S Bar B Ranch v. Omimex Canada , 601 F. App'x 569 ( 2015 )

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS FILED
FOR THE NINTH CIRCUIT MAY 04 2015
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
S BAR B RANCH, a Montana ) No. 13-35466
corporation, )
) D.C. No. 1:10-cv-00112-RFC
Plaintiff - Appellant, )
) MEMORANDUM*
v. )
)
OMIMEX CANADA, Ltd., )
a Delaware corporation, )
)
Defendant - Appellee. )
)
Appeal from the United States District Court
for the District of Montana
Richard F. Cebull, Senior District Judge, Presiding
Argued and Submitted April 7, 2015
Seattle, Washington
Before: FERNANDEZ, RAWLINSON, and CALLAHAN, Circuit Judges.
S Bar B Ranch appeals the judgment in favor of Omimex Canada, Ltd.,
which followed the district court’s grant of summary judgment on the contract and
fraud based claims brought by S Bar B. We have jurisdiction pursuant to 28
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
U.S.C. § 1291 and we affirm.
S Bar B sought to recover damages from Omimex on the basis that Omimex
had improperly determined the royalty amount that it was required to pay to S Bar
B for natural gas obtained from wells on S Bar B’s property.1 In this diversity
action, the law of the State of Montana applies. See Erie R.R. Co. v. Tompkins,
304 U.S. 64, 78, 58 S. Ct. 817, 822, 82 L. Ed. 1188 (1938). At the district court,
S Bar B conceded that its claims failed if Montana applies the “at the well” rule to
determine the royalties rather than the “first marketable product” rule.2 The district
court determined that Montana applied the “at the well” rule. We agree. As the
Montana Supreme Court has said, “[t]he price to be paid is not to be an arbitrary
price fixed by the lessee but the price actually given in current market dealings.”
Mont. Power Co. v. Kravik, 586 P.2d 298, 302 (Mont. 1978). The court explained,
“lessor should receive no less and lessee pay no more than the current selling price
of the gas.” Id. at 303. Moreover, it declared, “[w]here no market exists in the
field, . . . royalty may be computed upon receipts from the marketing outlet for the
products, less the costs and expenses of marketing and transportation.” Id. Those
1
S Bar B also sought class action certification for itself and others similarly
situated.
2
S Bar B and Omimex reiterate that agreement on appeal.
2
statements, especially when taken with others in the court’s discussion, show that
the court adopted the “at the well” rule. See, e.g., Bice v. Petro-Hunt, L.L.C., 768
N.W.2d 496, 501–02 (N.D. 2009); Heritage Res., Inc. v. NationsBank, 939 S.W.2d
118, 122 (Tex. 1996); Sartor v. United Gas Pub. Serv. Co., 173 So. 103, 106–07
(La. 1937). It does not appear that the Montana courts have applied a different rule
over the ensuing years. See, e.g., Rummel v. Altamont Oil & Gas, Inc., No. DV-
07-64, slip op. at 4–8 (Mont. Dist. Ct. Oct. 15, 2010). As the parties have
acknowledged, that disposes of this case; thus we need not and do not address the
other issues raised before us on appeal.
AFFIRMED. Omimex is awarded its costs on appeal.
3