Tuesday, March 12, 2013

XTO and Beck Energy Appeal Ohio Judge’s Decisions

XTO and Beck Energy are now attempting to appeal adverse decisions by the trial court in the Monroe County (Ohio) Common Pleas case, Hupp v. Beck Energy Corp.  The plaintiff landowners filed suit against Beck Energy claiming their leases with Beck Energy were void and should be terminated because Beck never drilled wells on their properties. According to the trial court’s decision, a range of three to nine years had elapsed since the various plaintiffs executed their leases.    The trial court granted summary judgment to the Plaintiffs on July 31, 2012, finding that the leases violated Ohio’s public policy encouraging oil and gas production.  The trial court also held that Beck Energy breached the implied covenant to reasonably develop the land by failing to drill any wells on any acreage under the leases.  The trial court then forfeited all of Beck Energy’s rights to the oil and gas under the plaintiffs’ properties.

On August 28, 2012, Beck Energy appealed the trial court’s decision granting summary judgment.  The Seventh District Court of Appeals, however, held that the appeal was premature and delayed the filing of Beck Energy’s appellate brief until after a final order was issued by the trial court.  While Beck Energy’s appeal was placed on hold, the plaintiffs filed a motion to certify a class action against Beck Energy.  The plaintiffs alleged there were more than 600 to 700 landowners that executed the same form oil and gas lease with Beck Energy.  On February 8, 2013, the trial court granted the plaintiffs’ motion for class certification finding that all of the properties were covered by the same leases with the same basic terms.  The trial court then held this was a final appealable order, and Beck Energy’s appeal of the decision granting summary judgment could go forward.  On March 7, 2013, Beck Energy filed another notice of appeal of the decision and order certifying the class action.

After Beck Energy’s original appeal was filed, XTO Energy filed a motion to intervene as a necessary party on September 7, 2012.  XTO purchased Beck Energy’s “deep rights” to plaintiffs’ leases.  The purchase took place on November 9, 2011, after the plaintiffs filed the initial complaint against Beck Energy on September 14, 2011 and the Amended Class Action Complaint on September 29, 2011.  Because XTO purchased the “deep rights” to the plaintiffs’ leases after the lawsuit was filed, the trial court denied XTO’s motion to intervene.  The trial court relied on the fact that all of the parties with interest in the leases were parties to the lawsuit when it was filed, and XTO was not a necessary party.    The trial court also relied on the fact that the sales agreement between XTO and Beck Energy provided that Beck would defend title to the leases, which Beck did attempt to do. 

On March 1, 2013, XTO appealed the trial court’s denial of its motion to intervene, as well as the trial court’s order granting summary judgment and class certification.  Plaintiffs then filed a motion to dismiss XTO’s appeal on March 8, 2013, challenging XTO’s ability to appeal the decisions granting summary judgment and class certification.

Both Beck Energy and XTO have now taken this case to the Ohio Court of Appeals in an attempt to reverse the trial court’s decisions voiding the Beck Energy leases and certifying a class action.  Appellate briefs have not yet been filed as both landowners and the oil and gas industry await the outcome and ultimate effect of the trial courts decisions.

For more information, please contact Paul Garinger at pgaringer@lgcr.com.