KRUG v. HELMERICH & PAYNE, INC.
2015 OK 74
Okla.2015Background
- Class action by royalty owners (Krug and Eubanks) against Helmerich & Payne (H&P) for uncompensated natural gas drainage from leased Beckham County wells (alleged 1982–1989).
- Jury originally awarded multiple awards totaling large sums; this Court in Krug I affirmed $3,650,000 for breach of the implied covenant to prevent drainage, reversed other awards, and remanded for recalculation of costs, interest, and fees.
- On remand the trial court denied prejudgment interest, held the Production Revenue Standards Act (PRSA) inapplicable, and concluded the damages were unliquidated so 23 O.S. §6 did not permit prejudgment interest.
- Plaintiffs appealed the denial of prejudgment interest; this appeal addresses (1) whether settled-law-of-the-case bars reconsideration, (2) applicability of the PRSA to the ANR settlement proceeds, and (3) whether prejudgment interest is available under 23 O.S. §6.
- The Supreme Court of Oklahoma affirmed: law-of-the-case did not bar review; PRSA inapplicable because H&P never produced/sold the gas; prejudgment interest under §6 not available because damages were unliquidated and required jury factfinding.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether settled-law-of-the-case precludes reviewing prejudgment interest on remand | Krug: appellate remand expressly directed trial court to reconsider prejudgment interest, so issue may be revisited | H&P: trial court previously denied prejudgment interest in 2008; that ruling should stand | Court: law-of-the-case does not preclude review here; remand instructions permit reconsideration |
| Whether PRSA (52 O.S. §570 et seq.) applies to settlement proceeds H&P received from ANR and whether PRSA interest is owed | Krug: settlement proceeds are attributable to production and thus fall within PRSA’s definition of "royalty proceeds" and trigger prejudgment interest | H&P: PRSA applies to proceeds from production actually sold/paid; drainage recovery is not "production" or sale so PRSA does not apply | Court: PRSA inapplicable because H&P never extracted/sold the gas; proceeds from drainage settlement are not "royalty proceeds" under the statute |
| Whether prejudgment interest is recoverable under 23 O.S. §6 | Krug: alternatively entitled to prejudgment interest under §6 even if PRSA inapplicable | H&P: damages were unliquidated and required jury determination, so §6 does not allow prejudgment interest | Court: §6 permits prejudgment interest only for liquidated or readily calculable claims; these drainage damages were unliquidated, so no §6 interest |
| (Procedural) Whether court may award prejudgment interest absent statutory authorization | Krug: equitable need for full compensation warrants interest | H&P: prejudgment interest must be statute-based, not judicially created | Court: prejudgment interest must be statutorily authorized; court will not create an allowance where Legislature did not provide it |
Key Cases Cited
- Krug v. Helmerich & Payne, Inc., 320 P.3d 1012 (Okla. 2013) (prior appeal affirming breach award and remanding for reconsideration of interest, costs, fees)
- Seal v. Corporation Comm’n, 725 P.2d 278 (Okla. 1986) (discussing PRSA purpose to protect royalty owners and correlative rights)
- Hull v. Sun Refining & Marketing Co., 789 P.2d 1272 (Okla. 1989) (purpose of PRSA includes avoiding needless litigation and allowing prejudgment interest as part of contractual remedies)
- Goodall v. Trigg Drilling Co., Inc., 944 P.2d 292 (Okla. 1997) (operator’s duty to hold and pay proceeds for benefit of royalty owners)
- Roye Realty & Dev., Inc. v. Watson, 2 P.3d 320 (Okla. 1996) (discussion of "produced" and "sold" in lease contexts)
- Withrow v. Red Eagle Oil Co., 755 P.2d 622 (Okla. 1988) (prejudgment interest principles; §6 governing rule)
- Fleet v. Sanguine, Ltd., 854 P.2d 892 (Okla. 1993) (characterizing PRSA interest historically and its role in enforcing timely payment)