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Bridenstine v. Kaiser-Francis Oil Co., Okla., Texas County Dist. Ct., No. CJ-2000-1

Kaiser-Francis Settlement Final

On November 16, 2004, the Kaiser-Francis settlement in this case became final. Kaiser-Francis deposited the required $83,964,657.53 into the Settlement Distribution Account (This does not include the $26 Million settlement with UP/Questar/Chase in 2001, which has already been distributed). The Special Master sent out the distribution forms. Each class member’s distribution from this settlement was approximately three and one half times the amount they received from the first settlement in this case. If you have distribution questions or issues, you should contact the Special Master Mike McDonald at (580) 625-4575, P.O. Box 458, Beaver, Oklahoma 7393.

Background

The Oklahoma City Attorneys for the Bridenstine Class - (From left to right) R.B. Short & Bob Barnes (Barnes & Lewis, P.C.) Doug Burns & Terry Stowers (Burns & Stowers, P.C) (not pictured: Jamie Kee - Guymon) Photo by Mark Hancock.

In 1995, Galen and Glen Bridenstine discovered that the oil and gas companies who had drilled wells on their property in 1983 through 1985, many of which were still producing, had not paid them all of the royalties that were due. Initially, they believed this underpayment was limited to a 45¢ per MMBtu charge for gathering, compression and dehydration, which the oil companies paid to themselves and secretly deducted from the amounts paid the Bridenstines. In their investigation, they discovered that Jack and Verdeen Slatten, other royalty owners on the same gathering system, had actually discovered the scheme in 1990 and had filed suit to collect the back revenues. The Slatten Suit was settled, and as part of the settlement, the oil companies insisted that the Slattens keep their discovery secret.

In August 1995, Bridenstine filed a class action suit against Kaiser-Francis Oil Co., the Union Pacific Resources Companies, the Questar Companies and Chase Manhattan Bank alleging they had failed to properly pay royalties to approximately 1,700 mineral owners in 215 gas wells located in Beaver and Texas Counties, in the panhandle of Oklahoma. As part of the pretrial discovery, Bridenstine uncovered other schemes to deprive the royalty owners of their royalty proceeds. In addition to the secret 45¢ fee, the oil companies (1) failed to pay for or report approximately 3,100,000 MMBtu of gas (the equivalent of 100% of the gas from 5 class wells) which was reflected on internal documents as “system gains” or “system overages” (which even Kaiser-Francis’ attorney referred to as “stolen gas” during the trial), (2) secretly paid additional fees to affiliates and an officer of the company as a “marketing” or “administrative” fee, (3) failed to get the best price available for the gas due to their other profit centers and (4) paid royalties on a low spot market price rather than the price they received on a high priced gas contract to sell gas to an electric generating facility in Oklahoma City (this last claim was settled in full prior to trial). The Class settled with Union Pacific, Questar, and Chase Manhattan Bank prior to trial for approximately $26 million.

After a approximate 5 week trial against the sole remaining defendant, Kaiser-Francis, a jury awarded the plaintiff Class $73.8 million, including $18.8 million punitive damages. By special interrogatories, the jury indicated that Kaiser-Francis failed to establish that the fees charged were reasonable and that royalty revenues increased in proportion to the fee charged. The jury also indicated that Kaiser-Francis (1) breached its contracts, (2) defrauded and deceived the Class, (3) converted the Class’ property, (4) breached its fiduciary duties, and (5) was unjustly enriched by its actions. And finally, the jury found that Kaiser-Francis was jointly and severally liable for the damages with Union Pacific and Questar as a result of (1) a conspiracy, (2) a joint venture, (3) a mining partnership, and (4) an agency relationship. After applying certain credits for settlements with the prior defendants, the Court entered judgment against Kaiser-Francis Oil Company in the amount of $59.6 million dollars in November, 2001. The Oklahoma Court of Appeals unanimously affirmed the trial court judgment. The Oklahoma Supreme Court refused to overturn the judgment on March 8, 2004.

After the mandate was issued, on April 1, 2004, Kaiser-Francis filed motions with the United States Bankruptcy Court in Houston, Texas seeking: a temporary restraining order and preliminary injunction barring the Class from collecting its judgment pending further determinations by the Bankruptcy Court; a declaratory judgment that Class damages attributable to time periods prior to February 19, 1991 were discharged in bankruptcy and hence cannot be collected against Kaiser-Francis; and that Kaiser-Francis be awarded damages against the Class for having sought recovery of damages against Kaiser-Francis for time periods prior to February 19, 1991.

On August 23, 2004, the parties in the Bridenstine v. Kaiser-Francis lawsuit reached a settlement after the case has been pending for over 9 years. The distribution amounts were about 31/2 times larger than the amount distributed in 2001 relating to settlements with other defendants. The settlement amount was $82.5 million dollars accruing interest at 6% from August 1, 2004 until paid. The case was filed in August 1995. The Class of approximately 1700 royalty owners was certified in 1999. In 2000 all but one defendant settled with the Class and paid $26 million. The case went to a jury trial in October 2001 with the sole remaining defendant (Kaiser-Francis) and judgment in favor of the Class royalty owners was entered in January 2002 in the approximate amount of $59 million. The case went through appeals in the Oklahoma state courts and mandate issued by the Oklahoma Supreme Court in favor of the Class royalty owners in April 2004. Still pending in State court at the time of the settlement was the Class motion for an additional award of attorney fees and costs against Kaiser (likely additional award of between $5 and $30 million). Kaiser then proceeded to bankruptcy court in the Southern District of Texas in Houston. Kaiser argued in the bankruptcy court that since it bought Waterford (one of the entities that had operated the Class wells and owned the Class leases) out of bankruptcy in 1990, the Class royalty owners' claims were discharged in bankruptcy. A hearing on cross-motions for summary judgment was heard in late July 2004 and the parties were awaiting a decision from the bankruptcy judge when the case settled. Since post-judgment interest was accruing at the approximate rate of 10% per annum, the judgment was worth about $78 million dollars when the case settled before considering an additional award for attorney fees and costs. Had the case not settled, appeals in the bankruptcy courts could have taken as long as 2 additional years. Click here to see the settlement terms.

Plaintiffs’ testifying experts were Dan Reineke, engineering; Barbara Ley, accounting; Tony Say, gas marketing; and Mark Garrett, accounting, all of Oklahoma City, Okla. Demonstrative exhibits and court room technology was provided by Cassandra Willis and Simon Aleman of TR Legal Systems, Inc. of Oklahoma City, OK. Although not testifying at trial, other key experts for the Class were Darrell Harris, forensic accounting; Bill Rogers, custom and usage; Dennis Shannon, mapping; Richard Sternloff, psychologist; Jim Kerrigan, landman (all of Oklahoma City, Okla.); David Huettner, punitive damages (Norman, Okla.); Wade Brorsen, statistical analysis (Stillwater, Okla.); and Dean Bowers, gas measurement (Dallas, TX).

Kaiser-Francis’ testifying experts were J.T. Mitchell, Kyle Pearson, John Wilson and Michael Zeeb.

PLAINTIFFS' COUNSEL:

Robert N. Barnes
Douglas E. Burns
Terry L. Stowers
Roy B. Short
all of Oklahoma City, Okla. and Robert J. Kee of Beaver, Okla.

Please click the link below in order to view the Bridenstine Class PDF files. If you need the PDF plugin please follow the Adobe link below. Note: All files are in PDF format.

Order on Distribution Process from the Common Fund

Claim Form

Order Approving Settlement

Petition (Third Amended)

Chase Settlement & Agreement

UP/Questar Settlement & Agreement

Order Approving Settlement of UP/Questar

Order Approving Attorneys’ Fees

Judgment –Verdict Forms – Special Interrogatories – Orders Correcting Judgment

Court of Civil Appeals Decision

Class’ Brief on Appeal

OK Supreme Court Order