Chieftain Royalty Company v. XTO Energy, Inc.

IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF OKLAHOMA
CHIEFTAIN ROYALTY COMPANY, 	)
)
Plaintiff, 	)
)
v. 	) 	No. CIV-11-29-FHS
)
XTO ENERGY, INC. (including 	)
predecessors, successors and 	)
affiliates), 	)
)
Defendants. 	)
OPINION AND ORDER
This 	is 	an 	action 	brought 	by 	Chieftain 	Royalty 	Company
(“Chieftain”) and putative class members seeking to recover for the
failure of XTO Energy, Inc. (including predecessors, successors and
affiliates)(“XTO”), as the operator of certain Oklahoma gas wells,
to 	properly 	pay 	royalties 	due 	on 	the 	production 	of 	gas 	and 	gas
constituents 	from 	these 	Oklahoma 	wells. 	Chieftain’s 	asserted
theories 	of 	recovery 1 	are 	derived 	from 	its 	underlying 	claim 	that
XTO 	has 	underpaid 	royalties 	on 	gas 	and 	its 	constituents 	by
improperly deducting costs incurred to transform the wellhead gas
into a marketable condition for sale.
Before the Court is XTO’s Motion to Dismiss (Dkt. No. 6) and
the Chieftain’s Motion to Stay Proceedings (Dkt. No. 24). 	On April
6, 2011, a hearing was held with respect to these motions. 	Relying
on 	the 	first-to-file 	rule, 	XTO 	asks 	this 	Court 	to 	dismiss 	this
1 Chieftain’s theories of recovery are (1) breach of
contact, (2) tortious breach of contract, (3) breach of fiduciary
or quasi-fiduciary duty, (4) fraud (actual and constructive) and
deceit, (5) conversion, (6) conspiracy, (7) accounting, and (8)
injunctive relief.
1
6:11-cv-00029-DES Document 29 Filed in ED/OK on 04/22/11 Page 1 of 6

putative 	class 	action 	because 	the 	claims 	asserted 	herein 	by
Chieftain and the putative class members are substantially the same
as those asserted in an earlier filed putative class action in the
United States District Court for the District of Kansas, Wallace B.
Roderick Revocable Living Trust v. XTO, Energy, Inc., Case No. 08-
1330-JTM-KMH (“Roderick). 2 	Chieftain objects to XTO’s request for
dismissal 	and, 	alternatively, 	has 	moved 	the 	Court 	to 	stay 	the
proceedings, including any ruling on XTO’s Motion to Dismiss, until
the United States District Court for the District of Kansas decides
whether it will carve out the Oklahoma class in the Roderick case
and 	transfer 	it 	to 	this 	Court 	or 	allow 	the 	modification 	of 	the
class definition in Roderick in order to exclude royalty owners in
Oklahoma gas wells from the class definition. 3 	For the following
reasons, 	this 	Court 	finds 	that 	it 	is 	appropriate 	to 	stay 	the
proceedings 	herein 	and 	allow 	the 	Roderick 	court 	to 	determine 	the
issues currently before it related to the proper forum in which the
underlying claims should proceed.
The first-to-file rule is grounded in the concepts of comity
among federal courts and sound judicial administration. 	Cadle Co.
v. Whataburger of Alice, Inc., 174 F.3d 599, 603 (5 th Cir. 1999).
2 In addition to seeking the dismissal of this entire case
on the basis of the first-to-file rule, XTO alternatively argues
for the dismissal of (1) Chieftain’s conversion claim, (2)
unnamed predecessors, successors, and affiliates, and (3) any
claim against XTO as a predecessor, successor, or affiliate.
3 On February 18, 2011, the Plaintiff in Roderick filed a
Motion To Sever A Portion Of The Class And Transfer Venue Or, In
The Alternative, Supplement Plaintiff’s Motion For Class
Certification To Narrow The Class Definition. 	Exhibit 1 to
Chieftain’s Motion To Stay Proceedings (Dkt. No. 24). 	A Motion
for Class Certification was previously filed in Roderick on
November 15, 2010. 	Exhibit 2 to XTO’s Motion to Dismiss (Dkt.
No. 6).
2
6:11-cv-00029-DES Document 29 Filed in ED/OK on 04/22/11 Page 2 of 6

“The 	concern 	manifestly 	is 	to 	avoid 	the 	waste 	of 	duplication, 	to
avoid rulings which may trench upon the authority of sister courts,
and to avoid piecemeal resolution of issues that call for a uniform
result.” 	West 	Gulf 	Maritime 	Ass’n 	v. 	ILA 	Deep 	Sea 	Local 	24, 	751
F.2d 	721, 	729 	(5 th 	Cir. 	1985). 	Under 	this 	well-established
doctrine, 	a 	district 	court 	is 	permitted 	“to 	decline 	jurisdiction
where a complaint raising the same issues against the same parties
has 	previously 	been 	filed 	in 	another 	district 	court.” 	Buzas
Baseball, Inc. v. Bd. of Regents of the Univ. of Ga., 189 F.3d 477
(table), 1999 WL 682883, at *2 (10 th Cir. Sept. 2, 1999). 	Although
the 	preference 	is 	for 	the 	first-filed 	court 	to 	decide 	on 	the
application 	of 	the 	first-to-file 	rule, 	a 	second-filed 	court 	may
exercise its discretion and consider the application of the first-
to-file rule in the first instance. 	Wallace B. Roderick Revocable
Living Trust v. XTO Energy, Inc., 679 F.Supp.2d 1287, 1296-97 (D.
Kan. 	2010). 	If 	it 	is 	determined 	that 	the 	first-to-file 	rule
applies, 	“the 	second 	district 	court 	has 	discretion 	to 	transfer,
stay, or dismiss the second case in the interest of efficiency and
judicial 	economy.” 	Cedars-Sinai 	Med. 	Ctr. 	v. 	Shalala, 	125 	F.3d
765, 769 (9 th Cir. 1997); see Cherokee Nation v. Nash, 724 F.Supp.2d
1159, 1171 (N.D.Okla. 2010)(“After determining whether the first to
file rule generally applies, courts within the Tenth Circuit have
the option of staying the second-filed action pending the outcome
of the first-filed action, rather than immediately transferring the
case to the first-filed court.”).
The application of the first-to-file rule is determined by an
examination 	of 	the 	following 	factors: 	(1) 	the 	chronology 	of 	the
actions, 	(2) 	the 	similarity 	of 	the 	parties 	involved, 	and 	(3) 	the
similarity 	of 	the 	issues 	at 	stake. 	Alltrade, 	Inc. 	v. 	Uniweld
Products, Inc., 946 F.2d 622, 625 (9 th Cir. 1991); Cherokee Nation,
724 F.Supp.2d at 1167; Wallace B. Roderick Revocable Living Trust,
3
6:11-cv-00029-DES Document 29 Filed in ED/OK on 04/22/11 Page 3 of 6

679 	F.Supp.2d 	at 	1296. 	It 	is 	abundantly 	clear 	that 	all 	three
factors 	weigh 	in 	favor 	of 	application 	of 	the 	rule. 4 	First, 	the
Roderick case was initially filed in the District Court of Kearny
County, Kansas, on September 18, 2008, and was later removed to the
United States District Court for the District of Kansas on October
24, 	2008. 	The 	instant 	case 	was 	initially 	filed 	in 	the 	District
Court of Coal County, Oklahoma, on December 17, 2010, and was later
removed 	to 	this 	federal 	court 	on 	January 	21, 	2011. 	Thus, 	the
Roderick 	case 	was 	filed 	first 	- 	more 	than 	two 	years 	before 	the
filing of the instant action. 	Second, the parties are similar as
XTO 	is 	the 	lone 	defendant 	in 	both 	actions 	and 	the 	putative 	class
concerning 	the 	Oklahoma 	wells 	in 	this 	case 	is 	included 	in 	the
Roderick putative class, i.e., this action is a complete subset of
the Roderick action. 	Finally, the issues at stake are undeniably
substantially similar. 5 	Although additional theories 	of recovery
are asserted in the instant action 6, the underlying claims in both
cases are centered on the argument that XTO underpaid royalties due
class 	members 	on 	the 	production 	of 	gas 	and 	its 	constituents 	by
improperly deducting costs incurred to place the gas in marketable
condition for sale. 	While the theories of recovery asserted in the
4 Indeed, in its Response Brief (Dkt. No. 15) to XTO’s
Motion to Dismiss, Chieftain does not contest the application of
the first-to-file doctrine. 	Rather, Chieftain argues that
transfer, as opposed to dismissal, is the applicable remedy and
that, in any event, XTO’s Motion to Dismiss “will shortly be
moot” in light of the motion filed in Roderick seeking a transfer
to this Court or an alteration of the Roderick class definition.
5 Chieftain recognizes this similarity of issues in its
Complaint wherein it states “[t]o Plaintiff’s knowledge, there is
no pending litigation against XTO that incorporates the statewide
claims of improper deductions from mineral interest proceeds
related to the Class wells other than the case styled Roderick et
al v. XTO Energy, Inc., Case No. 08-CV-01330-JTM-KMH D.C. KS.”
6 In Roderick, the theories of recovery are (1) breach of
contract, (2) unjust enrichment, and (3) accounting.
4
6:11-cv-00029-DES Document 29 Filed in ED/OK on 04/22/11 Page 4 of 6

cases do not mirror each other, the underlying claims nonetheless
arise 	out 	of 	the 	same 	alleged 	improper 	actions 	by 	XTO;
consequently, 	there 	is 	a 	substantial 	similarity 	of 	the 	issues 	at
stake.
Having determined that the first-to-file rule is applicable,
the Court concludes that a stay of this action is the appropriate
remedy under the circumstances. 	The Roderick Court has before it
a motion which will determine the proper forum for the resolution
of the claims against XTO by the royalty owners in Oklahoma wells.
This Court finds it proper to defer to the judgment of the Roderick
Court 	to 	resolve 	those 	issues. 	Maintaining 	the 	status 	quo 	until
the Roderick Court enters its rulings promotes the efficient use of
judicial resources as well as the resources of the parties. 	Should
the 	Roderick 	Court 	determine 	that 	it 	will 	not 	carve 	out 	the
Oklahoma class and transfer it to this Court and should it decline
to modify the class definition to exclude the Oklahoma class, then
this Court will transfer this action to the United States District
Court for the District of Kansas for consolidation with Roderick.
On the other hand, should the Roderick Court carve out the Oklahoma
class 	and 	transfer 	it 	to 	this 	Court 	for 	consolidation 	with 	the
instant 	action 	or 	should 	it 	allow 	a 	modification 	of 	the 	class
definition to exclude the Oklahoma class, then this Court will lift
the 	stay 	and 	proceed 	with 	the 	instant 	litigation. 	The 	parties
shall notify this Court when the Roderick Court issues its rulings
on these matters.
Based 	on 	the 	foregoing 	reasons, 	Chieftain’s 	Motion 	to 	Stay
Proceedings 	(Dkt. 	No. 	24) 	is 	granted. 	XTO’s 	Motion 	to 	Dismiss
(Dkt. 	No. 	6) 	is 	held 	in 	abeyance 	pending 	rulings 	by 	the 	United
States 	District 	Court 	for 	the 	District 	of 	Kansas 	in 	the 	Roderick
case.
5
6:11-cv-00029-DES Document 29 Filed in ED/OK on 04/22/11 Page 5 of 6

It is so ordered this 22 nd day of April, 2011.
6
6:11-cv-00029-DES Document 29 Filed in ED/OK on 04/22/11 Page 6 of 6