Pennaco Energy, Inc. v. Brett L. Sorenson, Trustee of the Brett L. Sorenson Trust Dated November 2, 2011

IN THE SUPREME COURT, STATE OF WYOMING
2016 WY 34
OCTOBER TERM, A.D. 2015
March 11, 2016
PENNACO ENERGY, INC.,
Appellant
(Defendant),
v.
S-15-0210
BRETT L. SORENSON, Trustee of the
Brett L. Sorenson Trust dated
November 2, 2011,
Appellee
(Plaintiff).
Appeal from the District Court of Sheridan County
The Honorable William J. Edelman, Judge
Representing Appellant:
Marie R. Yeates and Michael A. Heidler of Vinson & Elkins, L.L.P., Houston,
Texas; Mark R. Ruppert, Isaac N. Sutphin, and Jeffrey S. Pope of Holland & Hart,
LLP, Cheyenne, Wyoming; Patrick H. Martin, Professor of Law, Louisiana State
University. Argument by Ms. Yeates.
Representing Appellee:
Kendal R. Hoopes of Yonkee & Toner, LLP, Sheridan, Wyoming
Before BURKE, C.J., and HILL, DAVIS, FOX, and KAUTZ, JJ.
NOTICE: This opinion is subject to formal revision before publication in Pacific Reporter Third.
Readers are requested to notify the Clerk of the Supreme Court, Supreme Court Building,
Cheyenne, Wyoming 82002, of any typographical or other formal errors so that correction may be
made before final publication in the permanent volume.
DAVIS, Justice.
[¶1] This case arises from Pennaco Energy Inc.’s refusal to perform obligations under a
surface damage and use agreement. The story began some years back when Pennaco
acquired mineral leases beneath a surface estate owned by Brett Sorenson, Trustee of the
Brett L. Sorenson Trust. The parties negotiated a contract concerning damage to and use
of the surface estate. It granted Pennaco access to and use of the land during exploration
for and production of minerals it had leased. In return, Pennaco agreed to pay for damage
to and use of the surface estate, and to reclaim the land once operations ended.
[¶2] With the surface damage and use agreement in place, Pennaco began drilling and
production operations on Sorenson’s land. It continued operations and made the requisite
payments to Sorenson for a number of years, but then decided to sell its oil and gas
interest to CEP-M Purchase, LLC. As part of the sale, Pennaco assigned its interest in
the operations and agreements to CEP-M, which reassigned those interests to another
company, High Plains Gas, Inc. Since then, neither Pennaco nor the assignees have made
any of the payments required by the surface damage and use agreement and have not
reclaimed Sorenson’s land.
[¶3] Sorenson brought this lawsuit against Pennaco, CEP-M and High Plains Gas to
recover the unpaid surface damage and use payments, and for damages resulting from the
failure to reclaim lands and repair water wells. CEP-M and High Plains Gas defaulted.
Pennaco answered and unsuccessfully moved for summary judgment, after which the
case made its way to a jury trial. The jury rendered a verdict finding that Sorenson
suffered $1,055,982.62 in damages. The district court entered judgment on the jury’s
verdict, and also awarded Sorenson costs and attorney fees, as provided for in the
contract, in the amount of $332,662.97.
[¶4] Pennaco contends on appeal that the district court erred by (1) ruling as a matter of
law that Pennaco remained liable under the surface damage and use agreement after
assignment, and (2) using a 2.5 multiplier to enhance the lodestar amount in awarding
attorney fees. As to the first issue, the parties in this case submitted their briefs without
having the benefit of our recent decision in Pennaco Energy, Inc. v. KD Co. LLC, 2015
WY 152, 363 P.3d 18 (Wyo. 2015). That precedent controls the first issue, and we
conclude the district court did not err in ruling that Pennaco remains liable under the
surface damage and use agreement. As to the second issue, the district court did not
abuse its discretion in awarding attorney fees to Sorenson as it did. Accordingly, we
affirm.
ISSUES
[¶5] 1. Did the district court err when it determined as a matter of law that Pennaco
remains liable to perform obligations under the surface damage and use agreement, where
1
those obligations purportedly accrued after Pennaco assigned its interest in the mineral
estate and the surface damage and use agreement to a third party?
2. Did the district court abuse its discretion by adjusting Sorenson’s attorney fees
award upward 2.5 times from an amount calculated by multiplying the number of hours
by the hourly rate?
FACTS
[¶6] Sorenson owns a ranch along the Powder River near the town of Arvada,
Wyoming. The ranch land is a split estate for mineral development purposes; that is, the
surface estate is owned by Sorenson and the mineral estate is owned by several parties.
Specifically, the minerals are owned in part by seven private parties, the State of
Wyoming and Sorenson. The third party mineral owners, including the State of
Wyoming, executed oil and gas leases underlying the surface estate. Subsequently, so
did Sorenson.1
[¶7] In the 1990s, Pennaco acquired interests in the oil and gas leases underlying
Sorenson’s ranch. Pennaco and Sorenson then entered into a surface damage and use
agreement, the stated purpose of which was to give the parties a “firm understanding as to
what damages will be payable in the event of development of the lands” owned by
Sorenson. The contract gave Pennaco the right to enter upon and use Sorenson’s lands
for the purpose of coalbed methane drilling and production operations. The access and
use rights granted to Pennaco were separate from and in addition to the basic reasonable
use of the surface that Pennaco had as a mineral owner under the oil and gas leases. 2 As
a result, Pennaco had the benefit of detailed terms upon which it could construct access
roads, put up power lines, and install pipelines on Sorenson’s property.
[¶8] In exchange for the rights it was granted by the surface damage and use
agreement, Pennaco agreed to make annual payments to compensate Sorenson for the use
of his land and the damages caused by its operations. The agreement required annual
payments of $750.00 for each well drilled and $5.00 per rod3 for the access roads and
pipelines constructed. The contract provided that “[a]ll annual payments are due and
payable until such time as the property is restored and reclaimed.”
1
The lease executed by Sorenson covers only minerals at “shallow” depths, stating: “This lease covers
only those rights from the surface to the base of the Tertiary Age coal or 2,500 fee subsurface, whichever
is deeper.”
2
Because the parties entered into the surface damage and use agreement, Pennaco no longer ran the risk
of exceeding the requirements of reasonable use and accommodation that restrict a mineral lessee’s use of
the surface estate. See, e.g., Mingo Oil Producers v. Kamp Cattle Co., 776 P.2d 736, 739-42 (Wyo.
1989).
3
“A rod is 16.5 linear feet.” Barlow Ranch, Ltd. P’ship v. Greencore Pipeline Co. LLC, 2013 WY 34, ¶
10 n.3, 301 P.3d 75, 81 n.3 (Wyo. 2013).
2
[¶9] Pennaco also agreed to restore and reseed well sites, to remove all above-ground
equipment, and to restore the land to its original state when mineral production ended. It
was also required to return roads and other rights-of-way to a condition as close to the
land’s original state as reasonably possible. It promised to restore any of Sorenson’s
water wells or natural artesian springs that were impaired by the coalbed methane
operations, either by reconfiguring or redrilling them, or by drilling new water wells if
necessary.
[¶10] With the surface damage and use agreement in place, Pennaco began developing
its coalbed methane operation on Sorenson’s ranch. It drilled ten coalbed methane wells,
constructed 5.67 miles (1,815.37 rods) of road, and installed 4.19 miles (1,343.57 rods) of
pipeline. It also constructed four water disposal pits to store water produced by the wells.
[¶11] Pennaco made the annual payments required by the surface damage and use
agreement through 2010. However, in 2009, Pennaco wrote Sorenson that it intended to
shut-in4 some or all of its coalbed methane wells on the ranch.5 In early 2010, when
Pennaco was shutting down its operations, Sorenson contacted Pennaco’s landman
regarding reclamation of the coalbed methane operations, including reclaiming the four
water disposal pits (otherwise referred to as reservoirs). Pennaco’s landman wrote to him
in response on June 11, 2010, stating in part: “Pennaco affirms by the Surface Damage
and Surface Use Agreement (“SUA”) dated April 13, 2001 . . . that upon termination of
the productive life of the producing field in conjunction with the following
impoundments that if you elect not to retain the reservoirs for personal use that Pennaco
will reclaim them.”
[¶12] A few weeks later, Pennaco entered into a purchase and sale agreement effective
July 1, 2010 with CEP-M. As part of the sale,6 Pennaco assigned its interest in the lease
underlying Sorenson’s ranch lands and rights in the surface damage and use agreement to
CEP-M. That entity then assigned its interests to High Plains Gas. According to
Sorenson, the wells, pipelines, and roads were for all practical purposes abandoned.
4
A well that is shut-in is “not currently considered active in which the completion interval has not been
isolated from the wellbore above and where the wellbore condition is such that its utility may be restored
by opening valves or by energizing equipment involved in operating the well.” Wyoming Oil & Gas
Conservation Commission Rules, Ch. 1 § 2(vv) (filed June 3, 2015), available at http://soswy.state.wy.us
/Rules/RULES/9859.pdf.
5
A year later, in February of 2010, Pennaco notified Sorenson that he had the right to assume ownership
of the coalbed methane wells on his property in order to convert them to stock water wells. Sorenson
responded and indicated he wanted to take ownership of three of the wells. However, the three coalbed
methane wells were never converted to stock water wells because Pennaco never finished plugging them.
In any event, Sorenson did not seek damages for the cost of reclaiming them.
6
The sale affected a number of other coalbed methane properties. See KD Co. LLC, supra.
3
[¶13] After the assignment in 2010, Pennaco did not pay annual payments or reclaim
any of Sorenson’s land as required by the surface damage and use agreement. The
assignees did not do so either. Accordingly, Sorenson gave Pennaco written notice of its
default and of the impairment of his water sources as was required under the surface
damage and use agreement. Pennaco still did not perform these obligations after
receiving notice that Sorenson claimed it was in violation of the contract.
[¶14] Sorenson then sued Pennaco and the assignees to collect the annual payments and
to enforce the reclamation obligations he was owed under the surface damage and use
agreement. CEP-M and High Plains Gas failed to answer or otherwise respond to the
complaint, and as a result, the district court entered a default judgment against them.7
Pennaco answered, generally denying Sorenson’s claims.
[¶15] In due course, Pennaco filed a motion for summary judgment in which it claimed
that it was no longer required to perform the obligations in the surface damage and use
agreement. It argued that the exculpatory clause included in the mineral lease 8 was
incorporated by reference into the surface damage and use agreement, and that as a result,
it was no longer liable after assignment. Alternatively, it argued that obligations in the
surface damage and use agreement constitute covenants running with the ownership of
the mineral estate that benefits from using an easement on the surface estate. Thus, it
asserted, because the obligations are considered covenants running with the land, those
obligations passed from Pennaco to CEP-M when the mineral estate and surface damage
and use agreement was assigned, leaving Pennaco free and clear of any continued
liability. Sorenson argued in response that Pennaco continued to be bound to perform the
obligations in the contract after assignment by basic principles of contract law. Sorenson
contended that because there was neither an exculpatory clause in the contract nor a
subsequent novation, Pennaco remained on the hook.
[¶16] The district court denied Pennaco’s motion for summary judgment, finding that
the company was not entitled to judgment as a matter of law. By virtue of its analysis
and ultimate conclusion, the district court decided in effect that Pennaco remained liable
under the surface damage and use agreement. Accordingly, Pennaco’s continued liability
was treated as a foregone legal conclusion by the parties and the district court, and it was
no longer an issue for jury trial. The trial instead focused on the amount of damages
owed by Pennaco for breach of the contract.
[¶17] The damage case was tried to a jury over a four-day period. After Sorenson rested
his principal case, Pennaco moved for judgment as a matter of law pursuant to W.R.C.P.
50(a), but in its motion it only challenged the sufficiency of the evidence to support
7
Both entities are evidently bankrupt and/or judgment proof.
8
Pennaco’s oil and gas lease covering Sorenson’s minerals contains the following exculpatory clause: “If
all or any part of this lease is assigned, no leasehold owner shall be liable for any act or omission of any
other leasehold owner.”
4
Sorenson’s claims for damages. It did not raise the legal issue of whether it was liable
under the surface damage and use agreement after assignment. The district court denied
the motion, and Pennaco then presented its case.
[¶18] The court’s charge to the jury included an instruction not objected to by Pennaco
indicating that the court had previously determined that Pennaco was obligated to honor
the surface damage and use agreement it entered into with Sorenson, and that it was
required to fulfill its obligations under the agreement regardless of whether it sold or
assigned it to CEP-M.
[¶19] The jury returned a verdict finding that Sorenson had suffered damages of: (1)
$76,033.62 for unpaid annual surface payments; (2) $883,732.00 for the costs of
reclaiming Pennaco’s operations; and (3) $96,217.00 for the cost of replacing an artesian
spring that had been damaged by Pennaco’s drilling operations.9 The district court
subsequently entered judgment in favor of Sorenson in the amount of $1,055,982.62.
Pennaco renewed its motion for judgment as a matter of law concerning damages
pursuant to W.R.C.P. 50(b), this time tersely touching upon the legal issue of its liability
under the assigned contract.
[¶20] Sorenson then moved for an award of costs and attorney fees under the surface
damage and use agreement, which provided: “Operator, if determined by a court of
competent jurisdiction to be in default, will be responsible for all reasonable legal fees
and costs.” Although Sorenson’s counsel took the case on a contingent fee arrangement,
they meticulously tracked the hours they worked on the case.
[¶21] Applying the lodestar test, the district court first determined the total fee that
would have been charged based upon the number of hours worked times Sorenson’s
attorneys’ usual hourly rate—$124,591.25. It then considered the factors listed in Wyo.
Stat. Ann. § 1-14-126(b) to decide whether an upward or downward adjustment to the fee
was warranted. Applying several of those factors, the district court awarded Sorenson
attorney fees in the amount of $311,478.13.
[¶22] Pennaco timely perfected this appeal.
DISCUSSION
Pennaco’s Contractual Obligations after Assignment
[¶23] We must first address Sorenson’s assertion that Pennaco did not preserve the legal
issue of whether it remains liable for obligations under the surface damage and use
9
The jury did not award Sorenson damages he sought for the repair of an additional water well.
5
agreement after assignment for appellate review. This complication arises out of the
order denying Pennaco’s motion for summary judgment.
[¶24] Although it denied Pennaco’s motion, the order also resulted in an affirmative
legal ruling somewhat akin to that made possible by the procedures found in W.R.C.P.
56(c)-(d).10 The district court determined, in essence, that Pennaco remained liable after
assignment as a matter of law. Although the order did not say this in so many words, the
parties and the court interpreted it that way, and it is easy to see why they did. The trial
was accordingly limited to causation and damages. A separate order granting a partial
summary judgment in favor of Sorenson on the issue of Pennaco’s continuing duty to
perform under the contract was neither requested by the parties nor entered sua sponte by
the district court.11
[¶25] On appeal, Sorenson takes an austere view of the situation, urging that because the
ruling denied Pennaco’s motion for summary judgment, and because Pennaco failed to
challenge the legal ruling on liability through a W.R.C.P. 50(a) motion, the issue was not
preserved for our review. It is true “that challenges to the denial of a defendant’s
summary judgment motion are generally not reviewable.” Halvorson v. Sweetwater Cty.
Sch. Dist. No. 1, 2015 WY 18, ¶ 21, 342 P.3d 395, 402 (Wyo. 2015). We have explained
that “[t]he proper procedural mechanism for challenging an adverse judgment, following
10
These procedural rules state in pertinent part:
(c) Motion and proceedings thereon. – . . . A summary judgment,
interlocutory in character, may be rendered on the issue of liability alone
although there is a genuine issue as to the amount of damages.
(d) Case not fully adjudicated on motion. – If on motion under this rule
judgment is not rendered upon the whole case or for all the relief asked
and a trial is necessary, the court at the hearing of the motion, by
examining the pleadings and the evidence before it and by interrogating
counsel, shall if practicable ascertain what material facts exist without
substantial controversy and what material facts are actually and in good
faith controverted. It shall thereupon make an order specifying the facts
that appear without substantial controversy, including the extent to which
the amount of damages or other relief is not in controversy, and directing
such further proceedings in the action as are just. Upon the trial of the
action the facts so specified shall be deemed established, and the trial
shall be conducted accordingly.
W.R.C.P. 56(c)-(d).
11
A court can grant summary judgment (or partial summary judgment) to a non-moving party so long as
the issue on which the ruling has been made has been completely presented to it. Basic Energy Services,
L.P. v. Petroleum Resource Management, Corp., 2015 WY 22, ¶ 20 n.11, 343 P.3d 783, 789 n.11 (Wyo.
2015) (citing City of Powell v. Busboom, 2002 WY 58, ¶ 6, 44 P.3d 63, 65 (Wyo. 2002); Union Pac. R.R.
Co. v. Caballo Coal Co., 2011 WY 24, ¶ 33 n.4, 246 P.3d 867, 876 n.4 (Wyo. 2011)).
6
a trial on the merits, is a motion for judgment as a matter of law.” Cargill, Inc. v.
Mountain Cement Co., 891 P.2d 57, 61 (Wyo. 1995).
[¶26] We see Sorenson’s point, but there is more to the order than just the denial of
Pennaco’s summary judgment motion. After studying the order and rest of the record, we
conclude that the order denying Pennaco’s motion determined as a matter of law that
Pennaco remained liable for the obligations in the surface damage and use agreement.
The ruling did not leave questions of fact for a jury to determine as to Pennaco’s
contractual duties, but only as to the damages caused by any breach of its obligations.
See W.R.C.P. 56(c); see also Wheatland Irr. Dist. v. McGuire, 537 P.2d 1128, 1129-30
(Wyo. 1975); cf. 10B Charles A. Wright & Arthur R. Miller, Federal Practice and
Procedure, Civil § 2736 (3d ed., database updated April 2015). That ruling then became
the law of the case, although it was not appealable until it was subsumed into a final
judgment on the entire case after the trial. See Big-D Signature Corp. v. Sterrett
Properties, LLC, 2012 WY 138, ¶ 18, 288 P.3d 72, 77 (Wyo. 2012). As a result, the
issue was preserved for our review. 12
12
We take this opportunity to encourage trial courts to prepare a final pretrial order pursuant to W.R.C.P.
16(e) in cases in which it holds a pretrial conference, and offer the parties a period of time to object to the
accuracy of its contents. This will aid in distilling the issues, clarify any confusion before trial, and
control the subsequent course of action. It will not only help the judge and the parties during trial, but it
also will simplify this Court’s review on appeal. Guidance can be taken from an authoritative secondary
source:
At the close of any pretrial conference the court should issue an order
reciting the action taken at the conference—the amendments to the
pleadings that were allowed, the agreements made by the parties, the
admissions as to issues of fact or the genuineness or the admissibility of
documents, the stipulations of the parties as to the facts or issues to be
tried, and the issues not disposed of and therefore remaining for trial. A
pretrial order may have the effect of determining the sufficiency of a
defense, may preserve a defense or claim that normally would be waived
by proceeding to judgment, or simply may require the filing of
statements or evidentiary or witness lists.
Pretrial orders are intended to further the purposes of the conference. As
stated by Judge Charles E. Clark: “A pre-trial order is an absolute
necessity if the good accomplished by the conference itself is to be
preserved for the further disposition of the case and in the trial itself.”
Recognizing the importance of the pretrial order at least one district court
confronted with an unclear order has set it aside and called a second
conference. Similarly, an appellate court, after finding that the pretrial
order relied upon by the lower court was not sufficiently definitive to
provide adequate guidance, remanded the case and directed the trial court
to start again.
6A Wright & Miller, supra, § 1526.
7
[¶27] Turning to the merits, Pennaco posits that in construing the surface damage and
use agreement, this Court must apply real property principles because the agreement
creates real property interests. It contends that if such principles are followed—namely
those found in the Restatement (Third) of Property: Servitudes § 4.4—the only possible
conclusion is that the obligations are covenants running with the land, and therefore the
covenant obligations are owed only by the owner at the time the covenant obligation is to
be performed. Pennaco says its obligations passed like a quarterback passes the football
to a receiver—once the ball is passed, the receiver has it, and the quarterback does not.
We view Pennaco’s attempts to relieve itself of the obligations it bargained to perform
more as a game of hot potato.
[¶28] The Court recently dealt with this subject in Pennaco Energy, Inc. v. KD Co. LLC,
supra. As in this case, the controlling issue was whether the relationship established
between Pennaco and the landowners by the surface agreements was primarily
contractual, or whether it was instead based on privity of estate involving covenants
running with the land. 2015 WY 152, ¶ 16, 363 P.3d at 22. After a thorough analysis,
we concluded the relationship was the former. Id. at ¶ 87, 363 P.3d at 40.
[¶29] We began our analysis in KD Co. LLC by examining well-established principles of
contract law concerning assignment and delegation. Id. at ¶ 17, 363 P.3d at 23. Rights
under a contract are assigned and contractual duties are delegated. Id. (quoting Joseph
M. Perillo, Contracts § 18.25, 665-66 (7th ed. 2014)). The assignor of a right usually has
no interest in the contractual rights after assignment. Id. However, and importantly here,
when a duty is delegated, the delegant remains liable. Id. “If this was not so, every
solvent person could obtain freedom from debts by delegating them to an insolvent.” Id.
While the delegant can appoint another to render performance on the obligor’s behalf,
such a delegation of a duty “does not free the obligor-delegant from the duty to see to it
that performance is rendered, unless there is a novation.” Id.
[¶30] These same principles of contract law apply to oil and gas leases. Id. at ¶ 18, 363
P.3d at 23-24; 2-19 Eugene O. Kuntz, Law of Oil and Gas § 19.17 (“Undoubtedly, the
generally accepted principles of contract law apply.”). It is well settled in oil and gas law
that, absent an express exculpatory clause, a lessee continues to remain liable to the lessor
for a breach of an express covenant in the oil and gas lease after assignment, even if the
express covenants run with the land:
Absent an express clause that terminates its obligations, the
original lessee-assignor will continue to be responsible to the
lessor for covenants in the lease under the doctrine of privity
of contract. Many oil and gas leases contain clauses
eliminating contractual liability of this nature, but some do
not. Where they do not, the courts are nearly universal in their
finding that the original lessee-assignor retains obligations to
8
the lessor with respect to at least some of the covenants under
the lease.
KD Co. LLC, ¶ 18, 363 P.3d at 23 (citation omitted); see also 2-4 Williams & Meyers,
Oil & Gas Law § 403.1 (“The original lessee continues [to be] liable to the lessor for a
breach of an express covenant of the lease occurring after his assignment of the lease
unless the lease contains a clause excusing him from further liability after assignment.”);
5-64 Kuntz, supra, § 64.6 (“Under traditional landlord-tenant law, a landlord can hold
both the original tenant and the tenant’s assignee liable for breach of a lease covenant that
runs with the estate. The original tenant is liable under the initial contractual agreement
(privity of contract) with the lessor, and the assignee is liable because it has accepted the
benefit of the leasehold estate and must accept its attached burdens as well (privity of
estate).”).
[¶31] The oil and gas lease between Sorenson and Pennaco includes such an exculpatory
clause, adhering to the aforementioned principles. It states: “If all or any part of this
lease is assigned, no leasehold owner shall be liable for any act or omission of any other
leasehold owner.” Accordingly, upon assignment Pennaco was relieved from that point
of the obligations set forth in that lease. See 4-6 Williams & Meyers, supra, § 677.
[¶32] While the oil and gas lease contains an exculpatory clause, the surface damage and
use agreement does not state that the lease is incorporated by reference. As a result, the
surface damage and use agreement does not incorporate the exculpatory clause contained
in the lease. We have made clear:
Under general contract principles, when a contract
expressly refers to and incorporates another instrument in
specific terms which show a clear intent to incorporate that
instrument into the contract, both instruments are to be
construed together. However, in order for an instrument to be
incorporated into and become part of a contract, the
instrument must actually be incorporated. It is not enough for
the contract to merely mention the instrument; the referring
language in the contract must demonstrate the parties
intended to incorporate all or part of the referenced
instrument. Parties do not undertake obligations contained in
a separate document unless their contract clearly says so. A
reference in a contract to another instrument will incorporate
the other instrument only to the extent indicated and for the
specific purpose indicated.
KD Co. LLC, ¶ 79, 363 P.3d at 38-39 (citations omitted).
9
[¶33] Because the surface damage and use agreement neither includes an exculpatory
clause nor states that the oil and gas lease is incorporated by reference, Pennaco contends
that the agreement is wholly different from and completely unrelated to the lease. That
would mean, according to Pennaco, that the same contract principles do not apply.
However, our study of this area of law reveals otherwise. The surface damage and use
agreement is in the same genus as the oil and gas lease. They are yoked together by the
very nature of the underlying subject matter of oil and gas development. Indeed, if there
were no oil and gas lease, there would be no need for a surface damage and use
agreement, the latter being a derivative of the former.
[¶34] To further understand the connection between these allied contracts, it may be
helpful to look at the anatomy of a typical oil and gas lease. Several secondary
authorities elucidate that oil and gas leases can contain various provisions and covenants
akin to those found in a surface agreement.
[¶35] A typical lease contains a provision authorizing assignments by the lessee, leaving no
question of the assignability of the lessee’s estate. 2-4 Williams & Meyers, supra, § 402; see
also 2-19 Kuntz, supra, § 19.17; 3 Nancy St. Paul, Summers Oil and Gas § 28:1-28.2 (3d ed.,
database updated 2015). A common example of a provision concerning the assignability
of the parties’ interest is as follows: “The rights of either party hereunder may be
assigned in whole or in part and the provisions hereof shall extend to the heirs, executors,
administrators, successors and assigns.” 4-6 Williams & Meyers, supra, § 677.2; see also
4-51 Kuntz, supra, § 51.2(a) (discussing general assignment clause relating to transfer by
lessee).
[¶36] When a lease does not contain express assignment language, an agreement to
allow assignment may still be implied by a provision regarding the running of the
covenants of the lease to assignees. 2-4 Williams & Meyers, supra, § 402; 4-6 Williams
& Meyers, supra, § 677.2. It is normal for a lease to have an express provision for the
running of the covenants of the lease to any transferee; and therefore, many contain that
language. 13 4-6 Williams & Meyers, supra, § 677.2; see also 2-4 Williams & Meyers,
supra, § 412; 5-64 Kuntz, supra, § 64.2, 64.7.
13
Williams and Meyers provides some representative examples of clauses providing for the running of
covenants:
All covenants and agreements herein set forth between the parties hereto,
shall extend to their respective heirs, legal representatives and assigns.
All terms, conditions, limitations and covenants between the parties
hereto shall extend to their respective heirs, successors, personal
representatives and assigns. The covenants herein on behalf of the
“Lessor” are the joint and several covenants of each of the parties of the
first part.
10
[¶37] As to other provisions governing the use of and damage to the surface estate, an
oil and gas lease can provide these parameters. Generally a lease will explicitly provide
for certain easements for the benefit of the lessee. 4-6 Williams & Meyers, supra, § 673;
see also 1-2 Williams & Meyers, supra, § 218. Lessees are “usually given more
extensive easements inasmuch as their operations require the use of the surface for a well
site or sites, machinery, pipe lines, roads, etc.” 1-2 Williams & Meyers, supra, § 218.
Indeed, provisions can be included concerning the lessee’s rights to the surface include
fencing and buried pipe covenants as well as reclamation obligations. Id. § 218.11; see
also 4-49 Kuntz, supra, § 49.4 (analyzing surface damage clause in lease), and § 49.6
(examining restoration of premises clause in lease); 5 St. Paul, supra, § 61:2 (providing a
sample surface agreement).
[¶38] A few lessons are learned from the above. An oil and gas lease can contain
covenants dealing with surface issues. Furthermore, even though oil and gas leases
usually include assignment and covenant running with the land language, contract
principles still control, and the lessee continues to remain liable for the obligations in the
lease even after an assignment. To avoid continued liability, the lease must include an
exculpatory clause, or the lessee must subsequently obtain a novation. This point has
been stated perfectly:
In view of the fact that the lessee will normally continue
subject to the terms and obligations of the lease despite an
assignment of his interest therein, he may provide in the lease
that upon assignment he shall be relieved of all obligations
thereunder. The following clause[] . . . [is] typical of
provisions of this kind: “An assignment of this lease, in whole
or in part, shall, to the extent of such assignment, relieve and
discharge lessee of any obligations hereunder.”
4-6 Williams & Meyers, supra, § 677.3; see also 4-51 Kuntz, supra, § 51.2(c) (“It is not
uncommon for the general assignment clause to contain a special provision for release of
the lessee upon an assignment of the lease. Such special provision will be referred to
herein as the clause releasing lessee after an assignment. In the absence of such clause,
All the covenants, obligations and considerations of this lease shall
extend to and be binding upon the parties hereto, their heirs, executors,
administrators, successors, assigns and successive assigns.
This lease and all its terms, conditions, and stipulations shall extend to
and be binding on all the heirs, grantees, successors or assigns of said
Lessor or Lessee.
4-6 Williams & Meyers, supra, § 677.2.
11
because of the privity of contract that exists between the lessor and lessee of an oil and
gas lease, the lessee remains liable for the performance of covenants contained in the
lease after having assigned all interest therein.”); 5-64 Kuntz, supra, § 64.7; 3 St. Paul,
supra, § 28:11 (“The principles of law governing contracts for the assignment of oil and
gas leases as to their formation, interpretation, performance, and breach are no different
from principles governing ordinary contracts for the transfer of an interest in land.”), and
§ 28:12 (“Assignments of oil and gas leases are contracts and are interpreted in
accordance with the general rules of contract interpretation.”).
[¶39] The aforementioned observations concerning provisions and covenants found in
oil and gas leases demonstrate that they are similar to the types found in surface
agreements like the one in this case. When terms concerning liability for surface damage
and permissible use of the surface are not provided in sufficient detail in the lease, the
parties often negotiate a surface agreement. It has been observed that:
Lessor and lessee not infrequently enter into a separate
surface use agreement in addition to the lease, which may
contain specific use provisions. It is necessary to review such
instruments carefully to determine whether they modify the
rights and duties of the parties.
4-6 Williams & Meyers, supra, § 673. Further reinforcing this point, in Wyoming an oil
and gas operator’s entry upon the land for operations is statutorily conditioned on
“attempting good faith negotiations and . . . [o]btaining an executed surface use
agreement providing for compensation to the surface owner for damages to the land and
improvements . . . .” Wyo. Stat. Ann. § 30-5-402(c)(ii) (LexisNexis 2015).
[¶40] Pennaco’s argument that surface agreements are categorically different than oil
and gas leases falls apart based upon the above. The oil and gas lease between Pennaco
and Sorenson did not include detailed covenants concerning surface damage and use or
reclamation, although such covenants could certainly have been negotiated into the
lease.14 Before entering upon Sorenson’s land, Pennaco therefore bargained for the
surface damage and use agreement, which contains specific surface damage, use and
reclamation provisions not found in the lease.
[¶41] Harkening back to the controlling question, there is no doubt that the surface
damage and use agreement is a contract governing permissible use, compensation for
damage, and required reclamation of Sorenson’s land. We must therefore construe it in
accordance with settled principles of contract interpretation. KD Co. LLC, ¶ 25, 363 P.3d
14
The oil and gas lease did provide some general terms regarding the use of Sorenson’s surface, granting
Pennaco “rights of way and easements for laying pipe lines, and erection of structures” for its operations
in producing coalbed methane.
12
at 25-26. We begin by considering de novo the plain language of the contract. Id. When
that language is clear and unambiguous, our inquiry is limited to the four corners of the
document, giving the words contained therein their ordinary meaning. Id. The parties
are free to agree to whatever lawful terms they desire, and we will not rewrite the
agreement under the guise of judicial construction. Id. Only when the contract is
ambiguous do we apply our rules of construction. Id. A contract is ambiguous if
indefiniteness of expression or double meaning obscures the parties’ intent.
[¶42] Reviewing the plain language of the surface damage and use agreement, it is clear
that Sorenson intended to grant Pennaco and “its agents, employees and assigns” the right
to enter and use the lands described for coalbed methane operations in the manner
outlined therein. The contract states that this grant of right-of-way “shall be a covenant
running with the lease. Any assignment(s) of the Leasehold covering Owner’s lands . . .
shall be made subject to this agreement, and all such assignees shall be bound by the
terms thereof.”
[¶43] In exchange for the access rights granted, Pennaco assumed several obligations,
including:
 Making annual payments to Sorenson for well sites, roads, and pipelines,
measured in terms of number of well sites and length of roads and pipelines.15
Pennaco agreed to make said payments “until such time as the property is restored
and reclaimed.”
 Reclaiming Sorenson’s lands by restoring and reseeding well sites, cleaning and
removing all above ground equipment and restoring the surface as close to its
original state, and returning any roads and other right-of-ways and sites as close to
their original condition.
 Restoring any water wells that were impaired by the coalbed methane operations.
[¶44] The contract contains nothing indicating that the parties intended servitudes to be
created under property law principles so that Pennaco would be able to relieve itself of
these obligations merely by assigning them to a third party. The obligations to reclaim
15
The surface damage and use agreement states: “The annual payments shall commence one (1) year
from the date of the original payment, and shall allow OPERATOR a right-of-way and easement, to be
used by OPERATOR, its agents, servants, employees and successors in interest as long as the annual
payments are made.” While Pennaco points to the term “easement” in support of its position that the
obligations equate to a servitude, we find this isolated reference cannot be interpreted to create a
permanent easement. See Hasvold v. Park Cnty. School Dist. No. 6, 2002 WY 65, 45 P.3d 635 (Wyo.
2002). The nature of the right away granted under the contract was to enable Pennaco access to its
mineral estate and terminated when the coalbed methane operations terminated. Simply put, the parties
did not intend to create a perpetual easement.
13
the surface estate and to pay until reclamation is complete “presume an ability and
willingness to perform after production ends.” KD Co. LLC, ¶ 36, 363 P.3d at 28. These
obligations are not the kind that the parties would expect to be performed only by the last
assignee of Pennaco; that is, the one holding the proverbial hot potato by assignment. As
we explained in KD Co. LLC, “[t]hey are logically connected to Pennaco, its financial
ability, and its initial creation of the gas operation, rather than to whatever the last
assignee may have done.” Id.
[¶45] Contrary to Pennaco’s position, oil and gas leases and surface agreements are of
the same breed of contract and the need for an exculpatory clause applies equally to both.
Based on the plain language in the surface damage and use agreement, we hold that the
parties intended for Pennaco to remain responsible for obligations in the agreement until
coalbed methane operations ceased and Sorenson’s land was reclaimed. 16 If Pennaco
intended to be released from liability for a breach occurring after assignment, it could
have negotiated an exculpatory clause in the contract.17 Absent such a clause, Pennaco
could have tried to obtain a novation from Sorenson at the time of assignment. It did
neither.
[¶46] To find that the assignment released Pennaco from its obligations would require us
to read an exculpatory clause that expressly terminated Pennaco’s obligations upon
assignment into the contract. There is no such clause, and we are not at liberty to rewrite
the agreement. See KD Co. LLC, ¶¶ 37-38, 363 P.3d at 28-29. Applying our usual
standard of review of summary judgment, see id, ¶ 14, 363 P.3d at 22, we conclude that
the district court did not err in ruling as a matter of law that Pennaco remained liable
under the surface damage and use agreement after assignment to CEP-M.
Amount of Attorney Fees Awarded to Sorenson
[¶47] Wyoming follows the American rule, which provides that each party is responsible
for his or her own attorney fees. Positive Progressions, LLC v. Landerman, 2015 WY
138, ¶ 29, 360 P.3d 1006, 1016 (Wyo. 2015). There are narrow exceptions, however.
16
We do not pretend to know what secret thoughts Pennaco had on this subject. We can only enforce the
intent reflected in the language of the agreement.
17
The surface damage and use agreement includes a provision on the topic of assignees, which states:
Assignees Bound: This agreement shall be binding upon the parties
herein, their agents, employees, successors, and assigns. If the CBM
lease or operation in question is sold, transferred or assigned, the
OPERATOR shall notify the OWNER and the new OPERATOR of the
well, or wells, shall be bound by the terms of this agreement.
A logical place to have included an exculpatory clause releasing Pennaco from liability after assignment
would have been within or immediately following this provision.
14
Attorney fees can be recovered where a contractual or statutory provision authorizes
them, or as a form of punitive damages when such damages can properly be awarded. Id.
[¶48] The surface damage and use agreement contains the following fee-shifting
provision: “Operator, if determined by a court of competent jurisdiction to be in default,
will be responsible for all reasonable legal fees and costs.” Based upon this provision,
and in accordance with W.R.C.P. 54(d), Sorenson requested and was granted an award of
attorney fees and costs.18
[¶49] Sorenson provided documentation showing that his attorneys’ total fees based on
their hourly rate were $124,591.25. He requested that the award be enhanced beyond that
figure to account for the fact that he and his attorneys had entered into a contingent fee
agreement. Under that agreement, Sorenson’s attorneys were entitled to 40% of the gross
recovery after a trial. That amounts to $422,393.04 on the $1,055,982.62 judgment.
[¶50] Sorenson did not request that the full contingency amount be awarded; rather, he
requested that the district court multiply the $124,591.25 by a factor of three and award
fees of $373,773.75. Applying Wyoming law and consulting other jurisdictions, the
district court adjusted the $124,591.25 upward 2.5 times, awarding attorney fees in the
amount of $311,478.13.
[¶51] Whether a court can award attorney fees is a question of law to be reviewed de
novo. KD Co. LLC, ¶ 15, 363 P.3d at 22. We review the amount of the award for an
abuse of discretion. Id. We have explained:
[A]n award of attorney fees is generally not the result of a
mathematical computation. The fees described by affidavit
are merely the starting point of the analysis, and it is through
a court’s exercise of discretion that it determines what portion
of the amount requested is reasonable and equitable under the
particular circumstances of a given case.
Thorkildsen v. Belden, 2012 WY 8, ¶ 11, 269 P.3d 421, 424 (Wyo. 2012).
[¶52] To determine the reasonableness of the attorney fee award, our courts follow the
two-factor federal lodestar test: “(1) whether the fee charged represents the product of
reasonable hours times a reasonable rate; and (2) whether other factors of discretionary
application should be considered to adjust the fee either upward or downward.” Positive
Progressions, LLC, ¶ 29, 360 P.3d at 1016 (quoting Alexander v. Meduna, 2002 WY 83,
18
The narrow issue raised on appeal by Pennaco deals with the amount of attorney fees awarded.
Pennaco does not contest the amount of costs awarded—$21,181.84— and so we will not address that
portion of the award any further.
15
¶ 49, 47 P.3d 206, 220-21 (Wyo. 2002)); Thorkildsen, ¶ 10, 269 P.3d at 424. The
Wyoming legislature directed our courts to consider the following factors to guide their
discretion and to help them arrive at a reasonable fee award:
(b) In civil actions for which an award of attorney’s fees is
authorized, the court in its discretion may award reasonable
attorney’s fees to the prevailing party without requiring
expert testimony. In exercising its discretion the court may
consider the following factors:
(i) The time and labor required, the novelty and
difficulty of the questions involved, and the skill requisite to
perform the legal service properly;
(ii) The likelihood that the acceptance of the particular
employment precluded other employment by the lawyer;
(iii) The fee customarily charged in the locality for
similar legal services;
(iv) The amount involved and the results obtained;
(v) The time limitations imposed by the client or by
the circumstances;
(vi) The nature and length of the professional
relationship with the client;
(vii) The experience, reputation and ability of the
lawyer or lawyers performing the services; and
(viii) Whether the fee is fixed or contingent.
Wyo. Stat. Ann. § 1-14-126(b)(i)-(viii) (LexisNexis 2015) (emphasis added); see
Dishman v. First Interstate Bank, 2015 WY 154, ¶ 15, 362 P.3d 360, 365-66 (Wyo.
2015).
[¶53] The district court appropriately took the first step in establishing a reasonable fee
by multiplying the number of hours worked by the attorneys’ usual hourly rate, and by
that calculation arrived at $124,591.25. It reviewed affidavits and other supporting
information provided by Sorenson, and determined that the amount of time and the
hourly rate were reasonable under the circumstances. See Dishman, ¶ 14, 362 P.3d at
365.
[¶54] For the second step in its analysis, the district court correctly consulted § 1-14-
126(b) and considered the listed factors to decide whether to adjust the fee either upward
or downward to arrive at a reasonable amount. See Thorkildsen ¶ 10, 269 P.3d at 424.
Because Sorenson’s attorneys took the case on a contingent fee basis, the statute obliged
the judge to consider that fact in determining the reasonable amount to award in attorney
fees because factor (viii) expressly provides for consideration of “[w]hether the fee is
fixed or contingent.” See Wyo. Stat. Ann. § 1-14-126(b)(viii).
16
[¶55] Pennaco says that under no circumstances should attorney fees be enhanced to
account for contingent fee agreements. In support of its position, Pennaco relies chiefly
on the United States Supreme Court case of City of Burlington v. Dague, 505 U.S. 557,
112 S. Ct. 2638, 120 L. Ed. 2d 449 (1992). There our nation’s highest court ruled that the
fee shifting provisions of the Solid Waste Disposal Act and the Clean Water Act did not
allow for the enhancement of fees based upon a contingent fee agreement under the
lodestar method. Id. at 562-67, 112 S.Ct. at 2641-44. It noted the difficulty of
determining the risk associated with any case and the possibility of “double counting”
fees if factors used in allowing the enhancement have already been subsumed in the
lodestar analysis. Id. at 563, 112 S.Ct. at 2641.
[¶56] Pennaco’s reliance on Dague is unconvincing. Our careful review of Dague does
not indicate there was an applicable statute or rule that expressly required consideration
of a contingent fee agreement as Wyoming’s § 1-14-126 does. If we were to accept
Pennaco’s position, we would have to decide that the legislature included meaningless
language in § 1-14-126(b)(viii), which this Court will not do. See City of Casper v.
Holloway, 2015 WY 93, ¶ 37, 354 P.3d 65, 75-76 (Wyo. 2015).
[¶57] Furthermore, the United States Supreme Court has softened its position somewhat
since Dague. See 10 Wright & Miller, supra, § 2675.2. In Perdue v. Kenny A., 559 U.S.
542, 130 S. Ct. 1662, 176 L. Ed. 2d 494 (2010), for example, it seems to have left the door
open for a contingent fee enhancement multiplier in a 42 U.S.C. § 1983 case in rare
circumstances.
In light of what we have said in prior cases, we reject
any contention that a fee determined by the lodestar method
may not be enhanced in any situation. The lodestar method
was never intended to be conclusive in all circumstances.
Instead, there is a “strong presumption” that the lodestar
figure is reasonable, but that presumption may be overcome
in those rare circumstances in which the lodestar does not
adequately take into account a factor that may properly be
considered in determining a reasonable fee.
Id. at 553-54, 130 S.Ct. at 1673.
[¶58] Our legislature expressly provided that whether a fee is fixed or contingent is a
factor that may properly be considered in adjusting the lodestar amount either upward or
downward to arrive at a reasonable fee award. See Wyo. Stat. Ann. § 1-14-126(b)(viii);
see also 20 Am. Jur. 2d Costs § 55 (2d ed. 2016 update) (“A court may consider a
contingent fee agreement and the amount it would have generated as evidence of usual
and customary fees in determining both the reasonableness and the amount of an award
17
of attorney’s fees.”); 20 C.J.S. Costs § 148 (database updated Dec. 2015) (“An agreement
between attorney and client concerning fees is not controlling, but a contingency
agreement may be considered when considering the discretionary factors governing an
award.”). Because the district court correctly considered this factor, the question
becomes whether it abused its discretion by enhancing the lodestar amount by 2.5 times.
We cannot say it did.
[¶59] This Court recognizes that our precedent on the subject of contingent fee
multipliers is slim. However, courts from other jurisdictions have dealt with the issue,
and their decisions provide helpful guidance. In Florida, courts analyze three factors in
evaluating the impact of contingent fee agreements in contract cases: “(1) whether the
relevant market requires a contingency fee multiplier to obtain competent counsel; (2)
whether the attorney was able to mitigate the risk of nonpayment in any way; and (3)
whether any of the factors set forth in Rowe 19 are applicable, especially, the amount
involved, the results obtained, and the type of fee arrangement between the attorney and
his client.” Standard Guar. Ins. Co. v. Quanstrom, 555 So. 2d 828, 834 (Fla. 1990); see
TRG Columbus Dev. Venture, Ltd. v. Sifontes, 163 So. 3d 548, 550 (Fla. Dist. Ct. App.
2015) (affirming contingent fee multiplier of 2.0); Citizens Prop. Ins. Corp. v.
Pulloquinga, No. 3D14-1248, 2015 WL 9584387, at *3 (Fla. Dist. Ct. App. Dec. 30,
2015) (affirming the application of a 1.5 contingent fee multiplier). A movant must
present evidence of these factors to justify a multiplier. Quanstrom, 555 So. 2d at 834.
[¶60] The district court followed Florida’s lead; it not only considered the discretionary
factors in § 1-14-126(b), but also applied the three factors in Quanstrom. The court was
presented with evidence20 that Sorenson sought out an attorney concerning his dispute
with Pennaco, but was unable to afford that attorney’s hourly rate to bring a lawsuit.
Sorenson then tried to work things out with Pennaco himself, but his efforts were
unsuccessful. A year later, Sorenson contacted his current counsel, who agreed to take
the case on contingency because Sorenson could not afford the firm’s hourly rate.
Additional evidence supported a conclusion that without an attorney willing to accept the
case on a contingent fee basis, Sorenson likely would not have been able to successfully
pursue his claims.
[¶61] The district court concluded that Sorenson proved that in order for a landowner
like himself to engage competent counsel for representation in a lawsuit of this type, he
had to enter into a contingent fee agreement. It held that “the current market demands the
average Wyoming landowner seeking counsel for representation against an oil and gas
19
Florida Patient’s Compensation Fund v. Rowe, 472 So. 2d 1145, 1150-51 (Fla. 1985).
20
Sorenson presented affidavits from himself and his attorney, as well as an opinion from an experienced
attorney located in northeast Wyoming. The evidence covered everything from Sorenson’s inability to
obtain representation on a fixed-fee basis to the level of work and preparation such a case requires.
Pennaco did not provide any evidence in opposing Sorenson’s motion.
18
company must hire an attorney on a contingency fee basis, and in order to encourage
firms to do so, a multiplier is needed.”21
[¶62] Regarding the second factor to be considered in applying a multiplier, evidence
indicated that Sorenson’s attorneys had no way of mitigating the risk of nonpayment, as
there was no surety of any kind. They were unable to hedge against the possibility that
he could not pay his fees because Sorenson had no other means to pay for the substantial
attorney time needed to prepare and try the case. The risks were great.
[¶63] From the start, Pennaco asserted it owed Sorenson nothing at all because it had
assigned its rights under the surface damage agreement. That legal issue was not finally
resolved by this Court until shortly before this appeal was argued, long after the attorneys
had expended the vast majority of the time required to present Sorenson’s claim. Beyond
that, the spectrum of potential damages presented an additional risk Sorenson’s attorneys
took. Pennaco’s experts testified that damages for reclamation totaled $150,000, while
Sorenson’s experts estimated it to be approximately $880,000, and it was for the jury to
decide which, if either, was correct. The district court concluded that “[t]here was a high
risk that the jury could have found Pennaco had not damaged the property, or they could
have found a very low reclamation amount should be awarded.” If the jury had gone
along with Pennaco’s figures, the shoe might have been on the other foot in terms of
arguing the effect of the contingent fee agreement, because the contingent fee would have
amounted to about half of what Sorenson’s attorneys would have earned at their
customary hourly rate.22
[¶64] As to other factors warranting the use of a multiplier, the district court was guided
by those set forth by the United States Supreme Court, see Perdue, 559 U.S. at 554-55, as
well as by the Florida Supreme Court, see Quanstrom, 555 So. 2d at 834. It determined
that the use of a 2.5 multiplier resulted in a reasonable attorney fee award because of the
exceptional nature of the case, the amount involved, and the results obtained. It found
that the damage award was nearly the largest possible amount that could have been
attained given the disagreement between expert witnesses as to what the damages and
reclamation costs would be. In the district court’s words, the fact that counsel “was able
21
The Florida Supreme Court has noted a primary rationale for the contingency risk multiplier is to
provide access to competent counsel for those who could not afford it. See Bell v. U.S.B. Acquisition Co.,
Inc., 734 So. 2d 403, 411 (Fla. 1999) (“The importance of this policy consideration is highlighted by the
fact that the very first factor listed in Quanstrom . . . is ‘whether the relevant market requires a
contingency fee multiplier to obtain competent counsel.’” (emphasis omitted)). “Multipliers are intended
to level the playing field, to provide litigants, who may otherwise lack the resources, to obtain competent
counsel, as a means of access to the legal system.” Michnal v. Palm Coast Dev., Inc., 842 So. 2d 927, 934
(Fla. Dist. Ct. App. 2003) (emphasis omitted).
22
The attorneys also ran the risk that Pennaco might become insolvent or bankrupt before a judgment
could be collected.
19
to recover the large award of over a million dollars for Sorenson was the result of
exceptional attorney work.”
[¶65] The court also recognized that the lodestar amount would not accurately represent
Sorenson’s actual attorney fees under the contingent fee agreement. The attorneys were
entitled to a 40% contingency by contract, and without enhancement, a large portion of
Sorenson’s damage award would have gone to his attorneys despite the fee-shifting
provision of the surface use and damage agreement.
[¶66] While the district court focused on Florida’s approach to enhancing attorney fee
awards when a contingent fee agreement is involved, we note that several other states
also take that factor into account. The Montana Supreme Court has confirmed that fees
may be awarded on the basis of a contingent fee agreement, and indicated that other
discretionary factors similar to the list in § 1-14-126(b) should also be considered before
such an award is made. See West v. Club at Spanish Peaks, L.L.C., 186 P.3d 1228, 1247-
48 (Mont. 2008). Idaho takes a similar approach in allowing awards of fees when there is
a contingent fee agreement, so long as the court considers other discretionary factors. See
Griffith v. Clear Lakes Trout Co., 200 P.3d 1162, 1172 (Idaho 2009). In Texas, whether
a fee is fixed or contingent is also one of the discretionary factors to be considered. See
Cleveland v. Taylor, 397 S.W.3d 683, 701-02 (Tex 2012). Oklahoma courts likewise
recognize that the contingent nature of the attorney’s employment allows a court to adjust
the basic hourly rate upward by allowing a risk-litigation premium based on the
likelihood of success at the outset of the representation. See Silver Creek Inv., Inc. v.
Whitten Const. Mgmt., 307 P.3d 360, 369-70 (Okla. Ct. App. 2013). Oregon courts have
made it clear that an award of reasonable attorney fees does not preclude the use of a
multiplier or other fee enhancement in contingent fee agreement cases. See ZRZ Realty
Co. v. Beneficial Fire & Cas. Ins., 300 P.3d 1224, 1240-41 (Ore. Ct. App. 2013); see also
Strawn v. Farmers Ins. Co. of Oregon, 226 P.3d 86, 95 (Ore. Ct. App. 2010).
[¶67] After carefully studying the record and applicable law, we conclude that the
district court’s finding in favor of a multiplier of 2.5 is permissible by statute, and that it
cannot be considered an abuse of discretion under the circumstances of this case.
However, we must echo the United States Supreme Court’s caveat that a reasonable fee is
one that is adequate to induce competent counsel to undertake representation in a
meritorious case, but it should not result in a windfall. See Perdue, 559 U.S. at 552.
CONCLUSION
[¶68] The district court did not err in determining that Pennaco continued to remain
liable after assignment for the obligations under the surface damage and use agreement.
The language of that contract plainly requires Pennaco to perform certain obligations
until coalbed methane operations have ceased and the lands are reclaimed. It does not
20
contain language indicating an agreement that Pennaco could be relieved of its
obligations if it assigned them to a third party.
[¶69] Furthermore, the district court did not abuse its discretion by enhancing the
lodestar amount by 2.5 times to arrive at a reasonable award of attorney fees. That
enhancement was warranted under the circumstances of this case.
[¶70] Affirmed.
21