Games et al v. Chesapeake Appalachia, LLC et al
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT CHESAPEAKE APPALACHIA LLC'S MOTION TO DISMISS AMENDED COMPLAINT: Granting 12 Motion to Dismiss for failure to State a Claim; Chesapeake Appalachia, LLC terminated; case continues as to def. SWN. Signed by Senior Judge Frederick P. Stamp, Jr on 11/13/17. (soa)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
FRED B. GAMES, MARY V. GAMES
and VALLIE J. WEST,
Civil Action No. 5:17CV101
CHESAPEAKE APPALACHIA, LLC and
SWN PRODUCTION COMPANY, LLC,
MEMORANDUM OPINION AND ORDER
GRANTING DEFENDANT CHESAPEAKE APPALACHIA LLC’S
MOTION TO DISMISS AMENDED COMPLAINT
The defendants, Chesapeake Appalachia, LLC (“Chesapeake”) and
SWN Production, LLC (“SWN”), removed this civil action to this
Court from the Circuit Court of Marshall County, West Virginia.
The plaintiffs, Fred B. Games, Mary V. Games, and Vallie J. West,
then amended their complaint.
The plaintiffs’ amended complaint
alleges that plaintiffs Fred and Mary Games, along with James Riley
West and Phyllis J. West, entered into oil and gas leases with
Chesapeake on December 5, 2008.
Both couples signed separate,
identical leases, but both leases covered the same property, which,
at the time, the four individuals jointly owned.
After the couple
signed the leases, the Wests’ son, plaintiff Vallie J. West,
inherited his parents’ interest in the property.
SWN acquired all
of Chesapeake’s interests in the alleged December 5, 2008 leases
through one or more assignments and/or purchase agreements entered
into between Chesapeake and SWN.
The plaintiffs seek a declaration that the December 5, 2008
leases expired at the end of the primary term and that the leases
have not been extended into any alleged secondary terms by any
“Delay in Marketing” payments the defendants have attempted to
Specifically, the plaintiffs allege that the “Delay in
Marketing” clause requires that a well must be located on the
leasehold or lands pooled with the leasehold that is “capable of
production” and that there were no such wells at the time the
primary term of the leases expired.
The plaintiffs also allege
that the defendants “violated their duties and implied covenants to
market oil and gas by not reasonably making efforts to market oil
and gas pursuant to the terms of the lease agreements which are the
subject of this matter” and “violated their duties of good faith
and their duties to act as reasonably prudent oil and gas operators
when they attempted to extend the subject oil and gas leases
through the payment of ‘Delay in Marketing’ payments when there
were no oil and gas wells which were capable of production.”
No. 9 at 4.
The plaintiffs also ask for punitive damages.
Chesapeake has filed a motion to dismiss the plaintiffs’
amended complaint against it.
Chesapeake first argues that the
claim for declaratory judgment should be dismissed as to Chesapeake
because Chesapeake has no interest in the leases, which have been
assigned to SWN.
Chesapeake argues that this case is analogous to
Dwyer v. Range Res.-Appalachia, No. 5:14CV21, 2014 WL 1648272 (N.D.
W. Va. Apr. 24, 2014), where this Court found that a lessee that
assigned its interest in a lease was not sufficiently interested in
a declaratory judgment claim regarding the continuing validity of
Next, Chesapeake argues that the plaintiffs’ claims
related to the implied duty to market and the implied covenant of
specificity to enable Chesapeake to respond.
argues that the plaintiffs’ claim for punitive damages should be
dismissed because it is a stand-alone claim and is without merit.
The plaintiffs filed a response to Chesapeake’s motion.
response, the plaintiffs argue that Chesapeake ignores parts of the
amended complaint that clearly allege that Chesapeake “owed duties
and covenants to the Plaintiffs and that Defendant Chesapeake
violated those duties through its actions in improperly attempting
to extend its leasehold with the Plaintiffs and, thereby, have
caused the Plaintiffs damage including a cloud on title of the
Plaintiffs’ oil and gas interests.”
ECF No. 18 at 2.
plaintiffs concede that it may be improper to include Chesapeake in
an action seeking only declaratory relief, but that, in this civil
action, the plaintiffs also properly assert both contractual and
tort claims against Chesapeake.
The plaintiffs contend that they
alleged in their complaint that Chesapeake’s actions have resulted
in damages and have “created a cloud upon the title to the
Plaintiffs’ oil and gas rights, which are the subject of this
ECF No. 18 at 5.
Thus, the plaintiffs conclude that
their amended complaint seeks much more than declaratory relief
regarding the lease agreement.
The plaintiffs further argue that
the Dwyer case cited by Chesapeake did not assert the type of
allegations related to the breach of duties and obligations that
are alleged in this case.
Chesapeake filed a reply to the plaintiffs’ response in
In reply, Chesapeake points out the plaintiffs’
acknowledgment that Chesapeake no longer has an interest in the
Thus, Chesapeake argues that, as it has not had an
interest in the leases for more than two years, the plaintiffs
“cannot properly raise either a declaratory judgment or a tort
claim against Chesapeake.”
ECF No. 21 at 1.
contends that no breach of contract claim is pled in the amended
The plaintiffs allege that Chesapeake violated the
“duty to market” and the “duty of good faith and fair dealing.”
recognize an independent cause of action for a breach of duty of
good faith and fair dealing separate and apart from a breach of
ECF No. 21 at 2.
Next, Chesapeake argues that
the plaintiffs cannot state a plausible claim for breach of an
implied duty to market because Chesapeake’s actions were expressly
authorized under the leases.
Lastly, Chesapeake points out that,
while the plaintiffs’ response speaks of tort recovery, the amended
complaint does not plead any tort claim.
For the following reasons, the motion to dismiss the amended
complaint must be granted as to Chesapeake.
In assessing a motion to dismiss for failure to state a claim
under Rule 12(b)(6), a court must accept all well-pled facts
contained in the complaint as true.
Nemet Chevrolet, Ltd v.
Consumeraffairs.com, Inc, 591 F.3d 250, 255 (4th Cir. 2009).
However, “legal conclusions, elements of a cause of action, and
bare assertions devoid of further factual enhancement fail to
constitute well-pled facts for Rule 12(b)(6) purposes.”
(citing Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009)).
unreasonable conclusions, or arguments.”
Wahi v. Charleston Area
Med. Ctr., Inc., 562 F.3d 599, 615 n.26 (4th Cir. 2009).
The purpose of a motion under Rule 12(b)(6) is to test the
formal sufficiency of the statement of the claim for relief; it is
not a procedure for resolving a contest about the facts or the
merits of the case.
5B Charles Alan Wright & Arthur R. Miller,
Federal Practice and Procedure § 1356 (3d ed. 1998).
12(b)(6) motion also must be distinguished from a motion for
summary judgment under Federal Rule of Civil Procedure 56, which
goes to the merits of the claim and is designed to test whether
there is a genuine issue of material fact.
For purposes of
the motion to dismiss, the complaint is construed in the light most
favorable to the party making the claim and essentially the court’s
statement of a claim under Federal Rule of Civil Procedure 8(a).
Id. § 1357.
A complaint should be dismissed “if it does not allege ‘enough
facts to state a claim to relief that is plausible on is face.’”
Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
plausibility is established once the factual content of a complaint
‘allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.’” Nemet Chevrolet,
591 F.3d at 256 (quoting Iqbal, 129 S. Ct. at 1949).
factual allegations are not required, but the facts alleged must be
sufficient “to raise a right to relief above the speculative
Twombly, 550 U.S. at 555.
The plaintiffs concede in their response to Chesapeake’s
motion to dismiss that Chesapeake assigned the leases to SWN.
No. 18 at 2-3 (“The Plaintiffs do not dispute that it may be the
case that a defendant such as Chesapeake may not be properly
included in an action seeking mere declaratory relief.”).
Court finds that the transfer of title to SWN is fatal to the
plaintiffs’ suit to quiet title against Chesapeake.
In order to
assert a declaratory judgment action against a defendant, the
defendant must be sufficiently interested in the subject matter of
28 U.S.C. § 2201(a).
In Dwyer, this Court ruled that
a lessee that assigned its interest in an oil and gas lease to
another party was not sufficiently interested in a declaratory
judgment claim regarding the continuing validity of that lease.
Dwyer, 2014 WL 1648272, at *3 (finding that the defendant would not
be affected by the declaratory judgment claim because it “no longer
has an interest in the leases due to its assignment of such
interest to [another party]”). Because Chesapeake does not have an
interest in the leases, the declaratory judgment claim against
Chesapeake does not satisfy the “case of actual controversy”
requirement of the Declaratory Judgment Act.
28 U.S.C. § 2201(a);
see MedImmune v. Genentech, Inc., 549 U.S. 118, 127 (2007) (“[T]he
phrase ‘case of actual controversy’ in the [Declaratory Judgment]
Act refers to the type of ‘Cases’ and ‘Controversies’ that are
justiciable under Article III.”).
The plaintiffs attempt to circumvent this Court’s finding in
In their response, the plaintiffs state in a footnote to
the sentence conceding that Chesapeake assigned its interest to SWN
that “[t]he Plaintiffs do not know, however, whether or not
Defendant Chesapeake may have retained any overriding royalty
interests related to the leases which were the subject of the
ECF No. 18 at 3 n.1.
However, this allegation was
not pled in the plaintiffs’ amended complaint and is raised for the
first time in the response to the motion to dismiss.
with the exception of this footnote, the plaintiffs otherwise admit
that SWN acquired all of Chesapeake’s interest in the leases.
There is no other allegation that the assignment from Chesapeake to
SWN contained any reservations, such as Chesapeake retaining any
complaint, the plaintiffs state that “Defendant SWN Production
Company acquired all of Defendant Chesapeake’s interests in the
alleged December 5, 2008 lease agreements through one or more
Defendant Chesapeake and Defendant SWN.”
ECF No. 9 at 2 (emphasis
A portion of the assignment is attached to Chesapeake’s
Chesapeake retained any overriding royalty interests.
Additionally, even if Chesapeake had not assigned its interest
in the leases to SWN, the plaintiffs nonetheless fail to set forth
the required elements for a suit to quiet title. The Supreme Court
of Appeals of West Virginia has held as follows:
In a suit to quiet title to land, the plaintiff should,
as a general rule, show three things: (1) That plaintiff
has a valid legal and equitable title to the premises;
(2) that he has actual possession thereof; (3) that the
defendant lays some claim thereto, stating the nature
thereof, so far as it is within plaintiff’s knowledge.
Hyman v. Swint, 119 S.E. 866, 867 (W. Va. 1923).
plaintiffs have not asserted factual allegations in support of any
of these three required elements of a suit to quiet title.
under Twombly, the plaintiffs are not entitled to declaratory
judgment “quieting title and stating that the alleged leases signed
on December 5, 2008 are no longer valid.”
ECF No. 9 at 4.
At most, the factual allegations in the amended complaint
could arguably give rise to a slander of title claim. The elements
of slander of title are as follows: “(1) publication of (2) a false
statement (3) derogatory to plaintiff’s title (4) with malice (5)
causing special damages (6) as a result of diminished value in the
eyes of third parties.”
TXO Prod. Corp. v. All. Res. Corp., 419
S.E.2d 870, 879 (W. Va. 1992).
However, the plaintiffs do not
plead a claim for slander of title in the amended complaint.
Additionally, the plaintiffs cannot plead a claim for slander of
title because Chesapeake has not held the leases since July 1,
2014, as evidenced by the Assignment, Bill of Sale and Conveyance
attached to Chesapeake’s reply.
ECF No. 21-1.
Thus, any tort
claim, including a claim for slander of title, would be barred by
the two-year statute of limitations applicable to that claim.
limitation is otherwise prescribed shall be brought: (a) Within two
years next after the right to bring the same shall have accrued, if
it be for damage to property . . . .”); Holmes v. Chesapeake
Appalachia, LLC, No. 5:11CV123, 2012 WL 3647674, at *7 (N.D. W. Va.
Aug. 23, 2012) (“[T]his 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 . . . .”).
Furthermore, in their amended complaint, the plaintiffs do not
Any attempt by the plaintiff to assert a
claim under an implied covenant of good faith and fair dealing or
implied duty to market is barred by Twombly because the factual
allegations are insufficient “to raise a right to relief above the
Twombly, 550 U.S. at 555.
In the amended
complaint, the plaintiffs generally state that the defendants
“violated their duties and implied covenants to market oil and gas
by not reasonably making efforts to market oil and gas pursuant to
the terms of the lease agreements which are the subject of this
matter” and “violated their duties of good faith and their duties
to act as reasonably prudent oil and gas operators when they
attempted to extend the subject oil and gas leases through the
payment of ‘Delay in Marketing’ payments when there were no oil and
gas wells which were capable of production.”
ECF No. 9 at 4.
Thus, the Court finds that the plaintiffs vaguely refer to claims
under an implied covenant of good faith and fair dealing and an
implied duty to market without stating the basis for, or setting
forth the elements of, those claims.
And, as Chesapeake points out, West Virginia law does not
recognize an independent cause of action for a breach of duty of
good faith and fair dealing “separate and apart from a breach of
Stand Energy Corp. v. Columbia Gas Transmission
Corp., 373 F. Supp. 2d 631, 644 (S.D. W. Va. 2005).
Thus, even if
a claim under an implied covenant of good faith and fair dealing
plaintiffs do not plead any breach of contract claim in their
Chesapeake is also correct that the implied duty to market
claim would likewise fail even if sufficiently pled under Twombly
because there is an express provision in the leases regarding any
delay in marketing.
The plaintiffs admit in the amended complaint
that Chesapeake tendered to the plaintiffs the delay in marketing
payments as required by the express “delay in marketing” provision
in the leases.
ECF No. 9 at 3.
This Court cannot find that
Chesapeake breached an implied duty to market when there is an
agreement, which Chesapeake satisfied.
See Barn-Chestnut, Inc. v.
CFM Dev. Corp., 457 S.E.2d 502, 509 (W. Va. 1995) (“[W]here the
express intention of contracting parties is clear, a contrary
intent will not be created by implication. The implied covenant of
good faith and fair dealing cannot give contracting parties rights
which are inconsistent with those set out in the contract.”
(quoting Bonanza Int’l, Inc. v. Rest. Mgmt. Consultants, Inc., 625
F. Supp. 1431, 1448 (E.D. La. 1986))).
Lastly, this Court must deny as moot the claim for punitive
plaintiffs cannot plead punitive damages as a stand-alone claim.
See Kerns v. Range Res.-Appalachia, LLC, No. 1:10CV23, 2011 WL
197908, at *7 (N.D. W. Va. Jan. 18, 2011) (“[I]n light of the fact
that all of the plaintiffs’ substantive claims fail as a matter of
law, it follows that their claim for punitive damages also fails
because punitive damages are a form of relief rather than an
And, even if the Court had found that there
was any breach of an implied covenant of fair dealing or an implied
duty to market, punitive damages are not an available remedy in an
action for breach of contract.
See Warden v. Bank of Mingo, 341
S.E.2d 679, 684 (W. Va. 1985) (“[P]unitive damages are generally
unavailable in pure contract actions.”); Berry v. Nationwide Mut.
Fire Ins. Co., 381 S.E.2d 367, 374 (W. Va. 1989) (“Generally,
absent an independent, intentional tort committed by the defendant,
punitive damages are not available in an action for breach of
For the reasons set forth above, Chesapeake Appalachia, LLC’s
motion to dismiss the amended complaint (ECF No. 12) is GRANTED as
to defendant Chesapeake Appalachia, LLC.
This action continues as
to defendant SWN.
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein.
November 13, 2017
/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE
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