Gulfport Energy Corporation v. Village of Barnesville, Ohio
Filing
16
OPINION AND ORDER granting 9 Motion to Intervene. Signed by Magistrate Judge Norah McCann King on 7/2/2015. (pes)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
GULFPORT ENERGY CORPORATION,
Plaintiff,
vs.
Civil Action 2:15-cv-780
Judge Watson
Magistrate Judge King
VILLAGE OF BARNESVILLE, OHIO,
Defendant.
OPINION AND ORDER
I.
Background
The Complaint, ECF 1, alleges that, on August 17, 2012, plaintiff
Gulfport Energy Corporation (“plaintiff” or “Gulfport”) and defendant
Village of Barnesville, Ohio, “executed the Gulfport Water Agreement
in which Barnesville granted to Gulfport the unrestricted right to
draw water from the Slope Creek Reservoir (the ‘Reservoir’) unless and
until the health and safety of area residents and businesses are
impaired.”
Complaint, ¶ 6.
On September 10, 2012, the Village of
Barnesville executed an oil and gas lease (the “Mineral Rights
Agreement”) with Antero Resources Corporation (“Antero”), “in which
Barnesville granted Antero the exclusive right to drill, explore,
conduct seismic prospect, operate, produce, remove, and market oil,
gas, hydrocarbons, and their constituents and by-products under
subsurface rights belonging to Barnesville in Somerset and Warren
Townships.”
Id. at ¶ 8.
On May 1, 2013, the Village of Barnesville and Antero entered
into a water use agreement that granted Antero “the non-exclusive
right to withdraw water from the Barnesville Slope Creek #3.”
1.
ECF 9-
In January 2014, the Village of Barnesville and Antero entered
into a water lease that revoked the May 2013 agreement.
The January
2014 agreement granted Antero “the right to withdraw water from said
Reservoir, at a withdrawal rate up to a maximum of 1.5 million gallons
per day (MGPD), to be averaged over a 30-day period,” subject to
withdrawal limitations upon water levels at the Reservoir falling
below a specified level.
ECF 9-2.
The agreement also provides that
Antero “may allow [the Village of Barnesville] the ability to market .
. . excess water for sale to third parties.”
Id. at p. 1.
However,
“[i]n no event . . . shall [the Village of Barnesville’s] sale of
water to third parties, during those times as determined by Grantee,
result in any ramifications by Grantee.”
Id. at pp. 1-2.
On June 30, 2014, “Antero assigned to Gulfport its rights to
develop minerals under the Mineral Rights Agreement.”
10.
Complaint, ¶
The Village of Barnesville has allegedly refused to provide
Gulfport with water in violation of Gulfport’s water rights.
Id.
Gulfport requested that the Village of Barnesville provide adequate
assurance of performance under the Gulfport Water Agreement, and, on
February 20, 2015, Barnesville allegedly refused to provide adequate
assurance and disputed whether Gulfport has superior rights to the
water in the Reservoir.
Id. at ¶ 14.
Gulfport filed this action on
March 5, 2015, seeking the following relief:
2
(A) A declaration that the Gulfport Water Agreement takes
priority over, and precedes, any other agreement that
Barnesville has entered into with a third-party for the
extraction of the same water.
(B) A declaration that Gulfport may draw water from the
Reservoir unless and until Barnesville finds it necessary
to restrict Gulfport’s water use based upon a concern for
the health and safety of area residents and businesses.
(C) Temporary, preliminary, and permanent injunctive relief
enjoining Barnesville from interfering with Gulfport’s
exercise of its water rights under the Gulfport Water
Agreement.
(D) Temporary, preliminary, and permanent injunctive relief
enjoining
Barnesville
from
granting
or
otherwise
recognizing priority rights in a third-party over Gulfport
concerning water rights in the Reservoir.
(E) Such other and further relief as allowed by law or in
equity that the Court deems appropriate and to which
Gulfport
is
entitled,
including,
without
limitation,
reasonable attorneys’ fees and the costs of this action.
Id. at p. 7.
This matter is now before the Court on Antero’s Non-Party Motion
to Intervene as Defendant and Memorandum in Support (“Motion to
Intervene”), ECF 9.
Antero seeks to intervene in this matter pursuant
to Federal Rules of Civil Procedure 24(a) and 24(b) “in order to
protect its direct and substantial interests relating to water usage
from [the Reservoir].”
Id. at p. 1.
The Village of Barnesville does
not oppose Antero’s Motion to Intervene; Barnesville argues that
resolution of plaintiff’s claim “will necessarily require a comparison
of the relative water rights of the others, including Antero.”
13.
ECF
Plaintiff opposes Antero’s Motion to Intervene on the basis that
“this lawsuit . . . is restricted to a determination of Gulfport’s
3
rights under the Gulfport Water Agreement.”
Brief in Opposition of
Gulfport Energy Corp. to Non-Party Antero Resources Corporation’s
Motion to Intervene (“Gulfport’s Response”), ECF 14.
With the filing
of Antero’s Reply, ECF 15, this matter is now ripe for consideration.
II.
Standard
Rule 24(a) of the Federal Rules of Civil Procedure governs
intervention of right, providing in pertinent part:
On timely motion, the court must permit anyone to intervene
who:
. . .
(2) claims an interest relating to the property or
transaction that is the subject of the action, and is so
situated that disposing of the action may as a practical
matter impair or impede the movant's ability to protect its
interest, unless existing parties adequately represent that
interest.
Fed. R. Civ. P. 24(a)(2).
The United States Court of Appeals for the
Sixth Circuit requires that intervention as of right satisfy four
factors:
(1) the motion to intervene is timely; (2) the proposed
intervenor has a substantial legal interest in the subject
matter of the case; (3) the proposed intervenor’s ability
to protect their interest may be impaired in the absence of
intervention; and (4) the parties already before the court
cannot
adequately
protect
the
proposed
intervenor’s
interest.
Coalition to Defend Affirmative Action v. Granholm, 501 F.3d 775, 779
(6th Cir. 2007) (citing Grutter v. Bollinger, 188 F.3d 394, 397-98
(6th Cir. 1999)).
“‘The proposed intervenor must prove each of the
four factors; failure to meet one of the criteria will require that
the motion to intervene be denied.’”
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United States v. Michigan, 424
F.3d 438, 443 (6th Cir. 2005) (quoting Grubbs v. Norris, 870 F.2d 343,
345 (6th Cir. 1989)).
Rule 24(b) governs permissive intervention, providing in
pertinent part: “On timely motion, the court may permit anyone to
intervene who . . . has a claim or defense that shares with the main
action a common question of law or fact.”
Fed. R. Civ. P. 24(b).
The
decision to permit intervention under Rule 24(b) falls within the
sound discretion of the trial court.
Coalition to Defend Affirmative
Action, 501 F.3d at 784 (citations omitted); United States v.
Michigan, 424 F.3d at 445.
“In exercising its discretion, the court
must consider whether the intervention will unduly delay or prejudice
the adjudication of the original parties’ rights.”
Fed. R. Civ. P.
24(b)(3).
Regardless of whether a party seeks to intervene under Rule 24(a)
or Rule 24(b), the motion to intervene “must state the grounds for
intervention and be accompanied by a pleading that sets out the claim
or defense for which intervention is sought.”
A motion to intervene must also be timely.
Fed. R. Civ. P. 24(c).
Blount-Hill v. Zelman, 636
F.3d 278, 284 (6th Cir. 2011).
III. Discussion
Antero first seeks to intervene as a matter of right under Rule
24(a).
As discussed supra, Antero must satisfy four factors to
intervene as a matter of right.
motion to intervene be timely.
Action, 501 F.3d at 779.
The first factor requires that the
Coalition to Defend Affirmative
Timeliness is a “threshold issue;” a court
5
must deny an untimely motion to intervene.
United States v. City of
Detroit, 712 F.3d 925, 930 (6th Cir. 2013) (quoting Grubbs, 870 F.2d
at 345-46); Blount-Hill, 636 F.3d at 284 (citations omitted); Stotts
v. Memphis Fire Dept., 679 F.2d 579, 582 (6th Cir. 1982) (citing NAACP
v. New York, 413 U.S. 345, 365 (1973)).
Courts consider five factors
in determining the timeliness of a motion to intervene:
“1) the point to which the suit has progressed; 2) the
purpose for which intervention is sought; 3) the length of
time preceding the application during which the proposed
intervenors knew or should have known of their interest in
the case; 4) the prejudice to the original parties due to
the proposed intervenors’ failure to promptly intervene
after they knew or reasonably should have known of their
interest in the case; and 5) the existence of unusual
circumstances
militating
against
or
in
favor
of
intervention.”
Blount-Hill, 636 F.3d at 284 (quoting Jansen v. City of Cincinnati,
904 F.2d 336, 340 (6th Cir. 1990)).
“No one factor is dispositive,
but rather the ʽdetermination of whether a motion to intervene is
timely should be evaluated in the context of all relevant
circumstances.’”
Id. (quoting Stupak-Thrall v. Glickman, 226 F.3d
467, 472-73 (6th Cir. 2000)).
Antero timely sought leave to intervene in this action.
Plaintiff filed this action on March 5, 2015, and Antero moved to
intervene on May 18, 2015.
Antero represents that it “immediately
took steps to prepare and file” its Motion to Intervene “[a]s soon as
Antero became aware of the action.”
Motion to Intervene, PAGEID 48.
Moreover, at the request of the parties, the Village of Barnesville
was granted until July 6, 2015, to respond to the Complaint, and the
6
preliminary pretrial conference originally scheduled for July 2, 2015,
was continued to August 5, 2015.
Order, ECF 12.
The parties and
Antero have been “actively involved in settlement discussions,” and
the parties consulted with Antero before filing their joint motion for
an extension of time to respond to the Complaint and to continue the
preliminary pretrial conference.
See ECF 11, p. 3 (“The parties, and
Antero, are in accord that the 31-day extension will aid settlement
and this Motion is unopposed. . . .
Non-party Antero agrees to the
continuance of the preliminary pretrial conference.”).
Under these
circumstances, the Court concludes that Antero’s motion to intervene
was timely.
The second factor requires that Antero have a “substantial legal
interest in the subject matter of the case.”
Jansen, 904 F.2d at 341.
This Circuit “subscribe[s] to a ‘rather expansive notion of the
interest sufficient to invoke intervention of right.’”
Grutter, 188
F.3d at 398 (quoting Michigan State AFL–CIO v. Miller, 103 F.3d 1240,
1245 (6th Cir. 1997)).
An applicant for intervention has a
“substantial legal interest in the subject matter of the case” if it
has “ʽa direct and substantial interest in the litigation,’” Reliastar
Life Ins. Co. v. MKP Invs., 565 F. App'x 369, 371-72 (6th Cir. 2014)
(quoting Grubbs, 870 F.2d at 346), “such that it is a ʽreal party in
interest in the transaction which is the subject of the proceeding.’”
Id. (quoting Providence Baptist Church v. Hillandale Comm., Ltd., 425
F.3d 309, 317 (6th Cir. 2005)).
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Antero argues that it has a substantial legal interest in this
case because “the interests Plaintiff seeks to protect in this
litigation directly implicate Antero’s rights and interests under its
own water lease with Barnesville.”
Motion to Intervene, PAGEID 48.
Antero argues that granting plaintiff the relief sought will cause
Antero to lose “the priority and rights it has under its own valid and
continuing water lease.”
Id. at PAGEID 48-49.
Gulfport argues that it “is seeking declaratory judgment on a
contract between only it and Barnesville” and that the “source of
Antero’s rights under its separate contract is not at issue here.”
Plaintiff’s Response, p. 6.
Gulfport argues that Antero has an
“indirect interest” or a “contingent economic interest” in this matter
and that any dispute between Antero and the Village of Barnesville
regarding Antero’s rights under the January 2014 water lease is
unrelated to this case.
Id. at pp. 8-9.
Gulfport further argues
that, because the Gulfport Water Agreement predates Antero’s water
lease and Antero was not a party to the Gulfport Water Agreement,
Antero “is completely unnecessary to determine Gulfport’s rights in
this lawsuit” and “only would be indirectly affected by the outcome of
the litigation.”
Id. at pp. 7-9.
In its reply, Antero argues that its interest is not indirect or
contingent because it “has exercised and continues to exercise its
priority to draw water from the reservoir pursuant to its water lease
with Barnesville.”
Antero’s Reply, p. 5.
Antero also argues that
“Gulfport is not merely asking this Court to determine whether
8
Gulfport — in vacuum — can purchase water from the reservoir at
issue.”
Id. at p. 3.
Rather, “Gulfport is asking for [] a finding of
a right as against all third parties and a specific finding (and
injunction to that effect) that its right to purchase water has
priority over the rights that Antero has negotiated in its water
lease.”
Id. (emphasis in original).
According to Antero, this Court
will be required to weigh the rights of each water user in order to
determine who has the superior rights.
Id. at pp. 3-6.
Gulfport seeks a declaration that the Gulfport Water Agreement
takes priority over “any other agreement that Barnesville has entered
into with a third-party for the extraction of” water in the Reservoir.
Complaint, p. 7.
The Complaint specifically references Antero’s
January 2014 water agreement with the Village of Barnesville and
attaches the oil and gas lease between Antero and the Village of
Barnesville.
Gulfport nevertheless argues that Antero lacks a
substantial legal interest in this case because the source of Antero’s
interest is not derived from the Gulfport Water Agreement.
Plaintiff’s Response, p. 6.
See
The Court agrees that the source of
Antero’s interest does not derive from the Gulfport Water Agreement.
Cf. Energy Coal Res., Inc. v. Paonia Res. LLC, No. 08-cv-117, 2008 WL
5397179, at *3 (E.D. Ky. Dec. 24, 2008) (“First, Black Diamond's
asserted interest in this action is indirect.
Indeed, the source of
its interest does not derive from the Option Agreement which forms the
basis of this action, but rather an entirely different instrument-the
Crested Butte operating agreement.”).
9
However, Gulfport seeks a
declaration that its water lease has priority over Antero’s water
lease.
A determination of priority among water leases will require
consideration of both the Gulfport Water Lease, which does not address
priority, and Antero’s water lease, which apparently grants Antero
priority water rights.
Moreover, Antero’s interest is not a
contingent interest, see Antero’s Reply, p. 5 (representing that
Antero “has exercised and continues to exercise its priority to draw
water from the reservoir pursuant to its water lease with
Barnesville”), and, contrary to Gulfport’s arguments, the outcome of
this litigation will not merely “indirectly affect[]” Antero.
Gulfport seeks a declaration that the Gulfport Water Agreement has
priority over Antero’s water lease, and it seeks an injunction
prohibiting the Village of Barnesville from interfering with
Gulfport’s priority water rights.
The claims asserted and the
remedies sought by Gulfport simply cannot be resolved by interpreting
only the Gulfport Water Lease. Cf. MasterCard Int'l Inc. v. Visa Int'l
Serv. Ass'n, Inc., 471 F.3d 377, 390 (2d Cir. 2006) (denying
intervention where the plaintiff could obtain complete relief from the
defendant without regard to the defendant’s contract with the party
seeking intervention). Rather, in order to determine priority, the
Court must also consider Antero’s water lease.
Under these
circumstances, the Court concludes that Antero has a substantial legal
interest in the subject matter of this case.
The third factor requires that Antero show that its “ability to
protect [its] interest may be impaired in the absence of
10
intervention.”
779.
Coalition to Defend Affirmative Action, 501 F.3d at
This factor requires “ʽa would-be intervenor [to] show only that
impairment of its substantial legal interest is possible if
intervention is denied.
This burden is minimal.’”
at 399 (quoting Miller, 103 F.3d at 1247).
Grutter, 188 F.3d
Here, Gulfport seeks a
declaration that its water lease has priority over Antero’s water
lease.
Gulfport also seeks an injunction to prevent the Village of
Barnesville “from interfering with Gulfport’s exercise of its water
rights under the Gulfport Water Agreement” and preventing Barnesville
from “recognizing priority rights in a third-party over Gulfport
concerning water rights in the Reservoir.”
Complaint, p. 7.
Antero
represents that it “has exercised and continues to exercise its
priority to draw water from the reservoir pursuant to its water lease
with Barnesville.”
Antero’s Reply, p. 5.
Granting Gulfport its
requested relief would impair this interest.
Finally, Antero must show that the existing defendant, the
Village of Barnesville, will not adequately represent Antero’s
interests.
Coalition to Defend Affirmative Action, 501 F.3d at 779;
Grutter, 188 F.3d at 400.
Antero is “ʽnot required to show that the
representation will in fact be inadequate.’”
400 (quoting Miller, 103 F.3d at 1247).
See Grutter, 188 F.3d at
“Indeed, ʽ[i]t may be enough
to show that the existing party who purports to seek the same outcome
will not make all of the prospective intervenor's arguments.’”
(quoting Miller, 103 F.3d at 1247) (alteration in original).
Id.
Antero
argues that “Defendant’s interest in enforcing the Antero-Barnesville
11
water lease (e.g., avoiding contract liability or securing agreed-upon
rates and terms) is not the same as Antero’s interest in protecting
its own rights (obtaining water essential for its continued business
operations).”
Motion to Intervene, PAGEID 50.
This Court agrees.
Although the Village of Barnesville has taken the same position as
Antero with regard to Antero’s Motion to Intervene, there is no
indication that the Village of Barnesville is actually seeking the
same outcome as Antero or that it will pursue all of Antero’s claims
and arguments.
Under these circumstances, the Court finds that Antero
will not be adequately represented by the existing parties to this
lawsuit.
Gulfport also argues that Antero’s Motion to Intervene should be
denied because Antero failed to attach to its motion a pleading that
sets out the claim or defense for which intervention is sought.
Gulfport’s Response, pp. 13-14.
Rule 24(c) requires that a motion to
intervene “state the grounds for intervention and be accompanied by a
pleading that sets out the claim or defense for which intervention is
sought.”
Fed. R. Civ. P. 24(c).
accompanied by such a pleading.
Antero’s Motion to Intervene is not
Nevertheless, the requirement to
attach a pleading at the time the motion is filed may be excused
where, as here, the parties are clearly on notice of the proposed
intervenor’s position and there is no indication that the parties will
be prejudiced by the failure to attach a pleading.
Baptist Church, 425 F.3d at 314.
See Providence
Antero clearly articulated its
position in the Motion to Intervene, has been actively involved in
12
this action and in settlement negotiations, see ECF 11, and moved to
intervene before defendant filed a responsive pleading and before the
Court’s scheduled preliminary pretrial conference.
Under these
circumstances, it would be improper to deny Antero intervention on the
basis that it failed to attach a proposed pleading to its motion.
Wherefore, based on the foregoing, the Court concludes that
Antero Resources Corporation must be permitted to intervene pursuant
to Fed. R. Civ. P. 24(a).
9, is GRANTED.
Antero’s Non-Party Motion to Intervene, ECF
Antero must file a responsive pleading by July 9,
2015.1
July 2, 2015
s/Norah McCann King_______
Norah McCann King
United States Magistrate Judge
1
The Court notes that Antero and Gulfport are both Delaware corporations and
that Antero’s intervention may affect this Court’s exercise of diversity
jurisdiction. In granting the motion for leave to intervene, the Court
expresses no present opinion on this issue. However, the Court will expect
the parties to address this issue.
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