Chieftain Royalty Co. v. SM Energy Co.
| Decision Date | 29 August 2017 |
| Docket Number | Case No. CIV-11-177-D |
| Parties | CHIEFTAIN ROYALTY COMPANY, Plaintiff, v. SM ENERGY COMPANY, et al., Defendants. |
| Court | U.S. District Court — Western District of Oklahoma |
Before the Court is Defendant SM Energy Company's (SME) Motion for Summary Judgment with Respect to Claims of Named Plaintiff and Motion to Dismiss Class Action for Mootness [Doc. No. 196]. Plaintiff Chieftain Royalty Company (Chieftain) has filed its response in opposition [Doc. No. 198] and SME has replied [Doc. No. 201]. On January 13, 2017, Chieftain filed a Supplemental Brief regarding SME's Motion [Doc. No. 221], to which SME responded [Doc. No. 224]. The matter is fully briefed and at issue.
The following material facts are either uncontroverted, or deemed admitted, and are viewed in the light most favorable to Chieftain. Lounds v. Lincare, Inc., 812 F.3d 1208, 1220 (10th Cir. 2015). Immaterial facts, facts not properly supported by the record, and legal arguments or conclusions were omitted. Chavez v. County of Bernalillo, 3 F. Supp. 3d 936, 949 n. 4 (D.N.M. 2014).
Chieftain alleges SME underpaid royalties due it and others for the production of natural gas from wells located in Oklahoma. See Second Amend. Compl. ¶ 17 [Doc. No. 98]. The proposed class consisted of, among others, "[a]ll non-excluded persons or entities who are or were royalty owners in Oklahoma wells where: (1) SM ENERGY (including its predecessors or affiliates) is or was the operator (or, as a nonoperator, SM ENERGY separately marketed gas)." See id. ¶ 10. The wells identified in Chieftain's Complaint were the Wilt #1-10 well, Hicklin #1-28 well, McDaniel #1-8 well, Edward #1-19 well, Brown #1-26 well, Opitz #1 well, Haley #1 well, Haley #2-31 well, Haley #3-31 well, Haley #4-31 well, Haley #5-31 well, and the Hart #1-31 well. See id. ¶ 18.
Pursuant to a Purchase and Sale Agreement between SME and Defendant EnerVest Energy Institutional Fund XIII-A, L.P., EnerVest Energy Institutional Fund XIII-WIB, L.P., and EnerVest Energy Institutional Fund XIII-WIC, L.P. (hereinafter "EnerVest"), EnerVest purchased certain assets in Oklahoma from SME, including the above-listed wells and their associated oil and gas leases. EnerVest subsequently conveyed an undivided 50% interest in the assets to Defendant FourPoint Energy, LLC ("FourPoint").
On August 5, 2015, Chieftain, EnerVest, and FourPoint executed a "Stipulation and Agreement of Settlement" (the Settlement) with respect to Chieftain's claims against those defendants. Under the Settlement, Chieftain agreedto release "all claims associated with the marketing of, the calculation, reporting and payment of royalty on, gas and its constituents ... during the Claim Period for each Class Well ["Released Claims" or "Class Claims"]." Settlement, ¶ 1.27 [Doc. No. 111-1]. The term "Class Wells" included "every oil and gas well that is located within properties and units acquired by certain of the Settling Parties under the aforementioned Purchase and Sale Agreement with SM dated November 4, 2013." See id. ¶ 1.7. The parties prepared a list of the wells to be included as part of the Settlement, which specified the aforementioned wells, and submitted the list as Exhibit 2 to the Settlement [Doc. No. 111-3]. However, the Settlement specifically stated it did not cover certain wells not sold by SME:
For clarification and the avoidance of any doubt as to the scope of this Settlement Agreement ... [i]t is understood and agreed that SM retained, and did not sell or otherwise convey to any of the Settling Parties, certain of the wells and properties covered by the Litigation, which are referred to herein as the "SM-Retained Properties" as further defined below. It is also understood and agreed that this Settlement Agreement is not intended to cover or release any claims whatsoever against SM relating to the SM-Retained Properties. As of the date of this Settlement Agreement, Litigation remains pending against SM related to its payment of royalty on gas and its constituents produced from the SM-Retained Properties, and such Litigation related to the SM-Retained Properties remains unaffected by this Settlement Agreement.
Chieftain's claims were to be released upon the "Effective Date," which was defined as the first date by which the Settlement became "Final and Non-Appealable." Settlement, ¶ 1.11. Under the agreement, "Final and Non-Appealable" meant:
Settlement, ¶ 1.15. Lastly, the Settlement stated that:
An award of attorneys' fees, Case Contribution Award and/or Litigation Expenses is not a necessary term of this Settlement Agreement and is not a condition of this Settlement Agreement. No decision by the Court or any court on any application for an award of attorneys' fees, Case Contribution Award or Litigation Expenses shall affect the validity or finality of the Settlement. Plaintiff and Plaintiff's Counsel may not cancel or terminate the Settlement Agreement or the Settlement based on this Court's or any appellate court's ruling with respect to attorneys' fees, Case Contribution Award and/or Litigation Expenses.
In November 2015, Danny George and Charles David Nutley (Objectors) objected to the Settlement [Doc. Nos. 130, 133]. Initially, Objectors challenged thesettlement on notice and procedural grounds, and contested the proposed attorney's fees and case contribution/incentive award. On December 23, 2015, the Court overruled the objections, approved the Settlement, and, after significant reductions, awarded attorney's fees and an incentive award to class counsel and Chieftain. See Order Granting Motion for Final Approval of Class Action Settlement [Doc. No. 154]; Order Granting Motion for Approval of Attorney Fees, Reimbursement of Litigation Expenses and Case Contribution Award [Doc. No. 156].
In its order certifying for appeal the Final Approval Order, the Court noted See Supplemental Rule 54(b) Certification Order at 3 (emphasis added) [Doc. No. 185]. In January 2016, Objectors appealed the Court's attorney's fees/case contribution award.
Chieftain was granted leave to amend its pleading, and on February 21, 2017, it filed its Third Amended Complaint [Doc. No. 228] where it sought damages relating to its interests in four additional wells - the Duncan Shores #1-1 well, Duncan Shores #2-1 well, Avanzini #3-1H well, and the Simmons #3-32 well. ThirdAmended Complaint, ¶ 18. SME admits these wells were not part of the Settlement. See Def. Reply Br. at 1-2 n. 2 [Doc. No. 201].1
On July 3, 2017, the Tenth Circuit reversed and remanded the attorney's fees and case contribution awards. See Chieftain Royalty Co. v. Enervest Energy Institutional Fund XIII-A, L.P., 861 F.3d 1182 (10th Cir. 2017). The Tenth Circuit's order did not address or affect the validity and fairness of the Settlement.
"Summary judgment is proper if, viewing the evidence in the light most favorable to the non-moving party, there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Patel v. Hall, 849 F.3d 970, 978 (10th Cir. 2017) (citing Peterson v. Martinez, 707 F.3d 1197, 1207 (10th Cir. 2013)). The substantive law will identify which facts are material; only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Equal Employment Opportunity Comm'n v. BNSF Railway Co., 853 F.3d 1150, 1155 (10th Cir. 2017).
The Court's function at the summary judgment stage is not to weigh the evidence and determine the truth of the matter asserted, but to determine whether there is a genuine issue for trial. Birch v. Polaris Indus., Inc., 812 F.3d 1238, 1251(10th Cir. 2015); In re Convergent Tech. Sec. Litig, 948 F.2d 507, 512 (9th Cir. 1991) ( ) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986)). An issue is "genuine" if there is sufficient evidence on each side so that a rational trier of fact could resolve the issue either way. Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998). An issue of fact is "material" if under the substantive law it is essential to the proper disposition of the claim. Id.
Once the moving party has met its burden, the burden shifts to the nonmoving party to present sufficient evidence in specific, factual form to establish a genuine factual dispute. Bacchus Indus., Inc. v. Arvin Indus., ...
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