Davis et al v. EQT Production Company et al
Filing
23
MEMORANDUM OPINION AND ORDER DENYING PLAINTIFFS' 10 MOTION TO REMAND. Signed by Senior Judge Frederick P. Stamp, Jr on 12/10/12. (mji)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
MARK S. DAVIS and
PATRICIA DAVIS,
Plaintiffs,
v.
Civil Action No. 5:12CV52
(STAMP)
EQT PRODUCTION COMPANY,
formerly known as
Equitable Production Company,
a Pennsylvania corporation,
THOMAS VARNER and NICK CRIADO,
Defendants.
MEMORANDUM OPINION AND ORDER
DENYING PLAINTIFFS’ MOTION TO REMAND
I.
Background
On September 17, 2008, the plaintiffs and defendant EQT
Production Company (“EQT”), then known as Equitable Production
Company, entered into an oil and gas lease (“the Lease”) which
purported to lease the oil and gas rights to the plaintiffs’ 31.12
acres of land located in Hancock County, West Virginia.
The Lease
was recorded the same day in the office of the Clerk of Hancock
County.
The plaintiffs filed this civil action in the Circuit Court of
Hancock County, West Virginia on March 12, 2012, claiming that they
were fraudulently induced to sign the Lease by EQT and its Landman,
defendant
Thomas
unconscionable.
Varner
(“Varner”),
and
that
the
Lease
is
The complaint seeks a declaration that the Lease
is void, and also asserts claims for fraud, both generally and in
the inducement, unconscionability of the Lease, unjust enrichment,
breach of implied covenant to diligently explore, develop, produce
and market, the tort of outrage, and notary public improprieties
and improper attestation and acknowledgment with regard to the
notarization of the Lease by defendant Nick Criado (“Criado”).1
Defendants EQT and Varner removed this action to this Court,2
claiming diversity jurisdiction as a result of fraudulent joinder.
They admit that both the plaintiffs and defendant Criado are
citizens of West Virginia, but argue that defendant Criado’s
citizenship should be disregarded for jurisdictional purposes,
because
the
plaintiffs
have
no
possibility
liability upon him in this action.
of
establishing
In the alternative, the
defendants argue that misjoinder is present here, and that the
claims against defendant Criado should be severed from the claims
against EQT and defendant Varner, and the claims against defendant
Criado alone should be remanded to state court.
The plaintiffs
then filed a motion to remand, maintaining that they have asserted
1
The complaint also asserts a claim entitled “arbitration
clause” which argues that the arbitration clause contained within
the Lease is unenforceable and unconscionable. However, there is
no allegation in the complaint or elsewhere that the defendants or
any other party have attempted to enforce the arbitration clause.
Accordingly, this claim is clearly a defense to an anticipated
attempt by the defendants to compel arbitration, rather than a
cause of action in itself. As the defendants have not attempted to
invoke the arbitration clause which is the subject of this claim,
nothing regarding the arbitration clauses’ enforceability will be
addressed herein.
2
Nick Criado was not served at the time of removal on April 5,
2012. This defendant waived service of summons in this action on
May 15, 2012. Title 28, United States Code, Section 1446 mandates
only that “all defendants who have been properly joined and served”
join or consent to removal.
2
valid claims against defendant Criado which were properly included
as a part of this civil action, and as such, the entire case must
be remanded for lack of subject matter jurisdiction.
This motion
is now fully briefed and ripe for disposition by this Court.
For
the reasons that follow, the plaintiffs’ motion to remand is
denied.
II.
Applicable Law
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
3
more depth to determine whether the non-diverse parties are real
parties in interest to the action.
457, 461 (4th Cir. 1999).
Mayes v. Rapoport, 198 F.3d
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.”
III.
Id.
Discussion
In their notice of removal, the defendants argue that this
Court has jurisdiction over this case because defendant Criado, 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., 6 F.3d 229, 232
(4th Cir. 1993)) (emphasis in original).
A claim of fraudulent
joinder places a heavy burden on the defendants.
at 232.
Marshall, 6 F.3d
“[T]he defendant must show that the plaintiff cannot
establish a claim against the nondiverse defendant even after
4
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.”
(internal citations omitted).
Id. at 232-33
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).
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 Mr. Criado.
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 Criado.
not
alleged
any
possible
claim
against
The defendants have met this burden.
The plaintiffs have alleged that defendant Criado improperly
notarized the Lease outside of their presence.
They name him as a
defendant to the allegations raised in Counts VI, VII, IX, X and
XI, which allege notary public improprieties, improper attestation
and acknowledgment, slander of title, the tort of outrage, and
civil conspiracy, respectively.
The plaintiffs acknowledge that
liability against defendant Criado which may result from his
allegedly improper notarization of the Lease must result from the
Uniform Notary Act (“UNA”), W. Va. Code § 29C-6-101. The UNA holds
notaries
“liable
to
the
persons
involved
for
all
proximately caused by the notary’s official misconduct.”
5
damages
Id.
In
support of liability under this framework and the claims asserted
in their complaint, the plaintiffs allege that defendant Criado
conspired with the other defendants in their fraudulent endeavor to
effectuate the Lease, and that the endeavor was only perfected by
recordation of the Lease, which was impossible without defendant
Criado’s notarization.
The plaintiffs also focus on the heavy
burden necessary for the defendants to show fraudulent joinder and
insist that, due to their allegations of notary misconduct and of
civil conspiracy between the parties to defraud the plaintiffs, the
defendants cannot carry their burden of showing that there is no
possibility of liability on defendant Criado’s part.
See W. Va.
Code § 29C-6-101; Marshall, 6 F.3d at 232-33.
In response, defendants EQT and Varner3 assert that they have
met their burden of proving that defendant Criado was fraudulently
joined in this action.
The defendants argue that because the
plaintiffs acknowledge that they signed the Lease, under West
Virginia law, they cannot show that defendant Criado’s alleged
improper notarization of the same proximately caused any injury
which they allege to have resulted from the Lease.
For the
following reasons, this Court agrees with the defendants that no
injury can be shown to have resulted from any of the malfeasance
alleged against defendant Criado, and as a result, will deny the
plaintiffs’ motion to remand.
3
Defendant Criado has not joined in the response to the motion
to remand.
6
As the defendants note, under West Virginia law, the proper
notarization of the Lease is immaterial to the validity and
enforceability of that lease between the parties thereto.
This is
because, under West Virginia Code § 31-1-1, transfers in an
interest in land need only be in writing and signed by all parties
to the transfer in order to be enforceable and valid between the
parties to the transfer.
See W. Va. Code § 31-1-1. There is no
mandate under West Virginia law which requires proper notarization
of a deed or lease in order to render it enforceable. The purpose
of a notary is “merely to acknowledge the authenticity of the
signature.”
Wolfe v. Greentree Mortg. Corp., No. 3:09cv74, 2010
U.S. Dist. LEXIS 6005, *3 (N.D. W. Va. Jan. 26, 2010).
In short,
the only element of validity of the Lease to which a notarization
attests is the authenticity of the signatures thereto.
Accordingly, as other courts in this district have found, the
plaintiffs’ admission that the signatures on the document are
authentic, precludes any finding that the plaintiffs’ claimed
injuries which resulted from the Lease were proximately caused by
its allegedly improper notarization. See id. (“Given the fact that
the plaintiff does not contest the fact that she, in fact, signed
the deed of trust, there can be no damage emanating from the notary
public’s failure to properly acknowledge that signature. Since
there is no damage, there is no ‘glimmer of hope’ of a judgment
against
defendant
Freda
[the
notary
public].”);
Heller
v.
TriEnergy, Inc., No. 5:12cv45, 2012 U.S. Dist. LEXIS 94003, at *2122 (N.D. W. Va. July 9, 2012) (“[A]ny finding of proximate cause
7
here is precluded by [the plaintiffs’] own concession that [they]
signed the Lease.
Without proximate cause, there can be no
possible claim against Trout.”); May v. Nationstar Mortgage, LLC,
No. 3:12cv43, 2012 U.S. Dist. LEXIS 102956, at *16 (Plaintiff has
no possible claim of unconscionable conduct against a notary public
when she admits that she signed the subject loan documents.)
(citing Wolfe, 2010 U.S. Dist. LEXIS 6005, at *3).
The plaintiffs attempt to avoid this inevitable conclusion
through two separate but related arguments.
First, they assert
that their complaint alleges that the concerted effort by all three
defendants, who they allege engaged in a civil conspiracy to
defraud and otherwise cause damage to the plaintiffs through the
execution of the Lease, resulted in the claimed damages.
The
plaintiffs claim that, even if Criado cannot be held liable for his
own alleged malfeasance, he can be held liable for the wrongdoing
of his co-conspirators.
It is true that, under West Virginia law,
co-conspirators can be held liable for torts which they did not
commit but for which they “shared a common plan for its commission
with the actual perpetrator(s).” Syl. pt. 9, Dunn v. Rockwell, 689
S.E.2d 255 (W. Va. 2009).
However,
statement
of
this
the
principle
necessary
liability in West Virginia.
alone
is
requirements
an
for
overly
simplistic
civil
conspiracy
The West Virginia Supreme Court of
Appeals has clarified that, while liability can attach under civil
conspiracy
law
for
tortious
activity
committed
by
other
co-
conspirators, liability does not lie with the conspiracy itself.
8
Id. at 269.
Rather, “‘[i]t is the tort, and each tort, not the
conspiracy, that is actionable.’”
Id. (quoting Segall v. Hurwitz,
339 N.W.2d 333, 338 (Wis. App. 1983)).
Accordingly, beyond
agreement with a tortious purpose, co-conspirators must all act in
some way which “promoted” the tort.
omitted).
Id. (internal quotation marks
Here, the alleged wrongful act committed by Criado, the
improper notarization of the Lease outside of the presence of the
plaintiffs, did nothing to promote the alleged “unlawful purpose”
alleged in the complaint.
Because West Virginia law requires deeds and leases to be
notarized in order to be recorded, the plaintiffs assert that
Criado’s allegedly improper notarization was necessary to “perfect”
the conspiracy.
However, this argument ignores the fact that the
recordation of the Lease, along with the notarization thereof, is
inconsequential to the enforceability of the Lease between the
parties to this civil action, and thus could not have aided or
contributed to any alleged conspiracy to defraud the plaintiffs
through
the
execution
of
the
Lease.
As
stated
above,
the
plaintiffs’ complaint argues that the Lease is unconscionable as
written and unenforceable due to fraud in the inducement of the
Lease.
However, it does not argue that the Lease is unenforceable
because the plaintiffs never agreed to or signed it.
Accordingly,
while a lack of a proper attestation would have prevented the Lease
from being recorded, as explained above, the Lease could not be
found to be unenforceable between the parties for that reason. Any
wrongdoing by Criado in the notarization of the Lease thus does
9
nothing to further the alleged conspiracy to fraudulently induce
the plaintiffs to execute an unconscionable lease document.4
As a second attempt to avoid the conclusion that defendant
Criado’s alleged improper actions have not caused any injury to the
plaintiffs,
the
plaintiffs
argue
that
because
the
Lease
was
recorded, it became enforceable as to third parties, and thus
foreclosed any possibility of the plaintiffs leasing the oil and
gas rights to their property to another company.
However, the
plaintiffs do not contend in their complaint or in the briefing of
their motion to remand, that they have at any time attempted to release their oil and gas rights only to be impeded from doing so by
the recorded Lease.
As such, to argue that they have been injured
by an inability to re-lease the oil and gas rights to their
property is purely speculation, and as there has been no actual
injury in this regard, cannot form the basis for liability.
Further, even if the plaintiffs had attempted to re-lease the
oil
and
gas
rights
to
their
property,
the
argument
that
an
unrecorded lease would not have been enforceable as to a third
party is overly simplistic. In West Virginia, unrecorded deeds and
4
In the briefing of the motion to remand, the plaintiffs also
allege that the defendants to this action were engaged in a “joint
enterprise.”
However, this allegation is also insufficient to
As
create possible liability on the part of defendant Criado.
Judge Groh correctly noted in May, a joint enterprise must first be
established before “each venturer [may be] liable for the unlawful
acts of a co-venturer.” May, 2012 U.S. Dist. LEXIS 102956, at *1415 n.1 (quoting Short v. Wells Fargo Bank Minn., N.A., 401 F. Supp.
2d 549, 563 (S.D. W. Va. 2005)).
Accordingly, when the
“substantive causes of action against [the allegedly fraudulently
joined defendant] fail, . . ., there can be no unlawful acts to
support a joint venture.” Id.
10
leases to real property are unenforceable against later third party
purchasers and/or lessees of that property only if that third party
lacks notice of the existence of the prior lease or deed.
v. Young, 230 S.E.2d 261, 265 (W. Va. 1976).
Farrar
Notice is imputed
upon all third parties if the lease or deed is recorded.
However,
it is also so imputed if, for any reason, reasonable research and
diligence on the part of the later purchaser/lessee would have
yielded notice of the Lease, or if they are aware of circumstances
“sufficient to put a prudent buyer on inquiry” as to its existence.
Fanti v. Welsh, 161 S.E.2d 501, 505 (W. Va. 1968).
As such, it is
highly speculative to assume that another possible lessee would not
have had notice of the existence of the Lease through means other
than the recording.
For all of these reasons, there is no
possibility
plaintiffs
liability
on
that
the
the
part
of
would
defendant
fraudulently joined to this action.
be
Criado,
able
and
to
establish
he
has
been
As a result, this Court must
deny the plaintiffs’ motion for remand.
IV.
Conclusion
For the reasons stated above, the plaintiffs’ motion to remand
(ECF No. 10) is DENIED.
IT IS SO ORDERED.
The Clerk is directed to transmit a copy of this order to
counsel of record herein.
11
DATED:
December 10, 2012
/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE
12
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