Stephens Prod. Co. v. Mainer
Stephens Prod. Co. v. Mainer
Opinion of the Court
Stephens Production Company appeals from an order of the Franklin County Circuit Court granting appellees' motion for class certification. Stephens contends that the trial court erred by granting the motion because the requirements of numerosity and superiority were not met. We affirm.
Appellees own mineral interests in land located in Franklin County. Stephens has leases with appellees and others that permit it to explore, drill, produce, and sell hydrocarbons from the leased property.
*907After Stephens suspended royalty payments, appellees filed a complaint in August 2015 alleging that the payments were suspended in an effort by Stephens to recoup improper deductions. The complaint asserted causes of action for (1) breach of contract; (2) violation of the prudent operator standard, Arkansas Code Annotated section 15-73-207 (Repl. 2009); (3) conversion; (4) violation of Arkansas Code Annotated sections 15-79-601 to -604; (5) fraud and deceit; and (6) violation of the Arkansas Deceptive Trade Practices Act.
Appellees moved for class certification on March 19, 2018. The class sought to be certified was described as
[a]ll persons or entities who are, or were, royalty owners in wells producing natural gas from the Barton Production Unit in Franklin County, Arkansas where Stephens Production Company is or was the operator and/or working interest owner/lessee under oil and gas leases which contain the following lease language:
"Lessee shall pay Lessor one-eighth (or applicable royalty if amended) of the proceeds received by Lessee at the well for all gas (including substances contained in such gas) produced from the leased premises and sold by Lessee."
Exclusions: The following persons are excluded from the class:
The persons or entities excluded from the Class are: (a) all governmental entities, including federal, state and local governments and their respective agencies, departments, or instrumentalities; (b) the States and territories of the United States or any foreign states or territories; (c) the United States of America; (d) any persons or entities that Plaintiffs' counsel is, or may be, prohibited from representing under the Arkansas Rules of Professional Conduct, including Defendant's counsel, their firms, and members of their firms; and (j) members of the judiciary and their staff to whom this action is assigned.
In their brief in support of the motion to certify, appellees alleged that the potential class numbered more than thirty-six members and "is so numerous and geographically dispersed that joinder of all members is impractical." They further alleged that a class-action suit was the superior method of resolving the dispute, as the central legal and factual issues presented are common to all members of the class. Appellant opposed the motion, contending that the requirements for class certification had not been met. Appellant asserted that the number of potential class members was too small to warrant certification. It also asserted that a class action was not superior to other methods for resolving the dispute because there existed no common questions of law and fact, and the potential class is too small for the time and expense involved in a class-action suit. After a hearing, the trial court entered an order granting appellees' motion and certifying the proposed class. This appeal followed.
Appellant argues that certain requirements for certification of a class were not met here. The six requirements for class-action certification as stated in Rule 23 of the Arkansas Rules of Civil Procedure (2017) are (1) numerosity, (2) commonality, (3) typicality, (4) adequacy, (5) predominance, and (6) superiority. Diamante, LLC v. Dye ,
The determination that the class-certification criteria have been satisfied is a matter within the broad discretion of the trial court, and this court will not reverse the trial court's decision absent an abuse of that discretion. ChartOne, Inc. v. Raglon ,
Appellant first argues that the requirement of numerosity is not met here. Rule 23(a) of the Arkansas Rules of Civil Procedure (2017) states that, as a prerequisite to a class action, the class must be so numerous that joinder of all members is impractical. We have not adopted a bright-line rule to determine how many class members are required to satisfy the numerosity requirement. See, e.g., Summons v. Mo. Pac. R.R. ,
Appellant points to this court's decision in North Little Rock v. Vogelgesang ,
Appellant also argues that appellees failed to satisfy the superiority requirement. A class action may be maintained if it is superior to other available methods for the fair and efficient adjudication *909of the controversy. Ark. R. Civ. P. 23(b) (2017). This court has held that the superiority requirement is satisfied if class certification is the more efficient way of handling the case, and it is fair to both sides. Johnson's Sales Co., Inc. v. Harris ,
Appellant does not contend on appeal that common issues of law or fact do not exist. Instead, appellant contends that superiority is not met here because the class is too small and the potential class members who have not joined the litigation had three years to do so before the class-certification motion was filed, making it unfair for appellant to be subjected to liability for claimants who were not interested in joining the litigation. The avoidance of multiple suits lies at the heart of any class action. See Lambert and Lambert Investors, Inc. v. Harris ,
Under these circumstances, a class action is the superior method of adjudicating this controversy. Proceeding as a class action is also fair to both sides, as each will be permitted to present evidence on the issue of whether appellant's cessation of royalty payments was permissible. ChartOne, Inc. ,
Affirmed.
Kemp, C.J., and Wood and Womack, JJ., dissent
The trial court's order indicates that at the time the order was entered, counsel for appellees had not completed its review of appellant's records, which would yield the final number of potential class members.
Dissenting Opinion
Under Rule 23(a) of the Arkansas Rules of Civil Procedure (2017), a class action is appropriate only if the class is so numerous that joinder of all members is impracticable. Today, our court breaks new ground in affirming the circuit court's conclusion that a putative class of seven to thirty-six members is so numerous that joinder is impracticable. Because the majority further relaxes our already liberal requirements for class certification, I dissent.
Until today, a forty-one-member subclass was the smallest class that this court had recognized as having satisfied the numerosity requirement. FirstPlus Home Loan Owner 1997-1 v. Bryant ,
Here, the circuit court abused its discretion in certifying a class that is not entitled to the numerosity presumption and the record does not support a finding of numerosity. This class falls within the numerical "gray area" defined by Newberg-thirty-six potential members. Yet nothing in the court's order suggests that it looked beyond numbers alone in reaching its numerosity decision. The circuit court made no findings as to whether joinder would be impracticable based on the geographic dispersion of class members, the size of individual claims, the financial resources of the class members, or the ability of claimants to institute individual suits. And although the court discussed judicial economy when setting forth its findings on superiority, there is no indication that judicial economy influenced its decision regarding numerosity. In other words, the circuit court certified what appears to be the smallest class ever certified in Arkansas without providing any indication as to why joinder for the remaining twenty-nine members would be impracticable.
Our court's review is of the record to determine whether the circuit court abused its discretion and the record is equally devoid of any evidence demonstrating that joinder is impracticable. See Philip Morris Cos., Inc. v. Miner ,
Simply stated, appellees here failed their evidentiary burden with respect to numerosity because the record lacks any evidence suggesting that joinder is impracticable. See Valley v. Nat'l Zinc Processors, Inc. ,
Kemp, C.J., and Womack, J., join in this opinion.
Reference
- Full Case Name
- STEPHENS PRODUCTION COMPANY v. Bill R. MAINER Peggy Ann Mainer Mary Hammond Living Trust H.H. Hammond Living Trust Billy Ray Mainer, Jr. Dwight Edward Cole and Cynthia Rose Cole Individually and on Behalf of All Others Similarly Situated
- Cited By
- 3 cases
- Status
- Published