Wickland et al v. American Mountaineer Energy, Inc. et al
Filing
38
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS MOTION TO DISMISS DKT. NO. 19 . Signed by Senior Judge Irene M. Keeley on 6/18/2018. (copy counsel of record)(jmm)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
MARGARET ANNE WICKLAND,
as Trustee for and on Behalf of
an Irrevocable Trust Established
December 23, 1974, and Revocable
Trust Established August 23, 1985;
and GUY CORPORATION,
Plaintiffs,
v.
//
CIVIL ACTION NO. 1:17CV205
(Judge Keeley)
AMERICAN MOUNTAINEER ENERGY, INC.;
and MURRAY ENERGY CORPORATION,
Defendants.
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 19]
For the reasons stated on the record during the scheduling
conference, and for the reasons discussed below, the Court GRANTS
in part and DENIES in part the defendants’ motion to dismiss for
failure to state a claim (Dkt. No. 19).
I. FACTUAL AND PROCEDURAL BACKGROUND
On December 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, 1985,
and Guy Corporation filed this action against American Mountaineer
Energy, Inc. (“AMEI”), and Murray Energy Corporation (“Murray”)
(Dkt. No. 1). The facts are taken from the complaint and construed
in the light most favorable to the plaintiffs. See De’Lonta v.
Johnson, 708 F.3d 520, 524 (4th Cir. 2013).
WICKLAND V. AMEI, ET AL.
1:17CV205
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 19]
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 Premises”). The plaintiffs or
their predecessors in interest originally leased the Premises in
1958 and 1962. On September 12, 2008, however, AMEI became the
lessee
of
the
Premises
pursuant
to
the
assignment
of
a
Consolidated, Amended and Restated Lease (“Lease”) (Dkt. Nos. 17-1;
17-2). That same day, Murray agreed to guarantee AMEI’s performance
under the Lease (Dkt. No. 17 at 6).
The Lease had a primary term of 20 years, and the parties
agreed that part of the consideration was the lessee’s “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. 17-1 at 21). To that end,
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
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WICKLAND V. AMEI, ET AL.
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MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 19]
Id. at 22. In 2013, the primary term of the Lease was extended to
23 years, and these deadlines extended respectively to 2010, 2016,
2019, and 2022 (Dkt. No. 17-3 at 3).
The
Lease
also
contemplated
annual
“advance
recoupable
production royalties” in the amount of $1,000,000 or $2,000,000
beginning
in
2008.
These
royalties
were
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 obligations.” Id. at 27-29. AMEI
would have been able to recoup the advance payments once it
actually began production and owed production royalties. If the
Lease terminated for any reason, however, the advance royalty
payments would “be forfeited and retained by Lessors, if not
recouped by Lessee as provided.” Id.
In the event that the Lease terminated, 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 to its designated assignee upon Lessor’s request therefore, to
the extent the same are assignable or transferrable.” Id. at 31. It
also agreed to “promptly deliver to Lessors (or its designee) all
surveys, maps, reports, drilling logs, core samples, coal analyses,
3
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MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 19]
and every other piece of information, document or instrument.” Id.
at 32-33. If AMEI failed to pay a royalty, the plaintiffs had the
right to terminate the Lease after providing AMEI with written
notice and a ten-day cure period. Id. at 39-40. Upon termination,
the plaintiffs had the right to re-enter the Premises, but AMEI
would remain liable for “the payment of royalties due at the time
of termination or re-entry.” Id. at 41.
Finally, as relevant to the complaint, the parties “understood
and irrevocably agreed that Lessee shall not have the right and
shall not sell, transfer, mortgage, pledge, collateralize, pass,
assign, 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.” Id. 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. It stated by press
release that the purchase would position “these companies for
4
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MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 19]
growth and for continued safe, low-cost coal production, utilizing
the longwall mining method” (Dkt. No. 17 at 3). On August 31, 2016,
Murray and AMEI advised the 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. Id.
When AMEI did not pay the scheduled advance royalty on
September 14, 2016, the plaintiffs provided a notice of default.
When neither AMEI nor Murray cured the default, the plaintiffs
terminated the Lease on October 4, 2016. Id. at 10. On October 17,
2016, AMEI acknowledged receipt of the default and termination
letters, but declined to cooperate in the transfer of mining
permits. Id. Thereafter, the plaintiffs discovered that AMEI and
Murray
had
been
pledging,
mortgaging,
collateralizing,
and
encumbering the Lease without their consent. Id. at 11.
In their complaint filed on December 1, 2017, the plaintiffs
make three claims for relief. In Count One, the plaintiffs allege
that AMEI breached the Lease 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, collateralizing, and/or otherwise
transferring rights in the Lease without the plaintiffs’ consent;
failing to cooperate in the transfer and assignment of permits,
5
WICKLAND V. AMEI, ET AL.
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MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 19]
licenses, other documents, and surface rights; and failing to
provide surveys, maps, reports, drilling logs, and other documents.
Id. at 13-18. As a result of these alleged breaches, the plaintiffs
seek $4 million in advance royalty payments (the 2016 and 2017
payments), as well as $267,820,000 in lost production royalties and
permitting expenses, with a present value of $110,980,000. Id. at
17-18. They also seek a declaration that previous advance royalty
payments are forfeited. Id. at 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, the plaintiffs seek to hold it liable
for AMEI’s alleged breaches. Id. at 21.
The defendants answered the complaint on January 8, 2018 (Dkt.
Nos. 9; 10). Pending is their motion to dismiss portions of the
complaint, which the Court took up at a scheduling conference held
on April 4, 2018 (Dkt. Nos. 19; 23).
II. STANDARD OF REVIEW
Fed. R. Civ. P. 12(b)(6) allows a defendant to move for
dismissal on the grounds that a complaint does not “state a claim
upon which relief can be granted.” When reviewing a complaint, the
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WICKLAND V. AMEI, ET AL.
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MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 19]
Court “must accept as true all of the factual allegations contained
in the complaint.” Anderson v. Sara Lee Corp., 508 F.3d 181, 188
(4th Cir. 2007) (quoting Erickson v. Pardus, 551 U.S. 89, 94
(2007)). “While a complaint . . . does not need detailed factual
allegations, a plaintiff’s obligation to provide the ‘grounds’ of
his
‘entitle[ment]
to
relief’
requires
more
than
labels
and
conclusions, and a formulaic recitation of the elements of a cause
of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544,
555 (2007) (internal citation omitted).
A court is “not bound to accept as true a legal conclusion
couched as a factual allegation.” Papasan v. Allain, 478 U.S. 265,
286 (1986). “[A] complaint must contain ‘enough facts to state a
claim to relief that is plausible on its face.’” Anderson, 508 F.3d
at 188 n.7 (quoting Twombly, 550 U.S. at 547). “A claim has facial
plausibility when the plaintiff pleads factual content that allows
the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009). A motion to dismiss “does not resolve contests
surrounding the facts, the merits of a claim, or the applicability
of defenses.” Republican Party of N.C. v. Martin, 980 F.2d 943, 952
(4th Cir. 1992).
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WICKLAND V. AMEI, ET AL.
1:17CV205
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 19]
In deciding on a motion, the Court need not confine its
inquiry
to
the
complaint;
it
may
also
consider
“documents
incorporated into the complaint by reference, and matters of which
a court may take judicial notice.” Tellabs, Inc. v. Makor Issues &
Rights, Ltd., 551 U.S. 308, 322 (2007). “A copy of a written
instrument that is an exhibit to a pleading is a part of the
pleading for all purposes.” Fed. R. Civ. P. 10(c).
III. APPLICABLE LAW
“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, 599-600
(4th Cir. 2004) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 79
(1938)). Here, the Court must apply West Virginia law. See 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.
8
26,
2014)
(citing
Dan
Ryan
WICKLAND V. AMEI, ET AL.
1:17CV205
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 19]
Builders, Inc. v. Crystal Ridge Dev., Inc., No. 1:09CV161, 2013 WL
5352844, at *11 (N.D.W.Va. Sept. 24, 2013)).
“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.”
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WICKLAND V. AMEI, ET AL.
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MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 19]
Syl. Pt. 5, Jochum v. Waste Mgmt. of W. Va., Inc., 680 S.E.2d 59
(W. Va. 2009) (quoting Estate of Tawney, 633 S.E.2d 22, Syl. Pt.
4).
IV. DISCUSSION
In their motion to dismiss, AMEI and Murray identify and seek
dismissal of “six specific claims” contained within the plaintiffs’
allegations: 2017 Advance Royalty Claim; Failure to Mine Claim;
Lost Production Royalties Claim; Surface Rights Transfer Claim;
Permit Applications Transfer Claim; and Good Faith and Fair Dealing
Claim. As an initial matter, the plaintiffs argue that the motion
is procedurally improper because the defendants are attacking
requests for relief or seeking to “prune” claims, rather than
moving to dismiss any of the three counts.
First, with regard to requests for relief, the plaintiffs
argue
convincingly
that
the
correct
measure
of
damages
inappropriate for analysis on a Rule 12(b)(6) motion.
“A plain reading of Rule 12(b)(6) indicates that the rule
may be used only to dismiss a ‘claim’ in its entirety.”
“[A] demand for relief is not part of a plaintiff's
statement of the claim.” As such, the nature of the
relief included in the demand for judgment is immaterial
to the question of whether a complaint adequately states
a claim upon which relief can be granted. “A court
therefore should not dismiss a complaint so long as it
sets out facts sufficient to support a reasonable
inference that the plaintiff is entitled to any relief
10
is
WICKLAND V. AMEI, ET AL.
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MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 19]
the court can grant, even if that relief is not
specifically requested.” “Any doubt on this score is
dispelled by Rule 54(c), which provides that a prevailing
party may obtain any relief to which he's entitled even
if he has not demanded such relief in his pleadings.”
“Thus, the selection of an improper remedy in the ...
demand for relief will not be fatal to a party's pleading
if the statement of the claim indicates the pleader may
be entitled to relief of some other type.”
Charles v. Front Royal Volunteer Fire & Rescue Dep’t, Inc., 21 F.
Supp. 3d 620, 629 (W.D. Va. 2014) (internal citations omitted).
Second, arguing that distinct allegations within each count
cannot be attacked separately by the defendants, the plaintiffs
cite In re Processed Egg Products Antitrust Litigation, MDL No.
2002, 2011 WL 4945864 (E.D. Pa. Oct. 17, 2011). In that case, the
plaintiffs alleged anti-trust violations against egg and eggproduct producers. Employing a motion to dismiss, the defendants
attempted to narrow the scope of and “establish parameters around
the Plaintiffs’ claim so as to provide some sort of guidance during
the pretrial stage.” Id. at *4. The district court denied the
motion, in part because the defendants had employed an improper
vehicle “to circumscribe and delineate pretrial issues” regarding
the scope of alleged anti-trust violations. Id. at *5. “[T]he task
of limiting the issues or ‘pruning off the surplusage’ should be
accomplished by pre-trial proceedings and not by motions addressed
to the complaint.” Id. (citation omitted).
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WICKLAND V. AMEI, ET AL.
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MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 19]
Unlike
the
defendants
in
Processed
Egg
Products,
the
defendants here are not “merely attack[ing] a non-existent claim”
in an attempt to circumscribe and narrow the issues for trial, but
rather have identified specific breach of contract allegations that
they contend do not state a claim for relief. That the plaintiffs
chose to include numerous allegations of breach of contract under
one count does not insulate separate and independent claims for
relief from review under Rule 12(b)(6). Cf. Mylan Labs., Inc. v.
Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993) (analyzing several
state-law claims for relief contained within one count). Although
the
defendants
attack
several
requests
for
relief
that
are
inappropriate for consideration at this stage of the litigation,
the majority of the defendants’ arguments relate to claims that are
appropriate for analysis under Rule 12(b)(6).
A.
Count One - Breach of Contract
1.
2017 Advance Royalty Claim
The defendants argue that the plaintiffs fail to state a claim
for breach of contract regarding failure to pay the advance royalty
payment scheduled for September 14, 2017, nearly a year after the
Lease terminated (Dkt. No. 20 at 5). According to the defendants,
12
WICKLAND V. AMEI, ET AL.
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MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 19]
the plain language of the Lease does not obligate them to make
royalty payments following termination of the Lease. Id. at 5-6.
This argument is misplaced. In their complaint, the plaintiffs
do not allege that AMEI breached the Lease by failing to make the
payment scheduled for September 14, 2017, but rather that this
payment was not made as a result of the defendants’ breaches (Dkt.
No. 17 at 14). Indeed, in response to the motion to dismiss, the
plaintiffs concede that the September 2017 payment is a measure of
damages that they allegedly incurred (Dkt. No. 21 at 10-11). Given
that the nature of relief “is immaterial to the question of whether
the complaint adequately states a claim upon which relief can be
granted,” Charles, 21 F. Supp. 3d at 629, the Court DENIES the
defendants’ motion to dismiss in this regard.
2.
Failure to Mine/Lost Production Royalties Claims
The plaintiffs allege, in part, that AMEI “materially breached
the Lease by failing to mine the mineable and merchantable coal
during the term of the Lease as required by the Lease” (Dkt. No. 17
at 15). And, as a portion of their damages for “AMEI’s material
breaches,” the plaintiffs seek $262,670,000 in lost production
royalties. Id. at 17-18. Although the parties have a tendency to
13
WICKLAND V. AMEI, ET AL.
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MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 19]
conflate these allegations, the defendants’ arguments regarding
each claim are best addressed separately.
First, the Lease clearly does not support a standalone claim,
the so-called Failure to Mine Claim, that AMEI is in breach for
failing to mine all coal from the Premises. In the Lease, the
parties acknowledged that AMEI had a “commitment to develop”
because part of the consideration for the Lease was that AMEI would
“promptly commence and actively pursue coal mining operations”
(Dkt. No. 17-1 at 21). To that end, the Lease imposed a schedule
regarding
permitting
and
active
mining,
which
was
eventually
amended to require the operation of a longwall mining system by
December 31, 2022 (Dkt. No. 17-3 at 3).
The Lease also required AMEI to follow “Best Mining Practice
of a prudent coal mining operator, so that there will be no
needless or avoidable loss or waste of coal” (Dkt. No. 17-1 at 19).
If mineable coal was not mined, AMEI nonetheless had to pay the
plaintiffs a production royalty on it. Id. The plaintiffs argue
that, because the Lease imposed an obligation on AMEI to pay a
royalty for mineable coal that it left unmined, the termination of
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MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 19]
the Lease obligates it to pay a production royalty for all the coal
left unmined on the Premises (Dkt. No. 21 at 18-20).1
In the context of the entire Lease, it is clear that the
parties did not contemplate such an obligation. For instance, the
obligation to mine all mineable coal or pay a production royalty
remained subject to “all other provisions of this Lease” (Dkt. No.
17-1 at 19). One of those provisions was that AMEI did not have to
commence operation of a longwall mining system until December 31,
2022, more than six years after the plaintiffs elected to terminate
the Lease for non-payment of the 2016 advance royalty. It follows
that, when the Lease terminated, so did AMEI’s obligation to mine
coal and to pay a production royalty for unmined coal.
Moreover, the Lease expressly provides that the plaintiffs
retain advance production royalties in the event that the Lease
terminates, but contains no such provision for the payment of
royalties on unmined coal. Id. at 27-29. If breach or termination
of the Lease rendered the defendants liable for a royalty on all
the Premises coal, the provision forfeiting advance royalties to
the plaintiffs would be rendered meaningless. Therefore, because
1
The plaintiffs neither allege nor contend that AMEI’s
refusal to pay the 2016 advance royalty constituted an anticipatory
breach of the entire contract. See Syl. Pt. 2, Yoak v. Marshall
Univ. Bd. of Governors, 672 S.E.2d 191 (W. Va. 2008).
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DENYING IN PART DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 19]
the Lease is not reasonably susceptible to the interpretation
posited by the plaintiffs, the Court GRANTS the defendants’ motion
to dismiss the Failure to Mine Claim.
Second, the plaintiffs’ Lost Production Royalties Claim is a
statement of the damages flowing from AMEI’s alleged breaches, not
a
freestanding
defendants’
claim
argument
(Dkt.
No.
regarding
17
the
at
2017
17-18).
Advance
Much
like
the
Royalty,
the
contention that this calculation “fails to state a claim” is an
inappropriate attack on the plaintiffs’ request for relief. See
Charles, 21 F. Supp. 3d at 629.2 The
Court
thus
DENIES
the
defendants’ motion to dismiss the Lost Production Royalties Claim,
subject to renewal of their argument at a later date.
3.
Good Faith and Fair Dealing Claim
The defendants also contend that any claim for breach of the
covenant of good faith and fair dealing should be dismissed because
the plaintiffs do not assert that AMEI exercised a discretionary
2
Indeed, the defendants rely solely on cases decided at
summary judgment or after trial to argue that the relief sought by
the plaintiffs is improper. See, e.g., Mike Ross, Inc. v. Dante
Coal Co., 230 F. Supp. 2d 716 (N.D.W.Va. 2002) (Keeley, C.J.);
Kanawha-Gauley Coal & Coke Co. v. Pittston Minerals Grp., Inc., No.
2:09-cv-01278, 2011 WL 3022239 (S.D.W.Va. July 22, 2011); Edwin
Miller Invs., LLC v. CGP Dev. Co., Inc., 752 S.E.2d 901 (W. Va.
2013); Desco Corp. v. Harry W. Trushel Const. Co., 413 S.E.2d 85
(W. Va. 1991).
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WICKLAND V. AMEI, ET AL.
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DENYING IN PART DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 19]
action in bad faith (Dkt. No. 20 at 12-13). The plaintiffs argue
that whether AMEI intentionally breached the Lease in bad faith by
failing to pay the 2016 advance royalty is a factual question
suited for further development (Dkt. No. 21 at 21-22).
“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.’” Evans v. United Bank, Inc., 775
S.E.2d 500, 509 (W. Va. 2015) (quoting Stand Energy Corp. v.
Columbia Gas Transmission, 373 F. Supp. 2d 631, 644 (S.D.W.Va.
2005)). But “[t]he implied covenant of good faith and fair dealing
cannot give contracting parties rights which are inconsistent with
those set out in the contract.” Barn-Chestnut, Inc. v. CFM Dev.
Corp., 457 S.E.2d 502, 509 (W. Va. 1995) (quoting Bonanza Int’l,
Inc. v. Rest. Mgmt. Consultants, Inc., 625 F. Supp. 1431, 1448
(E.D. La. 1986)). The covenant applies “[w]hen a contract confers
discretion on one of the parties that affects the rights of the
other.” Branch Banking & Trust Co. v. Sayer Brothers, Inc., No.
2:14cv19880, 2015 WL 6456570, at *20 (S.D.W.Va. Oct. 26, 2015)
(quoting Staats v. Bank of Am., N.A., No. 3:10cv68, 2010 WL
10899255, at *10 (N.D.W.Va. Nov. 4, 2010)).
The covenant does not give rise to a separate and independent
cause of action, but rather sounds in breach of contract. Evans,
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775 S.E.2d at 509 (citing Gaddy Engineering Co. v. Bowles Rice
McDavid Graff & Love, LLP, 746 S.E.2d 568, 578 (W. Va. 2013)). A
claim based on the implied covenant may be construed as a breach of
contract claim to the extent it covers matters not identical to
other breach of contract claims. JJK Mineral Co., LLC v. Noble
Energy, Inc., No. 5:16cv112, 2017 WL 2662196, at *2 (N.D.W.Va. June
20, 2017); see also LaPosta Oldsmobile, Inc. v. General Motors
Corp., 426 F. Supp. 2d 346, 355-56 (N.D.W.Va. 2006) (dismissing
claim that restated allegations in breach of contract claim).
Here, the plaintiffs allege that “AMEI has breached the Lease
and
its
implied
covenant
of
good
faith
and
fair
dealing
by
violating” various express provisions of the Lease related to
payment of advance royalties (Dkt. No. 17 at 13-18). Despite the
plaintiffs’ reference to the implied covenant, they have not
alleged
that
AMEI
violated
an
additional
duty
not
expressly
delineated in the contract. Because the implied covenant of good
faith and fair dealing cannot support rights contrary to those set
out in the Lease, the plaintiffs’ reliance on the implied covenant
is merely duplicative. See JJK Mineral Co., No. 5:16cv112, 2017 WL
2662196, at *2. Therefore, the Court GRANTS the defendants’ motion
18
WICKLAND V. AMEI, ET AL.
1:17CV205
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 19]
to dismiss Count One to the extent it is based on the implied
covenant of good faith and fair dealing.
B.
Count Two - Specific Performance
The Lease contains the following provision:
If for any reason this Lease is terminated or cancelled,
Lessee 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 Lessors’ request therefore, to
the extent the same are assignable or transferrable.
(Dkt. No. 17-1 at 31). In Count Two, the plaintiffs allege that
various permits have been issued to AMEI, and that several permit
applications remain pending. They further allege that, “because
AMEI chose to develop a mine plan for the mining permits that may
require the permit holder to owner certain surface rights,” it must
transfer
those
surface
rights
in
order
to
comply
with
its
obligation to transfer permits and permit applications under the
Lease (Dkt. No. 17 at 19-20).3 They seek to compel the defendants’
specific performance by requiring them to “transfer sufficient
surface rights in duration and scope to allow for the mining of all
3
This is apparently based on West Virginia’s requirement that
certain permit applications include “[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 the subject of pending court
litigation.” W. Va. Code § 22-3-9(a)(9).
19
WICKLAND V. AMEI, ET AL.
1:17CV205
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 19]
mineable coal and the transfer of existing permits, licenses, and
applications to Plaintiffs or their designee.” Id. at 20.
“Although pled as a separate count, the relief sought in Count
[Two] . . . is not an independent cause of action, but merely a
possible remedy should [the plaintiffs] ultimately establish . . .
a breach by [the defendants].” Windstar Holdings LLC v. Range Res.
Corp., No. 1:10CV204, 2011 WL 2709849, at *3 (N.D.W.Va. July 12,
2011). While the plaintiffs argue that their requests for specific
performance are demands for relief not subject to attack under Rule
12(b)(6) (Dkt. No. 21 at 11-12), the defendants contend that no
claim has been stated that would support the specific performance
requested. Neither of the defendants’ contentions regarding the
Permit Applications Transfer Claim and the Surface Rights Transfer
Claim are persuasive.
1.
Permit Applications Transfer Claim
The defendants contend that the Lease does not require them to
transfer permit applications, as opposed to active permits (Dkt.
No. 20 at 10). The Lease language, however, at best is ambiguous in
this regard. The parties certainly contemplated the transfer of
documents “required for mining or operation”; the inclusion of
“etc.” following “permits, licenses” is thus reasonably susceptible
20
WICKLAND V. AMEI, ET AL.
1:17CV205
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 19]
to an interpretation that would include pending permit applications
if such are required for mining or operation of the Premises. See
Jochum,
680
S.E.2d
59,
Syl.
Pt.
5.
“[T]he
construction
of
‘ambiguous contract provisions is a factual determination that
precludes dismissal on a motion for failure to state a claim.’”
Manning v. Mercatanti, 898 F. Supp. 2d 850, 862 (D. Md. 2012)
(quoting Martin Marietta Corp. v. Int’l Telecomm. Satellite Org.,
991 F.2d 94, 97 (4th Cir. 1992)). Therefore, the Court DENIES the
defendants’ motion to dismiss that part of Count Two seeking to
compel the transfer of pending permit applications.
2.
Surface Rights Transfer Claim
The defendants also contend that the Lease does not impose an
obligation to transfer surface rights, and that no statute or
regulation requires the plaintiffs to acquire AMEI’s surface rights
to receive transfer of permits or applications (Dkt. No. 20 at 1012). The plaintiffs contend that “the parameters and scope of the
cooperation obligations” under the Lease are inappropriate for
analysis under Rule 12(b)(6) (Dkt. No. 21 at 21).
Inasmuch as the plaintiffs do not contest that the Lease and
applicable law impose no express requirement that AMEI transfer
surface rights, the question presented is whether the Lease is
21
WICKLAND V. AMEI, ET AL.
1:17CV205
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 19]
reasonably susceptible to such an interpretation. That the Lease
requires the defendants to “cooperate” in the transfer of permits
may reasonably be read to require them to facilitate access to the
surface as contemplated by the permits and permit applications to
be transferred. Whether this construction is correct is an improper
question at this early stage of the parties’ litigation. Manning,
898 F. Supp. 2d at 862. Therefore, the Court DENIES the defendants’
motion to dismiss this aspect of Count Two.
V. CONCLUSION
For the reasons discussed, the Court GRANTS in part and DENIES
in part the defendants’ motion to dismiss (Dkt. No. 19).
It is so ORDERED.
The Court directs the Clerk to transmit copies of this
Memorandum Opinion and Order to counsel of record.
DATED: June 18, 2018.
/s/ Irene M. Keeley
IRENE M. KEELEY
UNITED STATES DISTRICT JUDGE
22
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