Krug v. Helmerich & Payne, Inc.

2013 OK 104, 320 P.3d 1012, 182 Oil & Gas Rep. 109, 2013 WL 6452587, 2013 Okla. LEXIS 140
CourtSupreme Court of Oklahoma
DecidedDecember 10, 2013
DocketNo. 106845
StatusPublished
Cited by39 cases

This text of 2013 OK 104 (Krug v. Helmerich & Payne, Inc.) is published on Counsel Stack Legal Research, covering Supreme Court of Oklahoma primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Krug v. Helmerich & Payne, Inc., 2013 OK 104, 320 P.3d 1012, 182 Oil & Gas Rep. 109, 2013 WL 6452587, 2013 Okla. LEXIS 140 (Okla. 2013).

Opinions

WINCHESTER, J.

{1 Helmerich & Payne, Inc. (H & P) appeals a judgment in favor of the plaintiffs, who are a class of oil and gas royalty owners. The jury returned verdicts on three alternative theories of recovery. The trial court judge granted judgment that included disgorgement of profits based on a sum the trial court found unjustly enriched H & P. On appeal, the Court of Civil Appeals affirmed in part and reversed in part, and remanded with instructions. We granted certiorari.

I. FACTS

2 The plaintiffs/appellees, H.B. Krug, Kathryn Krug, and Bobbie Ruth Eubanks, brought this class action against H & P. The class consists of the owners of minerals underlying two 640-acre sections of land, the Littauer and Copeland sections in Beckham County, Oklahoma. The plaintiffs leased the two sections to H & P, which operated natural gas wells on those sections from 1978 to 1998, when H & P sold its interests to a third party.

A. Defendant's Summary of Facts

{ 3 The defendant's summary of the record includes the following. In the 1970s ANR Pipeline Company negotiated separate "take- or-pay" contracts 1 with each working interest owner in the Littauer section to purchase [1015]*1015and transport 100% of the gas produced in that section through interstate pipelines. In the Copeland section ANR entered into take- or-pay contracts with all the working interest owners except Conoco, which contracted to sell its 50% share to an intrastate pipeline owned by Oklahoma Natural Gas. The working interest owners appointed H & P as operator of the Littauer and Copeland wells, which began producing in the late 1970s from the Hunton natural gas reservoir.

T4 Beginning in the early 1980s events including a national recession and a deregulation of the natural gas market resulted in an oversupply of natural gas. ANR's largest customer announced it would severely reduce its purchases. In May 1985 ANR severely reduced its natural gas purchases and, relying on the force majewre clauses in its contracts, refused to either take or pay for agreed quantities of gas. In October H & P brought take-or-pay claims against ANR. H & P also sought a release from its take or pay contract with ANR for the Littauer and Copeland wells and drilled and bore 60% of the cost of a second well. It additionally constructed and paid nearly all costs of constructing a pipeline to connect the Littauer No. 1 well to an ONG pipeline at a neighboring well. In April 1988 H & P added new claims to its take-or-pay lawsuit, including a ratable take2 claim that ANR was causing uncompensated drainage by refusing to take gas from H & P in proportion to other working interest owners. In December 1988 H & P filed a response to ANR's discovery requests from an H & P geologist who estimated that uncompensated drainage was occurring from the Littauer and Copeland see-tions. Subsequently, during the trial an H & P senior vice president testified that after review, the geologist's estimates were unsupportable and speculative causing him and ANR to dismiss the drainage claim as having no value.

1 5 In October 1989 H & P settled its take- or-pay lawsuit with ANR covering 98 wells for a net amount of $17,205,017. H & P calculated that the total damages for the take-or-pay and contract buyout of the Lit-tauer and Copeland wells for H & P's 15.4% interest in the Littauer was $109,582.40 and for the Copeland the amount was $161,220.32. H & P asserts that it never calculated a monetary damage figure for the uncompensated drainage alleged in the lawsuit and it was never a part of the settlement discussions with ANR. As expressly stated in the take-or-pay settlement agreement, ANR's payment was in satisfaction of H & P's take-or-pay claims, contract price claims and as consideration for the termination of the contracts, not for uncompensated drainage.

B. Plaintiffs' Summary of Facts

T6 The plaintiffs alleged that H & P breached its duties to them by failing to act as a reasonably prudent operator and by allowing uncompensated drainage of natural gas to occur from these two sections beginning January 1, 1982, and ending December 31, 1989. The plaintiffs also alleged that H & P received payment for uncompensated drainage through the October 31, 1989, take- or-pay settlement with ANR, which was responsible for carrying the gas from the two sections leased to H & P. They also alleged that H & P concealed the settlement from the royalty interest owners and that the plaintiffs and the class are entitled to a share of that settlement, in addition to all profits H & P obtained from what should have been paid to the royalty owners. The plaintiffs further alleged that H & P's conduct involved fraud, that H & P has been unjustly enriched [1016]*1016as a result, and that in addition to their actual damages, they should receive punitive damages.

C. Defendant's Response to Plaintiffs' Claims

17 H & P denied the allegations and asserted that it had paid all the royalty interest owners all they were entitled to receive. It also claims it had served as a reasonably prudent operator throughout the time period that the plaintiffs claim uncompensated drainage occurred. It denies that its take- or-pay settlement with ANR Pipeline included an amount for uncompensated drainage. Finally, it claimed that the plaintiffs were barred by the applicable statute of limitations.

D. Trial and Verdict

8 In alternative claims, the jury returned its verdict in favor of the plaintiff class, awarding $3,650,000 for breach of the implied duty to prevent uncompensated drainage, $4,055,000 breach of fiduciary duty for failure to prevent uncompensated drainage, and $6,845,000 for constructive fraud in the ANR settlement. The jury also found that H & P had been unjustly enriched. The jury verdict form stated that the jury did not "find by clear and convincing evidence that the Defendant acted in reckless disregard for the rights of others," and the jury did not "find by clear and convincing evidence that the Defendant acted intentionally and with malice toward others."

T9 Regarding the $6,845,000 for constructive fraud in the ANR settlement, the trial court held a second-stage hearing for the jury to determine the amount of the gross profit H & P made on $6,845,000 that H & P had held since October 31, 1989. In this disgorgement stage, the plaintiffs presented the annual reports and the files with the Securities Exchange Commission along with testimony to show how much the plaintiffs and the class would have made had they invested the amount in H & P. The amount the jury awarded for disgorgement of profits was $61,662,000.

{ 10 The trial court stated in its "Corrected Final Judgment Nunc Pro Tunc" of January 29, 2009, that it had previously ruled that the verdicts on the plaintiffs' claims for unjust enrichment and for disgorgement of profits would be treated as advisory. The court adopted the verdicts of the jury, independently agreeing with the verdicts and based on the same evidence and instructions of law considered by the jury. The court then found in favor of the plaintiffs on their claims, but found their award for disgorgement of profits should be increased to $112,677,750.3

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Cite This Page — Counsel Stack

Bluebook (online)
2013 OK 104, 320 P.3d 1012, 182 Oil & Gas Rep. 109, 2013 WL 6452587, 2013 Okla. LEXIS 140, Counsel Stack Legal Research, https://law.counselstack.com/opinion/krug-v-helmerich-payne-inc-okla-2013.