A & B Campbell Family et al v. Chesakpeake Energy Corporation et al

Filing 212

MEMORANDUM (Order to follow as separate docket entry) Signed by Honorable Karoline Mehalchick on 8/30/2024. (cd)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF PENNSYLVANIA
A&B CAMPBELL FAMILY LLC., et al.,
Plaintiffs,

CIVIL ACTION NO. 3:15-CV-00340

v.

(MEHALCHICK, J.)

CHESAPEAKE ENERGY CORP, et al.,
Defendants.
MEMORANDUM
Before the Court are four motions to dismiss filed by Defendants Anadarko E&P
Onshore LLC, as successor by conversion to and f/k/a Anadarko E&P Company LP
(“Anadarko”), Mitsui E&P USA LLC (“MEPUSA”), Access MLP Operating, L.L.C.,
Appalachia Midstream Services, L.L.C., Williams Partners, LP (“Access”), and Chesapeake
Appalachia, L.L.C. (“Chesapeake”), as well as a motion to intervene filed by Appalachian
Basic Minerals LP, McCrow Energy Partners, II, LLC, PennMarc Resources II, LP, and
Wildes Mineral Interests, LLC. (Doc. 111; Doc. 113; Doc. 115; Doc. 117; Doc. 149). This
action was originally filed by Plaintiffs, who consist of a group of oil and gas lessors, on
February 17, 2025.1 (Doc. 1). The operative amended complaint was filed on July 18, 2015.

1

The named Plaintiffs in this case are as follows: David J Bride, John M Barrett,
Richard D Marshall, Rexford Schoonover, F & M Robinson, LLC, Robert H Stoudt, Jr, SL
Allen LLC, MS & JC Doss, LLC, F. Robert Hauss, Ronald L Campbell, James E Canfield,
John R Snell, Jerry L. Price, DP Investments, LLC, David W Moon, DJH and WGH, LLC,
Charles L Emerson, Little Fall R & R Inc., Barbara E Mosier, Erven W Crawford, Paul
DeNault, Barbara P Grimes, Kendra P Solowiej, E. Larry Franklin, Clark H Beebe, Freda L
Canfield, Sandra L Marshall, Theodore B Gatto, Wesley G Mosier, Darlene R Newton,

(Doc. 94). For the following reasons, Anadarko, MEPUSA, and Access’s motions to dismiss
will be GRANTED. (Doc. 111; Doc. 113; Doc. 115). Chesapeake’s motion to dismiss will be
DENIED as MOOT. (Doc. 117). The motion to intervene will also be DENIED as MOOT.
(Doc. 149).
I.

PROCEDURAL AND FACTUAL BACKGROUND
This case arises from fracking activity in the Marcellus Shale area in Pennsylvania.2

(Doc. 94). Plaintiffs are a group of individuals who hold royalty interests under oil and gas

Valarie DeNault, Michael R Bride, James E Grimes, June Crawford, Carol Franklin, Cheryl
A Henry, Tor Tamarack, LLC, Peter P Solowiej, Mosier Real Estate Co., LLC, Shirley Bride,
Candy S Card, Robert L Dibble, Jr, David L Sandt, Doris J Newton, James P Snell, Neta
Repsher, Carol Hauss, H. Timothy Newton, Foster Family LLC, Cindy E Barrett, A & B
Campbell Family, Thomas R Frederick, Barto Family LLC, Patti L Stoudt, Jacqueline T
Place, Sue A Sites, Shawn Patrick Newton, Richard A Card, Jr, Deborah S Frederick, Russell
E Bulick, Richard W Jackson, Milton Repsher, Cathy Ann Brady, Dolores B Jackson, M.
Patricia Nelson, Renee S Newton, Epler Family LLC, Claudia C Price, Outdoor Investment,
LLC, Mary J Moon, Shawn Newton(trading as Newton Family Limited Partnership), James
T Barrett, Walter E Newton, III, Lynn Dibble, Paul A Sites, DJH & PAH, LLC, Theodore
A Johnson, Kent L Morgan, Nicole D Newton, Lori R Barrett, Morchar LLC, Michelle S
Snell, Walter E Newton, III(trading as Newton Family Limited Partnership), Diane V Bride,
Walter G Henry, Jr, Pamela L Emerson, Eugene J Barrett, Jr.
2

The following relevant background about fracking in Pennsylvania is taken from this
case’s counterpart Suessenbach Fam. Ltd. P'ship v. Access Midstream Partners, L.P.:
Fracking enables the production of natural gas and oil from rock formations
below the earth's surface, generally 5,000 to 20,000 feet. At such depth, there
may not be sufficient permeability or reservoir pressure to allow natural gas and
oil to flow from the rock into the wellbore at economic rates. Given the
extremely low natural permeability of shale, creating fractures in the rock is
critical to extract gas from shale reservoirs.
Large deposits of natural gas have been discovered in various shale deposits
throughout the United States, including in Pennsylvania, and several oil and
gas exploration and development companies have been actively accessing these
deposits due to the development of fracking technology that allows the deposits
2

leases in properties generally located above the Marcellus Shale. (Doc. 94, ¶ 1). In the
aggregate, Plaintiffs hold royalty interests in the natural gas produced from over 12,000 acres
of leasehold land. (Doc. 94, ¶ 1 n.1). The named Defendants in this case, Chesapeake, USA
Onshore Properties, Inc. (“Statoil”), Anadarko, and MEPUSA (together with Anadarko,
“Lessee Defendants”) also hold rights in Plaintiffs’ leases, either as the original lessee party

to be exploited. The Marcellus Shale formation located in and beyond
Pennsylvania is one of the largest natural gas reserves in the world. Plaintiffs'
lands are located in the Marcellus Shale.
Gaining access to the deposits in the shale regions, including the Marcellus
Shale, typically involves purchasing or leasing land or mineral rights in the
vicinity of suspected deposits and attempting to develop profitable wells. Once
a natural gas deposit is reached, a wellhead is placed on the deposit. After a
wellhead is in place, natural gas can be moved from the well through gathering
pipes and ultimately transported through an intrastate transmission pipeline.
Intrastate transmission pipelines connect to major interstate transmission
pipelines which transport natural gas throughout the United States. The
transport and processing steps which follow removal of natural gas from the
wellhead, but precede entry of the gas into an interstate transmission pipeline,
are sometimes referred to as “gathering.” Access Midstream operates between
the lessors at the wellhead and the interstate pipeline system.
Processing can also include certain services to make gas suitable for entry into
the interstate pipeline system, such as dehydration when the natural gas has a
high water content. Access Midstream as indicated, however, “[i]n general, the
natural gas in the northern Marcellus Shale is lean and typically requires little
to no treatment to remove contaminants.”
While federal rules limit fees that can be charged on the interstate pipelines to
prevent gouging, drilling companies levy fees on local pipelines, known as
gathering lines. However, even where such fees are deducted, they must be
reasonable and actual.
No. CIV.A. 3:14-1197, 2015 WL 1470863, at *2-3 (M.D. Pa. Mar. 31, 2015).
3

or as assignees of all or part of the right, title, and interest of the original lessee party.3 (Doc.
94, ¶ 2).
Broadly, Plaintiffs allege that Defendants engaged in “separate but related unlawful
schemes” to deprive Plaintiffs of royalties and royalty interests for gas produced on their
leaseholds. (Doc. 94, ¶ 7). Further, Plaintiffs allege that through an agreement among
Defendants to jointly develop natural gas wells and gathering systems in and around the
Marcellus Shale, Defendants have engaged in an unlawful, anti-competitive scheme. (Doc.
94, at 8). This scheme is allegedly intended to “allocate geographic markets for the acquisition
of gas mineral rights and operating working interests in oil and gas leases through the
establishment and abuse of restrictive areas of mutual interest.” (Doc. 94, at 8). The scheme
also allegedly permits Defendants, particular Chesapeake, to charge “supra competitive” fees
for gathering services at the wells on property leased by Plaintiffs. (Doc. 94, ¶ 17). In effect,
the scheme allegedly allows Defendants to defraud Plaintiffs of their royalties “by the
misrepresentation of unauthorized or artificially inflated deductions.” (Doc. 94, at 13).
On February 17, 2015, Plaintiffs first filed this lawsuit in this Court. (Doc. 1). On July
18, 2015, Plaintiffs filed the instant amended complaint. (Doc. 94). Therein, they alleged the
following causes of action: First Cause of Action–Agreement to Restrain Competition in
Violation of Section 1 of the Sherman Act, 15 U.S.C. § 1; Second Cause of Action–
Combination or Conspiracy to Monopolize Trade or Commerce in Violation of Section 2 of

3

By the date of this filing, Statoil and Chesapeake have been dismissed from this
action. (Doc. 110; Doc. 182).
4

the Sherman Act, 15 U.S.C. § 2; Third Cause of Action–Violation of RICO, 18 U.S.C. §§
1961-1968; Fourth Cause of Action–Conspiracy to Violate RICO, 18 U.S.C. § 1962(d); Fifth
Cause of Action–Breach of Contract – Express and/or Implied Covenants; Sixth Cause of
Action–Action for Accounting; Seventh Cause of Action–Conversion; and Eighth Cause of
Action–Civil Conspiracy. (Doc. 94, ¶¶ 236-56; 257-67; 268-88; 289-98; 299-310; 311-15; 316326; 327-32). As relief, Plaintiffs seek monetary, compensatory, and punitive damages. (Doc.
94, at 139-141).
On September 18, 2015, Anadarko, MEPUSA, Access, and Chesapeake each filed a
motion to dismiss Plaintiffs’ amended complaint as well as a brief in support of their respective
motions.4 (Doc. 111; Doc. 112; Doc. 113; Doc. 114; Doc. 115; Doc. 116; Doc. 117; Doc.
118). On October 25, 2015, Plaintiffs filed a consolidated brief in opposition addressing each
of Defendants’ motions to dismiss. (Doc. 122). On November 20, 2015, MEPUSA,
Anadarko, Access, and Chesapeake each filed a reply brief. (Doc. 127; Doc. 128; Doc. 129;
Doc. 130).
On December 19, 2016, Appalachian Basic Minerals LP, McCrow Energy Partners,
II, LLC, PennMarc Resources II, LP, and Wildes Mineral Interests, LLC filed a motion to

4

As Chesapeake has been dismissed from this action, its motion to dismiss is DENIED
as MOOT. (Doc. 117).
5

intervene in this action and a brief in support of their motion. (Doc. 149; Doc. 150). No brief
in opposition was ever filed in response.5
Without a ruling on any of the pending motions, this action was stayed pending
mediation on March 22, 2017. (Doc. 151). On June 28, 2020, resolution of this case was
further delayed by bankruptcy proceedings implicating Chesapeake. (Doc. 167). Upon the
resolution of these proceedings, Plaintiffs filed a notice of voluntary dismissal, dismissing
Chesapeake as a Defendant from this action. (Doc. 182).
On February 23, 2024, the undersigned was assigned to this case. On March 14, 2024,
after a conference call with the parties, this Court lifted the stay on this litigation and
scheduled oral argument on the pending motions to dismiss. (Doc. 191). The Court also
directed the parties to submit supplemental briefing addressing updates in the law since the
parties initially filed their briefs in 2015. On April 19, 2024, Anadarko, MEPUSA, and Access
filed their supplemental briefing.6 (Doc. 196; Doc. 197; Doc. 198). On April 23, 2024,
Plaintiffs filed their supplemental opposition brief. (Doc. 202). Oral argument subsequently
took place on May 21, 2024. Accordingly, the outstanding motions are ripe and ready for
disposition. (Doc. 111; Doc. 113; Doc. 115).

5

Because Plaintiffs’ complaint is to be dismissed, the motion to intervene will be
DENIED as MOOT. (Doc. 149). The motion may be reasserted once a second amended
complaint has been filed.
6

Access incorrectly filed their supplemental briefing as a motion to supplement. (Doc.

196).
6

II.

LEGAL STANDARD
Rule 12(b)(6) authorizes a defendant to move to dismiss for “failure to state a claim

upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). To assess the sufficiency of a
complaint on a Rule 12(b)(6) motion, a court must first take note of the elements a plaintiff
must plead to state a claim, then identify mere conclusions which are not entitled to the
assumption of truth, and finally determine whether the complaint’s factual allegations, taken
as true, could plausibly satisfy the elements of the legal claim. Burtch v. Milberg Factors, Inc.,
662 F.3d 212, 221 (3d Cir. 2011). In deciding a Rule 12(b)(6) motion, the court may consider
the facts alleged on the face of the complaint, as well as “documents incorporated into the
complaint by reference, and matters of which a court may take judicial notice.” Tellabs, Inc. v.
Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007).
After recognizing the required elements which make up the legal claim, a court should
“begin by identifying pleadings that, because they are no more than conclusions, are not
entitled to the assumption of truth.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). The plaintiff
must provide some factual ground for relief, which “requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). “[T]hreadbare recitals of the elements of
a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S.
at 678. Thus, courts “need not credit a complaint’s ‘bald assertions’ or ‘legal
conclusions…’” Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997) (quoting In
re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1429-30 (3d Cir. 1997)). The court also

7

need not assume that a plaintiff can prove facts that the plaintiff has not alleged. Associated
Gen. Contractors of Cal. v. Cal. St. Council of Carpenters, 459 U.S. 519, 526 (1983).
A court must then determine whether the well-pleaded factual allegations give rise to
a plausible claim for relief. “A claim has facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable inference that the defendant is liable for
the misconduct alleged.” Palakovic v. Wetzel, 854 F.3d 209, 219-20 (3d Cir. 2017) (quoting
Iqbal, 556 U.S. at 678) (internal quotation marks omitted); see also Sheridan v. NGK Metals
Corp., 609 F.3d 239, 262 n.27 (3d Cir. 2010). The court must accept as true all allegations in
the complaint, and any reasonable inferences that can be drawn therefrom are to be construed
in the light most favorable to the plaintiff. Jordan v. Fox, Rothschild, O’Brien & Frankel, 20 F.3d
1250, 1261 (3d Cir. 1994). This “presumption of truth attaches only to those allegations for
which there is sufficient factual matter to render them plausible on their face.” Schuchardt v.
President of the U.S., 839 F.3d 336, 347 (3d Cir. 2016) (internal quotation and citation
omitted). The plausibility determination is context-specific and does not impose a heightened
pleading requirement. Schuchardt, 839 F.3d at 347.
III. DISCUSSION
A. ANTITRUST CLAIMS ASSERTED UNDER THE SHERMAN ACT
Plaintiffs allege that Defendants have violated the Sherman Act by engaging in a
conspiracy to monopolize trade and restrain competition. (Doc. 94, at 106, 115). “The
purpose of the Sherman Act is to protect buyers and sellers from the effects of seller or buyer
‘market power’ unless obtained by competition on the merits.” Abrams v. Chesapeake Energy
Corp., No. 4:16-CV-1343, 2017 WL 6541511, at *6 (M.D. Pa. Dec. 21, 2017). Plaintiffs bring

8

claims under both Section 1 and Section 2 of the Sherman Act, which “prohibit agreements
that unreasonably restrain competition, and prohibit monopolization, attempted
monopolization, and conspiracies to monopolize, respectively.” Abrams, 2017 WL 6541511,
at *6. All Defendants argue that Plaintiffs lack standing to bring their Sherman Act claims
and that Plaintiffs have failed to sufficiently plead the necessary elements under Section 1 and
Section 2 of the Sherman Act. (Doc. 112, at 17-31; Doc. 114, at 16-28; Doc. 116, at 21-37).
The Court will address each contention in turn.
1. Plaintiffs have failed to allege they suffered an antitrust injury and thus do not
have standing to bring their antitrust claims.
This Court must first address whether Plaintiffs have standing to bring their Sherman
Act claims. All Defendants argue that Plaintiffs lack standing to bring their antitrust claims
because they were not injured in a manner consistent with the protections of the Act. (Doc.
112, at 23-24; Doc. 114, at 19; Doc. 116, at 21-22). In Associated General Contractors of California,
Inc. v. California State Council of Carpenters, the United States Supreme Court detailed factors to
be considered when determining whether a plaintiff has antitrust standing. 459 U.S. 519
(1983). These factors, as organized by the Third Circuit, are as follows:
(1) the causal connection between the antitrust violation and the harm to the
plaintiff and the intent by the defendant to cause that harm, with neither factor
alone conferring standing; (2) whether the plaintiff's alleged injury is of the type
for which the antitrust laws were intended to provide redress; (3) the directness
of the injury, which addresses the concerns that liberal application of standing
principles might produce speculative claims; (4) the existence of more direct
victims of the alleged antitrust violations; and (5) the potential for duplicative
recovery or complex apportionment of damages.
In re Lower Lake Erie Iron Ore Antitrust Litig., 998 F.2d 1144, 1165–66 (3d Cir.
1993); see also Ethypharm S.A. France v. Abbott Lab'ys, 707 F.3d 223 (3d Cir.
2013).

9

The threshold element of antitrust standing is “injury of the type the antitrust laws
were intended to prevent and that flows from that which makes defendants' acts unlawful.”
Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977). This requirement ensures
that antitrust laws are enforced “for the protection of competition, not competitors.”
Brunswick Corp., 429 U.S. at 488. Accordingly, antitrust standing is limited to consumers and
competitors in the relevant market, and to those whose injuries are “inextricably intertwined”
with the alleged antitrust agreement or conspiracy. Ethypharm, 707 F.3d at 233. Per the Third
Circuit, the “inextricably intertwined” exception requires the alleged injury to be the means
by which a defendant achieves anti-competitive ends and may be extended only to entities
that are in the business of selling goods and services in the same market. See Ethypharm, 707
F.3d at 237 (citing Broadcom Corp. v. Qualcomm, Inc., 501 F.3d 297, 320-21 (3d Cir. 2007)).
Furthermore, “[a]n antitrust plaintiff must allege not only personal harm, but also that the
defendant's conduct affected the ‘prices, quantity or quality of goods or services’ in the
relevant market.” Premier Comp Sols. LLC v. UPMC, 377 F. Supp. 3d 506, 531 (W.D. Pa. 2019);
Mathews v. Lancaster Gen. Hosp., 87 F.3d 624, 641 (3d Cir. 1996) (citing Tunis Bros. Co., Inc. v.
Ford Motor Co., 952 F.2d at 728); see also Eichorn v. AT & T Corp., 248 F.3d 131, 140 (3d Cir.
2001) (“[T]he antitrust laws were designed to protect market-wide anticompetitive
activities”). The ensuing injury must result from the competition-reducing effect of the
defendant’s behavior.
According to Anadarko, Plaintiffs have not alleged they suffered an antitrust injury
because “the harm alleged by Plaintiffs is not harm to market-wide competition.” (Doc. 112,
at 25). MEPUSA argues that, according to the amended complaint, Chesapeake, which has

10

been dismissed from this action, is alleged to have merely transferred an existing monopoly
to another entity, which “has no antitrust effect.” (Doc. 114, at 20); See Brunswick Corp. v.
Riegel Textile Corp., 752 F.2d 261, 266 (7th Cir. 1984) (An act that “creates no monopoly
power[, but] merely shifts a lawful monopoly into different hands . . . has no antitrust
significance.”); see also Columbia River People’s Utility Dist. v. Portland General Elec. Co., 217 F.3d
1187, 1190-91 (9th Cir. 2000) (holding that determining which party would be a stateapproved monopolist for an electrical plant had no antitrust significance because the
monopoly would exist either way). Access avers that Plaintiffs’ antitrust claims fail because
“Plaintiffs allege no reduction in competition” from the relevant agreements at issue in this
case, and thus no cognizable injury. (Doc. 116, at 22).
Plaintiffs respond to these arguments by citing Third Circuit precedent which stands
for the proposition that the existence of antitrust injury is not typically resolved through
motions to dismiss. (Doc. 122, at 28). Schuylkill Energy Res., Inc. v. Pa. Power & Light Co., 113
F.3d 405, 417 (3d Cir. 1997) (citing Brader v. Allegheny Gen. Hosp., 64 F.3d 869, 876 (3d Cir.
1995)). Plaintiffs also contend that they “remained prospective participants in the market for
Gas Mineral Rights, and therefore subject to potential injury in the market for such rights by
the anticompetitive activity of the defendants, due to the unique characteristics of oil and gas
leases.” (Doc. 122, at 23). Plaintiffs further recognize themselves as “sellers” in a buyers’
market for gas mineral rights however, such an allegation is absent from their amended
complaint. (Doc. 94; Doc. 122, at 30).
Antitrust injury is an essential element to antitrust standing. See SEI Glob. Servs., Inc. v.
SS&C Advent, No. 20-3386, 2022 WL 2356730, at *2 (3d Cir. June 30, 2022) (recognizing

11

antitrust injury the “threshold” for antitrust standing). But, as Plaintiffs point out, “[t]he
existence of antitrust injury is not typically resolved through motions to dismiss.” (Doc. 122,
at 28); In re Suboxone (Buprenorphine Hydrochloride & Naloxone) Antitrust Litig., 64 F. Supp. 3d
665, 684 (E.D. Pa. 2014); see also Ethypharm, 707 F.3d at 232 n.15 (antitrust standing is a
“merits issue”); see also CarePoint Health Sys. Inc. v. RWJ Barnabas Health, Inc., No. 22CV5421
(EP) (CLW), 2023 WL 7986429, at *5 (D.N.J. Nov. 17, 2023). “An antitrust plaintiff is only
required to ‘allege facts capable of supporting a finding or inference that the purported
anticompetitive conduct produced’” the purported harm. RWJ Barnabas Health, Inc., 2023 WL
7986429, at *5 (quoting In re Remicade Antitrust Litig., 345 F. Supp. 3d 566, 577 (E.D. Pa.
2018)). However, even considering this liberal demand, Plaintiffs have failed to meet their
burden to established they suffered an antitrust injury.
First, Plaintiffs do not allege any facts supporting there was a reduction in competition
stemming from their alleged injury. See SS&C Advent, 2022 WL 2356730, at *2 (stating an
antitrust injury must flow from “anti-competitive effect on the competitive market” in the
relevant market). Instead, Plaintiffs only allege harm to themselves through the
underpayment of royalties. (Doc. 94, ¶ 253); see AlphaCard Sys. LLC v. Fery LLC, No.
CV1920110ZNQTJB, 2023 WL 3506414, at *4 (D.N.J. May 17, 2023) (dismissing antitrust
claims because plaintiff failed to allege harm to competition, alleging only harm unto itself);
see also Elliott Indus. Ltd. P'ship v. BP Am. Prod. Co., 407 F.3d 1091, 1125 (10th Cir. 2005)
(finding the alleged injury of underpayment of royalties to be insufficient to confer antitrust
standing). Also, Plaintiffs fail to allege that the market for Gathering Services became less
competitive as a result of the complaint of activities, alleging instead that Chesapeake merely

12

transferred its monopoly power and that competitive fees were already charged in the market
for Gathering Services before the complained of agreements. (Doc. 94, ¶¶ 17, 211, 246-47). A
shift in a monopoly does not automatically establish a change in the market, especially
whereas here Plaintiffs fail to allege specific ways in which Defendants “bolstered and
extended” their monopoly power beyond their conclusory allegation stating as much. (Doc.
94, ¶ 248); see, e.g., Columbia River People’s Util. Dist. v. Portland Gen. Elec. Co., 217 F.3d 1187,
1190-91 (9th Cir. 2000) (recognizing that the same permissible constraints will exist whether
the monopoly is held by one party or another); see also, e.g., Hasu Shah v. Harristown Dev. Corp.,
No. 1:12-CV-2196, 2013 WL 6567764, at *8 (M.D. Pa. Dec. 13, 2013) (“The court agrees
with defendants [] that an existing monopoly's change of ownership is not, by itself, an
antitrust violation.”). Furthermore, because Plaintiffs allege that Defendants “enabled
themselves” to “cause Plaintiffs to receive below- market royalties as a result of the deduction
of unauthorized and/or artificially inflated costs from their royalties.” (Doc. 94, ¶ 253). Thus,
the Court cannot surmise that Plaintiffs’ alleged injury of decreased royalties was caused by
the unlawful exercise of market power by Defendants. See SS&C Advent, 2022 WL 2356730,
at *2 (affirming the dismissal of antitrust claims where plaintiff had “not alleged that harm
flows from any purported anticompetitive conduct by” defendants).
Next, Plaintiffs are not the proper parties to bring an antitrust action because they are
neither consumers nor competitors in the alleged relevant markets. W. Penn Allegheny Health
Sys., Inc. v. UPMC, 627 F.3d 85 (3d Cir. 2010) (Antitrust injury is limited to “consumers and
competitors in the restrained market.”). Whereas Plaintiffs may play an upstream role in the
market for gas minerals rights, their tangential relationship to the relevant market is

13

insufficient to confer standing. SigmaPharm, Inc. v. Mut. Pharm. Co., 454 F. App’x 64, 69 (3d
Cir. 2011) (concluding that even though plaintiff provided a crucial input in the relevant
market, it was not within the class of parties with antitrust standing). Plaintiffs attempt to
plead around this conclusion by alleging in a conclusory fashion that their injury is
“inexplicably intertwined” with Defendants’ alleged wrongdoing. (Doc. 94, ¶¶ 252-253). The
Third Circuit has extended antitrust standing to instances where “‘both plaintiffs and
defendants are in the business of selling goods or services in the same relevant market,’ though
they may not directly compete against each other.” Ethypharm, 707 F.3d at 237; see also
Hanover 3201 Realty, LLC v. Vill. Supermarkets, Inc., 806 F.3d 162 (3d Cir. 2015) (“suppliers and
other non-market participants generally do not have antitrust standing unless their injuries
were the very means by which the defendants carried out their illegal ends”). Standing exists
under the inextricably intertwined exception where the alleged injury is a “necessary step in
effecting the ends of the alleged illegal conspiracy.” Blue Shield v. McCready, 457 U.S. 465,
476-79, 484 (1982) (emphasis added). Here, however, based on the allegations in the amended
complaint, that is not the case. Plaintiffs’ allegations do not support their conclusion that they
and Defendants are buyers and sellers in the same market and Plaintiffs have failed to direct
the Court to any caselaw that suggests otherwise. See Broadcom Corp. v. Qualcomm Inc., 501
F.3d 297, 321 (3d Cir. 2007). Even more damaging to their claim for standing is Plaintiffs’
inability to point to non-conclusory, factual allegations in the complaint demonstrating how
reducing their royalties was a necessary means for Defendants to reduce competition in the
relevant market for Gas Mineral Rights. The Court is not convinced that Plaintiffs’
complained of injury is inextricably intertwined with Defendants’ alleged anticompetitive

14

scheme. The Court therefore finds that Plaintiffs have failed to sufficiently allege antitrust
standing at this juncture.7 Accordingly, Defendants’ motions to dismiss are GRANTED as
to Plaintiffs’ antitrust claims, the First and Second Causes of Action, which are hereby
DISMISSED without prejudice. (Doc. 94, ¶¶ 236-56, 257-67; Doc. 111; Doc. 113; Doc. 115).
2. Plaintiffs have failed to allege an anti-competitive agreement among all
Defendants.
Even if Plaintiffs did have standing to assert their Sherman Act claims against
Defendants, their claims would fail as insufficiently pled. Turning first to the Section 2 claim,
Plaintiffs do not explicitly refute Anadarko and MEPUSA’s claim that they have failed to
allege an antitrust conspiracy. (Doc. 112, at 17; Doc. 114, at 17; Doc. 122). Plaintiffs do,
however, defend their Section 1 claim. (Doc. 122, at 35). According to Defendants, Plaintiffs’
amended complaint does not sufficiently establish that Defendants came to the requisite
agreement to satisfy this claim. (Doc. 112, at 17-21; Doc. 114, at 17-19; Doc. 116, at 21-22).
To assert a claim under Section 1 of the Sherman Act, Plaintiffs must allege Defendants
engaged in a “contract, combination. . . or conspiracy, in restraint of trade or commerce.” Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 548 (2007). This requires a showing of that Defendants
made a conscious commitment to a common scheme. Burtch v. Milberg Factors, Inc., 662 F.3d

7

Plaintiffs allege “the economic injury suffered by Plaintiffs was a necessary step in,
integral to, or part of the essential means by which defendants Chesapeake and Access
Midstream sought to achieve their illegal and anticompetitive ends. As a result, the economic
injury suffered by Plaintiffs is inextricably intertwined with Defendants’ wrongdoing.” (Doc.
94, ¶ 252). This allegation is not only conclusory, but also fails to implicate all remaining
Defendants in this case.
15

212, 220 (3d Cir. 2011). Here, each Defendant argues that Plaintiffs have failed to allege that
all the Defendants named in the amended complaint together were engaged in “act actual
illicit agreement.” (Doc. 112, at 18; Doc. 114, at 17; Doc. 116, at 36). According to
Defendants, Plaintiffs’ claims are “conclusory” and “devoid of fact.” (Doc. 112, at 18; Doc.
114, at 17; Doc. 116, at 36). Plaintiffs maintain that “the amended complaint contains far
more than bare allegations of joint venture.” (Doc. 122, at 20).
The Court is tasked with determining whether the alleged anticompetitive conduct was
the result of an agreement among Defendants or each of their independent choices. Twombly,
550 U.S. at 553; see Howard Hess Dental Lab'ys Inc. v. Dentsply Int'l, Inc., 602 F.3d 237, 254 (3d
Cir. 2010) (“Section 1 claims are limited to combinations, contracts, and conspiracies, and
thus always require the existence of an agreement.”). Conduct that is "entirely consistent"
with the defendant pursuing its own economic interests does not support an inference of
conspiracy. In re Pressure Sensitive Labelstock Antitrust Litig., 566 F. Supp. 2d 363, 368 (M.D.
Pa. 2008); see also Twombly, 550 U.S. at 567 (allegations of conspiracy are deficient if there are
“obvious alternative explanation[s]” for the facts alleged). “While a showing of parallel
‘business behavior is admissible circumstantial evidence from which the fact finder may infer
agreement,’ it [also] falls short of ‘conclusively establish[ing] agreement or ... itself
constitut[ing] a Sherman Act offense.’” Twombly, 550 U.S. at 553 (citing Theatre Enterprises,
Inc. v. Paramount Film Distrib. Corp., 346 U.S. 537, 540 (2007)); see also See Valspar Corp. v. E.I.
Du Pont De Nemours and Company, 873 F.3d 185, 190-91 (3d Cir. 2017) (“single firm’s
independent action…does not implicate § 1”). Even conscious parallelism falls short of what
is required to establish a Sherman Act violation. Twombly, 550 U.S. at 553. To establish an

16

unlawful anticompetitive conspiracy, Plaintiffs must demonstrate that an “actual, manifest
agreement” exists between Defendants. In re Flat Glass Antitrust Litig., 385 F.3d 350, 361 (3d
Cir. 2004); see also Kerwin v. Casino, 802 F. App’x 723, 725-26 (3d Cir. 2020) (dismissing claim
where, among other things, plaintiff failed to plead facts “specify[ing] a time or place that any
actual agreement . . . occurred” or identifying the “particular individuals or organizations
[that] made such an agreement”) (quoting Burtch v. Milberg Factors, Inc., 662 F.3d 212, 225 (3d
Cir. 2011) (cleaned up). Plaintiffs’ “agreement” claim must include factual allegations with
respect to each defendant named in the complaint. In re Processed Egg Prods. Antitrust Litig., 821
F. Supp. 2d 709, 719 (E.D. Pa. 2011).
In their amended complaint, Plaintiffs point to several agreements made by various
groupings of Defendants over a five-year period to support a larger conspiracy containing all
Defendants. (Doc. 94, ¶¶ 136, 140, 141). Plaintiffs offer no factual allegations supporting their
conclusion that all Defendants, acting in concert, had an agreement to restrain trade in
violation of the Sherman Act. Without citing to any caselaw, Plaintiffs argue their Section 1
claim should not be dismissed because they “aver detailed factual allegations of overlapping
schemes among the defendants which are sufficient to create a plausible inference that the
defendants entered into an agreement to unreasonably restrain trade in the relevant markets.”
(Doc. 122, at 36). However, this is not so. To meet their burden, Plaintiffs must allege facts
that support Defendants shared “a unity of purpose.” In re Flat Glass Antitrust Litig., 385 F.3d
350, 357 (3d Cir. 2004). The amended complaint does not support that each Defendant was
even aware of each other’s conduct, never mind had a unity purpose. Instead, at most
Plaintiffs have alleged parallel conduct “entirely consistent” with each Defendant pursuing

17

its own interests by underpaying Plaintiffs’ royalties by deducting post-production costs. In re
Pressure Sensitive Labelstock Antitrust Litig., 566 F. Supp. 2d 363 (M.D. Pa. 2008). Furthermore,
this parallel conduct of deducting post-production costs has been upheld as permissible by the
Pennsylvania Supreme Court. Kilmer v. Elexco Land Servs., Inc., 990 A.2d 1147, 1149 (Pa.
2010). Accordingly, because Plaintiffs have failed to allege Defendants participated in an
anticompetitive agreement, Defendants’ motions to dismiss are to be GRANTED on this
basis. (Doc. 111; Doc. 113; Doc. 115). Even “under the most liberal notice pleading
requirements of Rule 8(a), a plaintiff must differentiate between defendants. . . An allegation
against multiple defendants that is bereft of specific wrongdoing by those proposed defendants
is insufficient to state a claim.” Bret Binder v. Weststar Mortg., Inc., No. CV 14-7073, 2016 WL
3762710, at *3 (E.D. Pa. July 13, 2016) (citation omitted). Accordingly, Plaintiffs’ First and
Second Causes of Action are DISMISSED without prejudice. See Ellison v. Am. Bd. of
Orthopaedic Surgery, Inc., No. CV168441KMJBC, 2018 WL 6629764, at *5 (D.N.J. Oct. 30,
2018) (dismissing Section 1 claims because plaintiff failed to allege an unlawful agreement).
3. Whether Plaintiffs have designated a proper geographic market is a question
best answered after discovery.
To state a claim under the Sherman Act, a plaintiff must also allege the existence of a
valid geographic market. Premier Comp Sols. LLC v. UPMC, 377 F. Supp. 3d 506, 524 (W.D.
Pa. 2019). The relevant geographic market is the “area in which a potential buyer may
rationally look for the goods or services he or she seeks.” Tunis Bros. Co., Inc. v. Ford Motor Co.,
952 F.2d 715, 726-27 (3d Cir. 1991). Typically, defining the appropriate geographic market
involves questions of material fact and requires expert testimony. Premier Comp Sols., 377 F.
Supp. 3d at 526. Still, Defendants argue that Plaintiffs’ proposed geographic market is
18

deficient, even considering their lack of discovery at this time. (Doc. 112, at 29-31; Doc. 114,
at 28 n.5; Doc. 116, at 26-28). Plaintiffs refute this. As they see it, they “cannot reasonably be
expected or required to define the proposed markets with any further precision until after they
have had the opportunity to conduct factual inquiries into the commercial realities faced by
natural gas exploration and production companies in discovery.” Eastman Kodak Co. v. Image
Tech. Servs., Inc., 504 U.S. 451, 482; (Doc. 122, at 35). The Court is inclined to agree, especially
given Plaintiffs’ argument that they based their proposed geographic markets on the
information that was publicly available to them at the time of filing the amended complaint.
(Doc. 202, at 17). However, having determined that Plaintiffs’ lack standing to bring their
antitrust claims, the Court will not further opine on this element of their claim.
B. RICO CLAIMS
Plaintiffs also allege that Defendants violated RICO. (Doc. 94, at 119). Specifically,
Plaintiffs claim that Defendants were part of a RICO enterprise designed to defraud Plaintiffs
by overcharging them for post-production costs associated with the gathering, transportation,
and marketing of natural gas. (Doc. 94, ¶ 272). Pursuant RICO, it is unlawful “for any person
employed by or associated with any enterprise engage in, or the activities of which affect,
interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct
of such enterprise's affairs through a pattern of racketeering activity.” 18 U.S.C. § 1962; see
Dongelewicz v. PNC Bank Nat'l. Ass'n, 104 Fed. Appx. 811, 816–817 (3d Cir. 2004) (citing
Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985)). To state a claim for a RICO violation,
Plaintiffs must allege that Defendants are (1) a person (2) who is associated with an enterprise

19

engaged in interstate commerce (3) who conducted the affairs of said enterprise (4) through a
pattern (5) of racketeering activity. Dongelewicz, 104 Fed. Appx. at 816–817.
Here, Plaintiffs allege the predicate racketeering activity is mail and wire fraud. (Doc.
94, ¶¶ 231-32). “Racketeering activity” includes mail and wire fraud as defined by 18 U.S.C.
§§ 1341 and 1343. See 18 U.S.C. § 1961(1). To establish a claim for mail or wire fraud, a
plaintiff must allege: “(1) a scheme to defraud; (2) the use of the mails or wires for the purpose
of executing the scheme; and (3) fraudulent intent.” Rapid Circuits, Inc. v. Sun Nat. Bank, No.
10-6401, 2011 WL 1666919, at *23 (E.D. Pa. May 3, 2011) (citing United States v. Pharis, 298
F.3d 228, 234 (3d Cir. 2002)); see also Katz v. DeLuca, No. CV 23-1188, 2024 WL 2188905, at
*5 (E.D. Pa. May 15, 2024). “When mail and wire fraud are the alleged predicate acts of a
RICO violation, ‘they must be pled with particularity to satisfy Federal Rule of Civil
Procedure 9(b); in particular, blanket allegations of mail and wire fraud lacking information
of who sent or received the fraudulent representations are insufficient to satisfy Rule 9(b).’”
DeLuca, 2024 WL 2188905, at *5 (quoting Rapid Circuits, Inc. 2011 WL 1666919, at *23).
Additionally, RICO makes it “unlawful for any person to conspire to violate any of the
provisions of subsection (a), (b), or (c) of this section.” 18 U.S.C. § 1962. Pursuant this section,
Plaintiffs have also asserted a RICO conspiracy claim against Defendants. (Doc. 94, at 126).
Defendants argue that Plaintiffs’ RICO claims should be dismissed because they have
failed to allege that they suffered a RICO injury, failed to allege Defendants engaged in a
RICO enterprise, failed to allege a pattern of racketeering activity, and failed to allege RICO
conspiracy. (Doc. 112, at 32-37; Doc. 114, at 29; Doc. 116, at 42). The Court will address
each argument in turn.

20

1. Plaintiffs have alleged a RICO injury.
The parties dispute whether Plaintiff have standing to assert their RICO claims.8 (Doc.
112, at 35-36; Doc. 114, at 36-37; Doc. 122, at 46). The RICO statute “provides a private right
of action to a person who is injured in his ‘business or property by reason of’ a RICO
violation.” Hausknecht v. John Hancock Life Ins. Co. of New York, 334 F. Supp. 3d 665, 679 (E.D.
Pa. 2018); see 18 U.S.C. § 1964. To have standing to assert their RICO claim, Plaintiffs must
allege that Defendants’ racketeering activities were the proximate cause of their injuries. In re
Sunrise Sec. Litig., 916 F.2d 874, 883 (3d Cir. 1990); see also Anza v. Ideal Steel Supply Corp., 547
U.S. 451, 461 (2006) (“When a court evaluates a RICO claim for proximate causation, the
central question it must ask is whether the alleged violation led directly to plaintiffs’
injuries.”); Hemi Group, LLC v. City of New York, 559 U.S. 1, 9 (2010) (To state a claim under
RICO, a plaintiff “is required to show that a RICO predicate offense ‘not only was a “but for”
cause of his injury, but was the proximate cause as well.’” (citation omitted)). Proximate cause
requires a showing that there is “some direct relation between the injury asserted and the
injurious conduct alleged.” In re Avandia Mktg., Sales Pracs. & Prod. Liab. Litig., 804 F.3d 633
(3d Cir. 2015) (citation omitted). Courts in the Third Circuit consider three factors when
determining the proximate cause of a RICO injury: “(1) whether the plaintiff was directly
harmed by the defendant's predicate acts, (2) whether damages are speculative or concrete,

8

Access does argue whether Plaintiffs have alleged a RICO injury in its brief in support
of its motion to dismiss. (Doc. 116).
21

and (3) whether alternative potential plaintiffs exist who could better redress the harm
alleged.” Lester v. Percudani, 556 F. Supp. 2d 473, 483 n.16 (M.D. Pa. 2008).
Plaintiffs’ alleged RICO injury is loss of royalties. (Doc. 94, ¶ 286). Plaintiffs allege
their injury was caused by “deduction of unauthorized or artificially inflated and
unreasonable post-production gathering and transportation costs in the calculation and
payment of such royalties to Plaintiffs” as part of Defendants’ scheme to overpay Access for
gathering services and then recover some of that overpayment. (Doc. 94, ¶ 286). Plaintiffs
further allege that their injury stems from their reliance on Defendants’ predicate acts in
issuing misleading monthly royalty statements that either “(a) fraudulently represented that
deductions shown for gas gathering and transportation costs were legitimately incurred and
permissible under the terms of the respective Plaintiffs’ leases; or (b) fraudulently concealed,
omitted or otherwise failed to disclose that such deductions had in fact been taken in
calculating the royalties paid to the respective Plaintiffs.” (Doc. 94, ¶¶ 233, 277-81, 283-84,
286; Doc. 122, at 47). As stated by Plaintiffs, “[i]n essence, [they] allege that they were initially
lulled into a false sense of security by the royalty statements.” (Doc. 122, at 48).
Plaintiffs aver that “[t]he Third Circuit has held that mailings ‘designed to lull victims
into a false sense of security, postpone their ultimate complaint to the authorities, and
therefore make the apprehension of the defendants less likely than if no mailings had taken
place’ are sufficient to support a claim for mail fraud.” (Doc. 122, at 48) (citing U.S. v. Lebovitz,
669 F.2d 894, 896 (3d Cir.1982) (quoting U.S. v. Maze, 414 U.S. 395, 403 (1974))). In
Suessenbach Family Ltd. Partnership v. Access Midstream Partners, L.P., this Court found this
argument persuasive and held a similar injury to the one at bar to be sufficient to establish

22

standing for the purpose of a motion to dismiss. No. CIV.A. 3:14-1197, 2015 WL 1470863,
at *11-13 (M.D. Pa. Mar. 31, 2015). Remaining consistent with this previous finding, the
Court here too finds Plaintiffs’ RICO allegations are sufficient at the motion to dismiss stage
to sustain their burden as to their RICO injury. Thus, the Court will not grant Defendants’
motions to dismiss on this basis. (Doc. 111; Doc. 113; Doc. 115).
2. Plaintiffs have failed to allege an association-in-fact RICO enterprise.
The parties dispute whether Plaintiffs have sufficiently alleged the existence of a RICO
enterprise. (Doc. 112, at 32; Doc. 114, at 33-34; Doc. 116, at 38; Doc. 122, at 38; Doc. 197,
at 20-21). For RICO purposes, “enterprise” is defined as “any individual, partnership,
corporation, association, or other legal entity, and any union or group of individuals
associated in fact although not a legal entity.” 18 U.S.C. § 1961(4). “[T]he ‘enterprise’ cannot
be the pattern of racketeering activity alone and must be ‘an entity separate and apart from
the pattern of activity in which it engages.’” Zakheim v. Curb Mobility LLC, No. CV 22-4594,
2023 WL 5339606, at *2 (E.D. Pa. Aug. 18, 2023) (quoting United States v. Turkette, 452 U.S.
576, 583 (1981)). There are two categories of associations that constitute a RICO enterprise:
(1) legal entities such as corporations and partnerships, and (2) associations-in-fact. See Ins.
Brokerage Litig., 618 F.3d at 364 (citing United States v. Turkette, 452 U.S. 576, 581-52 (1981)).
Here, Plaintiffs assert that Defendants, along with their respective officers, directors,
employees and agents, formed an association-in-fact enterprise. (Doc. 94, ¶¶ 270-72). In an
association-in-fact enterprise, entities act together “for a common purpose.” Boyle v. United
States, 556 U.S. 938, 946 (2009). Therefore, an association-in-fact must share “(1) a purpose,
(2) relationships among those associated with the enterprise, and (3) longevity sufficient to

23

permit these associates to pursue the enterprise’s purpose.” Boyle, 556 U.S. at 946; see also
Fleetwood Servs., LLC v. Complete Bus. Sols. Grp., Inc., 374 F. Supp. 3d 361, 373 (E.D. Pa. 2019).
“The Third Circuit has made clear that normal business relationships, without more,
are insufficient to support an association-in-fact enterprise.” Zakheim, 2023 WL 5339606, at
*3. Plaintiffs must allege that Defendants are “an entity separate and apart from the pattern
of activity in which it engages.” Turkette, 452 U.S. at 583. Here, Plaintiffs have not directed
the Court to any allegations containing “descriptive details about the relationships between
members of the enterprise.” Zakheim, 2023 WL 5339606, at *1, 3 (discussing the dismissal of
RICO claims because plaintiff had failed to allege a common purpose among defendants and
stating “requires pleading some descriptive details about the relationships between members
of the enterprise.”). Specifically, Plaintiffs have not alleged that each Defendant knowingly
agreed to participate together in an enterprise intended to defraud Plaintiffs. Instead, Plaintiffs
rely on conclusory allegations that each Defendant “agreed to, and did, participate in the
conduct of the Enterprise, and carried out its role using broad and independent discretion.”
(Doc. 94, ¶ 271); Zakheim, 2023 WL 5339606, at *3. This is especially true for MEPUSA and
Anadarko. (Doc. 94). Thus, Plaintiffs have failed to allege a RICO enterprise. (Doc. 94).
Similarly, Plaintiffs also fail to satisfy the predicates set out in Boyle v. United States.
556 U.S. at 946. While Plaintiffs allege the enterprise’s purpose was to defraud plaintiffs and
overcharge them for post-production costs, again, Plaintiffs fail to allege a relationship among
all Defendants to perpetuate this purpose. (Doc. 94, ¶ 272); Boyle, 556 U.S. at 946. The
amended complaint alleges independent and varied conduct by each Defendant, there are no
factual allegations supporting global, coordinated, and unified activity among all the

24

Defendants beyond Plaintiffs conclusory allegation that such activity occurred. See Elsevier
Inc. v. W.H.P.R., Inc., 692 F. Supp. 2d 297, 307 (S.D.N.Y. 2010) (dismissing RICO claim
where plaintiffs failed to allege how the members of the association-in-fact “came to an
agreement to act together”). Plaintiffs’ allegations of Defendants’ individual conduct is
insufficient to establish all Defendants acted in concert. See In re Ins. Brokerage Antitrust Litig.,
618 F.3d 300, 374 (3d Cir. 2010).
The amended complaint does not contain allegations that demonstrate Defendants
“understood the essential nature of the plan and knowingly agreed to participate in the plan.”
Schwartz v. Lawyers Title Ins. Co., 970 F. Supp. 2d 395, 405 (E.D. Pa. 2013). “Simply identifying
the allegedly associated components does not serve to put defendants on notice of the RICO
claim.” In re Ins. Brokerage, 618 F.3d at 369. Defendants’ motions to dismiss are thereby
GRANTED as to Plaintiffs’ RICO claim. (Doc. 111; Doc. 113; Doc. 115). Accordingly,
Plaintiffs have failed to allege the enterprise factor of their Third Cause of Action, their RICO
claim, which is to be DISMISSED without prejudice on this basis.9 (Doc. 94, ¶¶ 268-88); see

9

Plaintiffs allege mail and wire fraud to be the predicate racketeering activity. (Doc.
94, ¶ 277). Specifically, Plaintiffs allege “Defendants engaged in an intentional scheme or
artifice to defraud Plaintiffs and other owners of royalty interests under oil and gas leases with
the Lessee Defendants, in order to obtain their money or property through false or fraudulent
pretenses, representations or promises.” (Doc. 94, ¶ 277). Anadarko and MEPUSA argue that
Plaintiffs’ RICO claim fails also because they do not state their predicate claims with
particularity, as required under Rule 9. (Doc. 112, at 35; Doc. 114, at 30-31). Access does not
argue this element of Plaintiffs’ RICO claim, stating instead, “[a]lthough Access and its
affiliates do not believe that Plaintiffs have adequately pled (or will be able to prove) any of
the elements set forth above, they recognize that this Court found allegations similar to those
set forth in the Amended Complaint sufficient to allege a pattern of racketeering activity in
Suessenbach Family Ltd. P’ship v. Access Midstream, Case No. 14-cv-2297. Access will not
25

Kingfly Spirits, LLC v. Ragghianti, No. CV 22-50E, 2023 WL 6214262, at *3 (W.D. Pa. Sept.
25, 2023) (dismissing RICO claim where it was “bereft of connective tissue plausibly
establishing an ‘enterprise structure’ tying together the various actors”).
3. Plaintiffs’ RICO Conspiracy Claim fails.
Plaintiffs also assert a RICO conspiracy claim against Defendants. (Doc. 94, at 126).
RICO provides that “[i]t shall be unlawful for any person to conspire to violate any of the
provisions of subsection (a), (b), or (c).” 18 U.S.C. §1962(d). To plead a conspiracy to violate
§ 1962(c), a plaintiff must allege “(1) knowledge of the corrupt enterprise’s activities and (2)
agreement to facilitate those activities.” Smith v. Berg, 247 F.3d 532, 535 (3d Cir. 2001) (citing
Salinas v. United States, 522 U.S. 52, 66 (1997)). Liability for a RICO conspiracy “will arise
only from services which were purposefully and knowingly directed at facilitating a criminal
pattern of racketeering activity.” Berg, 247 F.3d at 538. RICO conspiracy claims are subject
to Fed. R. Civ. P. 8(a)’s pleading standards, not the heightened standard of Rule 9(b). See Rose
v. Bartle, 871 F.2d 331, 366 (3d Cir. 1989).
“Any claim under section 1962(d) based on a conspiracy to violate the other
subsections of section 1962 necessarily must fail if the substantive claims are themselves
deficient.” Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153, 1191 (3d Cir. 1993). Accordingly,
because Plaintiffs’ underlying RICO claim is to be dismissed, the Court is compelled to

address the same arguments here.” (Doc. 116, at 37). Having found other grounds for
Plaintiffs’ RICO claims to be dismissed, the Court will not address these arguments.
26

GRANT Defendants’ motions as to Plaintiffs’ RICO conspiracy claim. (Doc. 111; Doc. 113;
Doc. 115); see Lightning Lube, Inc., 4 F.3d at 1191; see also McLaughlin v. Int’l Bhd. Of Teamsters,
Loc. 249, 641 F. Supp. 3d 177, 201 (W.D. Pa. 2022). Plaintiffs’ RICO conspiracy claim, their
Fourth Cause of Action, is therefore DISMISSED without prejudice. (Doc. 94, ¶¶ 289-98);
see Zakheim, 2023 WL 5339606, at *4 (“Because I find that Plaintiffs have sufficiently pleaded
a claim under Section 1962(c), I will also deny Defendant's Motion as to Plaintiffs’ conspiracy
claim under Section 1964(d).”).
C. STATE LAW CLAIMS
Plaintiffs assert state law claims against Defendants for breach of contract, conversion,
civil conspiracy, and accounting. (Doc. 94 at 128, 132, 133, 135). Plaintiffs’ state law claims
are premised on their allegation that the Anadarko and MEPUSA (collectively, “Lessee
Defendants”) improperly deducted post-production costs when calculating the amount of
royalties that were to be paid to the Plaintiffs or, alternatively, that the Lessee Defendants
charged Plaintiffs with “arbitrary, excessive and unreasonable” deductions.” (Doc. 94, at
135). Lessee Defendants argue that each of Plaintiffs’ state law claims should be dismissed for
failure to state a claim. (Doc. 112, at 39; Doc. 114, at 40). For the following reasons, the Court
agrees.
1. Plaintiffs’ Breach of Contract claim fails as a matter of law.
Lessee Defendants dispute the viability of Plaintiffs’ breach of contract claims. (Doc.
112, at 39-40; Doc. 114, at 40-41). Plaintiffs allege that under the terms of their leases, the
Lessee Defendants are not entitled to deduct post-production costs in calculating the royalties
payable to Plaintiffs and thus breached their obligations under the leases by deducting such

27

costs. (Doc. 94, ¶ 304; Doc. 122, at 50). Lessee Defendants aver that, as a matter of law,
Pennsylvania Supreme Court precedent provides there is no cause of action for these alleged
post-production deductions. (Doc. 112, at 39-40; Doc. 114, at 40-41).
To state a breach of contract claim under Pennsylvania law, a plaintiff must allege: (1)
the existence of a contract, including its essential terms; (2) a breach of a duty imposed by the
contract; and (3) resultant damages. Ware v. Rodale Press, Inc., 322 F.3d 218, 255 (3d Cir.2003)
(quoting CoreStates Bank, N.A. v. Cutillo, 723 A.2d 1053, 1058 (Pa. Super. Ct. 1999)); Gottselig
v. Energy Corp. of Am., No. CIV.A. 15-971, 2015 WL 5820771, at *6 (W.D. Pa. Oct. 5, 2015).
The general principles of contract interpretation govern oil and gas leases. Smith v. Steckman
Ridge, LP, 2014 WL 1278120, at *4 (W.D. Pa. March 27, 2014); Gottselig, 2015 WL 5820771,
at *6. Here, the parties dispute whether Lessee Defendants breached their obligations under
the terms of Plaintiffs’ leases by deducting post-production costs from royalties payable to
Plaintiffs. In accordance with Pennsylvania Supreme Court precedent, the Court finds that,
per the allegations in the amended complaint, Lessee Defendants have not breached their
obligations in the applicable leases and Plaintiffs’ breach of contract claim is to be dismissed.
The parties agree that Kilmer v. Elexco Land Services is instructive here. 990 A.2d 1147,
1149, 1157-58 (Pa. 2010). In Kilmer, the Pennsylvania Supreme Court found that lessee gas
producers may deduct their post-production costs from royalty payments under an “at the
wellhead” lease provision like the ones at bar, which permits the “net-back” method to
determine deductions. 990 A.2d at 1149, 1157-58. Courts have interpreted this holding
broadly. Slamon v. Carrizo (Marcellus) LLC, 654 F. Supp. 3d 405, 435 (M.D. Pa. 2023); see also
Ulmer v. Chesapeake Appalachia, LLC, No. 4:08-CV-2062, 2011 WL 1344596, at *3 (“it is our

28

considered view that Kilmer was not meant to be read narrowly, and thus we find that the
deduction of post-production costs contained in the lease sub judice is a permissible use of the
net-back method under the GMRA”). Applying Kilmer, federal courts have dismissed breach
of contract claims premised on producers deducting post-production costs from their royalty
payouts. See Ulmer, 2011 WL 1344596, at *2 (“The holding of Kilmer is that the GMRA
permits the calculation of the royalties at the wellhead utilizing the net-back method. That is
exactly what the leases here provide, and as a result, we decline to void them”); see also Pollock
v. Energy Corp. of Am., No. CIV.A. 10-1553, 2011 WL 3667289, at *5 (W.D. Pa. June 27,
2011), report and recommendation adopted, No. CIV.A. 10-1553, 2011 WL 3667385 (W.D. Pa.
Aug. 22, 2011) (adopting a Magistrate Judge’s recommendation that defendants’ motion to
dismiss a breach of contract claim where the relevant oil and gas leases the leases contemplate
calculation of royalties by the net-back method.).
Here, it is apparent from the allegations in the amended complaint the Plaintiffs’ leases
entitled them to royalties based on the market value of the gas at the well using the netback
method. (Doc. 94, ¶145). Specifically, the applicable lease provision states:
The LESSEE covenants and agrees as follows: 1st – LESSEE … shall pay the
LESSOR on gas … produced from the premises and used off the premises or
lands pooled therewith or in the manufacture of gasoline, or other products
therefrom, or sold (whether to an affiliated or non-affiliated purchaser) the
market value at the well of one-eighth (1/8th) of the gas so used or sold. In no
event shall the gas royalty payable hereunder be computed on the basis of a
price the collection of which by LESSEE is unlawful or prohibited by order or
regulation of any governmental authority having jurisdiction, and market value
at the well shall not exceed the amount realized by LESSEE for such production
computed at the well…. LESSEE may pay all taxes and fees levied upon
LESSOR’s royalty share of production of oil and gas and deduct the amount
so paid from any monies payable to LESSOR hereunder….
(Doc. 94, ¶ 145) (emphasis added).
29

Whereas Plaintiffs attempt to argue that this language is ambiguous, courts have
recognized the “generally accepted industry-specific use of the term ‘at the wellhead’” as an
industry specific, technical term that should be construed as much.” Coastal Forest Res. Co. v.
Chevron U.S.A., Inc., No. 2:20-CV-1119, 2021 WL 1894596, at *4 (W.D. Pa. May 11, 2021).
The language at bar includes language that other courts, such as the Western District of
Pennsylvania, have found “expressly and unequivocally call for the calculation of royalties
‘at the wellhead.’” (Doc. 94, ¶ 145); Coastal Forest, 2021 WL 1894596, at *6. Courts have
found that this language requires that contract “be interpreted as permitting the net-back
method” and therefore as permissive of deducting post-production costs from royalty
payments. Coastal Forest, 2021 WL 1894596, at *6. Because Plaintiffs’ claims stem from
alleged netback deductions of post-production costs, their breach of contract claims cannot be
sustained, even given their allegations that such deductions were unjust, unreasonable, or
wrongful. Pennsylvania law allows for such deductions and does not impose a
“reasonableness” standard in deciding them. See Kilmer, 990 A.2d at 1149 & n.3, 1158 (citing
30 C.F.R. § 206.151). Accordingly, Plaintiffs’ breach of contract claim cannot stand as a
matter of law and is DISMISSED without prejudice.10 See Coastal Forest, 2021 WL 1894596,

10

Plaintiffs’ allegation of an implied-in-fact lease obligation that deductions for postproduction costs must not be “grossly excessive or otherwise unreasonable” fairs no better.
Kilmer anticipated and rejected this argument, finding that lessors’ and lessees’ interests are
typically aligned. 990 A.2d at 1158. Further, Plaintiffs have not provided any facts to support
their conclusory allegation that the post-production costs they were charged were excessive,
unreasonable, or artificially inflated. (Doc. 94, ¶ 307).
30

at * (dismissing a breach of contract claim where lease provisions expressly and unequivocally
call for the calculation of royalties “at the wellhead.”).
2. Plaintiffs’ Claims for Legal/Equitable Accounting are to be dismissed.11
The amended complaint asserts a claim for accounting. (Doc. 94, at 132). The parties
agree that there is no viable claim for an equitable accounting in this case because Plaintiffs
have adequate remedies at law for breach of contract and conversion. (Doc. 112, at 45; Doc.
114, at 48; Doc. 118, at 48; Doc. 122, at 60). The parties do dispute whether Plaintiffs are
entitled to legal accounting. “In Pennsylvania, the right to an accounting at law is a form of
relief that attaches only where the defendant has breached a valid contract with the plaintiff.”
Lightman v. Marcus, CIV.A. 12-97, 2012 WL 1344378, at *4 (E.D. Pa. Apr. 18, 2012) (citation
and quotation omitted) (emphasis added). To establish entitlement to a legal accounting,
Plaintiffs must allege a valid contract under which the defendant received monies in a capacity
which imposed upon it a legal obligation to account to the plaintiffs for the monies received
and a breach of defendant’s duty under the contract. Haft v. United States Steel Corp., 499 A.2d
676 (1985). “[A] legal accounting is not a separate claim but rather a form of relief that
accompanies a formal breach of contract claim.” Zamias v. Fifth Third Bank, No. 3:17-CV-153,
2018 WL 355462, at *17 (W.D. Pa. Jan. 9, 2018).

11

Access does not argue this issue because it is not a Lessee Defendant.
31

Because the Court has found that Plaintiffs’ breach of contract claim is to be dismissed,
their claim for legal accounting cannot stand. Accordingly, Plaintiffs’ Sixth Cause of Action,
their claim for accounting, is to be DISMISSED without prejudice. (Doc. 94, at 132).
3. Plaintiffs’ Conversion claim is to be dismissed.
Lessee Defendants request that this Court dismiss Plaintiffs’ state law conversion
claim. (Doc. 112, at 45-46; Doc. 114, at 49). Conversion is the “deprivation of another’s right
of property in, or use or possession of, a chattel, or other interference therewith, without the
owner’s consent and without lawful justification.” Rahemtulla v. Hassam, 539 F. Supp. 2d 755,
776 (M.D. Pa. 2008) (quoting Universal Premium Acceptance Corp. v. York Bank & Trust Co., 69
F.3d 695, 704 (3d Cir. 1995)); see also Gottesfeld v. Mechanics and Traders Ins. Co., 173 A.2d 763,
766 (Pa. Super. Ct. 1961). “Money may be the subject of a conversion only where the plaintiff
had a property interest in the money at the time of the alleged conversion.” It’s Intoxicating,
Inc. v. Maritim Hotelgesellshaft mbH, No. 11-CV-2379, 2013 WL 3973975, at *21-22 (M.D. Pa.
July 31, 2013).
Plaintiffs acknowledge that this Court has held “[t]he right to payment of money under
a contractual agreement does not constitute a property interest for purposes of conversion.”
It’s Intoxicating, Inc., 2013 WL 3973975, at *21-22. Plaintiffs, however, go on to cite an
exception detailed in Shonberger v. Oswell, where the Pennsylvania Superior Court held that
the failure to remit proceeds as required in connection with a consignment agreement is
sufficient to support an action for conversion. 365 Pa. Super. 481, 530 A.2d 112, 114 (1987);
(Doc. 122, 62). Plaintiffs also note that several courts have held that a plaintiff may proceed
on both a breach of contract and a conversion claim. See Bernhartdt, III, P.C. v. Needleman, 705

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A.2d 875 (Pa. Super. 1997) (in a dispute between lawyers over a referral fee, lawyer could
proceed on theories of breach of contract and conversion); see also Fed. R. Civ. P. 8(d)(2) (a
party may set forth two or more statements of a claim in the alternative; if one of them
independently would be sufficient, the pleading is not insufficient). (Doc. 122, at 63).
“[A] plaintiff may not ordinarily recover for the tort of conversion for a breach of duty
that simply restates a contractual obligation.” Figueroa v. Point Park Univ., 553 F. Supp. 3d
259, 277 (W.D. Pa. 2021). Further, “a claim for conversion cannot stand when there is a
contract between the parties that governs the same disputed funds.” Scott v. PNC Bank, Nat'l
Ass'n, 785 F. App'x 916, 920 (3d Cir. 2019). Plaintiffs’ conversion claim stems directly from
their allegation that “Defendants wrongfully and intentionally caused unauthorized or
artificially inflated and unreasonable deductions to be taken from royalties otherwise payable
to Plaintiffs.” (Doc. 94, ¶ 317). Plaintiffs’ leases govern these disputed funds. (Doc. 94, ¶ 319).
Thus, because the converted funds are directly related to the contracts at issue in this case,
and because arguable plaintiffs never had a right in the monies at issue, Plaintiffs do not have
a cause of action for conversion. Accordingly, Plaintiffs’ Seventh Cause of Action, their claim
for conversion, is DISMISSED without prejudice. (Doc. 94, at 133); see Meyer v. Delaware
Valley Lift Truck, Inc., 392 F. Supp. 3d 483, 495 (E.D. Pa. 2019) (dismissing conversion claim
and stating: “[w]here ‘the success of the conversion claim depend[s] entirely on the obligations
as defined by the contract,’ the conversion claim is barred” by the gist of the action doctrine.)
(quoting Pittsburgh Constr. Co. v. Griffith, 834 A.2d 572, 584 (Pa. Super. Ct. 2003))).

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4. Plaintiffs’ State Law Civil Conspiracy claim fails.
The parties dispute whether Plaintiffs have stated a claim for civil conspiracy. (Doc.
112, at 47-48; Doc. 114, at 51; Doc. 116, at 47; Doc. 122, at 64). Under Pennsylvania common
law, civil conspiracy requires that two or more conspirators reached an agreement to commit
an unlawful act or perform a lawful act by unlawful means. See Thompson Coal Co. v. Pike Coal
Co., 412 A.2d 466, 472 (Pa. 1979); Burnside v. Abbott Laboratories, 505 A.2d 973, 980 (Pa.
Super. 1985). Additionally, a plaintiff must show an overt act and actual legal damage. Phillips
v. Selig, 959 A.2d 420 (Pa. Super. 2008) (internal citations omitted). To allege a conspiracy
claim, Plaintiffs must also allege malice, which requires a showing that the sole purpose of
the conspiracy was to injure Plaintiffs without justification. Doltz v. Harris & Assoc., 280 F.
Supp. 2d 377, 389 (E.D. Pa. 2003)
Plaintiffs allege Defendants, acting with knowledge that artificially inflated gathering
and transportation fees would be passed-on to Plaintiffs and deducted from their royalties,
engaged in a scheme to defraud and deprive Plaintiffs of their duly owed royalty payments by
manipulating and misrepresenting certain post-production costs incurred and charged. (Doc.
94, ¶¶ 327-332; Doc. 122, at 65). In other words, Plaintiffs allege Defendants engaged in a
conspiracy to commit the tort of conversion. (Doc. 122, at 65). However, because Plaintiffs’
conversion claim is to be dismissed as insufficiently pled, as discussed supra, Plaintiffs’ civil
conspiracy claim cannot survive. Plaintiffs’ Eighth Cause of Action for civil conspiracy is
therefore DISMISSED without prejudice. (Doc. 94, ¶¶ 327-332).
IV. LEAVE TO AMEND
The Third Circuit has instructed that if a complaint is vulnerable to dismissal for failure
to state a claim, the district court must permit a curative amendment, unless an amendment
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would be inequitable or futile. Grayson v. Mayview State Hosp., 293 F.3d 103, 108 (3d Cir.
2002). The amended complaint, in its current form, does not clearly set forth any sufficiently
pled claims. (Doc. 94). Thus, as discussed supra, dismissal is warranted. However, it is not
apparent to the Court that amendment would be futile or inequitable. See Dennis v. Sheridan,
No. 1:18-CV-1131, 2019 WL 13328299 (M.D. Pa. May 31, 2019), report and recommendation
adopted, No. 1:18-CV-01131, 2019 WL 13328298 (M.D. Pa. June 19, 2019) (recommending
leave to amend be extended where it was not apparent from the pleadings that amendment
would be inequitable or futile). Accordingly, the Court will grant Plaintiffs leave to file a
second amended complaint.
V.

CONCLUSION
Based on the foregoing, Anadarko, MEPUSA, and Access’s motions to dismiss are

GRANTED. (Doc. 111; Doc. 113; Doc. 115). Plaintiffs’ amended complaint is DIMISSED
without prejudice. (Doc. 94). Chesapeake’s motion to dismiss is DENIED as MOOT. (Doc.
117). The motion to intervene is also DENIED as MOOT. (Doc. 149). Plaintiffs are granted
leave to file an amended complaint within twenty-eight days of this Memorandum and
accompanying Order, on or before Friday, September 27, 2024.
An appropriate Order follows.

Dated: August 30, 2024

BY THE COURT:

s/ Karoline Mehalchick
KAROLINE MEHALCHICK
United States District Judge

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