Court Opinion

ID: 4321340
Source: CourtListenerOpinion
Date Created: 2018-10-16 18:00:28.630558+00
Date Added: 2024-06-11T14:46:03.280304
License: Public Domain

Case: 17-10320      Document: 00514683594         Page: 1    Date Filed: 10/16/2018

           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT United States Court of Appeals
                                                                            Fifth Circuit

                                                                          FILED
                                                                      October 16, 2018
                                      No. 17-10320
                                                                       Lyle W. Cayce
                                                                            Clerk
HENRY SEELIGSON; JOHN M. SEELIGSON; SUZANNE SEELIGSON
NASH; SHERRI PILCHER,

               Plaintiffs - Appellees

v.

DEVON ENERGY PRODUCTION COMPANY, L.P.,

               Defendant - Appellant

                   Appeal from the United States District Court
                        for the Northern District of Texas
                              USDC No. 3:16-CV-82

Before WIENER, GRAVES, and HO, Circuit Judges.
PER CURIAM:*
       Plaintiffs-Appellees in this class action case (“Plaintiffs”) are royalty
owners who allege that Defendant-Appellant, Devon Energy Production
Company, L.P. (“DEPCO”), breached its royalty obligations by violating the
duty to market implied in the class members’ mineral leases. According to
Plaintiffs, DEPCO breached this duty by selling the raw, unprocessed gas to
its corporate affiliate at the wellheads at a price artificially reduced by an

       * Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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                                        No. 17-10320
unreasonably high processing fee. Plaintiffs aver that DEPCO then passed this
processing fee on to the royalty owners.
      Plaintiffs sought to certify a class comprising royalty owners who claim
that their royalty payments were reduced by DEPCO’s pricing scheme. The
district court held an evidentiary hearing, then certified the Class as follows:
      All person 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 Devon Gas Services, LP (“DGS”); (ii) received
      royalties from Devon Production Company, L.P. (“DEPCO”) on
      such gas; and (iii) had oil and gas leases that were on one of the
      [specific forms] . . . (“The Class Lease Forms”). 1
DEPCO now appeals the district court’s certification decision.
                             I.   FACTS AND PROCEEDINGS
      Plaintiffs are royalty owners of natural gas wells operated by DEPCO in
the Barnett Shale gas field. DEPCO is an oil and gas exploration and
production company that is the lessee under numerous natural gas well leases.
Several thousand of the wells that DEPCO operates in the Barnett Shale are
serviced by the Bridgeport Rich Gathering System (the “Bridgeport System”),
a series of horizontal pipelines that gather natural gas from individual wells
and transport it to the Bridgeport Gas Processing Plant (the “Bridgeport
Plant”). During the period of class claims, the Bridgeport System and
Bridgeport Plant were owned and operated by Devon Gas Services (“DGS”). In
turn, DEPCO and DGS are both wholly-owned subsidiaries of Devon Energy
Corporation.
      A.       DEPCO sells gas to DGS
      During all relevant times, DEPCO sold all the natural gas that it
produced from wells in the Bridgeport System to DGS under a 2005 Gas

      1   The court also indicated several persons or entities excluded from the Class.
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                                  No. 17-10320
Purchase and Processing Agreement (the “GPPA”). Under the terms of the
GPPA, DEPCO sold “wet” natural gas from the wells to DGS (1) at the
wellheads, (2) for a purchase price of “82.5% of the published industry index
value of the residue [“dry”] gas and natural gas liquids (“NGLs”).” DGS then
transported the wet gas from the individual wells, through the Bridgeport
System, to the Bridgeport Plant, where the wet gas was processed into (1)
NGLs and (2) dry residue gas. DGS then sold the processed dry residue gas to
third parties.
      The parties characterize this transaction in different ways. DEPCO says
that it transferred ownership of the gas to DGS at the moment of sale at the
wellhead. DEPCO claims that, because it no longer owned the gas when it was
transported through the Bridgeport System and processed at the Bridgeport
Plant, it did not charge Plaintiffs a “processing fee”; neither was it the seller of
the NGLs or the residue gas.
      According to Plaintiffs, however, these “sales” were sham transactions,
as DEPCO and DGS are closely related subsidiaries of the same corporate
parent, and DGS never transferred funds to DEPCO in payment for the gas.
Plaintiffs contend that DEPCO did not actually “sell” the gas to DGS at the
wellhead, but transported the gas to the Bridgeport Plant, where DGS
“charged” DEPCO a 17.5% processing fee—a percentage far greater than the
market rate for processing. Plaintiffs further contend that this processing fee
was passed on to the royalty owners by DEPCO’s artificial lowering of the
purchase price at the wellhead by 17.5%, uniformly using this methodology for
every well within the Bridgeport System. Plaintiffs insist that all royalty
owners thus received lower payments as a result of DEPCO’s purely internal
pricing scheme.

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       B.     Implied Duty to Market in Class Leases
       Each Plaintiff’s royalty interest was memorialized on one of nine
standard oil and gas lease forms (the “Class Lease Forms”). Plaintiffs claim
that all Class Lease Forms are “proceeds” leases, in which royalty payments
are based on the net proceeds, viz., the amount realized by the lessee—here,
DEPCO—when the gas is sold at the well. 2 According to Plaintiffs, when a
mineral lease does not contain any provision regarding a duty to market, Texas
law implies a duty to market. This duty requires producers like DEPCO to act
in good faith to obtain “the best price reasonably attainable.” Plaintiffs argue
that DEPCO breached the implied duty to market when it artificially lowered
the price of the natural gas that it sold to DGS at the wellhead. Plaintiffs
contend that because (1) all of the Class Lease Forms are deemed to include
such an implied duty to market, and (2) DEPCO used a uniform pricing
methodology to artificially lower the wellhead price and the resulting royalty
payments, all class members have “identical duty-to-market claims.”
       DEPCO maintains, however, that some of the Class Leases are not
subject to an implied duty to market. It claims that the district court did not
examine the Class Leases and only assumed that each of them was subject to
an implied duty to market. According to DEPCO, three of the named Plaintiffs’
nine leases were modified to change the lessee’s marketing duty, so that the
implied duty to market does not apply to each of the named Plaintiff’s leases,
much less to each of the 4,143 Class Leases.

       2 As discussed more fully below, Plaintiffs submitted expert testimony from an
“industry veteran” who reviewed more than 10,000 DEPCO leases. He identified 4,143 Leases
on the nine Class Lease Forms which did not include any modifications or addenda that
would modify the duty to market. Based on this evidence, the district court limited the Class
Leases to these 4,143 documents.
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       C.     District Court Decision
       Plaintiffs originally filed this suit in the Eastern District of Texas,
alleging that DEPCO improperly calculated and intentionally underpaid
royalties to Plaintiffs for gas that was processed through the Bridgeport Plant. 3
That court scheduled a day-long class certification hearing to receive evidence
on the certification issue. Shortly before the date scheduled for that hearing,
however, DEPCO filed an emergency motion to stay the proceedings pending
resolution of its motion to transfer venue. 4 The hearing was stayed and the
case was eventually transferred to the Northern District of Texas, where
Plaintiffs’ motion for class certification was eventually denied. 5 Plaintiffs then
filed a motion for reconsideration. Their motion requested an opportunity to
present evidence in support of certification, and the district court held a class
certification evidentiary hearing. After reviewing the additional evidence,
including “over one hundred exhibits, sizeable deposition designations, and the
testimony of four live witnesses[,]” the district court granted Plaintiffs’ motion
and certified the class. DEPCO timely appealed.
                               II.    LAW AND ANALYSIS
       A.     Standard of Review
       We review a district court’s class certification for abuse of discretion. 6
Abuse of discretion occurs only when all reasonable persons would reject the
view of the district court. 7 “Implicit in this deferential standard is a recognition
of the essentially factual basis of the certification inquiry and of the district

       3 These claims include gas that was processed at the Bridgeport Plant from January
1, 2008 until October 24, 2014.
       4 The motion to stay was subsequently granted by a panel of this court. See No. 17-

90002, Henry Seeligson, et al v. Devon Energy Production Co. LP.
       5 See ECF TX ND 3:16-CV-82, 139.
       6 Regents of Univ. of Cal. v. Credit Suisse First Bos. (USA), Inc., 482 F.3d 372, 380 (5th

Cir. 2007).
       7 Union Asset Mgmt. Holding A.G. v. Dell, Inc., 669 F.3d 632, 638 (5th Cir. 2012).
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                                       No. 17-10320
court’s inherent power to manage and control pending litigation.” 8 We review
de novo, however, whether the district court applied the correct legal
standard. 9
       B.     Federal Rule of Civil Procedure 23 Requirements
       “[T]o maintain a class action, the class sought to be represented must be
adequately defined and clearly ascertainable.” 10 This requirement is an
implied prerequisite of Rule 23. 11 “However, the court need not know the
identity of each class member before certification; ascertainability requires
only that the court be able to identify class members at some stage of the
proceeding.” 12 If the proposed class is ascertainable, the party seeking
certification must also comply with Federal Rule of Civil Procedure 23. 13 That
party must first satisfy Rule 23(a)’s requirements of numerosity, commonality,
typicality, and adequacy of representation. 14 If successful, that party must
then satisfy the provisions of one of Rule 23(b)’s three subsections. 15 In this
case, Plaintiffs rely on Rule 23(b)(3), “which requires that questions of law or
fact common to the class predominate over questions affecting only individual
members, and that a class action is superior to other available methods for the
fair and efficient adjudication of the controversy.” 16 “The Rule 23(b)(3)
predominance inquiry tests whether proposed classes are sufficiently cohesive

       8 In re Monumental Life Ins. Co., 365 F.3d 408, 414 (5th Cir. 2004) (quoting Allison v.
Citgo Petroleum Corp., 151 F.3d 402, 408 (5th Cir. 1998)).
       9 Maldonado v. Ochsner Clinic Found., 493 F.3d 521, 523 (5th Cir. 2007).
       10 Union Asset Mgmt. Holding, 669 F.3d at 639 (quoting DeBremaecker v. Short, 433
F.2d 733, 734 (5th Cir. 1970) (per curiam)).
       11 John v. Nat’l Sec. Fire & Cas. Co., 501 F.3d 443, 445 (5th Cir. 2007).
       12 Frey v. First Nat. Bank Sw., 602 F. App’x 164, 168 (5th Cir. 2015) (unpublished)

(quoting William B. Rubenstein, NEWBERG ON CLASS ACTIONS § 3:3 (5th ed. 2011)).
       13 FED. R. CIV. P. 23.
       14 FED. R. CIV. P. 23(a).
       15 FED. R. CIV. P. 23(b).
       16 Ahmad v. Old Republic Nat’l Title Ins., 690 F.3d 698, 702 (5th Cir. 2012) (citing

FED. R. CIV. P. 23(b)).
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to warrant adjudication by representation.” 17 Plaintiffs have the burden of
showing that Rule 23’s requirements are met. 18
             i.   Ascertainability
       The district court did not abuse its discretion in determining that the
class of royalty owners was ascertainable. DEPCO relied on precedent from the
Third Circuit to claim that the Plaintiffs had to demonstrate “by a
preponderance of the evidence, that the class is ‘currently and readily
ascertainable based on objective criteria.’” 19 But, this court has not adopted
that heightened standard. Instead, a party need only demonstrate—“at some
stage of the proceeding” 20—that the class is “adequately defined and clearly
ascertainable.” 21 Here, both DEPCO and the public records provide sufficient
objective criteria from which to identify class members. 22 We conclude that the
district court did not abuse its discretion in finding that the class is
ascertainable.
            ii.   Commonality
       The parties do not dispute the district court’s rulings regarding
numerosity, typicality, or adequacy of representation; however, DEPCO does

       17  Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 623 (1997).
       18  Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350–51 (2011).
        19 Carrera v. Bayer Corp., 727 F.3d 300, 306 (3d Cir. 2013) (quoting Marcus v. BMW

of N. Am., LLC, 687 F.3d 583, 593 (3d Cir. 2012)).
        20 Frey, 602 F. App’x at 168 (quoting William B. Rubenstein, NEWBERG ON CLASS

ACTIONS § 3:3 (5th ed. 2011)).
        21 Union Asset Mgmt. Holding, 669 F.3d at 639 (quoting DeBremaecker, 433 F.2d at

734).
        22 DEPCO claims that it does not record ownership by lease and does not have

complete records on past ownership. It contends that Plaintiffs’ proposed alternative—
reviewing property and title records—is not administratively feasible and therefore fails to
satisfy Rule 23’s ascertainability requirements. We are not convinced. Before any individual
class member can recover, he must demonstrate that he was entitled to receive royalty
payments. “However, . . . ‘the possibility that some [claimants] may fail to prevail on their
individual claims will not defeat class membership’ on the basis of the ascertainability
requirement.” In re Deepwater Horizon, 739 F.3d 790, 821 (5th Cir. 2014).
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challenge that court’s ruling on commonality. To satisfy Rule 23’s commonality
requirement, Plaintiffs had to demonstrate that there are questions of law or
fact common to the class. 23 A common question “must be of such a nature that
it is capable of classwide resolution—which means that determination of its
truth or falsity will resolve an issue that is central to the validity of each one
of the claims in one stroke.” 24 This requirement “can be satisfied by an instance
of the defendant’s injurious conduct, even when the resulting injurious
effects—the damages—are diverse.” 25
       The district court determined that the answers to two common questions
would determine whether DEPCO violated the implied duty to market: (1) “Did
the 82.5% value sale of residue gas and NGLs violate DEPCO’s duty to market
owed to royalty owners?” and (2) “Did DEPCO violate its duty to market owed
to royalty owners by failing to recover profits from DGS for gas sales DGS made
to third parties?”
       DEPCO contends that these questions are based on incorrect application
of Texas law and erroneous factual findings, leading the district court to abuse
its discretion in concluding that the proposed class satisfies Rule 23(a)’s
commonality requirement. If these questions are not common to the class, or if
they are based on incorrect legal conclusions or factual findings, class
certification was an abuse of discretion. 26
                  a. Duty to Market

       DEPCO insists that the district court abused its discretion when it
determined that each of the Class Leases imposed the same marketing duty

       23 FED. R. CIV. P. 23(a).
       24 Wal-Mart Stores, Inc., 564 U.S. at 350.
       25 Deepwater Horizon, 739 F.3d at 810–11.
       26 Regents of Univ. of Cal., 482 F.3d at 380 (“Where a district court premises its legal

analysis on an erroneous understanding of governing law, it has abused its discretion.”).
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without reviewing every individual lease and any “ancillary documents” that
might have modified DEPCO’s duty to market the gas. Relying on Dvorin v.
Chesapeake Exploration, DEPCO contends that, under Texas law, the district
court was required to review every Class Lease, as well as any ancillary
documents, before determining that all the Class Leases imposed the same
duty to market.
      The district court in Dvorin determined that the leases of the proposed
class members were insufficient to demonstrate that the claims could be
resolved with a “common answer.” 27 The court explained that, even though the
“specific portions of the royalty provisions . . . are substantially the same, the
court is required to review the contracts as a whole.” 28 Once the court reviewed
the entire document, it was clear that the contracts varied regarding “the point
of sale,” and “cost at the well.” 29 Some even contained clauses that limited
royalty payments based on the price Chesapeake paid for its share of
production. 30 The Dvorin court held that, because other terms of the contract
modified the royalty clauses, the class members’ claims could not be resolved
with a common answer.
      There is no evidence that such differences exist here. Dvorin did not hold
that a court must locate every potential ancillary document before determining
that a group of leases imposed the same duty. There, the plain language of the
contracts varied so much that it was not possible to reach a “common answer”
to the plaintiffs’ claims. Here, in comparison, the court determined that “none
of the nine lease forms contain language that modifies the implied covenant to

      27  Dvorin v. Chesapeake Expl., LLC, No. 3:12-CV-3728-G, 2013 WL 6003433, at *6
(N.D. Tex. Nov. 13, 2013).
       28 Id.
       29 Id.
       30 Id.

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market.” 31 Defendants have not provided any ancillary documents that modify
the duty to market in the Class Leases. 32 In fact, even six months after the
district court certified a class based on 4,143 individual leases, DEPCO’s expert
challenged only five of them.
       DEPCO also claims that three of the Class Lease Forms contain express
marketing clauses and therefore cannot include the implied duty to market.
Those clauses state that DEPCO must “use reasonable diligence to produce,
utilize, or market the minerals.” DEPCO is correct that this language
precludes the implied duty to market; however, it does not necessarily impose
a different marketing duty on DEPCO. Neither DEPCO nor Plaintiffs cite any
case that stands for the proposition that an express duty to market requires
either the same or a different marketing duty than the implied duty to market.
In Bowden v. Phillips Petroleum Co., the Texas Supreme Court evaluated a
similar situation, yet declined to state a categorical rule on this issue. 33 There,
the plaintiffs claimed that a group of proceeds leases, some with both express
marketing clauses and, others with the implied duty to market, imposed the
same duty. The court explained that it could be possible that express and
implied duties to market may not “in practice require different conduct.” 34
      Here, the express marketing clause in three of the Class Leases Forms
imposes a duty to use “reasonable diligence,” which is virtually identical to the
implied duty to act as a “reasonably prudent operator.” 35 Given this close

      31  See Seeligson v. Devon Energy Prod. Co., L.P., No. 3:16-CV-00082-K, 2017 WL
68013, at *17 (N.D. Tex. Jan. 6, 2017).
       32 During the certification hearing, Plaintiffs presented testimony from an industry

expert who led a team in reviewing more than 10,000 leases received from DEPCO. The
expert testified that any leases which had exhibits or addenda that modified the duty to
market were excluded from the class.
       33 247 S.W.3d 690, 701 (Tex. 2008).
       34 Id.
       35 See Amoco Prod. Co. v. Alexander, 622 S.W.2d 563, 567–68 (Tex. 1981).

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similarity and the fact that Texas law acknowledges that express marketing
clauses might impose the same duty as the implied duty to market, the district
court did not abuse its discretion in holding that DEPCO owed all class
members the same duty, under either the express marketing clause or the
implied duty to market. 36
      Owing a uniform duty, however, is not necessarily sufficient to establish
commonality. The duty DEPCO owed to the royalty owners was “an obligation
to obtain the best current price reasonably available.” 37 In Bowden v. Phillips
Petroleum, the Supreme Court of Texas explained that even if a gas producer
owed “an identical duty to market” to a group of royalty owners, the jury would
still need to determine “the price a reasonably prudent operator would have
received at the wellhead.” 38 The Bowden court explained that “variations in
well locations, quality of production, and field regulations, among other factors,
will require the jury to conduct a well-by-well analysis . . . unless the class offers
particular evidence that the gas price at the wells can be evaluated classwide.” 39
      Plaintiffs argue that such a well-by-well analysis is not necessary here
because DEPCO used a uniform pricing structure for every well in the
Bridgeport System. Plaintiffs contend that they do not need to adduce evidence
of a higher available price at each wellhead, but only evidence that DEPCO
could have processed the gas at a fee lower than the 17.5% it paid DGS. After
reviewing the parties’ motions and evidence, and hearing extensive testimony
regarding the Class Leases, the district court determined that DEPCO used a
classwide pricing structure determined by the uniform processing fee, so that

      36  This determination falls squarely within the “district court’s inherent power to
manage and control pending litigation.” See Monumental Life Ins. Co., 365 F.3d at 414
(quoting Allison, 151 F.3d at 408).
       37 Union Pac. Res. Grp., Inc. v. Hankins, 111 S.W.3d 69, 72 (Tex. 2003).
       38 Bowden, 247 S.W.3d at 701.
       39 Id. at 701–02 (emphasis added).

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the gas price at the wells could be evaluated classwide. 40 In light of the
“essentially factual basis of the certification inquiry and of the district court’s
inherent power to manage and control pending litigation,” 41 we are convinced
that the district court did not abuse its discretion in ruling that 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.” 42 This issue is precisely the
type of common question “that determination of its truth or falsity will resolve
an issue that is central to the validity of each one of the claims in one stroke.” 43
                   b. Duty to recover downstream profits
       The second question the district court found common to all class
members was, “Did DEPCO violate its duty to market owed to royalty owners
by failing to recover profits from DGS for gas sales DGS made to third parties?”
Later in the order, the district court framed this issue as whether DEPCO
breached its duty “by not following its own policy to recoup the profits DGS
made on subsequent gas sales.” At no point, however, did the district court

       40  See Bowden, 247 S.W.3d at 701.
       41  Monumental Life Ins. Co., 365 F.3d at 414 (quoting Allison, 151 F.3d at 408).
        42 See Bowden, 247 S.W.3d at 701. As discussed more fully below, the district court

made the factual determination that the price was determined based on the processing fee
DGS charged DEPCO. This factual finding is reviewed for clear error. See Energy Mgmt.
Corp. v. City of Shreveport, 467 F.3d 471, 479 (5th Cir. 2006). Furthermore, given the limit
on conducting “merits inquiries” at this stage in the litigation, and the deference granted to
the district court’s factual findings, that court did not abuse its discretion in determining that
whether DEPCO breached its duty to Plaintiffs was a common question capable of classwide
resolution. See Deepwater Horizon, 739 F.3d at 810 (quoting Wal-Mart Stores, Inc., 564 U.S.
at 350) (citations omitted) (holding that an issue is capable of classwide resolution when the
“determination of its truth or falsity will resolve an issue that is central to the validity of each
one of the claims in one stroke.”).
        43 Wal-Mart Stores, Inc., 564 U.S. at 350.

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explain why the implied duty to market includes a duty to recoup profits made
on downstream gas sales. 44
       DEPCO insists that neither the Class Leases nor the implied duty to
market imposed a duty to recoup downstream profits; and Plaintiffs do not
address this alleged duty in their brief. At best, Plaintiffs aver that DEPCO
policies instructed that “DGS may not make profit at the expense of [DEPCO
by] … sell[ing] gas to third parties at higher prices than the transfer price
under the GPPA.” 45 The district court did not provide any legal basis for
imposing a duty to recover downstream profits on DEPCO, so it abused its
discretion when it determined that this was a common question which could
support class certification.
       Fifth Circuit law, however, recognizes that even one common question
may be sufficient to support commonality. 46 Here, the district court determined
that the driving question behind this class litigation would be whether DEPCO
artificially lowered the wellhead price, in violation of the implied duty to
market. Texas law is clear that, to determine whether DEPCO has breached
the implied duty to market, the court must “focus[] on the behavior of the lessee
rather than on evidence of other sales.” 47 Because DEPCO’s behavior presents
“at least one contention that is central to the validity of each class member’s

       44  The court did not expressly find that DEPCO’s sales to DGS were a sham, but, based
on the way it phrased the second common question, it certainly seems to imply that the sale
was a sham. The validity of this possible conclusion, however, is not currently before this
panel.
        45 Plaintiffs do not assert that they have standing to enforce these internal guidelines,

but contend that standing is a merits question which should not be resolved at this stage of
the litigation.
        46 See Deepwater Horizon, 739 F.3d at 810.
        47 Hankins, 111 S.W.3d at 71.

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claims[,]” the district court did not abuse its discretion in ruling that
commonality was satisfied. 48
            iii.   Predominance
       Federal Rule of Civil Procedure 23(b)(3) requires the court to determine
whether “the questions of law or fact common to class members predominate
over any questions affecting only individual members.” 49 This “entails
identifying the substantive issues that will control the outcome, assessing
which issues will predominate, and then determining whether the issues are
common to the class, a process that ultimately prevents the class from
degenerating into a series of individual trials.” 50 Absent this analysis, “it [is]
impossible for the court to know whether the common issues would be a

       48  Id. While it is uncommon to find commonality based on a single issue, we are
mindful that commonality and predominance should be evaluated by “weighing, not counting,
issues.” See In re Oil Spill by Oil Rig Deepwater Horizon in Gulf of Mexico, on Apr. 20, 2010,
910 F. Supp. 2d 891, 912 (E.D. La. 2012), aff’d sub nom. In re Deepwater Horizon, 739 F.3d
790 (5th Cir. 2014). Given that whether DEPCO breached its duty to market will constitute
a substantial portion of the litigation, this single issue is sufficient to support the district
court’s commonality finding.
        DEPCO argues that the district court abused its discretion because it based the
purported common question in this case on erroneous factual findings regarding the type of
leases involved in this case. The parties agree that DEPCO sold natural, unprocessed gas to
DGS at the wellhead pursuant to a proceeds lease. In characterizing the transaction as a
sale of “residue gas and natural gas liquids,” the district court incorrectly described a market
value lease, rather than a proceeds lease. See Seeligson, 2017 WL 68013, at *2. In its analysis,
however, the court described the sale of natural gas at the wellhead and treated the leases
as proceeds leases, triggering the implied duty to market. See Seeligson, 2017 WL 68013, at
*15–16. Because it applied the correct analysis and ultimately described the complicated
transaction accurately, the district court’s initial misstatements regarding the type of gas
sold at the wellhead were harmless error.
        DEPCO also contends that the district court “implied” that affiliate sales should be
held to a higher duty to market than non-affiliate sales. This contention seems to be based
solely on the fact that the district court included the word “affiliate” in its description of the
issues in this case. Nothing in the district court’s opinion indicates that it sought to hold
DEPCO to a higher standard because it sold the gas to its corporate affiliate. DEPCO’s
contention on this issue is without merit.
        49 FED. R. CIV. P. 23(b)(3).
        50 Gene And Gene LLC v. BioPay LLC, 541 F.3d 318, 326 (5th Cir. 2008) (quoting Bell

Atl. Corp. v. AT&T Corp., 339 F.3d 294, 302 (5th Cir. 2003)).
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‘significant’ portion of the individual trials . . . much less whether the common
issues predominate.” 51
      DEPCO insists that each lease raises individual issues regarding tolling
and the applicable statute of limitations, precluding predominance. DEPCO
explains that the class certification order includes two categories of claims that
are time barred: (1) claims that DEPCO breached the implied duty to market
when it entered the GPPA in 2005; and (2) claims that DEPCO breached this
duty beginning on January 1, 2008, when it failed to recoup profits on DGS’s
downstream sales. Plaintiffs counter that the limitations periods were tolled
by the discovery rule and fraudulent concealment. DEPCO responds to this by
stating that the determination whether the limitation periods were tolled will
require “thousands” of mini-trials. DEPCO raised these potential individual
issues in the district court, but in its certification order, the court did not
discuss how limitations and tolling questions might affect predominance.
      Despite the potential for individual questions based on DEPCO’s statute
of limitations defense, the district court did not mention the role, if any, the
tolling or limitations issues would play in this class action litigation. To
establish predominance, the district court must identify “the substantive
issues that will control the outcome, assess[] which issues will predominate,
and then determin[e] whether the issues are common to the class.” 52 Absent
this analysis, “it [is] impossible for the court to know whether the common
issues would be a ‘significant’ portion of the individual trials . . . much less
whether the common issues predominate.” 53 The district court did not consider
the statute of limitations and tolling questions in its predominance analysis,

      51 Madison v. Chalmette Ref., L.L.C., 637 F.3d 551, 557 (5th Cir. 2011).
      52 Bell Atl., 339 F.3d at 301.
      53 Madison, 637 F.3d at 557.

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    Case: 17-10320       Document: 00514683594          Page: 16     Date Filed: 10/16/2018

                                       No. 17-10320
so it abused its discretion when it determined that common questions would
predominate over individual issues and certified the class. 54
                               III.    CONCLUSION
       The district court did not abuse its discretion in concluding that
Plaintiffs satisfied Federal Rule of Civil Procedure 23’s commonality
requirement. Because the court failed to address whether the applicable
statute of limitations and potential tolling questions would raise individual
issues, it abused its discretion in certifying the class as written. We therefore
REVERSE and REMAND for further proceedings consistent with this opinion.

       54 See id. (“By failing to adequately analyze and balance the common issues against
the individualized issues, the district court abused its discretion in determining that common
issues predominated and in certifying the class.”).
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