Trans Energy, Inc. et al v. EQT Production Company
Filing
48
MEMORANDUM OPINION AND ORDER DENYING WITHOUT PREJUDICE IN PART AND GRANTING IN PART DEFENDANT'S 37 MOTION TO DISMISS, DENYING WITHOUT PREJUDICE PLAINTIFFS' 42 MOTION FOR SUMMARY JUDGMENT, DENYING AS MOOT 46 MOTION TO FILE SURREPLY, AND DIRECTING PARTIES TO CONDUCT LIMITED DISCOVERY. Discovery due by 6/1/2015. Signed by Senior Judge Frederick P. Stamp, Jr on 3/17/2015. (copy to counsel via CM/ECF)(lmm)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
TRANS ENERGY, INC.,
a Nevada corporation,
PRIMA OIL COMPANY, INC.,
a Delaware corporation and
REPUBLIC PARTNERS VI, LP,
a Texas limited partnership,
Plaintiffs,
v.
Civil Action No. 5:13CV93
(STAMP)
EQT PRODUCTION COMPANY,
a Pennsylvania corporation,
Defendant.
MEMORANDUM OPINION AND ORDER
DENYING WITHOUT PREJUDICE IN PART AND GRANTING IN PART
DEFENDANT’S MOTION TO DISMISS,
DENYING WITHOUT PREJUDICE
PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT,
DENYING AS MOOT MOTION TO FILE SURREPLY,
AND DIRECTING PARTIES TO CONDUCT LIMITED DISCOVERY
I.
Procedural History
The plaintiffs, Trans Energy, Inc., Prima Oil Company, Inc.,
and Republic Partners VI, LP (“the plaintiffs”), filed a complaint
in this Court based on diversity jurisdiction.
The plaintiffs are
seeking a declaratory judgment, based on several sub-claims, that
they are the rightful titleholders to an oil and gas lease that
covers land located in Wetzel County, West Virginia and thus are
entitled to a quiet title declaration.
plaintiffs
seek
a
declaration
that
In the alternative, the
they
are
titleholders based on a claim of adverse possession.
the
rightful
The lease in
question is an 1892 lease executed by L.H. and J.S. Robinson (the
“Robinson Lease”).
These same plaintiffs, and the defendant in this case, EQT
Production Company (“EQT”), were involved in a prior action in this
Court, Trans Energy Inc. et al. v. EQT Production Co., No. 1:11CV75
(N.D. W. Va. 2011) (“Blackshere Lease action”).
That action also
involved an additional plaintiff, Republic Energy Ventures, LLC
(“REV”).
That case arose from the parties’ competing claims of
interest in the gas rights of a 3,800 acre plot of land located in
Wetzel and Doddridge Counties, West Virginia (“Blackshere Lease”).
This Court granted summary judgment to the plaintiffs based on a
finding that Prima Oil Company, Inc. (“Prima”) was a bona fide
purchaser of the Blackshere Lease and that it was the rightful
owner of both the oil and gas rights related to the Blackshere
Lease.
EQT then appealed that judgment to the United States Court
of Appeals for the Fourth Circuit.
Before a final determination was made in the case on appeal,
EQT filed a declaratory judgment action in the Circuit Court of
Wetzel County, West Virginia that seeks a declaration of the
rightful titleholder to the Robinson Lease (“the state court
action”).
from
the
The defendants in that action are the four plaintiffs
Blackshere
Lease
action
in
this
Court.
The
three
plaintiffs then filed the instant action in this Court, seeking
2
declaratory judgment of the rights of the parties to the Robinson
Lease at issue in the state court action.
Subsequently, a final disposition in the case on appeal was
entered in the plaintiffs’ favor.1
However, the Fourth Circuit
found that REV, a plaintiff in that action but not in this action,
should be dismissed as a dispensable party so as to maintain
diversity jurisdiction. After the mandate had been entered in that
action, this Court implemented a briefing schedule for the parties
to address the issue of preclusion.
The parties followed that
briefing schedule which resulted in plaintiffs’ motion for summary
judgment.
The defendant also filed a motion for leave to file a
surreply in conjunction with the plaintiffs’ motion for summary
judgment.
Further, given that the scheduling order was still in
place, the defendant filed a motion to dismiss in accordance with
the deadlines.
That scheduling order is now vacated.
II.
A.
Facts
Defendant’s Motion to Dismiss
In
its
motion
to
dismiss,
the
defendant
first
reviews
information it has uncovered through its own investigation: (1) REV
states on its website that it has initiated a joint venture with
Trans Energy, Inc. in Wetzel County, West Virginia; (2) REV’s
senior management and directors are the same persons who are
1
Trans Energy, Inc. v. EQT Prod. Co., 743 F.3d 895 (4th Cir.
2014).
3
Republic Partner’s original members and directors; and (3) Trans
Energy and Prima assigned to Republic Partners a portion of the
Robinson Lease in 2008 that was corrected on July 20, 2010 which
the defendant asserts is connected to REV’s registration with the
Delaware Secretary of State on July 2, 2010.
information,
the
defendant
asserts
that
this
Based on that
Court
lacks
jurisdiction because REV is an indispensable party that should have
been joined.
The defendant supports this assertion with three
arguments: (1) the Robinson Lease is property of the joint venture
between REV and Trans Energy; (2) REV is merely an alter ego of
Republic Partners; and (3) if the Robinson Lease is property of the
joint venture, then the joint venture is an indispensable party.
The plaintiffs, in reply, have asked that this Court deny the
motion to dismiss until after the motion for summary judgment is
resolved.
In the alternative, the plaintiffs request that this
Court allow them more time to respond or set up a separate briefing
schedule for the motion to dismiss.
In response, the defendant argues that pursuant to procedural
rules it was required to file a responsive pleading when it did
because this Court had previously stayed the action before the
defendant could do so.
Thus, the defendant asserts that it was
required to file either an answer or motion to dismiss by the
deadlines that had previously been set in the scheduling order.
Further, the defendant contends that the plaintiffs have the burden
4
of proving that jurisdiction is proper in this Court and they have
not done so, thus the motion should be granted.
Finally, the
defendant argues that the jurisdictional issue must be decided
before the preclusion issue.
B.
Plaintiffs’ Motion for Summary Judgment
In their motion for summary judgment, the plaintiffs contend
that the only issue this Court needs to resolve is whether the
current action is the same “cause of action” as the quiet title
claim in the Blackshere Lease action.
Further, the plaintiffs
argue that the defendant is precluded from questioning this Court’s
jurisdiction under res judicata.
defendant
has
already
litigated
The plaintiffs assert that the
the
citizenship
of
Partners and thus, this issue should not be reopened.
Republic
As to REV,
the plaintiffs contend that the defendant is precluded from raising
any jurisdictional issues with that party because the Fourth
Circuit has already found that REV is a dispensable party because
the defendant failed to show a “single, tangible way in which it
will be harmed by REV’s analysis.”
As such, because the defendant
now tries to raise novel jurisdictional issues that it could have
raised in the Fourth Circuit, the plaintiffs contend that it is
precluded from doing so.
In
response,
the
defendant
first
contends
that
summary
judgment is inappropriate because more discovery needs to be
conducted.
Further, the defendant argues that discovery is needed
5
as to whether or not REV and Trans Energy entered into a joint
venture together therefore defeating diversity jurisdiction.
The defendant then addresses the elements required for res
judicata and collateral estoppel. As to the rendering of a verdict
on the merits, the defendant contends that element is not met
because
the
Fourth
Circuit
nor
this
Court
had
competent
jurisdiction to make a decision on the merits based on the new
information that REV had a joint venture with Trans Energy and
REV’s status as an alter ego of Republic Partners.
As to the
plaintiffs’ argument that the defendant could have raised such
arguments in the Blackshere Lease action, the defendant asserts
that
it
could
not
because
of
the
misrepresentations
as
to
jurisdiction in this Court and the fact that discovery is not
available on appeal and the plaintiffs again failed to disclose
information as to REV.
In reply, the plaintiffs argue that the defendant had the
opportunity to discover any such joint venture in the previous
action and that such a joint venture is not proven by a simple
assertion on a website unless such an assertion actually addressed
a joint venture that involved title to any property.
Further, the
alter ego theory fails because the defendant could have raised it
on appeal or in a writ of certiorari to the United States Supreme
Court.
The plaintiffs contend that it also fails because the
defendant has offered no proof that there is no legitimate basis
6
for the separate existence of REV and Republic Partners, that
Republic Partners was merely created to maintain jurisdiction
before this Court, or that there is an element of injustice or
unfairness.
C.
Motion to File Surreply
In support of its motion to file a surreply, the defendant
contends that the plaintiffs failed to raise any issues with the
defendant’s argument that REV and Trans Energy were in a joint
venture together after the defendant raised it in its motion to
dismiss.
opportunity
The
to
defendant
respond
asserts
if
the
that
it
plaintiffs
would
have
had
an
had
raised
it
in
opposition to the motion to dismiss rather than in a reply to the
motion for summary judgment. In its surreply, the defendant argues
that under West Virginia partnership law, even if title was not in
the name of the joint venture, if it was purchased with partnership
funds, it is property of the joint venture.
Thus, the defendant
contends that because it is the nonmoving party, this Court must
view the evidence offered in the light most favorable to the
defendant which would lead the Court to the conclusion that the
property was purchased with joint assets.
For the reasons that follow, this Court finds that the
defendant’s motion to dismiss should be denied without prejudice
and the plaintiffs’ motion for summary judgment should be denied
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without prejudice.
Further, the defendant’s motion to file a
surreply is denied as moot.
III.
Applicable Law
Federal Rule of Civil Procedure 19 establishes a two-step
inquiry to determine whether an action may continue without the
joinder of additional parties.
Nat’l Union Fire Ins. Co. v. Rite
Aid of South Carolina, Inc., 210 F.3d 246, 249 (4th Cir. 2000).
The
Court
first
must
determine
“necessary” to the action.
whether
the
absent
Fed. R. Civ. P. 19(a).
party
is
A party may be
“necessary” if in the party’s absence, the court cannot accord
complete relief among existing parties[,]” or if the party claims
an interest relating to the action and disposing of the action in
the party’s absence would “impair or impede the person’s ability to
protect the interest” or “leave an existing party subject to
substantial
risk
of
incurring
double,
multiple,
or
otherwise
inconsistent obligations because of the interest.” Fed. R. Civ. P.
19(a).
If the party is in fact necessary, the Court must then
determine whether “in equity and good conscience, the action should
proceed among the existing parties or should be dismissed.”
R. Civ. P. 19(b).
Fed.
Rule 19 outlines several factors for the Court
to consider in determining whether a necessary party’s absence
warrants dismissal, including “the extent to which a judgment
rendered in the person’s absence might prejudice that person or the
8
existing
parties,”
the
available
options
for
mitigating
any
prejudice, the adequacy of a judgment in the necessary party’s
absence, and “whether the plaintiff would have an adequate remedy
if the action were dismissed for non-joinder.”
Id.
“Dismissal of a case is a drastic remedy, however, which
should be employed only sparingly.”
F.3d
at
250
(quoting
Teamsters
Nat’l Union Fire Ins., 210
Local
Union
No.
171
v.
Keal
Driveaway Co., 173 F.3d 915, 918 (4th Cir. 1999)). “In determining
whether to dismiss a complaint, a court must proceed pragmatically,
‘examin[ing] the facts of the particular controversy to determine
the potential for prejudice to all parties, including those not
before it.’”
12(b)(7)
Id.
bears
indispensable.
the
The party moving for dismissal under Rule
burden
of
showing
an
absent
party
is
5C Charles Alan Wright & Arthur R. Miller, Federal
Practice and Procedure § 1356 (3d ed. 1998).
IV.
Discussion
In its motion to dismiss, the defendant uses phrases “upon
information and belief,” “very likely,” and “appears to be” to
describe its allegations that REV is an alter ego of Republic
Partners and in a joint venture with Republic Partners and thus
non-diverse.
The defendant provides print-outs from websites and
other non-conclusive facts based on the defendant’s attempt to
obtain discovery materials on this issue.
The defendant requests
that this Court dismiss this action based on those facts. However,
9
the defendant also requests, in the alternative, that this Court
determine that there are insufficient facts before the Court to
render
the
decision
and
provide
an
opportunity
for
limited
jurisdictional discovery on the arguments and issues raised in the
motion to dismiss.
Rule 12(b)(7) authorizes the Court to dismiss a case for
failure to join a party under Rule 19.
Fed. R. Civ. P. 12(b)(7).
A motion to dismiss under Rule 12(b)(7) may be made at any time.
Fed. R. Civ. P. 12(h)(2).
This is so because this Court must
determine whether an action meets the requirements of Article III
of the United States Constitution in order to maintain jurisdiction
over an action.
This Court must “resolve jurisdictional Article
III standing issues before proceeding to consider the merits of a
claim.”
United States v. Day, 700 F.3d 713, 721 (4th Cir. 2012)
(citation omitted).
A stay of discovery is appropriate where a dispositive motion
has the potential to dispose of the case on a certain issue without
the need for discovery.
Tilly v. United States, 270 F. Supp. 2d
731, 735 (M.D.N.C. 2003).
However, where a party indicates that
discovery is needed on such an issue and it appears to be relevant
to the primary basis for the dispositive motion, the Court may, in
its
discretion,
order
discovery.
Cleveland
Const.,
Inc.
v.
Schenkel & Schultz Architects, P.A., No. 3:08-CV-407RJCDCK, 2009 WL
903564, at *2-3 (W.D.N.C. Mar. 31, 2009).
10
This Court must determine whether or not it has jurisdiction
before it may consider the plaintiffs’ preclusion claim.
Thus,
this Court must determine whether REV has a different relationship
with Republic Partners regarding the Robinson Lease than the
Blackshere Lease.
The evidence provided by the defendant is
inconclusive and insufficient to allow this Court to make such a
determination at this time.
Further, the defendant’s request for
discovery is relevant to the primary basis of the Rule 19 issue
which could dispose of this case.
As such, this Court finds that
a limited discovery period of seventy-five (75) days should be
undergone by the parties regarding the jurisdictional Rule 19
issue.
Accordingly, the defendant’s motion to dismiss is denied in
part without prejudice as to its request that this Court dismiss
the complaint.
Further, the motion to dismiss is granted in part
as to the defendant’s request that this Court allow a limited
discovery period based on the jurisdictional issue.
As such, this
Court finds that the plaintiffs’ motion for summary judgment should
be denied without prejudice to be re-filed, if necessary, and
considered by this Court after the motion to dismiss has been
disposed of by this Court. Finally, the defendant’s motion to file
a surreply is denied as moot as this Court did not have to consider
it at this time.
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V.
Conclusion
Based on the analysis above, the defendant’s motion to dismiss
is DENIED IN PART WITHOUT PREJUDICE as to its request to dismiss
the complaint and GRANTED IN PART as to its request for limited
discovery.
The plaintiffs’ motion for summary judgment is DENIED
WITHOUT PREJUDICE.
The defendant’s motion for leave to file
surreply is DENIED AS MOOT.
The parties are DIRECTED to conduct limited discovery on the
Rule 19 jurisdictional issue, to be completed by June 1, 2015.
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein.
DATED:
March 17, 2015
/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE
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