F I L E D United States Court of Appeals Tenth Circuit UNITED STATES COURT OF APPEALS OCT 18 1999 FOR THE TENTH CIRCUIT PATRICK FISHER Clerk
CHEVRON U.S.A. INC.,
Plaintiff-Counterclaim Defendant-Appellant,
v. No. 99-8000 (D.C. No. 96-CV-1017-J) THOMAS MORGAN, (D. Wyo.)
Defendant-Counterclaimant,
BOLACK MINERALS COMPANY, a New Mexico general partnership, in substitution for Tom Bolack, deceased,
Defendant-Counterclaimant- Appellee.
ORDER AND JUDGMENT *
Before TACHA , KELLY , and BRISCOE , Circuit Judges.
* This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. The court generally disfavors the citation of orders and judgments; nevertheless, an order and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3. After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument.
Plaintiff-counterclaim defendant Chevron U.S.A. Inc. appeals from the
district court’s order granting attorney fees in favor of defendant-counterclaimant
Bolack Minerals Company. The district court’s order was entered pursuant to
Wyo. Stat. Ann. § 30-5-303(b), which provides for reasonable attorney fees and
court costs to the prevailing party in an action brought to collect “[t]he proceeds
derived from the sale of production from any well producing oil, gas or related
hydrocarbons.” Wyo. Stat. Ann. § 30-5-301(a). We have jurisdiction over this
diversity action pursuant to 28 U.S.C. §§ 1332(a), 1291. We affirm.
Plaintiff and defendant entered into a unit operating agreement under which
plaintiff operated the Painter Reservoir Unit, a natural gas field, and paid
defendant his share of the gas sales. In 1993, a fire at a well injured several
workers who sued plaintiff for their injuries. Plaintiff then filed this action to
collect defendant’s proportionate share of the settlement amount paid to the
injured workers, and withheld defendant’s gas revenues to apply against its
portion of the settlement payment. Defendant refused to contribute to the
settlement and counterclaimed to collect the money withheld, asserting plaintiff
-2- had wrongfully withheld payment under the Royalty Payment Act, Wyo. Stat.
Ann. §§ 30-5-301 to 30-5-305. The district court certified to the Wyoming
Supreme Court the question whether defendant was required to contribute to the
settlement, and that court responded that defendant was not liable for contribution
to the settlement fund. See Bolack v. Chevron, U.S.A. Inc. , 963 P.2d 237, 242
(Wyo. 1998). Plaintiff then paid the gas revenues to defendant. Thereafter, the
district court awarded to defendant 1 the total amount of attorney fees and costs
incurred in the case, finding that all were necessarily incurred to obtain the
withheld gas revenues.
Plaintiff appeals, claiming the district court erred in awarding attorney fees
because they were incurred in defending the contract action, not in collecting the
gas revenues. It also challenges the costs awarded. Plaintiff concedes that it was
required to pay the gas revenues to defendant, but argues that it did not have to
pay those revenues until the Wyoming Supreme Court ruled that defendant was
not liable for contribution to the settlement fund. Plaintiff maintains that it had
the right to retain the proceeds until that time since the unit operating agreement
allowed plaintiff to place a lien on the proceeds as security for costs chargeable to
1 Defendant’s insurance company had subrogated it for its attorney fees and costs incurred in this lawsuit.
-3- defendant. See Appellant’s App. Vol. II, at 369 (unit operating agreement,
art. 15.5).
“Because this is a diversity case, we apply the forum state’s choice of law
rules.” West Am. Ins. Co. v. AV & S , 145 F.3d 1224, 1227 (10th Cir. 1998).
We apply Wyoming substantive law to this case arising in Wyoming and
involving a Wyoming statute. See Dobbs v. Chevron U.S.A., Inc. , 39 F.3d 1064,
1068 (10th Cir. 1994). The legal analysis underlying an award of attorney fees
is reviewed de novo. See West Am. Ins. Co. , 145 F.3d at 1230. The award of
attorney fees is reviewed for abuse of discretion, and the burden is on the party
challenging the award to demonstrate an abuse of discretion. See Johnston v.
Stephenson , 938 P.2d 861, 862 (Wyo. 1997).
We first determine that the Royalty Payment Act applies to the gas
revenues due to defendant. The legislative purpose of the Act was “to stop oil
producers from retaining other people’s money for their own use.” Independent
Producers Mktg. Corp. v. Cobb , 721 P.2d 1106, 1110 (Wyo. 1986). Because it
is a remedial statute, we must construe it liberally. See Moncrief v. Harvey ,
816 P.2d 97, 105 (Wyo. 1991).
Here, plaintiff failed to pay gas revenues to defendant, thereby invoking
the Act. Plaintiff’s reason for withholding the revenues, that the unit operating
agreement provided for a lien on them for costs, and its rationale that the
-4- Wyoming Supreme Court’s ruling could not have been anticipated, do not
remove it from the reach of the statute. “Equity is not a factor for consideration
because there are no exceptions in the Act providing justification for royalty
nonpayment.” Cities Serv. Oil & Gas Corp. v. State , 838 P.2d 146, 156
(Wyo. 1992); accord Ferguson v. Coronado Oil Co. , 884 P.2d 971, 979
(Wyo. 1994). ANR Production Co. v. Kerr-McGee Corp. , 893 P.2d 698
(Wyo. 1995), cited by plaintiff, is inapposite because there, unlike here, “the
parties did not have a preexisting legal relationship.” 893 P.2d at 706.
Plaintiff could have protected itself from penalties under the Act by
placing the gas revenues in escrow pending resolution of the disputes. See
Wyo. Stat. Ann. § 30-5-302. “The Royalty Payment Act also provides protection
to the legally responsible payor. The payor needs merely to deposit the disputed
proceeds in an escrow account to avoid paying penalty interest.” Moncrief ,
816 P.2d at 105. Because we hold that the Royalty Payment Act applies, we
reject plaintiff’s argument that defendant is not entitled to attorney fees because
the withholding of gas revenues benefitted defendant whereby it received 18%
interest, as provided by Wyo. Stat. Ann.
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F I L E D United States Court of Appeals Tenth Circuit UNITED STATES COURT OF APPEALS OCT 18 1999 FOR THE TENTH CIRCUIT PATRICK FISHER Clerk
CHEVRON U.S.A. INC.,
Plaintiff-Counterclaim Defendant-Appellant,
v. No. 99-8000 (D.C. No. 96-CV-1017-J) THOMAS MORGAN, (D. Wyo.)
Defendant-Counterclaimant,
BOLACK MINERALS COMPANY, a New Mexico general partnership, in substitution for Tom Bolack, deceased,
Defendant-Counterclaimant- Appellee.
ORDER AND JUDGMENT *
Before TACHA , KELLY , and BRISCOE , Circuit Judges.
* This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. The court generally disfavors the citation of orders and judgments; nevertheless, an order and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3. After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument.
Plaintiff-counterclaim defendant Chevron U.S.A. Inc. appeals from the
district court’s order granting attorney fees in favor of defendant-counterclaimant
Bolack Minerals Company. The district court’s order was entered pursuant to
Wyo. Stat. Ann. § 30-5-303(b), which provides for reasonable attorney fees and
court costs to the prevailing party in an action brought to collect “[t]he proceeds
derived from the sale of production from any well producing oil, gas or related
hydrocarbons.” Wyo. Stat. Ann. § 30-5-301(a). We have jurisdiction over this
diversity action pursuant to 28 U.S.C. §§ 1332(a), 1291. We affirm.
Plaintiff and defendant entered into a unit operating agreement under which
plaintiff operated the Painter Reservoir Unit, a natural gas field, and paid
defendant his share of the gas sales. In 1993, a fire at a well injured several
workers who sued plaintiff for their injuries. Plaintiff then filed this action to
collect defendant’s proportionate share of the settlement amount paid to the
injured workers, and withheld defendant’s gas revenues to apply against its
portion of the settlement payment. Defendant refused to contribute to the
settlement and counterclaimed to collect the money withheld, asserting plaintiff
-2- had wrongfully withheld payment under the Royalty Payment Act, Wyo. Stat.
Ann. §§ 30-5-301 to 30-5-305. The district court certified to the Wyoming
Supreme Court the question whether defendant was required to contribute to the
settlement, and that court responded that defendant was not liable for contribution
to the settlement fund. See Bolack v. Chevron, U.S.A. Inc. , 963 P.2d 237, 242
(Wyo. 1998). Plaintiff then paid the gas revenues to defendant. Thereafter, the
district court awarded to defendant 1 the total amount of attorney fees and costs
incurred in the case, finding that all were necessarily incurred to obtain the
withheld gas revenues.
Plaintiff appeals, claiming the district court erred in awarding attorney fees
because they were incurred in defending the contract action, not in collecting the
gas revenues. It also challenges the costs awarded. Plaintiff concedes that it was
required to pay the gas revenues to defendant, but argues that it did not have to
pay those revenues until the Wyoming Supreme Court ruled that defendant was
not liable for contribution to the settlement fund. Plaintiff maintains that it had
the right to retain the proceeds until that time since the unit operating agreement
allowed plaintiff to place a lien on the proceeds as security for costs chargeable to
1 Defendant’s insurance company had subrogated it for its attorney fees and costs incurred in this lawsuit.
-3- defendant. See Appellant’s App. Vol. II, at 369 (unit operating agreement,
art. 15.5).
“Because this is a diversity case, we apply the forum state’s choice of law
rules.” West Am. Ins. Co. v. AV & S , 145 F.3d 1224, 1227 (10th Cir. 1998).
We apply Wyoming substantive law to this case arising in Wyoming and
involving a Wyoming statute. See Dobbs v. Chevron U.S.A., Inc. , 39 F.3d 1064,
1068 (10th Cir. 1994). The legal analysis underlying an award of attorney fees
is reviewed de novo. See West Am. Ins. Co. , 145 F.3d at 1230. The award of
attorney fees is reviewed for abuse of discretion, and the burden is on the party
challenging the award to demonstrate an abuse of discretion. See Johnston v.
Stephenson , 938 P.2d 861, 862 (Wyo. 1997).
We first determine that the Royalty Payment Act applies to the gas
revenues due to defendant. The legislative purpose of the Act was “to stop oil
producers from retaining other people’s money for their own use.” Independent
Producers Mktg. Corp. v. Cobb , 721 P.2d 1106, 1110 (Wyo. 1986). Because it
is a remedial statute, we must construe it liberally. See Moncrief v. Harvey ,
816 P.2d 97, 105 (Wyo. 1991).
Here, plaintiff failed to pay gas revenues to defendant, thereby invoking
the Act. Plaintiff’s reason for withholding the revenues, that the unit operating
agreement provided for a lien on them for costs, and its rationale that the
-4- Wyoming Supreme Court’s ruling could not have been anticipated, do not
remove it from the reach of the statute. “Equity is not a factor for consideration
because there are no exceptions in the Act providing justification for royalty
nonpayment.” Cities Serv. Oil & Gas Corp. v. State , 838 P.2d 146, 156
(Wyo. 1992); accord Ferguson v. Coronado Oil Co. , 884 P.2d 971, 979
(Wyo. 1994). ANR Production Co. v. Kerr-McGee Corp. , 893 P.2d 698
(Wyo. 1995), cited by plaintiff, is inapposite because there, unlike here, “the
parties did not have a preexisting legal relationship.” 893 P.2d at 706.
Plaintiff could have protected itself from penalties under the Act by
placing the gas revenues in escrow pending resolution of the disputes. See
Wyo. Stat. Ann. § 30-5-302. “The Royalty Payment Act also provides protection
to the legally responsible payor. The payor needs merely to deposit the disputed
proceeds in an escrow account to avoid paying penalty interest.” Moncrief ,
816 P.2d at 105. Because we hold that the Royalty Payment Act applies, we
reject plaintiff’s argument that defendant is not entitled to attorney fees because
the withholding of gas revenues benefitted defendant whereby it received 18%
interest, as provided by Wyo. Stat. Ann. § 30-5-303(a), instead of 12% interest,
as provided by the unit operating agreement.
Turning to the amount awarded, plaintiff does not dispute the lodestar
amount of attorney fees. Instead, it objects to the award because, according to
-5- plaintiff, it is patently obvious that all of the fees were incurred in defending
plaintiff’s contract claim. To support its argument, plaintiff points out that it paid
defendant the gas revenues, plus interest, immediately after the Wyoming
Supreme Court issued its opinion.
We review for an abuse of discretion the district court’s decision not
to apportion the attorney fees between the contract defense and the claim for
payment under the Royalty Payment Act. See In re IC , 941 P.2d 46, 52
(Wyo. 1997). Among the factors a court may consider when awarding attorney
fees are the result obtained and the amount involved. See Johnston , 938 P.2d
at 863 (listing factors). Where a claim is made to reduce the amount of the fees
requested, we examine whether the district court has made “clear that it has
considered the relationship between the amount of the fee awarded and the results
obtained.” UNC Teton Exploration Drilling, Inc. v. Peyton , 774 P.2d 584, 595
(Wyo. 1989).
The district court concluded that defendant was required to defeat
plaintiff’s contract claim in order to collect the gas revenues. Therefore, all
of the attorney fees incurred were necessary to the Royalty Payment Act claim.
Under the circumstances, we determine that the district court did not “exceed the
bounds of reason,” and, therefore, did not abuse its discretion in its attorney fee
award. Johnston , 938 P.2d at 862.
-6- Plaintiff also challenges the costs awarded to defendant. It asserts that the
award included expenses not considered court costs even though only court costs
are permitted by § 30-5-303(b). Plaintiff did not raise this issue to the district
court. The citations to the appendix provided by plaintiff do not support its claim
that it raised this issue to the district court. Therefore, we decline to address it.
See Walker v. Mather (In re Walker) , 959 F.2d 894, 896 (10th Cir. 1992) (issue
not raised to district court will not be considered on appeal); see also S.E.C. v.
Thomas , 965 F.2d 825, 827 (10th Cir. 1992) (appellant must provide essential
references to record to carry its burden of proving error; court will not “sift
through” record to find support for appellant’s arguments).
The judgment of the district court is AFFIRMED.
Entered for the Court
Mary Beck Briscoe Circuit Judge
-7-