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Oklahoma business cover brief for May 7, 2019

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Court OKs class action in Chaparral lawsuit

An appeals court in Denver has upheld a federal judge’s order that defines members of a class action suit in a case that pits oil and gas mineral rights owners against Chaparral Energy Corp. over claims that a royalty agreement is misleading.

U.S. 10th Circuit Court Judge Nancy L. Moritz, Senior Judge Michael R. Murphy and Judge Allison H. Eid upheld a ruling issued by Chief U.S. District Judge Joe Heaton in Oklahoma City in January 2017, where Heaton concluded that any royalty owners who had leases with Chaparral where produced gas had been sold at the wellhead would be eligible to join the class action suit.

When the lawsuit was filed in 2011, plaintiffs Naylor Farms Inc. and Harrell’s LLC proposed including more than 10,000 royalty owners who had about 6,515 leases covering 1,889 wells.

They asserted in the suit that Chaparral had been deducting processing and transportation costs from payments to royalty owners that were not part of leases the company signed with those parties.

Chaparral, however, said plaintiffs should have known they would be required to pay those expenses from their proceeds and made various other arguments attempting to rebuff plaintiffs’ assertions. The actual case has not yet been litigated.

The case was interrupted for a time as Chaparral passed through bankruptcy proceedings but was reinstated after that process concluded.

An exact number of class action members that could proceed based on Heaton’s ruling was unknown Monday.

A spokeswoman for Chaparral Energy on Monday declined to comment about the case.

Staff report

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