PUBLISH

__________

UNITED STATES COURT OF APPEALS

Filed 6/18/96

TENTH CIRCUIT

In re: MERIDIAN RESERVE, INC., )

 )

Debtor. )

________________________________ )

 )

OCTAGON RESOURCES, INC., successor )

in interest by merger to Octagon Gas ) 

Systems, Inc., )

 )

Appellant, )

 ) No. 95-6239

v. )

 )

BONNETT RESOURCES )

 CORPORATION, )

 )

Appellee, )

_________________________________ )

 )

ROY T. RIMMER, )

 )

Intervenor-Appellee. )

__________________________________________________

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF OKLAHOMA

(D.C. No. CIV-95-506-W)

___________________________________________________

D. Kent Meyers (Harvey D. Ellis, Jr., with him on the briefs), Crowe & Dunlevy,

Oklahoma City, Oklahoma, for Appellant. 
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Kenneth L. Jones, Jr., Jones & Blaney, Oklahoma City, Oklahoma, for Appellee.

Robert S. Ballentine (H. Rey Stroube III, Charles A. Moore, and Betty C. Bradley, Akin,

Gump, Strauss, Hauer & Feld with him on the briefs), Houston, Texas, for IntervenorAppellee.

______________________________________________

Before PORFILIO, BRORBY, and EBEL, Circuit Judges.

_______________________________________________

PORFILIO, Circuit Judge.

________________________________________________
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This appeal represents the second time an aspect of this bankruptcy case has been

before us. The present controversy concerns an attempt by Octagon Resources Inc., as

the prevailing party, as defined by Okla. Stat. Ann. tit. 12, § 936 (West 1996), to gain its

attorney fees from Roy T. Rimmer and Bonnet Resources Corporation. The bankruptcy

court denied Octagon’s motion, and the district court affirmed. Octagon now appeals. 

We affirm.

An understanding of the basic facts of the substantive controversy between the

parties is necessary to resolving this appeal. Poll Gas, Inc. (not a party here) owned and

operated a natural gas gathering system. After a series of complicated transactions, Mr.

Rimmer received, “a full Five Percent (5%) perpetual overriding royalty interest on all

proceeds payable to [Poll] under the [system] ....” Octagon Gas Sys., Inc. v. Rimmer,

995 F.2d 948, 952 (10th Cir.), cert. denied, 114 S.Ct. 554 (1993) (alterations in original)

(Rimmer I). Poll Gas, Inc. filed for Chapter 11 bankruptcy protection in 1988, and in

January 1990, the bankruptcy court approved the trustee’s reorganization plan. Pursuant

to the plan, Poll’s natural gas gathering system was conveyed to Norwest Bank Minnesota

to satisfy the Bank’s secured claim. Norwest received the Poll system “free and clear of

liens, claims, interests, and encumbrances,” id., and conveyed the system to Octagon who

refused to recognize Mr. Rimmer’s interest in the system or pay him any royalties. As a

result, Bonnett Resources, a secured creditor of Mr. Rimmer asserting a claim in Mr.
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Rimmer’s interest in the Poll system, filed a declaratory judgment action in the

bankruptcy court to determine Mr. Rimmer’s interest. Mr. Rimmer intervened. The

bankruptcy court held Mr. Rimmer maintained his five percent interest in the proceeds of

natural gas sold through the Poll system unaffected by the reorganization plan or the

transfer to Octagon Resources. Id.

On appeal, we reversed that judgment. First, applying Oklahoma law, we

concluded Mr. Rimmer had an enforceable interest in the Poll system natural gas sale

proceeds by virtue of the various agreements. Id. at 952-54. Second, we determined Mr.

Rimmer’s interest was an “account” within the meaning of Article 9 of the Uniform

Commercial Code as adopted by Oklahoma. Id. at 954-55; see generally Okla. Stat. Ann.

tit. 12A, § 9-101 (West 1996) (codifying Article 9 of the U.C.C.). Pursuant to Article 9,

“the buyer of an account is treated as a secured party, his interest in the account is treated

as a security interest, the seller of the account is a debtor, and the account sold is treated

as collateral.” Rimmer I, 995 F.2d at 955. Third, we decided Poll’s Chapter 11

reorganization plan did not alter the application of Article 9 to Mr. Rimmer’s account. Id.

at 955-57. Finally, we remanded the case to the bankruptcy court with directions to

“readdress, in light of Article 9, the central issue of whether the reorganization plan

effectuated a transfer of Rimmer’s interest to Octagon, or whether Rimmer’s interest

survives the Plan.” Id. at 957.
1The statute here reads “to,” but a footnote in the annotated code indicates “to” should

instead read “of.” We have altered the statute to conform with this correction. 

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On remand, the bankruptcy court concluded Mr. Rimmer did not perfect his

security interest in the account. In Re: Meridian Reserve, Inc., No. 90-0131-BH, slip op.

at 8 (Bankr. W.D. Okla. Oct. 7, 1994). The court further held the exception contained in

Okla. Stat. Ann. tit. 12A, § 9-302(1) (West 1996) did not apply to the requirement of

filing a financing statement. Id. at 18. Therefore, the underlying substantive controversy

was resolved in favor of Octagon. 

After the bankruptcy court’s judgment was entered, Octagon filed a motion for an

award of attorney fees, as provided in Okla. Stat. Ann. tit. 12, § 936, in an amount

exceeding $460,000. That statute provides: 

In any civil action to recover on an open account, a statement of

account, account stated, note, bill, negotiable instrument, or contract

relating to the purchase or sale of goods, wares, or merchandise, or for labor

or services, unless otherwise provided by law or the contract which is the

subject [of]1 the action, the prevailing party shall be allowed a reasonable

attorney fee to be set by the court, to be taxed and collected as costs.

In ruling upon the motion, the bankruptcy court determined Oklahoma law applied

to the issue of whether attorney fees were appropriate because state law provided the rule

of decision in the underlying bankruptcy proceeding. That conclusion is not contested

here. The bankruptcy court further concluded the instant proceeding fell outside the

scope of the Oklahoma statute, reasoning the court was required to look to the “substance

of the complaint” filed by Bonnett. That substance, the court found, was “whether
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Rimmer’s interest passed to the buyer [Octagon].” In Re: Meridian Reserve, Inc., No.

90-0131-BH, slip op. at 4-5 (Bankr. W.D. Okla. Feb. 28, 1995). Further, the court

characterized Bonnett’s request for back payments from Octagon as “[c]ollaterally related

to the [substantive] issue.” Id. Finally, the court believed Oklahoma law dictated this

interpretation, stating: 

Viewed under the strict interpretation mandated by the Oklahoma Supreme

Court, the instant proceeding simply does not fall within the class of cases

contemplated by the statute. See, e.g., Kay v. Venezuelan Sun Oil Co., 806

P.2d 648 (Okla. 1991). In Oklahoma, the term “[o]pen account is defined

as an unsettled debt arising from items of work and labor, goods sold and

delivered, and other open transactions not reduced to writing and subject to

future settlement and adjustment. Nicholson v. Thixton, 448 P.2d 454, 455

(Okla. 1968). Oklahoma Oil & Gas Exploration Drilling Program, 877

P.2d 605, 611 n.8 (Okl. App. 1994). Here, the contract is in writing, the

debt is settled at 5% of the specified sales and is not subject to future

settlement and adjustment. 

Id. The court found further support for this view in Paramount Pictures Corp. v.

Thompson Theatres, Inc., 621 F.2d 1088, 1092 (10th Cir. 1980) (“An express contract,

which defines the duties and liabilities of the parties, whether it be oral or written, is not,

as a rule, an open account.”), and in Bickford v. John E. Mitchell Co., 595 F.2d 540, 545

(10th Cir. 1979) (The plaintiff’s “claims of alleged deficiencies in the payment of

royalties and alleged failure to reconvey patent and trademark rights” fall outside the

purview of § 936.). Therefore, the court concluded, “[t]his contract, thus, does not

constitute an account with the meaning of these interpretations, nor is it a suit on a

contract within the contemplation of the statute. It also does not fall within any of the
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other causes of action stated in the statute.” Id. at 5. The district court affirmed the

bankruptcy court’s ruling, reasoning in relevant part:

Giving this statute a strict interpretation as it is required to do, the

Court finds the subject of this lawsuit was not a contract relating to the

purchase or sale of goods. Rather, as stated, the issues concerned the nature

of Rimmer’s interest and whether such interest was property of Poll’s

bankruptcy estate.

In Re: Meridian Reserve, Inc., No. Civ-95-506-W, slip op. at 2 (W.D. Okla. June 20,

1995).

On appeal, Octagon raises the single issue of whether Okla. Stat. Ann. tit. 12, §

936 applies under the circumstances of this case. Octagon argues Bonnett Resources and

Mr. Rimmer’s action is on a contract to recover a percentage of the proceeds from

Octagon’s sale of goods to third parties and, therefore, is an action on a “contract relating

to the purchase or sale of goods” within the meaning of the statute. Octagon contends

both the bankruptcy court and the district court erred in concluding otherwise. 

We review the denial of an attorney fees award for an abuse of discretion. Mann

v. Reynolds, 46 F.3d 1055, 1062 (10th Cir. 1995); Sheets v. Salt Lake County, 45 F.3d

1383, 1391 (10th Cir.), cert. denied, 116 S.Ct. 74 (1995). However, any statutory

interpretation or other legal analysis underlying the district court’s decision concerning

attorney fees is reviewed de novo, Daleske v. Fairfield Communities, Inc., 17 F.3d 321,

323 (10th Cir.), cert. denied, 114 S.Ct. 1832 (1994), and any supporting findings of fact

are reviewed for clear error. Mann, 46 F.3d at 1062; Homeward Bound, Inc. v. Hissom
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Memorial Ctr., 963 F.2d 1352, 1355 (10th Cir. 1992). See also Akrla Energy Resources

v. Roye Realty & Developing, Inc., 9 F.3d 855, 865 (10th Cir. 1993) (“We review the

meaning of ‘prevailing party’ under Oklahoma law de novo.”).

Octagon raises a threshold question of whether the earlier decision of this court

represents the law of the case on certain dispositive issues. “The law of the case is a

judicial doctrine designed to promote decisional finality. Once a court decides an issue,

the doctrine comes into play to prevent the re-litigation of that issue in subsequent

proceedings in the same case.” Pittsburgh & Midway Coal Mining Co. v. Watchman, 52

F.3d 1531, 1536 n.4 (10th Cir. 1995). “The doctrine applies to issues previously decided,

either explicitly or by necessary implication.” Guidry v. Sheet Metal Workers Int’l

Ass’n, 10 F.3d 700, 705 (10th Cir. 1993), reh’g on other grounds, 39 F.3d 1078 (10th Cir.

1994) (en banc), cert. denied, 115 S.Ct. 1691 (1995) (citation omitted). In Guidry, the

court identified three potential reasons for concluding an issue had been implicitly

decided previously. “(1) resolution of the issue was a necessary step in resolving the

earlier appeal; (2) resolution of the issue would abrogate the prior decision and so must

have been considered in the prior appeal; and (3) the issue is so closely related to the

earlier appeal its resolution involves no additional consideration and so might have been

resolved but unstated.” Id. at 707 (footnote omitted). These factors were not intended to

be exhaustive. Id. at 707 n.5. In addition, this court has also recently joined “the majority

of our sister circuits in holding that dicta is not subject to the law of the case doctrine.” 
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United States v. Rice, 1996 WL 44452, at *4 (10th Cir. Feb. 5, 1996) (unpublished

disposition), petition for cert. filed, ___ U.S.L.W. ___ (U.S. May 6, 1996) (No. 95-

8943).

Applying these rules to the instant case, we conclude the law of the case doctrine is

inapplicable here. Our previous description of Mr. Rimmer’s “interest in the Poll System

gas sales proceeds” was made in two different contexts. First, in reciting the facts, we

described Mr. Rimmer’s interest as five percent of the proceeds from the sale of natural

gas through Poll’s system. Rimmer I, 995 F.2d at 951-52. Second, the court similarly

characterized Mr. Rimmer’s interest when responding to Octagon’s argument Mr.

Rimmer had no enforceable contractual interest. Id. at 952-53. Our prior characterization

was not made while applying the Oklahoma attorney fee statute; therefore, the difference

in context is crucial because the considerations involved in determining the applicability

of the attorney fees statute differ from either circumstance described in the prior decision. 

The terminology has a specific meaning in the Oklahoma attorney fee statute, but our

discussion labeling Mr. Rimmer’s interest was general in nature. At most, our description

of Mr. Rimmer’s interest can properly be characterized either as not resolving the

particular issue raised in this second appeal, or as dictum. Under either circumstance, the

law of the case doctrine does not drive our resolution of this appeal.

Octagon challenges the bankruptcy and district courts’ determination the language

of Okla. Stat. Ann. tit. 12, § 936 must be strictly construed. Octagon advances an
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argument based on a purported distinction between the Oklahoma courts’ interpretation of

the “labor or services” clause of the statute in comparison to the “goods, wares, or

merchandise” clause. According to Octagon, the Oklahoma courts strictly construe the

“labor or services” clause by requiring the contract to be for labor or services, but broadly

interpret the “goods, wares, or merchandise” clause by giving full effect to the statutory

language “related to.” Octagon is correct that Oklahoma case law may have previously

drawn a distinction in interpreting these two clauses of § 936. However, the distinction is

not as significant or dispositive as Octagon argues.

Oklahoma, like most states, follows the American Rule that each party is

responsible for its own litigation costs and expenses including attorney fees. See

generally Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 247 (1975)

(holding American Rule governed absent specific statutory authorization for awarding

attorney fees to prevailing party); Kay v. Venezuelan Sun Oil Co., 806 P.2d 648, 650

(Okla. 1991) (“The American Rule is firmly established in this jurisdiction.”). Oklahoma

courts are without the authority to award attorney fees absent a specific statute or

contractual term. In this case, Octagon maintains the necessary authority is provided by

§ 936. 

There is no overarching organizing principle to determine when an attorney fees

award is appropriate under the statute, however. Awarding attorney fees depends on the

totality of the circumstances involved in each particular case. With that caveat in mind,
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we believe the distinction between the two clauses Octagon draws is not supported by

Oklahoma precedent. 

In 1970, the Oklahoma legislature amended this statute to include the “labor or

services” clause. Five years later, in Russell v. Flanagan, 544 P.2d 510 (Okla. 1975), the

Oklahoma Supreme Court considered the scope of the new clause, offering a strict

interpretation of the statute. In that case, the plaintiff had brought a small claims action

for a breach of warranty on a labor contract for servicing a sewer line. Id. at 511. The

court held the action only collaterally concerned labor and services making an attorney

fees award inappropriate, reasoning:

We are of the opinion that the phrase “or for labor labor [sic] or

services” properly comes within the initial category of “a civil action” not,

as appellant contends, the antecedent classification of a “contract relating to

....”

We believe that the addition of the phrase “or for labor or services”

by amendment to the statute in 1970 was intended by the legislature to be

limited to those situations where suit is brought for labor or services

rendered. We believe that an improper and unintended meaning would

result if, as appellant contends, this clause were construed to allow attorney

fees in the all encompassing field of “contracts related to ..., labor or

services.”

It is our opinion that the clauses of the statute are arranged in an

illusory sequence and that to arrive at the obvious intent of the legislature

we must transpose the sections of the statute to read: ‘ * * * instrument, or

for labor or services, or contract relating to, * * *’

Where the legislative intent would be defeated by construction of a

statute as written the Court may transpose words and phrases as necessary

to arrive at the true meaning.
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Id. at 512. The Oklahoma legislature apparently has acquiesced in this reasoning, and the

Oklahoma courts continue to apply it. See, e.g., Burrows Constr. Co. v. Independent

Sch. Dist. No. 2, 704 P.2d 1136, 1138 (Okla. 1985); Ferrell Constr. Co., Inc. v. Russell

Creek Coal Co., 645 P.2d 1005, 1011 (Okla. 1982).

In contrast, Octagon argues in cases interpreting the “goods, wares, or

merchandise” clause, the Oklahoma courts have adopted a broad interpretation. In

addition to an Oklahoma Bar Journal article, James R. Lieber and Stephanie L. Jones, An

Analysis of 12 O.S., § 936 (1981): An Attorney Fee to the Prevailing Party, 59 O.B.J.

3661 (1988), Octagon Resources relies on three cases for its assertion. First, Octagon

argues the court adopted a broad definition of “relating to” in Hardesty v. Andro

Corporation-Webster Division, 555 P.2d 1030, 1036 (Okla. 1976). Octagon is correct. 

In Hardesty, the court adopted the following expansive definition of the term of art from

another jurisdiction:

“...it is commonly understood that ‘relating to’ embraces much more than

such words as ‘directly connected to’ or ‘a part of.’ We constantly use the

words ‘relating to’ in many circumstances where time and again we find an

event or a status often leading to or in our experience being followed by a

common consequence.”

Id. at 1036 (quoting State v. Gaddy, 184 N.E.2d 689, 693 (Ohio Com.Pl. 1962)). Second,

Octagon cites Arine v. McAmis, 603 P.2d 1130 (Okla. 1979), where the court rejected an

“unduly narrow reading of the statute,” in allowing a plaintiff who sought to rescind a

contract to receive attorney fees under § 936. The court noted the legislature used the
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general term “recover on” a contract and rescission fit within this definition. Id. at 1132. 

Third, Octagon offers a quotation from a case dealing with another attorney fees

provision. “This Court is bound to liberally construe statutes in derogation of the

common law so as to effect legislative object and promote justice.” Schaeffer v.

Shaeffer, 743 P.2d 1038, 1040 (Okla. 1987) (considering Okla. Stat. Ann. tit. 12, § 940

(West 1996) which allows an attorney fee award to the prevailing party in cases involving

the “negligent or willful infliction of harm to property.”). Nonetheless, we do not think

these three precedents and the Oklahoma Bar Journal support Octagon’s proposition.

In particular, more recent Oklahoma cases have adopted a strict interpretation of

the statute in all cases, not just those dealing with the “labor or services” clause. For

example, consider the relatively recent decision in Kay. There, the Oklahoma Supreme

Court began with an analysis of the “labor or services” precedents.

Exceptions to the American Rule are narrowly defined. Similarly, the

mandatory provisions of § 936 that the prevailing party in an action to

recover for labor and services shall be allowed a reasonable attorney fee are

strictly applied.

In Russell v. Flanagan, the “for labor and services” provisions of

§ 936 were strictly limited to actions brought to recover for labor and

services rendered. We specifically rejected an interpretation of § 936 which

would authorize the courts to award attorney fees to the prevailing party in

an action alleging injury that was merely related to a contract for labor and

services.

Id. at 650 (footnotes omitted). However, the court’s continuing discussion casts serious

doubt on Octagon’s argument.
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The revisit of our previous opinions confirms the rule of strict

application of the “labor and services” provisions of § 936. And, a plain

reading of § 936 in view of the amendatory history commands strict

application of the statute. As originally enacted, § 936 authorized the award

of attorney fees for collection on an open account, and was subsequently

amended to include seven additional specific categories evidencing

contractual indebtedness sought to be recovered. Our strict application rule

preserves the obvious legislative intent to authorize awards of attorney fees

to the prevailing parties in actions for money judgments for debts created by

the contracts enumerated in the statute.

Id. at 651-52 (footnotes omitted). Finally, in a footnote, the court further elaborated:

Legislative intent to mandate prevailing party attorney fees in actions

brought to enforce executory promises to pay monetary consideration for

receipt of property or labor or services is readily discernable from the

amendatory history of § 936..... These amendments indicate legislative

intent to mandate, “shall be allowed”, attorney fees in actions to collect

money promised, whether evidenced by a promissory note, a negotiable

instrument, an account whether from sale of tangible property or labor and

services and a bill or a contract for goods sold and delivered.

Id. at 652 n.11. Since Kay, the Oklahoma courts have continued to apply this stricter

interpretation of the statute. See TRW/REDA Pump v. Dean, 829 P.2d 15, 22 (Okla.

1992) (“Here we do have a specific statute allowing an award of fees for appellate work

in certain circumstances, but we recognize statutes allowing a prevailing party to recover

attorney fees are strictly applied by this Court.”); Beard v. Richards, 820 P.2d 812, 815-

16 (Okla. 1991) (“The Oklahoma Constitution, art. 2, § 6, guarantees that our courts will

be open to every person and justice shall be administered without sale, denial, delay or

prejudice. Liberal application of statutes authorizing prevailing party attorney fees has a

chilling effect on our open access to the courts guarantee. Accordingly, statutes
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authorizing prevailing party attorney fees are strictly applied by this Court.”) (citations

omitted); Robert L. Wheeler, Inc. v. Scott, 818 P.2d 475, 481 n.9 (Okla. 1991) (“We held

in Kay v. Venezuelan Sun Oil Co., 806 P.2d 648 (Okla. 1991), that § 936 must be strictly

applied and that an award of prevailing party attorney’s fees shall be allowed in actions to

collect money promised, whether evidenced by a promissory note, a negotiable

instrument, an account whether for sale of tangible property or labor and services and a

bill or a contract for goods sold and delivered.”). Whatever the Oklahoma Supreme Court

did in past cases, we think Kay and its progeny make clear a strict interpretation of § 936

is warranted. The Oklahoma Supreme Court has effectively read “related to” as “for” as

it originally did in Russell in interpreting the “labor or services” clause. We therefore

conclude both the bankruptcy court and the district court were correct in applying a strict

interpretation of the statute.

Under a strict interpretation of the statute, both the bankruptcy court and the

district court were correct in denying Octagon attorney fees. The nature of the action

filed by Bonnett Resources and Mr. Rimmer against Octagon was at most tangentially or

collaterally related to the purchase or sale of goods, wares, or merchandise. While

Octagon is correct that there is a relationship between the natural gas sold through the

system and the underlying litigation, we do not believe the relationship is close enough to

warrant an award of attorney fees. One need only examine the relief prayed for in the

various complaints to determine the real dispute was about the status of Mr. Rimmer’s
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five percent interest in the natural gas processed through the system after the bankruptcy

reorganization plan. Although plaintiffs sought to recover unpaid proceeds that were

attributable to Mr. Rimmer and his successors, that claim was raised only as an attribute

of the ownership rights the plaintiffs sought to settle. The action was simply not about

any debt Mr. Rimmer owed Octagon, which under Kay, appears to be the only way

attorney fees are recoverable under § 936. 

AFFIRMED.