Tenth Circuit: Operator Payment Records Satisfy Administrative Feasibility for Royalty Class Certification Without Title Searches
The Tenth Circuit reversed denial of class certification in a Hugoton Gas Field royalty dispute, holding that Merit Energy's business records identifying 1,900+ royalty payees satisfied administrative feasibility without requiring individualized title searches for each claimant. The court rejected OXY's argument that proof of record title ownership was necessary at the certification stage when the operator maintains payment records tied to a 2008 settlement agreement capping gathering charges at $0.15/mmbtu.
Background
Cherry Rider brought a putative class action against OXY USA, Inc. challenging royalty payments in the Hugoton Gas Field in Kansas. Merit Energy, as operator, maintained business records identifying over 1,900 royalty payees whose payments were tied to a 2008 settlement agreement that limited gathering charges to $0.15/mmbtu.
The Class Certification Dispute
The central issue on appeal was whether plaintiffs satisfied the administrative feasibility requirement for class certification under Rule 23. OXY argued that identifying class members required individualized title searches to prove record title ownership for each of the 1,900+ claimants, making class treatment administratively impracticable. Plaintiffs countered that Merit Energy's existing payment records, which tracked royalty payees subject to the 2008 settlement agreement's $0.15/mmbtu gathering charge limitation, provided a sufficient basis for identifying class members without resort to county land records.
The Tenth Circuit's Analysis
The Tenth Circuit reversed the district court's denial of class certification, holding that administrative feasibility was satisfied by the operator's business records. The court rejected defendants' contention that proof of record title ownership was required for every claimant at the certification stage. The panel held that when an operator maintains payment records tied to a specific settlement agreement governing gathering charges, those records provide an administratively feasible method for identifying class members.
Implications for Royalty Litigation
The ruling establishes that in the Tenth Circuit, internal business records tracking royalty payments under settlement agreements may be sufficient to support class certification when thousands of potential claimants are involved. For operators in Kansas and other Tenth Circuit jurisdictions, the decision means that maintaining systematic payment records can satisfy the administrative feasibility requirement for class certification purposes, even without individualized title verification at the certification stage.