The U.S. Court of Appeals for the Eighth Circuit delivered a sweeping victory for Schiffer Hicks Johnson client Southwestern Energy, affirming its defeat of a class action lawsuit that claimed the natural gas company underpaid royalties to thousands of royalty owners.

In a case that was closely watched by the oil and gas industry, named plaintiff Connie Jean Smith alleged that Southwestern Energies improperly deducted post-production costs paid to subsidiaries to the disadvantage of royalty owners.

After a 10-day trial in June 2017, a federal jury in Little Rock, Arkansas found that to the contrary, the charges incurred by Southwestern’s subsidiaries were reasonable and payments were in line with standard industry practice. Two appeals followed the verdict. One was brought by parties who had unsuccessfully attempted to intervene in the case; the other, by Smith, who sought a new trial on the grounds that a federal judge lacked sufficient evidence when he granted Southwestern partial summary judgment before trial.

The Eighth Circuit denied both appeals. In rejecting the main thrust of Smith’s argument, the Eighth Circuit said the lower court did not err; it appropriately found that Southwestern had a contractual obligation to pay its subsidiaries.

At the time Smith filed her appeal, other class actions on related claims and with similar lease provisions were already pending in state court, and in a novel legal strategy the trial team successfully sought to consolidate all of Southwestern’s royalty owners into a class of 12,000.

The ruling represents a complete victory for Southwestern and for both its trial and appellate legal teams, won at every stage of one of the rare class actions to proceed to verdict.

Southwestern’s representation at the trial level was led by Partner Marc Tabolsky and at the appellate level by Aaron M. Streett of Baker Botts LLP.