Abraham v. WPX Energy Production, LLC
20 F. Supp. 3d 1244
| D.N.M. | 2014Background
- Plaintiffs (royalty and overriding-royalty owners) allege systemic underpayment of royalties from gas produced in the San Juan Basin after NGLs were extracted and marketed by Williams entities. Plaintiffs have contracts with WPX Energy (the producer), not with Williams Four Corners, LLC (WFC) or Williams Energy Resources, LLC (WER).
- WPX (producer) contracted with WFC (midstream processor) to gather/process gas and with WER to market/sell NGLs; Plaintiffs allege WFC/WER retained value of NGLs and caused royalty underpayments.
- Plaintiffs assert breach-of-contract claims against WPX and unjust enrichment claims against WFC and WER as alternative relief.
- WFC/WER moved to dismiss unjust enrichment counts under Rule 12(b)(6), arguing (1) Plaintiffs have an adequate legal remedy (breach of contract against WPX), (2) relationships are too attenuated for quasi-contract, and (3) unjust enrichment elements not pled.
- Court considered whether New Mexico or Colorado law applies (some wells/processing in both states) and whether an unjust enrichment claim can proceed against a third party when a contract governs the same subject with a different party.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Choice of law / actual conflict between NM and CO unjust-enrichment law | Apply New Mexico law (plaintiffs argued NM law supports their claim) | No material conflict; if there is, apply choice-of-law rules | No actual conflict as applied — results same under NM and CO; court applies New Mexico law |
| Can plaintiffs assert unjust enrichment against WFC/WER when they have a breach-of-contract claim against WPX? | Yes — unjust enrichment is available against third parties when plaintiff has no contract with them and equitable relief may be needed; Elliott Indus. is distinguishable because parties there were in privity | No — quasi-contract is barred where an express contract governs the disputed subject; plaintiffs have an adequate legal remedy against WPX | Dismissed unjust enrichment: New Mexico law (as interpreted through Tenth Circuit precedent) disfavors unjust-enrichment relief where plaintiff has a viable contract remedy against another party unless contract remedy is unavailable |
| Adequacy of remedy at law — must plaintiffs show contract remedy is unavailable (e.g., bankruptcy) before pursuing unjust enrichment? | Not required at pleading stage; alternative equitable claims may proceed and double recovery can be avoided later | Yes — unjust enrichment should be limited to cases where contract remedy is inadequate or unenforceable (Ontiveros, Danley analogies) | Court requires plaintiffs to allege why the contract remedy is not viable; plaintiffs made no such allegations, so claim fails |
| Attenuation / relationship requirement for unjust enrichment | WFC/WER actively processed/marketed NGLs and knowingly retained proceeds; their role is proximate, so claim is plausible | Relationship too attenuated; allowing claim risks unlimited suits down the supply chain and would impose burdens probing contractual chains | Court rejects imposing a new close-relationship element under New Mexico law; but finds plaintiffs still fail because of viable contract remedy against WPX and lack of alleged inadequacy of that remedy |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must state plausible claim to survive Rule 12(b)(6))
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (conclusory allegations insufficient to state a plausible claim)
- Elliott Indus. LP v. BP Am. Prod. Co., 407 F.3d 1091 (10th Cir. 2005) (under New Mexico law, quasi-contractual remedies are disfavored where enforceable express contract regulates the disputed issue)
- Allstate Ins. Co. v. Hague, 449 U.S. 302 (1981) (constitutional limits on forum selection of law require significant contacts)
- Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985) (forum may not apply its law to claims lacking significant contacts; consider actual conflict among state laws)
- Salzman v. Bachrach, 996 P.2d 1263 (Colo. 2000) (elements and scope of unjust enrichment under Colorado law)
Decision: Motion to dismiss granted; Plaintiffs’ unjust enrichment claim against Williams Four Corners, LLC and Williams Energy Resources, LLC is dismissed.