Naylor Farms, Inc. v. Chaparral Energy, LLC
Opinion
Defendant Chaparral Energy, L.L.C. (Chaparral) operates approximately 2,500 oil and gas wells in Oklahoma. Plaintiffs Naylor Farms, Inc. and Harrel's, L.L.C. (collectively, Naylor Farms) have royalty interests in some of those wells. As a result, Naylor Farms receives a portion of the proceeds those wells generate. But according to Naylor Farms, Chaparral systematically underpaid Naylor Farms and other similarly situated royalty owners by improperly deducting from their royalty *783 payments certain gas-treatment costs-costs that Naylor Farms says Chaparral was required to shoulder under Oklahoma law. Thus, Naylor Farms brought a putative class-action lawsuit against Chaparral and moved to certify the class under Rule 23 of the Federal Rules of Civil Procedure. The district court granted Naylor Farms' motion to certify, and Chaparral now appeals the district court's certification order. For the reasons discussed below, we affirm.
Background
Under Oklahoma law, lessees like Chaparral are subject to an implied duty of marketability (IDM).
1
The IDM imposes upon lessees "a duty to provide a marketable product available to market."
Mittelstaedt v. Santa Fe Minerals, Inc.
,
Citing the IDM, Naylor Farms brought a putative class-action lawsuit against Chaparral, asserting claims for breach of contract, breach of fiduciary duty, fraud, unjust enrichment, and failure to produce in paying quantities. As relevant here, Naylor Farms' complaint alleges that Chaparral breached the IDM by improperly deducting GCDTP-service costs from the royalty payments Chaparral made to Naylor Farms and to other similarly-situated royalty owners. More specifically, Naylor Farms contends that in an attempt to circumvent the IDM, Chaparral enters into wellhead sales contracts with midstream processing companies. Under the terms of those contracts, the midstream companies acquire title or possession of unprocessed gas at or near the wellhead. 2 Yet according to Naylor Farms, the midstream companies don't actually pay Chaparral for the gas at this time. Instead, the midstream companies first perform certain GCDTP services and then sell the treated gas to downstream purchasers.
At that point, Naylor Farms asserts, the midstream companies (1) take the gross proceeds they receive from the downstream sales; (2) deduct from those gross proceeds the costs and fees associated with performing the GCDTP services; 3 and (3) pay Chaparral for the gas they previously acquired at the wellhead by giving Chaparral the resulting net proceeds. Chaparral *784 then calculates royalty payments based on the net proceeds it receives from the midstream companies, rather than calculating royalty payments based on the gross proceeds the midstream companies receive from the downstream sales. And in doing so, Naylor Farms alleges, Chaparral impermissibly "requires royalty owners to bear the costs of transforming unprocessed gas into a marketable product," thus violating the IDM. Id. at 13.
Based on this theory of liability, Naylor Farms moved to certify a class comprising it and other similarly situated royalty owners. 4 In relevant part, Naylor Farms argued that certification was appropriate under Rule 23 because (1) whether Chaparral breached the IDM is a common question, see Fed. R. Civ. P. 23(a)(2) ; and (2) this and other common questions predominate over any individual ones, see Fed. R. Civ. P. 23(b)(3).
In response, Chaparral asserted that whether it breached the IDM isn't a common question because a jury won't be able to answer it without first assessing "individualized issues, including the obligation created by each" individual lease "and the gas produced from each" individual well. App. vol. 2, 410. Further, Chaparral asserted, these individual questions about lease language and gas quality, as well as individual questions about damages, predominate over any common questions Naylor Farms might identify. Thus, Chaparral argued, Naylor Farms cannot satisfy Rule 23's certification requirements.
The district court disagreed and concluded that certification was appropriate. As an initial matter, the court ruled that Naylor Farms identified at least one common question: whether Chaparral breached the IDM. The district court then rejected Chaparral's arguments that answering this common question will require an individualized assessment of either the language that appears in each lease or the quality of the gas that comes from each well. Next, the district court ruled that common questions, including whether Chaparral breached the IDM, predominate over any individual ones. Ultimately, after addressing Rule 23's remaining requirements, the district court granted Naylor Farms' motion to certify. 5 Chaparral now appeals the district court's class-certification order.
Analysis
According to Chaparral, the district court erred in certifying the class under Rule 23. In support, Chaparral advances three discrete arguments. It first asserts the district court erred in failing to recognize that marketability constitutes an individual question-one that necessarily predominates over any common ones in this litigation. It next contends the district court erred in rejecting Chaparral's argument that distinctions in lease language also give rise to individual questions, and that those individual questions likewise predominate. Finally, it insists the district court erred in failing to recognize that in the absence of evidence indicating Chaparral employs a uniform payment methodology, certification is inappropriate. We address each of these arguments in turn.
I. Marketability
As discussed above, the cornerstone of Naylor Farms' class-action lawsuit is its *785 allegation that Chaparral breached the IDM by improperly saddling Naylor Farms and other similarly situated royalty owners with certain gas-treatment costs.
The parties agree that the success of this allegation turns in large part on when the gas at issue became marketable. But they disagree about whether, in assessing marketability, a jury will need to individually analyze the quality of gas that each well produced. And by extension, they also disagree about whether the attendant need to conduct such an individualized assessment renders class certification inappropriate.
To resolve the parties' disagreement on this point, we begin with an overview of Oklahoma state law. We then discuss Rule 23's certification requirements. Next, we explain how the district court applied Rule 23 in the context of Naylor Farms' state-law claims. Finally, we set forth the applicable standard of review and discuss whether, considering that deferential standard, Chaparral's marketability arguments require us to reverse the district court's class-certification order.
A. Oklahoma Law
As discussed in more detail below, the ultimate issue before us in this appeal is whether the district court abused its discretion in concluding that Naylor Farms satisfied Rule 23's certification requirements.
See
Vallario v. Vandehey
,
To the extent we "are called upon to interpret state law" in resolving this appeal, we begin by "look[ing] to the rulings of [Oklahoma's] highest state court."
Stickley v. State Farm Mut. Auto. Ins. Co.
,
In
Mittelstaedt
, the OSC began by explaining that the IDM imparts upon lessees like Chaparral a duty "to provide a marketable product available to market."
We derive two controlling principles from Mittelstaedt . First, Mittelstaedt resolved that when unmarketable gas undergoes GCDTP services for the purpose of transforming that unmarketable gas into a marketable product, the lessee must bear the cost of the GCDTP services. Second, Mittelstaedt resolved that when marketable gas undergoes GCDTP services to enhance the value of gas that is already marketable, the lessee may, under certain circumstances, allocate the cost of the GCDTP services to royalty holders.
Yet Mittelstaedt left unresolved a whole host of other questions. The most obvious are these: What does the term "marketable" mean, and what factors determine when, where, and if gas became marketable for purposes of applying Mittelstaedt 's marketable-product rule?
Notably, the OSC has declined at least two recent invitations to address these questions. See Order Denying Certiorari, Whisenant v. Strat Land Expl. Co. , No. 115,660 (Okla. Oct. 1, 2018); Order Denying Certiorari, Pummill v. Hancock Expl. LLC , No. 114,703 (Okla. May 21, 2018). Further, the OSC declined one of these invitations over the dissenting voices of two of its own members. See Dissent from Order Denying Certiorari, Pummill , No. 114,703 (May 21, 2018) (Winchester, J.) (noting that OSC "should grant certiorari to refine what constitutes a 'marketable product' as that term is used in [ Mittelstaedt ]").
Nevertheless, the Oklahoma Court of Civil Appeals (OCOCA) has attempted to fill the resulting legal vacuum, albeit with somewhat inconsistent outcomes.
See
Whisenant v. Strat Land Expl. Co.
,
In
Whisenant
, for instance, the OCOCA held that the state trial court erred when, in proceeding under
In reversing the district court's certification order, the
Whisenant
court initially expressed its view that the OSC has, "for good reasons," declined to "define the meaning of 'marketable product,' " opting instead to leave the marketability question "open to resolution on a case-by-case basis."
Whisenant
In
Pummill
, on the other hand, a different panel of the OCOCA indicated that, in some circumstances, it may be possible to determine whether gas is marketable without undertaking such a gas-quality assessment. In that case, the state trial court ruled that the gas at issue wasn't marketable "at or near the wellhead" and that instead the gas only became marketable once it "reache[d] the tailgate of" a midstream processing plant-i.e., once the midstream processing company completed certain GCDTP services.
Pummill
,
In reaching that conclusion, the trial court focused not on a qualitative analysis of the gas itself, but on evidence about "the market in which" the defendants (there, the well operator and multiple lessees) "chose[ ] to participate."
The
Pummill
court affirmed.
Notably, en route to affirming the trial court's ruling, the OCOCA declined to adopt Kansas's rule that gas is marketable once it is "acceptable to a purchaser in a good[-]faith transaction."
The OCOCA's 2018 decisions in
Pummill
and
Whisenant
illustrate what has long been clear: although "it is easy to articulate [
Mittelstaedt
's] marketable-product rule, application of it to a particular circumstance is difficult."
Foster v. Apache Corp.
,
B. Rule 23's Certification Requirements
Rule 23 sets forth the requirements for class certification.
8
See
Wal-Mart Stores, Inc.
,
Rule 23(a)(2)'s commonality requirement "is easy to misread."
Wal-Mart Stores, Inc.
,
Rule 23(b)(3)'s predominance requirement is related to, albeit "more demanding than," Rule 23(a)(2)'s commonality requirement.
Comcast Corp. v. Behrend
,
Notably, this doesn't mean a plaintiff must show "that all of the elements of the claim entail questions of fact and law that are common to the class" or "that the answers to those common questions [are] dispositive" of the claim.
CGC Holding Co.
,
Having reviewed the relevant Rule 23 requirements and examined Oklahoma's treatment of the marketability question, we next explain how the district court treated the interplay between the former and the latter in ruling on Naylor Farms' motion to certify.
C. The District Court's Ruling
The district court found that Naylor Farms successfully identified at least one common question: whether Chaparral breached the IDM. 10 And the court then *790 ruled that this common question predominates over any individual ones.
Critically, in doing so, the district court first narrowed the class to include only those royalty owners whose leases contain clauses that are similar to the royalty clauses (collectively,
Mittelstaedt
Clauses) the OSC considered in three cases: (1)
Mittelstaedt
, (2)
TXO Production Corp. v. State ex rel. Commissioners of Land Office
,
Next, the district court rejected Chaparral's argument that in order to determine whether Chaparral breached the IDM, a jury will have to engage in an individualized "well-by-well analysis" to determine when the gas from each well became marketable. Id. at 1149. In rejecting this argument, the district court acknowledged that gas quality might vary from well to well and that, as a result, some gas might require more or different GCDTP services to become marketable than other gas. But the district court explained that in order to determine whether Chaparral breached the IDM, an individualized gas-quality analysis is nevertheless "unnecessary" in this case because, as Naylor Farms demonstrated, all the gas at issue "require[d]" at least one GCDTP service "to become marketable." Id. at 1149, 1151, 1157.
Thus, the district court appeared to recognize, differences in the precise number and nature of GCDTP services required to make the gas from each well marketable are relevant only to the post-breach question of damages. And because Naylor Farms "provided evidence that [its] expert can determine damages on a class[ ]wide basis through use of a model," the district court ruled these distinctions don't defeat predominance. Id. at 1155. Alternatively, the district court pointed out that if necessary, it can divide the class into subclasses at a later date for purposes of determining damages. See Fed. R. Civ. P. 23(c)(1)(C) ("An order that grants or denies class certification may be altered or amended before final judgment."), (c)(5) ("When appropriate, a class may be divided into subclasses that are each treated as a class under this rule."). Accordingly, the district granted Naylor Farms' motion to certify.
D. Our Standard of Review
Our review of the district court's decision is highly deferential. So
*791
long as the district court "applied the proper standard in deciding whether to certify [the] class, we may reverse that decision only for abuse of discretion."
CGC Holding Co.
,
Here, Chaparral doesn't argue that the district court failed to apply the proper Rule 23 standard. Thus, in addressing those arguments Chaparral does make, we must defer to the district court's ruling unless Chaparral shows the district court's certification decision falls outside "the bounds of rationally available choices given the facts and law involved in the matter at hand."
E. Chaparral's Marketability Arguments
Chaparral's primary argument on appeal is that the district court abused its discretion in ruling that Naylor Farms demonstrated commonality and predominance because such a ruling is irreconcilable with Oklahoma's approach to determining marketability. Or, as Chaparral puts it, "Certifying a class of ' Mittelstaedt Clause [l]eases' is contrary to Mittelstaedt ." Aplt. Br. 16.
Recall that, under
Mittelstaedt
, two things are clear. First, when
unmarketable
gas undergoes GCDTP services for purposes of
transforming
the unmarketable gas into a marketable product, a lessee breaches the IDM by passing on to royalty owners the cost of performing those GCDTP services.
See
Mittelstaedt
,
Here, as Chaparral points out, the district court ruled that (1) the question of when the gas became marketable can be answered via generalized, classwide proof and (2) as a result, the marketability question doesn't defeat predominance.
See
Fed. R. Civ. P. 23(b)(3) (allowing for certification if common questions predominate over individual ones);
Tyson Foods, Inc.
,
But according to Chaparral, the district court's ruling on this point rests on a flawed assumption. Specifically, Chaparral contends that in ruling a jury can answer the marketability question without undertaking a well-by-well analysis, the district court relied on the fact that all the gas at issue actually underwent GCDTP services.
*792 And in so ruling, Chaparral argues, the district court made a legally erroneous assumption: it incorrectly assumed that any time gas undergoes GCDTP services, this proves, ipso facto, that the gas wasn't marketable before it underwent those services.
We agree with Chaparral that
if
the district court assumed GCDTP services function solely as a mechanism for transforming unmarketable gas into a marketable product, then the court committed a legal error. As Chaparral correctly points out,
Mittelstaedt
expressly recognizes that sometimes even
marketable
gas undergoes GCDTP services-not to "create a marketable product" but to "transform[ ] an already[-]marketable product into an enhanced" one.
Mittelstaedt
,
That is, contrary to Chaparral's argument, the district court neither ruled nor assumed "that gas must be
unmarketable
if it goes through a processing plant or receives one or more of the GCDTP services." Aplt. Br. 19. On the contrary, the district court expressly recognized that the marketability question turns not on
whether
the gas undergoes GCDTP services, but on whether the gas undergoes GCDTP services "
to become marketable
." App. vol. 5, 1151. Indeed, the district court expressly relied on evidence indicating that all the gas at issue here "require[d] GCDTP services
to be made marketable
" in order to distinguish the facts of this case from those before this court in
Wallace B. Roderick Revocable Living Trust v. XTO Energy, Inc.
,
Alternatively, Chaparral argues that the district court erred in treating marketability as a question of law. Instead, Chaparral asserts, marketability is a question of fact-one that turns, at least in part, on "gas quality." Aplt. Br. 23. And it further insists that because the quality of its gas varies from well to well, a jury will be unable to resolve the marketability question *793 (and, by extension, the question of whether Chaparral breached the IDM) without performing a well-by-well analysis to determine whether any of the gas at issue was marketable at the wellhead. Thus, Chaparral insists, the district court abused its discretion in failing to recognize that marketability defeats commonality and predominance.
In evaluating this argument, we need not resolve whether the district court treated marketability as a question of law or a question of fact. Nor must we resolve whether, if the district court indeed treated marketability as a question of law, it erred in doing so.
12
Even assuming Chaparral is correct on both points, that doesn't necessarily mean Chaparral is entitled to reversal. On the contrary, "we may affirm on any basis supported by the record, even if it requires ruling on arguments not reached by the district court."
Richison
, 634 F.3d at 1130. That is, we have a "preference for affirmance"-one that "follows from the deference we owe to the district courts and the judgments they reach, many times only after years of involved and expensive proceedings."
Id.
And "[b]ecause of the cost and risk involved anytime we upset a court's reasoned judgment, we are ready to affirm whenever the record allows it."
Id.
Thus, to demonstrate it is entitled to reversal, Chaparral must "shoulder a heavy burden": it "must come ready
both
to show" that the district court erred and "to explain why no other grounds" will allow us to affirm the district court's decision.
Id.
For the reasons discussed below, we conclude that in light of the OCOCA's persuasive reasoning in
Pummill
, Chaparral cannot shoulder the second part of this heavy burden here.
See
West v. Am. Tel. & Tel. Co.
,
In
Pummill
, the OCOCA relied heavily on two factors in affirming the state trial court's ruling that the gas at issue wasn't marketable before it underwent GCDTP services. As an initial matter, the OCOCA pointed out that the first "
actual sale
" of the gas occurred not when the defendants transferred the gas to a midstream processing company, but instead "at the 'tailgate' of the [processing] plants, where [the gas was] transferred into high-pressure lines."
Here, Naylor Farms has presented evidence of these same two factors. More importantly, it has presented
classwide
evidence of these same two factors.
See
Tyson Foods, Inc.
,
In short, the district court's ruling that marketability is subject to classwide proof under the specific facts of this case is entirely consistent with the OCOCA's decision in
Pummill
. Thus, Chaparral faces an uphill climb in attempting to show that this particular ruling rests on an error of state law.
See
West
,
In
Whisenant
, the OCOCA held that the state trial court erred in certifying a class of Oklahoma royalty owners under Oklahoma's analog to Rule 23, reasoning that a "highly individualized and fact-intensive review of each [class member's] claim," as informed by the quality of gas at each individual well, "would be necessary to determine if" the defendant in that case breached the IDM.
In light of
Whisenant
's similar procedural posture, Chaparral's argument isn't without appeal. But because that argument overlooks a critical aspect of
Whisenant
's analysis, we ultimately reject it. That is, the
Whisenant
court did hold that,
in that particular case
, "determinations of the quality of gas and other facts pertinent to each well" weren't "susceptible to generalized proof."
Critically, the facts in
Pummill
(and, by extension, the facts in this case) fit comfortably in the space "left ... open" by
Whisenant
.
II. Lease Language
Next, Chaparral asserts that even if gas-quality variations don't pose a bar to certification, lease-language variations do. Specifically, Chaparral asserts that "[a]t trial, every one of the contracts will have to be considered individually, defeating commonality and predominance." Aplt. Br. 27-28. But the district court concluded otherwise, ruling that its decision to limit the class to leases containing a Mittelstaedt Clause renders such an individualized analysis unnecessary. 14
In challenging this conclusion, Chaparral first asserts the district court abdicated its duty to determine which leases actually contain a
Mittelstaedt
Clause and instead merely "satisfied itself with [Naylor Farms'] contentions" that this is so.
Id.
at 28. We disagree. As the district court noted, Naylor Farms prepared a chart that "categorized" the leases at issue "by royalty[-]clause language." App. vol. 5, 1143. And we have previously indicated that this is precisely what a plaintiff should do to establish commonality under these circumstances.
See
Roderick
,
Like Naylor Farms, the plaintiffs in
Roderick
asserted that each class member's lease contained an IDM.
Here, Naylor Farms created such a chart. And contrary to Chaparral's assertions, the district court independently "confirmed that" the chart was "generally accurate." App. vol. 5, 1147. Notably, Chaparral doesn't provide us with any information that might call into question the district court's assessment of the chart's accuracy. Instead, Chaparral merely asserts that because there exist distinctions between the facts in this case and the facts in
TXO
,
Perhaps these "facts" will ultimately be relevant to the merits question of whether Chaparral
breached
the IDM.
Id.
Perhaps not. Either way, we fail to see how they might be relevant to the question of whether, as a threshold matter, the class leases
contain
an IDM. And the chart was designed to aid the district court in answering the latter question, not the former one.
See
Roderick
,
Here, Chaparral offers no further explanation regarding the relevance of these "facts" vis-à-vis the district court's Rule 23 inquiry. Aplt. Br. 28;
see also
Amgen Inc. v. Conn. Ret. Plans & Tr. Funds
,
Chaparral's remaining arguments about lease language rest on its assertions that (1) the leases at issue contain multiple royalty provisions and (2) the interplay between these royalty provisions renders the leases ambiguous. According to Chaparral, this ambiguity would entitle Chaparral to present individualized extrinsic evidence of "the intent of the parties and the meaning of the leases" at trial, including "exhibits [and] interlineations" to each individual lease, as well as evidence about industry customs in effect "when the various leases were executed." Aplt. Br. 33-36.
But as Naylor Farms points out, Chaparral didn't advance this specific extrinsic-evidence argument below as a basis for denying Naylor Farms' motion to certify the class. Instead, Chaparral merely asserted that, as a general matter, "differences in royalty obligations" and lease language defeat commonality and predominance. 15
*797
App. vol. 2, 411. Critically, our "rule against considering new arguments on appeal applies equally when 'a litigant changes to a new theory on appeal that falls under the same general category as an argument presented at trial.' "
United States v. Nelson
,
Alternatively, even assuming Chaparral preserved its extrinsic-evidence argument below, it fails to adequately brief this argument on appeal. This is so because Chaparral fails to identify any
specific
extrinsic evidence-in the form of an exhibit, interlineation, or industry custom-that might allow a jury to conclude that Chaparral breached the IDM as to one lease but not another.
See
Fed. R. App. P. 28(a)(8)(A) (requiring argument section of appellant's brief to contain "appellant's contentions and the reasons for them, with citations to the authorities and parts of the record on which the appellant relies");
Bronson v. Swensen
,
In its final lease-language argument, Chaparral asserts that individual variations in its agreements with midstream processing companies , rather than in its agreements with Naylor Farms and other royalty owners, defeat commonality and predominance. In support, Chaparral says Naylor Farms' underlying legal theory is that Chaparral committed fraud by using wellhead sales contracts to circumvent Oklahoma law. And to evaluate this theory, Chaparral contends, a jury will have to conduct an individualized inquiry to determine whether Chaparral entered into each of those wellhead sales contracts in good faith.
But this argument overlooks the fact that the district court declined to certify Naylor Farms' fraud claim. And Chaparral cites no authority indicating that whether it entered into the wellhead sales contracts in good faith is dispositive of, or even relevant to, the claims the district court did certify. Accordingly, we find this argument inadequately briefed and decline to consider it as well.
See
Fed. R. App. P. 28(a)(8)(A) ;
Bronson
,
III. Uniform Payment Methodology
As a final matter, Chaparral asserts Naylor Farms failed to demonstrate that Chaparral uses a uniform payment methodology to calculate royalty payments and that this "lack of a common payment methodology defeats class certification." Aplt. Br. 39.
We have indeed explained that the existence of a uniform payment methodology, standing alone, isn't
sufficient
to establish predominance.
See
Roderick
,
We see no indication that will occur here. On the contrary, as the district court pointed out, Naylor Farms "provided evidence that [its] expert can determine damages on a class[ ]wide basis through use of a model," thus obviating the need for individualized evidence. App. vol. 5, 1155;
see also
Tyson Foods, Inc.
,
Conclusion
For the reasons discussed above, we conclude that Chaparral fails to demonstrate the district court's decision to certify the class falls outside "the bounds of rationally available choices given the facts and law involved in the matter at hand."
CGC Holding Co.
,
The parties agree that Oklahoma substantive law controls.
The contracts fall into two categories: percentage-of-proceeds (POP) contracts and percentage-of-liquids (POL) contracts. The vast majority of the contracts at issue are POP contracts. Under a POP contract, the midstream processing company takes possession of the entire gas stream, processes the gas, sells it to a downstream purchaser, and then pays Chaparral a percentage of the resulting proceeds. Under a POL contract, the midstream processing company obtains (1) possession of and title to the natural gas liquids (NGLs) and (2) possession of (but not title to) the residue gas at the wellhead. Chaparral retains title to the residue gas, which the midstream processing company returns to Chaparral after performing certain GCDTP services. The midstream processing company then charges Chaparral a fee for performing the GCDTP services and also retains the NGLs.
Under a POL contract, the midstream processing company charges a fee and retains the NGLs.
After Naylor Farms moved to certify, Chaparral filed for bankruptcy. The bankruptcy court initially imposed an automatic stay on the underlying proceedings. But it then partially lifted that stay so the district court could rule on Naylor Farms' motion to certify.
The district court excluded Naylor Farms' fraud claim from the class-certification order.
In
Mittelstaedt
, the OSC discussed "separation, dehydration, compression, and treatment" but didn't mention gathering or transporting.
Section 2023(B)(3) is Rule 23(b)(3)'s state-law counterpart.
See
Whisenant
,
Rule 23's requirements inform our analysis of each of the three discrete arguments Chaparral presents on appeal. See infra Sections II, III.
Chaparral asserts that "Rule 23 includes an 'implied requirement of ascertainability' " and that Naylor Farms cannot satisfy this "implied requirement" here. Aplt. Br. 14 (quoting
Brecher v. Republic of Argentina
,
Chaparral contends the district court erred in concluding that the threshold issue of whether each lease contains an IDM is "in and of itself" a common question. Aplt. Br. 11. As an initial matter, we disagree with the premise of this argument; at most, it appears the district court treated the existence of the IDM " and its alleged breach" as a compound common question. App. vol. 5, 1154 (emphasis added).
In any event, even assuming the district court treated the existence of the IDM as a standalone common question and even assuming it erred in doing so, the error was harmless; the district court correctly concluded that
whether Chaparral breached the IDM
is a common question.
See
Wal-Mart Stores, Inc.
,
In asserting that gas can be marketable at the wellhead, Chaparral appears to rely in part on its position that the gas at issue here was in fact marketable at the wellhead-because (according to Chaparral) that is where Chaparral first "sold" the gas "to a [midstream processing company] in a good[-]faith transaction." Aplt. Br. 20; see also id. at 18 ("Gas is in marketable condition once it can be marketed.").
As an initial matter, we question whether the OSC would adopt this good-faith-transaction test for marketability.
See
Pummill
,
We nevertheless note in passing that it appears Oklahoma indeed treats marketability as question of fact.
See, e.g.
,
Whisenant
,
Notably, despite Chaparral's insistence that a well-by-well analysis is necessary to determine when the gas became marketable, Chaparral fails to point to any evidence in the record indicating that such an individualized analysis would yield a different conclusion.
Naylor Farms asserts we should take judicial notice of certain briefing in Mittelstaedt because, according to Naylor Farms, that briefing sheds additional light on the lease language at issue in Mittelstaedt as well as the arguments the parties made about that language. Because we conclude we may resolve Chaparral's lease-language arguments without this additional information, we deny Naylor Farms' motion to take judicial notice.
In its reply brief, Chaparral asserts for the first time that it raised an extrinsic-evidence argument in its response to Naylor Farms' motion for summary judgment. We agree that Chaparral's response to Naylor Farms' summary-judgment motion refers to what might be classified as extrinsic evidence. But we see no argument there that the need to examine such evidence precludes certification . Nor do we see any indication that the district court ever ruled on such an argument.
Reference
- Full Case Name
- NAYLOR FARMS, INC. ; Harrel's LLC, Plaintiffs-Appellees, v. CHAPARRAL ENERGY, LLC, Defendant-Appellant, Black Stone Minerals Company, L.P., Amicus Curiae.
- Cited By
- 52 cases
- Status
- Published