Donald Frederick Settlement: $22.6M and Third Circuit Ruling

The Frederick v. Range Resources settlement is a 2011 federal class action deal, valued at approximately $22.6 million, that rewrote thousands of Pennsylvania and Ohio oil-and-gas leases to cap the “post-production costs” Range Resources – Appalachia, LLC could deduct from landowner royalty checks. Instead of a lump-sum payout, the remedy amended the leases themselves and put enforceable ceilings on future deductions. The Third Circuit affirmed the deal’s enforcement in January 2023.

What the Lawsuit Was About

Donald and Louise Frederick, Michael and Paula Mahle, and Donald Porta sued Range Resources in the U.S. District Court for the Western District of Pennsylvania, Case No. 1:08-cv-00288. Their claim was simple in outline and expensive in practice: Range was shrinking royalty checks by deducting gathering, compression, dehydration, and transportation charges from the value of gas after it left the wellhead. The plaintiffs argued those deductions were excessive or unauthorized under their leases, and they brought breach of contract and unjust enrichment claims on behalf of every royalty holder whose interest Range held in Pennsylvania or Ohio before October 13, 2010.¹

Judge Sean J. McLaughlin certified the class on October 13, 2010, appointed Joseph E. Altomare as class counsel, and preliminarily approved the settlement. Notice reached 25,502 potential class members. Fifty-nine opted out. Nobody objected during the initial approval process.²

What the Settlement Actually Changed

Final approval came on March 17, 2011. The unusual feature of the deal was its structure: rather than distributing a fund, it amended the class members’ existing leases and imposed enforceable limits on Range’s deductions going forward.¹

The settlement drew a firm line between two cost categories. “Production Costs,” meaning exploration, drilling, and hydraulic fracturing, could never be deducted from royalties. “Post-Production Costs” (gathering, dehydration, compression, marketing, transportation) remained deductible but were newly capped:

Wet shale gas: post-production deductions capped at the lesser of the actual pro-rata share or $0.80 per MMBTU.
Dry shale gas: capped at $0.72 per MMBTU.
Other gas: existing post-production costs reduced by $0.03 per MCF.
Oil: royalties calculated from the actual purchase price paid by the first buyer, with no deductions.
Natural gas liquids: royalties based on the actual purchase price, net only of the processor’s or purchaser’s retained share of processing costs.

Range was also required to record the court’s order with the county recorder of deeds in every county where a class lease existed, folding the amended terms into the public land record.¹

How the $22.6 Million Figure Was Calculated

Because most of the benefit was prospective, the court needed an economist to price it. Dr. Harvey S. Rosen calculated the settlement’s present value at approximately $22,599,614. Of that, $1,750,000 was an initial cash payment. The rest, about $20.3 million, represented projected royalty savings for class members over the five years following approval.³

Attorney Fees

Class counsel’s fee tracked the settlement’s unusual shape. Attorneys received 25% of the $1,750,000 cash payment ($437,500) plus a future stream of one-half cent ($0.005) per MCF of gas produced under the class leases for up to 60 months. As security, the settlement granted class counsel a terminable interest in Range’s own leasehold interests. The court valued the total fee at a present value of $4,650,382, or roughly 20.58% of the overall settlement, and found it reasonable because it fell below the typical 25% benchmark.³

Enforcement and the Third Circuit’s 2023 Ruling

The 2011 approval did not end things. In January 2018 the plaintiffs moved to enforce the settlement, alleging Range wasn’t complying. A separate Rule 60 motion followed in September 2018 to fix a discrepancy between the agreement and the court’s order over whether the cap was measured in MMBTU or MCF.⁴

A class member named Raymond Seddon Jr. objected. He argued the district court had lost jurisdiction when the original case was dismissed, that he might not actually be a class member, and that the updated settlement gave the class “nothing.” The district court rejected all three arguments and approved the modifications. Seddon appealed.⁵

On January 26, 2023, the Third Circuit affirmed. The court held that the district court retained ancillary jurisdiction because the 2011 dismissal order had expressly incorporated the settlement’s terms. It rejected Seddon’s class-membership argument on estoppel grounds, since he had earlier represented himself as a class member. And it found the settlement fair under Rule 23, concluding it delivered “immediate, guaranteed relief to thousands” through retroactive payments, lease amendments, and Range’s waiver of certain defenses.⁵

Ongoing Disputes Over the Same Caps

The fight over how Range calculates royalties has continued. In September 2021, a separate class action, Rupert, et al. v. Range Resources – Appalachia, LLC (Case No. 2:21-cv-01281), was filed in the same court. The Rupert plaintiffs alleged Range was exceeding the $0.80 per MMBTU cap set by the Frederick lease addendums. They also alleged Range calculated royalties from point-of-sale volume rather than wellhead volume, failed to account for separately sold natural gas liquids, and deducted charges for “shrinkage” and firm transportation capacity.⁶

Range changed its royalty calculations in October 2021, offered voluntary reimbursements, and moved to dismiss the case as moot. In May 2022, Magistrate Judge Patricia L. Dodge denied the motion, ruling that Range could not “unilaterally dictate the amount owed” and that the adequacy of its corrective payments remained a live dispute requiring discovery.⁶

The Frederick settlement stands out because the remedy was not a check but a rewriting of the lease terms, with the caps recorded in county land records and enforceable against Range going forward. The follow-on Rupert litigation shows those caps are still doing work, and still being fought over.