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Devon Energy Production Company, L.P.

CASE CAPTION         In re Seeligson v. Devon Energy Production Company, L.P.
COURT United States District Court for the Northern District of Texas
CASE NUMBER 3:16-cv-00082
JUDGE Honorable Ed Kinkeade
PLAINTIFFS Henry Seeligson, John M. Seeligson, Suzanne Seeligson Nash, and Sherri Pilcher
DEFENDANT Devon Energy Production Company, L.P.
CLASS PERIOD January 1, 2008 through February 28, 2014

On October 24, 2014, Plaintiffs brought this class action to recover damages for Devon Energy Production Company, L.P.’s (“DEPCO”) unlawful calculation and intentional underpayment of millions of dollars in royalties owed to Plaintiffs and other lessors for the extraction of oil and gas from their Texas properties that was moved, gathered, transported and/or processed through the Bridgeport Gas Processing Plant. Specifically, DEPCO breached its duty to market by selling the raw, unprocessed gas to its corporate affiliate, Devon Gas Services, LP (“DGS”), at the wellheads at a price impacted by an unreasonably high processing fee. DEPCO then passed this processing fee on to the royalty owners. As a result, DEPCO imposed hidden fees on Plaintiffs and Class members that were not related to actual or reasonable costs, which were pocketed by its corporate affiliate. In fact, DEPCO imposed artificially inflated fees as high as 17.5% of the price of the gas flowing through the Bridgeport Plant.

The Parties engaged in significant discovery and Plaintiffs moved to certify the action as a class action on June 11, 2015. The Court first granted class certification on May 4, 2016, and DEPCO appealed that decision to the Fifth Circuit. The Fifth Circuit affirmed most of the Court’s findings, including, without limitation, that (i) the Class was ascertainable, (ii) all of the class leases imposed the same duty to market on DEPCO, and (iii) Plaintiffs could demonstrate that DEPCO breached its implied duty to market by basing its price on a higher processing fee than the fee that a reasonably prudent operator would have received at the wellhead. Seeligson v. Devon Energy Prod. Co., L.P., 761 F. App’x 329, 334, 336-37 (5th Cir. 2019). But, the Fifth Circuit remanded on a narrow issue related to predominance.

Plaintiffs moved again for class certification on May 7, 2019. On February 11, 2020, after a full-day evidentiary hearing, the Court certified a Class, including all persons or entities who, between January 1, 2008 and February 28, 2014, (i) are or were royalty owners in Texas wells producing natural gas that was processed through the Bridgeport Gas Processing Plant by DGS; (ii) received royalties from DEPCO on such gas; and (iii) had oil and gas leases on the following forms:  Producers 88-198(R) Texas Paid-Up (2/93); MEC 198 (Rev. 5/77); Producers 88 (Rev. 10-70 PAS) 310; Producers 88 Revised1-53—(With Pooling Provision); Producers 88 (2-53) With 640 Acres Pooling Provision; Producers 88 (3-54) With 640 Acres Pooling Provision; Producers 88 (4-76) Revised Paid Up with 640 Acres Pooling Provision; Producers 88 (7-69) With 640 Acres Pooling Provision; and Producers 88 (Rev. 3-42) With 40 Acres Pooling Provision (the “Class Lease Forms”). DEPCO again sought leave to appeal the class certification decision, but on May 15, 2020, the Firth Circuit denied DEPCO’s request.

Following an October 7, 2020 mediation, the Parties reached an agreement in principle to resolve the matter on a classwide basis, and informed the Court of such in a Joint Mediation Report, filed on October 16, 2020. Under the Settlement, DEPCO was required to pay $28 million into a Settlement Fund to be distributed among eligible Class Members in accordance with a plan of allocation approved by the Court.  On December 30, 2020, Plaintiffs moved for Preliminary Approval, which the Court granted on January 14, 2021. The Court then granted final approval on June 16, 2021. Distribution of Class Notice and payment of Settlement Funds to Class Members took place in 2021.