Post Oak Oil Co. v. Stack & Barnes, P.C., 81498

• Decision Date: 20 February 1996
• Docket Number: No. 81498,81498
• Citation: 913 P.2d 1311,1996 OK 23
• Parties: POST OAK OIL COMPANY, an Oklahoma Corporation, Appellant, v. STACK & BARNES, P.C., an Oklahoma Professional Corporation, and Joseph R. Dancy, Esq., Appellees.
• Court: Oklahoma Supreme Court

Page 1311

913 P.2d 1311

1996 OK 23

POST OAK OIL COMPANY, an Oklahoma Corporation, Appellant, v. STACK & BARNES, P.C., an Oklahoma Professional Corporation, and Joseph R. Dancy, Esq., Appellees.

No. 81498.

Supreme Court of Oklahoma.

Feb. 20, 1996.

Rehearing Denied April 3, 1996.

Certiorari to the Court of Appeals, Division No. 3.

Richard A. Shallcross, Brewster, Shallcross & De Angelis, Tulsa, for Appellant.

Murray E. Abowitz, Norman Lemonik, Abowitz, Welch & Rhodes, Oklahoma City, for Appellees.

SIMMS, Justice:

Post Oak Oil Company (Post Oak) appeals the summary judgment granted in favor of Joseph R. Dancy and Stack & Barnes, P.C., collectively referred to as Defendants. The Court of Appeals affirmed the judgment.

We granted certiorari to address Post Oak's claim that the Oklahoma courts currently use a subjective standard for legal malpractice instead of an objective "reasonable lawyer" standard. However, upon review, we find that the district court assumed as true certain facts which were disputed by the parties. Thus, summary judgment was improper. The opinion of the Court of Appeals is vacated, the judgment of the district court is reversed, and this cause is remanded.

FACTS

Post Oak was the operator of an oil and gas well in Garvin County, Oklahoma, known as the Zab well. Numerous other persons owned working interests in the well and each had executed a joint operating agreement known as the 1982 Version of the American Association of Petroleum Landmen Model Form 610 Operating Agreement (JOA).

At all relevant times, the Zab well was producing oil and gas from the Hunton formation in paying quantities. However, Post Oak became aware that several nearby wells were producing oil and gas from the Sycamore formation which was located at a shallower depth than the Hunton formation. As operator of the Zab well, Post Oak thought that the nearby wells may be draining hydrocarbons from the Sycamore reservoir that was bypassed when the Zab well bore was drilled to the Hunton formation.

Allegedly concerned that it may be liable for failing to uphold its fiduciary duty to stop drainage, Post Oak proposed to all Zab working interest owners to shut-in the existing well and complete a new up-hole well in the Sycamore formation. Two of the working interest owners (who owned 46 1/2% of all of the working interests) were against such action.

Being uncertain as to whether, under the terms of the JOA, it could shut-in the commercially-paying well and recomplete another one up-hole without first receiving consent from 100% of the working interest owners, Post Oak retained Dancy, an associate attorney employed by Stack & Barnes, for legal advice. Defendants assert Post Oak's representative, Dr. Bruce Bell, had earlier sought the same advice from two other unrelated attorneys who advised Post Oak that recompletion probably could not be accomplished absent consent of all working interests owners under the JOA. Defendants contend that Bell came to Dancy to "make the argument" that 100% consent is not required.

Nevertheless, Post Oak argues Dancy advised Bell that consent from 100% of working interest owners was not required under the JOA before recompletion could occur under the facts of the case. Dancy denies giving such advice. Allegedly relying on this advice, Post Oak shut-in the Zab well and completed a new well in the Sycamore formation which produced marginally.

Although Dancy denies it, Post Oak alleges that Dancy further advised Post Oak that the non-consenting owners were liable for the costs of such recompletion. Nevertheless, Dancy prepared lawsuits for Post Oak to file against each of the non-consenting working interest owners. Post Oak further asserts that Bell requested Dancy to consult with Robert Barnes, a senior partner at Stack & Barnes, about Dancy's advice on the interpretation of the JOA and on the lawsuits before proceeding with the recompletion or with the lawsuits. Post Oak also contends Bell instructed Dancy to coordinate the litigation with Post Oak's in-house counsel, George Williams. Dancy did not comply The working interest owners counter-sued Post Oak seeking punitive damages, and Bell requested a meeting with Barnes. Upon hearing of the events leading up to the meeting, Barnes advised Bell that Post Oak was in an untenable legal position. Barnes held the view that consent from all working interest owners was necessary under the JOA and that the non-consenting owners were not liable for the costs of recompletion. He suggested Post Oak settle the counterclaims of the working interest owners which Post Oak did by paying $260,000.00 in cash and forgiving indebtednesses of approximately $100,000.00. Post Oak claims to have been damaged by Dancy's errant counsel and failure to abide by Bell's instructions regarding Barnes and Williams. Consequently, Post Oak brought this legal malpractice action against Defendants, Dancy and Stack & Barnes.

with these requests and denies ever receiving such instructions from Bell. Post Oak's final complaint is that Dancy failed to inform Post Oak that he had never before tried a case to a judge or jury.

Defendants filed a motion for summary judgment to which Post Oak responded. Defendants denied Dancy's advice was erroneous. They argued, however, that even if it was erroneous advice, they are not liable because Dancy's advice was rendered in good faith relative to an unsettled question of law.

By letter, the trial court overruled the motion on the grounds that facts were in dispute. Defendants later moved the trial court to rehear the summary judgment motion pointing to a then newly-released Court of Appeals opinion to show the unsettled nature of the issue of law regarding whether an operator may shut-in a commercially-producing oil well without 100% agreement of the working interest owners.

The unpublished opinion, Thomas N. Berry & Co. v. Samson Resources Co., No. 75,817 (Okla.Ct.App.1993), has no precedential value. Nevertheless, Defendants insisted to the trial court that the opinion held that the 1982 Model Form 610 Joint Operating Agreement, the same form used by the parties in the case at bar, does not require the consent of 100% of the working interest owners to complete another well at another formation through the same well bore as an already commercially-producing well. The Court of Appeals' holding was in accord with the advice allegedly given by Dancy on the same issue. Relying on this interpretation of the provisions of the JOA by that division of the Court of Appeals, Defendants convinced the trial court that they could not be liable for legal advice given in good faith on an unsettled question of law on which well-informed lawyers might reasonably disagree.

In granting summary judgment to Defendants, the trial court quoted Wabaunsee v. Harris, ...