CPI Crude, Inc. v. Coffman

776 F.2d 1546, 1985 U.S. App. LEXIS 23609
CourtTemporary Emergency Court of Appeals
DecidedOctober 1, 1985
DocketNo. 5-114
StatusPublished
Cited by8 cases

This text of 776 F.2d 1546 (CPI Crude, Inc. v. Coffman) is published on Counsel Stack Legal Research, covering Temporary Emergency Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
CPI Crude, Inc. v. Coffman, 776 F.2d 1546, 1985 U.S. App. LEXIS 23609 (tecoa 1985).

Opinion

LACEY, Judge.

Before the court is an appeal from the decision of the district court granting sum-

mary judgment in favor of defendants based on a finding that the Texas statute of limitations had run on plaintiff’s claim prior to the filing of the original complaint on June 27, 1983. Plaintiff contends that the district court failed to apply the proper analysis in determining what analogous state statute of limitations applies to this action under § 210 of the Economic Stabilization Act, as amended, 12 U.S.C. § 1904 note (1980); that the district court applied the wrong statute of limitations; that the trial court erred in finding the amended statute does not apply to pre-existing causes of action; that the district court misapplied the test for accrual of a federal cause of action; and that the district court erred in failing to find an issue of fact existed based on plaintiff’s claim of fraudulent concealment. Defendants assert the propriety of the district court decision in all respects.

THE FACTS

Except for those relating to the claim of fraudulent concealment, the facts are not significantly in dispute. Plaintiff CPI Crude, Inc. (CPI) is a Texas corporation, with its principal place of business in that state, which purchased oil produced from the Yahweh Farm property in Fayette County, Texas. Defendants Coffman, Lynn and Webster own a royalty interest in the Yahweh Farm property. Defendants Thomas, Treischman and Chafin & Hedges Petroleum Company were dismissed from the action for plaintiff’s failure to prosecute as to them. The balance of the defendants are working interest owners in the Yahweh property.

Under the Department of Energy (DOE) Mandatory Petroleum Price and Allocation Regulations in effect prior to January 28, 1981, defendants were “producers” of crude oil. 10 C.F.R. § 212.31 (1980). As such they were subject to the mandatory pricing regulations of 10 C.F.R. part 212 subpart D (1980), and the certification requirements of 10 C.F.R. § 212.131 (1980). The regulations provided that “... no producer may charge a price higher than the [1548]*1548lower tier ceiling price for any first sale of domestic crude oil”, 10 C.F.R. § 212.73(a) (1980), and “[n]o firm may sell domestic crude oil unless it provides the certification required by this section”, 10 C.F.R. § 212.-131(c) (1980). To charge a higher price, the producer was obliged to show that the crude qualified for the higher price under one of the regulatory exceptions, and the producer was to certify to the purchaser the proper regulatory category of the crude within two months of the sale.

In December 1978 defendants made their first sale of crude oil from the Yahweh Farms property. This oil was sold from the A-l well and was certified and sold to CPI as “upper tier” crude. In early 1979 defendants began selling crude from the Yahweh Farms B-2 and C-3 wells to CPI at the “upper tier” price. These sales were made pursuant to written division order contracts, executed by each defendant, which authorized CPI’s purchase of the oil at “the price being posted or paid ... at the time of such delivery” [Record at 6].

Effective June 1, 1979, DOE regulations were amended to permit a new category of crude oil, exempt from price controls. “[N]ewly discovered crude oil”, that is, domestic crude produced from a property from which no crude was produced in calendar year 1978, was exempt from the pricing regulations, 10 C.F.R. § 212.79 and § 212.79(b) (1980).

“Property” means the right to produce domestic crude oil, which arises from a lease or from a fee interest. A producer may treat as • a separate property each separate and distinct producing reservoir subject to the same right to produce crude oil, provided that such reservoir is recognized by the appropriate governmental regulatory authority as a producing formation that is separate and distinct from, and not in communication with, any other producing formation.

10 C.F.R. § 212.72 (1980). Election to treat separate formations as separate properties is irrevocable unless production becomes commingled or the formations are unitized. FEA Ruling 1977-2, 42 F.R. 4409 (January 25, 1977). The Oil and Gas Lease covering the Yahweh Farms property provides that the lease covers the specific (metes and bounds) property and the right to produce extends to the reservoir known as the “Austin Chalk”. See Lease, Record on Appeal, Vol. I, Tab 1, at p. 2.

On June 28, 1979, the Yahweh Farms property was recertified as “newly discovered” through filing for the B-2 and C-3 wells. On August 24 and 27,1979, the A-l and D-4 wells were, respectively, recertified as “newly discovered”. These recertifications increased the price payable for oil produced from these wells retroactively to June 1, 1979.

CPI challenged the recertification of the A-l well as its records reflected a sale in 1978, which would have disqualified that well from unregulated pricing.

In response to the challenge, plaintiff was provided with an opinion letter dated November 26, 1979, from the Dallas law firm of Thompson & Knight, Esqs., which concluded that the A-l well could be recertified as “newly discovered”. This conclusion was based on information provided in a letter by Don Crow, Vice President of Field Operations for Chafin & Hedges Petroleum Company to the effect that the 1978 production from the A-l well was from the “Buda” formation. That well later became blocked, and the “Buda” formation was sealed off. The well was then completed in the “Austin Chalk” formation. According to Chafin & Hedges, the Texas Railroad Commission recognizes that these two formations are separate reservoirs not in communication with each other. Plaintiff asserts that “[a]t the time [it] received the opinion letter from Thompson & Knight, it had no reason to know of the fraudulent nature of -the information underlying the opinion letter.”

However, from 1978 on, all production from this lease came from Austin Chalk, and this fact was a matter of public record in early 1979. See Producers Monthly Report of Oil Wells, Record on Appeal, Vol. Ill, Tab 36, Report for December, dated March 1,1979. Nevertheless, plaintiff took no further action until early in 1983 when it conducted a detailed review of its purchase [1549]*1549records of newly discovered crude “in response to rampant rumors of intentional miscertification of newly discovered crude oil”. Id. Upon reevaluation it determined that the Thompson & Knight opinion letter was worthless because of the fraudulent information provided by defendants to the firm.

Plaintiff demanded repayment of the alleged $2,582,182.55 paid out in overcharges.

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Bluebook (online)
776 F.2d 1546, 1985 U.S. App. LEXIS 23609, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cpi-crude-inc-v-coffman-tecoa-1985.