Summary 2010 WY 37

Summary of Decision issued March 25, 2010

Summaries are prepared by Law Librarians and are not official statements of the Wyoming Supreme Court.

Case Name: Morris v. CMS Oil & Gas Co.

Citation: 2010 WY 37

Docket Number: S-09-0103; S-08-0104

Appeal from the District Court of Campbell County, the Honorable John R. Perry, Judge.

Representing Appellant Morris (Plaintiff): Patrick G. Davidson and Rebecca L. Winkler of Daly Law Associates, LLC, Gillette, Wyoming.

Representing Appellee CMS Oil & Gas Co. (Defendant): Thomas F. Reese, Drake D. Hill and Orintha E. Karns of Brown, Drew & Massey, LLP, Casper, Wyoming.

Facts/Discussion: Morris owns an overriding royalty interest in gas wells operated by CMS. Morris brought suit under the WRPA because she believed that CMS was not reporting production or paying her royalties properly.

Royalty payments: Morris failed to prove she was owed royalties or interest beyond what CMS had paid as of November 2002. She expressly testified she was unsure of the amount owed but that her expert would know. The expert testified that while there were some irregularities in the reports, they ultimately were resolved. Morris claimed she was unable to prove her damages because CMS refused to produce the necessary documentation during discovery. CMS’s expert testified he provided Morris’ expert with all the pertinent material he had in his possession and Morris’ expert acknowledged the same. Relying on an internal CMS memo, Morris asserted that the documentation provided was unreliable. The Court stated that while the memo disclosed that CMS had some initial problems with its reporting on some wells, it does not prove that the information ultimately provided was unreliable. Morris argued that CMS’s reported production numbers differed from those reported to the WOGCC as reflected on the website. The evidence suggested that the WOGCC numbers that Morris relied upon were not reliable. Morris’s expert testified he found thirty-three wells for which she had never received payment but he was never asked to calculate the royalty amount due on those wells. CMS’s expert testified only three such wells existed and testified the production numbers and volumes calculated by Morris’ expert were correct. No competent evidence on the sales price was presented. The Court upheld the district court’s conclusion that CMS ultimately paid Morris more than she was due.
Lack of reporting: The district court concluded that CMS failed to properly report for twenty-nine months. Neither party challenged the district court’s finding that CMS failed to report during the specified time period or argued that the finding was not supported by the record. The district court concluded that a producer who fails to submit a complete monthly report is liable to the interest owner in the amount of $100 per month. The clear intent of § 30-5-305(b) was that interest owners would receive all of the information identified in subparagraphs (i) through (xi) on a regular monthly basis. It authorizes the information to be provided by lease, property or well. Anyone who failed to do so would be liable to the interest owner for $100 for each month that a complete report was not provided. The district court correctly determined that CMS was liable to Morris in the amount of $100 for each month complete reporting did not occur. The evidence supported the district court’s determination that CMS failed to submit complete monthly reports from July 2000 through March 2002. The district court found CMS was required to report beginning December 1999. The Court noted the first sale was in December 1999 making the first payment and report due July 2000. On remand, the district court should consider the issue and determine the proper penalty.
Attorney’s fees and costs: The Court has defined whether a party is a prevailing party (for purposes of awarding costs of litigation) as one who improves his or her position by the litigation. Morris obtained payments she otherwise would not have, proved that CMS violated the WRPA and obtained a judgment requiring CMS to pay reporting penalties thereby improving her position. The Court upheld the district court’s determination that Morris was the prevailing party for the purposes of attorney’s fees. Morris claimed the district court erred in awarding fees to CMS. The district court’s award of attorney fees to CMS when Morris was the prevailing party cannot stand. The practical effect of the district court’s award of attorney’s fees to CMS was to punish Morris for not voluntarily dismissing her claim once CMS made some payment. This runs counter to the entire purpose of the WRPA as well as the express language of § 30-5-303(b) authorizing an attorney’s fee award to the prevailing party.
Application of the escrow provision: Morris asserted the district court erred when it held CMS was not in violation of the WRPA once it escrowed the funds in April 2002. She claimed the ruling failed to take into account that there were some wells for which she never received payment or reports so that CMS was continuing to violate the WRPA after it escrowed the funds. Therefore the calculation of the reporting penalty was incorrect. The testimony and evidence tended to show that upon paying Morris $38,657.41 as of November 2002, CMS had paid approximately $3,000 more than it owed. The ruling was supported by the evidence.

Conclusion: The district court’s conclusion that Morris received all the royalty payments she was due was supported by the evidence. The district court correctly concluded CMS failed to submit reports as required by WRPA. The district court’s conclusion that CMS violated the WRPA by failing to either pay Morris the royalties due or place them in escrow was supported by the evidence. Morris was the prevailing party and was properly awarded her attorney’s fees. The district court erred in awarding CMS attorney’s fees.

Affirmed in part, reversed and remanded in part.

J. Kite delivered the decision.

J. Golden, dissented: The Justice’s review of the record noted that attached to every payment made was a check detail containing the requisite statutory information. He would have reversed the district court’s ruling on reporting penalties. The Justice discussed the “catalyst theory” which the Court has never expressly commented upon. The theory runs directly contrary to the language and intent of § 30-5-303(b). The United States Supreme Court discussed the definition of “prevailing party” at length in Buckhannon. In order to be deemed a prevailing party, there must be a material modification in the legal relationship of the parties. The Justice would hold that a party can only be considered a “prevailing party” in a juridical action if the party receives some form of juridical relief such as judgment on the merits or a court ordered consent decree or court-approved settlement agreement. The Justice would follow the lead of the United State Supreme Court and adopt a bright-line rule defining a person who improves her position through litigation as a person who receives relief sought by means of some form of juridical action. Only juridical action can change the legal relationship between parties, the proper function of any legal action.

Link: http://tinyurl.com/yefmdqw .

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