Oklahoma Oil and Gas Litigation
Recently, the Oklahoma Court of Civil Appeals in Strack v. Continental Resources, Inc., 2017 OK CIV APP 53, reversed a trial court’s class certification of a hybrid, or issue class, which would have been the first hybrid class certified by an Oklahoma court. In so doing, the Court of Civil Appeals once again demonstrated the difficulties of obtaining class certification in certifying a royalty underpayment class-action lawsuit.
Plaintiffs consist of four family trusts (the “Trusts”) who own minerals subject to oil and gas leases with Continental that were included in governmentally-sanctioned drilling and spacing units. Plaintiffs sought a class action against Continental alleging failure to pay royalties on all hydrocarbons, improper deductions, insufficient reporting, and failure to receive the best price with a proposed class of over 14,000 royalty owners in over 1,100 wells in 35 different counties. The trial court certified a hybrid, issue class for an accounting, as well as declaratory relief in the form of 48 legal and equitable issues.
The Strack decision provides another hurdle for royalty underpayment class action lawsuits. While focusing on the Plaintiff’s request for an accounting, the Court of Civil Appeals stated that “there has been no legal determination that a violation of the provisions the PRSA has occurred such that specific performance would be equitable.” Strack, 2017 OK CIV APP 53, ¶ 19. The Court found that the Plaintiffs failed to meet their burden that individual adjudication would force Continental to act in legally conflicting ways and that the adjudication of separate individual royalty owners claims would substantially impair or impede the ability of other royalty owners to protect their interests. Further, Plaintiffs failed to “establish that one accounting will answer Continental’s Behavior will respect to the class as a whole” since the putative class includes over 14,000 royalty owners with over 8,000 different leases affecting more than 1,100 well in 35 counties in Oklahoma requiring a different inquiry to calculate each class member’s claim. Id. at ¶¶ 27-29. Finally, the Court held that the “declaratory relief sought by Plaintiffs is not dispositive of any claim or relief” and the “identified issues request the court issue multiple advisory opinions setting forth the legal framework for subsequent determinations of liability and potential damage” which this Court will not do. Id. at ¶ 35. Once again, the crux of the denial of class certification of royalty underpayment cases was the highly individualized fact-specific issues arising from a large number of royalty owners, with a variety of leases types, in a number of different wells.
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