Decker et al v. Statoil USA Onshore Properties, Inc. et al

Filing 139

MEMORANDUM OPINION AND ORDER AFFIRMING AND ADOPTING MAGISTRATE JUDGE'S DISCOVERY 131 ORDER, GRANTING EQT PRODUCTION COMPANY'S 125 MOTION FOR PROTECTIVE ORDER AND OVERRULING PLAINTIFFS' 135 OBJECTIONS. Signed by Senior Judge Frederick P. Stamp, Jr. on 10/26/16. (copy to counsel via CM/ECF) (lmm)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
DEAN PATRICK DECKER, III
and LORETTA DECKER,
Plaintiffs,
v.

Civil Action No. 5:15CV114
(STAMP)

STATOIL USA ONSHORE
PROPERTIES, INC.,
a Delaware corporation
and PETROEDGE ENERGY, LLC,
a Delaware limited
liability company,
Defendants,
and
EQT PRODUCTION COMPANY,
Intervenor-Defendant.
MEMORANDUM OPINION AND ORDER
AFFIRMING AND ADOPTING MAGISTRATE
JUDGE’S DISCOVERY ORDER,
GRANTING EQT PRODUCTION COMPANY’S
MOTION FOR PROTECTIVE ORDER AND
OVERRULING PLAINTIFFS’ OBJECTIONS
I.

Procedural History

The intervenor-defendant filed objections to a subpoena duces
tecum served by the plaintiffs and a motion for a protective order
prohibiting responses to a certain request.

ECF No. 125.

This

matter was referred to the Honorable Michael John Aloi, United
States Magistrate Judge.

Magistrate Judge Aloi entered an order

sustaining the intervenor-defendant’s objections and granting its
motion

for

a

protective

order.

The

plaintiffs

then

filed

objections to the magistrate judge’s order.

For the following

reasons, the magistrate judge’s order is affirmed and adopted and
the plaintiffs’ objections are overruled.
I.

Background

The plaintiffs’ (“the Deckers”) claims arise out of a 2011
agreement between Decker Energy LLC (“Decker Energy”) and PetroEdge
Energy, LLC’s (“PetroEdge”), called the “Participation Agreement.”
In the second amended complaint, the Deckers allege that they hold,
or are entitled to hold, overriding-royalty-interests in certain
oil and gas leases identified in the Participation Agreement as the
“Initial Leases,” the “Target Leases” acquired by PetroEdge, a
pooled unit known as the “Ball Unit,” and a well known as “Ball
Unit 1H.”
delegated

The Deckers allege that, after PetroEdge assigned and
its

rights

and

obligations

under

the

Participation

Agreement to Statoil USA Onshore Properties, Inc. (“Statoil”),
Statoil stopped paying royalties to the Deckers.

The Deckers also

allege a claim for unjust enrichment, seeking compensation for
work, expenses, and investments into these leases.
The Deckers seek a declaration that they hold or are entitled
to hold overriding-royalty-interests in the Initial Leases, the
acquired Target Leases, the Ball Unit, and Ball Unit 1H. They also
seek an accounting of the development and production on each lease
and the appointment of a special commissioner to execute and
deliver assignments of interests in the leases to the Deckers.

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Further, the Deckers request a judgment for all unpaid royalties on
the leases and for their unjust enrichment claim.
EQT

Production

Company

(“EQT”)

then

filed

a

motion

to

intervene as a defendant as a matter of right under Federal Rule of
Civil Procedure 24(a) because EQT purchased Statoil’s interests in
the Target Leases.

This Court granted that motion.

Before the

motion was granted, the Deckers served EQT with a subpoena duces
tecum scheduling a deposition of its corporate representative under
Rule 30(b)(6) and requesting certain documents.

One of the

Deckers’ requests was for documents and testimony regarding “EQT’s
drilling programs, plans and forecasts for all West Virginia Leases
and assets acquired from Statoil.”

ECF No. 129-1 at 6.

EQT filed

a motion for a protective order regarding that request, arguing
that the request is irrelevant, overly broad, and seeks proprietary
information.

The Deckers argue that the request is reasonably

calculated to lead to admissible evidence regarding the expected
amount of production from the Target Leases. Magistrate Judge Aloi
granted EQT’s motion for a protective order, and the Deckers filed
timely objections to that order.
II.

Applicable Law

Under Federal Rule of Civil Procedure 72(a), a district court
may refer to a magistrate judge “a pretrial matter not dispositive
of a party’s claim or defense.”

Fed. R. Civ. P. 72(a).

The

parties may file objections to the magistrate judge’s order, and

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the “district judge in the case must consider timely objections and
modify or set aside any part of the order that is clearly erroneous
or is contrary to law.”

Id.

Federal Rule of Civil Procedure 26(b)(1) permits parties to
“obtain

discovery

regarding

any

nonprivileged

matter

that

is

relevant to any party’s claim or defense and proportional to the
needs of the case.”

Fed. R. Civ. P. 26(b)(1).

In considering

proportionality, courts must consider: (1) “the importance of the
issues at stake in the action”; (2) “the amount in controversy”;
(3) “the parties’ relative access to relevant information”; (4)
“the parties’ resources”; (5) “the importance of the discovery in
resolving the issues”; and (6) “whether the burden or expense of
the

proposed

discovery

outweighs

its

likely

benefit.”

Id.

“Information within this scope of discovery need not be admissible
in evidence to be discoverable.”

Id.

Courts may forbid certain

disclosures or discovery “to protect a party or person from
annoyance, embarrassment, oppression, or undue burden or expense.”
Fed. R. Civ. P. 26(c)(1).
III.

Discussion

The Deckers requested documents and testimony regarding “EQT’s
drilling programs, plans and forecasts for all West Virginia Leases
and assets acquired from Statoil under the [relevant purchase and
sale agreement].”

ECF No. 129-1 at 6.

Magistrate Judge Aloi

granted EQT’s motion for a protective order, concluding that the

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request was irrelevant and disproportional to the disputed issues
in this case.
First, Magistrate Judge Aloi concluded that the request is
irrelevant because the Deckers fail to show how future projected
production is related to the past, unpaid royalties they claim
entitlement to.

In their objections, the Deckers argue that the

information is relevant and material because the value of their
claimed overriding-royalty-interests in the Target Leases must be
determined by the number of wells a reasonably prudent operator
could be expected to drill on the properties. They argue that data
on EQT’s expected drilling on the Target Leases is necessary to
accurately determine the value of the Deckers’ overriding-royaltyinterests in those leases.
Count Three of the Deckers’ second amended complaint seeks a
declaration that the Deckers are entitled to overriding-royaltyinterests in the Target Leases and “an accounting and relief for
any and all revenues and/or income generated from the development
and production of the Target Leases.”

ECF No. 76 at 4.

Thus, the

Deckers seek a judgment for all unpaid royalties, not for the
future value of the Target Leases.

Accordingly, EQT’s future

development plans for the Target Leases is irrelevant to the
resolution of the issues in this civil action. This Court finds no
clear error in the magistrate judge’s conclusions.

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Second, Magistrate Judge Aloi concluded that the request is
overly broad because it extends beyond the Target Leases, as the
Deckers request information for all West Virginia leases EQT
acquired from Statoil. In their objections, the Deckers argue that
the magistrate judge should have granted in part and denied in part
EQT’s motion, requiring responses as to the Target Leases and
issuing a protective order as to all other leases.

However, a

court need not rein in a party’s overly broad discovery request
rather than precluding a response.

Further, even with such

limitations, the requested information is irrelevant.

This Court

finds no clear error in the magistrate judge’s conclusion.
Third, Magistrate Judge Aloi concluded that the request seeks
confidential development and commercial information and that EQT
established good cause for seeking a protective order.

In their

objections, the Deckers argue that EQT failed to make a specific
showing that it would suffer severe economic harm if it responded
to their request.

The Deckers further argue that EQT failed to

demonstrate that the existing protective order (ECF No. 24) would
not safeguard its allegedly proprietary information and that the
magistrate judge should have ordered EQT to respond in accordance
with the existing protective order.

Regardless of whether the

existing protective order would be sufficient to safeguard EQT’s
proprietary information, the information is irrelevant, the request
is overly broad, and EQT demonstrated that disclosure would be

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burdensome and disproportional to the issues in dispute and could
result in a competitive disadvantage if disclosed.

This Court

finds no clear error in the magistrate judge’s conclusion.
IV.
For

the

foregoing

Conclusion

reasons,

the

magistrate

judge’s

order

granting EQT’s motion for a protective order (ECF No. 131) is
AFFIRMED and ADOPTED.

Accordingly, EQT’s motion for a protective

order (ECF No. 125) is GRANTED, and the Deckers’ objections to the
magistrate judge’s order (ECF No. 135) are OVERRULED.
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein.
DATED:

October 26, 2016

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

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