Devon Energy has won a ruling from the U.S. Fifth Circuit Court of Appeals in New Orleans after being sued by 214 plaintiffs who had claimed the Oklahoma City energy company had uderpaid them by more than $100 million in oil-and-gas royalties.
The suit was filed against Devon Energy Production Company, L.P. in a Texas state court but Devon had it moved to a federal court because many of the plaintiffs lived in other states. As the Appeals Court noted, “In fact, some Plaintiffs reside in places that are thousands of miles away from Texas, such as Alaska, Massachusetts, and the United Kingdom.”
The plaintiffs wanted the case returned to state court and a lower court ordered it to be returned.
On appeal, the United States Court of Appeals for the Fifth Circuit disagreed with the district court’s interpretation of the statute. The appellate court found that not all plaintiffs had incurred their “principal injuries” (financial harm from Devon’s alleged underpayment of royalties) in Texas, as required under the “local controversy” exception of CAFA.
Accordingly, the appellate court vacated the district court’s judgment remanding the case to state court and directed that the case be reinstated on the district court’s docket. This ruling signifies that the case will proceed in federal court, not state court.
The matter of whether there really was $100 million in royalty underpayments will have to be decided in the federal court.