The opinion
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OKLAHOMA
KUNNEMAN PROPERTIES LLC, )
On behalf of itself and all others similarly )
situated, )
)
Plaintiff, )
)
v. ) Case No. 17-CV-456-GKF-JFJ
)
MARATHON OIL COMPANY, )
)
Defendant. )
OPINION AND ORDER
Before the Court is Plaintiff’s First Motion to Compel (ECF No. 50), which is GRANTED
IN PART and DENIED IN PART as set forth below.
I. Factual and Procedural Background1
This case involves the alleged underpayment, late payment, or non-payment of royalties
and oil and gas production proceeds from gas-producing wells operated by Defendant Marathon
Oil Company (“Marathon”). Plaintiff Kunneman Properties, LLC owns royalty interests in
Marathon-operated wells and purports to bring this action on behalf of itself and others similarly
situated in two separate classes. Plaintiff claims Marathon “underpaid royalty by deducting the
costs necessary to make gas marketable when Marathon bears the sole burden of shouldering those
costs under Oklahoma law.” ECF No. 50 at 4 (citing Compl. ¶¶ 61-89). Proposed Class I consists
of all persons who own or owned minerals in Oklahoma subject to an oil and gas lease from
September 1, 2011, to present wherein Marathon improperly reduced royalty payments by
1 This Order assumes familiarity with Plaintiff’s Class Action Complaint (ECF No. 2) and Judge
Frizzell’s Opinion and Order dated September 24, 2019 (ECF No. 83).
charging the owners for the cost of marketing, gathering, compressing, dehydrating, treating,
processing, or transporting hydrocarbons produced. Proposed Class II consists of all persons or
entities who received untimely payments from defendant or its designee for oil and gas proceeds
from Oklahoma wells, and whose payments did not include interest required by statute.
Early in the case, when the parties filed their Joint Status Report, Plaintiff argued that
“discovery should not be stayed, limited, or bifurcated.” ECF No. 39. Conversely, Marathon argued
that “discovery should be bifurcated, with discovery prior to the class certification hearing being
limited to class certification issues and those merits issues directly related to class certification.” Id.
On February 6, 2019, United States District Judge John Dowdell issued a scheduling order setting a
discovery deadline of January 6, 2020, without making any reference to bifurcation. ECF No. 42.
Although the Scheduling Order did not set a trial date or other pretrial motion dates requested by
Plaintiff, it otherwise tracks Plaintiff’s proposed schedule. Compare ECF No. 39 with ECF No. 42.
Accordingly, Judge Dowdell rejected Marathon’s proposal to bifurcate discovery into phases and
set one discovery deadline governing the case.
On February 22, 2019, Plaintiff issued the discovery requests currently at issue. On May
24, 2019, upon joint motion of the parties, Judge Dowdell extended all deadlines but did not revisit
the issue of bifurcation. That amended scheduling order, which currently governs the litigation,
sets a class-certification hearing for April 29, 2020, and sets a discovery deadline of July 20, 2020.
ECF No. 49. Shortly after Plaintiff filed the pending motion to compel, Marathon caused new
counsel to enter an appearance, and the case was reassigned to United States District Judge
Gregory Frizzell. Upon his entry to the case, Judge Frizzell did not issue a new scheduling order
or otherwise revisit scheduling issues. On September 24, 2019, Judge Frizzell ruled on Marathon’s
pending motion to dismiss. Pursuant to this ruling, the remaining Class I claim is breach of lease,
and the remaining Class II claims are (1) breach of statutory obligation to pay interest; (2)
accounting and disgorgement; and (3) injunctive relief. See ECF No. 83. No class has yet been
certified.2
II. Standard of Review
Under Rule 26 of the Federal Rules of Civil Procedure, parties may obtain discovery
“regarding any nonprivileged matter that is relevant to any party’s claim or defense and
proportional to the needs of the case.” Fed. R. Civ. P. 26(b)(1). Discoverable information need
not be admissible at trial. Id. Rule 26 provides six factors to consider regarding proportionality:
(1) the importance of the issues at stake in the action; (2) the amount in controversy; (3) the parties’
relative access to relevant information; (4) the parties’ resources; (5) the importance of the
discovery in resolving the issues; and (6) whether the burden or expense of the proposed discovery
outweighs its likely benefit. Fed. R. Civ. P. 26(b)(1). This analysis often means “that the burden
of responding to discovery lies heavier on the party who has more information, and properly so.”
Fed. R. Civ. P. 26(b) advisory committee’s note (2015 amendment). Rule 26’s proportionality
requirement is not “intended to permit the opposing party to refuse discovery simply by making a
boilerplate objection that it is not proportional.” Fed. R. Civ. P. 26(b) advisory committee’s note
(2015 amendment).
Document requests must describe what is being sought with “reasonable particularity.”
Fed. R. Civ. P. 34(b)(1)(A). Objections to discovery requests must be stated “with specificity.”
Fed. R. Civ. P. 34(b)(2)(B). Mere boilerplate objection language, such as “vague, over-broad,
2 In a class action alleging underpayment of royalties, the Tenth Circuit recently rejected defenses
to class certification premised on gas-quality variations, varying lease language, and a lack of
uniform payment methodology. See Naylor Farms, Inc. v. Chaparral Energy, LLC, 923 F.3d 779,
795-98 (10th Cir. 2019). Plaintiff contends that that decision confirms that “cases like this are
viable, valuable, and should be certified” but that it still must have discovery to prove certification
is proper. ECF No. 50 at 1.
unduly burdensome, not reasonably calculated to lead to discovery of admissible evidence,”
without more, is not sufficient. See Howard v. Segway, Inc., No. 11-CV-688-GKF-PJC, 2013 WL
869955, at *1, *3 (N.D. Okla. Mar. 7, 2013). “When the district court does intervene in discovery,
it has discretion in determining what the scope of discovery should be.” In re Cooper Tire &
Rubber Co., 568 F.3d 1180, 1189 (10th Cir. 2009). District courts managing discovery matters
are subject to review only for abuse of discretion. See Caves v. Beechcraft Corp., No. 15-CV-125-
CVE-PJC, 2016 WL 355491, at *1 (N.D. Okla. Jan. 29, 2016).
III. Parties’ Arguments
In their brief and during the hearing, Marathon raised three principal objections to
Plaintiff’s discovery requests: (1) the requests are not relevant to class-certification issues; (2) the
requests will require extensive searches of Marathon’s electronically stored information (“ESI”),
which is overly burdensome prior to class certification; and (3) all challenged individual requests
are facially overbroad or vague. Defendant contends that, based on the thousands of documents it
has already produced related to oil and gas royalty calculations, “both parties will have everything
they need to fully analyze and argue class certification” and that the disputed requests are merely
designed to “create settlement leverage.” ECF No. 70 at 2.
In its response and during the hearing, Plaintiff argued: (1) relevance is not limited to class
certification issues and, regardless, the disputed requests are relevant to class certification; (2)
Marathon’s global objection to producing any ESI is without merit; and (3) the challenged
individual requests are not overbroad or vague, in light of Plaintiff’s offer to limit ESI searches to
specific search terms and custodians. Plaintiff contends Marathon is attempting to “curate
document production to match [its] sham defenses against class certification” and that it “object[s]
on relevancy and proportionality grounds for the types of documents – i.e., internal
communications – that most clearly contain common answers for class certification.” ECF No. 50
at 7.
IV. Analysis
The Court holds: (1) discovery is not limited to class-certification issues; (2) Marathon
must search and produce ESI, subject to agreed ESI protocols; and (3) certain requests are vague
or overbroad and will be limited by the Court.
A. Discovery Is Not Limited to Class Certification Issues
As explained above, the district judge has not bifurcated discovery into stages, and there is
one discovery deadline governing the litigation. Marathon has not moved for modification of the
scheduling order or for bifurcation, and the Court will not revisit the issue of bifurcation under the
guise of sustaining Marathon’s discovery objections. Nor will the Court jeopardize the current
scheduling order by postponing the production of ESI until after a ruling on class certification.
Further, the Court finds the vast majority of requests are relevant to class certification, rather than
merely merits issues, such that bifurcation would not significantly limit the discovery being
compelled. Marathon’s objections based on the requested discovery’s lack of relevance to class-
certification issues are overruled. Marathon’s objections premised on the discovery’s lack of
proportionality to this “stage” of the proceedings are also overruled, as discovery is not staged or
bifurcated.
B. ESI Must Be Searched With Established ESI Protocols
Across multiple requests for production, Plaintiff is requesting that Marathon search,
review, and produce ESI. Specifically, Plaintiff is requesting searches of email accounts, shared
folders, and desktop folders. Plaintiff stands willing (and has been willing) to negotiate search
terms, custodians, and other ESI protocols for these requests. In support of its global argument
that ESI searches are overly burdensome, Marathon relies on the affidavit of James Cashion,
eDiscovery Support Analyst at Marathon. Cashion explained that, prior to March 26, 2018, emails
not otherwise governed by a litigation hold order were retained for 45 days. Id. at ¶ 14. Cashion
further represented that no backup data has been retained for emails prior to February 9, 2018. Id.
at ¶ 15. Cashion estimates it would take 240-288 machine hours to “publish” the requested
documents, and eight to twelve weeks for two paralegals to review the documents. See ECF No.
70-2 at ¶¶ 25, 29.
The Court overrules Marathon’s blanket objection to search and production of ESI.
Although Marathon contends Plaintiff has all discovery it needs for purposes of class certification,
Marathon’s internal documents and communications, and communications with midstream
providers, could tend to show commonality of claims and Marathon’s understanding and
application of the implied duty to market in Oklahoma on a class-wide basis. Further, search of
electronic databases for relevant internal communications or documents is not merely a fishing
expedition. It is not overly speculative that Marathon employees discussed the bases and reasoning
behind the royalty calculation data already produced. Communications, board minutes, and
presentations may be important to establishing class-wide treatment of royalty calculations for
Oklahoma wells. ESI may be particularly relevant here, because Plaintiff contends Marathon
continued improperly calculating Oklahoma royalties even after settling a prior lawsuit presenting
similar allegations regarding improper royalty calculation. See ECF No. 50 at 4 n.8 (citing final
approval of $40 million settlement in Hill v. Marathon Oil Company, No. CIV-08-37-R (W.D.
Okla.)).
Cashion’s burden analysis is not particularly meaningful, because it does not account for
any specified search terms, specific number of custodians, or other ESI protocols. Although
Cashion states that Plaintiff “has not proposed any specific ESI protocol or search terms,” see id.
at ¶ 9, Plaintiff contends it was willing to do so but Marathon stood on its blanket objection.
Further, under the retention policy explained by Cashion, it appears that ESI searches will be for
a significantly more limited duration than the entire requested Class Period.3 Cashion’s affidavit
does not persuade the Court that production of ESI is globally overly burdensome or
disproportionate to the needs of this case. Considering all proportionality factors, the Court finds
the requested ESI is important to the issues at stake; that there is a significant amount in
controversy; that Marathon has access and resources to search ESI; and that the overall burden or
expense of searching ESI does not outweigh its likely benefit. Fed. R. Civ. P. 26(b)(1).
However, as discussed below, certain requests are overly burdensome without limitations
in the form of ESI protocols, and Plaintiff agrees that protocols are necessary and appropriate. The
Court will not sua sponte establish ESI search protocols, and the Court orders the parties to meet
and confer on the subject of establishing ESI protocols. Subject to establishment of these protocols
by agreement, and other limits established for specific requests below, the Court overrules
Marathon’s global objection to search and review of ESI at this stage of the proceeding.4
3 In the discovery requests, “Class Period” is defined as (September 1, 2011, through the date class
notice is given).
4 Plaintiff cited at least three Orders compelling similar discovery requests (including ESI) in cases
where Plaintiff’s counsel represents a class of royalty owners against different oil and gas
companies. See, e.g., ECF No. 50-1 (Order granting motion to compel against Devon Energy
Company in case pending in Pittsburg County). These Orders did not set forth reasoning and were
of limited persuasive value. However, they dispel the general notion that ESI is not routinely
ordered in these proceedings.
C. Specific Requests are Granted, Denied, or Narrowed as Follows
1. Organizational Charts and Employee Lists (RFP No. 1(b))
Moot. At the hearing, Marathon agreed to provide a custodian list for employees with
information about the Marathon Oklahoma Leases and Marathon Wells during the Class Period.
Plaintiff was satisfied with this response at the hearing.5
2. Gas Contracts and Return-on-Investment Documents for Midstream
Gathering Systems (RFP Nos. 4(a)(iv)-(v))
Granted. In these requests, Plaintiff seeks documents relating to Marathon Wells
connected to Marathon-owned or -operated midstream assets. Specifically, Plaintiff requested, for
each midstream gathering system owned or operated by Marathon, that Marathon produce its Gas
Contracts for the system (4(a)(iv)), and documents showing the internal return on investment that
Marathon included in the price structure for the system (4(a)(v)). These requests are relevant to
what fees and proceeds midstream service providers absorb or pass on to Marathon, which then
may be passed on to royalty owners. Although Marathon has already produced pricing formulas
to show the value of the gas sold, the deductions charged, and the exemptions passed on to the
royalty owners, the requested contracts with third-party producers show the source of the pricing
formulas. Notably, Marathon did not argue these requests were overly burdensome or
disproportionate to the needs of the case, only that the documents sought were not relevant.
5 The Court’s capitalized phrases refer to defined terms in Plaintiff’s discovery requests.
3. Documents Relating to Royalty Accounting and Payment (RFP No. 10)
a. How Royalty Was Calculated; Approvals of Proposed Changes to
Methodology; and Decisions to Deduct Midstream Service Costs
(RFP Nos. 10(b)(i)-(iii))
Granted, subject to limitations and ESI protocols. These requests are relevant to showing
Marathon’s class-wide decisions or changes regarding royalty calculations during the Class Period.
To ensure proportionality, Plaintiff must limit this request to a proportional and reasonable number
of search terms and custodians. Further, as discussed at the hearing, RFP Nos. 10(b)(i) and
10(b)(ii) are limited to documents pertaining to Marathon Wells, as defined in Plaintiff’s Requests
for Production. RFP Nos. 10(b)(ii) and 10(b)(iii) are limited to the Class Period, as defined in
Plaintiff’s Requests for Production. The parties shall meet and confer to establish ESI protocols
and to identify relevant search terms and relevant custodians.
b. Methodology Used for Marathon Wells Acquired from Other
Companies (RFP No. 10(b)(iv))
Granted, subject to limitations and ESI protocols. This request is relevant to showing
whether, upon acquisition, Marathon changed course in royalty payment methods and how
Marathon set up a payment methodology for the acquired well. To ensure proportionality, Plaintiff
must limit this request to a proportional and reasonable number of search terms and custodians.
This request shall also be limited to the Class Period. The parties shall meet and confer to establish
ESI protocols and to identify relevant search terms and relevant custodians.
c. Royalty Payment Methodology in Other States (RFP No.
10(b)(vi))
Granted, subject to limitations and ESI protocols. This request is relevant to whether
Marathon uses the same payment methodology in Oklahoma as it does in states with differing laws
regarding the implied duty to market. However, the Court finds the request to be facially
overbroad, because it extends to all documents that could potentially relate to how Marathon
calculates royalties in every state across the entire country without limitation. Accordingly, RFP
No. 10(b)(vi) is limited to charts and summary documents that compare royalty payment
methodologies used in Oklahoma with methodologies used in other states. If necessary, the parties
shall meet and confer to establish ESI protocols and to identify relevant search terms and relevant
custodians.
d. “Source” Documents for Check Stub Numbers and Calculations
(RFP No. 10(c)(i))
Denied, as vague and facially overbroad. Plaintiff requests documents showing the
“source” of the numbers appearing “on the check stub and whether any value, volume, or Btu has
been reduced or netted-out” before Marathon reports that number “on the check stub sent to royalty
owners.” It would be disproportionately burdensome for Marathon to comply with this request as
written, given that (1) it seeks production of extensive information for each and every royalty
owner for every Marathon Well for every month during the Class Period; (2) the meaning of
“source” documents is unclear; and (3) Plaintiff did not offer to limit this request in any reasonable
way during the hearing. Further, Marathon represents that it has already produced pay history and
contracts to enable the parties, counsel, and experts to evaluate how cost exemptions were set up
for individual owners regarding the Marathon Wells during the relevant time period.
e. Contracts and Written Instructions Provided to or by
Accounting Entities (RFP No. 10(c)(ii))
Granted, subject to limitations and ESI protocols. How Marathon instructed accounting
entities to calculate royalty payments is relevant to class certification and liability, and for purposes
of comparing such instructions with the data and calculations Marathon produced. To ensure
proportionality, Plaintiff must limit this request to a proportional and reasonable number of search
terms and custodians. This request shall also be limited to the Class Period. The parties shall meet
and confer to establish ESI protocols and to identify relevant search terms and relevant custodians.
4. Documents Relating to Other Class Action Settlements (RFP No. 14)
Granted, subject to limitations and ESI protocols. Plaintiff requests any documents
“concerning class action settlements greater than $5 million by other Oklahoma producers,
including, but not limited to,” seven identified settlements enumerated in RFP No. 14. During the
hearing, Plaintiff limited the request to the seven enumerated settlements. The request is relevant
to whether and for what reasons Marathon made any changes to royalty payment methodologies
after other Oklahoma producers paid large settlements to settle royalty underpayment claims. It is
not overly speculative that large settlements sparked internal discussions about how royalties were
being calculated in Oklahoma. Nor is it overly speculative to conclude that many of these
communications are non-privileged. To ensure proportionality, Plaintiff must limit this request to
a proportional and reasonable number of search terms and custodians. The parties shall meet and
confer to establish ESI protocols and to identify relevant search terms and relevant custodians.
5. Analyses, Presentations, and Financial Projections Regarding
Marathon’s Oklahoma Oil and Gas Production Assets and Midstream
Service Costs (RFP. No. 16)
Granted, subject to limitations and ESI protocols. The requests are relevant, because
analyses, presentations, and financial projections may show what fees and proceeds are being
passed on to royalty owners at which stages of marketability. The request is limited to the
specifically listed items, and the phrase “documents showing” is stricken from the request. To
ensure proportionality, Plaintiff must limit this request to a proportional and reasonable number of
search terms and custodians. The parties shall meet and confer to establish ESI protocols and to
identify relevant search terms and relevant custodians.
6. Communications with Midstream Services Providers (RFP No. 22)
RFP 22 requests “documents relating to [Marathon’s] communications with providers of
Midstream Services” regarding six topics. The Court finds all six subparts relevant to issues
presented but finds that some requests are facially overbroad and therefore imposes limits to ensure
proportionality to the needs of the case. On a global basis, the Court limits RFP 22 to Marathon’s
communications with providers of Midstream Services, rather than all “documents relating to”
such communications.
a. Implied Duty to Market and Marketable Products (RFP No. 22(a))
Granted, subject to limitations and ESI protocols. This request is facially overbroad and
burdensome to the extent it seeks all documents and communications in any way related to these
two broad concepts. The Court finds the phrase “marketable products” to be particularly
overbroad, and the Court limits this request to communications with providers of Midstream
Services regarding the specific concept of the “implied duty to market” under Oklahoma law. The
Court also limits the request to the Class Period. To further ensure proportionality, Plaintiff must
limit this request to a proportional and reasonable number of search terms and custodians. The
parties shall meet and confer to establish ESI protocols and to identify relevant search terms and
relevant custodians.
b. Other Communications (RFP Nos. 22(b)-(f))
Granted, subject to limitations and ESI protocols. In the remaining requests, Plaintiff seeks
communications with service providers regarding: where “title to the gas will transfer under the
gas contract(s) being negotiated” (22(b)); providing testimony in this royalty underpayment case
or other prior class actions where Marathon was a defendant but the service provider was not
(22(c)); this case (22(d)); any prior case involving any Marathon Wells (22(e)); and changing to
or from a fee-based agreement to a POP or POI agreement (22(f)). The Court finds all requests to
be relevant to class certification and liability. To ensure proportionality, Plaintiff must limit these
requests to a proportional and reasonable number of search terms and custodians. The parties shall
meet and confer to establish ESI protocols and to identify relevant search terms and relevant
custodians.
7. Documents Already Produced in Hal McKnight et al. v. Marathon Oil
Company, Case No. 5-17-CV-264-HE (W.D. Okla.) (the “McKnight
Case”) (RFP No. 26)
Moot. Plaintiff requests “all documents produced” in the McKnight Case, which Plaintiff
represents was a recently litigated and settled individual case with claims against Marathon that
were analogous to the class claims in this case. At the hearing, Marathon represented that Plaintiff
has all responsive documents from that case.
8. Request to Compel Production of Documents Marathon Promised to
Produce
Denied. Plaintiff asks the Court to compel Marathon to produce documents in response to
RFPs 2(j)-(k), 4(a)(i), 5(d), 5(e), and 10(a). Marathon agreed to produce documents in response
to these RFPs, but Plaintiff contends production has not been forthcoming. Marathon is still in the
process of searching for and producing documents to Plaintiff, and there is no indication that
Marathon is being dilatory in responding to these discovery requests. Accordingly, Plaintiff’s
request for an order compelling production of these documents is denied at this time.
V. Conclusion
Plaintiff’s First Motion to Compel (ECF No. 50) is GRANTED IN PART and DENIED
IN PART as set forth above. Plaintiff shall propose ESI protocol for relevant requests no later
than ten days from the date of this Order, and the parties shall meet and confer regarding disputes
and make all efforts to reach agreement.
SO ORDERED this 15th day of October, 2019.