                           ___________

                           No. 94-1353
                           ___________

Bob Klein; Genevieve Klein;     *
John Frank Pendergrass; Sam     *
Thompson; Margaret Schaffer;    *
Clymer Law; Donnie Hall;        *
Wayne Franklin, Class           *
Representative; Glen Morris,    *
Class Representative; Rowland   *
Vernon, Class Representative,   *
                                *
          Appellants,           *
                                * Appeal from the United States
     v.                         * District Court for the Western
                                * District of Arkansas.
Arkoma Production Company;      *
Arkla, Inc.; Arkla Exploration *
Company; Jerral W. Jones;       *
Michael V. McCoy,               *
                                *
          Appellees.            *
                           ___________

                  Submitted:    January 11, 1995

                       Filed: January 9, 1996
                            ___________

Before BEAM, BRIGHT, and HANSEN, Circuit Judges.
                           ___________

BEAM, Circuit Judge.


     Jerral W. Jones and Michael V. McCoy were sole shareholders of
Arkoma, a natural gas production company which held leases with Bob
Klein and other royalty owners.      Jones and McCoy sold Arkoma
(sometimes old Arkoma) to Arkla, an exploration and pipeline
company. Bob Klein and the royalty owners1 appeal the district
court's finding that they are not entitled to recover any portion



    1
     The named appellants represent a class of approximately 3000
lessors.
of funds exchanged in the transaction.       The district court,
contrary to our earlier mandate, determined that Jones and McCoy
had not settled the royalty owners' take-or-pay claims when Jones
and McCoy effected the sale of Arkoma to Arkla and further
determined that Arkoma had not breached any implied duties to the
lessors. We reverse.

I.   BACKGROUND


     The facts of this case are set forth in our opinion in the
earlier appeal of this action and need only be briefly repeated
here. See Klein v. Jones, 980 F.2d 521, 523-25 (8th Cir. 1992)
(Klein I). Jones and McCoy were, as stated, sole shareholders of
Arkoma, a gas production company.     Arkoma had leases with the
royalty owners (lessors) for mineral rights to property located in
the Arkoma basin in western Arkansas.       Under the leases, the
royalty owners were entitled to one-eighth of the proceeds from gas
produced on the owners' land. Arkoma received seven-eighths of the
gas production proceeds for its "working interest."2


     Arkoma sold natural gas to Arkla. One of Arkoma's contracts
with Arkla (GPC 5239) had a take-or-pay provision.3 Because the
price of natural gas fell, Arkla was unable to "take" the gas at
the agreed price and was unwilling to "pay" for it. Accordingly,
Arkoma had claims against Arkla for the amounts due under the take-


      2
      Jones and McCoy, as individuals, also owned and controlled
property in the Arkoma basin through several tax partnerships.
These tax partnerships also leased mineral rights to Arkoma. This
factual scenario appears more complicated than it is because Jones
and McCoy wore many hats and because the transactions were
structured to maximize tax benefits to Jones and McCoy.
      3
      A take-or-pay provision is a clause in a gas contract that
requires the purchaser to either take delivery of or to pay for the
minimal contract volume of gas that the producer/seller has
available for delivery. Under such a clause, the purchaser usually
has the right to take gas paid for (but undelivered) in succeeding
years (make-up gas). Klein v. Jones, 980 F.2d 521, 523 n.1 (8th
Cir. 1992).

                               -2-
-or-pay provision of the contract.      The claims amounted to
approximately $36 million by March 1986 and were accruing at the
rate of about $3 million per month.


     In an effort to resolve the dispute over these claims, Arkla
and old Arkoma embarked on a series of negotiations, ultimately
resulting in the sale of Arkoma to Arkla. Jones and McCoy received
$173 million as a result of the transaction.4 After the purchase
of Arkoma by Arkla, the disputed gas production contract (GPC 5239)
was reformed. Under the new contract, Arkla paid new Arkoma (now
wholly owned by Arkla) less for its gas, and consequently the
royalty owners received lower royalty payments. The royalty owners
were not aware of any of this until they received royalty checks at
a lower rate in March 1987.


     The royalty owners sued in district court for breach of the
duty of fair dealing arising from a fiduciary relationship, breach
of contract as third-party beneficiaries of the gas purchase
contract, tortious interference with a contract, unjust enrichment
and breach of implied covenant to market.      The district court


       4
        That sum can be broken down as follows.        The parties
initially agreed that Arkla would pay at least $73 million for
Arkoma, including the stock owned by Jones and McCoy. This amount
was subject to an adjustment to account for the results of
additional drilling on land subject to the leases.         Most of
Arkoma's interests in the wells were held in tax partnerships
involving Arkoma and others, including Jones and McCoy. Before
Arkla's purchase of Arkoma stock, Jones and McCoy acquired the tax
partnership interests from others and assigned them to Arkoma. For
the assignment of these interests to Arkoma, Jones and McCoy
received a $35 million promissory note which was paid the day it
was received. Jones and McCoy also received an agreement for Arkla
to provide a quantity of gas to Jones and McCoy which agreement was
secured by a promissory note for $24 million. Jones and McCoy sold
their Arkoma stock to Arkla for $14 million.      Additionally, in
1989, pursuant to the 1986 agreement that the amount was subject to
an adjustment, Jones and McCoy received another $100 million for
the revaluation of gas reserves.

     The royalty owners contend that they are entitled to one-
eighth of the $24 million payment for the gas purchase contract and
one-eighth of one-half of the $100 million payment.

                               -3-
dismissed all claims. The royalty owners appealed to this court
and we reversed the dismissal of the unjust enrichment claim and
the breach of implied covenant to market claim. Klein I, 980 F.2d
at 533.


        In Klein I, we determined as a matter of law that the
complicated transactions between Arkla, Arkoma, Jones and McCoy for
the purchase and sale of old Arkoma included some payment for the
"settlement" of the royalty owners' take-or-pay claims. Id. at
525. ("The difference in the fair market value of the reserves
[$.83 per mcf.] and the amount paid to Jones and McCoy [$1.62 per
mcf.] represented the value paid to Jones and McCoy to settle
Arkla's take or pay dispute under GPC 5239"). Noting that this
case "cr[ies] for equity," we adopted the so-called "Harrell rule."
Id. at 527, 531. Under that rule, oil and gas leases should be
construed in a manner so that the lessee and lessor split all
economic benefits arising from the land; a royalty should be due on
either take-or-pay payments or settlement. Id. at 533 (J. Bright,
concurring).    We remanded to the district court for further
proceedings consistent with the opinion.


     On remand, the parties and the court agreed that the remaining
claims were the royalty owners' unjust enrichment claims against
Jones and McCoy5 and the royalty owners' breach of implied covenant
to market claim against Arkoma.6    Klein v. Arkoma, No. 90-2060,
Mem. Op. at 2-3 (W.D. Ark. Jan. 5, 1994). The district court found
the record fully developed on the implied covenant to market claim
but took further evidence on the unjust enrichment claim. Id. at
21.

     5
      This equitable claim is against Jones and McCoy personally
and not against Arkoma as a corporation because it was Jones and
McCoy who received the benefit of the "premium" Arkla paid for the
opportunity to reform the contract.
     6
      This claim is essentially directed at old Arkoma. However,
new Arkoma is the same corporation with a new stockholder, Arkla.
Because Arkla owns Arkoma, Arkla may also be liable if Arkoma
cannot satisfy a judgment.

                               -4-
     After trial, the district court found:


     [t]here was no direct proof in the previous record on the
     question of whether Jones/McCoy had, in fact, settled a
     take-or-pay claim. It was, rather, for this court on
     remand to hear the proof and determine what the facts are
     with regard to that issue. It is therefore unfortunate,
     in this court's view, that both the majority and
     concurring opinions in Klein v. Jones, assume that the
     sale of Arkoma from Jones/McCoy to Arkla amounted to a
     settlement of a take-or-pay claim existing between the
     parties. With respect, it is noted that the facts found
     by this court after a five day trial do not support that
     assumption.

Id. at 29-30 (emphasis in original) (footnote omitted).      The
district court found that the take-or-pay claim was not settled
until after the sale of Arkoma because GPC 5239 was not reformed
until after Arkoma (new Arkoma) was owned by Arkla. Id. at 30.
The district court concluded that "Jones and McCoy were legally
entitled to receive all they did receive from such sale. They had
the legal right to sell their interests in Arkoma (including the
[Arkoma] take-or-pay claim) and cannot be said to have been
unjustly enriched because they chose to exercise that legal right."
Id. at 35. On the breach of implied covenant to market claim, the
district court found that the amendment of GPC 5239 "was prudent
and reasonable and served to properly comply with the implied duty
to market gas which New Arkoma, as lessee under the leases, owed to
plaintiffs as lessors." Id. at 63.


     The royalty owners have again appealed and the issue, once
again, is whether the royalty owners are entitled to share in any
portion of the $173 million that Jones and Mccoy received from the
various transactions. The royalty owners first contend that the
district court failed to follow the mandate of this court on
remand. They assert error in the district court's finding that the
transaction at issue was not a settlement of the take-or-pay claim
and assert that they are entitled to judgment on that claim. They
also contend that the district court erred in determining that
Arkoma had not breached an implied covenant to market.

                               -5-
II.   DISCUSSION


      A.   "Settlement" Finding--Law of the Case


     We agree with the royalty owners that the district court
failed to follow the mandate of this court. The district court
erred in determining that there had been no settlement of the take-
or-pay claim.   In Klein I, we ruled that the funds received by
Jones and McCoy included an amount that represented the value to
Arkla of its right to reform the take-or-pay contract. That amount
was characterized as a "settlement" of the take-or-pay claims. The
legal conclusion that Jones and McCoy settled the take-or-pay
claims is the law of the case and the district court was bound to
follow it.7


     The law of the case doctrine prevents relitigation of a
settled issue in a case and requires that courts follow decisions
made in earlier proceedings to insure uniformity of decisions,
protect the expectations of the parties and promote judicial
economy. Bethea v. Levi Strauss & Co., 916 F.2d 453, 456-57 (8th
Cir. 1990). See also Liberty Mut. Ins. Co. v. Elgin Warehouse &
Equip., 4 F.3d 567, 570 (8th Cir. 1993). When a case has been
decided by this court on appeal and remanded to the district court,
every question which was before this court and disposed of by its
decree is finally settled and determined. Houghton v. McDonnell
Douglas Corp., 627 F.2d 858, 864 (8th Cir. 1980). The district
court is bound by the decree and must carry it into execution
according to the mandate. Id. It may not "`alter it, examine it
except for purposes of execution, or give any further or other
relief or review it for apparent error with respect to any question
decided on appeal.'" Id. (quoting Thornton v. Carter, 109 F.2d

      7
     Generally, parties must bring any perceived errors in a panel
opinion to the court's attention through a petition for rehearing.
Liberty Mut. Ins. Co. v. Elgin Warehouse & Equip., 4 F.3d 567, 571
n.6 (8th Cir. 1993).       We note that no one disputed our
characterization of the transactions as a "settlement" in the
petitions for rehearing that were filed in the earlier appeal.

                                 -6-
316, 319-20 (8th Cir. 1940)). Under the law of the case doctrine,
a district court must follow our mandate, and we retain the
authority to decide whether the district court scrupulously and
fully carried out our mandate's terms. Jaramillo v. Burkhart, 59
F.3d 78, 80 (8th Cir. 1995).


     The district court erroneously concluded that our holding was
a factual "assumption." It was not. It was a legal conclusion.
We found that, as a matter of law (regardless of how the parties
viewed the several agreements), the various transactions, including
the ultimate reformation of GPC 5239, amounted, at least in part,
to a "settlement" of the royalty owners' take-or-pay claims.8
Klein I, 980 F.2d at 531-32.


     The interpretation of an unambiguous contract is a question of
law. W.S.A., Inc., v. Liberty Mut. Ins. Co., 7 F.3d 788, 791 (8th
Cir. 1993).   The determination that a contract is, or is not,
ambiguous is also a legal determination and no deference is paid to
the trial court's decision on the issue.        Maurice Sunderland
Architecture, Inc. v. Simon, 5 F.3d 334, 337 (8th Cir. 1993).
Also, in construing the contract, the court can consider both "the
Agreement as a whole" and the "undisputed context in which the
Agreement was concluded." Realex Chem. Corp. v. S.C. Johnson &
Son, Inc., 849 F.2d 299, 302 (8th Cir. 1988) (emphasis in
original). There was no dispute in the earlier litigation that the



     8
      We note that the district court's rejection of our holding
was based mainly on the sequence of events. The district court did
not find that no settlement had ever taken place, but that the
settlement did not occur until Jones and McCoy were out of the
picture (when the gas purchase contract was reformed).          The
district court is wrong for two reasons:      a) we rejected this
argument in the first appeal; and b) finding that the actual
reformation of the gas purchase contract is the settlement does not
reflect economic reality.     There was no consideration for the
reformation. The quid pro quo to enable Arkla to renegotiate the
contract was exchanged in December 1986 when Arkla bought Arkoma
from Jones and McCoy. In other words, Jones and McCoy received the
money, the "premium" to settle the take-or-pay claims.

                               -7-
transactions surrounding the sale of Arkoma were the vehicles by
which Arkla could reform GPC 5239.


     As indicated, we concluded as a matter of law that the sales
agreements and supporting documentation amounted to a settlement of
the take-or-pay claims. In consideration of this settlement, Jones
and McCoy received a premium, a price for the purported sale of
Arkoma which was over and above the market value of its gas
reserves and assets.    Klein I, 980 F.2d at 531-32.      Our legal
conclusion that the transaction was a settlement was based upon the
undisputed context of the negotiations leading up to the agreement:
the parties viewed the transactions as part and parcel of an
agreement to resolve the take-or-pay claims and the transactions
resulted from the negotiations to resolve the take-or-pay dispute.
We have again reviewed the record and remain convinced that our
conclusion is correct.9 In any event, the district court was not
free to reject our legal conclusion.




    9
     It is clear that the transactions amounted to a settlement of
the potential claim. See Appellants' Appendix at 136 (November 25,
1986, Letter from Alan M. Warren, President of Arkla Exploration
Co. offering to purchase Arkoma for $75 million dollars, including
settlement of take-or-pay claims); Appellants' Appendix at 141
(Handwritten notes headed "Details of Proposed Deal" indicating
"value to AEC [Arkla Exploration Co.] under lower pricing scenario
approximately 50 mm$--Jones won't settle for less than 75mm$--
portion of settlement must be take or pay . . . consultants have
indicated that $.80/mcf is a `reasonable' market value for reserves
in the ground--have backed into portion of settlement which must be
take or pay--24mm"); Appellants' Appendix at 152-157 (Arkla, Inc.,
Board of Directors' Meeting Minutes, December 17, 1986, containing
numerous references to "take-or-pay" and citing elimination of
take-or-pay obligation as a benefit of purchase); Appellants'
Appendix at 158-179 (Documents presented at December 17, 1986,
Board of Directors' Meeting entitled "Reformation of Arkoma
Contract and Purchase of Arkoma Production Company"). All of this
evidence was available to both the district court and to this court
in Klein I. See Klein v. Arkoma, No. 90-2060 (W. D. Ark. March 4-
12, 1991) (Trial Exhibits Nos. 51, 53, 58 and 72).

                               -8-
     B.    Unjust Enrichment


     The district court initially rejected the royalty owners'
unjust enrichment claim on the ground that the royalty owners had
a right to recover under their leases and therefore should not be
entitled to an equitable remedy.     Klein v. Arkoma, No. 90-2060
Preliminary Conference at 13 (Transcript of Findings) (W.D. Ark.
March 4, 1991). We reversed that finding. Klein I, 980 F.2d at
533.    Normally, when an express contract exists between the
parties, unjust enrichment is not available as a means of recovery.
Moeller v. Theis Realty, Inc., 683 S.W.2d 239, 240 (Ark. Ct. App.
1985). However, when an express contract does not fully address a
subject, a court of equity may impose a remedy to further the ends
of justice. See, e.g., Roberson Enters., Inc. v. Miller Land &
Lumber Co., 700 S.W.2d 57, 59 (Ark. 1985) (imposing conditional
cancellation). The leases in this case do not address whether a
take-or-pay settlement fits within the definition of the "market
value" of gas produced and sold under the leases.10 Moreover, Jones
and McCoy were not parties to the leases. For those reasons, we
adopted the Harrell rule, and cited Henry v. Ballard & Cordell
Corp., 418 So. 2d 1334, 1338 (La. 1982) for the proposition that
courts should construe transactions in such a way that the lessee
and lessor split all economic benefits from the land. Klein I, 980
F.2d at 531-32.

     A claim for unjust enrichment is an equitable claim.       In
matters of equity, the court is one of conscience which should be
ever diligent to grant relief against inequitable conduct, however
ingenious or unique the form may be. Holland v. Walls, 621 S.W.2d


      10
        Under Hillard v. Stephens, 637 S.W.2d 581, 584-85 (Ark.
1982), a lessor with a "market value" lease has a right to receive
from the lessee a percentage of all proceeds the lessee receives
from the sale of gas produced under a gas purchase contract. See
Klein I, 980 F.2d at 533-34 (the settlement can be viewed as
representing how much Arkla was willing to pay to either 1) be
released from the contract or 2) pay for gas it had already
received under the contract) (J. Bright, concurring).

                               -9-
496, 497 (Ark. Ct. App. 1981). A court of equity may fashion any
reasonable remedy that is justified by proof. Mid-State Trust II
v. Jackson, 854 S.W.2d 734, 738 (Ark. Ct. App. 1993).


     Under Arkansas law, a party is unjustly enriched when he has
received something of value that belongs to another.       Dews v.
Halliburton Indus., Inc., 708 S.W.2d 67, 69 (Ark. 1986).        The
measure of damages for unjust enrichment is the amount of unfair
gain received by those unjustly enriched.11 See, e.g., Holland, 621
S.W.2d at 499.    Here, the evidence shows that Jones and McCoy
received a "premium" from Arkla to enable Arkla to reform the gas
purchase contract to the detriment of the royalty owners.       The
royalty owners never received any of the premium that Jones and
McCoy received for the settlement of the take-or-pay claims.


     Accordingly, because the evidence establishes as a matter of
law that Jones and McCoy settled the take-or-pay claims, and
because the Harrell rule entitles lessors to share in all proceeds
from the land, we hold that the royalty owners are entitled to
recover from Jones and McCoy on their unjust enrichment claim. We
have reviewed the voluminous record in this case and can find no
evidence that the royalty owners' rights or interests were
separately considered in the negotiations between Jones and McCoy
and the Arkla defendants.     We thus conclude that the royalty
owners' interest is subsumed within the "premium" that Jones and
McCoy received as part of the sale.


     We must next determine what part of the funds received by
Jones and McCoy in the transactions represented the "premium" paid
to enable Arkla to reform the contract.      After review of the
record, we find that the $24 million "gas contract" payment

    11
      In this connection, we note that the only part of the monies
exchanged in the transaction that flowed through Arkoma to Jones
and McCoy was the $35 million to pay off the promissory note for
the assignment of Jones's and McCoy's interests as lessors. All
the other sums were paid directly to Jones and McCoy. The royalty
owners do not claim entitlement to the $35 million payment.

                               -10-
(secured by a promissory note) represented part of the "premium."12
The royalty owners are entitled to a one-eighth share of that $24
million. In addition, pursuant to the 1986 agreement, Jones and
McCoy received, in 1989, an additional $100 million for revaluation
of wells. The evidence shows that the 1989 payment was premised on
the 1986 agreement and it also includes part of the premium. The
$100 million payment consists of payment of $1.62 for reserves in
the ground which were worth $.83 on the spot market.           This
difference represents the "premium" Arkla paid to reform GPC 5239.
Accordingly, the royalty owners are entitled to one-eighth of
approximately half ($.83/$1.62) of $100 million. On remand, the
district court shall determine the amount with specificity and
shall enter judgment against Jones and McCoy in that amount.13


     C. Breach of Implied Covenant to Market


     The district court found that evidence showed the actions of
Arkoma in reforming the contract were prudent and reasonable.
Klein v. Arkoma, No. 90-2060, Mem. Op. at 46 (W.D. Ark. Jan. 5,
1994).   Although that finding may be correct, that is not the
issue. We find that the implied covenant to market under a lease
necessarily encompasses not only the duty to make prudent and
reasonable business decisions, but the duty to share the proceeds
of those decisions with the lessors. The breach in this case is


     12
      The evidence shows that the "gas contract" was actually an
illusory contract. McCoy testified that "[t]here was actually no
gas.   There was no meter. There was no one selling and no one
buying." Trial transcript at 714. This portion of the deal was
apparently structured this way so that Arkla could pay in
installments. Id. at 711-12. Jones and McCoy received monthly
checks from Arkla for non-operational wells. Id. at 712-13.
    13
      At oral argument, counsel for the royalty owners stated that
the certified class in this case consists of only the Arkansas
royalty owners. The Arkansas royalty owners comprise approximately
seventy percent of the royalty owners entitled to share in the
proceeds. Accordingly, the royalty owners in this litigation are
entitled to approximately seventy percent of the award.        The
district court on remand shall also determine the proper amount to
be awarded to these plaintiffs.

                               -11-
neither the decision to settle, nor the decision to reform the
contract, but the failure to share the benefits of the settlement
with the beneficial owners of those proceeds.


     This result is also mandated by our decision in Klein I. In
adopting the Harrell rule, we held that the economic benefits of
the land must be proportionally split between lessees and lessors
of an oil and gas lease. Here, we determined that a "premium" was
paid to enable Arkla to reform the contract. As noted earlier, the
royalty owners received no share of the premium.


     The district court erred when it conflated the cause of action
for breach of lease obligations with that of breach of the gas
purchase contract. The claim for breach of implied covenant to
market arises under the lease. Klein I, 980 F.2d at 526. The
district court, discussing the breach of implied covenant claim,
states:

     As has been said by both the Court of Appeals and by this
     court, plaintiffs were incidental beneficiaries with
     respect to GPC 5239. Thus, these benefits incidentally
     acquired by plaintiffs when GPC 5239 came into being were
     in like manner incidentally lost when New Arkoma and
     Arkla, for prudent reasons, amended GPC 5239.


Klein, No. 90-2060, mem. op. at 44-45. The court further states
that "[n]o authority has been cited to the Court to support the
notion that the loss of such incidental benefits amounts to a
violation of the implied covenant to market which attends a mineral
lease." Id. at 60. After first noting that there is no express
covenant to sue to enforce take-or-pay obligations under GPC 5239,
the district court further states:


     Arkansas law does not recognize any implied covenant on
     the part of a lessee under an oil and gas lease to file
     suit to enforce the terms of a gas purchase contract, to
     which lessee is a party, for the benefit of the lessor
     under the said lease who is neither a party nor a third
     party beneficiary with respect to the said gas purchase
     contract.

                               -12-
Id.

     In Klein I, we affirmed the holding that the landowners could
not maintain a suit for breach of the GPC 5239 contract. Klein I,
980 F.2d at 527.     However, the question of breach of implied
covenant to market is a completely different issue. The implied
covenant arises in and from the leases and is not premised upon GPC
5239, except that GPC 5239 may be evidence that defines the extent
of the duty or that measures damages flowing from its breach.


     To affirm the district court's holding would mean that the
royalty owners' status as incidental beneficiaries of GPC 5239
precludes their claim to enforce an implied covenant to market
under the leases. That result would effectively negate our earlier
finding that there is such an implied covenant.


     The flaw in the district court's implied covenant analysis is
that it assumes that the only way to satisfy the implied covenant
would have been to sue to enforce the GPC 5239 take-or-pay
obligations.14 To the contrary, it may have been reasonable for
Arkoma to forego suing Arkla on the take-or-pay claims for a
premium reflected, as in this case, in the monies paid in the
transactions involving the sale of the corporation. However, in
order to fulfill its obligations to its lessors, Arkoma needed to
ensure that the landowners received a portion of the funds paid by
Arkla as a premium.




      14
       To that end, there was much testimony about the value and
prospect of success of the potential claim.       That evidence is
irrelevant because the value has already been determined by the
amount Arkla was willing to pay to settle the potential claim. The
prospect of success is likewise irrelevant since the claim was
settled, not litigated.

                               -13-
     We hold that Arkoma breached a duty under the implied covenant
to market owed to the lessors under the leases.        This breach
occurred when Arkoma failed to retain and pay over to the royalty
owners a proportionate share of the premium paid by Arkla to settle
the take-or-pay claims.    Accordingly, the class is entitled to
judgment against Arkoma under the implied covenant to market.


     The liability here is primary as to Jones and McCoy and
secondary against Arkoma.   After all, Jones and McCoy actually
received the monies rightfully belonging to the Arkansas royalty
owners. See supra at 10 n.11.

     The dissent charges the court with three errors and then
concludes that Jones and McCoy are entitled to $173 million while
the owners of the land from which the gas is extracted are due zero
dollars. The court disagrees and responds briefly to each concern.


     The dissent first insists that we commit a factual error when
we speak of the royalty owners take-or-pay claims, asserting that
the claims belong only to Arkoma.         Infra at 17-18.      The
significance of Klein I and its adoption of the Harrell rule is
that the royalty owners are entitled, by virtue of the leases, to
a proportionate share of Arkoma's take-or-pay claims. Klein I, 980
F.2d at 531-32.    Also, the dissent, like the district court,
confuses the royalty owners' contract rights under the leases with
those under GPC 5239. Supra at 12-13.


     Next, the dissent challenges both the fact of and the
correctness of this court's finding in Klein I that a settlement
had been reached. Infra at 18-20. That we found as a matter of
law that the contracting parties had settled the take-or-pay claims
is beyond dispute.     Both the parties and the district court
recognized this result on remand. Klein v. Arkoma, No. 90-2060,
Mem. Op. at 30 (W.D. Ark. Jan. 5, 1994).        In challenging the
correctness of the decision, the dissent charges us with appellate
court factfinding under the guise of deciding a question of law.

                               -14-
Infra at 21. In doing so, the dissent disregards the trial court
record and also misapprehends Arkansas law.


     We strongly disagree that any appellate court findings of fact
were made in either Klein I or in this decision.       The dissent
quotes statements by the district court in Klein I to show that
settlement of the take-or-pay claims was in dispute. The dissent
then turns the district court's legal observation that "I don't
think the plaintiffs [royalty owners] have a right to any portion
of the proceeds of a settlement of a take or pay obligation," into
a "recognized . . . genuine factual dispute." Infra at 19. The
basis for this legal/factual metamorphosis is difficult to
perceive.


     Admittedly, the settlement issue was hotly contested, but it
was the legal question of whether and upon what terms a settlement
was reached, rather than the facts surrounding the events of
December 1986, that was in dispute. Resolution of the issue did
not, and does not, involve deciding issues of fact.      Whether a
contract (here, the settlement agreement) is formed is a question
of law. For example, if it is undisputed that party one says "I
will give you ten dollars if you won't sue me" and party two says
"okay", this court, or any court, is free to determine, as a matter
of law, that the transaction constitutes a settlement calling for
a payment of $10 to party two. That is exactly what this court did
in Klein I.    The court considered and relied upon undisputed
documentary evidence that had been presented to the district court
and found that the transaction amounted to a settlement. Supra at
8 n.9. We merely construed unambiguous contracts in the context of
undisputed facts, all the while viewing the evidence most favorably
to the nonmoving parties.     Within this context we applied the
Harrell rule to determine who would receive portions of the agreed
upon amounts.


     Building on its misapprehension of the factual/legal
situation, the dissent cites Rowland v. Worthen Bank & Trust Co.,

                               -15-
680 S.W.2d 726, 728 (Ark. Ct. App. 1984) as support for the
proposition that "[u]nder applicable Arkansas law, whether or not
a settlement was made is an issue of fact for the trier of fact."
Infra at 20-21. The Rowland case simply does not stand for that
proposition.   The issue in Rowland was whether a lawyer, as a
matter of law, may bind a client to an agreement [by the lawyer] to
settle a claim. Rowland, 680 S.W.2d at 727. The trial court said
no. Id. The Arkansas Court of Appeals reversed, holding that the
settlement was, indeed, binding as a matter of law. Id. at 728.
The court conceded that the extent of the authority a client may
grant to his lawyer may be a question of fact. Id. However, in
Rowland, as here, when the context within which the settlement is
achieved is not in dispute, whether a settlement was reached and
the interpretation of the terms and conditions of such settlement
are questions of law for the court. These questions are precisely
what this court was entitled to answer and did answer in Klein I.
These legal conclusions were binding upon the district court on
remand.


     The dissent's claims of appellate court factfinding appear to
be bottomed on the posture of the appeal in Klein I as an appeal
from a motion for summary judgment.    Infra at 18.    Notably, in
Klein I, the district court had granted summary judgment in favor
of Jones and McCoy on all claims except the breach of implied
covenant to market claim. Klein I, 980 F.2d at 526. That claim
was fully tried. Id. The evidence with respect to the threshold
issue of whether the take-or-pay claims had been settled is the
same with respect to all claims. As noted, all of the facts on
which this court relied had been presented to the district court.
Supra at 8, n.9.


     Finally, the dissent's objection to the court's covenant to
market holding is incorrect as well. The dissent construes the
various agreements and states, "I disagree with the court's basic
conclusion that Jones and McCoy were paid anything as individuals
to settle the take-or-pay dispute between the two corporations, but

                               -16-
instead were paid only for the value of Arkoma itself."   Infra at
22.   However, when you cut through the form and get to the
substance of this dispute, as outlined supra at 3 n.4 and 8 n.9,
you find, under the dissent's approach, that Jones and McCoy would
have been paid $173 million for all of the stock in a $14 million
company. Every dollar beyond the $14 million paid for the Arkoma
stock represented payment for either the oil reserves owned by
Jones and McCoy or the take-or-pay interests held by Jones and
McCoy, as individuals, and by the royalty owners. If Jones and
Mccoy were entitled to direct or indirect compensation for their
take-or-pay claims, so were the royalty owners. Thus, all of the
maneuvering by Jones and McCoy to the contrary, the undisputed
record simply fails to establish that the royalty owners had no
lawful right to part of the settlement reached with Arkla.

III.    CONCLUSION


     For the reasons set forth above, the judgment of the district
court is reversed and this action is remanded to the district court
for entry of judgment against Jones, McCoy and Arkoma in an amount
to be determined by the district court, together with interest as
provided by law.


HANSEN, Circuit Judge, dissenting.


       I respectfully dissent.


     First, the court errs factually when it speaks of the "royalty
owners' take-or-pay claims". Supra, at 2, 4. The only "take-or-
pay claims" that existed in this case were those held by Arkoma
against Arkla arising out of Arkla's refusal to either take or pay
pursuant to one or more of eight gas purchase contracts (the most
notable of which is GPC 5239) between the two corporations. The
take-or-pay claims against Arkla were always contract rights and
nothing more. The take-or-pay claim in GPC 5239 was not held by
the plaintiffs, and most certainly not by Jones and McCoy as

                                 -17-
individuals, but solely by the plaintiffs' lessee, Arkoma. It was
always a corporate asset of Arkoma's, a receivable, if you will, of
disputed and doubtful value heavily laden with litigation risks.
In the first appeal we held that the plaintiff royalty owners were
not even third party beneficiaries of GPC 5239, holding them to be
"at the most, incidental beneficiaries." Klein v. Jones, 980 F.2d
521, 527 (8th Cir. 1992) (Klein I). Their claims, if any, must be
bottomed on their leases with Arkoma, and as I understand it, their
unjust enrichment claims in this lawsuit are that Jones and McCoy
failed to share with them some of the monies Jones and McCoy
received when Jones and McCoy sold their individual interests in
Arkoma to Arkla's wholly-owned subsidiary, Arkla Exploration
Company. Or as the plaintiffs' counsel put it at oral argument,
"They got theirs--we didn't get ours."1


     Second, I most respectfully disagree with our court's first
and basic premise that this court concluded as a matter of law in
the first appeal that an identifiable and discrete part of the
money Jones and McCoy received from the sale of Arkoma represented
a "settlement" of the take-or-pay dispute between Arkla and Arkoma.
If it was anything, our prior comment that "[t]he difference in the
fair market value of the reserves and the amount paid to Jones and
McCoy represented the value paid to Jones and McCoy to settle
Arkla's take or pay dispute under GPC 5239," id. at 525, was an
unnecessary and exceptionally inappropriate appellate court fact-
finding, and we should candidly recognize it as such. It must be
remembered that this case first came to us on a grant of summary
judgment by the district court (Morris S. Arnold, J.) purely on a
question of law.    Whether the take-or-pay claim held by Arkoma


    1
     Contrary to the criticism made by my brothers, supra, at 14,
17, in my view the royalty owners are entitled to everything their
leases entitle them by applying the "Harrell Rule" to let them
share in the settlement of the take or pay contracts. As outlined
herein, my dispute is with the court's adamant insistence that the
first appeal decided as a matter of law that the take or pay
contracts were settled by payments to Jones and McCoy and the terms
of such a settlement.

                               -18-
against Arkla had in fact been settled by any of the payments made
to Jones and McCoy was hotly contested in the summary judgment
papers filed with the trial court. The district judge acknowledged
the disputes of fact about the "settlement" of the take-or-pay
claim that existed at the time of the submission of the summary
judgment motion:


          The briefs are full of a lot of argument about
          whether or when this take or pay contract was
          settled, whether it was settled when Arkoma
          was sold and Mr. Jones and Mr. McCoy got money
          for their stock and some other things, or
          whether it was settled when in fact Arkoma
          entered into a new agreement with the Arkla
          companies.


(JM App. at 2-3.) Having recognized the genuine factual disputes
before him about "whether or when this take or pay contract was
settled," the district judge went on to say:


          But I don't think it matters, at least not on
          this level, when or if the contract was
          settled, because I don't think the plaintiffs
          have a right to any portion of the proceeds of
          a settlement of a take or pay obligation.


(Id. at 3.)2 It was on that issue of law that we reversed the
district court's grant of summary judgment to Jones and McCoy and


     2
      The court's majority misreads this dissent. Supra, at 15.
As stated above, the genuine factual disputes recognized by the
first district judge were "whether or when this take or pay
contract was settled." The only metamorphosis which occurs is when
the majority takes those recognized and existing factual disputes
as to "whether and upon what terms a settlement was reached,"
supra, at 15, and now says they were really questions of law
decided by the first appeal. The real question of law involved in
the first appeal was whether the first district judge was right
when he said that royalty owners had no right to any portion of the
proceeds of a settlement of a take or pay contract. We said that
the district court was wrong, and that royalty owners, under the
"Harrell Rule," have a right to share in the settlement of a take
or pay contract between their lessee and a pipeline company. I do
not disagree with that legal conclusion.

                               -19-
adopted the "Harrell Rule." For our court to say today that "[o]ur
legal conclusion that the transaction was a settlement was based
upon the undisputed context of the negotiations leading up to the
agreement . . .", supra, at 8 (emphasis added), is directly
contrary to the record before the district court at the time it
granted summary judgment and cannot be correct. Like the district
court, it was not necessary "on this level" for this court to
decide in Klein I "whether or when this take or pay contract was
settled" (let alone what was paid to settle it, which is also what
the court now says the first opinion did and what it is now trying
to enforce). All we had to decide in Klein I was whether royalty
owners had a legal entitlement to share in the settlement of a take
or pay contract and leave to the district court on remand to
determine the factual issues of what, when, whether, and how
settlement occurred.


      We consistently reverse district judges who decide disputed
issues of fact in determining summary judgment motions. See
Teleconnect v. Ensrud, 55 F.3d 357, 360 (8th Cir. 1995) ("The
summary judgment mechanism is not designed to forecast the work of
the finder of fact."); Oldham v. West, 47 F.3d 985, 989 (8th Cir.
1995). We should be willing to take the same medicine we dose out
and recognize our own errors when we make them.        We are not
allowed on appeal to weigh the evidence and resolve disputed
questions of fact. McCurry v. Tesch, 824 F.2d 638, 640 (8th Cir.
1987) ("The trial court is the place for the facts to be found.
Appellate courts should not find the facts . . . ."). Rather, on
appeal from a grant of summary judgment as in Klein I, we are only
authorized to view the evidence in the light most favorable to the
nonmovant (not to determine what disputed facts that evidence
proves) and then to decide whether the movant has "established its
right to a judgment with such clarity as to leave no room for
controversy . . . ." Kegel v. Runnels, 793 F.2d 924, 927 (8th Cir.
1986). Under applicable Arkansas law, whether or not a settlement
was made is an issue of fact for the trier of fact. Rowland v.
Worthen Bank & Trust Co., N.A., 680 S.W.2d 726, 728 (Ark. App.

                               -20-
1984) ("The Court of Appeals cannot act as a factfinder.    We must
therefore reverse and remand this matter to the trial court so that
a further hearing may be held to determine whether a settlement had
been made . . . ." (citation omitted)).3 We committed fundamental
error in Klein I when we included in the "FACTS" portion of the
opinion the resolution of what everyone in the district court knew
were hotly disputed fact issues -- "whether or when this take or
pay contract was settled."       Because Jones and McCoy had no
opportunity in the summary judgment setting to obtain a ruling from
the district judge on the disputed issues of fact before the first
appeal, they were not and should not be bound on remand by our
court's statements on the factual issues. See International Union,
UAW v. Mack Trucks, Inc., 917 F.2d 107, 110-11 (3d Cir. 1990),
cert. denied, 499 U.S. 921 (1991).


     Nor are we now correct, and in truth we compound our error,
when we take what was an unwarranted appellate court fact-finding,
call it a "conclusion of law," and then use it as "the law of the
case" to reverse carefully considered detailed findings of fact
made by the district judge after hearing all of the evidence in a
five-day trial. Our gratuitous finding (or "assumption" as the
district judge more politely characterized it on remand) was not
only unwarranted, ill-advised, and inappropriate, it was, as the

       3
        Contrary to the majority's criticism, supra, at 15-16,
Rowland is directly on point. In Rowland, as it was in this case
with respect to the first appeal, only a question of law was before
the appellate court. It was precisely because the Arkansas trial
court had made no findings of fact about "whether, under the facts
of this case, a settlement in fact had been made. . ." (680 S.W.2d
at 728) (emphasis added) that the Arkansas appellate court remanded
to determine if a settlement had in fact been made. At the risk of
repetition, then District Judge Arnold, just like the state trial
judge in Rowland, made no fact-finding about "when or if the
contract was settled" (JM App. at 3), because, just like the state
trial judge in Rowland, he decided the case on a question of law.
The difference between our court and the Arkansas Court of Appeals
is that the state appellate court correctly declined the
opportunity to look at the facts in the record as they existed
before the trial court and make the factual determinations that a
settlement had, in fact, been made (and also its terms) as our
court erroneously does.

                               -21-
district judge's meticulous fact-findings on remand demonstrate,
clearly wrong.


     We can still correct rather than compound our previous error
by now treating our prior finding not as either established fact or
as the law of the case, but as what it should have been -- a
recitation of the evidence as viewed in the light most favorable to
the nonmoving plaintiffs at the time the trial court granted
summary judgment against them. Then we are free to do that which
the law requires us to do now -- review the findings of fact made
by the district court on remand for clear error. Having done so,
I would affirm the district court on the unjust enrichment claims
made by the plaintiffs against Jones and McCoy.


     I also dissent from the court's opinion with respect to the
implied covenant-to-market claim made against the Arkla defendants.
The court pegs its conclusion of liability on a determination that
"Arkoma failed to retain and pay over to the royalty owners a
proportionate share of the premium paid by Arkla to settle the
take-or-pay claims." Supra, at 14. The "premium" the court is
talking about is the "premium" the court erroneously finds Jones
and McCoy were paid as individuals to settle the take-or-pay
dispute pursuant to the terms of the December 31, 1986,
transactions.    Supra, at 10-11.    Because I disagree with the
court's basic conclusion that Jones and McCoy were paid anything as
individuals to settle the take-or-pay dispute between the two
corporations, but instead were paid only for the value of Arkoma
itself, which included whatever present contingent asset value the
take-or-pay dispute with Arkla may have had to Arkoma, I cannot
concur with the court's conclusion about Arkoma's responsibility to
retain some of the monies paid by Arkla for the plaintiffs'
benefit. In addition, any monies paid by Arkla went directly to
Jones and McCoy without passing through Arkoma. There was nothing
for Arkoma to "retain." In my view, the implied covenant-to-market
claim only reaches the actions of New Arkoma in renegotiating its
contract rights in GPC 5239. (The reader must remember that the

                               -22-
plaintiffs had no legally enforceable rights in the contract and
were only incidental beneficiaries thereof.) With respect to that
issue, I agree with the district court that there was no violation
of any such implied covenant. The actions taken by New Arkoma in
negotiating an end to the stalemate were similar to those taken by
many other producers with disputed take-or-pay contracts, and
resulted in the movement of the plaintiffs' gas out of the ground
at better than existing market prices with royalties being paid.4
Its actions in renegotiating GPC 5239 meet the test we set out in
Klein I -- "The test of compliance with an implied covenant is that
of a reasonable developer." Klein I, 980 F.2d at 532.      In fact,
given the market conditions then existing, it probably would have
been imprudent not to have renegotiated the contract. See Frey v.
Amoco Prod. Co., 603 So.2d 166, 176 (La. 1992) (While making a long
term contract containing a take-or-pay provision with pipeline
company was originally prudent, producer "would also likely be
deemed to have acted imprudently" if it failed to renegotiate in
face of pipeline's financial inability to fully perform take or pay
given market conditions.). Although the following quotation may be
subject to the criticisms made herein, this court said as much in
Klein I:


     In this case the take-or-pay elements in the developers
     [sic] contracts with the pipeline/marketer were, because
     of Federal Energy Regulatory Commission intervention,
     literally bankrupting the pipeline, and those facts must
     be considered in evaluating the reasonableness of
     defendants' actions.    We find it reasonable for the
     defendants to make some effort to liquidate the take-or-
     pay obligations of AEC.



      4
       The majority again errs in its reading of this dissent.
Under the district court's judgment, which should be affirmed, the
royalty owners received the benefit of the above market prices
contained in the renegotiated take or pay contract which reopened
their wells.   For the first time since the take or pay dispute
arose, they began receiving real dollars, not "zero dollars." They
were receiving zero dollars, i.e., nothing, all the while the
unresolved take or pay contract dispute between Arkoma and Arkla
caused their gas to remain shut in and no production occurred.

                               -23-
Klein I, 980 F.2d at 526. Plaintiffs have failed to show that the
district court's fact-findings on this claim are clearly erroneous;
the evidence fully supports the trial court's determination that no
violation of the implied covenant to market gas in a reasonable and
prudent manner occurred, and I would affirm its judgment in all
respects.


     Accordingly, I respectfully dissent.


     A true copy.


          Attest:


               CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.




                               -24-
