DocketNumber: No. 07-1266-EFM
Citation Numbers: 271 F.R.D. 253, 182 Oil & Gas Rep. 17, 2010 U.S. Dist. LEXIS 78352, 2010 WL 3023957
Judges: Melgren
Filed Date: 8/2/2010
Status: Precedential
Modified Date: 10/19/2024
MEMORANDUM AND ORDER
Plaintiff Gene R. Eatinger, on behalf of himself and other royalty owners of wells located in Kansas, brings claims against Defendant BP America Production Company (“BP”) for underpayment or non-payment of royalties on natural gas and/or constituents of the gas stream produced from Kansas wells leased by BP. From Plaintiffs’ Amended Complaint, they claim that they are the beneficiaries of an implied covenant with BP through which BP is obligated to place the gas extracted from their wells, along with all constituent parts, in marketable condition at no cost to Plaintiffs. Contrary to this implied covenant, Plaintiffs claim that BP deducted from their royalty payments or otherwise charged them for placing the gas and constituent parts in marketable condition. In addition, Plaintiffs claim BP paid them a lower starting price than it received in arms-length sales transactions, and further claim that BP made no payments at all for gas constituents such as condensate, nitrogen, and helium. Plaintiffs also allege that BP made misleading and fraudulent representations regarding methods of calculation and forms of payment. BP moved for summary judgment as to claims advanced by the prospective plaintiff class covered by previously-settled class actions in Kansas,
On July 27, 2010, Plaintiffs Motion for Certification came before the Court for hearing. For the following reasons, the Court grants Plaintiffs’ motion.
A. MOTION TO CERTIFY CLASS
I. Standard
Whether to certify a class is committed to the broad discretion of the trial court.
As the parties seeking class certification, Plaintiffs have the burden to demonstrate “under a strict burden of proof’ that the requirements of Rule 23 are clearly satisfied.
In this ease, Plaintiffs seek to proceed under Rule 23(b)(3), which requires that “questions of law or fact common to the members of the class predominate over any questions affecting individual members” and that a class action “is superior to other available methods for the fair and efficient adjudication of the controversy.”
II. DISCUSSION
a. Class Definition
In determining whether to certify a class, the Court first addresses the proposed class definition. “Defining the class is of critical importance because it identifies the persons (1) entitled to relief, (2) bound by a final judgment, and (3) entitled under Rule 23(c)(2) to the “best notice practicable” in a Rule 23(b)(3) action.”
Plaintiffs seek class certification of the following class:
*257 All royalty owners of BP America Production Company (and its predecessors and successors) from wells located in Kansas that have produced gas and/or gas constituents (such as residue gas or methane, natural gas liquids, helium, nitrogen, or condensate) from September 9,1990 to the date of class notice and whose gas was processed at BP’s Jayhawk Processing Plant (or previously was gathered over the A, B, or C gathering lines that were historically operated by Williams).
Excluded from the Class are: (1) the Mineral Management Service (Indian tribes and the United States); and (2) Defendant, its affiliates, predecessors, and employees, officers and directors.14
All royalty owners of BP America Production Company (and its predecessors and successors) from wells located in Kansas that have produced gas and/or gas constituents (such as residue gas or methane, natural gas liquids, helium, nitrogen, or condensate) on or after August 1, 2004 to the date of Class Notice and whose gas was processed at BP’s Jayhawk Processing plant.
Excluded from the Class are: (1) the Mineral Management Service (Indian tribes and the United States); (2) Defendant, its affiliates, predecessors, and employees, officers and directors; and (3) any claims for Gathering Charges.15
The Court, therefore, finds that the proposed class definition, as modified, is sufficiently defined so as to allow potential class members to be identified.
b. Rule 23(a) Requirements
1. Numerosity
To satisfy the numerosity requirement of Rule 23(a)(1), Plaintiffs must establish that the class is so numerous so as to make joinder impracticable.
Plaintiffs compare the putative class in this case to the class certified in Youngren v. Amoco Production Co.,
2. Commonality
Rule 23(a)(2) requires Plaintiffs to show that “questions of law or fact are common to the class,”
Plaintiffs have identified a number of issues of law or fact they claim are common to all putative class members, including: (1) whether BP properly deducts a share of the “Conservation Fee” imposed on “operators” from royalty owners; (2) whether the royalty price used to pay royalties on helium should be the “crude helium” price or a “Grade A helium” price; (3) when helium is in marketable condition; (4) whether BP is required to pay royalties on condensate or “slop oil”; (5) whether BP is required to pay royalties on liquid nitrogen; (6) whether BP is entitled to deduct a NGL transportation, fractional, or marketing fee paid to a BP affiliate; (7) when NGL’s are in marketable condition; (8) whether BP is required to pay royalties^on 100% of the NGL’s or only on 65% as it has been doing; (9) whether BP is required to pay royalties on 100% of helium or only on 20% as it has been doing; (10) whether BP is entitled to take any deductions before the gas and its constituents are in marketable condition; (11) even assuming that some deductions for extraction of helium and NGL’s were proper, whether the amounts taken by BP are excessive or unreasonable; (12) whether BP improperly reduces royalties by including sales to an affiliate names BP Canada in the WASP calculation; (13) whether the raw gas is marketable at the well prior to conditioning; (14) the interest rate owed by BP as a result of any failure to property compute and timely pay royalties; and (15) whether BP owes royalty on the helium payment it received from Praxair in January 2009.
In its Response, BP asserts that Plaintiffs have not, and in fact cannot, meet the commonality requirement because they are unable to account for the impact of the prior Youngren settlement on the certification request. BP argues the representative plaintiff, Eatinger, lacks commonality with the putative class he claims to represent because, as a class member of the Youngren settlement, he released any claims that occurred prior to August 2004, including future claims relating to gathering charges. BP contends that as a result, Eatinger cannot be typical of or share a common interest with the putative class, which purports to claim injury as far back as September 9, 1990. Thus, BP argues class certification fails on this basis.
BP’s arguments concerning this element are unpersuasive. Here, whether BP either failed to pay or underpaid royalties is an issue that underlies every claim. These claims are common not only to the representative Plaintiff, but also to the putative class members. Because Eatinger was a class member of Youngren, certain of his claims that occurred prior to August 2004 are barred by that settlement; however, his claims occurring from August 2004 to present remain viable. The same holds true for members of the putative class who were also members of the Youngren class. Thus, the Court finds that Plaintiffs have satisfied the commonality requirement.
3. Typicality
Rule 23(a)(3) requires that the representative plaintiff possess the same interests and suffer the same injuries as the proposed class members.
Similar to commonality, typicality results directly from the nature of a plaintiffs claims. Eatinger asserts his claims are typical of the class members’ claims because BP treats all royalty owners the same and uses the same methodology for calculating royalty payments. Eatinger argues that the nature of the claims in this action would be the same if brought multiple times by various class members or once in a class action, and therefore, typicality is satisfied.
In response, BP argues against typicality by asserting the same arguments it presented with respect to commonality. BP’s assertions, however, do not defeat a finding of typicality under Rule 23(a)(3). Here, Eating-er’s and the putative class members’ claims are based on the same legal theories and arise from the same pattern of conduct by BP. They allege injury on account of BP’s underpayment or failure to pay royalties. Thus, the Court finds that Eatinger has met the typicality requirement.
4. adequacy of representation
Pursuant to Rule 23(a)(4), a representative plaintiff must show that he will fairly and adequately protect the interests of the class.
Eatinger asserts that he has no interests antagonistic to the class, and accordingly, he is an adequate class representative. BP made no argument to the contrary in its Response. Therefore, the Court has no reason to doubt that Eatinger will adequately and fairly represent and protect the interests of all members of the putative class.
c. Rule 23(b)(3) Requirements
In addition to meeting the requirements of Rule 23(a), Plaintiff must satisfy the requirements of one of three qualifying tests under Rule 23(b) to determine whether a class action may be maintained. Here, Plaintiff seeks to certify the class under Rule 23(b)(3). Rule 23(b)(3) addresses situations where “class action treatment is not as clearly called for as it is in Rule 23(b)(1) and (b)(2) situation, [but] may nevertheless be convenient and desirable.”
Rule 23(b)(3) provides that a class action may be maintained if the Court finds that the Rule 23(a) prerequisites have been met, and that the “questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.”
(A) the class members’ interests in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already begun by or against class members; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and (D) the likely difficulties in managing a class action.37
1. Predominance Requirement
Plaintiff argues that BP’s liability to the class will be proven through common evidence, and that the evidence will not vary between members of the class. Plaintiff also asserts that the case challenges the methods and formulas BP uses in calculating royalty payments, along with its failure to pay royalties at all on certain items, and does not turn on individual issues. Plaintiff also argues that the predominance prong is satisfied because production of the royalty owners is processed at BP’s Jayhawk plant, with royalties calculated and paid using the same formulas. Plaintiff contends that the arguments relating to royalty calculations and payments are identical for all class members, and claims that once the proper method is determined, royalties for each class member can be calculated using data already in BP’s possession. BP fails to address predominance under Rule 23(b)(3) in its Response.
After reviewing the record, the Court finds that common questions in this case predominate over individual questions as to each royalty owner. The predominance requirement is met if there is a common nucleus of operative facts relevant to the dispute and those common questions represent a significant aspect of the case which can be resolved for all members of the class in a single adjudication.
2. Superiority Requirement
Plaintiff asserts that a class action is the superior method for resolving these claims and that there is no other available method for handling the litigation. Plaintiff argues that because there are potentially thousands of royalty owners, litigating their claims in a class action is preferable over raising those claims in individual actions. Moreover, Plaintiff argues that because of the small size of any individual royalty owner’s claim, absent bringing a class action, the claims would never be adjudicated due to the disproportionate wealth of the parties. BP does not address the superiority requirement under Rule 23(b)(3).
In this ease, the alternative to a class action would be for members of the class to individually bring suit to adjudicate their claims. This obviously would create unnecessary duplicative litigation, which would be
d. Conclusion
Based on the foregoing, the Court concludes that Plaintiffs proposed class satisfies the requirements of Rule 23. Accordingly, the class will be certified with respect to all of Plaintiffs’ claims.
III. Appointment of Counsel
An order certifying a class must also appoint class counsel that will adequately represent the interests of the class.
Plaintiff is presently represented by the law firm of Gunderson Sharp & Walke, LLP (“Gunderson Sharp”), with offices located in Kansas, Iowa, and Texas. BP does not oppose Gunderson Sharp as class counsel for this action. After reviewing the record, the Court is satisfied that the law firm of Gunderson Sharp meets the criteria of Rule 23(g) and will adequately represent the interests of the class as counsel. Gunderson Sharp has participated in this action since its inception and has prepared and filed all briefing on behalf of Plaintiff. Gunderson Sharp has also participated in numerous depositions with regard to class certification in this case and has conducted all discussions with opposing counsel. Gunderson Sharp also has previously been appointed as class counsel in this Court in an unrelated case. Accordingly, the Court is confident Gunderson Sharp is qualified to represent the plaintiff class in this lawsuit. Thus, this firm is appointed as counsel for this action.
IV. Notice
Under Rule 23(c)(2)(B), when a court certifies a class under Rule 23(b)(3), the Court “must direct to class members the best notice that is practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort.”
B. MOTION TO SEVER
Plaintiffs also moves the Court, pursuant to Fed.R.Civ.P. 54(b), to issue final judgment on claims occurring prior to August 1, 2004 that were barred by the Court’s May 1, 2010 Order on BP’s Motion for Summary Judgment. Plaintiffs argue that conflicting authority exists concerning the manner in which the record must reflect a prior court’s findings on class certification and settlement factors. Plaintiffs claim that this issue is a purely a matter of law, that there is no just cause to delay, and that no judicial savings by waiting would be realized.
BP opposes severing, arguing that Plaintiffs do not seek to sever a claim, but instead, seeks to sever the time period of all claims
A court’s certification under Rule 54(b) is only appropriate when the order that it is certifying is a final order, and when there is “no just reason to delay review of the final order until it has conclusively ruled on all claims presented by the parties to the case.”
IT IS THEREFORE ORDERED that Plaintiffs’ Motion to Certify Class (Doc. 129) is hereby GRANTED.
IT IS FURTHER ORDERED that the Court appoints as class counsel the law firm of Gunderson Sharp & Walke, LLP.
IT IS FURTHER ORDERED that on or before September 3, 2010, Defendant BP shall provide Plaintiffs’ counsel with the names, addresses, and if possible, telephone numbers for all royalty owners who are potential members of the class.
IT IS FURTHER ORDERED that on or before September 3, 2010, Plaintiffs shall provide the Court for approval an order regarding notice that complies with the requirements of Fed.R.Civ.P. 23(c).
IT IS FURTHER ORDERED that Plaintiffs’ Motion to Sever (Doc. 150) is hereby DENIED.
IT IS SO ORDERED.
. Plaintiffs initially alleged claims concerning wells in Kansas, Colorado, and Wyoming, and BP’s summary judgment motion argued that, in addition to the prior Kansas class action settlements, Plaintiffs’ Colorado and Wyoming claims were similarly barred based on class action settlements and releases in those states. The parties, however, have stipulated to amending the class definition to include only those claims concerning Kansas wells.
. In the May 6, 2010 Order, the Court barred claims that occurred prior to May 1, 2006 pursuant to the Smith Settlement and release. Plaintiff subsequently moved for reconsideration, which the Court granted and modified its Order so as to bar Plaintiffs claims tire occurred prior to August 1, 2004 pursuant to the settlement and release of Youngren.
. See Shook v. El Paso County, 386 F.3d 963, 967 (10th Cir.2004).
. Sibley v. Sprint Nextel Corp., et al., 254 F.R.D. 662, 670 (D.Kan.2008) (citing Esplin v. Hirschi, 402 F.2d 94, 99 (10th Cir.1968); Clark v. State Farm Mut. Ins. Co., 245 F.R.D. 478, 481 (D.Colo.2007); Heartland Commc’ns, Inc. v. Sprint Corp., 161 F.R.D. 111, 115 (D.Kan.1995)); see also Fed. R. Civ.P. 23(c)(1)(C) (”[a]n order that grants or denies class certification may be altered or amended before final judgment.’’).
. Gen. Tel. Co. v. Falcon, 457 U.S. 147, 155, 102 S. Ct. 2364, 72 L.Ed.2d 740 (1982); see Nat’l Union Fire Ins. Co. v. Midland Bancor, Inc., 158 F.R.D. 681, 685 (D.Kan.1994).
. Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 177, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974); see Adamson v. Bowen, 855 F.2d 668, 676 (10th Cir.1988); Anderson v. City Of Albuquerque, 690 F.2d 796, 799 (10th Cir.1982).
. Shook, 543 F.3d at 612 (quoting Falcon, 457 U.S. at 160, 102 S.Ct. 2364 (no "impermeable wall” between merits and decision to certify class)); see also J.B. ex rel. Hart v. Valdez, 186 F.3d 1280, 1289 (10th Cir.1999) (Granting or denying class certification is a highly fact-intensive matter of practicality); Reed v. Bowen, 849 F.2d 1307, 1309 (10th Cir.1988) ("Whether a case should be allowed to proceed as a class action involves intensely practical considerations, most of which are purely factual or fact-intensive. Each case must be decided on its own facts, on the basis of 'practicalities and prudential considerations.’ ”) (citing United States Parole Comm’n v. Geraghty, 445 U.S. 388, 402-03, 406 n. 11, 100 S.Ct. 1202, 63 L.Ed.2d 479 (1980)).
. Shook, 543 F.3d at 612; see Eisen, 417 U.S. at 178, 94 S.Ct. 2140 (in determining propriety of a class action, the question is not whether plaintiffs state a cause of action or will prevail on merits, but whether the requirements of Rule 23 are met); Gariety v. Grant Thornton, LLP, 368 F.3d 356, 366 (4th Cir.2004) (court must address factors spelled out in Rule 23 through findings, even if they overlap with the issues on the merits).
. See Trevizo v. Adams, 455 F.3d 1155, 1162 (10th Cir.2006).
. Fed.R.Civ.P. 23(a).
. Fed.R.Civ.P. 23(b)(3).
. In re Urethane Antitrust Litig., 237 F.R.D. 440, 444 (D.Kan.2006) (citing Manual for Complex Litigation § 21.222, at 270 (4th ed.2005)).
. Id.
. Doc. 130, p. 10, 33-34 (Plaintiffs’ Memorandum on Class Certification).
. The term "Gathering Charges” means "all charges, expenses, or assessments, including fuel, associated with any and all activities occurring between the wellheads ... and the inlet to [BP]'s Jayhawk Plant in Grant County, Kansas, including, but not limited to, compression and dehydration, regardless of (1) whether such activities occurred on or off the leased premises, (2) what entity provided such services or how it is paid for, and (3) where or how title to the gas is transferred. Youngren v. Amoco (Youngren II Stipulation of Settlement, Section 1.9), Case No. 89-CV-22, Stevens County District Court, Kansas.
. During the July 27, 2010 hearing, based on the Court’s ruling on BP’s summary judgment motion, BP withdrew its objections and agreed that Plaintiff meets all Rule 23(a) requirements for class certification. Nonetheless, the Court will address in its analysis the objections initially raised by BP in its Response to the instant motion.
. Trevizo, 455 F.3d at 1162; Fed.R.Civ.P. 23(a)(1).
. See Rex v. Owens ex rel. State of Okla., 585 F.2d 432, 436 (10th Cir.1978).
. Id.
. No. 98 CV 22 (26th Judicial Dist., Stevens County, Kan. July 1, 2004).
. Fed.R.Civ.P. 23(a)(2).
. Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 156, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982).
. See Olenhouse v. Commodity Credit Corp., 136 F.R.D. 672, 679 (D.Kan.1991).
. Doc. 130, pp. 13-14 (Plaintiffs’ Motion for Class Certification).
. Fed.R.Civ.P. 23(a)(3); see also DG ex rel. Stricklin v. Devaughn, 594 F.3d 1188, 1198 (10th Cir.2010).
. See. Stricklin, 594 F.3d at 1198 (citing Anderson v. City of Albuquerque, 690 F.2d 796, 800 (10th Cir.1982)).
. Olenhouse, 136 F.R.D. at 680; see also Strick-lin, 594 F.3d at 1198-99 (“Provided the claims of Named Plaintiffs and class members are based on the same legal or remedial theory, differing fact situations of the class members do not defeat typicality.")
. See Fed.R.Civ.P. 23(a)(4).
. E. Tex. Motor Freight Sys., Inc., v. Rodriguez, 431 U.S. 395, 403, 97 S.Ct. 1891, 52 L.Ed.2d 453 (1977); Rutter & Wilbanks Corp. v. Shell Oil Co., 314 F.3d 1180, 1187-88 (10th Cir.2002).
. Valley Drug Co. v. Geneva Pharm., Inc., 350 F.3d 1181, 1189 (11th Cir.2003).
. See id.; Cf. Albertson's, Inc., v. Amalgamated Sugar Co., 503 F.2d 459, 464 (10th Cir.1974) (the fact that class members benefit unevenly will not generally preclude class certification).
. Valley Drug Co., 350 F.3d at 1189.
. During the July 27, 2010 Class Certification hearing, BP’s indicated for the record that, based on the Court’s summary judgment Order barring claims that occurred prior to August 1, 2010, its position is that Plaintiff satisfies all Rule 23(b)(3) requirements for class certification. As with the Rule 23(a) requirements, the Court will nevertheless conduct an analysis under Rule 23(b)(3).
. Amchem Prod., Inc., v. Windsor, 521 U.S. 591, 615, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997).
. Id.
. Fed.R.Civ.P. 23(b)(3); see also Amchem, 521 U.S. at 623, 117 S.Ct. 2231 (predominance requirement "tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation”); Monreal v. Potter, 367 F.3d 1224, 1237 (10th Cir.2004) (Rule 23(b)(3)’s requirement that common issues predominate is "far more demanding" than Rule 23(a)'s commonality requirement).
. Fed.R.Civ.P. 23(b)(3)(A)-(D).
. See Smith v. MCI Telecomm. Corp., 124 F.R.D. 665, 684 (D.Kan.1989); Joseph v. Gen. Motors Corp., 109 F.R.D. 635 (D.Colo.1986).
. See Smith, 124 F.R.D. at 677 (individualized damages claims are no barrier to class certification where computation is mechanical in nature).
. Fed.R.Civ.P. 23(c)(1)(B), (g)(1).
. Fed.R.Civ.P. 23(g)(1)(C).
. Fed.R.Civ.P. 23(c)(2)(B).
. Okla. Tpk. Auth. v. Bruner, 259 F.3d 1236, 1242 (10th Cir.2001) (citing Fed.R.Civ.P. 54(b); Curtiss-Wright Corp. v. Gen. Elec. Co., 446 U.S. 1, 8, 100 S.Ct. 1460, 64 L.Ed.2d 1 (1980)).
. Bruner, 259 F.3d at 1242 (citing Curtiss-Wright Corp. 446 U.S. at 7, 100 S.Ct. 1460) (internal quotations omitted).
. Id. (quoting Moore’s Federal Practice 3d § 202.06[2]).