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Chieftain Royalty Co. v. SM Energy Co.

United States District Court, W.D. Oklahoma

August 29, 2017

SM ENERGY COMPANY, et al., Defendants.



         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 agreed to 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.

Settlement at 1, n. 1.

         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:

(a) Forty (40) days have elapsed without the filing of: (i) any appeal or original action in any court challenging or seeking reconsideration, modification or vacation of the Judgment, or otherwise seeking to interfere with or evade provisions of this Settlement Agreement and the settlement contemplated hereunder; or (ii) any motion which would extend the time to appeal from the Judgment, or which challenges or seeks reconsideration, modification or vacation of the Judgment; or
(b) One of the kinds of proceedings listed in subparagraph (a) above, has been filed and has resulted in a final order or judgment by the court in which it was commenced; that final order or judgment has itself become final and is no longer subject to further review in any court; and additionally, if the proceeding was commenced in an Oklahoma state district court, all of the conditions of subparagraph (a) are satisfied with respect to such separate final order or judgment.

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 ...

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