Wallace B. Roderick Revocable Living Trust v. XTO Energy, Inc.

281 F.R.D. 477, 2012 WL 1059882
CourtDistrict Court, D. Kansas
DecidedMarch 28, 2012
DocketNo. 08-1330-JTM
StatusPublished
Cited by4 cases

This text of 281 F.R.D. 477 (Wallace B. Roderick Revocable Living Trust v. XTO Energy, Inc.) is published on Counsel Stack Legal Research, covering District Court, D. Kansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Wallace B. Roderick Revocable Living Trust v. XTO Energy, Inc., 281 F.R.D. 477, 2012 WL 1059882 (D. Kan. 2012).

Opinion

MEMORANDUM AND ORDER

J. THOMAS MARTEN, District Judge.

Defendant XTO Energy, Inc. produces natural gas and related chemical products from wells located in Kansas. The plaintiff Wallace B. Roderick Revocable Living Trust (“Roderick”) alleges that XTO has cheated royalty owners by, among other things, deducting from their payments the costs of rendering the gas marketable, in violation of Kansas law. XTO denies the allegation,

The matter is now before the court on Roderick’s Amended Motion for Class Certifieation. (Dkt. 172). For good cause shown, the motion for certification is hereby granted.

Facts

Roderick requests certification of the following class:

All royalty owners of XTO Energy, Inc. (and its affiliated predecessors and successors) from wells located in Kansas that have produced gas and/or gas constituents (such as residue gas or methane, natural gas liquids, helium, nitrogen or condensate) from January 1, 1999 to the present. Excluded from the Class are: (1) the Mineral Management Service (Indian tribes and the United States); (2) Defendant, its affiliates, predecessors, and employees, officers and directors; (3) Any NYSE or NASDAQ listed company (and its subsidiaries) engaged in oil and gas exploration, gathering, processing, or marketing; and (4) the claims of royalty owners as to Kansas wells gathered by Timberland and processed at the Tyrone Plant, such claims having been dismissed by this Court based upon the certified class in Beer (now Fankhouser) et al. v. XTO Energy, Inc., Case No. CIV-07-798-L, U.S. Dist. Ct., Western District of Oklahoma (Doe. 110).

The proposed class covers wells in Kansas only. Roderick has decided to relinquish any class claims for wells located in Colorado. (Dkt. 110, at 17). In addition, the proposed class definition excludes approximately 68 wells serviced by the Timberland Gathering System, which supplies gas for processing at the Tyrone Plant in Oklahoma.

The raw natural gas produced by defendant is separated into a number of valuable products. After first separating oil and water from the gas at each well, the raw gas is metered for volume, and sampled and analyzed, and placed into a gathering line where it joins gas from other wells. Gas in the gathering line is compressed, treated, and dehydrated as it travels to the processing plant. Heavy gas molecules condense into a [480]*480condensate liquid, which is collected and sold by the gatherer.

On reaching the processing plant, the gas is separated into crude helium, Y-grade or raw mix NGLs, liquid nitrogen, and residue gas. The residue gas is pressurized and placed into an interstate gas pipeline for commercial sale. Mixed NGLs are sent by a liquid pipeline to a fractionation plant, where they are segregated and made available for commercial sale. The helium is sent to a refinery for processing to commercial level Grade A helium.

The plaintiff alleges that XTO does not undertake itself the burden or costs of rendering the gas into marketable condition. Rather, it alleges that XTO essentially hires third parties to accomplish this task. Under these contracts, XTO compensates the third party by (a) paying a cash fee coupled with some in-kind transfer, (b) supplying a percentage of the proceeds or an index price to pay for the gathering and process, or (c) using some combination of these methods. XTO then deducts, or “netbacks,” these costs from the amounts paid to royalty owners.

There is evidence supporting the conclusion that XTO pays royalties predicated on a common methodology, which typically reflects a standard index price less a netback for charges set forth in the third party marketing contracts. Royalty owner payments are also reduced by a conservation fee. The amounts paid to individual royalty owners are all calculated using XTO’s accounting system, Avatar. This system assigns each well an unique number and name. Remittances are determined by the terms contained in XTO’s contract with the purchaser of the gas or gas-related product. Except for royalty owners which are a government or otherwise are tax-exempt, Avatar treats royalty owners the same. An accounting director for XTO has testified that, except for such exempt owners, Avatar does not consider “anything ... in connection with the payment of [the] royalty owner that is based ... on specific language in a lease.”

The court finds that the matter is ripe for determination. The court further finds that an evidentiary hearing on the issues advanced by plaintiffs motion is not required. See Hershey, 2011 WL 1234883, at *14 (finding hearing not necessary given substantial evidentiary record submitted to the court).

1. General Principles of Class Certification

Class certification requires that the plaintiff satisfy all four prerequisites of Rule 23(a) and at least one of the three requirements of Rule 23(b). See Amchem Prods. v. Windsor, 521 U.S. 591, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997). In resolving a claim for certification, the court must perform a rigorous analysis of the Rule 23 elements Gen. Tel. Co. v. Falcon, 457 U.S. 147, 155, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982). The court accepts as true the allegations in the complaint, but it “need not blindly rely on conclusory allegations which parrot Rule 23 requirements [and] may ... consider the legal and factual issues presented by plaintiffs complaints.” J.B. ex rel. Hart v. Valdez, 186 F.3d 1280, 1290 n. 7 (10th Cir.1999). The court should focus on the requirements of Rule 23 — not the merits underlying the class claim. See Shook v. El Paso County, 386 F.3d 963, 971 (10th Cir.2004). The court has broad discretion in determining whether to certify a class. Rector v. City & County of Denver, 348 F.3d 935, 949 (10th Cir.2003). Class certification requirements are liberally construed, and doubts may be resolved in favor of certification. See Esplin v. Hirschi, 402 F.2d 94, 99 (10th Cir.1968), cert. denied, 394 U.S. 928, 89 S.Ct. 1194, 22 L.Ed.2d 459 (1969).

This court has discussed the principles regarding class certification in many cases. See In re Urethane Antitrust Litig., 251 F.R.D. 629 (D.Kan.2008) (granting certification of price fixing claims brought by buyers of chemical products) (Urethane II); Payson v. Capital One Home Loans, No. 07-2282-JTM, 2008 WL 4642639 (D.Kan. Oct. 16, 2008) (granting certification of class of lender’s loan consultants). The court has specifically upheld class certifications for claims raised by oil and gas ownership interests. See Hershey v. ExxonMobil Oil, 07-1300-JTM, 2011 WL 1234883 (D.Kan. March 31, 2011); Arkalon Grazing Ass’n v. Chesapeake Operating, 275 F.R.D. 325 (D.Kan.2011); [481]*481Freebird, Inc. v. Merit Energy, No. 10-1154-KVH, 2011 WL 13638 (D.Kan. Jan. 4, 2011); Eatinger v. BP America Prod’n, 271 F.R.D. 253 (D.Kan.2010); Schell v. Oxy U.S.A., No. 07-1258-JTM, 2009 WL 2355792 (D.Kan. July 29, 2009).

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