Shell Cortez Pipeline Co. v. Shores

• Decision Date: 08 January 2004
• Docket Number: No. 2-01-006-CV.,2-01-006-CV.
• Citation: 127 S.W.3d 286
• Parties: SHELL CORTEZ PIPELINE COMPANY, Shell CO<SUB>2</SUB> Company, Ltd. n/k/a Kinder Morgan CO<SUB>2</SUB> Company, L.P., Shell Oil Company, Shell Western E & P Inc., SWEPI LP, Mobil Oil Corporation, Mobil Producing Texas & New Mexico, Inc., and Mobil Cortez Pipeline, Inc., Appellants, v. Gary H. SHORES, John W. Barfield, and Frank Gibson, in their Representative Capacities as Co-Trustees of the Alicia L. Bowdle Trust, William G. Kemp and Marie J. Bench, in their Representative Capacities as Co-Trustees of the Bernard M. Bench Family Trust, Bonnie Lynn Whiteis, Individually, William C. Armor, Jr., Individually, and Gary H. Shores, in his Representative Capacity as Administrator with Will Annexed of the Estate of Margaret Bridwell Bowdle, Deceased, Appellees.
• Court: Texas Court of Appeals

127 S.W.3d 286

SHELL CORTEZ PIPELINE COMPANY, Shell CO₂ Company, Ltd. n/k/a Kinder Morgan CO₂ Company, L.P., Shell Oil Company, Shell Western E & P Inc., SWEPI LP, Mobil Oil Corporation, Mobil Producing Texas & New Mexico, Inc., and Mobil Cortez Pipeline, Inc., Appellants, v. Gary H. SHORES, John W. Barfield, and Frank Gibson, in their Representative Capacities as Co-Trustees of the Alicia L. Bowdle Trust, William G. Kemp and Marie J. Bench, in their Representative Capacities as Co-Trustees of the Bernard M. Bench Family Trust, Bonnie Lynn Whiteis, Individually, William C. Armor, Jr., Individually, and Gary H. Shores, in his Representative Capacity as Administrator with Will Annexed of the Estate of Margaret Bridwell Bowdle, Deceased, Appellees.

No. 2-01-006-CV.

Court of Appeals of Texas, Fort Worth.

January 8, 2004.

Griffin, Whitten, Jones & Reib, Michael J. Whitten, Denton, McGinnis, Lochridge & Kilgore, L.L.P., Brian S. Engel, Marc O. Knisely, Richard Kelley, Akin Gump Strauss Hauer & Feld, L.L.P., Shannon H. Ratliff, Austin, Exxon Mobil Corp., Jack Balagia, Taylor Snelling, Houston, for appellants Mobil.

Wood, Thacker & Weatherly, P.C., R. William Wood, Grace Weatherly, Denton, Vinson & Elkins, L.L.P., Andrew McCollam III, Phillip B. Dye, Jr., Gwen J. Samora, Alan B. Daughtry, Jennifer H. Davidow, Houston, for appellants Shell.

McKool Smith, Gary Cruciani, Charles Cunningham, Robert M. Manly, Rader & Campbell, Donovan Campbell Jr., Robert E. Rader, Jr., Lalon C. Peale, Hartnett Law Firm, James J. Hartnett, Jr., Will F. Hartnett, Robert B. Perry, Dallas, Robison & Robison, Douglas M. Robison, Denton, Ikard & Golden, P.C., Frank Ikard, Austin, for appellees.

PANEL A: CAYCE, C.J.; WALKER, J.; and SAM J. DAY, J. (Retired, Sitting by Assignment).

OPINION

SUE WALKER, Justice.

I. INTRODUCTION

Two groups of Appellants, the Mobil defendants¹ (collectively referred to as "Mobil") and the Shell defendants² (collectively referred to as "Shell") bring interlocutory appeals from a class certification order entered by the statutory probate court of Denton County. See Tex. Civ. PRAC. & REM.CODE ANN. § 51.014 (Vernon Supp.2004). The probate court certified a nationwide class of current and former overriding royalty owners in the McElmo Dome Unit, located in Colorado, and their claims for breach of contract, declaratory judgment, breach of agency duty to market, breach of the duty of good faith and fair dealing, action on account, and conspiracy against Shell and Mobil stemming from the alleged underpayment of carbon dioxide royalties since 1982. The primary issue we address in this appeal is whether the probate court has subject matter jurisdiction. Because we hold that the statutory probate court in this instance does not have subject matter jurisdiction over the class claims at issue here, we vacate the trial court's class certification order and dismiss the case.

II. FACTUAL BACKGROUND

In the early 1980s, Shell and Mobil possessed extensive interests in oil fields in West Texas in the Permian Basin. Shell and Mobil decided to maximize the oil output of these fields by flooding them with carbon dioxide. To this end, Shell and Mobil set about obtaining carbon dioxide from the nearby McElmo Dome CO₂ formation in Colorado. Shell and Mobil drafted and executed a Unit Agreement for the development and operation of the McElmo Dome (Leadville) Unit. This Agreement designated Shell as the Unit Operator. Shell and Mobil agreed to jointly build and operate a pipeline to transport the carbon dioxide from the McElmo Dome Unit to the West Texas oil fields.

Before the Colorado Oil and Gas Conservation Commission would approve formation of the Unit, Shell and Mobil were required to obtain the consent and approval of requisite percentages of the working interests in the Dome and also of the royalty owners and overriding royalty owners. To accomplish this, Shell, with the approval of Mobil, prepared and sent all overriding and royalty owners a solicitation package. The solicitation package contained information indicating that the working interest owners would pay all installation and operating costs of the "program" and that there would be no costs to royalty owners. The package also indicated that the royalty owners would not "have to pay for the pipeline, transportation or injection of CO₂."

Appellees allege that since 1982, Shell and Mobil have deducted tens of millions of dollars in transportation charges in calculating and paying royalties to the royalty owners of the McElmo Dome Unit. Moreover, Appellees allege that Shell and Mobil concealed from royalty owners the deduction of the carbon dioxide transportation charges by deducting them off-the-top and showing on the monthly statements mailed to the royalty owners a "gross price" received for the CO₂ that was in fact a gross price minus transportation costs. Appellees also contend that at times the transportation costs charged back to royalty owners by Shell and Mobil exceeded the price Shell and Mobil sold the carbon dioxide for, resulting in a "negative netback" to royalty owners.

III. OTHER APPEALS & PROCEEDINGS

Previously in this same litigation, Shell, Mobil, and other defendants perfected interlocutory appeals pursuant to civil practice and remedies code section 15.003(c) challenging the probate court's order denying their motions to transfer venue to Harris County. Tex. Civ. Prac. & Rem.Code Ann. § 15.003(c). We held that three of the four named plaintiffs in the underlying lawsuit, the Bench Family Trust, Bonnie Lynn Whiteis, and William C. Armor, Jr., could not independently establish proper venue in Denton County, that the probate court therefore necessarily determined the joinder issue, and that the these three plaintiffs failed to establish section 15.003(a)'s four joinder requirements. Consequently, we reversed the trial court's order denying Shell's and Mobil's motions to transfer venue as to these three plaintiffs and ordered their claims transferred to Harris County. See id. The parties filed motions for rehearing of this decision, and Appellees also filed a motion for en banc rehearing. As of the date of the issuance of this opinion, the motions for rehearing remain pending before this court.

In addition to the joinder appeal, three mandamus proceedings have been filed in this litigation. Two of the original proceedings were consolidated with the joinder appeal and denied. We also denied the third mandamus, but the supreme court conditionally granted the writ. In re SWEPI, 85 S.W.3d 800 (Tex.2002) (orig.proceeding). Additionally, a second class certification appeal has been filed with this court, Mobil v. First State Bank of Denton, No. 2-02-119-CV. As of the date of the issuance of this opinion, that appeal has not yet been submitted in this court. We abated all of these cases on the joint motion of the parties pending settlement negotiations, but at the parties' request, they have been reinstated.

IV. THE CLASS CERTIFICATION HEARING AND ORDER

The trial court conducted a four-day evidentiary hearing on Appellees' motion for class certification and admitted and considered over 430 exhibits. Ultimately, the trial court certified the following class "under Rule 42(a) and 42(b)(1), (b)(2), (b)(3), and (b)(4):"

All non-governmental owners of overriding royalty interests from August 24, 1982 to the commencement of the class certification hearing herein under mineral leases granted to one or more of the Mobil Defendants and Shell Defendants, or their predecessors-in-interest, in any property that became unitized by virtue of the McElmo Dome Unit Agreement.

The trial court specifically excluded the following from the "Plaintiff Class:"

(a) all Defendants and their affiliates; (b) any such overriding royalty interest owner who also is or was, during said timeframe, a working interest owner of the Unit; (c) Harry Ptasynski, W.L. Gray & Co., and all plaintiffs in Grynberg et al. v. Shell Oil Company, et al., Cause No. 98-CV-43, District Court, Montezuma County, Colorado; and (d) as to those claims arising from the wrongful pricing of CO[₂] (the "Wrongful Pricing Claim") and/or from the wrongful setting of the tariff of the Cortez Pipeline (the "Unreasonable Transportation Claim"), and members of the CO[₂] Claims Coalition, L.L.C. (The "Claims Coalition") who, as of the commencement of the class certification hearing herein, have executed a written assignment of their Wrongful Pricing Claim and their Unreasonable Transportation Claim to the Claims Coalition and have not received back a written reassignment of such claims (the "Claims Coalition Assignors").

V. PROBATE COURT'S SUBJECT MATTER JURISDICTION

In its first issue, Shell asserts that neither the Texas Probate Code nor the Texas Trust Code confers subject matter jurisdiction on the trial court, the statutory probate court of Denton County, over a "national class action of over 1,000 different overriding royalty owners spanning 27 states." Mobil, likewise, in one of its subissues contends that the probate court lacks jurisdiction over this class litigation. Appellees contend, however, that this court itself has no jurisdiction to review Shell's and Mobil's jurisdictional complaints in these interlocutory class certification appeals. See Tex. Civ. Prac. & Rem.Code Ann. § 51.014. We disagree and we hold that the trial court lacks subject matter jurisdiction over the class claims.

A. Appellate Court Jurisdiction

Before the probate court signed the class certification order at issue here, Shell and Mobil filed pleas to the jurisdiction. They challenged the probate court's jurisdiction over the existing plaintiffs' claims. The probate court denied Shell's and Mobil's pleas to the jurisdiction. Appellees point out that section 51.014(a)(8) of the civil practice and remedies code permits an interlocutory appeal from an order that "grants or denies a plea to the jurisdiction by a governmental unit as...