“In the present case, the reprehensibility of Shell’s conduct is heightened by its intentional deceit of the interest owners whose oil proceeds it held for their benefit…”
NANCY FULLER HEBBLE AND OTHERS vs SHELL OIL CO.
In May 2008, an Oklahoma jury ordered Shell Oil Co. to pay a whopping $66 million to five royalty owners for their share of the proceeds from a highly lucrative oil well dug in the early-1970s. The payments were awarded to two families who owned the land where Shell drilled for oil, but were never informed when Shell struck a huge reserve and built a well on the land in 1973.
Shell had threatened to drag the case out and in line with this policy, appealed against the jury verdict on various grounds. As Richard Wiseman, the Chief Ethics & Compliance Officer of Royal Dutch Shell plc is aware, the same threat to make litigation “drawn out and difficult” was once made to us in writing by Nigel Rowley of Mackrell Turner Garrett, the London law firm representing Shell, where Mr Wiseman begun his career as a lawyer. Shell had not realised that we too can also be difficult.
The following are extraordinary verbatim extracts from a recent decision by three Oklahoma appeal court judges who confirmed the verdict that Shell had deliberately defrauded the families:
OPINION BY CAROL M. HANSEN, Presiding Judge:
Defendant/Appellants, Shell Western E & P, Inc. and Shell Oil Company (collectively Shell), seek review of the trial court’s judgment based on a jury verdict in favor of Plaintiff/Appellees (Owners) for $13,205,916.00 in actual damages and $53,625,000.00 in punitive damages in Owners’ action for underpayment of oil and gas proceeds.
We find no error of law in the conduct of trial and affirm.
In 1985, Shell sold its interest in the Crews Lease to Maynard Oil Company (Maynard). Shell admits it failed to pay Owners $750,708.00 in net profits from 1973 through 1985.
In 1995, Owners filed the suit below against Shell and Maynard, seeking actual and punitive damages under theories of fraud and breach of statutory and quasi-fiduciary duties. Maynard settled with Owners and was dismissed. Shell filed multiple motions for summary judgment on statute of limitations grounds, among others.
The parties tried the matter to a jury in May 2008. The trial court bifurcated the issues of liability and actual damages from the issue of punitive damages. The jury found for Owners on their claims for (1) false representation, nondisclosure or concealment, deceit, or constructive fraud, and (2) breach of fiduciary duty. It awarded actual damages in the amount of$13,205,916.00. The jury then awarded $53,625,000.00 in punitive damages. The trial court entered judgment for Owners in the amount of $66,830,916.00.
The trial court made the requisite finding on the record and out of the presence of the jury there was “clear and convincing evidence of fraud, non-disclosure, concealment, deceit,” and lifted the cap on punitive damages. It then submitted the question of punitive damages to the jury.
We review the trial court’s initial determination of the presence of clear and convincing evidence of fraud for error of law.
The testimony of Shell’s division order analyst provided clear and convincing evidence Shell knew in 1988 it held oil proceeds belonging to Owners. The testimony of Shell’s designated corporate representative is clear and convincing evidence (1) Shell knew Owners did not know about the proceeds, (2) Shell did not tell Owners about the proceeds, (3) Shell knew Owners relied on Shell’s operating statements, and (4) Shell intended to keep Owners’ proceeds based on its position the statute of limitations had run in 1987, two years after it sold the Crews Lease to Maynard. Based on this record, we hold the trial court did not err as a matter of law in its initial determination of the presence of clear and convincing evidence of fraud.
In the present case, the reprehensibility of Shell’s conduct is heightened by its intentional deceit of the interest owners whose oil proceeds it held for their benefit while it owed a fiduciary duty to those owners arising from its resort to the police powers of the state in unitizing oil and gas interests.
For the foregoing reasons, the trial court’s judgment is AFFIRMED.
MITCHELL, C.J., and HETHERINGTON, J. (sitting by designation), concur.
18 DECEMBER 2009
Shell Oil weighs appeal of $66M verdict: 17 May 2008
“Maynard Oil Co. settled prior to trial for a confidential amount, leaving Shell Oil as the sole defendant at trial.”