District court partially grants class certification in royalty deduction dispute

On September 16, 2013, a magistrate judge the United States Court for the Western District of Pennsylvania vacated a report and recommendation issued on August 5, 2013, that denied landowners class certification in a dispute arising from royalty deductions by a well operator. Pollock v. Energy Corp. of America, 2013 WL 5338009 (Sept. 16, 2013). The landowner’s argued that ECA deducted royalty payments not permitted under the leases, i.e. charges for interstate pipeline services, marketing costs, and deductions for fuel use to compress extracted gas.

In vacating its earlier recommendation, the court granted the motion to certify classes in part and denied it in part. The court recommended certification of two of the three subclasses defined by the landowners.

First, the court recommended certification of all Pennsylvania lessors holding an oil and gas lease with ECA for which interstate pipeline service charges were deducted prior to March 26, 2012. The court explained that the group was sufficiently numerous because the circumstantial evidence showed more than forty person were affected; the members claims were sufficiently common because the improper deduction of interstate pipeline charges could be shown by common evidence; the claim was typical between the class members; that predominance was satisfied because the common issues could be satisfied by common proof; and that the class was the superior method for adjudicating the dispute.

Second, the court recommended certification of all Pennsylvania lessors holding an oil and gas lease with ECA for which marketing fees were deducted from royalties prior to March 26, 2012. The court explained that the group was sufficiently numerous; the claims are common and typical of the class because the arguments for commonality and typicality mirror those made for the first subclass;  and the claims for deduction of marketing fees satisfy predominance and superiority because the arguments raised by both parties mirror those for subclass one.

The court, however, recommended denying class certification of all Pennsylvania lessors holding an oil and gas lease with ECA for which ECA failed to pay a royalty on gas used as plant fuel off the leased premises. The court explained, while the class was sufficiently numerous, the proof required to prove claims was not common and the factual circumstances of each plaintiff were not typical because the proof required to satisfy the claim and the factual circumstances surrounding each plaintiff were “individual” to each member of the class.

On September, 30, 2013 the United States District Court for the Western District of Pennsylvania adopted the report and recommendation and granted class certification to the first two sub-classes, while denying it to the third. Pollock v. Energy Corp. of America, 2013 WL 5491736 (Sept. 30, 2013). The district court judge found that neither party’s objections to the magistrate’s report and recommendation were sustainable, and therefore adopted it.

Written by: Garrett Lent, Research Assistant

Agricultural Law Resource and Reference Center

October 2013