Grayden v. Spring Creek Energy Partners, LLC
| Decision Date | 28 December 2022 |
| Docket Number | 22-1097 |
| Parties | KIMBERLY S. GRAYDEN, f/k/a Kimberly S. Pitman, Plaintiff - Appellant, v. SPRING CREEK ENERGY PARTNERS, LLC, a Colorado limited liability company; JASON L. EDDINGTON, individually, Defendants - Appellees. |
| Court | U.S. Court of Appeals — Tenth Circuit |
KIMBERLY S. GRAYDEN, f/k/a Kimberly S. Pitman, Plaintiff - Appellant,
v.
SPRING CREEK ENERGY PARTNERS, LLC, a Colorado limited liability company; JASON L. EDDINGTON, individually, Defendants - Appellees.
No. 22-1097
United States Court of Appeals, Tenth Circuit
December 28, 2022
(D.C. No. 1:21-CV-00106-RM-NRN) (D. Colo.)
Before HARTZ, TYMKOVICH, and MATHESON, Circuit Judges.
ORDER AND JUDGMENT [*]
Scott M. Matheson, Jr. Circuit Judge
Kimberly Grayden claimed that Spring Creek Energy misled her into selling one-third of her overriding royalty interests in three oil and gas leases on land in Weld County, Colorado. She alleged that Spring Creek misrepresented that there were no producing wells on the land. The district court granted summary judgment to Spring Creek, holding that county property records put Ms. Grayden on notice of producing wells, so her reliance on Spring Creek's misrepresentations was not justified. Finding
genuine issues of material fact as to what the records showed, and exercising jurisdiction under 28 U.S.C. § 1291, we reverse.
I. BACKGROUND
We begin with background on (A) oil and gas leases and (B) the factual and procedural history in this case.
A. Oil and Gas Leases
An overriding royalty interest is an interest in real property for a percentage-based share of the proceeds from oil and gas leases. See Colo. Rev. Stat. § 38-30-107.5; Howard R. Williams &Charles J. Meyers, Oil and Gas Law § 202.3 (2022) ("Williams &Meyers"). The owner receives payments from the proceeds of oil or gas production. See Williams &Meyers § 202.3. The interest terminates when the lease terminates. See id.
An oil and gas lease typically sets a primary term of years. See id. § 604. At the end of the primary term, the lease either terminates or enters an indefinite secondary term if certain conditions in the lease are met. See id. For the secondary term to take effect, the lessee must record an affidavit of extension. See Colo. Rev. Stat. § 38-42-106(1).
An oil and gas lease may be subject to "pooling," which "refers to the aggregation of two or more tracts of land into a drilling unit of prescribed size." Williams &Meyers § 901; see Colo. Rev. Stat. § 34-60-116. Pooling is "intended to allow for more efficient oil and gas drilling by decreasing waste and avoiding drilling of unnecessary wells." Wildgrass Oil &Gas Comm. v. Colorado, 447 F.Supp.3d 1051, 1057 (D. Colo. 2020) (citing Colo. Rev. Stat. § 34-60-116), aff'd, 843 Fed.Appx. 120 (10th Cir. 2021). It
"reduces the number of wells drilled while also compensating [interest] owners for their share of the resources extracted." Id. at 1057.[1]
B. Factual and Procedural History
1. Factual History[2]
In 2016, Ms. Grayden inherited overriding royalty interests in three oil and gas leases located on land in Weld County, Colorado, and operated by Noble Energy. These royalty interests entitled her to a portion of the proceeds from the production of oil and gas on the land subject to these leases.
The three leases originated in 1970 or 1971 and remain in effect. Their primary terms ended in 1975 or 1976. They have been extended into the indefinite secondary term. In 2018, the leases were amended to allow for pooling. Some of the land subject to these leases has since been pooled.
In 2018, Spring Creek-a business that buys and sells mineral rights, including those for oil and gas-asked Ms. Grayden whether she would be interested in selling her royalty interests. She repeatedly told Spring Creek that she would not sell any portion of
her royalty interests in leases associated with then-producing oil and gas wells. She believed at the time there were none. Spring Creek told her there were no then-producing wells on the land. In March 2020, Ms. Grayden and Spring Creek executed a Purchase and Sale Agreement. She ultimately agreed to sell one third of her royalty interests for $401,535.50. Ms. Grayden alleged she agreed to this sale based on Spring Creek's misrepresentations.[3]
2. Procedural History
a. District court proceedings
In January 2021, Ms. Grayden filed a diversity action in the District of Colorado against Spring Creek, asserting fraudulent concealment, unjust enrichment, unilateral mistake, and civil theft claims. Her "core claim is that [Spring Creek] intentionally misled her . . . about the state of oil and gas activity on the land in which she inherited overriding royalty interests in Weld County, Colorado." Aplt. Br. at 8.
Spring Creek moved for summary judgment on all claims. A magistrate judge recommended granting summary judgment for Spring Creek on Ms. Grayden's unjust enrichment claim and denying summary judgment on the other claims.
Before the district court, Spring Creek objected to the magistrate judge's recommendation. It...
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