Date: 10-12-2015

Case Style: Whisenant v. Sheridan Production Company

Case Number: 15-6154

Judge: Bobby Ray Baldock

Court: UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT

Plaintiff's Attorney: Michael E Grant, Rex A Sharp

Defendant's Attorney: John J Griffin, Jr, Erin P Sullenger, L Mark Walker

Description: Tony R. Whisenant filed a class action in state court alleging that
Sheridan Production Company, LLC (Sheridan) failed to pay or underpaid royalties
for natural gas wells it operated in Beaver County, Oklahoma. Sheridan removed the
suit to federal court under the Class Action Fairness Act of 2005 (CAFA), 28 U.S.C.
§ 1332(d), and the district court denied Mr. Whisenant’s motion to remand. Having * After examining the briefs and appellate record, this panel has determined unanimously that oral argument would not materially assist the determination of this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore ordered submitted without oral argument. This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. It may be cited, however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
obtained this court’s permission to appeal, see id. § 1453(c)(1); Whisenant v.
Sheridan Prod. Co., No. 15-603 (10th Cir. Aug. 12, 2015) (unpublished order),
Mr. Whisenant now challenges the denial of the motion to remand. We reverse the
district court’s decision and remand for further proceedings.
“CAFA gives federal courts jurisdiction over certain class actions, defined in
§ 1332(d)(1), if the class has more than 100 members, the parties are minimally
diverse, and the amount in controversy exceeds $5 million.” Dart Cherokee Basin
Operating Co. v. Owens, 135 S. Ct. 547, 552 (2014). Importantly, however, the
amount in controversy must exceed $5 million “exclusive of interest and costs.”
28 U.S.C. § 1332(d)(2). This appeal concerns the interpretation of the phrase
“exclusive of interest and costs.”
The district court determined that the alleged unpaid royalties amounted to
$3,721,797, which is less than the jurisdictional minimum. But the district court also
held that, in cases involving payment of gas royalties, Oklahoma’s Production
Revenue Standards Act includes as actual damages 12% per annum interest on
amounts that are not timely paid. See Okla. Stat. Ann. tit. 52, § 570.10(D)(1). The
district court held that, under Oklahoma law, this “interest provision is part of the
total liability recovered and is compensatory in nature, thereby constituting a part of
the judgment, and is to be considered a part of the total liability recovered.” Jt. App.,
Vol. 1 at 63. Accordingly, the district court added $1,512,869 in interest to the
unpaid royalties to arrive at an amount in controversy of at least $5,234,666, which
satisfies CAFA’s jurisdictional threshold.
Our review is de novo. See Frederick v. Hartford Underwriters Ins. Co.,
683 F.3d 1242, 1245 (10th Cir. 2012). Although we “look to state law to determine
the nature and extent of the right to be enforced in a diversity case,” determining the
amount in controversy ultimately “is a federal question to be decided under federal
standards.” Horton v. Liberty Mut. Ins. Co., 367 U.S. 348, 352-53 (1961). “[O]ur
primary task in interpreting statutes [is] to determine congressional intent, using
traditional tools of statutory construction.” Woods v. Standard Ins. Co., 771 F.3d
1257, 1265 (10th Cir. 2014) (internal quotation marks omitted). “We begin our
analysis by examining the statute’s plain language and if the meaning of that
language is clear, our inquiry is at an end.” Id.
CAFA directs that the amount in controversy be calculated “exclusive of
interest and costs.” 28 U.S.C. § 1332(d)(2). The parties have not directed us to, nor
have we found, any CAFA cases construing this provision. But this is the same
phrase that long has appeared in the general diversity-jurisdiction provision,
28 U.S.C. § 1332(a). “The normal rule of statutory construction assumes that
identical words used in different parts of the same act are intended to have the same
meaning.” Sorenson v. Sec’y of Treasury, 475 U.S. 851, 860 (1986) (internal
quotation marks omitted); see also Nat’l Credit Union Admin. v. First Nat’l Bank &
Tr. Co., 522 U.S. 479, 501 (1998) (noting “the established canon of construction that
similar language contained within the same section of a statute must be accorded a
consistent meaning”). We therefore look to § 1332(a) cases for guidance.
This court’s most instructive precedent is State Farm Mutual Automobile
Insurance Co. v. Narvaez, 149 F.3d 1269, 1271 (10th Cir. 1998), in which the
plaintiff insurance company relied on § 1332(a) to establish jurisdiction over its
declaratory judgment action. Because the two insurance policies at issue had limits
totaling exactly $50,000, rather than exceeding $50,000 as required for jurisdiction,
the insurance company urged the court also to consider its claim that it did not owe
the interest that the insured claimed was due on unpaid uninsured motorist benefits.
See id. We rejected this suggestion, stating that “interest is not counted if it was an
incident arising solely by virtue of a delay in payment of the underlying amount in
controversy.” Id. (internal quotation marks omitted). “[I]f [the insurer] was
ultimately obligated to pay [the insured] the uninsured motorist benefits, the interest
on the unpaid policies would arise solely by virtue of [the insurer’s] delay in paying
the insurance claim. This is precisely the type of interest that § 1332 prohibits us
from considering.” Id.
Other circuits also have adopted the view that “‘[i]nterest’ for purposes of
§ 1332(a) is a sum that becomes due because of delay in payment,” Principal Mut.
Life Ins. Co. v. Juntunen, 838 F.2d 942, 943 (7th Cir. 1988) (per curiam) (citing
Velez v. Crown Life Ins. Co., 599 F.2d 471, 473-74 (1st Cir. 1979)), and leading
treatises agree, see 15 James Wm. Moore et al., Moore’s Federal Practice

- 5 -
§ 102-106[5][b] (3d ed. 2015) (“For purposes of calculating the jurisdictional
amount, a federal court may not look to any amount claimed as interest by the
plaintiff that is attributable solely to a delay in payment or to a wrongful deprivation
of funds.”); 14AA Charles Alan Wright et al., Federal Practice & Procedure § 3712
(2011) (“[I]nterest uniformly is excluded . . . if it is only incidental to the claim the
plaintiff is asserting or if it arises solely by virtue of a delay in the payment of an
obligation.” (footnote omitted)). As stated by the First Circuit:
When the statute requires that the amount in controversy “exceeds the sum * * * of $10,000, exclusive of interest and costs * * *” it makes no difference whether the interest which is sought accumulated upon the principal obligation sued upon because of contract, or by common law, or by statute, or whether the interest be termed a penalty or damages, so long as it is an incident arising solely by virtue of a delay in payment.
Regan v. Marshall, 309 F.2d 677, 678 (1st Cir. 1962) (alterations in original).
Under these authorities, the district court erred in holding that Oklahoma’s
statutory interest provision can be considered in determining the amount in
controversy in this suit. As in Narvaez, if Sheridan ultimately is obliged to pay
royalties to the class members, the interest obligation would arise solely by virtue of
its delay in paying those royalties. It makes no difference that the obligation arises
from an Oklahoma statute and may, under that statute, be termed damages. See
Regan, 309 F.2d at 678. As Narvaez succinctly states, “[t]his is precisely the type of
interest that § 1332 prohibits us from considering.” 149 F.3d at 1271.
Offering an alternative ground to affirm the district court’s denial of remand,
Sheridan argues that instead of adding the statutory interest, we may add reasonable

- 6 -
attorney’s fees to the unpaid royalties. Sheridan raised this argument before the
district court, but the district court did not reach the issue because it already had
determined that Sheridan satisfied the amount-in-controversy requirement. The
parties’ arguments indicate that this issue would benefit from being considered by the
district court in the first instance. See Woods, 771 F.3d at 1270 (remanding for the
district court to consider whether CAFA’s amount-in-controversy requirement was
met). We therefore decline to address Sheridan’s alternative ground for affirmance.

Outcome: The motion to seal Volume 2 of the joint appendix is granted. The judgment
of the district court is reversed and this matter is remanded for further proceedings, including a determination of whether any amounts other than interest under Oklahoma’s Production Revenue Standards Act may be added to the alleged unpaid royalties to satisfy CAFA’s amount-in-controversy requirement.

Plaintiff's Experts:

Defendant's Experts:

Comments: