O'Hara et al v. Capouillez et al

Filing 68

MEMORANDUM OPINION AND ORDER GRANTING MOTION TO REMAND, DENYING MOTION TO STRIKE, DENYING WITHOUT PREJUDICE MOTION TO COMPEL ARBITRATION AND STAY AND DENYING WITHOUT PREJUDICE MOTION TO STAY PENDING RULING ON MOTION TO COMPEL ARBITRATION: Granting [6 ] Motion to Remand; Denying 9 Motion to Strike ; Denying Without Prejudice 18 Motion to Compel and 20 Motion to Stay and Compel Arbitration; case remanded to Circuit Court of Ohio County and Dismissed and Stricken from active docket of this Court. Clerk directed to enter judgment pursuant to FRCP 58. Signed by Senior Judge Frederick P. Stamp, Jr on 4/14/14. (copy to Clerk, Circuit Court of Ohio Co, WV)(soa)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
MICHAEL C. O’HARA and
DEIRDRE J. O’HARA,
husband and wife,
Plaintiffs,
v.

Civil Action No. 5:13CV119
(STAMP)

WILLIAM CAPOUILLEZ and
GEOLOGICAL ASSESSMENT AND
LEASING, a foreign limited
liability company not
authorized to do business in
the State of West Virginia,
Defendants.
MEMORANDUM OPINION AND ORDER
GRANTING MOTION TO REMAND,
DENYING MOTION TO STRIKE,
DENYING WITHOUT PREJUDICE MOTION
TO COMPEL ARBITRATION AND STAY
AND DENYING WITHOUT PREJUDICE MOTION TO STAY
PENDING RULING ON MOTION TO COMPEL ARBITRATION
I.

Background

The plaintiffs, Michael C. O’Hara and Deirdre J. O’Hara,
commenced this action in the Circuit Court of Ohio County, West
Virginia,

alleging

that

the

defendants,

William

Capouillez

(“Capouillez”) and Geological Assessment and Leasing, engaged in
the unlawful practice of law.

The plaintiffs assert that the

parties entered into an agreement, in which the defendants were to
act as the plaintiffs’ consultants and representatives in matters
relative to the procurement, negotiation, execution and performance
of an oil and gas lease.

The plaintiffs state that, in return for

their services, the defendants charge a fee based on the payments
the plaintiffs were to receive from the lease.

The plaintiffs

request that this Court determine that the payment of fees based on
such agreement is void due to the defendants’ unauthorized practice
of law.
The defendants removed this action to this Court on the basis
of diversity of citizenship pursuant to 28 U.S.C. § 1332.

The

plaintiffs then filed a motion to remand this action, in which they
argued that defendants have not established that the amount in
controversy exceeds $75,000.00 exclusive of interest and costs.
The plaintiffs assert that the defendants only state in the notice
of removal that the defendants believe it is more likely than not
that the amount in controversy exceeds that amount, which the
plaintiffs assert is insufficient for removal.
The defendants responded in opposition to the motion to
remand.

First, the defendants state that sufficient evidence

establishes that the amount in controversy exceeds $75,000.00
exclusive of interest and costs.

In support of this argument, the

defendants attach an affidavit from defendant Capouillez, which
states among other things that his royalty payments are alone worth
$5,000.00 per acre, and because there are 44.94 acres of land
involved, the total amount involved clearly exceeds $75,000.00.
Defendant Capouillez’ estimates are based on what he has received
pursuant to a separate lease of property owned by Helen and John

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Tominack (hereinafter “Tominack lease”).

Second, the defendants

argue that the value is based on the lease agreement, regardless
of whether the plaintiffs plead a certain monetary amount, and the
lease

is

worth

millions,

jurisdictional amount.

which

is

far

in

excess

of

the

Third, the defendants argue that if this

Court were to use its common sense, it would also find that the
amount in controversy exceeds $75,000.00 exclusive of interest and
costs.

Fourth, the defendants argue that should the Court feel

that it needs more evidence, the Court should allow very limited
discovery, as they believe Chesapeake Appalachia, LLC may have
documents supporting the amount in controversy.
The plaintiffs replied, which reply was styled as a motion to
strike and reply, wherein they first request that this Court strike
the affidavit from defendant Capouillez. The plaintiffs argue that
this Court is limited to considering the facts on the record at the
time of removal. Because the defendants did not file the affidavit
with their notice of removal, but instead waited to file it in
conjunction with their response to the motion to remand, the
plaintiffs assert that this Court cannot consider such affidavit
and as such, this Court should strike the affidavit.

Even if this

Court does not strike the affidavit, however, the plaintiffs argue
that the affidavit should be afforded no weight because the
circumstances described in it are not specific to the subject case.
The plaintiffs also assert that the defendants in their response
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misstate the relief sought by the plaintiffs, as the plaintiffs are
not seeking to void the underlying oil and gas lease.
The defendants then filed a response in opposition to the
motion to strike arguing that the Court may consider the affidavit
in determining whether the amount in controversy requirement is
met, and the interests of fairness, judicial efficiency, and
economy

strongly

plaintiffs

then

favor
filed

consideration
a

reply

to

of

the

the

affidavit.

motion

to

strike

The
the

affidavit, asserting again that this Court should strike the
affidavit and the law that the defendants cited in support of their
response is not applicable to this case.
For the reasons stated below, this Court grants plaintiffs’
motion to remand and denies plaintiffs’ motion to strike. Further,
the

defendants’

motion

to

compel

arbitration

and

stay

and

defendants’ motion to stay pending a ruling on the motion to compel
arbitration and stay are denied without prejudice to refiling in
state court, if appropriate.
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

4

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).

This

Court

has

consistently applied the “preponderance of evidence” standard to
determine whether a defendant has met its burden of proving the
amount in controversy. Removal jurisdiction is strictly construed,
and if federal jurisdiction is doubtful, the federal court must
remand.

Id.

Although courts strictly construe the statute

granting removal jurisdiction, Doe v. Allied Signal, Inc., 985 F.2d
908, 911 (7th Cir. 1993), the court is not required “to leave
common sense behind” when determining the amount in controversy.
Mullens v. Harry’s Mobile Homes, 861 F. Supp. 22, 24 (S.D. W. Va.
1994).

When the amount in controversy is not apparent on the face

of the plaintiff’s complaint, the federal court must attempt to
ascertain the amount in controversy by considering the plaintiff’s
cause of action as alleged in the complaint and any amendments
thereto, the notice of removal filed with a federal court, and
other relevant materials in the record.

14C Charles Allen Wright

& Arthur R. Miller, Federal Practice and Procedure § 3725 at 73 (3d
ed. 1998).

However, the court is limited to examining only

evidence that was available at the moment the petition for removal

5

was filed.

Chase v. Shop ‘N Save Warehouse Foods, 110 F.3d 424,

428 (7th Cir. 1997).
III.
A.

Discussion

Affidavit Evidence
As this Court has noted a number of times, removal cannot be

based upon speculation and “bare allegation[s] that the amount in
controversy exceeds $75,000.” See Asbury-Casto v. Glaxosmithkline,
Inc., 352 F. Supp. 2d 729, 731 (N.D. W. Va. 2005); and Haynes v.
Heightland, No. 5:05CV127, 2006 WL 839512 at *3 (N.D. W. Va. Mar.
28, 2006).

With regard to claims for which the plaintiffs make no

specific damages demand, a removing defendant must present actual
evidence

that

the

amount

in

controversy

is

exceeded;

simple

conjecture will not suffice. See Bartnikowski v. NVR, Inc., 307 F.
App’x 730, 737 (4th Cir. 2009) (unpublished) (finding that amount
in controversy not shown when defendant “has put forth no evidence
of its own to support [the claimed amount in controversy, but]
rather, has only presented a conjectural argument”).
The defendants’ notice of removal states only the percentages
they are to receive pursuant to the agreement, which are 10% of any
bonus rental payment, 12.5% of any delay rental payments in
perpetuity, and 1.5% royalty payments in perpetuity, and the
acreage that the agreement applies to, which is 44.64 acres.

The

defendants assert that based on these percentages and the acreage,
they believe the amount in controversy exceeds $75,000.00 exclusive

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of interest and costs.

The plaintiffs assert that this is only

speculation and is not sufficient to establish the amount in
controversy. The defendants in response, produced the affidavit of
defendant Capouillez, which estimates the royalty payments to be at
least $5,000.00 per acre.
While the plaintiffs assert that this Court should strike
defendant

Capouillez’s

affidavit,

this

Court

finds

that

even

assuming it could consider the affidavit as evidence of the amount
in controversy, the affidavit itself is based on speculative
estimates.1 In his affidavit, defendant Capouillez states that the
wells drilled in the area near plaintiffs’ property can be expected
to generate six figure royalty payments per acre over a 25-year
period. He then provides documents concerning the royalty payments
based on the Tominack lease, and estimates that based on these
payments, the payments based on the plaintiffs’ lease would be
worth more than $5,000.00 per acre.

He further states that if he

transferred or sold his royalty payments to a third-party, the
resale value is also $5,000.00 per acre. These estimates, however,

1

This Court is aware that a similar case exists with the same
defendants, wherein the court denied the leasee’s motion to remand.
See Tominack v. Capouillez, No. 5:13CV121, 2013 WL 5913848 (N.D. W.
Va. Nov. 4, 2013). The figures used in the calculation provided in
the affidavit in that action, however, were based on actual
payments received pursuant to the agreement at issue in that case.
The payments were not speculative estimates of what the defendants
expected to receive. No such information concerning any payments
pursuant to the lease or agreement in this case is available or has
been provided to this Court.
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are only speculation and based solely on what defendant Capouillez
expects he will receive pursuant to the agreement.

There is no

proof that any wells have been or ever will be drilled, unlike with
the Tominack lease.

Accordingly, this Court finds that the

affidavit does not itself provide sufficient evidence to meet
defendants’ burden of proving by a preponderance of the evidence
that the amount in controversy exceeds $75,000.00.2

See McMahon v.

Advance Stores Co., Inc., No. 5:07CV123 , 2008 WL 183715 *8 (N.D.
W. Va. Jan. 18, 2008) (“This Court concludes that the defendants’
calculations, based as they are upon unfounded assumptions and
ill-defined

estimates,

cannot

be

deemed

reliable

bases

for

calculating the amount in controversy in this case.”); see also
Laws v. Priority Trustee Services of N.C., LLC, No. 3:08CV103, 2008
WL 3539512 *2 (W.D. N.C. Aug. 11, 2008) (“Regardless of the
standard, it is clear that a proponent of federal jurisdiction
cannot base the amount in controversy on unstated assumptions and
estimates.”).

2

This Court recognizes that the defendants also assert that
based on common sense alone, this Court should deny plaintiffs’
motion to remand. While this Court knows that it does not have to
leave its common sense behind when deciding a motion to remand, it
does not view the value of the royalty agreement as being so
clearly in excess of the jurisdictional amount to deny remand
solely on its common sense, as all payments are only speculative
estimates.
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B.

Value of Object Argument
The

defendants

next

argue

that

the

plaintiffs’

entire

motivation for filing this action is to void the underlying lease
with Chesapeake Appalachia, LLC, and the plaintiffs have thus, put
into dispute the entirety of the lease. The defendants assert that
as a result, the value of the lease, which they allege to be in the
millions, should be taken into account when determining whether the
amount in controversy exceeds $75,000.00.

The plaintiffs assert

that they are not seeking to void the entire lease, and voiding the
aspects of the lease relating to the defendants’ royalty payments
would not void the remainder of the lease it has with Chesapeake
Appalachia, LLC.
“‘In actions seeking declaratory or injunctive relief, it is
well established that the amount in controversy is measured by the
value of the object of the litigation.’”

McCoy v. Erie Ins. Co.,

147 F. Supp. 2d 481, 492 (S.D. W. Va. 2001) (quoting Hunt v.
Washington State Apple Adver. Comm’n, 432 U.S. 333, 347 (1977)).
In assessing the value of the object of the litigation, the United
States Court of Appeals for the Fourth Circuit looks at the
pecuniary result to either party which a judgment would produce.
Dixon v. Edwards, 290 F.3d 699, 710 (4th Cir. 2002) (“[T]he test
for determining the amount in controversy in a diversity proceeding
is ‘the pecuniary result to either party which [a] judgment would

9

produce.’”) (quoting Gov’t Emp. Ins. Co. v. Lally, 327 F.2d 568,
569 (4th Cir. 1964)).
The plaintiffs at no time in their complaint or motion
briefing indicate that they are seeking to void the underlying
lease.

The plaintiffs only state that they seek the agreement

concerning the payments to the defendants to be declared void. The
pecuniary result involved, therefore, is the possible loss or
retention of the royalty payments.

Accordingly, the royalty

agreement is the object of the litigation, not the lease.

As

stated above, the defendants have not set forth sufficient evidence
to

establish

that

the

royalty

agreement

involved

exceeds

$75,000.00.
C.

Discovery Argument
The defendants next argue that they should be permitted to

conduct very limited discovery to provide this Court with more
evidence and material to establish that the amount in controversy
exceeds $75,000.00.

The Fourth Circuit has stated that “the

decision of whether or not to permit jurisdictional discovery is a
matter committed to the sound discretion of the district court.”
Base Metal Trading, Ltd. v. OJSC “Novokuznetsky Aluminum Factory,
283 F.3d 208, 216 n.3 (4th Cir. 2002) (citations omitted).

This

Court finds that in this instance it is not appropriate to allow
such discovery. Accordingly, this Court denies defendants’ request
for any further discovery in this Court.

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IV.

Conclusion

For the reasons stated above, the plaintiffs’ motion to remand
(ECF No. 6) is hereby GRANTED and the plaintiffs’ motion to strike
(ECF No. 9) is hereby DENIED.

Accordingly, defendants’ motion to

compel arbitration and stay (ECF No. 18) and defendants’ motion to
stay pending a ruling on the motion to stay and compel arbitration
(ECF No. 20) are DENIED WITHOUT PREJUDICE to being raised in state
court, if appropriate.

Accordingly, it is ORDERED that this case

be REMANDED to the Circuit Court of Ohio County, West Virginia. It
is further ORDERED that this case be DISMISSED and STRICKEN from
the active docket of this Court.
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein and to the Clerk of
the Circuit Court of Ohio County, West Virginia.

Pursuant to

Federal Rule of Civil Procedure 58, the Clerk is DIRECTED to enter
judgment on this matter.
DATED:

April 14, 2014

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

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