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Cline v. Sunoco, Inc. (R&M)

United States District Court, E.D. Oklahoma

October 3, 2019

PERRY CLINE, on behalf of himself and all others similarly situated, Plaintiff,
v.
SUNOCO, INC. (R&M), and, SUNOCO PARTNERS MARKETING & TERMINALS, L.P., Defendants.

          OPINION

          John A. Gibney, Jr. United States District Judge

         Perry Cline owns a royalty interest in oil wells in Oklahoma. Sunoco, Inc. (R&M), and Sunoco Partners Marketing & Terminals, L.P. ("Sunoco"), purchase oil from those wells, sell the oil, and, pursuant to Oklahoma law, pay Cline proceeds from those sales. Under Oklahoma law, when Sunoco pays the proceeds late, it must also pay statutory interest. Cline has sued Sunoco for not paying him statutory interest when Sunoco pays the late proceeds. Cline seeks to maintain a class action on behalf of those to whom Sunoco paid production proceeds late and did not pay statutory interest.

         To support his motion for class certification, Cline has offered the testimony and expert reports of Barbara A. Ley, a certified public accountant. Ley has developed a model by which she says that she can identify the individual class members and calculate class-wide damages using information from Sunoco's business records. Sunoco has moved to exclude Ley's reports and testimony for the purposes of the class certification motion. Because Ley's testimony and expert reports are admissible, the Court will deny the defendant's motion to exclude.

         I. BACKGROUND

         Perry Cline owns a royalty interest in oil wells in Oklahoma. Sunoco buys oil from a large number of wells, including Cline's, sells the oil, and distributes proceeds from the oil to well owners. Under Oklahoma's Production Revenue Standards Act ("PRSA"), Sunoco must pay owners statutory interest if Sunoco does not pay the proceeds pursuant to statutory timetables. See Okla. Stat. tit. 52, § 570, et seq. The PRSA includes exceptions to the normal deadlines for a first purchaser, like Sunoco, to pay the proceeds, depending on specific circumstances. The PRSA also imposes a 12 percent statutory interest rate on late payments. If a first purchaser pays proceeds late because of an unmarketable title, the PRSA imposes a 6 percent interest rate.

         Cline has sued Sunoco, alleging that Sunoco has a practice of not paying interest until an owner requests it. Cline alleges that this practice not only violates the PRSA but also amounts to fraud. Cline has moved to certify a class of owners to whom Sunoco did not pay statutory interest. He has also asked the Court to name him as the class representative.

         To support his motion for class certification, Cline introduced the expert reports and opinions of Ley, an oil and gas accountant. Ley's reports rely on a model using information in Sunoco's business records by which she will identify late payments and calculate the statutory interest owed on these payments. She will also exclude certain payments that fall within the exceptions and modified timetables under the PRSA. Ley has calculated the interest due using the 12 percent rate, but can adjust the rate to 6 percent for any late payments made due to unmarketable title. By identifying these payments, Ley's methodology will also identify the individual class members.

         Sunoco has moved to exclude Ley's reports and testimony from Cline's class certification motion, arguing that Ley's model is inaccurate and unreliable.

         II. DISCUSSION [1]

         Courts apply different standards when evaluating expert testimony at the class certification stage. See 3 William B. Rubenstein, Newberg on Class Actions § 7:24 (5th ed. 2019). The Supreme Court, however, has suggested that a court should perform a Daubert analysis. Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 354 (2011) ("The District Court concluded that Daubert did not apply to expert testimony at the certification stage of class-action proceedings. We doubt that is so."). At the class certification stage, "the parties remain engaged in merits discovery..., [so] the information available to experts is limited." In re EpiPen (Epinephrine Injection, USP) Mktg, Sales Practices & Antitrust Litig., No. 17-MD-2785-DDC-TJJ, 2019 WL 1569294, at *4 (D. Kan. Apr. 11, 2019). The Court, therefore, should focus on the expert's qualifications and methodology when evaluating expert testimony at this stage. Id.

         Accordingly, the Court considers Ley's opinion against the Rule 702 and Daubert/Kumho framework, but it remains mindful of the stage of the litigation and the purposes for which Cline has introduced Ley's testimony and reports.

         A. Qualifications

         The Court must first determine whether Ley's "knowledge, skill, experience, training, or education" make her qualified to give an opinion. Fed.R.Evid. 702; see also 103 Inv'rs I, L.P. 470 F.3d at 990. Sunoco says that Cline overstates Ley's qualifications and distinguishes the cases in which Ley has testified, but it does not argue that Ley lacks the necessary qualifications to render an opinion. Ley, a certified public accountant licensed to practice in Oklahoma and Texas, has over forty years of experience. Her expertise includes oil and gas issues. Ley has testified in a number of oil and gas cases in both state and federal courts in Oklahoma. Thus, Ley has adequate qualifications to testify as an expert in this matter.

         B. ...


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