Phillips Petroleum Company, Gpm Gas Corporation, Phillips Gas Marketing Company, Phillips Gas Company, and Gpm Gas Trading Company v. Royce Yarbrough

405 S.W.3d 70, 2013 WL 3119574
CourtTexas Supreme Court
DecidedJune 21, 2013
Docket12-0198, 12-0199
StatusPublished
Cited by13 cases

This text of 405 S.W.3d 70 (Phillips Petroleum Company, Gpm Gas Corporation, Phillips Gas Marketing Company, Phillips Gas Company, and Gpm Gas Trading Company v. Royce Yarbrough) is published on Counsel Stack Legal Research, covering Texas Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Phillips Petroleum Company, Gpm Gas Corporation, Phillips Gas Marketing Company, Phillips Gas Company, and Gpm Gas Trading Company v. Royce Yarbrough, 405 S.W.3d 70, 2013 WL 3119574 (Tex. 2013).

Opinion

*72 Justice LEHRMANN

delivered the opinion of the Court.

For the second time, we address issues of class certification in this action involving alleged underpayment of oil and gas royalties. In 2008, we reviewed the trial court’s certification of three subclasses of royalty owners, each asserting a single breach-of-lease claim. Bowden v. Phillips Petrol. Co., 247 S.W.Sd 690 (Tex.2008). After the court of appeals reversed the certification order as to all three subclasses, we affirmed in part and reversed and remanded in part on interlocutory appeal. Id. at 694. We affirmed as to the two subclasses that asserted claims for breach of the implied covenant to market. Id. at 702, 709. We reversed the decertification order as to the third subclass, which alleged breach of a uniform express royalty provision contained in gas royalty agreements (GRAs) that amended the class members’ leases. Id. at 708. We also directed the trial court to conduct a res judicata analysis in determining whether certification was appropriate under former Rule 42(b)(4) of the Texas Rules of Civil Procedure. 1 Id. at 698.

On remand, Respondent Royce Yar-brough, class representative of the remaining subclass of royalty owners, amended her petition to allege that Phillips Petroleum Company and its affiliates (collectively, Phillips) 2 breached the implied covenant to market, which in turn contributed to their underpayment of royalties under the GRAs. Phillips filed various motions seeking a ruling from the trial court that there was no class claim for breach of the implied covenant to market, arguing that a new certification motion and hearing were required to determine whether the claim was an appropriate class claim under Rule 42(b)(3). These motions were all denied.

Phillips filed both a notice of interlocutory appeal and a petition for writ of mandamus in the court of appeals. That court dismissed the interlocutory appeal for lack of jurisdiction and denied the petition for writ of mandamus. Phillips then filed both a petition for review and a petition for writ of mandamus in this Court. We hold that the court of appeals erred in dismissing the interlocutory appeal for lack of jurisdiction, that the trial court abused its discretion in allowing the addition of a class claim for breach of the implied covenant to market without requiring Yarbrough to file an amended motion for class certification or holding a certification hearing, and that the trial court abused its discretion in failing to conduct a rigorous analysis of res judicata in contravention of our mandate in Bowden. Accordingly, we reverse the court of appeals’ judgment and remand to the trial court for further proceedings consistent with this opinion.

I. Factual and Procedural Background

A. Pr^-Bowden Proceedings 3

This suit was filed as a putative class action on behalf of Texas royalty owners *73 alleging Phillips underpaid oil and gas royalties. In September 2000, the trial court signed its first certification order, certifying three subclasses of royalty owners. Bowden, 247 S.W.3d at 694. On interlocutory appeal, the court of appeals reversed and remanded. Id. at 695. The royalty owners filed an amended certification motion, and in June 2002, following a hearing, the trial court entered the certification order at issue in Bowden. Id. The trial court again certified three subclasses of royalty owners, each of whom asserted a single claim for relief. Id. Subclasses 1 and 3 asserted a claim for breach of the implied covenant to market, 4 while Subclass 2 (the GRA class) alleged Phillips breached uniform provisions in the GRAs governing the calculation of royalty payments. Id. at 695-96.

On interlocutory appeal, the court of appeals reversed the certification order as to all three subclasses, holding that individual issues of liability would predominate over common issues. Id. at 694. The court of appeals further held, with respect to all three subclasses, that “the certification order impermissibly split the class members’ causes of action,” resulting in the application of res judicata to bar all unasserted breach of contract claims. Id. at 696. The court concluded that the class representatives’ “willingness to abandon” all such unasserted claims rendered them per se inadequate to represent the class. Id. at 696-97.

B. Bowden Holdings

We issued our opinion in Bowden in February 2008, affirming the court of appeals’ decertification order in part and reversing in part. Addressing the res judi-cata issue first, we cited our intervening opinion in Citizens Insurance Co. v. Daccach, 217 S.W.3d 430 (Tex.2007), in which we held that class suits are “subject to the same preclusion rules as other procedural forms of litigation” and that class members are therefore barred from asserting in subsequent litigation claims that arose from the same transaction or subject matter as the class claims and either could have been or were litigated in the prior suit. Bowden, 247 S.W.3d at 697 (citing Daccach, 217 S.W.3d at 450, 451, 455). While we disagreed with the court of appeals’ conclusion that class representatives who split claims are per se inadequate, id., we noted that “[tjrial courts should assess the Rule 42 requirements in light of res judicata’s preclusive effect on abandoned claims when considering whether to certify a class,” id. at 698. We concluded:

In the second certification order, the trial court acknowledged that the class limited its suit to a single claim for each subclass. On remand, it should consider the applicability of res judicata in future proceedings to abandoned claims in evaluating certifiability, as we explain in Daccach, as part of its determination [under Rule 42] of the prerequisites of commonality, typicality, superiority, adequacy of representation, and predominance.

Id. (citation omitted).

With regard to the court of appeals’ order decertifying the three subclasses on predominance grounds, we affirmed as to Subclasses 1 and 3, but reversed as to the GRA class. Id. at 709. As to Subclass 1, *74 we held that “individual issues would predominate” because the claim for breach of the implied covenant to market would require an evaluation of “the price a reasonably prudent operator would have received at the wellhead,” and the royalty owners failed to provide evidence that such a price could be evaluated classwide. Id. at 701-02.

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Bluebook (online)
405 S.W.3d 70, 2013 WL 3119574, Counsel Stack Legal Research, https://law.counselstack.com/opinion/phillips-petroleum-company-gpm-gas-corporation-phillips-gas-marketing-tex-2013.