*1 economic under the act is a larger regulation part agencies unless would be undercut in which the scheme regulatory activity, Therefore, Id. were regulated. preemp- the intrastate activity not effect of act does violate Congress’s power regulate tive the resi- The dismissalof station discontinuations. railroad agency lack of Court for the Pulaski Circuit County dents’ petition by be affirmed. due must jurisdiction preemption Affirmed. HALES, INC.,
SEECO, al. et v. Allen et al. 96-1392 Arkansas Court of
Supreme delivered October Opinion *2 Mars, Mars; Gould; Everett & Thomas A. by: Kenneth S. Watkins, for appellants. John J. PLC, Maurras, & Smith Don A.
Harper, Young, by: Smith and Maurras; Eickenhorst; S. Walton and Gable Gotwals Marilyn Mock J. Schwabe, Sturdivant, M. M. by: Benjamin Singletary, James A. Timothy Carney, appellees. SEECO, Inc. L. Appellants Brown, Justice. Robert are (AWG) Western Gas Arkansas (SEECO), Company Electric subsidiaries of Southwestern owned appellant wholly Hales, Allen et al. (the roy- (Southwestern). Appellees Company oil and leases are lessors under various owners), possessed alty action suit to claim who a class royalties SEECO brought The trial certified roy- due but not court were paid. allegedly set out in Rule as a classafter criteria considering alty of Civil Procedure. The class of the Arkansas Rules 23(a) (b) 3,000 SEECO, than members. is to consist of more estimated AWG, the class certification and and Southwestern have appealed *3 the that common contest trial court’s findings ques- specifically individ- law and fact over questions affecting tions of predominate the claim that the members. The further reject ual class appellants for the fair and classaction is the method owners’ superior royalty issue, the a efficient of this As controversy. corollary adjudication that to trial will contend the constitutional right by jury appellants bifurcated trials with one deciding be skewed by having jury deter- for owners and the a second jury royalty affirm. We mining questions.
In their the owners claim that SEECO royalty complaint, contract, failed enforce the of a known as provisions gas-sales the AWG and further failed to royalty- Contract against pay the from the under the owners gas proper proceeds produced SEECO affected contract. The numerous leases by complaint into and states that Contract 59 was entered between SEECO under on 1978. It that Contract 59 SEECO AWG July alleges Franklin, Crawford, in dedicated acreage Johnson, Washington, that and Counties for oil and and AWG Logan gas production, for 20 under itself volumes of a obligated years purchase gas at a That “take-or-pay” arrangement guaranteed arrange- price. that ment in this (AWG, instance) provided purchaser either a volume of at the contract buy price pay specified gas The without owners that price taking allege gas. royalty the term did not of Contract SEECO throughout require or take the volumes AWG to pay guaranteed prices required the terms of the gas agreement. per further that The allowed (1) SEECO royalty allege: to freeze below for the AWG the contract gas price period prices 1994; between December 1984 and that SEECO (2) July wells, and released and arbitrarily imprudently acreage, production contract, of the from Contract the term throughout in the for resulted sale of less than the contract that gas (3) price; failed to drill additional SEECO wells for fully plan develop increased on owners’ that production (4) royalty acreage; SEECO to AWG without com- continuously gas storage provided Other misdeeds were set SEECO out in com- pensation. which, owners, to the resulted in lower plaint according royalty and, thus, less them. prices proceeds owners also that SEECO con- royalty allege fraudulently cealed its failures under Contract 59 by intentionally refusing document other deficiencies under Contract 59. pricing that state SEECO They conduct favorable to engaged AWG due to their as affiliate owned companies relationship wholly Southwestern SEECO’s course conduct resulted in sig- nificant losses to the owners. that in complaint 1987 SEECO solic- specifically alleges
ited the of mineral purchase interests from owners and the market for natural misrepresented price that solicita- gas. *4 letter, tion that SEECO noted had been gas prices declining but, recent to the failed years, according allegation, SEECO to disclose that under Contract 59 AWG was to make min- obligated imal of volume and that at a purchases gas certain pay gas The also asserts in a price. that 1983 letter complaint SEECO advised owners that it had royalty entered into a con- gas-sales tract with Natural Gas which (NGP) would result in Pipeline reduced The royalties. owners claim that royalty SEECO failed to disclose that the same dedicated under NGP gas contract was dedicated under Contract its already with provi- take-or-pay sion, aat higher significantly purchase price. seek owners in excess of compensatory damages
$58,450,000 and and punitive damages against appellants, jointly on the fraud; theories of: and fraud constructive severally, legal (1) leases; breach of the (2) oil and breach of the to mar- gas (3) duty fair faith and breach of the duty good (4) ket gas reasonably; & -602 15-74-601 of Ark. Code Ann. violation (5) dealing; §§ withholding which 1994), penalties fraudulently govern (Repl. enrichment; tortious inter- (7) and lease (6) unjust oil payments; relations; vio- (9) civil with contractual (8) conspiracy; ference 1994), Ark. Ann. 15-72-305 (Repl. lation of Code § on a calculation royalties weighted-average price. requires for certification of class owners also asked pursuant Procedure. 23 of the Arkansas Rules of Civil Rule Dr. David testified At the Taylor class-certification hearing, become that he was a named plaintiff seeking representa- dedi- interests in eleven oil leases tive because his royalty gas He that his claims concerned cated under Contract 59. testified the lack of enforcement of Contract 59 regarding gas price to be as well as the volume of sold SEECO to AWG by cross-examination, that On Dr. stated SEECO Taylor purchased. leases to had converted leases from voluntarily fixed-price pro- leases based on its over last number ceeds performance not He also that the terms of leases should contended years. not because were affiliateswhich were control SEECO AWG therefore, at arms’ determination royalty-price dealing length; 59, as to his be dictated the terms of should Contract by opposed that there was fraud in con- leases. Dr. further contended Taylor sent with the letter the 1987 solicitation letter nection neither made reference to Contract out SEECO because letter by and AWG’s under contract. obligation take-or-pay rebuttal, fraudu- attacked Dr. assertion of SEECO Taylor’s file and showed that 59 had been on lent concealment Contract with the Public Service since (PSC) Arkansas Commission or 1979. also offered several articles SEECO newspaper that, on it should have information put royalty argued, was a 1991 article entitled notice about One January pricing. Defended from the Ozark Practices Company,” “Purchasing and the which documented from the PSC challenges Spectator, AWG, General’s Office Attorney regarding high prices paid *5 Contract A second which were on to under 59. passed ratepayers Left was a entitled “Gas article Company January story Democrat-Gazette, from the Arkansas Prices PSC Told” High, was under indicated AWG too much Con- also paying tract a November 1994 article entitled “Settlement 59. Finally, After Years” in the Northwest Arkansas Times docu- Reached Office, mented between the a settlement General’s PSC Attorney staff, AWG, SEECO, and a reduction for AWG causing ratepayers 59 violated because Contract Arkansas’s least-cost law. purchasing Dr. that he unaware testified was of these articles. Taylor Hales,
Allen Franklin another named plaintiff potential he was testified that for certification as a representative, asking under with owner two leases were dedi- SEECO which royalty cated to 59. In his Hales echoed Dr. Contract deposition, Taylor’s concerns the fact that the 1983 and about 1987 letters were silent about 59. Dr. Contract Robert Gordon also testified by Jeffers that SEECO should have enforced Contract 59. deposition Clower, Southwestern, an
Brooks tes- attorney employed by tified that he the oil and leases of Dr. Dr. perused Taylor, Jef- fers, Hales, and Mr. and concluded that some contained leases a covenants, and a disclaimer of while fixed-price implied other leases to be aon provided royalties basis paid proceeds and did not contain disclaimer clause. He also testified that the various differed leases respect government-regulation clauses, which would make some leases certain defenses subject that would be unavailable in connection with other leases. The form, leases also differed with Dr. Taylor, example, having three different of leases. Clower testified that the types leases may or not be for the may subject made pooling agreements purpose unit, which would forming drilling also terms of the vary lease agreements. court trial entered order an the class of SEECO,
owners affected acts and by omissions alleged AWG, and Southwestern. Two subclasses were created based on whether the subclass leases were leased to SEECO and dedicated under Contract leased to third affected Con- parties tract 59. The trial court’s found order that the following issues existed: predominating evidence an produced plaintiffs indicates: alleged
overallscheme course of conduct by the defendantsdesigned *6 408 the irrespec- the members of classas proposed group
to defraud
the
lease or
volume of
of the
of oil and
type
production
tive
leases;
Arkansas Western
the
that SEECO
deference to
from
take,
to
failed
enforce the
allegedly
price
Gas
interest
Company’s
since the contract’s
other
of Contract
almost
provisions
and
the
and
concealed such conduct from proposed
actively
inception
class;
state
in corre-
that the
failed to
material facts
defendants
have been sent to members of the
spondence
appears
citizens and residents of this
dis-
including
judicial
potential
trict;
failed
intentionally
documentary
the defendants
to keep
fear of discovery
of the deficiencies under Contract 59 for
records
class;
deficiencies
the members
proposed
of such
in actions before the Arkansas
engaged
the defendants allegedly
Service
conceal their actions
designed
Public
Commission
class.
the members of the proposed
from
I. Predominance
trial
that the
court erred in its
pre
appellants urge
are
We observe
trial courts
initially
given
dominance finding.
Direct
Ins.
discretion in matters of class certification.
Gen.
broad
Lane,
Union Nat’l
Co. v.
328 Ark.
Five cases
of this court’s recent
provide
compendium
on
statements
In Arkansas La.
holdings
Gas
predominance.
Morris,
Co.
This
was embraced in International
approach
Elec.,
Union of
Hudson,
Radio & Mach. Workersv.
In affirming
the actions of
the unions’ liability
that the common question
an
advocated
We
approach
members
again
their
predominated.
issue first:
the common
the merits of
deciding
will be the focus
the unions’ liability
central
question
to the sub-
with respect
That can be decided
the class action.
not an instantane-
mass action was
even though
alleged
classes
the unions
held liable in general,
if
are
they
ous event. Again,
the claims of
have as
they may
defenses
any
will be able to present
thereafter, the only
are
class members
presented
the individual
classmembers will
that the individual
the decision being
effect of
decide,
will not have
and the court
not have to prove,
in each case.
of liability
general question
Hudson,
Workers
Elec., Radio & Mach.
Union
International
*8
at
at
747 S.W.2d
88.
Ark.
Lemarco,Inc. v.
decision in
effect was this court’s
To the same
Lemarco,
a classwas
Wood,
(1991).
Ark.
Lemarco, at at Inc. v. 726. This rationale continued to hold Summons Missouri sway R.R., case, Pac. Ark. In that S.W.2d 5,000 trial court refused a class of about North Little certify Rock and business residents who were forced to evacuate people the area when a railroad accident caused a chemical tank car to overturn. The residents the railroad and sought recovery against Union under Carbide theories strict negligence for liability food, shelter, treatment, on expenditures medical clothing, mental This damages court determined that pain anguish. the trial abused court its discretion in not the class because the and strict questions regarding liability negligence issues, over liability predominated because a any class action awas method for superior handling numerous claims. We concluded that the of the repeated litigation liability and the question inconsistent results possibility outweighed fact that each claimant would have different evidence. We damage reversed the trial court and the class certification even approved this though court that each claimant have the recognized burden of that the railroad’s conduct was proving proximate cause of his damages. *9 273,
The case of Arthur v. 320 Ark. 895 S.W.2d Zearley, 928 case, followed. In that (1995) this court determined that the trial court abused its discretion in a class of who plaintiffs fraud, claims medical brought negligence, battery, outrage, strict and breach of out of the liability, warranty arising implanta- tion of Orthoblock into their who spines. were the Appellants, manufacturer of the Orthoblock and doctors and medical facilities for the responsible surgical that issue of procedures, argued informed consent was a to the individual claims and predicate could not be tried on a class basis. This court as it agreed, was clear that each would to plaintiff about oral required testify with communications his and that the of issue informed physician 412 battery, the claims negligence, was woven throughout
consent This court also concealment. or fraudulent and fraud outrage, indi- focus on of causation require that the issue concluded treat- received Orthoblock claims, who as each vidual person into medical condition his or her to ment would be place required this court acknowledged presence evidence. Although individual issues, number of that the large it determined common means for actions rendered individual superior and fairness. obtaining efficiency v. that Arthur in the asserts appeal
SEECO now present actions caselaw on class our changed essentially Zearley, supra, a class of with certification of we renounced the plaintiffs because certification to resolve claims as individual opposed upholding in the until later individual issues issues and deferring with that characterization Zearley We disagree proceeding. hand course in the case at is single What is decision. alleged directed at conduct appellants fraudulent perpetrated facts owners, on the same each depending plaintiff fraudulent issue of a for recovery. legal arguments case and a common starting point is central to instant scheme had no com- Arthur v. for all classmembers. Zearley, supra,simply issues of issue, in that case that individual and we mon recognized claims of the essence of the and causation were informed consent each separate plaintiff. issues that of their argument support SEECO, AWG, to the fact and Southwestern point
predominate,
a fraud
seek
based on
theory
that the
recovery
are cor
reliance
each
plaintiff.
appellants
proof
requires
fraud,
reliance must
actual
evidence
justifiable
rect that to prove
Ark.
948
Firm,
Law
P.A. v.
329
Sexton
Milligan,
be offered.
Parkerson,
131, 936
327 Ark.
v.
Calandro
(1997);
S.W.2d
Ark.
914 S.W.2d
v.
Clark
(1997);
Ridgeway,
S.W.2d
law,
Moreover,
never
fraud is
under Arkansas
pre
745 its
sumed,
must exist
and convincing testimony
prove
and clear
First Nat’l
elements. Nicholson Simmons
Corp.,
Houser,
Serv., Inc. v.
Interstate
483 (1993);
Freeway
849 S.W.2d
vein,
In the same
872 (1992).
appellants
Ark.
the assertion
are individual issues with
that there
respect
assert
*10
concealment,
of fraudulent
particularly surrounding
require-
ment that
exercise reasonable
to dis-
diligence
Cabot,
cover
fraudulent concealment.
Milam v. Bank
See
any
Baker,
327 Ark.
cealment, causation, or rehance have usually been rejected and will not bar satisfaction because predominance those recover, issues right to the a class go member contrast common issues underlying of the defendant’s liability. Newberg 4.26, Herbert B. Newberg, at on Class Actions § 4-104 (3d ed. 1992).
Other courts have reached the same conclusion in common-
law fraud claims
the reliance
See,
Walco
despite
requirement.
e.g.,
Thenen,
Investments,Inc. v.
common-law fraud
holding
individual
reliance would create significant
no indication that
were
in a
contained
because the alleged misrepresentations
issues
see,
all
But
members).
uniform to
class
Kelley
statement
e.g.,
proxy
Stables, Inc.,
405 (W.D.
139 F.R.D.
Okl.
v. Mid-AmericaRacing
fraud claim
certification
common-law
1990)
pendent
(denying
action;
member
the
a securities
stating
in
every
proposed
the
as to
reliance on
would have to
his
testify
prospectus).
to
contention of lack of reasonable diligence
As
appellants’
concealment,
view
fraudulent
discovering
majority
appears
this
not
as a bar to
finding
be that
does
predomi-
operate
lapse
See,
Indus.
Anti-
in the
issue.
In Re
Diamonds
nance
e.g.,
374
(S.D.
1996);
167 F.R.D.
N.Y.
Re
trust Litigation,
Catfish
F.
Miss.
Town
(N.D.
1993);
Antitrust
1019
Litigation,
Supp.
Co.,
v.
We hold that fact although raised these chal bemay diligence arguments by appellants, the alle will not override the common relating lenges question of a scheme overarching gation perpetrated appellants. in the resolution of this issue which must be starting point scheme. There was matter relates to the existence the alleged no abuse discretion trial court. raise a also constitutionality challenge
Appellants under Article of the Arkansas of bifurcated trials section assert that a bifurcated could Constitution. They procedure their if the matter with one began infringe upon jury-trial right, but with a common issues concluded second deciding jury jury at issues. We do not know this determining juncture Thus, use whether trial court will juries. any multiple opinion See, on the in nature. Baker Car & advisory subject e.g., Rental, Rock, Little Truck 325 Ark. Inc. City of decline to this issue. We address II. Superiority further that a class action be Rule 23(b) requires supe methods rior to other available for the fair efficient adjudica- noted, tion of the As this court has held controversy. repeatedly common, that real can be had if efficiency predominating ques- decided, tions of law fact are first with cases then splintering issues, See, the trial of individual if Farm Bureau necessary. e.g., Holders, Mutual Ins. Co. v. Farm Bureau Policy S.W.2d 129 Summonsv. (1996); R.R., Lemarco, MissouriPac. supra; *12 Wood, Inc. v. Elec., International Union Radio & supra; Mach. Hudson, Workersv. supra.
Moreover, to in what we said in Lemarco, repeat part Wood, Inc. v. a class action is fair to both sides. The supra, appel lants can evidence of fair with the present owners dealing on this core issue. may can also prevail individ They present ual defenses should this subsequendy, This prove necessary. is fair to the procedure because to sue as individuals not be may feasible. We hold economically that a class action is method for this superior adjudicating controversy. Again, there was no abuse of discretion the trial court in class.
Affirmed.
Thornton, J., dissents. Ray Thornton, Justice, dissenting. reverse I I because do not find that either the trial court’s order or the rec-
ord reflects the that I type rigorous believe is analysis required under Rule 23 to determine the reasons the common why ques- tions over the individual predominate a class why action is to other methods of superior the issues. There- trying fore, I dissent for the respectfully reasons stated in the dissenting & Health opinion Ins. Co. Mega v. Jacola, Life S.W.2d 898 (1997).