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Supreme Court reverses QEP’s $31M judgment

Posted: Tuesday, Feb 7th, 2017

SUBLETTE COUNTY – The Wyoming Supreme Court released its opinion last week for QEP and Wexpro’s 2016 appeal of a $30-plus-million award to Rocky Mountain Resources (RMR).

The justices reversed a Ninth District Court civil jury’s 2015 decision that the two companies owed RMR millions in unpaid royalties, remanded the case back to Judge Marv Tyler – and then essentially closed the matter by granting QEP’s motion for summary judgment.

The “overriding royalty interest” (ORRI) of millions had been awarded by the six-person jury after the February 2015 trial; Judge Tyler then upheld the jury’s awards in his March 2015 order.

Before they filed their 2016 Supreme Court appeal, he ordered both companies to post bonds for the amounts they had been ordered to pay to RMR.

QEP deposited $20,080,848 and Wexpro posted $16,975,729.20 as ordered to assure the unpaid judgment they are protesting would be available, records show. The bonds covered past damages, pre-judgment interest and estimated post-judgment interest of 10 percent for two years plus RMR’s current and future 4-percent ORRI on a Pinedale Anticline lease created in 1951.

The legal process began in 2011, when RMR filed against QEP and Wexpro after they denied the ORRI was still valid because the original leases had expired and “washed out” those terms. They argued the terms did not attach to the reacquired Anticline lease.

After the 2015 trial, QEP and Wexpro sought another trial, which Judge Tyler denied.

The companies then provided notice of their intent to appeal to the Wyoming Supreme Court, filed the appeal in February 2016 and justices heard oral arguments on Oct. 19, 2016.

Justice D.J. Fenn, writing for the court, worked through the historic aspects of the lease, past litigation and royalties in question – which had started out in 1951 as two leases.

“After analyzing the actual language used in the assignment form and applying it to the undisputed facts in this case, this Court concludes that the overriding royalty interest did not attach to the Ribbe (RMR) lease,” Justice Fenn wrote, saying, “… Rather, it was an entirely new lease issued on different terms to an entirely different lessee.”

RMR’s ORRI thus ended in 1979 when the leases were terminated because “the Ribbe Lease was not a substitute lease that was intended to take the place of the (original) leases.”

“The district court erred when it denied QEP and Wexpro’s motion for summary judgment and granted RMR’s motion,” he wrote. “Therefore we reverse and remand to the district court with instructions to enter summary judgment in favor of QEP and Wexpro.”

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