Opinion ID: 165825
Heading Depth: 3
Heading Rank: 2

Heading: Elliott's Argument

Text: 36 Elliott challenges the 39% processing charge on two grounds: (1) the extraction of NGLs is not a post-production cost legitimately deducted in calculating the value at the wellhead; and (2) even if it is a legitimate post-production cost, the fee is neither actual nor reasonable. The purpose of the challenge to the processing fee is to establish underpayment of royalties. Elliott, however, has never asserted an unequivocal and straight-forward contract claim alleging a breach of Appellees' express obligations to pay royalties. 9 In fact, Elliott steadfastly disclaims any cause of action for breach of an express contract. 10 37 While not retracting its unequivocal disclaimer of a cause of action for breach of an express contract, Elliott attempts to ameliorate the possible consequences of this strategic decision by suggesting that its claims are at least contextually contractual and that an express contract claim is impossible because the royalty provisions are silent with respect to the 39% fee. That the royalty instruments make no mention of a 39% figure, however, does not preclude an express contract claim. Oil and gas leases are interpreted like any other contract. Harvey E. Yates Co. v. Powell, 98 F.3d 1222, 1229-30 (10th Cir.1996). If a contract is ambiguous, the jury or the court must engage in factfinding to determine the meaning of the contract. 11 See Allsup's Convenience Stores, Inc. v. North River Ins. Co., 127 N.M. 1, 976 P.2d 1, 12 (1999). Indeed, courts routinely address claims for underpayment of royalties based upon royalty instruments which do not specify the allocation of costs. 12 Contrary to Elliott's remonstrations, its strategy in forsaking any claim for breach of express contract is significant. Elliott's refusal to pursue such a contract claim is a rejection of the very foundation of its relationship with Appellees giving rise to any duties, including the core duty of royalty payment. Elliott's choice has effectively preempted the question of whether the express royalty provisions are ambiguous and, if so, how the ambiguity is to be resolved, a rather pedestrian matter to resolve in a contract dispute. See supra n. 11. 38 In lieu of a claim for breach of an express contract, Elliott has asserted claims such as breach of implied covenants, conversion, fraud, and unjust enrichment. Each of these alternative claims is built upon and dependent on the underlying express contractual obligation to pay royalties. As a consequence, it is impossible to fully adjudicate the claims in the absence of a claim for breach of an express contract to pay royalties. Most importantly, our evaluation of these alternative claims to determine whether they are consistent or inconsistent with the underlying contracts is further hampered by the condition of the record. The record contains no royalty instruments and only a few examples of overriding royalty instruments which were submitted by Appellees. 13 Regardless of whether this is a result of Elliott's strategic choice not to allege an express contract claim or disputes over discovery, it further illustrates the difficulty of considering Elliott's claims premised on implied covenants, fraud, conversion, and unjust enrichment. 39
40 The district court granted Appellees' motion for summary judgment on its at the well obligations under the royalty contracts. Dist. Ct. Order No. 1 at 2. The court concluded that the meaning of the at the well language is clear and unambiguous: under Creson v. Amoco Production Co., 129 N.M. 529, 10 P.3d 853 (Ct. App.2000), royalties are to be paid on the value of the gas in its unprocessed state as it comes to the surface at the mouth of the well before it is transported and processed. Id. at 7. The adjustment for removing the NGLs so the gas is marketable, the district court said, is consistent with the at the well language of the royalty obligations. Id. at 8. 41 On appeal Elliott argues that the district court erred in reading the terms of the royalty obligations as consistent with the 39% processing charge. Elliott argues that the district court erroneously read Creson as holding that the net proceeds/work-back method is the approved method of calculating royalty payments in New Mexico. Moreover, Elliott contends the district court wrongly decided that, in calculating the royalties owed to Elliott under the work-back method, Appellees could deduct a fictitious 39% fee that was never actually incurred in processing the gas. Elliott asserts that only those actually incurred and reasonable costs can be deducted in calculating the royalty owed. Elliott further argues that, as part of its erroneous decision, the district court improperly concluded that the gas in this case was marketable at the wellhead. 42 Appellees counter that the royalty instruments contain express language governing Appellees' royalty obligations to Elliott. Appellees assert that under the at the well language they are required to pay royalties based on the value of the refined natural gas products less any post-production costs. One of the alleged post-production costs which Appellees deduct from the value of the refined natural gas products is the 39% charge for processing the gas at their jointly-owned Plant. Appellees argue that the district court correctly concluded that New Mexico law does not support Elliott's theory that only those actually incurred and reasonable costs can be deducted. Royalties, Appellees argue, are owed only on the value of the gas as it emerges from the wellhead. Furthermore, Appellees argue that royalty payments are a matter of contract and not dependent upon whether the gas is marketable. 43 As indicated, the posture of this case is unusual in that Elliott declined to bring and affirmatively disclaims a breach of contract claim. Yet, it appears impossible to resolve this case without assessing the meaning of the at the well contractual language. All parties agree that the royalty instruments contain language that requires royalties to be paid based on the market value of the gas at the well as produced (unless they require payment based on a same as fed basis) and nowhere do these instruments specifically mention the 39% figure. 44 The district court did not err in relying on Creson for guidance in determining the meaning of at the well. In Creson, the Court of Appeals of New Mexico recognized that [a] royalty or other nonoperating interest in production is usually subject to a proportionate share of the costs incurred subsequent to production where the royalty or nonoperating interest is payable at the well. 10 P.3d at 857 (quotations omitted). The Creson court reasoned that the phrase net proceeds derived from the sale of Carbon Dioxide Gas at the well is unambiguous and means that Plaintiffs are entitled to royalties based on the value of the carbon dioxide gas as it emerges at the wellhead. Id. Under this language, the Creson court held that royalties for gas sold downstream were subject to deductions for post-production, value-enhancing costs. Id. at 862. Although the instruments in the present case refer to market value as opposed to net proceeds, the Creson court used the terms interchangeably and cited with approval a Fifth Circuit case, Piney Woods Country Life School v. Shell Oil Co., 726 F.2d 225 (5th Cir.1984), which interpreted the meaning of market value. 14 Creson, 10 P.3d at 858. The Creson court therefore appeared to see no difference between the terms net proceeds and market value, but rather focused on the fact that the at the well language means that post-production costs are deducted from the value of the processed carbon dioxide gas in arriving at the proper royalty valuation. Id. 45 The district court concluded that because the phrase at the well means that royalty is paid on the value of unprocessed gas as it emerges at the wellhead, the challenged adjustments result in royalty payments consistent with the value of the gas `as it emerges at the wellhead.' 15 Dist. Ct. Order No. 1 at 8. The at the well royalty obligations do require royalty payments based on the unprocessed gas as it emerges at the wellhead. Whether Appellees complied with these at the well royalty obligations, however, depends upon whether the 39% charge is a post-production cost that may properly be deducted under the net-back or work-back methodology in order to arrive at the correct at the well value. To determine compliance, there would appear to be at least three questions which must be answered: (1) whether the 39% fee is properly characterized as a processing cost such that it is a post-production cost subject to deduction; (2) whether such deductible costs must be actual and reasonable 16 and, if so, whether the 39% is an actual and reasonable cost; and (3) whether the gas is in fact marketable at the wellhead. In Creson, these issues were not disputed. 10 P.3d at 856, 859 (noting that plaintiffs did not dispute the type of cost deducted or whether the costs were not the actual costs or were inflated; plaintiffs conceded the carbon dioxide gas was marketable at the wellhead). 46 Without resolution of these issues, which are substantially factual questions, 17 it is not possible to determine whether the challenged adjustments result in royalty payments consistent with the value of the gas `as it emerges at the wellhead.' Dist. Ct. Order No. 1 at 8. It was therefore improper for the district court to decide that Appellees complied with their at the well royalty obligations. This, however, does not affect our disposition of Elliott's claims. Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Elliott's noncontractual claims do not depend upon or require construction or interpretation of the at the well language of the royalty obligations. Indeed, Elliott's claims fail as a matter of law regardless of the meaning of the at the well language. Thus, these outstanding factual questions regarding the proper construction and application of the at the well royalty obligations are neither genuine nor material issues. See Fed.R.Civ.P. 56(c). The district court's grant of summary judgment in favor of Appellees is therefore affirmed. See United States v. Sandoval, 29 F.3d 537, 542 n. 6 (10th Cir.1994) (We are free to affirm a district court decision on any grounds for which there is a record sufficient to permit conclusions of law, even grounds not relied upon by the district court. (quotations omitted)). 47
48 The district court concluded that the royalty instruments creating the obligations between the parties required the rejection of any claims of implied covenants between the parties. Dist. Ct. Order No. 2 at 3. The court held that because Appellees paid the royalty obligations owed to Elliott pursuant to methodologies approved by New Mexico courts, it was impossible to conclude that Appellees violated any implied covenant of good faith and fair dealing. Id. at 5. Thus, the district court denied Elliott's summary judgment motion on the implied covenant of good faith and fair dealing and sua sponte dismissed that count as moot. The court granted Appellees' summary judgment motion on Elliott's implied duty to market claim and dismissed Count 4. The court concluded that an implied duty to market cannot co-exist with express covenants that specifically cover the same subject matter. Id. at 6. 49 On appeal Elliott urges that because the royalty instruments are silent on the calculation of the royalty owed by Appellees, implied covenants govern how the royalties should be calculated. These implied covenants, Elliott asserts, do not permit Appellees to deduct costs incurred before a gas is in a marketable condition nor do the implied covenants permit Appellees to deduct costs that are not actually incurred or are unreasonable. 50 Appellees argue that their royalty obligations are governed solely by the express provisions of the royalty instruments themselves and any implied covenants cannot alter Appellees' obligations. In addition, Appellees argue that implied duties do not provide independent claims for relief because such implied covenants are, by definition, implied in contracts and they may only be asserted as part of a breach of contract claim. Even if Elliott is correct that implied covenants exist in this case, Appellees assert that the implied covenant of good faith and fair dealing and the implied duty to market do not support Elliott's actually incurred and reasonable theory of the deductibility of post-production costs. 51 In New Mexico, oil and gas leases are interpreted like any other contract. Harvey E. Yates Co., 98 F.3d at 1229-30; see also Cont'l Potash, Inc. v. Freeport-McMoran, Inc., 115 N.M. 690, 858 P.2d 66, 80 (1993) (In interpreting mining agreements, courts generally have applied the rules for interpreting contracts and leases.). The primary objective in construing a contract is to ascertain the intention of the parties. Cont'l Potash, Inc., 858 P.2d at 80 (quotation omitted). The intent of the parties is deduced from the language employed by them. Id. 52 [W]hen parties reduce their agreements to writing, the written instrument is presumed to embody their entire contract, and the court should not read into the instrument additional provisions unless this be necessary in order to effectuate the intention of the parties as disclosed by the contract as a whole. An implied covenant must rest entirely on the presumed intention of the parties as gathered from the terms as actually expressed in the written instrument itself, and it must appear that it was so clearly within the contemplation of the parties that they deemed it unnecessary to express it, and therefore omitted to do so, or it must appear that it is necessary to infer such a covenant in order to effectuate the full purpose of the contract as a whole as gathered from the written instrument. It is not enough to say that an implied covenant is necessary in order to make the contract fair, or that without such a covenant it would be improvident or unwise, or that the contract would operate unjustly. It must arise from the presumed intention of the parties as gathered from the instrument as a whole. 53 Id. (quoting Kingsley v. W. Natural Gas Co., 393 S.W.2d 345, 350-51 (Tex.Civ.App. 1965)). The Supreme Court of New Mexico went on to say that 54 implied covenants are not favored in law, especially when a written agreement between the parties is apparently complete. The general rule is that an implied covenant cannot co-exist with express covenants that specifically cover the same subject matter. 55 When it is clear, however, from the relevant parts of the contract taken together and considered with the facts and circumstances surrounding the execution of the agreement, that the obligation in question was within the contemplation of the parties or was necessary to effect their intention, then such obligation may be implied and enforced. But when the contract between the parties speaks to the obligation sought to be implied, the courts will not write that implied obligation into the contract. Stated conversely, there may be an implied covenant on the part of the lessee (in the absence of any expressed on the subject as in the lease).[ 18 ] 56 Id. (citations, alterations, and quotation omitted). See also Nearburg v. Yates Petroleum Corp., 123 N.M. 526, 943 P.2d 560, 569 (1997) (holding that courts cannot imply covenants which are inconsistent with express provisions). Thus, in accordance with New Mexico law, any analysis of implied covenants between parties that have a contractual relationship must be linked to an examination of the contractual agreements themselves. 57
58 New Mexico has long recognized an implied covenant on the part of the lessee (in the absence of any expressed on the subject as in [the] lease) that after production of oil and gas in paying quantities is obtained, he will thereafter continue the work of development for production of oil and gas with reasonable diligence as to the undeveloped portion of the leased land. Libby v. DeBaca, 51 N.M. 95, 179 P.2d 263, 265 (1947). In addition, the lessee must proceed with reasonable diligence, as viewed from the standpoint of a reasonably prudent operator, having in mind his own interest as well as that of the lessor, to market the product. Id. In Libby the court said that this duty to market included building a plant to convert the gas into dry ice because that was the only way the gas could be sold. Id. The New Mexico Supreme Court later characterized the implied duty to market as an implied covenant to make diligent efforts to market the production in order that the lessor may realize on this royalty interest. Darr v. Eldridge, 66 N.M. 260, 346 P.2d 1041, 1044 (1959) (quotation omitted). In Darr the court was faced with a situation where the lessee was holding onto the property without selling the minerals. Id. 59 Elliott argues that Appellees are obligated under this implied duty to market to pay royalties on the actual price received by Appellees for the gas and NGLs and that Appellees' conduct in taking excessive cost deductions and failing to pay royalties on the best price reasonably possible breached that duty. Elliott, however, is unable to demonstrate that such an implied duty exists in this case. Elliott's assertion that the 39% processing charge is not addressed in the royalty leases is unavailing. In a situation where, as here, the parties have reduced their agreement to writing in the form of an oil and gas lease or other royalty instrument, it is to that agreement that we must turn to decide whether any implied duty to market was intended by the parties or would contradict the express provisions of that agreement. Cont'l Potash, Inc., 858 P.2d at 80. Elliott, however, attempts to divorce its implied duty to market claim from its contractual relationship with Appellees and, in fact, explicitly disclaims reliance on the express provisions of the royalty agreements. This court cannot speculate as to what those various agreements contain or how to construe the scope of any implied covenant to market that may exist. 60 Even if we were to ignore Elliott's strategic choice to avoid reliance on the express contractual language, Elliott's implied duty to market claim would still fail. Elliott relies on this implied duty to supplement the royalty provisions and the at the well language, but under New Mexico law, covenants are not implied for subjects that are treated in express provisions. See id. at 80 ([I]mplied covenant[s] cannot co-exist with express covenants that specifically cover the same subject matter.). Moreover, Elliott has failed to suggest how, under New Mexico law, Appellees have breached the implied duty to market. Appellees were and are actively producing gas, processing the gas, and selling the refined natural gas and NGLs. Thus, Appellees have complied with the implied duty to market as articulated by the New Mexico courts. See Darr, 346 P.2d at 1044. Elliott contends that under the implied duty to market Appellees bear the burden of all costs incurred to put the gas in a marketable condition including the cost of removing the NGLs from the gas. Thus, Elliott argues any 39% processing fee should not be borne by the royalty owners. This conception of the implied duty to market finds no support within New Mexico case law. 19 Nor is the claim saved by Elliott's assertion that the 39% fee is a production cost that must be borne by Appellees because there is no market for the unprocessed gas at the wellhead. This duty imagined by Elliott is inconsistent with New Mexico law because the express terms of the royalty obligations direct the royalty to be paid on the value of the gas at the well. See Cont'l Potash, Inc., 858 P.2d at 80 (no implied covenants when subject matter addressed in contract); Creson, 10 P.3d at 856, 859 (marketability goes to issue of compliance with royalty obligations). 61 Elliott, therefore, has failed to present any analysis demonstrating that the implication of an unexpressed duty to market is necessary or appropriate. Thus, the district court correctly concluded that no genuine issue of material fact exists with respect to Elliott's claim of a breach of an implied duty to market. 62
63 In Continental Potash, the New Mexico Supreme Court said: 64 Whether express or not, every contract in New Mexico imposes the duty of good faith and fair dealing upon the parties in the performance and enforcement of the contract. The breach of this covenant requires a showing of bad faith or that one party wrongfully and intentionally used the contract to the detriment of the other party. 65 858 P.2d at 82 (citation omitted). Elliott's good faith and fair dealing claim, however, suffers from much the same problem as the implied duty to market claim. [T]he implied covenant of good faith and fair dealing depends upon the existence of an underlying contractual relationship. . . . Azar v. Prudential Ins. Co. of Am., 133 N.M. 669, 68 P.3d 909, 925 (Ct.App.2003). Despite its assertion to the contrary, Elliott cannot decouple its claim for breach of the implied covenant of good faith and fair dealing from the contract because the contractual relationship is the only relationship that exists between the parties. See id. at 927 (The implied covenant of good faith and fair dealing . . . requires the existence of an underlying contract and may not be used to override the express provisions of an integrated, written contract.). 66 The manner in which Elliott has framed this issue makes it impossible to discuss, let alone determine, what the possible parameters of an implied covenant of good faith and fair dealing would involve. 67 Generally, in the absence of an express provision on the subject, a contract contains an implied covenant of good faith and fair dealing between the parties. Under the implied covenant of good faith and fair dealing, courts can award damages against a party to a contract whose actions undercut another party's rights or benefits under the contract. Our Supreme Court has nevertheless refused to apply this implied covenant to override an express at-will termination provision in an integrated, written contract. 68 Kropinak v. ARA Health Servs., Inc., 131 N.M. 128, 33 P.3d 679, 681 (Ct.App.2001) (citations omitted). While Elliott asserts that Appellees' conduct is not governed by the contracts between the parties and that the contracts are silent as to the conduct at issue, it provides no contractual analysis suggesting that the implication of an unexpressed covenant of good faith and fair dealing is necessary to effectuate the express provisions for the payment of royalties. 20 See, e.g., Allsup's Convenience Stores, Inc., 976 P.2d at 14 (The concept of the implied covenant of good faith and fair dealing requires that neither party do anything that will injure the rights of the other to receive the benefit of their agreement. (quotation omitted)); Gilmore v. Duderstadt, 125 N.M. 330, 961 P.2d 175, 182 (Ct.App.1998) (Whether there has been a breach of the covenant of good faith and fair dealing is a factual inquiry that focuses on the contract and what the parties agreed to. (citations omitted)); Bourgeous v. Horizon Healthcare Corp., 117 N.M. 434, 872 P.2d 852, 856 (1994) (This concept of the duty of good faith initially developed in contract law as a kind of `safety valve' to which judges may turn to fill gaps and qualify or limit rights and duties otherwise arising under rules of law and specific contract language. (quotations omitted)). The district court, therefore, did not err in dismissing Elliott's claim of breach of an implied covenant of good faith and fair dealing. 69
70 The district court granted summary judgment in favor of Appellees on all of Elliott's tort claims. Dist. Ct. Order No. 3 at 2. The court concluded that Elliott's constructive fraud claim failed because the contractual relationship between the parties does not impose the requisite duty to disclose. The court rejected the fraud claim because there was no duty to disclose and, to the extent the claim rested on allegations of misrepresentations, Elliott failed to show detrimental reliance. Finally, the court granted summary judgment on Elliott's conversion claim because [t]here are no facts on which the Court could conclude that [Appellees] unlawfully exercised dominion and control over [Elliott's] royalty rights or that [Appellees'] acts constituted an unauthorized and injurious use of Elliott's property. In addition to rejecting each individual tort claim, the district court, relying on Isler v. Texas Oil and Gas Corp., 749 F.2d 22 (10th Cir.1984), agreed with Appellees that Elliott's assertion that Appellees failed to pay royalties can be a breach of no duty other than one created by contract. This, the court concluded, provided an additional basis for dismissal of the claims of constructive fraud, fraud, and conversion. 71 On appeal Elliott argues that the district court misapplied New Mexico law when it suggested tort claims are barred simply because the parties have a contractual relationship. Elliott further asserts that its fraud claims are viable because it has established that Appellees were under a duty to disclose the 39% charge and with regard to Appellees' alleged misrepresentations, Elliott contends it has shown the requisite detrimental reliance. 21 Appellees counter that the district court properly concluded that Isler compelled dismissal of Elliott's tort claims. In addition, Appellees argue that they had no duty to disclose information concerning the 39% processing deduction, thus Elliott cannot pursue claims for constructive fraud and fraud. Finally, Appellees argue that the court correctly concluded that there was no evidence of Elliott's reliance on Appellees' alleged misrepresentations. 72 In Isler v. Texas Oil and Gas Corp., plaintiffs sought to maintain a negligence action against defendant for failure to make rental payments despite a provision in the contract that limited liability for failure to make such payments. 749 F.2d at 22. This court reversed a judgment in favor of plaintiffs on their tort claim because the facts alleged in plaintiffs' tort claim are precisely the same as those alleged in their contract claim. Id. at 24. Relying on New Mexico case law, we reasoned that when a contract specifically define[s] the rights and duties of the parties any claimed breach of an extracontractual tort duty is precluded. Id. This is because parties should be bound by the terms of written agreements to which they freely commit themselves. Rio Grande Jewelers Supply, Inc. v. Data General Corp., 101 N.M. 798, 689 P.2d 1269, 1271 (1984). The rule in New Mexico is that the concept of freedom of contract and notions of contractually assumed duties and liabilities can act to limit general tort liability in certain circumstances when limited liability is expressly bargained for. State ex rel. Udall v. Colonial Penn Ins. Co., 112 N.M. 123, 812 P.2d 777, 785 (1991). 73 Isler and corresponding New Mexico case law stand for the proposition that the existence of any tort liability cannot conflict with any contractual duties between the parties. See Hess Oil Virgin Islands Corp. v. UOP, Inc., 861 F.2d 1197, 1200 (10th Cir.1988) (noting that Isler holds no tort duty can be imposed on a party where that party's same duties and rights are specifically defined by contract). While the relationship between the parties in the instant case is rooted in contract, Elliott has failed to provide this court with any analysis of its tort claims in the context of the express contracts obligating Appellees to pay royalties. As a consequence, this court can only speculate as to the interrelationships of Appellees' express contractual duties and the purported duties alleged to have been breached in Elliott's tort claims. Elliott's unsupported conclusory allegations regarding the nature of Appellees' obligations untethered to any discussion of the contractual duties governing the parties' relationship do not create a genuine issue of material fact. The district court's grant of summary judgment is therefore affirmed. 74
75 The district court relied on Ontiveros Insulation Co. v. Sanchez, 129 N.M. 200, 3 P.3d 695 (Ct.App.2000), in granting Appellees' motion for summary judgment on Elliott's unjust enrichment claim. The court concluded under Ontiveros that because the claim arises in equity it cannot exist where, as here, the parties are in privity of contract. On appeal Elliott argues that the court misread Ontiveros to automatically bar unjust enrichment claims where a contractual relationship between the parties exists. Moreover, Elliott suggests that even if Ontiveros does bar claims where a contractual provision governs, it does not prevent Elliott from bringing its unjust enrichment claim because there is no express contractual provision related to the 39% processing fee at issue. Appellees respond that the district court properly read and applied Ontiveros and Elliott's argument that its unjust enrichment claims should stand because there is no express contractual provision related to the 39% fee is untenable. 76 In Ontiveros, the New Mexico Court of Appeals said that equity does not take the place of remedies at law, it augments them; in this regard, an action in contract would be preferred to one in quasi-contract. 3 P.3d at 699. Consistent with the district court's interpretation of Ontiveros to mean that the presence of a contract bars a claim for unjust enrichment, 77 the hornbook rule [is] that quasi-contractual remedies . . . are not to be created when an enforceable express contract regulates the relations of the parties with respect to the disputed issue. Courts have recognized this principle and have stated their unwillingness to resort to the doctrine of unjust enrichment to override a contractual [] provision. 78 Member Servs. Life Ins. Co. v. Am. Nat'l Bank & Trust Co. of Sapulpa, 130 F.3d 950, 957 (10th Cir.1997) (citations omitted) (involved ERISA case); see also 26 Richard A. Lord, Williston on Contracts § 68:5 (4th ed. 2004) (Where the plaintiff has no alternative right on an enforceable contract, the basis of the plaintiff's recovery is the unjust enrichment of the defendant.). Elliott's unjust enrichment claim fails, like Elliott's other extracontractual claims addressed above, because the claim for underpayment of royalties is grounded in the parties' contractual relationship. Elliott asserts that there is no express contractual claim based on the 39% in-kind processing fee deductions because the parties have no such contract and thus they should be permitted to bring a claim for unjust enrichment. 22 Elliott mistakes form for function. The contracts may not delineate any specific deductions, yet the contracts control how royalties are to be paid. Indisputably, there are contracts between the parties, thus any claim for underpayment of royalties, including a claim for unjust enrichment, must begin with those contracts. The district court's grant of summary judgment to Appellees on Elliott's unjust enrichment claim is therefore affirmed. 79
80 Appellees moved for partial summary judgment on Elliott's statutory claims, including Elliott's claim under the New Mexico Unfair Practices Act, which the district court originally denied. Later, Appellees again moved for partial summary judgment on Elliott's punitive damages and UPA claim. The district court vacated the previous order denying Appellees' summary judgment motion and granted Appellees' motion, dismissing Count 1 of the Second Amended Complaint. The district court concluded that Elliott, as a royalty owner, is neither a purchaser nor seller of royalty gas, nor does the case involve the sale, lease, rental, or loan of goods and services as required by the UPA. 81 On appeal Elliott argues that the district court erred by ignoring that Elliott is an involuntary purchaser of processing services under the UPA. Elliott argues that Appellees violated the UPA by charging Elliott inflated rates for processing services and misrepresenting the amount (39% in-kind fee) charged for such services. The State of New Mexico, as amicus curiae, supports Elliott's argument, asserting that Appellees' conduct falls within the ambit of the UPA. The State argues that Appellees' retention of 39% of the NGLs is in connection with the processing services at the Plant. Appellees counter that real estate interests, including oil and gas leases, are not goods or services under the UPA, and, under New Mexico law, royalty instruments do not result in purchases or sales of either oil and gas or post-production services. 82 The UPA provides that [u]nfair or deceptive trade practices and unconscionable trade practices in the conduct of any trade or commerce are unlawful. N.M. Stat. Ann. § 57-12-3. Trade or commerce includes the advertising, offering for sale or distribution of any services and any property and any other article, commodity or thing of value, including any trade or commerce directly or indirectly affecting the people of this state. Id. at § 57-12-2(C). An unfair or deceptive trade practice 83 means an act specifically declared unlawful pursuant to the Unfair Practices Act . . ., a false or misleading oral or written statement, visual description or other representation of any kind knowingly made in connection with the sale, lease, rental or loan of goods or services or in the extension of credit or in the collection of debts by a person in the regular course of his trade or commerce, which may, tends to or does deceive or mislead any person. . . . [ 23 ] 84 Id. at § 57-12-2(D). An unconscionable trade practice is similarly defined as 85 an act or practice in connection with the sale, lease, rental or loan, or in connection with the offering for sale, lease, rental or loan, of any goods or services, including services provided by licensed professionals, or in the extension of credit or in the collection of debts which to a person's detriment: 86 (1) takes advantage of the lack of knowledge, ability, experience or capacity of a person to a grossly unfair degree; or 87 (2) results in a gross disparity between the value received by a person and the price paid. 88 Id. at § 57-12-2(E). Because the Unfair Practices Act constitutes remedial legislation, [courts] interpret the provisions of this Act liberally to facilitate and accomplish its purposes and intent. State ex rel. Stratton v. Gurley Motor Co., 105 N.M. 803, 737 P.2d 1180, 1185 (Ct.App. 1987). 89 This circuit recently recognized that the UPA  `does not apply to sales of real estate.' Kysar v. Amoco Prod. Co., 379 F.3d 1150, 1157 (10th Cir.2004) (quoting McElhannon v. Ford, 134 N.M. 124, 73 P.3d 827, 832 (Ct.App.2003)). Kysar held that misrepresentations in connection with a mineral lease regarding rights of access were unconnected to a good or service and therefore did not constitute a violation of the UPA. Id. In concluding that a completed house is a form of realty and therefore cannot be goods or services under the UPA, the McElhannon court said, [t]he word goods is generally understood to mean personal estate as distinguished from realty, and [t]he word services is generally understood to mean work done by one person at the request of another. 73 P.3d at 832 (quotations, citations, and alterations omitted). The court further reasoned that [t]o the extent goods and services are combined to create a structure that is permanently affixed to realty, they are understood to have been `converted' to realty. Id. 90 Elliott is a royalty interest owner alleging, at the core of its case, underpayment of royalties. 91 The term royalty or royalty interest, as used in oil and gas parlance to define a mineral interest in land, has a well known and commonly accepted meaning. It means a share (usually 1/8th) in the oil and gas reserved to the landowner from an oil and gas lease, which when produced is delivered to the purchaser free of cost to the landowner. 92 Shinn v. Buxton, 154 F.2d 629, 632 (10th Cir.1946). In New Mexico a grant or reservation of the underlying oil and gas, or royalty rights provided for in a mineral lease as commonly used in this state, is a grant or reservation of real property. 93 Duvall v. Stone, 54 N.M. 27, 213 P.2d 212, 215 (1949). [I]t matters not whether the production from a mineral well is claimed or whether a portion of the fund resulting from the sale of the production is claimed; in New Mexico, both assets are realty. Fullerton v. Kaune, 72 N.M. 201, 382 P.2d 529, 533 (1963). Because the payment of royalties, including any associated deductions for post-production costs, is not connected to goods or services but to realty, Elliott's claim does not fall within the ambit of the UPA. The district court's grant of summary judgment is therefore affirmed. 94
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
108 The district court granted ConocoPhillips' motion for summary judgment on its contractual duty under its same as fed royalty obligations, concluding that Elliott failed to rebut the evidence submitted by ConocoPhillips. ConocoPhillips relied upon the testimony of Danny Frizzell and Curtis Bradley to support its position that ConocoPhillips has paid royalties to its same as fed royalty owners, including Elliott, in accordance with its contractual obligations. Elliott responded with an affidavit from Stephen Elliott. On appeal Elliot argues without any citations to the record that it successfully raised genuine questions of material fact and that the district court erred in deciding those disputed facts in favor of ConocoPhillips. Without a specific reference, we will not search the record in an effort to determine whether there exists dormant evidence which might require submission of the case to a jury. Gross v. Burggraf Constr. Co., 53 F.3d 1531, 1546 (10th Cir.1995) (quotation omitted). 109 We agree with the district court's rejection of the Elliott affidavit based on its conclusory statements. See, e.g., Matthiesen v. Banc One Mortgage Corp., 173 F.3d 1242, 1247 (10th Cir.1999) (rejecting testimony of an expert as conclusory for summary judgment). As the district court noted, [Stephen] Elliott does not identify the properties to which he refers, making it impossible for [ConocoPhillips] or for this Court to address or evaluate his assertions. Because Elliott came forward with no other evidence to rebut ConocoPhillips' motion, the district court's grant of summary judgment in favor of ConocoPhillips is affirmed. See United States v. Simons, 129 F.3d 1386, 1388 (10th Cir.1997) (Where a movant has met the initial burden required to support summary judgment, the non-movant then must either establish the existence of a triable issue of fact under Fed.R.Civ.P. 56(e) or explain why he cannot . . . under Rule 56(f). (quotation omitted)). 110
111 In its Second Amended Complaint Elliott alleged that Appellees' conduct is a per se violation of Sections 1 and 2 of the Sherman Antitrust Act, or, in the alternative, an unreasonable restraint of trade in violation of Section 1 of the Sherman Antitrust Act. Elliott seeks to recover treble damages plus attorneys' fees and costs of litigation pursuant to 15 U.S.C. § 15. In addition, Elliott seeks a permanent injunction to stop Appellees from engaging in the alleged illegal acts, as provided by Section 16 of the Clayton Act, 15 U.S.C. § 26. 112 More specifically, Elliott claims that BP and ConocoPhillips have combined and conspired to illegally fix the price charged for processing gas extracted from the San Juan Basin by charging a 39% processing fee. By charging this exorbitant 39% processing fee, Elliott alleges Appellees have contracted, combined and conspired to illegally depress the wellhead price. Additionally, Elliott alleges that Appellees have entered into an illegal tying arrangement whereby gas in which Elliott owns an interest must be processed at the Plant as a condition of entry to the interstate market. The effect of this tying arrangement, Elliott asserts, is to fix prices and depress values paid to Elliott. Not only does Elliott argue that Appellees have fixed the price of royalties paid to Elliott, but further alleges that Appellees' conduct suppresses interstate competition among sellers, purchasers, or users of gas and NGLs. 113 Appellees moved to dismiss Elliott's antitrust claim for failure to state a claim because Elliott's injury, if any, does not constitute an antitrust injury and Elliott does not have standing to pursue an antitrust claim. Appellees further alleged that Elliott added the antitrust claim only to provide a new basis for federal jurisdiction under 28 U.S.C. § 1331. 114 The district court granted Appellees' motion to dismiss. The court concluded that because Elliott failed to show that they have been damaged by an anticompetitive effect of defendants' actions, Elliott has not demonstrated an antitrust injury or that it has standing to bring an antitrust claim. 115 On appeal Elliott argues that the district court erred in concluding it did not suffer an antitrust injury and did not have standing to bring its antitrust claims. Elliott argues that it is a captive consumer in the market for gas processing services and Appellees, in violation of Section 1 of the Sherman Act, formed a cartel to horizontally fix prices for gas processing services at anticompetitive levels and injured the class. Secondly, in violation of Section 2, Elliott claims that it was injured as a supplier of raw natural gas with entrained NGLs because only one purchaser, Appellees, exercised monopolistic power to use their excessive gas processing to drive down the amount the class receives as payment for the natural gas and NGLs supplied to the marketplace. 116 The legal sufficiency of a complaint is a question of law; therefore, a Rule 12(b)(6) dismissal is reviewed de novo. Sutton v. Utah State Sch. for Deaf & Blind, 173 F.3d 1226, 1236 (10th Cir.1999). 117 [A]ll well-pleaded factual allegations in the . . . complaint are accepted as true and viewed in the light most favorable to the nonmoving party. A 12(b)(6) motion should not be granted unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief. 118 Id. (quotations and citation omitted). Under this standard of review, we affirm the district court's dismissal of Elliott's antitrust claims. 119 Section 1 of the Sherman Act declares illegal [e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade of commerce among the several States, or with foreign nations. 29 15 U.S.C. § 1. Section 2 of the Sherman Act provides that [e]very person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce. . . shall be deemed guilty of a felony. . . . 30 15 U.S.C. § 2. 120 Under Section 4 of the Clayton Act, any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor . . ., and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee. 15 U.S.C. § 15(a). Despite the broad language of Section 4, a private plaintiff must have suffered an antitrust injury and must have standing to bring an antitrust claim. Atl. Richfield Co. v. USA Petroleum, Co., 495 U.S. 328, 344, 110 S.Ct. 1884, 109 L.Ed.2d 333 (1990); see also Sharp v. United Airlines, Inc., 967 F.2d 404, 406 (10th Cir.1992). Antitrust injury and antitrust standing are overlapping concepts; [s]tanding cannot be established without an antitrust injury, but the existence of an antitrust injury does not automatically confer standing. Sharp, 967 F.2d at 406 (quotation omitted). 31 121 An antitrust injury is an injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendant's acts unlawful. Reazin v. Blue Cross & Blue Shield of Kan., Inc., 899 F.2d 951, 962 n. 15 (10th Cir.1990) (quotation omitted). The Sherman Act was designed to protect market participants from anticompetitive behavior in the marketplace. See Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 530, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983). Thus, [t]he antitrust injury requirement ensures that a plaintiff can recover only if the loss stems from a competition- reducing aspect or effect of the defendant's behavior. Atl. Richfield Co., 495 U.S. at 344, 110 S.Ct. 1884. 122 The injury alleged by Elliott is the underpayment of royalties. The alleged underpayment is a result of the 39% fee charged by Appellees to process gas. Any injury that Elliott has suffered from this fee is not an antitrust injury because it has no adverse effect on competition or consumers. Id. at 337, 110 S.Ct. 1884. Indeed, Elliott appears to recognize the problem with its antitrust claim and tries to implicate competition/consumers by casting itself in the role of either a consumer or a supplier. Elliott, however, is neither a consumer of Appellees' products, nor a competitor of Appellees in producing gas and Elliott makes no allegation of any harm other than the economic loss which Elliott itself allegedly suffered. Fundamentally, although Elliott tries to characterize itself as a consumer of gas processing services and also as a supplier of natural gas and NGLs, Elliott is a royalty interest owner in a lease to Appellees. 123 Mere injury as a landlord or lessor entitled to royalties would not by itself be the kind of injury to competition that the antitrust laws are designed to prevent. The requirement that the alleged injury be related to anticompetitive behavior requires, as a corollary, that the injured party be a participant in the same market as the alleged malefactors. 124 R.C. Dick Geothermal Corp. v. Thermogenics, Inc., 890 F.2d 139, 148 (9th Cir. 1989) (en banc) (quotation omitted). Thus, Appellees' alleged conduct does not harm competition or consumers. 125 Even assuming that Appellees' conduct harmed competition, Elliott's injury is not a result of this alleged anticompetitive behavior. See, e.g., Pool Water Prods. v. Olin Corp., 258 F.3d 1024, 1033 (9th Cir.2001). An anticompetitive injury would exist if, for example, Elliott alleged that Appellees were conspiring with gas purchasers to keep downstream sales prices artificially low, such that Elliott's resulting royalty payments were reduced. See, e.g., Mandeville Island Farms, Inc. v. Am. Crystal Sugar Co., 334 U.S. 219, 223-24, 227, 68 S.Ct. 996, 92 L.Ed. 1328 (1948) (concluding beet growers properly stated an antitrust claim by alleging sugar refiners agreed to pay uniform prices for sugar beets). This is not Elliott's allegation. Nor is it Elliott's allegation that the effect of Appellees charging the 39% fee is anticompetitive by in some way limiting Elliott's participation in the natural gas market. See, e.g., Telecor Communications, Inc. v. Southwestern Bell Tel. Co., 305 F.3d 1124, 1128-29 (10th Cir.2002) (describing Southwestern Bell's actions making it more difficult for competitors to enter the Oklahoma pay phone market). Elliott's allegation is that Appellees are improperly calculating the royalty payment due Elliott — either by charging an unreasonable fee for a legitimate post-production cost or by charging a fee for an illegitimate post-production cost. Even assuming Appellees' conduct is anticompetitive, Elliott's claimed injury does not stem from the competition- reducing aspect or effect of [Appellees'] behavior. Atlantic Richfield Co., 495 U.S. at 344, 110 S.Ct. 1884. 126 Because we conclude that Elliott has not alleged an antitrust injury, its antitrust claims necessarily fail. Sharp, 967 F.2d at 406. The district court thus properly dismissed Elliott's antitrust claims for failure to state a claim.