Plaintiffs Box Elder Kids, LLC filed a class action lawsuit against Defendants Anadarko Petroleum Corporation, Anadarko E & P Onshore, LLC, and other associated entities alleging a breach of Surface Owner Agreements (SOAs). These agreements obligated Anadarko, as successor to Union Pacific Land Resources Company, to pay a percentage of the value from oil, gas, and other hydrocarbons extracted from lands in Colorado, Wyoming, and Utah, which were previously owned by Union Pacific, to the Plaintiffs.
The Plaintiffs owned the surface land where these hydrocarbons were extracted. The complaint sought recovery of these payments, referred to as the “Surface Owner Payment.” Additionally, the Plaintiffs claim unjust enrichment and allege fraud, deceit, and constructive fraud against Anadarko and its affiliates.
Section 2 of the Shaklee SOA contains the following payment provision, which gives the surface owner a contractual right to cash payments based on the value of oil and gas produced from or allocated to the lands covered by the SOAs:
[Anadarko] agrees, so long as it is receiving oil and/or gas production from or oil and/or gas royalties upon production from the described premises or allocated thereto under the provisions of a unitization agreement, to pay or cause to be paid to the Landowner in cash the value (which shall never be greater than the amount realized by [Anadarko] from the sale of such production) on the premises of two and one-half percent (2-1/2%) of all the oil and gas and associated liquid hydrocarbons hereafter produced, saved, and marketed therefrom or allocated thereto as aforesaid, . . .
This breach of contract dispute centers around the meaning of ambiguous terms in Section 2 of the parties’ SOAs. The Court considered Plaintiffs’ motion to generally disqualify Defendants’ expert witness, Jamie Jost, and to prevent her from testifying as to various opinions contained her report.
Environmental Expert Witness
Jamie Jost is known for her dedication and passion to the Rocky Mountain Region’s environmental and economic sustainability in legal, land use and oil and gas development matters. She is the founder and managing shareholder of Jost Energy Law, P.C., a 100% female owned and operated firm specializing in natural resources and land use law.
Discussion by the Court
According to Jost, “When Anadarko’s predecessors and Plaintiffs’ predecessors entered into the SOAs, the parties stated their intent that the described premises may be used for oil and gas development. Section 2 of the SOAs obligates Anadarko to pay Plaintiffs 2.5% of the value of the oil and gas produced from, or allocated to pursuant to a unitization agreement, the surface owner’s described premises subject to the SOA. The SOAs do not require Anadarko to pay more than 2.5% of the value of the oil and gas allocated to the described premises under a unitization agreement. Oil and gas industry terms, custom, and practice support Anadarko’s payment of 2.5% of the value of the oil and gas allocated to the SOA described premises under a unitization agreement.”
Plaintiffs asked the Court to exclude Jost’s opinions pertaining to (1) the “reasonable” interpretation of the original contracting parties’ intent; (2) oil and gas industry custom; and (3) what the “correct” interpretation of the contract is.
Section 2 of the Surface Owner Agreement
Jost’s opinions asserting what Section 2 of the SOAs obligates Defendants to pay, and by what methodology, pertain to the dispositive issue the trier of fact must decide in this case. The Court held that those opinions, which are effectively tantamount to contract interpretation, are inadmissible and will not be permitted.
Plaintiffs also objected to any opinions offered by Jost that discuss whether Defendants’ interpretation of Section 2 is supported by oil and gas industry custom. In support, they argued that such evidence is inadmissible parol evidence because, “where one party to the agreement is not familiar with the industry, like the original contracting surface landowners here, evidence of industry custom is not helpful to the trier of fact for determining the parties’ intent.”
According to the Court, “there appears to be disputed evidence as to whether the original parties had experience dealing in oil and gas contracts.” Whether evidence of industry standards and customs is relevant cannot be determined until the jury decides this threshold fact question. Until then, Jost will be permitted to opine on whether industry standards and customs support Defendants’ interpretation of Section 2’s ambiguous terms.
What remained in Plaintiffs’ motion challenging Jost are various arguments pertaining to whether her opinions are supported and consistent with language in the SOAs and their competing interpretation of the relevant parol evidence. The Court concluded, however, that such evidence bears on the weight of such evidence, not its admissibility.
Held
In sum, the Court will not altogether exclude Jamie Jost’s opinions regarding the ambiguous provisions of Section 2, but it will exclude those opinions that amount to contract interpretation.
Key Takeaways:
Jost’s opinions asserting what Section 2 of the SOAs obligates Defendants to pay, and by what methodology, pertain to the dispositive issue the trier of fact must decide in this case. An opinion is not objectionable just because it embraces an ultimate issue. Nevertheless, an expert witness’s testimony may not usurp the jury’s fact-finding function.
Please refer to the blog previously published about this case:
Environmental History Expert Witness’ Testimony About the Original Parties’ Motivations Admitted
Case Details:
| Case Caption: | Box Elder Kids, Llc Et Al V. Anadarko E & P Onshore, Llc Et Al |
| Docket Number: | 1:20cv2352 |
| Court: | United States District Court for the District of Colorado |
| Order Date: | August 27, 2024 |
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