Chieftain Royalty Company v. XTO Energy, Inc.
Filing
109
OPINION AND ORDER by Judge Frank H. Seay granting 75 Sealed Motion for Class Certification (dma, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF OKLAHOMA
CHIEFTAIN ROYALTY COMPANY,
)
)
)
)
) No. CIV-11-29-FHS
)
)
)
)
Plaintiff,
v.
XTO ENERGY, INC.,
Defendant.
OPINION AND ORDER
Now before the court for its consideration is the Motion for
Class
Certification
filed
on
January
Chieftain Royalty Company (“Chieftain”).
6,
2012,
by
Plaintiff,
The parties have fully
briefed the issues with Defendant, XTO Energy, Inc. (“XTO”), having
filed a Response (“XTO’s Response”) on January 20, 2012, and
Chieftain having filed its Reply on January 27, 2012.
On February
6, 2012, the Court held a hearing on class certification.
Having
considered the parties’ respective briefs, the arguments presented
at the class certification hearing, and the parties’ proposed
findings of fact and conclusions of law, the Court finds the Motion
for Class Certification (“Chieftain’s Motion”) should be granted
with a class certified as requested by Chieftain.
Background
XTO is an oil and gas exploration company.
In order to
explore for and obtain production of oil and gas, XTO enters into
leases with mineral interest owners (“lessors”), who grant XTO
(“lessee”) “the right to explore, drill for, produce and market the
hydrocarbons
and
other
products
1
from
the
leased
premises.”
Affidavit of Daniel T. Reineke (“Reineke Affidavit”), Exhibit A to
Chieftain’s
Motion
at
3.
In
exchange,
the
lessors
receive
compensation under the lease and “a continuing fractional interest
in the sale of the produced products.”
Id.
It is Chieftain’s
contention that “[u]nder both the explicit and implicit terms of a
typical lease, a lessee/producer is required to perform all work
and bear all costs and expenses necessary to produce and market the
products from the lessor’s mineral estate, including putting the
gas in marketable condition (also called marketable gas, residue
gas, pipeline quality gas and marketable commodity).” Id. at 3-4.1
The raw gas at the wellhead contains non-hydrocarbon contaminants
(i.e. water vapor, carbon dioxide, hydrogen sulfide, nitrogen,
oxygen, helium, dust, and other substances) and hydrocarbons known
as “natural gas liquids” (i.e., ethane, propane, normal butane,
iso-butane, and natural gasoline, commonly called “NGLs”).
4.
Id. at
This raw gas, or “wet gas,” requires conditioning to eliminate
or reduce the contaminants to acceptable limits to make this gas
marketable.
Id. at 5.
involves
flow
the
of
“the
This conditioning process initially
production
stream
through
initial
mechanical separators, which separate the raw gas vapor phase from
the liquid phase of the stream.”
Id.
If necessary, some initial
compression occurs on the lease to allow the gas to enter the
gathering system, which “consists of a series of small, low
pressure pipelines which typically collect raw gas from multiple
wells located within a localized geographical area and deliver the
raw gas to a central point for treatment and processing.”
7.
Id. at
Further compression typically takes place on the gathering
1
The fractional interest, or “royalty interest,” retained by
the lessor is typically between one-eighth and one-quarter, free of
costs and expenses, with the lessee typically receiving between
three-quarters and seven-eighths of the resulting production, less
costs and expenses. Reineke Affidavit at 4.
2
system as the raw gas is of insufficient pressure to move along the
gathering system and into the processing plant.
Id.
Gas from the
wells, or “fuel gas,” is used to power the compressor and other
equipment on the gathering system.
The raw gas within the
Id.
gathering system is also subjected to a dehydration process where
“some of the constituents of the raw gas may condense and drop out
of the raw gas stream in the form of liquids (also called “drip
liquids,” “drip condensate” and “scrubber oil”).”
Id.
These
valuable drip liquids “are typically collected at the compressor
stations and sold by the operator of the gathering system for his
own account.”
Id.
Additional treatment of the raw gas may take
place on the gathering system and these services are all spelled
out in the Gas Gathering Agreement between the lease operator and
the
gathering
company.
system
Id. at 7-8.
operator,
referred
to
as
a
“midstream”
After passing through the gathering system,
the raw gas is then delivered to a treating and/or processing
plant, which functions to “(i) transform the low pressure raw
wellhead gas into residue gas that is “pipeline quality” gas in
order that it may enter the high-pressure interstate pipeline
system; and (ii) to extract the NGLs so they can be marketed.” Id.
These
types
of
services
are
spelled
out
in
the
Processing
Agreements entered into with midstream companies.
Chieftain is a royalty owner in numerous XTO wells located in
Oklahoma.
See
Affidavit
Affidavit”)(Dkt. No. 97).
of
Robert
S.
Abernathy
(“Abernathy
Chieftain has a direct lessor-lessee
relationship with XTO in at least two of the XTO wells.
Id. and
Affidavit of Alyce Hoge, Exhibit D to Chieftain’s Motion at 3.
At
issue in this case with respect to the putative Class members are
2,296 XTO wells.
XTO’s Response.
Affidavit of Karissa K. Cottom, Exhibit 1 to
These wells are covered by approximately 14,300
leases from which XTO markets gas.
3
XTO’s Response at 3-4.
Chieftain asserts that there are in excess of 16,000 royalty owners
who qualify as members of the proposed Class. Affidavit of Barbara
A. Ley (“Ley Affidavit”), Exhibit B to Chieftain’s Motion at 11.
With respect to the majority of XTO’s Oklahoma wells, XTO is
the operator and it directly markets the gas for itself and other
working interest owners.
With respect to the remaining Oklahoma
wells, XTO separately markets the gas in its role as a nonoperator.
Chieftain brings this action for itself, and on behalf
of the putative Class members, against XTO seeking to recover for
XTO’s failure to properly pay royalties due on the production of
gas and gas constituents from these Oklahoma wells.
in
its
state
court
Petition2,
Chieftain
asserts
As set forth
theories
of
recovery for (1) breach of contract, (2) tortious breach of
contract, (3) breach of fiduciary duty or quasi-fiduciary duty, (4)
fraud (actual and constructive) and deceit, (5) conversion, (6)
conspiracy, (7) accounting, and (8) injunctive relief. Chieftain’s
underlying claim as to all theories of recovery is that XTO has
underpaid royalties on gas and gas constituents by improperly
deducting costs or fees incurred to transform the wellhead gas into
2
Chieftain’s state court Petition was filed in the District
Court of Coal County, Oklahoma, on December 17, 2010. On January
21, 2011, XTO removed Chieftain’s state court action to this
federal court. On April 22, 2011, this Court applied the first-tofile rule and stayed this action pending a ruling from the United
States District Court for the District of Kansas in Wallace B.
Roderick Revocable Living Trust v. XTO Energy, Inc., Case No. 081330-JTM-KMH (“Roderick”), to allow the Kansas federal court the
opportunity to decide whether it would carve out the Oklahoma class
in the Roderick case and transfer it to this Court. On June 3,
2011, the Roderick Court severed all claims related to the Oklahoma
wells from its case and transferred those claims to this Court. See
Wallace B. Roderick Revocable Living Trust v. XTO Energy, Inc.,
Case No. 11-192-FHS (E.D. Okla.).
On June 30, 2011, the
transferred Roderick case (Case No. 11-192-FHS) and the instant
case were consolidated as related cases.
4
a marketable condition for sale.
According to Chieftain, these
improper deductions from the royalty payments include, but are not
limited to, the following: “(1) deducting direct and indirect fees
for marketing, gathering, compression, dehydration, processing,
treatment, and other similar services; (2) not paying royalty on
wellhead gas that was used off the lease premises or in the
manufacture of products; and (3) not paying royalty on condensate
that dropped out of the gas stream.”
Petition, ¶ 13.
In Chieftain’s Motion, it seeks the certification of the
following class:
All non-excluded persons or entities who are or were
royalty owners in Oklahoma wells since July 1, 2002,
where XTO, including its predecessors or affiliates, is
or was the operator (or, as a non-operator, XTO
separately marketed gas). The Class Claims relate only
to payment for gas and its constituents (helium, residue
gas, natural gas liquids, nitrogen and condensate)
produced from the wells.
The Class does not include
overriding royalty owners or other owners who derive
their interest through the oil and gas lessee.
The persons or entities excluded from the Class are: (1)
agencies, departments or instrumentalities of the United
State of America and the State of Oklahoma; (2) publicly
traded oil and gas exploration companies and their
affiliates; (3) the claims of royalty owners in XTO wells
gathered by Timberland and processed at the Tyrone Plant
which are presently the subject of the action styled
Fankouser, et al v. XTO Energy, Inc., Case No CIV-07-798L USDC WD OK (formerly Beer et al v. XTO); and (5)
persons or entities that Plaintiffs’ counsel is, or may
be prohibited from representing under Rule 1.7 of the
Oklahoma Rules of Professional conduct.
Chieftain’s Motion at 43-44.
Class Certification Principles
5
When assessing the propriety of a plaintiff’s request for
class certification, a federal court does not make a determination
on the merits of the suit, but rather the inquiry is whether the
plaintiff has satisfied the requirements of Rule 23 of the Federal
Rules of Civil Procedure.
DG ex rel. Stricklin v. Devaughn, 594
F.3d 1188, 1194 (10th Cir. 2010).
Certification is appropriate if
“the proposed class satisfies the requirements of Rule 23(a) and
the requirements of one of the types of classes in Rule 23(b).” Id.
Under
Rule
23(a),
a
party
seeking
certification
must
affirmatively demonstrate that
(1) the class is so numerous that joinder of all members
is impracticable, (2) there are questions of law or fact
common to the class, (3) the claims or defenses of the
representative parties are typical of the claims or
defenses of the class, and (4) the representative parties
will fairly and adequately protect the interests of the
class.
In assessing these factors, the court should accept the allegations
in the complaint as true, but it “need not blindly rely on
conclusory allegations which parrot Rule 23 requirements.” J.B. ex
rel. Hart v. Valdez, 186 F.3d 1280, 1290 n. 7 (10th Cir. 1999).
The
certification
be]
evaluation
requires
“the
trial
court
[to
satisfied, after a rigorous analysis, that the prerequisites of
Rule
23(a)
have
been
satisfied.”
General
Southwest v. Falcon, 457 U.S. 147, 161 (1982).
Telephone
Co.
of
On occasion, this
”’rigorous analysis’ will entail some overlap with the merits of
the plaintiff’s underlying claim,” Wal-Mart Stores, Inc. v. Dukes,
131 S.Ct. 2541, 2551 (2011), as “it may be necessary for the court
to
probe
behind
the
pleadings
before
coming
to
certification question,” Falcon, 457 U.S. at 160.
rest
on
the
The court is
invested with broad discretion in resolving the certification
6
issue.
Rector v. City & County of Denver, 348 F.3d 935, 949 (10th
Cir. 2003).
An order certifying a class may later be altered or
amended before final judgment.
Fed.R.Civ.P. 23(c)(1)(C).
If the court is satisfied that the four threshold requirements
of Rule 23(a) have been met, the plaintiff must then come forward
and establish that the proposed class meets one of the requirements
for certification under Rule 23(b).
Here, Chieftain alleges
certification is appropriate under Rule 23(b)(3), which allows a
class to be maintained where “questions of law or fact common to
class
members
predominate
over
any
questions
affecting
only
individual members, and that a class action is superior to other
available methods for fairly and efficiently adjudicating the
controversy.”
Numerosity
With respect to the numerosity element of Rule 23(a)(1),
Chieftain bears the burden of establishing that “the class is so
numerous as to make joinder impracticable.” Peterson v. Okla. City
Hous. Auth., 545 F.2d 1270, 1273 (10th Cir. 1976).
Chieftain
asserts the numerosity element is satisfied as the putative class
consists of in excess of 16,000 royalty owners scattered throughout
Oklahoma and other states.
In XTO’s Response, it does not contest
Chieftain’s argument as to numerosity.
Consequently, the Court
finds Chieftain has satisfied the numerosity requirement under Rule
23(a)(1).
Commonality
The second prerequisite under Rule 23(a) requires a showing
that “there are questions of law or fact common to the class.”
7
Fed.R.Civ.P. 23(a)(2).
This commonality requirement entails a
demonstration that the class members “possess the same interest and
suffer the same injury.”
Falcon, 457 U.S. at 156.
contention
drive
must
litigation.
it
is
therefore
the
claims
A common
asserted
in
the
This common contention “must be of such a nature that
capable
of
classwide
resolution
-
which
means
that
determination of its truth or falsity will resolve an issue that is
central to the validity of each one of the claims in one stroke.”
Wal-Mart,
131
differences
in
certification.
S.Ct.
the
at
2551.
claims
Dissimilarities
do
not
or
necessarily
factual
preclude
DG v. Devaughn, 594 F.3d 1188, 1195 (10th Cir.
2010)(“Factual differences between class members’ claims do not
defeat certification where common questions of law exist.”).
Certification is appropriate upon a finding of “a single issue
common to the class.”
At
its
core,
J.B. ex rel. Hart, 186 F.3d at 1288.
this
action
involves
the
definition of the implied duty of marketability.
application
and
Under Oklahoma
law, an implied duty to market production is placed on an oil and
gas lessee. Wood v. TXO Production Corp., 854 P.2d 880, 882 (Okla.
1993).
“[T]he implied duty to market means a duty to get the
product to the place of sale in a marketable form.”
Id.
An oil
and gas lessee bears all costs associated with turning the raw gas
into a marketable product, unless the lease expressly and clearly
provides that such costs are to be proportionately borne by the
lessor.
Mittlestaedt v. Santa Fe Minerals, Inc., 954 P.2d 1203,
1207 (citing Wood, 854 P.2d at 883).
Oklahoma law does allow for
post-production costs to be charged to royalty owners where the
product is in a marketable condition if the lessee can prove that
(1) the costs are reasonable, (2) the actual royalty revenues
increased in proportion with the costs assessed against the royalty
interest, and (3) the costs are associated with transforming an
8
already marketable product into an enhanced product. Mittlestaedt,
954 P.2d at 1208, 1210.
It
is
Chieftain’s
commonality
contention
requirement
because
that
“the
it
has
satisfied
determination
of
the
what
processes are necessary to create a ‘marketable’ product is a
common question that will be answered uniformly for all Class
members.”
Chieftain’s Motion at 19.
determination
is
the
common
factual
Tethered to this legal
issue
of
“[w]hether
XTO
routinely deducted any costs and expenses, incurred before the
products became commercially marketable, from payments that were
due and owing to the Class member royalty owners.”
Id. at 17.
The
Court finds that these common questions are sufficient to establish
commonality.
In
opposition
to
Chieftain’s
commonality
argument,
XTO
contends that there are, in effect, 86 different lease forms
involved in this case and, therefore, it does not employ a uniform
method of paying Oklahoma royalty owners as the royalty payments
are determined by the language of the lease.
XTO also argues that
the multiple marketing arrangements it has with the midstream
companies affects the determination of amount due to the royalty
owners.
The Court rejects these arguments as the evidence before
it establishes that XTO operates under a generalized, uniform
method of calculating royalty payments by charging royalty owners
with deductions for making the gas marketable, without reference to
either the individual lease language or marketing arrangements with
midstream companies.
See Ley Affidavit at ¶ 10 and Reineke
Affidavit at p. 20, ¶F.
explain
XTO’s
royalty
In fact, when provided an opportunity to
payment
system,
XTO’s
designated
representative, Joni VanMeter (“VanMeter”), was unable to contest
XTO’s implementation of a uniform system without reference to
9
individual leases.
VanMeter testified that she did not know how
many Oklahoma royalty owners, if any, have been flagged to not have
deductions for treating, processing, gathering, compression, and
dehydration. VanMeter Deposition, Exhibit F to Chieftain’s Motion,
at 80-82 and 150-151.
Additionally, VanMeter could not relate any
instances where XTO paid royalty on fuel gas or on drip condensate.
Id. at 151-157.
Thus, the record reflects that XTO employs a
uniform royalty payment methodology which does not take into
account individual lease language.3
In a related context, XTO also argues that a certification of
a class in this case would abridge the fundamental rule under the
Rules Enabling Act, 28 U.S.C. § 2072(b), that Rule 23 cannot be
interpreted to “abridge, enlarge or modify any substantive right.”
It is XTO’s position that certification would prevent it from
raising the material terms of the lease agreements in defense of
Chieftain’s claims.
The Court disagrees.
Contrary to XTO’s claim
that certification would require the Court to ignore the terms of
the various leases, the express terms of the various leases will
necessarily have to be evaluated, at the appropriate stage of these
proceedings, to determine whether the implied duty of marketability
has been abrogated.
XTO’s defenses centered on the existence of a
duty to create a marketable product, or the scope of such duty,
3
A possible exception to this uniform treatment exists. For
class certification purposes, the parties relied on data from 11
Sample Wells as being representative of XTO’s Oklahoma wells. On
one of the wells, the data suggests that a different payment
methodology was used, but XTO did not provide any explanation as to
why royalty owners were paid differently. Ley Affidavit, at 11.
On another well, “XTO did not provide enough royalty payment data
. . . to make this determination” as to calculation of royalty
payments.
Id.
The Court finds the uncertainty of the royalty
payment methodology as to these two sample wells does not prevent
certification in light of the substantial evidence of a uniform
policy on the remaining wells.
10
remain available to XTO in the context of class certification. The
Court finds certification will not abridge any substantive right of
XTO.
XTO also contends that the Supreme Court’s decision in WalMart has implemented a material shift in the class certification
analysis requiring the denial of certification in this case.
Court
disagrees.
Wal-Mart
involved
a
district
The
court’s
certification of current and former female employees of Wal-Mart
who asserted Title VII sex discrimination claims in connection with
“the discretion exercised by their local supervisors over pay and
promotion matters.”
Wal-Mart, 131 S.Ct. at 2547.
The Supreme
Court reversed and held that class certification under these
circumstances was not appropriate as there was no common contention
which
was
capable
of
classwide
resolution.
In
addressing
commonality, the Supreme Court stated:
The only corporate policy that the plaintiff’s evidence
convincingly establishes is Wal-Mart’s “policy” of
allowing discretion by local supervisors over employment
matters.
On its face, of course, that is just the
opposite of a uniform employment practice that would
provide the commonality needed for a class action; it is
a policy against having uniform employment practices.
Id. at 2554 (emphasis in the original).
These facts are vastly
different from those involved herein. The discretion afforded WalMart supervisors with respect to employment decisions stands in
stark contrast to a uniform policy employed by an oil and gas
exploration
company
for
the
payment
of
royalties.
Wal-Mart
reaffirmed the standard for commonality that all class members
suffer a common injury. Id. at 2551. Application of that standard
to a factual situation allowing individual Wal-Mart supervisors
discretion in making employment decisions does not mandate a
11
similar outcome herein where a uniform royalty payment methodology
exists.
In sum, the Court finds the commonality requirement of Rule
23(a)(2) is satisfied as all putative class members “possess the
same interest and suffer the same injury,” Falcon, 457 U.S. at 156,
arising from general issue of the application of the implied duty
of marketability and XTO’s uniform royalty payment methodology.
This commonality finding permeates all claims asserted by Chieftain
- breach of contract, tortious breach of contract, breach of
fiduciary
duty
or
quasi-fiduciary
duty,
fraud
(actual
and
constructive) and deceit, conversion, conspiracy, accounting, and
injunctive relief4 - as the underlying basis for all claims is the
assertion that XTO has made improper deductions to transform
wellhead gas into a marketable condition for sale.5
The validity
of these individual claims and related defenses asserted by XTO, as
well as the scope of the implied duty of marketability as applied
to the class members’ lease agreements, are issues which do not
prevent certification, but rather, are issues capable of resolution
at the summary judgment stage of this litigation.
4
Chieftain references an unjust enrichment claim in its
briefing.
A review of Chieftain’s Petition, however, fails to
reveal a separately plead claim for unjust enrichment.
5
The Court rejects XTO’s argument in the context of
Chieftain’s fraud and deceit claim that class certification is
inappropriate for lack of commonality given that each class member
must establish reliance on a false representation to his or her
detriment.
Under the circumstances alleged here - false
representations uniformly made to royalty owners in writing, on
monthly check stubs - certification is not defeated given the
inference
that
could
be
drawn
from
such
standardized
misrepresentations. See Weber v. Mobil Oil Corporation, 243 P.3d
1 (Okla. 2010)(claims for fraud and deceit appropriate for
certification in royalty owners class action where standardized
written misrepresentations alleged).
12
Typicality
Class certification requires “the claims or defenses of the
representative parties be typical of the claims or defenses of the
class.”
Fed.R.Civ.P. 23(a)(3).
“The commonality and typicality
requirements of Rule 23(a) tend to merge” as both elements seek to
determine “whether the named plaintiff’s claim and the class claims
are so interrelated that the interests of the class members will be
fairly and adequately represented in their absence.”
U.S. at 157-158, n.13.6
Falcon, 457
While the representative plaintiff’s
claims need not be identical to the class members’ claims, there
must be some nexus established. Devaughn, 594 F.3d at 1198-99. “A
named plaintiff’s claim is ‘typical’ when it arises out of the same
event, practice or course of conduct of the defendant, and is based
on the same legal theory on which the putative class claims are
predicated.”
Hill v. Kaiser-Francis Oil Co., 2010 WL 2474051, at
*4 (W.D. Okla. 2010).
The
Court
finds
that
Chieftain’s
claims
for
breach
of
contract, tortious breach of contract, breach of fiduciary duty or
quasi-fiduciary duty, fraud (actual and constructive) and deceit,
conversion, conspiracy, accounting, and injunctive relief are
typical of the class claims.
All claims have as their nexus the
allegation that XTO made improper deductions from their royalty
payments in violation of the implied duty of marketability through
the utilization of a common and uniform methodology.
6
As Chieftain
The Supreme Court also noted that the commonality and
typicality requirements “tend to merge with the adequacy-ofrepresentation requirement, although the latter requirement also
raises concerns about the competency of class counsel and conflicts
of interest.” Falcon, 457 S.Ct. at 157-58, n.13.
13
and the class members have sustained the same injury7 and will use
the
same
evidence
to
establish
their
claims,
typicality
is
satisfied.
Adequacy
The
final
prerequisite
under
Rule
23(a)
is
that
“[t]he
representative parties will fairly and adequately protect the
interest of the class.” Fed.R.Civ.P. 23(a)(4). Evaluation of this
factor involves the resolution of two questions: “(1) do the named
plaintiffs and their counsel have any conflicts of interest with
other class members and (2) will the named plaintiffs and their
counsel prosecute the action vigorously on behalf of the class.?”
Rutter & Wilbanks Corp. v. Shell Oil Co., 314 F.3d 1180, 1187-88
(10th Cir. 2002).
A minor conflict will not defeat certification -
the conflict must be fundamental in the sense that some class
members claim harm by the same conduct that benefitted other
members of the class.
Valley Drug Co. v. Geneva Pharmaceuticals,
Inc., 350 F.3d 1181, 1189 (11th Cir. 2003).
Such a fundamental
conflict renders the class representative’s interests “actually or
potentially antagonistic to, or in conflict with, the interests and
objectives
of other class members.”
Id.
XTO contends a conflict exists between Chieftain and the
putative class members based on its contention that the two leases
submitted
by
Chieftain
negate
the
implied
duty
to
create
a
marketable product, while other class members are operating under
7
The fact that elements of damages available to class members
may vary does not preclude a finding of typicality. See Fankhouser
v. XTO Energy, Inc., 2010 WL 5256807, *4 (W.D. Okla. 2010)(“The
fact that damages may vary or that damages calculations must be
conducted on an individual basis for each class member will not
preclude a finding of typicality under Rule 23(a)(3).”).
14
leases that do not negate such duty.
Even assuming the Court
ultimately concludes at a later stage of this litigation that the
Chieftain-type
leases
negate
the
implied
duty
to
create
a
marketable product, any exclusion of such lessors does not present
a fundamental conflict as Chieftain is also a royalty owner in
numerous other XTO wells in Oklahoma where the implied duty to
market could be applicable. See Abernathy Affidavit at 1-3. Thus,
the Court is satisfied that no conflicts exist that would prevent
Chieftain from vigorously prosecuting this action on behalf of the
Class members.
The Court also finds there is no dispute as to the
adequacy of class counsel to prosecute this action.
Chieftain’s
attorneys are exceptionally well-qualified, experienced attorneys.
Moreover,
lead
counsel
and
their
firms
have
participated
in
numerous oil and gas class actions involving royalty owner issues.
See Chieftain’s Motion, at 31, n.75. Consequently, the Court finds
Chieftain has satisfied the adequacy requirement of Rule 23(a)(4).
Predominance and Superiority
As noted above, in addition to satisfying the elements of Rule
23(a), Chieftain must establish one of the prerequisites under Rule
23(b) for certification.
Chieftain seeks certification under Rule
23(b), which requires a findings that common questions predominate
over individual claims and that a class action is the superior
method for adjudicating the controversy.
With respect to these
findings, the Court examines:
(A) the class
controlling the
actions;
members’ interest in
prosecution or defense
individually
of separate
(B) the extent and nature of any litigation concerning
the controversy already begun by or against class
members;
15
(C) the desirability or undesirability or concentrating
the litigation of the claims in the particular forum; and
(D) the likely difficulties in managing a class action.
Fed.R.Civ.P. 23(b)(3).
certification.
These factors all weigh in favor of
No litigation is pending concerning the putative
Oklahoma class members8 and no interest in pursuing an individual
action is evident from the pleadings, nor does it appear to be
economically feasible to bring individual claims for what, in most
circumstances, would be a limited recovery.
central
issue
in
this
case
involves
the
Furthermore, as the
implied
duty
of
marketability and XTO’s uniform methodology for deductions with
respect to its Oklahoma wells, there is substantial benefit to
concentrating the litigation in this forum where the common issues
can be resolved in one arena.
Finally, the Court does not
anticipate difficulties in the management of this class action.
Conclusion
Based on the foregoing reasons, the Court finds Chieftain has
satisfied its burden under Rule 23 of establishing this case as a
class action.
Chieftain’s Motion for Class Certification is
granted and the following class is certified:
All non-excluded persons or entities who are or were
royalty owners in Oklahoma wells since July 1, 2002,
where XTO, including its predecessors or affiliates, is
or was the operator (or, as a non-operator, XTO
separately marketed gas). The Class Claims relate only
to payment for gas and its constituents (helium, residue
8
Of course, the Roderick case involving royalty owners in
Kansas wells is pending before the District Court of Kansas. On
March 28, 2012, the Roderick case was certified as a class action.
See Dkt. No. 108 (Memorandum Order and Opinion).
16
gas, natural gas liquids, nitrogen and condensate)
produced from the wells.
The Class does not include
overriding royalty owners or other owners who derive
their interest through the oil and gas lessee.
The persons or entities excluded from the Class are: (1)
agencies, departments or instrumentalities of the United
State of America and the State of Oklahoma; (2) publicly
traded oil and gas exploration companies and their
affiliates; (3) the claims of royalty owners in XTO wells
gathered by Timberland and processed at the Tyrone Plant
which are presently the subject of the action styled
Fankouser, et al v. XTO Energy, Inc., Case No CIV-07-798L USDC WD OK (formerly Beer et al v. XTO); and (5)
persons or entities that Plaintiffs’ counsel is, or may
be prohibited from representing under Rule 1.7 of the
Oklahoma Rules of Professional conduct.
Chieftain’s counsel of record are appointed as class counsel.
Since this is an action certified under Rule 23(b)(3), “the best
notice that is practicable under the circumstances” must be given
“to all members who can be identified through reasonable effort.”
Fed.R.Civ.P. 23(c)(2)(B).
The Court orders the parties to confer
and submit to the Court within 30 days of the date of this order a
notice that complies with Rule 23(c)(2)(B). Should the parties not
reach an agreement on such notice by the end of the 30-day period,
Chieftain shall notify the Court in writing and the Court will
thereafter set this matter for hearing on the issue of the notice
to be sent under Rule 23(c)(2)(B).
It is so ordered this 12th day of April, 2012.
17
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