Date: 07-18-2012

Case Style: Samson Resources Co. v. Newfield Exploration Mid-Continent

Case Number: 2012 OK 68

Judge: Gurich

Court: Supreme Court of Oklahoma

Plaintiff's Attorney: Michael E. Smith, Sharon T. Thomas, Hall, Estill, Hardwick, Gable, Golden & Nelson P.C., Oklahoma City, OK, for Plaintiff-Appellant

Defendant's Attorney: Gregory L. Mahaffey, Mahaffey & Gore, P.C., Oklahoma City, OK, for Defendant-Appellee

Description: ¶1 In August of 2009, Samson Resources Company owned oil and gas leases covering 87.78 mineral acres in Roger Mills County, Oklahoma, including the Schaefer Lease. The Schaefer Lease covered 70 net acres in the Southwest Quarter of Section 28 and had a three-year primary term that ended on November 22, 2007. If drilling operations were commenced by the end of the primary term, the lease would continue so long as such operations continued. If drilling operations were not commenced by the end of the primary term, the lease would expire.

¶2 On August 2, 2007, Newfield sent a letter to Samson, proposing to drill a well in Section 28. The estimated cost of the well was over $8.5 million dollars. On August 9, 2007, Newfield filed an application with the Commission, seeking to force pool the interests of Samson and other owners in Section 28.1

¶3 On October 4, 2007, Samson sent a letter to Newfield offering to enter into an agreement regarding Newfield's proposal to drill a well in Section 28 and Newfield's force pooling application.2 Newfield did not accept Samson's proposal. Newfield's force pooling application was protested and set for hearing on December 12-14, 2007. Samson decided to take no action regarding the Schaefer Lease and allowed it to expire at the end of its term on November 22, 2007.3

¶4 Before the Schaefer Lease expired, Newfield began dirt work in the Southwest Quarter of Section 28, perpetuating the Schaefer Lease. According to Samson, Newfield concealed the dirt work from Samson, obtained a drilling permit from the Commission on November 27, 2007, and spudded a well known as the Miss Carol 1H-28 on December 1, 2007. Because Samson was allegedly unaware of Newfield's actions and believed the Schaefer Lease had expired, it did not appear at the December 12-14, 2007 hearing on Newfield's force pooling action.

¶5 The Commission's pooling order issued on February 21, 2008, Order No. 550310, did not disclose that Newfield had already commenced drilling the Miss Carol Well in Section 28 or that it had taken any action that might have perpetuated the Schaefer Lease. The pooling order, drafted by Newfield, stated that Newfield was "proposing" to drill a well in Section 28 and required Newfield to commence drilling the well within 180 days. It also required owners to elect whether to participate and pay or whether to accept a cash bonus. Believing it owned only 17.78 mineral acres, Samson elected, by letter on February 26, 2008, to participate to the full extent of its interest. On March 10, 2008, Samson sent Newfield a check in the amount of $285,999.63, representing Samson's prepayment for its 17.78 acres. A Newfield landman treated Samson's payment as an election to participate to the extent of all its interest and did not compare the prepayment amount against the respective amounts of working interest acreage in the unit.

¶6 Newfield sent an e-mail dated April 14, 2008, to Samson that informed Samson that Newfield had commenced operations prior to the expiration of the Schaefer Lease. Newfield's e-mail stated that Samson had underpaid well costs and that an election to participate with 87.78 acres would require prepayment of $1,411,982.45. Samson responded by e-mail on the same date, informing Newfield its intent was only to elect its 17.78 acres. On April 28, 2008, Samson filed an Application to Determine Election Pursuant to Pooling Order 550310 with the Commission. Samson sought to have its election to participate in the Miss Carol well limited to 17.78 acres rather than 87.78 acres.

¶7 After an administrative hearing at the Commission, the Administrative Law Judge determined that Samson's timely election to participate only covered 17.78 acres of its interest and that Samson accepted the cash bonus as to its remaining 70 acres. The Oil and Gas Appellate Referee reversed the ALJ's determination, finding that the ALJ improperly relied on actions which occurred prior to the issuance of the pooling order. The Commission issued Order No. 567706, which adopted the Referee's report, reversed the ALJ, and declared that Samson had elected to participate to the full extent of its 87.78 acre interest in the unit. The Commission found Samson made a "unilateral mistake" when it elected to participate to the full extent of its interest. Samson appealed the Commission's order to the Court of Civil Appeals, which affirmed. This Court denied certiorari review on June 28, 2010 (Samson I).

¶8 Before COCA issued its opinion in Samson I affirming the Commission, Samson filed an action in the District Court of Roger Mills County, alleging actual fraud, deceit, intentional and negligent misrepresentation, constructive fraud, and breach of duty as operator. Samson also alleged Newfield's actions amounted to extrinsic fraud on the Commission, rendering Pooling Order No. 550310 invalid as to Samson's working interest attributable to the 70-acre Schaefer Lease.

¶9 Newfield filed a 12 O.S. § 2012(B)(1) motion to dismiss for lack of subject matter jurisdiction, arguing that Samson's petition was an impermissible collateral attack on a valid Commission order. After reviewing briefs and exhibits and holding a hearing on the motion, the trial court dismissed Samson's petition, finding that Samson's petition and causes of action were an impermissible collateral attack upon a final order of the Commission. Samson appealed, and COCA affirmed, treating the dismissal as a summary judgment because the parties attached evidentiary materials to their pleadings. Samson petitioned this Court for certiorari review, and we granted review on June 20, 2011.

Standard of Review

¶10 The subject of this appeal is Newfield's 12 O.S. § 2012 (B)(1)4 motion to dismiss, which was granted by the trial court. The purpose of a motion to dismiss is to test the law that governs the claim in litigation rather than to examine the underlying facts of that claim. Rogers v. Quiktrip Corp., 2010 OK 3, ¶ 4, 230 P.3d 853, 856. As such, whether a claim should have been dismissed for lack of subject matter jurisdiction is a question of law this Court reviews de novo. Id.

Analysis

¶11 Samson first argues that its claims should not have been dismissed by the trial court because only the trial court had jurisdiction to hear the claims asserted.5 We find this argument persuasive. The Commission oversees the conservation of oil and gas, and its jurisdiction is limited to the resolution of public rights. Tucker v. Special Energy Corp., 2008 OK 57, ¶ 9, 187 P.3d 730, 733. Public rights are involved when "a unitization order, pooling order, or order setting the allowables on the unit's well" affects "the correlative rights of all mineral rights owners in [a] common source of supply [in a] unit." Id. (internal quotations omitted). The Commission does not have jurisdiction over private rights and does not have jurisdiction to hear and render judgments in an action for damages sounding in tort. Rogers, 2010 OK 3, ¶ 6, 230 P.3d at 857. Questions in an action concerning the relationship of private parties, their duties, rights and obligations, and the existence of liability for the breach of such duties are matters particularly within the jurisdiction of the district courts. Id. ¶ 7, 230 P.3d at 858.

¶12 In its petition, Samson claimed that Newfield owed it a duty and that Newfield breached that duty by failing to disclose certain facts to Samson. Samson alleged Newfield's actions amounted to actual fraud, deceit, and intentional misrepresentation, entitling Samson to actual damages, including the amounts Samson paid or is required to pay Newfield regarding the Schaefer Lease. Alternatively, Samson argued these actions amounted to constructive fraud and negligent misrepresentation, entitling it to actual, consequential, incidental, and special damages. Finally, Samson claimed in its petition that as the operator of the well Newfield owed Samson a duty of good faith and full and fair disclosure. Samson claimed Newfield breached this duty, entitling Samson to actual and punitive damages. In this case, Samson's claims sound in tort and are of a private nature. Therefore, the trial court erred by sustaining Newfield's motion.

¶13 Newfield also argues that Samson's claims are precluded because Samson had a full and fair opportunity to litigate the issues in the prior Commission action. The limited record on appeal does not support COCA's finding that Samson's claims are precluded because it is clear that the Order of the Commission was not based upon actions that occurred prior to the issuance of the pooling order.6 The trial court dismissed the action before either party had the opportunity below to fully address whether Samson's claims, or any factual or legal issues in support of those claims, were precluded by the Commission proceeding.7

¶14 Finally, Samson argues that the pooling order including Samson's working interest attributable to the 70-acre Schaefer Lease is invalid due to Newfield's extrinsic fraud on the Commission. Neither the trial court nor COCA considered the issue of extrinsic fraud. However, the pooling order became a valid and final order of the Commission when this Court denied certiorari review in Samson I. The pooling order may not be attacked on remand on the basis of extrinsic fraud. See Okla. Const. art. IX, § 20; 52 O.S. § 111; Mullins v. Ward, 1985 OK 109, n.7, 712 P.2d 55, 59 n.7.8

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See: http://www.oscn.net/applications/oscn/deliverdocument.asp?cite=2012+OK+68

Outcome: ¶15 Samson's claims for damages sounding in tort were beyond the Commission's jurisdiction, and the district court in this case was the proper tribunal for Samson to bring its claims. While we express no view on the merits of Samson's claims, the district court erred by dismissing the case for lack of subject matter jurisdiction. The trial court's order granting Newfield's Motion to Dismiss is reversed.

COURT OF CIVIL APPEALS' OPINION VACATED; DISTRICT COURT'S JUDGMENT REVERSED; MATTER REMANDED FOR FURTHER PROCEEDINGS

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