Limitations of Action: Discovery Rule Pooling and Unitization: Duty of Operator to Royalty Owners Damages: Punitive Damages; Oklahoma

摘要

Owners are flue successors to a net profits interest reserved in a 1927 assignment of an oil and gas lease (the "Crews Lease")- Shell acquires the Crews Lease in 1948 and drills wells on the lease through the 1950s, paying a share of the net profits to Owners or their predecessors. In 1964, the Oklahoma Corporation Commission creates a waterflood unit (the "Brittain Sims Unit") for secondary recovery operations in the Sims Sand. The plan of unitization designates Shell as the unit operator. In 1970, the Commission creates the Brittain Deese Unit for secondary recovery by waterflood in the Deese Sands. The plan of unitization for this unit again designates Shell as operator. The plans for both of the Brittain Units include express wording recognizing that net profits interests would share in the proceeds from production. In 1972, the Commission enters an order establishing 80-acre normal drilling and spacing units for the development of oil from the Sycamore formation. In 1985, Shell sells its interest in the Crews Lease to Maynard Oil Company. Shell admits that it failed to pay Owners $750,708.00 in net profits from 1973 through 1985. Over $715,000.00 is attributable to the Brittain Deep No. 2 Well, and the remainder is attributable to the Brittain Deese Waterflood Unit Shell paid the net profits due from the Brittain Sims unit In 1995, Owners file suit against Shell and Maynard, seeking actual and punitive damages under theories of fraud and breach of statutory and quasi-fiduciary duties. Maynard settles with Owners and is dismissed from the litigation.