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Parties Involved:
Alexander Energy Corporation
Appellee
Mobil Oil Corporation
Appellant
Presidio Exploration, Inc.
Not Party
The Roy Reed Trust Partnership
Not Party

Document Text:

FILL D 

TTnited State! Court of Appeahi UNITED STATES COURT OF APPEA'LS Tenth Circuit 

FOR THE TENTH CIRCUIT FEB 2 3 1993 

PRESIDIO EXPLORATION, INC., 

Plaintiff, 

v. 

ALEXANDER ENERGY CORPORATION, 

Defendant-Appellee, 

MOBIL OIL CORPORATION, 

Defendant-Appellant, 

and 

THE ROY REED TRUST PARTNERSHIP, 

Defendant. 

) 

) 

) 

) 

ROBERT L. HOECKER 

Clerk 

) Nos . 92-6117 

) & 

) 92-6118 

) (D.C . No. CIV-90-1582-R) 

) (W. D. Okla. ) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

ORDER AND JUDGMENT* 

Before TACHA and BALDOCK, Circuit Judges, and BROWN,** Senior 

District Judge. 

**Honorable Wesley E. Brown, Senior District Judge, United States 

District Court for the District of Kansas, sitting by designation. 

* This order and judgment has no precedential value and shall 

not be cited, or used by any court within the Tenth Circuit, 

except for purposes of establishing the doctrines of the law of 

the case, res judicata, or collateral estoppel . 10th Cir. R. 36 . 3 . 

Appellate Case: 92-6117 Document: 010110175858 Date Filed: 02/23/1993 Page: 1 
After examining the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

assist the determination of these appeals. See Fed. R. App. P. 

34(a); 10th Cir. R. 34.1.9. 

submitted without oral argument. 

The cases are therefore ordered 

Defendant Mobil Oil Corporation appeals from the district 

court's denial of its motion for judgment notwithstanding the 

verdict. Following a jury trial, judgment was entered in favor of 

plaintiff Alexander Energy Corporation on its fraud and 

misrepresentation claims. The district court also awarded costs. 

On appeal, Mobil maintains the district court erred in allowing 

the misrepresentation claims to go to the jury. The company also 

argues that Alexander's evidence on damages was insufficient and 

that the court erred in awarding costs. We affirm. 

The underlying litigation began when Presidio Exploration 

Company sued Mobil, Alexander, and the Roy Reed Trust Partnership 

seeking entitlement to a 12.5% working interest in the Myron No. 

18-1 oil well in Dewey County, Oklahoma. The day before the trial 

was scheduled to begin, all claims, except those which Alexander 

asserted against Mobil, were dropped . Only Alexander's claims are 

relevant in this appeal. At trial, Alexander was positioned as 

the plaintiff and Mobil as defendant. 

In 1988, Alexander initiated discussions with Roy Reed to 

obtain permission to drill the well now known as the Myron. 

Alexander had already determined that Mobil and Roy Reed owned the 

tract of land in question. Roy Reed informed Alexander that the 

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Appellate Case: 92-6117 Document: 010110175858 Date Filed: 02/23/1993 Page: 2 
tract was governed by a Joint Operating Agreement (JOA), which did 

not allow one interest holder to farrnout its ownership interest. 

To avoid a conflict, Alexander initiated discussions with Mobil's 

landrnan, Joyce Silver, concerning the proposed well. 

During their discussions, Silver showed Alexander 

representatives certain documents reflecting Mobil's position that 

the JOA was about to expire. Further negotiations followed . 

Eventually, Roy Reed agreed to farrnout its interest to Alexander. 

It did so, in part, because it believed the JOA was expired. On 

September 11, 1989, the Oklahoma Corporation Commission granted 

Alexander's forced pooling application, which had in it a 

statement that the JOA on the tract was no longer in effect. 

Once the pooling application was granted, Mobil had various 

options as an owner. It chose not to participate in the costs 

associated with the drilling, but kept a 6.5% production interest. 

This was substantially less than the 75% interest under the JOA, 

but relieved Mobil of any financial commitmenc to the explorati on 

and drilling. Under the pooling order, Alexander was solely 

responsible for drilling costs, which were substantial. 

Sometime in 1989, Mobil received additional requests for 

farrnouts on tracts which the "expired" JOA covered . These 

requests came from companies unrelated to Alexander. On 

February 13, 1990, Joyce Silver prepared a "lease check" 

evaluating these requests. That document contained an affirmative 

statement that the JOA was still in effect. The lease check 

stated, however, that part of the contract area was subject to the 

Alexander pooling order. It is undisputed that, according to 

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Appellate Case: 92-6117 Document: 010110175858 Date Filed: 02/23/1993 Page: 3 
industry custom and practice, JOA covered lands cannot be force 

pooled. 

Mobil's change in position on the status of the JOA put 

Alexander's interest in substantial jeopardy. The company was not 

aware, however, that Mobil represented to other oil companies that 

the JOA was in effect. In fact, although Silver was in contact 

with Alexander representatives after she drafted the lease check, 

she did not disclose the company's change in position. At this 

time, Alexander was already committed to a $400,000 financial 

expenditure and was scheduled to begin drilling the well in March 

of 1990. 

On April 5, 1990, Alexander representatives received a 

telephone call from Presidio Exploration. Presidio advised 

Alexander it was claiming an undivided 12.5% interest in the Myron 

production pursuant to the JOA. Because Presidio was a party to 

the JOA, but not a recorded leasehold interest owner, previous 

title checks did not reveal its existence. In subsequent phone 

conversations with Joyce Silver and Mobil in-house counsel, 

Alexander was reassured that Mobil had not changed its position 

with respect to the expiration of the JOA. The underlying 

litigation with Presidio ensued. 

In its complaint, Presidio alleged the JOA was still in 

effect. In its initial answer to that complaint, Mobil stated it 

had insufficient knowledge to admit or deny the allegation 

regarding the JOA. On December 31, 1990, however, Mobil filed an 

amended answer and cross claim alleging that the JOA was in 

effect. The cross claim alleged Alexander was a trespasser and 

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Appellate Case: 92-6117 Document: 010110175858 Date Filed: 02/23/1993 Page: 4 
that the pooling order was void. Mobil claimed an undivided 75% 

interest in the Myron production. 

In response, Alexander filed the misrepresentation claims 

which are at the heart of this appeal. Alexander alleged Mobil 

fraudulently induced it to complete drilling and fraudulently 

failed to disclose its change in position. The company argued 

Mobil did so because it did not want to pay drilling expenses. 

Alexander urged that Mobil changed its position once the drilling 

was complete because it wanted a greater share of production than 

the . pooling order allowed. At the time these pleadings were 

filed, the long term production prospects for the Myron were very 

good. 

As discovery proceeded, it became apparent that the Myron was 

not going to be a strong producer after all. As a consequence, 

Presidio and Mobil no longer had a great interest in owning it. 

On the day before trial, those companies dropped their claims. 

Only Alexander's claims remained . The jury was instructed on 

Alexander's fraud, constructive fraud, and negligence claims. It 

found in Alexander's favor and awarded $70,000 in actual damages 

and $70,000 in punitive damages. Mobil's motion for judgment 

notwithstanding the verdict was denied. This appeal followed. 

I . 

We review the district court's denial of the motion for 

judgment notwithstanding the verdict de novo. First Sec. Bank 

Beaver v. Taylor, 964 F.2d 1053, 1055 (10th Cir. 1992). 

of 

The 

judgment may be overturned "'only if the evidence points but one 

way and is susceptible to no reasonable inferences supporting 

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Appellate Case: 92-6117 Document: 010110175858 Date Filed: 02/23/1993 Page: 5 
[Alexander] . '" Ralston Dev. Co;r:p. v. United States. 937 F . 2d 510, 

512 (10th Cir. 1991) (quoting Zirrrrnerman v. First Fed. Sav. & Loan 

Ass'n, 848 F.2d 1047, 1051 (10th Cir. 1988)) . The standard is the 

same on a motion for directed verdict. Zirrrrnerman, 848 F.2d at 

1051. 

Mobil argues that because it made a misrepresentation of law, 

rather than fact, Alexander may not recover. In Oklahoma, a 

plaintiff cannot predicate a fraud claim on a misrepresentation of 

law because '"everyone is presumed to know the law, both civil and 

criminal, and is bound to take notice of it. Hence one has no 

right to rely on such representations or opinions and will not be 

permitted to say that he was misled by them.'" First Nat'l 

Bank & Trust Co. v. Muskogee Discount House, 382 P . 2d 137, 139 

(Okla . 1963) (quoting 23 Am. Jur. Fraud and Deceit § 45). Mobil 

maintains its alleged wrongful interpretation of the JOA was a 

legal error. 

Alexander's misrepresentation claim was premised on Mobil's 

wrongful change of position. Specifically, the misrepresentation 

alleged was the concealment of the change in position. It was 

not, as Mobil suggests, a claim based on misrepresentation 

concerning the written document alone. In particular, after 

Presidio asserted a claim to 

representatives sought specific 

the Myron production, Alexander 

assurances from Mobil that it 

would not change its position in light of the new circumstances. 

They later did. Mobil's effort to recast this misrepresentation 

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Appellate Case: 92-6117 Document: 010110175858 Date Filed: 02/23/1993 Page: 6 
as purely legal is unavailing. The district court did not err in 

denying the motion for judgment notwithstanding the verdict. 

II. 

Mobil also argues Alexander's evidence on damages was 

insufficient, as a matter of law, to support the jury verdict. In 

diversity cases such as this, we consider sufficiency of the 

evidence under federal law. 1 FDIC v. Palermo, 815 F.2d 1329, 1335 

(10th Cir. 1987). We may set aside the jury decision only if "the 

evidence is so patently in favor of the moving party that a jury 

verdict in favor of the opposing party would be improper. " 

Peterson v. Hager, 724 F.2d 851, 853-54 (10th Cir. 1984). In 

conducting the sufficiency inquiry, however, we use state law as a 

guide, where necessary, to review substantive claims. 

Palermo, 815 F.2d at 1335. 

Mobil maintains the damage award cannot stand because 

Alexander did not satisfy the prerequisites for establishing 

entitlement to attorney's fees under Oklahoma law. See Seate ex 

rel. Burk v. City of Okla. City. 598 P.2d 659, 663 (Okla . 

1979) (attorneys in Oklahoma must present detailed time records 

showing work performed). At trial, damage testimony came from two 

witnesses. Bob Alexander testified his company spent 

approximately $70,000 defending the Presidio lawsuit. Appellee's 

Supp. App. Ex. B at 149. Expert Wilson Busby testified 

1 Alexander maintains Mobil waived this argument through its 

failure to raise it in its motion for directed verdict at trial. 

We disagree. The record establishes Mobil argued that Mr. Busby's 

testimony was insufficient to substantiate the damage claims. See 

Appellee's Supp. App. Ex.Nat 230. 

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Appellate Case: 92-6117 Document: 010110175858 Date Filed: 02/23/1993 Page: 7 
extensively on the amount of damages incurred and the 

reasonableness of the fees submitted. See id. Ex. C at 170-77. 

Alexander did not, however, submit extensive documentation 

justifying the fees. 

This case is distinguishable from Burk and its progeny in one 

very important respect. Alexander is not seeking attorney's fees 

as the prevailing party to this action. Rather, the attorney's 

fees are part and parcel of the damages sustained. They represent 

monies Alexander had to expend as the result of Mobil's wrongful 

conduct. See Eureka Inv. Corp. v. Chicago Title Ins. Co . , 743 

F.2d 932, 943 (D.C. Cir. 1984); see also Wilshire Oil Co. v. 

Riffe, 409 F.2d 1277, 1284-85 (10th Cir. 1969) (reasonable 

compensation should be afforded where a party was involved in 

previous litigation due to wrongful conduct of defendant). 

In light of the posture of the damages issue, our only 

inquiry is under the standard enunciated above for determining 

whether the denial of judgment notwithstanding the verdicc wa~ 

correct. ~ee Ford Motor Credit Co . v . Milburn, 615 F.2d 892, 894 

(10th Cir. 1980) (jnov is appropriate only if there is no evidence 

or it is so conclusive in moving party's favor that jury verdict 

for opposing party must be set aside). We have reviewed the 

record and hold the evidence submitted at trial on the damages 

issue was sufficient to require submission to the jury. The 

jury's award was not speculative, nor was the evidence so lacking 

that a directed verdict was proper. Consequently, Mobil's 

challenge must fail. 

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III. 

Finally, Mobil argues the award of costs was improper because 

Alexander made no affirmative showing that the items claimed were 

expended solely in conjunction with its successful claims. We 

review the award under an abuse of discretion standard. U.S . 

Indus., Inc. v . Touche Ross & Co . , 854 F . 2d 1223, 1245 (10th Cir. 

1988) . After carefully reviewing the record, we hold the district 

court did not err. 

Consequently, the judgment of the United States District 

Court for the Western District of Oklahoma is AFFIRMED. 

Entered for the Court 

Deanell Reece Tacha 

Circuit Judge 

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