Blackhawk Land and Resources, LLC et al v. WWMV, LLC et al
Filing
31
MEMORANDUM OPINION AND ORDER denying the defendants' 10 MOTION to Dismiss. The denial is without prejudice to raise the issues anew based on further evidence in support thereof. Signed by Judge John T. Copenhaver, Jr. on 9/29/2017. (cc: counsel of record; any unrepresented parties) (taq)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF WEST VIRGINIA
AT CHARLESTON
BLACKHAWK LAND AND RESOURCES, LLC and
PANTHER CREEK MINING, LLC,
Plaintiffs,
v.
Civil Action No. 2:16-cv-10711
Honorable John T. Copenhaver, Jr.
WWMV, LLC and RWMV, LLC,
Defendants.
MEMORANDUM OPINION AND ORDER
Pending is the defendants’ motion to dismiss, filed on
December 5, 2016.
I.
Factual and Procedural Background
As a result of acquiring certain assets from the
Patriot Coal Corporation in 2015, Blackhawk Land and Resources,
LLC (“Blackhawk Land”) succeeded in interest to Patriot Coal
Corporation or one of its affiliates and became a lessor or
sublessor to WWMV or RWMV, as the case may be, under several
leases and subleases for coal mining lands and a counterparty
under a wheelage agreement.
Panther Creek Mining, LLC, an
affiliate of Blackhawk Land, became a “counterparty” to both
defendants under an Electricity Usage Agreement.
Plaintiffs
sued for breach of these various agreements on November 8, 2016,
alleging failure to pay various amounts due, among other
violations.
Defendants moved to dismiss for lack of subject
matter jurisdiction under Federal Rule of Civil Procedure
12(b)(1).
In support of their motion, defendants have filed a
memorandum of law as well as a later reply to plaintiffs’
response, whereas plaintiffs have filed a response and a surreply in opposition.
Defendants argue two grounds: lack of
diversity jurisdiction and mandatory arbitration.
In their complaint, plaintiffs allege that both of
them are limited liability companies, organized under the laws
of Delaware, and none of their members are citizens of West
Virginia.
They also allege that upon information and belief,
both defendants are West Virginia limited liability companies
(“LLCs”) with their principal places of business located in
Charleston, West Virginia, and that the sole member of RWMV is
Ralph Ballard, a West Virginia citizen and resident, and the
sole member of WWMV is RWMV.
II. Governing Standard
Federal district courts are courts of limited subject
matter jurisdiction, possessing “only the jurisdiction
authorized them by the United States Constitution and by federal
statute.”
United States ex rel. Vuyyuru v. Jadhav, 555 F.3d
2
337, 347 (4th Cir. 2008).
As such, “there is no presumption
that the court has jurisdiction.”
Pinkley, Inc. v. City of
Frederick, 191 F.3d 394, 399 (4th Cir. 1999) (citing Lehigh
Mining & Mfg. Co. v. Kelly, 160 U.S. 327, 327 (1895)). Indeed,
when the existence of subject matter jurisdiction is challenged
under Rule 12(b)(1), “[t]he plaintiff has the burden of proving
that subject matter jurisdiction exists.”
Evans v. B.F. Perkins
Co., 166 F.3d 642, 647 (4th Cir. 1999); see also Richmond,
Fredericksburg, & Potomac R.R. Co. v. United States, 945 F.2d
765, 768 (4th Cir. 1991). If subject matter jurisdiction is
lacking, the claim must be dismissed. See Arbaugh v. Y & H
Corp., 546 U.S. 500, 506 (2006).
Subject matter jurisdiction may be attacked by a
defendant with either a facial or a factual challenge.
United States, 585 F.3d 188, 192 (4th Cir. 2009).
Kerns v.
In a facial
challenge, the defendant is asserting that the allegations
contained in the complaint fail to sufficiently establish the
existence of subject matter jurisdiction.
Id.
In a facial
attack, the plaintiff is “afforded the same procedural
protection as she would receive under a Rule 12(b)(6)
consideration,” so that “facts alleged in the complaint are
taken as true,” and the defendant's motion “must be denied if
the complaint alleges sufficient facts to invoke subject matter
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jurisdiction.”
Id (citation omitted).
In a factual challenge,
a defendant may argue “that the jurisdictional allegations of
the complaint [are] not true.”
Id.
This permits a trial court
to consider extrinsic evidence or hold an evidentiary hearing to
“determine if there are facts to support the jurisdictional
allegations.”
Id.
III. Discussion
A. Diversity Jurisdiction Objection
Defendants mount a challenge to diversity jurisdiction
of the court and claim that, notwithstanding a demand letter,
plaintiffs refuse to show the citizenship of every person or
entity in their chain of ownership so as to show complete
diversity from all the persons or entities in the defendants’
chain of ownership.
Defendants maintain that upon a challenge,
plaintiffs have the burden of proving that subject matter
jurisdiction exists.
In support of their challenge, defendants claim that
contrary to the complaint’s allegations, they are not solemember LLCs, and that some of their members are not citizens of
West Virginia.
But as plaintiffs point out, defendants only make a
facial challenge to diversity jurisdiction without supplying any
4
proof of lack of diversity, noting also their previous objection
to diversity in a letter to plaintiffs.
Plaintiffs counter that when presented with a facial
challenge, the court can take plaintiff’s allegations as true,
and there is no burden of proof on them to establish
jurisdiction by a preponderance of evidence.
Plaintiffs’
allegation that defendants are citizens of West Virginia while
no member of the plaintiffs is a citizen of that state should
suffice, according to them.1
As an initial matter, for complete diversity to exist
and support subject matter jurisdiction, all members of the LLCs
on the plaintiffs’ side must be of different citizenship than
all members of the LLCs on the defendants’ side.
The court agrees with plaintiffs that defendants here
mount a facial attack, as they do not prevent evidence
contradicting the existence of diversity jurisdiction.
Accordingly, plaintiffs’ allegations are to be taken as true,
similarly to a Rule 12(b)(6) context.
“An allegation of
diversity is defective only where it ‘fails to negate the
possibility that diversity does not exist.’”
Contreras v. Thor
Defendants claim that they also have Wyoming citizens in their chain of
ownership. This assertion does not in itself defeat complete diversity and
does not change the facial nature of the jurisdiction attack since no proof
of defective pleading was presented. Plaintiffs also note that WWMV asserted
in other litigation that it was a citizen of West Virginia.
1
5
Norfolk Hotel, L.L.C., 292 F. Supp. 2d 794, 797 (E.D. Va. 2003)
(quoting Baer v. United Services Auto. Ass'n, 503 F.2d 393, 397
(2d Cir.1974)).
See also Ellenburg v. Spartan Motors Chassis,
Inc., 519 F.3d 192, 200 (4th Cir. 2008).
The Third Circuit
recently reached a similar result in a similar LLC case, noting
also that “a plaintiff may plead diversity jurisdiction without
making affirmative allegations of citizenship.”
Lincoln Ben.
Life Co. v. AEI Life, LLC, 800 F.3d 99, 106-07 (3d Cir. 2015).
Since defendants have not presented evidence undermining
plaintiffs’ averments of diversity jurisdiction, the court must
at this stage take plaintiffs’ allegations as true and deny the
motion to dismiss on this ground.
B. Arbitration Objection
The second argument defendants make is that the
complaint is barred by arbitration provisions contained in:
(1) the Blackhawk and Imperial Leases, to which one of the
defendants is a party, and (2) leases, subject to which one of
the defendants subleased the land plots (and whereby the
provisions allegedly were incorporated).
Defendants argue that
the parties therefore agreed to arbitrate, and courts should
enforce the agreements by dismissing this action.
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Plaintiffs object that many of the complaint’s
allegations are not covered by the arbitration provisions.
Defendants, in their reply, provide a listing of allegedly
applicable provisions, agreement by agreement.
While the court agrees with plaintiffs that new
arguments should not be raised in a party’s reply, in this
instance defendants do not so much make a new argument as they
elaborate on their summary statements in their initial
supporting memorandum; accordingly, the court will consider the
cited provisions to assess their applicability to the complaint.
Defendants are correct that Section 21 of the
Blackhawk Lease (Exhibit C to the complaint) contains a
mandatory arbitration provision.
However, plaintiffs maintain
that the arbitration provision does not apply to the complaint
since the latter centers on unpaid taxes and minimum royalties.
Indeed, Sections 9 and 19.4, respectively, of the lease provide
for all legal remedies for collecting taxes and minimum
royalties, carving the dispute sub judice out of the arbitration
provision.
Therefore, the allegations under the Blackhawk Lease
survive defendants’ motion to dismiss.
Defendants’ arguments regarding the other agreements
similarly fail.
In particular, defendants argue that the Shonk
Sublease “references and incorporates” the Shonk Lease (Exhibit
7
1 to defendants’ reply), Paragraph 22 of which in turn “provides
for binding arbitration of any and all disputes.”
Not so.
Section 22.1 of the Shonk Lease notes that a dispute is only
subject to arbitration if both parties have an “express written
agreement to arbitrate.”
With no such agreement being produced,
or its existence alleged, defendants’ argument on dismissing the
claims pertaining to the Shonk Sublease fails.
Defendants also argue that the Payne-Gallatin base
lease requires arbitration, and the Payne-Gallatin Sublease
references such lease.
Since they have not produced the lease
to support this claim, the court is unable to determine the
validity of their contention at this juncture.
Finally, defendants’ reply in numbered paragraphs 6-8
raises arbitration arguments regarding the Dickinson and
Chesapeake Subleases and the Imperial Lease.
Since the
agreements implicated contain substantively identical
provisions, the court considers them together.
In each
instance, defendants cite to paragraph 18 of the underlying
lease, containing a mandatory arbitration provision.
such reliance is misplaced.
However,
The agreements at issue not only do
not reference arbitration but also contain a detailed section,
“Default; Forfeiture; Remedies Cumulative.”
Therein, subsection
(c) states, “All provisions herein concerning the remedy of Sub-
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Lessor in case of breach by WWMV of any condition, covenant or
agreement herein contained shall be deemed to be cumulative and
not exclusive, and shall not deprive Sub-Lessor of any of its
other legal or equitable remedies which may now or hereafter be
provided under the laws of the State of West Virginia or under
the Lease.”
In this light, the court does not find that section
1 of the sublease evinces an agreement to arbitrate.
It
contains generic language about the sublease being “subject to
and in accordance with the terms and conditions of the Lease and
this Sublease” and that “Sub-Lessor hereby excepts and reserves
all of the rights and remedies of the Lessor . . . and WWMV
hereby assumes all of the obligations and conditions of the
Lessee . . . in the same manner as if WWMV were the Lessee under
the Lease.”
This assumption of obligations and rights does not
indicate that the parties agreed to resolve their disputes under
the sublease through arbitration, when the sublease contains
explicit provisions on forfeiture and expressly reserves other
legal rights.
Accordingly, defendants’ argument is unavailing
regarding the Dickinson and Chesapeake Subleases and the
Imperial Lease.
Defendants also appear to argue that the parties
agreed to a cure of their dispute, and plaintiffs subsequently
rejected tender amounts.
Since this argument does not support
the present motion and sounds in the way of an affirmative
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such matter in support thereof. (All motions
unsupported by memoranda will be denied without
prejudice pursuant to L.R. Civ. P. 7.1 (a)).
02/08/2016
Last day for Rule 26(f) meeting.
02/15/2016
Last day to file consider Parties= context
defense, the court is unable to Report of it in thePlanning of a
Meeting. See L.R. Civ. P. 16.1.
motion to dismiss.
02/22/2016
Scheduling conference at 4:30 p.m. at the Robert C.
Byrd United States Courthouse in Charleston, before
the undersigned, unless canceled. Lead counsel
IV. Conclusion
directed to appear.
For the foregoing reasons, the court orders that the
02/29/2016
Entry of scheduling order.
03/08/2016
Last day to serve F.R. Civ. P 26(a)(1) disclosures.
motion to dismiss be, and it hereby is, denied. The denial is
without prejudice to is requested to transmit this Order and
The Clerk raise the issues anew based on further
Notice to all counsel of record and to any unrepresented
evidence in support thereof.
parties.
ENTER: September 5, 2016
DATED: January 29, 2017
John T. Copenhaver, Jr.
United States District Judge
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