Mayo v. Kaiser-Francis Oil Co., KAISER-FRANCIS
| Decision Date | 05 February 1998 |
| Docket Number | KAISER-FRANCIS,No. 1,No. 89662,89662,1 |
| Citation | 962 P.2d 657 |
| Parties | 1998 OK CIV APP 94, 138 Oil & Gas Rep. 619 Murlene MAYO and Ray Mayo, Earnest L. Dahl, Martha Dahl Woody, Odus M. Dahl and Mary Anita Dahl, Bertha Clingman, James Hatfield and Katherine Hatfield, Mildred Johnson and Delta Johnson, Wanda Wood, Clyde Buck, William Arthur Bennett and Betty Joyce Bennett, Anna G. Kynerd, W.C. Dahl and Ada Dahl, Douglas Sullivan, Aubrey Dahl, P.O. Dahl and Lena Dahl, Randy Dahl and Shirley Dahl, Kerby Dahl and Paula Dahl, Haskel Hatfield and Alma Hatfield, Tessamae Hatfield, Fern Thompson, and Mary Loafman, Plaintiffs/Appellants, v.OIL COMPANY, a Delaware corporation, Texas Southwest Gas Corporation, a Texas corporation, Senex Pipeline Company, a Delaware corporation, Defendants/Appellees. Court of Civil Appeals of Oklahoma, Division |
| Court | United States State Court of Criminal Appeals of Oklahoma. Court of Civil Appeals of Oklahoma |
Appeal from the District Court of Grady County; James R. Winchester, Judge.
AFFIRMED.
Richard L. Allen, Allen, Allen & Tack, Chickasha, for Appellants.
Frederic Dorwart, Tulsa, for Appellees Texas Southwest Gas Corporation and Senex Pipeline Company.
Keith F. Sellers, Holliman, Langholz, Runnels, Holden, Forsman & Sellers, Tulsa, for Appellee Kaiser-Francis Oil Company.
¶1 Appellants as owners of mineral interests underlying Sections 20 and 29, Township 6 North, Range 8 West, Grady County, Oklahoma, seek review of the trial court's order refusing to certify as a class all royalty owners, excess royalty owners, and working interest owners in Sections 19, 20, and 29 in Appellants' action against Kaiser-Francis Oil Company as operator of several wells and owner of a small leasehold interest in Sections 20 and 29, and Texas Southwest Gas Corporation and/or Senex Pipeline Co., the contractual purchaser of the gas from the wells and asserted affiliates of Kaiser-Francis, for alleged underpayment of royalties. In this appeal, Appellants continue to assert they satisfied each element necessary for class certification. We disagree and, accordingly, affirm the trial court's order.
¶2 In the early 1960's, Appellants and other mineral interest owners in the subject sections (or their predecessors-in-interest) leased their various oil and gas interests in the subject sections to third parties (Lessees). In turn, the various Lessees entered into six gas purchase contracts with Oklahoma Natural Gas in 1962 which provided that ONG would purchase all gas from the leased wells during the life of the lease and pay a sum certain. Twenty six years later, in 1988, Texas Southwest bought an interest in some of the ONG contracts, purchasing production and selling the gas in turn to El Paso Natural Gas. Also in 1988, Kaiser-Francis acquired a small interest in existing oil and gas leases in Sections 20 and 29. These specific leasehold interests are covered by two of the six 1962 gas purchase contracts; that is, Kaiser-Francis was bound by the gas purchase contract initially entered into by its predecessor-in-interest with ONG which in turn assigned two of the contracts to Texas Southwest. Thereafter, Kaiser-Francis proposed and did drill two additional producing wells in Sections 20 and 29. All gas continued to be sold pursuant to the 1962 gas purchase contracts which were still in full force and effect, and the Appellants were paid according to the terms of the contract, apparently by their Lessees.
¶3 In 1993, Appellants brought suit against Kaiser-Francis, Texas Southwest and/or Senex alleging Appellants "entered into oil and gas leases covering Sections 20 and 29 ... which may or may not be owned by [Kaiser-Francis, Texas Southwest, and/or Senex] ...," and the latter three conspired to underpay royalty pursuant to an alleged scheme by which Kaiser-Francis sold production to Texas Southwest and/or Senex at the contract rate then the latter resold the gas at a higher rate after payment of royalties based on the lower contract rate. Appellants sought designation of the case as a class action asserting this alleged scheme involved all mineral interest owners in Sections 29 and 30 in addition to a subsequent request to add all mineral interest owners in Section 19.
¶4 At the hearing on Appellants' motion to certify the class, the trial court focused on issues related to commonality, i.e., whether there were questions of law and fact common to the class. In this regard, the trial court found no privity between Kaiser-Francis and Appellants except as to those leases in which Kaiser-Francis owned an interest (and, consequently, those leases in which Texas Southwest/Senex was involved). That is, the trial court determined that Kaiser-Francis was only obligated to pay under the terms of its gas purchase contract and not pay other mineral interest owners unrelated to Kaiser-Francis who had entered into gas purchase contracts with purchasers unrelated to Kaiser-Francis or its affiliates. The trial court denied class certification, and Appellants appeal.
¶5 Oklahoma law permits one or more members of a class to sue on behalf of all members of the class only if all of each of the following four elements are found to be present: (1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class. 12 O.S.1991 § 2023. Ordinarily, certification of a class is a decision which should be made by the trial court in a "practical and realistic manner, based on what is actually involved in the litigation," but "no mechanical formula exists which can be applied to all cases." Mattoon v. City of Norman, 1981 OK 92, 633 P.2d 735. Consequently, on review of an order granting or denying class action certification, we will not reverse unless the trial court's decision stands clearly affected by an abuse of discretion. Mattoon, 1981 OK 92, p 29, 633 P.2d at 741. See also, Abel v. Tisdale, 1983 OK 109, 673 P.2d 836 ().
¶6 In the present case, the trial court made it clear from the bench that Appellants had failed to demonstrate the necessary commonality of issues by seeking to include in the proposed class each and every owner of a mineral interest in the subject sections regardless of a lack of any relationship whatsoever with Kaiser-Francis or its affiliates, notwithstanding Appellants' argument that all such mineral interest owners had been underpaid, albeit most by third parties. We agree with the trial court. Any named owner with a mineral interest in a lease in which Kaiser-Francis is operator or retains an interest could pursue a cause of action against Kaiser-Francis and its affiliates for alleged underpayment of royalty. However, Appellants argue that Kaiser-Francis owed every mineral interest owner the full value of a one-eighth royalty by virtue of 52 O.S. § 540 and/or 52 O.S. § 87.1 notwithstanding lack of privity. In this regard, the trial court's findings from the bench indicate an implied determination that the validity of the gas purchase contracts--which were factually uncontroverted--were not superseded by 52 O.S. § 540 or 52 O.S. § 87.1 which sets out the duty to pay royalty and obligates either the operator or first purchaser of gas to pay Appellants one-eighth of the production after costs. 1 Appellants proffered no evidence that these statutes supersede a valid contract entered into at arms length and which was fair at the time it was executed. See, Shell Oil Co. v. Corporation Commission, 1963 OK 238, 389 P.2d 951.
¶7 This issue has been litigated numerous times in other jurisdictions with, admittedly, mixed results. However, we are persuaded by the reasoning of the federal district court in New York when, in explaining its findings in a similar case, stated:
[T]he attempt of the plaintiff to include in her class not only beneficiaries of her own Trust, but beneficiaries of separate and distinct Trusts is akin to attempts by shareholders of one corporation to sue on behalf of the shareholders of all other like corporations.... Thus far the courts have limited the equitable remedies of the individual plaintiff only to actions involving the economic unit with which he is associated....
Schaffner v. Chemical Bank, 339 F.Supp. 329 (S.D.N.Y.1972). See also, Baltimore Football Club, Inc. v. Superior Court, 171 Cal.App.3d 352, 215 Cal.Rptr. 323 (1985) ().
¶8 As we apply this analysis, we cannot say the trial court's decision to deny class certification stands affected by an abuse of discretion. That is, Appellants sought to certify a class regardless of the class members' contractual relationship with Kaiser-Francis, but we have previously noted herein that Appellants presented no evidence that either § 87.1 or § 540 superseded Kaiser-Francis' contractual rights and obligations with other owners of interests in the unit. In this regard, we also recognize that if Appellants were to attempt to certify a class of those mineral owners of interests in leases operated, owned, or affected by Kaiser-Francis and its alleged affiliates, Appellants would nevertheless have to demonstrate the class is so numerous that joinder of all members is impracticable. As the record does not contain sufficient evidence on this issue--and Appellants did not pursue this smaller class certification--we cannot say the trial court erred in denying Appellants' requested class certification.
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CHAPTER 15 SPECIAL ROYALTY LITIGATION ISSUES: CLASS ACTIONS
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