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Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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PUBLISH 

FILED 

UNITED 

Udecl States Court of Appeab STATES COURT OF APPEALS Tt:tth Circuit 

JAMES L. PARKS and JES OIL 

AND GAS CORPORATION, 

Plaintiffs-Appellees, 

v. 

AMERICAN WARRIOR, INC., 

Defendant-Appellant. 

TENTH CIRCUIT 

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JAN 0 4 1995 

PATRICK FISHER -- Clerk 

No. 93-6162 

ON APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE WESTERN DISTRICT OF OKLAHOMA 

(D.C. No. CIV-91-480-T) 

Submitted on the briefs: 

carl Michael Smith and G. Neal Rogers of Lawrence & Ellis, P.A. of 

Oklahoma city, OK, for the Defendant-Appellant. 

Eric s. Gray and Thomas P. Goresen of Gray, Goresen, Moriarty & 

Wright, Oklahoma City, OK, for Plaintiffs-Appellees. 

Before ANDERSON and BRORBY, Circuit Judges, and MECHEM, * Senior 

United states District Judge. 

MECHEM, Senior United States District Judge. 

* The Honorable Edwin L. Mechem, Senior United States District 

Judge for the District of New Mexico, sitting by designation. 

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After examining the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

assist in the determination of this appeal. See Fed. R. App. P. 

34(a); lOth Cir. R.34.1.9. The cause is therefore ordered 

submitted without oral argument. 

In this diversity case defendant appeals the district court's 

award of attorney's fees under state law. Defendant also 

challenges the court's refusal to reduce the fee award pursuant to 

an offer of judgment and in light of plaintiffs' agreement to share 

fees with a non-party. 

BACKGROUND 

Plaintiffs-appellees, James Parks and Jes Oil and Gas 

Corporation, brought suit for breach of contract and negligence 

against defendant-appellant American Warrior, Inc. (hereinafter 

"AWI") seeking compensatory and punitive damages for the permanent 

closure of a well in which each of the parties held a working 

interest. AWI appeals the district court's award of attorney's 

fees to plaintiffs under Oklahoma law. AWI also appeals the 

district court's refusal to decrease the fee award by one-third 

despite a cost-sharing agreement between plaintiffs and a non-party 

to the action, and the court's subsequent determination that AWl's 

offer of judgment did not defeat the damages award. Finally, 

defendant challenges the district court's acceptance of the 

parties' stipulation as to plaintiffs' reasonable attorney's fees. 

We affirm. 

Plaintiffs sought to recover damages for the injury caused by 

defendant's wrongful plugging of an oil well on theories of breach 

Appellate Case: 93-6162 Document: 01019290310 Date Filed: 01/04/1995 Page: 2 
of contract, breach of fiduciary duty and negligence. The District 

Court instructed the jury on the breach of contract and breach of 

fiduciary duty claims only. The court declined to instruct the 

jury that the cost of drilling a replacement well was a proper 

measure of damages, directing the jury instead to measure damages 

as the value of reserves lost to all the parties as a result of the 

plugging. After entry of judgment on a jury verdict for actual and 

punitive damages totaling $66,150, plaintiffs moved the Court for 

an award of attorney fees, expenses and costs under an Oklahoma 

statute which provides for the payment of fees and costs to the 

prevailing party in "any civil action to recover damages for the 

negligent or willful injury to property and any other incidental 

costs related to such action." 12 Okla. stat. 12, S 940(A). The 

fee application and Bill of Costs were consolidated for hearing 

before a United States Magistrate Judge. The Magistrate held the 

attorney fees were recoverable under state law, and further held 

that the fees were not subject to reduction for AWI's pretrial 

offer of judgment. Fed.R.Civ.P. 68. Nor were the fees subject to 

reduction because of a litigation agreement with a non-party. The 

Magistrate accepted a stipulation by the parties that $135,000 was 

a reasonable fee award, and $15,000 was a reasonable cost award. 

AWI objected to the Magistrate's report and recommendations. Upon 

de novo review, the district court affirmed the Magistrate's 

decision. 

The first issue presented is whether the wrongful plugging of 

an oil and gas well in which plaintiffs have a working interest 

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falls within the scope of the Oklahoma statute. If it does fall 

within the statute, the parties raise the additional issue of 

whether fees and costs can be awarded for a negligence claim which 

is raised in the pleadings but is not presented to the jury. 

We review a district court's award of attorney's fees for 

abuse of discretion. Supre v. Ricketts, 792 F.2d 958, 961 (lOth 

Cir. 1986). The district court's factual findings are only 

reversed if clearly erroneous. Id. Legal conclusions and 

statutory analysis are reviewed de novo. Mid-America Pipeline co. 

v. Lario Enterprises, Inc., 942 F.2d 1519, 1524 (lOth Cir. 1991). 

DISCUSSION 

The Oklahoma Supreme Court held that 12 o.s. supp. 1979 § 

940 (A) "contemplates only those actions for damages for the 

negligent or willful physical injury to property." Woods Petroleum 

corp. v. Delhi Gas Pipeline corp., 700 P.2d 1011, 1013 (Okla. 

1984). The statute does not apply to all property rights, but is 

strictly construed to apply to claims for physical injury to 

tangible property. Id.; see 872 P.2d 926 (not applicable to 

slander of title claim); Pelican Production Corp. v. Wishbone Oil 

& Gas, Inc., 746 P.2d 209 (Okla. ct. App. 1987) (not applicable in 

suit for conversion of hydrocarbons). However, the negligent 

destruction of an oil and gas well falls within the scope of § 

940 (A) . Marino v. Otis Engineering Corp., 839 F. 2d 1404, 1413 

(lOth Cir. 1988); Busby v. Canon Well Services, Inc., 771 P.2d 1016 

(Okla. ct. App. 1989). 

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The Marino court awarded fees to the prevailing party despite 

the fact that the plaintiff held only a property right to capture 

and produce oil and gas. Marino sued Otis alleging negligent 

manufacture and installation of a well packer. The packer had to 

be milled out of the well, thereby destroying the well. The jury 

found for the defendant, who then moved for an award of attorney's 

fees under 12 o.s. S 940(A) as the prevailing party in a suit 

seeking damages for negligent destruction of property. Marino, 839 

F.2d at 1412. Marino argued that his oil and gas lease was merely 

a property right, and his claim was necessarily limited to relief 

for damage to the property right. Id. We rejected that argument, 

stating that the "lease has been devalued, if at all, because of 

the physical damage caused to the lease properties in milling out 

the packer from the well itself." Id. We looked to the pleadings 

to find that Marino specifically claimed compensation for damage to 

the geological formations from which he could have produced oil and 

gas had the defendant not destroyed the well. Id. Plaintiffs in 

the case at bar are not precluded from an award of fees under the 

Oklahoma statute by the fact that they hold a working interest in 

the oil and gas lease. 

The Oklahoma court of appeals reached the same conclusion in 

Busby. Busby hired Canon to fracture his oil and gas well but the 

well was destroyed when Canon used the wrong chemical agent and 

emulsified the formation. Busby, 771 P.2d at 1016. Busby brought 

action in state court for breach of contract or in the alternative 

in negligence. Id. The jury found for the defendant and the court 

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awarded fees and costs. The question presented on appeal was 

whether -Busby's suit for destruction of the well fell within 12 

o.s. S 940(A). The state appellate court held that the fee award 

was proper because "the trial court was presented with actual 

injury to the property itself, and not the broader field of rights 

in property found to be outside the meaning of § 940 (A) ••.• " 

Busby, 771 P.2d at 1017. These cases suggest that a claim 

addressing the willful or negligent damage to tangible property 

falls within the statute even if none of the parties own the 

damaged property. 

Defendant next argues that the statute does not apply in this 

case because the trial court dismissed the negligence claim when it 

declined to give plaintiffs' proposed jury instruction on damages 

or any instruction on negligence. That issue is not controlling 

here. Defendant admits to deliberately plugging the well without 

notice or consent as required by contract. Section 940 goes to 

willful or negligent conduct. The Oklahoma Supreme Court construed 

"willful" in the context of § 940 as follows: 

[W]illful denotes an action proceeding from a conscious 

motion of the will. When the word is utilized in 

statutes involving turpitude, it generally means with 

evil purpose, criminal intent, or the like, but it is 

often used without that implication in statutes 

denouncing acts not in themselves wrong. In such cases 

the word denotes that which is intentional, knowing or 

voluntary as distinguished from accidental, and 

characterizes conduct marked by careless disregard, 

whether or not one has the right to act. 

scheaffer v. Scheaffer, 743 P.2d 1138, 1140 (Ok. 1987). (citations 

omitted) . This case arises from the intentional plugging of a well 

and falls within the scope of 12 o.s. S 940. 

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If attorney's fees are held to be proper under the statute, 

defendant asserts that the cost-sharing contract between plaintiffs 

and a non-party operates to decrease the defendant's liability to 

plaintiffs for damages and fees. The plaintiffs entered into an 

agreement with Trey on January 29, 1991, whereby Trey agreed to pay 

one-third of the cost of pursuing the claim against AWI, including 

attorney's fees. The plaintiffs authorized Trey to take all 

necessary steps to pursue their claims and agreed not to settle the 

claims against AWI without Trey's permission. In exchange, 

plaintiffs promised to give Trey 40 % of any recovery. 

The Magistrate found the agreement was champertous, but did 

not affect the duties of the defendant to the plaintiffs and could 

not be used in the action to decrease defendant's liability. The 

trial court adopted the Magistrate's findings. 

Champerty "is an officious intermeddling in a suit which in no 

way belongs to one, by maintaining or assisting either party with 

money or otherwise to prosecute or defend it." Mitchell v. Amerada 

Hess Corp., 638 P.2d 441, 444 (Okla. 1981). The contract between 

the plaintiffs and Trey is clearly champertous. However, as the 

Magistrate also noted, the existence of a champertous agreement 

between plaintiff and a third party does not affect the defendant's 

obligation to plaintiffs. ~ A defendant cannot cite a 

champertous agreement as a bar to claims of liability. Id. In 

this case, the champertous agreement does not relieve AWI of any 

liability to plaintiffs. 

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Next, defendant claims that, pursuant to 12 o.s. S 940(B), it 

is not liable for plaintiffs' attorney's fees in light of its offer 

of judgment for $125,000. Section 940(B) provides that when an 

offer of judgment exceeds the award obtained by the plaintiff at 

trial, plaintiff is not entitled to fees and costs. 12 o.s. S 

940 (B). However, where, as here, an offer includes fees and costs, 

the court will look at the combined total of the damages awarded 

and fees and costs to determine whether the total falls below the 

offer of judgment. carson v. Specialized Concrete, Inc., 801 P.2d 

691, 693 (Okla. 1990). Defendant argued that the offer exceeded 

the award when the cost-sharing agreement with Trey operates to 

decrease the damages, fees and costs by one-third. We decline to 

decrease the award, and the unmodified award exceeds the offer of 

judgment by approximately $91,000. Plaintiffs fee award is not 

defeated by 12 o.s. S 940(B). 

The last issue raised by defendant is whether the trial court 

erred in accepting a stipulation by both parties that plaintiffs' 

reasonable attorney's fees were $135,000 and reasonable costs were 

$15,000. On appeal AWI attacks its own stipulation, arguing that 

this lodestar amount should be reduced in light of the factors 

enumerated in Hensley v. Eckerbart, 461 u.s. 424 (1983). Defendant 

cites no law in support of this argument. The Oklahoma courts 

routinely award fees in the amount the parties stipulate is 

reasonable without further review. See Prince v. Brown, 856 P.2d 

589 (Okla. ct. App. 1993), cert. denied July 1993; Professional 

construction Consultants, Inc. v. state of Oklahoma, ex rel. 

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Grimes, 646 P.2d 1262 (Okla. 1982); Maupin v. Independent School 

District No. 26 of Ottawa County, 632 P.2d 396 (Okla. 1981). 

Absent special circumstances, a stipulation binds the parties who 

make it. Valleios v. c.E. Glass, co., 583 F.2d 507, 510 (10th Cir. 

1978). Having stipulated to the reasonableness of the dollar 

amounts, defendant has no grounds to challenge the amounts awarded 

by the district court. 

CONCLUSION 

Oklahoma law recognizes an oil and gas well as tangible 

property, and a well negligently capped falls within 12 o.s. S 

940(A). Plaintiffs are entitled to an award of attorney's fees and 

costs under state law. The award is not properly reduced as a 

result of a champertous agreement with a non-party. Defendant's 

offer of judgment is less than plaintiffs' judgment plus fees and 

costs and does not defeat the fee award. The district court 

properly accepted the parties stipulation of reasonable fees and 

costs without further analysis. 

The judgment of the district court is AFFIRMED. 

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