OGP Energy Limited Partnership #1 v. QEP Energy Company

Filing 14

ORDER granting 5 Defendant's Motion to Dismiss and Plaintiff's tortious breach of contract claimis hereby DISMISSED, as more fully set out. Signed by Honorable David L. Russell on 9/16/14. (jw)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA
OGP ENERGY LIMITED PARTNERSHIP )
#1,
)
)
Plaintiff,
)
)
v.
)
)
QEP ENERGY COMPANY, f/k/a
)
QUESTAR EXPLORATION and
)
PRODUCTION COMPANY, a Texas
)
Corporation,
)
)
Defendants.
)

CIV-14-842-R

ORDER
This matter comes before the Court on the Motion to Dismiss, filed by Defendant QEP
Energy Company, addressing Plaintiff OGP Energy Limited Partnership's ("OGP") claim for
tortious breach of contract. (Doc. NO. 5). Plaintiff has responded in opposition to the
motion, and Defendant has filed a reply in support thereof. Having considered the parties'
submissions, the Court finds as follows.
Plaintiff filed this action in the District Court of Caddo County, asserting that it had
been a co-tenant of Defendant with regard to certain leases covering 160 net mineral acres
in the NW/4 of Section 28, Township 11 North, Range 13 West, in Caddo County,
Oklahoma.1 Subsequent to Defendant's transfer of its interest to Chesapeake Exploration
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OGP apparently obtained the rights to a 1/8 interest, which was retained by Robert Garbrecht when
he assigned a 7/8th interest to Texas Pacific Oil Company, Inc., in 1977, subject to the purchaser first
recovering the purchase price and its proportionate share of drilling, completion and operating costs of any
unit well. Mr. Garbrecht assigned his 1/8 interest to OGP in 1994. OGP alleges that QEP Energy Company
acquired its interest from Texas Pacific before transferring it on November 1, 2000, to Chesapeake
(continued...)

Limited Partnership, in 2000, Plaintiff, following inquiry to Chesapeake, began receiving
production revenues attributable to its interest in the leases at issue herein. Plaintiff contends
QEP Energy Company, during its tenure as co-tenant, failed to advise OGP of payout or to
notify and pay Plaintiff for production attributable to its interests once payout occurred,
keeping proceeds to which OGP was entitled for itself. In the Amended Petition Plaintiff
seeks an accounting and urges claims of constructive fraud/deceit, negligence/gross
negligence, breach of trust- fiduciary duty, breach of contract, and tortious breach of
contract. Defendant seeks dismissal of Plaintiff's claim of tortious breach of contract,
arguing the absence of any special relationship between OGP or Garbrecht and QEP Energy
Company so as to support such a cause of action.
Defendant concedes that every contract in Oklahoma recognizes the implied duty of
good faith and fair dealing. See First Nat’l Bank & Trust Co. of Vinita v. Kissee, 1993 OK
96, ¶ 24, 859 P.2d 502, 509. It argues, however, that the concept of a tortious breach of
contract has not been extended to circumstances like those alleged by Plaintiff. Rather, the
tort arising from the breach of contract is limited to special relationships marked by disparty
in bargainig power, such as insurer-insured or bank-depositor, where the bank intentionally
dishonors a check.
Because it appears to the undersigned that Plaintiff is relying solely on the status of
co-tenants as a basis for extra-contractual tort liability stemming from the alleged breach of

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(...continued)
Exploration Limited Partnership.

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a contract, the Court concurs with Defendant that dismissal of the tortious breach is
appropriate.
Under Oklahoma law, “[e]very contract ... contains an implied duty of good
faith and fair dealing.” Wathor v. Mutual Assurance Adm'rs, Inc., 87 P.3d 559,
561 (Okla.2004). In cases involving “ordinary commercial contracts, a breach
of that duty merely results in damages for breach of contract, not independent
tort liability.” Id. In the “proper case,” however, “punitive ...damages may be
sought.” Conover v. Aetna U.S. Health Care, Inc., 320 F.3d 1076, 1079 (10th
Cir.2003) (emphasis added). The “proper case” requires that a “special
relationship” exist between the parties. See Wathor, 87 P.3d at 561-62.
Oklahoma courts have found such a “special relationship” in only very limited
circumstances, most notably between an insurer and insured. Id. at 561; see
also, Allison v. UNUM Life Ins. Co., 381 F.3d 1015, 1027 (10th Cir.2004)
(“there is no dispute that the Oklahoma [badfaith] law is directed toward the
insurance industry”). The “special relationship” in insurance contracts stems
from the “quasi-public nature of insurance, the unequal bargaining power
between the insurer and insured, and the potential for an insurer to
unscrupulously exert that power at a time when the insured is particularly
vulnerable.” Wathor, 87 P.3d at 561-62; see also Christian v. American Home
Assurance Co., 577 P.2d 899, 902 (Okla.1977) (noting the special relationship
in insurance contracts exists because the insured is not entering the contract to
obtain commercial advantage but to protect from risk of accidental losses).
Combs v. Shelter Mutual Ins. Co., 551 F.3d 991, 998-99 (10th Cir. 2008). Having been
unwilling to extend a claim for tortious breach of contract to the relationship between an
operator and a royalty owner, the Court is unwilling to extend such a claim to the relationship
between cotenants as pled in the instant action. See Chieftain Royalty Co. v. Dominion
Oklahoma Texas Exploration & Production, Inc., Case No. CIV-11-344-R, p. 5-7
(W.D.Okla. July 14, 2011); McKnight v. Linn Operating, No. CIV-10-30-R, p. 10
(W.D.Okla. April 1, 2010). The Oklahoma Supreme Court described the relationship
required to give rise to tort liability as:

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marked by (1) disparity in bargaining power where the weaker party has no
choice of terms, also called an adhesion contract, and (2) the elimination of
risk. Rodgers v. Tecumseh Bank, 1988 OK 36, ¶¶ 14–16, 756 P.2d 1223, 1226.
Tort liability is allowed in these types of contracts, because bad faith, or, more
properly, breach of the implied duty to deal fairly and in good faith,
precipitates the precise economic hardship the contract was intended to avoid.
Christian v. American Home Assurance Co., 1977 OK 141, 577 P.2d 899.
Embry v. Innovative Aftermarket Systems, L.P., 247 P.3d 1158, 1160 (Okla. 2010)(citations
omitted). Plaintiff has not convinced the Court that its relationship with Defendant falls into
this narrow category or that the Court should extend a tortious breach of contract claim to the
relationship described in the Amended Petition. Accordingly, Defendant's motion to dismiss
is hereby GRANTED, and Plaintiff's tortious breach of contract claim is hereby
DISMISSED.
IT IS SO ORDERED this 16th day of September, 2014.

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