Chieftain Royalty Company v. XTO Energy, Inc.
6:11-cv-00029
E.D. Okla.Apr 12, 2012Background
- Chieftain Royalty Company sues XTO Energy, Inc. in the Eastern District of Oklahoma seeking class certification for royalty underpayment in Oklahoma wells.
- Motion for Class Certification was filed January 6, 2012; a hearing occurred February 6, 2012, with briefing through January 27, 2012.
- Proposed class includes all non-excluded royalty owners in Oklahoma wells since July 1, 2002 where XTO is operator or separately markets gas as a non-operator.
- Plaintiff alleges XTO deducted costs to transform gas into a marketable form, reducing royalty payments, through a uniform methodology across wells.
- Evidence shows 2,296 wells and approximately 14,300 leases; parties estimate over 16,000 potential class members; state court actions relate to similar issues.
- Court approves a class action under Rule 23(b)(3), finding uniform policy and common issues dominate, with individual damages to be addressed later.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Rule 23(a) satisfaction? | Chieftain contends numerosity, commonality, typicality, and adequacy are satisfied. | XTO argues lease diversity and varying marketing arrangements defeat commonality. | Rule 23(a) satisfied. |
| Predominance and superiority under Rule 23(b)(3)? | Common questions on marketability and uniform deductions predominate; class is superior. | Disparate lease terms prevent predominance; individualized issues prevail. | 23(b)(3) satisfied. |
| Wal-Mart effect on certification? | Wal-Mart is distinguishable; here a uniform policy exists. | Wal-Mart requires denial where no common policy exists. | Wal-Mart not controlling; not dispositive here. |
Key Cases Cited
- General Tel. Co. of Southwest v. Falcon, 457 U.S. 147 (1982) (establishes rigorous analysis for Rule 23(a) prerequisites)
- Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011) (commonality requires a common core of conduct; broad discretion does not equal commonality)
- J.B. ex rel. Hart v. Valdez, 186 F.3d 1280 (10th Cir. 1999) (ties typicality to the event or conduct underlying class claims)
- DG ex rel. Stricklin v. Devaughn, 594 F.3d 1188 (10th Cir. 2010) (overlaps between merits and certification permissible under rigorous analysis)
- Mittlestaedt v. Santa Fe Minerals, Inc., 954 P.2d 1203 (Okla. 1998) (post-production costs may be charged to royalty owners under certain conditions)
- Wood v. TXO Production Corp., 854 P.2d 880 (Okla. 1993) (implied duty to market gas to marketable form borne by lessee)
- Fankhauser v. XTO Energy, Inc., 2010 WL 5256807 (W.D. Okla. 2010) (typicality may hold despite varying damages calculations)