## Facts

- Rock Island Improvement Company owned two tracts of land in Oklahoma used for coal mining (the Rees-Heavener and Rees-Petros mines).
- Helmerich & Payne, Inc. (H&P) leased the tracts from Rock Island from 1968 to 1977 for coal mining purposes.
- The lease contained an express covenant requiring that, upon completion or abandonment of mining operations, the surface be restored as nearly as possible to its pre-mining condition.
- H&P subleased mining operations to Sam Sexton, Jr., who conducted strip mining and left two strip pits and other unreclaimed conditions at the end of the lease term.
- Rock Island sued H&P for breach of the reclamation covenant, seeking damages measured by the cost to reclaim the land.
- The parties stipulated that the diminution in market value from the unreclaimed condition was $6,797, while Rock Island’s expert estimated reclamation cost at about $375,000.
- A jury awarded Rock Island $375,000; Sexton had agreed to indemnify H&P for any judgment Rock Island obtained.

## Issues

1. Under Oklahoma law, whether damages for breach of an express reclamation covenant are measured by cost of performance or by diminution in value.
2. Whether the district court abused its discretion by admitting Rock Island’s expert testimony on reclamation costs.
3. Whether the $375,000 verdict was excessive under the proper measure of damages.
4. Whether alleged trial errors required a new trial.
5. Whether damages could include reclamation costs for land subject to pending state condemnation proceedings.
6. Whether the judgment had to be reduced by a stipulated $50,000 credit based on funds forfeited by Sexton to the State.

## Decision

- The Tenth Circuit affirmed the judgment for Rock Island on liability and the cost-of-performance measure of damages.
- The court held the reclamation clause was an express, bargained-for obligation and a substantial part of the lease consideration, supporting cost-of-performance damages despite a small stipulated diminution in value.
- The court found no abuse of discretion in admitting Rock Island’s expert testimony; H&P’s objections went to weight rather than admissibility.
- The court rejected the claim that the verdict was excessive because the award was supported by evidence of reclamation costs and matched the measure of damages the jury was entitled to apply.
- The court found no reversible trial unfairness warranting a new trial.
- The court allowed damages covering the area involved in pending condemnation because the condemnation was not complete and Rock Island still held title at trial.
- The court modified the judgment to apply the parties’ stipulated $50,000 credit and otherwise affirmed as modified.

## Legal Principles

- For breach of an express contractual covenant to restore land after mining, Oklahoma contract damages may be measured by cost of performance when the restoration obligation is a substantial, bargained-for term rather than an incidental provision.
- A large disparity between cost of performance and diminution in market value does not bar cost-of-performance damages where the contract’s purpose includes restoration and the injured party’s interest is not fully captured by market value alone.
- Trial courts have broad discretion over admission of expert testimony; challenges to assumptions and estimates typically affect weight, not admissibility.
- A verdict applying the correct measure of damages will not be set aside as excessive if supported by competent evidence within a reasonable evidentiary range.
- Pending condemnation does not automatically eliminate an owner’s recoverable contract damages when legal title remains with the owner and the taking is not complete.
- Stipulated credits that affect the net recovery must be reflected in the final judgment.

## Conclusion

The Tenth Circuit held that breach of a mining lease’s express reclamation covenant supported cost-of-performance damages even though the stipulated diminution in market value was minimal, upheld the evidentiary and trial rulings supporting the jury’s award, and modified the judgment to include a stipulated $50,000 credit.


Rock Island Improvement Co. v. Helmerich & Payne, Inc., 698 F.2d 1075 (10th Cir. 1983)