Saturday, March 26, 2011

Defendant invokes rare procedural mechanism, but Federal District Court denies certification to the Virginia Supreme Court of issue involving subsurface mineral rights

On March 24, 2011 United State District Court Judge James P. Jones from the Western District of Virginia denied a Defendant's request to utilize a rarely employed procedural mechanism to request advice from the Supreme Court of Virginia in a pending federal case. 

Judge Jones' opinion can be found here:

Background on Legard et al. v. EQT Production Co.

In the matter of Legard et al. v. EQT Production Co., EQT requested the W.D. Va. certify a question to the Supreme Court of Virginia regarding royalty payments for subsurface rights.  The procedural mechanism sought by EQT is rarely utilized, but when the right is granted is an incredible tool for the interaction of federal procedure, state procedure, and state law.

Legard and EQT are involved in litigation over the payment of royalties allegedly due under leases to Plaintiff landowners in Dickenson County, Virginia.  Royalties are paid to the landowners by a company that extracts the minerals form the earth pursuant to a contract.  Royalties are often calculated as a percentage of the value of the minerals extracted.  The question at issue in this motion is how the value of those mineral is calculated.  In other words, do the Plaintiffs receive royalties based on the market value of the gas where it is extracted form the ground, or do the Plaintiffs receive a percentage of the value of the product once the lessee has delivered it to the stream of commerce (e. g. a larger pipeline or transport station where the product can be mingled with the product from other lines of production.)

A federal court case can be partially resolved in state court

This legal issue has not been settled under Virginia law.  Federal courts, in certain instances, may hear matters involving state law.  The Federal Court, where applicable, is required to follow the jurisprudence of the Commonwealth of Virginia's courts.  In some instances, issues of great importance will arise for which Virginia courts have provided no precedent.

In these instances the Virginia Supreme Court of Virginia has provided a procedural mechanism for asking the Court to decide a single legal issue affecting a pending matter in a Federal Court, or in the highest appellate court of any other state.

This is Rule of the Virginia Supreme Court 5:40:

This rule, although providing a powerful remedy (an advisory opinion), is designed for rare use as indicated by its many restrictions, for example:

1. No litigant may certify a question for review, only Judges.
2. The order issued by the Judge must contain certain specific elements, such as the exact question to be asked, relevant facts, and the reason the answer to the question is necessary for determination of the other proceeding.
3. The Judge signing the order certifying the question will have substantial control over the certified question, the facts presented, and the purpose of the question and could issue a certified question different form the one requested.

The Supreme Court of Virginia places two more caveats on certified questions:
1. The Supreme Court can deny to hear the certified question,
2. Even once the Supreme Court agrees to hear a certified question, the Court can revoke that agreement at any time.

As interesting as this procedure is, it is rarely used (see links for caseload statistics below).  Judicial statistics from 2005-2008 show this procedure was used only three times.  All three cases were accepted and ruled upon by the Supreme Court of Virginia

How the Legard court came to address this issue

The Court in Legard received a motion to dismiss from EQT.  Judge Jones referred the motion to dismiss to Magistrate Judge Pamela Meade Sargent for review of the pleadings, and related documents, and to make a recommendation for Judge Jones' ruling.  Mag. Judge Jones recommended finding the legal issue of timing of valuation in favor of the Plaintiffs.  Based on speculation, Judge Jones would likely adopt the Mag. Judge's determination, so the Defendant sought this rarely used procedural mechanism of certifying the question to the Virginia Supreme Court to obtain a favorable ruling.

The opinion from Judge Jones on whether to certify the question is succinct, thoroughly cited, and well written.  In short, Judge Jones determined this matter is not beyond determination of a Federal Court, would cause unnecessary delay and expense, and has been addressed by other jurisdictions thereby giving guidance to how Virginia law might determine the results.


Although Rule 5:40 exists, it is rarely used, and appears to be a disfavored mechanism in Federal Courts.  One should expect if Rule 5:40 is successfully invoked, it will be an important issue.  I will update the post if I find any instances from 2009-2011 in which a question has been certified under Rule 5:40.

Caseload statistics:

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