Reirdon v. Cimarex Energy Co.
Filing
33
OPINION & ORDER by Magistrate Judge Kimberly E. West denying 14 Motion to Dismiss Case for Failure to State a Claim. (adw, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF OKLAHOMA
DORSEY J. REIRDON,
)
)
)
)
)
)
)
)
)
Plaintiff,
v.
CIMAREX ENERGY CO.,
Defendant.
Case No. CIV-16-113-KEW
OPINION AND ORDER
This matter comes before the Court on Defendant’s Motion to
Dismiss Plaintiff’s Original Petition for Failure to State a Claim
(Docket Entry #14).
Plaintiff initiated this action on March 11,
2016 in the District Court in and for Marshall County, Oklahoma.
Defendant removed the case to this Court on April 1, 2016.
Key to
a determination of the subject Motion is a review of the specific
allegations in Plaintiff’s Original Petition.
Plaintiff alleges he is a royalty owner in the well designated
as the Joe 1-15H and Defendant is the operator of the well.
Plaintiff contends Defendant was legally obligated to pay interest
on
untimely
payments
to
royalty
owners,
including
Plaintiff.
Specifically, the Original Petition defines the term “Owner” as
“persons with a legal interest in the mineral acreage under a well
which entitles such person(s) . . . to payments of O&G Proceeds.”
(Petition
at
¶1).
(Petition at ¶¶2-3).
He
also
alleges
that
he
is
an
“Owner”.
The Petition further defines “Untimely
Payments” as “‘proceeds from the sale of oil and gas production or
some portion of such proceeds [that] are not paid prior to the end
of the applicable time periods provided’ by statute”, citing to
Okla. Stat. tit. 52 § 570.10(D) and Okla. Stat. tit. 52 § 570, et
seq. (Petition ¶5). Plaintiff alleges that the Production Revenue
Standards Act (the “Act”) requires the payment of interest on any
Untimely Payments made to Owners.
(Petition ¶6).
Plaintiff
contends Defendant “is well aware of its obligations to pay the
required interest on Untimely Payments” but “routinely delays
payment of production proceeds and denies Owners the interest
payments to which they are entitled as part of an overarching
scheme to avoid its obligations under Oklahoma law.”
(Petition
¶7).
After alleging the personal basis for his claims, Plaintiff
asserts he brings the action as a representative of a class defined
as
All non-excluded persons or entities who: (1) received
Untimely Payments from Defendant (or Defendant’s
designee) for O&G Proceeds from Oklahoma Wells; and (2)
whose payments did not include statutory interest.
The persons or entities excluded from the Class are: (1)
agencies, departments, or instrumentalities of the United
States of America or the State of Oklahoma; (2) publicly
traded oil and gas companies and their affiliates; (3)
persons or entities that Plaintiff’s counsel may be
prohibited from representing under Rule 1.7 of the
Oklahoma Rules of Professional Conduct; and (4) officers
of the court.
(Petition ¶20).
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Plaintiff proceeds through the analysis required for class
certification,
certification.
alleging
He
the
also
facts
sets
representative of the class.
which
forth
his
he
asserts
warrants
qualification
(Petition ¶¶21-27).
as
a
While a bit
redundant, Plaintiff reiterates that he and the putative class
members were entitled to oil and gas proceeds from Defendant,
payments of the same were untimely, and Defendant failed to pay the
statutorily provided interest.
(Petition ¶¶28-39).
For his first cause of action, Plaintiff contends Defendant
“held O&G Proceeds belonging to Plaintiff and the Class and
Defendant failed to timely pay O&G Proceeds owing to Plaintiff and
the
Class”
and
“[i]n
violation
of
the
Act,
when
Defendant
ultimately made its Untimely Payments to Plaintiff and the Class,
Defendant did not pay the interest owing on the Untimely Payments.”
(Petition
¶¶46-47).
Plaintiff
concludes
on
this
claim
that
Defendant’s failure to pay the due and owing interest was “knowing
and intentional and/or the result of Defendant’s gross negligence”
which resulted in harm to Plaintiff and the putative class.
(Petition ¶¶48-49).
In the second claim, Plaintiff asserts Defendant owned and/or
operated numerous oil and gas wells throughout Oklahoma and assumed
the duties associated with the operation of the wells, including
the duty to pay oil and gas proceeds to Owners in accordance with
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Oklahoma law.
(Petition ¶52).
In the course of doing so,
Plaintiff alleges Defendant “took on such duties with the intent to
deceive
Owners
and
not
pay
the
full
O&G
Proceeds
specifically, the interest on Untimely Payments.
owed”
-
Plaintiff states
Defendant “knowingly and intentionally suppressed the fact that
interest was owed to Plaintiff and the Class members” and “intended
to avoid its obligation to pay the statutorily mandated interest
and only pay when an Owner specifically requests payment of the
statutory interest.” (Petition ¶53). Plaintiff states that he and
the putative class “relied on and trusted Defendant to pay them the
full O&G Proceeds to which they were entitled under Oklahoma law”
and alleges they were damaged as a result.
(Petition ¶¶54-55).
Plaintiff also asserts a claim for punitive damages under this
fraud allegation.
As a separate third claim, Plaintiff seeks equitable relief in
the form of an accounting and disgorgement of any benefits derived
from Defendant’s “improper and unlawful use of Plaintiff’s and the
Class’ interest payments, including interest that has accrued on
such interest . . . .”
Plaintiff
requesting
that
also
(Petition ¶¶58-62).
asserts
Defendant
a
be
claim
precluded
for
injunctive
from
failing
relief,
to
make
interest payments on any future Untimely Payments to Plaintiff, the
class, “and royalty owners.”
(Petition ¶¶64-68).
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Through the pending Motion, Defendant contends Plaintiff’s
claims failed to meet the plausibility standard enunciated in
United States Supreme Court cases of Bell Atlantic Corp. v.
Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 556 U.S. 662
(2009).
Defendant also asserts that Plaintiff’s negligence claim
is not legally cognizable under Oklahoma law against an insurer.
Clearly, Bell Atlantic changed the legal analysis applicable
to dismissal motions filed under Fed. R. Civ. P. 12(b)(6), creating
a “refined standard” on such motions.
Khalik v. United Airlines,
671 F.3d 1188, 1191 (10th Cir. 2012)(citation omitted).
Bell
Atlantic stands for the summarized proposition that “[t]o survive
a motion to dismiss, a complaint must contain sufficient factual
matter, accepted as true, to ‘state a claim for relief that is
plausible on its face.’”
Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949
(2009) quoting Bell Atlantic, 550 U.S. at 570.
The Supreme Court
did not parse words when it stated in relation to the previous
standard that “a complaint should not be dismissed for failure to
state a claim unless it appears beyond doubt that the plaintiff can
prove no set of facts in support of his claim which would entitle
him to relief” is “best forgotten as an incomplete, negative gloss
on an accepted pleading standard.”
Bell Atlantic,
550 U.S. at
546.
The Tenth Circuit has interpreted the plausibility standard as
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referring “to the scope of the allegations in the complaint:
if
they are so general that they encompass a wide swath of conduct,
much of it innocent, then the plaintiffs ‘have not nudged their
claims across the line from conceivable to plausible.’” Robbins v.
Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008).
The Bell Atlantic
case, however, did not intend the end of the more lenient pleading
requirements of Fed. R. Civ. P. 8(a)(2). Khalik, 671 F.3d at 1191.
Rather, in Khalik, the Tenth Circuit recognized the United States
Supreme Court’s continued endorsement of Rule 8's “short and plain
statement” requirement in the case of Erickson v. Pardus, 551 U.S.
89 (2007) wherein the Supreme Court found “[s]pecific facts are not
necessary; the statement need only ‘give the defendant fair notice
of what the . . . claim is and the grounds upon which it rests.’”
Id. at 93.
It is against this backdrop that the sufficiency of
Plaintiff’s initial filing is evaluated.
Defendant first challenges the sufficiency of Plaintiff’s
allegations
surrounding
the
claim
for
breach
of
a
statutory
obligation to pay interest, arguing Plaintiff has failed to state
a claim.
After accurately reciting the requirements for the
payment of interest in Okla. Stat. tit. 52 § 570.1, Defendant
states Plaintiff fails to identify specific instances of late
payment of oil and gas proceeds and non-payment of interest and
fails to specify an interest rate. The level of specificity sought
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by Defendant is not mandated by the plausibility standard in
Twombly/Iqbal and their progeny. Post-Twombly, the essence of Rule
8 of the Federal Rules of Civil Procedure remains providing a
“defendant fair notice of what the . . . claim is and the grounds
upon which it rests” and cautioning that “[s]pecific facts are not
necessary.”
Khalik, 671 F.3d at 1192 quoting Erickson v. Pardus,
551 U.S. 89, 93 (2007).
On the claim for breach of the statutory
obligation to pay interest, Plaintiff has alleged payments were
made in an untimely manner in accordance with the requirements with
the
Act
and
interest
was
not
paid.
These
allegations
sufficient to withstand the rubric of Twombly/Iqbal.
are
The rate of
interest is provided by the statute and did not need to be parroted
in the Petition to state a claim.
Moreover, this Court concurs
with Plaintiff that Defendant sets out the factual and monetary
value of Plaintiff’s claims in considerable detail in the Notice of
Removal in order to establish jurisdiction in this Court.
It does
not appear Defendant lacks the knowledge to defend this claim.
Defendant also contends the fraud claim asserted by Plaintiff
lacks the specificity required by Fed. R. Civ. P. 9(b) and the
plausibility under Rule 8.
To the extent Defendant asserts a
plausibility argument against Plaintiff’s fraud claim, such an
allegation must fail.
Plaintiff clearly sets forth that the claim
is based upon the intentional act of withholding and obfuscating
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the requirement for the payment of interest. Whether Plaintiff can
prove such a claim is of no moment to whether it has adequately
stated a claim for fraud.
The level of particularity required by Rule 9(b) for fraud
claims
is
necessarily
subject
to
the
type
of
factual
claim
asserted. “In all averments of fraud or mistake, the circumstances
constituting fraud or mistake shall be stated with particularity.
Malice, intent, knowledge, and other conditions of mind of a person
may be averred generally.”
Fed.R.Civ.P. 9(b).
The Tenth Circuit
requires a complaint alleging fraud to set forth the time, place,
and contents of the false representation, the identity of the party
making
the
false
statements,
and
the
consequences
of
the
statements.
Koch v. Koch Indus., Inc., 203 F.3d 1202, 1236 (10th
Cir. 2000).
The purpose of these requirements is to provide the
defendant with fair notice of a plaintiff's claims and the factual
ground upon which they are based. Id.
At this early stage of the litigation, Plaintiff minimally
sets forth the facts surrounding the alleged fraud, given the
factual basis for the claims.
Plaintiff has alleged Defendant
acted with intent in failing to pay interest on Untimely Payments
and intentionally suppressed the fact interest was owed upon which
Plaintiff relied to his detriment.
Given the allegedly uneven
positions of the parties with regard to the information upon which
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the claim of fraud is based, Plaintiff has plead as particularly as
the facts allow.
This Court agrees with Defendant that Plaintiff’s claims for
equitable relief of an accounting, disgorgement, and injunctive
relief are byproducts of the base claims for breach of a statutory
duty and fraud.
Separately identifying this relief, however, does
not warrant dismissal until the merits of the other claims are
determined.
It is certainly premature to ascertain whether the
basis for equitable relief is meritorious.
IT IS THEREFORE ORDERED that Defendant’s Motion to Dismiss
Plaintiff’s Original Petition for Failure to State a Claim (Docket
Entry #14) is hereby DENIED.
IT IS SO ORDERED this 16th day of September, 2016.
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