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McClintock v. Exxonmobil Oil Corp.

United States District Court, E.D. Oklahoma

March 29, 2018

PAULA PARK MCCLINTOCK, Plaintiff,
v.
EXXONMOBIL OIL CORPORATION; and ENTERPRISE CRUDE OIL, LLC, Defendants.

          OPINION AND ORDER

          KIMBERLY E. WEST UNITED STATES MAGISTRATE JUDGE

         This matter comes before the Court on Defendant Enterprise Crude Oil, LLC's Motion to Dismiss Plaintiff's Fraud Claim (Docket Entry #57). Plaintiff initiated this action on April 13, 2016 in the District Court in and for Marshall County, Oklahoma. Defendant removed the case to this Court on April 1, 2016.

         Plaintiff alleges she is the owner of certain oil and gas wells in Oklahoma. Defendant ExxonMobil Oil Corp. is identified as the producing owner/operator of oil and gas wells in Oklahoma which is obligated to pay oil and gas proceeds to Plaintiff. Defendant Enterprise Crude Oil, LLC (“Enterprise”) is a first purchaser of production from oil and gas wells in Oklahoma which is also alleged to be obligated to pay Plaintiff oil and gas proceeds. Plaintiff contends Defendants were legally obligated to pay interest on untimely payments to royalty owners, including Plaintiff. Specifically, the First Amended Complaint defines the term “Owner” as “persons with a legal interest in the acreage under a well which entitles such person(s) . . . to payments of O&G Proceeds.” (First Amended Complaint (“FAC”) at ¶1). She also alleges that he is an “Owner”. (FAC at ¶¶2-3). The First Amended Complaint 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. (FAC ¶5). Plaintiff alleges that the Production Revenue Standards Act (the “Act”) requires the payment of interest on any Untimely Payments made to Owners. (FAC ¶6).

         Plaintiff contends Defendants “are well aware of their obligations to pay the required interest on Untimely Payments” but “routinely delay payment of production proceeds and deny Owners the interest payments to which they are entitled as part of an overarching scheme to avoid its obligations under Oklahoma law.” (FAC ¶7).

         After alleging the personal basis for her claims, Plaintiff asserts she brings the action as a representative of a class defined as

All non-excluded persons or entities who: (1) received Untimely Payments from Defendants (or Defendants' designees) 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.

(FAC ¶23).

         Plaintiff proceeds through the analysis required for class certification, alleging the facts which she asserts warrants certification. She also sets forth his qualification as a representative of the class. (FAC ¶¶24-30). Plaintiff reiterates that she and the putative class members were entitled to oil and gas proceeds from Defendants, the historical purpose for the Oklahoma statute under which she proceeds, that payments of the proceeds were untimely, and Defendants failed to pay the statutorily provided interest as a result of the delay in payment of the oil and gas proceeds. (FAC ¶¶31-43).

         In her first cause of action, Plaintiff contends Defendant “held O&G Proceeds belonging to Plaintiff and the Class and Defendants failed to timely pay O&G Proceeds owing to Plaintiff and the Class” and “[i]n violation of the Act, when Defendants ultimately made its (sic) Untimely Payments to Plaintiff and the Class, Defendants did not pay the interest owing on the Untimely Payments.” (FAC ¶¶50-51). Plaintiff concludes on this claim that Defendants' failure to pay the due and owing interest on the Untimely Payments was “knowing and intentional and/or the result of Defendant's gross negligence” which resulted in harm to Plaintiff and the putative class. (FAC ¶¶52-53).

         Plaintiff also asserts a claim for fraud, alleging Defendants 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 Oklahoma law. (FAC ¶56-57). In the course of doing so, Plaintiff alleges Defendants “took on such duties with the intent to deceive Owners and not pay the full O&G Proceeds owed” - specifically, the interest on Untimely Payments. Plaintiff states Defendants “knowingly and intentionally suppressed the fact that interest was owed to Plaintiff and the Class members” and “intended to avoid their obligation to pay the statutorily mandated interest and only pay when an Owner specifically requests payment of the statutory interest.” (FAC ¶58). Plaintiff states that she and the putative class “relied on and trusted Defendants to pay them the full O&G Proceeds to which they were entitled under Oklahoma law” and alleges they were damaged as a result. (FAC ¶¶59-60). Plaintiff also asserts a claim for punitive damages under this fraud allegation. (FAC ¶61).

         As a separately set out claim, Plaintiff seeks equitable relief in the form of an accounting and requests an order directing Defendants “to disgorge themselves of any benefits derived from their improper and unlawful use of Plaintiff's and the Class' interest payments, including interest that has accrued on such interest since the time in which Defendants made the Disputed Payments to Plaintiff and the Class. (FAC ¶¶63-67).

         Plaintiff also asserts a claim for injunctive relief, requesting “a permanent injunction, ordering Defendants to pay interest as required by law when Defendants make future Untimely Payments to Plaintiff, the Class, and Owners.” (FAC ¶¶69-73).

         Enterprise requests dismissal of Plaintiff's common law fraud claim contending (1) that the Energy Litigation Reform Act (the “Reform Act”) specifically precludes Plaintiff from pursuing the fraud claim through its “exclusive remedy” language; and (2) that, should the fraud claim be permitted to proceed, Plaintiff's allegations ...


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