S Bar B Ranch v. Omimex Canada, Ltd.

MEMORANDUM

S Bar B Ranch appeals the judgment in favor of Omimex Canada, Ltd., which followed the district court’s grant of summary judgment on the contract and fraud based claims brought by S Bar B. We have jurisdiction pursuant to 28 U.S.C. § 1291 and we affirm.

S Bar B sought to recover damages from Omimex on the basis that Omimex had improperly determined the royalty amount that it was required to pay to S Bar B for natural gas obtained from wells on S Bar B’s property. In this diversity action, the law of the State of Montana applies. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 , 58 S.Ct. 817, 822 , 82 L.Ed. 1188 (1938). At the district court, S Bar B conceded that its claims failed if Montana applies the “at the well” rule to determine the royalties rather than the “first marketable product” rule. The district court determined that Montana applied the “at the well” rule. We agree. As the Montana Supreme Court has said, “[t]he price to be paid is not to be an arbitrary price fixed by the lessee but the price actually given in current market dealings.” Mont. Power Co. v. Kravik, 179 Mont. 87 , 586 P.2d 298, 302 (1978). The court explained, “lessor should receive no less…