Holmes et al v. Chesapeake Appalachia, LLC et al

Filing 49

MEMORANDUM OPINION and ORDER; Denying 19 Plaintiffs' Motion to Remand ;Granting 28 Defendant Miller's Motion to Dismiss; Granting in part and Denying in part 13 Motion to Dismiss/Compel Arbitration; and Submitting This action to Arbitr ation; Denying as moot 15 Motion to Dismiss; Denying 18 Motion to Strike ; Denying as moot 20 Motion for Leave to File; and Denying as moot 8 Motion To Dismiss. Defendant Miller is dismissed with Prejudice; Civil Action is DISMISSED and stricken from active docket of this Court To be Brought in Arbitration, Signed by Senior Judge Frederick P. Stamp, Jr on 8/23/12. (soa)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
MITCHELL R. HOLMES and
PATRICIA A. HOLMES,
Plaintiffs,
v.

Civil Action No. 5:11CV123
(STAMP)

CHESAPEAKE APPALACHIA, LLC,
CHESAPEAKE ENERGY CORP.,
CHESAPEAKE OPERATING INC.,
NOMAC DRILLING, LLC,
BRONCO DRILLING COMPANY, INC.,
GREAT LAKES ENERGY PARTNERS, LLC,
n/k/a RANGE RESOURCES-APPALACHIA, LLC,
and BRENDA ANN MILLER,
Defendants.
MEMORANDUM OPINION AND ORDER
DENYING PLAINTIFFS’ MOTION TO REMAND,
GRANTING DEFENDANT BRENDA ANN MILLER’S MOTION TO DISMISS,
GRANTING DEFENDANTS CHESAPEAKE APPALACHIA, LLC,
NOMAC DRILLING, LLC, AND BRONCO DRILLING
COMPANY, INC.’S MOTION TO COMPEL ARBITRATION,
AND SUBMITTING THIS ACTION TO ARBITRATION
I.

Procedural History

The plaintiffs, Mitchell and Patricia Holmes, filed this civil
action in the Circuit Court of Ohio County, seeking a declaratory
judgment

with

regard

to

the

rights

and

obligations

of

the

plaintiffs, defendants Chesapeake Appalachia, LLC (“Chesapeake
Appalachia”),

Chesapeake

Energy

Corp.

(“Chesapeake

Energy”),

Chesapeake Operating, Inc. (“Chesapeake Operating”), and Great
Lakes Energy Partners, LLC, n/k/a Range Resources-Appalachia, LLC
(“Range”) under two oil and gas leases, as well as an Order of
Payment associated with one of the leases.

The complaint also

asserts related claims of slander of title, the tort of outrage,

and civil conspiracy against all defendants, and a claim of
trespass against defendants Nomac Drilling, LLC (“Nomac”), Bronco
Drilling Company, Inc. (“Bronco”) and Chesapeake Appalachia.
The defendants removed this matter to this Court, claiming
removal jurisdiction based upon complete diversity under 28 U.S.C.
§§ 1332 and 1446.
assert

that,

In support of this contention, the defendants

although

plaintiffs

and

defendant

Brenda

Miller

(“Miller”) are both residents of West Virginia, defendant Miller
was fraudulently joined to this action, and thus her residency
should be disregarded for purposes of determining whether complete
diversity exists between the parties.

Following removal, the

plaintiffs filed a motion to strike and dismiss the notice of
removal, and a motion to remand this action to the Circuit Court of
Ohio County, arguing that the notice of removal was improperly
filed and that defendant Miller was not fraudulently joined.

This

motion is now fully briefed and ripe for determination by this
Court.

For the reasons that follow, this Court agrees with the

defendants that the notice of removal should not be stricken, and
that defendant Brenda Miller was fraudulently joined to this
action.

Accordingly, plaintiffs’ motion to remand is denied.

Also pending before this Court are defendant Range’s motion to
dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6);
defendant Brenda Ann Miller’s motion to dismiss pursuant to Rule
12(b)(6); Chesapeake Operating and Chesapeake Energy’s motion to
dismiss under Rule 12(b)(6); and defendants Chesapeake Appalachia,

2

Bronco and Nomac’s motion to compel arbitration and dismiss under
Rule

12(b)(6);

which

have

all

been

fully

briefed.

For

the

following reasons, this Court will grant defendant Miller’s motion
to dismiss, grant Chesapeake Appalachia, Bronco and Nomac’s motion
to compel arbitration, and finding that, as a result, it is
necessary to send all claims against all remaining defendants to
arbitration, deny all other motions to dismiss as moot.
II.

Facts1

On or about March 7, 2006, the plaintiffs entered into an Oil,
Gas, and Coalbed Methane Gas Lease with what is now defendant Range
(“Base Lease”), leasing oil and gas rights for their approximately
60 acre tract of land in Ohio County, West Virginia (“leasehold
property”). The primary term of the Base Lease was five years, and
the lease was filed in the Office of the Clerk of the Ohio County
Commission of Ohio County, West Virginia on May 19, 2006.

On or

about December 7, 2010, the plaintiffs entered into an Oil and Gas
Lease with defendant Chesapeake Appalachia, leasing oil and gas
rights to the leasehold property to defendant Chesapeake Appalachia
(“Top Lease”).

The effective date of the Top Lease was March 7,

2011, and it too had a primary term of five years.
On July 1, 2010, defendant Range assigned the Base Lease to
Chesapeake Appalachia and Statoil USA Onshore Properties, Inc.

On

December 16, 2010, a Declaration of Notice of Pooled Unit was filed

1

For the purposes of this opinion, this Court adopts, for the
most part, the facts as set forth by the plaintiffs in their
complaint.
3

in the Office of the Ohio County Clerk for the “Esther Weeks Unit,”
to be operated by Chesapeake Appalachia.

(ECF No. 3 Ex. 2 *1)

This pooled unit included the leasehold property which was, at the
time, still subject to the now assigned Base Lease.

According to

the terms of the Base Lease, because the plaintiffs’ property was
part of a pooled unit prior to the expiration of the primary term,
the Base Lease did not expire at the conclusion of the five-year
primary term, but instead continued year-to-year, “for so long as
oil, gas and/or coalbed methane or other liquid hydrocarbons are
produced in paying quantities from the Leased Premises. . .”

(ECF

No. 3 Ex. 1 *1.1)
Pursuant to an Order of Payment executed on the Top Lease,
which required that the Base Lease first be released of record
before payment became due, defendant Chesapeake tendered a bonus
check to the plaintiffs in the amount of $299,990.00 on March 22,
2011.

(See ECF No. 3 Ex. 1 *38)

deposited

the

check,

they

However, when the plaintiffs

were

informed

by

their

banking

institution that defendant Chesapeake Operating or others acting on
their behalf had issued a “stop payment” order on the check.
Following a demand by plaintiffs’ counsel for payment pursuant to
the Order of Payment, on the basis that payment was complete “upon
mailing

or

dispatch,”

Chesapeake

Energy

and/or

Chesapeake

Appalachia terminated the Top Lease by Release of Oil and Gas
Lease, filed with the Office of the Ohio County Clerk on April 20,
2011.
did

(See ECF No. 3 Ex. 2 *22)

not

receive

ten

dollars

The plaintiffs assert that they

or
4

any

other

good

and

valuable

consideration in order to release the oil and gas rights subject to
the Top Lease, as is stated in the release.
The

plaintiffs

now

seek

declaratory

(Id.)
judgment

as

to

the

validity of the Top Lease, of the Release of Oil and Gas Lease, and
of the Base Lease.

They contend that Chesapeake Appalachia acted

in bad faith in extending the Base Lease, which it held following
the assignment by defendant Range, knowing that it had executed the
Top Lease with the plaintiffs less than two weeks prior to the
filing of the Declaration of Pooled Unit.

Further, they seek a

court order stating that the Base Lease is invalid because it was
improperly notarized by defendant Brenda Miller in Pennsylvania,
when the plaintiffs assert that the Base Lease was finalized in
West Virginia, and that they never traveled to Pennsylvania for
purposes of execution of the lease and could not have been present
at the time of the notarization.

They claim that, with the Base

Lease invalidated, the Top Lease must be valid, and that they are
owed payment pursuant to that lease as a result.
The plaintiffs also claim that the Release of Oil and Gas
Lease executed by Chesapeake Appalachia is invalid because they
never received the consideration claimed to support the release.
The plaintiffs further assert that defendants Bronco and Nomac, as
subsidiary drillers and subcontractors of Chesapeake Appalachia,
continue to engage in drilling on the leasehold property pursuant
to

the

claimed

trespass.

invalid

Base

Lease,

and

are

thus

committing

Finally, the plaintiffs allege that the actions of all

of the defendants collectively have amounted to slander of title to
5

the leasehold property, and the tort of outrage, or intentional
infliction of emotional distress. The plaintiffs also maintain the
defendants’ actions constitute a civil conspiracy to deprive them
of their sign-on bonus and royalties for the leasehold property.
III.
A.

Applicable Law

Motion to Remand
A defendant may remove a case from state court to federal

court in instances where the federal court is able to exercise
original jurisdiction over the matter.

28 U.S.C. § 1441.

Federal

courts have original jurisdiction over primarily two types of
cases: (1) those involving federal questions under 28 U.S.C. § 1331
and (2) those involving citizens of different states where the
amount in controversy exceeds $75,000.00, exclusive of interests
and costs pursuant to 28 U.S.C. § 1332(a).

The party seeking

removal bears the burden of establishing federal jurisdiction. See
Mulcahey v. Columbia Organic Chems. Co., Inc., 29 F.3d 148, 151
(4th Cir. 1994). Removal jurisdiction is strictly construed due to
“significant federalism concerns,” implicated by abrogating a state
court

of

the

jurisdiction.

ability
Id.

to

decide

a

case

over

which

it

has

Thus, if federal jurisdiction is doubtful, the

federal court must remand.

Id.

However, when a defendant removes a case that, on its face,
does not present complete diversity, courts are permitted to
utilize the doctrine of fraudulent joinder to examine the record in
more depth to determine whether the non-diverse parties are real
parties in interest to the action.
6

Mayes v. Rapoport, 198 F.3d

457, 461 (4th Cir. 1999).

Under the doctrine of fraudulent

joinder, a defendant may remove a case on the basis of diversity
jurisdiction even if a non-diverse defendant is a party to the
case, so long as the removing party can prove that the non-diverse
defendant was fraudulently joined to the action.

Id.

Fraudulent

joinder “effectively permits a district court to disregard, for
jurisdictional purposes, the citizenship of certain nondiverse
defendants, assume jurisdiction over a case, dismiss the nondiverse
defendants, and thereby retain jurisdiction.”
B.

Id.

Motion to Compel Arbitration
The Federal Arbitration Act (“FAA”) applies to “[a] written

provision in any . . . contract evidencing a transaction involving
commerce to settle by arbitration a controversy thereafter arising
out of such contract or transaction, or the refusal to perform the
whole or any part thereof . . . .”

9 U.S.C. § 2.

When a party

seeks enforcement of the arbitration clause of an agreement during
proceedings in a district court, a party sufficiently “invoke[s]
the full spectrum of remedies under the [Federal Arbitration Act,
9 U.S.C. § 1 et seq.(“FAA”)].”

Choice Hotels Intern., Inc. v. BSR

Tropicana Resort, Inc., 252 F.3d 707, 710 (4th Cir. 2001).
In order to compel arbitration under the FAA, the law of the
United States Court of Appeals for the Fourth Circuit provides that
a moving party must “demonstrate (1) the existence of a dispute
between the parties, (2) a written agreement that includes an
arbitration provision which purports to cover the dispute, (3) the
relationship

of

the

transaction,
7

which

is

evidenced

by

the

agreement, to interstate or foreign commerce, and (4) failure,
neglect, or refusal of the [opposing party] to arbitrate the
dispute.”

Adkins v. Labor Ready, Inc., 303 F.3d 496, 500-01 (4th

Cir. 2002) (citing Whiteside v. Teltech Corp., 940 F.2d 99, 102
(4th Cir. 1991).

Further, while federal law determines the

arbitrability of issues, “[w]hether a party agreed to arbitrate a
particular dispute is a question of state law governing contract
formation.”

Id. at 501 (citing First Options of Chicago, Inc. v.

Kaplan, 514 U.S. 938, 944 (1995)).
Federal policy generally takes a liberal stance in favor of
enforcement of contractual arbitration clauses.
F.3d at 500.
pursuant

to

See Adkins, 303

When determining whether an issue is arbitrable
a

contractual

provision,

courts

are

required

to

“resolve ‘any doubts concerning the scope of arbitrable issues
. . . in favor of arbitration.’”

Hill v. PeopleSoft USA, Inc., 412

F.3d 540, 543 (4th Cir. 2005) (quoting Moses H. Cone Mem’l Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983)).
C.

Motion to Dismiss
Rule 12(b)(6) of the Federal Rules of Civil Procedure allows

a defendant to raise the defense of “failure to state a claim upon
which

relief

can

be

granted”

as

a

motion

in

response

to

a

plaintiff’s complaint before filing a responsive pleading.
In assessing a motion to dismiss for failure to state a claim
under Rule 12(b)(6), a court must accept the factual allegations
contained in the complaint as true.

Advanced Health-Care Servs.,

Inc. v. Radford Cmty. Hosp., 910 F.2d 139, 143 (4th Cir. 1990).
8

Dismissal is appropriate only if “‘it appears to be a certainty
that the plaintiff would be entitled to no relief under any state
of facts which could be proven in support of its claim.’”

Id. at

143-44 (quoting Johnson v. Mueller, 415 F.2d 354, 355 (4th Cir.
1969)); see also Rogers v. Jefferson-Pilot Life Ins. Co., 883 F.2d
324, 325 (4th Cir. 1989).
A motion to dismiss for failure to state a claim under Rule
12(b)(6) should be granted only in very limited circumstances, as
the pleading requirements of Federal Rule of Civil Procedure
8(a)(2) only mandate “a short and plain statement of a claim
showing that the pleader is entitled to relief.” Conley v. Gibson,
355 U.S. 41, 47 (1957).

Still, to survive a motion to dismiss, the

complaint must demonstrate the grounds to entitlement to relief
with “more than labels and conclusions . . . factual allegations
must be enough to raise a right to relief above the speculative
level.”

Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007).
IV.

A.

Discussion

Motion to Strike and Dismiss Defendants’ Notice of Removal and
to Remand
As an initial matter, the plaintiffs have moved this Court to

strike and dismiss the defendants’ notice of removal.

In support

of this motion, the plaintiffs assert that the defendants have
improperly averred in their notice of removal that defendant Miller
joined in the removal, when they also argue that defendant Miller
was not properly served, and when counsel for defendant Miller did
not sign the notice of removal.

9

The

defendants,

with

the

exception

of

defendant

Miller,

responded, arguing that the motion to strike and dismiss the notice
of removal and to remand is improper both procedurally and on the
merits.

First, they argue that the only procedural vehicle by

which the Court may strike a filing is through Federal Rule of
Civil Procedure 12(f), and this rule only allows the Court to
strike “from a pleading any insufficient defense or redundant,
immaterial, impertinent, or scandalous matter.” (emphasis added).
The

defendants

maintain

that

a

notice

of

removal

is

not

a

“pleading” under the rules, and that the only response to a notice
of removal allowed by the rules or by Title 28 of the United States
Code is a motion to remand.

This Court agrees.

As the notice of

removal is not a “pleading”2 under the rules, this Court lacks the
power to strike it under Federal Rule of Civil Procedure 12(f).
Further, inasmuch as the plaintiffs’ motion to strike could be
construed as a motion to remand for violation of the removal
procedure under 28 U.S.C. § 1446, this Court must deny this motion
on the merits as well.

Initially, § 1446 only requires that “all

defendants who have been properly joined and served” join or
consent to removal.

It appears from the filings, that defendant

Miller was not personally served until October 5, 2011.

2

This case

Federal Rule of Civil Procedure 7(a) lists the only
“pleadings” allowed under the federal rules. These are: “(1) a
complaint; (2) an answer to a complaint; (3) an answer to a
counterclaim designated as a counterclaim; (4) an answer to a
crossclaim; (5) a third-party complaint; (6) an answer to a thirdparty complaint; and (7) if the court orders one, a reply to an
answer.”
10

was removed to this Court on September 13, 2011.

Accordingly,

defendant Miller was not properly served at that time of removal,
thus her consent to the same was not required.

Finally, the

defendants acknowledge their mistake in indicating on their notice
of removal that defendant Miller joined in removal.

However, they

also point out that, throughout the notice, they take note multiple
times that defendant Miller has not been properly served, and thus
does not join in the notice.

It is clear to this Court that any

indication that defendant Miller joined in the notice of removal
was inadvertent on the part of the defendants and was not intended
to deliberately mislead the plaintiffs or this Court.
Court

finds

no

prejudice

to

the

plaintiffs,

this

As this
Court,

or

defendant Miller in this error, this Court declines to dismiss the
defendants’ notice of removal on this basis.
B.

Motion to Remand
The plaintiffs also filed a separate motion to remand. Before

this Court is able to determine whether any issues in this case are
arbitrable, or whether the plaintiffs have successfully alleged any
claims against any of the named defendants, this Court must
determine whether removal of this action was proper.

See Vaden v.

Discover Bank, 556 U.S. 49, 58 (2009) (“[A] party seeking to compel
arbitration may gain a federal court’s assistance only if, ‘save
for’ the agreement, the entire, actual ‘controversy between the
parties,’ as they have framed it, could be litigated in federal
court.”) (internal citations omitted); Vt. Agency of Natural Res.
v. United States ex rel. Stevens, 529 U.S. 765, 778-79 (2000)
11

(abrogated on different grounds) (“Questions of jurisdiction, of
course,

should

be

given

priority--since

if

there

is

no

jurisdiction, there is no authority to sit in judgment of anything
else.”).

In their notice of removal, the defendants argued that

this Court has jurisdiction because defendant Miller, who, along
with

the

plaintiffs

is

a

resident

of

West

Virginia,

was

fraudulently joined in this action.
To establish fraudulent joinder, “the removing party must
demonstrate either ‘outright fraud in the plaintiff’s pleading of
jurisdictional facts’ or that ‘there is no possibility that the
plaintiff would be able to establish a cause of action against the
in-state defendant in state court.’” Hartley v. CSX Transp., Inc.,
187 F.3d 422, 424 (4th Cir. 1999) (quoting Marshall v. Manville
Sales

Corp.,

original).

6

F.3d

229,

232

(4th

Cir.

1993))

(emphasis

in

A claim of fraudulent joinder places a heavy burden on

the defendants.

Marshall, 6 F.3d at 232.

“[T]he defendant must

show that the plaintiff cannot establish a claim against the
nondiverse defendant even after resolving all issues of fact and
law in the plaintiff’s favor.

A claim need not ultimately succeed

to defeat removal; only a possibility of right to relief need be
asserted.”

Id. at 232-33 (internal citations omitted).

Further,

the burden is on the defendants to establish fraudulent joinder by
clear and convincing evidence.

Rinehart v. Consolidated Coal Co.,

660 F. Supp. 1140, 1141 (N.D. W. Va. 1987).
However, when fraudulent joinder is alleged, a court is
permitted to examine the entire record by any means available in
12

order

to

determine

challenged

party,

the

legitimacy

including

of

taking

affidavits submitted by the parties.

the
into

claim

against

consideration

the
any

Id. and Boss v. Nissan N.

Am., 228 F. App’x 331, 336 (4th Cir. 2007) (unpublished).
Here, the defendants do not allege outright fraud in the
plaintiffs’ pleadings.

Instead, the defendants argue that the

plaintiffs simply do not assert a claim against Ms. Miller.
Therefore,

to

defeat

the

plaintiffs’

motion

to

remand,

the

defendants must establish by clear and convincing evidence that,
even resolving all issues of fact and law in the plaintiffs’ favor,
the

plaintiffs

have

defendant Miller.

not

alleged

any

possible

claim

against

The defendants have met this burden.

The plaintiffs have alleged that defendant Miller improperly
notarized the Base Lease in Pennsylvania when they were not
present.

In support of their motion to remand, the plaintiffs

argue that defendant Miller is not fraudulently joined to this
action because it is impossible to determine, without discovery,
the

extent

of

her

relationship

with

defendant

Range,

her

involvement with the execution of the Base Lease, and/or whether
the plaintiffs were injured by her actions.

They focus on the

heavy burden necessary for the defendants to show fraudulent
joinder and insist that, because defendant Miller’s actions with
regard to the notarization of the Base Lease may have violated West
Virginia law concerning notary misconduct, the defendants cannot
carry their burden of showing that there is no possibility of

13

liability on defendant Miller’s part. See W. Va. Code § 29C-6-101;
Marshall, 6 F.3d at 232-33.
In response, the defendants3 assert that they have met their
burden of proving that defendant Miller was fraudulently joined in
this action.

The defendants state that claims one, two and three

all seek determinations in contract with regard to the validity of
contracts to which defendant Miller is not, and has never been, a
party. Claim four, they assert, is only alleged against Chesapeake
Appalachia, and defendants Nomac and Bronco.4

Finally, they argue

that, in addition to the plaintiffs’ failure to allege conduct on
defendant Miller’s part that could lead to liability under the
theories of slander of title, the tort of outrage, or civil
conspiracy

(claims

five,

six

and

seven),

the

plaintiffs

are

foreclosed from bringing any of these causes of action against
defendant Miller by the applicable two-year statute of limitations.
This Court addresses each of these issues in turn.
Claims one, two and three raised in the plaintiffs’ complaint
all

seek

this

Court’s

declaration

regarding

the

rights

and

responsibilities owed under the Base and Top Leases, as well as the
Order of Payment under the Top Lease, and the Release of the Top
Lease.

As stated above, the defendants argue that the plaintiffs

3

All defendants to this action filed a joint response to the
plaintiffs’ motion to remand.
4

The plaintiffs have not contested this argument, and it
appears clear from the face of the complaint that the plaintiffs
have not raised claim four against defendant Miller. Accordingly,
this Court will not address whether claim four could lead to
liability for defendant Miller.
14

have fraudulently joined defendant Miller to these claims because
she is not a party to any of these agreements.

This Court agrees.

In order to assert a declaratory judgment action against a
defendant, that defendant must be sufficiently “interested” in the
subject matter of the action.

28 U.S.C. § 2201(a).

For the

reasons asserted below, because defendant Miller is not a party to
the contracts which are the subjects of the declaratory judgment
actions

raised

in

claims

one,

two

and

three,

she

is

not

sufficiently “interested” in the claims to allow the plaintiffs to
assert declaratory judgment claims against her.
It is well established that, as a general matter, non-parties
to contracts cannot be held to possess rights or responsibilities
thereunder.

See EEOC v. Waffle House, Inc., 534 U.S. 279, 294

(2002) (“It goes without saying that a contract cannot bind a
nonparty.”).

In their response to the defendants’ contention that

defendant Miller is not a proper defendant to these claims of
relief, the plaintiffs assert that defendant Miller’s actions in
notarizing the Base Lease “are instrumental in determining the
rights of the parties and the full extent of Plaintiffs’ causes of
action.”

(ECF No. 32 *10)

While it is possible that the proof of plaintiffs’ claims
regarding the validity of the leases may require a determination of
whether or not defendant Miller’s notarization of the Base Lease
was valid, this does not make her a valid defendant to these
declaratory judgment claims.

None of the contracts which are the

bases for the declaratory judgment claims create any rights or
15

responsibilities on the part of defendant Miller.

No matter how

this or any court rules on any of these three claims, those rulings
could

only

impact

the

rights

and

responsibilities

of

the

plaintiffs, defendant Chesapeake Appalachia, and defendant Range,
as they are the only parties to this case which have any rights or
responsibilities under these contracts.

It may turn out that

defendant Miller will be a witness in determining the validity of
these contracts and that an ultimate decision as to these claims
could turn on her actions with regard to the Base Lease.

However,

as she is not a party to any of these contracts, she is an improper
party to claims seeking a determination as to their validity.
So too are the plaintiffs wholly barred from recovery against
defendant Miller under claim five, an allegation of slander of
title, claim six, which asserts the tort of outrage, and claim
seven, an allegation of civil conspiracy based upon the tortious
wrongdoing asserted in the previous claims.

The only claim of

misconduct against defendant Miller stems from her notarization of
the Base Lease on March 7, 2006.

Accordingly, when the plaintiffs

filed the instant action in the Circuit Court of Ohio County on
August 19, 2011, more than five years had passed since defendant
Miller’s alleged wrongdoing.

As the defendants contend, the

statute of limitations has run as to defendant Miller on all of
these tort claims.
In West Virginia, the applicable statute of limitations for
tort claims for bodily injury or property damage not subject to a
specifically prescribed statute of limitations, is two years “after
16

the right to bring the same shall have accrued.”
§ 55-2-12(b).

W. Va. Code

Initially, the tort of outrage carries no specific

statute of limitations outside of this “catch all” provision
contained in § 55-2-12(b), and thus is governed by the statute of
limitation of two years.

See Travis v. Alcon Lab. Inc., 202 W. Va.

369, 382 (1999). Further, while the West Virginia Supreme Court of
Appeals has not directly commented on the matter, this Court
believes that, if faced with the question, the West Virginia high
court would hold that slander of title is governed by the two-year
statute of limitations under § 55-2-12 as well.
In establishing the tort of slander of title, the West
Virginia Supreme Court held that the cause of action required an
injury of “diminished [property] value in the eyes of third
parties.”

TXO Production Corp. v. Alliance Res. Corp., 187 W. Va.

457, 466 (1992). The West Virginia Supreme Court has found that an
injury to the right to conduct business is an injury to a property
right, and is governed by the two-year statute of limitations for
torts seeking recovery for property damage. Garrison v. Herbert J.
Thomas Mem’l Hosp. Ass’n, 190 W. Va. 214, 221 (1993).

Further,

determining the applicability of a statute of limitations to a
cause of action, the West Virginia high court focuses on “the type
of interest which is allegedly harmed.”
221.

Garrison, 190 W. Va. at

Thus, based upon the required injury to perceived property

value under slander of title, the § 55-2-12 two-year statute is
most applicable.

Finally, since the tort of civil conspiracy is

not a stand-alone tort in West Virginia, the statute of limitations
17

of the underlying tortuous activity; here two years, controls. See
Dunn v. Rockwell, 225 W. Va. 43, 57 (2009).
The plaintiffs raise two arguments against the application of
the

statute

of

§ 55-2-12(b).

limitations

enumerated

in

West

Virginia

Code

First, they argue that, because their complaint

contains issues regarding contract disputes, the tort claims in the
complaint should be given the ten-year statute of limitations
applicable to contract disputes in West Virginia.
§ 55-2-6.

W. Va. Code

In support of this contention, they cite to the West

Virginia Supreme Court’s position that “a complaint that could be
construed as being either in tort or contract will be presumed to
be in contract whenever the action would be barred by the statute
of limitation if construed as being in tort.”
W.

Va.

498,

503

(1996).

However,

the

Smith v. Stacy, 198
plaintiffs

fail

to

acknowledge the fact that the Smith decision was interpreting the
statute of limitations for a legal malpractice case.

The cause of

action for legal malpractice in West Virginia is a hybrid action,
and “may be brought in contract or in tort.”

Id. at 502 (internal

citations omitted). The torts of slander of title, outrage, and as
a result, civil conspiracy in this case, are not such potentially
hybrid actions.
sounds

in

Simply because part of the plaintiffs’ complaint

contract

does

not

mean

complaint becomes a contract action.

that

the

entirety

of

that

Accordingly, this contention

of the plaintiffs is without merit.
Further, the plaintiffs argue that the discovery rule tolls
the statute of limitations in this case to March 2011, when the
18

Chesapeake defendants allegedly stopped payment on the plaintiffs’
bonus check, causing the plaintiffs to inspect the Base Lease, and
notice the allegedly improper notarization for the first time.
This argument misconstrues the discovery rule in West Virginia.
The rule is not a subjective one which allows for tolling until the
actual date of discovery, but is rather an objective standard,
which tolls the statute until such time as the plaintiffs either
did, or should have, by reasonable diligence discovered the right
of action.

Dunn v. Rockwell, 689 S.E.2d 255, 264-65.

Here, the

plaintiffs were provided with the documents for the Base Lease when
it was executed in 2006.
should

have

Inspection of that lease would have or

immediately

revealed

the

allegedly

improper

notarization, and would have or should have noticed the plaintiffs
to their right of action against the defendant Miller at that time.
Accordingly, with reasonable diligence, the plaintiffs would have
or should have discovered the alleged wrongdoing immediately upon
receiving the Base Lease, and the discovery rule does not work to
toll the statute of limitations in this case.
Finally, the plaintiffs argue that they have a right of action
against defendant Miller for notary misconduct under West Virginia
Code § 29C-6-101.

However, the plaintiffs’ complaint does not

contain a claim for notary misconduct, nor have the plaintiffs
moved to amend the complaint to add such a claim.

Further, even if

the complaint did contain such a claim, it too would be barred by
the statute of limitations.

As explained above, the plaintiffs

would have or should have become aware of defendant Miller’s
19

alleged misconduct through reasonable diligence in 2006.

The West

Virginia Supreme Court of Appeals has not ruled directly on the
statute of limitations for liability under West Virginia Code
§ 29C-6-101.

However, as described above, the damages alleged by

the plaintiffs here are to their future ability to lease and
conduct business with the leasehold property, a property interest
in West Virginia.

Thus, the applicable statute of limitations is

two years, under West Virginia Code § 55-2-12(b).
As a result of the foregoing, the defendants have successfully
sustained their burden of proof in establishing that defendant
Miller has been fraudulently joined to this action.

Accordingly,

in disregarding her residency, this Court finds that it possesses
subject matter jurisdiction over this action pursuant to 28 U.S.C.
§§ 1332 and 1441.

The plaintiffs’ motion to remand this action to

the Circuit Court of Ohio County is denied.

As a further result of

the foregoing, the plaintiffs have failed to allege a cause of
action against defendant Miller.

Thus, her motion to dismiss

pursuant to Federal Rule of Civil Procedure 12(b)(6) is granted.
C.

Motion to Compel Arbitration
Defendants Chesapeake Appalachia, Nomac, and Bronco filed a

joint motion to compel arbitration and to dismiss. This Court will
first address the motion to compel arbitration.

These defendants

assert that arbitration of this matter is required because both of
the relevant leases contain arbitration clauses which mandate
arbitration of all claims or controversies “concerning,” “arising
out of,” or “relating to” the leases.
20

(ECF No. 3 Ex. 1 *25 & *34)

They

also

argue

that

the

FAA

applies

because

the

leases

“evidenc[e]” transactions “involving commerce.” 9 U.S.C. § 2.
Finally,

they

maintain

that

the

arbitration

clauses

are

enforceable, and cover all of the claims raised in the plaintiffs’
complaint.
The

plaintiffs

agreement

to

do

not

arbitrate

contest

between

that

there

themselves

is

and

a

written

Chesapeake

Appalachia; nor do they argue that the relevant agreements are not
subject to the FAA.

Rather, the plaintiffs respond to this motion

by arguing that the arbitration clauses of the Base and Top Leases
are not enforceable because they were the result of unequal
bargaining power between the parties, because the leases are
adhesion contracts, and because the clauses are unconscionable.
They also argue that their claims are not ripe for arbitration
because they contest the validity of both of the leases containing
the arbitration clauses, and that declaratory judgment actions are
not subject to arbitration.
Initially,

this

Court

finds

that,

pursuant

to

the

test

enumerated in Adkins, and described in detail above, the moving
defendants have satisfied their burden of demonstrating that the
FAA applies to the arbitration agreements at issue.
at 500-501.

See 303 F.3d

This Court next holds that the claims brought by the

plaintiffs are all “ripe” for arbitration, and are all covered
under the terms of the arbitration clauses.

Finally, this Court

finds that the arbitration clauses are not unconscionable, and are
enforceable despite any apparent unequal bargaining power between
21

the

plaintiffs

and

defendant

Range

and

defendant

Chesapeake

Appalachia, and despite the supposed adhesive nature of the leases.
The Fourth Circuit, as well as the United States Supreme
Court,

has

repeatedly

unconsionability

or

stated

otherwise

that,

while

arguments

unenforcability

of

for

the

arbitration

agreements themselves are rightly considered by district courts in
opposition to motions to compel arbitration, claims regarding the
enforceability of a contract as a whole are claims only to be
raised before the arbitrator. Snowden v. CheckPoint Check Cashing,
290 F.3d 631, 636 (4th Cir. 2002) (“[I]f a party seeks to avoid
arbitration . . . by challenging the validity or enforceability of
an arbitration provision on any grounds that ‘exist at law or in
equity for the revocation of any contract,’ 9 U.S.C. § 2, the
grounds ‘must relate specifically to the arbitration clause and not
just to the contract as a whole.’”) (quoting Hooters of Am., Inc.
v. Phillips, 173 F.3d 933, 938 (4th Cir. 1999)); Sydnor v. Conseco
Fin. Serv. Corp., 252 F.3d 302, 305 (4th Cir. 2001) (When “the
dispute pertains to the formation of the entire contract, rather
than the arbitration agreement,” the issues of enforceability are
“determined by the arbitrator.”); Buckeye Check Cashing, Inc. v.
Cardegna, 546 U.S. 440, 445 (2006) (reaffirming that, under the
FAA, a challenge to the validity of a contract as a whole, not
specifically to an arbitration clause contained therein, is to be
determined in arbitration) (citing Prima Paint Corp. v. Flood &
Conklin Mfg. Co., 388 U.S. 395, 403-04 (1967)).

22

Accordingly, the plaintiffs’ contentions that, because their
complaint contests the validity of the leases, the claims are not
“ripe” for arbitration are without merit. The above-cited case law
also renders meritless the plaintiffs’ assertions that declaratory
judgment actions are not subject to arbitration, as declaratory
judgment actions quite often seek a determination of the validity
of a contract and/or specific contractual provisions.

See also

Schultz v. AT&T Wireless Servs., Inc., 376 F. Supp. 2d 685, 690
(N.D. W. Va. 2005); Miller v. Equifirst Corp., No. 2:00-0335, 2006
U.S. Dist. LEXIS 63816 (S.D. W. Va. Sept. 5, 2006) (both granting
motions to compel arbitration in declaratory judgment actions).
Further, the arbitration clauses in each of the leases are
both quite broad. The language of the arbitration agreement in the
Base Lease purports to cover “[a]ny controversy or claim arising
out of or relating to this Lease, or the breach thereof.”
3 Ex. 1 *25)

(ECF No.

The Top Lease contains an agreement that “in the

event of a disagreement between Lessor and Lessee concerning this
Lease or the associated Order of Payment, performance thereunder,
or damages caused by Lessee’s operations, the resolution of all
such disputes shall be determined in arbitration . . . .”
3 Ex. 1 *34)

(ECF No.

Accordingly, because all of plaintiffs’ claims

clearly arise out of the defendants’ alleged actions concerning one
or the other of the leases, all of the plaintiffs’ claims are
covered by the arbitration agreements in both of the leases.
The plaintiffs have also failed to show that the arbitration
agreements in the Base and Top Leases are unconscionable.
23

As the

plaintiffs

concede,

an

arbitration

clause

is

not

rendered

unconscionable simply because a contract is one of adhesion, or
because the parties thereto are of unequal bargaining power.

In

West

be

Virginia,

in

order

for

an

arbitration

clause

to

unconscionable, the court must find unacceptable a combination of
“the relative positions of the parties, the adequacy of the
bargaining position,” lack of “meaningful alternatives” in the
formation of the challenged clause, and “the existence of unfair
terms.” Art’s Flower Shop v. Chesapeake & Potomac Tel. Co., 186 W.
Va. 613, syl. 4 (1992).
In support of their contention that the arbitration clauses
are

unconscionable,

the

plaintiffs

assert

that

they

are

not

sophisticated in the field of oil and gas rights, while defendants
Chesapeake and Range are highly sophisticated.

They state that

they were not advised of their right to counsel, and that they
relied upon the assurances of landmen and agents of Range, and that
they also believe that a consultant was compensated by Range. They
also claim that the leases presented to them by both of these
defendants were in a “this or nothing” form.

However, they do not

support these conclusory statements with affidavits, or any other
evidence whatsoever.

Further, the moving defendants contend that

the plaintiffs actually negotiated portions of the leases.
Finally, the only “unfair terms” noted by the plaintiffs exist
in the Top Lease, and even in that lease, the plaintiffs largely

24

point to unfair terms outside of the arbitration clause itself.5
The only term of the Top Lease’s arbitration clause that the
plaintiffs claim to be unfair is the mandate that “[a]rbitration
shall be the exclusive remedy and cover all disputes[.]”

However,

there is no explanation as to why this term is unfair, and this
Court is unable to determine the reason why it would be, as it
applies to all parties to the agreement equally.

There is no

indication that arbitration is a more favorable vehicle for dispute
resolution for one party than it is for the other, and the term
binds all parties to arbitration. Accordingly, the plaintiffs have
failed to show that the arbitration clause in either lease is
unconscionable.

For these reasons, Chesapeake Appalachia, LLC,

Bronco and Nomac’s6 motion to compel arbitration is granted.
All of the above being said, this Court recognizes that
defendants Range, Chesapeake Energy, and Chesapeake Operating, have

5

As explained above, this Court cannot consider the
unconscionability of the contract as a whole in considering a
motion to compel arbitration, but can only consider the
unconscionability of the arbitration clause itself.
6

This Court notes that neither defendant Bronco nor defendant
Nomac are parties to either of the leases. However, it is well
established in the Fourth Circuit that non-parties to contracts can
enforce arbitration agreements against parties to the same based
upon “equitable estoppel.” American Bankers Ins. Grp., Inc. v.
Long, 453 F.3d 623, 627 (4th Cir. 2006).
Equitable estoppel
applies when “the signatory to the contract containing the
arbitration
clause
raises
allegations
of
substantially
interdependent and concerted misconduct by both the nonsignatory
and one or more of the signatories to the contract.” Id. at n.3
(citing Brantley v. Republic Mortgage Ins. Co., 424 F.3d 392, 396
(4th Cir. 2005)).
As this case falls squarely within this
definition of equitable estoppel, Bronco and Nomac may enforce the
arbitration clauses against the plaintiffs.
25

not moved to compel arbitration in this case, but have rather
chosen to solely move to dismiss pursuant to Federal Rule of Civil
Procedure

12(b)(6).

However,

this

Court

believes

it

to

be

appropriate and necessary to require the claims against these
defendants to be brought in arbitration as well.

The Fourth

Circuit has not spoken on a district court’s authority to sua
sponte compel arbitration when neither party to an action so moves.
However,

the

precedent

of

other

circuits,

coupled

with

the

positions that the Fourth Circuit has taken on similar issues,
support this Court’s conclusion that, while not necessarily a
favored

action,

such

sua

sponte

action

is

permissible

and

appropriate in circumstances so warranting, which this Court finds
here.
Under the FAA, arbitration clauses are considered waivable.
9 U.S.C. § 3.

Further, it has long been a settled matter that

arbitration clauses are a form of a forum-selection clause, the
enforcement of which is considered in the Fourth Circuit as a
motion to dismiss for improper venue, pursuant to Federal Rule of
Civil Procedure 12(b)(3). See Potenciano Aggarao v. MOL Ship Mgmt.
Co., Ltd., 675 F.3d 355, 365 n.9 (4th Cir. 2012) (“[T]he Supreme
Court has characterized an arbitration clause as ‘a specialized
kind of forum selection clause.’”) (quoting Scherk v. AlbertoCulver Co., 417 U.S. 506, 519 (1974)); and Sucampo Pharm., Inc. v.
Astellas Pharma, Inc., 471 F.3d 544, 549-50 (4th Cir. 2006) (“[A]
motion to dismiss based on a forum-selection clause should be

26

properly treated under Rule 12(b)(3) as a motion to dismiss on the
basis of improper venue.”).
As a result, a number of circuits have held that, as a general
matter, because “venue is primarily a matter of convenience of
litigants and witnesses,” and because arbitration clauses are
waivable, district courts should not “dismiss sua sponte either for
improper venue or for failure to follow a forum selection clause.”
Auto. Mechs. Local 701 Welfare and Pension Funds v. Vanguard Car
Rental USA, Inc., 502 F.3d 740, 747 (2007); see also Wright, Miller
& Cooper, Federal Practice and Procedure: Jurisdiction 3d § 3826
(“Because of the waiver principle and the personal nature of the
defense, it generally (but not always) is thought inappropriate for
the district court to dismiss an action on its own motion for
improper venue.”); Janis v. Ashcroft, 348 F.3d 491 (6th Cir. 2003);
Gomez v. USAA Federal Savings Bank, 171 F.3d 794, 796 (2d Cir.
1999).
However, as is noted in Wright, Miller & Cooper, while sua
sponte dismissal based upon a forum selection clause is “generally”
considered inappropriate, this is not always the case. The general
concern in sua sponte enforcement of such clauses is that the party
opposing such enforcement is not afforded the opportunity to brief
the matter for the Court.

See Algodonera de las Cabezas, S. A. v.

American Suisse Capital, Inc., 432 F.3d 1343, 1345-46 (11th Cir.
2005); Moneygram Payment Systems, Inc. v. Consorcio Oriental, S.A.,
65 Fed. App’x 844 (3d Cir. 2003)(unpublished).

This concern does

not factor into this case, because the plaintiffs have already
27

received a full opportunity to brief the issue of arbitrability in
response

to

defendants.

a

motion

to

compel

arbitration

filed

by

other

Further, the Second Circuit has stated that, under

“extraordinary circumstances,” a district court may sua sponte
“conclude that venue was improper.”
88.

This,

enforcement

coupled
of

with

arbitration

the

Stich v. Rehnquist, 982 F.2d

strong

clauses,

federal

leads

preference

this

Court

to

for
the

conclusion that it is necessary to find extraordinary circumstances
in this case, and send the remaining claims against all of the
remaining defendants to arbitration.
Such extraordinary circumstances are found because this Court
believes that the claims brought against each of the defendants who
have not moved for arbitration are inexorably intertwined with and
dependent upon the claims brought against the defendants who have
moved

to

compel

efficiency,

arbitration.

avoidance

of

Accordingly,

possible

the

conflicting

interests
judgments

of
and

obligations, and the high possibility of the inability to reach a
full and complete result in arbitration should all defendants not
participate in those proceedings, mandate that all claims against
all defendants be litigated together.

This Court thus finds that

all of the plaintiffs’ claims against all defendants except for
defendant Miller, who was previously dismissed, must be dismissed
to be raised in arbitration.
V.

Conclusion

For the reasons stated above, the plaintiffs’ motion to strike
and

dismiss

notice

of

removal
28

and

remand

(ECF

No.

18)

and

plaintiffs’ motion to remand (ECF No. 19) are DENIED.

Defendant

Brenda Ann Miller’s motion to dismiss (ECF No. 28) is GRANTED.
Defendants Chesapeake Appalachia, LLC, Bronco Drilling, LLC, and
Nomac Drilling LLC’s motion to compel arbitration and to dismiss
(ECF No. 13) is GRANTED inasmuch as it moves to compel arbitration,
and DENIED AS MOOT inasmuch as it moves for dismissal pursuant to
Fed. R. Civ. P. 12(b)(6).

Defendant Range Resources-Appalachia,

LLC’s motion to dismiss (ECF No. 8), as well as plaintiffs’ motion
for leave to file surreply to defendant Range’s motion to dismiss
(ECF No. 20) are DENIED AS MOOT.

Defendants Chesapeake Energy

Corp. and Chesapeake Operating, Inc.’s motion to dismiss (ECF No.
15) is DENIED AS MOOT.

Defendant Brenda Ann Miller is DISMISSED

from this action WITH PREJUDICE. This civil action is DISMISSED to
be brought in arbitration in accordance with this memorandum
opinion and order.

The Clerk is DIRECTED to dismiss this civil

action and strike it from the active docket of this Court.
IT IS SO ORDERED.
The Clerk is directed to transmit a copy of this order to
counsel of record herein.
DATED:

August 23, 2012

/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE

29