Fritz Dairy Farm LLC, et al v. Chesapeake Exploration. L.L.C., et al

Filing

OPINION filed : the district court's judgment is AFFIRMED, decision not for publication. Karen Nelson Moore, Circuit Judge; Raymond M. Kethledge, Authoring Circuit Judge and Arthur J. Tarnow, Senior U.S. District Judge for the Eastern District of Michigan, sitting by designation.

Case: 13-3379

Document: 32-2

Filed: 06/03/2014

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NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 14a0402n.06
No. 13-3379
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
FRITZ DAIRY FARM, LLC; MARK R. FRITZ; )
MICHELLE E. FRITZ,
)
)
Plaintiffs-Appellants,
)
)
v.
)
)
CHESAPEAKE EXPLORATION, LLC; RICHARD )
OWEN; KENYON ENERGY, LLC,
)
)
Defendants-Appellees.
)
)

FILED
Jun 03, 2014
DEBORAH S. HUNT, Clerk
ON APPEAL FROM THE
UNITED STATES DISTRICT
COURT
FOR
THE
NORTHERN DISTRICT OF
OHIO

Before: MOORE and KETHLEDGE, Circuit Judges; TARNOW, District Judge.*
KETHLEDGE, Circuit Judge.

In this case, the district court enforced a settlement

agreement that Chesapeake Exploration entered into with Fritz Dairy Farm and its owners, Mark
and Michelle Fritz. The Fritzes argue that the district court lacked jurisdiction over the case, or
alternatively, that there was no valid agreement to enforce. We reject their arguments and
affirm.
In 2010, the Fritzes entered into two oil and gas leases with Kenyon Energy.

A

contractor named Richard Owen negotiated and prepared the leases for Kenyon, who later
assigned its rights to Chesapeake. As recorded, each lease ran for a primary term of five years

*

The Honorable Arthur J. Tarnow, Senior Judge for the Eastern District of Michigan, sitting by
designation.

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No. 13-3379, Fritz Dairy Farm LLC, et al. v. Chesapeake Exploration LLC, et al.
and granted Chesapeake the right to renew the lease for another five. The Fritzes say that Owen
fraudulently altered the leases to add the right to renew.
The Fritzes therefore sued Owen, Kenyon, and Chesapeake to that effect in state court.
Chesapeake removed the case to federal court. At a status conference before the district court,
the parties began negotiating a potential settlement. During negotiations, the court allowed the
Fritzes to leave so that they could tend to the cows on their farm. The Fritzes’ lawyer, Stephen
Leiby, continued negotiating in their absence.
After a few hours, the parties reached an agreement and read the terms—amendments to
the leases, monetary compensation for the Fritzes, and dismissal of the lawsuit—into the record.
The court asked Leiby if he had spoken to the Fritzes. Leiby replied, “I conferred with my
clients. They’ve agreed with the settlement.” The court asked whether the Fritzes agreed with
“all the terms” of the agreement. Leiby replied, “[t]hey do, Your Honor.” The court then asked
whether any part of the agreement was to be confidential. Neither party had discussed the issue,
but both agreed to keep confidential the amount of the Fritzes’ monetary compensation. The
court gave the parties 30 days to draw up the relevant documents.
Over the next few weeks, the parties exchanged drafts of those documents. Then Leiby
emailed Chesapeake to say “I do not have any commitment from my clients regarding the terms
of the settlement agreement or the lease amendment and ratification. At this point my hands are
tied.” The next day—and unbeknownst to Leiby—the Fritzes sent a long letter to the district
court, which told the story of the leases and the litigation so far.

As for the settlement

agreement, the Fritzes explained that “[o]nce we returned home, collected our senses and viewed
the proposed documentation submitted to us by Chesapeake we came to the only conclusion
possible that we were again being taken advantaged up [sic].” In closing, the Fritzes said,

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No. 13-3379, Fritz Dairy Farm LLC, et al. v. Chesapeake Exploration LLC, et al.
“we . . . do not agree to settle with Mr. Owen, Chesapeake and Kenyon Energy.” Thereafter,
Chesapeake moved to enforce the settlement agreement per the terms read into the record. The
district court held an evidentiary hearing and granted the motion. This appeal followed.
The Fritzes first argue that the district court lacked jurisdiction over the case.
Chesapeake removed the case to federal court on the basis of diversity jurisdiction.

See

28 U.S.C. § 1441. Diversity jurisdiction lies when the amount in controversy exceeds $75,000
and the suit is between “citizens of different States[.]”

28 U.S.C. § 1332.

Diversity of

citizenship must be complete—“no plaintiff can be the citizen of the same State as any
defendant.” Exact Software N. Am., Inc. v. DeMoisey, 718 F.3d 535, 541 (6th Cir. 2013). Here,
the Fritzes (and their farm) are undisputedly Ohio citizens. They assert that Richard Owen was
also an Ohio citizen, and thus scuttled complete diversity here. The district court, in contrast,
found that Owen was an Oklahoma citizen. We review that finding for clear error. Carrier
Corp. v. Outokumpu Oyj, 673 F.3d 430, 440 (6th Cir. 2012).
For purposes of diversity jurisdiction, citizenship means domicile: the state where a party
both physically resides and intends to remain. Von Dunser v. Aronoff, 915 F.2d 1071, 1072
(6th Cir. 1990). Richard Owen swore to the district court that he was “a permanent resident” of
Oklahoma and listed his address there. That would seem to resolve his citizenship. But the
Fritzes reply that Owen submitted an application to become a notary in Ohio, in which he stated
he was a “legal resident” of the state and listed an Ohio address to boot. The problem is that
domicile “is not necessarily synonymous with residence[.]” Miss. Band of Choctaw Indians v.
Holyfield, 490 U.S. 30, 48 (1989). The Fritzes offer no evidence that Owen ever intended to
remain in Ohio. To the contrary, Owen explained that his Ohio address was that of a hotel in

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No. 13-3379, Fritz Dairy Farm LLC, et al. v. Chesapeake Exploration LLC, et al.
which he “temporarily stay[ed]” while “engaging in temporary business in Ohio.” The district
court did not clearly err in finding that Owen was an Oklahoma citizen.
The Fritzes next argue that there was no valid agreement to enforce because Leiby
exceeded his settlement authority. We review the district court’s finding to the contrary for clear
error. Therma-Scan, Inc. v. Thermoscan, Inc., 217 F.3d 414, 419 (6th Cir. 2000). A lawyer
“acting within the scope of his actual authority, expressly or impliedly conferred” can bind a
client. Damon’s Mo., Inc. v. Davis, 590 N.E.2d 254, 257 (Ohio 1992). The Fritzes assert that
they denied Leiby authority to enter into two specific terms of the agreement. The first term
ditched each lease’s right to renew, but extended the primary term from five years to seven and a
half. The second term required confidentiality as to the monetary compensation the Fritzes
received. The district court found that the Fritzes granted Leiby full and complete settlement
authority, in which case he was authorized to enter into the two terms regardless of whether the
Fritzes later disagreed with them.
We see no clear error in that finding. Leiby told the district court that he had “full and
complete settlement authority[.]” Based upon its firsthand observations, the court found Leiby
more credible than the Fritzes. The court’s own recollection of the status conference was that
Leiby had full and complete settlement authority. And in their own letter to the court, the Fritzes
said that their objections to the two terms emerged not prior to or during negotiations—when
they might have limited Leiby’s authority—but after, “[o]nce we returned home” and “collected
our senses[.]” Because Leiby had authority to settle, the Fritzes are bound by the agreement he
made, even if they are unhappy with the results.
The district court’s judgment is affirmed.

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