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631 S.W.3d 555
Ark.
2021
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Background

  • 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)
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Case Details

Case Name: Dan Larry Pennington; Norma J. Bryant; Aaron Parish Black, as Trustee of the Ralph J. and Reba J. Family Trust; And Aaron Parish Black, as Trustee of the Reba J. Parish Trust, Individually and on Behalf of a Class of Similarly Situated Individuals v. Bhp Billiton Petroleum (Fayetteville), LLC; And Mmgj Arkansas Upstream, LLC
Court Name: Supreme Court of Arkansas
Date Published: Oct 14, 2021
Citations: 631 S.W.3d 555; 2021 Ark. 179
Court Abbreviation: Ark.
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    Dan Larry Pennington; Norma J. Bryant; Aaron Parish Black, as Trustee of the Ralph J. and Reba J. Family Trust; And Aaron Parish Black, as Trustee of the Reba J. Parish Trust, Individually and on Behalf of a Class of Similarly Situated Individuals v. Bhp Billiton Petroleum (Fayetteville), LLC; And Mmgj Arkansas Upstream, LLC, 631 S.W.3d 555