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Cline v. Sunoco, Inc. (R&M)

United States District Court, E.D. Oklahoma

December 10, 2019

PERRY CLINE, on behalf of himself and all others similarly situated, Plaintiff,
v.
SUNOCO, INC. (R&M), and, SUNOCO PARTNERS MARKETING & TERMINALS, L.P., Defendants.

          OPINION

          John A. Gibney, Jr. United States District Judge

         Perry Cline represents class members who own interests in oil wells in Oklahoma. The defendants, Sunoco, Inc. (R&M), and Sunoco Partners Marketing & Terminals, L.P. ("Sunoco"), purchase and sell oil from the wells. Sunoco pays the class members proceeds when it sells the oil. Oklahoma's Production Revenue Standards Act ("PRSA") governs when Sunoco must pay those proceeds and imposes statutory interest for paying the proceeds late. See Okla. Stat. tit. 52, § 570, et seq. Cline has sued Sunoco for failing to pay the statutory interest on late payments it made on oil proceeds.

         Cline has moved for partial summary judgment on two issues: (1) whether Sunoco violates the PRSA by not paying statutory interest on late royalty payments until an owner demands that interest; and (2) whether the PRSA requires Sunoco to pay the statutory interest at the same time it makes the late payments. Because the Court concludes that Sunoco must pay the statutory interest without a demand and at the same time it makes the late payment, the Court will grant Cline's motion for partial summary judgment.

         I. BACKGROUND

         Sunoco buys oil from numerous wells in Oklahoma and distributes proceeds from the oil to well owners. The class members own interests in those wells. The PRSA dictates when Sunoco must pay the proceeds, and it requires Sunoco to pay statutory interest to interest owners when it pays the proceeds late.[1]

         Sunoco often waits until an interest owner requests the statutory interest before it pays that interest. When it receives a request, Sunoco investigates the payment and pays the interest if it determines that it owes interest under the PRSA. Sunoco, however, says that it sometimes pays interest owners the required statutory interest without a request.

         In July, 2017, Cline sued Sunoco in Oklahoma state court. Cline alleges that Sunoco's practice of paying interest on late proceed payments violates the PRSA, and that Sunoco has committed fraud by hiding the fact that Sunoco owes interest to the class members. Sunoco removed the action to this Court in August, 2017.

         Cline moved to certify the class and name him as class representative in June, 2019. In his motion, Cline explained that this action raises common questions of law and fact, including:

(1) whether, under Oklahoma law, Sunoco owed interest to Plaintiff and the Class on any and all Untimely Payments;
(2) whether owners must make a demand prior to being entitled to receive statutory interest;
(3) whether Sunoco's failure to pay interest to Plaintiff and the putative class on any Untimely Payments constitutes a violation of the PRSA; and
(4) whether Sunoco defrauded Plaintiff and the putative class by knowingly withholding statutory interest.

(Dk. No. 91, at 22-23.) On October 3, 2019, the Court certified a class of interest owners to whom Sunoco paid proceeds late but did not pay the statutory interest.[2] The Court approved the manner and form of class notice in November, 2019. The class opt-out period expired on December 9, 2019.

         In October, 2019, Cline moved for partial summary judgment on whether Sunoco violates the PRSA by waiting to pay statutory interest until an owner requests it, and whether the PRSA requires Sunoco to pay the statutory interest with the late payments. Sunoco moved to strike or stay briefing on the motion until after the class notice period expired. The Court denied the motion to strike or stay and instructed the parties to brief the motion as ordered by the Court. On December 6, 2019, the Court held a hearing on the motion for partial summary judgment. Because the opt-out period has expired, the Court finds it appropriate to issue a ruling on the merits of this action.

         II. DISCUSSION [3]

         A. Disputes of Facts

         To succeed on the motion for partial summary judgment, Cline must first establish that Sunoco omits interest on late payments and waits for a demand from an owner before paying that interest. The parties disagree about whether Sunoco's actions constitute a uniform "policy" or a frequent "practice," and Sunoco insists that it sometimes pays interest with the late payment and without the request of the interest owner. Those arguments miss the point. Sunoco cannot seriously dispute that it waits to pay statutory interest until it receives a request from the interest owner; indeed, it has admitted that it does. (See, e.g., Dk. No. 103-2; Dk. No. 105, at 17-18.) The record establishes that Sunoco engages in this conduct. (See Dk. No. 142-1, 7:13-8:19; Dk. No. 142-2, 6:6-8:10; Dk. No. 142-3, 7:2-9:10; Dk. No. 142-5, 7:8-15; Dk. No. 160-1, 6:12-7:19.) Thus, no genuine dispute of material fact exists about Sunoco's actions with regard to the interest payments.

         B. Questions of Law

         Cline asks the Court to decide two legal questions that lie at the center of this litigation.[4]First, he asks for a ruling that Sunoco's "uniform policy of not paying statutory interest until an owner makes a demand" violates the PRSA. (Dk. No. 142, at 9.) Second, he asks the Court to decide whether the PRSA "expressly require[s] payment of interest at the time proceeds are paid late." (Dk. No. 142, at 11.) Because any demand requirement depends on when Sunoco must pay interest, the Court first considers when the PRSA requires Sunoco to pay interest on late payments.

         1. Timin2 of ...


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