State ex rel. Wright v. Oklahoma Corp.

170 P.3d 1024

2007 OK 73

STATE of Oklahoma ex rel. Charles W. WRIGHT and Rachel Lawrence Mor, individuals and Taxpayer Citizens of the State of Oklahoma, Plaintiffs/Appellants, v. OKLAHOMA CORPORATION COMMISSION, a state agency, and Commissioners Denise A. Bode, Jeff Cloud, Bob Anthony, and Brooks Mitchell, Director of the Oklahoma Storage Tank Division, and Ben Jackson, General Counsel Oklahoma Corporation Commission, and ConocoPhillips Company, an Oklahoma corporation, Defendants/Appellees.

State of Oklahoma ex rel. Oklahoma Corporation Commission, State of Oklahoma ex rel. Brooks Mitchell, Director of the Oklahoma Storage Tank Division; and, State of Oklahoma ex rel. Robyn Strickland, Administrator of the Oklahoma Petroleum Storage Tank Release Environmental Cleanup Indemnity Fund, Plaintiffs/Appellees, v. ConocoPhillips Company, Defendant/Appellee, v. Rachel Lawrence Mor and Charles W. Wright, Intervenors/Appellants.

No. 101,605.

No. 101,606.

Supreme Court of Oklahoma.

October 2, 2007.

As Corrected October 3, 2007.

On Certiorari to the Oklahoma Court of Civil Appeals, Div. II, Okla. Sup.Ct. No. 101,605.

On Certiorari to the Oklahoma Court of Civil Appeals, Div. II, Okla. Sup.Ct. No. 101,606.

¶ 0 In Okla. Sup.Ct. No. 101,605, taxpayers sought a qui tam remedy against the Corporation Commission and others in the District Court for Oklahoma County where they challenged a settlement agreement between the Commission and Phillips Petroleum Company. The defendants filed motions to dismiss the qui tam proceeding, and the Hon. Barbara Swinton, District Judge, sustained those motions. Taxpayers appealed and the Court of Civil Appeals reversed the dismissal order. The Commission and others sought certiorari from this Court. In Okla. Sup.Ct. No.101,606, the Corporation Commission brought a declaratory judgment action in the District Court for Oklahoma County and requested judicial approval of its settlement agreement with Phillips Petroleum Company and taxpayers sought to intervene. The Hon. Barbara Swinton, District Judge, denied taxpayers' motion to intervene and they appealed. The Court of Civil Appeals reversed the order denying the motion to intervene. ConocoPhillips Company sought certiorari from this Court. We hold that: (1) The Petroleum Storage Tank Release Environmental Cleanup Indemnity Fund contains state funds; (2) The officials' declaratory judgment proceeding was not sufficient to make the taxpayers' qui tam remedy premature as a matter of law when the declaratory judgment proceeding did not present for judicial review the facts and law of the controversy submitted by taxpayers' written demand letter; (3) The qui tam petition was sufficient against a challenge that it failed to state a claim upon which relief may be granted when the petition alleged that (a) that state funds were paid upon claims that the officials knew were not legally due, (b) that an audit by the State Auditor and Inspector had informed officials that payment had been made without authority, (c) that officials had been coerced to make payments that were not authorized by law, and (d) that the officials' declaratory judgment proceeding was an improper response to their written demand letter; (4) A qui tam plaintiff's motion to intervene in an official's declaratory judgment proceeding based upon the insufficiency of the declaratory judgment petition is not barred by the good-faith presumption of officials in seeking declaratory relief; and (5) A motion to dismiss a petition for its failure to state a claim upon which relief may be granted is not converted to a motion for summary judgment by the nonmovant's reliance upon materials outside of the pleadings when the movant does not rely on matters outside the pleadings and challenges the sufficiency of the petition.

CERTIORARI PREVIOUSLY GRANTED IN CAUSE NOS. 101,605, 101606

IN CAUSE NO. 101,605 OPINION OF THE COURT OF CIVIL APPEALS IS VACATED AND THE DISTRICT COURT ORDER SUSTAINING MOTIONS TO DISMISS IS REVERSED AND THE MATTER IS REMANDED FOR FURTHER PROCEEDINGS

IN CAUSE NO. 101,606 OPINION OF THE COURT OF CIVIL APPEALS IS VACATED AND THE DISTRICT COURT ORDER DENYING A MOTION TO INTERVENE IS REVERSED AND THE MATTER IS REMANDED FOR FURTHER PROCEEDINGS

David Pomeroy, Terry Stokes, Fuller, Tubb, Pomeroy & Stokes, P.C., Oklahoma City, OK, for Plaintiffs/Appellants in No. 101,605, and for Intervenors/Appellants in No. 101,606.

Kieran D. Maye, Jr., Miller Dollarhide, Oklahoma City, OK, for Defendant/Appellees Oklahoma Corporation Commission, Commissioner Denise A. Bode, Commissioner Jeff Cloud, Commissioner Bob Anthony, Brooks Mitchell, and Ben Jackson in No. 101,605, and for Plaintiffs/Appellees in 101,606.

Rob F. Robertson, Dennis C. Cameron, Gable & Gotwals, Oklahoma City, OK, for Appellee ConocoPhillips Company in 101,605 and Defendant/Appellee in 101,606.

EDMONDSON, V.C.J.

¶ 1 This case involves procedural issues in a qui tam proceeding and a related declaratory judgment proceeding. The first order brought for appeal is a district court order granting a motion, without prejudice, that sought dismissal of a taxpayer qui tam remedy sought against the Oklahoma Corporation Commission and other defendants.¹ The second order brought before us on appeal is a district court order denying those same taxpayers' motion to intervene in a related declaratory judgment proceeding brought by the Oklahoma Corporation Commission that sought judicial approval of a settlement agreement made by the Corporation Commission and others.² We address both appeals with a single opinion.³

¶ 2 The Oklahoma Legislature created the Petroleum Storage Tank Release Indemnity Program in 1989. Oklahoma Statutes Title 17 §§ 350-358, inclusive.⁴ The Indemnity Program created the Petroleum Storage Tank Release Environmental Cleanup Indemnity Fund (Indemnity Fund) to pay statutorily specified expenses related to rehabilitating sites polluted by petroleum from petroleum storage tank systems. 17 O.S. §§ 352(5), 353.

¶ 3 Phillips Petroleum Company, now ConocoPhillips Company (and herein Phillips), between 1991 and 1998 filed claims for reimbursement from the Indemnity Fund and was paid approximately 2.9 million dollars. In 2000 Phillips filed twenty-seven claims for additional payments from the Indemnity Fund. Employees of the Corporation Commission determined that Phillips was entitled to an additional $940,000, approximately, and this amount was paid.

¶ 4 The total amount requested by Phillips was in excess of 5.9 million dollars, but it received only $3,941,170.00. Phillips pressed the Commission for additional payment on its claims. The State Auditor and Inspector reviewed the amounts paid to Phillips and determined that of the $3,941,170.00 paid to Phillips only $2,924,346.00 was within the pertinent statutory authority, and that $1,026,824.00 was questioned as an unauthorized overpayment.

¶ 5 Phillips pressed for additional payment on its claims. In August of 2003 Brooks Mitchell, Director of the Storage Tanks Division, and Ben Jackson, General Counsel for the Oklahoma Corporation Commission, agreed to pay Phillips an additional 3.6 million dollars from the Indemnity Fund. In August of 2003 the agreement was executed authorizing payment of an additional 3.6 million dollars in monthly installments, and Phillips agreed to refrain from pressing for additional payments.

¶ 6 Taxpayers allege that prior to the 3.6 million-dollar payment, new Commission employees became involved with the "leadership" of the Indemnity Fund and the Petroleum Storage Tanks Division. They allege in their Petition that the Commissioners, Commission management, including Brooks Mitchell, Director of the Storage Tanks Division, and Ben Jackson, General Counsel for the Corporation Commission, "were repeatedly informed by their legal counsel of the findings of the State Auditor that ... Phillips' claims had been more than fully paid and no further payment was authorized by statute or other authority."

¶ 7 Taxpayers allege that the impropriety of the settlement agreement includes (1) payment on a case in which the Commission entered an order denying Phillips' claim, that order having been affirmed on appeal to the Oklahoma Supreme Court and mandate previously issued, (2) payment for cases where not statutorily authorized, (3) payment on claims where there was no qualifying documented release of petroleum into the environment, (4) payment for attorney fees and litigations costs when the cases were not litigated, and (5) payment for landscaping and other nonenvironmental cleanup costs.

¶ 8 In July, 2004, Taxpayers sent to the Corporation Commission and the individual Commissioners a Tax Payer Demand—Qui Tam Notice demanding that the Commission rescind the agreement and reclaim funds paid to Phillips in violation of Oklahoma law. The demand letter states that the State Auditor and Inspector questioned $1,026,824.00 as an unauthorized payment to Phillips and that the Commission had improperly agreed to pay an additional 3.6 million dollars to Phillips.

¶ 9 In support of their view that funds had been improperly paid to Phillips, Taxpayers' demand letter alleges that the 3.6 million included payment for a claim that the Commission had previously denied, which order "had been affirmed on appeal to the Oklahoma Supreme Court." They also allege that the settlement agreement provided for payment "on cases for which reimbursement is statutorily not permitted, such as attorney fees, litigation costs, landscaping and other non-environmental clean-up costs." The demand letter also alleges that the settlement agreement improperly paid Phillips for sites and claims not eligible for reimbursement from the Indemnity Fund. The demand letter states that Officers of the Commission "entered into the settlement agreement permitting the transfer of state environmental funds for claims which were `... known to be fraudulent or void, or in pursuance of any...