EQT Gathering, LLC v. A Tract of Property Situated in Knott County, Kentucky

Filing 29

MEMORANDUM OPINION & ORDER: that the defendants motion to dismiss, R. 21 , is DENIED. Signed by Judge Amul R. Thapar on 9/18/12.(MJY)cc: COR

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
SOUTHERN DIVISION
PIKEVILLE
EQT GATHERING, LLC,
Plaintiff,
v.
A TRACT OF PROPERTY SITUATED
IN KNOTT COUNTY, KENTUCKY,
Corresponding to Property Tax Map
Number 87, Parcel 47 (160 acres), et al.,

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Civil Action No. 12-58-ART

MEMORANDUM OPINION &
ORDER

Defendants.
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―Before impugning an opponent’s motives, even when they legitimately may be
impugned, answer his arguments.‖ Sidney Hook, The Ethics of Controversy, in Philosophy
and Public Policy 117, 122 (1980).

In our federal system, plaintiffs who satisfy the

requirements of 28 U.S.C. § 1332 are free to file actions based on state law in federal court.
There are many reasons a plaintiff might choose to do so. At various points in their briefs,
each party questions the motives of the other. But the role of a district court is not to
examine those motives; it is to determine whether it has jurisdiction over a case based on the
applicable rules and doctrines and, if it does, to rule on the merits.
The defendants seek to dismiss this condemnation proceeding on three grounds: (1)
the plaintiff either failed to establish jurisdiction or waived its right to proceed in federal
court; (2) if the Court has jurisdiction, it should abstain from exercising it; and (3) the
plaintiff failed to comply with state and federal procedural rules for condemnation

proceedings. Because clear precedent forecloses each of these arguments, the motion to
dismiss is denied.
BACKGROUND
On June 13, 2012, EQT Gathering, LLC, a company that constructs, maintains, and
operates natural gas pipelines, filed this condemnation action under Kentucky Revised
Statutes §§ 278.502 and 416.550 through 416.670. Compl., R. 1 ¶¶ 1, 4, 13. EQT wants
certain rights-of-way on 160 acres of property in Knott County, Kentucky, so that it can
maintain and operate an existing natural gas pipeline, the Mayking Node 3.

Id. ¶ 6.

Consistent with Federal Rule of Civil Procedure 71.1, which governs condemnation actions,
EQT named as defendants the individuals that were known to ―hav[e] or claim[] an interest
in the property.‖ 12 Charles Alan Wright et al., Federal Practice & Procedure: Civil § 3045
(2d ed. 2012); see R. 1 at 1–2. On July 9, 2012, those defendants filed a joint motion to
dismiss for lack of subject-matter jurisdiction and for failure to state a claim for relief. R. 21.
The pleadings and briefs on the motion to dismiss make it clear that this is not the
parties’ first tussle. The property owners in this case filed a trespass action in Knott Circuit
Court against multiple defendants, including EQT. See R. 1 ¶ 12; Answer, R. 20 ¶ 12. EQT
moved for summary judgment and argued that Kentucky law treats trespass actions against
an entity with the power of eminent domain as inverse condemnation actions. See R. 23-12.
The property owners responded that Kentucky law requires a condemnation action before a
trespass action will be treated as one for inverse condemnation. See R. 23-13. The motion
was denied without opinion on August 20, 2012. See Order Overruling, Honican, et al. v.
EQT Gathering LLC, No. 09-CI-00237 (Knott Cnty. Cir. Ct. Aug. 20, 2012) (consolidated
with 09-CI-00334).
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DISCUSSION
As an initial matter, the defendants’ do not specify which Rule 12(b) defenses they
assert. A review of their motion to dismiss reveals four arguments. See supra at 1–2. The
first argument relates to subject-matter jurisdiction, which is the proper subject of a Rule
12(b)(1) motion. See Fed. R. Civ. P. 12(b)(1). The second and third relate to doctrines of
abstention that allow a federal court to refrain from exercising jurisdiction and are also
properly brought under Rule 12(b)(1). See, e.g., Coles v. Granville, 448 F.3d 853, 857–67
(6th Cir. 2006) (affirming the district court’s dismissal of a case under Rule 12(b)(1) on
Rooker-Feldman and Younger abstention grounds). The fourth argument alleges EQT failed
to comply with procedural requirements and can be dealt with under Rule 12(b)(6).
EQT asserts the motion should be converted into a motion for summary judgment
under Federal Rule of Civil Procedure 12(d). R. 23 at 3. Conversion under this rule requires
matters ―outside the pleadings‖ to be ―presented to and not excluded by the court.‖ Fed. R.
Civ. P. 12(d). The defendants attached six documents from the state-court proceeding
mentioned in the complaint, R. 1 ¶ 12, to their motion to dismiss. R. 22-1 to -6. The
documents are all public records, which a court may consider without converting a 12(b)(6)
motion. See Jackson v. City of Columbus, 194 F.3d 737, 745 (6th Cir. 1999), abrogated on
other grounds by Swierkiewicz v. Sorema N.A., 534 U.S. 506 (2002). Furthermore (and this
is why the type of Rule 12(b) motion matters), the documents are relevant to only the
jurisdictional questions. The Court may consider evidence to resolve jurisdictional disputes
under Rule 12(b)(1) but cannot consider evidence under Rule 12(b)(6). See Carrier Corp. v.
Outokumpu Oyj, 673 F.3d 430, 440 (6th Cir. 2012). Therefore conversion is unnecessary,
and the Court will not consider EQT’s extrinsic evidence.
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I.

The Jurisdictional Arguments
A.

The Amount-In-Controversy Requirement

As the party filing the lawsuit, the plaintiff bears the burden of proof to demonstrate
jurisdiction. See Rogers v. Stratton Indus., 798 F.2d 913, 915 (6th Cir. 1986).

The

defendants argue that EQT has not proven the amount in controversy is above the $75,000
requirement for diversity jurisdiction. In doing so, they do not offer any facts of their own.
Thus, the Court accepts the allegations in the complaint as true when evaluating the
challenge. See Ohio Nat’l Life Ins. Co. v. United States, 922 F.2d 320, 325 (6th Cir. 1990).
The complaint alleges that EQT will have to either reroute the Meyking Node 3
pipeline or construct an additional pipeline if it is unable to condemn the defendants’
properties. It alleges the cost of those actions would be greater than $75,000. R. 1 ¶ 7.

The

defendants argue that the proper measure of the amount in controversy is actually the value
of the defendants’ property and that EQT cannot aggregate those property values to meet the
$75,000 requirement.

The Court rejected this exact argument once before because the

amount in controversy is generally calculated ―from the perspective of the plaintiff, with a
focus on the economic value of the rights he seeks to protect.‖ Smith v. Nationwide Prop. &
Cas. Ins. Co., 505 F.3d 401, 407 (6th Cir. 2007) (quotation omitted); see also Minute Entry
Order, EQT Gathering, LLC v. A Tract of Property Situated in Letcher County, No. 09-79ART (E.D. Ky. Sept. 17, 2009), R. 23.1 Therefore the relevant figure is not the value of the
defendants’ land, but the costs EQT Gathering will incur if unable to condemn their property.

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The debate over whether the amount in controversy must be determined only from the plaintiff’s perspective or
from either the defendant’s or the plaintiff’s perspective does not affect this case. See, e.g., Olden v. Lafarge Corp.,
383 F.3d 495, 503 n.1 (6th Cir. 2004).

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In the alternative, the defendants argue EQT Gathering’s claim that its costs will be
greater than $75,000 is ―unverified and unproven.‖ R. 21 at 20. That statement is not
enough to cast doubt on the allegations in the complaint, which, as explained, are presumed
correct. And in any case the Coots Affidavit, which estimates the cost of rerouting the
Mayking Node 3 pipeline at over one million dollars, extinguishes all doubt. See R. 23-15;
see also Moir v. Greater Cleveland Regional Transit Authority, 895 F.2d 266, 269 (6th Cir.
1990) (―[T]he court is empowered to resolve factual disputes when subject-matter
jurisdiction is challenged [on a Rule 12(b)(1) motion].‖). Because it does not appear ―to a
legal certainty that the plaintiff in good faith cannot claim the jurisdictional amount,‖
dismissal for lack of subject matter jurisdiction is improper. Klepper v. First Am. Bank, 916
F.2d 337, 340 (6th Cir. 1990).
B.

Waiver of Federal Jurisdiction

A defendant in a state-court action can waive his right to remove the case to federal
court by ―tak[ing] actions in state court that manifest his or her intent to have the matter
adjudicated there.‖ EIE Guam Corp. v. Long Term Credit Bank of Japan, Ltd., 322 F.3d 635,
649 (9th Cir. 2003). This is not a removal case, so the defendants’ waiver argument does not
apply. See R. 21 at 8–10.
The defendants urge this Court to penalize EQT for filing this ―duplicative‖ suit,
which they believe is a clear example of forum shopping. See R. 21 at 10–12. The presence
of a parallel state-court action does not generally bar a plaintiff from filing suit in federal
court. See Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976).
In any event, the trespass suit is not parallel to this condemnation suit. The defendants claim
the state and federal cases are parallel because the question whether EQT Gathering has the
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authority to condemn their land under Kentucky law is in dispute in the state suit. R. 21 at
12. In state court, EQT argued that damages for trespass are limited to diminution of value
because it has the power of eminent domain. See R. 23 at 10–11 (describing the second
summary judgment motions); see also id. (arguing the property owners did not contest
EQT’s eminent domain authority in state court). The fact that a state action may raise a
similar issue does not make it parallel. A parallel action requires substantially similar
parties, claims, and issues, such that the actions can be thought of as substitutes. See
Crawley v. Hamilton Cnty. Comm’rs, 744 F.2d 28, 31 (6th Cir. 1984). A condemnation
action in the Kentucky courts would be a parallel state action. But the state action here is the
property owners’ trespass suit, which seeks damages for past actions, not a transfer of title.
To gain title, EQT had to file a separate condemnation action: The only question was
whether to do so in state or federal court. Finally, the trespass suit includes additional
defendants. R. 23 at 25. The state-court trespass action is relevant, if at all, only if the state
court issues a decision that has preclusive effect on this case. See 28 U.S.C. § 1738.
Because there is no argument that EQT waived its right to federal jurisdiction, this Court has
jurisdiction.
II.

The Abstention Arguments
Federal courts have a ―virtually unflagging obligation . . . to exercise the jurisdiction

given them.‖ Colo. River, 424 U.S. at 817. Thus the defendants’ argument for abstention
starts from a disadvantage.
A.

Colorado River Water Conservation District Abstention

Under the Colorado River doctrine, a federal court may dismiss an action in favor of a
concurrent state-court proceeding when considerations of ―conservation of judicial resources
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and comprehensive disposition of litigation‖ counsel against retaining jurisdiction. Colo.
River, 424 U.S. at 817 (quoting Kerotest Mfg. Co. v. C-O-Two Fire Equip. Co., 342 U.S.
180, 183 (1952)). In order for the doctrine to apply, however, a parallel state action must
exist. See Romine v. Compuserve Corp., 160 F.3d 337, 339 (6th Cir. 1998). There is no
parallel state action here. See supra at 6. The danger that Colorado River seeks to avoid is
piecemeal litigation. See Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1,
19 (1983) (noting that the existence of a parallel state action is the ―paramount‖
consideration when deciding whether to abstain under Colorado River). And that problem
does not exist when the litigation is not parallel because two suits will be required even with
abstention. Id. Thus Colorado River abstention is not appropriate.
B.

Thibodaux Abstention

Thibodaux abstention counsels district courts to abstain when a case raises novel
issues of state law that are ―intimately involved with sovereign prerogative,‖ as eminent
domain is. La. Power & Light Co. v. City of Thibodaux, 360 U.S. 25, 28–29 (1959). Why?
Because all a district court sitting in diversity does is make an educated guess as to what the
state courts would do. See Nat’l Sur. Corp. v. Hartford Cas. Ins. Co., 493 F.3d 752, 755 (6th
Cir. 2007). Abstention allows parties to ask the state courts for a declaratory judgment on
the state law question and then return to federal court with an answer in hand.
Thibodaux abstention is inappropriate in this case because state law is clear. The
defendants urge this Court to abstain because Ky. Rev. Stat. § 278.502 ―has never been
interpreted, in respect to a situation like that before the [Court].‖ R. 21 at 18 (quoting
Thibodaux, 360 U.S. at 30). They do not explain how § 278.502 is ambiguous in this case or
point to any conflicting interpretations of the statute that the Kentucky courts are better
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suited to resolve. See Thibodaux, 360 U.S. at 30 (noting disagreement between an opinion of
the Louisiana Attorney General and the language of the state statute).

Perhaps the

defendants believe it is unclear whether state law gives EQT the authority to condemn their
property.

See R. 21 at 18 (referencing the second motion for summary judgment

proceedings). If that is the case, they must at least explain to the Court why the language of
§ 278.502, which clearly references pipeline companies, is unclear. They must also explain
why the Kentucky courts would be better suited to resolve the ambiguity. They have not
done so. Because there is no apparent ambiguity for the Court to resolve, there is no reason
to abstain.
C.

Pullman Abstention

Citing Pennhurst St. Sch. & Hosp. v. Halderman, 465 U.S. 89 (1984), the defendants
argue that the Court should abstain, see R. 21 at 27. But Pennhurst held that the Eleventh
Amendment bars federal courts from enjoining state officials on the basis of state law. 465
U.S. at 106. Maybe the defendants intended to invoke Railroad Comm’n of Tex. v. Pullman
Co., 312 U.S. 496 (1941). See R. 21 at 26–28 (arguing that § 278.502 is unconstitutional
under the state and federal constitutions, that a federal court cannot find that a state law
violates a state constitution, and that the Kentucky courts should be permitted to resolve the
issue). When the constitutionality of a state statute is raised, Pullman abstention allows the
federal court to stay a case in favor of a state court declaratory judgment action. This gives
the state courts a chance to interpret the statute in a way that avoids the constitutional
problem.

Pullman abstention prevents the federal courts from making unnecessary

constitutional rulings and preserves state laws. See 312 U.S. at 500–01. Pullman abstention
is not appropriate here.
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The Kentucky Supreme Court has repeatedly held that § 278.502 (and previous
versions of the statute) does not violate the Kentucky Constitution. See Cornwell v. Cent.
Ky. Natural Gas Co., 249 S.W.2d 531, 533 (Ky. 1952) (―Appellants concede K.S. § 3766b–1
(which later became KRS 278.500) was declared to be constitutional [in Calor and Kentucky
Heating Company].‖); Barker v. Lannert, 222 S.W.2d 659, 664 (Ky. 1949) (―We are of the
opinion that the act in question does not contravene the provisions of either sections 13 or
242 of the Constitution.‖); Kentucky Heating Co. v. Calor Oil & Gas Co., 142 S.W. 728, 728
(Ky. 1912) (―In the former opinions of the court . . . , this court has declared the
constitutionality of the statute. . . . We are not disposed to alter the position taken in those
cases.‖); Calor Oil & Gas Co. v. Franzell, 109 S.W. 328, 331 (Ky. 1908) (―The question of
the constitutionality of section 3766a of the Kentucky Statutes of 1903, which gives the right
of eminent domain to the owners of gas and oil wells for the purpose of piping their products
to market, is not now an open one.‖).
The defendants’ argument that § 278.502 violates the Federal Constitution is one
sentence and exists only by reference to their argument that § 278.502 violates the Kentucky
Constitution. See R. 21 at 27 (―Of course, the [defendants] also maintain that KRS § 278.502
offends the Fifth Amendment to the U.S. Constitution in this regard as well.‖). Because the
later argument lacks any basis in precedent, this Court will not attempt to make an argument
on the defendants’ behalf. See United States v. Zannino, 895 F.2d 1, 7 (1st Cir.1990) (―It is
not enough to merely mention a possible argument in the most skeletal way, leaving the court
to do counsel's work, create the ossature for the argument, and put flesh on its bones.‖).
Because there is no reason to doubt the constitutionality of § 278.502, there is no reason to
abstain under Pullman.
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Finally, the defendants suggest that the Kentucky Supreme Court should be given the
opportunity to grant them greater protection under the state constitution.

R. 21 at 27–28.

The Court will not abstain based on the theoretical possibility that a state court might
overrule prior precedent, as that would require abstention in every diversity case.
III.

The Rule 12(b)(6) Motion
In the alternative, the defendants argue that the plaintiff’s complaint must be

dismissed.

See Fed. R. Civ. P. 12(b)(6). The defendants’ argument in favor of dismissal

under Rule 12(b)(6) is twofold: (1) EQT cannot exercise the power of eminent domain under
§ 278.502; and (2) even if it can, EQT violated the procedural requirements of Fed. R. Civ.
P. 71.1 and the Kentucky Eminent Domain Act. Both arguments miss the mark.
―In deciding a Rule 12(b)(6) motion, a district court must (1) view the complaint in
the light most favorable to the plaintiff and (2) take all well-pleaded factual allegations as
true. But the district court need not accept a bare assertion of legal conclusions.‖ Tackett v.
M & G Polymers, USA, LLC, 561 F.3d 478, 488 (6th Cir. 2009) (internal citations and
quotation omitted).

To survive a motion to dismiss, the claim must be more than

―speculative.‖ See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). But the
complaint does not need to allege specific facts as long as it gives a defendant fair notice of
the claim and the basis for the claim. See Erickson v. Pardus, 551 U.S. 89, 93 (2007).
A.

EQT’s Eminent Domain Authority Under Ky. Rev. Stat. § 278.502

Rule 71.1, which governs diversity condemnation proceedings, requires ―a short and
plain statement of . . . the authority for the taking.‖ Fed. R. Civ. P. 71.1(c)(2)(A). EQT
claims the authority to condemn the defendants’ properties from Ky. Rev. Stat. § 278.502.
R. 1 ¶ 13. The statute provides:
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―Any corporation or partnership organized for the purpose of, and any
individual engaged in or proposing to engage in, constructing, maintaining, or
operating oil or gas wells or pipelines for transporting or delivering oil or gas,
including oil and gas products, in public service may, if it is unable to contract
or agree with the owner after a good faith effort to do so, condemn the lands
and material or the use and occupation of the lands that are necessary for
constructing, maintaining, drilling, utilizing, and operating pipelines . . . .‖
Ky. Rev. Stat. § 278.502.
The defendants argue that EQT has not pled sufficient facts to establish that it can invoke the
eminent-domain authority granted in § 278.502. But EQT has done so.
First, the defendants argue EQT has not alleged ―a good faith effort‖ to acquire the
property directly from the defendants. R. 21 at 23. The complaint alleges that ―EQT
Gathering was unable to contract, or otherwise agree, with the owners of the subject
property.‖ R. 1 ¶ 12; see also id. ¶ 18. The complaint also alleges that the defendants in this
case initiated a trespass suit against EQT in state court. Id. The complaint, of course, does
not use the phrase ―good faith,‖ but doing so would have been an impermissible statement of
a legal conclusion. See Tackett, 561 F.3d at 488. The allegation that EQT attempted and
was unable to acquire the defendants’ property outside of a condemnation proceeding is
sufficient to put the defendants on notice of the basis for EQT’s claim of authority to
condemn their property under § 278.502.
Second, the defendants argue that EQT did not allege that condemnation is
―necessary‖ because the complaint indicates that the current pipeline location was a mistake.
R. 21 at 24–25. The complaint alleges that EQT did not condemn defendants’ property
before construction because ―the pipeline was intended and believed to be constructed on
property adjacent to the [defendants’] property.‖ R. 1 ¶ 10. After construction, EQT
received information that the pipeline actually fell partially on the defendants’ property. Id.

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Now that the pipeline exists, EQT seeks condemnation of the defendants’ property to
maintain the pipeline in its current form. Id. The case the defendants cite for support
actually shows that necessity is a flexible term. See Petroleum Exploration v. Hensley, 213
S.W.2d 262, 263 (Ky. 1948) (―The question is: In the light of the facts here, is the course as
desired a practical necessity?‖). The discussion of the amount in controversy, supra at 4–5,
showed that, as between condemning the defendants’ land and rerouting or rebuilding the
pipeline, it is at least plausible that condemnation is a practical necessity. The ―mistake‖ at
issue here is unclear: It could be that the pipeline was constructed in the wrong spot or that
the initial surveys and maps were incorrect. In either case, the complaint does not indicate
that EQT ―capriciously or wantonly locate[d] its line so as to injure‖ the defendants in
violation of the rule in Hensley. Hensley, 213 S.W.3d at 263. The complaint sufficiently
puts the defendants on notice of the basis for EQT’s claim of necessity under § 278.502,
which is all that is required to avoid dismissal under Rule 12(b)(6).
B.

The Procedural Requirements of Fed. R. Civ. P. 71.1 and Kentucky Law

Rule 71.1 ―governs an action involving eminent domain under state law,‖ except ―if
state law provides for trying an issue by jury—or for trying the issue of compensation by jury
or commission or both—that law governs.‖ Fed. R. Civ. P. 71.1(k). So the defendants’
arguments that EQT did not comply with the procedural requirements of the Kentucky
Eminent Domain Act, Ky. Rev. Stat. §§ 416.540 to .680, are not grounds for dismissal.
EQT’s failure to file a petition in state court, R. 21 at 23, to describe ―the current use and
occupation of the lands to be condemned,‖ id. at 25, and to apply to the state court for the
appointment of commissioners, id., might have been problematic had the case been filed in
state court. But those failures do not violate Rule 71.1.
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Finally the defendants argue that EQT did not comply with a provision of Rule 71.1
that requires a plaintiff to ―name as defendants both the property—designated generally by
kind, quantity, and location—and at least one owner of some part of or interest in the
property.‖ Fed. R. Civ. P. 71.1(c)(1). According to the defendants, EQT’s complaint names
only ―A Tract of Property Situated in Knott County‖ as a defendant. R. 21 at 24. The
caption states that there are ―Defendants,‖ and then lists both named and unnamed owners of
property under the heading ―Serve.‖ R. 1 at 1–2. The complaint indicates the listed named
and unnamed owners are defendants as well. The defendants are correct that the complaint is
not a model of clarity. But that does not mean the complaint violates Rule 71.1(c)(1).
Therefore there is no procedural violation that justifies dismissal of this case.
CONCLUSION
Accordingly, it is ORDERED that the defendants’ motion to dismiss, R. 21, is
DENIED.
This the 18th day of September, 2012.

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