Antitrust Law Daily Wrap Up, TOP STORY—DColo: Proposed U.S. Consent Decree Resolving Allegations of Collusion for Mineral Rights Leases Rejected , (Dec 14, 2012)

By Jeffrey May, J.D.

The federal district court in Denver has rejected a proposed consent decree that would have settled the Department of Justice Antitrust Division's first action challenging an anticompetitive bidding agreement for mineral rights leases. The court found that the settlement "for nothing more than the nuisance value of this litigation" was not in the public interest (U.S. v. SG Interests I Ltd., December 12, 2012, Matsch, R.).

In its complaint, the government alleged that three companies colluded in bidding on federal lands offered by the U.S. Department of Interior’s Bureau of Land Management (BLM) in 2005. Gunnison Energy Corporation allegedly agreed with two limited partnerships—-SG Interests I Ltd. and SG Interests VII Ltd.—-managed by Gordy Oil Company that only the SGI companies would bid at the auctions and then assign an interest in the acquired leases to Gunnison Energy. As a result of the alleged agreement, the BLM received lower bid payments. The complaint also alleged False Claims Act violations for false statements made to the government in connection with the agreement not to compete.

Under the terms of a proposed consent decree, the companies agreed to pay a total of $550,000 to settle the charges. The SGI defendants would be required to pay $275,000, and Gunnison would be required to pay $275,000.

The government's net recovery would be $390,000, however, because it had agreed to compensate a whistleblower who asserted a claim pursuant to the qui tam provisions of the False Claims Act. The whistleblower—a former Gunnison employee—alleged that the defendants defrauded the United States, by engaging in conduct later challenged by the government.

The court found that the proposed consent decree was not in the public interest. The settlement would not act to deter future antitrust violations by the defendants or others in the industry, according to the court.

The court pointed to the "unrepentant arrogance" of Gunnison, as evidenced in the company's statement in response to public comments received on the consent decree. In that statement, Gunnison said that "joint bidding is common in the oil and gas industry" and that it was settling the case "not because it engaged in any illegal or improper conduct, but because the cost of defending itself would far exceed the cost of settling." The company went on to say, that it "supports the settlement, but stands ready to defend itself if the settlement is not approved."

"It is not in the public interest to approve a final judgment that permits a defendant to leave its civil action in such a smirking, self-righteous attitude," the court concluded.

This is Case No. 1:12-cv-00395.

Kathleen S. O'Neill for Department of Justice. L. Poe Leggette (Fulbright & Jaworski, LLP) for SG Interests I, Ltd. Timothy R. Beyer (Bryan Cave) for Gunnison Energy Corporation.

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