PDC Energy, Inc. v. DCP Midstream, LP

Filing 38

ORDER denying 16 Motion to Intervene, by Magistrate Judge Michael J. Watanabe on 6/26/2014.(trlee, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 14-cv-01033-RM-MJW
PDC ENERGY, INC.,
Plaintiff,
v.
DCP MIDSTREAM, LP,
Defendant.
ORDER ON
MOTION TO INTERVENE (Docket No. 16)
MICHAEL J. WATANABE
United States Magistrate Judge
This case is before this court pursuant to an Order Referring Case (Docket No.
30) issued by Judge Raymond P. Moore on May 30, 2014.
Now before the court is the Motion to Intervene (Docket No. 16) filed by Buddy
Baker on behalf of himself and a class of similarly situated royalty owners as described
in the motion (hereinafter “Baker”). The court has carefully considered the subject
motion (Docket No. 16), plaintiff and defendant’s responses (Docket Nos. 32 & 33), and
Baker’s replies (Docket Nos. 35 & 36). In addition, the court has taken judicial notice of
the court’s file, and has considered the applicable Federal Rules of Civil Procedure and
case law. The court now being fully informed makes the following findings of fact,
conclusions of law, and order.1

1

A Motion to Intervene is a non-dispositive motion that may be determined by a
magistrate judge pursuant to 28 U.S.C. § 636(b)(1)(A). See SRS California Operations, LLC v.
Kazel, No. 08-cv-01878-MSK-KLM, 2010 WL 194944, at *1 (Jan. 13, 2010); Pub. Serv. Co. of
Colorado v. Bd. of Cnty. Comm’rs of San Miguel Cnty., No. 04-cv-01828-REB-CBS, 2005 WL
2293650, at *3 (D. Colo. Sept. 19, 2005).

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I. Background
Plaintiff PDC Energy, Inc. is an oil and gas exploration and production company.
Plaintiff sells the gas it produces to defendant DCP Midstream, LP pursuant to
approximately 90 gas purchase agreements (collectively the “Gas Purchase
Agreements”). Defendant then processes the gas and resells the resulting products.
The Gas Purchase Agreements provide for a process in which plaintiff is paid a
percentage of the proceeds from defendant’s sales. This matter involves a dispute over
whether defendant has underpaid plaintiff.
Plaintiff pays royalties to various entities and individuals (including Baker) from
the proceeds it receives from defendant. In 2008, Baker brought claims in this District
on behalf of himself and similarly situated parties alleging that plaintiff was not properly
paying the royalties. See 07-cv-01362-JLK-CBS (consolidated with 07-cv-02508). In
2009, plaintiff and Baker settled those claims and executed a settlement agreement
(hereinafter the “PDC Settlement Agreement”) which set forth how the royalty payments
would be calculated and paid.
Baker now seeks to intervene in this matter. Baker argues he is entitled to
intervene as a matter of right pursuant to Rule 24(a). Alternatively, Baker argues in
favor of permissive intervention pursuant to Rule 24(b)(1)(B).
II. Intervention as a Matter of Right
Federal Rule of Civil Procedure 24(a)(2) provides that, on timely motion, the
court must permit intervention as of right to anyone who: “claims an interest relating to
the property or transaction that is the subject of the action, and is so situated that

3
disposing of the action may as a practical matter impair or impede the movant's ability to
protect its interest, unless existing parties adequately represent that interest.” Fed. R.
Civ. P. 24(a)(2). Under Tenth Circuit law interpreting this rule, “an applicant may
intervene as a matter of right if (1) the application is timely, (2) the applicant claims an
interest relating to the property or transaction which is the subject of the action, (3) the
applicant's interest may be impaired or impeded, and (4) the applicant's interest is not
adequately represented by existing parties.” Elliott Indus. Ltd. P'ship v. B.P. Am. Prod.
Co., 407 F.3d 1091, 1103 (10th Cir. 2005). Neither plaintiff nor defendant challenge the
timeliness of Baker’s motion to intervene. They do, however, argue Baker has failed to
meet the other three requirements.
As to the first and second requirements, Baker concedes he is not a party to the
Gas Purchase Agreements. Nevertheless, Baker argues he has an interest in this
matter by virtue the PDC Settlement Agreement. Specifically, Baker points out that,
pursuant to the PDC Settlement Agreement, the settlement class will be entitled to
recover their proportionate royalty share of any amount defendant is found to have
underpaid plaintiff in connection with this matter.
The problem with Baker’s argument is that any interest he has is clearly collateral
to this action and contingent on plaintiff prevailing. Baker’s interest in royalty fees is
collateral to plaintiff’s claims, and this interest is contingent on plaintiff prevailing. In
other words, Baker’s claims involve how much plaintiff must allocate to Baker if plaintiff
prevails. The court finds that such an interest is insufficient to support intervention by
right.
Mitchell v. Faulkner, No. 07 Civ. 2318(DAB), 2009 WL 585882 (S.D.N.Y. Mar. 5,

4
2008), proves instructive on this issue. Mitchell involves the 1970s rock group, the Bay
City Rollers. The plaintiff band members brought breach of contract claims against the
defendant record company for failure to account for and pay certain royalties. Former
members of the band sought to intervene the case. The putative intervenors were not a
party to the 1981 contract between the plaintiffs and the record company. Rather, they
claimed to have an interest in the royalties by virtue of various alleged oral and written
agreements with the band members and with the record company regarding how the
royalties would be divided among the former band members.
In finding they did not have an “interest” sufficient to meet the second
requirement, the court noted that the former band members’ claims “did not rise from
Plaintiffs’ pleadings or cause of action, but instead, seek to inject new questions of both
law and fact.” Id., at *5. Any interest the former band members had in the royalties was
“contingent upon” the plaintiffs’ recovery from the record company. Id. (internal
quotation marks omitted) (quoting Wash. Elec. Co-op, Inc. v. Mass. Mun. Wholesale
Elec. Co., 922 F.2d 92, 97 (2d Cir. 1990)). Accordingly, the former band member’s aim
to intervene was not to “advance the underlying litigation but to raise a new issue
concerning how much of the recovery” was due from the plaintiffs to the former band
members. Id. (internal quotation marks omitted) (quoting Compagnie Noga D’Imp. Et
D’Exp. S.A. v. The Russian Fed’n, 2005 WL 1690534, at *4 (S.D.N.Y. July 20, 2005)).
The court also found that, even assuming the former band members had an
interest, that interest would not be affected, impaired, or impeded by the disposition of
the matter. The court noted that the former band members’ participation had “nothing to
do with whether or how much Plaintiffs may or may not recover in their breach of

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contract action against [the record company], and the disposition [of] the instant action
without [the former band members’] participation will not bar under the doctrines of res
judicata or collateral estoppel any future attempt by [the former band members] to
pursue their share of the royalties against Plaintiffs.” Id., at *5.
This court finds that the reasoning in Mitchell is sound and adopts it in whole.
The court further finds the reasoning is applicable to the circumstances in this matter.
Any additional royalty payments due to Baker are plainly contingent upon plaintiff’s
recovery in this matter. Baker is seeking to raise a new issue as to how much of
plaintiff’s (possible) recovery will be due to him. Furthermore, if plaintiff is successful in
this action, nothing prevents Baker from then pursuing plaintiff for his share.
Baker argues Mitchell is distinguishable because the former band members’
request to intervene “was denied because their claim to a proportionate share of
royalties . . . was not derived from the amounts the plaintiffs sought to recover from the
defendants under the 1981 contract.” Docket No. 35, at 7. In other words, additional
legal and factual issues would need to have been resolved to determine the former
band members’ share. In contrast, Baker points out that his share of plaintiff’s
(possible) recovery “is not dependant upon an occurrence of a sequence of events after
a judgment is entered in this case” since the amount can be calculated during this
litigation based upon the method set forth in the PDC Settlement Agreement. Id.
The court does not agree with Baker’s contention that any additional legal and
factual issues would be minimal. As Baker states elsewhere in his reply, there is a
“substantial possibility” that plaintiff and Baker “will diverge with respect as to how the
PDC settlement class members’ royalty share should be calculated and paid to them.”

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Docket No. 35, at 10-11. Having reviewed the pleadings related to Baker’s motion to
intervene, the court agrees.
Baker also argues that his (contingent) interest will be impaired by the disposition
of this matter. Baker argues that plaintiff could enter into a “discounted” settlement with
defendant, thereby reducing his share. The court finds that this argument is too
speculative. In addition, the same situation was certainly possible in Mitchell.
Furthermore, even if it is assumed that the second and third requirements have
been met, it is clear the fourth requirement cannot be. It is presumed that
representation is adequate “when the objective of the applicant for intervention is
identical to that of one of the parties.” San Juan Cnty., Utah v. U.S., 503 F.3d 1163,
1204 (10th Cir. 2007). “Even if their ultimate goals are actually in opposition, as when
the party and nonparty will ultimately clash over any spoils of the party’s success in the
suit, their common objective with respect to that success is the controlling
consideration.” Statewide Masrony v. Anderson, 511 Fed. Appx. 801, 806-07 (10th Cir.
2013) (citing Bottoms v. Dresser Indus., Inc., 797 F.2d 869, 872-73 (10th Cir. 1986)).
Baker and plaintiff’s objectives are the same - recover the allegedly unpaid proceeds
from defendant. Baker’s contention that he and plaintiff will likely clash as to how
Baker’s share will be calculated and paid is simply not relevant to the adequate
representation requirement. Accordingly, the court finds that Baker’s interests are
presumed to be adequately represented by plaintiff. The court finds Baker has not
rebutted this presumption.
Accordingly, the court finds the second, third, and fourth requirements have not
been met. As such, Baker’s request to intervene as a matter of right is denied.

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III. Permissive Intervention
Federal Rule of Civil Procedure 24(b)(1)(B) provides that, on timely motion, the
court may permit intervention to anyone who “has a claim or defense that shares with
the main action a common question of law or fact.” Fed. R. Civ. P. 24(b)(1)(B). The
decision whether or not to grant a motion for permissive intervention is within the district
court's sound discretion. See, e.g., City of Stilwell v. Ozarks Rural Elec. Co-op. Corp.,
79 F.3d 1038, 1043 (10th Cir. 1996).
Baker’s claims arise from a contract separate from the one at issue in this matter.
Under these circumstances and the other circumstances as outlined above, the court
finds Baker has not shown a common question. See Statewide Masonry, 511 Fed.
Appx. at 808. Furthermore, even if such a threshold showing is made, the court may
look to “whether the would-be intervenor's input adds value to the existing litigation.”
Lower Arkansas Valley Water Conservancy Dist. v. United States, 252 F.R.D. 687, 691
(D. Colo. 2008). In light of plaintiff’s “adequate representation” as discussed above, the
court finds Baker’s input would not add any value . Accordingly, Baker’s request for
permissive intervention is denied.
IV. Order
WHEREFORE, for the foregoing reasons, it is hereby
ORDERED that Baker’s Motion to Intervene (Docket No. 16) is DENIED.

Date: June 26, 2014
Denver, Colorado

s/ Michael J. Watanabe
Michael J. Watanabe
United States Magistrate Judge