KRUG v. HELMERICH & PAYNE, INC., 362 P.3d 205

Background

Class action by royalty owners (Krug, Eubanks) against Helmerich & Payne (H&P) over uncompensated natural gas drainage from leased Beckham County wells (alleged January 1, 1982–December 31, 1989).
Jury awarded damages on alternative theories; this Court in Krug v. Helmerich & Payne, Inc. (2013) affirmed $3,650,000 for breach of the implied covenant, reversed other large awards, and instructed the trial court to reconsider costs, interest, and fees consistent with the opinion.
On remand the trial court found the Production Revenue Standards Act (the Act) inapplicable and denied prejudgment interest under 23 O.S. §6 because damages were unliquidated.
Plaintiffs appealed the denial of prejudgment interest; the Supreme Court of Oklahoma retained jurisdiction to decide three discrete questions: applicability of the law-of-the-case doctrine, applicability of the Act, and availability of prejudgment interest under 23 O.S. §6.
The Court held (1) law-of-the-case did not bar review (remand expressly required reconsideration), (2) the Act did not apply because H&P never produced/sold the drained gas or received production proceeds to trigger the Act, and (3) §6 does not permit prejudgment interest because damages for drainage were unliquidated and required jury factfinding.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether law-of-the-case bars reconsideration of prejudgment interest	Krug: remand in Krug 1 required trial court to re-evaluate prejudgment interest; issue may be revisited	H&P: prior 2008 interlocutory denial of prejudgment interest is settled and not subject to relitigation	Held: Law-of-the-case inapplicable—Court had expressly directed reconsideration on remand
Whether the Production Revenue Standards Act applies to ANR settlement proceeds	Krug: settlement proceeds from ANR are "royalty proceeds" under the Act, so prejudgment interest should accrue	H&P: Act covers proceeds from actual production/sale, not recovery for uncompensated drainage; jury award is not "royalty proceeds"	Held: Act inapplicable because H&P never produced or sold the gas; no statutory royalty proceeds existed to trigger the Act
Whether prejudgment interest is recoverable under 23 O.S. §6 for drainage damages	Krug: alternatively entitled to prejudgment interest under §6 if Act doesn't apply	H&P: §6 requires damages to be certain or capable of calculation; drainage damages were unliquidated	Held: §6 does not permit prejudgment interest because damages were unliquidated and required jury estimation
Whether court may award prejudgment interest notwithstanding statutory limits	Krug: court should award to achieve full compensation	H&P: court cannot judicially create interest absent statutory basis	Held: No judicial creation of prejudgment interest; recovery must be statutorily authorized and here is not available

Key Cases Cited

Krug v. Helmerich & Payne, Inc., 320 P.3d 1012 (Okla. 2013) (prior appeal that affirmed breach-of-covenant award and remanded for reconsideration of interest/costs/fees)
Seal v. Corporation Com'n, 725 P.2d 278 (Okla. 1986) (describing legislative purpose of the Production Revenue Standards Act)
Hull v. Sun Refining & Mktg. Co., 789 P.2d 1272 (Okla. 1989) (explaining Act's purpose to avoid suspended payments and treating prejudgment interest as part of contractual remedy)
Goodall v. Trigg Drilling Co., Inc., 944 P.2d 292 (Okla. 1997) (operator's duty to hold proceeds for royalty owners and liability for failing to pay)
Roye Realty & Dev., Inc. v. Watson, 2 P.3d 320 (Okla. 1996) (discussion of terms "produced", "sold", and entitlement to royalty on production sold off premises)
Withrow v. Red Eagle Oil Co., 755 P.2d 622 (Okla. 1988) (clarifying §6 liquidated-vs-unliquidated rule for prejudgment interest)
Purcell v. Sante Fe Minerals, Inc., 961 P.2d 188 (Okla. 1998) (treating prejudgment interest under the Act and its remedial purpose)