EnCana Oil & Gas (USA), Inc. v. Miller

2017 COA 112, 405 P.3d 488, 2017 WL 3431822, 2017 Colo. App. LEXIS 1009
CourtColorado Court of Appeals
DecidedAugust 10, 2017
DocketCourt of Appeals 16CA1979
StatusPublished
Cited by167 cases

This text of 2017 COA 112 (EnCana Oil & Gas (USA), Inc. v. Miller) is published on Counsel Stack Legal Research, covering Colorado Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
EnCana Oil & Gas (USA), Inc. v. Miller, 2017 COA 112, 405 P.3d 488, 2017 WL 3431822, 2017 Colo. App. LEXIS 1009 (Colo. Ct. App. 2017).

Opinion

Opinion by

JUDGE FOX

¶ 1 A certified class of Colorado oil and gas royalty owners (the Class) and EnCana Oil & Gas (USA), Inc. (EnCana), were involved in litigation beginning in 2005 over EnCana’s alleged underpayment of royalties on natural gas it produced. In 2008, EnCana and the Class entered into a settlement agreement that detailed the payment of funds to settle past claims, established the methodology En-Cana would use for future royalty payments, and included an arbitration clause. The district court’s final judgment approved and incorporated the settlement agreement, dismissed the 2005 case- with prejudice, and reserved jurisdiction to enforce the agreement. In 2016, Colorado oil and gas royalty owners Sally Miller; Barclay Farms, LLC; Joan Elaine Brehón; David and Joyce Furlong, as Co-Trustees for the Janette Foote Estate; Niles Miller; White River Royalties, LLC; Whitney Brace, as Trustee for the T.E. McClintldck Trust; and Helen Nelson, as Trustee of the Edwin Miller Trust (collectively Owners), purporting to act on behalf of the Class, filed a demand for arbitration alleging that EnCana had underpaid royalties owed to members of the Class in violation of the 2008 settlement agreement. EnCana quickly filed a new case in district court asserting that (1) the Class ceased to exist when the 2005 case was dismissed with prejudice in 2008 and (2) the 2008 settlement agreement did not authorize arbitration on a class-wide basis. In September 2016, the district court issued an order finding that the Class had not ceased to exist, deciding that the claims between EnCana and the Class should be resolved in class-wide arbitration, and entering summary judgment against EnCana. EnCana now appeals the district court’s September 2016 order. We affirm.

I. Background

¶ 2 In the 2005 case, Miller v. EnCana Oil & Gas (USA) Inc., No. 05CV2753 (City & Cty. of Denver Dist. Ct. Aug. 26, 2008), the then putative Class sued EnCana over EnCa-na’s alleged underpayment of royalties for natural gas produced in Colorado. The Class sought damages and declaratory relief to determine the proper method for calculating future royalty payments where the Class members’ royalty agreements were silent as to the deduction of post-production costs from royalty payments. In 2006, after briefing and a two-day evidentiary hearing, the district court certified the Class pursuant to C.R.C.P. 23(b)(3). Notice of the certification was mailed to approximately 6000 Class members and about 150 members opted out of the Class.

¶ 3 In 2008, EnCana and the Class entered into a settlement agreement stating that En-Cana’s payment of $40,000,000 to the Class resolved all disputes concerning natural gas production through December 31, 2008. En-Cana and the Class further agreed on a royalty payment methodology for natural gas production on or after January 1, 2009, allocating post-production costs based on the location of the well(s) processing the gas. 1 The agreement contains the following arbitration'clause:

In the' event of a dispute over EnCana’s payment of royalty under [the methodology for calculating royalties on gas produced on or after January 1, 2009], such dispute will be resolved in an arbitration administered by the Judicial Arbiter Group (“JAG”), with the Honorable Richard W. Dana as Arbitrator. The arbitration will be conducted in accordance with the rules (but not under the administrative auspices) of the American Arbitration Association [AAA] then in effect. If Judge Dana is unable to serve as Arbitrator, the Arbitrator will be designated by JAG from among its panel of Arbitrators. If JAG no longer exists, the Parties will attempt to agree on an arbitrator, and if unable to do so, arbitration will be conducted under the rules of the [AAA] then existing.

As relevant here, the agreement (1) defines “Parties” as “Plaintiffs, Class Members and *492 EnCana, each of whom individually may be referred to as a ‘Party’ (2) adopts Colorado law; (3) provides that it runs with the land; and (4) states that it is binding upon “EnCa-na and the Class Members and their respective .., successors and assigns, with respect to both the current interests owned by En-Cana- and Class Members and, any additional interest that either EnCana or Class Member's acquire under the Royalty Agreements.” 2

¶ 4 The district court preliminarily approved the settlement agreement, and a notice of the proposed settlement was mailed-to the Class members informing them of the settlement terms and their right to object. Based upon the evidence adduced, at the class fairness hearing, the district court approved the settlement as being “fair, reasonable, bona fide and adequate to the Settlement Class.” The district court then entered a final judgment approving the settlement agreement .“between EnCana and [the] Class[,] except for those persons and entities [opting] out of the class,” and dismissing the case with prejudice. The judgment states that “[flor production of Natural Gas ,.. occurring from the Leases on and after January 1, 2009 and continuing for the respective lives of the Leases, EnCana (and its successors) shall calculate and pay Class Members (and their successors) royalties as set forth in the Agreement,” consistent with the methodology and subclasses laid out in section 10 of the agreement. The district court’s judgment expressly ' ,

reserves jurisdiction, without affecting the finality of this Final Judgment, over (a) implementing, administering and enforcing this Settlement and any award or distribution from the Settlement Funds; (b) disposition of the Settlement Funds; and (c) other matters related or ancillary to the foregoing.

The judgment incorporates the settlement agreement, specifying that the judgment and the settlement agreement “are to be construed .together as one Settlement between the Parties.” . r

1 5 In 2016, Owners, on behalf of the Class, filed a demand for class arbitration with JAG, alleging that EnCana violated the settlement agreement by underpaying royalties on natural gas produced since January 1, 2009. EnCana responded by suing Owners, in City and County of Denver District Court case 16CV31444, for declaratory relief. In a later motion, EnCana claimed that the settlement agreement did not authorize arbitration on a class-wide basis and requestéd that the district court decide the issue and stay arbitration. Responding to EnCana’s motion, Owners' did not oppose EnCana’s request that the courtj not the arbitrator, decide whether their agreement authorized class arbitration. The district court stayed arbitration until it resolved the disputed question.

¶ 6 Owners next moved for summary judgment on the issue of class arbitration, and EnCana'later filed (1) a CÍR.C.P. 56(h) motion asking the district court to.decide that the Class ceased to exist after the 2008 dismissal with prejudice and (2) a cross-motion for summary judgment on the class arbitration issue. In September 2016, the district court issued an order finding that the Class had not ceased to exist and entering summary judgment in favor of Owners, deciding that the claims between EnCana and the Class should be resolved in class-wide arbitration.

¶ 7 EnCana now appeals the September 2016 order.

II, The Class May Enforce the Settlement Agreement

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Cite This Page — Counsel Stack

Bluebook (online)
2017 COA 112, 405 P.3d 488, 2017 WL 3431822, 2017 Colo. App. LEXIS 1009, Counsel Stack Legal Research, https://law.counselstack.com/opinion/encana-oil-gas-usa-inc-v-miller-coloctapp-2017.