Deyarmett v. Antero Resources Corporation

Filing 10

MEMORANDUM OPINION AND ORDER granting 4 Motion to Dismiss for Lack of Jurisdiction Signed by Chief District Judge Louis Guirola, Jr. on 5/19/2017 (wld)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
SOUTHERN DIVISION
ROBERT WAYNE DEYARMETT
v.

PLAINTIFF
CAUSE NO. 1:17CV86-LG-RHW

ANTERO RESOURCES CORPORATION

DEFENDANT

MEMORANDUM OPINION AND ORDER
GRANTING MOTION TO DISMISS
BEFORE THE COURT is the [4] Motion to Dismiss filed by Defendant
Antero Resources Corporation pursuant to Federal Rule of Civil Procedure 12.
Plaintiff Robert Wayne Deyarmett has not responded to the Motion, and the time
for doing so has long expired. See, e.g., Oviedo v. Lowe’s Home Improvement, Inc.,
184 F. App’x 411, 413 (5th Cir. 2006) (while pro se parties “are entitled to some
leniency, the right of self-representation does not exempt a party from compliance
with relevant rules of procedural and substantive law”) (citation and quotation
marks omitted). The Court has reviewed the Motion, the Memorandum in Support,
and the relevant law, and is of the opinion that the Motion should be granted for
failure to join an indispensable party.
Plaintiff, a Mississippi citizen currently incarcerated with the Mississippi
Department of Corrections (“MDOC”), instituted a state court action against
Defendant Antero. Plaintiff claims Antero owes him and/or his family oil and gas
royalties and/or other payments pursuant to a March 2006 Oil and Gas Lease (“the
Lease”) between Plaintiff and Antero. Antero did not receive notice of the state
court action against it until Plaintiff filed an Amended Complaint therein and sent

Antero a copy. Thereafter, Antero, a Delaware corporation with its principal place
of business in Colorado, timely removed the action to this Court based on diversity
jurisdiction. See 28 U.S.C. §§ 1332, 1446.1 Following removal, Antero filed the
pending Motion to Dismiss.
Antero argues that (1) the Court lacks subject matter jurisdiction; (2)
Plaintiff has failed “to join an indispensable party whose joinder is not feasible[;]”
(3) Plaintiff has failed “to state a claim against Antero upon which relief can be
granted[;]” and (4) the action should otherwise be “dismissed for insufficient process
and insufficient service of process . . . .” (Mot. To Dismiss 2, ECF No. 4). While the
Court is of the opinion that it has subject matter jurisdiction, the Court will dismiss
this action because Plaintiff has failed to join an indispensable party, as discussed
below. Accordingly, the Court need not address Antero’s other arguments for
dismissal.
I.

SUBJECT MATTER JURISDICTION
The Court must address the challenge to its subject matter jurisdiction first.

See Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001). “On issues
involving jurisdiction, the district court may consider evidence outside the pleadings
. . . .” In re The Compl. of RLB Contracting, Inc., 773 F.3d 596, 601 (5th Cir. 2014).

1

It is apparent from the state court pleadings that the amount in controversy
exceeds $75,000. Plaintiff sought to join MDOC as a defendant to the state court
action, although it does not appear that MDOC was ever made a party defendant.
Regardless, the Court agrees with Antero that any joinder of MDOC is or would be
improper.
2

Antero argues that subject matter jurisdiction lies exclusively in the United
States Bankruptcy Court for the Southern District of Texas, in which the Chapter
11 bankruptcy of Vanguard Natural Resources, LLC (No. 17-30560) is pending. In
support, Antero has submitted a 2012 Purchase and Sale Agreement (“PSA”)
between Antero and Vanguard Permian, LLC, a wholly-owned subsidiary of
Vanguard Natural Resources, LLC (hereinafter “Vanguard”). Vanguard has
identified the PSA – which lists Plaintiff’s Lease as an Asset, (see PSA, ECF No. 43, at Ex. A p.36 (ECF p.105)) – as an executory contract in its bankruptcy. Antero
states that Vanguard “assumed all obligations and liabilities arising from the
Assets, including obligations to pay royalties and to perform all obligations
previously imposed on Antero pursuant to the Oil and Gas Lease” that is the subject
of this action. According to the PSA, Vanguard assumed all such obligations and
liabilities, whether incurred before or after the PSA went into effect.
Thus, Antero contends that monies owed under the Lease, if any, are
Vanguard’s property subject to the exclusive jurisdiction of the bankruptcy court
pursuant to 28 U.S.C. § 1334(e). That section provides in pertinent part that the
bankruptcy court2 “shall have exclusive jurisdiction . . . of all the property, wherever
located, of the debtor as of the commencement of [the bankruptcy] and of property of
the estate . . . .” Contrary to Antero’s argument here, that section

2

While the statute refers to the “district court,” “28 U.S.C. § 157(a) then
provides for the district court’s referral of bankruptcy cases to the bankruptcy
courts[,]” which the Southern District of Texas has done here. See In re Brown, 521
B.R. 205, 216 (Bankr. S.D. Tex. 2014).
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more properly denotes a grant by Congress of in rem jurisdiction over
property of the debtor as of the commencement of the case and over
property of the estate. Section 1334(e) must be harmonized with the
provisions of § 1334(b) granting non-exclusive jurisdiction over matters
‘arising under,’ ‘arising in,’ and ‘related to’ bankruptcy and/or
bankruptcies. An action, in personam, that seeks to establish personal
liability of the debtor on a claim, but which is not specifically targeted
to ownership of, or rights in and to, property of the estate does not fall
within this subsection. The bankruptcy court, pursuant to § 1334(e),
retains jurisdiction over the disposition of any property of the debtor or
the estate necessary to satisfy any such claim or judgment. . . . Thus,
an in personam suit against a debtor, which has as its ultimate end the
satisfaction of a claim from property of the debtor or the estate, may
proceed in a forum other than bankruptcy court, assuming that the
automatic stay has been modified,3 without offending the exclusivity
provision of § 1334(e) because the ultimate end of the suit, i.e.,
satisfaction of the judgment from property of the debtor or estate,
cannot be had without dispensation from the bankruptcy court which
exclusively controls the property of the debtors and its estate.
Landry v. Exxon Pipeline Co., 260 B.R. 769, 781-82 (Bankr. M.D. La. 2001).
Here, then, even accepting arguendo Antero’s argument that the property at
issue is property of Vanguard’s bankruptcy estate, the state court had initial subject
matter jurisdiction over this in personam suit. As a result, this Court can now
exercise subject matter jurisdiction over this action based on diversity.
II.

FAILURE TO JOIN INDISPENSABLE PARTY
Nevertheless, the Court is persuaded that Vanguard is an indispensable

party to this action and that dismissal is appropriate on that ground. “Rule 12(b)(7)
allows dismissal for ‘failure to join a party under Rule 19.’” HS Res., Inc. v.
Wingate, 327 F.3d 432, 438 (5th Cir. 2003) (citing Fed. R. Civ. P. 12(b)(7)).

3

The automatic stay, 11 U.S.C. § 362(a), has not been modified here.
4

“Rule 19 provides for the joinder of all parties whose presence in a lawsuit is
required for the fair and complete resolution of the dispute at issue.” Id.; see also
Pulitzer-Polster v. Pulitzer, 784 F.2d 1305, 1308 (5th Cir. 1986) (“The federal rules
seek to bring all persons that may have an interest in the subject of an action
together in one forum so that the lawsuit can be fairly and completely disposed of.”).
“‘In ruling on a dismissal for lack of joinder of an indispensable party, a court may
go outside the pleadings and look to extrinsic evidence.’” Timberlake v. Synthes
Spine, Inc., No. V-08-4, 2011 WL 2607044, at *2 (S.D. Tex. June 30, 2011) (citation
omitted); 35B C.J.S. Federal Procedure § 858.
“Determining whether to dismiss a case for failure to join an indispensable
party requires a two-step inquiry.” Hood ex rel. Miss. v. City of Memphis, 570 F.3d
625, 628 (5th Cir. 2009). “First the district court must determine whether the party
should be added under the requirements of Rule 19(a).” Id. Under that Rule, a
party should be added if
(A) in that p[arty]’s absence the court cannot accord complete relief
among existing parties; or
(B) that p[arty] claims an interest relating to the subject of the action
and is so situated that disposing of the action in the p[arty]’s absence
may:
(i) as a practical matter impair or impede the p[arty]’s ability to
protect the interest; or
(ii) leave an existing party subject to a substantial risk of
incurring double, multiple or otherwise inconsistent obligations
because of the interest.

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Second, if joinder is called for, the Court must decide “whether, in equity and
good conscience, the action should proceed among the existing parties or should be
dismissed.” Fed. R. Civ. P. 19(b); Pulitzer-Polster, 784 F.2d at 1309. In doing so,
the Court considers:
(1) the extent to which a judgment rendered in the p[arty]’s absence
might prejudice that p[arty] or the existing parties;
(2) the extent to which any prejudice could be lessened or avoided by:
(A) protective provisions in the judgment;
(B) shaping the relief; or
(C) other measures;
(3) whether a judgment rendered in the p[arty]’s absence would be
adequate; and
(4) whether the plaintiff would have an adequate remedy if the action
were dismissed for nonjoinder.
Id.; see also Pulitzer-Polster, 784 F.2d at 1312. “In circumstances where the
litigation should not proceed without [the absent party], the federal suit should be
dismissed.” Pulitzer-Polster, 784 F.2d at 1308-09. Deciding “whether an entity is
an indispensable party is a highly-practical, fact-based endeavor . . . .” See Hood v.
City of Memphis, 570 F.3d at 628.
Here, the Court’s review of the evidence discussed in Section I. convinces it
that Vanguard should be added. The Court’s adjudication of this action would
necessarily have to include a determination as to whether Vanguard or Antero is
responsible for any royalty payments under the Lease pursuant to the terms of the
6

PSA – without Vanguard’s presence to assert any applicable defenses or otherwise
protect its interest in those contracts. See, e.g., Innovate Display Techs. LLC v.
Microsoft Corp., No. 2:13-CV-00783-JRG, 2014 WL 2757541, at *4 (E.D. Tex. June
17, 2014) (“Generally, ‘where interpretation of a contract is involved, parties to the
contract must be joined.’”) (citation omitted); Harris Trust & Sav. Bank v. Energy
Asset Int’l Corp., 124 F.R.D. 115, 117 (E.D. La. 1989). Plaintiff has not submitted
anything to persuade this Court otherwise. See Hood v. City of Memphis, 570 F.3d
at 628 (“While the party advocating joinder has the initial burden of demonstrating
that a missing party is necessary, after an initial appraisal of the facts indicates
that a possibly necessary party is absent, the burden of disputing this initial
appraisal falls on the party who opposes joinder.”) (citation and quotation marks
omitted). Additionally, there is a real risk of competing determinations by this
Court and the bankruptcy court that could result in inconsistent obligations owed
by Antero.
However, Vanguard cannot be added because its current status as a debtor in
bankruptcy insulates it from service of process by virtue of the automatic stay set
forth in 11 U.S.C. § 362(a). See, e.g., Altava Health Mktg., Ltd. v. Shortgrass, Inc.,
No. H-04-873, 2005 WL 2277598, at *14 (S.D. Tex. Sept. 15, 2005); F&M
Distributors v. Am. Hardware Supply, 129 F.R.D. 494, 498 (W.D. Pa. 1990).
Therefore, the Court must conduct a Rule 19(b) analysis to decide whether this
action should proceed among Plaintiff and Antero or should be dismissed.

7

Having carefully examined the Rule 19(b) factors, the Court finds dismissal
warranted. There can be little doubt that Vanguard would be prejudiced if the
Court were to decide this action and determine that Vanguard – not Antero – is
responsible for any royalty payments. Antero could also be prejudiced by
inconsistent judgments in this Court and the bankruptcy court. The Court cannot
conceive of an adequate solution, other than dismissal, to lessen or avoid such
prejudice to these entities. Furthermore, if the Court decided that Vanguard was
responsible, any judgment rendered in Vanguard’s absence clearly would not be
adequate. Finally, while the Court offers no opinion as to the ultimate viability of
any claim against Vanguard, Plaintiff has other available avenues (such as filing an
adversary proceeding or proof of claim or obtaining relief from stay) to attempt to
obtain the relief he seeks.
IT IS THEREFORE ORDERED AND ADJUDGED that this action is
DISMISSED WITHOUT PREJUDICE. A separate judgment will be entered.
SO ORDERED AND ADJUDGED this the 19th day of May, 2017.

s/

Louis Guirola, Jr.

LOUIS GUIROLA, JR.
CHIEF U.S. DISTRICT JUDGE

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