 for breach of fiduciary duty for failure to prevent uncompensated damages; and $6,845,000 for constructive fraud in the pipeline settlement. It also found that H & P had been unjustly enriched.

¶ 5 The trial court added additional damages for disgorgement of profits and set the total amount awarded to the royalty owners as $119,522,750. The court also awarded interest on $6,845,000 from November 21, 2008, and interest on the remaining $112,677,750 from January 8, 2009, until paid in full. The trial court also awarded the royalty owners costs and attorney fees. H & P filed an appeal on February 27, 2009, which culminated in our opinion in Krug v. Helmerich & Payne, Inc., 2013 OK 104, 320 P.3d 1012 (Krug 1 ).

¶ 6 In Krug 1, this Court reversed in part and remanded to the district court for further proceedings. We affirmed the jury's verdict of $3,650,000 in damages based on the implied covenant to protect against drainage which was based on the lease agreement. However, we reversed the $4,055,000 verdict and the judgment for $119,522,750, determining that the royalty owners were not entitled to pursue a claim for constructive fraud/unjust enrichment when they had an adequate remedy at law –––– breach of contract. Finally, we directed the trial court to revisit its order of costs, interests, and attorney fees in a manner consistent with our opinion. We said that "[i]f the court finds that prejudgment interest is due pursuant to a judgment for a breach of the implied duty in an oil and gas lease to protect against drainage, the court is directed to determine and award the appropriate interest rate or rates."

¶ 7 Accordingly, on June 24, 2014, the trial court held a hearing concerning the prejudgment interest, attorneys' fees, and costs. Subsequently, on July 2, 2014, the trial court filed an order determining that the Production Revenue Standards Act (the Act), 52 O.S. 2011 § 570.01.1 et seq. was inapplicable to this cause, and that the royalty owners were not entitled to attorneys' fees, costs, or expenses under it. The trial court also held that because the plaintiffs' claims were unliquidated, they were not entitled to prejudgment interest pursuant to 23 O.S. 2011 § 6.⁴ We retained the cause on April 29, 2014, and it was assigned on April 30, 2015, after the briefing cycle was completed.

I.THE SETTLED–LAW–OF–THE–CASE DOCTRINE DOES NOT PRECLUDE RESOLUTION OF THE ISSUE OF PREJUDGMENT INTEREST UNDER THE FACTS OF THIS CAUSE.

¶ 8 H & P argues that because the trial court denied prejudgment interest in a 2008 order,⁵ the issue cannot be revisited now, even though this Court in Krug 1, reversed the $4,055,000 verdict and the judgment for $119,522,750, and directed the trial court to revisit its order of costs, interests, and attorney fees in a manner consistent with the reversal. Krug 1 also directed the trial court to determine and award the appropriate interest rate or rates, if the court found that prejudgment interest was due. The royalty owners contend that the trial court was expressly instructed to address the issue of prejudgment interest on remand, and that H & P's argument based on the settled-law-of-the-case doctrine is without merit under the circumstances of this cause. We agree.

¶ 9 The settled-law-of-the-case doctrine bars from relitigation issues finally determined by an appellate court in the review process or those that the aggrieved party has failed to raise in the course of the appellate contest.⁶ The doctrine embodies a judicial economy notion designed to prevent rehashing of issues in successive appeals.⁷ However, the law-of-the-case doctrine is merely a presumption, whose strength varies with the circumstances.⁸ The rule is a flexible one which allows courts to depart from erroneous prior rulings, as the underlying policy of the rule is one of judicial efficiency, not restraint of judicial power.⁹

¶ 10 Here the cause was reversed and remanded by this Court with directions to proceed in accordance with our decision and the trial court did so. It would be incongruous and inconsistent to now preclude review of the trial court's denial of prejudgment interest based upon the interlocutory ruling in 2008. No appellate court has ruled on the issue of prejudgment interest in this cause. Additionally, we reversed substantial verdicts in Krug 1, and we expressly directed the trial court to re-consider the prejudgment issue. Accordingly, we determine that the settled-law-of-the-case doctrine is inapplicable under the circumstances of this cause.

II.

THE PRODUCTION REVENUE STANDARDS ACT, 52 O.S. 2011 § 570.1 ET SEQ., IS INAPPLICABLE UNDER THE FACTS PRESENTED.

¶ 11 The royalty owners argue that when H & P received a settlement payment from ANR Pipeline, H & P was obligated to pay a royalty share to them, pursuant to the Act. They also contend that: 1) when H & P failed to pay such royalties, the proceeds began to accrue interest under the Act as well; and 2) the Act was intended to discourage producers from wrongfully withholding proceeds attributable to royalty owners and that requiring prejudgment interest on such proceeds would comport with the Act's intent. H & P insists such prejudgment interest on the proceeds is not due because neither the Act nor its predecessor applies to claims which are premised drainage rather than actual oil and gas production. It also contends that a jury award for drainage is not an award of "royalty proceeds" under the Act.

¶ 12 Legislative intent controls statutory interpretation.¹⁰ The intent is ascertained from the whole act based on its general purpose and objective.¹¹ In construing statutes, relevant provisions must be considered together whenever possible to give full force and effect to each.¹² To ascertain intent, we look to the language of the pertinent statute.¹³ We presume that the Legislature intends what it expresses.¹⁴ Except when a contrary intention plainly appears, terms are given their plain and ordinary meaning.¹⁵

¶ 13 The Act regulates the marketing, sale, and production of hydrocarbons from Oklahoma wells.¹⁶ It generally applies to all owners and all producing wells in Oklahoma with certain exceptions.¹⁷ It sets forth the operator's duties and its duties regarding proceed sharing/royalty disbursement requirements.¹⁸

¶ 14 The Act defines "royalty proceeds" as the share of proceeds or other revenue derived from or attributable to any production of oil and gas that may be attributed to any royalty share, but excludes payments of bonus, delay rentals, shut-in royalties or any royalty payable to the Commissioners of Land office or other governmental entity.¹⁹ When royalty proceeds are not paid within the time constraints outlined in the Act, interest begins to accrue and is compounded annually.²⁰ Should a violation of the Act occur, recovery for...