631 S.W.3d 555
Ark.2021Background
- Plaintiffs are oil-and-gas royalty holders who receive monthly royalty payments based on the weighted average sales price (WASP) of gas delivered to an interstate pipeline.
- Defendants (lessees) allegedly deducted midstream (post‑production) costs from WASP, producing lower monthly royalty payments.
- Plaintiffs sued in federal district court for breach of contract, alleging recurring underpayments over more than five years.
- Defendants asserted the five‑year statute of limitations for written contracts barred recovery because the first alleged breach occurred more than five years before suit.
- The federal court certified the question whether under Arkansas law earlier underpayments outside the limitations period prevent recovery for underpayments within the period.
- The Arkansas Supreme Court held each monthly royalty underpayment gives rise to a separate breach and starts a new five‑year limitations period for that payment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the 5‑year statute of limitations bars claims for monthly royalty underpayments within the limitations period when an earlier underpayment occurred outside it | Each monthly underpayment is a separate breach; accrual and limitations run from each missed/underpaid monthly payment | The breach was a single failure that began with the first underpayment, so the claim is time‑barred if that first breach occurred >5 years before suit | Each monthly underpayment accrues its own cause of action; limitations runs from each payment date, so timely monthly claims survive |
Key Cases Cited
- Linke v. Kirk, 204 Ark. 393 (1942) (statute of limitations runs on each installment when due)
- Karnes v. Marrow, 315 Ark. 37 (1993) (installment obligations give rise to separate accruals for limitations)
- Dupree v. Twin City Bank, 300 Ark. 188 (1989) (cause of action accrues when plaintiff could first maintain action to a successful conclusion)
- Ray & Sons Masonry Contractors, Inc. v. U.S. Fid. & Guar. Co., 353 Ark. 201 (2003) (statute commences to run when right to commence action comes into existence)
- Lutz v. Chesapeake Appalachia, LLC, 717 F.3d 459 (6th Cir. 2013) (under Ohio law, each monthly royalty underpayment creates a separate cause of action)
- Lyle v. Jane Guinn Revocable Tr., 365 S.W.3d 341 (Tex. Ct. App. 2010) (periodic payments can give rise to a cause of action at the end of each period)
- Armstrong Petroleum Corp. v. Tri‑Valley Oil & Gas Co., 116 Cal. App. 4th 1375 (Cal. Ct. App. 2004) (monthly incorrect payments trigger accrual for that month)
