Packard et al. v. Antero Resources Corporation
Filing
26
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS MOTION TO DISMISS THE AMENDED COMPLAINT DKT. NO. 21 AND DISMISSING THE AMENDED COMPLAINT WITH PREJUDICE DKT. NO. 20 . This civil action is dismissed, with prejudice and terminated from the active docket of this Court. Signed by Senior Judge Irene M. Keeley on 3/18/19. (mh)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
JANET C. PACKARD, ET AL.,
Plaintiffs,
v.
CIVIL ACTION NO. 1:18CV04
(Judge Keeley)
ANTERO RESOURCES CORPORATION,
a Delaware corporation,
Defendant.
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT’S
MOTION TO DISMISS THE AMENDED COMPLAINT [DKT. NO. 21] AND
DISMISSING THE AMENDED COMPLAINT WITH PREJUDICE [DKT. NO. 20]
In this consolidated breach of contract case, the plaintiffs,
Janet C. Packard, Leroy Packard, Garnet C. Cottrill, and Marlyn C.
Sigmon (“the Plaintiffs”), allege in their Amended Complaint that
the
defendant,
Antero
Resources
Corporation
(“Antero”),
has
breached certain lease agreements and violated its duty to act in
good faith by pooling the Plaintiffs’ mineral interests through the
use of a horizontal well (Dkt. No. 20). Antero has moved to dismiss
the Amended Complaint contending, among other things, that the
Plaintiffs’ reformed deeds are subject to the pooling modifications
that were executed in 2012 (Dkt. Nos. 21, 22). Alternatively, it
submits that the reformed deeds do not apply retroactively against
it because, under West Virginia law, it is a third party whose
rights will be affected (Dkt. No. 22). Because Antero’s first
argument disposes of the matter in its entirety, the Court GRANTS
PACKARD v. ANTERO
1:18V04
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT’S
MOTION TO DISMISS THE AMENDED COMPLAINT [DKT. NO. 21] AND
DISMISSING THE AMENDED COMPLAINT WITH PREJUDICE [DKT. NO. 20]
Antero’s motion (Dkt. No. 21) and DISMISSES the Amended Complaint
WITH PREJUDICE.
I. BACKGROUND
A.
The Amended Complaint1
In their Amended Complaint, the Plaintiffs allege that they
own mineral interests in real property subject to three oil and gas
leases. These include one tract containing 50.82 acres in Union
District, Harrison County, West Virginia, two tracts containing 6.5
and 104.75 acres in Union District, Harrison County, West Virginia,
and one tract containing 54.18 acres in Union District, Harrison
County, West Virginia (“the Subject Property”) (Dkt. No. 20 at 113).2 When the Plaintiffs inherited their interests in these tracts
in 1987, those interests were subject to three oil and gas leases
(“the Subject Leases”).3 Id. at 2, 5, 10. Allegedly, the Subject
Leases “did not provide authority for pooling or unitization.” Id.
at 13.
1
The facts are taken from the Amended Complaint and, as they must be, are
construed in the light most favorable to the plaintiffs. See De’Lonta v. Johnson,
708 F.3d 520, 524 (4th Cir. 2013).
2
Unless otherwise noted, citations to docket entries in this Memorandum
Opinion and Order refer to the lead case: Civil Action No. 1:18cv4.
3
Although the Amended Complaint does not explain how Janet Packard’s
husband, Leroy Packard, obtained his interest in the mineral interests at issue
here, it has no impact on the Court’s analysis.
2
PACKARD v. ANTERO
1:18V04
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT’S
MOTION TO DISMISS THE AMENDED COMPLAINT [DKT. NO. 21] AND
DISMISSING THE AMENDED COMPLAINT WITH PREJUDICE [DKT. NO. 20]
Later, in 1989, the Plaintiffs conveyed their interests in the
50.82-acre tract, the 6.5- and 104.75-acre tracts, and the 54.18acre tract to Gerald W. Corder, Roger M. Corder, and Randall N.
Corder (“the Corders”), respectively (“the 1989 Deeds”). Id. at 2,
5-6, 10-11. The Plaintiffs concede that all three conveyances
“failed to reserve an undivided interest in the oil and gas to the
grantors,” which they describe as a “scrivenor’s error.” Id. at 2,
6, 11. Although the 1989 Deeds failed to reserve their mineral
interests, the Plaintiffs allege that the property tax on their
mineral interests has been assessed and paid since at least 2004,
making them “of record.” Id. at 4, 8-9, 12-13. These tax tickets
are attached to the Amended Complaint as Exhibit 2 (Dkt. No. 20-2).
While the property taxes were being assessed and paid, Antero
acquired the Subject Leases in 2010 and 2012 (Dkt. No. 20 at 3, 6,
11).4 After acquiring these leases, Antero had the Corders execute
three oil and gas lease modifications that purportedly gave Antero
the express right to “pool” the underlying mineral interests (“the
Pooling Modifications”) (Dkt. No. 20-1).
4
Although the Amended Complaint alleges that Antero acquired the Subject
Leases in 2010 and 2012, Antero submits that it became the assignee of the
Subject Leases in 2008 and 2010 (Dkt. No. 22 at 3).
3
PACKARD v. ANTERO
1:18V04
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT’S
MOTION TO DISMISS THE AMENDED COMPLAINT [DKT. NO. 21] AND
DISMISSING THE AMENDED COMPLAINT WITH PREJUDICE [DKT. NO. 20]
Nearly two years later, in 2014, the Plaintiffs and others
filed suit in the Circuit Court of Harrison County, West Virginia,
to reform the 1989 Deeds to include their previously omitted
reservation of mineral interests (Dkt. No. 20 at 2-3, 6, 11, 1314). Soon after filing suit, the Plaintiffs and others filed a
“Notice of Lis Pendens” in the Office of the Clerk of Harrison
County, West Virginia, to put others on notice that litigation was
pending and that they claimed mineral interests under the 1989
Deeds (Dkt. No. 20-5). After their state court action succeeded
(Dkt. No. 20-7), the parties executed reformed deeds, which were
recorded in 2016 (“the Reformed Deeds”) (Dkt. Nos. 20 at 3-4, 6-8,
11-12; 22-3). The Reformed Deeds establish that the Plaintiffs and
others retained their respective mineral interests in the 1989
Deeds. Id.
Even though the Subject Leases do not expressly grant the
right to pool or unitize, the Plaintiffs allege that Antero has
drilled horizontal wells through each of the tracts at issue,
produced minerals from the oil and gas estate, and pooled their gas
with the gas of others (Dkt. No. 20 at 15-17). Accordingly, the
Amended Complaint asserts a claim for breach of contract. Id. at
16-17.
4
PACKARD v. ANTERO
1:18V04
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT’S
MOTION TO DISMISS THE AMENDED COMPLAINT [DKT. NO. 21] AND
DISMISSING THE AMENDED COMPLAINT WITH PREJUDICE [DKT. NO. 20]
B.
Procedural History
The plaintiffs filed these actions in December 2017 in the
Circuit Court of Harrison County, West Virginia (Dkt. No. 1-1).
Antero timely removed them to this Court based on diversity
jurisdiction (Dkt. No. 1). After Antero moved to dismiss each of
the complaints (Dkt. No. 6), the Court held a scheduling conference
during which it consolidated the cases and granted in part and
denied in part Antero’s motions (Dkt. Nos. 18, 19). Later, the
Court issued a Memorandum Opinion explaining its decision, and
expressly declining to address Antero’s argument that it had the
right to pool under the Pooling Modifications because the parties
had not addressed what effect, if any, the Reformed Deeds had on
these modifications (Dkt. No. 23 at 15). The Plaintiffs responded
by filing an Amended Complaint alleging the instant breach of
contract claim (Dkt. No. 20). Now pending is Antero’s motion to
dismiss the Amended Complaint, which is fully briefed and ripe for
review (Dkt. No. 21).
II. STANDARD OF REVIEW
Federal Rule of Civil Procedure 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 the
5
PACKARD v. ANTERO
1:18V04
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT’S
MOTION TO DISMISS THE AMENDED COMPLAINT [DKT. NO. 21] AND
DISMISSING THE AMENDED COMPLAINT WITH PREJUDICE [DKT. NO. 20]
sufficiency of a complaint, a district 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
‘entitle[ment]
to
to
relief’
provide
the
requires
more
‘grounds’
than
of
his
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).
In order to be sufficient, “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
6
PACKARD v. ANTERO
1:18V04
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT’S
MOTION TO DISMISS THE AMENDED COMPLAINT [DKT. NO. 21] AND
DISMISSING THE AMENDED COMPLAINT WITH PREJUDICE [DKT. NO. 20]
the applicability of defenses.” Republican Party of N.C. v. Martin,
980 F.2d 943, 952 (4th Cir. 1992).
When deciding the motion, the Court need not confine its
inquiry
to
the
complaint;
it
may
also
consider
“documents
incorporated into the complaint by reference.” 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. DISCUSSION
Antero contends that the Amended Complaint fails to state a
claim for breach of contract because it has not breached or
violated its duties under the Subject Leases (Dkt. No. 22 at 8).
According to Antero, it has the authority to pool the Subject
Property under the Pooling Modifications. Id. And according to the
plain language of the Plaintiffs’ Reformed Deeds, those deeds are
“subject to” the Pooling Modifications. Id.
In response, the Plaintiffs principally argue that Antero was
not a “bonafide purchaser” because it had actual or constructive
notice of their mineral interests before executing the Pooling
Modifications (Dkt. No. 24 at 10). Thus, they argue that the
Reformed Deeds relate back to the original date of the 1989 Deeds.
7
PACKARD v. ANTERO
1:18V04
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT’S
MOTION TO DISMISS THE AMENDED COMPLAINT [DKT. NO. 21] AND
DISMISSING THE AMENDED COMPLAINT WITH PREJUDICE [DKT. NO. 20]
Id. at 10-13. Addressing Antero’s plain language argument more
specifically,
the
Plaintiffs
contend
that
the
Reformed
Deeds
explicitly relate back to the date of the 1989 Deeds. Id. at 13-14.
And because they relate back, the Plaintiffs insist that they are
not subject to pooling modifications executed by others.5 Id. at
14-15.
The Reformed Deeds include the following two clauses:
By executing this Deed of Reformation,
GRANTOR and GRANTEES thereby acknowledge that
this deed complies with th November 3, 2015
court order referenced herein. GRANTOR and
GRANTEES each hereby further acknowledge and
agree that as a result of the execution of
this Deed of Reformation, GRANTOR and each of
the GRANTEES own the undivided interest in the
oil and gas estates of the tracts subject to
this deed as set forth herein as of September
5, 1989.
This conveyance is made subject to all
other exceptions, reservations, restrictions,
conditions, covenants, easements, rights of
way or other servitudes, if any, made,
retained or vested in prior instruments of
record in the chain of title to the real
estate herein conveyed, insofar as the same
are valid and in effect.
(Dkt. No. 22-3 at 5, 17, 29-30) (emphasis added).
5
The Plaintiffs also argue that the Subject Leases do not expressly or
implicitly provide for pooling (Dkt. No. 24 at 15-16), but both arguments are not
relevant to whether the Reformed Deeds are “subject to” the Pooling
Modifications.
8
PACKARD v. ANTERO
1:18V04
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT’S
MOTION TO DISMISS THE AMENDED COMPLAINT [DKT. NO. 21] AND
DISMISSING THE AMENDED COMPLAINT WITH PREJUDICE [DKT. NO. 20]
In West Virginia, it is well settled that contracts must be
read in their entirety. Wood v. Sterling Drilling & Prod. Co.,
Inc., 422 S.E.2d 509, 511 (W. Va. 1992). Indeed, contracts “must be
considered and construed as a whole, giving effect, if possible, to
all parts of the instrument. Accordingly, specific words or clauses
of an agreement are not to be treated as meaningless, or to be
discarded, if any reasonable meaning can be given them consistent
with the whole contract.” Syl. Pt. 3, Moore v. Johnson Serv. Co.,
219 S.E.2d 315 (1975); see also W. Va. Dep’t of Highways v. Farmer,
226 S.E.2d 717, 719 (W. Va. 1976) (“It has long been held that
where language in a deed is unambiguous there is no need for
construction and it is the duty of the court to give to every word
its usual meaning.”).
Here, that task is not difficult. Reading these two clauses
together, it is clear that, although the Reformed Deeds relate back
to the date of the 1989 Deeds, they are “subject to” any servitudes
that are recorded in the chain of title, “insofar as the same are
valid and in effect.” The relevant question, then, is whether the
Pooling Modifications, which were recorded in the chains of title
(Dkt. No. 20-1), are indeed valid and in effect.
9
PACKARD v. ANTERO
1:18V04
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT’S
MOTION TO DISMISS THE AMENDED COMPLAINT [DKT. NO. 21] AND
DISMISSING THE AMENDED COMPLAINT WITH PREJUDICE [DKT. NO. 20]
The Plaintiffs submit that the Pooling Modifications are
neither valid nor in effect because Antero was not a “bonafide
purchaser” when it executed the Pooling Modifications in 2012 (Dkt.
No. 24 at 14). This is so because Antero ostensibly had actual or
constructive knowledge of their mineral interests at that time. Id.
at 8-10, 15 n.6. On the other hand, Antero contends that the
Plaintiffs’ bonafide purchaser argument is irrelevant for two
reasons (Dkt. No. 6-7).
First,
the
bonafide
purchaser
doctrine
only
applies
to
interests in “real property,” and “[p]ooling mineral interests does
not create ‘an interest in real property.’” Id. at 7. Rather,
“‘pooling results in a consolidation of contractual and financial
interests regarding the drilling and production of oil and gas from
the combined parcels of land.’” Id. (emphasis omitted) (quoting
Syl. Pt. 1, Gastar Exploration, Inc. v. Contraguerro, 800 S.E.2d
891 (W. Va. 2017)). Next, the bonafide purchaser doctrine does not
extend to reformed deeds, which are governed by whether the rights
of intervening third parties will be affected. Id. at 8 (citing
Durbin v. McElroy Coal Co., No. 17-0289, 2018 WL 1721898, at *3 (W.
Va. Apr. 9, 2018)). The Court need only address Antero’s first
argument to dispose of this issue.
10
PACKARD v. ANTERO
1:18V04
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT’S
MOTION TO DISMISS THE AMENDED COMPLAINT [DKT. NO. 21] AND
DISMISSING THE AMENDED COMPLAINT WITH PREJUDICE [DKT. NO. 20]
Under West Virginia law, “[a] bona fide purchaser is one who
actually purchases in good faith.” Syl. Pt. 1, Kyger v. Depue, 6 W.
Va. 288 (1873) (emphasis omitted). In other words, “a bona fide
purchaser
of
consideration,
suspicious
land
paid
is
‘one
or
parted
circumstances
to
who
put
purchases
with,
him
without
on
for
a
valuable
notice
inquiry.’”
of
any
Subcarrier
Commc’ns, Inc. V. Nield, 624 S.E.2d 729, 737 (W. Va. 2005) (quoting
Stickley v. Thorn, 106 S.E. 240, 242 (W. Va. 1921)). “This rule
protects good faith purchasers who conduct due diligence prior to
purchasing an interest in real property.” Trans Energy, Inc. v. EQT
Prod. Co., 743 F.3d 895, 904 (4th Cir. 2014) (citing Gullett v.
Burton, 345 S.E.2d 323, 327 (W. Va. 1986)).
To determine whether the bonafide purchaser doctrine applies
here, the Court must determine whether the Pooling Modifications
created an interest in real property. In Gastar Exploration, the
Supreme Court of Appeals of West Virginia considered whether a
lease’s pooling provision was dependent upon the consent and
ratification of nonparticipating royalty interests. 800 S.E.2d at
898. To answer that question, the Supreme Court considered whether
to apply a “cross-conveyance theory” or a “contract theory.” Id. at
899. Under the latter theory, “pooling results in a consolidation
11
PACKARD v. ANTERO
1:18V04
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT’S
MOTION TO DISMISS THE AMENDED COMPLAINT [DKT. NO. 21] AND
DISMISSING THE AMENDED COMPLAINT WITH PREJUDICE [DKT. NO. 20]
of contractual and financial interests regarding oil and gas
production from the combined parcels of land. Joint or undivided
ownership interests in oil and gas rights are not created.” Id.
(emphasis added). Finding that West Virginia is a contract theory
state, the Supreme Court rejected the alternative theory and
confirmed that “pooling results in a consolidation of contractual
and financial interests regarding the drilling and production of
oil and gas from the combined parcels of land.” Id. at 901.
Based
on
the
holding
in
Gastar
Exploration,
the
Court
concludes that the Pooling Modifications at issue here did not
create an interest in real property, but rather consolidated
“contractual and financial interests regarding the drilling and
production of oil and gas” under the Subject Property. 800 S.E.2d
at 901. And because the Pooling Modifications did not create an
interest in real property, the bonafide purchaser doctrine does not
apply. See Trans Energy, Inc., 743 F.3d at 904 (citing Gullett, 345
S.E.2d at 327). Critically, the Plaintiffs have neither alleged nor
argued that the Pooling Modifications are not valid or in effect
for any other reason (Dkt. No. 24 at 13-14). Accordingly, the Court
concludes that the
plain language of the Reformed Deeds subjects
12
PACKARD v. ANTERO
1:18V04
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT’S
MOTION TO DISMISS THE AMENDED COMPLAINT [DKT. NO. 21] AND
DISMISSING THE AMENDED COMPLAINT WITH PREJUDICE [DKT. NO. 20]
them to the Pooling Modifications because those modifications are
valid and in effect.
In sum, the Court concludes that the Amended Complaint fails
to state a claim for breach of contract because the Pooling
Modifications give Antero the right to pool oil and gas under the
Subject Leases.
IV. CONCLUSION
For these reasons, the Court GRANTS Antero’s Motion to Dismiss
the Amended Complaint (Dkt. No. 21), DISMISSES this civil action
WITH PREJUDICE, and ORDERS that it be terminated from the active
docket.
It is so ORDERED.
The Court directs the Clerk to transmit copies of this
Memorandum Opinion and Order to counsel of record.
DATED: March 18, 2019.
/s/ Irene M. Keeley
IRENE M. KEELEY
UNITED STATES DISTRICT JUDGE
13
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