Attorneys for thousands of Fayetteville Shale property owners and Southwestern Energy and its subsidiaries have reached a settlement in a seven-year lawsuit that accused the companies of improperly skimming payments to property owners for drilling wells on their land.
Conway County Circuit Judge Terry Sullivan gave preliminary approval Thursday to the settlement, which states the company will pay as much as $45 million. Sullivan will hold a final fairness and approval hearing June 28.
The settlement class represents about 13,000 people who were owed royalties from Jan. 1, 2006, through Sept. 30, 2016, although they may opt out, according to court records.
The settlement comes nearly a year and a half after Southwestern Energy, the last major driller in the shale, withdrew its last drilling rigs from the area. Wells have continued to run in the shale with diminished production and value.
In the settlement, Southwestern Energy and its subsidiaries SEECO (Southwestern Energy Exploration Co.), SWN Production, DeSoto Gathering Co. and Southwestern Energy Services deny the claims of Eldridge Snow, an 88-year-old Center Ridge man who sued them in 2010.
The settlement states the company and its subsidiaries will pay $30 million, lower deductions from future royalty payments at an estimated value of $15 million to property owners and pay up to $150,000 for a settlement administrator.
Attorneys for Snow intend to seek up to 45 percent of the $30 million -- $13.5 million -- in attorneys' fees. They also plan to seek a fee for Snow and up to $750,000 for various litigation costs.
Court records had not previously included plaintiffs' estimates for how much they allege Southwestern Energy and its subsidiaries improperly deducted from royalty payments.
Dan Smolen, an attorney for Snow from Smolen Smolen and Roytman in Tulsa, said he could not divulge how the settlement amounts were reached because of a protective order. But he said attorneys had estimated between $0.05 and $0.19 per thousand cubic feet of gas had been improperly deducted.
In a news release from his attorneys, Snow said, "this is a great settlement, especially considering the prolonged period of extremely low natural gas prices."
In his order tentatively approving the settlement, Sullivan wrote that the settlement was fair and had been entered into "in good faith."
In their joint motion for approval of their proposed settlement, attorneys for Snow and Southwestern Energy and its subsidiaries argued that their settlement was "fairly and honestly negotiated, at arm's length, and without collusion."
"In reaching this proposed compromise, the parties have considered the time, effort, and costs involved in protracted class action litigation, particularly in light of the strengths and weaknesses of their respective cases and the overall complexity of this case, and believe the value of an immediate recovery outweighs the possibility of any future recovery, promotes judicial economy, and serves the interest of justice," the filing reads.
Attorneys for the company and its subsidiaries were unavailable or declined comment to the Arkansas Democrat-Gazette on Friday.
"We believe this to be a fair and reasonable settlement and a true win for the royalty owners," Smolen said in the news release. "The settlement, if approved by the Court, provides the benefit of a substantial recovery for the class while avoiding the costs and risks inherent in adversarial litigation."
The case was one of three certified class-action lawsuits against Southwestern Energy and its subsidiaries that claimed the company cheated property owners out of promised royalty payments by deducting fees for doing business among the Southwestern subsidiaries, and other complaints.
The Snow case alleged that SEECO used internal accounting practices to determine deductions that exceeded reasonable amounts, deducted costs that weren't allowed, and reported false and misleading amounts to property owners on their check stubs, among other complaints. It was certified for class action in October 2014 and affirmed for class action by the Arkansas Supreme Court in December.
The three class-action lawsuits are among numerous lawsuits that have been filed in recent years in Arkansas over whether people who leased mineral rights to natural-gas companies were adequately compensated according to their contracts. Such lawsuits have become common nationwide, including in Pennsylvania, Texas, Oklahoma, Ohio and Louisiana. Some cases have been settled in Arkansas and other states.
Many of the lawsuits contend that natural-gas companies -- including the shale's biggest companies, Southwestern Energy Co., XTO Energy and BHP Billiton, which purchased Chesapeake Energy's assets in the shale -- have withheld payments improperly in a variety of ways from people who signed leases. Those ways, according to the suits, include charging too many fees, such as for services through subsidiary companies.
Experts have said the three Southwestern cases all being certified at the same time created a "race to judgment." In a race to judgment, the case that is resolved first can limit who can be a member of a class in other cases. Typically, class-action lawsuits over similar issues representing similar populations are combined into one case, experts said, but that didn't happen with Eldridge Snow v. SEECO, Sara Stewmon v. SEECO or Connie Jean Smith v. SEECO.
Attorneys for Southwestern Energy and its subsidiaries filed a notice of the Snow settlement Thursday in federal court, which is hearing Connie Jean Smith's lawsuit against the companies.
"The settlement, if finally approved, would fully resolve the claims of all members of the class in the case pending before the Court, as well as the claims of other SEECO cost-bearing royalty owners who are not members of the class in this case, but are members of the classes in Snow and Stewmon," attorneys wrote. That case is set for trial June 5. The companies have requested a continuance of that trial and a stay in the case in light of the Snow settlement.
Stewmon v. SEECO has had little action since having its class-certification upheld by the Arkansas Supreme Court in December. The claims made by two class members, who had become the class representatives, were dismissed in March, but the class-action remained, according to a state court records search.
Metro on 05/20/2017