HARRISBURG – The Supreme Court of Pennsylvania almost unanimously sided with natural gas companies in finding that State Attorney General Josh Shapiro’s office can’t target practices connected to the leasing of mineral rights, under the auspices of the Unfair Trade Practice and Consumer Protection Law.
State Supreme Court justices issued the 6-1 ruling on March 24, in favor of Anadarko Petroleum Corporation and Chesapeake Energy Corporation, that the AG’s office cannot use the UTPCPL to take legal action on behalf of sellers against buyers.
This action reversed the rulings of lower courts in Pennsylvania.
Justices Sallie Updyke Mundy, Thomas G. Saylor, Debra Todd, Christine Donohue, David N. Wecht and Chief Justice Max Baer all voted in the affirmative, with Justice Kevin M. Dougherty casting the lone dissenting vote.
Shapiro’s office initially sued Anadarko and Chesapeake in 2015, accusing the corporate pair of driving out competition and not extending signing bonuses and royalties to landowners, through dividing up the leasing of mineral rights in Northern Pennsylvania.
Anadarko’s argument centered on its contentions that it merely bought mineral rights through land leasing and did not sell services, thus, not falling under the auspices of the UTPCPL.
The company received support for this argument in a Jan. 9, 2020 amicus brief from the Marcellus Shale Coalition, the Pa. Independent Oil & Gas Association and the American Petroleum Institute – who added that legislators could have enacted similar regulations to the UTPCPL for governing oil and gas mineral leasing rights, and chose not to.
Anadarko sold its assets in the Marcellus Shale region in late 2016, while Chesapeake was removed from the case in 2020, when it filed for bankruptcy in federal court.
Shapiro’s office settled its case with Chesapeake last month for $5.6 million in landowner payments and legal costs.
In the majority ruling, the state Supreme Court said the UTPCPL applies to sellers only and in ruling otherwise in March 2019, the Commonwealth Court of Pennsylvania was in error.
“The UTPCPL clearly regulates the conduct of sellers, and it does not provide a remedy for sellers to exercise against buyers. Thus, the legislature chose to define trade and commerce as only acts of selling for purposes of the UTPCPL, even though the ordinary meaning of those terms signifies both buying and selling goods. We may not disregard this policy choice,” Mundy said.
“Defining trade and commerce exclusively as acts of sellers aligns with and effects the legislative purpose of protecting consumers by ‘equalizing the market position and strength of the consumer vis-à-vis the seller’ and deterring sellers from using unfair, deceptive and fraudulent practices.”
In his dissent, Dougherty disagreed with Anadarko’s argument that landowners “are not powerless, and actually retained significant leverage because they are able to bargain for changes to the terms of the contracts and able to decline the contract entirely.”
“Anadarko’s superior knowledge of the market in the Marcellus Shale region along with its sophistication in oil and gas lease agreements may consistently tip the scales in their favor throughout the negotiation process. Moreover, producers have the advantage of being insulated from trespass actions when they take gas from under the property of owners who refuse to ‘play ball’ – the producers need only obtain leases on the neighboring land,” Dougherty stated.
“I would therefore affirm the Commonwealth Court’s holding that the claims set forth in the Second Amended Complaint may be actionable under the UTPCPL.”
Though the AG’s office, led by Democrat Shapiro, has championed the clarification of what constitutes unfairly competitive acts under the UTPCPL, the Republican-controlled Pennsylvania Legislature asserts that such an action was tantamount to creating a state antitrust law outsides lawmakers’ confines.
“We are reviewing this opinion and have plans to engage legislators on this matter to update Pennsylvania laws to better protect those misled by corporations like this one,” the AG’s office said.
Supreme Court of Pennsylvania case 81 MAP 2019
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com