Ideal v. Burlington Resources Oil & Gas Co. LPIdeal v. Burlington Resources Oil & Gas Co. LP
{1} Plaintiffs-Respondents (Plaintiffs) are royalty owners who brought a class action lawsuit claiming that Defendant-Petitioner (Burlington) has underpaid royalties by improperly deducting the costs and expenses associated with placing natural gas in a marketable condition. The district court certified a class under Rule 1-023(B)(2) and (B)(3) NMRA, finding that “[t]he common pre-tailgate deduction issues and the ‘marketable conditions rule’ continue to dominate the overall case.” We granted this interlocutory appeal to review the district court’s certification of the class. At the time we granted this appeal, wе had undertaken a review of a similar class action case in Davis v. Devon Energy Corp.,
{2} Burlington raises two additional issues not addressed in Davis: (1) whether Plaintiffs are precluded from re-litigating the issue
I. CLASS CERTIFICATION UNDER RULES 1-023(B)(2) AND (B)(3)
A. RULE 1-023(B)(2) CERTIFICATION WAS APPROPRIATE
{3} Burlington argues that certification under Rule 1-023(B)(2) is improper because the nature of the claims for declaratory and injunctive relief will require highly individualized inquiries and analyses of the various underlying instruments and, in any event, the final relief requested by Plaintiffs is predominately money damages. Burlington’s arguments that certification is improper under Rule 1 — 023(B)(2) are the same arguments which were rejected in Davis,
{4} The injunctive and declaratory relief sought by Plaintiffs in this case is no different than the relief sought and affirmed in Davis. See id. ¶¶ 16, 18, 25. Here the district judge found that Burlington acted or failed to perform a legal duty on grounds generally applicable to all class members when he stated that “[i]n taking deductions for pre-tailgate Processing [sic] costs from all royalty and overriding royalty owners, Burlington has acted on grounds generally applicable to the class.” This finding was similar to the finding made by the district court in Davis. See id. ¶ 18 (“[T]he district court found that Defendants аcted on grounds generally applicable to all class members by deducting certain costs uniformly in all royalty agreements, regardless of the language of those instruments.”). Therefore, we affirm the certification of the class under Rule 1-023(B)(2).
B. RULE 1-023(B)(3) CERTIFICATION
{5} To certify a class under Rule 1-023(B)(3), the court must find that “the questions of law or fact common to the members of the class predominate over any questions affecting only individual members[.]” On appeal, Burlington argues that certification of the class under Rule 1-023(B)(3) was inappropriate because Continental Potash, Inc. v. Freeport-McMoran, Inc.,
{6} In Davis, we stated that Continental Potash and Mark V do not apply in every situation and held that “[i]n determining whether a covenant may be implied in a given contract, courts must first determine the legal theory supporting the implication of that promise.” Davis,
{7} From a review of the record in this case, we are not sure whether the district court concluded that the marketable condition rule applied as a matter of law, as did the district judge in Davis. See id. ¶ 37 (basing the decision on the “district court’s conclusion that the marketable condition rule has been incorporated in the existing duty to market”). In his letter opinion, the district judge, in discussing the common questions, noted that “[t]he common pre-tailgate deduction issues and the ‘marketable conditions rule’ continue to dominate the overall ease.” Similarly, in his findings of facts and conclusions of law, the district judge noted that one of the issues common to all class members was “[w]hether the implied duty to place gas in marketable condition applies in New Mexico[.]” If the district court relied on the marketable condition rule applying as a matter of law, then certifying a Rule 1 — 023(B)(3) class would have been appropriate; if not, Continental Potash would apply and Rule 1-023(B)(3) certification could be improper depending on whether common issues would continue to predominate. See Davis,
{8} We remand to the district court to resolve whether the marketable condition rule applies as a matter of law or because the parties may have intended it to apply. In the first case, certification was proper; in the second case, certification under Rule 1-023(B)(3) is dependent upon the extent to which the trial court determines that individualized proof is necessary.
II. PRECLUSION
{9} Burlington argues that Plaintiffs should be precluded from litigating this matter as a class action because class certification was denied in the 1990-A litigation. The district court disagreed, stating that:
The ease of San Juan 1990-A v. El Paso Prod. Co., No. D01010-CV-9501997, does not answer or control the issues presented in this case, or otherwise preclude the Plaintiffs from seeking class certification in this case, as the elements of collateral estoppel with regard to the 1990-A class certification decision are not met in this case, and, in addition, applying preclusive effect to 1990-A with regard to the class certification issues in this case would be fundamentally unfair.
Burlington contends that the district court erred because all the elements of issue preclusion are met in this case. See Deflon v. Sawyers,
(1) the party to be estopped was a party to the prior proceeding, (2) the cause of aetion in the case presently before the court is different from the cause of actionin the prior adjudication, (3) the issue was actually litigated in the prior adjudication, and (4) the issue was necessarily determined in the prior litigation.
Shovelin v. Cent. N.M. Elec. Coop., Inc.,
{10} Because the facts are not in dispute, we review de novo the question of issue preclusion. Rosette, Inc. v. United States Dep’t of the Interior,
A. ABSENT CLASS MEMBERS ARE NOT THE SAME PARTY FOR PURPOSES OF PRE-CERTIFICATION DECISIONS
{11} Burlington relies on Alvarez v. May Department Stores Co.,
{12} In rejecting the broad application of issue preclusion from Alvarez, we adopt a more limited approach regarding when pre-certification decisions will have a preclusive effect on absent class members. In Taylor v. Sturgell,
“[v]irtual representation’s” intense case-by-case analysis is particularly undesirable in circumstances where its application would replace settled, rule-like procedures. In cases such as the instant case, these procedures already exist in the form of Rule 23. The application of the doctrine of virtual representation in these circumstances would create an end run around the limitations of Rule 23, and would as a result both avoid its limitations (which are explicitly grounded in due process) and replace a clear rule with an unruly standard. Such a result would defeat the purposes of both res judicata and Rule 23.
Bittinger v. Tecumseh Prods. Co.,
{13} To allow the plaintiffs to be bound by the denial of class certification before a properly conducted class action has even begun would expand the application of virtual representation beyond what the Supreme Cоurt intended and beyond the point where we are willing to apply preclusive effect. Accordingly, we hold that virtual representation should be limited to apply to absent class members only in situations where the class has been properly certified and conducted. In addition, it does not apply to pre-certification decisions, including denial of class certification.
B. IT WOULD BE FUNDAMENTALLY UNFAIR TO PRECLUDE ABSENT CLASS MEMBERS BASED ON PRE-CERTIFICATION DECISIONS
{14} The district court held that it would be fundamentally unfair to “apply[] preclusive effect to [the] 1990-A [litigation] with regard to the class certification issues in this case[.]” We agree. In Shovelin, we held that even if the defеndant had “met its burden and proved that the application of collateral estoppel was appropriate, the trial court could then determine whether [the plaintiff] was given a full and fair opportunity to litigate the issues[.]”
{15} It would be unfair to preclude absent class members from pre-certification decisions because such preclusion would be inconsistent with due process guarantees. In, Phillips Petroleum Co. v. Shutts,
[t]he plaintiff must receive notice plus an opportunity to be heard and participate in the litigation, whether in person or through counsel ... [and] requires at a minimum that an absent plaintiff be provided with an opportunity to remove himself from the class by executing and returning an “opt out” or “request for exclusion” form to the court.
(Citations omitted.) To preclude Plaintiffs in this case based on the denial of class certification in the 1990-A litigation would deny them these minimal due process rights. See Eastham v. Pub. Employees’ Ret. Ass’n Bd.,
III. THE DISTRICT COURT IS NOT REQUIRED TO MAKE A RECORD OP ITS ANALYSIS OF CHOICE OF LAW AND CONFLICT OF LAW DECISIONS
{16} The district court held that “[t]he law of New Mexico will control Plaintiffs’ claims in this case, and there are no conflict of law or choice of law issues present in this case.” We granted certiorari on the broad issue of whether choice of law and conflict of law principles preclude class certification. In both its brief in chief and its reply brief, Burlington focuses on the district court’s duty to make a record of its analysis. Plaintiffs, however, specifically address whether New Mexico law applies. Although Burlington did not brief this issue, we granted certiorari on whether choice of law and conflict of law issues preclude certification and will address the district court’s conclusion in holding that New Mexico law applies. See State v. Javier M.,
{17} Burlington argues that the district court erred by not “engaging] in the requisite analysis to determine whether choice of law and conflict of law principles precluded certification” as required by Ferrell v. Allstate Insurance Co.,
{18} We believe that Burlington reads too much into Ferrell. Although the district court must conduct the disciplined analysis specified in Ferrell, and cannot certify a class without first determining which law will apply, id. ¶¶ 13-14, we do not require district courts to write opinions or the details of their analysis. See Manning v. Atchison, T. & S.F. Ry. Co.,
{19} In addition, a district court’s decision will be upheld as long as the right result was reached, even if the court reached the decision for the wrong reason. Meiboom v. Watson,
A. THE DISTRICT COURT PROPERLY CONCLUDED THAT NEW MEXICO LAW APPLIES
{20} Although Burlington argues only that the district court erred because it did not perform the necessary analysis, we would be remiss if we did not analyze the propriety of the district court’s conclusion. See Allsup’s Convenience Stores, Inc. v. North River Ins. Co.,
{21} The district court reached the right result when it concluded that New Mexico law applies to this case. In Ferrell, we held that “the Restatement (Second) [Conflict of Laws (2001) ] is a more appropriate approach for multi-state contract class actions”- and rejected the more rigid Restatement (First) Conflict of Laws (2001). Ferrell,
{22} We have previously held that these cоntracts transfer an interest in real property, and therefore the contracts at issue are properly analyzed according to Restatement (Second) Conflict of Laws § 190 (Contractual Duties Arising From Transfer Of Interests In Land).
The contractual duties imposed upon the parties to a deed of transfer of an interest in land are determined, in the absence of an effective choice of law by the parties, by the local law of the state where the land is situated unless, with respect to the particular issue, some other state has a more significant relationship under the principles stated in § 6 to the transaction and the parties, in which event the local law of the other state will be applied.
Id.; see Uhden v. N.M. Oil Conservation Comm’n,
Several factors serve to explain the importance attributed by the rule to the location of the land. The state where the land is situated will have a natural interest in transactions affecting it, particularly in view of the fact that land by its nature is immovable. Also, since in the situations covered by the rule the land constitutes the subject matter of the contract, it can often be assumed that the parties, to the extent that they thought about the matter at all, would expect that the local law of the state where the land is situated would be applied to determine many of the issues arising under the contract. The rule furthers the choiсe-of-law values of certainty, predictability and uniformity of result and, since the state where the land is situated will be readily ascertainable, of ease in the determination of the applicable law.
Id.
{23} We also hold that the decision to apply New Mexico law was constitutional because New Mexico has significant contacts creating state interest and application of New Mexico law is neither arbitrary nor fundamentally unfair. Ferrell,
{24} Burlington’s assertion that this is a contract case, as opposed to a case dealing with realty, rests solely on the case of Team Bank v. Meridian Oil Inc.,
IY. CONCLUSION
{25} We affirm the district court’s conclusions not to preclude Plaintiffs’ claims based
{26} IT IS SO ORDERED.
Notes
. We do not address whether there would be any prejudice to Burlington, as none has been brought to our attention, and Burlington stated at oral arguments that even if the district court had performed the requisite analysis, application of New Mexico law may have been appropriate.