Nations Fund I, LLC v. Cunningham Energy LLC et al
Filing
40
MEMORANDUM OPINION AND ORDER granting 28 Motion to Dismiss or for a Stay of Proceedings; directing that the 6 third-party complaint is DISMISSED without prejudice; Vesta O&G Holdings, LLC, Vesta VFO, LLC, Rick Cott, and Joshua William Coleman are DISMISSED from this action. Signed by Judge Irene C. Berger on 8/18/2020. (cc: counsel of record; any unrepresented party) (kew)
Case 2:20-cv-00191 Document 40 Filed 08/18/20 Page 1 of 6 PageID #: 378
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA
CHARLESTON DIVISION
NATIONS FUND I, LLC,
Plaintiff,
v.
CIVIL ACTION NO. 2:20-cv-00191
CUNNINGHAM ENERGY LLC,
and RYAN CUNNINGHAM,
Defendants and Third-Party Plaintiffs,
v.
VESTA O&G HOLDINGS, LLC,
VESTA VFO, LLC,
RICK COTT, and
JOSHUA WILLIAM COLEMAN,
Third-Party Defendants.
MEMORANDUM OPINION AND ORDER
The Court has reviewed the Third-Party Defendants’ Motion to Dismiss or For a Stay of
Proceedings (Document 28), the Memorandum of Law in Support of Third-Party Defendants’
Motion to Dismiss or For a Stay of Proceedings (Document 29), and Cunningham Energy LLC’s
and Ryan Cunningham’s Response in Opposition to the Motion to Dismiss or For Stay of
Proceedings (Document 34). For the reasons stated herein, the Court finds that the third-party
claim should be dismissed.
The Plaintiff, Nations Fund, alleges that Defendants Cunningham Energy and Ryan
Cunningham (collectively, “Cunningham”) breached an equipment lease and lease guaranty by
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defaulting on payments. Cunningham filed a third-party complaint (Document 6) naming the
following Defendants: Vesta O&G Holdings, LLC, Vesta VFO, LLC, Rick Cott, and Joshua
William Coleman.
The third-party complaint alleges that Cunningham Energy and Vesta signed a Letter of
Intent containing terms “wherein Vesta pledged to fund (i) Cunningham Energy’s operating
expenses, (ii) drilling expenses for seven new wells, and (iii) certain payable accounts” in return
for the assignment of Cunningham Energy’s oil and gas interests to Vesta’s control and a royalty
interest in the wells. (Third Party Compl. at ¶ 9.) It alleges that both parties performed some
obligations under the Letter of Intent until Vesta withdrew funding and withdrew from the
investment agreement beginning in March 2019. Cunningham contends that it relied on the
agreement with Vesta when it contracted with Nations Fund to provide drilling services.
Cunningham alleges breach of contract, asserting that “The Vesta entities and their agents
promised as part of the Vesta’s investment in Cunningham Energy oil and gas operations in West
Virginia to pay certain expenses of Cunningham Energy including amounts allegedly due
Plaintiff.” (Id. at ¶ 19.) The third-party complaint also asserts causes of action for indemnity
and contribution on the grounds that Vesta agreed to fund drilling expenses and extinguish
accounts payable and that any damages or compensation Cunningham owes to Nations Fund
resulted from the conduct of Vesta.
In a case previously filed in this district and pending in front of the Honorable Thomas
Johnston, Cunningham alleges the same breach of the same contract(s), naming as defendants the
same individuals and entities as the third-party Defendants herein. See, Verified Complaint,
Cunningham Energy, LLC et al v. Vesta O & G Holdings, LLC, et al, Civ. Action No. 2:20-cv-61,
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Document 1. The causes of action include breach of contract – first LOI [letter of intent],
promissory estoppel, detrimental reliance, breach of implied duty of good faith and fair dealing,
fraud in the inducement, misrepresentation, violation of the West Virginia Uniform Securities Act,
violation of the Securities and Exchange Act, joint venture liability, piercing the corporate veil,
preliminary injunction, breach of contract – second LOI and MOU [memorandum of
understanding], fraud in the inducement – second LOI and MOU, and, in the alternative,
TRO/Preliminary/Permanent Injunction.
Vesta moves to dismiss or stay the third-party complaint, arguing that it is duplicative of
the previously filed action pending before Judge Johnston. It contends that the two cases “involve
the same parties, same issues, and same evidence,” and that Judge Johnston has already made
substantive rulings. (Vesta Mem. at 3.) Vesta further argues that, because the case pending
before Judge Johnston seeks declaratory relief, it may more expeditiously resolve the threshold
issue of whether a valid, enforceable contract between the parties exists. It further cites the risk
of inconsistent judgments if both cases proceed, as well as the harm to the interest of judicial
economy.
Cunningham opposes dismissal or a stay of the third-party complaint. It contends that the
third-party complaint was properly filed under the rules. Further, because the derivative claims
in the third-party complaint “arise solely from Cunningham Energy’s potential liability to
Plaintiff,” and Nations Fund is “not a party in the other federal court action,” Cunningham
contends that the third-party complaint “presents the only forum for Cunningham Energy to assert
these derivative claims for indemnity and contribution.” (Cunningham Resp. at 2.) Cunningham
argues that Vesta is estopped from seeking dismissal of the third-party complaint on the basis that
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“the other federal court action provides the best avenue to adjudicate the underlying claims”
because “these same parties moved to dismiss the entirety of Cunningham Energy’s Complaint in
that action.” (Id. at 2–3.) Cunningham asserts that it is “impermissible” to seek to avoid liability
in both cases. 1 (Id. at 3.)
Where duplicative or parallel actions are pending in multiple courts, under the “first filed”
rule, courts should “giv[e] priority to the first suit absent showing a balance of convenience in
favor of the second.” Learning Network, Inc. v. Discovery Commc'ns, Inc., 11 F. App'x 297, 300
(4th Cir. 2001) (unpublished); McJunkin Corp. v. Cardinal Sys., Inc., 190 F. Supp. 2d 874, 876
(S.D. W. Va. 2002) (Haden, C.J). The first-filed rule may be applied to claims initiated in a thirdparty complaint. See, e.g., Golden Corral Franchising Sys., Inc. v. GC of Vineland, LLC, No.
5:19-CV-255-BO, 2020 WL 1312863, at *2 (E.D.N.C. Mar. 17, 2020) (transferring a duplicative
suit to the court where a previously-filed third party claim based on the same agreements was
pending). The first-filed rule is equitable and need not be followed where there is evidence of
bad faith, forum shopping, or an anticipatory filing in a less-favorable forum.
Touchstone
Research Lab., Ltd. v. Anchor Equip. Sales, Inc., 294 F. Supp. 2d 823, 826–27 (N.D.W. Va. 2003).
“Application of the first-filed rule requires a district court to dismiss, stay, or transfer a later-filed
lawsuit in deference to the earlier-filed action.” J & M Distrib., Inc., v. Hearth & Home Techs.,
Inc., No. 5:12-CV-69, 2013 WL 12131600, at *2 (N.D.W. Va. Jan. 8, 2013).
As an initial matter, the Court, of course, rejects Cunningham’s argument that Vesta cannot
seek to dismiss this action as duplicative because it also seeks to dismiss the previously filed action
on the merits. One purpose of the first-filed rule is to ensure a single determination of the merits.
1 LOL.
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Denial of liability does not preclude a party from making appropriate procedural motions, and
Vesta’s position that it did not breach an enforceable contract with Cunningham is hardly
inconsistent with its position that it should not be required to defend two identical suits.
The Court finds that the third-party complaint is duplicative of the previously filed action
pending before Judge Johnston. The third-party complaint focuses only on those aspects of the
relationship between Cunningham and Vesta that are relevant to Nations Fund, but both the thirdparty complaint and the earlier action arise from the same contractual dispute. None of the issues
that may weigh against application of the first-filed rule are applicable here, as Cunningham filed
both the first federal action and this third-party claim in the Southern District of West Virginia,
involving the same parties and counsel, and there is no indication of bad faith or gamesmanship.
Any potential recovery Cunningham could gain through the third-party complaint is available
should it prevail in the previous action, given that both actions are based on the same alleged
contractual obligations. Because the allegations and recovery sought in the earlier-filed federal
action entirely encompass those in the third-party complaint, the Court finds that a stay, transfer,
or consolidation would be futile. Accordingly, Vesta’s motion to dismiss should be granted.
Wherefore, after thorough review and careful consideration, the Court ORDERS that the
Third-Party Defendants’ Motion to Dismiss or For a Stay of Proceedings (Document 28) be
GRANTED and that the third-party complaint (Document 6) be DISMISSED without prejudice.
The Court further ORDERS that Vesta O&G Holdings, LLC, Vesta VFO, LLC, Rick Cott, and
Joshua William Coleman be DISMISSED from this action.
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The Court DIRECTS the Clerk to send a copy of this Order to counsel of record and to
any unrepresented party.
ENTER:
6
August 18, 2020
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