DeCristo Land et al v. Anadarko E&P Onshore LLC et al

Filing 16

MEMORANDUM re pltf's MOTION to Remand to State Court 5 (Order to follow as separate docket entry) Signed by Honorable John E. Jones, III on 11/4/16. (ma)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
DeCRISTO LAND, et. al.,

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Plaintiffs,
v.
ANADARKO E&P ONSHORE, LLC,
et. al.,
Defendants.

4:16-cv-1731
Hon. John E. Jones III

MEMORANDUM
November 4, 2016
Presently before the Court is a Motion to Remand (the “Motion”) (Doc. 5)
filed by Plaintiffs DeCristo Land, LLC (“DeCristo”), Castle Minerals, LLC
(“Castle”), and JLS Holdings, LLC (“JLS”). Plaintiffs filed a Complaint against
numerous defendants in the Court of Common Pleas of Tioga County,
Pennsylvania on July 18, 2016. (Doc. 1, ex. A, p. 4). Defendant SWEPI, LP
(“SWEPI”) filed a notice of removal to this Court on August 18, 2016. (Doc. 1).
SWEPI filed a Motion to Dismiss on August 25, 2016. (Doc. 3). Plaintiffs filed the
instant Motion to Remand on August 29, 2016 (Doc. 5), as well as a motion to stay
briefing on SWEPI’s Motion to Dismiss on September 8, 2016 (Doc. 7), which
was granted by this Court. (Doc. 8). The Motion has been fully briefed (Docs. 9,

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13, 15) and is therefore ripe for our review. For the reasons that follow, the Motion
shall be granted and the case remanded to state court.
I.

BACKGROUND
Plaintiffs are the owners of certain oil, gas, and mineral rights underlying

real estate in Ward and Sullivan Townships, Tioga County, Pennsylvania. (Doc. 1,
ex. A, p. 8). Plaintiffs bring this action to quiet title based upon an oil and gas lease
referred to as the Bourbeau lease. (Id.). The Bourbeau lease gave its holders an
interest in the oil, gas, and mineral rights at issue for a primary period of five years
commencing on January 13, 2006, but would continue if certain conditions were
met. (Id., at p. 9). Plaintiffs seek a declaration that the lease expired on January 13,
2016 and that they are the exclusive owners of the gas, oil, and mineral rights. (Id.,
at pp. 23-24).
In their Complaint, Plaintiffs name two defendants as “Parties”, while
naming ten defendants as “Nominal Defendants.” (Id., at pp. 5-8). The two party
defendants are SWEPI and Anadarko E&P Onshore, LLC (“Anadarko”)
(collectively “Party Defendants”) (Id., at p. 5). The Party Defendants allegedly
each have a 50% interest in the Bourbeau lease. (Id., at p. 11). The nominal
defendants are Frontier Forest Company, Inc., Calvin, Marlene and David
Molyneux, Armenia Mountain Meadows, LLC, Ross Avenue Minerals 2012, LLC,
Belmont Royalty and Minerals 2012, LLC, Crain Entergy, Ltd., Crain II Oil & Gas
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Ltd., Cherry Minerals, LLC, and Associates Royalty and Minerals, LLC
(collectively “Nominal Defendants”). (Id., at pp. 5-8). Plaintiffs refer to the
nominal defendants as the “Landowner Defendants” in their Motion. (See Doc. 5).
Plaintiffs allege that each of the Nominal Defendants “own and/or retain a partial
interest in the underlying oil/gas lease at issue in this matter.” (Doc. 1, ex. A, pp. 58). Both parties agree that the Plaintiffs and four of the Nominal Defendants are
citizens of Pennsylvania. (Doc. 13, p. 2).
Plaintiffs assert two claims against the Party Defendants. Count I is an action
to quiet title pursuant to Pa.R.C.P. 1061(b)(3). (Doc. 1, ex. A, p. 21). Count II
seeks a declaratory judgment pursuant to 42 Pa.C.S. § 7531, et. seq. (Id., at p. 22).
Plaintiffs do not assert any claims against the Nominal Defendants.
II.

STANDARD OF REVIEW
Federal statutory law permits a defendant to remove a case filed in the state

court system to federal court. 28 U.S.C. § 1441. Courts construe the removal
statute against removal and resolve doubts in favor of remand.1 Boyer v. Snap-on
Tools Corp., 913 F.2d 108, 111 (3d Cir. 1990). “The party asserting jurisdiction
bears the burden of showing the action is properly before the federal court.”
Sikirica v. Nationwide Ins. Co., 416 F.3d 214, 219 (3d Cir. 2005). Furthermore,
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SWEPI acknowledges that Third Circuit precedent instructs courts to strictly construe removal,
yet points out that the Supreme Court has not spoken on this matter. (Doc. 13, p. 6). As we are
sure SWEPI knows, this Court is bound by the Third Circuit and will follow its instruction in
considering remand.
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“[i]f at any time before final judgment it appears that the district court lacks subject
matter jurisdiction, the case shall be remanded.” 28 U.S.C. § 1447(c). In
considering a motion to remand, “the district court must assume as true all factual
allegations of the complaint.” Steel Valley Auth. v. Union Switch & Signal Div.,
809 F.2d 1006, 1010 (3d Cir. 1987).
III.

DISCUSSION

Plaintiffs argue that the Court must remand this case to state court for four
reasons. First, Plaintiffs argue that removal was prohibited by 28 U.S.C. §
1441(b)(2) because four of the Nominal Defendants are citizens of Pennsylvania.
Relatedly, Plaintiffs next argue that this Court lacks subject matter jurisdiction
because four of the Nominal Defendants are citizens of Pennsylvania and thus
there is not complete diversity between the Plaintiffs and Defendants. Third,
SWEPI did not obtain consent of all served defendants before removing, in
violation of 28 U.S.C. § 1446(b)(2)(A). Finally, Plaintiffs argue that SWEPI has
failed to meet its burden to show that the amount in controversy exceeds $75,000
in order to establish subject matter jurisdiction.
As Plaintiffs’ first three arguments hinge on whether we agree with the
SWEPI that the Nominal Defendants were fraudulently joined, we will discuss
them together, followed by a discussion on the amount in controversy requirement.
1. Fraudulent Joinder
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In response to the first three arguments by Plaintiffs, SWEPI argues that the
Court need not consider the Nominal Defendants for purposes of jurisdiction or
removal requirements because they are fraudulently joined parties. Plaintiffs reply
by arguing that the Nominal Defendants are indispensable parties who were not
fraudulently joined, and whose citizenship impacts removal to federal court.
“In a suit with named defendants who are not of diverse citizenship from the
plaintiff, the diverse defendant may still remove the action if it can establish that
the non-diverse defendants were ‘fraudulently’ named or joined solely to defeat
diversity jurisdiction.” In re Briscoe, 448 F.3d 201, 216 (3d Cir. 2006). Fraudulent
joinder exists where “there is no reasonable basis in fact or colorable ground
supporting the claim against the joined defendant, or no real intention in good faith
to prosecute the action against the defendant or seek a joint judgment.” Abels v.
State Farm Fire & Cas. Co., 770 F.2d 26, 32 (3d Cir. 1985) (internal quotation
omitted). “If the district court determines that the joinder was ‘fraudulent’ in this
sense, the court can disregard, for jurisdictional purposes, the citizenship of certain
nondiverse defendants, assume jurisdiction over a case, dismiss the nondiverse
defendants, and thereby retain jurisdiction.” In re Briscoe, 448 F.3d at 216
(internal quotation omitted).
Fraudulently joined parties are sometimes referred to as “nominal” parties.
Abels, 770 F.2d at 29. However, Plaintiffs’ labeling of the nondiverse defendants
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as the “Nominal Defendants” in their complaint does not necessitate a finding that
they qualify as nominal parties under the legal sense of the word. SWEPI takes
issue with the Plaintiffs’ characterization of the Nominal Defendants as
“indispensable parties” under Federal Rule of Civil Procedure 19, and argues that
indispensability of a party has no bearing on fraudulent joinder and jurisdiction.
(Doc. 13, p. 8).
SWEPI cites to Castner v. Exxon Co., U.SA., 563 F. Supp. 684 (E.D. Pa.
1983) for the proposition that indispensability is not informative upon fraudulent
joinder. To be sure, the Castner court did say that “in the context of an assertedly
fraudulent joinder the proper question to be asked is not whether the defendant
whose joinder is challenged is an indispensable party, but whether there is a ‘real
cause of action asserted against’ that defendant.” Id., at 687. However, SWEPI
takes this quote out of context. The court was merely stating that indispensability is
not the only lens with which to view fraudulent joinder. The court recognized just
one sentence earlier that “‘Indispensable party’ indeed appears as the talismanic
concept in certain of the removal cases.” Id.
SWEPI also cites to Korsun v. Progressive N. Ins. Co., 2006 WL 3143169,
but this opinion explicitly recognizes that “[a] nominal party is defined as one that
is neither necessary nor indispensable to join in the action.” Id., at *3 (internal
quotation omitted). SWEPI further relies on Kane v. Waltrip, 2009 WL 2997939,
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and states that this Court held that “the question of whether a party has been
fraudulently joined is separate and distinct from the question of whether a party is
a nominal defendant; only in the latter situation does the Court examine whether
the party is necessary or indispensable.” (Doc. 13, p. 9). We find this to be an
incorrect reading of Kane; that contention is not stated anywhere in the opinion,
and it appears that SWEPI is inferring this conclusion simply from the Court
addressing concepts of fraudulent joinder and nominal parties in separate
paragraphs. Kane represents an entirely different set of circumstances and has no
bearing on our analysis.
Contrary to the SWEPI’s assertion, indispensability is an important factor to
consider when assessing diversity jurisdiction. The Third Circuit has stated, “when
a nondiverse party is added to a federal proceeding and that party's presence is
indispensable to the furnishing of complete relief, remand is mandated where
federal subject matter jurisdiction depends on diversity jurisdiction, even though
removal was originally proper.” Steel Valley Auth., 809 F.2d at 1010-1011. The
Court further stated that when considering remand, “while nominal or fraudulently
joined parties may be disregarded, indispensable parties may not.” Id., at 1010.
SWEPI, as the removing party, bears the burden of establishing that this case
is properly before federal court. Sikirica v. Nationwide Ins. Co., 416 F.3d 214, 219
(3d Cir. 2005). In response to Plaintiffs’ argument that the Nominal Defendants are
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indispensable parties, SWEPI offers a footnote conclusively stating that the
Nominal Defendants’ interests in the property rights are not enough to make them
indispensable. (Doc. 13, p. 10). In sharp contrast, Plaintiffs offer argument that the
Nominal Defendants have rights that are subject to the Bourbeau lease and a
declaration by this Court that the lease has expired will directly impact their
proprietary and monetary interests. (Doc. 9, p. 16).
SWEPI is correct that “joinder may be considered fraudulent if the plaintiff
has failed to state a cause of action against the nondiverse defendant.” Spring-Ford
Area Sch. Dist. v. Genesis Ins. Co., 158 F. Supp. 2d 476, 479 (E.D. Pa. 2001)
(internal quotations omitted). “However, the removing party bears a heavy burden
of persuasion in demonstrating that a party has been fraudulently joined.” Id., at
480 (internal quotation omitted). The Third Circuit has recognized that “[i]f there
is even a possibility that a state court would find that the complaint states a cause
of action against any one of the resident defendants, the federal court must find that
joinder was proper and remand the case to state court.” Boyer v. Snap-on Tools
Corp., 913 F.2d 108, 111 (3d Cir. 1990) (internal quotation omitted).
Here, Plaintiffs seek a declaratory judgment that the oil, gas, and mineral
rights at issue are owned solely by them. (Doc. 1, ex. A, p. 23). While the action
pursuing declaratory judgment and the action to quiet title are only aimed
specifically at the Party Defendants, the complaint asserts that each of the Nominal
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Defendants currently have an interest in the oil, gas, and mineral rights. (Id., at pp.
5-8). Because Plaintiffs’ claims seek to establish sole ownership over property that
the Nominal Defendants have an interest in and therefore a joint judgment against
all adverse interest holders, there is absolutely a “possibility that a state court
would find that the complaint states a cause of action against any one of the
resident defendants.” Boyer, 913 F.2d at 111. A declaration by the court that the
Plaintiffs are the sole owners of these property rights will effect all those with an
interest in the property.
Plaintiffs point the Court to an analogous case from the Western District of
Pennsylvania. (Doc. 9, p. 17). In Krupa v. Hilcorp Energy I LP, 2014 WL 2506144
(W.D. Pa. June 3, 2014), the District Court adopted a report and recommendation
from a magistrate judge that recommended remand on almost identical facts. The
Krupa plaintiffs were owners of real estate that was subject to an oil and gas lease.
Id., at *4. The plaintiffs sought declaratory judgment that the lease was void
against the original leaseholders and all purported assignees of the interests in the
oil and gas rights. Id. In light of that, the plaintiffs joined all purported
predecessors in interest to the lease as defendants, including two whose citizenship
destroyed complete diversity of citizenship. Id., at *6. The main defendants argued
that these nondiverse parties were fraudulently joined. Id. The magistrate judge
conducted a fraudulent joinder analysis that focused on whether the defendants
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were necessary parties to the action. Id., at *8. After finding that one of the
defendants was dispensable for reasons not applicable here, the judge found that
the other defendant was indispensable and therefore fraudulent joinder was
inapplicable. Id., at*13. The judge stated, “[i]t is well settled that in an action to set
aside a lease or a contract, all parties who may be affected by the determination of
the action are indispensable.” Id. (internal quotation omitted). Because the
defendant “has an interest that will be adversely affected by a declaratory judgment
declaring the [lease] void”, joinder was proper and remand was required. Id.
The present matter is significantly analogous, and we find the magistrate
judge’s reasoning to be persuasive. The Nominal Defendants have a legitimate
interest in the resolution of this matter such that we cannot say that they are
fraudulently joined parties. It is uncontested that four of the Nominal Defendants
are citizens of Pennsylvania and thus complete diversity is not attained. Therefore,
SWEPI has not met its burden in establishing that jurisdiction is proper before this
Court and we must remand for lack of subject matter jurisdiction.
2. Amount in Controversy
Plaintiffs argue that the SWEPI did not meet its burden of establishing the
amount in controversy requirement for subject matter jurisdiction under 28 U.S.C.
§ 1332. SWEPI responds by offering a declaration by its land representative that
the rights at issue are worth more than $75,000. Because we find that the Nominal
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Defendants are not fraudulently joined such that diversity still exists, this argument
is rendered moot. For purposes of clarity and completeness, however, the Court
notes that SWEPI has met its burden of establishing the amount in controversy.
When the amount in controversy is challenged, “both sides submit proof and the
court decides, by a preponderance of the evidence, whether the amount-incontroversy requirement has been satisfied.” Dart Cherokee Basin Operating Co.,
LLC v. Owens, 135 S. Ct. 547, 554 (2014). Plaintiffs offered no evidence to rebut
SWEPI’s contention that the amount in controversy had been satisfied, and indeed
SWEPI supplied the court with a declaration by a knowledgeable party to that
effect. Therefore, the Court can easily find that the requirement has been met.
IV.

CONCLUSION

For the foregoing reasons, we find that this Court lacks subject matter
jurisdiction and will therefore grant Plaintiffs’ motion to remand the case to state
court. (Doc. 5). A separate order shall issue in accordance with this ruling.

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