Steven J. Abraham, & H Ltd. v. WPX Energy Prod., LLC, No. CIV 12–0917 JB/ACT.

CourtUnited States District Courts. 10th Circuit. District of New Mexico
Writing for the CourtJAMES O. BROWNING
Citation20 F.Supp.3d 1244
Decision Date09 May 2014
Docket NumberNo. CIV 12–0917 JB/ACT.
PartiesSteven J. ABRAHAM, and H Limited Partnership on behalf of themselves and others similarly situated, Plaintiffs, v. WPX ENERGY PRODUCTION, LLC f/k/a Williams Production Company, LLC, Williams Four Corners, LLC and Williams Energy Resources, LLC, Defendants.

20 F.Supp.3d 1244

Steven J. ABRAHAM, and H Limited Partnership on behalf of themselves and others similarly situated, Plaintiffs,
v.
WPX ENERGY PRODUCTION, LLC f/k/a Williams Production Company, LLC, Williams Four Corners, LLC and Williams Energy Resources, LLC, Defendants.

No. CIV 12–0917 JB/ACT.

United States District Court, D. New Mexico.

Filed May 9, 2014


Motion granted.

[20 F.Supp.3d 1246]

Jake Eugene Gallegos, Michael J. Condon, Gallegos Law Firm, P.C., Santa Fe, NM, for the Plaintiffs.

Sarah Gillett, Dustin L. Perry, Hall Estill Hardwick, P.C., Tulsa, OK Christopher A. Chrisman, Holland & Hart LLP, Denver, CO, Mark F. Sheridan, Bradford C. Berge, Robert J. Sutphin, Elisa C. Dimas, John C. Anderson, Holland & Hart LLP, Santa Fe, NM, for the Defendants.


MEMORANDUM OPINION 1
JAMES O. BROWNING, District Judge.

THIS MATTER comes before the Court on Williams Four Corners, LLC's and

[20 F.Supp.3d 1247]

Williams Energy Resources LLC's Motion to Dismiss Plaintiffs' Third Claim for Relief, filed October 30, 2012 (Doc. 18)(“MTD”). The Court held a hearing on May 1, 2013. The primary issues are: (i) whether, following New Mexico's “actual conflict” doctrine, there is a conflict between New Mexico and Colorado law, as applied in this case; and (ii) whether, under New Mexico and Colorado law, when a plaintiff has asserted a breach-of-contract claim against one defendant, that plaintiff may also assert an unjust enrichment claim for the same subject matter against a third party with whom the plaintiff does not have a contract. Although the parties did not raise the choice-of-law issues, but discussed only New Mexico law, the Court concludes that there is no actual conflict between New Mexico and Colorado law, because the Plaintiffs' unjust enrichment claims fail under both New Mexico and Colorado law. Thus, the Court will apply New Mexico law, grant the MTD, and dismiss the Plaintiffs' unjust enrichment claim.

FACTUAL BACKGROUND

This matter arises from alleged royalty underpayments for wells in the San Juan Basin in New Mexico and Colorado. See Third Amended Class Action Complaint ¶¶ 13–14, at 5, filed October 29, 2012 (Doc. 15)(“TAC”). As this matter comes before the Court on a motion to dismiss, the Court will assume that all facts in the Plaintiffs' complaints are true. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (stating that, to survive a motion to dismiss, “[f]actual allegations must be enough to raise a right to relief above the speculative level ... on the assumption that all the allegations in the complaint are true (even if doubtful in fact)”).

Defendant WPX Energy Production, LLC (“WPX Energy”) is in the business of exploring for and producing natural gas, and is the lessee under the leases. See TAC ¶ 3 at 2; id. ¶ 10, at 4. The Plaintiffs own royalty and overriding royalty interests burdening WPX Energy's working interest in oil-and-gas leases in Colorado and New Mexico. See TAC ¶ 3, at 2; id. ¶ 6, at 3. The hydrocarbons at issue are produced from wells that WPX Energy owned and operated in San Juan Basin. See TAC ¶ 7, at 3; id. ¶ 13, at 5.

The San Juan Basin, one of the largest natural gas producing fields located in northwest New Mexico and southwest Colorado, was originally developed in the early 1950's by El Paso Natural Gas Company.... The natural gas produced in the San Juan Basin is conventional gas which contains methane (natural gas) and entrained natural gas liquids (“NGLs”), such as ethane and butane. In order to make the gas safe to enter the interstate pipeline, the NGLs must be removed from the gas stream.

Elliott Indus. LP v. BP Am. Prod. Co., 407 F.3d 1091, 1099 (10th Cir.2005) (“ Elliott Indus.”). Pursuant to separate contracts between WPX Energy, the “upstream” exploration and production company, TAC ¶ 3, at 2, and Defendant Williams Four Corners, LLC (“WFC”), the “ ‘midstream’ enterprise,” TAC ¶ 4, at 2, WFC gathers the gas, transports it from the wells to a processing plant, and, in some instances, processes the extraction of NGLs. TAC ¶ 4, at 2; id. ¶ 7, at 3; id. ¶ 11, at 4; id. ¶ 25, at 9; id. ¶ 39, at 12; id. ¶ 44, at 13; id. ¶ 64, at 18–19. Defendant Williams Energy Resources, LLC (“WER”) then markets and sells the NGLs on behalf of WPX Energy and WFC. TAC ¶ 5, at 3; id.

[20 F.Supp.3d 1248]

¶¶ 39–40, at 12; id. ¶¶ 42, 44, at 13; id. ¶ 64, at 18.

PROCEDURAL BACKGROUND

On October 29, 2012, the Plaintiffs filed the TAC, alleging that the combined conduct of WPX Energy, WFC, and WER has resulted in “systemic underpayment” of royalties and overriding royalties “due to the failure to pay on the burdened leaseholds' production on NGLs and on oil and condensate, understating the liquids content of production, the improper charging of post-production expenses against production revenues, and deductions in the royalty computation of charges that are not actually incurred and are unreasonable.” TAC ¶ 14, at 5. The Plaintiffs contend that, although their contracts are with WPX Energy, WFC and WER are jointly responsible for the underpayment of royalties, because WFC extracts NGLs, and because WER disposes of the NGLs “free of royalty at a substantial financial detriment” to the Plaintiffs and the proposed class. TAC ¶ 14, at 5. The Plaintiffs' claims against WPX Energy include breach of contract, see TAC ¶¶ 58–61, at 17–18; breach of the covenant of good faith and fair dealing, see TAC ¶¶ 62–65, at 18–19; breach of the implied covenant to market, see TAC ¶¶ 70–79, at 20–22; and violation of the New Mexico Oil and Gas Proceeds Payment Act, N.M. Stat. Ann. §§ 70–10–1 to –6, see TAC ¶¶ 86–88, at 23. The claims against WFC and WER are for unjust enrichment. See TAC ¶¶ 66–69, at 19. Against WPX Energy, WFC, and WER, the Plaintiffs request declaratory judgment, accounting for the underpayments, and an injunction for the future royalty calculations and payments. See TAC ¶¶ 80–85, at 22–23.

The Plaintiffs allege that WFC and WER were unjustly enriched from WFC's processing contracts with WPX Energy, by retaining the value of the NGLs. See TAC ¶¶ 64, 66–69, at 18–29; MTD at 2. WFC and WER (collectively, “WFC/WER”) move the Court, pursuant to rule 12(b)(6) of the Federal Rules of Civil Procedure, to dismiss the unjust enrichment claims against them in the TAC. See MTD at 1. WFC/WER argue that the Plaintiffs cannot maintain an unjust enrichment claim against WFC or WER, because the Plaintiffs have an adequate remedy at law through the breach-of-contract claim against WPX Energy. See MTD at 3.

WFC/WER argue that the contracts between the Plaintiffs and WPX Energy govern the Plaintiffs' NGL underpayment claims. See MTD at 3. Elliott instructs that the Royalty Agreements are the ‘very foundation’ of the parties' relationship, and defines the ‘core duty of a royalty payment.’ ” MTD at 3 (quoting Elliott Indus., 407 F.3d at 1108). By filing a breach-of-contract claim against WPX Energy based on the royalty agreements, WFC/WER say that the Plaintiffs recognize that the royalty agreements govern the underpayment claims. See MTD at 4. WFC/WER contend that the existence of royalty agreements precludes the Plaintiffs from asserting quasi-contractual claims against WPX Energy. See MTD at 4. WFC/WER argue that the Plaintiffs cannot maintain unjust enrichment claims, because, “[f]irst, Plaintiffs have an adequate remedy at law (breach of contract) against WPX. Second, any connection between Plaintiffs and Williams is too attenuated to give rise to a claim of unjust enrichment. And third, Plaintiffs fail to meet the requirements for unjust enrichment.” MTD at 4–5.

Regarding the first argument, WFC/WER argue that the unjust enrichment theory evolved to provide relief when a party cannot claim relief through an existing contract or other remedy at law. See MTD at 5. WFC/WER contend that, if the

[20 F.Supp.3d 1249]

parties are in privity and can pursue a contract claim, they cannot pursue unjust enrichment claims. See MTD at 5. WFC/WER argue that New Mexico law, as the Tenth Circuit construed it in Elliott Indus., does not allow unjust enrichment claims if there is an enforceable express contract between the parties, because the Tenth Circuit stated that “ ‘the hornbook rule [is] that quasi-contractual remedies ... are not to be created when an enforceable express contract regulates the relations of the parties with respect to the disputed issue.’ ” MTD at 5 (alteration in original)(quoting Elliott Indus., 407 F.3d at 1117). WFC/WER point out that other courts have “barred unjust enrichment claims against third parties when the claim involves the issues that are the subject of a contract.” MTD at 6 (citing Randall's Island Aquatic Leisure, LLC v. City of New York, 92 A.D.3d 463, 938 N.Y.S.2d 62, 62 (2012); Bellino Schwartz Padob Adver., Inc. v. Solaris Mktg. Grp., Inc., 222 A.D.2d 313, 635 N.Y.S.2d 587, 588 (1995); Pepi Corp. v. Galliford, 254 S.W.3d 457, 462 (Tex.App.2007)). Because the claim against WFC/WER covers the same subject matter as the breach-of-contract claim against WPX Energy, WFC/WER argue that the Plaintiffs cannot maintain the unjust enrichment claim. See MTD at 7.

Next, WFC/WER contend that the relationship between the Plaintiffs and WFC or WER is too attenuated to support an unjust enrichment claim. See MTD at 7. According to WFC/WER, the Restatement (Third) of Restitution and Unjust Enrichment § 2 cmt. b (2011), articulates the principle that, unless the claimant has a legally protected interest in the benefit conferred on another party, “the fact that we derive advantage from the efforts and expenditures of others is not ‘unjust enrichment’ but just one of the advantages of civilization.” MTD at 7. WFC/WER cite cases from New York to support the proposition that, without a direct relationship, a plaintiff cannot bring an unjust enrichment claim against a third party: “[T]o allow an unjust enrichment claim in that circumstance would...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT