EnCana Oil & Gas (USA), Inc. v. Miller
2017 COA 112
| Colo. Ct. App. | 2017Background
- In 2005 a certified Colorado class sued EnCana for alleged underpayment of natural-gas royalties; the court certified the class in 2006 and ~6,000 members were notified (≈150 opted out).
- In 2008 EnCana and the certified Class entered a settlement: $40M for past claims, a methodology for post‑2009 royalty payments (six geographically based subclasses), an arbitration clause, and a final judgment approving and incorporating the settlement; the judgment reserved jurisdiction to enforce the settlement.
- In 2016 several royalty owners (Owners), purporting to act for the Class, demanded class arbitration alleging EnCana underpaid royalties post‑2009 under the settlement methodology.
- EnCana sued for declaratory relief, arguing (1) the certified Class ceased to exist when the 2008 case was dismissed with prejudice, and (2) the arbitration clause did not authorize class‑wide arbitration.
- The district court ruled the Class survived the 2008 dismissal, concluded the settlement authorized class (or subclass) arbitration, and entered summary judgment for Owners; EnCana appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the certified Class survive the 2008 dismissal with prejudice so it can enforce the settlement? | Owners: The settlement was incorporated into the dismissal and the judgment reserved jurisdiction; the agreement runs for the life of the leases and binds successors/assigns. | EnCana: Rule 23 is procedural; dismissal ended the class and any ongoing Rule 23 obligations. | Class survives: dismissal incorporated the settlement and reserved jurisdiction; the agreement’s terms run for the lives of the leases and bind successors/assigns. |
| Did the district court have to re‑evaluate Rule 23 adequacy post‑dismissal before allowing enforcement/arbitration? | Owners: No further Rule 23 analysis required because the court previously conducted full certification and the settlement re‑endorsed the class/subclasses. | EnCana: The court should reassess adequacy, composition, and counsel changes under C.R.C.P. 23(c)(1). | No further Rule 23 reassessment required here; settlement context and prior certification suffice, and enforcement of the agreement is appropriate. |
| Does the settlement’s arbitration clause permit class (or subclass) arbitration despite being silent on class arbitration? | Owners: The agreement repeatedly frames rights/obligations in class/subclass terms and defines Parties as the Class plus EnCana; context and language show intent to allow class/subclass arbitration. | EnCana: Silence on class arbitration implies bilateral arbitration; class arbitration cannot be implied solely from an agreement to arbitrate. | The court held the settlement’s language and context show a contractual basis for class/subclass arbitration; summary judgment on that issue was proper. |
| Was additional notice to class members required before filing the 2016 arbitration demand? | Owners: No—class members already received notice at certification and settlement approval, and the demand enforces the settlement rather than asserts new claims. | EnCana: Class counsel did not provide sufficient additional notice of the arbitration demand, violating due process. | No additional notice required for the arbitration demand; if the arbitrator deems more notice necessary, the arbitrator may address it. |
Key Cases Cited
- Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375 (failure to preserve settlement obligations in dismissal can divest court of enforcement jurisdiction; incorporation or reservation of jurisdiction preserves enforcement)
- Allen v. Pacheco, 71 P.3d 375 (Colo. 2003) (contracts — including settlement agreements — are construed to give effect to parties’ reasonable expectations and benefits of the bargain)
- Lane v. Urgitus, 145 P.3d 672 (Colo. 2006) (arbitration clauses divest courts of jurisdiction over arbitrable questions; context controls scope)
- Stolt‑Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (class arbitration requires a contractual basis; cannot be compelled absent agreement)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (arbitration is a matter of contract; FAA enforces privately negotiated arbitration agreements)
- Puleo v. Chase Bank USA, N.A., 605 F.3d 172 (3d Cir.) (questions about inclusion of successors/assignees and arbitrability may be for arbitrator absent threshold contract validity issues)
- Rothstein v. Am. Int’l Grp., Inc., 837 F.3d 195 (2d Cir.) (settlement agreements are hybrids — construed as contracts and enforced as orders)