November 18, 2017

Colorado Court of Appeals: Class Did Not Cease to Exist When Settlement Entered

The Colorado Court of Appeals issued its opinion in EnCana Oil & Gas (USA), Inc. v. Miller on Thursday, August 10, 2017.

Class Action Settlement—Arbitration Provision—C.R.C.P. 23—Survival of the Class.

A certified class of Colorado oil and gas royalty owners (the Class) and EnCana Oil & Gas (USA), Inc. (EnCana) litigated, beginning in 2005, EnCana’s alleged underpayment of royalties on natural gas it produced. In 2008, EnCana and the Class entered into a settlement agreement that detailed payment of funds to settle past claims, established the methodology EnCana would use for future royalty payments, and included an arbitration clause. The district court’s final judgment approved and incorporated the settlement agreement, dismissed the 2005 case with prejudice, and reserved jurisdiction to enforce the agreement. In 2016, oil and gas royalty owners (Owners), purporting to act on behalf of the Class, filed a demand for arbitration alleging EnCana had underpaid royalties owed to Class members in violation of the settlement agreement. EnCana filed a new case in district court asserting that (1) the class ceased to exist when the 2005 case was dismissed with prejudice in 2008, and (2) the 2008 settlement agreement did not authorize arbitration on a class-wide basis. The district court found that the class had not ceased to exist and the claims should be resolved in class-wide arbitration, and entered summary judgment against EnCana.

On appeal, EnCana contended that the district court erred in finding that the Class continued after the case was dismissed. The court of appeals determined that the Class survived the 2008 dismissal because (1) compliance with the settlement agreement became part of the dismissal order, so the district court retains jurisdiction to give effect to the agreement; and (2) the agreement continues for the lives of the leases or royalty agreements covered by the settlement agreement and expressly burdens and benefits successors and assigns of the parties.

EnCana also claimed that the district court failed to satisfy C.R.C.P. 23. The district court did not err in declining to engage in further Rule 23 analysis after the 2008 dismissal and judgment approving the settlement agreement.

The court next rejected EnCana’s contention that Class counsel failed to provide sufficient notice of the arbitration demand.

EnCana then argued it was error to determine that the settlement agreement contained a contractual basis to conclude that EnCana and the Class agreed to class arbitration. EnCana asserted that because the arbitration clause is silent on class arbitration, the district court should have presumed that the parties agreed to bilateral arbitration only. The settlement agreement explicitly names all members of a certified class as a party to the agreement, frames the disputes in class- or subclass-wide terms, and provides relief on a class- or subclass-wide basis. The arbitration clause’s context thus demonstrates an agreement to class rather than bilateral arbitration. Further, to conclude that the settlement agreement evidenced that the parties contemplated engaging in approximately 5,850 individual arbitrations to resolve future disputes rather than a single class arbitration would be absurd.

The judgment was affirmed.

Summary provided courtesy of Colorado Lawyer.

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