Yes, the title of this post is a shameless Halloween reference, but the underlying issues in a recent federal court decision from Oklahoma are important to royalty litigation practitioners. The case is Jerry Venable Revocable Family Tr. v. Chesapeake Operating, LLC, 2017 WL 4052808 (W.D. Okla. 2017).
Here’s what happened: some royalty owners filed a class action complaint against Chesapeake in Beaver County in the Oklahoma panhandle. Chesapeake removed the case to federal court under the Class Action Fairness Act (CAFA), but the royalty owners filed a motion to remand the case back to state court. The royalty owners claimed the case fell under the so-called “home state exception” to CAFA jurisdiction, which prevents removal to federal court when 2/3 of the proposed class and the defendant are both “citizens” of the removal state (here, Oklahoma).
To prove that 2/3 of the proposed class were Oklahoma citizens, the Plaintiffs hired a statistics expert. This expert used random sampling and other statistics tools to make that case that 2/3 of the proposed class were Oklahoma citizens and submitted an affidavit to the Court alongside the Plaintiffs’ motion to remand.
The expert and the royalty owners’ motion ran into two problems, however.
- First, the expert’s data did not take into account that around 14% of the proposed class were trusts (legal entities), whose citizenship is determined by the citizenship of their underlying members/beneficiaries, which was apparently unknown.
- Second, “the Court found a number of individuals that were found to be Oklahoma citizens on plaintiff’s counsel’s data compilation that [other data provided by the expert] indicated were deceased.”
Obviously, this was an embarrassing mistake, but the presence of dead royalty owners in the expert’s calculations also had legal consequences. Namely, the Court would need to know the citizenship of the dead royalty owners’ heirs, which was unknown, in order to determine whether the 2/3 Oklahoma citizens threshold under CAFA had been met.
This case the highlights the need for royalty class action attorneys to understand the nuances of determining and proving state citizenship (for corporations, LLCs, trusts, deceased potential class members, etc). These issues are especially important in complicated “overlapping,” parallel, or “gerrymandered” class actions where class definitions often refer to residents or citizens of certain states in order to avoid removal under CAFA. Indeed, in most of these situations, the procedural and jurisdictional nuances become like a tortuous civil procedure and federal courts exam from law school. Best to stay up to date and do your jurisdictional homework. Otherwise, you risk being haunted by deceased class members, as here.