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Cooper Clark Foundation v. Oxy USA Inc.

United States District Court, D. Kansas

March 27, 2019

COOPER CLARK FOUNDATION, On behalf of itself and All others similarly situated, Plaintiff,
v.
OXY USA INC., Defendant.

          MEMORANDUM AND ORDER

          JOHN W. BROOMES UNITED STATES DISTRICT JUDGE

         This case comes before the court on Plaintiffs' motion to remand. (Doc. 11.) The motion has been fully briefed and is ripe for decision. (Docs. 16, 19, 26, 27.) Plaintiffs' motion is DENIED for the reasons set forth herein.

         I. Procedural History and Relevant Facts

         In 2016, Plaintiffs[1] filed three putative class actions in the state courts of Kansas: Cooper Clark Foundation v. Oxy USA Inc., No. 2016-cv-000039 (Grant County); Cooper Clark Foundation v. Oxy USA Inc., No. 2016-cv-000017 (Haskell County); and Phillip Fink v. Oxy USA Inc., No. 2016-cv-000013 (Morton County). All three actions allege improper deductions and fees related to processing and marketing natural gas under three different gas agreements. Each separate action brings a suit on behalf of a specified class under K.S.A. 60-223(a) and (b)(3) alleging a breach of implied covenants of oil and gas lease agreements to which Oxy and the putative class members were parties. Plaintiffs allege that Oxy entered into oil and gas leases to obtain the best reasonable price for the gas products but failed to pay on the full volume of gas products.

         The Grant County action was filed by Plaintiff Cooper Clark Foundation on December 20, 2016. The putative class is as follows: “All royalty owners [in] Kansas wells: (a) where OXY USA Inc. was the operator (or, as a non-operator, separately marketed gas); (b) who were paid royalties for production of gas, NGLs, or Helium from July 1, 2007 to April 30, 2014; and (c) whose gas was originally marketed by OXY USA Inc. under the August 1, 2005 gas contract, as amended.” (Doc. 1, Exh. 2 at 13.)

         The Haskell County action was filed by Plaintiff Cooper Clark Foundation one day later on December 21, 2016. The putative class is as follows: “All royalty owners [in] Kansas wells: (a) where OXY USA Inc. was the operator (or, as a non-operator, separately marketed gas); (b) who were paid royalties for production of gas, NGLs, or Helium from July 1, 2007 to April 30, 2014; and (c) whose gas was originally marketed by OXY USA Inc. under the December 1, 2005 gas contract, as amended.” (Doc. 1, Exh. 4 at 13.)

         The Morton County action was filed by Phillip Fink on November 15, 2016. The putative class was originally defined as follows: “All royalty owners in Morton County, Kansas wells: (a) where OXY USA Inc. was the operator (or, as a non-operator, separately marketed gas); (b) who were paid royalties for gas, NGLs, or Helium from July 1, 2007 to April 30, 2014; and (c) whose gas was marketed by OXY USA Inc. under the Sept. 1. 2003 gas contract, as amended.” (Doc. 1, Exh. 6 at 13.)[2]

         In all three actions, the petitions reference a prior class action, Littell, et al. v. OXY USA, Inc., No. 98-CV-51 (Kan. Dist. Ct. Stevens Cty), which previously settled claims regarding the deductions of midstream gathering, compression, dehydration, and treatment (“GCDT”) costs incurred before the processing plant. Plaintiffs' current claims are based on deductions after the processing plant inlet. Moreover, Plaintiffs' petitions also reference a previous class action that was originally filed in Kearny County and then removed to this court, Wallace B. Roderick Revocable Living Trust v. OXY USA, Inc., No. 12-cv-01215-EFM-GEB. Plaintiffs represent that the three actions are the result of Judge Melgren's decision decertifying the Roderick case, in which Judge Melgren “suggested that the case might have to be certified on a gas contract-by-gas contract basis.” (See, e.g., Doc. 1, Exh. 6 at n. 1.) Plaintiffs' petitions state that Judge Melgren's decision to decertify resulted in Plaintiffs filing a dismissal without prejudice of the Roderick action and then filing separate actions in state court. (Id.) Plaintiffs contend that the state cases were filed on a gas contract-by-gas contract basis “following Judge Melgren's lead.” (Doc. 11 at 3.)

         The three actions had been pending for some time in state court and, in early 2018, Plaintiffs moved to consolidate the three actions pursuant to K.S.A. 60-242(a). Oxy opposed the motion to consolidate. On July 11, 2018, Judge Ambrosier granted the motion as follows:

The Kansas Supreme Court has held that a district court may consolidate an action pursuant to K.S.A. 60-242(a) when there is a common question of law or fact. Schwartz v Western Power & Gas Co., 208 Kan. 844, 852, 494 P.2d 1113, 1120 (1972). The Court believes that there exists common issues in the three (3) pending cases, which justifies consolidation.
In their response to Plaintiff's motion, Defendant does not seriously dispute that a common question exists. Defendant, however, instead focuses their argument upon the procedural history and the current Case Management Conference Orders filed in each case. It is true that this ruling will require that the parties enter into an amended Case Management Conference Order for all three (3) cases. It is also true that this order places these cases in a similar position as to where they were prior to the Federal Court's order on decertification. While the Court is sympathetic to Defendant's plight of being right back in the same position they were and understands that this decision makes their victory in Federal Court somewhat hollow, that does not change the fact that, pursuant to Kansas statute, these cases are proper for consolidation.
IT IS THEREFORE ORDERED, ADJUDGED and DECREED that Plaintiff's Motion for Consolidation is granted. Counsel for Plaintiff shall prepare a journal entry consistent with this decision and submit the same to Defendant's counsel for signature. The cases shall be consolidated under Grant County Case 2016-CV-39 and all hearings will be held in Grant County with Judge Ambrosier. This Court is authorized to inform counsel that Judge Gilmore has reviewed the transcript of the hearing, concurs with this decision of the Court and Morton County Case 2016-CV-13 is consolidated as well.
The parties shall attempt to enter an agreed Amended Case Management Conference Order, if they are unable to do so, Mr. Sharp shall set a conference call with the Court so that new deadlines may be established.

(Doc. 16, Exh. A.)

         On August 7, 2018, Plaintiffs filed a motion to amend the class action petitions for the Morton County and Grant County cases. (Doc. 7.) Plaintiffs did not move to amend the Haskell County petition because that petition had been amended prior to consolidation. (Doc. 7 at 1.) Notably, the motion to amend states that Plaintiffs sought to amend the Morton and Grant County petitions in order to “conform the allegations” to those in the Haskell County amended petition. (Doc. 7 at 2.)

         Oxy filed a notice of removal on August 9, 2018. (Doc. 1.) Oxy alleged that this court has jurisdiction under the Class Action Fairness Act of 2005 (“CAFA”), 28 U.S.C. § 1332(d), and 28 U.S.C. § 1453. Plaintiffs have now filed a motion to remand. (Doc. 11.) Plaintiffs contend that the amount in controversy does not exceed $5, 000, 000 unless the court considers the total amount for all three actions that were consolidated by the state court.[3]

         After reviewing the briefs in this matter, the court held a motion hearing. (Doc. 25.) At the hearing, the court concluded, and the parties agreed, that the key issue in evaluating subject matter jurisdiction in this case is whether consolidation of these cases in Kansas state court resulted in a merger of the consolidated cases. The court allowed the parties to file supplemental briefs to address the issue. Those briefs have now been filed. (Docs. 26, 27.) The court's order is based on the record developed by the parties.

         II. ...


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