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Gagnon v. Merit Energy Company, LLC

United States District Court, D. Colorado

December 30, 2015

WADE GAGNON, VALERIE VAN TASSEL, and DAVID F. WILLIAMS, on behalf of themselves and all others similarly situated, Plaintiffs,
MERIT ENERGY COMPANY, LLC, formerly known as Merit Energy Company, Defendant.


William J. Martínez Judge

Wade Gagnon, Valerie Van Tassel, and David F. Williams (collectively, “Plaintiffs”) bring this action on behalf of themselves and all others similarly situated. Before the Court is Plaintiffs’ Motion for Class Certification (“Certification Motion”), filed on April 6, 2015. (ECF No. 54.) On August 10, 2015, Merit Energy Company (“Defendant” or “Merit”) filed its Response to Plaintiffs’ Certification Motion. (ECF No. 91.) Plaintiffs’ Reply was filed on October 14, 2015. (ECF No. 97.) For the reasons explained below, the Court denies the Certification Motion.


Plaintiffs and their proposed Class are “royalty owners” who own interests in wells that produce gas in Colorado and Oklahoma. (ECF No. 21 at 6-7.) Subject to leases and contractual agreements, Defendant extracts, conditions, and markets the gas from the wells. (Id. at 7.) After leaving the well, the gas may undergo a variety of services to change its condition, such as gathering, compression, dehydration, treating/blending, or processing (collectively, “GCDTP”). (See Id. at 15.) In exchange for the right to extract and sell the minerals, Defendant agrees to pay a portion of its revenue to the royalty owners. (Id. at 7.)

Plaintiffs initiated this action on March 21, 2014 by filing a class action Complaint against Defendant. (ECF No. 1.) On May 13, 2014, Plaintiffs filed a First Amended Class Action Complaint. (ECF No. 21.) That Amended Complaint alleges that Defendant breached leases and contracts by failing to properly pay royalties on gas production to Plaintiffs and members of the proposed Class. (ECF No. 21 at 16.) Specifically, Plaintiffs contend that Defendant was obligated to pay royalties based on the “gross” value of the gas. (Id.) They allege, however, that Defendant paid Plaintiffs royalties based on the net value of the gas, which was calculated by deducting the cost of GCDTP services from the gross value. (Id. at 15-16.)


A. Legal Standard

As the parties seeking class certification, Plaintiffs must first demonstrate that all four prerequisites of Federal Rule of Civil Procedure 23(a) are clearly met. Shook v. El Paso Cnty., 386 F.3d 963, 971 (10th Cir. 2004); see also Tabor v. Hilti, Inc., 703 F.3d 1206 (10th Cir. 2013). These threshold elements consist of the following: (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 party 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. Fed.R.Civ.P. 23(a).

If Plaintiffs prove they have met these threshold requirements, they must then demonstrate that the action falls within one of the three categories set forth in Rule 23(b). Shook, 386 F.3d at 971. Here, Plaintiffs seek certification pursuant to Rule 23(b)(3), which requires a showing that “questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.”

The party seeking to certify a class bears the strict burden of proving the requirements of Rule 23. Trevizo v. Adams, 455 F.3d 1155, 1162 (10th Cir. 2006). Rule 23 does not set forth a “mere pleading standard.” Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541, 2551 (2011). Instead, a party seeking to certify a class “must affirmatively demonstrate his compliance with the Rule.” Id. When deciding whether the proposed class meets the requirements of Rule 23, the Court accepts the plaintiffs’ substantive allegations as true, though it need not blindly rely on conclusory allegations and may consider the legal and factual issues which the complaint presents. Shook, 386 F.3d at 968; see also Vallario v. Vandehey, 554 F.3d 1259, 1265 (10th Cir. 2009). The Court should not pass judgment on the merits of the case, but must conduct a “rigorous analysis” to ensure that the requirements of Rule 23 are met. D.G. ex rel. Stricklin v. Devaughn, 594 F.3d 1188, 1194 (10th Cir. 2010).

The decision whether to grant or deny class certification “involves intensely practical considerations and therefore belongs within the discretion of the trial court.” Tabor, 703 F.3d. at 1227.

B. Proposed Class

In their Certification Motion, Plaintiffs propose the following Class definition:

All royalty owners in Oklahoma wells and all royalty owners and overriding royalty owners in Moffat, Washington, and Rio Blanco County, Colorado [w]ells operated by Merit Energy and producing gas or gas constituents (such as residue gas, NGLs, or helium) at any time from January 1, 1999 to the date class notice is provided to the certified class.
The defined class excludes: (1) Indian tribes; (2) the United States of America; (3) any publically traded company or entity that produces, gathers or processes [g]as along with along with the affiliated entities of such publically traded entities including without limitation all subsidiaries, partnerships, limited liability companies, trusts, limited partnerships and other entities owned or controlled by such publically traded company or entity; (4) Merit Energy, its affiliates, its predecessors-in-interest, and their respective employees, officers, and directors; (7) [sic] royalty and overriding royalty owners to the extent that in the lease creating the royalty interest or the written documents creating the overriding royalty interest expressly authorized all of the deductions for [g]as; (8) [sic] royalty owners in leases identified in Foster v. Merit Energy, Case No. 5:10-cv-00758-F, Doc. 53-1, Clause Nos. 202(d), 202(g), 215, 247, 296, 302, 303, 307, 310, 319, 323, 325, and 327; (9) [sic] “same as fed” leases; (10) [sic] plaintiffs suing under the current petition in Chieftain ...

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