A-W Land Co., LLC et al v. Anadarko E & P Company LP et al
Filing
268
ORDER granting in part and denying in part 229 Motion to Compel Discovery, and granting 255 Second Motion to Compel Discovery, by Magistrate Judge Michael J. Watanabe on 5/11/15.(dkals, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 09-cv-02293-MSK-MJW
A-W LAND CO. LLC,
VERNON JESSER and MARY JESSER,
KENT J. MCDANIEL and DEANNA R. MCDANIEL, and
MARVIN BAY and MILDRED BAY, co-trustees of the Bay Family Trust,
individually and on behalf of all others similarly situated,
Plaintiffs,
v.
ANADARKO E&P ONSHORE LLC, and
ANADARKO LAND COMPANY,
Defendants.
ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S MOTION TO
COMPEL DISCOVERY (Docket No. 229), AND GRANTING PLAINTIFF’S SECOND
MOTION TO COMPEL DISCOVERY (Docket No. 255)
MICHAEL J. WATANABE
United States Magistrate Judge
In this class action, Plaintiffs allege that Defendants’ lessees trespassed by using
oil and gas drills with a larger footprint on the surface estate than Defendants were
legally entitled to use. A class has been certified to resolve certain common legal
questions—but once those questions are resolved, the case will be decertified and will
proceed to the merits as individual cases (if it goes forward at all). As the parties await
ruling on the common questions, they have begun merits discovery—and Plaintiffs have
now filed two motions to compel discovery over Defendants’ objections.
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The Court has reviewed the parties’ filings (Docket Nos. 229, 230, 236, 238, 253,
254, 255, 256, & 265); taken judicial notice of the court’s entire file in this case; and
considered the applicable Federal Rules of Civil Procedure, statutes, and case law.
Now being fully informed, the Court makes the following orders.
Plaintiffs’ [First] Motion to Compel Discovery
Plaintiffs’ first motion to compel (Docket No. 229) concerns their August 9, 2014,
discovery requests and can be divided into two categories: requests for which
Defendants dispute relevance, and requests for which Defendants dispute custody and
control over responsive documents.
I.
Relevancy Objections
Defendants make relevance objections to interrogatories 3, 4, 5, 6, 7, 12, 16, and
17, plus document request 1. Those requests, and Defendants’ responses, are:
Interrogatory No. 3. Identify and describe the policies and
practices of Anadarko and its predecessor(s) over time in Colorado,
Wyoming and Utah as to how the 2-1/2% royalty under the Surface
Owner’s Agreements is paid or allocated, where the SOA covers less
than the entire spacing unit and to whom it is paid.
RESPONSE: Defendants object to this Interrogatory on the
grounds that allocation of production or payment of money due under
SOAs in Colorado, Wyoming and Utah is not relevant or reasonably
calculated to lead to the discovery of admissible evidence in this case
because (1) members of the certified class in this case, by definition, have
no SOAs on the lands at issue, and (2) members of the certified class,
again by definition, are surface owners in the Wattenberg Field in
Colorado, not surface owners in other areas of Colorado or in Wyoming or
Utah. Defendants also object to this Interrogatory on the grounds that the
SOAs do not provide for payment of a “royalty,” a term that has a specific
legal meaning in the oil and gas context.
Interrogatory No. 4. Describe Anadarko’s policy or practice
with regard to the payment of a portion of the 2-1/2% royalty to
surface owners in the Wattenberg Field whose land is not covered by
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an SOA, but whose land is included in a spacing unit that includes
surface land covered by an Active SOA on which a well is drilled, and
describe such policy or practice and the reasons for such policy and
practice.
RESPONSE: Defendants object to this Interrogatory on the
grounds that allocation of production or payment of money due under
SOAs in the Wattenberg Field is not relevant or reasonably calculated to
lead to the discovery of admissible evidence in this case because
members of the certified class in this case, by definition, have no SOAs on
the lands at issue. Defendants also object to this Interrogatory on the
grounds that the SOAs do not provide for payment of a “royalty,” a term
that has a specific legal meaning in the oil and gas context.
Interrogatory No. 5. In regard to interrogatory 4, if Anadarko’s
policy or practice is different in areas of Colorado outside the
Wattenberg Field or in Wyoming or Utah, please explain the reasons
for maintaining the different policy or practice in the separate
geographic areas.
RESPONSE: Defendants incorporate by reference their objections
to Interrogatory No. 4. Defendants further object to this Interrogatory on
the grounds that allocation of production or payment of money due under
SOAs in areas of Colorado other than the Wattenberg Field, Wyoming,
and Utah is not relevant or reasonably calculated to lead to the discovery
of admissible evidence in this case because members of the certified
class in this case, by definition, are surface owners in the Wattenberg
Field in Colorado, not surface owners in other areas of Colorado or in
Wyoming or Utah.
Interrogatory No. 6. Describe Anadarko’s policy with regard to
payment of a portion of the 2-1/2% royalty to Surface Owners in the
Wattenberg Field whose lands are covered by Active SOA’s upon
which no well is drilled, but where such SOA lands are included in a
spacing unit in which a well is drilled.
RESPONSE: Defendants object to this Interrogatory on the
grounds that allocation of production or payment of money due under
SOAs in Colorado, Wyoming and Utah is not relevant or reasonably
calculated to lead to the discovery of admissible evidence in this case
because members of the certified class in this case, by definition, have no
SOAs on the lands at issue. Defendants also object to this Interrogatory
on the grounds that the SOAs do not provide for payment of a “royalty,” a
term that has a specific legal meaning in the oil and gas context.
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Interrogatory No. 7. In regard to interrogatory 6, if Anadarko’s
policy or practice is different in areas of Colorado outside the
Wattenberg Field or in Wyoming or Utah, please explain the reasons
for maintaining the different policy or practice in the separate
geographic areas.
RESPONSE: Defendants incorporate by reference their objections
to Interrogatory No. 6. Defendants further object to this Interrogatory on
the grounds that allocation of production or payment of money due under
SOAs in areas of Colorado other than the Wattenberg Field, Wyoming,
and Utah is not relevant or reasonably calculated to lead to the discovery
of admissible evidence in this case because members of the certified
class in this case, by definition, are surface owners in the Wattenberg
Field in Colorado, not surface owners in other areas of Colorado or in
Wyoming or Utah.
...
Interrogatory No. 12. Identify and describe the policies and/or
practices of Anadarko and Kerr-McGee in the Wattenberg Field
regarding payments made or to be made to surface landowners for
horizontal wellheads located on their land.
RESPONSE: . . . Defendants also object to this Interrogatory on
the ground that a policy or practice, if any existed, concerning payment for
horizontal wellheads is not relevant or reasonably calculated to lead to the
discovery of admissible evidence in this case. Plaintiffs’ allegations in this
case are that Defendants have exceeded the permissible scope of surface
use reserved in the Union Pacific deeds and therefore trespassed when
their lessees drilled “unnecessary” vertical wells (i.e., more than on vertical
well per quarter section) on Plaintiffs’ and the class members’ surface.
There are no allegations in this case concerning any trespass based on
horizontal wellheads. Without waiving and subject to these objections,
Defendants state that they do not drill wells on their oil and gas estate in
Wattenberg Field and, accordingly, they have no such policies or
practices.
...
Interrogatory No. 16. In connection with Anadarko’s decision
to discontinue or to continue offering SOA’s to the surface
landowners and paying the 2-1/2% royalty to the surface owners
under whose lands Anadarko’s minerals are located, please state
what geographic regions of Colorado (other than the Wattenberg
Field), Wyoming and Utah were covered by such decision, and when
the decision to discontinue or continue was made.
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RESPONSE: Defendants object to this Interrogatory on the
grounds that their decision to discontinue or continue offering SOAs to
surface landowners or paying surface landowners under the terms of
SOAs in areas of Colorado other than the Wattenberg Field, Wyoming or
Utah are not relevant or reasonably calculated to lead to the discovery of
admissible evidence in this case because (1) members of the certified
class in this case, by definition, have no SOAs on the lands at issue, and
(2) members of the certified class, again by definition, are surface owners
in the Wattenberg Field in Colorado, not surface owners in other areas of
Colorado or in Wyoming or Utah. Defendants also object to this
Interrogatory on the grounds that the SOAs do not provide for payment of
a “royalty,” a term that has a specific legal meaning in the oil and gas
context..
Interrogatory No. 17. If Anadarko and its lessees’ practice of
offering SOA’s and 2-1/2% royalty was discontinued and then
reinstated in some geographic regions of Colorado, Wyoming or
Utah, please describe the period of discontinuation, the reasons for
discontinuation, and the reasons for reinstatement, and identify
persons, entities or governmental agencies with whom Anadarko
was in communication regarding such decision, and persons within
Anadarko who were involved in reinstating the practice.
RESPONSE: Defendants object to this Interrogatory on the
grounds that their decision to discontinue or continue offering SOAs to
surface landowners or paying surface landowners under the terms of
SOAs in Colorado, Wyoming or Utah are not relevant or reasonably
calculated to lead to the discovery of admissible evidence in this case
because (1) members of the certified class in this case, by definition, have
no SOAs on the lands at issue, and (2) members of the certified class,
again by definition, are surface owners in the Wattenberg Field in
Colorado, not surface owners in other areas of Colorado or in Wyoming or
Utah. Defendants also object to this Interrogatory on the grounds that the
SOAs do not provide for payment of a “royalty,” a term that has a specific
legal meaning in the oil and gas context.
...
Request for Production No. 1. Produce all documents of
Anadarko and its predecessor(s) that describe how the 2-1/2%
royalty under the SOA’s is or was to be paid or allocated on lands in
Colorado, Wyoming, and Utah where the SOA covers less than the
entire spacing unit.
RESPONSE: Defendants object to this Request on the grounds
that documents describing allocation of production or payment of money
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due under SOAs are not relevant or reasonably calculated to lead to the
discovery of admissible evidence in this case because (1) members of the
certified class in this case, by definition, have no SOAs on the lands at
issue, and (2) members of the certified class, again by definition, are
surface owners in the Wattenberg Field in Colorado, not surface owners in
other areas of Colorado or in Wyoming or Utah. Defendants also object to
this Interrogatory on the grounds that the SOAs do not provide for
payment of a “royalty,” a term that has a specific legal meaning in the oil
and gas context.
(Docket No. 230-6, pp. 6-8, 12-13, 15-16; Docket No. 230-7, p.4.) Defendants later
supplemented their responses to other discovery requests, but not to any of the
requests at issue here. (Docket No. 236-1.) In briefing the motion before the Court,
Defendants make no argument about “royalty” being a legal term of art. (See Docket
No. 236.) The Court therefore deems the term-of-art objection to be waived.
The parties agree, as they must, on the governing legal standards set forth in the
Federal Rules of Civil Procedure:
Parties may obtain discovery regarding any nonprivileged matter that is
relevant to any party’s claim or defense . . . . For good cause, the court
may order discovery of any matter relevant to the subject matter involved
in the action. Relevant information need not be admissible at the trial if
the discovery appears reasonably calculated to lead to the discovery of
admissible evidence.
Fed. R. Civ. P. 26(b)(1).
In order to maintain their relevance objections, Defendants define the claims and
defenses of the parties strictly, as a simple trespass case. In Defendants’ view, the only
relevant issues are the scope of Defendants’ right to use the surface estates, the actual
use of those surface estates, and what damages arose if the latter exceeded the former.
Under that view of the case, nothing that happened on other parcels of land can have
any relevance. But this case is not that simple. To begin with, the case turns on
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Defendants’ vicarious liability for the acts of its lessees—an inquiry that necessarily
involves Defendants’ knowledge and intent with regard to the alleged trespass. See AW Land Co., LLC v. Anadarko E&P Co. LP, 2011 WL 2970966, at *3-5 (D. Colo. July
21, 2011) (then-District Judge Krieger, granting leave to amend complaint and reopen
case). Further, Plaintiffs seek equitable remedies that might be measured by
Defendants’ gains rather than Plaintiffs’ losses, depending on Defendants’ willfulness.
See A-W Land Co. LLC v. Anadarko E & P Onshore LLC, 2014 WL 7051161, at *3 (D.
Colo. Dec. 12, 2014) (Magistrate Judge Watanabe, granting leave to file second
amended class action complaint). The reasons behind Defendants’ decision to offer, or
not to offer, payment in exchange for allegedly excess surface use in different
geographic areas and factual situations may well shine light on both of those questions.
Plaintiffs’ discovery requests are therefore reasonably calculated to lead to admissible
evidence.
In fact, Defendants effectively concede this point. Throughout their opposition to
the motion to compel, Defendants argue that the facts disprove Plaintiffs’ assertions.
For example, as to Interrogatories 4 and 6, Plaintiffs suggest that Defendants’ payment
practices for different landowners within a spacing unit—some with physical wellheads,
some without—may show whether the payments are intended to compensate for
surface use. (Docket No. 230, p.9.) In rebuttal, after making their other relevance
arguments, Defendants argue that the payments are made to anyone within a spacing
unit regardless of the presence of a well—thereby disproving Plaintiffs’ theory that the
practice shows payment for well placement. (Docket No. 236, pp. 10-11.) But of
course, if the payment practices weren’t relevant, they couldn’t disprove Plaintiffs’
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theory. By repeatedly arguing that the facts disprove Plaintiffs’ case, Defendants
necessarily concede relevance.
Finally, Defendants pose one objection unique to Interrogatory 12. Defendants
argue that they provided a substantive answer and need not provide any further answer.
But the Court does not find their “substantive” answer to be sufficient. The interrogatory
asked them to explain their policies or practices for payments to be made to surface
estate owners for horizontal wellheads. Defendants answered by stating that they do
not drill wellheads and therefore have no applicable policies or practices. Defendants’
answer is incomplete, because the interrogatory did not ask about Defendants’
practices as to horizontal wellheads drilled by Defendants. The interrogatory asked for
practices or policies as to horizontal wellheads regardless of who drills them. Plaintiffs
are entitled to an answer to the question they asked—which includes horizontal
wellheads drilled by Defendants’ lessees or other agents.
For the foregoing reasons, the Court grants Plaintiffs’ motion to compel complete
responses to interrogatories 3, 4, 5, 6, 7, 12, 16, and 17, plus document request 1, from
Plaintiffs’ August 9, 2014, discovery requests.
II.
Custody-and-Control Objections
Defendants further object to the entire set of discovery requests to the extent
they ask Defendants to respond on behalf of Kerr-McGee, a sister company affiliated
with Defendants but not under their direct legal control. Plaintiffs note that the sister
companies share various officers and directors, and have often exchanged documents
and information in transactions with each other; moreover, Defendants have produced
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various documents from Kerr-McGee on a sporadic basis throughout this and related
litigation.
In similar circumstances, this Court set forth the applicable standard:
For purposes of Fed. R. Civ. P. 34, documents are deemed to be in
a party’s possession, custody or control if that party has actual
possession, custody or control of the materials “or has the legal right to
obtain the documents on demand.” Resolution Trust Corp. v. Deloitte &
Touche, 145 F.R.D. 108, 110 (D. Colo.1992) . . . . Some courts have
construed “control” more broadly to include the “practical ability to obtain
the materials sought upon demand.” See, e.g., Securities and Exchange
Commission v. Credit Bancorp, Ltd., 194 F.R.D. 469, 471 (S.D. N.Y. 2000)
. . . . However, even under the most expansive interpretation of “control,”
the “practical ability” to demand production must be accompanied by a
similar ability to enforce compliance with that demand.
Klesch & Co. v. Liberty Media Corp., 217 F.R.D. 517, 520 (D. Colo. 2003).
Nothing Plaintiffs have shown meets this standard of an enforceable practical
ability. Plaintiffs cite to Tomlinson v. El Paso Corp., 245 F.R.D. 474 (D. Colo. 2007), as
an example of a third party’s records being under the custody or control of a party
opponent. But that case involved data stored by a third-party pension administrator—in
other words, records stored by an agent within the scope of the agency relationship.
Here, there is no showing that Kerr-McGee is an agent of Defendants’. Plaintiffs have
already served a third-party subpoena on Kerr-McGee and will need to enforce that
subpoena under Rule 45 if they are unsatisfied with the response.
The Court therefore denies Plaintiffs’ motion to the extent it seeks to compel
Defendants to produce documents and interrogatory responses on behalf of KerrMcGee.
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Plaintiffs’ Second Motion to Compel Discovery
Plaintiffs’ second motion to compel (Docket No. 255) concerns their February 5,
2015, discovery requests, consisting of two requests for production of documents.
Those requests, and Defendants’ responses, are:
Request No. 1. Produce all Warranty Deeds entered into by
Anadarko’s Predecessor in Wyoming and Utah.
RESPONSE: Defendants object to this Request on the grounds
that warranty deeds entered into by Union Pacific Railroad Company or its
affiliates in Wyoming and Utah are not relevant or reasonably calculated to
lead to the discovery of admissible evidence because (1) members of the
certified class in this case, by definition, are surface owners in the
Wattenberg Field in Colorado, not surface owners in Wyoming or Utah,
and (2) the Request seeks warranty deeds without regard to whether they
concern severance of the mineral and surface estates or whether they
reflect a completely different type of conveyance.
Defendants also object to this Request because it is overly
burdensome and oppressive, particularly given the lack of relevance of the
information to this case. Defendants own more than five million gross
mineral acres in Utah and Wyoming. The effort to locate and produce
deeds severing the mineral estate and the surface estate will require a
substantial commitment of time and resources.
Request No. 2. Produce all SOAs entered into in Wyoming and
Utah.
RESPONSE: Defendants object to this Request on the grounds
that Surface Owner’s Agreements in Wyoming and Utah are not relevant
or reasonably calculated to lead to the discovery of admissible evidence in
this case because (1) members of the certified class in this case, by
definition, have no SOAs on the lands at issue, and (2) members of the
certified class, again by definition, are surface owners in the Wattenberg
Field in Colorado, not surface owners in Wyoming or Utah.
In addition, as explained by deposition testimony and documents
previously produced in this and related cases, starting in the late 1990s
surface owners in the Wattenberg Field have become increasingly
dissimilar from surface owners in Wyoming and Utah. As a result, the
context in which SOAs historically have been offered no longer exists in
the Wattenberg Field, and many of the reasons for offering SOAs no
longer apply in the Wattenberg Field. Generally, in the late 1800s and
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early 1900s, Defendants’ predecessors severed and conveyed Generally,
in the late 1800s and early 1900s, Defendants’ predecessors severed and
conveyed the surface of entire sections of land to third parties. These
large parcels of property were principally used by the purchasers for
agricultural purposes. As Front Range communities have expanded, the
formerly large agricultural parcels in the Wattenberg Field are regularly
being subdivided into small residential or commercial use parcels. Instead
of a single surface owner of a section of land over Defendants’ minerals,
there are many different owners of the small subdivided parcels, as
evidenced by the number of potential class members. The existence of a
large number of individuals owning lots in a single section of land
decreases the likelihood that Defendants would be able to obtain an
overall uniform commitment for that entire section of land and multiplies
Defendants’ administrative burdens to track individual owners and
implement individual agreements. The burdens therefore outweigh the
possible benefit. Moreover, the Wattenberg Field surface owners who
have SOAs routinely object to, and have even sued Defendants and their
lessees to block, surface use for oil and gas development, notwithstanding
their commitments to the contrary in the SOAs. As a result, Defendants
do not receive a benefit from SOAs in the Wattenberg Field.
In contrast, the surface parcels over Defendants’ minerals in
Wyoming and Utah are still mostly large agricultural parcels held by a
limited group of surface owners, and those surface owners work with
Defendants and their lessees to facilitate oil and gas development.
Defendants still receive benefit from SOAs in Wyoming and Utah.
In light of the lack of relevance of the Wyoming and Utah SOAs to
this case, Defendants also object to this Request as unduly burdensome
and oppressive. As noted above, Defendants own more than five million
gross mineral acres in Utah and Wyoming. The effort to locate and
produce all of the SOAs covering that acreage will require a substantial
commitment of time and resources.
(Docket No. 255-2.) In briefing the motion before the Court, Defendants make no
argument about the requests being overbroad, unduly burdensome, or oppressive.
(See Docket No. 265.) The Court therefore deems the unduly-burdensome objection to
be waived.
Defendants’ remaining argument is a relevancy argument—asserting that the
circumstances surrounding its Utah and Wyoming transactions are too dissimilar to
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those surrounding its Wattenberg Field transactions to have any relevance. But the
dissimilarities noted by Defendants, even if true, do nothing to undermine Plaintiffs’
theory of relevance. Plaintiffs allege that, historically, Defendants and their
predecessors paid 2.5% of royalties from a well, in exchange for license to exceed their
legal rights on the surface estate; when Defendants stopped offering the payments but
(allegedly) continued exceeding their legal rights, they trespassed. Thus, Plaintiffs seek
documents they hope will connect the payments to the surface use. Defendants argue,
here, that such transactions were no longer practicable in the Wattenberg Field but
remain practicable elsewhere. But this “practicability” argument does nothing to
undermine Plaintiffs’ theory of the transaction. The added administrative cost of dealing
with a large number of small landowners would justify stopping payments whether or not
the payments were made in exchange for additional surface rights. The dissimilarities
Defendants rely on might explain their conduct and might undermine Plaintiffs’ efforts to
show knowledge or intent as to the alleged trespass—but they do not establish that the
documents Plaintiffs requested are irrelevant.
For the foregoing reasons, the Court grants Plaintiffs’ motion to compel complete
responses to their February 5, 2015, discovery requests.
Order
For the foregoing reasons, it is hereby ORDERED that:
Plaintiffs’ Motion to Compel Discovery (Docket No. 229) is GRANTED IN
PART and DENIED IN PART;
Plaintiffs’ Second Motion to Compel Discovery (Docket No. 255) is
GRANTED;
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No later than June 5, 2015, Defendants shall provide complete responses to
Interrogatories 3, 4, 5, 6, 7, 12, 16, and 17, plus Document Request 1, from
Plaintiffs’ August 9, 2014, discovery requests, and also complete responses
to Document Request 1 and 2 from Plaintiffs’ February 5, 2015, discovery
requests—except that Defendants need not provide responses on behalf of
Kerr-McGee; and
Each party shall pay its own fees and costs with regard to these motions, as
the Court finds that an award of fees or costs would be unjust under the
circumstances.
Dated:
May 11, 2015
Denver, Colorado
/s/ Michael J. Watanabe
Michael J. Watanabe
United States Magistrate Judge
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