Corder v. Antero Resources Corporation et al
Filing
29
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF'S MOTION TO AMEND THE COMPLAINT, GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS AND CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS: It is ORDERED that the Cour t CONSOLIDATES civil action numbers 1:18cv30 through 1:18cv40 for the purpose of deciding this motion, 1:18cv30 to serve as the lead case; Antero Midstream Partners LP, Antero Resources Pipeline LLC, and Antero Resources Investment LLC are DISMISSED from this case; Plaintiffs' Motions to Amend the Amended Complaint is GRANTED and the Clerk is DIRECTED to file the Second Amended Complaint; Antero's Motion to Dismiss the Plaintiffs' claims for breach of contract is DENIED; Antero 39;s Motion to Dismiss the Plaintiffs' claims for breach of fiduciary duty is GRANTED; Antero's Motion to Dismiss the Plaintiffs' claims for fraud is GRANTED; Antero's Motion to Dismiss the Plaintiffs' claims for punitive damages is GRANTED. Signed by Senior Judge Irene M. Keeley on 6/11/18. (cnd)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
GERALD W. CORDER,
Plaintiff,
v.
//
ANTERO RESOURCES CORPORATION,
a Delaware corporation;
ANTERO MIDSTREAM PARTNERS, LP,
a Delaware corporation;
ANTERO RESOURCES PIPELINE, LLC,
a Delaware corporation; and
ANTERO RESOURCES INVESTMENT, LLC,
a Delaware corporation,
CIVIL ACTION NO. 1:18CV30
(Judge Keeley)
c/w 1:18CV31, 1:18CV32,
1:18CV33, 1:18CV34, 1:18CV35,
1:18CV36, 1:18CV37, 1:18CV38,
1:18CV39, and 1:18CV40
for the purpose of ruling
on these motions
Defendants.
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],1
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
On December 6, 2017, 11 identical complaints were filed in the
Circuit Court of Harrison County, West Virginia, against Antero
Resources Corporation ("Antero"), Antero Midstream Partners LP
("Midstream Partners"), Antero Resources Pipeline LLC ("Pipeline"),
and Antero Resources Investment LLC ("Investment") (collectively,
"Antero defendants") (Dkt. No. 1-1). Antero and Midstream Partners
removed the cases to this Court on February 12, 2018, on the basis
of diversity jurisdiction (Dkt. No. 1). The plaintiffs argue that
the
Antero
1
defendants
have
been
improperly
deducting
Unless otherwise noted, citations to docket entries in this
Memorandum Opinion and Order refer to Civil Action No. 1:18-CV-30.
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
post-production costs from royalty payments due to the plaintiffs
under certain oil and gas leases. Finding that these motions
involve questions common to all cases, the Court CONSOLIDATES civil
action numbers 1:18-CV-30 through 1:18-CV-40 for the purpose of
deciding this motion, 1:18-CV-30 to serve as the lead case.
I. BACKGROUND
The recitation of the facts is taken from the second amended
complaints and is construed in the light most favorable to the
plaintiffs. See De’Lonta v. Johnson, 708 F.3d 520, 524 (4th Cir.
2013).
The plaintiffs allege that they own oil and gas interests
which were leased, assigned or otherwise acquired by and presently
held by Antero. The lessor’s rights and remedies were transferred
by heirship, purchase or otherwise to the plaintiffs. Antero
purportedly
acquired
responsibilities
by
the
leases
lessees’
and
rights,
modifications
duties,
of
leases,
and
by
assignment, or by Antero’s acquisition of leases and rights thereto
from previous lessors. As support for these propositions, the
plaintiffs attached various royalty statements from Antero, as well
as an opinion entered by the Circuit Court of Harrison County
2
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
describing several of the plaintiffs’ interest in certain tracts of
real property.
The
plaintiffs
allege
that
Antero
had
duties
and
responsibilities to them pursuant to the following leases covering
tracts of land situated in Harrison County, West Virginia:
(A)
48.69 acres (Deed Book 393, Page 399)
The lease covering this tract requires Antero to pay a royalty
“on gas, including casinghead gas or other gaseous substance,
produced from said land and sold or used beyond the well or for the
extraction of gasoline or other product, [in] an amount equal to
One-Eighth (12.5%) (amended to be 15%) of the net amount realized
by
Lessee
computed
at
the
wellhead
from
the
sale
of
such
substances” (Dkt. No. 27-1 at 25).
The parties also agreed that “all oil, gas or other proceeds
accruing to the Lessor under this lease or by state law shall be
without
deduction,
directly
or
indirectly,
for
the
cost
of
producing, gathering, storing, separating, treating, dehydrating,
compressing, processing, transporting, and marketing the oil, gas
and other products produced hereunder to transform the product into
marketable form; however, any such costs which result in enhancing
3
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
the value of the marketable oil, gas or other products to receive
a better price may be deducted from Lessor’s share of production so
long
as
they
are
based
on
Lessee’s
actual
cost
of
such
enhancements. However, in no event shall Lessor receive a price
that is less than, or more than, the price received by Lessee.” Id.
(B)
50.82 acres (Deed Book 839, Page 23)
The lease covering this tract requires Antero “to pay one-
eighth (1/8) of the value at the well of gas from each and every
gas well from which is marketed and used off the premises.” The
plaintiff claims that this lease was later amended to require “1/8
of the value of the gas from each well.” Id.
(C)
54.18 acres (Deed Book 1082, Page 656)
The lease covering this tract requires Antero to pay “one-
eighth of the value at the well of the gas from each and every
well.” Id. at 25-26.
(D)
104.75 acres (Deed Book 1103, Page 733)
The lease covering this tract requires Antero “to pay 1/8 of
the price received by the lessee from the sale of such gas.” Id. at
26.
(E)
59 acres (Deed Book 1084, Page 203)
4
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
The lease covering this tract requires Antero to pay “1/8 of
the gross proceeds received from each and every well drilled on
said properties providing natural gas, an amount equal to oneeighth (1/8) of the gross proceeds received from the sale of same
at the prevailing price for gas at the well, for all natural gas
saved and marketed from the said premises.” Id.
(F)
105 acres (Deed Book 1084, Page 197)
The lease covering this tract requires Antero to pay “1/8 of
the gross proceeds received from each and every well drilled on
said properties providing natural gas, an amount equal to oneeighth (1/8) of the gross proceeds received from the sale of same
at the prevailing price for gas at the well, for all natural gas
saved and marketed from the premises.” Id.
(G)
44.4 acres (Deed Book 99)
The lease covering this tract requires Antero to pay “$100 per
year for each and every gas well obtained on the premises.” Id.
(H)
50 acres (Deed Book 143, Page 291)
The lease covering this tract requires Antero to pay “1/8 of
the value at the well of the gas from each and every gas well
drilled on the premises.” Id.
5
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
According to the plaintiffs,
Contrary to their contractual, legal, statutory and
common law duties and responsibilities, Investment and
Antero and/or defendants’ subsidiaries, Midstream and
Pipeline, and/or defendants’ other subsidiaries have and
continue to take deductions, reduce plaintiffs’ royalty
payments, overcharge plaintiffs for the deductions that
they do charge plaintiffs, and otherwise reduce and not
pay for plaintiffs’ royalty on volume and/or price and/or
by taking the liquid hydrocarbons which are part of the
natural gas extracted from the said gas and subtracting
unauthorized deductions therefrom.”
(Dkt.
No.
27-1
at
31).
More
particularly,
Antero
has
“sold
plaintiffs’ natural gas liquids for money without compensating
plaintiffs for same,” and has deducted expenses and taxes in
contravention of West Virginia law. Id. at 31-32. In addition, the
plaintiffs allege that Antero charged them “with costs and charges
which were unreasonably excessive and not actual.” Id. at 32.
Specific allegations related to each claim for relief will be
discussed below in connection with Antero’s motions to dismiss. The
plaintiffs make the following claims for relief: 1) Breach of
Contract, 2) Breach of Fiduciary Duty, 3) Fraud, and 4) Punitive
Damages. Id. at 35-37.
Pending are motions to dismiss the amended complaint filed by
Antero and Midstream Partners, which are fully briefed and ripe for
6
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
review (Dkt. No. 16). Also pending are the plaintiffs' motions to
amend their complaints for a second time (Dkt. No. 27).
II. JURISDICTION
As an initial matter, the Court must address whether it has
subject matter jurisdiction. Pursuant to 28 U.S.C. § 1332, the
Court finds that there is diversity of citizenship based on the
citizenship of properly joined parties.
A.
Plaintiffs
1.
Gerald W. Corder resides in West Virginia (1:18-CV-30).
2.
Marlyn Sigmon resides in Virginia (1:18-CV-31).
3.
Garnet Cotrill resides in Florida (1:18-CV-32).
4.
Randall N. Corder resides in West Virginia (1:18-CV-33).
5.
Janet C. Packard and Leroy Packard reside in Florida (1:18-CV34).
6.
Lorena Krafft resides in Ohio (1:18-CV-35).
7.
Cheryl Morris resides in Tennessee (1:18-CV-36).
8.
Tracy Bridge resides in Ohio (1:18-CV-37).
9.
Angela Nicholson resides in Virginia (1:18-CV-38).
10.
Kevin McCall resides in Ohio (1:18-CV-39).
11.
Brian McCall resides in Ohio (1:18-CV-40).
7
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
B.
Defendants
1. Antero
Antero is a Delaware corporation with its principal place of
business in Denver, Colorado. The defendants do not contest that,
as the alleged party to contracts with the plaintiffs, Antero is an
appropriate defendant in this action.
2.
Midstream Partners
Midstream Partners is a limited partnership, at least one of
whose partners may be a citizen of West Virginia. In their notices
of removal and briefing on the motions to dismiss, the defendants
contend that Midstream Partners has been fraudulently joined to
defeat diversity (Dkt. Nos. 1 at 5; 17 at 2 n.1; 20 at 1 n.1).
Under the doctrine of fraudulent joinder, a district court may
"disregard, for jurisdictional purposes, the citizenship of certain
nondiverse defendants, assume jurisdiction over a case, dismiss the
nondiverse defendants, and thereby retain jurisdiction." Mayes v.
Rapoport, 198 F.3d 457, 461 (4th Cir. 1999). "The party alleging
fraudulent joinder bears a heavy burden-it must show that the
plaintiff cannot establish a claim even after resolving all issues
of law and fact in the plaintiff's favor." Johnson v. Am. Towers,
8
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
LLC, 781 F.3d 693, 704 (4th Cir. 2015) (quoting Hartley v. CSX
Transp., Inc., 187 F.3d 422, 424 (4th Cir. 1999)). In order to
establish fraudulent joinder, "the removing party must establish
either: [t]hat there is no possibility that the plaintiff would be
able to establish a cause of action against the in-state defendant
in state court; or [t]hat there has been outright fraud in the
plaintiff's pleading of jurisdictional facts." Mayes, 198 F.3d at
464 (emphasis added). Under the former "no possibility" standard,
a removing defendant cannot succeed if there is a "glimmer of hope"
that the plaintiff's claim against a non-diverse defendant will
succeed. Id. at 466.
Here, there is no hope that the plaintiffs will succeed on
their breach-of-contract or breach-of-fiduciary-duty claims against
Midstream Partners. "It is well-settled that ‘[a] non-party to a
contract cannot be sued for breach of contract.’" Ohio Valley
Health Servs. & Educ. Corp. v. Riley, 149 F. Supp. 3d 709, 715
(N.D.W.Va. 2015) (quoting A. Hak Indus. Servs. BV v. TechCorr USA,
LLC, 2014 WL 7243191, at *12 (N.D.W.Va. Dec. 19, 2014)).
The original complaint alleges that Antero, not Midstream
Partners, acquired the rights under the relevant leases (Dkt. No.
9
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
1-1 at 7).2 In addition, although the plaintiffs alleged that the
defendants were involved in a joint venture that subjects them to
joint liability, they did not plead any facts to support the
"critical component" of a joint venture: "an agreement to share in
the profits and losses of an enterprise." Pyles v. Mason Cty. Fair,
Inc., 806 S.E.2d 806, 812 (W. Va. 2017). Nor did the plaintiffs
allege the "necess[ary]" fact that Midstream Partners had equal
control over its "common commercial pursuits" with Antero. Id.
Moreover, as the defendants contend (Dkt No. 20 at 1 n.1), the
plaintiffs failed to plead any specific facts in support of their
bare
recitation
of
legal
elements
regarding
the
defendants'
possible status as alter egos. Accord O'Bryan v. Synthes, Inc., No.
5:13-cv-25981, 2014 WL 297835, at *6 (S.D.W.Va. Jan. 27, 2014)
(citing Laya v. Erin Homes, Inc., 352 S.E.2d 93 (W. Va. 1986).
Moreover, as discussed below, the plaintiffs cannot succeed
against any of the defendants on their claims for misrepresentation
and punitive damages.
2
See Dotson v. Elite Oil Field Servs., Inc., 91 F.Supp.3d
865, 870 (N.D.W.Va. 2015) (“The Court must determine removal
jurisdiction on the basis of the state court complaint at the time
of removal, and ... a plaintiff cannot defeat removal by amending
it.”)(citations omitted).
10
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
Because there is no possibility that the plaintiffs will
succeed in their claims against Midstream Partners, the Court finds
that Midstream Partners has been fraudulently joined and DISMISSES
it from this case.
3.
Pipeline
Pipeline
is
an
LLC
that
merged
into
Antero
Resources
Appalachian Corporation (“Appalachian”), with Appalachian being the
surviving corporation. Appalachian later became Antero. Because
Antero is the surviving corporation, the Court need not consider
Pipeline’s citizenship when assessing diversity. See Vision Bank v.
Dynamic Air, Inc., No. 10-00543-CG-B, 2011 WL 1475939, at *3 (S.D.
Ala. Mar. 30, 2011) (collecting cases). Further, because Pipeline
is not a proper party, the Court DISMISSES it from this action.
4.
Investment
Investment was a Delaware LLC that filed its certificate of
cancellation on October 31, 2017. Because an LLC cannot be sued
after
it
dissolves
and
files
a
certificate
of
cancellation,
Investment cannot be named as a party in this action. See Decker v.
Statoil USA Onshore Props., Inc., No. 5:15CV114, 2015 WL 6159483,
at *1-*2 (N.D.W.Va. Oct. 20, 2015). The plaintiffs’ argument to the
11
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
contrary is not convincing, as they only cite authority applicable
to corporations, not limited liability companies. See Delaware Code
Title 8, § 278. Therefore, finding that Investment is not a proper
party, the Court DISMISSES it from this action.
III. MOTION TO AMEND
The plaintiffs filed these actions on December 6, 2017, in the
Circuit Court of Harrison County, West Virginia (Dkt. No. 1-1).
Antero and Midstream Partners removed the cases on February 12,
2018, on the basis of diversity jurisdiction (Dkt. No. 1). On
February 20, 2018, Antero and Midstream Partners moved to dismiss
the complaints (Dkt. No. 4). When the plaintiffs moved to file
amended complaints on March 6, 2018 (Dkt. No. 9), the Court granted
the motions and denied the defendants' motions to dismiss as moot
(Dkt.
No.
12).
Now
the
plaintiffs
have
moved
to
amend
the
complaints for a second time (Dkt. No. 27).
Federal Rule of Civil Procedure 15(a)(1) states, in pertinent
part, that "[a] party may amend its pleading once as a matter of
course (A) within 21 days after serving it, or (B) ... 21 days
after service of a responsive pleading or 21 days after service of
a motion under Rule 12(b), (e), or (f), whichever is earlier." If
12
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
a party seeks to amend its pleadings in all other cases, it may
only do so "with the opposing party's written consent or the
court's leave. The court should freely give leave when justice so
requires." Fed.R.Civ.P. 15(a)(2). Rule 15(a) grants the district
court broad discretion concerning motions to amend pleadings, and
leave should be granted absent some reason "such as undue delay,
bad faith, or dilatory motive on the part of the movant, repeated
failure to cure deficiencies by amendments previously allowed,
undue
prejudice
to
the
opposing
party
...
[or]
futility
of
amendment." Foman v. Davis, 371 U.S. 178, 182 (1962); see also Ward
Elec. Serv. v. First Commercial Bank, 819 F.2d 496, 497 (4th Cir.
1987); Gladhill v. Gen. Motors Corp., 743 F.2d 1049, 1052 (4th Cir.
1984).
The plaintiffs seek leave to amend their complaints to set
forth additional allegations pertaining to the relevant mineral
chains of title. Having reviewed the plaintiffs’ proposed second
amended complaints, the Court concludes that the amendment is not
made in bad faith. The plaintiffs do not seek to add any new causes
of action, but rather to plead additional allegations in support of
the causes of action originally pled. Furthermore, the amendment
13
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
neither unduly delays these recently-filed actions, nor unduly
prejudices the remaining defendant, Antero. The Court further
concludes that, for the reasons discussed below, the proposed
amendments are not futile. Accordingly, pursuant to Fed.R.Civ.P.
15(a)(2), the Court GRANTS the plaintiffs’ Motions to Amend the
Amended Complaint (Dkt. No. 27) and DIRECTS the Clerk to file the
Second Amended Complaint (Dkt. No. 27-1). Because the second
amended complaint does not present any novel claims or legal
theories, the Court will consider Antero’s pending Motion to
Dismiss as it relates to the second amended complaint.
IV. MOTION TO DISMISS
A.
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 the 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 to
14
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
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).
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
the applicability of defenses." Republican Party of N.C. v. Martin,
980 F.2d 943, 952 (4th Cir. 1992).
In deciding on 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
15
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
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).
B.
Discussion
1.
Breach of Contract
a.
Pleading Standard
As the Court stated in KBS Preowned Vehicles, LLC v. Reviva,
Inc.:
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.
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)); see
also Charleston Nat'l Bank v. Sims, 70 S.E.2d 809, 813 (W. Va.
1952) (quoting Jones v. Kessler, 126 S.E. 344 (W. Va. 1925)); Exec.
Risk Indem., Inc. v. Charleston Area Med. Ctr., Inc., 681 F. Supp.
2d 694, 714 (S.D.W. Va. 2009) (citing 23 Williston on Contracts §
63:1 (Richard A. Lord, ed., 4th ed. West 2009)) (same elements).
16
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
In its motion to dismiss, Antero first argues that the
plaintiffs have not sufficiently alleged Antero’s “connection to
each and every lease, memorandum, or amendment” (Dkt. No. 17 at 1).
This Court's precedent plainly requires the plaintiffs to allege
the parties' connection to oil and gas leases at issue. In Cather
v. Seneca-Upshur Petroleum, Inc., the plaintiff alleged only that
defendant Forest Oil was "a lessee or ultimate assignee of the
leases" at issue. No. 1:09CV139, 2010 WL 3271965, at *3 (N.D.W.Va.
Aug. 18, 2010). Because the Court was not satisfied that this
allegation clearly established Forest Oil's connection to the
contracts, it construed Forest Oil's motion to dismiss as a motion
for a more definite statement and allowed the plaintiff to file an
amended complaint detailing the corporate merger that resulted in
Forest Oil's interest. Id. at *4.
Here, as argued by Antero, the allegations in the first
amended complaints varied in sufficiency with regard to each lease.
Some of the leases attached to the amended complaints were executed
by the plaintiffs and Antero themselves, but a significant number
were executed by other parties. Although the plaintiffs attached
royalty statements from Antero, none of these documents references
17
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
the particular tracts or leases in question in a manner sufficient
to
establish
the
parties'
connection.
In
the
second
amended
complaints, however, the plaintiffs allege facts sufficient to
establish their own-and Antero's-connection to each lease through
the record chain of title for the tracts at issue (Dkt. No. 27-1 at
2-25). Accordingly, the second amended complaints adequately allege
the existence of enforceable contracts between the plaintiffs and
Antero.
Second, Antero argues that the plaintiffs' amended complaints
fail to allege that they performed any of their obligations
outlined
in
the
lease
agreements
or
were
excused
from
such
performance. This is a light burden; Twombly does not require the
plaintiffs to plead factual support for a prima facie case, so long
as
their
allegations
make
it
factually
plausible
that
the
defendants are liable for the misconduct alleged. See, e.g.,
Connelly v. Lane Const. Corp., 809 F.3d 780, 788-89 (3d Cir. 2016).
Indeed,
in
amending
the
complaints
for
a
second
time,
the
plaintiffs took the opportunity to address their performance, and
have sufficiently alleged that they fulfilled their duties and
18
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
obligations under the leases by maintaining title (Dkt. No. 27-1 at
26).
Because the plaintiffs have corrected each of the pleading
deficiencies identified in Antero’s motion to dismiss, the Court
concludes that the plaintiffs have adequately pleaded claims for
breach of contract.
b.
Matter of Law
Antero also argues that the plaintiffs have failed to state a
claim for breach of contract as a matter of law because the leases
at issue allow Antero to deduct post-production costs (Dkt. No. 17
at 9-14). The second amended complaints attach eight separate
leases with different language.
As an initial matter, only one of the leases at issue is a
flat-rate lease subject to W. Va. Code § 22-6-8. Therefore, as the
Supreme Court of Appeals of West Virginia has noted, all but one of
the leases is “unaffected” by Leggett v. EQT Prod. Co., 800 S.E.2d
850, 853, cert. denied, 138 S. Ct. 472 (W. Va. 2017). Instead, the
leases remain governed by the analysis in Wellman v. Energy Res.,
Inc., 557 S.E.2d 254 (W. Va. 2001), and Estate of Tawney v.
Columbia Nat. Res., L.L.C., 633 S.E.2d 22 (W. Va. 2006). The Court
19
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
will address the three types of leases at issue in this case in
turn.
First, the leases regarding Tract (A) require a royalty on
“the net amount realized by Lessee computed at the wellhead.” They
also
contain
a
“Market
Enhancement
Clause,”
which
forbids
deductions regarding preparation, transportation, and sale of a
marketable product, but permits deductions for steps taken to
enhance the value of already marketable products. Antero contends
that, because certain of the leases covering Tract (A) contain a
Market Enhancement Clause, it may deduct post-production expenses
from the plaintiffs’ royalties (Dkt. No. 17 at 13).
Indeed, leases containing the Market Enhancement Clause may be
Tawney-compliant. The clause “expressly provide[s] that the lessor
shall bear some part of the costs incurred between the wellhead and
the point of sale,” Tawney, 633 S.E.2d 22, Syl. Pt. 10, by
deducting the actual cost of enhancements to the value of oil and
gas that is already in marketable form. Nonetheless, the clause
also expressly forbids Antero from deducting costs to market oil
and gas or place it in marketable form. Id. Given that such
deductions fall within the general breach-of-contract allegations
20
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
in the second amended complaints, the Market Enhancement Clause
provides no reason to dismiss the complaints for failure to state
a claim.
Second, the royalty provisions regarding Tracts (B), (C), (E),
(F), and (H) appear to require royalties based on the market price
due to either of the following clauses: (a) “value at the well,” or
(b) “gross proceeds received from the sale of the same at the
prevailing
price.”
Antero
argues
that
Tawney
is
inapplicable
because the royalty provisions are based on “market value” rather
than “proceeds” (Dkt. No. 17 at 12-14). In support, it relies on
Imperial Colliery Co. v. Oxy USA Inc., 912 F.2d 696 (4th Cir.
1990), in which the Fourth Circuit reasoned that post-production
deductions are a permissible way to arrive at the “wholesale market
value at the well.” Although the reasoning in Imperial Colliery Co.
is on point, the more recent and binding decision of the Supreme
Court of Appeals in Tawney rejected a similar argument. There, the
defendant asserted that “wellhead-type language clearly called for
allocation of post-production expenses” when read in conjunction
with language such as “gross proceeds,” “market price,” or “net of
all
costs.”
Tawney,
633
S.E.2d
21
at
28-29.
Due
to
inherent
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
ambiguities, the court found that none of these modifiers was
sufficient to overcome the Wellman presumption that the lessee must
bear post-production costs. Id. Therefore, the “market value”
provisions do not render the leases unambiguous enough to escape
Tawney.
Third, Antero argues that the plaintiffs have not stated a
claim for breach of contract with regard to Tract (G), which is
subject to a flat-rate lease (Dkt. No. 17 at 14). Pursuant to
Leggett, Antero is entitled to take reasonable, actual postproduction deductions from the plaintiffs’ royalties with regard to
this well. The plaintiffs have thus alleged that the “defendants
charged [them] with costs and charges which were unreasonably
excessive and not actual” (Dkt. No. 27-1 at 32). This allegation
makes it plausible that Antero has breached the lease agreements by
failing to comply with the requirements of Leggett. Therefore, the
plaintiffs have stated a claim for breach of contract with regard
to Tract (G).
For these reasons, the Court DENIES Antero’s motion to dismiss
the plaintiffs’ claims for Breach of Contract (Count One).
22
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
2.
Breach of Fiduciary Duty
Antero argues that the plaintiffs' claims for Breach of
Fiduciary Duty (Count Two) should be dismissed because a fiduciary
duty is not formed by the mere execution of an oil and gas lease
(Dkt. No. 17 at 15-17).
In their response, the plaintiffs concede that many courts
have held that an oil and gas producer does not owe a fiduciary
duty to a landowner with respect to the operational duties and
allegations to its lessees. However, they argue that "these cases
fail to acknowledge that the duties and responsibilities actually
assumed by a lessee as a result of a natural gas lease are much
different than that seen in more typical leases" (Dkt. No. 19 at
17). They further argue that a duty exists, "particularly when the
gas company receives money for both the plaintiffs and defendants,"
because the gas company must honestly account for the royalties
owed to the landowners.
In
its
reply,
Antero
reiterates
its
argument
that
West
Virginia law has repeatedly held that the duty owed between parties
in an oil and gas lease does not rise to the level of a fiduciary
relationship (Dkt. No. 20 at 9-10).
23
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
This Court has previously concluded that a fiduciary duty does
not exist between the parties of an oil and gas lease because the
duty created is one of "ordinary prudence" and not of a fiduciary.
Cather v. Seneca-Upshur Petroleum, Inc., 2010 WL 3271965, *5
(N.D.W.Va. August 18, 2010). Many other courts in factually similar
cases have also held that a fiduciary duty does not exist between
the parties of a oil and gas lease. See, e.g., Leggett v. EQT Prod.
Co., 2015 WL 1212342 (N.D.W.Va. March 17, 2015); The Kay Company,
LLC v. EQT Prod. Co., et al., Civil Action No. 1:13CV151 (N.D.W.Va.
Sept. 4, 2014); W.W. McDonald Land Co., v. EQT Prod. Co., 2013 WL
6098497
(S.D.W.Va. Nov. 21, 2013); Wellman v. Bobcat Oil & Gas,
Inc., 2010 WL 2720748 (S.D.W.Va. July 8, 2010).
The facts in this case are similar to the cases cited as all
involve deduction of royalty fees to pay for post-production costs
in relation to oil and gas leases. West Virginia law is clear that
a fiduciary duty does not exist in this type of case dealing with
gas and oil leases. Accordingly, the Court GRANTS Antero’s motion
to dismiss the plaintiffs' claims for Breach of Fiduciary Duty
(Count Two).
24
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
3.
Fraud
a.
Antero
Particularity
first
argues
that,
under
the
heightened
pleading
standards of Fed.R.Civ.P. 9(b), the plaintiffs did not plead the
relevant facts of their fraud claims with sufficient particularity
(Dkt. No. 17 at 18-21).
"The essential elements in an action for fraud are: "(1) that
the act claimed to be fraudulent was the act of the defendant or
induced by him; (2) that it was material and false; (3) that
plaintiff relied on it and was justified under the circumstances in
relying upon it; and (4) that he was damaged because he relied on
it." Syl. Pt. 5, Folio v. City of Clarksburg, 655 S.E.2d 143 (W.
Va. 2007) (internal quotation and citation omitted).
When pleading fraud, a party must state with particularity the
factual circumstances constituting the alleged fraud or mistake.
See Fed.R.Civ.P. 9(b). To meet this standard, the Fourth Circuit
has held that a claim for fraud must state "the time, place, and
contents of the false representations as well as the identity of
the person making the misrepresentation and what he obtained
thereby." Harrison v. Westinghouse Savannah River Company, 176 F.3d
25
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
776, 784 (4th Cir. 1999) (requiring more notice than required under
Rule 8, so that the defendant can prepare an adequate answer). In
cases involving allegations of fraud relating to "an omission
instead
of
an
affirmative
misrepresentation,"
however,
"less
particularity is required." In Town Hotels Ltd. Partnership v.
Marriot Int'l, Inc., 246 F.Supp.2d 469, 487 (S.D.W.Va. 2003)
(citing Shaw v. Brown & Williamson Tobacco Corp., 973 F.Supp. 539,
552 (D.Md. 1997)).
The
Fourth
Circuit
has
instructed
district
courts
to
"hesitate" in dismissing a fraud claim under Rule 9(b) if satisfied
"(1) that the defendant has been made aware of the particular
circumstances for which she will have to prepare a defense at
trial, and (2) that plaintiff has substantial prediscovery evidence
of those facts." Id. at 486 (quoting Harrison, 176 F.3d at 784).
Here, the plaintiffs have not pleaded their fraud claims with
the requisite particularity. In the second amended complaints, the
plaintiffs allege that
[d]efendants misrepresented to plaintiffs that defendants
were entitled to take deductions from plaintiffs'
royalty, that they had the right to take the amount of
deductions they took, reduced plaintiffs' royalty
payments, misrepresented the amount of volume that was
26
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
taken from plaintiffs' property, overcharged plaintiffs
for services, and/or wrongfully claimed plaintiffs'
royalty due was less than the amount actually due, and
failed to report to plaintiffs that they were extracting
and selling liquids from plaintiffs' natural gas, thereby
denying plaintiffs the rents and royalties to which they
were due.
Dkt. No. 27-1 at 36. The plaintiffs' allegations of fraud can
therefore
be
grouped
into
three
categories:
(1)
affirmative
misrepresentations, (2) material omissions, and (3) fraud by way of
reducing royalty payments. The first question before the Court is
whether these allegations amount to fraud under West Virginia law.
As to affirmative misrepresentations, the plaintiffs have
failed to allege any such misrepresentation with particularity.
While
the
plaintiffs
generally
allege
that
the
"defendants
misrepresented . . . that [they] were entitled to take deductions
from plaintiffs' royalty, [and] that they had the right to take the
amount
of
deductions
specifically
identify
they
any
took,"
false
the
complaint
representation
does
made
by
not
the
defendants to the plaintiffs (Dkt. No. 27-1 at 36). Because these
allegations of affirmative misrepresentations lack the specificity
necessary
to
provide
the
defendants
with
"the
particular
circumstances for which [they] will have to prepare a defense at
27
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
trial," they are stated with insufficient particularity to meet the
requirements of Rule 9(b). In Town Hotels, 246 F.Supp.2d at 486.
As to material omissions, the plaintiffs allege that the
defendants "failed to report . . . that they were extracting and
selling liquids from plaintiffs' natural gas" (Dkt. No. 27-1 at
36). This claim seemingly depends on the existence of some legal
duty
owed
by
the
defendants
to
the
plaintiffs
to
share
the
allegedly undisclosed information. However, the plaintiffs have
failed to allege which defendant(s) were responsible for these
alleged omissions. Moreover, Antero is the only defendant alleged
to be a party to any of the plaintiffs' leases. Because Midstream
is not a party to the leases, the plaintiffs cannot claim that it
owes them any contractual duties.
Finally, the plaintiffs have alleged fraud based on the
defendants' "reduc[tion of] plaintiffs' royalty payments" and
"overcharge[ of] plaintiffs for services" (Dkt. No. 27-1 at 36). At
bottom, it is simply unclear how these allegations, which do not
involve any representations, fit within the elements of an action
for fraud under West Virginia law.
28
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
Nevertheless, as argued by Antero, the plaintiffs have failed
to adequately allege justifiable reliance, the third element of
fraud. Beyond a general allegation that they “rel[ied] on the
defendants for the honest accounting and lawful payment[]. . . of
royalty owed" (Dkt. No. 27-1 at 36), the plaintiffs have not
alleged
any
acts
they
took
in
reliance
on
Antero’s
alleged
misrepresentations. See Mountain Link Assocs., Inc. v. Chesapeake
Energy Corp., No. 2:13-cv-16860, 2014 WL 4851993, at *10 (S.D.W.Va.
Sept. 29, 2014) ("Beyond their conclusory assertion that they
‘relied upon Defendants' material misrepresentations to their
detriment" . . ., Plaintiffs do not point to any acts of theirs in
reliance on Defendants' representations about the correctness of
their calculations of the royalty deductions."). As succinctly
stated by the court in Bluestone Coal Corp. v. CNX Land Res., Inc.,
No. 1:07-00549, 2007 WL 6641647, at *4 (S.D.W. Va. Nov. 16, 2007)
(Faber, J.), in the context of an alleged bad faith denial of an
option contract,
[i]t can hardly constitute fraud to contend that [an]
agreement means something different than the construction
placed upon it by the other party. The essence of
conflict between the parties is disagreement as to the
meaning of the written memorandum they signed. Resolution
29
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
of their dispute must turn on construction of the
agreement itself. Even if, as [plaintiff] contends,
[defendant] instructed [its agent] to lie about the true
nature of this agreement, a legitimate fraud claim is not
formed. Attempting to conceal a breach of contract by
engaging in a scheme to misrepresent the true nature of
that contract is not fraud. There is no reliance, only an
intentional false statement, which is more akin to
perjury.
Because the plaintiffs have failed to allege any justifiable
reliance on Antero’s misrepresentations, they have failed to state
a claim for fraud.3
b.
Gist of the Action
Alternatively, Antero persuasively argues that the plaintiffs'
fraud claims should be dismissed under the "gist of the action"
doctrine.
Under West Virginia law, "[i]f the action is not maintainable
without pleading and proving the contract, where the gist of the
action is the breach of the contract, either by malfeasance or
misfeasance, it is, in substance, an action on the contract,
3
Although these matters were addressed in the defendants’
motions to dismiss the first amended complaints, the plaintiffs did
not attempt to correct these deficiencies in their second amended
complaints. Therefore, the Court perceives that no further
opportunity to amend this claim is warranted.
30
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
whatever may be the form of the pleading." Cochran v. Appalachian
Power Co., 246 S.E.2d 624, 628 (W. Va. 1978).
This so-called "gist of the action" doctrine provides that a
tort claim arising from a breach of contract may be pursued only if
" ‘the action in tort would arise independent of the existence of
the
contract.'"
Secure
US,
Inc.
v.
Idearc
Media
Corp.,
No.
1:08CV190, 2008 WL 5378319, at *3–4 (N.D.W.Va. Dec. 24, 2008)
(quoting Syl. Pt. 9, Lockhart v. Airco Heating & Cooling,567 S.E.2d
619 (W.Va. 2002)). In other words, "[t]he source of the duty is
controlling. To be maintained, the action in tort must arise
independent of the existence of the contract." CWS Trucking, Inc.
v. Welltech Eastern, Inc., No. 2:04–CV–84, 2005 WL 2237788, at *2
(N.D.W.Va. 2005) (citing Syl. Pt. 9, Lockhart, 567 S.E.2d 619)
The Supreme Court of Appeals recently affirmed the continued
vitality of the doctrine, finding that "recovery in tort will be
barred" where any of the following four factors is present:
(1) where liability arises solely from the contractual
relationship between the parties;
(2) when the alleged duties breached were grounded in the
contract itself;
(3) where any liability stems from the contract; and
(4) when the tort claim essentially duplicates the breach
of contract claim or where the success of the tort claim
31
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
is dependent on the success of the breach of contract
claim.
Gaddy Engineering Co. v. Bowles Rice McDavid Graff & Love, LLP, 746
S.E.2d 568, 586 (W. Va. 2013) (quoting Star v. Rosenthal, 884
F.Supp.2d 319, 328–29 (E.D.Pa. 2012)). Accordingly, in order to
maintain a cause of action for tort, a plaintiff must establish the
existence of a legal duty independent from any contractual duty.
Lockhart, 567 S.E.2d at 624 ("[A plaintiff] cannot maintain an
action in tort for an alleged breach of a contractual duty.").
Here, the alleged fraud arises solely from the contractual
relationship between the plaintiffs and the defendants (i.e., the
leases at issue). As noted, the plaintiffs' fraud claims are
grounded in allegations that the defendants have made material
misrepresentations related to royalties owed to the plaintiffs
under the relevant leases, and that the defendants have wrongfully
reduced the plaintiffs' royalty payments.
It is clear that the misrepresentations alleged in the amended
complaints all relate to royalty payments owed to the plaintiffs
and are thus directly tied to the duties and obligations assumed in
the relevant leases. Gaddy, 746 S.E.2d at 586. In other words, the
32
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
claims do not arise independently of the existence of a contract.
CWS Trucking, 2005 WL 2237788, at *2. Rather, Antero's alleged
liability
for
these
claims
"stems
from"
the
leases
and
the
plaintiffs' fraud claims against Antero thus are barred by the gist
of the action doctrine.
For these reasons, the Court GRANTS Antero’s motion to dismiss
the plaintiffs' claims for Fraud (Count Three).
4.
Punitive Damages
Finally,
Antero
argues
that
the
plaintiffs'
claims
for
Punitive Damages (Count Four) should be dismissed because, under
West Virginia law, a separate cause of action for punitive damages
does not exist. Antero also seems to argue that, if the Court
dismisses the tort claims against it, then no basis exists to award
punitive damages in the case (Dkt. No. 17 at 23-25). In response,
the plaintiffs argue that, contrary to Antero’s assertions, they
have adequately pleaded independent causes of action, which they
incorporated by reference into their claim for punitive damages
(Dkt. No. 19 at 24).
For
the
reasons
discussed,
the
Court
has
dismissed
the
plaintiffs' claims for Breach of Fiduciary Duty (Count Two) and
33
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
Fraud
(Count
Three).
Consequently,
it
also
dismisses
the
plaintiffs' claims for Punitive Damages as they relate to those
tort claims.
Regarding the Breach of Contract claim, the plaintiffs allege
that Antero has improperly deducted post-production costs from
royalty payments due to the plaintiffs under the relevant leases.
Under West Virginia law, punitive damages are generally unavailable
in a breach of contract action. See Berry v. Nationwide Mut. Fire
Ins. Co., 381 S.E.2d 367, 374 (W. Va. 1989) ("Generally, absent an
independent, intentional tort committed by the defendant, punitive
damages are not available in an action for breach of contract.").
Here, as noted, the plaintiffs seek punitive damages based on
Antero’s alleged taking of portions of the plaintiffs' royalties to
which the defendants were not entitled under the leases. Thus, the
plaintiffs
have
not
pled
"an
independent,
intentional
tort"
committed by Antero that would allow for the potential recovery of
punitive damages.
Accordingly, the Court GRANTS Antero’s motion to dismiss the
plaintiffs' claims for Punitive Damages (Count Four).
34
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
V. CONCLUSION
For the reasons discussed, the Court:
•
CONSOLIDATES civil action numbers 1:18-CV-30, 1:18-CV-31,
1:18-CV-32, 1:18-CV-33, 1:18-CV-34, 1:18-CV-35, 1:18-CV36, 1:18-CV-37, 1:18-CV-38, 1:18-CV-39, and 1:18-CV-40
for the purpose of this Memorandum Opinion and Order
only, 1:18-CV-30 to serve as the lead case;
•
GRANTS
the
plaintiff’s
Motion
to
Amend
the
Amended
Complaint (Dkt. No. 27);
•
GRANTS the plaintiff’s Motion to Amend the Amended
Complaint in case number 1:18CV31 (Dkt. No. 27);
1:18CV32 (Dkt. No. 28); 1:18CV33 (Dkt. No. 27);
1:18CV34 (Dkt. No. 28); 1:18CV35 (Dkt. No. 27);
1:18CV36 (Dkt. No. 27); 1:18CV37 (Dkt. No. 27);
1:18CV38 (Dkt. No. 27); 1:18CV39 (Dkt. No. 28); and
1:18CV40 (Dkt. No. 27);
•
DIRECTS the Clerk to file the plaintiff’s Second Amended
Complaint (Dkt. No. 27-1);
35
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
•
DIRECTS the Clerk to file the plaintiff’s Second
Amended Complaint in case number 1:18CV31 (Dkt. No.
27-1); 1:18CV32 (Dkt. No. 28-1); 1:18CV33 (Dkt. No.
27-1); 1:18CV34 (Dkt. No. 28-1); 1:18CV35 (Dkt. No.
27-1); 1:18CV36 (Dkt. No. 27-1); 1:18CV37 (Dkt. No.
27-1); 1:18CV38 (Dkt. No. 27-1); 1:18CV39 (Dkt. No.
28-1); and 1:18CV40 (Dkt. No. 27-1);
•
DENIES the defendants’ Motion to Dismiss the plaintiff’s
Breach of Contract claim as alleged in Count One of the
Second Amended Complaint (Dkt. No. 16);
•
DENIES
the
defendants’
Motion
to
Dismiss
the
plaintiff’s Breach of Contract claim as alleged in
Count One of the Second Amended Complaint in case
number 1:18CV31 (Dkt. No. 16); 1:18CV32 (Dkt. No.
17); 1:18CV33 (Dkt. No. 16); 1:18CV34 (Dkt. No.
17); 1:18CV35 (Dkt. No. 16); 1:18CV36 (Dkt. No.
16); 1:18CV37 (Dkt. No. 16); 1:18CV38 (Dkt. No.
16); 1:18CV39 (Dkt. No. 16); and 1:18CV40 (Dkt. No.
16);
36
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
•
GRANTS the defendants’ Motion to Dismiss the plaintiff’s
claims for Breach of Fiduciary Duty, Fraud, and Punitive
Damages (Dkt. No. 16) and DISMISSES Counts Two, Three,
and Four of the Second Amended Complaint;
•
GRANTS
the
defendants’
Motion
to
Dismiss
the
plaintiff’s claims for Breach of Fiduciary Duty,
Fraud, and Punitive Damages in case number 1:18CV31
(Dkt. No. 16); 1:18CV32 (Dkt. No. 17); 1:18CV33
(Dkt. No. 16); 1:18CV34 (Dkt. No. 17); 1:18CV35
(Dkt. No. 16); 1:18CV36 (Dkt. No. 16); 1:18CV37
(Dkt. No. 16); 1:18CV38 (Dkt. No. 16); 1:18CV39
(Dkt. No. 16); and 1:18CV40 (Dkt. No. 16); and
DISMISSES Counts Two, Three, and Four of the Second
Amended Complaint;
•
DISMISSES defendants Antero Midstream Partners LP, Antero
Resources Pipeline LLC, and Antero Resources Investment
LLC from this case and case numbers 1:18CV31, 1:18CV32,
1:18CV33,
1:18CV34,
1:18CV35,
1:18CV38, 1:18CV39, and 1:18CV40.
It is so ORDERED.
37
1:18CV36,
1:18CV37,
CORDER v. ANTERO
1:18CV30
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S MOTION
TO AMEND THE COMPLAINT [DKT. NO. 27],
GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
TO DISMISS [DKT. NO. 16], AND
CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS
The Court
DIRECTS
the Clerk to transmit copies of this
Memorandum Opinion and Order to counsel of record.
DATED: June 11, 2018.
/s/ Irene M. Keeley
IRENE M. KEELEY
UNITED STATES DISTRICT JUDGE
38
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