Greghol Ltd. Partnership v. Oryx Energy Co.

1998 OK CIV APP 111, 959 P.2d 596, 142 Oil & Gas Rep. 465, 69 O.B.A.J. 2934, 1998 Okla. Civ. App. LEXIS 91
CourtCourt of Civil Appeals of Oklahoma
DecidedApril 28, 1998
Docket90355
StatusPublished
Cited by7 cases

This text of 1998 OK CIV APP 111 (Greghol Ltd. Partnership v. Oryx Energy Co.) is published on Counsel Stack Legal Research, covering Court of Civil Appeals of Oklahoma primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Greghol Ltd. Partnership v. Oryx Energy Co., 1998 OK CIV APP 111, 959 P.2d 596, 142 Oil & Gas Rep. 465, 69 O.B.A.J. 2934, 1998 Okla. Civ. App. LEXIS 91 (Okla. Ct. App. 1998).

Opinions

OPINION

HANSEN, Judge.

¶ 1 Defendant/Appéllants, Oryx Energy Company (Oryx), and Norge Marchand Unit (Unit), seek review of the trial court’s order granting the motion of Plaintiff/Appellant, Greghol Limited Partnership (Greghol), to certify this ease as a class action. The order found the four requirements of 12 O.S.1991 § 2023(A) had been met and one of the three alternative requirements of § 2023(B) was satisfied because issues 'of law and fact common to the members of the class, to wit, the deduction from royalty payments of post-production costs, predominated over questions affecting only individual members. On appeal, Oryx contends the record supports none of the trial court’s findings except that of numerosity. We affirm.

¶ 2 The Norge Marchand Unit was created by the Oklahoma Corporation Commission in 1973. Oryx is the unit operator. Greghol owns an overriding royalty interest in a lease within the unit. Oryx owns almost 25% of the working interest in the unit, but does not own any interest in the lease underlying [598]*598Greghol’s override. Greghol sued Oryx, Unit, and several other units, alleging Oryx, as unit operator of all the defendant units, charged overriding royalty interest owners and royalty owners post-production costs, marketing costs, administration costs, and costs incurred in gathering, compressing, treating, transporting, or dehydrating the gas produced. Greghol later dismissed several units, then sought class certification with members of the class being all non-participating interest owners in the remaining named units who held their interests under leases with one of various clauses providing for the interest to be free of costs.

¶ 3 At hearing on the motion, a Greghol employee testified the “remittance advices” from Oryx reflected deductions for marketing charges. An accountant for Oryx agreed under direct examination by Greghol’s counsel that gas proceeds were “distributed the same proportionately to each override and royalty interest owner in the Norge Mar-chand Unit,” and stated, “The only owner that is treated differently is the MMS1,” because “[t]hey have certain provisions that they require a different settlement.” She admitted Oryx Gas Marketing had deducted “an overhead fee,” which was passed through proportionately to all override and royalty interest owners except the MMS. Under cross-examination by Oryx’s counsel, the accountant testified Oryx sells the gas to Pan Energy for a contract price of 85 percent of the residue gas proceeds and 80 percent of the natural gas liquids proceeds. She agreed Oryx did not “take any deductions out of the proceeds it pays to any of the royalty owners or overriding royalty interest owners in the Norge Marchand Unit,” and explained the apparent deduction for marketing charges on the remittance advices was “[b]eeause the Minerals Management Service requires that their reporting of payment be different, we have to show the 100 percent figures for them, and then show the 15 percent and 20 percent separately on separate lines on their report.”

¶4 Greghol called as an expert witness an oil and gas attorney who testified the payment obligations created by Greghol’s overriding royalty interest were typical of those created by most of the other overrides and oil and gas leases in Unit, except for four leases which “specifically provide for the ability to deduct post-production costs.” He stated the common question of law was “may one deduct post-production costs from these types of owners which are named in the unit plans pursuant to 52 O.S. 287.1 as being other than a lessee.” Oryx called as an expert witness an oil and gas attorney who testified he found 13 different types of royalty clauses, 16 different types of overriding royalty clauses, and various types of division orders, creating individual issues and resulting in different ways of paying royalty.

¶ 5 The trial court excluded owners from units other than the Norge Marchand, granted the motion to certify the class action, and defined the class as follows:

All royalty and overriding royalty interest owners (excluding Oryx Energy Company, its affiliates and any agency, department, or instrumentality of the United State [sic] of America) who, at any time on or after June 3, 1991, have been parties to the Norge Marchand Unit Plan as established by the Oklahoma Corporation Commission, and to whom Oryx Energy Company and the Norge Marchand Unit has [sic] the obligation to pay any portion of the royalties on gas produced and sold from the oil and gas wells comprising the Norge Marchand Unit.

¶ 6 A trial court’s order granting class certification is entitled to great deference. Perry v. Meek, 1980 OK 151, 618 P.2d 934, 941. We will not disturb such an order unless abuse of discretion is shown. If the record does not support the conclusion that the requisites of 12 O.S.1991 § 2303(A) and (B) are present, then the trial court’s action would be an abuse of discretion. Shores v. First City Bank Corp., 1984 OK 67, 689 P.2d 299, 301. A close question should be resolved in favor of sustaining certification because the order is always subject to modification prior to judgment on the merits. Perry v. Meek, 618 P.2d at 940. The predominance of common questions of law or fact “is a qualitative rather than quantitative matter;” where a litany of individual issues are presented, “the crucial element of the test [is] [599]*599whether those very questions preclude the common from being predominant.” Mattoon, 633 P.2d at 739.

¶ 7 Oryx and Unit contend there is no evidence in the record that common issues of fact or law exist and predominate. There is a contested issue of fact as to whether Oryx made any deductions from the gas proceeds when paying overriding royalty interest and royalty owners. If Oryx made no deductions at all, it has no liability to any of the class members regardless of the terms of their conveyances. This issue of fact, being critical to liability, predominates. If Oryx did make deductions, there is evidence in the record it did so treating all overriding royalty interest and royalty interest owners equally, again regardless of the terms of their conveyances. Therefore, individual issues created by the specific language of the conveyance instruments do not preclude the common issue, i.e. whether the deductions for post-production costs are proper, from being predominant. As in Young v. West Edmond Hunton Lime Unit, 1954 OK 195, 275 P.2d 304, 310, “[t]he legal questions raised in this action are of common or general interest to the many owners of royalty interests within the unit, and the character of 'the relief sought appears to be applicable to all.”2 The trial court did not abuse its discretion in finding common issues of law or fact existed and predominated.

¶ 8 Oryx and Unit contend the trial court improperly found Greghol satisfied the typicality and adequacy of representation requirements because the class definition included both overriding royalty interest and royalty interest owners and both those holding under Oryx leases and those holding under other leases in the unit.

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Greghol Ltd. Partnership v. Oryx Energy Co.
1998 OK CIV APP 111 (Court of Civil Appeals of Oklahoma, 1998)

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Bluebook (online)
1998 OK CIV APP 111, 959 P.2d 596, 142 Oil & Gas Rep. 465, 69 O.B.A.J. 2934, 1998 Okla. Civ. App. LEXIS 91, Counsel Stack Legal Research, https://law.counselstack.com/opinion/greghol-ltd-partnership-v-oryx-energy-co-oklacivapp-1998.