SEECO, Inc. v. Snow
2016 Ark. 444
| Ark. | 2016Background
- Snow sued SEECO (operator) alleging SEECO underpaid royalties by deducting unreasonable post‑production costs from gas sales from Fayetteville Shale wells and asserted multiple state-law claims (breach of lease, fraud, conversion, unjust enrichment, statutory duties).
- Snow moved to certify a class of royalty owners; the circuit court certified a class limited to persons who were Arkansas citizens at the commencement of the action and whose royalties derived from SEECO‑operated Fayetteville Shale wells where certain affiliated entities gathered/purchased gas.
- Circuit court previously granted partial summary judgment to SEECO on (1) SEECO’s contractual right to deduct reasonable costs (but not whether amounts were reasonable), (2) SEECO’s right to use gas for operations, and (3) no fiduciary duty under the statutory prudent-operator standard.
- SEECO removed to federal court under CAFA after it changed corporate domicile; the case was remanded and the state court’s certification order was appealed as immediately appealable.
- The trial court found Rule 23 requirements (numerosity, commonality, typicality, adequacy, predominance, superiority, and ascertainability) satisfied and appointed Snow as class representative and his counsel as class counsel.
- SEECO appealed, arguing the Arkansas‑citizen limitation is a gerrymander to avoid federal jurisdiction, that the class definition is not ascertainable or manageable, that common issues do not predominate, that Snow and his counsel are inadequate, and that certification violated due process; the appellate court affirmed certification and denied a motion to strike an opt‑out notice.
Issues
| Issue | Plaintiff's Argument (Snow) | Defendant's Argument (SEECO) | Held |
|---|---|---|---|
| Class definition limited to Arkansas citizens | Limitation is proper and class identity can be determined by objective records | Limitation is an artifice to avoid federal jurisdiction and lacks rational relation to claims | Court upheld Arkansas‑citizen class as not inherently improper and ascertainable by objective criteria |
| Adequacy of representative and counsel | Snow is willing, familiar with issues, counsel qualified | Counsel conflicts by representing only Arkansas lessors; Snow leaves decisions to counsel; well proximity creates conflict | Court found Snow and counsel adequate; no evidence of collusion or disabling conflict |
| Ascertainability / administrative feasibility | Class membership can be identified via SEECO records and public records (voter, tax, etc.) | Citizenship/residency confusion makes class unascertainable | Court found objective criteria and court oversight make membership ascertainable |
| Commonality / Predominance (merits-related common issues) | SEECO used uniform postage‑stamp rate and common method of calculating royalties => common questions predominate | Whether post‑production costs are unreasonable depends on individual leases, wells, and costs | Court found common questions about SEECO’s calculation method and lease clauses predominate over individual issues |
| Typicality | Snow’s claim arises from same lease clause and SEECO conduct as class | Snow’s lease has notice-of-breach clause; his incentives differ | Court held Snow’s claim is typical; notice clause does not defeat typicality |
| Superiority / manageability | Class action is more efficient than thousands of suits | Arkansas‑only class forces multiple suits and risks unmanageability (e.g., jointly held leases with non‑Arkansas co‑owners) | Court found class superior and manageable for now; concurrence warned of potential future manageability problems |
| Due process (procedural) | Not raised below | Certification limits SEECO’s defenses and fairness; forum shopping | Not reached on appeal because SEECO failed to obtain a ruling below; appellate review precluded |
Key Cases Cited
- Campbell v. Asbury Auto., Inc., 381 S.W.3d 21 (Ark. 2011) (Rule 23 certification factors)
- GGNSC Arkadelphia, LLC v. Lamb, 465 S.W.3d 826 (Ark. 2015) (abuse-of-discretion standard for class certification)
- Rosenow v. Alltel Corp., 358 S.W.3d 879 (Ark. 2010) (review of class-certification record without delving into merits)
- Beverly Enters.-Ark., Inc. v. Thomas, 259 S.W.3d 445 (Ark. 2007) (elements of adequacy under Rule 23)
- Philip Morris Cos., Inc. v. Miner, 462 S.W.3d 313 (Ark. 2015) (members may prove class membership by affidavit/testimony)
- Gen. Motors Corp. v. Bryant, 285 S.W.3d 634 (Ark. 2009) (individual issues do not defeat certification where common wrongdoing questions exist)
- Leathers v. Warmack, 19 S.W.3d 27 (Ark. 2000) (citizenship/domicile explained)