K.P. Kauffman Company, Inc. Wins Lawsuit Defending Sale of Natural Gas

K.P. Kauffman Company, Inc., (KPK) prevailed in a class-action royalty underpayment case tried in Denver District Court. The jury returned its verdict in KPK’s favor on Monday, June 8, 2009, in the case of Helen Mleynek v. K.P. Kauffman Company, Inc.

The win for KPK is a victory for natural gas producers in the state of Colorado. KPK successfully argued that it fulfilled its duty to market natural gas under state law by selling its gas at the wellhead. The jury rejected the Class’ claim that KPK’s gas was not marketable until it was processed, and that royalties should have been paid on the residue gas and natural gas liquids.

The case, filed in Denver District Court in 2007, was a class action lawsuit with approximately 2,500 royalty owners seeking over $10.6 million in damages and increased royalties for future production.

“I am proud of my family, our staff and the legal team at Holland & Hart for supporting our efforts to stand up to this legal challenge,” KPK chairman, CEO and president, Kevin P. Kauffman, stated after the victory. “This victory is not just for my company, but it is for the entire oil and gas industry in Colorado. The lawsuit demanded we pay royalties on money we do not have, and will not receive. I always believed it was important to fight it, and I am thankful to those who stood by me.”

The KPK win in court successfully proved that the first commercial marketplace for natural gas is at the wellhead.

Tony Shaheen and Chris Chrisman of Holland & Hart LLP tried the case for KPK.

According to Shaheen, “Until now, conventional wisdom was that, because of the Rogers v. Westerman Farm Co. case, you could not prove gas was marketable at the wellhead. Kauffman’s win proves that the conventional wisdom was wrong.”