Seeco, Inc. v. Stewmon

2016 Ark. 435, 506 S.W.3d 828, 2016 Ark. LEXIS 367
Supreme Court of Arkansas·Decided December 8, 2016·No. CV-15-198·Published·Cited by 12 cases

Opinions

JOSEPHINE LINKER HART, Associate Justice

11 This is a class-action case. Appellants SEECO, Inc., DeSoto Gathering Company, LLC, and Southwestern Midstream Services Company (collectively SEECO), are subsidiaries of Southwestern Energy Company. In this interlocutory appeal, SEECO challenges an order of the St. Francis County Circuit Court granting class certification to a group of landowners who entered into natural-gas leases with SEECO. SEECO also challenges whether Mrs. Stephanie DeVazier is a proper substitute class representative. After the circuit court had certified the class, SEECO filed an appeal to this court and completed briefing, but before submission of the case, Mrs. Stewmon passed away. This court entered, on appellee’s motion, an order for substitution of a new qualified class representative. Before the substitution was made, Circuit Judge L.T. Simes passed away. Judge Kathleen Bell was assigned as Judge Simes’s replacement. |aOn March 22, 2016, Judge Bell entered an order finding that DeVazier was a - qualified class representative and approved her as a substitute for Stewmon.

SEECO timely filed a supplemental notice of appeal and presented an additional 27 pages of argument, some of which duplicates what was presented in the original brief. When appropriate, we will combine the redundant arguments in our discussion.

In the original appeal, SEECO argues: (1) the prior filing of Snow1 precludes this case from going forward; (2) the class definition erroneously requires a determination of the merits to identify class members; (3) appellee did not introduce evidence to prove the Rule 23 requirements for class certification; and (4) the redundant class certification violates appellants’ federal and state constitutional rights to due process. For its “supplemental” argument, SEECO argues: (A) Mrs. DeVazier has not properly joined this suit and must be dismissed. (B) Even if Mrs. DeVazier were permitted to enter the case, she is not a proper class representative under Rule 23. (C) The circuit court lacked jurisdiction to hear Mrs. DeVazier’s claims because they are already being litigated in the June Merrell lawsuit and in the concurrently pending Snow class action. (D) When class certification is pending on appeal and the class representatives dies, the certification must be vacated as moot.

At issue is a provision in more than 16,000 of SEECO’s standard gas leases that allows SEECO to deduct from royalty payments reasonable expenses incurred in gathering, [ ^compression, treatment, and marketing the natural gas that is extracted from the wells. The St. Francis County Circuit Court defined the class as

[a]ll residents of the State of Arkansas who entered into leases with Defendant SEECO (up through September 27, 2013) for the development and operation of natural gas wells on property located in the State of Arkansas and who signed leases allowing for deduction of reasonable costs for gathering, compression, treatment and marketing. Specifically excluded are any leases which have non-Arkansas residents as parties to the lease.

(Hereinafter, “the class.”)

SEECO, Inc. is an energy company engaged in the exploitation of natural-gas deposits found in the geological region of Arkansas known as the “Fayetteville Shale.”2 SEECO secures gas leases and drills the gas wells. DeSoto Gathering Company, LLC, and Southwestern Midstream Services Company engage in gathering, compression, treatment, and marketing natural gas. The appellees/lessors’ complaint, filed September 27, 2013, alleges that the relationship between the aforementioned SEECO defendants allowed SEECO to manipulate the costs associated with bringing the natural gas to market through upcharging for services provided by the subsidiary companies3 and by allowing the subsidiary companies to use natural |4gas without authorization or compensation to the owners. As a result, SEECO deducted “fraudulent” and “unfair” expenses from the lessors’ royalties. It asserted causes of action for breach of contract; unjust enrichment; breach of the “Prudent Operator Standard,” a statutory duty of good faith to accurately pay royalties in accordance with Arkansas Code Annotated section 15-73-207, including treble damages and attorney fees for underpayment of royalties; deceptive trade practices; and fraud.

The lessors’ dissatisfaction with SEE-CO’s deductions from their royalty payments has, to date, spawned two other class-action lawsuits. On May 7, 2010, El-dridge Snow became lead plaintiff in a similar lawsuit filed in Conway County. On October 14, 2014, the Conway County Circuit Court entered an order that certified the proposed class in Snow.4 SEECO, Inc. v. Snow, 2016 Ark. 444, 506 S.W.3d 206, is also on appeal and is a companion case to the case-at-bar. A third class-action, Smith v. SEECO, was certified in federal court.

At the certification hearing in the instant case, the St. Francis Circuit Court had before it the complaint, Stewmon’s copy of the SEECO form gas lease, the Dedicated Field Services Agreement entered into between SEECO and DeSoto Gathering Company that sets the rates for gathering charges on gas SEECO produces in the Fayetteville Shale, which does not make any special provisions for a particular gas well; SEECO’s admission that over 10,000 leases |ncontain similar language to the deduction clause in the Stew-mon lease; SEECO employee Stephen Guidry’s deposition in which he testified that 66.2% of the 16,760 or 11,095 leases with SEECO are implicated by the class definition proposed by Stewmon. It also had copies of check stubs memorializing the deductions to Stewmon’s royalties. Also submitted was a deposition from Stewmon and the entire record from the Snow case, which contained copies of additional SEECO gas leases. Based on the information that the circuit court had before it, it certified the class.

On appeal, SEECO first argues that the prior filing of Snow precludes this case from going forward. It contends that this court prohibits co-equal lower courts from competing with each other over the same action and the same parties under an exclusive-jurisdiction rule that provides either for dismissal on appeal or an extraordinary writ. Citing Foster v. Hill, 372 Ark. 263, 275 S.W.3d 151 (2008), and Edwards v. Nelson, 372 Ark. 300, 275 S.W.3d 158 (2008), SEECO asserts that both class-action lawsuits are barred by the “doctrine of concurrent jurisdiction.” According to SEECO, this doctrine is based on comity and the necessity of avoiding conflict in the execution of judgments by independent courts. SEECO notes that the class descriptions in Snow and in the instant case include “the same class of Arkansans who have leases with SEECO providing for deduction of reasonable costs for gathering, treatment, and marketing” the extracted natural gas. SEECO argues further that there is no meaningful distinction between the terms “resident” and “citizen.” It contends that eliminating competing lawsuits is necessary to preclude “interference” from the other lawsuit, which it |7contends has already occurred, with Snow attempting to intervene in the case-at-bar. As an alternative position, SEECO urges this court to use its superintending authority over the inferior courts of this state to “end the feud” between the parties in the competing lawsuits.

Free access — add to your briefcase to read the full text and ask questions with AI

Seeco, Inc. v. Stewmon, 2016 Ark. 435, 506 S.W.3d 828, 2016 Ark. LEXIS 367 (Ark. 2016).

2016 Ark. 435 (Seeco, Inc. v. Stewmon) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

Related