The United States Court of Appeals for the Tenth Circuit issued two decisions last week vacating orders out of district courts in both Oklahoma and Kansas certifying royalty class actions against XTO Energy, Inc. (XTO). See Chieftain Royalty Co. v. XTO Energy, Inc., Case No. 12-7047 (Jul. 9, 2013) and Wallace B. Roderick Revocable Living Trust v. XTO Energy, Inc., Case No. 12-3176 (Jul. 9, 2013). In each case, the royalty owners alleged that XTO had improperly deducted costs associated with placing the gas into a "marketable condition."
Read both cases if you are facing class action royalty claims. From the Chieftain decision:
As we emphasized in Roderick, 'the mere raising of a common question does not automatically satisfy Rule 23(a)'s commonality requirement.' *** Instead, the common contention 'must be of such a nature that it is capable of classwide resolution - which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.' Wal-Mart, 131 S. Ct. at 2551; see id. ('What matters to class certification ... [is] the capacity of a classwide proceeding to generate common answers apt to drive the resolution of the litigation.' (quotations omitted)).
In each case, there was a failure to undertake the correct analysis at the trial court level. Again, in Chieftain: "First, the district court did not examine whether lease language variations destroy the possibility of resolving the common question on a classwide basis. Specifically, the legal validity of XTO's uniform payment methodology might differ greatly among class members if certain leases negate or abrogate the [implied duty of marketability]."
Nice to see that the lease language matters.