BRISCOE, Circuit Judge.
This complex litigation involves several oil and gas leases. The lessee, plaintiff Atlantic Richfield Company ("ARCO"), filed a claim for declaratory relief. The defendant lessors—the Farm Credit Bank of Wichita ("FCB"), Carol Koscove ("Koscove"), and members of the Garcia family ("the Garcias")—countered by filing a variety of counterclaims against ARCO. The district court issued a series of rulings resolving all of the parties' claims prior to trial. ARCO appeals three of these rulings, and the defendants appeal at least seven others. We exercise jurisdiction pursuant to 28 U.S.C. § 1291, affirm in part, and reverse in part.
In the 1970s, ARCO discovered that carbon dioxide ("CO
The parties' leases provide the starting point for all royalty calculations. The Garcias' lease expressly contemplates some form of a transportation deduction and states that royalties shall be based on market values determined "at the mouth of the well":
Id. at 276. FCB's lease is silent on the deductibility of transportation expenses. Like the Garcias' lease, however, the 1975 version of FCB's lease states that royalties shall be based on market values determined "at the mouth of the well":
Id. at 345. FCB's lease was amended and "corrected" in 1977. Among other things, the corrected amendment changes the royalty rate from 1/8 to 3/16, id. at 348, and adds a provision entitled "Gas Pricing":
In addition to the lease contracts, the question also arose as to whether ARCO's relationship with the Exxon Company ("Exxon") affected the parties' royalty obligations. ARCO executed an "Agreement on Principles" ("AOP") in 1981 that conveyed to Exxon a 50% interest in the Pipeline and the CO
As intended, CO
ARCO initiated this litigation by filing suit against FCB, Koscove, and other parties in July 1995. Among other things, the company requested a judicial declaration that "it has been and continues to be proper for ARCO to deduct the allocated share of all costs associated with transporting the CO
II. ARCO'S TRANSPORTATION DEDUCTION
Because the parties litigated the propriety of ARCO's transportation deduction in motions for summary judgment, our standard of review is de novo. See King of the Mountain Sports, Inc. v. Chrysler Corp., 185 F.3d 1084, 1089 (10th Cir.1999) (affirming that "[w]e review the grant of summary judgment de novo"). Summary judgment is appropriate if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R.Civ.P. 56(c). When applying this standard, we "view the evidence and draw all reasonable inferences therefrom in the light most favorable to the party opposing summary judgment." Martin v. Kansas, 190 F.3d 1120, 1129 (10th Cir.1999). "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Martin, 190 F.3d at 1129 (citation omitted). When the parties file cross motions for summary judgment, "we are entitled to assume that no evidence needs to be considered other than that filed by the parties, but summary judgment is nevertheless inappropriate if disputes remain as to material facts." James Barlow Family Ltd. Partnership v. David M. Munson, Inc., 132 F.3d 1316, 1319 (10th Cir.1997); see also Buell Cabinet Co. v. Sudduth, 608 F.2d 431, 433 (10th Cir.1979) ("Cross-motions for summary judgment are to be treated separately; the denial of one does not require the grant of another.").
A. Procedural history
The parties began by submitting cross-motions for summary judgment addressing the deductibility of transportation costs from the defendants' royalties. ARCO later withdrew its request for summary judgment against Koscove, stating that "certain unique facts and circumstances" indicated that "it was the intent of the parties to the Koscove lease that transportation costs not be deducted." Id. at 940. The district court then considered the balance of ARCO's motion and concluded that ARCO could deduct transportation expenses for its 50% share of the SMU CO
The defendants subsequently filed a separate motion for summary judgment asking the district court to rule that IDC, COC, and other depreciation costs could not be used by ARCO to reduce royalty payments. The court granted the motion in part, holding that under the terms of the defendants' leases "neither the cost of capital, nor the interest during construction are to be included or can be included as a matter of law in transportation costs." Id. at 3795. The court reasoned that IDC and COC were "ownership charges, not transportation charges." Id. at 3794. ARCO filed two motions to reconsider, both of which were denied. In its order denying ARCO's first motion to reconsider, the court reiterated that the defendants' lease contracts permitted deductions for "actual costs, that is, plaintiff's out of pocket expenses for transporting the gas. . . . Interest during construction is not authorized under the agreement, and cost of capital and plaintiff's hypothetical profit margin for transporting the gas are not actual costs." Id. at 3849-50 (emphasis in original). The court went on to conclude that operations and maintenance costs and depreciation expenses constituted "actual cost[s] of transporting the gas." Id. at 3850.
The district court thus made three important rulings bearing on ARCO's transportation deduction. The court determined that (1) ARCO could deduct transportation costs from FCB's and the Garcias' royalties, but not from Koscove's; (2) ARCO could not include IDC or COC in its transportation deduction, but could include other depreciation costs; and (3) ARCO and Exxon should share all transportation costs equally for purposes of computing the depreciation deduction.
B. Royalty calculations under FCB's lease
We must first determine whether the district court correctly construed FCB's lease. The Colorado Supreme Court recognizes that "[t]he primary goal of contract interpretation is to determine and give effect to the intention of the parties." USI Properties East, Inc. v. Simpson, 938 P.2d 168, 173 (Colo.1997); see also May v. United States, 756 P.2d 362, 369 (Colo.1988) ("It is axiomatic that a contract must be construed to ascertain and effectuate the mutual intent of the parties."). The parties' intent "is determined primarily from the language of the instrument itself and extraneous evidence of intent is only admissible where there is an ambiguity in the terms of the agreement." May, 756 P.2d at 369; see also New York Life Ins. Co. v. KN Energy, Inc., 80 F.3d 405, 411 (10th Cir.1996) (stating that under Colorado law a reviewing court must "ascertain the parties' intent at the time the document was executed, and that intent is to be determined primarily from the instrument itself"); Pepcol Mfg. Co. v. Denver Union Corp., 687 P.2d 1310, 1314 (Colo.1984) ("It is only where the terms of an agreement are ambiguous or are used in some special or technical sense not apparent from the contractual document itself that the court may look beyond the four corners of the agreement in order to determine the meaning intended by the parties."). In determining whether a contractual term is ambiguous, "the instrument's language must be examined and construed in harmony with the plain and generally accepted meaning of the words employed, and reference must be made to all the provisions of the agreement." May, 756 P.2d at 369 (quoting Radiology Prof'l Corp. v. Trinidad Area Health Ass'n, Inc., 195 Colo. 253, 577 P.2d 748,
1. Transportation expenses
The 1975 version of FCB's lease clearly permits deductions for transportation expenses. The original lease states that FCB's royalty shall be based on the "proceeds of the sale" at "the mouth of the well." By itself, the phrase "at the mouth of the well" necessarily incorporates a transportation deduction, since the nearest market for CO
3 Eugene Kuntz, Treatise on the Law of Oil and Gas § 40.5, at 356 (1989); see also 3 Williams & Meyers on Oil and Gas Law § 645.2, at 597-98, 601-02 (1999) (confirming that a royalty interest payable "at the well" is "usually subject to a proportionate share of the costs incurred subsequent to production," including "[t]ransportation charges or other expenses incurred in conveying the minerals produced from the well-head to the place where a buyer of the minerals takes possession thereof"). Even if we assume that the "at the mouth of the well" clause is silent on the allocation of transportation costs, Colorado law fills the void. The rule in Colorado is that "absent a lease provision to the contrary, the cost required to transport an otherwise marketable product to a distant market is to be deducted before the royalty is to be computed." Rogers v. Westerman Farm Co., 986 P.2d 967, 971 (Colo.Ct.App.1998); see also Garman v. Conoco, Inc., 886 P.2d 652, 654 n. 1 (Colo.1994) (noting that "[t]raditionally, the costs to transport gas to a distant market are shared by all benefitted parties").
Unable to identify any ambiguities in the original lease, FCB nonetheless argues that the "at the mouth of the well" clause cannot support a transportation deduction for two reasons. First, FCB asserts that there was no "trade usage or custom relating to the leasing, production or transportation of CO
Both of these arguments are red herrings. As discussed above, the phrase "at the mouth of the well" in the original lease either (a) expressly contemplates a transportation deduction; or (b) is silent on the issue, in which case the parties are required to share transportation expenses under state law. FCB's purported ignorance of any "trade usage" associated with the phrase "at the mouth of the well" in
This brings us to the 1977 amendments, which arguably trump the terms of the original lease. The Gas Pricing provision appears to shift the focus of FCB's royalty calculation from the "proceeds of the sale" at "the mouth of the well" to the highest of three "current market price[s] at the time the gas is produced and sold." Jt.App. at 352. The Gas Pricing provision further states that it overrides "[a]nything to the contrary." Id. Without any immediate market in Colorado, ARCO necessarily had to account for transportation costs under the original lease to determine the proceeds of any sale "at the mouth of the well." In contrast, the Gas Pricing provision in the amended lease ostensibly requires ARCO to pay a 3/16 royalty on the highest of three specified amounts at the moment of any CO
There is, however, an alternative interpretation of the Gas Pricing provision that is equally reasonable. As ARCO points out, the original lease arguably "provided the critical information for calculating FCB's royalty: (i) the rate—`1/8', (ii) the principal or corpus on which the royalty is calculated—`proceeds of the sale' and (iii) the place of valuation—`at the mouth of the well.'" ARCO's Response Brief To Opening Brief Of FCB at 5. Because the Gas Pricing provision "does not mention the place of valuation," id. at 9, it is conceivable that the 1977 amendments had no effect on the "at the mouth of the well" language in the 1975 version of the lease. The amendments do not expressly contradict or remove this language, and adopt by reference most of the terms of the original lease "as if fully set out herein." Jt.App. at 348, 351. Once again, nothing within the four corners of the contract suggests that this alternative interpretation of the Gas Pricing provision is unreasonable.
We therefore conclude that the Gas Pricing provision is ambiguous when juxtaposed with the "at the mouth of the well" clause in the original lease. It is beyond cavil that "[t]erms used in a contract are ambiguous when they are susceptible to more than one reasonable interpretation." B & B Livery, Inc. v. Riehl, 960 P.2d 134, 136 (Colo.1998). Once a contract is determined to be ambiguous, "the meaning of its terms is generally an issue of fact to be determined in the same manner as other disputed factual issues." Dorman v. Petrol Aspen, Inc., 914 P.2d 909, 912 (Colo. 1996) (citation omitted); see also Polemi v. Wells, 759 P.2d 796, 798 (Colo.Ct.App. 1988) (stating that when an ambiguity "cannot be resolved by reference to other contractual provisions," extrinsic evidence must be considered "to determine the mutual intent of the parties at the time of contracting"). The parties' appellate briefs refer to several types of extrinsic evidence that may help resolve this issue of fact, including (1) statements by FCB's chief negotiator suggesting that he inserted the Gas Pricing provision in 1977 to replace the "at the mouth of the well" clause; (2) correspondence from 1977 suggesting that ARCO did not bargain away its right to deduct transportation expenses;
2. Highest price
FCB also contends that the amended lease precludes ARCO from (1) using a weighted average price (WAP) to calculate royalties, and (2) basing the WAP in part on the value of Exxon's CO
FCB's Opening Brief at 12-13 (footnote omitted). According to FCB, this methodology is inconsistent with the phrase "amount received by Atlantic for its share of the gas" in subsection (3) of the Gas Pricing provision.
We conclude the "amount received" language in the Gas Pricing provision does not foreclose the use of a WAP. "Amount" typically means "aggregate" or "the total number or quantity." Webster's Third New Int'l Dictionary 72 (unabridged ed.1993). That definition indicates that the "amount received" in the amended lease refers to the aggregate price received by ARCO from all CO
On the flip side of the coin, however, the use of Exxon's sales to calculate the WAP disregards the plain language of the lease. Subsection (3) of the Gas Pricing provision does not say that a potential basis for FCB's royalties is "the amount received by Atlantic and Exxon" for their respective shares of the CO
C. The components of the transportation deduction
1. IDC and COC
Whether IDC and COC are deductible transportation expenses depends in part on the language of the parties' lease contracts. We begin with the Garcias'
We need not complete the second task, because the phrase "cost of transporting" is decidedly ambiguous. The phrase does not expressly include IDC and COC. Nor does it expressly exclude IDC and COC. Moreover, several permutations of the word "cost" have been deemed ambiguous by Colorado courts. For example, in Tripp v. Cotter Corp., 701 P.2d 124 (Colo. Ct.App.1985), a Colorado court of appeals concluded that the phrase "cost of milling" was ambiguous:
Id. at 126. Other Colorado cases reach similar results. See Pepcol, 687 P.2d at 1314 (finding the term "at seller's cost" to be ambiguous); Southgate Water Dist. v. City and County of Denver, 862 P.2d 949, 955 (Colo.Ct.App.1992) (deeming the phrase "actual costs" to be ambiguous); Hott v. Tillotson-Lewis Constr. Co., 682 P.2d 1220, 1223 (Colo.Ct.App.1983) (finding the term "cost-plus" to be ambiguous).
Generic dictionary definitions also provide little assistance in resolving this ambiguity. The leading definition of "cost" is "the amount or equivalent paid or given or charged or engaged to be paid or given for anything bought or taken in barter or for service rendered." Webster's Third New Int'l Dictionary 515 (unabridged ed.1993); see also Black's Law Dictionary 345 (6th ed.1990) (defining "cost" as "expense," "price," and "[t]he sum or equivalent expended, paid or charged for something"). "Transport" is normally defined as "to transfer or convey from one person or place to another," and "transportation" is commonly thought to mean "an act, process, or instance of transporting or being transported." Webster's Third New Int'l Dictionary 2430 (unabridged ed.1993); see also Black's Law Dictionary 1499 (6th ed.1990) (defining "transport" as "[t]o carry or convey from one place to another," and "transportation" as "[t]he movement of goods or persons from one place to another, by a carrier"). It is not obvious whether IDC and COC—i.e., the returns that might have been achieved through alternative investments—constitute "amounts paid or given or charged" to "transfer or convey" something from one place to another. Given the uncertain meaning of the Garcias' lease, we reverse the district court's grant of summary judgment and remand this issue for additional proceedings.
Next we address FCB's lease contract, which does not contain the phrase "cost of transporting." Because FCB's lease does not address the deductibility of transportation expenses, our review of the contract is governed by Garman. Garman and its progeny establish that lessees may deduct reasonable "transportation costs," absent a lease provision to the contrary. See Rogers, 986 P.2d at 971, 975. Hence, under the Garman-Rogers rubric ARCO's IDC and COC are deductible if they (1) qualify as transportation costs, and (2) are reasonable. The definition of "transportation costs" is a question of law, while the reasonableness of any given transportation expense is a question of fact. Cf. Garman, 886 P.2d at 661 n. 28 (remarking that the deductibility of certain
We conclude that IDC and COC are, in fact, deductible unless the parties provide otherwise in the lease contract. No Colorado case directly addresses this issue. Nonetheless, at least two other sources of authority suggest that IDC and COC fall within the definition of "transportation costs" for purposes of royalty deductions. First, as the Colorado Supreme Court intimated in Garman, federal regulations governing deductions for post-production expenses are "instructive." 886 P.2d at 661 n. 28. These regulations permit a "transportation allowance" based on the "reasonable actual costs" incurred by certain lessees. 30 C.F.R. § 206.157(b) (1998). As implemented by the Minerals Management Service (a bureau of the United States Department of the Interior), federal regulations allow ARCO to deduct IDC and COC when calculating royalties on government leases. Second, Colorado tax regulations enacted in 1996 allow "return on investment" and "return of investment" deductions for transportation equipment. Jt.App. at 2375-76, 2434-36, 2442. These regulations likewise suggest that IDC and COC constitute deductible expenses.
The writings of Professor Owen L. Anderson—upon which the defendants heavily rely in their appellate brief—also support ARCO's position. In a 1994 article, Professor Anderson opined that an oil and gas lessee often has "an incentive to overstate post-production costs in order to minimize its royalty-payment obligations," and that courts should "consider only reasonable and necessary costs, not to exceed actual direct costs, when determining the lessee's royalty obligation." Owen L. Anderson, Calculating Royalty: "Costs" Subsequent To Production—"Figures Don't Lie, But. . . .", 33 Washburn L.J. 591, 597 (1994). Professor Anderson thus concluded that in what are known as "wellhead value" jurisdictions, "a return on investment `cost' should be eliminated from the work-back royalty calculation or—at the very least—be limited to a cost-of-money charge, such as the prime rate of interest." Id. at 637. In a forthcoming piece, however, Professor Anderson clarifies his 1994 article and states that a different rule should attach in "marketable product" jurisdictions such as Colorado:
On this issue of first impression, we hold that ARCO's depreciation deduction cannot be based on Exxon's capital expenditures. The defendants' leases require ARCO to make royalty payments on all CO
Practical considerations also support the conclusion that ARCO cannot use Exxon's capital expenditures to reduce the defendants' royalties. First, ARCO cannot use Exxon's capital expenditures to obtain tax deductions. ARCO offers no objection to the following description of joint venture tax returns filed by the two companies: "These returns conform to . . . the 1981 AOP and the amendment thereto, including ARCO and Exxon's tax partnerships. In these documents ARCO and Exxon receive credit for depreciation expense for the capital each provided to the venture. ARCO does not report a depreciation expense based on Exxon capital and vice versa." Opening Brief of Koscove, FCB, and Garcias at 54. Second, to calculate their royalty dividends the defendants should not be forced to examine the financial reports of third parties like Exxon. That ARCO decided to execute an agreement with Exxon does not change the equation. Through the AOP, ARCO voluntarily conveyed to Exxon a 50% interest in CO
There is, however, yet another factual matter that must be remanded to the district court for consideration. ARCO contends that it "paid" for Exxon's unequal capital contribution by assigning 50% of the SMU CO
III. THE DEFENDANTS' PREJUDGMENT INTEREST
Well-worn principles govern our review of the district court's grant of prejudgment interest. "A federal court sitting in diversity applies state law, not federal law, regarding the issue of prejudgment interest." Chesapeake Operating, Inc. v. Valence Operating Co., 193 F.3d 1153, 1156 (10th Cir.1999). An award of prejudgment interest "is generally subject to an abuse of discretion standard of review on appeal." Driver Music Co. v. Commercial Union Ins. Companies, 94 F.3d 1428, 1433 (10th Cir.1996); accord Chesapeake Operating, 193 F.3d at 1156. That said, "any statutory interpretation or legal analysis underlying such an award is reviewed de novo." Driver Music, 94 F.3d at 1433.
A. Procedural history
The issue of prejudgment interest arose after the district court ruled that ARCO improperly deducted IDC and COC from the defendants' royalties. The parties stipulated that as a result of these deductions, ARCO withheld $988,909 from FCB and $687,556 from the Garcias. Applying Colorado Revised Statutes ("C.R.S.") § 5-12-102(1)(b), the court awarded prejudgment interest on these sums at an annually compounded rate of 8%. The court denied the defendants' request for moratory interest pursuant to C.R.S. § 5-12-102(1)(a). FCB and the Garcias appeal this ruling. The court also rejected ARCO's argument that prejudgment interest after July 1, 1990 should be governed by C.R.S. § 34-60-118.5. ARCO appeals this ruling.
B. C.R.S. § 34-60-118.5
ARCO contends that the district court should have applied § 34-60-118.5 of the Colorado Oil and Gas Conservation Act, not § 5-12-102, to determine the rate of prejudgment interest. Section 34-60-118.5 governs certain proceedings before the Colorado Oil and Gas Commission ("Commission"), see generally Grynberg v. Colorado Oil and Gas Conservation Comm'n, 7 P.3d 1060, 1062-64 (Colo.Ct. App.1999) (discussing the Commission's jurisdiction under the statute), and contains the following provision:
C.R.S. § 34-60-118.5(4). The statute defines a "payee" as a person "legally entitled to payment from proceeds derived
ARCO's argument is twofold. First, ARCO labels § 34-60-118.5 as a "specific" (rather than a "general") provision, and asserts that nothing in the statute "limits the interest rate on `proceeds withheld' to Oil and Gas Commission proceedings." ARCO's Opening Brief at 63. Second, ARCO draws an analogy to Bulova Watch Co. v. United States, 365 U.S. 753, 81 S.Ct. 864, 6 L.Ed.2d 72 (1961). In that case a claimant recovered a judgment against the United States for "an overpayment of its excess profits taxes." Id. The claimant and the government disputed whether the provisions of 28 U.S.C. § 2411(a) or the provisions of § 3771(e) of the Internal Revenue Code governed the date from which interest accrued. The claimant asserted that § 2411(a) controlled because his judgment was entered by a court rather than an administrative body. The Supreme Court rejected the claimant's position, reasoning that the effect of the claimant's argument would make "the starting date of interest in such cases dependent upon the forum selected by the taxpayer. . . . [I]t is almost certain that Congress did not intend such an anomalous, nonuniform and discriminatory result." Id. at 757, 81 S.Ct. 864.
Neither of these arguments demonstrates that the district court's refusal to apply § 34-60-118.5 was erroneous. As in most jurisdictions, in Colorado "[i]t is a well-accepted principle of statutory construction that in the case of conflict, a more specific statute controls over a more general one." Delta Sales Yard v. Patten, 892 P.2d 297, 298 (Colo.1995). But that general principle does not control the outcome of this case, because there is no inherent conflict between § 34-60-118.5 and § 5-12-102. By its terms, § 34-60-118.5 only governs enforcement proceedings before the Commission and is inapplicable to claims for breach of contract:
Grynberg, at 1063. Indeed, through its amendment of the statute in 1998, the Colorado legislature clarified and reinforced its intent "to exclude the resolution of contractual disputes from the jurisdiction of the Commission." Id. at *3; see also C.R.S. § 34-60-118.5(5) (stating that the Commission "shall decline jurisdiction" over any "bona fide dispute over the interpretation of a contract for payment"). Unlike the claimant in Bulova, therefore, a Colorado litigant alleging a breach of an oil and gas royalty agreement cannot select among different fora. Instead, that litigant must assert his claim in a court of law, where § 5-12-102 establishes the rate of prejudgment interest. In addition, even if a litigant alleging a breach of an oil and gas agreement could choose between administrative and judicial tribunals, Bulova would not necessarily control. The law of oil and gas "is unlike any other area," see supra n. 7, and the Supreme Court's construction of the Internal Revenue Code hardly limits the Colorado General Assembly's ability to prescribe different rates of prejudgment interest for different types of oil and gas proceedings.
C. Moratory interest
Moratory interest is governed by § 5-12-102(1). That statute "allows a court to award interest in `an amount which fully recognizes the gain or benefit realized by the person withholding such money,' or at the statutory rate of eight
In the present case, the district court held that the defendants failed to show ARCO's return on wrongfully withheld royalties was greater than 8%. The defendants offered to prove that (1) ARCO "had the use of these underpayments of royalty in its own corporate treasury;" (2) the appropriate measure of ARCO's gain was its "return on equity" ("ROE"), or "the net income of the company divided by the average amount of equity;" and (3) ARCO's ROE for the period in question was approximately 16%. Jt.App. at 7182, 7183-86, 7292. The court concluded that § 5-12-102 required a "showing [of] what happened to the specific money withheld," and found that the defendants' proffered evidence did not address "what happened with this particular money." Id. at 7212. Because this evidence was "speculative" and there was "not sufficient tracing of the funds," the court applied § 5-12-102(1)(b). Id. at 7211, 7212.
The district court did not commit reversible error by refusing to award moratory interest. Section 5-12-102(1)(a) requires "specific proof" of the amount gained from withheld funds. See, e.g., Northwest, 943 F.2d at 1229; Lowell Staats, 878 F.2d at 1270; Davis Cattle, 393 F.Supp. at 1194. The defendants' return on equity calculation lacks the requisite specificity. As ARCO notes in its appellate brief, the values undergirding the calculation come from annual reports that
ARCO's Answer Brief In Response To Opening Brief Of Koscove, FCB and Garcias at 53 (citations omitted). The annual reports do not contain a ROE for the SMU, ARCO Permian (the ARCO division responsible for the SMU), or even ARCO's domestic oil and gas operations. Moreover, the value of the additional royalties owed is dwarfed by ARCO's net income, making it difficult to say with certainty what gain ARCO specifically derived by withholding those payments.
The defendants' arguments to the contrary are not compelling. The defendants maintain that the district court's ruling renders § 5-12-102(1)(a) "inapplicable to ARCO or virtually any company which wrongfully withholds another's money," because companies like ARCO could create "an effective defense against claims for moratory interest" simply by "co-mingling" funds with other corporate assets. Opening Brief Of Koscove, FCB, and Garcias at 61-62. This argument sidesteps the rule that § 5-12-102 requires a claimant to specifically prove the gain or benefit received by the offending party—whether that party is an individual or a corporation. The "specific proof" requirement has been in force at least since the Davis Cattle decision in 1975, and in the interim the Colorado legislature has declined to amend the statute. Perhaps for that reason, courts routinely deny requests for moratory interest pursuant to § 5-12-102. See, e.g., Northwest, 943 F.2d at 1229; Lowell Staats, 878 F.2d at 1270-71; Chaparral, 849 F.2d at 1291 & n. 4; James v. Coors Brewing Co., 73 F.Supp.2d 1250, 1256 (D.Colo.1999); FDIC v. Clark, 768 F.Supp. 1402, 1414-15 (D.Colo.1989); Ballow, 878 P.2d at 683-84. Indeed, over the last 25 years it appears that courts have approved awards of moratory interest in only two published opinions, neither of which is factually similar to the instant case. See Great Western Sugar, 778 P.2d at 273-75 (approving an award of moratory interest based on a three-part model designed to show the net profit resulting from the wrongful withholding of natural gas under a sales contract); Davis Cattle, 393 F.Supp. at 1194-95 (awarding moratory interest where the claimant demonstrated that the offending party "was able to leave $23-million of [its] credit line untapped" and save 11.5% in interest).
IV. THE DEFENDANTS' FRAUD COUNTERCLAIMS
A. Procedural history
Koscove and FCB each asserted counterclaims sounding in fraud.
FCB's claim survived ARCO's initial motions to dismiss, but Koscove's did not. After the district court denied ARCO's first motion to dismiss as untimely, the company sought judgment on the pleadings under Federal Rule of Civil Procedure 12(c). The court granted ARCO's
ARCO challenged FCB's re-pleaded fraud claim in two motions. The first was a motion for summary judgment, which the district court denied. As the scheduled trial date approached, ARCO filed a "Motion To Exclude Evidence Of Farm Credit's Alleged Fraud Damages." Id. at 3965. The court granted this motion, precipitating the dismissal of FCB's fraud claim. Id. at 5186, 6639, 6867. FCB appeals the grant of ARCO's motion to exclude.
B. Koscove's claim
A motion for judgment on the pleadings under Rule 12(c) is treated as a motion to dismiss under Rule 12(b)(6). Mock v. T.G. & Y. Stores Co., 971 F.2d 522, 528 (10th Cir.1992). Our standard of review is therefore de novo. Realmonte v. Reeves, 169 F.3d 1280, 1283 (10th Cir. 1999). We uphold a dismissal under Rule 12(b)(6) "only when it appears that the plaintiff can prove no set of facts in support of the claims that would entitle the plaintiff to relief." Mock, 971 F.2d at 529 (quoting Jacobs, Visconsi & Jacobs Co. v. City of Lawrence, 927 F.2d 1111, 1115 (10th Cir.1991)). We likewise "accept the well-pleaded allegations of the complaint as true and construe them in the light most favorable to the non-moving party." Realmonte, 169 F.3d at 1283; accord Mock, 971 F.2d at 529.
Even if we construe the allegations in her favor, Koscove's claim for fraudulent concealment is insufficient as a matter of law. Detrimental reliance is an essential element of a claim for fraudulent concealment. A plaintiff asserting such a claim must show
Ballow v. PHICO Ins. Co., 875 P.2d 1354, 1361 (Colo.1993); see also Alzado v. Blinder, Robinson & Co., 752 P.2d 544, 558 (Colo.1988) ("To claim damages from allegedly fraudulent statements, the plaintiff must establish detrimental reliance on the statements."). Here, Koscove concedes that she cannot plead detrimental reliance other than delay in filing suit. See Opening Brief Of Koscove, FCB and Garcias at 5, 42. Delay in filing suit, without more, does not satisfy the fifth element of a claim for fraudulent concealment—"action on the concealment resulting in damages." Koscove does not allege that her delay in filing suit permitted ARCO to successfully assert a statute of limitations defense. Nor does she allege that her delay caused any other form of damage. Because Koscove's fraudulent concealment claim contains no allegations of any injury, the district court properly dismissed it. Cf. Mills v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 703 F.2d 305, 308 (8th Cir.1983) (finding that a plaintiff failed to establish detrimental reliance because he did not allege that he was "barred from filing suit" as a consequence of the defendant's conduct); Werman v. Malone, 750 F.Supp. 21, 23 (D.Me.1990) (concluding that a plaintiff's bare-bones allegation that he "refrained from filing suit" as a result of the defendant's conduct was "insufficient as a matter of law to establish the element of detrimental reliance").
C. FCB's claim
The district court excluded evidence relating to FCB's fraud claim on two grounds. First, the court held that FCB inexcusably failed to include its theory of damages in the final pre-trial order. FCB initially alleged that, but for ARCO's fraudulent conduct, it would have taken its share of CO
The district court's exclusion of FCB's alleged fraud damages was proper. The only argument advanced by FCB on appeal is that evidence of its damages "was available to ARCO" through the report of FCB's expert. Opening Brief Of Koscove, FCB and Garcias at 62-63. FCB cites no evidence in the record and no case law to support its assertion. Under these circumstances, the district court's refusal to amend the pre-trial order cannot be deemed an abuse of discretion. See Koch, 203 F.3d at 1222 (explaining that a final pre-trial order "shall be modified only to prevent manifest injustice," and that "the burden of demonstrating manifest injustice falls upon the party moving for modification"). Similarly, FCB presents no argument on appeal concerning the district court's ruling that the proposed "mineral interest" damages were too speculative to go to a jury. FCB's failure to address this issue in its appellate brief constitutes a waiver. See Coleman v. B-G Maintenance Management of Colorado, Inc., 108 F.3d 1199, 1205 (10th Cir.1997) ("Issues not raised in the opening brief are deemed abandoned or waived."); Phillips v. Calhoun, 956 F.2d 949, 953-54 (10th Cir.1992) (observing that "[a] litigant who fails to press a point by supporting it with pertinent authority, or by showing why it is sound despite a lack of supporting authority or in the face of contrary authority, forfeits the point") (citation omitted).
V. THE DEFENDANTS' BREACH OF FIDUCIARY DUTY COUNTERCLAIMS
A. Procedural history
FCB, Koscove, and the Garcias asserted counterclaims against ARCO for breach of fiduciary duty. The defendants alleged that ARCO, as the operator of the SMU, breached a fiduciary duty "[b]y selling and using the gas at less than fair market value" and "by wrongfully deducting . . . post-production costs and expenses without disclosure." Jt.App. at 185 (¶ 96). The defendants averred that they "d[id] not have access to the records and information" maintained by ARCO, and that ARCO occupied "a position of superiority" with respect to this revenue and royalty information. Id. at 146 (¶ 104). The defendants reiterated their allegation that ARCO brushed aside "repeated demands for an accounting and for proper payment of royalty owed." Id. (¶ 109).
As it did with FCB's re-pleaded fraud claim, ARCO challenged the defendants' breach of fiduciary duty claims in two motions. After an unsuccessful attempt to secure judgment on the pleadings, ARCO filed a motion for summary judgment. The court granted the summary judgment
B. ARCO's alleged duty
Prior decisions from Colorado and this circuit strongly suggest that a lessee-lessor relationship, even if it encompasses the operation of an oil and gas unit, does not automatically create fiduciary responsibilities. Cases dealing with "overriding" royalty owners are illustrative. For example, the court in Degenhart v. Gold King Petroleum Corp., 851 P.2d 304 (Colo.Ct. App.1993) commented that "[o]rdinarily, the mere reserving of an overriding royalty in the assignment of an oil and gas lease does not create a confidential or fiduciary relationship." Id. at 306; see also id. (stressing that the record in the case was "devoid of any evidence indicating any personal or other special relationship between plaintiffs and defendant which could support the existence of a confidential or fiduciary relationship"). The Colorado Supreme Court expressly endorsed this portion of the Degenhart opinion in Garman. See 886 P.2d at 659 n. 23 (stating that the Degenhart court "correctly explained the reservation of an overriding royalty interest does not create a confidential or fiduciary relationship"). Furthermore, at least one case from this circuit indicates that a lessee who serves as a unit operator generally owes lessors only a duty of good faith, not a fiduciary duty:
Amoco Prod. Co. v. Heimann, 904 F.2d 1405, 1412 (10th Cir.1990) (citations omitted). In view of these precedents, we predict that the Colorado Supreme Court would not categorize as fiduciary all lessee-lessor relationships involving unitization agreements.
However, that a fiduciary duty does not necessarily arise from a lessee-lessor relationship does not mean a fiduciary duty never arises from such a relationship. Colorado courts recognize that a variety of relationships can create fiduciary responsibilities under certain circumstances, even if those relationships are not fiduciary per se. See, e.g., Paine, Webber, Jackson & Curtis, Inc. v. Adams, 718 P.2d 508, 517-18 (Colo.1986) (declining to "adopt a rule that a stockbroker/customer relationship is, per se, fiduciary in nature," and holding that the existence of any fiduciary obligations turns on "proof of circumstances"); Bohrer v. DeHart, 943 P.2d 1220, 1225 (Colo.Ct.App.1996) (remarking that a clergy-parishioner relationship "may be fiduciary in nature," depending on the facts of the case); Dolton v. Capitol Fed. Sav. and Loan Ass'n, 642 P.2d 21, 23 (Colo.Ct.App.1981) ("While there is no per se fiduciary relationship between a borrower and lender, a fiduciary duty may arise from a business or confidential relationship . . . ."). These cases demonstrate that "the existence of a fiduciary or confidential relationship is generally a question of fact for the jury." Elk River Associates v. Huskin, 691 P.2d 1148, 1152 (Colo.Ct. App.1984); see also Winkler v. Rocky Mountain Conference of the United Methodist
Applying these authorities to the case at hand, we conclude the district court erred when it entered summary judgment as a matter of law on the defendants' fiduciary duty claims. The district court granted ARCO's motion for summary judgment based on Degenhart and Garman. Our review of the facts asserted by the parties convinces us there are material facts at issue and we remand the case for further factual development of this issue. The proceedings on remand should take into account Colorado's definition of a "fiduciary": "a person having a duty, created by his undertaking, to act primarily for the benefit of another in matters connected with the undertaking." Destefano v. Grabrian, 763 P.2d 275, 284 (Colo.1988). Further proceedings should also take into account Colorado's operative definition of a "fiduciary relationship":
Johnston v. CIGNA Corp., 916 P.2d 643, 646 (Colo.Ct.App.1996); see also Winkler, 923 P.2d at 157 (citing the Restatement (Second) of Torts § 874 (1979) for an identical proposition); Dolton, 642 P.2d at 23 (indicating that "a fiduciary duty may arise from a business or confidential relationship which impels or induces one party `to relax the care and vigilance it would and should have ordinarily exercised in dealing with a stranger'") (citation omitted).
VI. THE DEFENDANTS' FAIR MARKET VALUE COUNTERCLAIMS
Our review of the defendants' fair market value counterclaims is controlled by Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993) and Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999). Daubert requires a trial judge to "ensure that any and all scientific testimony or evidence admitted is not only relevant, but reliable." 509 U.S. at 589, 113 S.Ct. 2786. This inquiry is "a flexible one," not governed by "a definitive checklist or test." Id. at 593, 594, 113 S.Ct. 2786. Potentially pertinent factors include whether the expert's theory or technique (1) "can be (and has been) tested," id. at 593, 113 S.Ct. 2786; (2) "has been subjected to peer review and publication," id.; (3) has a "known or potential rate of error" with "standards controlling the technique's operation," id. at 594, 113 S.Ct. 2786; and (4) enjoys "widespread acceptance" in the relevant scientific community. Id. Kumho Tire establishes that the "gatekeeping" requirement set forth in Daubert "applies not only to testimony based on `scientific' knowledge, but also to testimony based on `technical' and `other specialized' knowledge." 119 S.Ct. at 1171 (citation omitted). The objective of that requirement "is to make certain that an expert, whether basing testimony upon professional studies or personal experience, employs in the courtroom the same level of intellectual rigor that characterizes the practice of an expert in the relevant field." Id. at 1176.
Kumho Tire also establishes that "a court of appeals is to apply an abuse-of-discretion standard when it `review[s] a trial court's decision to admit or exclude expert testimony.'" Id. (quoting General Elec. Co. v. Joiner, 522 U.S. 136, 138-39, 118 S.Ct. 512, 139 L.Ed.2d 508 (1997)); accord Summers v. Missouri Pacific R.R. Sys., 132 F.3d 599, 603 (10th Cir.1997). This standard "applies as much to the trial court's decisions about how to determine reliability as to its ultimate conclusion." Kumho Tire, 119 S.Ct. at 1176. As a general matter, a district court abuses its discretion "when it renders `an arbitrary, capricious, whimsical, or manifestly unreasonable judgment.'" Copier v. Smith &
A. Procedural history
The defendants' fair market value counterclaims rested in large part on the testimony of their expert witness, economist James Smith. ARCO filed a motion in limine to preclude Smith from testifying, arguing that Smith's opinions were speculative, based on unsupported hypotheses, and unreliable. At a hearing the court advised the defendants that it would allow Smith to render opinions based on "actual sales" of CO
Before ruling on ARCO's motion in limine, the district court held an in camera evidentiary hearing. Smith testified at the hearing and was subject to cross-examination. After listening to Smith's testimony and reviewing the papers submitted by the parties, the court concluded that Smith "disregarded the actual sales data of carbon dioxide gas in West Texas" and "failed to look to comparable sales of CO
B. Smith's theory of valuation
The valuation theory in Smith's expert report proceeds along the following lines. Smith's initial premise is that "a high percentage" of the CO
According to Smith, ARCO and Exxon "are not alone in producing carbon dioxide primarily to meet their own needs." Id. Smith notes that the industry is "vertically integrated," id., since the same firms that produce CO
Id. (footnotes omitted). As a result, "most of the carbon dioxide moves within, not between, firms, and therefore the market price is not observed." Id.
Against this backdrop, Smith avers that "third-party sales of carbon dioxide in West Texas" do not provide "a reliable indicator of fair market value." Id. at 4857. Because ARCO supplies CO
Smith then turns his attention to the actual market value of CO
Id. (footnotes omitted). Thus, "even if arms-length prices were available from other geographic areas or other markets, the amount that purchasers would be willing to pay for use of carbon dioxide in those applications would understate the value" of CO
Because no "direct indicator" of fair market value is available, Smith focuses on "indirect indicators" of what CO
C. Basis for exclusion
The district court did not abuse its discretion by excluding Smith's testimony. The court initially examined some of the factors listed in Daubert, and found that (1) Smith's opinions were formed specifically for this litigation; (2) Smith had not employed the profit maximization theory on previous occasions to determine the value of CO
The defendants offered Smith's testimony as a means of determining the "market value" to which their lease contracts referred. "Market value" represents "the price that would be paid by a willing buyer to a willing seller in a free market." 3 Eugene Kuntz, Treatise on the Law of Oil and Gas § 40.4, at 329 (1989); see also Black's Law Dictionary 597 (6th ed.1990) (defining "fair market value" as "[t]he amount at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of the relevant facts"); Rhodes v. Amoco Oil Co., 143 F.3d 1369, 1373 n. 4 (10th Cir.1998) (same). That being the case, when a lessee sells gas in an open and competitive market,
3 Eugene Kuntz, Treatise on the Law of Oil and Gas § 40.4, at 332 (1989) (footnotes omitted);
Id. § 40.4, at 337 (footnotes and citation omitted); see also Weymouth v. Colorado Interstate Gas Co., 367 F.2d 84, 88 (5th Cir.1966) (stating that market value "may be established by expert opinion" or by "[e]vidence of sales of comparable properties") (citation omitted).
While expert testimony based on hypothesis can (and sometimes must) be used to establish market value, courts tend to prefer evidence derived from actual sales. For instance, in Ashland Oil, Inc. v. Phillips Petroleum Co., 554 F.2d 381 (10th Cir.1975), we intimated that "comparable sales or current market price is the best" and "by far the preferable method" for determining value. Id. at 387; see also id. (commenting that the expert testimony presented in the case, "[n]o matter how interesting" as a matter of theory, was "only opinion evidence" and did not "establish facts"); cf. Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 242, 113 S.Ct. 2578, 125 L.Ed.2d 168 (1993) ("Expert testimony is useful as a guide to interpreting market facts, but it is not a substitute for them."). Accordingly, even if the relevant market is not perfectly competitive, "it still makes better sense to begin with the collective judgment expressed in the market price" than to start with "a wholly subjective pronouncement of worth." Campbell v. United States, 228 Ct.Cl. 661, 661 F.2d 209, 221 (1981). By the same token, when determining market value "[c]ompletely comparable sales are not likely to be found" and "[s]ales that have some different characteristics must be considered." Piney Woods Country Life Sch. v. Shell Oil Co., 726 F.2d 225, 239 (5th Cir.1984); see also id. (suggesting that a court "should not dismiss fairly comparable sales out of hand because of certain incomparable qualities").
Judged by these standards, the district court's conclusion that Smith strayed too far from the available sales data cannot be described as "manifestly unreasonable." For example, the prices received by ARCO from several CO
Moreover, the district court's conclusion that Smith unjustifiably disregarded sales data from all CO
Suffice it to say that our standard of review plays a major role in the disposition of this issue. Whether the existence of other markets and the sales data presented by ARCO fatally undermine Smith's theory is eminently debatable. If our review were de novo, we might very well conclude that Smith's theory explains or otherwise accounts for these markets and data. When we apply an abuse of discretion standard, however, "we defer to the trial court's judgment because of its first-hand ability to view the witness or evidence and assess credibility and probative value." Towerridge, Inc. v. T.A.O., Inc., 111 F.3d 758, 763 (10th Cir.1997) (quoting Moothart v. Bell, 21 F.3d 1499, 1504 (10th Cir.1994)). With that standard in mind, we affirm the district court's exclusion of Smith's testimony.
VII. ARCO'S STATUTE OF LIMITATIONS DEFENSE
A. Procedural history
The final issue for review has a brief procedural history. In a motion for judgment as a matter of law, ARCO asserted a statute of limitations defense against some of the Garcias' counterclaims. Citing C.R.S. § 13-80-109, the district court held that the counterclaims were timely because they (1) "arose out of the same transaction that is the subject matter of ARCO's declaratory judgment claim;" and (2) "were filed within one year after ARCO initiated" its claim for declaratory relief. Jt.App. at 3735. ARCO appeals this ruling, which we review de novo. See King of the Mountain Sports, 185 F.3d at 1089.
B. C.R.S. § 13-80-109
The focal point of the parties' arguments on appeal is § 13-80-109. That statute states in full:
As interpreted by the Colorado courts, this provision "makes it clear that its purpose is to allow a party against whom a claim has initially been asserted to plead a stale claim only in response to the claim asserted against that party and only if it arises out of the same transaction or occurrence, or the same series thereof." Duell v. United Bank of Pueblo, 892 P.2d 336, 340-41 (Colo.Ct.App.1994); see also id. at 343 (stating that the statute brings Colorado "into line" with "the majority of jurisdictions which allow the use of stale claims defensively") (Tursi, J., concurring).
We reject at the outset ARCO's proposed construction of § 13-80-109. ARCO principally contends that (1) § 13-80-109 "says nothing about reviving all
Even so, the district court erred when it applied § 13-80-109 to the Garcias' counterclaims. To trigger the statute, one party must seek relief against a "defending party." That did not happen in this case. In its declaratory judgment action, ARCO asserted no claim against the Garcias. Because the Garcias were not named as defendants, ARCO was not obligated to serve them. The Garcias essentially named themselves as defendants in 1997, when they sought and received permission to intervene. By that time, however, well over a year had elapsed since ARCO filed its claim for declaratory relief in 1995. By leaving the Garcias out of its complaint, ARCO eliminated the risk that it would be exposed to defensive counterclaims that otherwise would have been barred by the statute of limitations. By the Garcias' reasoning, a party who previously sat on its hands could automatically revive a "stale" claim arising out of a common transaction or occurrence by seeking and obtaining leave to intervene as a defendant. That stretches the language of § 13-80-109 too far. Consequently, we vacate the district court's ruling and remand the case to determine whether the Garcias' claims are in fact barred by the applicable statute(s) of limitation.
Our ruling today is necessarily multifaceted.
1. We REVERSE the district court's ruling that FCB's lease unambiguously permits ARCO to deduct transportation expenses, and REMAND this issue for additional proceedings. On remand the district court should determine what extrinsic evidence, if any, is relevant and admissible for the purpose of clarifying the meaning of the Gas Pricing provision in FCB's contract.
2. We AFFIRM the district court's ruling that FCB's lease permits ARCO to use a weighted average price under the third subsection of the Gas Pricing provision, but REVERSE the district court's ruling that the same provision permits ARCO to use amounts received by Exxon to calculate the weighted average price.
3. We REVERSE the district court's ruling that the phrase "cost of transporting" in the Garcias' lease unambiguously
4. As regards FCB's lease which was silent as to transportation costs, we REVERSE the district court's ruling that IDC and COC do not constitute "transportation costs" under Garman and its progeny. Unless the parties intended something to the contrary in their contracts, IDC and COC are "transportation costs" under Garman and its progeny. If the district court or a jury determines on remand that FCB's lease permits ARCO to deduct transportation expenses, then IDC and COC should be included in the calculation.
5. We REVERSE the district court's ruling permitting ARCO to deduct depreciation expenses based on Exxon's capital expenditures, and REMAND this issue to determine the amount ARCO actually contributed toward the development of the SMU and the Pipeline.
6. We AFFIRM the district court's ruling that C.R.S. § 5-12-102(1)(b), rather than C.R.S. § 34-60-118.5, governs the rate of prejudgment interest. If the district court or a jury determines on remand that the leases executed by FCB and the Garcias permit ARCO to deduct IDC and COC, this issue will become moot.
7. We AFFIRM the district court's ruling that the defendants failed to specifically prove their entitlement to moratory interest.
8. We AFFIRM the district court's ruling that Koscove failed to plead the element of detrimental reliance and thus failed to state a claim for fraudulent concealment.
9. We AFFIRM the district court's ruling that FCB failed to present or preserve a viable damages theory in support of its claim for fraud.
10. We REVERSE the district court's ruling that the defendants' breach of fiduciary duty counterclaims are insufficient as a matter of law and REMAND for further proceedings.
11. We AFFIRM the district court's ruling excluding the testimony of the defendants' expert, Dr. James Smith.
12. We REVERSE the district court's ruling that C.R.S. § 13-80-109 applies to the Garcias' counterclaims, and REMAND this issue to determine whether the Garcias' claims are barred by the applicable statute(s) of limitation.
Shamrock Oil & Gas Corp. v. Coffee, 140 F.2d 409, 410-11 (5th Cir.1944).