Witt v. Chesapeake Exploration, L.L.C.

276 F.R.D. 458, 177 Oil & Gas Rep. 632, 2011 U.S. Dist. LEXIS 102444, 2011 WL 4027385
CourtDistrict Court, E.D. Texas
DecidedSeptember 12, 2011
DocketCivil Action No. 2:10-cv-22-TJW
StatusPublished
Cited by3 cases

This text of 276 F.R.D. 458 (Witt v. Chesapeake Exploration, L.L.C.) is published on Counsel Stack Legal Research, covering District Court, E.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Witt v. Chesapeake Exploration, L.L.C., 276 F.R.D. 458, 177 Oil & Gas Rep. 632, 2011 U.S. Dist. LEXIS 102444, 2011 WL 4027385 (E.D. Tex. 2011).

Opinion

MEMORANDUM OPINION AND ORDER

T. JOHN WARD, District Judge.

Pending before the Court is Plaintiffs’ Motion for Class Certification (Dkt. No. 37). In their motion, named plaintiffs Merrell and Lucille Witt, Eugene and Sharon Witt, Paula and Larry Pigg, and Joseph and Deborah Campbell (collectively, “Plaintiffs”) ask the Court to certify a class under Rule 23(c) of the Federal Rules of Civil Procedure for damages as a result of Defendants Chesapeake Exploration, LLC (“Chesapeake”), Chesapeake Energy Corporation (“Chesapeake Energy”), and Chesapeake Operating, Inc. (“Chesapeake Operating”) (collectively, “Defendants”) alleged failure to pay the lease bonus consideration owed class members under mineral leases as well as interest on those lease bonus amounts that were paid untimely. The Court held a hearing on Plaintiffs’ motion on August 11, 2011. Having considered the briefing and arguments of the parties, the evidence provided, and the applicable law, the Court DENIES Plaintiffs’ Motion for Class Certification for the reasons discussed below.

I. Background

Plaintiffs bring this putative class action as a result of Chesapeake’s alleged breach of over 500 oil and gas leases in Texas. Plaintiffs allege that the leases at issue were form leases prepared by Chesapeake, offered to the lessors of Texas minerals by Chesapeake, executed and delivered by those lessors to Chesapeake (or its agents), and filed of record in the county clerks’ offices by Chesapeake (either in full or by Memorandum of Lease). Plaintiffs further allege that the minerals were transferred to Chesapeake by delivery of the executed leases, but that Chesapeake uniformly did not pay hundreds of lessors their full bonuses as and when they became due. Plaintiffs have provided copies of roughly 517 executed leases.1 One of Chesapeake’s land brokers, Pangaea Land Services (“Pangaea”), was ordered by Chesapeake to file the leases within 48 hours of being executed.2 However, Chesapeake offered evidence that it was using a number of different brokers, including Pangaea, during the relevant time period,3 and Plaintiffs have offered no evidence as to the practices of these brokers. Of the 517 leases included as part of the class certification evidence, Plaintiffs’ Summary of Identified Class Members indicates that 487 leases or memorandum of leases were filed in the appropriate county.4 Plaintiffs allege that Chesapeake made a decision to breach its contractual obligations to pay agreed lease bonuses to lessors by unilaterally refusing to pay the full lease bonuses, or delaying payments of bonuses, to hundreds of lessors because of economic concerns that had nothing to do with the terms of the leases. According to Plaintiffs’ summary, 337 potential class members were paid late or were not paid their entire lease bonus, and 134 potential class members were never paid their lease bonus.5 To support the assertion that [461]*461Chesapeake made a unilateral decision to breach the leases for economic reasons, Plaintiffs cite the testimony of Chesapeake’s 30(b)(6) designee, Tyler Beaver, in a state court ease filed by the named plaintiffs against Chesapeake Exploration, LLC and Pangaea Land Services, LLC, Case No. 90-0180 in the District Court Harrison, County, Texas, 71st Judicial District.6 In that case, Mr. Beaver testified that the reason the drafts of the named plaintiffs were dishonored and that Chesapeake decided to decrease the bonus prices been offered was because of the economic crash and the drop in gas prices.7 Plaintiffs allege that, as to each class member, Chesapeake agreed in drafts given to lessors that “[a] cashiers cheek made payable to your bank will be mailed upon the expiration of the waiting period (days) indicated on the front of the draft.”8 Plaintiffs allege that Chesapeake’s failure to pay the full lease bonuses or to pay them timely constituted a breach of the leases by Chesapeake.

With respect to the named plaintiffs, Plaintiffs allege that, in the summer of 2008, Chesapeake, through its broker, Pangaea, contacted Plaintiffs about Chesapeake’s desire to lease their minerals.9 Plaintiffs claim that the landmen working on behalf of Chesapeake offered Plaintiffs the same lease terms using the same printed oil and gas lease form.10 The lease bonus varied according to the interest owned by each Plaintiff.11 Plaintiffs claim that the lease bonus was generally a multiple of lessor’s net mineral acreage and a price per acre, but Plaintiffs provide no citation to the record for this claim. The named plaintiffs executed and delivered to Chesapeake, via its broker, the mineral conveyances (Paid-/up Oil and Gas Leases), and placed the “drafts” for collection with their respective banks. Each of the leases of the named plaintiffs was filed of record.12 Each Paid-Up Oil and Gas Lease for the Plaintiffs states “[i]n consideration of a cash bonus in hand paid and the covenants herein contained, Lessor hereby grants, leases and lets exclusively to Lessee the following described land ...”13 None of the leases describes the amount of the lease bonus.14 However, each named plaintiff was provided with a bank draft for a specified amount that states that it is “[i]n payment of Consideration for Oil and Gas Lease” and is “[p]ayable on or before 45 business days sight with approval of title and form of _ agreement.”15 Each draft was also accompanied by “Instructions for Draft” which stated “A cashiers check made payable to your bank will be mailed upon the expiration of the waiting period (days) indicated on the front of the draft.”16 However, after the Plaintiffs presented their bank drafts for payment, Chesapeake refused to pay the lease bonus indicated on the respective bank drafts and instead [462]*462proposed to pay a discounted lease bonus, equivalent to pricing at $5,000 per acre for the various leases.17 Plaintiffs allege that when the named plaintiffs refused to accept a partial payment of the lease bonus owed them, Chesapeake refused to pay any bonus.18

Chesapeake has provided evidence that different land brokers working for Chesapeake during the relevant time period used different form bank drafts.19 Despite the different forms, all of the bank drafts contain language similar to the following: “Payable on or before _ business days sight with approval of title and form of _ agreement;”20 or “On approval of lease or mineral deed described hereon by drawee not later than_banking days after arrival of this draft at collecting bank;”21 or “The below consideration shall be tendered subject to the approval by Drawee/Lessee of the Oil, Gas and Mineral Lease described herein, and upon approval of title by same Drawee, not later than FORTY-FIVE (45) business days after execution and delivery of this voucher to Drawee’s Offices;”22 or “Not longer than _banking days after sight but on approval of the instrument described hereon and/or upon approval of title of same.”23

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Bluebook (online)
276 F.R.D. 458, 177 Oil & Gas Rep. 632, 2011 U.S. Dist. LEXIS 102444, 2011 WL 4027385, Counsel Stack Legal Research, https://law.counselstack.com/opinion/witt-v-chesapeake-exploration-llc-txed-2011.