In a case that could signal a wave of similar type lawsuits for the oil and gas industry, an Ohio trial court recently granted a motion for class certification in an action filed against a Utica Shale driller seeking to invalidate hundreds of oil and gas leases in Monroe and Belmont counties.
In Hupp v. Beck Energy Corp., three landowners filed suit claiming that their leases with Beck Energy Corp. were void and should be terminated because Beck never drilled wells on their property and that a provision allowing Beck to pay a nominal delay rental was against public policy. The Court agreed and granted summary judgment.
Two weeks later, Plaintiffs filed a motion for class certification. XTO Energy, a subsidiary of ExxonMobil Corp., then sought leave to intervene in the action since Beck had sold the Plaintiffs’ deep drilling rights to XTO as part of a larger transaction in December of 2011.
The Court noted that there were potentially six to seven hundred plaintiffs and that the leases in question were all identical except for a few blanks which would be filled in for the date of the lease, the names and addresses of the lessors and the property descriptions.
As a result, the Court found that the individual joinder of all the parties in the original suit was impractical and that, because there existed questions of law and fact that were common to the class, a class action was the appropriate vehicle.
In addition to issuing its order on the issue of class certification, the Court denied XTO’s request to intervene in the litigation, ruling that when Beck entered into the purchase agreement with XTO for the sale of the leases, XTO was put on notice of the litigation and its potential consequences before finalizing the deal. As such, they could not try to intervene almost a year after the case was filed and more than nine months after acquiring the leases from Beck.
Both Beck and XTO have not indicated whether they will appeal the trial court’s decisions. Either way, one should expect more challenges by land owners to try to terminate existing leases in an effort to take advantage of the recent leasing boom in Ohio.
This article was authored by John W. Bruni, Jackson Kelly, PLLC. For more information on the author, see here.