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 motion by Defendants Cimarex
Energy Company and Cimarex Energy Company of Colorado
(together, “Cimarex”) for partial dismissal of
the Plaintiffs' Amended Class Action Complaint for
failure to state a claim. For the reasons set forth below,
the Court finds that the Defendants' Partial Motion to
Dismiss Plaintiff's Amended Class Action Complaint for
Failure to State a Claim and Brief in Support [Docket No. 44]
should be hereby DENIED.
Plaintiff is a resident of Texas and owns mineral interests
in Oklahoma wells operated by Cimarex Energy Co. of Colorado.
He contends 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, ¶¶
addition to the personal allegations, Plaintiff assert 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.
October 14, 2016, the Plaintiff filed a Complaint which
contained the following causes of action: (I) breach of
contract, (II) tortious breach of contract, (III) unjust
enrichment, and (IV) fraud (actual and constructive) and
deceit, as well as enumerated claims for (V) an accounting
and (VI) an injunction. The Defendant moved for dismissal of
all Count II-VI. See Docket Nos. 2, 25. This Court
denied the motion as to Count III, V, and VI, but granted the
motion as to Counts II and IV, dismissing the fraud claim
without prejudice and giving Plaintiff fourteen days to amend
the Complaint. See Docket No. 42. Plaintiff then
filed the First Amended Class Action Complaint, Docket No.
43, which 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. The Defendants have again moved to dismiss Count
III, the claim of fraud, for failure to state a claim for
asserts that the Plaintiffs' claim of fraud in
Plaintiff's First Amended Class Action Complaint again
fails to state a claim for relief. Specifically, Cimarex
argues that the Plaintiffs have failed to allege facts
sufficient to establish the element of detrimental reliance.
Cimarex thus asserts that Plaintiff's claim of fraud
should be dismissed with prejudice.
Fed.R.Civ.P. 9(b), “In alleging fraud or mistake, a
party must state with particularity the circumstances
constituting fraud or mistake. Malice, intent, knowledge, and
other conditions of a person's mind may be alleged
generally.” In this case, the Plaintiff alleges that
Cimarex “secretly and knowingly underpaid royalties on
Oklahoma Wells, ” and “implemented a uniform and
systematic payment policy to not pay royalty to Plaintiff . .
. on Fuel Gas[, ]” including “uniform
misrepresentations and/or omissions to Plaintiff . . . on
their monthly check counter-foils that falsely reported a
gross volume and price for the gas that was actually a net
volume and price less fuel gas.” Docket No. 43, p. 12,
¶¶ 53-54. Furthermore, Plaintiff alleges that
Cimarex sent these royalty checks, along with a
“remittance statement, ” every month, and that
Plaintiff received a royalty check and remittance statement
every month. Id., at ¶ 55.
reliance, Plaintiff alleges that these monthly remittance
statements “purport to report the gross volume and
gross value of all the natural gas 9and all of its
constituents) produced, ” and that “Cimarex knew
Plaintiff  had no choice by to rely on Cimarex's false
statements as truthful and accurate” because
“Plaintiff  lacked access to Cimarex's internal
records that Plaintiff  could use to verify the truth and
accuracy of Cimarex's monthly representations.
Id., at ¶¶ 57-58. Moreover, he alleges
that he “acted in reliance on Cimarex's uniform
misrepresentations and/or omissions by accepting and cashing
their monthly royalty checks under the impression that these
checks fully compensated them for all of the royalty to which
they were entitled” and that this reliance was
detrimental “because it enabled Cimarex to use funds
for years that were rightfully owed to Plaintiff[.]”
Id., at ¶ 59.
Court stated in its previous Order, see Docket No.
42, in the Tenth Circuit, a Complaint alleging fraud must
“set forth the time, place and contents of the false
representation, the identity of the party making the false
statements and the consequences thereof.” Koch v.
Koch Industries, Inc., 203 F.3d 1202, 1236 (10th Cir.
2000), quoting Lawrence National Bank v. Edmonds (In re
Edmonds), 924 F.2d 127, 180 (10th Cir. 1991). The
purpose of this requirement is to provide the Defendants with
“fair notice of plaintiff's claims and the factual
ground upon which [they] are based.” Id. at
1236-1237 (citations omitted). Additionally, “[u]nder
the Supreme Court's plausibility standard, the plaintiffs
were required to plead sufficient facts to create a
reasonable inference of reliance.” Hitch
Enterprises, Inc. v. Cimarex Energy Co., 859 F.Supp.2d
1249, 1261 (W.D. Okla. 2012), citing Iqbal, 556 U.S.
at 678, and Bryson v. ...