Opinion ID: 165825
Heading Depth: 4
Heading Rank: 6

Heading: New Mexico Oil and Gas Proceeds Payment Act

Text: 95 The relevant language of the New Mexico Oil and Gas Proceeds Payment Act reads: 96 The oil and gas proceeds derived from the sale of production from any well producing oil, gas or related hydrocarbons in New Mexico shall be paid to all persons legally entitled to such payments, commencing not later than six months after the first day of the month following the date of first sale and thereafter not later than forty-five days after the end of the calendar month within which payment is received by payor for production unless other periods or arrangements are provided for in a valid contract with the person entitled to such proceeds. 97 N.M. Stat. Ann. § 70-10-3 (2004). 98
99 In the Second Amended Complaint, Elliott asserted that Appellees' underpayment of royalties is a failure to make full payments to Elliott for their pro rata share of proceeds from the sale of NGLs within the requisite forty-five day period. As such, Elliott seeks payment of all unpaid amounts and interest calculated at the rate of eighteen percent per year on the unpaid balance. The district court granted summary judgment to Appellees on Elliott's Payment Act claim because the court concluded the claim necessarily failed once the court rejected all of Elliott's other theories of potential liability. 100 On appeal, Elliott argues that in addition to the numerous theories supporting Appellees' liability for underpayment of royalties, Elliott can proceed independently under the Payment Act. The State of New Mexico, as amicus curiae, supports Elliott's argument, declaring that by requiring Elliott to have an independent contract or tort claim in order to proceed under the Payment Act, the District Court has fabricated a limitation upon the availability of the Payment Act to injured payees which the Legislature clearly did not intend, and has emasculated the remedial nature of the Payment Act. 101 Elliott cites to no legal authority for its position that the Payment Act supplies an independent statutory basis for relief. Cf. Phillips v. Calhoun, 956 F.2d 949, 954 (10th Cir.1992) (holding that failure to develop a legal argument supporting a claim results in waiver of the claim). Although the State provides a more extensive legal argument for its position, its entire argument rests on the assumption that Elliott has in fact been underpaid by Appellees. A claim for underpayment of royalties may very well fall within the provisions of the Payment Act. Elliott and the State misread the district court's order to suggest otherwise. The district court did not hold that Elliott must assert a certain type of claim — contract or tort, for example — in order to bring a claim under the Payment Act. Instead, based on the plain language of the statute, the district court properly concluded that in order to maintain a Payment Act claim, Elliott must allege a potentially successful claim for underpayment of royalties or theory of liability showing that it is legally entitled to such payments, N.M. Stat. Ann. § 70-10-3 (2004), independent of any claim under the Act itself. 24 Because we agree with the district court that Elliott has failed to demonstrate any potentially successful theory of liability, Elliott's claim under the Payment Act fails and the district court's grant of summary judgment is affirmed. 102
103 Elliott also argues that because BP admitted it had underpaid its same as fed overriding royalty owners, summary judgment should have been granted in favor of Elliott on its Payment Act claim against BP. Appellees respond that the question of BP's liability under its same as fed leases was not an issue in this case. Appellees contend that only ConocoPhillips' same as fed leases are at issue because only ConocoPhillips asserted a counterclaim and thereafter moved for summary judgment on its compliance with those leases. Even if BP's same as fed leases were at issue, Appellees argue that Elliott's Payment Act claim lacks merit because Elliott affirmatively prevented BP from correcting the payment error. 104 The district court granted summary judgment to ConocoPhillips on its same as fed royalty obligations without any reference to BP's same as fed leases. Dist. Ct. Order No. 1 at 10. In a subsequent order, the district court, without any reference to BP's same as fed leases, rejected Elliott's Payment Act claim because no theories of potential liability remained. 25 Dist. Ct. Order No. 4. Elliott had moved for summary judgment against BP under the Payment Act because of alleged underpayment of royalties on BP's same as fed leases. Elliott filed its motion for summary judgment after members of the class received a letter from BP admitting underpayment. 26 Appellees are correct, however, that BP's same as fed leases were never a part of Elliott's case. 27 105 Generally, failure to set forth in the complaint a theory upon which the plaintiff could recover does not bar a plaintiff from pursuing a claim. Green Country Food Market, Inc. v. Bottling Group, LLC, 371 F.3d 1275, 1279 (10th Cir.2004). The liberalized pleading rules, however, do not permit plaintiffs to wait until the last minute to ascertain and refine the theories on which they intend to build their case. Id. This is particularly true if permitting a plaintiff to change its theory will prejudice the other party in maintaining its defense. Id. In this instance Elliott, in its summary judgment motion, attempted to assert an entirely new factual basis for relief which had not heretofore been a part of the case. 28 The thrust of Elliott's entire case had been Appellees' underpayment of royalties based on the 39% in-kind deduction charged to at the well royalty owners. The letter sent by BP indicates that it was erroneously treating some overriding royalty interest owners under the at the well methodology as opposed to the same as fed methodology. Elliott had never asserted in its complaint that this was a basis for liability and to permit Elliott to make this claim at such a late stage in the proceedings would risk prejudicing BP. 106 The district court properly rejected Elliott's Payment Act claim because it concluded no potentially successful theory of liability remained. One of the theories of potential liability was BP's alleged underpayment of royalties on its same as fed leases. This was not, however, a theory that was ever raised by Elliott prior to its summary judgment motion. The district court thus appropriately denied Elliott's motion for summary judgment on the Payment Act claim. 107