United States District Court, E.D. Oklahoma
DORSEY J. REIRDON, Plaintiff,
CIMAREX ENERGY COMPANY AND CIMAREX ENERGY CO. OF COLORADO, Defendants.
OPINION AND ORDER
P. SHREDER, UNITED STATES MAGISTRATE JUDGE
matter comes before the Court on partial motion for summary
judgment by Defendants Cimarex Energy Company and Cimarex
Energy Company of Colorado (together, “Cimarex”).
For the reasons set forth below, the Defendants' Motion
for Summary Judgment on All Claims Associated with the Beard
Leases and Brief in Support [Docket No. 55] is DENIED.
filed this case in this Court on October 14, 2016. Docket
Nos. 1-2. On January 19, 2017, this Court held a status and
scheduling conference, at which time the Court granted the
parties leave to file a series of partial summary judgment
motions without prejudice to ultimately filing a summary
judgment motion on the main merits of the case. Docket No.
37. Plaintiff filed an Amended Class Action Complaint on
October 11, 2017, following this Court's ruling on a
partial Motion to Dismiss. Docket Nos. 25, 42, 43. Defendants
then filed a series of partial summary judgment motions.
Docket Nos. 53-55. The Court then stayed the case on June 26,
2018, pending formal mediation by the parties, and the case
was thereafter reopened following the conclusion of mediation
on September 25, 2018. Docket Nos. 78, 81. Plaintiff contends
in the Amended Class Action Complaint that Cimarex used,
caused to be used, and/or allowed third parties to use
natural gas from Oklahoma wells, but that despite express
provisions in the oil and gas leases, Cimarex
“knowingly and systematically underpaid royalty”
to him through a policy of not paying royalties for fuel gas,
and that Cimarex failed to disclose on monthly royalty
checkstubs that it “was not paying royalty on the full
volume and value of production from the Oklahoma
wells.” Docket No. 43, pp. 1-2, ¶¶ 1-6.
addition to the personal allegations, Plaintiff asserts that
he is acting as a representative of a class defined as:
All non-excluded persons or entities who are or were royalty
owners in Oklahoma wells where Cimarex, including its
predecessors or affiliates, is or was the well operator and
working interest owner (or, as a non-operating working
interest owner, Cimarex separately marketed gas), and who,
from January 1, 2013 are or were entitled to share in royalty
proceeds payable under oil and gas leases that contain an
express provision stating that royalty will be paid on gas
used off the lease premises and/or in manufacture of
The persons or entities excluded from the Class are: (1)
agencies, departments or instrumentalities of the United
States of America and the State of Oklahoma; (2) officers of
the Court involved in this action; (3) publicly traded oil
and gas exploration companies and their affiliates; and (4)
persons or entities that Plaintiff's counsel is, or may
be prohibited from representing under Rule 1.7 of the
Oklahoma Rules of Professional Conduct.
Docket No. 43, pp. 3-4, ¶ 15. The class allegations
indicate that the common questions of fact include: (a)
whether, under express terms of the oil and gas leases under
which Reirdon and the putative Class are entitled to be paid
royalty, Cimarex has or had a duty to pay royalty on Fuel
Gas; (b) whether Cimarex has paid the full amount of royalty
owed on Fuel Gas; and (c) whether Cimarex's uniform
royalty payment methodology breaches Cimarex's express
duties to pay royalty on Fuel Gas. See Docket No.
43, pp. 4-5, ¶ 19. Plaintiff's First Amended Class
Action Complaint sets out the following enumerated causes of
action: (I) breach of contract, (II) unjust enrichment, and
(III) fraud (actual and constructive) and deceit, as well as
enumerated claims for (IV) an accounting and (V) an
injunction. As to the breach of contract claim, at issue
here, the Plaintiff alleges that the Defendants breached the
express covenant in each oil and gas lease containing
language related to “gas . . . used off the leased
premises, or in the manufacture of products therefrom . . .
or used by lessee off the lease premises for any
purpose.” Docket no. 43, p. 11. Specifically, Plaintiff
alleges that the Defendants “systematically failed to
pay royalty to Plaintiff and the putative Class on such Fuel
Gas through the use of a uniform royalty payment
judgment is appropriate if the record shows that “there
is no genuine dispute as to any material fact and the movant
is entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56(a). A genuine issue of material fact exists
when “there is sufficient evidence favoring the
nonmoving party for a jury to return a verdict for that
party.” Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 249 (1986). The moving party must show the absence
of a genuine issue of material fact, see Celotex Corp. v.
Catrett, 477 U.S. 317, 325 (1986), with the evidence
taken in the light most favorable to the non-moving party,
Adickes v. S.H. Kress & Co., 398 U.S. 144, 157
(1970). However, “a party asserting that a fact cannot
be or is genuinely disputed must support the assertion by . .
. citing to particular parts of materials in the record . . .
or . . . showing that the materials cited do not establish
the absence or presence of a genuine dispute[.]”
undisputed facts reflect that Magnum Hunter, a wholly owned
subsidiary of Cimarex Energy Co. is the lessee, but Cimarex
distributes the royalties associated with the oil and gas
wells and leases at issue in this lawsuit. Magnum Hunter
sells the gas to Madill Gas Processing Company, L.L.C.
(“Madill”), and delivers the gas to Madill at or
near Madill's North Madill Compressor Station in Marshall
County, Oklahoma. A pro rata share of the gas is used off the
leased premises as Fuel Gas to power compressors which move
the gas from the leased premises to Madill's gas
processing plan. A pro rata share is also used to power
machinery and equipment at Madill's gas processing plant,
including compressors, an amine treater, and generators.
the initiation of this lawsuit, Defendants paid royalties on
the value of the Fuel Gas used off premises to power the
compressors and amine treater from January 1, 2013 to
present, but to date have not paid royalties on a pro rata
share of Fuel Gas used off the leased premises to: (i)
cryogenically process gas into natural gas liquids and
residue gas, (ii) deliver gas from the plant to a residue gas
pipeline at the plaint tailgate, and (iii) run generators
that were used to power the Madill processing plant before it
switched to electrical power in April 2014.
the present partial motion for summary judgment, Cimarex
seeks summary judgment with regard to Plaintiff's breach
of contract claims for royalty as they apply to two July 29,
1953 oil and gas leases: (i) between G.W. Taliaferro (lessor)
and Wayne W. Beard (lessee), and (ii) between B.N. Taliaferro