Antitrust Law Daily Wrap Up, ANTITRUST—D. Colo.: Bid rigging claims against oil, gas, mineral assets purchaser proceed, (Aug 15, 2016)

By Michael Menzhuber, J.D., LL.M.

A motion to dismiss antitrust, breach of contract, tortious interference, and civil conspiracy claims against a company that was the sole bidder at the auction of oil, gas, and mineral rights was denied by the federal district court in Denver. The court determined that: (1) the plaintiff sellers had standing to bring the action; (2) the claims were not barred by the statute of limitations; and (3) the allegations of an agreement by the sole bidder with another company to not bid at the auction were sufficient to meet the definition of a per se antitrust violation (Branta, LLC v. Newfield Production Co., August 12, 2016, Wiley, D.).

On March 21, 2011, Newfield Production Company purchased oil, gas, and mineral assets in the Uinta Basis of Utah from Branta, LLC, Branta Exploration & Production Company, Harvest (US) Holdings, and Harvest Natural Resources, Inc. at auction. Prior to the purchases, Newfield entered into a confidentiality agreement that prohibited it from contacting other entities that may have been interested in purchasing Branta’s assets. According to Branta, Ute Energy was the other viable entity that would have been interested in the purchase. The confidentiality agreement was later modified to allow Newfield to communicate with the Harvest plaintiffs. Subsequently, Newfield executed a separate confidentiality agreement with the Harvest plaintiffs.

The Branta and Harvest plaintiffs argued that, prior to the auction, Newfield breached the confidentiality agreement by contacting Ute Energy and offering to compensate it if it did not bid competitively in the auction. The plaintiffs asserted that they did not learn of Newfield’s communications until a few years after the auction when they became aware of a May 2011 letter from Ute Energy to Newfield discussing the auction.

The plaintiffs filed claims against Newfield for breach of contract, violation of the Colorado Antitrust Act and the Sherman Antitrust Act, tortious interference with prospective business advantage, and civil conspiracy. Newfield responded by filing a motion to dismiss on the grounds that: (1) the plaintiffs lacked of standing; (2) the federal antitrust and breach of contract claims were barred by the statute of limitations; and (3) the antitrust claims did not allege a per se violation.

Standing. Newfield argued that the plaintiffs lacked standing because they allegedly sold their claims to Newfield in the purchase and sales agreements. The court, however, determined that the conveyance of the plaintiffs’ claims was intended to only apply to royalties or net profits. Therefore, since the plaintiffs’ legal claims were not for payments related to royalties or net profits, they had standing to bring their action against Newfield.

Statute of limitations. The court determined that the plaintiffs’ breach of contract and Sherman Antitrust Act claims were not barred by their respective statute of limitation. The limitations period for each of these claims was four years and the plaintiffs’ claims were filed prior to the expiration of the four-year limitations period.

Antitrust claims. As an initial matter, the court noted that two elements must be demonstrated for an antitrust claim brought under Section 1 of the Sherman Act, including: (1) an agreement in the form of a contract, combination, or conspiracy; and (2) an unreasonable restraint of trade in a relevant market. The court determined that the plaintiffs sufficiently alleged the existence of an illegal agreement between Newfield and Ute Energies because they alleged: (1) the auction price was depressed because Ute Energy did not submit a bid; (2) that Newfield concealed its breach of the confidentially agreements to prevent discovery of the conspiracy; and (3) that after Newfield purchased the assets at below market value, Ute Energies sold acreage in the Uinta Basis at a minimum 67 percent markup on the price that Newfield paid at auction.

The court also found that the plaintiffs sufficiently alleged that the defendants’ agreement affected the competitive bids to be submitted at auction for the plaintiffs’ assets. Consequently, the court determined that plaintiffs’ allegations were sufficient to meet the definition of a per se antitrust violation.

The case is No. 1:15-cv-00416-WYD-KLM.

Attorneys: Matthew E. Johnson (Wheeler Trigg O’Donnell, LLP) for Branta, LLC, Branta Exploration & Production Company, LLC, Harvest US Holdings, Inc. and Harvest Natural Resources, Inc. Amy L. Benson (Bryan Cave LLP) and James Martin Truss (Dykema Cox Smith) for Newfield Production Co.

Companies: Branta, LLC; Branta Exploration & Production Company, LLC; Harvest US Holdings, Inc.; Harvest Natural Resources, Inc.; Newfield Production Co.

Cases: Antitrust ColoradoNews