Boyer et al v. Chesapeake Energy Corporation et al

Filing 94

ORDER Statoil's motion to dismiss 50 is granted as to plaintiffs' fraud claims and those claims are dismissed with prejudice; the motion is denied as to the breach of contract claims; plaintiffs' motion for leave to join Larchmont and file an amended complaint 61 is denied. Signed by Honorable Joe Heaton on 10/29/2015. (lam)

IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
JOHN BOYER, ET AL.,
Plaintiffs,
vs.
CHESAPEAKE ENERGY
CORPORATION, ET AL.,
Defendants.

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NO. CIV-15-1017-HE

ORDER
According to the petition,1 plaintiffs are owners of mineral interests in Bradford
County, Pennsylvania. They allegedly entered into oil and gas leases with defendant
Chesapeake Energy Corporation or its affiliated entities (“Chesapeake”), and are entitled to
the payment of royalties under the terms of the leases. Chesapeake is alleged to be the
operator of the leases. The other defendants are non-operating working interest owners.
Plaintiffs generally allege defendants underpaid royalties to them.2
Defendant Statoil USA Onshore Properties Inc. (“Statoil”) has moved to dismiss the
claims against it for failure to state a claim under Fed.R.Civ.P. 12(b)(6). Also pending is
plaintiffs’ motion for leave to amend their complaint to add Larchmont Resources LLC as
a defendant. The court concludes the motion to dismiss should be granted in part and denied

1

The petition filed in state court is referred to hereafter as the complaint. This case was
commenced in Texas state court, later removed to the U.S. District Court for the Northern
District of Texas, and transferred by that court to this one.
2

There were fourteen plaintiffs at the time the suit was filed. Ten of those have dismissed
their claims (see Doc. #74) and four remain: Stephen Davis, Barbara Davis, Paul Heimbach and
Marian Heimbach.

in part, and that the motion for leave to amend and add party should be denied.
Statoil seeks dismissal of plaintiffs’ fraud claims on the basis that they are not pled
with the specificity required by Fed.R.Civ.P. 9(b) and that they are barred by the substantive
law of both Pennsylvania and Texas law.3

Plaintiffs’ response does not address either

argument. There is nothing in the complaint which identifies any specific misrepresentation
by Statoil nor is there any obvious basis for rejecting the substantive doctrines which
defendant relies on. Plaintiffs have therefore confessed the motion. See L.Cv.R. 7.1(g). The
fraud claims against Statoil will be dismissed and, in light of the substantive objection noted,
the dismissal will be with prejudice.
Statoil has moved to dismiss the contract claims on the basis they do not sufficiently
allege compliance with all conditions precedent to plaintiffs’ right to recover, in particular
a contract provision allegedly requiring notice to the lessee of any claimed breach and a oneyear opportunity to cure. The complaint generally alleges compliance with all conditions
precedent (Doc. #1-3, ¶ 63) and plaintiffs argue such general allegations are permitted by
Fed.R.Civ.P. 9(c). The court agrees. Defendant’s argument is, in substance, an effort to
apply the pleading standards announced in Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007),
and Ashcroft v. Iqbal, 556 U.S. 662 (2009), to the pleading of conditions precedent. Those
cases were directed to the general standard for pleading a claim for relief under Fed.R.Civ.P.

3

Statoil relies on authorities in both states indicating that a fraud claim will not
ordinarily be recognized where the “gist of the action” is in contract and the only loss or
damage is to the subject matter of the contract.
2

8(a), rather than to allegations relating to conditions precedent which are specifically
addressed in Rule 9(c).

That rule authorizes “generally” pleading compliance with

conditions precedent, as plaintiffs have done here. See Hildebrand v. Allegheny Cnty., 757
F.3d 99, 111–12 (3rd Cir. 2014)(“Neither Iqbal nor Twombly purport to alter Rule 9.”); also
Swanda Bros. Inc. v. Chasco Constructors, Ltd., No. CIV-08-199-D, 2009 WL 290936, at
*1–2 (W.D. Okla. Feb. 5, 2009) The motion will be denied as to the contract claim,
With respect to plaintiffs’ motion for leave to join Larchmont Resources LLC
(“Larchmont”) as a defendant, Chesapeake and Statoil object on the basis that Larchmont is
not an indispensable party, that it is likely a non-diverse party, and adding it as defendant
would likely destroy diversity. Plaintiffs deny any effort to avoid federal jurisdiction,
arguing that none of the parties now know whether Larchmont is diverse or not, but urge that
Larchmont needs to be a party for various reasons.
The court concludes on the present showing that plaintiffs’ motion to add Larchmont
should be denied. The motion arises against the backdrop of 28 U.S.C. §1447(e), which
provides: “If after removal the plaintiff seeks to join additional defendants whose joinder
would destroy subject matter jurisdiction, the court may deny joinder, or permit joinder and
remand the action to the State court.” Apparently no party is presently certain where
Larchmont’s citizenship is, but plaintiff does not contest defendants’ assertion that
Larchmont is a limited liability company with members which are

themselves

unincorporated associations and that, as a result, determining citizenship is a substantial and
complex task. However, there appears to be a substantial likelihood that adding Larchmont
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would destroy subject matter jurisdiction, based on the scope of its apparent membership.
Further, there are various indications that plaintiffs seek to add Larchmont, at least in part,
because of the potential impact on jurisdiction. They have voluntarily dismissed other nonoperating working interest owners which appear to be positioned the same as Larchmont,
undercutting their suggestion here that Larchmont is an indispensable party.4 Further, the
timing of the effort to add Larchmont comes soon after the impact of its citizenship in other,
similar cases became an issue and was known to the parties. Finally, there appears to be no
substantial prejudice to plaintiffs from not permitting joinder. If their claims ultimately prove
to be valid, they will have a judgment against the apparently solvent entity that was the
operator of the wells and which committed the alleged breaches. To the extent joint and
several liability exists as to the non-operating owners, plaintiffs retain the ability to pursue
Larchmont separately in the same fashion that they presumably could with respect to the
other non-operators they have voluntarily dismissed. In sum, plaintiffs have not made a
showing sufficient to warrant granting leave in the circumstances existing here, where doing
so would put in substantial question the court’s continued subject matter jurisdiction. See
generally, State Distribs. Inc. v. Glenmore Distilleries Co., 738 F.2d 405, 416 (10th Cir.
1984).

4

Plaintiffs argue Larchmont is an indispensable party because it may be jointly and
severally liable with Chesapeake. However, joint and several liability does not translate into
indispensable status. See Resolution Trust Corp. v. Stone, 998 F.2d 1534, 1549–50 (10th Cir.
1993); Fed.R.Civ.Proc. 19 advisory committee notes (“[Rule 19] is not at variance with the
settled authorities holding that a tortfeasor with the usual ‘joint-and-several’ liability is merely
a permissive party to an action against another with like liability.”).
4

Statoil’s motion to dismiss [Doc. #50] is therefore GRANTED as to plaintiffs’ fraud
claims [Doc. #50] and those claims are dismissed with prejudice. The motion is DENIED
as to the breach of contract claims. Plaintiffs’ motion for leave to join Larchmont and file
an amended complaint [Doc. 61] is DENIED.
IT IS SO ORDERED.
Dated this 29th day of October, 2015.

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