Covol Fuels No. 4, LLC v. Pinnacle Mining Company, LLC

Filing

PUBLISHED AUTHORED OPINION filed. Originating case number: 5:12-cv-04138. [999538671]. [14-1395]

Appeal: 14-1395

Doc: 41

Filed: 03/03/2015

Pg: 1 of 29

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 14-1395

COVOL FUELS NO. 4, LLC, a Utah limited liability company,
Plaintiff – Appellant,
v.
PINNACLE MINING COMPANY, LLC, a Delaware limited liability
company,
Defendant – Appellee.

Appeal from the United States District Court for the Southern
District of West Virginia, at Beckley.
Irene C. Berger,
District Judge. (5:12-cv-04138)

Argued:

January 28, 2015

Decided:

March 3, 2015

Before KING and FLOYD, Circuit Judges, and DAVIS, Senior Circuit
Judge.

Affirmed in part, vacated in part, and remanded by published
opinion. Judge King wrote the majority opinion, in which Senior
Judge Davis joined.
Judge Floyd wrote a separate opinion
dissenting in part and concurring in part.

ARGUED:
Thomas Vincent Flaherty, FLAHERTY SENSABAUGH BONASSO
PLLC, Charleston, West Virginia, for Appellant.
Timothy J.
Downing, ULMER & BERNE LLP, Cleveland, Ohio, for Appellee.
ON
BRIEF:
Alan L. Sullivan, James D. Gardner, SNELL & WILMER
L.L.P., Salt Lake City, Utah, for Appellant.
Wm. Scott
Wickline, Christopher D. Pence, HARDY PENCE PLLC, Charleston,
West Virginia; Joseph A. Castrodale, Paul R. Harris, Matthew T.
Wholey, ULMER & BERNE LLP, Cleveland, Ohio, for Appellee.

Appeal: 14-1395

Doc: 41

Filed: 03/03/2015

Pg: 2 of 29

KING, Circuit Judge:
From 2008 to 2011, Covol Fuels No. 4, LLC (“Covol”) and
Pinnacle Mining Co., LLC (“Pinnacle”) were parties to a business
agreement wherein Covol conducted coal fines recovery operations
at

Pinnacle’s

mine

“Pinnacle mine”).

in

Wyoming

County,

West

Virginia

(the

After it became economically unfeasible for

Covol to continue those recovery operations, it initiated this
civil action in the Southern District of West Virginia, alleging
claims

for

breach

of

contract,

tort,

and

unjust

enrichment.

Pinnacle moved for summary judgment, which was awarded as to all
claims.

See Covol Fuels No. 4, LLC v. Pinnacle Mining Co., LLC,

14 F. Supp. 3d 724 (S.D. W. Va. 2014) (the “Opinion”). 1

Covol

has appealed the district court’s award of summary judgment on
its contract and tort claims.
genuine

issues

of

material

As explained below, there are

fact

that

must

respect to Covol’s breach of contract claim.

be

resolved

with

On the other hand,

we agree with the Opinion that Covol’s tort claims are barred by
the

so-called

“gist

of

the

action

doctrine.”

We

therefore

affirm in part, vacate in part, and remand.

1

The Opinion is found at J.A. 2861-90. (Citations herein
to “J.A. ___” refer to the contents of the Joint Appendix filed
by the parties in this appeal.)

2

Appeal: 14-1395

Doc: 41

Filed: 03/03/2015

Pg: 3 of 29

I.
A.
The

Pinnacle

mine

includes

several

stages

of

operations

through which coal is recovered, beginning with mining coal from
the Pocahontas Number 3 seam. 2

That extracted material goes

through Pinnacle’s “wash” or “prep” plant (the “wash plant”),
which strips coal from waste (the “refuse material”).

Pinnacle

then pumps the refuse material through a slurry line and into
its nearby Smith Branch impoundment (the “impoundment”).
The impoundment is a ten-acre, man-made pond created by a
dam on the downstream side of the impoundment, on the Smith
Branch of Pinnacle Creek, near Pineville, West Virginia.

It

measures 200-feet deep at the greatest depth, runs nearly a mile
in length, and is between 500- and 1000-feet across.
material
water.

settles

into

the

impoundment,

which

is

The refuse
filled

with

Pinnacle is able to pump water out of the impoundment

and into a so-called “toe pond” downstream.

From there, the

water may either be pumped into an underground reservoir (and
then

back

flows

into

into

Pinnacle’s

Pinnacle

wash

Creek,

plant)
the

2

or

released,

Guyandotte

where

River,

it

and,

We recite the facts in the light most favorable to Covol,
as the nonmoving party. See Durham v. Horner, 690 F.3d 183, 185
n.3 (4th Cir. 2012).

3

Appeal: 14-1395

Doc: 41

Filed: 03/03/2015

Pg: 4 of 29

eventually, to the Ohio River, the Mississippi River, and the
Gulf of Mexico.
The

refuse

material

contains

fine-grained

coal

(“coal

fines”) not captured by the wash plant.

If refuse material is

lifted

processed

those

from
coal

purposes. 3

the

impoundment,

fines,
In

which

October

it
be

can

can
sold

2006,

Beard

be

for

various

Pinnacle,

LLC

to

extract

industrial
(“Beard”)

initiated coal fines recovery operations at the Pinnacle mine,
wherein it dredged the impoundment for refuse material, which it
processed at an adjacent facility (the “processing facility”).
B.
1.
In February 2008, Covol executed a series of contracts with
various

Pinnacle

operations. 4

affiliates,

The

principal

whereby
contract

Covol
at

took
issue

over
is

Beard’s

the

Coal

3

The coal fines in the impoundment are apparently of
substantial value, having been extracted from the Pocahontas
Number 3 seam, which contains some of the best coal in the
world.
See C. Stuart McGehee, Pocahontas No. 3 Coal Seam, W.
Va.
Encyclopedia
(Oct.
22,
2010),
http://www.wvencyclopedia.org/articles/1880.
See also Castner
v. Coffman, 178 U.S. 168, 173 (1900) (observing that coal from
the Pocahontas Number 3 seam has been “well and favorably known
as a coal of high grade”).
4

Through a series of related agreements, Covol purchased
the processing facility and its assets from Beard; Covol assumed
a lease from Beard Technologies, Inc., in order to operate the
processing facility; and Covol and Pinnacle agreed on a manner
for splitting the profits from the processed coal fines.

4

Appeal: 14-1395

Doc: 41

Filed: 03/03/2015

Pg: 5 of 29

Purchase and Refuse Recovery Agreement (the “Agreement”). 5
Agreement

—

a

fully

integrated

—

contract

was

executed

The
on

February 15, 2008, and imposed a five-year term, with the option
for the parties to mutually agree to renew for additional oneyear terms.

Covol was authorized to unilaterally terminate the

contract under section 12 of the Agreement if its operations
became economically unfeasible.

The Agreement designates that

it shall be governed by West Virginia law.

See Agreement § 27.

Pursuant to the Agreement, Covol agreed to purchase and
process “all or part of” the refuse material located in the
impoundment, and to handle and process that material “in such a
way which does not interfere with Pinnacle’s Mining Operations.”
See Agreement § 4.

Pinnacle disclaimed any representation or

warranty as to the “character or quality or amount of the Refuse
Material Covol removes or receives.”

Id. § 20.

Pursuant to

section 18 of the Agreement, Pinnacle was required to provide
Covol with:

an area near the impoundment where Covol could

install and maintain its equipment; ingress and egress across
Pinnacle’s
for

Covol

5

property;
to

and

“any

“transport

right-of-way

the

Refuse

reasonably
Material

The Agreement is located at J.A. 75-92.

5

needed”

from

the

Appeal: 14-1395

Doc: 41

Filed: 03/03/2015

Pg: 6 of 29

[impoundment] to the processing [facility].” 6

Two provisions of

the Agreement — sections 7 and 8 — imposed contractual duties
relating

to

applicable

laws.

Section

7

required

Covol

and

Pinnacle, in performing their obligations under the Agreement,
to

“comply

in

responsibilities

all
under”

respects
applicable

with
state

and
and

undertake
federal

all
laws. 7

Relatedly, section 8 required the parties to obtain and maintain
any necessary permits or licenses. 8
6

Section 18 of the Agreement, which is titled “Access and
Lease Provisions,” provides, in pertinent part:
Pinnacle shall provide to Covol:
(i) a mutually
agreeable area . . . to install and maintain its
Processing Facility . . . ; (ii) any right-of-way
reasonably needed by Covol to transport the Refuse
Material from the [impoundment] to the processing
[facility]; and (iii) ingress and egress over the
property of Pinnacle . . . to support the activities
described in this Agreement. . . .
7

Section 7 of the Agreement, which is titled “Compliance
with Laws,” provides, in pertinent part:
In performing their respective obligations under this
Agreement, Covol and Pinnacle shall comply in all
respects with and undertake all responsibilities under
all applicable . . . rules, regulations, . . . or
other similar requirements of any federal, state, or
local government, agency, court, or public authority
(“Governmental
Requirements”),
including,
but
not
limited to, those regulating or otherwise relating to
environmental pollution and environmental control,
safety,
health,
labor,
such
as,
for
example,
Governmental Requirements under . . . the Federal Mine
Safety and Health Act of 1977, as amended[;] . . . .
8

Section 8 of the Agreement, which is titled “Licenses and
Permits,” provides, in pertinent part:
(Continued)
6

Appeal: 14-1395

Doc: 41

The

Filed: 03/03/2015

Agreement

provided

Pg: 7 of 29

for

both

profit from the recovered coal fines.

Pinnacle

and

Covol

to

Sections 2 and 3 set out

that Covol would sample and test the recovered coal fines to
determine their quality.

Depending on the levels of ash and

moisture, the coal fines would be categorized as either “met
coal” or “steam coal.”

See Agreement § 2.

Met coal — which

contains lower ash and moisture content and is therefore more
valuable — would be purchased by an affiliate of Pinnacle, while
Pinnacle had an option — but no obligation — to purchase steam
coal.

See id.
2.
Covol paid $14 million to purchase the processing facility,

and then immediately spent another $4 million renovating it.
Covol’s coal fines recovery operations were under way by the
summer of 2008.

A number of issues and events arose in the

following years that ultimately made it economically unfeasible
for

Covol

to

continue

in

the

business.

Covol

ceased

operations at the Pinnacle mine in 2012.

Pinnacle shall maintain its existing permits that are
required for its performance under this Agreement.
Any additional permits required by Pinnacle for
Covol’s operations . . . shall be acquired by Pinnacle
. . . .

7

its

Appeal: 14-1395

Doc: 41

Filed: 03/03/2015

Pg: 8 of 29

The biggest obstacle Covol faced related to the water level
of

the

impoundment.

To

extract

the

refuse

material,

Covol

utilized a dredge machine with a mechanical arm that dipped into
the water and dragged refuse material out of the impoundment.
The mechanical arm was 25-feet long, meaning that the dredge
could only reach the top 25 feet of water.
several

times

that

Pinnacle

adjust

the

water

Covol requested
level

so

that

Covol’s dredge could capture refuse material located deeper in
the

impoundment.

Moreover,

in

prevented

it

Pinnacle,

2011,
from

however,

Pinnacle

pumping

adopted

water

out

declined
a

of

new
the

to

do

so.

protocol

that

impoundment

and

lowering the water level (the “water management plan”). 9

Without

those adjustments to the water level, Covol was able to extract
only a portion of the refuse material.

9

West
Virginia
regulations
concerning
selenium
contamination of surface water required Pinnacle to change its
operations in order to come into regulatory compliance. See W.
Va. Code R. §§ 47-30-1 to 47-30-15 (2009).
Selenium is an
antioxidant that has been naturally found in West Virginia coal,
rocks, and soil. See J.A. 1637. Although humans require a very
small amount of selenium, it “can be toxic in larger amounts and
has been found to cause reproductive problems in some aquatic
animals.” Id. Pinnacle had at least two options: (1) a water
management plan, that would control selenium contamination by
essentially recycling the water in the impoundment, so that it
would not be released; and (2) a water treatment plan, that
would reduce the amount of selenium contained in the water
through a chemical process.
Pinnacle selected the water
management plan. See id. at 1652-58.

8

Appeal: 14-1395

Doc: 41

Filed: 03/03/2015

Pg: 9 of 29

Throughout Covol’s coal fines recovery operations under the
Agreement, the parties were subject to mine plans required by
the federal Mine Safety and Health Administration (the “MSHA”),
see

30

C.F.R.

required

by

§§ 77.216-77.217

the

West

Virginia

(2008),

and

operating

Department

of

permits

Environmental

Protection (the “WVDEP”), see W. Va. Code R. §§ 38-2-1 to 38-214 (2008).
submitted

As of 2008, a mine plan was in effect that had been
in

2002

and

approved

prior

to

Beard

processing facility (the “Beard mine plan”).

opening

the

Covol operated

under that plan from 2008 until August 2010, when the first two
phases of a modified mine plan (the “modified mine plan”) were
approved by both the MSHA and the WVDEP. 10

During the parties’

relationship under the Agreement, an approved mine plan required
that any mining of the impoundment be performed concomitant with
an incremental lowering of the water level. 11

10

Covol had pursued modifications to the Beard mine plan in
order to conduct the spoil removal project, which is described
infra at 10.
11

The Beard mine plan described two phases of operations
for removing coal fines from the impoundment, and stated that
the water level would be lowered “between 15 and 30 feet” during
phase 1, and “an additional 20 to 30 feet” during phase 2. See
J.A. 2026.
The modified mine plan set out six phases of
operations, although only two of those phases were approved by
both the MSHA and the WVDEP.
That plan called for the water
level of the impoundment to be lowered in 25-foot increments.
See id. at 2014.

9

Appeal: 14-1395

Doc: 41

Beyond

the

Filed: 03/03/2015

problems

Covol

Pg: 10 of 29

encountered

in

accessing

the

refuse material located deeper than 25 feet below the surface of
the impoundment, it also faced a decline in the quality of coal
fines.

When Covol began its operations at the Pinnacle mine,

Pinnacle’s wash plant was relatively inefficient, meaning that
it left a high level of coal in the refuse material.

That

remaining coal was of good quality in terms of ash and moisture
content.

Covol,

then,

benefited

from

the

wash

plant’s

inefficiency on the front end because it could recover that coal
on the back end.
Agreement,

During the negotiations leading up to the 2008

Pinnacle

was

aware

that

the

wash

plant

was

inefficient and outdated, though it did not inform Covol of any
plans to update the wash plant.
approve that upgrade until 2009.
of those plans in July 2010.

In fact, Pinnacle did not
It subsequently notified Covol

Pinnacle completed its upgrades to

the wash plant in 2011.
In the face of those obstacles to its coal fines recovery
operations,

Covol

impoundment

that

attempted
could

be

to

maximize

mined.

the

areas

Initially,

of

the

Covol

was

restricted as to what portions of the impoundment its dredge
could reach under the Beard mine plan.

Once the modified mine

plan was approved, Covol invested $4 million to excavate spoil
material from the banks of the impoundment, giving Covol new
access to millions of tons of coal fines (the “spoil removal
10

Appeal: 14-1395

Doc: 41

project”).

Filed: 03/03/2015

Pg: 11 of 29

That expenditure was properly approved in October

2010 and the project was completed in 2011.

Covol realized no

benefit from the spoil removal project, however, because its
coal

fines

recovery

unfeasible

as

impoundment.

a

operations

result

of

the

had
static

become
water

economically
level

of

the

Therefore, in 2011, Covol was soliciting offers to

sell its business.
C.
Covol

filed

this

civil

action

against

Pinnacle

in

the

Southern District of West Virginia on August 7, 2012, alleging
four

causes

of

action.

First,

Covol

charged

Pinnacle

with

breaching the Agreement, maintaining that Pinnacle had violated
its obligations under both the express terms of the Agreement
and the implied covenant of good faith and fair dealing.

Covol

claimed damages including lost profits from its share of more
than $100 million worth of coal.

Second, Covol asserted a tort

claim for fraudulent concealment, alleging that Pinnacle hid its
intentions to renovate the wash plant and to implement the water
management plan while Covol was spending millions of dollars to
renovate the processing facility and undergo the spoil removal
project.

Third, Covol asserted another tort claim for negligent

misrepresentation, predicated on the theory that Pinnacle had
breached its duty to provide Covol with material information by
failing to disclose its plans relating to the wash plant and
11

Appeal: 14-1395

water

Doc: 41

Filed: 03/03/2015

management

enrichment

plan.

claim

Pg: 12 of 29

Fourth,

stemming

from

Covol
the

alleged

monetary

an

unjust

benefit

that

Pinnacle received due to Covol’s investment in the spoil removal
project.
After discovery had been completed, on October 17, 2013,
Pinnacle
Following

moved

for

briefing,

summary
the

judgment

district

on

court,

all

as

four

claims.

explained

in

its

Opinion, granted Pinnacle summary judgment as to each claim.
With

respect

to

Covol’s

breach

of

contract

claim,

the

district court determined that the Agreement is not ambiguous,
and thus undertook to identify and enforce its plain and natural
meaning.

See

Opinion

15.

More

specifically,

the

Opinion

rejected Covol’s contentions that sections 1, 4, 8, and 18 of
the Agreement gave Covol a right to access the refuse material.
Id. at 16-19.

Alternatively, the court determined that even if

the Agreement did provide such a right, “allowing Covol access
to the bottom of the impoundment pond does not require Pinnacle
to affirmatively lower the water level.”

Id. at 17.

The court

further reasoned that, as a matter of law, Pinnacle did not
breach the Agreement because “Covol simply had to deal with more
water in the impoundment where the refuse material was located,”
and “the Agreement explicitly disclaims any warranty regarding
the quantity or quality of the refuse material.”
The

court

surmised

that

“Pinnacle
12

may

have

Id. at 20-21.
made

business

Appeal: 14-1395

Doc: 41

decisions

Filed: 03/03/2015

that

ultimately

Pg: 13 of 29

made

Covol’s

operations

more

difficult, but no evidence indicates that Pinnacle breached the
[Agreement].”

Id. at 21.

Given that Covol could not succeed on

its contract claim arising under the terms of the Agreement, the
court ruled that Covol’s good faith and fair dealing theory must
similarly fail.

That was so because “there is no avenue through

the applicable case law that affords Covol an independent cause
of action for a breach” of that covenant.

Id. at 22.

Next, the district court analyzed Covol’s two tort claims
together.

The Opinion briefly explained that the claims would

not succeed on their merits, but emphasized that the tort claims
were barred by the gist of the action doctrine because “they
would

not

arise

[Agreement].”

See

independent
Opinion

of

26.

the

existence

Finally,

the

of

court

the

granted

summary judgment on Covol’s unjust enrichment claim because “the
subject

matter

of

express

contract,”

this

claim

which

involves

“cannot

be

the

enrichment claim” under applicable law.
Covol

has

timely

noticed

this

the

performance

basis

of

an

of

an

unjust

Id. at 30.
appeal,

and

we

possess

grant

of

summary

jurisdiction pursuant to 28 U.S.C. § 1291.

II.
We

review

judgment.

de

novo

a

district

court’s

See Desmond v. PNGI Charles Town Gaming, LLC, 630
13

Appeal: 14-1395

Doc: 41

Filed: 03/03/2015

F.3d 351, 354 (4th Cir. 2011).

Pg: 14 of 29

In so doing, “it is elementary

that . . . ‘[t]he evidence of the non-movant is to be believed,
and all justifiable inferences are to be drawn in [its] favor.’”
Greater

Balt.

Ctr.

for

Pregnancy

Concerns,

Inc.

v.

Mayor

of

Balt., 721 F.3d 264, 283 (4th Cir. 2013) (en banc) (quoting
Anderson

v.

Liberty

Lobby,

Inc.,

477

U.S.

242,

255

(1986)).

Summary judgment may be granted only where “there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law.”

Libertarian Party of Va. v. Judd,

718 F.3d 308, 312-13 (4th Cir. 2013) (internal quotation marks
omitted).

A dispute is genuine if “a reasonable jury could

return a verdict for the nonmoving party.”

Dulaney v. Packaging

Corp. of Am., 673 F.3d 323, 330 (4th Cir. 2012).

A fact is

material if it “might affect the outcome of the suit under the
governing law.”

Anderson, 477 U.S. at 248.

III.
On appeal, Covol contends that the district court erred in
granting summary judgment on its breach of contract claim and on
its tort claims.

Covol requests that the judgment be vacated

and the matter remanded for trial.
A.
We begin by addressing Covol’s breach of contract claim.
Covol asserts that Pinnacle breached the Agreement by failing to
14

Appeal: 14-1395

Doc: 41

Filed: 03/03/2015

Pg: 15 of 29

lower the water level of the impoundment, thereby interfering
with Covol’s ability to access the coal fines contained therein.
Pinnacle, meanwhile, disputes that it was under any obligation
to adjust the water level.

Covol maintains that such a duty was

created by both the express terms of the Agreement and by the
implied covenant of good faith and fair dealing.

We address

those contentions in turn.
1.
First, whether the terms of the Agreement obliged Pinnacle
to

adjust

language
reference

the

of

water

that

to

level

contract.

water

of

the

The

levels.

impoundment

Agreement

Covol

hinges

makes

nevertheless

no

on

the

explicit

relies

on

sections 1, 4, 7, 8, and 18 of the Agreement — individually and
in combination — as bestowing on Covol a right to access the
refuse material in the impoundment and imposing a corresponding
duty on Pinnacle to adjust the water level.
The Supreme Court of Appeals of West Virginia has explained
that, in construing a contract, a reviewing court must first
determine whether the contract is ambiguous, meaning that the
language is “reasonably susceptible of two different meanings,”
or “that reasonable minds might be uncertain or disagree as to
its meaning.”

See Syl. Pt. 4, Estate of Tawney v. Columbia

15

Appeal: 14-1395

Doc: 41

Filed: 03/03/2015

Pg: 16 of 29

Natural Res., LLC, 633 S.E.2d 22, 23-24 (W. Va. 2006). 12
or not a contract is ambiguous is a question of law.
Pt. 5, id. at 24.
court

should

natural

enforce

meaning

of

extrinsic evidence.
(W. Va. 1995).

Whether
See Syl.

If the contract is unambiguous, then the
its
the

terms

according

language

used

to

the

without

plain

and

considering

See Payne v. Weston, 466 S.E.2d 161, 166

If, however, the contract is ambiguous, then

extrinsic evidence may be consulted to discern what the parties
intended the rights and obligations of the agreement to include.
See id.

Importantly, “when the document has been found to be

ambiguous[,] . . . the determination of intent through extrinsic
evidence become[s] a question of fact,” rather than a question
of law.

Id.
a.

In section 18 of the Agreement, Pinnacle undertakes several
duties regarding Covol’s right to access its property.

Relevant

here, section 18(ii) provides that Pinnacle must
provide . . . any right-of-way reasonably needed by
Covol to transport the Refuse Material from the
[impoundment] to the processing [facility].
12

Pursuant to the Constitution of West Virginia, the
Supreme Court of Appeals of West Virginia articulates new points
of law through its syllabus.
See W. Va. Const. art. VIII, § 4
(“[I]t shall be the duty of the court to prepare a syllabus of
the points adjudicated in each case in which an opinion is
written in which a majority of the justices thereof concurred,
which shall be prefixed to the published report of the case.”).

16

Appeal: 14-1395

Doc: 41

Filed: 03/03/2015

Pg: 17 of 29

Section 18(ii) clearly gives Covol a right-of-way relating to
the refuse material.

The parties disagree, however, as to the

meaning of the term “from the [impoundment],” and whether that
term

required

impoundment.

Pinnacle

to

adjust

the

water

level

of

the

We therefore must determine whether section 18(ii)

is ambiguous on that point.
Covol characterizes section 18(ii) as requiring Pinnacle to
provide a right-of-way within the impoundment itself, such that
Pinnacle

must

retrieve

the

adjust

the

refuse

water

level

material.

in
That

order

for

Covol

interpretation

to
is

reasonable, given that the provision obliges Pinnacle to provide
“any right of way reasonably needed.”

See Agreement § 18(ii).

Pinnacle maintains that section 18(ii) only speaks to Covol’s
right to transport “over the land from the Impoundment to the
Processing Facility,” suggesting that the right-of-way begins at
the edge of the impoundment.

See Br. of Appellee 31.

That

interpretation is also reasonable because the term “from the
[impoundment]” makes no explicit reference to the right-of-way
extending into the impoundment.
section

18(ii)

could

be

A third reasonable reading of

somewhere

in

the

middle:

that

it

provides Covol a right-of-way within the impoundment to access
any

refuse

material

that

Covol

manipulating the water level.

could

reach

without

Pinnacle

Thus, there are at least three

17

Appeal: 14-1395

Doc: 41

reasonable

Filed: 03/03/2015

interpretations

of

Pg: 18 of 29

section

18(ii),

indicating

that

underscores

the

the provision is ambiguous.
A

broader

ambiguity.
to

reading

of

the

Agreement

Section 18(ii) describes Covol’s right with respect

transporting

refuse

material,

and

“refuse

material”

is

broadly defined in section 1 of the Agreement to include “coal
waste material . . . located at” Pinnacle’s refuse site.

In

section 4, Covol undertakes to “purchase . . . all or part of
the Refuse Material produced, previously, currently and any in
the

future,

County.”

from
A

Pinnacle’s

reasonable

Mining

Operations

construction

of

the

in

Wyoming

term

“refuse

material” can encompass the material as it sits in the bottom of
the

impoundment,

plant.

Section

having

been

18(ii)

may

pumped
thus

in

from

naturally

be

Pinnacle’s

wash

interpreted

as

giving Covol the right-of-way to extract the refuse material
from the impoundment.
18(ii)

is

ambiguous

In all, we are satisfied that section
and

can

be

reasonably

interpreted

in

alternative ways.
Because section 18(ii) is ambiguous, extrinsic evidence may
be considered in order to resolve the factual question of what
the parties intended.

If a reasonable jury could decide that

question in favor of Covol, then a genuine dispute of material
fact

exists,

precluding

summary

judgment.

See

Dulaney

v.

Packaging Corp. of Am., 673 F.3d 323, 330 (4th Cir. 2012) (“A
18

Appeal: 14-1395

Doc: 41

Filed: 03/03/2015

Pg: 19 of 29

genuine question of material fact exists where, after reviewing
the record as a whole, a court finds that a reasonable jury
could return a verdict for the nonmoving party.”).

Covol relies

on deposition testimony of William Boor, who testified on behalf
of Pinnacle regarding the Agreement, pursuant to Rule 30(b)(6)
of the Federal Rules of Civil Procedure. 13

Boor testified that

Covol’s intent in entering the Agreement was to remove refuse
material from the impoundment.

See J.A. 1324.

Boor agreed that

“the purpose of the [A]greement” was that “Covol wanted to get
the [coal] fines out of the [impoundment].”

Id. at 1325.

When

asked whether Covol would have entered into the Agreement if it
would not be given access to the refuse material, Boor replied:
“Yeah, that would be no deal.

I mean, the purpose of the deal

was for their business plan to clean coal.”

Id. at 1325-26.

He

agreed that “to clean the coal you had to have access to the
coal.”

Id. at 1326.

In light of that testimony, Covol has established a genuine
dispute of material fact as to whether the parties intended for
the right-of-way granted in section 18(ii) to require Pinnacle

13

Rule 30(b)(6) of the Federal Rules of Civil Procedure
pertains to depositions of organizations, including corporate
entities.
The organization is permitted to designate a person
to testify on its behalf, and the organization is bound by that
testimony.
See Reilly v. Natwest Markets Grp., Inc., 181 F.3d
253, 268 (2d Cir. 1999).

19

Appeal: 14-1395

Doc: 41

Filed: 03/03/2015

Pg: 20 of 29

to adjust the water level so that Covol could access the refuse
material located in the impoundment.

See Scites v. Marcum, 560

S.E.2d 505, 509 (W. Va. 2002) (explaining that size, location,
and nature of right-of-way are factual questions to be decided
by jury).

We must remand because the proper interpretation of

the Agreement can only be resolved by the trier of fact.

See

World-Wide Rights Ltd. v. Combe Inc., 955 F.2d 242, 245 (4th
Cir. 1992). 14
b.
Covol also contends that Pinnacle was obliged to adjust the
water level of the impoundment based on the provisions of the
mine plans.
Agreement.

That argument relies on sections 7 and 8 of the
Section 7 required Pinnacle to comply with the law,

including state and federal regulations.

Section 8 required

Pinnacle to “maintain its existing permits” and to acquire any
additional
operations.

permits

needed

in

order

for

Covol

to

conduct

its

Reading sections 7 and 8 in tandem, Covol contends

that Pinnacle breached the Agreement when it violated the mine
plans by refusing to lower the water level of the impoundment.
14

The district court’s alternative ruling — that, if Covol
was given some right to access the refuse material, that right
did not encompass all refuse material in the impoundment or
require Pinnacle to adjust the water level — is unpersuasive.
That construction is not clear from the Agreement, and thus
reflects a factual determination that could not be made against
Covol in the summary judgment proceedings.

20

Appeal: 14-1395

Doc: 41

Filed: 03/03/2015

Pg: 21 of 29

A threshold issue here is whether the mine plans should be
incorporated

into

the

Agreement.

In

order

to

incorporate

a

separate document into a contract, “a general reference” to the
other document is not enough.

See Syl. Pt. 2, State ex rel. U-

Haul Co. of W. Va. v. Zakaib, 752 S.E.2d 586, 589 (W. Va. 2013).
Rather,
(1) the writing must make a clear reference to the
other document so that the parties’ assent to the
reference
is
unmistakable;
(2) the
writing
must
describe the other document in such terms that its
identity may be ascertained beyond doubt; and (3) it
must be certain that the parties to the agreement had
knowledge of and assented to the incorporated document
so that the incorporation will not result in surprise
or hardship.
Id.
Taking the facts in Covol’s favor, the parties were aware
that

mine

plans

operations

at

—

the

which

could

Pinnacle

mine.

be

modified

—

Nonetheless,

would
the

govern

parties’

awareness of the mine plans is not, by itself, sufficient to
incorporate the terms of those plans into the Agreement.

The

Agreement does not clearly reference mine plans, nor does the
contractual
intended

for

language
the

expressly

terms

contractual relationship.

of

the

indicate
mine

that

plans

to

the

parties

govern

their

Therefore, the Agreement is the sole

document memorializing the parties’ agreements.
Next, Covol contends that, even if the terms of the mine
plans are not incorporated into the Agreement, Pinnacle agreed
21

Appeal: 14-1395

Doc: 41

Filed: 03/03/2015

Pg: 22 of 29

to abide by the terms of those mine plans, requiring it to
adjust the water level.
provision

that

requirements.

That argument hinges on section 7’s

Pinnacle

comply

with

all

governmental

Covol, however, did not raise section 7 in its

opposition to summary judgment in the district court.
1282-1316.
for

our

See J.A.

Although that issue has not been squarely preserved

review,

we

observe

that

whether

section

7

obliged

Pinnacle to adhere to the terms of the mine plans, and whether
Pinnacle

breached

any

such

obligation,

issues that a jury must decide.

would

raise

factual

In any event, a remand is

required on the basis of section 18(ii) of the Agreement.
2.
Beyond the terms of the Agreement, Covol predicates its
claim for breach of contract on a theory that Pinnacle breached
the

implied

covenant

of

good

faith

and

fair

dealing

by

interfering with Covol’s access to the refuse material and the
coal

fines

contained

therein.

Commercial Code provides that:
this

chapter

performance
(2006).

imposes

and

an

West

Virginia’s

Uniform

“Every contract or duty within

obligation

enforcement.”

See

of
W.

good
Va.

faith
Code

in

its

§ 46-1-304

“Good faith” means “honesty in fact and the observance

of reasonable commercial standards of fair dealing.”
1-201(b)(20).

22

Id. § 46-

Appeal: 14-1395

Doc: 41

Filed: 03/03/2015

Pg: 23 of 29

The district court ruled that Covol could not succeed on
its good faith and fair dealing theory because Covol had not
otherwise raised a genuine issue of material fact as to the
terms

of

found

the

that

Agreement.
Pinnacle

See

did

Opinion

not

breach

22

(“Having

any

duty

previously
[under

the

Agreement], there is no avenue through the applicable case law
that affords Covol an independent cause of action for a breach
of the covenant of good faith and fair dealing.”).

In light of

our

to

determination

that

Pinnacle

is

not

entitled

summary

judgment with respect to Covol’s theory that Pinnacle breached
the Agreement, we are satisfied that summary judgment should not
have

been

granted

as

to

Covol’s

allegation

that

Pinnacle

breached the implied covenant of good faith and fair dealing.
3.
Overall, then, section 18(ii) of the Agreement is ambiguous
as to whether Covol had the right to access the refuse material
located within the impoundment, thereby requiring Pinnacle to
adjust the water level of the impoundment.

We therefore vacate

the district court’s award of summary judgment on Covol’s breach
of contract claim and remand. 15

15

The parties have focused much attention on the reasons
that Pinnacle did not lower the water level of the impoundment,
such as its efforts to comply with state regulations concerning
selenium contamination.
But whether Pinnacle was required to
take some action to comply with the law does not affect whether
(Continued)
23

Appeal: 14-1395

Doc: 41

Filed: 03/03/2015

Pg: 24 of 29

B.
Covol also disputes the district court’s award of summary
judgment as to its tort claims for negligent misrepresentation
and fraudulent concealment. 16
relies

on

alleged

As to both of those claims, Covol

misstatements

and

concealments

by

Pinnacle

with respect to Pinnacle’s intention to adjust the water level
of the impoundment and its intention to upgrade the wash plant.
We are satisfied, as was the district court, that Covol’s
tort claims are barred by the gist of the action doctrine.

That

doctrine is meant “to prevent the recasting of a contract claim
as a tort claim.”

Gaddy Eng’g Co. v. Bowles Rice McDavid Graff

& Love, LLP, 746 S.E.2d 568, 577 (W. Va. 2013).

It applies if

any one of four factors is present, including:
(1) where liability arises solely from the contractual
relationship between the parties; (2) when the alleged
duties breached were grounded in the contract itself;
(3) where any liability stems from the contract; and

the Agreement required Pinnacle to adjust the water level of the
impoundment.
16

Under West Virginia law, “[f]raudulent concealment
involves the concealment of facts by one with knowledge or the
means of knowledge, and a duty to disclose, coupled with an
intention to mislead or defraud.” See Trafalgar House Constr.,
Inc. v. ZMM, Inc., 567 S.E.2d 294, 300 (W. Va. 2002). Negligent
misrepresentation, in turn, can be established where a person
“under a duty to give information to another . . . makes an
erroneous statement when he has no knowledge on the subject, and
thereby misleads the other to his injury.” See Folio v. City of
Clarksburg, 655 S.E.2d 143, 151 (W. Va. 2007).

24

Appeal: 14-1395

Doc: 41

Filed: 03/03/2015

Pg: 25 of 29

(4) when the tort claim essentially duplicates the
breach of contract claim or where the success of the
tort claim is dependent on the success of the breach
of contract claim.
Id. (quoting Star v. Rosenthal, 884 F. Supp. 2d 319, 328-39
(E.D. Pa. 2012)).

In Gaddy, the Supreme Court of Appeals of

West Virginia observed that “whether a tort claim can coexist
with a contract claim is determined by examining whether the
parties’ obligations are defined by the terms of the contract.”
Id.
The Gaddy decision is instructive here.
verbal

fee

company.

agreement
The

between

company

an

alleged

attorney

that

the

Gaddy involved a

and

an

agreement

engineering
included

a

promise by the lawyer to pay the company one-third of certain
recovered revenues, but the lawyer disagreed that such a promise
was ever made.
tort

claims

agreement.

The company thereafter brought both contract and
premised

on

that

asserted

recovered-revenue

The Gaddy court determined that the gist of the

action doctrine barred the company’s tort claim because that
claim “simply redoubled [the company’s] efforts in trying to
prove the existence of the [disputed provision].”
S.E.2d at 577.

Gaddy, 746

As such, the tort claim was “simply [a] breach

of contract claim[] masquerading as” a tort.
Put succinctly, the same is true here.

Id.
Covol’s assertions

that Pinnacle made misrepresentations or concealed its intention

25

Appeal: 14-1395

Doc: 41

regarding

the

Filed: 03/03/2015

water

level

of

Pg: 26 of 29

the

impoundment

Covol’s claim for breach of contract.

simply

recast

And with respect to the

alleged misstatements or concealments as to the wash plant, any
liability would be defined by the Agreement, wherein Pinnacle
expressly disclaimed any warranty as to the quality of refuse
material in the impoundment.
In
because

sum,
the

Covol’s
gist

of

See Agreement § 20.

claims
those

for

actions

tort

liability

sounds

in

are

barred

contract.

The

district court therefore properly granted judgment to Pinnacle
on

the

fraudulent

concealment

and

negligent

misrepresentation

claims.

IV.
Pursuant to the foregoing, we affirm the district court’s
awards of summary judgment as to Covol’s tort claims, vacate
with respect to Covol’s claim for breach of contract, and remand
for such other and further proceedings as may be appropriate.

AFFIRMED IN PART,
VACATED IN PART,
AND REMANDED

26

Appeal: 14-1395

Doc: 41

Filed: 03/03/2015

Pg: 27 of 29

FLOYD, Circuit Judge, dissenting in part and concurring in part:
In
requires

my

Pinnacle

operations.
conjures

view,

an

In

nothing
to

pump

holding

ambiguity

fundamental respects.

in

the

water

Agreement’s
to

language

facilitate

there

Covol’s

I

otherwise,

where

plain

the

is

believe
none,

coal

erring

majority
in

two

Accordingly, except in regard to Part

III.B of the majority’s opinion, I respectfully dissent.
First, the majority tacitly attributes a meaning to “rightof-way” that is anything but “plain and ordinary.”

Berry v.

Mountain Air Prop. Owners Ass’n, No. 13-1324, 2014 WL 5312274,
at *3 (W. Va. Oct. 17, 2014).
to

pass

through

property

A “right-of-way” is “[t]he right

owned

Dictionary 1522 (10th ed. 2014).

by

another.”

Black’s

Law

Although a landowner cannot

interfere with the use of a right-of-way, a landowner has no
duty

to

benefit.

maintain

or

facilitate

its

use

for

the

grantee’s

See, e.g., Greiner v. Columbia Gas Transmission Corp.,

41 F. Supp. 2d 625, 631 (S.D. W. Va. 1999); Restatement (Third)
of Property: Servitudes § 4.13(2) (2000); James W. Ely, Jr. &
Jon W. Bruce, The Law of Easements & Licenses in Land § 8.22
(2014).

Thus, the pertinent part of § 18 provides Covol only

the right to pass through Pinnacle’s property; it clearly does
not impose an affirmative obligation on Pinnacle to facilitate
Covol’s passage and suit Covol’s changing needs.

27

Appeal: 14-1395

Doc: 41

Filed: 03/03/2015

Pg: 28 of 29

Second, the majority fails to construe the Agreement “as a
whole, taking and considering all the parts together.”

Faith

United Methodist Church & Cemetery of Terra Alta v. Morgan, 745
S.E.2d 461, 481 (W. Va. 2013) (quoting Maddy v. Maddy, 105 S.E.
803, 803 (W. Va. 1921)).

Specifically, the majority overlooks

the significance of § 20, which provides:
Pinnacle makes no representation as to the
character or quality or amount of the Refuse
Material
Covol
removes
or
receives.
Pinnacle HEREBY DISCLAIMS ANY WARRANTIES,
EXPRESS OR IMPLIED, IN CONNECTION WITH THE
REFUSE MATERIAL.
. . .
Pinnacle has not
made any representation or warranty to Covol
regarding the suitability or safety of
Pinnacle’s property for the processing of
the
Material
as
contemplated
by
this
Agreement.
J.A.

85-86

(capitalization

in

original).

Given

Pinnacle’s

express disclaimers regarding the amount of material that Covol
should

expect

to

recover

and

the

suitability

of

Pinnacle’s

property for Covol’s operations, it is hard to see how Pinnacle
had

an

affirmative

obligation

to

pump

water

and

alter

the

conditions of its property simply to allow Covol to access more
material.
In

summary,

unless

one

attributes

a

novel

meaning

to

“right-of-way” and isolates § 18 from the rest of the Agreement,
the Agreement unambiguously does not impose any obligation on
Pinnacle to pump and lower water for Covol’s benefit.

28

As a

Appeal: 14-1395

result,

Doc: 41

I

Filed: 03/03/2015

respectfully

dissent

court’s determination in full.

29

Pg: 29 of 29

and

would

affirm

the

lower