Fout et al v. EQT Production Company

Filing 180

MEMORANDUM OPINION AND ORDER DENYING PLAINTIFFS' MOTION TO ALTER OR AMEND JUDGMENT PURSUANT TO RULE 59 OF THE FEDERAL RULES OF CIVIL PROCEDURE: The plaintiffs' motion to alter or amend judgment under Rule 59 (ECF No. 175 ) is DENIED. Signed by Senior Judge Frederick P. Stamp, Jr on 7/26/2018. (wrr)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
JOHN FOUT, NANCY FOUT,
J&N MANAGEMENT, LLC and
J&N MANAGEMENT ENTERPRISES, LLC,
Plaintiffs,
v.

Civil Action No. 1:15CV68
(STAMP)

EQT PRODUCTION COMPANY,
a Pennsylvania corporation,
Defendant.
MEMORANDUM OPINION AND ORDER
DENYING PLAINTIFFS’ MOTION TO ALTER OR
AMEND JUDGMENT PURSUANT TO RULE 59 OF
THE FEDERAL RULES OF CIVIL PROCEDURE
I.

Background

Following the jury trial of this civil action, the plaintiffs
have filed a motion to alter or amend judgment pursuant to Federal
Rule of Civil Procedure 59.1

The plaintiffs argue that the

judgment should be altered or amended for the following reasons:
(1) the defendant, EQT Production Company, has no authority to
deduct taxes from the plaintiffs; (2) the plaintiffs are entitled
to a 1/8 royalty without deductions as a matter of law; (3) the
defendant failed to follow Leggett v. EQT Production Company, 800
S.E.2d 850 (W. Va.) (“Leggett II”), cert. denied, 138 S. Ct. 472
(2017)

in

performing

its

“net

back”

or

“work

back”

royalty

calculation; and (4) without a written policy detailing deductions,
1

For a more thorough background of this civil action, see ECF
No. 153.

the defendant’s policy is arbitrary and vague and not enforceable
in law.
As to the defendant’s authority to deduct taxes from the
plaintiffs’

royalties,

the

plaintiffs

argue

that

only

the

legislature has the power to tax, and that the defendant has no
such power.

Furthermore, the plaintiffs assert that, by law, the

taxes at issue are imposed on the producer, and that Leggett II
said nothing about a shifting of the burden of the producer’s tax
to the royalty owner.

As to the plaintiffs’ entitlement to a 1/8

royalty without deductions, the plaintiffs argue that the written
agreement between the defendant and the West Virginia Department of
Environmental Protection controls the royalty distribution.

The

plaintiffs contend that the agreement requires that the defendant
pay a 1/8 royalty to the plaintiffs and was never modified to
permit deductions.

The plaintiffs allege that the defendant

adopted a verbal deduction policy in 2012, but that the defendant’s
agreement

with

the

West

Virginia

Department

of

Environmental

Protection was never modified to reflect the verbal deduction
policy.
its

Thus, the plaintiffs argue that the defendant must follow

written

agreement

with

the

West

Virginia

Department

of

Environmental Protection and ignore its oral policy permitting
deductions.
As to whether the defendant followed Leggett II in its royalty
calculations, the plaintiffs argue that the defendant’s use of its

2

index price violates West Virginia law because Leggett II requires
that the downstream price be compared to the wellhead price.
Lastly, the plaintiffs argue that the defendant’s oral deduction
policy is unenforceable because the defendant agreed in writing to
pay the plaintiffs a 1/8 royalty. The plaintiffs conclude that the
April 11, 2018 verdict is contrary to law and must be altered.
Accordingly, the plaintiffs request a judgment restoring to the
plaintiffs all royalties due to them, including general deductions
and deductions for taxes.
The defendant filed a response in opposition to the motion, in
which it argues that there is no valid basis in either fact or law
to grant the relief requested by the plaintiffs.

The defendant

cites this Court’s standard for granting a motion under Rule 59:
“The United States Court of Appeals for the Fourth Circuit has
recognized three grounds for amending an earlier judgment: (1) to
accommodate an intervening change in controlling law; (2) to
account for new evidence not available at trial; or (3) to correct
a clear error of law or prevent manifest injustice.” Moore v. Life
Ins. Co. of N. Am., 708 F. Supp. 2d 597, 614 (N.D. W. Va. 2010),
aff’d, 439 F. App’x 245 (4th Cir. 2011) (citing Pacific Ins. Co. v.
Am. Nat’l Fire Ins. Co., 148 F.3d 396, 403 (4th Cir. 1998)).

The

defendant notes that the plaintiffs do not argue that there has
been a change in controlling law or that any new evidence has come

3

to light, but rather appear to argue that there has been clear
error of law.
The defendant argues that there has been no clear error of
law. First, the defendant contends that this Court’s prior rulings
were correct and that there is no basis upon which to reconsider or
amend them.
alleged

The defendant asserts that each of the plaintiffs’

grounds

for

their

Rule

59

motion

have

already

been

considered and ruled upon by this Court either in its Memorandum
Opinion and Order Denying Plaintiffs’ Motion for Partial Summary
Judgment or its Memorandum Opinion and Order Regarding Defendant’s
Motions in Limine.

The defendant again cites Moore, which states

that “[a] Rule 59(e) motion may not be used to relitigate old
matters

and

is

sparingly . . . .
court

to

an

extraordinary

remedy

that

should

be

used

It is improper to use such a motion to ask the

‘rethink

what

the

court

has

already

thought

through-rightly or wrongly.’” Id. (quoting Above the Belt, Inc. v.
Mel Bohannan Roofing, Inc., 99 F.R.D. 99, 101 (E.D. Va.1983)).
Second, the defendant addresses the exhibits attached to the
plaintiffs’ motion.

The exhibits include Form WW-6A1 documents

filed by the defendant with the West Virginia Department of
Environmental Protection in connection with the wells at issue.
The defendant argues the exhibits were not offered as evidence at
trial and do not constitute new evidence unavailable at trial.
Thus, the defendant contends that the exhibits cannot provide a

4

basis upon which to alter or amend this Court’s prior rulings or
the judgment in this case.

See id. at 614-15 (“Rule 59(e) motions

may not be used . . . to raise arguments which could have been
raised prior to the issuance of the judgment, nor may they be used
to argue a case under a novel legal theory that the party had the
ability to address in the first instance.” (quoting Pacific Ins.
Co., 148 F.3d at 403)).

Even so, the defendant contends that the

Form WW-6A1 documents do not modify or overrule the applicable law
because, as a result of Leggett II, there is no dispute that West
Virginia Code § 22-6-8 governs the royalties at issue in this case.
The plaintiffs did not file a reply to the defendant’s
response in opposition.

For the reasons set forth below, the

plaintiffs’ motion to alter or amend judgment is denied.
II.

Applicable Law

The United States Court of Appeals for the Fourth Circuit has
recognized three grounds for amending an earlier judgment under
Federal Rule of Civil Procedure 59(e): (1) to accommodate an
intervening change in controlling law; (2) to account for new
evidence not available at trial; or (3) to correct a clear error of
law or prevent manifest injustice. Pac. Ins. Co. v. Am. Nat’l Fire
Ins. Co., 148 F.3d 396, 403 (4th Cir. 1998).

“Rule 59(e) motions

may not be used . . . to raise arguments which could have been
raised prior to the issuance of the judgment, nor may they be used
to argue a case under a novel legal theory that the party had the

5

ability to address in the first instance.”

Id.

A Rule 59(e)

motion may not be used to relitigate old matters and is an
extraordinary remedy that should be used sparingly.

Id.

It is

improper to use this motion to ask the court to “rethink what the
court ha[s] already thought through — rightly or wrongly.”

Above

the Belt, Inc. v. Mel Bohannan Roofing, Inc., 99 F.R.D. 99, 101
(E.D. Va. 1983).
III.

Discussion

This Court finds that the plaintiffs’ motion does not satisfy
any of the three grounds for amending an earlier judgment under
Rule 59(e).

The plaintiffs do not assert that there has been a

change in the controlling law or that new evidence has come to
light that was not available at the time of trial.

Rather, the

plaintiffs appear to rely on the third ground under Rule 59(e),
asserting that there has been a clear error of law or manifest
injustice.
The plaintiffs first allege that the judgment should be
altered because the defendant has no authority to deduct the
producer’s

severance

taxes

from

the

plaintiffs.

This

Court

previously ruled on this issue in its order on the plaintiffs’
motion for partial summary judgment, finding that “the issue of
deducting severance taxes is commensurate with the defendant’s
burden of proving by a preponderance of the evidence whether the
deductions of post-production expenses were reasonable and actually

6

incurred.”

ECF No. 157 at 1.

post-production

expenses,

At trial, the jury found that the

including

severance

taxes,

were

reasonable and actually incurred, and, accordingly, this Court
entered judgment for the defendant.

ECF Nos. 169 and 170.

This

Court finds that the plaintiffs have not presented any evidence
that this Court’s order or judgment, as each relates to the
severance tax issue, amounts to a clear error of law or manifest
injustice.

Thus, this Court finds that judgment should not be

altered or amended on this ground.
The plaintiffs next allege that the judgment should be altered
because they are entitled to a 1/8 royalty without deductions.
This Court previously granted the defendant’s motion in limine
seeking to preclude argument or evidence that royalties paid to the
plaintiff should be paid without deduction or allocation of postproduction costs.

ECF No. 158 at 14-15.

Specifically, this Court

ruled that “any argument that EQT should pay the plaintiffs
royalties without deduction or allocation of any post-production
costs is contrary to Leggett [II].

Under Leggett [II], EQT is

permitted to deduct post-production expenses from the plaintiffs’
royalty payments that are reasonable and actually incurred by the
lessee.”

ECF No. 158 at 15.

This Court finds that judgment should

not be altered or amended on this ground because the plaintiffs
have not presented any evidence that this Court’s order on the

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motion in limine amounted to a clear error of law or manifest
injustice.
Also in support of the allegation that they are entitled to a
1/8 royalty without deductions, the plaintiffs attach to their
motion Form WW-6A1 documents filed by the defendant with the
Department of Environmental Protection in connection with the wells
at issue.
exhibits

However, the plaintiffs did not offer the documents as
at

trial

and

do

not

unavailable before the trial.

argue

that

the

documents

were

Thus, the Court cannot reconsider

its prior orders or judgment at this time based on the attached
documents.

See Pac. Ins. Co. v. Am. Nat’l Fire Ins. Co., 148 F.3d

at 403 (“Rule 59(e) motions may not be used . . . to raise
arguments which could have been raised prior to the issuance of the
judgment, nor may they be used to argue a case under a novel legal
theory that the party had the ability to address in the first
instance.”).

And, even if the Court could consider the documents,

the documents would not change the applicable law as set forth in
Leggett II.

See Leggett II, 800 S.E.2d at 853 (“Royalty payments

pursuant to an oil or gas lease governed by West Virginia Code
§

22-6-8(e)

(1994)

may

be

subject

to

pro-rata

deduction

or

allocation of all reasonable post-production expenses actually
incurred by the lessee.”).
The plaintiffs also allege that the judgment should be altered
because the defendant failed to follow Leggett II in performing its

8

“net back” or “work back” royalty calculation. This Court ruled on
this issue in its Memorandum Opinion and Order Denying Plaintiffs’
Motion for Partial Summary Judgment and Granting in Part and
Denying in Part Defendant’s Motion for Summary Judgment.
153.
to

ECF No.

This Court found that “the evidence presented is sufficient

create

a

triable

issue

of

fact

at

trial

concerning

the

reasonableness of the post-production expenses actually incurred by
the lessee.”

ECF No. 153 at 8.

At trial, the jury found that the

royalty calculations were reasonable and that the post-production
expenses were actually incurred, and, accordingly, this Court
entered judgment for the defendant.

ECF Nos. 169 and 170.

This

Court finds that the plaintiffs have not presented any evidence
that this Court’s order or judgment, as each relates to the royalty
calculation, amounts to a clear error of law or manifest injustice.
Thus, this Court finds that judgment should not be altered or
amended on this ground.
Lastly, the plaintiffs allege that the judgment should be
altered or amended because, without a written policy detailing
deductions, the defendant’s policy is arbitrary and vague and not
enforceable in law.
by this Court.

This issue has also previously been addressed

During trial, this Court approved the parties’

stipulation agreeing that the defendant has no written policy
regarding deductions, and the Court read the stipulation to the
jury at the close of evidence at trial.

9

ECF No. 164 at 1.

The

Court also instructed the jury that the lack of a written policy is
a fact that the jury may consider in determining whether the postproduction expenses allocated to the plaintiffs were reasonable.
This Court finds that judgment should not be altered or amended on
this ground because the plaintiffs have not presented any evidence
showing that the jury’s consideration of the lack of a written
policy amounts to a clear error of law or manifest injustice.
IV.

Conclusion

For the foregoing reasons, the plaintiffs’ motion to alter or
amend judgment under Rule 59 (ECF No. 175) is DENIED.
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein.
DATED:

July 26, 2018

/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE

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