Wickland et al v. American Mountaineer Energy, Inc. et al

Filing 196

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS MOTION FOR SUMMARY JUDGMENT DKT. NO. 142 AND DENYING DEFENDANTS MOTION FOR SUMMARY JUDGMENT DKT. NO. 144 . Signed by District Judge Thomas S. Kleeh on 4/12/2019. (copy counsel of record)(jmm)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
MARGARET ANNE WICKLAND, et al.,
Plaintiffs,
v.

Case No. 1:17-cv-205
(Judge Kleeh)

AMERICAN MOUNTAINEER ENERGY,
INC. et al.,
Defendants.

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING IN
PART PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 142] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 144]

This

matter

is

before

the

Court

on

the

parties’

cross-

motions for summary judgment, filed on November 30, 2018 [Dkt.
Nos. 142 and 144].

The parties filed response and reply briefs

on December 21, 2018 and January 11, 2018, respectively [Dkt.
Nos.

157;

158;

consideration. 1
GRANTS

in

part

159;

and

160],

For

the

reasons

and

DENIES

in

and

the

issues

discussed

part

the

below,

motion

judgment filed by Plaintiffs [Doc. No. 142].

are

ripe
the

for

for

Court

summary

The Court DENIES

the motion for summary judgment filed by Defendants [Doc. No.
144].

1

On April 5, 2019, the Court held a pre-trial conference with the parties
[Dkt. No. 191] and advised that a written memorandum opinion would be
forthcoming which would deny Defendants’ motion for summary judgment and
reserve some liability issues and the question of damages for the April 15,
2019, bench trial [Dkt. No. 193 at 8-9].

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

I.
On

December

Civil Case No. 1:17cv205

FACTUAL AND PROCEDURAL BACKGROUND
1,

2017,

the

Plaintiffs,

Margaret

Anne

Wickland, as Trustee for and on Behalf of an Irrevocable Trust
Established December 23, 1974, and Revocable Trust Established
August

23,

“Plaintiffs”),

1985,

and

filed

this

Guy

Corporation

diversity

action

(collectively

against

American

Mountaineer Energy, Inc. (“AMEI”) and Murray Energy Corporation
(“Murray”) [Dkt. No. 1].

The Plaintiffs filed an unredacted

complaint on February 20, 2018 [Dkt. No. 17] after the entry of
a protective order on February 14, 2018 [Dkt. No. 16].
The Plaintiffs are the sole owners of two grants of right,
title,

and

interest

in

and

to

the

mineable

and

merchantable

Pittsburgh vein or seam of coal underlying two parcels of land
in Harrison County, West Virginia (the “Leased Premises”) [Dkt.
Nos.

17;

143-1].

The

Plaintiffs

or

their

predecessors

interest originally leased the Premises in 1958 and 1962.
September

12,

2008,

however,

AMEI

became

the

lessee

of

in
On
the

Premises pursuant to the assignment of a Consolidated, Amended
and Restated Lease (“Lease”) [Dkt. No. 143-1].

That same day,

Murray agreed to guarantee AMEI’s performance under the Lease
[Dkt. No. 143-6 at 5].
The Lease had a primary term of 20 years, and the parties
agreed

that

part

of

the

consideration
2

was

the

lessee’s

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

Civil Case No. 1:17cv205

“commitment to promptly commence and actively pursue coal mining
operations

on

the

Leased

Premises

in

order

to

maximize

the

benefits of the current coal market conditions” [Dkt. No. 143-1
at 21].

The Lease imposed the following schedule on AMEI:

•

September 14, 2010:

Apply for necessary permits

•

September 14, 2013:

Receive all permits

•

September 14, 2016:

Commence substantial construction

•

December 31, 2019:

Operate longwall mining system

[Id.

at

22].

In

2013,

the

primary

term

of

the

Lease

was

extended by agreement to 23 years, and AMEI’s deadlines were
extended respectively to 2010, 2016, 2019, and 2022 [Dkt. No.
143-7 at 3-4].

The purpose of the Lease was for lessee to

“install, at the earliest possible time, and thereafter operate
at least one (1) complete, modern and efficient longwall mining
system (including all related equipment and facilities) in the
Leased

Premises”

lessee was

to

[Dkt.

“have

No.

143-1

installed

at

and

be

19].

As

extended,

diligently

the

operating

a

complete, modern, efficient and adequate longwall mining system”
on or before December 31, 2022 [Dkt. No. 143-7 at 3].
The
production

Lease

also

royalties”

contemplated
(“advance

annual

“advance

payments,”

recoupable

“advance

royalty

payments” or “minimum royalties”) in the amount of $1,000,000 or
$2,000,000 beginning in 2008 [Dkt. No. 143-1 at 27].
3

These

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

minimum

royalties

were

Civil Case No. 1:17cv205

not

intended

to

be

penalties

against

AMEI, but rather were “compensation to Lessors for the delay in
receiving

Production

Royalties

.

.

.

which

were

reasonably

anticipated to have been paid if Lessee had timely performed
such conditions and obligation” [Id. at 27-29; Dkt. No. 143-8 at
6].

AMEI would have been able to recoup the advance payments

once it began production and owed production royalties [Id.]
the

Lease

terminated

for

any

reason,

however,

the

If

advance

royalty payments would “be forfeited and retained by Lessors, if
not recouped by Lessee as provided in this Lease” [Id.].
provision

for

advance

payments

was

restated

in

the

The
2013

Amendment to Consolidated, Amended and Restated Lease [Dkt. No.
143-7 at 4], and required AMEI to pay advance royalty payments
to lessor of $2,000,000 in years one, two, seven, and eight of
the Lease, as well as in years nine through the remaining term,
from 2016 through 2031 [Id. at 3; 4].

Advance payments of

$1,000,000 were owed to lessor in years three, four, five, and
six [Id. at 4].
As to the advance payments, the Lease provided that “[t]he
‘Amount Due’ in each such year shall be adjusted based on any
increase (but not any decrease) in the consumer price index (or
other comparable index) using December 2008 as the ‘base’” [Dkt.
No. 143-1 at 28].

The Lease further required lessee to credit
4

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

any

advance

payment

“from

Civil Case No. 1:17cv205

such

Production

Royalties

paid

to

Lessee, any time, against the Production Royalty due in such
year” [Id.].

No advance payment “shall be due when Production

Royalties actually paid in a year equal or exceed the Advance
Recoupable Production Royalty payment due for such year” [Id.].
Moreover, if the Lease terminated for any reason, and the lessee
“has not recovered all of the outstanding Advance Recoupable
Production Royalties paid by Lessee hereunder against Production
Royalty, . . . said unrecovered Advance Recoupable Production
Royalties shall be irrevocably forfeited by Lessee” [Id.].
If

the

Lease

terminated

or

cancelled,

AMEI

agreed

“to

cooperate in the timely transfer and/or assignment of any and
all permits, licenses, etc. required for mining or operation to
Lessors

or

therefore,

to
to

its
the

designated
extent

assignee
the

upon

same

transferrable” [Dkt. No. 143-1 at 31].

are

Lessor’s

request

assignable

or

If the lease terminated

for any reason other than the exhaustion of coal, AMEI agreed to
promptly deliver to Lessors (or its designee) all
surveys, maps, reports, drilling logs, core samples,
coal analyses, and every other piece of information,
document or instrument, regardless of the form it is
in, related in any way to this Lease and/or Lessee’s
activities and operations hereunder and/or in or on
the Leased Property.
[Id. at 32-33].

If AMEI failed to pay a royalty, the plaintiffs

had the right to terminate the Lease after providing AMEI with
5

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

Civil Case No. 1:17cv205

written notice and a ten-day cure period [Id. at 39-40].
termination,

AMEI

would

remain

liable

for

“the

payment

Upon
of

royalties due at the time of termination or re-entry” [Id. at
41.].
With respect to lessor remedies, the Lease states that the
“remedies set forth under this Lease shall be cumulative and
shall not be exclusive of other rights or remedies available to
Lessors under West Virginia statutory law or common law” [Dkt.
No. 143-1 at 41].
enter

and

take

In the event of termination, lessors “may repossession

of

the

Leased

Premises

without

limitation of legal process,” and thereafter “re-let the same,
or any part thereof, upon such terms and conditions as Lessors
may deem proper” [Id.].

According to the Lease, neither “re-

entry nor re-letting shall discharge the Lessee from the payment
of royalties due at the time of termination or re-entry, or from
any unsatisfied obligation of the Lessee under the Lease” [Id.].
Also,

no

termination

or

re-entry

by

lessors

“shall

bar

the

recovery of accrued royalties or damage for the breach of any of
the terms, conditions or covenants on the part” of the lessee
[Id.].
Pursuant to the Lease, the parties
understood and irrevocably agreed that Lessee shall
not have the right and shall not sell, transfer,
mortgage,
pledge,
collateralize,
pass,
assign,
6

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American Mountaineer Energy,
Inc., et al.

Civil Case No. 1:17cv205

sublease or encumber (collectively ‘Transfer’) this
Lease or any interest in the Leased Premises, in whole
or in part, directly or indirectly, without the
express prior written consent of Lessors which may be
withheld for any reason, with or without cause, and
Lessee hereby specifically and irrevocably waives and
relinquishes all rights to make any Transfer without
such written consent.
[Dkt. No. 143-1 at 44-45].

The Plaintiffs had the right to

terminate the Lease if this provision was violated [Id. at 45].
In 2013 and 2015 respectively, Murray acquired Consolidated
Coal

Company

for

$3.5

billion

and

other

coal

reserves

from

Foresight Reserves, LP for $1.37 billion [Dkt. Nos. 17 at 3;
143-8

at

purchase

21-26].
would

Murray

position

stated

“these

by

press

companies

release

for

growth

that

the

and

for

continued safe, low-cost coal production, utilizing the longwall
mining method” [Dkt. No. 17 at 3].
2016,

Murray

and

AMEI

notified

By letter on August 31,

Plaintiffs

that,

in

order

to

“conserve cash,” AMEI would not make the next scheduled advance
royalty payment or comply with other obligations under the Lease
[Dkt.

Nos.

reference

143-11
was

at

explained

2-3;
as

143-13].
follows

The
by

a

“conserve
Murray

cash”

corporate

representative:
We have, just based on our credit agreements, very
substantial payments due on our first lien debt at the
end of each quarter, and we have very significant
payments due on a semi-annual basis on April 15th and
October 15th of each calendar year.
So given the
timing of this (the September 14, 2016 royalty
7

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

Civil Case No. 1:17cv205

payment), the conservation of cash would have been in
an effort to have sufficient liquidity in order to
make those required debt service payments.
[Dkt. No. 143-8 at 10-11].

The representative acknowledged that

Murray’s concern about its “liquidity position” did not excuse
AMEI’s failure to pay Plaintiffs a minimum royalty under the
Lease [Id. at 19-20].

Murray and AMEI offered to “put the

project ‘on hold’ for five (5) years” and to pay Plaintiffs
$50,000 annually in advance royalty payments rather than the
$2,000,000 due under the Lease [Dkt. No. 143-13].

Defendants

also advised the Plaintiffs that “there will be no increase to
any amount payable in the future years to offset this reduced
annual

advance

lease

payment

for

the

five

(5)

year

period”

[Id.].
AMEI did not pay the scheduled advance royalty on September
14,

2016

nonpayment,

when
the

it

was

due

Plaintiffs

[Dkt.
provided

No.

143-8

AMEI

and

at

8].

Murray

Upon
with

a

notice of default [Dkt. Nos. 143-4 at 4; 143-11 at 3; 143-14].
When neither AMEI nor Murray cured the default, the Plaintiffs
terminated the Lease on October 4, 2016 [Dkt. No. 143-11 at 3].
On October 17, 2016, AMEI acknowledged receipt of the default
and

termination

letters,

but

declined

to

cooperate

transfer of mining permits [Dkt. No. 143-17].

in

the

At that time,

AMEI stated that a transfer of the mining permits would not be
8

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

Civil Case No. 1:17cv205

possible because Plaintiffs do not hold the necessary property
rights

to

the

leasehold

estate

[Id.].

AMEI

also

notified

Plaintiffs that the WV/NPDES permits would not be transferred
[Id.].
had

Thereafter, the Plaintiffs learned that AMEI and Murray

been

without

encumbering
the

consent

the
of

leasehold

Plaintiffs

interest
in

under

connection

the

with

Lease
Murray

financing transactions that took place in 2013, 2014, 2015, and
2016 [Dkt. Nos. 143-4 at 5; 143-5 at 7-8].
AMEI
Plaintiffs

and
the

Murray

acknowledge

advance

that

recoupable

the

failure

production

to

pay

royalty

on

September 14, 2016, and the recording of encumbrances without
Plaintiffs’ consent breached the terms of the Lease 2 [Dkt. Nos.
143-4 at 6; 143-5 at 8; 145 at 2; 8; 17].

AMEI and Murray

further acknowledge that, despite “reasonable cooperation” and
application efforts, AMEI did not obtain a Section 401 Water
Quality Certification (“Section 401 Certification”) or Section
404 Clean Water Act Permit (“Section 404 Permit”) by September
2

AMEI and Murray filed an Offer of Judgment on August 3, 2018 for the 2016
advance royalty payment together with interest, or $2,460,000.00 [Dkt. No.
57].
The offer was based on “Plaintiffs’ claim against AMEI for breach of
the September 12, 2008 Consolidated, Amended and Restated Lease between
Plaintiffs and AMEI, as amended, (the “Lease”) by failing to pay the Advance
Recoupable Production Royalty that was due on September 14, 2016” [Id. at 1].
The offer was not accepted. AMEI and Murray also concede “that some security
interests that were prohibited by Section 7.6 and not permitted by Section 11
of the Assignment were inadvertently recorded against the” leasehold [Dkt.
No. 145 at 17]. One of the improper liens was recorded by Defendants after
the termination of the Lease [Dkt. Nos. 143 at 5; 143-3 at 130; 143-10]. As
the improperly recorded liens are now released, Defendants believe this
ground for Plaintiffs’ breach of contract claim is moot.

9

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Inc., et al.

Civil Case No. 1:17cv205

14, 2016 as required by the Lease [Dkt. Nos. 145 at 19; 30-32;
143-9 at 15-16].
In their complaint, the Plaintiffs alleged three claims for
relief.

In Count One, the Plaintiffs claim that AMEI breached

the Lease as follows:

by failing to make a scheduled $2,000,000

advance royalty payment on September 14, 2016; failing to mine
the mineable and merchantable coal during the term of the Lease;
pledging,

encumbering,

transferring
consent;

rights

failing

to

in

collateralizing,
the

obtain

Lease
a

and/or

without

Section

401

the

otherwise
Plaintiffs’

Certification

and

Section 404 Permit by September 14, 2016; failing to cooperate
in

the

transfer

and

assignment

of

permits,

licenses,

other

documents, and surface rights; and failing to provide surveys,
maps, reports, drilling logs, and other documents [Dkt. No. 1 at
13-18].

Because of these breaches, Plaintiffs seek advance or

minimum

royalty

payments,

lost

production

royalties

and

permitting expenses, and a declaration that the previous advance
royalty payments are forfeited [Id. at 17-18].

In Count Two,

the Plaintiffs seek specific performance from AMEI and Murray,
including

the

transfer

of

permits,

licenses,

pending

permit

applications, and necessary surface rights [Id. at 19-20].

In

Count Three, due to Murray’s role as guarantor under the Lease,

10

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

the

Plaintiffs

seek

to

Civil Case No. 1:17cv205

hold

it

liable

for

AMEI’s

alleged

breaches [Id. at 21].
The Defendants answered the complaint on January 8, 2018
[Dkt. Nos. 9; 10].

The Defendants filed a motion to dismiss

portions of the complaint, which was considered by the Court at
the April 4, 2018 scheduling conference [Dkt. Nos. 19; 23].

The

Court issued a Memorandum Opinion and Order Granting in Part and
Denying Part Defendants’ Motion to Dismiss [Dkt. No. 19] on June
18, 2018.

See, Wickland, et al. v. Am. Mountaineer Energy,

Inc., et al., No. 1:17CV205, 2018 WL 3029273 (N.D.W. Va. June
18, 2018) (the “Order”).
Order dismissed two:

Of Plaintiffs’ claims, the Court’s

breach of contract based on failing to

mine the mineable and merchantable coal during the lease term;
and breach of contract based on the implied covenant of good
faith

and

fair

dealing.

Defendants’

denied as to the remaining claims.

motion

to

dismiss

was

The parties filed cross-

motions for summary judgment on November 30, 2018 [Dkt. Nos. 142
and 144], and the matter is scheduled for a bench trial on April
15, 2019.
II.

STANDARD OF REVIEW

Summary judgment is appropriate when there is no genuine
issue

of

material

fact

and

judgment as a matter of law.

the

moving

party

is

entitled

to

Fed. R. Civ. P. 56(c); see also
11

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

Civil Case No. 1:17cv205

Hunt v. Cromartie, 526 U.S. 541, 549 (1999); Celotex Corp. v.
Catrett, 477 U.S. 317, 322-23 (1986); Hoschar v. Appalachian
Power Co., 739 F.3d 163, 169 (4th Cir. 2014).

A “material fact”

is a fact that could affect the outcome of the case.
v.

Liberty

Lobby,

Inc.,

477

U.S.

242,

248

(1986);

Anderson
News

&

Observer Publ’g Co. v. Raleigh-Durham Airport Auth., 597 F.3d
570,

576

(4th Cir.

2010).

A

“genuine

issue”

concerning

a

material fact exists when the evidence is sufficient to allow a
reasonable jury to return a verdict in the nonmoving party’s
favor.

FDIC v. Cashion, 720 F.3d 169, 180 (4th Cir. 2013); News

& Observer, 597 F.3d at 576.
Thus, a summary judgment motion should be granted if the
nonmovant fails to make a showing sufficient to establish the
existence of an essential element of his claim or defense upon
which he bears the burden of proof.

Celotex, 477 U.S. at 323.

That is, once the movant shows an absence of evidence on one
such element, the nonmovant must then come forward with evidence
demonstrating there is indeed a genuine issue for trial.
323-324.

The

existence

of

a

mere

scintilla

of

Id. at
evidence

supporting the nonmovant’s position is insufficient to create a
genuine issue; rather, there must be evidence on which a jury
could reasonably find for the nonmovant.
252.

Anderson, 477 U.S.

When determining whether summary judgment is appropriate,
12

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

a

court

must

view

all

Civil Case No. 1:17cv205

factual

evidence

and

any

reasonable

inferences to be drawn therefrom, in the light most favorable to
the nonmoving party.

Hoschar, 739 F.3d at 169.

In considering a motion for summary judgment, the court
will not “weigh the evidence and determine the truth of the
matter,”

Anderson,

477

U.S.

at

determinations of credibility.
182 (4th Cir. 1986).

249,

nor

will

it

make

Sosebee v. Murphy, 797 F.2d 179,

If disputes over a material fact exist that

“can be resolved only by a finder of fact because they may
reasonably

be

resolved

in

judgment is inappropriate.

favor

of

either

party,”

summary

Anderson, 477 U.S. at 250.

If,

however, the nonmoving party “fails to make a showing sufficient
to

establish

the

existence

of

an

element

essential

to

that

party’s case,” then summary judgment should be granted because
“a

complete

failure

of

proof

concerning

an

essential

element . . . necessarily renders all other facts immaterial.”
Celotex, 477 U.S. at 322-323.
When presented with motions for summary judgment from both
parties, courts apply the same standard of review.
Voorhaar,

316

F.3d

516,

523

(4th

Cir.

2003).

Rossignol v.
Courts

“must

review each motion separately on its own merits to determine
whether either of the parties deserves judgment as a matter of
law,” resolving factual disputes and drawing inferences for the
13

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

nonmoving

party

as

to

Civil Case No. 1:17cv205

each

motion.

Id.

at

523;

see

also

Monumental Paving & Excavating, Inc. v. Pa. Manufacturers’ Ass’n
Ins. Co., 176 F.3d 794, 797 (4th Cir. 1999).
III. APPLICABLE LAW
Summary judgment in this case turns on one issue:
proper

construction

of

the

Lease

between

the

the

parties.

“A

federal court exercising diversity jurisdiction is obliged to
apply the substantive law of the state in which it sits.”

Volvo

Const. Equip. N. Am. v. CLM Equip. Co., Inc., 386 F.3d 581, 599600 (4th Cir. 2004) (citing Erie R.R. Co. v. Tompkins, 304 U.S.
64, 79 (1938)).

Here, the Court must apply West Virginia law.

Beckley Mech., Inc. v. Erie Ins. & Cas. Co., 374 F. App’x 381,
383 n. 1 (4th Cir. 2010) (unpublished decision) (citing Erie,
304 U.S. 64).
Under West Virginia law, a prima facie breach of
contract claim requires the plaintiff to allege four
elements:
(1) that there is a valid, enforceable
contract; (2) that the plaintiff has performed under
the contract; (3) that the defendant has breached or
violated its duties or obligations under the contract;
and (4) that the plaintiff has been injured as a
result.
KBS Preowned Vehicles, LLC v. Reviva, Inc., No. 1:13CV138, 2014
WL 12591890, at *2 (N.D.W. Va. Mar. 26, 2014) (citing Dan Ryan
Builders, Inc. v. Crystal Ridge Dev., Inc., No. 1:09CV161, 2013
WL 5352844, at *11 (N.D.W. Va. Sept. 24, 2013)).

14

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Inc., et al.

Civil Case No. 1:17cv205

“A valid written instrument which expresses the intent of
the parties in plain and unambiguous language is not subject to
judicial construction or interpretation but will be applied and
enforced according to such intent.”

Syl. Pt. 2, Toppings v.

Rainbow Homes, Inc., 490 S.E.2d 817 (W. Va. 1997) (quoting Syl.
Pt. 1, Cotiga Dev. Co. v. United Fuel Gas Co., 128 S.E.2d 626
(W. Va. 1962)).

“Uncertainties in an intricate and involved

contract should be resolved against the party who prepared it.”
Syl. Pt. 8, Estate of Tawney v. Columbia Nat. Res., LLC, 633
S.E.2d

22

(W.

Va.

2006)

(quoting

Syl.

Pt.

1,

Charlton

v.

Chevrolet Motor Co., 174 S.E. 570 (W. Va. 1934)).
“The

mere

fact

that

parties

do

not

agree

to

the

construction of a contract does not render it ambiguous.

The

question as to whether a contract is ambiguous is a question of
law to be determined by the court.”

Syl. Pt. 2, CONSOL Energy,

Inc. v. Hummel, 792 S.E.2d 613 (W. Va. 2016) (quoting Syl. Pt.
1, Berkeley Cty. Pub. Serv. Dist. v. Vitro Corp. of Am., 162
S.E.2d

189

(W.

Va.

1968)).

Ambiguous

language

is

that

“reasonably susceptible of two different meanings or language of
such doubtful meaning that reasonable minds might be uncertain
or disagree as to its meaning.”

Syl. Pt. 5, Jochum v. Waste

Mgmt. of W. Va., Inc., 680 S.E.2d 59 (W. Va. 2009) (quoting Syl.
Pt. 4, Tawney, 633 S.E.2d 22).
15

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Inc., et al.

Civil Case No. 1:17cv205

To determine the intent of the parties to a contract, a
court must examine the contract “in its entirety.”

Columbia Gas

Trans. Corp. v. E.I. du Pont de Nemours & Co., 217 S.E.2d 919,
925 (W. Va. 1975).

The contract must be construed to “render

all its provisions consistent and harmonious.”

Edwin Miller

Investments, L.L.C. v. CGP Dev. Co., Inc., 752 S.E.2d 901, 906907 (W. Va. 2013).
IV.

DISCUSSION

Plaintiffs request summary judgment on all counts of the
complaint [Dkt. Nos. 142; 143].
Murray

breached

the

Lease

recoupable

production

wrongfully

encumbering

interest;

failing

to

Plaintiffs insist that AMEI and

by

royalty
and

obtain

failing
since

to

pay

September

collateralizing
a

Section

the

401

the

advance

14,

2016;

leasehold

Certification

and

Section 404 Permit by September 14, 2016; failing to cooperate
in

the

transfer

and

assignment

of

permits,

licenses,

other

documents, and surface rights; and failing to provide surveys,
maps, reports, drilling logs, and other documents as required
after termination of the Lease [Dkt. Nos. 17; 143].

Plaintiffs

contend that the breaches of the Lease left them without the
benefit of their bargain and unable to re-lease the premises
[Id.].

16

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

While

AMEI

and

Civil Case No. 1:17cv205

Murray

concede

that

AMEI

did

not

pay

Plaintiffs the advance royalty payment on September 14, 2016, or
thereafter, and that they “inadvertently” encumbered the Leased
Premises

without

providing

notice

to

Plaintiffs

and

without

consent, 3 in violation of the Lease, Defendants disagree that the
breaches

resulted

in

injury

to

Plaintiffs

minimum royalty payment for 2016.

beyond

a

single

AMEI and Murray also agree

that AMEI did not obtain a Section 401 Certification or Section
404 Permit by September 14, 2016 as expressly required by the
Lease, but argue that they took every reasonable step to do so,
stopping their efforts once Plaintiffs notified them of default.
Defendants contest the claim that they have failed to cooperate
in

the

transfer

and

assignment

of

permits,

licenses,

other

documents, and surface rights because the Plaintiffs do not own
the surface rights necessary to mine the leasehold interest.
3

Defendants admit that “some security interests prohibited by Section 7.6 and
Section 11 of the Assignment were inadvertently recorded against the”
leasehold [Dkt. No. 145 at 17; Exh. 10 at 129-131], but that they have “now
been released, and those releases have been properly recorded” [Id. at 17;
Exh. 1 at 222].
Defendants seem to believe that the wrongful encumbrances
cannot be deemed a contract breach if they were “inadvertent” and are
released.
Whether the recording of wrongful encumbrances or liens was
intentional or inadvertent makes no difference under the language of Lease.
Any pledge, collateralization, or encumbrance without the express prior
written consent of the Plaintiffs violates the Lease. Moreover, the failure
of Plaintiffs to declare default on this ground does not absolve Defendants
of liability or waive Plaintiffs’ claim [Dkt. No. 143-1 at 40-41]. The Court
also notes that Defendants’ inadvertence in publicly recording improper liens
against the Lease Premises occurred thirteen (13) separate times over a
multi-year time frame, including once in 2017 after the Lease was terminated,
and after Defendants’ August 31, 2016 letter advising Plaintiffs that the
project lacks value for the foreseeable future [Dkt. Nos. 143-3 at 130; 143-4
at 5-6].

17

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

Civil Case No. 1:17cv205

Defendants argue that the Plaintiffs have no ownership interest
in the surface rights above the Leased Premises, and that the
Lease

requires

no

cooperation

by

way

of

the

transfer

or

assignment of those surface rights which are necessary for the
transfer of the mining permits.
A. Breach of Contract
The proper starting point for resolving this dispute is the
text of the Lease.

The Lease requires that AMEI, as lessee, pay

Plaintiffs, as lessors, an “annual advance recoupable production
royalty”

[Dkt.

No.

143-1

at

27].

These

advance

or

minimum

payments were not intended as a penalty against AMEI, but as
“compensation to Lessors for the delay in receiving” expected
production royalties if lessee timely performed the conditions
of the Lease [Id. at 27-29].

AMEI was to recoup the advance

payments once it began production and owed production royalties
[Id.].

The Lease provided for advance payments to Plaintiffs

for the life of the Lease, from September 14, 2008 to September
14, 2031 [Id.; Dkt. No. 143-7 at 3-4].

The exception to this is

that no advance royalty payment “shall be due when Production
Royalties actually paid in a year equal or exceed the Advance
Recoupable

Royalty

payment

due

for

such

year”

[Id.].

The

parties’ intention as to the required payment of annual advance
recoupable production royalties is unambiguous.
18

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

Civil Case No. 1:17cv205

Plaintiffs argue that the remedy for the failure to pay the
advance royalty payment is to put the Plaintiffs in the same
position as if the Lease had been performed [Dkt. Nos. 143 at
13-14; 159 at 2].

Defendants counter by arguing that such an

interpretation of the Lease would serve as an improper penalty
to AMEI and Murray, and that compensatory damages in breach of
contract actions are to be more strictly confined than those in
cases of tort 4 [Dkt. No. 145 at 15-16].

Similar arguments have

been lodged against breach of contract claims that relate to
royalty provisions that also include acceleration clauses.

See

Lampert v. Tams Mgmt., Inc., et al., No. 5:15CV6746, 2016 WL
9110168 (S.D.W. Va. Mar. 11, 2016).
Here,

the

parties

recoupable

production

production

lease,

provision.

and

negotiated
royalty
AMEI

a

straightforward

provision
knowingly

as

part

failed

to

of

advance
a

honor

coal
the

Murray agreed to guarantee AMEI’s adherence to and

performance of all terms and conditions of the Lease, including

4
The text of the Lease seems to contradict Defendants’ position that a socalled broad interpretation of the annual advance recoupable production
royalty provision would unnecessarily penalize AMEI and Murray. The language
shows that the parties intended for the advance payments to be “recoupable”
and recovered by lessee upon the payment of production royalties to
Plaintiffs [Dkt. No. 143-1 at 27-29].
It further states that if the Lease
terminates for any reason and advance payments have not been recovered by
lessee against production royalties, the advance payments are irrevocably
forfeited by lessee [Id. at 28]. Defendants’ argument that the parties did
not intend for advance royalty payments to extend beyond any single year in
which no production occurred or be retained by Plaintiffs after termination
of the Lease may not be consistent with the parties’ agreement.

19

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

the

language

governing

Civil Case No. 1:17cv205

advance

royalty

payments.

The

Court

FINDS that the language is unambiguous, and that AMEI breached
the Lease as to the minimum royalty payment which was reasonably
anticipated to have been paid if the lessee had performed its
obligations.

Any

other

interpretation

of

the

Lease

would

transform the document into a one-sided agreement that could be
unilaterally terminated by AMEI and Murray at any time without
concern for provisions governing advance royalty payments and
production royalties, permitting, construction, and production
deadlines, and lessors’ ownership of the Leased Premises, and
corresponding rights and remedies.

Such a reading would deny

Plaintiffs the benefit of their bargain when the parties, each a
commercial entity, agreed to this relationship.
Another

point

conceded

by

AMEI

and

Murray

is

that

the

companies wrongfully encumbered and collateralized the leasehold
interest, in violation of Section 7.6 of the Lease and Section
11 of the Assignment [Dkt. Nos. 145 at 17; 145-10 at 129-130].
However,

Defendants

maintain

that

the

encumbrances

were

unintentional, and released without causing harm to Plaintiffs.
One

of

the

improper

liens

was

filed

in

February

2017,

four

months after the Lease was terminated [Dkt. Nos. 157 at 18; 1578

at

18

Defendants

and

Exh.

with

a

B;

157-6

at

130].

Memorandum

of

Lease

20

Plaintiffs
Termination

presented
by

letter

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

Civil Case No. 1:17cv205

dated November 3, 2017, and requested that the memorandum be
executed to record in Harrison County, and that all improperly
recorded liens and encumbrances be released [Dkt. No. 157-10].
The

purpose

of

the

Memorandum

of

Lease

Termination

was

to

correct the public record to reflect that AMEI no longer had a
leasehold interest in the Leased Premises that it had pledged to
its and Murray’s lenders [Id.].

Defendants refused to execute

the Memorandum of Lease Termination [Dkt. No. 157 at 11].
Based

on

the

record

presented,

the

Court

FINDS

that

no

question of material fact exists as to whether AMEI breached the
Lease by improperly recording liens against the Leased Premises
without

Plaintiffs’

unambiguous.

consent.

The

language

of

the

Lease

is

That the breach may have been inadvertent or that

the liens created have now been released makes no difference for
the purposes of liability.
AMEI and Murray likewise concede that AMEI did not obtain a
Section 401 Certification or Section 404 Permit by September 14,
2016 as required under the plain language of the Lease [Dkt.
Nos. 143-9
required

at

that

15-16;
lessee

143-7
make

at

2;

143-1

applications

at

22].

for

all

The

Lease

“permits,

licenses and/or approvals required by any governmental authority
to mine, process and market coal on and from the Leased Premises
and to construct and maintain all improvements required for such
21

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

Civil Case No. 1:17cv205

mining, processing and marketing” by September 14, 2013 [Dkt.
Nos. 143-1 at 22; 143-7 at 2].
that

lessee

“will

have

The Lease language also stated

received

September 14, 2016 [Id.].

all

Permits”

on

or

before

AMEI’s obligation on this point is

not ambiguous or in dispute.

Accordingly, the Court FINDS that

Defendants breached the Lease by failing to secure a Section 401
Certification and Section 404 Permit by September 14, 2016, as
intended and agreed to by the parties.
If the Lease is terminated for any reason other than the
exhaustion of all the coal, its language is clear that AMEI, as
lessee, shall promptly deliver to lessor or its designee “all
surveys,

maps,

analyses,

and

reports,
every

drilling

other

piece

logs,
of

core

samples,

information,

coal

document

or

instrument, regardless of the form it is in, related in any way
to this Lease” and/or lessee’s activities and operations under
the Lease or on the Leased Premises [Dkt. No. 143-1 at 31-32].
Here, after the termination of the Lease, Plaintiffs requested
from Defendants all information consistent with this section,
which

was

described

by

one

of

Defendants’

corporate

representatives as a “survivorship provision” that required the
sharing of information after the fact [Dkt. No. 143-3 at 93-95].
The information was not delivered in a prompt manner as intended
by the parties, and became the subject of multiple discovery
22

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

disputes

during

this

Civil Case No. 1:17cv205

litigation,

terminated on October 4, 2016. 5

long

after

the

Lease

was

Given this current record, the

Court FINDS that AMEI breached the Lease with respect to its
duty to promptly provide plaintiffs with surveys, maps, reports,
drilling logs, and other documents as required after termination
of the Lease.
As to Plaintiffs’ breach of contract claim, the Court FINDS
that the parties had a valid Lease and that its language is
unambiguous on AMEI’s obligations to 1) pay a minimum royalty by
a date certain; 2) obtain necessary mining and environmental
permits,
abstain

licenses,
from

and

wrongfully

certifications
pledging

5

and

by

a

date

encumbering

certain;
the

3)

Leased

The same corporate representative, Jason Witt, testified that Defendants
started gathering the information requested by Plaintiffs, which was required
to be promptly provided under the Lease, but that he was not certain the
information gathered was delivered [Dkt. No. 143-3 at 95].
He also stated
that if the information was readily available and in a format easily
transferrable, he would have expected it to be transferred after the Lease
terminated and before litigation [Id. at 94-95]. The Lease terminated on or
about October 4, 2016, and the complaint in this matter was filed on December
1, 2017 [Dkt. Nos. 143-11; 1]. The Court’s Docket reflects that, while the
parties have engaged in discovery in this litigation, multiple disputes as to
the completeness of written discovery responses, proper verification of
written discovery, and scope of Fed. R. Civ. P. 30(b)(6) designations have
occurred, particularly on Defendants’ behalf. Ultimately, Motions to Compel
were pursued by Plaintiffs [Dkt. Nos. 42; 52], and the parties agreed to
resolve the disputes by agreed order [Dkt. No. 59].
The disputes over the
designation of Fed. R. Civ. P. 30(b)(6) witnesses [Dkt. Nos. 126; 131], were
likewise resolved by an agreed order which denied Plaintiffs’ motion for
sanctions but granted Plaintiffs’ request for fees and costs [Dkt. No. 134].
The parties then had a dispute over the bill of costs that was submitted by
Plaintiffs pursuant to the agreed order [Dkt. Nos. 148; 153; 154; and 155],
which was resolved by order on January 1, 2019 [Dkt. No. 161]. Some of these
protracted
discovery
disputes
involved
information
subject
to
the
“survivorship provision” of the Lease. Therefore, the record is replete with
examples of Defendants’ failure to comply with their obligation under the
Lease to promptly deliver to Plaintiffs all records and documents related to
the Lease, lessee’s activities and operations, or the Leased Premises.

23

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

Civil Case No. 1:17cv205

Premises; and 4) promptly deliver to Plaintiffs surveys, maps,
reports, drilling logs, and other documents after termination.
The

Court

further

FINDS

that

there

is

no

evidence

that

Plaintiffs failed to perform their obligations under the Lease,
while Defendant AMEI violated its duties as discussed above.
Therefore,

the

Court

GRANTS

in

part

Plaintiffs’

motion

for

summary judgment [Dkt. No. 142] as to liability on these grounds
for the breach of contract claim.
B. Specific Performance
In Count Two of the complaint, Plaintiffs assert that, in
addition to the grounds for breach of contract discussed above,
AMEI and Murray breached the Lease by failing to cooperate in
the

transfer

and

assignment

of

permits,

licenses,

documents, and surface rights [Dkt. No. 1 at 18-20].

other

The Lease

expressly states that if it is terminated or cancelled for any
reason, AMEI agrees “to cooperate in the timely transfer and/or
assignment of any and all permits, licenses, etc. required for
mining or operation to Lessors or to its designated assignee
upon

Lessor’s

request

therefore,

to

the

extent

the

assignable or transferrable” [Dkt. No. 143-1 at 31].

same

are

Plaintiffs

seek to compel specific performance of the Lease by requiring
Defendants to “transfer sufficient surface rights in duration
and scope to allow for the mining of all mineable coal and the
24

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

transfer

of

existing

Civil Case No. 1:17cv205

permits,

licenses,

and

applications

to

Plaintiffs or their designee” [Dkt. Nos. 1 at 19-20].
After Plaintiffs notified AMEI and Murray that they were
terminating

the

Lease

for

Defendants’

failure

to

cure

the

default, AMEI acknowledged the Lease termination but declined to
cooperate in the transfer of mining permits [Dkt. No. 143-17].
Jason Witt, on behalf of AMEI, stated by letter that a transfer
of the mining permits would not be possible because Plaintiffs
did not
estate

hold

the

[Id.].

WV/NPDES

Witt

permits

circumstances”

necessary

further

“would

[Id.].

property

also

rights

advised
be

to

the

that

the

corresponding

non-transferrable

Plaintiffs

requested

a

leasehold

under

“term

the

sheet

containing the fair sale price of the surface rights, as well
as, alternatively, terms for a lease of the surface rights, or
the form of another proposed legal document” by which Plaintiffs
may obtain the legal right to enter the surface and conduct
mining operations [Dkt. No. 143-16].

It is not clear from the

record that a meaningful formal response was made to Plaintiffs’
request. 6
6

AMEI states that it offered to convey or transfer all of its surface rights
to Plaintiffs “in exchange for exactly what AMEI paid for those surface
rights” but that the offer was not accepted [Dkt. No. 158 at 16 n. 17]. As
set forth in the Court’s Order of June 18, 2018, “West Virginia law ‘implies
a covenant of good faith and fair dealing in every contract for purposes of
evaluating a party’s performance of that contract’” [Dkt. No. 38 at 17
(citations omitted)].
With that in mind, the Court notes that Defendants’
“offer” ignores the term “assignment” as it is used in the cooperation

25

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

Civil Case No. 1:17cv205

To effectuate a mining permit transfer, Plaintiffs asked
that

an

AMEI

application

corporate

for

Mining

representative

Permit

sign

U-2004-10

(the

a

transfer

“AMEI

Mining

Permit”) for its submission to WVDEP [Dkt. No. 157 at 19].

AMEI

agreed to sign the permit transfer application if it included a
statement

that

provides

in

part:

“AMEI

has

disputed

any

obligation to transfer ownership of, or leasehold interests in,
the surface properties to the Lessors, and has stated that it
will object to certain aspects of the proposed operations under
these

mining

lawful

rights

permits
to

use

that
the

AMEI

believes

surface

in

exceeds

connection

the

Lessors

with

their

mineral ownership” [Dkt. No. 145-15 at 16].
On September 28, 2018, Plaintiffs submitted the AMEI Mining
Permit transfer application on behalf of its designee, Ozias
Energy,

LLC

(“Ozias

Energy”)

[Dkt.

No.

145-14

at

24-25].

Immediately thereafter, on October 1, 2018, AMEI filed a formal
letter of protest to object to the permit transfer application
[Dkt. No. 145-19].

AMEI contends that West Virginia Code § 22-

3-9(a)(9) requires an applicant to support its permit transfer

provision of the Lease. Assignment agreements for surface rights and surface
use agreements are not uncommon instruments for parties to utilize when
access to and the production of mineral rights are in question. A refusal to
negotiate anything other than an outright transfer of ownership seems
contrary to the Lease language that requires AMEI’s cooperation such that the
lessor may continue with mining operations on the Leased Premises when the
Lease is terminated or cancelled.

26

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

Civil Case No. 1:17cv205

request with a description of the legal documents upon which the
applicant’s

legal

right

to

enter

and

conduct

surface-mining

operations on the proposed permit area is based and whether that
right is subject of pending court litigation [Id.].
of

protest

also

references

the

settled

The letter

principle

of

West

Virginia common law that a mineral owner has the right to enter
the overlying surface only to the extent that it is “fairly
necessary”

or

“reasonably

necessary”

to

extract

the

mineral

[Id.].
AMEI objected to the transfer application by claiming that
Plaintiffs’

proposed

construction

plant,

loadout,

and

rail

other

and

use

surface

of

a

facilities

preparation
associated

with the proposed operations are not “reasonably necessary” to
extract the coal in the permitted underground mining area [Dkt.
No. 145-19]. 7

The protest letter explains that the West Virginia

Surface Coal Mining and Reclamation Act prevents the transfer of
a mining permit “unless the applicant affirmatively demonstrates
that the application is in compliance with all requirements of
that statute and the rules issued under it” [Id.].

Because an

applicant is required to identify the legal documents upon which
its

right

to

enter

and

conduct

7

the

proposed

surface

mining

As explained supra, AMEI developed and proposed this very plan in support of
its application for the appropriate permits necessary to commence mining
operations consistent with the Lease.

27

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

operations
legal

is

based,

instrument

and

that

Civil Case No. 1:17cv205

Plaintiffs

grants

it

“failed

the

right

to

any

construct

to

identify

the

facilities authorized by this mining permit,” AMEI argued that
“the Secretary should deny this permit transfer, for failing to
satisfy the minimum requirements for approval” [Id.].
Plaintiffs maintain that because AMEI chose to develop a
mine plan and seek mining permits for that plan that require the
permit holder to own certain surface rights, AMEI must transfer
or assign those rights to comply with the Lease obligation to
cooperate in the transfer of permits and permit applications
[Dkt. No. 143 at 25-26].
sophisticated

parties

They argue that AMEI and Murray are

within

the

coal

industry,

and

knew

or

should have known that to effectuate the express language of the
Lease, Plaintiffs would need to be granted rights to the surface
of the Leased Premises to receive the “timely transfer and/or
assignment of any and all permits, licenses, etc. required for
mining

or

operation”

[Id.

at

27].

If

the

language

is

interpreted as argued by Defendants, the cooperation provision
would be illusory and superfluous, and render the purpose of the
Lease
from

meaningless
actively

because

pursuing

it

coal

would
mining

prevent

Plaintiff

operations

on

the

lessors
Leased

Premises after termination or cancellation of the Lease [Id.].

28

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

Civil Case No. 1:17cv205

Defendants assert that AMEI has “done everything possible
to fulfill its duty under” the Lease to “‘cooperate’ in the
transfer of permits ‘to the extent the same are assignable or
transferrable’” [Dkt. No. 158 at 9].
“the

AMEI

mining

party . . . that

permit

lacks

is

sufficient

Defendants also argue that

not

‘transferrable’

surface

rights,” 8

and

to

a

that,

under the Lease, AMEI is “only required to cooperate in the
transfer of permits that are “‘transferrable’” [Dkt. No. 145 at
22].

AMEI and Murray deny that they have affirmatively impeded

the transfer of permits and permit transfer applications, as
alleged by Plaintiffs, and maintain that even if the permits are
not transferred, Plaintiffs will have incurred no damages [Id.
8

Defendants have made conflicting statements about whether the mining permit
can transfer to Plaintiffs. In a letter to Plaintiffs after termination of
the Lease, AMEI representative Jason Witt advised that the permits are nontransferrable under West Virginia law because Plaintiffs have no ownership
rights in the surface of the leasehold estate [Dkt. No. 145-17]. In his Fed.
R. Civ. P. 30(b)(6) deposition, Witt testified that the permits in question
can be transferred but “you still have that issue of who owns the surface and
who controls it and what rights will be – I mean what compensation would be
paid for those rights if another party owns them” [Dkt. No. 143-3 at 104–05].
To effectuate a transfer, AMEI’s corporate officer signed a permit transfer
application which was returned to Plaintiffs for submission to the WVDEP on
September 28, 2018 [Dkt. No. 145-14 at 24-25]. Immediately after, on October
1, 2018, AMEI’s counsel in this matter, Christopher Power, filed a formal
letter of protest objecting to the permit transfer, and affirming AMEI’s
position that the permit should not transfer because the designee cannot meet
the minimum requirements for transfer – namely a right to access and use the
surface [Dkt. No. 145-19].
Nevertheless, on March 22, 2019, Defendants
sought a continuance of the bench trial in this matter because AMEI
anticipates the WVDEP’s decision granting the mining permit transfer
application which would, according to Defendants’ motion, render moot
Plaintiffs’ claim for breach from Defendants’ failure to cooperate [Dkt. No.
170]. Based on the evidence presented to date, the Court concludes that the
mining permits at issue are transferrable under West Virginia law, and an
administrative process exists with the relevant state regulatory agencies to
effectuate those transfers.

29

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

at 9-10].
for

Civil Case No. 1:17cv205

At the pre-trial hearing on April 5, 2019, counsel

Defendants

transfers

to

argued

AMEI’s

Plaintiffs

right

and

to

protest

insisted

that

the

permit

“[t]here’s

no

obligation to cooperate if the Permit Transfer Application – if
the permit is not transferable.

There is nothing in that lease

language that prevents AMEI from challenging whether or not the
permit is transferable” [Dkt. No. 193 at 25].
Plaintiffs assert that Defendants’ “selective reading” of
the

phrase

“to

transferrable”
provisions
principles
They

is

and
of

contend

the

extent

contrary

its

the
to

purpose,

contract
that

same

the
as

assignable

remainder
well

interpretation

Defendants’

are

as

to

the

West

[Dkt.

failure

of

No.

and
Lease

Virginia’s

157

cooperate

at
in

21].
the

transfer of existing permits has prevented them from mitigating
the

losses

incurred

because

breaches,

and

further

developing

the

mineral

of

AMEI

prevented
reserves

and

them

that

are

Murray’s

from
the

material

re-leasing

and

subject

the

of

Lease [Dkt. No. 143 at 8].
On the record as it is currently developed, the Court FINDS
that the Lease language governing the scope of Defendants’ duty
to cooperate in the transfer of permits and permit applications
is ambiguous.

The parties certainly contemplated the transfer

and/or assignment of “any and all permits, licenses, etc.” that
30

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

are

“required

for

mining

Civil Case No. 1:17cv205

or

operation

to

Lessors

or

to

its

designated assignee upon Lessors’ request therefore” [Dkt. No.
143-1 at 31].

As determined by the Court in its June 16, 2018

Order, the inclusion of “etc.” following “permits, licenses” is
reasonably susceptible to an interpretation that would include
permit transfer applications if they are required for mining or
operation

on

the

Leased

Premises

[Dkt.

No.

38

at

20-21].

Defendants insist that no Lease provision, statute, regulation
or tenet of common law requires them to transfer the entirety of
their surface rights to Plaintiffs.
cooperation

provision

in

the

While this may be true, the
Lease

also

references

an

“assignment,” and the record is not clear on whether the parties
have discussed something short of a full conveyance of surface
property rights by Defendants. 9
There also exists an issue of material fact as to whether
the parties intended the qualifying phrase “to the extent the
same are assignable and transferrable” to be as restrictive as
9

Plaintiffs asked Defendants for a term sheet for the potential transfer
and/or assignment of the surface rights, but it does not appear that terms of
a transaction were meaningfully discussed. Defendants interpret Plaintiffs’
specific performance/failure to cooperate claim as a request for the judicial
condemnation of private property [Dkt. No. 158 at 16]. AMEI maintains that
it offered an outright conveyance or transfer of the surface rights to
Plaintiffs “in exchange for exactly what AMEI paid for those surface rights”
but that it was not accepted [Id. at 16 n. 17]. The Court notes that this
“offer” appears to ignore the “assignment” language in the cooperation
provision of the Lease, which seems contrary to its purpose of requiring
cooperation such that the lessor, on request to the lessee, may continue with
mining operations on the Leased Premises if the Lease with Defendants is
terminated or cancelled.

31

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

Civil Case No. 1:17cv205

maintained by Defendants.

If so, it seems the parties would

have intended for Plaintiff lessors to be prevented from mining
the Leased Premises in perpetuity, so long as Defendants owned
the

surface

rights

and

assignment of the same.

refused

to

negotiate

a

transfer

or

On its face, this interpretation seems

to contradict the express Lease language which states that the
parties do not intend to create a perpetual lease nor to convey
a free-hold estate of any kind [Dkt. No. 143-1 at 21].
the

Court

needs

to

hear

additional

evidence

on

However,

this

issue.

Accordingly, the Court DENIES in part Plaintiffs’ motion for
summary

judgment

[Dkt.

No.

142]

on

whether

AMEI

and

Murray

breached the Lease language that requires the timely transfer or
assignment of “permits, licenses, etc.” that are required for
mining or operation, and whether Plaintiffs may be entitled to
specific performance.
C. Guaranty Claim
On the record presented, there is no question that Murray
agreed to guarantee AMEI’s performance under the Lease when it
was

executed

Defendants

on
also

September
concede

12,

2008

that

[Dkt.
Murray

No.

143-6

at

“absolutely

5].
and

unconditionally guaranteed the full and complete performance and
payment by AMEI under the Lease and Assignment” [Dkt. No. 143-4
at 5].

They further admit that Murray did not pay the advance
32

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

Civil Case No. 1:17cv205

royalty payment that AMEI failed to pay Plaintiffs by September
14, 2016 [Id. at 6].

Defendants assert that Murray received a

May 31, 2017 letter from Plaintiffs’ counsel which identified “a
number of different alleged breaches of the Lease by AMEI,” and
“merely included” a statement that the letter “‘shall also serve
as

a

demand

guaranty

on

Murray

obligations

in

Energy

Corporation

paragraph

9

of

pursuant

the

to

its

Assignment

and

Assumption Agreement’” [Dkt. Nos. 145 at 9; 157-28].

Because

Plaintiffs previously invoked the guaranty obligation in a more
specific manner after AMEI failed to pay the minimum royalty in
2009, Defendants argue that the May 31, 2017 “demand” letter was
insufficient to put Murray on notice of the breach of the Lease
and the action to be taken to fulfill the guaranty obligation
[Id.].
Plaintiffs counter Defendants’ argument with reference to
Plaintiffs’
Murray

demand

and/or

Recoupable

AMEI

letter,
to

Production

pay

which
the

Royalty;

specifically

amounts
the

due

complete

for

called
the

transfer

for:

Advanced
of

the

permits and licenses on the Leased premises; the release of all
liens and public filings to the Leased Premises; and a mutuallyagreed

written

termination

Nos. 157 at 31; 157-28].

and/or

settlement

agreement

[Dkt.

Defendants’ corporate representative,

Jason Witt, also testified there was no basis for Murray to
33

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

Civil Case No. 1:17cv205

assert that it was not obligated for the payments and liability
owed by AMEI to Plaintiffs [Dkt. No. 157-6 at 56].

Regardless,

Murray has not made any payment owed by AMEI, or acknowledged
its obligations to guaranty the performance of AMEI under the
Lease [Dkt. No. 29 at 6].
The

Court

FINDS

that

no

genuine

issue

of

material

fact

exists as to whether Murray breached the guaranty agreement for
AMEI’s failure to pay Plaintiffs the September 14, 2016 minimum
royalty.

However, the Court further FINDS that the record is in

dispute on the scope and extent of Murray’s guaranty obligation
because the record as to damages attributable to AMEI for breach
of contract has not been established such that judgment as a
matter of law is appropriate.

For these reasons, the Court

DENIES in part Plaintiffs’ motion for summary judgment [Dkt. No.
142] on liability as to Murray’s guaranty obligation beyond the
minimum royalty AMEI failed to pay Plaintiffs by September 14,
2016.
D. Damages
Regarding damages for the breach of contract claims alleged
in the complaint, Plaintiffs seek advance or minimum royalty
payments, lost production royalties and permitting expenses, and
a declaration that the previous advance royalty payments made by
AMEI

are

forfeited

[Dkt.

No.

1
34

at

17-18].

They

also

seek

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

specific

performance

Civil Case No. 1:17cv205

from

AMEI

and

Murray,

including

the

transfer of permits, licenses, pending permit applications, and
necessary surface rights to allow Plaintiffs to mine the Leased
Premises [Id. at 19-20].
Plaintiffs

ask

that

Pursuant to the guaranty obligation,

Murray

be

held

fully

liable

for

AMEI’s

breaches and liabilities [Id. at 21].
Plaintiffs seek the benefit of their bargain, or remedies
that will put them in the same position as if AMEI and Murray
performed their Lease obligations.

See Kanawha-Gauley Coal &

Coke Co. v. Pittston Minerals Grp., Inc., No. 2:09-cv-01278,
2011 WL 3022239, at *12 (S.D.W. Va. July 22, 2011).
specifically
payments

request

from

2016

the

following

through

2031;

damages:
lost

Plaintiffs

minimum

production

royalty

royalties;

costs to obtain permits not yet transferred to Plaintiffs or
obtained by AMEI, including the Section 401 Certification and
Section 404 Permit, and costs necessary to satisfy environmental
mitigation

requirements;

an

order

that

compels

Defendants

to

transfer and/or assign necessary surface rights, mining permits,
and permit applications; and attorneys’ fees and costs resulting
from Defendants’ willful and intentional breach of the Lease,
and

incurred

to

obtain

compliance

by

AMEI

of

obligations under the Lease [Dkt. No. 143 at 19-30].

35

its

turnover

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

Defendants

argue

Civil Case No. 1:17cv205

that

compensatory

damages

in

breach

of

contract actions are to be strictly confined [Dkt. No. 145 at
15-16], and that the damages alleged by Plaintiffs are excessive
and

speculative.

future

advance

Defendants
royalties

challenge

where

a

the

lease

availability
terminated,

is

of
and

dispute that a significant environmental mitigation payment is a
“cost” necessary to obtain a mine permit [Dkt. No. 158 at 3-6].
Defendants further dispute Plaintiffs’ contention that AMEI made
a willful, “conscious decision” to abandon the Lease, and that
they failed to fully cooperate in the transfer of all mining
permits and licenses, or in obtaining a Section 404 permit [Id.
at 7-11].

Likewise, Defendants maintain that the Lease does not

require the transfer or assignment of surface property owned by
AMEI, and that an order of specific performance on this issue
would amount to a judicial condemnation of private property [Id.
at

16-17].

Defendants

assert

that

any

damages

alleged

by

Plaintiffs arose from Plaintiffs’ termination of the Lease and
not

from

any

alleged

breach

by

AMEI

at

the

time

of

the

termination [Id. at 19].
As described herein, this matter involves a coal production
lease

and

royalties

owed

to

Plaintiff

lessors.

The

Supreme

Court of Appeals of West Virginia has defined a mining royalty
as

“a

payment

to

the

owner

of
36

minerals

in

place

for

the

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

privilege

of

removing

Civil Case No. 1:17cv205

and

appropriating

the

same,

and

is

ordinarily based on upon the quantity of material produced.”
Bethlehem Steel Corp. v. Shonk Land Co., 288 S.E.2d 139, 150 (W.
Va. 1982) (quoting Koppers Coal Co. v. Alderson, 26 S.E.2d 226
(W. Va. 1943)).
contractual
industry.
1987)

West Virginia courts have routinely enforced

royalty

provisions

in

the

context

of

the

coal

Anderson v. Nichols, 359 S.E.2d 117, 120 (W. Va.

(affirming

award

of

summary

judgment

for

arbitrator’s

award of royalty payment under coal lease); Babcocke Coal & Coke
Co. v. Brackens Creek Coal Land Co., 37 S.E.2d 519, 524 (W. Va.
1946) (enforcing royalty provisions of contract and declining to
rescind the same despite difficulties in performance); Flavelle
v. Red Jacket Consol. Coal & Coke Co., 96 S.E. 600, 605 (W. Va.
1918)

(writing

that

“if

a

lessee

covenants

to

.

.

.

pay

a

definite rental or royalty, in the event he fails to do so and
he is not exonerated therefrom by some other stipulation of the
contract, he will generally be held to a strict performance of
the covenant”); Lawson, et ux. v. Williamson Coal & Coke Co., 57
S.E. 258, 260-261 (W. Va. 1907) (enforcing royalty provision
despite defendant’s failure to commence mining).
The

Fourth

Circuit

has

adopted

a

similar

approach.

In

Orlandi v. Goodell, 760 F.2d 78, 82 (4th Cir. 1985), the Fourth
Circuit found that a royalty payment was enforceable under the
37

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

Civil Case No. 1:17cv205

“clear terms of the contract” negotiated by the parties, despite
the defendant’s claim of mutual mistake.
82.

Orlandi, 760 F.2d at

In reaching this conclusion, the Fourth Circuit relied on

Babcocke Coal, where the West Virginia Supreme Court of Appeals
stated that “it is frequent occurrence in the business world
that a party to a contract finds that its performance is onerous
and unprofitable; nevertheless, good faith and fair dealing call
for performance.”

Id. (quoting Babcocke, 37 S.E.2d at 522).

In West Virginia, “[c]ontract damages are ordinarily based
on the injured party’s expectation interest and are intended to
give him the benefit of his bargain by awarding him a sum of
money that will, to the extent possible, put him in as good a
position

as

performed.”

he

would

have

been

in

had

the

contract

been

Kanawha-Gauley Coal & Coke Co., 2011 WL 3022239, at

*12 (citing Restatement (Second) of Contracts § 347 (cmt. a)
(1981)).

Thus, West Virginia recognizes that a party injured by

the breach of a contractual obligation may recover compensatory
damages “as may fairly and reasonably be considered as arising
naturally – that is, according to the usual course of things –
from

the

breach

of

the

contract

itself,

or

such

as

may

reasonably be supposed to have been in the contemplation of both
parties at the time they made the contract, as the probable

38

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

result of its breach.”

Civil Case No. 1:17cv205

Kentucky Fried Chicken of Morgantown,

Inc. v. Sellaro, 214 S.E.2d 823, 827 (1975).
West Virginia courts look to the language of the contract
to

ascertain

consequential
Desco

Corp.

(1991); see

whether
damages

v.

were

Harry

also

damages

W.

are

direct

foreseeable
Trushel

Bethlehem

Steel

by

Const.
Corp.,

the
Co.,
288

and

whether

parties.

See

413

S.E.2d

S.E.2d

139,

85
149

(1982).

Moreover, the Fourth Circuit has held that absent a

specific

contractual

provision

barring

claims

for

future

damages, such prospective damages are recoverable by a plaintiff
in a contract action.

Meineke Car Care Centers, Inc. v. RLB

Holdings, LLC, 423 F. App’x 274, 280 (4th Cir. 2011) (reversing
lower court and holding that prospective royalties are a proper
measure

of

post-termination

damages

in

a

breach

of

contract

case).
The
exhibits,

Court
and

has

before

reports

from

it

extensive

the

parties’

experts [Dkt. Nos. 143-19; 143-25].

briefing,

voluminous

respective

industry

As one may expect, the

expert witnesses do not agree on the value of Plaintiffs’ breach
of contract claims or the damages to which Plaintiffs may be
entitled.
estimates

Plaintiffs’
Plaintiffs’

$55,797,141.36

[Dkt.

expert

damages
No.

at

143-19
39

witness,
between
at

18].

John

C.

Bullock,

$21,968,272.36
Defendants’

and

expert

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

Civil Case No. 1:17cv205

witness, Stephen G. Capelli, opines that Plaintiffs terminated
the coal lease which ended AMEI’s obligation to pay any minimum
royalty after the termination date [Dkt. 143-25 at 10].

Capelli

also disputes that Plaintiffs are entitled to the value of lost
coal production if Defendants do not transfer the surface rights
above the Leased Premises, and he characterizes any such claim
as

too

reserves

speculative
[Id.

at

and

based

10-11].

on

inappropriately

estimated

also

with

Capelli

disagrees

the

mineability of Plaintiffs’ reserves [Id. at 12].
The

Court

FINDS

that

a

genuine

issue

of

material

fact

exists as to the type, scope, and amount of damages Plaintiffs
may

be

entitled

to

as

a

result

of

the

breach

of

contract,

whether the breach was decided as a matter of law, on pending
cross-motions for summary judgment, or as may be established by
a preponderance of the evidence during the bench trial.

For the

reasons stated, the Court DENIES in part Plaintiffs’ motion for
summary judgment [Dkt. No. 142] on the issue of damages that may
have

resulted

from

Defendants’

Additionally,

and

for

Court

the

entirety

DENIES

all

the
of

breach

reasons

set

Defendants’

judgment [Dkt. No. 144].

40

of
forth
motion

the

Lease.

herein,
for

the

summary

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

V.

Civil Case No. 1:17cv205

CONCLUSION
The Court GRANTS in part and DENIES in part the Plaintiffs’

motion

for

summary

judgment

[Dkt.

No.

142].

Plaintiffs

are

entitled to judgment as a matter of law on liability for the
following breach of contract claims against AMEI:
•

failing to pay the advance recoupable production royalty
since September 14, 2016;

•

wrongfully pledging and encumbering the Leased Premises;

•

failing to provide surveys, maps, reports, drilling logs,
and other documents as required after termination of the
Lease; and

•

failing to obtain a Section 401 certification and Section
404 permit by a date certain as required in the Lease.

There remains a genuine issue of material fact as to Plaintiffs’
claim that AMEI breached the Lease by failing to cooperate in
the

transfer

and

assignment

of

documents, and surface rights.

permits,

licenses,

other

There also remains an issue as

to whether Plaintiffs are entitled to specific performance of
certain

Lease

obligations.

Also,

while

Plaintiffs

have

established that Murray failed to honor its contractual guaranty
obligation
royalty

on

upon

demand

September

for

14,

AMEI’s

2016,

the

nonpayment
scope

and

of

the

extent

minimum
of

the

guaranty obligation remains at issue for the parties to address
41

Wickland, et al. v.
American Mountaineer Energy,
Inc., et al.

during

the

bench

trial.

Civil Case No. 1:17cv205

Finally,

there

exists

material

questions of fact as to Plaintiffs’ damages, and judgment of law
cannot be granted.
The Court DENIES Defendants’ motion for summary judgment
[Dkt. No. 144].
It is so ORDERED.
The

Court

directs

the

Clerk

to

transmit

copies

of

Memorandum Opinion and Order to counsel of record.
Dated:

April 12, 2019.
/s/ Thomas S. Kleeh
THOMAS S. KLEEH
UNITED STATES DISTRICT JUDGE

42

this