Foster v. Apache Corp.
285 F.R.D. 632
W.D. Okla.2012Background
- Foster sues Apache for underpayment of royalties on gas production in Oklahoma and seeks to represent a broad class of royalty owners.
- Class defined as non-excluded persons owning royalty interests in Oklahoma wells where Apache is operator or marketed gas, from 2000 onward.
- Apache markets gas via two main arrangements (direct to interstate pipeline and through midstream purchasers) affecting royalty deductions and accruals.
- Oklahoma law provides a marketable-product rule and PRSA-based profit sharing, which together govern when and how royalties are calculated and paid.
- Foster contends deductions for gathering/processing and fuel gas were improperly applied or not paid on midstream transaction proceeds, NGLs, and fuel gas.
- The court denied Foster’s motions for class certification and related relief, finding the proposed class lacks common questions and predominance; other motions deemed moot.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Do common questions predominate for class certification? | Foster argues common questions exist in uniform royalty calculations and marketable-product issues. | Apache contends lease-specific terms require individualized inquiries; marketability varies by lease and arrangement. | No; common questions do not predominate; certification denied. |
| Is the point of marketability a class-wide issue? | Gas becomes marketable only when residue is pipeline-ready, making the issue common. | Marketability is fact-specific per Mittelstaedt and varies with lease terms and marketing arrangements. | Not a class-wide issue; not suitable for certification. |
| Are there common questions on fuel gas treatment under class leases? | Fuel gas payments were not properly included when gas was used off-lease or in manufacture of products. | Whether fuel-gas royalty is due depends on contract form (POP vs cash) and individual circumstances. | Not a basis for class certification. |
| Are typicality and adequacy satisfied in light of lease differences? | All class claims arise from systemic underpayments under PRSA; Foster is a typical class representative. | Differences in leases and defenses could affect claims and representation. | Typicality and adequacy not sufficient to overcome lack of commonality and predominance. |
Key Cases Cited
- Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (U.S. 2011) (commonality requires a question capable of classwide resolution)
- Mittelstaedt v. Santa Fe Minerals, Inc., 954 P.2d 1203 (Okla. 1998) (marketable-product rule; post-production costs must be fact-specific)
- Wood v. TXO Prod. Corp., 854 P.2d 880 (Okla. 1992) (marketable-product rule framework in Oklahoma royalty payments)
- General Telephone Co. of the Northwest, Inc. v. Falcon, 457 U.S. 147 (U.S. 1982) (categorical approach to determining class claims; need for common issues)
- Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (U.S. 2011) (reiterated standard for commonality and predominance in class actions)