Date: 02-23-2007

Case Style: Freeman and others v. Ceja Corporation, Arline B. Oliphant,Eric B Oliphant, John D. Mayo II, Peter O. Mayo, Gregory W. Oliphant Living Trust, Samuel Oliphant Age 21 Trust, Thomas J. Oliphant Living Trust and Besha Lu Deane Trust and others

Case Number: CJ-2002-2686

Judge: Thornbrugh

Court: District Court, Tulsa County, Oklahoma

Plaintiff's Attorney: Dennis A. Caruso of Caruso Law Firm, PC 1325 East 15th Street, Suite 201 Tulsa, Oklahoma 74120 (918)583-5900 Ned Dismukes

Defendant's Attorney: Randall Vaughan and John Randolph of PRAY WALKER David Bryant and Craig Fitzgerald of BRYANT LAW FIRM

Description: Plaintiffs claimed rights in a portion of the working interests acquired by CEJA and the other defendants in oil and gas leases, lands and drilling units underlying Forbes Lake State Park ("FLSP") in Marion County, Illinois, referred to as the "FLSP Leases". Plaintiffs contend that they are entitled to the legal and equitable remedies of accrued damages, an accounting concerning Plaintiffs' share of the net revenue attributable their working interests in the FLSP leases, and the recovery of working interests in the FLSP Leases, all based on several theories of recovery. Plaintiffs' claims include breach of contract against Ceja and the Oliphant/Mayo Defendants arising from a Joint Operating Agreement ("JOA")that was implied to Plaintiffs leases. The JOA contained an Area of Mutual Interest provision that required Defendants to share the FLSP Leases. Ceja Corporation executed the 1997 JOA in its individual capacity and, as agent for the Oliphant/Mayo Defendants. Ceja and the Oliphant/Mayo Defendants breached the JOA by failing to share with Plaintiffs the interests acquired in the FLSP Leases. Plaintiffs also contended that Ceja breached its fiduciary duty owed to Plaintiffs. Based on the facts and circumstances of the case, Ceja was required to share the FSLP leases with Plaintiffs. They breached these duties by failing to share the FLSP Leases with Plaintiffs and failing to disclose all material facts concerning the exploration, development, acquisition, testing and development of the FLSP working interests and related prospect. Defendants denied all alegations. They further claimed that the AMI in the JOA was a mistake. They further contended that the JOA did not apply to Plaintiffs later drilled wells. Defendants contended that Ceja did not request and Plaintiffs did not sign any joint operating agreement with respect to those later wells or leases. and the leases Ceja obtained in FLSP are not within one mile of the Contract Area in JOA. Defendants also claimed that the parties never amended the JOA or AMI Clause to enlarge or extend the Area of Mutual Interest such that the FLSP leases would fall within it. Further, they claimed that the parties never agreed, expressly or impliedly, to treat the AMI Clause as though it applied to any leases that were within one mile of any FLSP leases. Defendants also raised additional defenses of 1. The claims of one or more Plaintiffs are not prosecuted by the real party in interest. 2. The claims are barred by statute of limitations. 3. The claims are barred by laches. 4. Plaintiffs' breach of contract claims are barred by mistake and/or Defendants' entitlement to reformation. 5. Plaintiffs' breach of contract claims are barred by the Statute of Frauds. 6. No written contract conveying or promising to convey any interest in FSP exists. 7. Any amendment or modification of the AMI provision of the McCarty JOA would have to be in a signed writing to satisfy the Statute of Frauds. 8. The parol evidence rule precludes admission of extrinsic evidence of the parties' intent with respect to the McCarty JOA. 9. There was no mutual intent for the McCarty JOA to apply to any leases other than McCarty. 10. Any oral or implied amendment of the McCarty JOA to extend the AMI provision is barred by the "modification in writing" clause. 11. The parties never agreed to any amendment, modification, or imputation of the McCarty JOA to include any other leases. 12. There is insufficient evidence to support amendment or modification by course of dealing or performance. 13. The AMI provision was included in the McCarty JOA by mistake. Ceja never intended to grant Plaintiffs an AMI right in McCarty or any future leases or even knew that the McCarty JOA included an AMI provision. 14. There is no consideration for the AMI right, especially not in any post-McCarty wells. 15. No relationship exists which gives rise to any fiduciary relationship by operation of law. 16. Ceja's "control" over leases in which it is operator is the result of arms-length business transactions and does not give rise to a fiduciary duty. 17. Any "trust reposed" in any Defendant was unknown to that Defendant and without that Defendant's consent. No Defendant ever agreed to allow Plaintiffs to rely on the Defendant's judgment. 18. Plaintiffs had access to expert advice in Jim Freeman eliminating any need to rely on Ceja's expertise. 19. Even if a fiduciary relationship existed, no Defendant breached any fiduciary duties to Plaintiffs. 20. Operators are permitted by law to acquire adjoining properties without accounting to other working interest owners. 21. Plaintiffs were not entitled to information and data about the FSP leases. 22. Plaintiffs were not entitled to information on the Miselbrook No. 2 well. 23. Defendants did not enter into self-dealing transactions. 24. Plaintiffs suffered no damages as a result of any breach of fiduciary duty. 25. Plaintiffs' recovery for breach of fiduciary duty is precluded or reduced by their own breach of fiduciary duty. 26. Oliphant-Mayo Defendants have no business relationship, fiduciary or otherwise, with Plaintiffs. 27. The Oliphant-Mayo Defendants are not parties to any joint operating agreement(s) or any other agreements alleged by Plaintiffs and are not bound by, nor are their interests subject to, any such agreements. 28. Ceja's signature on the McCarty JOA is ineffective as an agent's agreement to convey an interest in real property on behalf of the Oliphant-Mayo Defendants. 29. The Statute of Frauds bars any claim that Ceja executed the McCarty JOA on behalf of the Oliphant-Mayo Defendants. 30. Ceja lacked authority to act as agent of the Oliphant-Mayo Defendants in any dealings with Plaintiffs material to Plaintiffs' claims. 31. The alleged knowledge and/or actions of Ceja are not imputed or imputable to the Oliphant-Mayo Defendants. 32. Plaintiffs' claims are barred by the statute of frauds. 33. Plaintiffs' claims are barred by the parol evidence rule. 34. Plaintiffs' claims are barred by lack or failure of consideration. 35. Plaintiffs' claims are barred by unconscionability. 36. Plaintiffs' claims are barred by mistake. 37. Plaintiffs' claims are barred by unclean hands. 38. Plaintiffs' claims are barred by their own breaches of duty or actual or constructive fraud. 39. Plaintiffs' claims are barred by the statute of limitations. 40. Plaintiffs' claims are barred by laches. 44. Plaintiffs' claims are barred by estoppel. 45. Standing / Real Party in Interest

Outcome: Plaintffs' verdicts on all claims -(1)breach of contract claim against all Defendants and (2) breach of fiduciary duty against Defendant Ceja Corporation, both in the amount of 3.67 Million in past damages and a 5.555% Gross Working Interest in the FLSP Leases located in an Illinois oil and gas field covering future oil production with an estimated value of 3-4 Million, for total damages of approx. 7-8 Million.

Plaintiff's Experts: Melvin Cockrell, Houston, Texas Clifford Clark, Denver, Colorado

Defendant's Experts: R. Dobie Langenkamp Tulsa, Oklahoma

Comments: None