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From our archives: Plaintiffs win $66 million from Shell Oil

Royal Dutch Shell evasion of royalties: Plaintiffs win $66 million from Shell Oil after making the mistake of relying on Shell’s “honesty and integrity”:

“Shell told us [in 1995] that if we didn’t want to accept a nuisance value settlement, they would drag the case out and my clients would be dead before they ever got the money,” said Calvert. “They ended up being partly right.”

Sat May 17, 2008

NEWSOK.COM: Shell weighs appeal in royalty case

By Jack Money

Shell Oil Co. is weighing an appeal of a $66 million verdict this month by a Stephens County jury in a royalties payment case, company officials said Friday.

The verdict stems from a case where five women claimed they were owed royalties that had not been paid since the early 1970s.

Background to case

The royalties involved a well on a 20-acre lease in a 640-acre unit between Ardmore and Duncan. The area is one of old production, in which more than 100 wells have been drilled.

The original agreement, executed in 1927, gave W.F. Daiber and P.C. Dings 25 percent interest in the well, with the remainder going to the original operating interest owner, Wilt Franklin Petroleum.

In 1948, the well’s operating interest changed hands, ending up with Shell Oil Co., which held the interest until 1985 when a Shell subsidiary sold the interest to Maynard Oil Co.

Descendants of Daiber and Dings continued receiving royalties throughout that time. But they claim they were told in 1994 by an informant that check stubs provided by Shell had not been accurate since the early 1970s, and later that Maynard had not corrected the problem.

Until being contacted by an informant, the plaintiffs — three daughters of Ed Galt, members of the P.C. Dings Trust, and two great-nieces of W.F. Daiber, did not realize they were owed money, their attorney, Randy Calvert, said.

The plaintiffs asked Maynard, which asked Shell about the informant’s claim but were unable to get any answers to their questions, prompting them to file the case in 1995. Calvertsaid Shell has admitted in writing to Maynard it was wrong, but still chose not to pay the owed funds. Maynard, meanwhile, settled its part of the case for an undisclosed amount.

What were the results?

The verdict awards the plaintiffs about $13 million for owed interest payments of about $1 million, plus interest, and $53 million in punitive damages. Calvert said his clients were relying on Shell, then Maynard’s, honesty and integrity.

“When someone gets a statement from an oil company, it is very difficult to discover if something has been concealed or hidden,” he said. “So, there is a certain amount of trust required by the system, and Shell breached that trust.”

Calvert said it appears from case documents that royalty owners in at least one other, nearby lease were shorted royalties as well.

A Shell spokesman said Friday the company disagreed with the jury’s verdict.

“We have solid grounds for an appeal,” said Kelly Coone op de Weegh, a senior communications adviser for Shell Exploration and Production.

ENDS

RELATED ARTICLES

Shell Oil weighs appeal of $66M verdict: 17 May 2008

Duncan Banner Daily Newspaper: Foreman explains $66 million verdict: 30 May 2008

Verdicts & Settlements January 13, 2009: Shell Oil to pay $66M to royalty owners: 13 January 2009

Extract

It took nearly four decades, but an Oklahoma jury ordered Shell Oil Co. to pay $66 million to five royalty owners (several of them deceased) for their share of a lucrative oil well dug in the early-1970s. The payments will go to two families who owned the land where Shell drilled for oil but were never informed when the company struck a huge reserve and built a well on the land in 1973.

Time was not an ally for plaintiffs’ attorney Randy Calvert, given that it took 20 years for his clients to even realize there was a well. Once they finally filed a complaint in 1995, Shell and then-lease owner Maynard Oil Co. switched counsel and dragged their feet on the case.

“Shell told us [in 1995] that if we didn’t want to accept a nuisance value settlement, they would drag the case out and my clients would be dead before they ever got the money,” said Calvert. “They ended up being partly right.”

Maynard Oil Co. settled prior to trial for a confidential amount, leaving Shell Oil as the sole defendant at trial.

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