Chieftain Royalty Company v. XTO Energy, Inc.
Filing
29
OPINION AND ORDER by Judge Frank H. Seay granting 24 Motion to Stay; XTO's Motion to Dismiss 6 is held in abeyance pending rulings by the USDC for the Dist. of Kansas (trl, Chambers)
IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF OKLAHOMA
CHIEFTAIN ROYALTY COMPANY,
)
)
)
)
)
)
)
)
)
)
)
Plaintiff,
v.
XTO ENERGY, INC. (including
predecessors, successors and
affiliates),
Defendants.
No. CIV-11-29-FHS
OPINION AND ORDER
This
is
an
action
brought
by
Chieftain
Royalty
Company
(“Chieftain”) and putative class members seeking to recover for the
failure of XTO Energy, Inc. (including predecessors, successors and
affiliates)(“XTO”), as the operator of certain Oklahoma gas wells,
to properly pay royalties due on the production of gas and gas
constituents from these Oklahoma wells.
Chieftain’s asserted
theories of recovery1 are derived from its underlying claim that
XTO
has
underpaid
royalties
on
gas
and
its
constituents
by
improperly deducting costs incurred to transform the wellhead gas
into a marketable condition for sale.
Before the Court is XTO’s Motion to Dismiss (Dkt. No. 6) and
the Chieftain’s Motion to Stay Proceedings (Dkt. No. 24). On April
6, 2011, a hearing was held with respect to these motions. Relying
on the first-to-file rule, XTO asks this Court to dismiss this
1
Chieftain’s theories of recovery are (1) breach of
contact, (2) tortious breach of contract, (3) breach of fiduciary
or quasi-fiduciary duty, (4) fraud (actual and constructive) and
deceit, (5) conversion, (6) conspiracy, (7) accounting, and (8)
injunctive relief.
1
putative
class
action
because
the
claims
asserted
herein
by
Chieftain and the putative class members are substantially the same
as those asserted in an earlier filed putative class action in the
United States District Court for the District of Kansas, Wallace B.
Roderick Revocable Living Trust v. XTO, Energy, Inc., Case No. 081330-JTM-KMH (“Roderick).2
Chieftain objects to XTO’s request for
dismissal and, alternatively, has moved the Court to stay the
proceedings, including any ruling on XTO’s Motion to Dismiss, until
the United States District Court for the District of Kansas decides
whether it will carve out the Oklahoma class in the Roderick case
and transfer it to this Court or allow the modification of the
class definition in Roderick in order to exclude royalty owners in
Oklahoma gas wells from the class definition.3
For the following
reasons, this Court finds that it is appropriate to stay the
proceedings herein and allow the Roderick court to determine the
issues currently before it related to the proper forum in which the
underlying claims should proceed.
The first-to-file rule is grounded in the concepts of comity
among federal courts and sound judicial administration.
v. Whataburger of Alice, Inc., 174 F.3d 599, 603 (5
th
Cadle Co.
Cir. 1999).
2
In addition to seeking the dismissal of this entire case
on the basis of the first-to-file rule, XTO alternatively argues
for the dismissal of (1) Chieftain’s conversion claim, (2)
unnamed predecessors, successors, and affiliates, and (3) any
claim against XTO as a predecessor, successor, or affiliate.
3
On February 18, 2011, the Plaintiff in Roderick filed a
Motion To Sever A Portion Of The Class And Transfer Venue Or, In
The Alternative, Supplement Plaintiff’s Motion For Class
Certification To Narrow The Class Definition. Exhibit 1 to
Chieftain’s Motion To Stay Proceedings (Dkt. No. 24). A Motion
for Class Certification was previously filed in Roderick on
November 15, 2010. Exhibit 2 to XTO’s Motion to Dismiss (Dkt.
No. 6).
2
“The concern manifestly is to avoid the waste of duplication, to
avoid rulings which may trench upon the authority of sister courts,
and to avoid piecemeal resolution of issues that call for a uniform
result.”
F.2d
West Gulf Maritime Ass’n v. ILA Deep Sea Local 24, 751
721,
729
(5th
Cir.
1985).
Under
this
well-established
doctrine, a district court is permitted “to decline jurisdiction
where a complaint raising the same issues against the same parties
has previously been filed in another district court.”
Buzas
Baseball, Inc. v. Bd. of Regents of the Univ. of Ga., 189 F.3d 477
(table), 1999 WL 682883, at *2 (10th Cir. Sept. 2, 1999).
Although
the preference is for the first-filed court to decide on the
application of the first-to-file rule, a second-filed court may
exercise its discretion and consider the application of the firstto-file rule in the first instance.
Wallace B. Roderick Revocable
Living Trust v. XTO Energy, Inc., 679 F.Supp.2d 1287, 1296-97 (D.
Kan. 2010).
If it is determined that the first-to-file rule
applies, “the second district court has discretion to transfer,
stay, or dismiss the second case in the interest of efficiency and
judicial economy.”
Cedars-Sinai Med. Ctr. v. Shalala, 125 F.3d
765, 769 (9th Cir. 1997); see Cherokee Nation v. Nash, 724 F.Supp.2d
1159, 1171 (N.D.Okla. 2010)(“After determining whether the first to
file rule generally applies, courts within the Tenth Circuit have
the option of staying the second-filed action pending the outcome
of the first-filed action, rather than immediately transferring the
case to the first-filed court.”).
The application of the first-to-file rule is determined by an
examination of the following factors: (1) the chronology of the
actions, (2) the similarity of the parties involved, and (3) the
similarity of the issues at stake.
Alltrade, Inc. v. Uniweld
Products, Inc., 946 F.2d 622, 625 (9th Cir. 1991); Cherokee Nation,
724 F.Supp.2d at 1167; Wallace B. Roderick Revocable Living Trust,
3
679 F.Supp.2d at 1296.
It is abundantly clear that all three
factors weigh in favor of application of the rule.4
First, the
Roderick case was initially filed in the District Court of Kearny
County, Kansas, on September 18, 2008, and was later removed to the
United States District Court for the District of Kansas on October
24, 2008.
The instant case was initially filed in the District
Court of Coal County, Oklahoma, on December 17, 2010, and was later
removed to this federal court on January 21, 2011.
Thus, the
Roderick case was filed first - more than two years before the
filing of the instant action.
Second, the parties are similar as
XTO is the lone defendant in both actions and the putative class
concerning the Oklahoma wells in this case is included in the
Roderick putative class, i.e., this action is a complete subset of
the Roderick action.
Finally, the issues at stake are undeniably
substantially similar.5
Although additional theories of recovery
are asserted in the instant action6, the underlying claims in both
cases are centered on the argument that XTO underpaid royalties due
class members on the production of gas and its constituents by
improperly deducting costs incurred to place the gas in marketable
condition for sale. While the theories of recovery asserted in the
4
Indeed, in its Response Brief (Dkt. No. 15) to XTO’s
Motion to Dismiss, Chieftain does not contest the application of
the first-to-file doctrine. Rather, Chieftain argues that
transfer, as opposed to dismissal, is the applicable remedy and
that, in any event, XTO’s Motion to Dismiss “will shortly be
moot” in light of the motion filed in Roderick seeking a transfer
to this Court or an alteration of the Roderick class definition.
5
Chieftain recognizes this similarity of issues in its
Complaint wherein it states “[t]o Plaintiff’s knowledge, there is
no pending litigation against XTO that incorporates the statewide
claims of improper deductions from mineral interest proceeds
related to the Class wells other than the case styled Roderick et
al v. XTO Energy, Inc., Case No. 08-CV-01330-JTM-KMH D.C. KS.”
6
In Roderick, the theories of recovery are (1) breach of
contract, (2) unjust enrichment, and (3) accounting.
4
cases do not mirror each other, the underlying claims nonetheless
arise
out
of
the
same
alleged
improper
actions
by
XTO;
consequently, there is a substantial similarity of the issues at
stake.
Having determined that the first-to-file rule is applicable,
the Court concludes that a stay of this action is the appropriate
remedy under the circumstances.
The Roderick Court has before it
a motion which will determine the proper forum for the resolution
of the claims against XTO by the royalty owners in Oklahoma wells.
This Court finds it proper to defer to the judgment of the Roderick
Court to resolve those issues.
Maintaining the status quo until
the Roderick Court enters its rulings promotes the efficient use of
judicial resources as well as the resources of the parties. Should
the Roderick Court determine that it will not carve out the
Oklahoma class and transfer it to this Court and should it decline
to modify the class definition to exclude the Oklahoma class, then
this Court will transfer this action to the United States District
Court for the District of Kansas for consolidation with Roderick.
On the other hand, should the Roderick Court carve out the Oklahoma
class and transfer it to this Court for consolidation with the
instant action or should it allow a modification of the class
definition to exclude the Oklahoma class, then this Court will lift
the stay and proceed with the instant litigation.
The parties
shall notify this Court when the Roderick Court issues its rulings
on these matters.
Based on the foregoing reasons, Chieftain’s Motion to Stay
Proceedings (Dkt. No. 24) is granted.
XTO’s Motion to Dismiss
(Dkt. No. 6) is held in abeyance pending rulings by the United
States District Court for the District of Kansas in the Roderick
case.
5
It is so ordered this 22nd day of April, 2011.
6
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