Backwater Properties, LLC et al v. Range Resources-Appalachia, LLC et al
Filing
71
MEMORANDUM OPINION and ORDER. The Court grants-in-part, denies-in-part, and denies-in-part as moot Range and Duncan 35 and 36 motions to dismiss. The Court GRANTS the defendants' motion to dismiss the plaintiffs' Sherman Antitrust cla im; DENIES the defendants' motions to dismiss the plaintiffs' claims for breach of the oil and gas leases, breach of the bonus contracts, declaratory judgment, specific performance, fraud, interference with prospective contract, and unjust enrichment; and DENIES AS MOOT the defendants' motions to dismiss the plaintiffs' claim for violation of WV Code 46A-6-101 et seq. Signed by District Judge Irene M. Keeley on 5/5/11. (mh)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
BACKWATER PROPERTIES, LLC., and all
West Virginia residents similarly
situated, and VANCE RIVER TERMINAL,
INC., and all West Virginia residents
similarly situated,
Plaintiffs,
v.
//
CIVIL ACTION NO. 1:10CV103
(Judge Keeley)
RANGE RESOURCES-APPALACHIA, LLC,
as a wholly owned subsidiary of
RANGE RESOURCES CORP., and DUNCAN
LAND AND ENERGY, INC.,
Defendants.
MEMORANDUM OPINION AND ORDER GRANTING-IN-PART, DENYING-IN-PART,
AND DENYING AS MOOT-IN-PART DEFENDANTS’ MOTIONS TO DISMISS
[DKT. NO. 35, 38]
I.
INTRODUCTION
During a scheduling conference, the Court GRANTED-IN-PART,
DENIED-IN-PART, and DENIED-IN-PART AS MOOT the motions to dismiss
filed by the defendants, Range Resources-Appalachia, LLC (“Range”),
and Duncan Land and Energy, Inc. (“Duncan”) (collectively, “the
defendants”). The reasons for the Court’s rulings follow.
II.
FACTUAL BACKGROUND
Two entities, Backwater Properties, LLC (“Backwater”), and
Vance River Terminal, Inc. (“Vance”), have filed a putative class
action lawsuit regarding alleged oil and natural gas leases and
related bonus contracts solicited by Range. They seek to certify
two classes of plaintiffs, Class A and Class B (collectively, “the
BACKWATER PROPERTIES, ET AL. v. RANGE RESOURCES, ET AL. 1:10CV103
MEMORANDUM OPINION AND ORDER
plaintiffs”). Backwater seeks to represent the Class A plaintiffs,
landowners1 who entered into such agreements, “but whose lease and
bonus contracts were never honored . . . and who eventually signed
lease contracts with either these Defendants or other similar
companies but at lower prices[.]” Pls.’ Amend. Compl. at p. 2, ¶
2(b)
(dkt.
no.
22).
Vance
seeks
to
represent
the
Class
B
plaintiffs, landowners who entered into such agreements, “but whose
lease and bonus contracts were never honored[.]” Id. at p. 3, ¶
3(b). Presumably, the Class B owners did not sign leases with other
companies after Range’s repudiation.
In
their
amended
complaint,
the
plaintiffs
allege
that,
beginning in early 2008, as oil and natural gas reserves in the
Marcellus shale formation became highly sought-after commodities,
Range and Duncan began tying up oil and gas leases in West Virginia
and Pennsylvania.
Concerned that a competitive bidding process
would have a negative impact on their ability to secure oil and gas
leases
at
formulated
advantageous
“the
Bid
prices,
Rigging
Range
Plan”
and
outlined
Duncan
in
allegedly
the
amended
complaint, which was intended to exclude competition and obtain
leases in this market.
1
The plaintiffs and putative class members may own only the
properties’ mineral rights and not the surface estate, but the
Court refers to them as “landowners” for convenience.
2
BACKWATER PROPERTIES, ET AL. v. RANGE RESOURCES, ET AL. 1:10CV103
MEMORANDUM OPINION AND ORDER
A.
The Bid Rigging Plan
As part of the Bid Rigging Plan, Range and Duncan allegedly
offered lucrative above-market leases and “bonus contracts” to
landowners in exchange for their signatures. These leases paid more
than the then-customary royalties and signing bonuses. The bonus
contracts, in the form of a “Dear Property Owner” letter, stated
that bonus payments would be “subject to a 180-day ‘approval
period’ by management,” during which “Range would purport to
confirm the lessor’s title to property and confirm that the correct
parties did in fact sign the leases.”
Pls.’ Amended Compl. at p.
5, ¶ 11.
Despite these representations, Range allegedly spent the
approval period monitoring the spot markets for oil and natural gas
in order to determine the profitability of the leases and bonus
contracts submitted to the landowners.
The Bid Rigging Plan
anticipated that the favorable terms of the proposed leases and
bonus contracts would prompt the lessor-landowners to decline
offers from Range’s competitors and discourage Range’s competitors
from submitting alternative bids and offers.
Also as a part of the alleged Bid Rigging Plan, Duncan hired
representatives (“landmen”) to solicit signatures from landowners.
These landmen claimed to be agents of Range and represented that
3
BACKWATER PROPERTIES, ET AL. v. RANGE RESOURCES, ET AL. 1:10CV103
MEMORANDUM OPINION AND ORDER
Range was interested in leasing the landowners’ property for oil
and gas exploration. They also claimed that, upon executing leases
with Range, Range would deliver or pay to the landowners a royalty
equivalent to the price of 17% of the oil and gas produced at the
wellhead (in contrast to the customary 12.5% royalty).
B.
The Offers
If a landowner expressed an interest in such a proposal, a
landman would return with an “offer” from Range that included an
oil and gas lease and a “separate” bonus contract for signing the
lease. These leases would run from the date of signing for minimum
terms of five to seven years.
Critical to the scheme, landmen
assured the landowners that the bonus contract’s conditions of
management
approval
and
confirmation
“perfunctory,” “mere formalit[ies].”
of
good
title
were
They indicated that the
landowners could “accept” these “offers” by signing the oil and gas
leases and bonus contracts. Id. at pp. 6-12, ¶¶ 14, 17 and 46.
Range then performed title searches, confirming that the plaintiffs
owned their properties free and clear, and “internally further
approved the leases,” but “did not pay the bonuses or notify
Plaintiffs of this internal approval of the oil and gas leases.”
Pls.’ Amended Compl. at p. 9, ¶ 23.
4
BACKWATER PROPERTIES, ET AL. v. RANGE RESOURCES, ET AL. 1:10CV103
MEMORANDUM OPINION AND ORDER
Ultimately, as oil and gas prices began to plummet in the fall
of 2008, Range returned the oil and gas leases to the plaintiffs,
stamped “void.”
The plaintiffs then notified Range that it was in
breach of contract and demanded their bonus payments and Range’s
performance of the leases.
Range, however, refused to honor most
of the contracts.
C.
The Plaintiffs’ Causes of Action
Based on these allegations, the putative plaintiff classes
have asserted a variety of claims, including 1) breach of the oil
and gas leases, 2) breach of the bonus contracts, 3) a declaratory
judgment that the statute of frauds, W. Va. Code § 36-1-3, does not
render the bonus contracts or the oil and gas leases unenforceable,
4) fraud, 5) interference with prospective contract, 6) unjust
enrichment, and 7) violation of § 1 of the Sherman Antitrust Act.
The Class B plaintiffs also seek Range’s specific performance of
the oil and gas leases. Both classes have withdrawn their claim
under the West Virginia Consumer Credit and Protection Act. See W.
Va. Code § 46A-6-101 et seq.
III.
LEGAL STANDARD
To survive a motion to dismiss based on Fed. R. Civ. P.
12(b)(6), a complaint must contain factual allegations sufficient
to state a plausible claim for relief.
5
Ashcroft v. Iqbal, 129 S.
BACKWATER PROPERTIES, ET AL. v. RANGE RESOURCES, ET AL. 1:10CV103
MEMORANDUM OPINION AND ORDER
Ct. 1937, 1949 (2009); Bell Atlantic Corp. V. Twombly, 550 U.S.
544, 557 (2007). “The plausibility standard requires a plaintiff to
demonstrate more than a sheer possibility that a defendant has
acted unlawfully. It requires the plaintiff to articulate facts,
when adopted as true, that show that the plaintiff has stated a
claim
entitling
him
entitlement to relief.”
to
relief,
i.e.,
the
plausibility
of
Francis v. Giacomelli, 588 F.3d 186, 193
(4th Cir. 2009)(internal quotations omitted).
Although the Court must accept factual allegations in a
complaint as true, this “tenet . . . is inapplicable to legal
conclusions.”
Id. at 1950.
Thus, a complaint may be dismissed
when the facts alleged clearly demonstrate that the plaintiff has
not stated a claim and is not entitled to relief.
5B Charles Alan
Wright & Arthur R. Miller, Federal Practice and Procedure § 1357 at
344-45 (3d ed. 2007).
“Determining whether a complaint states a
plausible claim for relief will . . . be a context-specific task
that
requires
the
reviewing
experience and common sense.”
court
to
draw
on
its
judicial
Iqbal, 129 S. Ct. at 1949 (citation
omitted).
6
BACKWATER PROPERTIES, ET AL. v. RANGE RESOURCES, ET AL. 1:10CV103
MEMORANDUM OPINION AND ORDER
IV.
A.
DISCUSSION
Claim for Breach of the Oil and Gas Leases and Claim for
Breach of the Bonus Contracts
According to the plaintiffs, Duncan landmen, acting as agents
of Range, offered the landowners two contracts: an offer to lease
their oil and gas interests, and a separate contract providing a
signing bonus.
These landmen allegedly told the landowners they
could accept these offers by signing the documents presented to
them.
1.
Offers
The defendants argue that the plaintiffs’ contract claims fail
because, as a matter of law, Range never made offers to the
plaintiffs. They further contend that the oil and gas leases and
bonus contracts signed by the plaintiffs were merely offers that
Range ultimately rejected.
The defendants argue that, under West
Virginia law, the oil and gas leases and bonus contracts were too
“indefinite” to be offers because they were not signed by Range,
were subject to title verification, and, finally, had to be
approved by Range’s senior management.
Under West Virginia law, contract formation requires an offer,
acceptance
agreement.
of
the
offer,
and
consideration
supporting
the
See First National Bank v, Marietta Mfg. Co., 153
7
BACKWATER PROPERTIES, ET AL. v. RANGE RESOURCES, ET AL. 1:10CV103
MEMORANDUM OPINION AND ORDER
S.E.2d 172 (1967).
“[M]utuality of assent is an essential element
of all contracts.” Id. (citing Wheeling Downs Racing Ass’n v. West
Virginia Sportservice, Inc., 216 S.E.2d 234 (W. Va. 1975)).
“In
order for this mutuality to exist, it is necessary that there be a
proposal or offer on the part of one party and an acceptance on the
part of the other.”
Id.
In other words, contract formation
requires “a complete meeting of the minds on all material matters,
leaving nothing for future negotiations.”
Allen v. Simmons, 125
S.E. 86, 88 (W. Va. 1924).
Section 24 of the Second Restatement of Contracts defines an
offer as “‘the manifestation of willingness to enter into a
bargain, so made as to justify another person in understanding that
his assent to that bargain is invited and will conclude it.’”
Verizon West Virginia, Inc. v. West Virginia Bureau of Employment
Programs, 586 S.E.2d 170, 205 n.11 (W. Va. 2003)(Davis, J.,
dissenting)((quoting
Restatement (Second) of Contracts, § 24
(1981))(internal citation and quotation marks omitted)). “An offer
must be certain in its essential terms to create a power of
acceptance.”
Charbonnages de France v. Smith, 597 F.2d 406, 417
(4th Cir. 1979)(construing West Virginia law).
Generally, in West Virginia “‘the existence of a contract is
a question of fact for the jury.’” Ruckdeschel v. Falcon Drilling
8
BACKWATER PROPERTIES, ET AL. v. RANGE RESOURCES, ET AL. 1:10CV103
MEMORANDUM OPINION AND ORDER
Co., L.L.C., 693 S.E.2d 815, 820 (W. Va. 2010)(quoting Syl. Pt. 4,
Cook v. Heck's Inc., 342 S.E.2d 453, 457 (W. Va. 1986)).
constitutes
a
contract,
however,
and
the
application
What
of
an
unambiguous writing, present questions of law. See Croft v. TBR,
Inc.,
664
S.E.2d
109,
111
(W.
Va.
2008)(citations
omitted);
Williams v. Precision Coil, Inc., 459 S.E.2d 329, 339 n. 18 (W. Va.
1995).
At this early stage of the litigation, the Court cannot fully
evaluate
the
terms
of
any
agreements
between
the
parties.
Nevertheless, when the allegations of oral representations in the
plaintiffs’ amended complaint are considered in pari materia with
the leases and bonus contracts, they support plausible claims for
breach of two separate contracts.
Significantly, the amended
complaint alleges that the oral representations of the landmen,
including
assurances
that
management
approval
and
title
verification were perfunctory, and that the plaintiffs could accept
the offers merely by their signatures, were a part of the offers
they accepted from Range.
It further alleges that Range satisfied
the conditions of management approval and title verification. See
Pls.’ Amended Compl. at p. 9, ¶ 23.
9
BACKWATER PROPERTIES, ET AL. v. RANGE RESOURCES, ET AL. 1:10CV103
MEMORANDUM OPINION AND ORDER
2.
Escape Provisions of the Oil and Gas Leases and Claim for
Lost Royalties
The defendants also seek to dismiss the plaintiffs’ claim for
lost royalties based on the breach of contract.
They argue that
the proposed leases explicitly provide that Range has no obligation
to extract oil and gas from the land, and that such express
disclaimer precludes any implication otherwise.
Given that the
precise terms of any such agreements have yet to be determined, the
Court cannot fully evaluate the merits of this argument at this
time.
For the same reason, it also declines to dismiss the
plaintiffs’ claim for lost royalties as speculative.
B.
Claim for a Declaratory Judgment
Count Three of the amended complaint seeks a declaration that
a) the Bonus Contracts are not contracts for more than one year for
the sale or lease of real property, and b) that the statute of
frauds
does
unenforceable.
not
render
the
bonus
contracts
or
the
leases
The defendants argue that the oil and gas leases
are subject to the statute of frauds because they are not signed by
Range and constitute leases for terms of five to seven years. They
further argue that the bonus contracts are intrinsically related to
these leases because 1) the letters and leases were presented to
the plaintiffs at the same time; 2) the bonus payments were
10
BACKWATER PROPERTIES, ET AL. v. RANGE RESOURCES, ET AL. 1:10CV103
MEMORANDUM OPINION AND ORDER
conditioned upon approval by Range’s management of the proposed
leases; 3) the bonus contracts are intrinsically related to the
proposed leases; 4) the bonus payments were substitutes for part of
the consideration; and 5) the plaintiffs seek bonus payments as
part of their damages for the alleged breaches of the oil and gas
leases.
Thus, from the defendants’ perspective, the leases and
bonus contracts constitute a single agreement, and the lack of
Range’s
signature
on
the
bonus
contracts
or
leases
prevents
enforcement of any agreement.
The plaintiffs, on the other hand, argue that the statute of
frauds raises no bar to enforcement of the bonus contracts because
they are separate agreements, and not part of the oil and gas
leases.
for
Moreover, they contend that, as the bonus contracts call
payments
to
be
made
within
90-180
days
of
the
lease’s
execution, they are not contracts for more than one year.
Under West Virginia law, “the underlying purpose of the
statute of frauds is ‘to prevent the fraudulent enforcement of
unmade contracts, not the legitimate enforcement of contracts that
were in fact made.’” Heartland, L.L.C. v. McIntosh Racing Stable,
L.L.C., 632 S.E.2d 296, 305 (W. Va. 2006) (quoting Timberlake v.
Heflin, 379 S.E.2d 149, 153 (W. Va. 1989)).
of Appeals of West Virginia has observed,
11
As the Supreme Court
BACKWATER PROPERTIES, ET AL. v. RANGE RESOURCES, ET AL. 1:10CV103
MEMORANDUM OPINION AND ORDER
[t]he Statute of Frauds was not enacted to
afford persons a means of evading just
obligations; nor was it intended to supply a
cloak of immunity to hedging litigants lacking
integrity; nor was it adopted to enable
defendants to interpose the Statute to a
contract fairly, and admittedly, made.
In
brief, the Statute “was intended to guard
against the perils of perjury and error in the
spoken word.”
Id. (quoting 10 Williston on Contracts § 29.4 at 437-38 (internal
citation omitted in original)).
The provisions of W. Va. Code §
36-1-3, therefore, operate as a procedural bar to the enforcement
of certain oral contracts unless the statute’s conditions are met.
Moreover, “‘[t]he operation of the statute of frauds goes only to
the remedy; it does not render the contract void.’” Heflin, 379
S.E.2d at 153 (quoting Ross v. Midelburg, 42 S.E.2d 185, 193 (W.
Va. 1947)).
West Virginia recognizes several exceptions to the statute of
frauds. Of significance, here, one of the exceptions estops a party
to an oral agreement from invoking the statute of frauds in
situations involving fraud and partial performance of a contract.
Bennett v. Charles Corp., 226 S.E.2d 559, 563 (W. Va. 1976).
Here, the plaintiffs have adequately alleged two separate
breach of contract claims, but it is too early in the case to
determine whether the leases and bonus contracts form two separate
contracts or a single agreement.
12
Furthermore, as discussed later
BACKWATER PROPERTIES, ET AL. v. RANGE RESOURCES, ET AL. 1:10CV103
MEMORANDUM OPINION AND ORDER
in this opinion, the plaintiffs have adequately alleged that Range
employed
fraudulent
means
when
soliciting
their
signatures.
Therefore, under Bennett, the fraud exception to the statute of
frauds may apply. 226 S.E.2d at 563.
The Court, consequently,
concludes that the plaintiffs have stated a plausible declaratory
judgment claim, the merits of which must be developed through
discovery.
C.
Claim for Specific Performance
The Class B plaintiffs seek specific performance of the oil
and gas leases. The defendants seek to dismiss this claim on the
basis that specific performance is an extraordinary remedy not
generally available to a plaintiff-lessor seeking to compel the
development of oil and gas interests. The defendants also assert
that the terms of the proposed leases permit Range to drill or not
drill, and that it cannot be forced to perform under the terms of
those leases.
The
plaintiffs
contend
they
have
adequately
alleged
the
predicates for obtaining specific performance, that they seek only
to compel Range to exploit the land in good faith, and that the
Supreme Court of Appeals of West Virginia has previously recognized
specific performance as an appropriate remedy within the context of
a coal lease. See Blair v. Dickinson, 54 S.E.2d 828 (1949) (quoting
13
BACKWATER PROPERTIES, ET AL. v. RANGE RESOURCES, ET AL. 1:10CV103
MEMORANDUM OPINION AND ORDER
Oberman, Trustee v. Red Rock Fuel Company, et al., 99 S.E. 66 (W.
Va. 1919)).
At this early stage of litigation where it is
uncertain whether the parties had one or more agreements, and what
the terms and scope of such agreements may have been, the Court
will reserve the question of whether the remedy of specific
performance is available to the plaintiffs.
D.
Claim for Fraud
The amended complaint alleges that landmen told the plaintiffs
they could accept offers to enter leasing agreements and separate
bonus contracts by signing documents provided by Range, and that
these statements were false when made because Range never intended
to conclude any bargains.
The defendants, however, argue as a
matter of law that the plaintiffs' fraud claim fails because 1) it
is barred by the gist of the action doctrine; 2) it is inadequately
pleaded; and 3) the plaintiffs’ reliance on oral representations
was unjustified as a matter of law.
1.
The Gist of the Action Doctrine
Under the "gist of the action" doctrine, a tort claim arising
from a breach of contract may be pursued only if "‘the action in
tort would arise independent of the existence of the contract.'"
Secure US, Inc. v. Idearc Media Corp., No. 1:08CV190, 2008 WL
5378319, at *3-4 (N.D.W. Va. 2008) (quoting Syl. Pt. 9, Lockhart v.
14
BACKWATER PROPERTIES, ET AL. v. RANGE RESOURCES, ET AL. 1:10CV103
MEMORANDUM OPINION AND ORDER
Airco Heating & Cooling, 567 S.E.2d 619 (W. Va. 2002)). Under West
Virginia law, a plaintiff may pursue a fraud claim by establishing:
“(1) that the act claimed to be fraudulent was
the act of the defendant or induced by him;
(2) that it was material and false; that
plaintiff relied on it and was justified under
the circumstances in relying upon it; and (3)
that he was damaged because he relied on it.”
Syl. Pt. 1, Lengyel v. Lint, 280 S.E.2d 66, 69 (W. Va. 1981)
(quoting Horton v. Tyree, 139 S.E. 737 (W. Va. 1927)). Moreover,
pursuant to a longstanding principle of West Virginia law, a
plaintiff cannot predicate a fraud claim on another party’s failure
to perform a promise, and such a claim is only available when the
other party made “‘a false assertion in regard to some existing
matter by which a party is induced to part with his money or
property.’”
Legg v. Johnson, Simmerman & Broughton, 576 S.E.2d
532, 539 (W. Va. 2002) (quoting Syl. pt. 1, Love v. Teeter, 24 W.
Va. 741 (1884)).
Here, the amended complaint alleges that landmen representing
Range falsely told the plaintiffs they could finalize agreements
with Range simply by providing their signatures.
Based on these
false representations, the plaintiffs claim they did not consider
later offers from other oil and gas companies.
They contend their
claim of fraud is independent of their breach of contract claim
because the asserted harm is the loss of a contractual opportunity
15
BACKWATER PROPERTIES, ET AL. v. RANGE RESOURCES, ET AL. 1:10CV103
MEMORANDUM OPINION AND ORDER
with another entity, not the loss of a contractual bargain with
Range.
As pled, the plaintiffs’ fraud claim does not rise or fall on
whether their cause of action sounds in contract, but rather
provides a separate and distinct legal theory of liability.
Thus,
even if the Court eventually concludes that no contract existed
between Range and the plaintiffs, such a conclusion would not
preclude a finding that Range, Duncan, or both of them, misled the
plaintiffs into believing they had a binding agreement and should
be held liable for fraud.
Therefore, the gist of the action
doctrine does not bar such a claim.
2.
The Pleading Standards for Fraud Claims
The defendants also argue that the plaintiffs' fraud claim
fails to satisfy the pleading requirements of Fed. R. Civ. P. 9(b)
because it does not allege who made the fraudulent statements and
when such representations were made.
The defendants also contend
that the plaintiffs’ fraud claim is based on "future occurrences,"
not statements that were materially false when made.
To survive a motion to dismiss, a fraud claim must "state with
particularity the circumstances constituting fraud or mistake."
Fed. R. Civ. P. 9(b). "[T]he ‘circumstances' required to be pled
with particularity under Rule 9(b) are ‘the time, place, and
16
BACKWATER PROPERTIES, ET AL. v. RANGE RESOURCES, ET AL. 1:10CV103
MEMORANDUM OPINION AND ORDER
contents of the false representations, as well as the identity of
the person making the misrepresentation and what he obtained
thereby.'" Harrison v. Westinghouse Savannah River Co., 176 F.3d
776, 784 (4th Cir. 1999) (quoting 5 Charles Alan Wright and Arthur
R. Miller, Federal Practice and Procedure: Civil § 1297, at 590 (2d
ed. 1990)).
The amended complaint in this case satisfies these pleading
requirements; it alleges the "who" (Range landmen), the “when”
(July, August, and September of 2008), and the “where” (the
plaintiffs' properties).
As to what was said, it alleges that
landmen told them they could conclude their bargains by signing the
leases and bonus contracts, when in fact the landmen knew such
representations were untrue, allowing Range to gain 90-180 day
options to lease the plaintiffs’ land. Thus, the amended complaint
meets Rule 9(b)’s requirement that a fraud claim be pled with
particularity.
3.
Justifiability of the Plaintiffs’ Reliance
Finally, the defendants argue that, as a matter of law, the
plaintiffs' reliance on any oral representations was unjustified
because the written documents provided by the landmen directly
contradicted their alleged oral representations. The plaintiffs,
however, assert that this argument is premature, and that, at this
17
BACKWATER PROPERTIES, ET AL. v. RANGE RESOURCES, ET AL. 1:10CV103
MEMORANDUM OPINION AND ORDER
early stage of the litigation, they need only state a plausible
claim for relief.
The plaintiffs are correct.
Even acknowledging that critical
issues, such as what exactly the landmen told the plaintiffs, and
whether reliance on such statements was reasonable, have yet to be
developed, the Court concludes that the plaintiffs have met their
initial pleading burden under Iqbal.
E.
Claim for Interference with Prospective Contract
The defendants also argue that the claim in the amended
complaint for interference with prospective contract fails because
it, too, is barred by the gist of the action doctrine.
They
further argue that the plaintiffs have failed to adequately plead
an identifiable contract or expectation.
1.
The Gist of the Action Doctrine
As discussed earlier, the gist of the action doctrine permits
a plaintiff to pursue a tort claim related to a contractual claim
only where the tort claim arises independently of the contract. See
Lockhart, 567 S.E.2d 619.
In West Virginia, to state a claim for
intentional interference with a prospective business contract, "[a]
plaintiff must prove:
(1) existence of a contractual or business
relationship or expectancy . . . ; (2) an
18
BACKWATER PROPERTIES, ET AL. v. RANGE RESOURCES, ET AL. 1:10CV103
MEMORANDUM OPINION AND ORDER
intentional act of interference by a party
outside that relationship or expectancy . . .;
(3) proof that the interference caused the
harm sustained; and (4) damages.
Torbett v. Wheeling Dollar Sav. & Trust Co., 314 S.E.2d 166, 173
(W. Va. 1983).
Here, the amended complaint alleges that the basis of the
claim for intentional interference with prospective contract is the
false representations made by Range’s landmen, not any contract
between the parties.
Such allegations constitute a claim for
relief that is independent of any contract into which the parties
may or may not have entered.
Thus, the gist of the action doctrine
does not bar the plaintiffs’ claim for tortious interference with
prospective contract.
2.
The Adequacy of the Pleadings
The amended complaint also adequately sets forth the elements
of a claim of interference with prospective contact.
First, it
asserts that the plaintiffs received bona fide offers to lease
their gas rights from other companies after signing contracts with
Range.
It
reassurances
then
alleges
concerning
that
the
the
solid
landmen’s
nature
of
statements
the
Range
and
deals
prevented them from accepting these offers, thus causing them to
lose the opportunity to profit from their gas rights at the height
of the market.
19
BACKWATER PROPERTIES, ET AL. v. RANGE RESOURCES, ET AL. 1:10CV103
MEMORANDUM OPINION AND ORDER
If true, these facts are sufficient to support a recovery for
the
tort
of
interference
with
prospective
contract
in
West
Virginia, which "recognizes a cause of action based on tortious
interference with contractual relations."
Wood County Airport
Authority v. Crown Airways, Inc., 919 F. Supp. 960, 968 (S.D.W. Va.
1996) (citing Torbett, 314 S.E.2d at 171). The tort may be based on
interference with either an existing or a prospective relationship.
Id. (quoting Restatement (Second) of Torts § 766B (1979)).
The amended complaint alleges that, after entering agreements
with Range, the plaintiffs received later offers from Chesapeake,
CNX, and other companies, and that false representations by the
landmen led them to believe they could not accept such offers.
Allegations relating to the Bid Rigging Plan sufficiently establish
that,
if
true,
Range’s
interference
with
such
prospective
opportunities was intentional and continued throughout the time
when
the
therefore
plaintiffs
have
received
adequately
other
pleaded
offers.
a
claim
The
for
plaintiffs
intentional
interference with prospective contracts.
F.
Claim for Unjust Enrichment
The defendants argue that the plaintiffs' claim for unjust
enrichment fails as a matter of law because 1) the plaintiffs did
not confer a benefit on Range; and 2) even if the plaintiffs did
20
BACKWATER PROPERTIES, ET AL. v. RANGE RESOURCES, ET AL. 1:10CV103
MEMORANDUM OPINION AND ORDER
confer a benefit, Range paid valuable consideration for it (i.e.
$1.00).
The plaintiffs contend that they have adequately stated a
claim for unjust enrichment because they conferred 90-180 day
options on Range for which they received no compensation. They
further assert that Range’s initial consideration of $1.00 was
inadequate, but that any dispute as to its adequacy should be
determined at a later time.
Under West Virginia law,
"[u]njust enrichment of a person occurs when
he has and retains money or benefits which in
justice and equity belong to another . . . .
The benefit may be an interest in money, land,
chattels, or choses in action; beneficial
services conferred; satisfaction of a debt or
duty owed by him; or anything which adds to
his security or advantage."
Dunlap v. Hinkle, 317 S.E.2d 508, 512 (W. Va. 1984) (quoting
Commercial Fixtures and Furnishings, Inc. v. Adams, 564 P.2d 773,
776 (Utah 1977)). The remedy for unjust enrichment is restitution.
See LaPosta Oldsmobile, Inc. v. General Motors Corp., 426 F.
Supp.2d 346, 356 (N.D.W. Va. 2006) (citing Restatement (First) of
Restitution § 1 (1988)). West Virginia law also recognizes that a
real estate option may have value, which consists of
a continuing offer to sell, which may, or may
not, within the time specified, at the
election of the optionee, be accepted. The
owner parts with his right to sell to another
for such time, and gives to the optionee this
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BACKWATER PROPERTIES, ET AL. v. RANGE RESOURCES, ET AL. 1:10CV103
MEMORANDUM OPINION AND ORDER
exclusive privilege. It is the right of
election to purchase, which has been bought
and paid for, and which forms the basis of the
contract between the parties.
Tate v. Wood, 289 S.E.2d 432, 434 (W. Va. 1982).
Pursuant to these standards, the plaintiffs have adequately
pleaded a claim for unjust enrichment.
Furthermore, factual
development is necessary to determine whether Range obtained a
benefit, or, if it did, whether it obtained such benefit unjustly.
Dismissing the plaintiffs’ claim for unjust enrichment at this time
therefore would be premature.
G.
Claim for Violations of the Sherman Antitrust Act
The defendants argue that the plaintiffs’ antitrust claim
fails as a matter of law because it fails to allege an antitrust
contract, combination or conspiracy, and also how Range's actions
created an unreasonable restraint on trade. In their response, the
plaintiffs contend that they have adequately stated a claim under
§ 1 of the Sherman Antitrust Act based on their allegation that
Range and Duncan were competitors and conspirators. They also
assert that, as pled, the Bid Rigging Plan constituted illegal per
se horizontal price-fixing because it prevented the plaintiffs from
receiving the highest bids possible, and also prevented Range’s
competitors from bidding on their properties.
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BACKWATER PROPERTIES, ET AL. v. RANGE RESOURCES, ET AL. 1:10CV103
MEMORANDUM OPINION AND ORDER
"‘The purpose of antitrust law, at least as articulated in the
modern cases, is to protect the competitive process as a means of
promoting
economic
efficiency.'"
Valuepest.com
v.
Bayer
Corporation, 561 F.3d 282, 290 (4th Cir. 2009) (quoting Morrison v.
Murray Biscuit Co., 797 F.2d 1430, 1437 (7th Cir. 1986)). To state
a claim under 15 U.S.C. § 1, a plaintiff must establish two
elements: "(1) an agreement between at least two legally distinct
persons
or
entities;
and
(2)
that
the
agreement
imposed
an
unreasonable restraint on trade." Patel v. Scotland Memorial Hosp.,
91 F.3d 132, 1996 WL 38920, at *2 (4th Cir. 1996) (table case)
(citing Estate Constr. Co. v. Miller & Smith Holding Co., 14 F.3d
213, 220-21 (4th Cir. 1994)).
Under the first element, an agent and principal cannot form a
"‘contract, combination' or ‘conspiracy,'" in violation of the
Sherman Antitrust Act. Valuepest.com, 561 F.3d at 288. "[C]oncerted
activity susceptible to sanction by [15 U.S.C. § 1] is activity in
which multiple parties join their resources, rights, or economic
power together in order to achieve an outcome that, but for the
concert, would naturally be frustrated by their competing interests
(by way of profit-maximizing choices).'" Dickson v. Microsoft
Corporation, 309 F.3d 193, 204 (4th Cir. 2002) (quoting Virginia
Vermiculite, Ltd. v. HGSI, 307 F.3d 277, 282 (4th Cir. 2002)).
23
BACKWATER PROPERTIES, ET AL. v. RANGE RESOURCES, ET AL. 1:10CV103
MEMORANDUM OPINION AND ORDER
In the seminal case of Bell Atlantic Corp. v. Twombly, the
Supreme Court of the United States specifically addressed whether
a complaint adequately pleaded a claim under § 1 of the Sherman
Act, and held that the complaint contained insufficient allegations
of antitrust violations to nudge the claims “across the line from
conceivable to plausible.”
550 U.S. at 570.
Accordingly, those
claims failed as a matter of law and were subject to dismissal. Id.
According
to
the
plaintiffs,
their
amended
complaint
adequately alleges that Duncan was Range’s competitor.
That
contention, however, is belied by numerous other allegations in the
amended complaint that Duncan served as Range’s agent.
Thus, even
when viewed in the light most favorable to the plaintiffs, the only
reasonable reading of the amended complaint is that Duncan was an
agent of Range, and not its competitor.
The plaintiffs have
produced no plausible allegations or argument to the contrary, and
their antitrust claim, therefore, must be dismissed. See Twombly,
550 U.S. at 570.
H.
Claim for Violation of W. Va. Code § 46A-6-101 et seq.
As noted earlier, the plaintiffs have withdrawn their claim
for violation of W. Va. Code § 46-6-101 et seq. See Cather, et al.
v. Seneca-Upshur Petroleum, Inc., et al., No. 1:09CV139, 2010 WL
3271965, at *6-*8 (N.D.W. Va. Aug. 18, 2010) (holding that lessors
24
BACKWATER PROPERTIES, ET AL. v. RANGE RESOURCES, ET AL. 1:10CV103
MEMORANDUM OPINION AND ORDER
of natural gas are not “consumers” protected by the West Virginia
Consumer Credit and Protection Act).
The Court need not discuss
this claim further and denies as moot the defendants’ motions to
dismiss this claim.
V. CONCLUSION
For the reasons discussed, the Court GRANTS-IN-PART, DENIESIN-PART, and DENIES-IN-PART AS MOOT the motions to dismiss filed by
Range and Duncan (dkt. nos. 35, 38). Specifically it:
C
GRANTS the defendants’ motions to dismiss the plaintiffs’
Sherman Antitrust claim;
C
DENIES the defendants’ motions to dismiss the plaintiffs’
claims for breach of the oil and gas leases, breach of the
bonus contracts, declaratory judgment, specific performance,
fraud, interference with prospective contract, and unjust
enrichment; and
C
DENIES
AS
MOOT
the
defendants’
motions
to
dismiss
the
plaintiffs claim for violation of W. Va. Code § 46A-6-101 et
seq.
It is so ORDERED.
The Court directs the Clerk to transmit copies of this Order
to counsel of record.
DATED: May 5, 2011.
/s/ Irene M. Keeley
IRENE M. KEELEY
UNITED STATES DISTRICT JUDGE
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