Matthews et al v. Ankor Energy, LLC, et al.

Filing 47

ORDER ADOPTING 38 Report and Recommendation with MODIFICATION as set out in Order. Defendants' motions to dismiss (Docs. 24 & 26 ) are DENIED in their entirety. Signed by Senior Judge Callie V. S. Granade on 08/13/2018. (mab)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
HOOPER W. MATTHEWS, III, et
al.,
Plaintiffs,
vs.
ANKOR ENERGY, LLC, et. al.,
Defendants.

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) CIVIL ACTION NO. 17-0062-CG-B
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ORDER

This matter is before the Court on the May 2, 2018 Report and
Recommendation of the Magistrate Judge (Doc. 38), Plaintiff’s motion to reconsider
paragraph III (i) of the Report and Recommendation (Doc. 39), the objections to the
Report and Recommendation filed by Defendant Ankor Energy, LLC and Ankor
E&P Holdings Corp. (collectively “Ankor”) (Doc. 41) and Defendant GS E&R
America Offshore, LLC (“GS”) (Doc. 42) and the responses and replies to the motion
to reconsider and to the objections (Docs. 40, 43, 44, 45, 46). After due and proper
consideration of all portions of this file deemed relevant to the issues raised, and a
de novo determination of those portions of the recommendation to which Plaintiff
has moved for reconsideration and to which objection is made, the Court deems it
proper to sustain Plaintiffs’ objection regarding the dismissal of Count Five and to
overrule Defendants’ objections and adopts the Report and Recommendation, as
modified in this Order and Opinion.

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I. Background
The Magistrate Judge’s Report and Recommendation sets forth the
circumstances that gave rise to this action as well as the parties’ contentions and
the parties do not appear to object to those statements. As the Report and
Recommendation notes, Defendant Ankor moved for dismissal on a number of
grounds:
(1) the Oil and Gas Board of Alabama has primary jurisdiction to
establish whether waste has occurred; (2) Plaintiffs have failed to
exhaust their administrative remedies; (3) Plaintiffs are not permitted
to collaterally attack the applicable production orders issued by the Oil
and Gas Board; (4) the claims asserted by the Kelly Plaintiffs are
barred by res judicata; (5) Plaintiffs’ claims are barred because they
failed to give proper notice of any alleged breaches at issue; (6)
Plaintiffs have failed to satisfy a condition precedent for alleging a
violation of Ala. Code § 9-17-1 or a violation of any rule, regulation, or
order promulgated by the Oil and Gas Board; (7) Plaintiffs’ negligence
and wantonness claims are barred by the statute of limitations; (8)
Plaintiffs cannot assert any tort claims because the duties allegedly
breached arise under the leases; (9) the terms and provisions of the Oil
and Gas Board are incorporated, by reference, into the lease
agreements; (10) Plaintiffs’ statutory waste claims are not cognizable
under Alabama law, and their common-law waste claim fails as a
matter of law; (11) Plaintiffs failed to allege a sufficient basis for
punitive damages under Ala. Code § 6-11-20; (12) the Oil and Gas
Board has not made a finding of waste as defined under Alabama law,
but has instead found that Defendant Ankor’s operations were in
conformance with the applicable orders, which would prevent waste;
and (13) Plaintiffs do not own the underground oil and gas, if any,
under Alabama law. (Docs. 24, 25).
(Doc. 38, pp. 4-5). Defendant GS adopted Ankor’s arguments and also asserted that
it does not own, and has never owned, any interest in the wells at issue or the leases
at issue, and that it did not operate any of the wells at issue. The Magistrate Judge

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discussed all of the above bases and concluded that Defendants’ motions should only
be Granted as to their contention that Count Five should be dismissed because no
statutory claim for waste exists under ALA. CODE § 9-17-19 (paragraph III (i)). The
Magistrate Judge concluded that the motions to dismiss should be denied as to
Defendants’ other bases. Plaintiffs now moves for reconsideration1 of paragraph
III(i) (which found that Count Five should be dismissed) and the Defendants object
to the Magistrate Judge’s finding that the motion should be denied as to the
remaining bases.

II. Standard of Review
In reviewing a Magistrate Judge’s report and recommendation, the district
court “shall make a de novo determination of those portions of the report or
specified proposed findings or recommendations to which objection is made.” 28
U.S.C. § 636(b)(1). “‘Parties filing objections to a Magistrate Judge’s report and
recommendation must specifically identify those findings objected to. Frivolous,
conclusive, or general objections need not be considered by the district court.’”
United States v. Schultz, 565 F.3d 1353, 1361 (11th Cir. 2009) (per curiam) (quoting
Marsden v. Moore, 847 F.2d 1536, 1548 (11th Cir. 1988)). Absent objection, the

The Court construes Plaintiffs’ motion to be an objection to the Report and
Recommendation. Although the motion to reconsider could have been referred back to the
Magistrate Judge for reconsideration of her Report and Recommendation, the Magistrate
Judge’s final conclusion would have ultimately come before the undersigned judge for
review. As such, the undersigned finds it more efficient to consider Plaintiff’s argument as
an objection.
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district judge “may accept, reject, or modify, in whole or in part, the findings and
recommendations made by the Magistrate Judge,” 28 U.S.C. § 636(b)(1), and “need
only satisfy itself that there is no clear error on the face of the record in order to
accept that recommendation,” FED. R. CIV. P. 72, Advisory Committee Note 1983
Addition, Subdivision (b). Further, “the district court has broad discretion in
reviewing a Magistrate judge’s report and recommendation” —it “does not abuse its
discretion by considering an argument that was not presented to the Magistrate
judge” and “has discretion to decline to consider a party’s argument when that
argument was not first presented to the Magistrate judge.” Williams v. McNeil, 557
F.3d 1287, 1290–92 (11th Cir. 2009).

III. Discussion
A. Ankor’s Objections
The Magistrate Judge granted Ankor’s motion to dismiss only to the extent
Plaintiff claimed a private right of action under § 9-17-19 and rejected all of Ankor’s
other arguments. Ankor now objects to the Magistrate Judge’s conclusion that its
other bases for dismissal fail. Ankor’s objections generally repeat the arguments it
asserted in its motion to dismiss. Ankor asserts that its motion should be granted
because: (1) this Court should defer primary jurisdiction to the State oil and Gas
Board of Alabama (the “Board”), (2) Plaintiffs have not exhausted their
administrative remedies, (3) Plaintiffs’ complaint is an improper collateral attack on
the Board’s Orders, (4) Plaintiffs’ complaint is barred by res judicata, (5) Plaintiffs
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failed to comply with the notice requirements in the lease, (6) Plaintiff cannot
maintain their tort claims because they arise from duties created by the leases, (7)
The Board’s orders supersede the contractual terms, and (8) Plaintiffs cannot
maintain punitive damage claims because their claims sound in contract.
(1) Primary Jurisdiction
As stated by the Magistrate Judge, “Primary jurisdiction is ‘a flexible
doctrine to be applied at the discretion of the district court.’” (Doc. 38, p. 9, quoting
Wagner & Brown v. ANR Pipeline Co., 837 F.2d 199, 201 (5th Cir. 1988)). “The court
can consider various factors but ultimately should base its decision on the totality of
the circumstances and the particular facts of the case.” Williams v. Ala. Dep't of
Transp., 119 F. Supp. 2d 1249, 1255–56 (M.D. Ala. 2000) (citation omitted). “It
must be mindful of the fact that abstention, as a practical matter, often
permanently deprives the plaintiff of his or her day in court.” Id. at 1256 (citation
omitted).
In the instant case, while the legislature has authorized the Board to resolve
certain issues it also expressly provided that “[n]othing contained or authorized in
this article and no civil action by or against the board” and no “rule, regulation or
order issued under this article … shall impair or abridge or delay any cause of
action for damages which any person may have or assert against any person
violating any provision of this article or any rule, regulation, or order issued under
this article.” ALA. CODE § 9-17-19. As the Magistrate Judge noted, the Alabama
Supreme Court found it appropriate in Sheffield v. Exxon Corp., 424 So.2d 1297

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(Ala. 1982), to hear claims arising from an oil and gas lease even though, as here,
there were prior orders issued by the Board. In Sheffield, the Court found summary
judgment should be denied as to a claim that was based on implied covenants of an
oil and gas lease. The Court found that the claim was “not an impermissible
collateral attack on the orders of the Board”. Id. at 1304. The Sheffield Court noted
that the Alabama statute provides for judicial review of Board rules, regulations
and orders when an aggrieved person files a civil action within 30 days from the
date of the order, rule, or regulation. Id. The Sheffield Court found that the Lessors
were not precluded from litigating the issue even though the action was filed years
after the date of the Board order at issue, as the activities in question occurred
several years after the order. Id. The Court stated that “[t]o accord the Oil and Gas
Board’s express order the preemption status urged by Lessees would raise serious
due process questions.” Id. Here, as in Sheffield, there are allegations that waste
occurred after the orders entered by the Board. Ankor argues that because the
Board has exercised jurisdiction over the issue of “waste” and it is an essential
element of Plaintiffs’ claims, the Court should defer jurisdiction to the Board, “at
least until such time, if ever,” that the Board determines that waste has occurred.
However, while the Court would welcome the Board’s expertise, there is no
indication that the Board has any immediate plans to make that determination. If
the Board was expected to rule on that issue in the near future, a stay of this action
until the issue had been decided by the Board might be appropriate, but the parties
have not made the undersigned aware of any imminent proceedings or rulings by

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the Board on this matter and it is not clear that the Board would necessarily ever
rule on the issue. The Court also notes that if the Board were to determine waste
occurred, the legal consequences of that determination would still need to be
judicially determined since Plaintiffs would have no remedy for damages before the
Board.2 The Board does not have authority to adjudicate breach of contract claims.
After considering the circumstances of this case, the Court agrees with the
Magistrate Judge that it is not necessary to invoke primary jurisdiction of the
Board.
(2) Exhaustion of Administrative Remedies
The Magistrate Judge found that Plaintiffs’ claims should not be dismissed
for failure to exhaust remedies because, as in Sheffield, much of the alleged waste is
alleged to have occurred more than 30 days after the special field rules issued for
the subject wells. (Doc. 38, p. 13). Ankor reiterates its argument that Plaintiffs have
failed to utilize the administrative remedy available to them under Alabama Code §
9-17-15 and have “failed to exhaust the host of other administrative remedies
available to them prior to initiating this action.” (Doc. 41, p. 4). However, as

That fact alone would not justify declining to invoke primary jurisdiction to the Board.
“The doctrine functions not to determine whether the court or agency will finally decide an
issue; rather it serves to delay the judicial decision until the court can take advantage of
the agency's expertise.” Skybolt Aeromotive Corp. v. MilSpec Prod., Inc., 2017 WL 2540817,
at *5 (M.D. Fla. June 9, 2017) (citation omitted); but see, Self v. BellSouth Mobility, Inc.,
111 F. Supp. 2d 1169, 1172 (N.D. Ala. 2000) (“A court should refer a matter to an agency
only where there is a ‘ “strong possibility” that the agency decision would end the dispute’
or at least serve as a ‘ “material aid in ultimately deciding” ’ the issue before the court.
Sprint Corp. v. Evans, 846 F.Supp. 1497, 1505 (M.D. Ala. 1994) (citations omitted).
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mentioned above, the legislature expressly provided that “any cause of action for
damages which any person may have or assert against any person violating any
provision of this article or any rule, regulation, or order issued under this article”
shall not be impaired, abridged or delayed by anything “contained or authorized in
this article.” ALA. CODE § 9-17-19. In light of this express mandate as well as the
conclusions of the Sheffield case discussed above, the Court agrees with the
Magistrate Judge that Defendants’ motions for dismissal based on lack of
exhaustion should be denied.
(3) Collateral Attack on the Board’s Orders
As previously mentioned, the Sheffield case found that the claim in that case
was “not an impermissible collateral attack on the orders of the Board.” Sheffield,
424 So.2d at 1304. The Magistrate Judge found the instant case to be analogous to
the Sheffield case and distinguishable from another Alabama case, Phillips
Petroleum Co. v. Stryker, 723 So.2d 585 (Ala 1998). In its objection, Ankor cites as
support for its objection two Louisiana cases: Trahan v. Superior Oil Co., 700 F.2d
1004 (5th Cir. 1983) and Mayer v. Tidewater Oil Co., 218 F. Supp. 611 (W.D. La.
1963). However, the applicable Louisiana statutes, contrary to the Alabama
statutes, do not state that an action for damages by an aggrieved person shall not
be impaired, abridged or delayed by anything contained or authorized in the article.
In fact, the Louisiana statute mandates that a person must exhaust his
administrative remedies before obtaining court review. See LSA-R.S. 30:12. The
undersigned, after reviewing the cited cases, agrees with the Magistrate Judge’s

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conclusion.
(4) Res Judicata
Ankor contends that the Kelly Plaintiffs had an opportunity to litigate
their current claims against Ankor in a case brought in the Circuit Court of
Escambia County, Alabama, Kelly v. Renaissance Petroleum Co., et. al., and that
their failure to do so at that time precludes them from attempting to litigate their
claims in the current action. The Magistrate Judge properly stated the standard for
the application of res judicata as follows:
“When [a court is] ‘asked to give res judicata effect to a state court
judgment, [the court] must apply the res judicata principles of the law
of the state whose decision is set up as a bar to further litigation.’ ”
Kizzire v. Baptist Health Sys., Inc., 441 F.3d 1306, 1308 (11th Cir.
2006) (quoting Amey, Inc. v. Gulf Abstract & Title, Inc., 758 F.2d 1486,
1509 (11th Cir. 1985)); see also Muhammad v. Sec’y, Fla. Dep’t of Corr.,
739 F.3d 686, 688 (llth Cir. 2014). Thus, in the instant action,
Alabama’s res judicata principles apply.
Under Alabama law, “the essential elements of res judicata [frequently
referred to as claim preclusion] are[:] (1) a prior judgment on the
merits, (2) rendered by a court of competent jurisdiction, (3) with
substantial identity of the parties, and (4) with the same cause of
action presented in both actions.” Equity Res. Mgmt., Inc. v. Vinson,
723 So. 2d 634, 636 (Ala. 1998); see also Wheeler v. First Ala. Bank of
Birmingham, 364 So. 2d 1190, 1199 (Ala. 1978). “If those four elements
are present, then any claim that was, or that could have been,
adjudicated in the prior action is barred from further litigation.”
Equity Res. Mgmt., 723 So. 2d at 636.
(Doc. 38, pp. 16-17 (internal footnote omitted). The Magistrate Judge found that
the first three elements were met but found that the fourth element was not met
because claims presented in the state case were not based on the same “substantial
evidence” because the state court breach-of-lease claims alleged failure to pay
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royalties as a result of their successful drilling, whereas the claims in this case arise
from the alleged existence of waste and focus on different conduct. In its brief in
support of dismissal, Ankor argues that because any claims arising under the
Kelley leases could have been litigated in the former action, they are barred by res
judicata. Although not previously argued, Ankor but now points out that an
Alabama statute prohibits the splitting of a cause of action for breach of contract
into several separate suits and requires that “all breaches occurring up to the
commencement of the action must be included therein.” (Doc. 41, p. 12, citing ALA
CODE § 6-5-280). The statute states the following:
If a contract is entire, only one action can be commenced for breach
thereof; but if it is severable or if the breaches occur at successive
periods in an entire contract, as where money is to be paid by
installments, an action will lie for each breach; provided, that all the
breaches occurring up to the commencement of the action must be
included therein.
ALA. CODE § 6-5-280. Thus, although the alleged breaches raised in the prior suit
involved different evidence, the Kelly Plaintiffs were required to bring all breach
claims together that had occurred “up to the commencement of the action” unless
the different breaches were of severable portions of the contract.
“[T]he divisibility of a contract depends on the intention of the parties as
found from the apportionability of the contract's consideration, the subject matter
and object of the entire contract, and any other pertinent facts surrounding its
making at the time it was made.” Vill. Inn Pancake House of Mobile, Inc. v. Higdon,
294 Ala. 378, 382, 318 So. 2d 245, 249 (1975); see also Benchmark Homes, Inc. v.
Aleman, 786 So. 2d 1101, 1104 (Ala. 2000) (citations omitted) (“ ‘A test of
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severability which has frequently been applied is to the effect that, if the
consideration is single, the contract is entire, but if the consideration is either
expressly or by necessary implication apportioned, the contract will be regarded as
severable.’”); Blythe v. Embry, 36 Ala. App. 596, 597, 61 So. 2d 142, 143 (Ala. Ct.
App. 1952) (citation omitted) (“The consideration to be paid, and not the subject or
thing to be performed, determines whether a contract is entire or severable. If it is
expressly, or by implication, apportioned, the contract is severable.”). Here, the
prior breaches relate to royalties to be paid from production from the wells and the
breaches in the instant case also relate to the production of the wells. The breaches
concern the entire purpose of the agreement. Although the conduct complained of
in the first breaches (the failure to pay), and the conduct complained of in the
current breach claims (Defendants’ operation of the wells) is very different, the
agreement to act as a reasonably prudent operator is clearly entwined with the
agreement to pay royalties. Notably, Plaintiffs have not argued that the contract is
severable. Accordingly, the Court finds the contract is not severable.
However, Ankor acknowledges that the claims in the prior suit involving
these same wells “were removed from the case prior to trial.” (Doc. 33, p. 24 n 7).
There are no allegations in the complaint to further explain what happened
procedurally to those claims and the undersigned is not aware of the circumstances
under which these prior breach-of-contract claims were “removed.” It is unclear
whether the claims were voluntarily dismissed or whether a final disposition of
those claims was accomplished in the prior lawsuit. Unless the first claims were

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disposed of with prejudice to the Kellys’ right to reassert them, they have not been
fully or finally litigated. Section 6-5-280 bars a second action, but if the claims were
not finally litigated and arose out of a different nucleus of facts, then Plaintiff would
be free to raise them in a new action and § 6-5-280 would not prohibit such claims.3
Accordingly, the Court finds that Defendants have not demonstrated that § 6-5-280
bars the Kellys’ breach of contract claims here.
The Magistrate Judge found, and the undersigned agrees, that the current
breach of contract claims did not arise out of the same nucleus of facts as the claims
asserted in the prior lawsuit. Accordingly, the Court finds that res judicata does not
bar these claims.
(5) Failure to Comply with Notice Requirements
Ankor contends that Plaintiffs did not comply with the notice requirements
under the lease. There is no dispute that the leases contain notice requirements.
There also appears to be no dispute that Plaintiffs sent Ankor correspondence
intended to satisfy the notice requirements. As the Magistrate Judge stated,
“[t]here exists a conflict as to whether the correspondence sent by Plaintiffs to
Ankor comport with the requirements contained in the leases.” (Doc. 38, p. 23).
Accordingly, the undersigned agrees with the Magistrate Judge that at this stage of
the proceedings, where Plaintiffs’ factual assertions are taken as true, it is

If the claims were not extinguished and the Kelly Plaintiffs still have any viable claims
that arose prior to the commencement of this case for failure to pay royalties under the
lease, then § 6-5-280 requires that they assert them here with their current breach of
contract claims.
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premature to determine if the notices were sufficient as a matter of law.
(6) Tort Claims
Ankor contends that Plaintiffs cannot maintain their tort claims because they
arise from duties created by the leases. The Magistrate Judge noted there are
recognized exceptions to the rule that failure to perform under a contract will not
give rise to an action in tort and found that because Plaintiffs’ tort claims are based
on an alleged implied duty it was unclear at this juncture whether Plaintiffs’
negligence and wantonness claims are in actuality contract claims masquerading as
tort claims. While “an ordinary breach of contract will not give rise to a tort,” “[i]t is
possible for a tort to arise in Alabama out of a breach of a duty implied by or arising
out of a contract.” Brown-Marx Assocs., Ltd. v. Emigrant Sav. Bank, 703 F.2d 1361,
1371 (11th Cir. 1983) (citation omitted). In Brown-Marx the Court found there was
no actionable tort because the claim alleged a violation of an obligation “plainly set
out in the contract itself.” Id. “The Brown–Marx panel distinguished between
claims for breach of an obligation expressly set forth in the contract (which are not
actionable in tort under Alabama law) and claims for breach of a duty implied by or
arising out of the contract (which may be actionable in tort).” Hardy v. Jim Walter
Homes, Inc., 2008 WL 906455, at *14 (S.D. Ala. April 1, 2008) (citing Brown–Marx,
703 F.2d at 1371). Here, the Plaintiffs allege Defendants were negligent and
wanton by causing waste and allowing coning and channeling to occur which is
prohibited by Alabama oil and gas statutes and by failing to act as reasonably
prudent oil and gas operators. These alleged duties are not set out in the contracts.

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They allegedly arise from both the contract and the Alabama statutes. “[T]ort duties
may arise from statute, regulation, common law or contract,” but if it is from
contract, “Alabama law recognizes that misfeasance of a contract will support a tort
duty, nonfeasance of a contract will not.” Powers v. CSX Transp., Inc., 190 F. Supp.
2d 1284, 1295 (S.D. Ala. 2002). Here, to the extent the duties arise from the
contracts, the Plaintiffs do not claim that the Defendants wholly failed to perform,
but that they did so negligently or wantonly. Thus, Plaintiffs allege misfeasance,
not nonfeasance. “‘When the contract does not in terms require reasonable care in
doing the act stipulated to be done, the law imposes a duty—but does not imply a
contract—to exercise due care in doing the act; and, therefore, when negligence
exists in doing that act an action in tort only is available because there is no express
or implied contract which is breached.’” Great N. Land & Cattle Inc. v. Firestone
Tire & Rubber Co., 337 So. 2d 1323, 1327 (Ala. Civ. App. 1976) (quoting Waters v.
American Cas. Co. of Reading, Pa., 261 Ala. 252, 258, 73 So.2d 524 (1953)). “[W]hen
the allegation points to misfeasance, the claim can sound in tort or in contract, so
the court looks to the gist or gravamen of the complaint and the evidence provided
to determine whether the duty arose from the contract or from a general duty of
care owed to everyone.” Citizens Bank & Tr. v. LPS Nat. Flood, LLC, 51 F. Supp. 3d
1157, 1172 (N.D. Ala. 2014) (citation omitted). In Citizens Bank & Tr., the Court
found the claims could not be maintained as tort claims because the contract
expressly provided not only that the specific services would be provided but that
they would be done accurately. The Citizens Bank & Tr. Court distinguished the

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claims from those in Marsh v. Southern Airways, Inc., 316 F.2d 91 (5th Cir. 1963),
as follows:
“When the contract does not in terms require reasonable care in doing
the act stipulated to be done, the law imposes a duty—but does not
imply a contract—to exercise due care in doing the act; and, therefore,
when negligence exists in doing that act an action in tort only is
available because there is no express or implied contract which is
breached.” Marsh, 316 F.2d at 93–94 (quoting Waters, 73 So.2d at 529).
In the instant case, the contract is written, not implied, and it
expressly stated promises by LPS not only to provide flood zone
determinations but also to do so accurately. Accordingly, the Marsh
decision does not require a different result.
Citizens Bank & Tr., 51 F. Supp. 3d at 1173. In the instant case, Plaintiffs’ tort
claims allege a duty of reasonable care that was not expressly stated in the
contracts. In fact, the duties to not cause waste or to allow coning and channeling to
occur appear to arise at least in part from Alabama’s oil and gas statutes. Thus, the
claims appear to be actionable as tort claims. However, as stated above, the Court
must look to the complaint and the evidence in support to determine whether the
duty arose from the contract or from a general duty of care owed to everyone.
Accordingly, the Court agrees with the Magistrate Judge that at this juncture, it is
unclear whether Plaintiffs’ negligence and wantonness claims can be maintained as
torts.
(7) Whether the Board’s Orders Supersede the Contractual Terms
In the Orders at issue, the Board granted Ankor’s petitions to establish new
oil fields, to reform or establish a production unit, to adopt special filed rules for
those oil fields and to establish field limits for those oil fields. (Doc. 25-1, pp. 1-51).

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The Orders state that the granting of the petitions will prevent waste and will
protect the corelative rights of the mineral interest owner. The Court understands
the Orders to essentially grant Ankor a permit to commence drilling operations on
the properties. The Orders set certain rules that the Board believes are necessary to
prevent waste and protect the land owners but do not determine that there will in
fact be no waste ever so long as the specified rules are met. “[F]or a Board order to
‘supersede or supplement’ a provision in a private contract the Board order and the
contractual provision must conflict.” Pac. Enterprises Oil Co. (USA) v. Howell
Petroleum Corp., 614 So. 2d 409, 414 (Ala. 1993) (citation omitted). Ankor has not
pointed to any specific provisions of the lease that conflict with the rules or limits
set by the permits. Nor does the Court understand the Plaintiffs’ claims to assert
that Defendants breached the leases or other duties because they filed to comply
with lease provisions that violated the rules or limits set by the permits. The Orders
supplement the leases to the extent they require Ankor to do more than the leases
require, but the Court agrees with the Magistrate Judge that Ankor has not shown
that they conflict with the leases or with Ankor’s alleged duty to act as a reasonably
prudent operator.
(8) Punitive Damages
Defendants assert, and the Magistrate Judge agreed, that punitive damages
are not available for Plaintiff’s breach of contract or negligence claims. However,
Plaintiffs allege in their amended complaint that that Defendants engaged in
reckless and wanton conduct. (Doc. 20, ¶68). To recover punitive damages Plaintiffs

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must “prove[ ] by clear and convincing evidence that the defendant[s] consciously or
deliberately engaged in oppression, fraud, wantonness, or malice with regard to the
plaintiff[s].” ALA. CODE § 6-11-20(a). Ankor argues that the claim for punitive
damages fails to meet the requirements of § 6-11-20 because the wantonness claim
does not specify that Defendants acted “consciously or deliberately.” However, § 611-20 does not state that Plaintiff must specifically allege in the complaint that the
conduct was conscious or deliberate, but only that to recover punitive damages it
must be proven to be consciously or deliberately done. Accordingly, the undersigned
agrees with the Magistrate Judge that Defendants have not shown that Plaintiffs’
cannot recover punitive damages.
B. Plaintiff’s Objection: Private Right of Action under ALA. CODE
§ 9- 17-19
The Magistrate Judge found that ALA. CODE § 9-17-19 does not provide a
private statutory claim for waste. The Magistrate Judge was persuaded by the
reasoning of the Colorado Supreme Court in Gerrity Oil & Gas v. Magness, 946 P.2d
913 (Colo. 1997), as modified on denial of reh'g (Oct. 20, 1997), in which that court
construed a similar Colorado statute and found it did not create a private cause of
action.
The Alabama statute at issue, § 9-17-19, states the following:
(a) Nothing contained or authorized in this article and no civil action
by or against the board and no penalties imposed or claimed against
any person for violating any provision of this article or any rule,
regulation or order issued under this article and no forfeiture shall
impair or abridge or delay any cause of action for damages which any
person may have or assert against any person violating any provision

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of this article or any rule, regulation or order issued under this article.
Any person so damaged by the violation may institute a civil action for
and recover such damages as he may show that he is entitled to
receive.
(b) In the event the board should fail to bring a civil action to enjoin
any actual or threatened violation of any provision of this article or of
any rule, regulation or order made under this article, then any person
or party in interest adversely affected by such violation or threat
thereof and who has requested the board to institute a civil action in
the name of the state may, to prevent any or further violation, bring a
civil action for that purpose in any court in which the board could have
brought a civil action. If, in such civil action, the court holds that
injunctive relief should be granted, then the state shall be made a
party and shall be substituted by order of the court for the person who
brought the action, and the injunction shall be issued as if the state
had at all times been the complaining party.
ALA. CODE § 9-17-19. The Colorado statute provided:
Nothing in this article, and no suit by or against the commission, and
no violation charged or asserted against any person under this article,
shall impair, abridge, or delay any cause of action for damages which
any person may have or assert against any person violating any
provision of this article, or any rule, regulation, or order issued under
this article. Any person so damaged by the violation may sue for and
recover such damages as he otherwise may be entitled to receive.
§ 34–60–114, 14 C.R.S. (1995). In Magness, the court found that the phrase “any
cause of action which a person may have or assert” in the Colorado statute merely
preserves a person’s right to assert any cause of action for damages the person
might have. Magness, 946 P.2d at 924. The court found that that phrase “does not,
standing alone, give rise to a damages remedy.” Id. The Alabama statute includes
almost identical language: “any cause of action for damages which any person may
have.” However, the Alabama statute also provides that “[a]ny person so damaged
by the violation may institute a civil action for and recover such damages as he may
show that he is entitled to receive.” A plain reading of this language indicates that
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a person damaged by a violation of this article may bring a civil action to recover
damages. The Colorado statute has similar language but, as pointed out by the
Magness Court, the Colorado statute qualifies the right by providing only that a
person may sue to recover “such damages as he otherwise may be entitled to
receive.” The Magness court found that “[t]he use of the term, ‘otherwise,’ clarifies
that a person may be entitled to receive damages when there is a violation of a
commission rule, but that it is not the violation which gives rise to the entitlement.”
Magness, 946 P.2d at 924. The Alabama Statute does not clarify that the damages
a person may sue for are those that he otherwise may be entitled to receive.
The Magistrate Judge also discussed King v. Estate of Gilbreath, 2016 WL
7626248, (D.N.M. Mar. 30, 2016), which found that a similar New Mexico statute
provided a private right of action for damages for waste. The New Mexico statute
provided the following:
Nothing in this act contained or authorized, and no suit by or against
the commission or the division, and no penalties imposed or claimed
against any person for violating any statute of this state with respect
to conservation of oil and gas, or any provision of this act, or any rule,
regulation or order issued thereunder, shall impair or abridge or delay
any cause of action for damages which any person may have or assert
against any person violating any statute of the state with respect to
conservation of oil and gas, or any provision of this act, or any rule,
regulation or order issued thereunder. Any person so damaged by the
violation may sue for and recover such damages as he may be entitled
to receive. In the event the division should fail to bring suit to enjoin
any actual or threatened violation of any statute of this state with
respect to the conservation of oil and gas, or of any provision of this
act, or of any rule, regulation or order made thereunder, then any
person or party in interest adversely affected by such violation, and
who has notified the division in writing of such violation or threat
thereof and has requested the division to sue, may, to prevent any or
further violation, bring suit for that purpose in the district court of any
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county in which the division could have brought suit. If, in such suit,
the court holds that injunctive relief should be granted, then the
division shall be made a party and shall be substituted for the person
who brought the suit, and the injunction shall be issued as if the
division had at all times been the complaining party.
King, 2016 WL 7626248, at *4. The New Mexico court discussed the Magness case
but found the New Mexico statute was different because it referred to violations of
any statute in the first sentence and did not use the word “otherwise” in the second
sentence. The King court explained the difference as follows:
The Colorado court concluded that the emphasized language indicates
that there was no intention to create a private cause of action. Use of
the word “may” shows that a violation of the Oil and Gas Conservation
Act or commission rule does not, by itself, give rise to a damages
remedy. Use of the “otherwise” clause confirms that it is not the
violation of the Act or commission rule itself that gives rise to an
entitlement to damages. [Magness, 946 P.2d at 924].
In contrast, the New Mexico statute does not include “otherwise.” And
the Colorado court's conclusion on the effect of the word “may” depends
on the fact that the Colorado statute only refers to violations of the Act
or commission rule. But New Mexico's Section 70-2-29 additionally
refers to violations of “any statute of the state with respect to
conservation of oil and gas.” Use of the word “may” in Section 70-2-29
therefore does not suggest that violation of New Mexico's Oil and Gas
Act does not give rise, by itself, to a damages remedy.
Because of the critical differences in the statutes, the Court is not
persuaded by the Energen Defendants' argument that Section 70-2-29
does not create a private cause of action. Instead, Section 70-2-29
provides that any person may sue for damages if injured by a violation
of: the Oil and Gas Act; a rule, regulation or order issued under the Oil
and Gas Act; or “any statute of the state with respect to conservation of
oil and gas.” See Marbob Energy Corp. v. New Mexico Oil Conserv.
Comm'n, 2009-NMSC-013, ¶ 9, 206 P.3d 135, 139 (providing that court
looks to plain language, construing statute in accordance with
legislative intent).
King, 2016 WL 7626248, at *5.
The Alabama statutes’ mandate that “[a]ny person so damaged by the

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violation may institute a civil action for and recover such damages as he may show
that he is entitled to receive” is nearly identical to the language of the New Mexico
statute which states: “[a]ny person so damaged by the violation may sue for and
recover such damages as he may be entitled to receive.” As previously pointed out,
Alabama’s statute does not include the word “otherwise” to indicate the civil actions
referred to arose from something other than the statute. However, the Alabama
statute does not refer to violations of “any statute of this state with respect to
conservation of oil and gas,” which was the second fact the King court found
distinguished the New Mexico statute from the Colorado statute. Thus, Alabama’s
statute can be distinguished from both the Colorado and the New Mexico statute.
However, the Court does not find that the fact that the Alabama statute does not
refer to violations of other oil and gas statutes changes the plain meaning of the
mandate that any person damaged by a violation of the statute may institute a civil
action for damages. Though neither the parties not the Court have found examples
of civil actions that have been brought under ALA. CODE § 9-17-19, there have also
been no cases uncovered that dismissed such claims or ruled that no private right of
action could be maintained. The undersigned concludes that the Alabama statute
does provide a private right of action. Accordingly, Plaintiffs’ objection is sustained
and Defendants’ motion to dismiss Count Five of Plaintiffs’ complaint based on the
lack of a statutory claim for waste will be denied.
C. GS’s Objections
GS contends that it does not and has never owned any interest in or operated

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the wells or leases at issue and that it never received any notice of any claimed
breach of any of the leases. In support of these contentions, GS submitted the
declaration of its president, JaeSeung Lee. (Doc. 27, p. 5-6). The Magistrate Judge
noted that Plaintiffs did not address GS’ factual contentions in their opposition to
the motion but stated that the Court “will not treat a claim as abandoned merely
because the plaintiff has not defended it in opposition to a motion to dismiss.” (Doc.
38, p. 38 (quoting Gailes v. Marengo Co. Sheriff’s Dept., 916 F.Supp.2d 1238, 1243
(S.D. Ala. 2013) and also citing Anderson v. Greene, 2005 WL 1971116 at *3, (S.D.
Ala. Aug. 16, 2005)). The Magistrate Judge found that the allegations of the
complaint satisfied the Twombly standard and that the Court could not consider the
Lee affidavit without converting the motion to a motion for summary judgment.
(Doc. 38, pp. 38-39). GS argues that the Court should have converted the motion
since Plaintiff did not address GS’s contentions and the facts are therefore
“undisputed.” However, the undersigned agrees with the Magistrate Judge that the
motion should not be converted at this early stage of the proceedings. Plaintiffs’
complaint contains specific factual allegations contrary to GS’s assertions and
Plaintiffs should be given the opportunity to conduct some discovery to prove those
allegations.

IV. Conclusion
After due and proper consideration of all portions of this file deemed relevant
to the issues raised, and a de novo determination of those portions of the report and

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recommendation to which objection is made, the report and recommendation of the
Magistrate Judge made under 28 U.S.C. § 636(b)(1)(B) is ADOPTED as the opinion
of this Court with the MODIFICATION explained above that Defendants’ motion
to dismiss Count Five of Plaintiffs’ complaint based on the lack of a statutory claim
for waste will be denied.
Accordingly, it is ORDERED that Defendants’ motions to dismiss (Docs. 24
& 26), are hereby DENIED in their entirety.
DONE and ORDERED this 13th day of August, 2018.
/s/ Callie V. S. Granade
SENIOR UNITED STATES DISTRICT JUDGE

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