$42.6M Settlement Approved in Hopper v. Jay-Bee Oil & Gas

Brenda Lee Hopper, et al. v. Jay-Bee Oil & Gas Inc., et al

Case Background

In 2020, Brenda Lee Hopper, both individually and on behalf of a group of leaseholders, filed a class action lawsuit against several hydraulic fracturing operators, including Jay-Bee Oil & Gas Inc., Jay-Bee Production Co., JB Exploration I LLC, Jay-Bee Royalty LLC, and Randall J. Broda. The lawsuit accused the Defendants of unlawfully deducting post-production expenses from royalty payments owed to the class members. The case was filed in the United States District Court, West Virginia Northern. Judge John Preston Bailey presided over this lawsuit and approved the settlement. [Case number: 20-101]

Cause

The class members include all persons and entities, including their respective successors and assigns, who, since May 21, 2010, through December 31, 2023, were paid or due royalties from Jay-Bee, under certain West Virginia oil and gas leases, excluding publicly traded oil and gas exploration companies and leases subject to binding arbitration provisions. Hopper argued that the defendants violated the terms of the oil and gas leases by failing to properly calculate and pay royalties on natural gas and natural gas liquids (NGLs).

Plaintiffs alleged that Defendants improperly deducted "Post-Production Expenses" when calculating and paying royalties to Class Members under certain oil and gas leases. They further claimed that Defendants misled Class Members by stating on monthly royalty statements that the royalties paid represented the "gross" proceeds received by Jay-Bee. In reality, these amounts were "net" of Post-Production Expenses. These expenses included costs, charges, and fees for gathering, compressing, dehydrating, processing, transporting, storing, and marketing the oil, gas, and other hydrocarbons produced under the leases and from the wells involved in the lawsuit.

In 2022, the Plaintiff submitted a second amended complaint to the U.S. District Court for the Northern District of West Virginia. This amendment introduced a section addressing "questions of law, fact, and damages common to all Class Members, which predominate over any questions affecting individual Class Members." These questions focused on specific issues related to the deduction of royalties. The second amended complaint also added new defendants: Abacus Union LLC, JBU LLC, BB Land LLC, JB Exploration II LLC, DMRB Services LLC, and Deborah V. Broda-Morgan.

Key Arguments and Proceedings

Legal Representation

Plaintiff(s): Brenda Lee Hopper and Debra Lynn Kurfis, as Co-Executrixes of the Estate of Allen E. Smith | Judith E. Ash-Young | Richard L. Armstrong | Donald R. Reynolds
- Counsel for Plaintiff(s): Victor S. Woods | Brian R. Swiger | Brian A. Glasser | Jonathan R. Marshall | Thanos Basdekis | John A. Budig | Timothy R. Linkous | Scott A. Windom | William E. Ford III | J. Michael Benninger

Defendant(s): Jay-Bee Oil & Gas, Inc. | Jay-Bee Production Company | JB Exploration I, LLC | Jay-Bee Royalty, LLC | Abacus Union, LLC | JBU, LLC | BB Land, LLC | JB Exploration II, LLC | DMRB Services, LLC | Deborah V. Broda-Morgan | Randall J. Broda in his individual capacity | the Estate of Randall J. Broda | Peter Sachs, as Administrator Ad Litem for the Estate of Randall J. Broda (collectively, the “Defendants”)
- Counsel for Defendant(s): Charles R. Bailey | Josef A. Horter | Mike Seely | Michael D. Leffel | Vi Tran | Shane McDonald | Drake Lawsage

Claims

Hopper filed claims for breach of contract, breach of fiduciary duty, and breach of the implied covenant of good faith and fair dealing. She also alleged conversion, misrepresentation, fraud, concealment, civil conspiracy, and negligence. Hopper sought both compensatory and punitive damages.

Defense

On November 2, 2022, the defendants filed a motion to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6). They argued that the complaint did not present a valid claim for which relief could be granted. However, on December 5, 2022, Judge Bailey denied the motion to dismiss. He ruled that the Plaintiff had sufficiently stated a claim for fraud with the necessary level of detail.

Settlement

The parties continued negotiating, and on August 16, 2024, the Plaintiffs filed an unopposed motion to approve the settlement notice. In the motion, the Plaintiffs detailed the settlements. The first, the Jay-Bee settlement, totaled $38,467,289, including a 16% discount and 4.5% interest. This settlement involved the Jay-Bee Defendants: Jay-Bee Oil & Gas Inc., Jay-Bee Production Co., JB Exploration I LLC, BB Land LLC, Jay-Bee Royalty LLC, JBU LLC, Abacus Union LLC, DMRB Services LLC, JB Exploration II LLC, and Deborah V. Broda-Morgan. Under the Jay-Bee settlement, starting with the January 2024 production month, Jay-Bee would deduct only post-production expenses authorized by the settlement. For any unauthorized deductions from April 2024 onward, Jay-Bee agreed to refund the amounts directly with interest. The second settlement, called the estate settlement, was reached with Peter A. Sachs, the administrator ad litem for Randall J. Broda's estate, and was valued between $4.2 million and $5 million. Leaseholders qualified for payment under the Jay-Bee settlement if their lease was in West Virginia, they held a royalty interest from May 21, 2010, to December 31, 2023, and they received or were due royalty payments from the Jay-Bee Defendants. Leaseholders whose leases included an arbitration clause were excluded. The settlement payment for each leaseholder depended on the production and sale of natural gas from wells during the class period, their ownership percentage, and any improper deductions from royalties, minus attorney fees, litigation costs, and incentive awards. On August 20, 2024, Judge John Preston Bailey approved the unopposed motion by signing the order. On December 12, 2024, the final approval was entered.

Court Documents:

Final Approval

Press Release:

PR Newswire

Court Approves $46.6M Combined Settlement in Jay-Bee Oil & Gas Royalty Dispute