The United States District Court for the Southern District of Texas denied class certification last week in a putative oil and gas royalty class action against Baker Botts client Talisman Energy USA, Inc., which alleged misallocation of production and underpayment of royalties in the company’s Eagle Ford shale operations.
Plaintiffs brought the action in May 2016 on behalf of nearly 4,000 royalty owners in the Eagle Ford shale against Talisman Energy USA, Inc. The plaintiffs claimed that Talisman breached the leases by using volumetric allocation and by miscalculating production volumes compressed during processing and treatment.
Adding to the novelty of the claim, the plaintiffs sought damages under a “confusion of goods” and commingling theory that would have entitled each royalty owner to a proportionate share of the total production from large central development processing facilities.
“We are pleased with the court’s decision,” said Baker Botts partner Jason Newman. “This ruling recognizes the realities of modern shale development—namely, the widespread use of central processing facilities to aggregate production under oil and gas leases that vary in terms.”
“It also protects putative class members by ensuring that they are not swept up in a class action that is unsuitable for mass adjudication,” added Baker Botts partnerAaron M. Streett.
Baker Botts was brought into the case to litigate the class-certification issues. Central to the firm’s argument was that issues regarding typicality, adequacy, predominance and superiority precluded class treatment. After numerous rounds of briefing and three class-certification hearings, the court agreed with these legal arguments and evidence showing that the plaintiffs’ claims would create irreconcilable intraclass conflicts by advocating for volume-allocation methods that would help some class members while hurting others.
The court also found that differences in the language of the thousands of individual leases presented individualized issues that would predominate over common issues at trial. The court accepted the firm’s argument that the damages determination would have required thousands of individual calculations and adjustments.
Talisman entered the Eagle Ford Shale region, located south of San Antonio, in 2010. Repsol acquired Talisman in 2015.
The case is Regmund et al. v. Talisman Energy USA, Inc., Civil Action No. 4:16-CV-02960, in the United States District Court for the Southern District of Texas.
The Baker Botts team representing Talisman included partners Aaron M. Streett,Jason Newman, and Louie Layrisson; senior associates Tina Nguyen, Mark Little, andJustin Lipe; and associates Travis Gray, Laura Shoemaker, and Margaret Wittenmyer. Liskow & Lewis served as co-counsel.
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