Oil & Gas Company Answers Class Action Petition for Seismic Damage Claims in Oklahoma

On September 21, 2015, New Dominion LLC filed an answer to the class action petition brought by Jennifer Lin Cooper, an Oklahoma resident, against the company.

On February 10, 2015, Jennifer Lin Copper filed a lawsuit against New Dominion LLC and Spess Oil Company operating disposal wells in Lincoln County along with 25 unnamed companies. They sought class action status to include people in Lincoln County and eight surrounding counties claiming property and market loss damages due to recent earthquake activities. Their claims emphasized the connection between wastewater disposal wells and seismic activity.

In its answer and counterclaim, New Dominion LLC alleged that [w]ithout knowing the identity of the John Doe Defendants, [they are] unable to respond to allegations concerning their operations.”

Further information on this case is available at docket no. CJ-2015-0024 in the Lincoln County District Court.

Written by Chloe Marie - Research Fellow

09/25/2015

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

Chesapeake Energy Agrees to Settle Royalty Class Action Lawsuit for $7.5 Million

Chesapeake Energy agreed to settle a class action lawsuit that alleged that Chesapeake breached its contracts with leaseholders and its implied duty to pay the proper royalty amount to leaseholders. The Plaintiffs, Pennsylvania leaseholders with leases containing "Market Enhancement Clauses," had alleged that Chesapeake improperly deducted "post-wellhead" costs from their royalty payments and that the gas was sold in an "unmarketable condition" to Chesapeake's affiliates and third parties, which breached Chesapeake's duty to sell the gas at the higher "marketable condition" rate and reduced the Plaintiff's royalty.  Chesapeake denied all of the allegations.  While U.S. District Court Judge Malachy Mannion must approve of the settlement before it takes effect, Governor Tom Corbett issued a statement on September 4, 2013, stating that he was "pleased with the proposed settlement" and that the "settlement is a significant step forward in protecting the interests of Pennsylvania landowners."

For more information on this settlement and Governor Corbett's statement, see: https://stateimpact.npr.org/pennsylvania/2013/09/03/chesapeake-energy-agrees-to-pay-7-5-million-to-settle-royalty-lawsuit/

The Plaintiff's complaint and Chesapeake's answer may be found at the U.S. District Court for the Middle District of Pennsylvania, Docket No.: 3:13-cv-02289-MEM

Tom Panighetti

September 6, 2013

Third Circuit upholds motion to remand class action lease dispute: applies “local controversy” exception

On August 16, 2013, the Third Circuit Court of Appeals upheld the United States District Court for the Western District of Pennsylvania’s order to remand a class action lease dispute to the Mercer County Court of Common Pleas. While the Third Circuit upheld the District Court’s decision to remand the action, it overturned the application of the “home state exception” to CAFA’s federal jurisdiction provision, and instead applied the “local controversy exception.” Vodenichar v. Halcon Energy Properties, Inc., 2013 WL 4268840 (3^rd Cir. Aug. 16, 2013).

The action before the Third Circuit arose from a dispute between various landowners in Mercer County, who had hired agents to negotiate oil and gas leases on their behalf with Halcon Energy. According to the record, the landowners argued that “Halcon agreed to accept the leases absent a title defect, an adverse environmental claim, or restrictions on the ability to explore, drill for or produce oil, gas, or hydrocarbons.” The well operator, Halcon, however, argued that “geology” language in the recession provision was fraudulently omitted by the agents acting on behalf of the landowners.

After the landowners filed a putative class action against Halcon alleging breach of the lease and the duty of fair dealing, Halcon informed the landowners and the District Court it intended to join the landowner’s agents. The landowners voluntarily filed a motion to dismiss this action (the first action) without prejudice, and decided to file direct claims against both the agents and Halcon in the state court (the second action). The District Court granted these motions, and ordered the parties to continue current alternative dispute resolution and maintain discovery. The landowners filed suit in the Mercer County Court of Common Pleas, and Halcon removed the second action to the District Court for the Western District of Pennsylvania. Landowners filed for a motion to remand under CAFA’s “home state” and “local controversy” exceptions. The District Court granted the motion for the “home state exception.” It, however, denied the motion for the “local controversy exception” because it does not apply where “other class actions” have been pursued in a three year period. Halcon appealed.

The Third Circuit held that the “home state exception” did not apply in this case because Halcon, which is not a Pennsylvania citizen, was a primary defendant. The court found Halcon to be a primary defendant because the landowner’s sought equally apportioned and direct liability from all the Defendants, including Halcon. The Third Circuit also held that the “local controversy exception” did apply because the second action was not a separate action, but rather a continuation of the first action brought by the plaintiffs. The court explained that “no other action” was brought by the second complaint because the complaints from the two actions were nearly identical, and the District Court maintained ADR and discovery between the parties. These directives from the District Court signaled the second action was simply a continuation of the first, rather than an independent “other action.” Therefore, the landowner’s motion to remand was granted under the “local controversy exception” of CAFA.

Written by: Garrett Lent, Research Assistant

Agricultural Law Resource and Reference Center

August 2013

District Court recommends landowners be denied class certification

On August 5, 2013, the United States District Court for the Western District of Pennsylvania published a report and recommendation to deny a landowner group’s class certification. Pollock v. ECA, WL 4015777 (W.D. Pa. Aug. 5, 2013). The landowner plaintiffs were party to oil and gas leases with ECA. According to the Plaintiffs’ claims ECA deducted amounts from the royalty payments that were not permitted under the leases. The plaintiffs’ argued that deducting charges for interstate pipeline services and deduction of charges for marketing costs prior to March 26, 2012, and deductions for fuel used to compress the extracted gas.

The plaintiff landowners came to the court to seek class certification to begin a class action suit against ECA. The court recommended class certification be denied because the landowner Plaintiffs failed to demonstrate: a) that the class was numerous; b) that the claims against ECA were common to the class; and c) that the Plaintiffs are typical of the class. 

The court explained that the landowners merely pointing to the number of lessors with ECA in Department of Environmental Protection data was not sufficient to demonstrate numerosity because they offered no evidence that the leases involved contained language consistent with alleged improper deductions. Further, the court explained that the claims were not common to the class because differing royalty clauses would require “an individualized inquiry into the duties and obligations” of the leases. Finally, the court explained the Plaintiffs did not demonstrate they were typical of the class because their litigation did not advance the class interests as a whole. Therefore, the court recommended the class certification be denied.

Written by: Garrett Lent, Research Assistant

Agricultural Law Resource and Reference Center

August 2013

Cherry Canyon files class action suit against hydraulic fracturing equipment suppliers

On July 31, 2013, amidst the DOJ anti-trust investigation of pressure pumping and oil field equipment suppliers, Halliburton, Schlumberger and Baker Hughes, Cherry Canyon Resources, a pressure pumping equipment purchaser, initiated a class action lawsuit against the suppliers under the Sherman Anti-Trust Act. Cherry Canyon filed its complaint in the United States District Court for the Southern District of Texas. Among the allegations, Cherry Canyon claims that the Defendant suppliers “shared a conscious commitment to a common scheme designed to achieve the unlawful objective of artificially fixing, raising, pegging, maintaining, and stabilizing the price and output of Fracking Pressure Pumping Services” in the United States from May 2011 to the present. According to the complaint and news sources, the Defendants, collectively, control over 60% of the market for pressure pumping services in North America.

For more information on the suit, the complaint can be retrieved from pacer.gov, searching under the United States District Court for the Southern District of Texas, 2:13-cv-00238.

Written by: Garrett Lent, Research Assistant

Agricultural Law Resource and Reference Center

August 2013