Continental Trend Resources, Inc. v. OXY USA Inc., s. 92-6350

• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)
• Citation: 44 F.3d 1465
• Docket Number: Nos. 92-6350,92-6384,s. 92-6350
• Parties: 1995-1 Trade Cases P 70,992 CONTINENTAL TREND RESOURCES, INC.; Harold G. Hamm, Trustee of the Harold G. Hamm Revocable Inter Vivos Trust; Gary H. Wright; Cindy Wright; Jeffrey B. Hume; Farrar Oil Company, Plaintiffs-Appellees, v. OXY USA INC., Defendant-Appellant, and Williams Natural Gas Company, Defendant. CONTINENTAL TREND RESOURCES, INC.; Harold G. Hamm, Trustee of the Harold G. Hamm Revocable Inter Vivos Trust; Gary H. Wright; Cindy Wright; Jeffrey B. Hume; Farrar Oil Company, Plaintiffs-Appellants, v. OXY USA INC. and Williams Natural Gas Company, Defendants-Appellees.
• Decision Date: 12 January 1995

Page 1465

44 F.3d 1465 1995-1 Trade Cases P 70,992 CONTINENTAL TREND RESOURCES, INC.; Harold G. Hamm, Trustee
of the Harold G. Hamm Revocable Inter Vivos Trust; Gary H.
Wright; Cindy Wright; Jeffrey B. Hume; Farrar Oil
Company, Plaintiffs-Appellees,
v.
OXY USA INC., Defendant-Appellant,
and
Williams Natural Gas Company, Defendant.
CONTINENTAL TREND RESOURCES, INC.; Harold G. Hamm, Trustee
of the Harold G. Hamm Revocable Inter Vivos Trust; Gary H.
Wright; Cindy Wright; Jeffrey B. Hume; Farrar Oil
Company, Plaintiffs-Appellants,
v.
OXY USA INC. and Williams Natural Gas Company, Defendants-Appellees. Nos. 92-6350, 92-6384. United States Court of Appeals,
Tenth Circuit. Jan. 12, 1995.

Page 1469

W. DeVier Pierson (Mark E. Greenwold, also of Pierson Semmes and Bemis, Washington, DC, Robert F. Hill and Ronald L. Wilcox of Hill & Robbins, Denver, CO, James M. Peters and Robert C. Smith, Jr. of Monnet, Hayes, Bullis, Thompson & Edwards, Oklahoma City, OK, with him on the briefs), for defendant-appellant/cross-appellee OXY USA Inc.

Eric S. Eissenstat (Burck Bailey and Dino E. Viera, also of Fellers, Snider, Blakenship, Bailey & Tippens, Allan DeVore, Oklahoma City, OK, Randy Moeder, Gen. Counsel, Continental Resources, Inc., Enid, OK, with him on the briefs), for plaintiffs-appellees/cross-appellants Continental Trend Resource, Inc. et al.

D. Richard Funk and C. Kevin Morrison of Connor & Winters, Tulsa, OK, as counsel for

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Williams Natural Gas Co., joined in the response brief filed, for OXY USA Inc. in No. 92-6384.

Before McWILLIAMS and LOGAN, Circuit Judges, and BROWN, District Judge. ^*

LOGAN, Circuit Judge.

Defendant OXY USA Inc. (OXY) appeals (No. 92-6350) a judgment entered after a jury verdict for plaintiffs ¹ on their state tortious interference with contract claims and on OXY's counterclaim for breach of contract. Plaintiffs cross-appeal (No. 92-6384) the court's entry of summary judgment for OXY on plaintiffs' federal antitrust claims and its denying plaintiffs attorney's fees for defending against OXY's counterclaim.

OXY first argues that we must reverse the tortious interference verdict because the district court erred in instructing the jury on the elements of tortious interference with existing and prospective contracts. OXY secondly argues that we must reverse the $30,000,000 punitive damages awarded in connection with the tortious interference claim because: (1) the jury instructions were erroneous, (2) the jury was permitted to award punitive damages for conduct (breach of contract and contract damages) for which punitive damages are not permitted under state law, (3) the procedures followed by the district court deprived OXY of due process of law, and (4) the punitive damages award was so excessive that it violated substantive due process and Oklahoma law. Alternatively, OXY asks us to order a remittitur. OXY finally argues that it is entitled to a new trial on its counterclaims for breach of contract because the court failed to properly instruct the jury.

Plaintiffs assert in their cross-appeal that the district court erred in dismissing their antitrust claims and in denying their attorney's fees for defending against OXY's breach of contract counterclaim.

I

Background

Plaintiffs own interests in gas wells in the Sooner Trend, a four-county area in Oklahoma. About 140 of these wells were connected to the Rodman gas gathering system owned by defendant Williams Natural Gas Company (WNG). ² The Rodman system collected natural gas from wells in the Sooner Trend and transported it to the Rodman gas processing plant. OXY was part owner of the Rodman processing plant and operated both the plant and the gathering system. ³ The Rodman plant extracted natural gas liquids and dehydrated and compressed gas from the Rodman gathering system; the tailgate of the Rodman Plant fed into WNG's high pressure interstate pipeline. WNG did not own any facilities to compress or dehydrate gas. ⁴ Plaintiffs' gas required some dehydration in order to meet the WNG pipeline's quality requirements and compression to enter WNG's high pressure line.

Before the mid-1980s all of the gas on the Rodman system was sold to WNG for resale to its customers. In July 1988 WNG began offering gathering and transportation services

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on the Rodman system as an open access transporter pursuant to the Federal Energy Regulatory Commission (FERC) Order No. 436, which enabled gas producers to deal directly with gas buyers rather than through intermediary interstate pipelines. An open access transporter is required to

provide access to all shippers on a "first-come, first-served" basis, even if the shipper intends to compete with the pipeline company in the sale of gas.... The purpose ... is to increase downstream competition in natural gas sales by ensuring that sellers who do not transport their own gas have access to transportation facilities.

Colorado Interstate Gas Co. v. FERC, 890 F.2d 1121, 1123 (10th Cir.1989) (citations omitted); see also Northern Natural Gas Co., (Div. of Enron Corp.) v. FERC, 929 F.2d 1261, 1263-64 (8th Cir.), cert. denied, 502 U.S. 856, 112 S.Ct. 169, 116 L.Ed.2d 132 (1991) (open access policy was means by which FERC sought to increase competition in the market for natural gas). WNG's tariff set forth the terms and conditions of service, including the fee for transporting gas.

In 1989, plaintiffs asserted that their gas purchase and processing contracts with defendants had expired or terminated ⁵ and sought open access so that they could sell gas to entities other than WNG and OXY. However, WNG denied plaintiffs' requests to transport gas to other parties. Plaintiffs assert that OXY and WNG told them that bypassing the Rodman plant was impossible.

Plaintiffs then filed the instant suit in June 1990, alleging that OXY and WNG violated federal and state antitrust laws by monopolizing and conspiring to monopolize transportation and processing of gas with contracts tying gas processing to gas transportation, and by denying plaintiffs access to essential facilities. Plaintiffs also contended that defendants tortiously interfered with plaintiffs' existing and prospective contracts under Oklahoma law. In support of the tort claim, plaintiffs alleged that although OXY knew that its gas purchase or processing contracts with plaintiff had expired or were invalid, OXY refused to allow plaintiffs to utilize the Rodman system to market gas, and shut-in plaintiffs' wells, stopping their flow of gas. Plaintiffs also claimed that OXY contacted potential purchasers of plaintiffs' gas, and falsely asserted OXY had contractual rights to that gas. OXY counterclaimed, alleging conversion and that plaintiffs breached their contractual duties to OXY by attempting to sell gas to third parties. In its counterclaims OXY asserted that its contracts with plaintiffs continued to be valid.

The district court granted defendants' summary judgment motion on the federal and state antitrust claims, but denied summary judgment on the tortious interference state claims. ⁶ The remaining claims and counterclaims were then tried to a jury.

OXY and WNG moved for a directed verdict at the close of plaintiffs' evidence on the tortious interference claims. The district court granted WNG's motion but denied OXY's, except as to certain damages. The district court also denied plaintiffs' motion for a directed verdict on OXY's contract counterclaims, except as to certain wells. At the conclusion of the evidence the district court found that there was clear and convincing evidence on which OXY could be found liable for punitive damages under Okla.Stat. tit. 23, Sec. 9, and submitted the punitive damages question to the jury. ⁷

The jury rendered a general verdict for plaintiffs on the tortious interference claim

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against OXY and awarded compensatory damages of $269,000 ⁸ and punitive damages of $30 million. The jury returned a general verdict against OXY on its contract counterclaims. The district court denied OXY's motions to alter or amend the judgment, for remittitur, for judgment notwithstanding the verdict, or for new trial. These appeals followed. II

Tortious Interference Claims

OXY asserts that we must reverse the jury verdict on tortious interference because it was based on improper jury instructions. Although in a diversity case the substance of jury instructions is a matter of state law, the acceptance or refusal of a tendered instruction is a procedural matter governed by federal law. Farrell v. Klein Tools, Inc., 866 F.2d 1294, 1296 (10th Cir.1989). In reviewing jury instructions we consider them as a whole and ask whether they accurately stated the governing law and provided the jury with an ample understanding of the issues and the applicable standards. Brown v. Wal-Mart Stores, Inc., 11 F.3d 1559, 1564 (10th Cir.1993). The controlling questions are whether the jury was misled and whether the instructions provided an understanding of the issues and explained the jury's duty to determine those issues. Estate of Korf v. A.O. Smith Harvestore Prods., Inc., 917 F.2d 480, 484 (10th Cir.1990). We will reverse only if an erroneous instruction is prejudicial in light of the record as a whole. Mason v. Texaco, Inc., 862 F.2d 242, 246 (10th Cir.1988) (Mason I ).

Oklahoma law requires a party claiming tortious interference with contract or business relations to prove that (1) it had a business or contractual right that was interfered with, (2) the interference was malicious and wrongful (not justified, privileged, or excusable), and (3) the interference proximately caused damage. James Energy Co. v. HCG Energy Corp., 847 P.2d 333, 340 (Okla.1992); Waggoner v. Town & Country Mobile Homes, Inc., 808 P.2d 649, 654 (Okla.1990), limited on other grounds by Dutsch v. Sea Ray Boats, Inc., 845 P.2d 187, 193 (Okla.1992). For purposes of this appeal we accept plaintiffs' proposition that the plaintiff in a prospective...