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Ulibarri v. Energen Resources Corp.

United States District Court, D. New Mexico

February 26, 2019

GERALD ULIBARRI, Plaintiff,
v.
ENERGEN RESOURCES CORPORATION, Defendant.

          MEMORANDUM OPINION AND ORDER

          ROBERT C BRACK SENIOR U.S. DISTRICT JUDGE.

         This matter is before the Court on Plaintiff's Motion for Leave to Amend the Case Management Order Setting Deadlines for Filing Amended Claims and Adding Additional Parties and Motion for Leave to File a Second Amended Class Action Complaint. (Doc. 33.) Jurisdiction arises under 28 U.S.C. § 1332. Having considered the submissions of counsel and relevant law, the Court will GRANT IN PART Plaintiff's motion.

         I. Background

         Plaintiff brings this putative class action on behalf of himself and other class members to recover proceeds they are allegedly owed under Royalty Agreements with Defendant Energen Resources Corporation (Energen). Plaintiff filed both his original Class Action Complaint (Doc. 1) and his First Amended Class Action Complaint (Doc. 3 (Am. Compl.)) on March 29, 2018. Plaintiff brings claims for breach of contract and violation of the New Mexico Oil and Gas Proceeds Payment Act. (See Id. ¶¶ 35-41.) Energen filed its Answer and Counterclaim on May 25, 2018. (Doc. 9.)

         The Court filed its Order Setting Case Management Deadlines and Discovery Parameters for Pre-Class Certification Discovery on August 3, 2018. (Doc. 27.) The Court imposed a deadline of September 14, 2018, for Plaintiff to move to amend his pleadings or add additional parties. (Id. at 2.) Non-expert discovery pertaining to class certification ended on November 30, 2018. (Id.) The Court imposed a briefing schedule for Plaintiff's motion for class certification, with the motion due on March 11, 2018, and briefing complete on April 26, 2019. (See Doc. 28; deadlines extended by Doc. 69.)

         Following certification-related discovery, Plaintiff filed this motion to amend. He seeks to file a Second Amended Class Action Complaint with three changes: (1) the removal of allegations related to tolling under the applicable statute of limitations (see Am. Compl. ¶ 28); (2) the addition of White River Royalties, LLC (White River) as an additional named plaintiff; and (3) the amendment of the class definition to include two newly discovered types of Royalty Agreements. (See Doc. 33 at 1-2.) With respect to the third change, Plaintiff's proposed class in the Second Amended Complaint would include “[a]ll persons and entities to whom Energen paid royalties on natural gas produced by Energen from wells located in the state of New Mexico between March 29, 2012[, ] and May 31, 2015, pursuant to leases or overriding royalty agreements (collectively, ‘Royalty Agreements')” that contain one of the following types of royalty provisions:

[(1)] a royalty provision which obligated Energen to pay royalties based on a specified percentage of “the proceeds of the gas, as such, for gas from wells where gas only is found, ” (“proceeds royalty provision”)[; (2)] a royalty provision which obligate[d] Energen to pay royalties based upon a specified percentage “of the gross proceeds each year, payable quarterly, for the gas from each well where gas only is found” (“gross proceeds royalty provision”)[; (3)] a royalty provision which obligate[d] Energen to pay royalties based upon a specified percentage “of the gross proceeds at the prevailing market rate” (“gross proceeds at the prevailing market rate royalty provision”)[; (4)] a royalty provision which obligate[d] Energen to pay royalties based upon a percentage of the greater of “(i) the market value of the product sold or used in a condition acceptable for delivery to a transmission pipeline, or (ii) the gross proceeds received by Lessee upon arm[']s length sale of such as conditioned for delivery to a transmission pipeline” (“greater of market value or gross proceeds royalty provision”)[; or (5)] a royalty provision which obligate[d] Energen to pay royalties based upon a specified percentage of the gross proceeds without “deduction from the value of Lessor's royalty by reason of any required processing, cost of dehydration, compression, transportation, or other matter associated with marketing gas produced from the lands covered hereunder” (“gross proceeds without deduction of post-production costs royalty provision”).

(Doc. 33-1 (2d Am. Compl.) ¶ 1.) The fourth and fifth types of Royalty Agreements in this list are new to the Second Amended Complaint. (See Doc. 33 at 2.) Plaintiff's substantive allegations and claims for relief remain unchanged. (Compare Am. Compl., with 2d Am. Compl.)

         Energen does not oppose removing the allegations regarding the statute of limitations, but it does oppose the other two changes. (See Doc. 36.) Energen contends that Plaintiff learned of the information that forms the basis for his motion in late August 2018; thus his motion-filed approximately four weeks after the deadline to file a motion to amend-is untimely. (See Id. at 3.)

         At the heart of Plaintiff's case are leases that Energen originally had an interest in. (See Id. at 2-3.) Energen sold most of its interest in the leases to Southland Royalty Company (Southland) in March 2015.[1] (Id.) In fact, Plaintiff has a related case pending in this Court against Southland. See Ulibarri v. Southland Royalty Co., 16cv0215 RB-JHR (D.N.M.) (the “Southland litigation”). Plaintiff has received similar discovery consisting of approximately 300 leases from both Energen and Southland, as many leases that Southland currently holds were formerly held by Energen. (See Doc. 36 at 2-3.)

         On August 15, 2018, Southland produced leases that contained the two new royalty provisions that Plaintiff seeks to add to the class definition. (See Doc. 33 at 3.) On August 29, 2018, Energen produced leases with the “gross proceeds without deduction of post-production costs” royalty provision language, but no lease containing the “greater market value or gross proceeds royalty provision” language.[2] (See Doc. 44 at 6.) On September 17, 2018, Plaintiff's counsel (Mr. Robert Harken) gave Energen's counsel a list of the leases Southland had produced but Energen had not, in an effort to help Energen complete its production. (See Docs. 33 at 7; 33-4.) Presumably, these leases included the two new royalty provisions. Energen's counsel responded on October 5, 2018, and produced some, but not all of the leases on Plaintiff's list. (See Doc. 33-5.) Energen's counsel stated that it had no intention to produce lease agreements with the “greater market value or gross proceeds royalty provision” language, because that provision does not appear in the First Amended Complaint's class definition. (See id.)

         On August 30, 2018, Southland produced discovery that identified White River as a potential class member. (Doc. 33 at 6.) Because White River is a long-time client of Plaintiff's counsel, Mr. Harken reached out to White River to determine whether and under what lease agreements it had received royalties from Energen. (Id.) “On September 13, 2018, White River Royalties confirmed it had received royalties from Energen . . . .” (Id.) Energen produced data on September 19, 2018, that identified White River as a potential class member. (Id.) White River has asked Mr. Harken “to participate in this litigation as a named Plaintiff.” (Doc. 33 at 4 (citing Doc. 33-2 ¶ 4).)

         II. Legal Standards

         Rule 15 allows a party to amend its pleading once as a matter of course in limited circumstances. Fed.R.Civ.P. 15(a)(1). Otherwise, a party may only amend its pleading with “opposing party's written consent or the court's leave.” Fed.R.Civ.P. 15(a)(2). Rule 15 directs that leave shall be freely given “when justice so requires.” Id. “The purpose of the Rule is to provide litigants ‘the maximum opportunity for each claim to be decided on its merits rather than on procedural niceties.'” Minter v. Prime Equip. Co., 451 F.3d 1196, 1204 (10th Cir. 2006) (quoting Hardin v. Manitowoc-Forsythe Corp., 691 F.2d 449, 456 (10th Cir. 1982)). A court may deny a motion for leave to amend where there has been “undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to ...


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