ONLINE OIL, INC. v. CO&G PRODUCTION GROUP, LLC
2018 OK CIV APP 1
| Okla. Civ. App. | 2017Background
- Dispute arose from an August 21, 2007 Contract for Sale of Lease Rights and Appointment of Operator for the Hill Top Redfork Sands Units in Tulsa County; Online Oil and Realty Developers (owned by Kris Agrawal) were the sellers and CO&G the purchaser/operator.
- CO&G assumed operations; Online and Realty Developers later challenged the sale, alleging the signer for Realty Developers lacked authority. CO&G counterclaimed and joined other Agrawal-related entities and Kris Agrawal.
- In May 2011 the district court granted partial summary judgment declaring CO&G the operator and establishing/foreclosing an operator's lien for unpaid operating expenses (initially $3,282,218.37) enforceable against any Agrawal interests in the Hill Top Units.
- Because multiple Agrawal parties repeatedly failed to comply with discovery and a pretrial order to produce unredacted emails, the court imposed sanctions and entered a December 5, 2013 Final Judgment for CO&G on multiple claims (including breach, fraud, and tortious interference) and awarded actual damages of $5,508,689.89 and punitive damages equal to that amount.
- Agrawal defendants moved for reconsideration/new trial; the motion was denied May 14, 2014. The Agrawal defendants appealed; appellate stay due to bankruptcy was later lifted and appeal proceeded.
- Court of Civil Appeals affirmed most rulings, modified actual damages on the tortious interference claim to $13,500, vacated the punitive damages awards (remanding for further proceedings on punitive damages), and affirmed/reviewed sanction-related rulings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether judgment by sanction was proper for failure to produce unredacted emails | CO&G: sanction valid; discovery orders required production and sanctions permissible | Agrawal: only Online and Realty were served with discovery; third-party defendants cannot be sanctioned | Held: Sanctions proper. Pretrial order compelled production from third-party Agrawal entities; failure to comply justified judgment as sanction. |
| Whether Agrawal defendants preserved meritorious defenses (ownership/authority to sell leases) | Agrawal: Gregory Williams lacked authority; merits warrant trial | CO&G: lien/right to enforce independent of contract ownership; partial summary judgment established operator status and lien | Held: Agrawal failed to preserve an issue that would defeat CO&G's lien; even if contract ownership succeeded, CO&G's lien remained enforceable. |
| Whether damages awarded on tortious interference were supported and properly measured | CO&G: awarded full operating losses as damages from interference | Agrawal: damages unsupported or excessive | Held: Modified. Actual damages for tortious interference limited to proven legal fees of $13,500 (the only interference-related loss shown); other operating-expense recovery rests on lien/contract theories. |
| Whether punitive damages (equal to actual damages) were supported by clear and convincing evidence and constitutional guideposts | CO&G: punitive award justified by fraud and tortious interference and sanctionable discovery misconduct | Agrawal: punitive award unsupported, excessive, and procedurally defective | Held: Vacated. Record lacks clear-and-convincing proof of recklessness/malice relating to underlying torts and insufficient consideration of statutory factors and Gore/constitutional guideposts; remand for further proceedings on punitive damages. |
Key Cases Cited
- Dismuke v. Cseh, 1992 OK 50, 830 P.2d 188 (trial-court findings reviewed for competent evidence)
- Payne v. DeWitt, 1999 OK 93, 995 P.2d 1088 (sanctions and requirement of meaningful inquiry into damages when entry results from discovery sanctions)
- Wilspec Techs., Inc. v. Dunan Holding Group Co. Ltd., 2009 OK 12, 204 P.3d 69 (punitive damages for tortious interference require clear-and-convincing proof of recklessness or malice)
- Barnett v. Simmons, 2008 OK 100, 197 P.3d 12 (trial court inherent authority and discovery sanctions)
- LeFlore v. Reflections of Tulsa, Inc., 1985 OK 72, 708 P.2d 1068 (punitive damages recoverable where breach amounts to independent tort involving malice)
- Cooper Indus., Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424 (requiring record consideration of punitive-damage factors for meaningful appellate review)
- State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408 (BMW/Gore guideposts govern punitive-damages constitutional review)
- BMW of N. Am., Inc. v. Gore, 517 U.S. 559 (guideposts for assessing punitive damages)
- Horizons, Inc. v. Keo Leasing Co., 1984 OK 24, 681 P.2d 757 (motion within 10 days treated as new-trial motion; limits issues on appeal)