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Nichols v. Chesapeake Operating, LLC

United States District Court, W.D. Oklahoma

September 13, 2017

BILL G. NICHOLS, on behalf of himself and all others similarly situated, Plaintiff,
v.
CHESAPEAKE OPERATING, LLC, and CHESAPEAKE EXPLORATION, LLC, Defendants.

          ORDER

          VICKI MILES-LaGRANGE UNITED STATES DISTRICT JUDGE

         Before the Court is plaintiff's Motion to Abstain under the Home-State Mandatory Abstention Exception to CAFA, filed October 14, 2016. On April 12, 2017, plaintiff filed his Supplement to His Motion to Abstain under Home State Exception to CAFA. On June 27, 2017, the parties filed a Joint Stipulation. On July 14, 2017, defendants filed their response, and on September 5, 2017, plaintiff filed his reply. Based upon the parties' submissions, the Court makes its determination.

         Plaintiff filed this proposed class action for breach of lease, breach of fiduciary duty, fraud, deceit and constructive trust against defendants in the District Court of Beaver County, Oklahoma on August 9, 2016. In the Class Action Petition, plaintiff defines the proposed class as follows:

All persons who are (a) an “Oklahoma Resident”; and, (b) a royalty owner in Oklahoma wells where Chesapeake Operating, LLC (f/k/a Chesapeake Operating, Inc.) and/or Chesapeake Exploration, LLC is or was the operator (or a working interest owner who marketed its share of gas and directly paid royalties to the royalty owners) from January 1, 2015 to the date Class Notice is given. The Class claims relate to royalty payments for gas and its constituents (such as residue gas, natural gas liquids, helium, nitrogen, or drip condensate).
Excluded from the Class are: (1) agencies, departments or instrumentalities of the United States of America, including but not limited to the U.S. Department of the Interior (the United States, Indian tribes, and Indian allottees); (2) Defendants, their affiliates, predecessors, and employees, officers, and directors; (3) Any NYSE or NASDAQ listed company (and its subsidiaries or affiliates) engaged in oil and gas exploration, gathering, processing, or marketing; (4) the claims of royalty owners to the extent covered by arbitration clauses or prior settlement agreements, if any, still in effect on or after January 1, 2015; (5) overriding royalty owners and others whose interest was carved out from the lessee's interest; (6) royalty owners and others who opted out or objected of record in Fitzgerald Farms, LLC v. Chesapeake Operating, Inc., Cas e No . CJ-10-38, Beaver County, Oklahoma; (7) royalty owners who have already filed and still have pending lawsuits for underpayment of royalties against Chesapeake at the time suit is filed herein; (8) royalty owners taking gas in-kind, if any.
Oklahoma Resident” means: Persons to whom, from January 1, 2015 to the date suit was filed herein, (a) Chesapeake mailed or sent each monthly royalty check on an Oklahoma well to an Oklahoma address (including direct deposit); (b) Chesapeake mailed or sent a 1099 for both 2014 and 2015 to an Oklahoma address; (c) the Settlement Administrator in Fitzgerald Farms, LLC v. Chesapeake Operating, Inc., Case No. CJ-10-38, Beaver County, Oklahoma mailed or sent a distribution check and 1099 to an Oklahoma address; and, (d) except for charitable institutions, were not subject to the Oklahoma Withholding Tax for Nonresidents on royalties paid in 2014 to the date suit was filed.

         Class Action Petition [docket no. 1-1] at ¶ 13.

         On September 15, 2016, defendants removed this action to this Court. On October 13, 2016, plaintiff filed a motion to remand. On February 23, 2017, this Court denied plaintiff's motion to remand.

         Plaintiff now moves this Court for an order abstaining from jurisdiction over this putative class action and remanding this case to the District Court of Beaver County, Oklahoma, under the home state exception to diversity jurisdiction under the Class Action Fairness Act (“CAFA”).[1]The home state exception provides:

A district court shall decline to exercise jurisdiction under paragraph
(2) -
* * *
(B) [when] two-thirds or more of the members of all proposed plaintiff classes in the aggregate, and the primary defendants, are citizens of the State in which the action was originally filed.

28 U.S.C. ยง 1332(d)(4)(B). It is undisputed that the two defendants in this case are citizens of Oklahoma for purposes of CAFA and that this action was originally filed in Oklahoma state court. The only disputed issue is whether two-thirds or more ...


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