Fout et al v. EQT Production Company
Filing
36
MEMORANDUM OPINION AND ORDER DENYING WITHOUT PREJUDICE PLAINTIFFS' PARTIAL MOTION FOR SUMMARY JUDGMENT AND DEFENDANT'S MOTION TO FILE A SURREPLY: It is ORDERED that Plaintiffs' 23 Motion for Partial Summary Judgment is DENIED WITHOUT PREJUDICE and Defendant's 35 Motion to File Surreply is DENIED WITHOUT PREJUDICE. Signed by Senior Judge Frederick P. Stamp, Jr on 3/7/16. (cnd)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
JOHN FOUT and NANCY FOUT,
Plaintiffs,
v.
Civil Action No. 1:15CV68
(STAMP)
EQT PRODUCTION COMPANY,
a Pennsylvania corporation,
Defendant.
MEMORANDUM OPINION AND ORDER
DENYING WITHOUT PREJUDICE
PLAINTIFFS’ PARTIAL MOTION FOR SUMMARY JUDGMENT
AND DEFENDANT’S MOTION TO FILE A SURREPLY
I.
Background
This civil action concerns the royalty payments that the
plaintiffs believe defendant EQT Production Company (“EQT”) failed
to pay them.
The plaintiffs own an undivided interest in oil and
natural
in
gas
Wetzel
County,
West
Virginia.
EQT
and
the
plaintiffs entered into a lease agreement, under which EQT would
pay a flat-rate royalty payment in exchange for both development
and production rights.
In their complaint, the plaintiffs contend
that EQT has underpaid the plaintiffs and incorrectly deducted
post-production costs from their royalty payments.
In addition to
those actions, the plaintiffs also believe that EQT failed to
provide a “full and truthful accounting of the production from
Plaintiffs’
minerals
and
[payment] was calculated.”
the
manner
ECF No. 1.
in
which
[the]
royalty
The plaintiffs assert six
counts in their complaint, which are the following: (1) failure to
properly account, (2) breach of contract, (3) breach of fiduciary
duties,
(4)
fraud,
(5)
negligent
misrepresentation,
and
(6)
punitive damages. EQT filed a partial motion to dismiss Counts III
and IV, which are claims of breach of fiduciary duties and fraud
(respectively).
This Court granted in part and denied in part
EQT’s partial motion to dismiss. As a result of that ruling, Count
III was dismissed and Count IV still remains.
Therefore, at this
stage, the following counts remain: failure to properly account
(Count I); breach of contract (Count II); fraud (Count IV);
negligent misrepresentation (Count V); and punitive damages (Count
VI).
At issue now is the plaintiffs’ motion for partial summary
judgment.
ECF No. 23.
In their motion, the plaintiffs request
that this Court grant summary judgment in their favor as to their
breach of contract claim (Count II). The plaintiffs argue that EQT
has wrongfully deducted post-production costs, in violation of the
holding in Tawney v. Columbia Natural Resources, L.L.C., 633 S.E.2d
22
§
(2006).
22-6-8,
statute.”
The
which
plaintiffs
is
then
sometimes
turn
to
West
referred
to
as
Virginia
the
“flat
Code
rate
They believe that the clear language of the statute
limits the deduction of post-production costs.
The plaintiffs
conclude their argument by asserting that EQT is violating the
terms of a settlement reached in Kay Co., et al. v. Equitable
2
Production Company, et al., Civil Action No. 2:06-0612 (“Kay Co.”),
of which the plaintiffs were parties.
EQT filed a response in opposition.
ECF No. 32.
argues that it has not breached the terms of the lease.
EQT first
EQT then
turns to the flat rate statute, and asserts that its royalty
requirements have been altered by the statute.
of
Tawney,
EQT
attempts
plaintiffs’ case.
to
distinguish
As to the holding
that
case
from
the
EQT relies on the language “at the wellhead” of
the flat rate statute to indicate when post-production costs are to
be deducted.
In support of its argument, EQT believes that the
legislative history and plain language of the flat rate statute
contradict the plaintiffs’ assertions.
EQT also contends that the
terms of the prior settlement in Kay Co. have not been violated.
The plaintiffs filed a reply, wherein they reassert their initial
arguments.
ECF No. 34.
EQT then filed a motion to file a
surreply, in which it seeks to dispute allegations raised in the
plaintiffs’ reply.
ECF No. 35.
For the reasons set forth below, the plaintiffs’ motion for
partial summary judgment is DENIED WITHOUT PREJUDICE, and EQT’s
motion to file a surreply is DENIED WITHOUT PREJUDICE.
II.
Summary
judgment
is
Applicable Law
appropriate
if
“the
pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no genuine
3
issue as to any material fact and that the moving party is entitled
to a judgment as a matter of law.”
Fed. R. Civ. P. 56(c).
The
party seeking summary judgment bears the initial burden of showing
the absence of any genuine issues of material fact.
Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).
See Celotex
“The burden then
shifts to the nonmoving party to come forward with facts sufficient
to create a triable issue of fact.”
Temkin v. Frederick County
Comm’rs, 945 F.2d 716, 718 (4th Cir. 1991) (citing Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986)).
However, as the Supreme Court of the United States noted in
Anderson, “Rule 56(e) itself provides that a party opposing a
properly supported motion for summary judgment may not rest upon
the mere allegations or denials of his pleading, but . . . must set
forth specific facts showing that there is a genuine issue for
trial .” Anderson, 477 U.S. at 256.
“The inquiry performed is the
threshold inquiry of determining whether there is the need for a
trial—whether, in other words, there are any genuine factual issues
that properly can be resolved only by a finder of fact because they
may reasonably be resolved in favor of either party.”
Id. at 250;
see also Charbonnages de France v. Smith, 597 F.2d 406, 414 (4th
Cir. 1979) (Summary judgment “should be granted only in those cases
where it is perfectly clear that no issue of fact is involved and
inquiry into the facts is not desirable to clarify the application
4
of the law.” (citing Stevens v. Howard D. Johnson Co., 181 F.2d
390, 394 (4th Cir. 1950))).
In Celotex, the Court stated that “the plain language of Rule
56(c) mandates the entry of summary judgment, after adequate time
for discovery and upon motion, against a party who fails to make a
showing
sufficient
to
establish
the
existence
of
an
element
essential to that party’s case, and on which that party will bear
the burden of proof at trial.”
Celotex, 477 U.S. at 322.
Summary
judgment is not appropriate until after the non-moving party has
had sufficient opportunity for discovery.
See Oksanen v. Page
Mem’l Hosp., 912 F.2d 73, 78 (4th Cir. 1990), cert. denied, 502
U.S. 1074, 112 S. Ct. 973, 117 L.Ed.2d 137 (1992).
In reviewing
the supported underlying facts, all inferences must be viewed in
the light most favorable to the party opposing the motion.
See
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
587, 106 S. Ct. 1348, 89 L.Ed.2d 538 (1986).
III.
Discussion
At issue in this civil action is West Virginia Code § 22-6-8,
which is more commonly referred to as “the flat rate statute.” The
statute states in relevant part that the “owner of the oil or gas
in place” (the plaintiffs) are to receive the following:
[N]ot less than one eighth of the total amount paid to or
received by or allowed to the owner of the working
interest at the wellhead for the oil or gas so extracted,
produced or marketed before deducting the amount to be
paid to or set aside for the owner of the oil or gas in
5
place, on all such oil or gas to be extracted, produced
or marketed from the well.
W. Va. Code § 22-6-8(e) (2016) (emphasis added).
As will be
discussed below, the parties dispute what “at the wellhead” means
in relation to when or if certain post-production costs may be
deducted from royalties.
The primary issue in the plaintiffs’ motion for partial
summary
judgment
involves
questions
that
this
Court
recently
entered for certification to the Supreme Court of Appeals of West
Virginia.
In Patrick D. Leggett et al. v. EQT Production Co., et
al., Civil Action 1:13CV4 (“Leggett”), a nearly identical issue
arose:
the meaning of “at the wellhead” under the West Virginia
flat rate statute in light of the Supreme Court’s holding in Estate
of Tawney v. Columbia Natural Resources, LLC, 633 S.E.2d 22 (W. Va.
2006). Similar to the situation in this civil action, the lease in
Leggett involved a flat-rate lease, and the parties disputed the
meaning of “at the wellhead” in light of the flat rate statute and
the holding in Tawney.
In Leggett, this Court found that the
phrase “at the wellhead,” as used under the West Virginia flat rate
statute, has not been definitively interpreted or defined.
After
analyzing Tawney and the flat rate statute, this Court determined
that
the
unsettled
nature
of
the
applicable
law
warranted
certification to the Supreme Court of Appeals of West Virginia. In
its order of certification, this Court certified the following two
questions:
6
1.
Va.
Does Tawney v. Columbia Natural Resources, L.L.C., 219 W.
266,
633
S.E.2d
22
(2006),
which
was
decided
after
the
enactment of West Virginia Code § 22-6-8, have any effect upon the
Court’s decision as to whether a lessee of a flat-rate lease,
converted pursuant to West Virginia Code § 22-6-8, may deduct postproduction expenses from his lessor’s royalty, particularly with
respect to the language of “1/8 at the wellhead” found in West
Virginia Code § 22-6-8(e)?
2.
Does West Virginia Code § 22-6-8 prohibit flat-rate
royalties only for wells drilled or reworked after the statute’s
enactment and modify only royalties paid on a per-well basis where
permits for new wells or to modify existing wells are sought, or do
the provisions of West Virginia Code § 22-6-8 abrogate flat-rate
leases in their entirety?
That order of certification was entered on February 10, 2016.
See Leggett, ECF No. 187.
This Court believes that the answers to
the above questions are dispositive to deciding the merits of the
plaintiffs’ motion for partial summary judgment.
questions have only recently been submitted.
The above-
Therefore, it does
not appear to be proper to rule on the merits of the plaintiffs’
motion at this time until the Supreme Court decides whether to
answer those questions.
Accordingly, the plaintiffs’ motion is
DENIED WITHOUT PREJUDICE, and EQT’s motion to file a surreply is
DENIED WITHOUT PREJUDICE.
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IV.
Conclusion
For the reasons set forth above, the plaintiffs’ motion for
partial summary judgment is DENIED WITHOUT PREJUDICE, and EQT
Production Company’s motion to file a surreply is DENIED WITHOUT
PREJUDICE.
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein.
DATED:
March 7, 2016
/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE
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