Cunningham Property Management Trust v. Ascent Resources, LLC et al

Filing 69

ORDER granting 61 Plaintiffs' Motions for Consolidation. Plaintiffs' requests for leave to file a combined amended complaint is GRANTED. Plaintiffs shall file their amended complaint within fourteen days of the date of this decision. Signed by Judge Edmund A. Sargus on 7/23/2020. (cmw)

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
CUNNINGHAM PROPERTY
MANAGEMENT TRUST,
Individually and on behalf of a
class of all others similarly situated,
Plaintiffs,

Case No. 2:16-CV-957
JUDGE EDMUND A. SARGUS, JR.
Magistrate Judge Chelsey M. Vascura

v.
ASCENT RESOURCES-UTICA, LLC,
Defendants.

BRIAN EATON and CYNTHIA EATON,
Plaintiffs,

Case No. 2:19-CV-3412
JUDGE EDMUND A. SARGUS, JR.
Magistrate Judge Chelsey M. Vascura

v.
ASCENT RESOURCES-UTICA, LLC,
Defendants.

OPINION AND ORDER
The instant matter is before the Court for consideration of two motions for consolidation
filed by Cunningham Property Management Trust (“Cunningham”) and Brian Eaton and Cynthia
Eaton (the “Eatons”) (collectively, “Plaintiffs”). (2:16-cv-957, ECF No. 61 and 2:19-cv-3412, ECF
No. 10). Defendant Ascent Resources-Utica, LLC (“Defendant”) has responded in opposition to
Plaintiffs’ motions (2:16-cv-957, ECF No. 62 and 2:19-cv-3412, ECF No. 11), and Plaintiffs
replied (2:16-cv-957, ECF No. 63 and 2:19-cv-3412, ECF No. 12). For the reasons that follow,
Plaintiffs’ motions for consolidation are GRANTED. (Case No. 2:16-cv-957, ECF No. 61 and
Case No. 2:19-cv-3412, ECF No. 10).

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I.
These actions arise from a dispute over royalty payments that Defendant, an oil and gas
company, owes to Plaintiffs who are royalty interest holders. Specifically, Plaintiffs own certain
properties burdened by oil and gas leases that require Defendant to pay Plaintiffs a royalty in
exchange for the rights to produce, save and market oil from their land. According to Plaintiffs,
the royalty payments contain significant and improper “post-production” cost deductions for items
such as compression, processing, treating, transportation, fuel, marketing and fathering. (Case No.
2:16-cv-957, ECF No. 20 at ¶ 42 and Case No. 2:19-cv-3412, ECF No. 2 at ¶ 31).
In light of these circumstances, Cunningham filed a putative class action lawsuit against
Defendant which is before this Court and the Eatons filed a state court action against Defendant
that was later removed to federal court and assigned to the docket of the Honorable James L.
Graham. The Complaints in both actions assert the following claims only against one defendant,
Ascent Resources-Utica, LLC.: (i) a request for accounting; (ii) breach of contract; (iii) unjust
enrichment; and (iv) fraud. (Case No. 2:16-cv-957, ECF No. 20 at ¶ 91-116 and Case No. 2:19cv-3412, ECF No. 2 at ¶ 58-80). Additionally, Cunningham and the Eatons both seek an injunction
against Defendant to stop further deductions of post-production costs from royalty payments as
well as a declaratory judgment that prohibits Defendant from deducting “post-production” costs
from royalty payments. (Case No. 2:16-cv-957, ECF No. 20 at ¶ 118-123 and Case No. 2:19-cv3412, ECF No. 2 at ¶ 82-87).
Cunningham and the Eatons seek to consolidate their cases into a single action before the
undersigned. (Case No. 2:16-cv-957, ECF No. 61 and Case No. 2:19-cv-3412, ECF No. 10). In
their motions for consolidation, Plaintiffs move the Court specifically to: (i) transfer the Eaton
litigation to the undersigned’s docket; (ii) to consolidate the Eaton and Cunningham litigation; and

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(iii) to grant leave to Plaintiffs to file a combined amended complaint. (See id.). After Plaintiffs
filed their motions for consolidation, the case was transferred to this Court’s docket pursuant to
this district’s related case doctrine, S. D. Ohio Civ. R. 3.1, in essence granting Plaintiffs’ request
for transfer. (Case No. 2:16-cv-957, ECF No. 68 and Case No. 2:19-cv-3412, ECF No. 15). In
relevant part, Local Rule 3.1 provides:
(b) Related Cases. . . . For purposes of this Rule, civil cases may be deemed related
by the Court if they:
(1) Arise from the same or substantially identical transaction,
happening, or event; or
(2) Call for a determination of the same or substantially identical
questions of law or fact; or
(3) Would entail a substantial duplication of effort and expense by the
Court and the parties if heard by different Judges; or
(4) Seek relief that could result in a party’s being subject to conflicting
orders of this Court.

Consequently, the issues before the Court are consolidation and the propriety of filing an
amended complaint.
II
A.

Standard
Federal Rule of Civil Procedure 42(a) affords the trial court the discretion to consolidate cases

involving common questions of law or fact. Cantrell v. GAF Corp., 999 F.2d 1007, 1010–11 (6th
Cir.1993). Rule 42(a) states as follows:
(a) Consolidation. When actions involving a common question of law or fact are
pending before the court, it may order a joint hearing or trial of any or all the
matters in issue in the actions; it may order all the actions consolidated; and it
may make such orders concerning proceedings therein as may tend to avoid
unnecessary costs or delay.

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The purpose of consolidation is to “administer the court’s business ‘with expedition and economy
while providing justice to the parties.’” Advey v. Celotex, Corp., 962 F.2d 1177, 1180 (6th Cir.
1992).
Courts should consider “[w]hether the specific risks of prejudice and possible confusion
[are] overborne by the risk of inconsistent adjudications of common factual and legal issues, the
burden on parties, witnesses and available judicial resources posed by multiple lawsuits, the length
of time required to conclude multiple suits as against a single one, and the relative expense to all
concerned of the single-trial, multiple-trial alternatives.” Doe v. Caremark, LLC, No.s 2:18-cv238 and 2:18-cv-488, 2019 U.S. Dist. LEXIS 8575, at *5-6 (S.D. Ohio Jan. 16, 2019) (citing
Cantrell v. GAF Corp., 999 F.2d at 1011).
Ultimately, “consolidation does not merge the suits into a single action, change the rights
of the parties, or make parties in one suit parties in the other.” Twaddle v. Diem, 200 Fed.Appx.
435, 438 n.4 (6th Cir. 2006) (citing Johnson v. Manhattan Ry. Co., 289 U.S. 479, 496–97 (1933)
(interpreting predecessor of Rule 42(a))). And “it is the district court’s responsibility to ensure that
parties are not prejudiced by consolidation.” Lewis v. ACB Bus. Servs., Inc., 135 F.3d 389, 412-13
(6th Cir. 1998).
B.

Argument
Plaintiffs contend that consolidation is proper because both actions involve common

questions of law and fact. (Case No. 2:19-cv-3412, ECF No. 10 at 4 & 6). 1 Plaintiffs advance two
primary arguments in support of this position. First, Plaintiffs contend that the testimony of
Defendant’s Controller, Jeffrey Lenocker, supports consolidation. (Id. at 4). According to

1

The motions for consolidation, response memoranda and reply memoranda in cases 2:16-cv-957 and 2:19-cv-1041
are almost identical. Therefore, all references in this Opinion and Order are to Case No. 2:19-cv-1041, unless otherwise
stated.

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Plaintiffs, Lenocker testified that deductions are taken based on lease language that falls into three
categories: net proceeds, gross proceeds, and market enhancement clauses. (Id.) (citing Exhibit A,
Lenocker Depo. at 19-20 & 70-73). Plaintiffs highlight that, by Lenocker’s own admission, all
lessors in these groups are treated the same in terms of deductions. (Id.). In Plaintiffs’ view,
Lenocker’s testimony demonstrates that the difference between the Cunningham and Eaton lease,
i.e., a Market Enhancement Clause, is merely superficial given that the leases are treated the same
when it comes to the deduction of post-production costs. (Id.). Second, Plaintiffs argue that their
conversations with Cunningham’s expert supports the conclusion that Market Enhancement
Clause lessors, like the Eatons, would constitute a proper sub-class in the Cunningham class action.
(Id. at 4).
Defendant disagrees, contending that consolidation is inappropriate for three primary
reasons. (ECF No. 11 at 7-11). Defendant argues, first, that consolidation is improper because the
Eaton and Cunningham litigation are at two different phases, with discovery further along in the
older case. (Id. at 7, 9). Second, the cases involve two separate issues of law and fact. (Id. at 7).
According to Defendant, the issues of law and fact in each case differ because the Eaton lease
contains a Market Enhancement Clause and the Cunningham lease does not. (Id. at 8). And, third,
Defendant argues that the Cunningham and Eaton litigation should not be consolidated because
doing so would bring “a new putative class claim into a case where no such claim could possibly
have been asserted” again referring to the Market Enhancement Clause. (Id. at 11). Defendant’s
arguments are not well taken.
Consolidation will allow the Court to administer its business with expedition and economy
while providing justice to the parties. It conserves judicial resources and the resources of the parties
to place discovery, motion practice and trial on a unilateral track. The Cunningham and Eaton

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litigations also involve overwhelmingly common questions of law and fact. To the extent that
Defendant contends it will be prejudiced by the Eatons’ Market Enhancement Clause, the Court
agrees with Plaintiffs that this issue can be fairly dealt with as a sub-class if this case were to be
granted class action status. Also, the Court highlights that consolidation does not require every
question of law and fact to be the exact same. This one issue does not make the consolidation
somehow unruly or cause the only defendant any prejudice. There is no potential risk of confusion
and the burden on the parties and witnesses is certainly negligible since there is only one defendant
and all plaintiffs support consolidation. While there will be some minor delay of the Cunningham
action, balancing that against the benefit to all in combining into a single action and the relative
expense to all concerned of the single-trial as opposed to multiple-trial alternatives support
consolidation.
For these reasons, the Court concludes that consolidating the Eaton and Cunningham litigation
is appropriate.
III
A. Standard
Federal Rule of Civil Procedure 15(a) permits a party to amend the complaint after a
responsive pleading has been filed only with the opposing party’s consent or by leave of the court.
With respect to the latter, such leave should “be freely granted when justice so requires.” Fed. R.
Civ. P. 15(a). That standard was construed by the Supreme Court in Foman v. Davis, 371 U.S. 178
(1962):
If the underlying facts or circumstances relied upon by plaintiff may be a proper
subject of relief, he ought to be afforded an opportunity to test his claim on the
merits. In the absence of any apparent or declared reason--such as undue delay, bad
faith or dilatory motive on the part of the movant, repeated failure to cure
deficiencies by amendments previously allowed, undue prejudice to the opposing
party by virtue of the allowance of the amendment, futility of amendment, etc.-6

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the leave sought should be “freely given.” Of course, the grant or denial of an
opportunity to amend is within the discretion of the District Court . . . .
Delay alone is not a ground for denying leave to amend. Dana Corporation v. Blue Cross & Blue
Shield Mutual, 900 F.2d 882, 888 (6th Cir. 1990). The party opposing leave to amend must
demonstrate significant prejudice. Duggins v. Steak ‘ N Shake, Inc., 195 F.3d 828, 834 (6th Cir.
1999); Moore v. City of Paducah, 790 F.2d 557, 562 (6th Cir. 1986).
In addition to prejudice, futility may provide a basis for denying leave to amend. The Sixth
Circuit has ruled that “it is well settled that the district court may deny a motion for leave to amend
a complaint if such complaint, as amended, could not withstand a motion to dismiss.”
Neighborhood Dev. Corp. v. Advisory Council on Historic Preservation, 632 F.2d 21, 23 (6th Cir.
1980); Matthews v. Jones, 35 F.3d 1046, 1050 (6th Cir. 1994).
“Normally, a party seeking an amendment should attach a copy of the amended complaint.”
See Kuyat v. BioMimetic Therapeutics, Inc., 747 F.3d 435, 444 (6th Cir. 2014). Although a copy
of the amended complaint normally accompanies a request for leave to file an amended complaint,
a district may be able to determine whether justice requires the amendment so long as the substance
of the proposed amendment is available for the court’s review. Roskam Baking Co. v. Lanham
Mach. Co., 288 F.3d 895, 906 (6th Cir. 2002).
B.

Argument
In Defendant’s view, the Court should deny Plaintiffs’ request to amend because they have

failed to attach a proposed amended complaint to their motion. (ECF No. 11 at 13). Defendant
further contends that, even if the cases are consolidated Plaintiffs have failed to address whether
good cause exists to modify the scheduling order in the Cunningham litigation to allow for the
filing of a combined amended complaint. (Id.). In light of these circumstances, Defendant posits
that a combined amended complaint is prejudicial and unwarranted.
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Plaintiffs contend that if consolidated “the new facts regarding how Ascent groups its
categories of leases and then treats its grouped leases, combined with facts learned about the
company’s failure to engage in arm’s length transactions and the forthcoming opinion of
Cunningham’s expert, all present circumstances warranting amendment.” (ECF No. 10 at 8). In
that same vein, Plaintiffs argue that there is no risk of prejudice because combining the Eaton and
Cunningham litigation would save resources and any timeline issues could be resolved through a
reasonable extension. (Id. at 9). Likewise, Plaintiffs aver that a combined amended complaint
would not be futile because certain claims in both actions have survived the 12(b)(6) stage. (Id.).
This Court agrees.
First, Plaintiffs provide an acceptable reason for not attaching a proposed amended
complaint, explaining that the precise form of the amended complaint hinges on whether this Court
grants consolidation. (ECF No. 12 at 6-8). Instead, Plaintiffs have provided the substance of their
proposed amendments, which is sufficient. After reviewing the substance of Plaintiffs’ proposed
amendments, the Court is satisfied that, under these circumstances, justice requires the filing of a
combined amended complaint. The Court and parties will benefit from a combined amended
complaint. Accordingly, Plaintiffs’ request to file a combined amended complaint is well taken.
IV.
For the reasons set forth above, Plaintiffs’ motions for consolidation are GRANTED.
(Case No. 2:16-cv-957, ECF No. 61 and Case No. 2:19-cv-3412, ECF No. 10) and Plaintiffs’
requests for leave to file a combined amended complaint is GRANTED. Plaintiffs shall file their
amended complaint within fourteen days of the date of this decision.
IT IS SO ORDERED.
DATE: 7/23/2020

s/ Edmund A. Sargus, Jr.
EDMUND A. SARGUS, JR.
UNITED STATES DISTRICT JUDGE
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