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Mealey's Fracking-Report-sample-issue-may-2014


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Download the inaugural issue of Mealey's Fracking Report, May 2014. To order, call 800.223.1940 or visit the LexisNexis Store at …

Download the inaugural issue of Mealey's Fracking Report, May 2014. To order, call 800.223.1940 or visit the LexisNexis Store at

MORE > Known for extensive asbestos and toxic tort litigation coverage, the legal news journalists from Mealey Publications announced this new Report to follow the federal state and local litigation involving hydraulic fracturing. The report also covers federal and state regulatory and legislative developments, as well as rulings by administrative agencies tasked with enforcing laws that impact hydraulic fracturing. The newsletter will report on civil tort actions by property owners, including causes of actions for nuisance, trespass, negligence and strict liability; causation disputes regarding contamination of land and water supplies, noise and air pollution, damages caused by vibrations; personal injury lawsuits; citizen suits; government enforcement actions, including issues of land use, zoning and preemption; challenges to government enforcement actions, laws and regulations, including freedom of information and Fifth Amendment takings claims; oil and gas lease disputes; land use and property rights disputes, including quiet title actions and easement disputes; contract disputes; and insurance coverage claims.

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  • 1. MEALEY’STMTM Fracking Report May 2014 Volume 1, Issue #1 5th Circuit Panel Vacates Summary Judgment, Remands To Decide Intervenor’s Status NEW ORLEANS — A unanimous Fifth Circuit U.S. Court of Appeals panel ruled May 7 that an Eastern District of Texas judge lacked jurisdiction over an assignment of rights dispute among natural gas well operating companies because a nondiverse intervenor destroyed subject-matter jurisdiction; the panel vacated a summary judgment order and remanded the lawsuit with instructions to determine if the intervenor is an indispensable party. SEE PAGE 4. Wyoming Supreme Court Defines Trade Secrets, Remands Fracking Fluid Disclosure Case CHEYENNE, Wyo. — The Wyoming Supreme Court issued a unanimous opinion March 12 vacating a lower ruling that the components of hydraulic fracturing fluid are exempt from disclosure as trade secrets and instructing the lower court to apply the federal definition of trade secrets to review a Wyoming Oil & Gas Conservation Commission order denying requests for disclosure of the chemicals in the fluid; the mandate issued March 28. SEE PAGE 5. Order To Produce Seismic Data Affirmed; Water Well Suit Fact Discovery Ends May 23 SCRANTON, Pa. — Phase 1 fact discovery in a lawsuit in the U.S. District Court for the Middle District of Pennsylvania alleging contamination of residential water wells with hydraulic fracturing chemicals closes May 23; a motion by the natural gas extraction company defendants for reconsideration of an October 2013 order to produce seismic data and open hole logs was denied in January. SEE PAGE 7. Louisiana Appeals Panel Rules Plaintiffs Lack Standing To Seek Restoration Damages LAKE CHARLES, La. — A unanimous Third Circuit Louisiana Court of Appeal panel on May 7 affirmed summary judgment against surface estate owners seeking damages from oil and natural gas operators for allegedly failing to restore the surface estate; the panel applied the subsequent purchaser doctrine and concluded that the plaintiffs lack standing to seek damages for alleged injuries before they purchased the subject land. SEE PAGE 10. Legacy Oil Pollution Claims Dismissed Without Prejudice In Louisiana Federal Court NEW ORLEANS — Defense motions to dismiss were granted in part on April 22 with leave to amend in a well field legacy contamination lawsuit pursued by landowners in the U.S. District Court for the Eastern District of Louisiana. SEE PAGE 12. Oklahoma Class Plaintiffs Appeal Dismissal Of Claims For Waste Hauling Pollution DENVER — Class action representatives of an Oklahoma action alleging fly ash and produced water contamination filed an appellant brief April 21 in the 10th Circuit U.S. Court of Appeals seeking reversal of an order denying remand under the local controversy exception to the Class Action Fairness Act of 2005 or, alternatively, vacating summary judgment for defendants for failing to state a claim. SEE PAGE 15. Texas Supreme Court Remands Attorney Fee Award Dispute Arising From Royalty Suit AUSTIN, Texas — The Supreme Court of Texas issued a per curiam opinion on April 25 remanding an attorney fee dispute with instructions for the trial court to develop a record sufficient to calculate attorney fees with the lodestar method; the disputed attorney fees are from a lawsuit to enforce an assignment of working interests in oil and natural gas producing wells. SEE PAGE 18. Natural Gas Operator Held Liable To Indemnify Driller For Contamination Litigation COLUMBUS, Ohio — A natural gas operating company sued by a drilling company with which it contracted to spud wells in West Virginia is liable under the drilling contract to reimburse settlement and litigation costs for a related well-water contamination lawsuit naming both companies as defendants, the presiding U.S. District Court for the Southern District of Ohio judge ruled April 16. SEE PAGE 19.
  • 2. Bill Lowe editor Thomas E. Moylan managing editor Jennifer Hay copy desk manager Amy Bauer marketing brand manager Toria Dettra production associate To contact the editor: Bill Lowe (215) 988-7733 email: The Report is produced monthly by LexisNexisâ Mealey’sä 1600 John F. Kennedy Blvd., Suite 1655 Philadelphia, PA. 19103 (215) 564-1788 Customer Service: 1-800-MEALEYS (1-800-632-5397) Email: Web site: Print: $995* for a full year * Plus sales tax, shipping and handling where applicable. An online version of this report with email delivery is also available through LexisNexis on Contact your LexisNexis representative or call 1-800-223-1940 for details. PRINT ISSN 2372-9457 ONLINE ISSN EBOOK ISBN 9781630445232 LexisNexis and the Knowledge Burst logo are registered trademarks of Reed Elsevier Prop- erties Inc., used under license. Mealey’s is a trademark of LexisNexis, a division of Reed Elsevier Inc. ª 2014, LexisNexis, a division of Reed Elsevier Inc. All rights reserved. MEALEY’STMTM Fracking ReportMay 2014 Volume 1, Issue #1 Cases in this Issue Page Chesapeake Louisiana v. Buffco Production Inc., et al., No. 13-40458, 5th Cir. ........................................................................................................... 4 Powder River Basin Resource Council, et al. v. Wyoming Oil & Gas Conservation Commission, et al., No. 13-120, Wyo. Sup. ........................... 5 Susan Berish, et al. v. Southwestern Energy Production Co., et al., No. 10-1981, M.D. Pa........................................................................................ 7 Lisa Parr, et al. v. Aruba Petroleum Inc., No. 11-1650, County Court at Law No. 5 of Dallas County, Texas ........................................................... 9 Carlos Boone, et uxor v. ConocoPhillips Co., et al., No. 13-1106, La. App., 3rd Cir. ........................................................................................................... 10 Catherine P. Alford, et al. v. Chevron USA Inc., et al., No. 13-5457 (consolidated), E.D. La........................................................................................ 12 William Reece, et al. v. AES Corp., et al., No. 14-7010, 10th Cir. .......................... 15 Larry T. Long, et al. v. Robert M. Griffin, et al., No. 11-1021, Texas Sup.............. 18 Warren Drilling Inc. v. Equitable Production Co., No. 12-425, S.D. Ohio............. 19 Thomas A. Neuhard, et uxor v. Range Resources-Appalachia, No. 11-1989, M.D. Pa. ......................................................................................................... 21 Rugh A. Mason, et uxor v. Range Resources-Appalachia, et al., No. 12-369, W.D. Pa............................................................................................................... 22 Edward E. Kamuck v. Shell Energy Holdings, et al., No. 11-1425, M.D. Pa........... 24 Joe Rath, et al. v. BHP Billiton Petroleum (Arkansas) Inc., et al., No. 13-602, E.D. Ark.............................................................................................................. 25 Daniel W. Nicholson v. XTO / Exxon Energy Inc., No. 13-899, N.D. Texas ........ 26 Sheila Russell, et al. v. Chesapeake Appalachia, et al., No. 14-148, M.D. Pa............ 28 Bobbie Hill, et al. v. Southwestern Energy Co., No. 12-500, E.D. Ark.................... 30 Mary L. Vermillion, et al. v. Mora County, N.M., et al., No. 13-1095, D. N.M.... 31 Columbia Gas Transmission v. Gary Galloway, No. 14-77, E.D. Ky. ...................... 33 Thomas Chaffee, et al. v. Talisman Energy USA Inc, et al., No. 14-690, M.D. Pa............................................................................................................... 33 Tennessee Gas Pipeline Co. v. Permanent Easements, et al., No. 14-1821, 3rd Cir................................................................................................................. 35 Dr. Alfonso Rodriguez, M.D., v. Michael L. Krancer, et al., No. 12-1458, M.D. Pa............................................................................................................... 36 Published document is available at the end of the report. For other available documents from cases reported on in this issue, visit or call 1-800-MEALEYS.
  • 3. In this Issue Assignment Of Rights 5th Circuit Panel Vacates Summary Judgment, Remands To Decide Intervenor’s Status.......................................... page 4 Trade Secrets Wyoming Supreme Court Defines Trade Secrets, Remands Fracking Fluid Disclosure Case.............................................. page 5 Order To Produce Seismic Data Affirmed; Water Well Suit Fact Discovery Ends May 7 Verdict Texas Jury Awards $2.9 Million To Family Alleging Harm From Natural Gas Fracturing........................................................... page 9 Legacy Damages Louisiana Appeals Panel Rules Plaintiffs Lack Standing To Seek Restoration Damages....................................................... page 10 Legacy Oil Pollution Claims Dismissed Without Prejudice In Louisiana Federal Court............................................... page 12 Appeal Oklahoma Class Plaintiffs Appeal Dismissal Of Claims For Waste Hauling Pollution.............................. page 15 Texas Supreme Court Remands Attorney Fee Award Dispute Arising From Royalty Suit ................................................. page 18 Duty To Defend Natural Gas Operator Held Liable To Indemnify Driller For Contamination Litigation...................................................... page 19 Lease Dispute Pennsylvania Federal Judge Rules Gas Well Activity Did Not Extend Term Of Lease....................................................... page 21 Pennsylvania Federal Judge Denies Summary Judgment In Natural Gas Lease Dispute........................................ page 22 April Trial Stayed Pending Dispositive Motion Ruling In Pennsylvania Federal Court............................................... page 24 Royalties March 2015 Royalty Trial Set In Arkansas; Some Claims Dismissed In January Order.......................................... page 25 Wrongful Death Gas Well Operator Objects To Order Denying Dismissal In Texas Federal Court ........................................................... page 26 Personal Injury Gas Well Operators Seek Order To Support Claims Before Summary Judgment Discovery..................................... page 28 Waste Disposal Discovery Dispute Reported By Oilfield Well Operators In Arkansas Injection Suit .............................................................. page 30 Ordinance Challenge New Mexico Property Owners Amend Complaint In Suit Challenging Fracking Ban................................................ page 31 Pipeline Gas Pipeline Operator Seeks Declaratory Judgment, Removal Of Bull From Easement...................................................... page 33 Property Damage Pennsylvania Plaintiffs Sue Well, Pipeline Operators For Loss Of Property 33 Natural Gas Pipeline Operator Appeals $78,000 Award In Pennsylvania Easement Suit .............................................. page 35 MEALEY’S Fracking Report Vol. 1, #1 May 2014 Cite as Mealey’s Fracking Report, Vol. 1, Iss. 1 (5/14) at p.___, sec.___. 3
  • 4. News 5th Circuit Panel Vacates Summary Judgment, Remands To Decide Intervenor’s Status NEW ORLEANS — A unanimous Fifth Circuit U.S. Court of Appeals panel ruled May 7 that an Eastern District of Texas judge lacked jurisdiction over an assignment of rights dispute among natural gas well operating companies because a nondiverse intervenor destroyed subject-matter jurisdiction; the panel vacated a summary judgment order and remanded the lawsuit with instructions to determine if the intervenor is an indispensable party (Chesapeake Louisiana v. Buffco Production Inc., et al., No. 13-40458, 5th Cir.). (Opinion in Section D. Document #94-140513- 013Z.) Chesapeake Louisiana filed state law claims against Free- man Capital, Buffco Production Inc., Twin Resources, Wayne Freeman and Freeman Resources to recover for alleged overpayment of an assignment of deep rights in the Geisler Unit property in Harrison County, Texas (No. 10-359, E.D. Texas). Chesapeake Louisiana claimed federal jurisdiction because the defendants are citizens of Texas and it is a citizen of Oklahoma. 2008 Agreement The alleged overpayment involved a transaction arising from a July 2008 agreement between Chesapeake Loui- siana and Buffco. Chesapeake Louisiana agreed to pay approximately $232 million to acquire Buffco’s working interestsinthedeeprightsintheGeisler,Bowen,Hemby and Yow units for three years. The letter contains a non-operator clause through which Chesapeake Louisi- anaagreestomakethesameoffertonon-operatingwork- ing interests in the same properties. Freeman, Freeman Capital and Harleton Oil & Gas Inc. are the owners of the non-operating working interests. Based on faulty information from a third party, Chesa- peake Louisiana believed Buffco and Freeman each owned 50 percent interests in the Geisler unit deep rights, for which it paid each of them $6.8 million. The parties agree the proper allocation of the working interests in the Geisler unit is Buffco, 25 percent; Free- man, 22 percent, Freeman Capital, 3 percent; and Harleton Oil 50 percent. Therefore, by its payment to Buffco and Freeman, Chesapeake Louisiana ac- quired only 47 percent of the working interests in the Geisler Unit. Buffco, Freeman and Freeman Capital alleged in coun- terclaimsthatChesapeakeLouisianawasrequiredtopur- chase their interests in the Bowen, Hemby and Yow production units. Harleton Oil intervened and alleged claims against Chesapeake Louisiana, Freeman and Buffco. Harleton Oil sought 50 percent of the $13.6 million paid to Buffco and Freeman. In exchange, Harleton Oil would transfer its interest in the Geisler Unit to Che- sapeake Louisiana. Harleton alleged fraud claims against Buffco for misrepresenting its Geisler Unit interests to Chesapeake Louisiana. Chesapeake Louisiana and Buffco settled their dispute. Subsequently, Judge Rodney Gilstrap granted sum- mary judgment in favor of Chesapeake Louisiana and Harleton Oil with respect to the Geisler Unit and in favor of Chesapeake Louisiana with respect to the Bowen, Hemby and Yow units. Summary Judgment Following the entry of summary judgment, Freeman and Freeman Capital filed a joint motion to dismiss for lack of subject matter jurisdiction on the grounds that Harleton Oil’s intervention destroyed diversity and its status as an indispensable party. Judge Gilstrap concluded that Harleton Oil is a defendant-intervenor and denied the motion. In addi- tion, he ruled that an analysis of whether supplemental jurisdiction attached was unnecessary. Vol. 1, #1 May 2014 MEALEY’S Fracking Report 4
  • 5. Freeman, Freeman Capital, Buffco and Harleton Oil appealed. Judges Patrick E. Higginbotham, W. Eugene Davis and Catharina Haynes heard the appeal and filed a per curiam opinion overturning the judgment in part. ‘‘As a court of limited jurisdiction, we must first satisfy ourselves, independent of the district court’s determi- nation, that subject-matter jurisdiction exists over the parties’ claims related to the Geisler Unit,’’ according to the panel. ‘‘As the parties correctly acknowledge, diversity jurisdic- tion existed over the suit prior to Harleton’s interven- tion; however, we must consider whether Harleton’s intervention destroyed diversity such that the district court lacked jurisdiction over this matter.’’ First, the panel considered whether Harleton Oil is properly recognized as a defendant-intervenor or a plaintiff-intervenor. ‘‘Here, the principal purpose of the suit and the primary and controlling matter in dis- pute suggest that Harleton is a plaintiff,’’ according to the panel. ‘Plaintiff-Intervenor’ ‘‘Harleton’s proper alignment as a plaintiff-intervenor is further illustrated by the fact that the summary judgment order awarded relief to both Harleton and Chesapeake, and both Harleton and Chesapeake are essentially aligned on appeal in seeking affirmance of the order. Further, Harleton affirmatively seeks to be aligned with Chesapeake in certain circumstances, such as when it argues that its unjust enrichment claim is timely because its claim can relate back to the unjust enrichment claim filed by Chesapeake. Finally, while Harleton brought a claim against Chesapeake, Buffco, and Freeman, no party has brought a claim against Harleton, and Harleton has no potential for liability. Such a lack of potential for liability against a party suggests that the party should be aligned as a plaintiff,’’ according to the panel. ‘‘Having determined that Harleton should have been aligned as a plaintiff-intervenor, we are bound to con- clude that the district court lacked diversity jurisdiction over the Geisler Unit claims. ‘‘Therefore, because there was no subject-matter juris- diction over the parties’ Geisler Unit claims following Harleton’s intervention, we must vacate the grant of summary judgment with respect to the Geisler Unit claims,’’ according to the panel. The panel remanded the claims to permit the District Court to consider if Harleton is an indispensable party and if the Geisler Unit-related claims should be dismissed. With respect to Freeman and Freeman Capital’s coun- terclaims for interests in the Bowen, Hemby and Yow units, the appellants aver that the counterclaims must be dismissed because subject matter jurisdiction is lacking over the Geisler Unit claims, according to the panel. Contrary to Freeman and Freeman Capital, an independent basis for jurisdiction exists, according to the panel. ‘We Affirm’ ‘‘Harleton did not destroy diversity with respect to these claims because its claims were limited to the Geisler Unit,’’ according to the panel. ‘‘Further, the amount in controversy with respect to these claims exceeded $75,000. Therefore, because Freeman and Freeman Capital’s only challenge on appeal rests on their juris- dictional argument, we affirm the district court’s deci- sion concerning the Bowen, Hemby, and Yow Units.’’ Jesse R. Pierce and Brian Kevin Tully of Pierce & O’Neill in Houston represent Chesapeake Louisiana. Ben Taylor of Fulbright & Jaworski in Dallas and Eric M. Albritton of Albritton Law in Longview, Texas, represent Freeman and Freeman Capital. Gene Francis Creely II of Creely Law Firm in Houston represents Buffco. Gregory Dunne Smith of Ramey & Flock in Tyler, Texas, represents Harleton Oil. I Wyoming Supreme Court Defines Trade Secrets, Remands Fracking Fluid Disclosure Case CHEYENNE, Wyo. — The Wyoming Supreme Court issued a unanimous opinion March 12 vacating a lower ruling that the components of hydraulic fracturing fluid are exempt from disclosure as trade secrets and instructing the lower court to apply the federal defini- tion of trade secrets to review a Wyoming Oil & Gas Conservation Commission order denying requests for disclosure of the chemicals in the fluid; the mandate MEALEY’S Fracking Report Vol. 1, #1 May 2014 5
  • 6. issuedMarch28(Powder River Basin Resource Council, et al. v. Wyoming Oil & Gas Conservation Commis- sion, et al., No. 13-120, Wyo. Sup.). (Opinion in Section E. Document #94-140513- 033Z. Mandate available. Document #94-140513- 034R.) Powder River Basin Resource Council, Wyoming Out- door Council, Earthworks and Center for Effective Government fka OMB Watch appealed the denial of disclosure of public records documenting the identity of chemicals used in hydraulic fracturing operations in Wyoming from the Wyoming Oil & Gas Conserva- tion Commission (WOGCC) pursuant to the Wyom- ing Public Records Act (WPRA; Wyoming Statute Subsection 16-4-204) and the Wyoming hydraulic fracturing disclosure rule. 7th Judicial District After WOGCC denied the request for information, the environmental groups filed a petition for review under the Wyoming Administrative Procedure Act (APA; Wyo. Statute Annotated section 16-3-114[c]) March 23, 2012, in the Wyoming Seventh Judicial District Court, Natrona Co. The groups argue the supervisor arbitrarily refused to disclose information, and the deci- sions was an abuse of discretion and contrary to the law. Halliburton Energy Services intervened, and the parties stipulated to a record including 65 requests for trade secret status approved by the WOGCC supervisor and posted on the commission website. The stipulated record also included correspondence with respect to the amendments by the commission to rules for exemp- ting certain information about hydraulic fracturing pro- ducts from disclosure as trade secrets. The environmental groups and Halliburton filed cross- motions for summary judgment based on the stipulated record. Judge Catherine E. Wilking conducted a hear- ing on the motions and granted summary judgment March 21, 2013, rejecting the claims of the environ- mental groups. The environmental groups appealed. The Wyoming Supreme Court heard oral arguments Nov. 20 and issued the opinion March 12. ‘‘Proceedings to challenge denial of access to documents claimed to be public must follow procedures established by the WPRA, and those are not subject to review under the Administrative Procedures Act [Sheaffer v. University of Wyoming, 2006 Wy 99, N˜ 4, 139 P.3d 468, 470 (Wyo. 2006)],’’ Justice Michael K. Davis wrote for the court. ‘Reverse And Remand’ ‘‘We will therefore reverse and remand to the district court. That court will have to decide whether to permit Appellants to amend their pleadings and file appro- priate documents to seek an order to show cause, or whether to dismiss the case instead. In the latter event, Appellants may file new action with the appropriate request for an order to show cause as contemplated by the WPRA. The district court is vested with broad discretion to determine whether to allow amendment of pleadings, and we will not interfere with that dis- cretion. Voss v. Goodman, 2009 WY 40, N˜ 14, 203 P.3d 415, 420 (Wyo. 2009). Regardless of which choice the district court makes, on presentation of an adequate application for an order to show cause, the district court should conduct appropriate proceedings and determine whether the information Appellants seek constitutes trade secrets or not, with the burden of showing that they do upon the custodian (here the Supervisor) and any intervenors.’’ ‘‘We understand the difficulty attendant upon holding these proceedings — they must be conducted in such a manner that the information sought to be protected is not disclosed until the court can determine whether it is in fact subject to disclosure,’’ according to the court. ‘‘This may require the use of in camera hearings, sealed files, or even closed hearings, tools that courts custo- marily use in cases involving trade secrets.’’ The court then turned to the standard to be applied on remand to trade secret cases under the WPRA. ‘‘This is a general question of law which can be answered without regard to the limited record we have, and it is in the interest of judicial economy to do so,’’ accord- ing to the court. E M A I L T H E E D I T O R email editor bill lowe at Vol. 1, #1 May 2014 MEALEY’S Fracking Report 6
  • 7. ‘‘In order to maintain an open and accountable govern- ment, the Wyoming legislature enacted WPRA in 1969. The Act provides a public right of access to records of the state, its agencies, and local government entities. Wyo. Stat. Ann. § 16-4-202(a) (LexisNexis 2013),’’ according to the court. ‘Disclosure Generally’ ‘‘The WPRA, like the FOIA [federal Freedom of In- formation Act], requires that disclosure generally pre- vail over secrecy.’’ ‘‘Striking a delicate balance between the public’s right of access to government records and the protection of proprietary information, the WPRA contains several exemptions from disclosure, which are set forth in § § 16-4-203(b) & (d),’’ according to the court. The exemption pertinent to the current case addressing trade secrets, privileged information and confidential commercial, financial, geological or geological data is found in 16-4-203(d)(v), according to the court. This exemption has never been subject to interpretation. ‘‘Having carefully contemplated the purpose of the WPRA, studied relevant case law, and considered com- peting arguments, we adopt the definition of trade secrets articulated by federal courts under the FOIA. A trade secret in the public records context is ‘a secret, commercially viable plan, formula, process or device that is used for the making, preparing, compounding, or processing of trade commodities and that can be said to be the end product of either innovation or sub- stantial effort [Anderson v. Department of Health & Human Services, 907 F.2d 936, 943-44 (10th Cir.)],’ ’’ according to the court. ‘‘This ‘definition requires that there be a direct relationship between the trade secret and the productive process.’ Id.’’ ‘‘We are left with the question of whether individual ingredients of hydraulic fracturing formulae can consti- tute trade secrets under the definition we adopt. We cannot resolve that issue in this appeal, unfortunately.’’ ‘Independently Resolve’ ‘‘The district court must independently resolve this dis- pute based on the credibility of the witnesses and per- suasiveness of the evidence presented by each party,’’ according to the court. Justices Marilyn S. Kite, William U. Hill, Barton Voigt and E. James Burke joined in the opinion. ShannonRoseAndersonofPowderRiverBasinResource Council in Sheridan, Wyo., and Timothy J. Preso, Laura D. Beaton and Katherine Kirklin O’Brien of Earth- justice in Bozeman, Mont., represent the appellants. Eric A. Easton and Peter K. Michael of the Wyoming Attorney General’s Office in Casper, Wyo., represents WOGCC. Steven L. Leifer of Baker Botts in Wash- ington, D.C., and John A. Masterson and Alaina M. Stedillie of Lewis Roca Rothgerber in Casper represent Halliburton. I Order To Produce Seismic Data Affirmed; Water Well Suit Fact Discovery Ends May 23 SCRANTON, Pa. — Phase 1 fact discovery in a law- suit in the U.S. District Court for the Middle District of Pennsylvania alleging contamination of residential water wells with hydraulic fracturing chemicals closes May 23; a motion by the natural gas extraction com- pany defendants for reconsideration of an October 2013 order to produce seismic data and open hole logs was denied in January (Susan Berish, et al. v. Southwestern Energy Production Co., et al., No. 10- 1981, M.D. Pa.). (Order extending discovery deadline available. Docu- ment #94-140513-026R. Order denying motion to reconsider available. Document #94-140513-027R.) Suzanne Berish is the lead plaintiff among a group of more than two dozen residents of Lenox Township, Susquehanna County. The lawsuit was filed in the Sus- quehanna County Court of Common Pleas (Suzanne Berish, et al. v. Southwestern Energy Production Co., et al., No. 10-1882, Pa. Comm. Pls., Susquehanna Co.). The plaintiffs include adults and children who live within a quarter mile of the so-called Price Well No. 1. Removal Southwestern Energy Production filed notice of removal Sept. 23, 2010, to the Middle District of Pennsylvania. A motion filed by the plaintiffs for leave to join de- fendants Halliburton Energy Services Inc., BJ Services MEALEY’S Fracking Report Vol. 1, #1 May 2014 7
  • 8. Co., Shlumberger Limited and Union Drilling Inc. was granted May 3, 2012, by Judge A. Richard Caputo. The plaintiffs allege in the third amended complaint filed May 17, 2012, that Halliburton Energy Services, Union Drilling, Schlumberger Limited and BJ Services provided services, equipment and support to South- western Energy Production, the owner and operator of Price Well No. 1. The plaintiffs allege that they have been exposed to hazardous chemicals, including barium, manganese and strontium, by the hydraulic fracturing of the defen- dants. As a result of the fracking, their real properties have been damaged, and the value of their real proper- ties has been diminished, according to the plaintiffs. Plaintiff Connor Seamon avers that as a result of drink- ing contaminated water, he has become physically ill and manifests neurological symptoms of exposure to toxicants, including heavy metals. The plaintiffs allege negligence, private nuisance, strict liability and trespass causes of action. The plaintiffs seek an injunction ordering the defen- dants to stop releasing contaminants, which they allege is a violation of the Pennsylvania Hazardous Sites Cleanup Act (35 Pa. Statutes subsection 6020.1.1). They also seek compensatory and punitive damages in addition to creation of a medical monitoring fund. The plaintiffs voluntarily dismissed Schlumberger Limited in November 2012. Seismic Data Judge Caputo entered an order Aug. 27, 2013, instruct- ing Southwestern Energy Production and Schlumberger Technology Corp., a nonparty contractor, to file briefs regarding the discovery of seismic data and open hole logs. The defendants opposed the release on the grounds that the data are trade secrets. Judge Caputoissuedan order Oct.11 granting the plain- tiffs access to seismic data and open hole logs. The order was stayed Oct. 28 pending disposition of the motion to reconsider filed Oct 24. Judge Caputo denied the motion Jan. 16. ‘‘There are six elements used to determine whether information must be kept secret so it confers a competitive advantage to the owner of the information [Pestco Inc. Associated Products Inc., 800 A2d. 700, 706 (Pa. Super. 2005)],’’ according to Judge Caputo. ‘‘The burden is on SEPCO [Southwestern Energy Production Co.] to demonstrate that the open hole logs and the seismic data are trade secrets.’’ First, the information claimed by Southwestern Energy Production to be a trade secret is known by Schlum- berger and an unknown number of employees, accord- ing to Judge Caputo. ‘‘Moreover, there is no evidence of any protection SEPCO required of Schlumberger to require its employees of the information learned both while working at Schlumberger and after leaving Schlumberger’s employ.’’ Second, some 25 to 50 Southwestern Energy Produc- tion employees are aware of the information, according to Judge Caputo. ‘‘There is no evidence of any require- ments on SEPCO’s employees regarding the prohibi- tion of dissemination of this information while in the employ of SEPCO or thereafter.’’ Third, Southwestern Energy Production shared the information with Schumberger, a contractor, according to Judge Caputo. The distribution of the information is unknown, and there is no evidence of restrictions on the distribution of the evidence. Value Of Information Fourth, there is a lack of evidence of the value of the information about the information, according to Judge Caputo.Fifth,itisundisputedthatSouthwesternEnergy Production spent considerable money to develop the data, which mitigates in favor of classifying the infor- mation as a trade secret. Finally, the sixth issue concerns the value of the data about Price No. 1 Well to other potential well sites. The authority cited by the defendants for trade-secret classi- fication under this test, the Texas Supreme Court opi- nion in In re Bass (113 S.W.3d 735 [Texas 2003]), is distinguishable, according to Judge Caputo. ‘‘In Bass, the non-participating royalty interest owners of land sued the mineral estate owner claiming that implied duty to develop the land was breached. The mineral estate owner contracted with Exxon to run a geological survey of seismic activity on the entire land. The mineral estate owner never opted to develop the Vol. 1, #1 May 2014 MEALEY’S Fracking Report 8
  • 9. land. In seeking to support their claim of breach of implied duty to develop the land, the royalty interest owners sought the seismic data because it would ‘reveal whether development would be profitable.’ In re Bass, 113 S.W.3d at 738.’’ The seismic data at issue in Bass was not confined to a single well, according to Judge Caputo. ‘‘In Bass, it is apparent that it relates to the entire 22,000 acres.’’ For these reasons, the motion to reconsider is denied, according to Judge Caputo. The parties stipulated Feb. 28 to an extension of the case management deadlines. Judge Caputo endorsed the stipulation March 3. Fact discovery, including fact depositions, will be completed by May 23, accord- ing to Judge Caputo. ‘‘All other deadlines in the Second Amended Case Management Order dated September 30, 2013 shall be extended accordingly.’’ Counsel Patrick Walsh of Kelly, Polishan, Walsh & Solfanelli of Old Forge, Pa., represents Price. Michael Gleeson, M.D., of the Law Office of Michael Gleeson in Arch- bald, Pa., Peter J. Cambs and William J. Dubanevich of Parker Waichman in Port Washington, N.Y., and Christopher P. Caputo of Caputo & Mariotti in Moo- sic, Pa., represent the plaintiffs. Joel Robin Burcat and Matthew M. Haar of Saul Ewing in Harrisburg, Pa., and John H. Barr, Michael C. Connelly and Robert D. Ayers of Bracewell & Giu- liani in Houston represent BJ Services. David R. Fine and George A. Bibikos of K&L Gates in Harrisburg represent Southwestern Energy Production and Halli- burton Energy Services. Patricia Fecile-Moreland of Marks, O’Neill, O’Brien & Courtney in Philadelphia and David P. Helwig of Marks, O’Neill, O’Brien & Courtney in Pittsburgh represent Union Drilling. I Texas Jury Awards $2.9 Million To Family Alleging Harm From Natural Gas Fracturing Case name: Lisa Parr, et al. v. Aruba Petroleum Inc. Case number: 11-1650 Court: County Court at Law No. 5 of Dallas County, Texas Judge: Mark Greenberg Verdict / Settlement (breakdown): $2.9 million ($275,000 diminution of real property value, $750,000 each for past physical pain and suffering to Bob and Lisa Parr, $500,000 past physical pain and suffering to Emma Duval, $100,000 each for future physical pain and suffering to Bob and Lisa Parr, $50,000 for past physical pain and suffering to Emma Duval, $100,000 each to Bob and Lisa Parr for past mental anguish, $100,000 for past mental anguish to Emma Duval) Plaintiff(s): Lisa Parr, minor daughter Emma Duval, Robert Parr Defendant(s): Aruba Petroleum Inc. Date: April 22, 2014 Background: Lisa and Robert Parr own 40 acres over the Barnett Shale in Wise County, Texas. Hydraulic fracturing for natural gas extraction began in 2008 in the Barnett Shale. Twenty-two wells eventually were drilled within two miles of the Parrs’ residence; no wells or natural gas extraction activities occur on the Parrs’ tract. The Parrs attribute their personal injuries and property damage to benzene, toluene, ethylben- zene, xylene and other volatile organic compounds used to complete the wells by hydraulic fracturing. The Parrs named 11 defendants in the lawsuit filed in 2011. Aruba Petroleum Inc. and Encana Oil & Gas (USA) Inc. remained as defendants in the 11th amended petition filed Sept. 17, 2013. Halliburton Co. was granted a no-evidence summary judgment in 2013 on the grounds that its actions were not the proximate cause of the Parrs’ alleged injuries. Settle- ments were reached with the remaining defendants prior to trial. Aruba Petroleum was granted summary judgment on negligence, gross negligence and trespass causes of action. The trial proceeded on the claim of private nuisance against Aruba Petroleum. The jury was instructed to determine if Aruba Petroleum intention- ally created a private nuisance and if the company’s conduct was abnormal and out of place; five of the six the jurors answered the first question in the affirma- tive and the second question in the negative. The jury declined to award punitive damages. MEALEY’S Fracking Report Vol. 1, #1 May 2014 9
  • 10. Claim: Personal injury, property damage Injury: Chronic nose bleeding, irregular heartbeat, muscle spasms, open sores, emotional distress, harm to livestock, damage to the environment, loss of property value Defense: The Parrs cannot prove Aruba Petroleum caused their injuries because of the number of wells drilled near their property by other oil and gas com- panies. Aruba Petroleum complied with applicable federal and state laws and air quality and drilling safety guidelines established by the Texas Railroad Commis- sion and the Texas Commission on Environmental Quality. Other: Plaintiff attorneys: Brad J. Glide, Glide Law Firm, Houston; David Matthews, Mathews & Associates, Dallas; Richard A. Capshaw, Capshaw & Associates, Dallas Defense attorneys: Ben Barron, Ben K. Barron PC, Dallas; Michael J. Mazzone, Haynes & Boone, Houston Key related documents: 11th amended complaint available. Document #15-140506-058C. Verdict in Section B. Document #15-140506-057V. I Louisiana Appeals Panel Rules Plaintiffs Lack Standing To Seek Restoration Damages LAKE CHARLES, La. — A unanimous Third Circuit Louisiana Court of Appeal panel on May 7 affirmed summary judgment against surface estate owners seek- ing damages from oil and natural gas operators for allegedly failing to restore the surface estate; the panel applied the subsequent purchaser doctrine and con- cluded that the plaintiffs lack standing to seek dam- ages for alleged injuries before they purchased the subject land (Carlos Boone, et uxor v. ConocoPhillips Co., et al., No. 13-1106, La. App., 3rd Cir.; 2014 La. App. LEXIS 1204). (Opinion in Section A. Document #94-140513- 012Z.) Carlos and Lori Boone appealed a motion for sum- mary judgment and exception of prescription decided against them in the Louisiana 15th Judicial District Court of Vermillion Parish (No. 92292). Judge John Damian Trahan granted the motion filed by EnerQuest Oil & Gas, a former lessee of the property. Rights Reserved The Boones purchased 18.66 acres of land encumbered by mineral reservations and oil and natural gas leases for $120,000 in August 2005 from Primeaux Properties Inc. Primeaux Properties purchased the tract in 2003 from Aaron Lagneaux and Eric Lagneaux, who inher- ited the property. Oil and natural gas operations on the property date back to 1972. The Lagneauxs reserved the minerals and mineral rights of the property in the 2003 sale. EnerQuest acquired the wells and operating rights on the tract in 2000 from Phillips Petroleum Co. Ener- Quest sold its operating rights and interest in the prop- erty to Petro ‘‘E’’ in 2004. The sale and assignment to Petro ‘‘E’’ included EnerQuest’s use of the surface of the subject property and the obligation to clean and restore the surface. The Boones asserted contamination and property damage in the lawsuit filed in May 2010. The Boones alleged claims against six oil and natural gas operators. They allege claims against ConocoPhillips Co. as suc- cessor to Phillips Petroleum, EnerQuest and Petro ‘‘E’’ and three other operators. Our Copyright Policy Subscribers are encouraged to copy sections of this report for use in court submissions. You also are welcome to copy a single article to send to a client or colleague, and to copy and route our table of contents. However, it is a violation of our copyright to copy substantial portions of this report for any other reasons without permission. Illegal copying can seriously undermine subscription-based publications like ours; moreover, the Copyright Act of 1976 provides for damages for illegal copying. If you wish to copy and distribute sections of the report, simply contact Vol. 1, #1 May 2014 MEALEY’S Fracking Report 10
  • 11. In support of their claims, the Boones alleged the dis- covery of abandoned debris and equipment on the land and asserted a failure to properly clean and restore the property. The Boones identified three of five wells on the property in a first amended petition filed in July 2012 that they allege were operated by EnerQuest before its sale to Petro ‘‘E.’’ EnerQuest moved for summary judgment on the grounds that the Boones as a matter of law are pre- cluded from asserting a tort or contract claim for prop- erty damage before its 2005 acquisition of the property without a specific assignment of that right from Phillips Petroleum. Leave To Amend The Boones offered assignments of rights from Pri- meaux and the Lagneauxs in response to the summary judgment motion. Judge Trahan granted the Boones leave to file a supplemental and amending petition asserting their right as assignees to the rights of the previous owners, claims for fraud and conspiracy and solidary liability of all defendants. Judge Trahan then granted EnerQuest summary judg- mentandexceptionofprescription.TheBoonesappealed. ‘‘We begin with a review of the subsequent purchaser rule or doctrine [Eagle Pipe and Supply Inc. v. Amerado Hess Corp., 79 So.3d 246, 256-57 (La. 10/25/11)],’’ Judge Ulysses Gene Thibodeaux wrote for the panel. ‘‘Relevant to our inquiries here, a real right is not defined by the Civil Code but has long been held to be a proprietary interest and a species of ownership, which ‘defines the relation of man to things and may, therefore, be declared against the world.’ Eagle Pipe and Supply, Inc., 79 So.3d at 259,’’ according to the panel. ‘‘A real thing and a real obligation both attach to a thing. Id. at 261; La. Civ. Code art. 1764, Revision Comments—1984, (b).’’ ‘‘As illustrated by Eagle Pipe and Supply, Inc. through its analysis of Clark v. J.L. Warner Co. et al., La. Ann. 408 (1851) and subsequent jurisprudence, the former owner retains the right to recover damages caused by the former owner’s lessee during the former owner’s ownership of the property,’’ according to the panel. The August 2005 sale and conveyance of the property from Primeaux to the Boones does not assign the seller’s personal right to sue the lessee for damage done to the land before the date of the sale, according to the panel. ‘Subsequent Purchaser’ ‘‘Lagneaux reserved the rights to himself in 2003, and in 2005 Primeaux, who never obtained them from Lagneaux, referenced the mineral and lease reservations in its sale to the Boones and pointed the Boones to the recorded prior act of sale from Lagneaux. Accordingly, the Boones knew that the land was encumbered by reserved mineral rights and leases. Under the subse- quent purchaser doctrine, they do not have a right of action to sue for damages occurring prior to their ac- quisition of the property.’’ In an attempt to sue EnerQuest, the Boones obtained assignments from Lagneaux and Primeaux in September 2012, according to the panel. ‘‘We find that the assign- ments also fail to provide the plaintiffs with a right of action for pre-acquisition damages against EnerQuest.’’ Lagneaux had no right of action in tort against Pri- meaux to assign in 2012 as a matter of law, according to the panel. Louisiana Civil Code Article 3493, which governs damage to immovable property, has a one-year statute of limitations. The statute of limitations expired in March 2004, according to the panel. Primeaux could not assign contractual rights to the Boones in September 2012 because it did not acquire contractual rights from Lagneaux in 2003, according to the panel. ‘‘Accordingly, the Boones did not obtain any tort or contract rights from the previous owners via the assignments to sue for damages prior to the act of sale in 2005.’’ Alternatively, the Boones aver that they have a right of recovery as third-party beneficiaries of the surface lease granted in 2002 by Lagneaux to EnerQuest, according to the panel. In Andrepont v. Acadia Drilling Co. (231 So.2d 347 [1969]), the Louisiana Supreme Court iden- tified three criteria for determining if contracting parties provided a benefit for a third party. The Boones have not met their burden of proving they are third-party beneficiaries under the contracts, according to the panel. ‘Withheld Its Lease’ Finally, the Boones aver that the 2002 surface lease had a 10-year term and was effective until 2012, which MEALEY’S Fracking Report Vol. 1, #1 May 2014 11
  • 12. included their ownership of the surface, according to the panel. ‘‘We disagree. As previously discussed, Lagneaux withheld its leases and contractual rights from assign- ment to the Boones, and in any event the surface lease did not provide fordamages. It only provided for restora- tion which was not due until six months after the lease expired.’’ ‘‘Based upon the foregoing, we affirm the trial court’s judgment granting the motion for summary judgment and exception of prescription in favor of EnerQuest Oil & Gas, LLC. Costs of this appeal are assessed to the plaintiffs, Carlos and Lori Boone.’’ Judges Sylvia R. Cooks and John E. Conery joined in the opinion. Warren A. Perrin of Perrin, Landrey, deLaunary, Dar- tez & Ouellet in Lafayette, La., and Michael Gregory Stag of Smith Stag in New Orleans represent the plain- tiffs. Morgan J. Wells Jr. of Larzelere Picou Wells Simp- son Lonero in Metairie, La., represents EnerQuest. Rebecca H. Dietz of King, Krebs & Jurgens in New Orleans represents ConocoPhillips. I Legacy Oil Pollution Claims Dismissed Without Prejudice In Louisiana Federal Court NEW ORLEANS — Defense motions to dismiss were granted in part on April 22 with leave to amend in a well field legacy contamination lawsuit pursued by landowners in the U.S. District Court for the Eastern District of Louisiana (Catherine P. Alford, et al. v. Chevron USA Inc., et al., No. 13-5457 [consolidated], E.D. La.; 2014 U.S. Dist. LEXIS 55724; See 4/15/14, Page 27). (Order available. Document #15-140506-037R. Third amendedcomplaint available. Document #15-140506- 038C. Brief in support of motion to reconsider available. Document #15-140506-039B. Response to motion to reconsider available. Document #15- 140506-041B.) Plaintiffs led by Catherine Alford filed suit in the 25th Judicial District Court in Plaquemines Parish, La., (No. 60-4883) to recover damages for contamination of their property in the so-called Potash Field by oil and gas operators Chevron USA Inc., Goodyear Petroleum Co., Hilcorp Energy I, Laurent Oil & Gas, Malloy Energy Co., Noble Energy Inc., Shell Oil Co., Exxon Mobil Corp., Gulf Oil Corp., Anadarko E&P Onshore, BP America Production Co., Chevron USA Holdings Inc., Four Star Oil and Gas, French Gulf Coast Partners and Pan American Petroleum Corp. Removing Defendant The lawsuit was removed in August 2013 by Chev- ron USA. This so-called legacy litigation, as described in Marin v. Exxon Mobil Corp. (48 So.3d 234, 238 [La. 2010]), arises from operations conducted decades ago that left an unwanted legacy in the form of actual or alleged contamination, according to Judge Sarah S. Vance. Facilities constructed by the defendants during extrac- tion operations allegedly released hazardous substances onto the plaintiffs’ property, according to Judge Vance. Exxon Mobil moved to dismiss or for a more definite statement in September 2013, which Judge Vance granted in part on April 1 with leave to amend (2014 U.S. Dist. LEXIS 44621). Judge Vance denied the motion for a more definite statement. Pursuant to the April 1 order, the plaintiffs filed a third amended sup- plemental complaint on April 21. Exxon Mobil on April 11 moved for reconsideration with respect to the classification of servitude and implied obligations of mineral servitude holders. Exxon Mobil challenges the application of the obliga- tions as successor to Humble Oil & Refining. ‘‘The Court’s Order and Reasons states that the February 17, 1960 Servitude Agreement attached to Plaintiffs’ petition grants a mineral servitude to Hum- ble Oil on Plaintiffs’ property. Exxon respectfully sub- mits that this legal conclusion is manifestly erroneous, as the Servitude Agreement does not convey any rights to Exxon with respect to exploring for, producing, or reducing minerals to possession or ownership.’’ The agreement grants only rights with respect to con- struction and maintenance of pipelines and equipment for treating, transporting and storing oil, gas, sulfur, saltwater brine and other minerals on the subject land, according to Exxon Mobil. ‘‘Absolutely no rights Vol. 1, #1 May 2014 MEALEY’S Fracking Report 12
  • 13. to explore for, produce, or reduce to possession and ownership any minerals are transferred through the document. Thus, by its very terms, the 1960 Servitude Agreement cannot be classified as a Mineral Servitude.’’ Reconsider Because the agreement does not convey mineral servi- tude or mineral rights, the plaintiffs cannot state a cause of action under Louisiana Mineral Code articles 11 and 22, according to Exxon Mobil. ‘‘As such, Exxon respectfully requests this Court reconsider its finding that Exxon is a mineral servitude owner, and therefore, its conclusion that ‘the complaint plausibly alleges that Exxon breached the duties it owes to plaintiffs as a mineral servitude holder to ‘keep[] the property subject to the [servitude] in good order’ and to ‘exercise [its[ rights with reasonable regard’ for those of plaintiffs.’’’ The plaintiffs cite Louisiana Civil Code 639 in an April 28 response to the motion to reconsider. ‘‘Civil Code Article 639 declares that a limited personal servitude is a real right that confers ‘in favor of a person a specified use of an estate less than full enjoyment,’’’ according to the plaintiffs. ‘‘Because limited personal servitudes such as a mineral lease ‘constitute an intermediary category between usu- fruct and predial servitudes,’ they are ‘regulated by application of the rules governing usufruct and predial servitudes to the extent that their application is com- patible with the rules governing a right of use of servi- tude.’ [La. Civil Code article 645],’’ according to the plaintiffs. ‘‘Both the rules governing usufruct and the rules governing predial servitudes require restoration of the thing subject to the usufruct or predial servitude.’’ ‘‘Exxon clearly has the obligation of ‘preserving the substance’ of the plaintiffs’ property under both the 1950 Lease and the 1960 Servitude [Eagle Pipe and Supply Inc. v. Amerada Hess Corp., 79 So.3d 246, 258-259],’’ according to the plaintiffs. The plaintiffs also aver that they have the right to enforce mineral lessee obligations arising from the end of mineral lease. ‘‘Exxon ignores the fact that a miner lease is ‘a hybrid institution’ [Mineral Code Article 16] that may be classified as a limited personal servi- tude,’’ according to the plaintiffs. Eagle Pipe ‘‘When the mineral lease terminates, the lessee’s obliga- tion to the surface owner does not disappear, as the lessee is ‘always with the obligation of preserving the sub- stance.’ [Eagle Pipe, 79 So.3d at 258-259] (emphasis added),’’ according to the plaintiffs. ‘‘Exxon is responsible for its obligations both under the 1950 Lease and the 1960 Servitude,’’ according to the plaintiffs. The order issued April 22 grants in part with leave to amend motions filed in September 2013 by Chevron USA, Four Star Oil and Gulf Oil (collectively, Chev- ron); Anadarko E&P Onshore, BP America and Pan American Petroleum (collectively, BP); Hilcorp Energy I; and French Gulf Coast Partners to dismiss certain of the plaintiffs’ claims and for a more definite statement. Judge Vance denied the motions for a more definite statement. Judge Vance dismissed all the claims without prejudice, except the claims under Civil Code articles 2683(2), 2686 and 2692 and Mineral Code articles 11 and 122. Theplaintiffshave21daystofileanamendedcomplaint. Judge Vance dismissed claims for restoration damages under Civil Code article 2683(3) as premature because the plaintiffs do not allege that the 1950 lease has expired. The plaintiffs are correct that obligations imposed on lessees under Civil Code articles 2683, 2686, 2688 and 2692 and articles 11 and 122 of the Mineral Code continue (Marin, 48 So.3d at 256), according to Judge Vance. Civil Code article 2683(2) and Mineral Code articles 11 and 122 collectively require mineral lessees to use leased property as a so-called prudent administrator, according to Judge Vance. The plaintiffs allege in the article 2686 claim that the defendants used the leased property in a way that may cause damage to the prop- erty, according to Judge Vance. The Article 2692 claim alleges that the subject property was damaged by the improper storage of waste, which triggers a duty to repair the property, according to Judge Vance. Without Prejudice Judge Vance dismissed without prejudice claims for frau- dulent concealment, restoration, breach of express con- tract,violationoftheprudentoperatordoctrine,landloss, punitive damages, continuing trespass, civil fruits, conti- nuing nuisance, strict liability and unjust enrichment. MEALEY’S Fracking Report Vol. 1, #1 May 2014 13
  • 14. Donald T. Carmouche, Diane Adele Owen, John Hogarth Carmouche, Ross Joseph Donnes, Victor Lynn Marcello and William Robert Coenen III of Tal- bot, Carmouche & Marcello in Baton Rouge, La., and William Peter Connick of Connick & Connick in Metairie, La., represent the plaintiffs. Michael Raudon Phillips, Brittany Buckley Salup, David Philip Curtis, Michelle Purchner Cumberland and Shannon A. Shelton of Kean Miller in New Orleans and Alan James Berteau, Charles Simon McCowan III and Louis Victor Gregoire Jr. of Kean Miller in Baton Rouge represent Chevron USA, Gulf Oil, Chevron USA Holdings and Four Star Oil and Gas. Loulan Joseph Pitre Jr., Demarcus J. Gordon, Jane Jackson and Terrence Kent Knister of Gordon, Arata, McCollam, Duplantis & Egan in New Orleans repre- sent Goodrich Petroleum and Malloy Energy. Craig Isenberg, Andrea Mahady Price, Michelle M. Ruther- ford, Richard Edward Sarver and Zachary I. Rosenberg of Barrasso, Usdin, Kupperman, Freeman & Sarver in New Orleans represent Hilcorp Energy I. Paul J. Hebert and David K. McCory of Ottinger Hebert in Lafayette, La., represent Laurent Oil & Gas. Joseph P. Farnsworth and Daria Burgess Diaz of Stone Pigman Walther Wittman in New Orleans represent Noble Energy. Patrick Wise Gray, Amy Allums Lee and Jack Brandon Stanley of Johnson Gray McNamara in Lafayette represent Shell Oil. Phillip E. Foco of Tay- lor, Porter, Brooks & Phillips in Baton Rouge and Anthony Joseph Lascaro and John Allain Viator of Bienvenu, Bonnecaze, Foco, Viator & Holinga in Baton Rouge represent Exxon Mobil. James E. Lapeze and Jonathan J. Fox of Liskow & Lewis in New Orleans represent Anadarko E&P. Versatile research materials for busy legal professionals on the go! LexisNexis® offers a growing selection of titles covering state jurisdictions and practice areas in the eBook format. You can: electronically ® content Thanks to the functionality of eBooks, your legal library is now portable and easy to access. For more information or to download a sample LexisNexis ebook, go to To purchase an eBook, or the LexisNexis® Store: LexisNexis eBooks are available in epub format for use on devices like the Apple® iPad® and mobi format for use on devices like the Amazon® Kindle™ . LexisNexis and the Knowledge Burst logo are registered trademarks of Reed Elsevier Properties Inc., used under license. Matthew Bender is a registered trademark of Matthew Bender Properties Inc. Other products or services may be trademarks or registered trademarks of their respective companies. © 2012 LexisNexis. All rights reserved. OFF01778-0 2012 ® Vol. 1, #1 May 2014 MEALEY’S Fracking Report 14
  • 15. James P. Dore of Kean Miller, Amy DeGeneres Berret, Benn Vincent and Shelly J. Harrison in Baton Rouge represent BP America Production. Patrick S. Ottinger and Hebert of Ottinger Hebert in Lafayette represent French Gulf Coast Partners. Dore and Vincent repre- sent Pan American Petroleum. I Oklahoma Class Plaintiffs Appeal Dismissal Of Claims For Waste Hauling Pollution DENVER — Class action representatives of an Okla- homa action alleging fly ash and produced water con- tamination filed an appellant brief April 21 in the 10th Circuit U.S. Court of Appeals seeking reversal of an order denying remand under the local controversy exception to the Class Action Fairness Act of 2005 or, alternatively, vacating summary judgment for defen- dants for failing to state a claim (William Reece, et al. v. AES Corp., et al., No. 14-7010, 10th Cir.). (Appellant brief available. Document #94-140513- 030B.) Bill Reece is the lead plaintiff in a putative class action removed in November 2012 to the U.S. District Court for the Eastern District of Oklahoma (Bill Reece, et al. v. AES Corp., et al., No. 12-457, E.D. Okla.; 2013 U.S. Dist. LEXIS 2236) pursuant to the Class Action Fair- ness Act (CAFA; U.S. Code 28:1332[d]) by XTO Energy Inc. from the LeFlore County, Okla., County Court (No. 11-256). Amended Complaint The plaintiffs filed a first amended complaint on Aug. 20, 2013, alleging claims against AES Corp., AES Shady Point Inc., AES Shady Point, MMHF aka Mak- ing Money Having Fun, Thumbs Up Ranch, Daryl Jackson dba Daryl Jackson Trucking, Kevin J. Jackson, Kenneth Jackson, Chad Jackson, GCI Mining aka George Colliers Inc., Mountain Minerals, Brazil Creek Minerals Inc., Farrell-Cooper Mining Co., Ash Grove Resources, Marine Coal Sales Co., Hunter Ridge Coal Co., International Coal Group, Coal Creek Minerals, McCorkle Truck Line Inc., Star Bulk aka PX Transportation Inc., R&J Trucking Inc., SEECO Inc., XTO Energy Inc., Stephens Production Co., Chesapeake Operating Inc., Petrohawk Operating Co., Hanna Oil & Gas Co., Highland Oil & Gas, Cholla Petroleum Inc., BP America Production Co., Ross Production Co., Shields Operating Inc., Sedna Energy Inc., Hogback Exploration Inc., Bishop Truck- ing, Bear Productions Inc., Graco Fishing & Rental Tools Inc., TXD Transport, Mike Krebbs Construc- tion Inc., Big Mac Tank Trucks, Oklahoma Big Mac Tank Truck, B&B Gas Well Services Inc. and Bear Transports. The plaintiffs allege that chemicals in oil and natural gas well waste and in coal combustion waste and fly ash hauled to and deposited at a dump site one mile south of Bokoshe, Okla., in LeFlore County have contami- nated the environment where they live and work. The haul routes to the dump site are also contaminated with fugitive chemicals from the hazardous wastes, ac- cording to the plaintiffs. Defendants AES, AES Shady Point Inc. and AES Shady Point own a coal-fired electricity generation plant in LeFlore County, according to the plaintiffs. Defendants GCI Mining, Mountain Minerals, Brazil Creek Miner- als, Farrell-Cooper Mining, Ash Grove Resources, Mar- ine Coal, Hunter Ridge, International Coal and Coal Creek deliver coal and limestone to the AES Shady Point plant, according to the plaintiffs. Well Defendants Defendants SEECO, a wholly owned subsidiary of Southwestern Energy; XTO Energy; Stephens Produc- tion; Chesapeake Operating; Petrohawk Operating; Hanna Oil & Gas; Highland Oil & Gas; Cholla Pet- roleum; BP America Production; Ross Production; Shields Operating; Sedna Energy; Hogback Explora- tion own oil and natural gas wells in Arkansas and Oklahoma, according to the plaintiffs. Defendants Bishop Trucking, Bear Productions, Graco Fishing & Rental Tools, TXD Transport, Mike Krebbs Construction, Big Mac Tank Trucks, B&B Gas Well Services and Bear Transports hauled produced fluid wastes (PFW) from the oil and natural gas wells to the MMHF dump site, according to the plaintiffs. Making Money Having Fun operates the MMHF dis- posal site, according to the plaintiffs. Thumps Up Ranch owns the land where the disposal site is located. Daryl, Kevin, Kenneth and Chad Jackson own Thumbs Up Ranch, according to the plaintiffs. MEALEY’S Fracking Report Vol. 1, #1 May 2014 15
  • 16. By disposing of the waste and fly ash at the dump, the AES defendants have caused the release of arsenic, bar- ium, chromium, copper, lead, manganese, mercury, nickel, vanadium and zinc from the dump site, accord- ing to the plaintiffs. The PFW from oil and gas wells includes saltwater, sand, acid, oil- and water-based drilling fluids, comple- tion flowback fluid, frack flowback fluid, workover flowback fluid, rainwater gathered at the well sites, dril- ling cuttings and pit water generated in the extraction of oil and natural gas, according to the plaintiffs. The plaintiffs allege that they are exposed to hydrochlo- ric acid, hydraulic fracturing sand, diesel fuel, surfac- tants, potassium chloride, benzene and isopropanol from the PFW. Class Area The plaintiffs allege that the class area is within three miles of the MMHF dump. Class claims alleged by the plaintiffs in the first amended complaint are abnormally dangerous activity strict liability, public and private nuisance, trespass, negligence, negligence per se, trespass, diminution of property values, personal injury, unjust enrichment and violations of Oklahoma law. The damages alleged by the plaintiffs are diminution of property value; loss of use of property; contamination of soil, surface and groundwater and the air; and perso- nal injuries such as respiratory conditions, skin and eye irritations, cancer and death. The plaintiffs in December 2012 moved to remand under the local controversy and home state exceptions to CAFA. Judge Heaton denied the motion in April 2013 after concluding that the plaintiffs had not met their burden of establishing class citizenship. The plaintiffs filed a renewed motion to remand in May 2013 with a proffer of class membership and addi- tional evidence of class citizenship. Judge Heaton denied the motion and declined to consider the proffer of citizenship evidence as untimely. The defendants in September 2013 moved to dismiss the first amend complaint for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). Judge Heaton granted the motion on Jan. 8, 2014, and entered final judgment on Jan. 28 for the defendants. The plaintiffs appealed. The plaintiffs assign errors with respect to the denial of remand under the local controversy exception to CAFA and to dismissal for failing to state a claim. ‘Local Controversy’ ‘‘The allegations set forth in the FAP [first amended petition] and the reasonable inferences and interpre- tation of those allegations demonstrate that this case is a local controversy,’’ according to the plaintiffs. ‘‘The district court’s failure to remand this case to state court as a local controversy pursuant to 29 U.S.C.A § 1332(d)(4)(A) was [in] error and undermines CAFA’s statutory purpose,’’ according to the plaintiffs. The plaintiffs aver that they met their burden of showing that at least one defendant is ‘‘significant’’ and a citizen of Oklahoma and that the principal inju- ries occurred in Oklahoma. With respect to the failure to state a claim error, the plaintiffs aver that they satisfied Federal Rule of Civil Procedure 8(a)(2). ‘‘The FAC [first amended com- plaint] alleges facts which if taken as true, for the pur- poses of Fed.R.Civ.P. 12(b)(6), provide the district court and Defendants with exactly the kind of notice and evidence of Appellants’ claims and demands for relief to which Defendants are entitled,’’ according to the plaintiffs. ‘‘Together with the prodigious body of probative evi- dence pled with specificity by Appellants, and the im- portant inferences which reasonably can and must be drawn in Appellants’ favor, the FAC satisfies in every respect the ‘short and plain statement’ requirement of Fed.R.Civ.P. (8(a), as well as the ‘plausible’ reference expressed in Bell Atl. Corp., [Bell Atlantic Corp. v. Twombly, 550U.S. 544(2007)] 550U.S. 544,’’accord- ing to the plaintiffs. ‘‘For the foregoing reasons, Appellants respectfully request that this Court reverse the district court’s order denying remand as to this action in its entirety. Alternatively, Appellants further request this Court vacate the district court’s order dismissing Appellants’ claims, both with prejudice and without on the basis Vol. 1, #1 May 2014 MEALEY’S Fracking Report 16
  • 17. that Appellants have met the pleading standards set forth under Fed.R.C.P. 8(a).’’ Counsel Clark O. Brewster, Montgomery L. Lair and J. Randall Miller of Brewster & De Angelis in Tulsa, Okla., repre- sent the plaintiffs. David W. Wulfers, Todd Maxwell Henshaw, Kara E. Moore and Shannon Davis of James, Potts & Wulfers Inc. of Tulsa and Mary B. Scott and William McAlister of Abowitz, Timberlake, Dahnke & Gisinger in Okla- homa City represent Bear Productions and Bear Transports. Jeff Belote of Jeff Belote Law in McAlester, Okla., represents Integrity Energy. Linda C. Martin and N. Lance Bryan of Doerner, Saunders, Daniel & Anderson in Tulsa and Dru Warren of Dru Warren Law in Poteau represent MMHF, Thumbs Up Ranch and the Jacksons. Matthew S. Panach, Bradley A. Gungoll and Jordan K. Russell of Gungoll, Jackson, Collins, Box & Devoll in Enid, Okla., represent Quick Transport. James M. Reed, Michael E. Smith and Sharon T. Tho- mas of Hall, Estill, Hardwick, Gable, Golden & Nelson in Tulsa represent AES Corp., AES Shady Point, Mon- tana Minerals and Coal Creek Mineral. Brian R. McLaughlin of McLaughlin & Sanders in Stigler, Okla., represents Bishop Trucking and B&B Gas Well Services. Matthew T. Warren Gotcher and Mat- thew Thomas Sheets of Gotcher & Beaver in McAles- ter, Okla., represent Mike Krebbs Construction. Floyd James III of Law Offices of Green, Johnson & Mumina in Oklahoma City represents GCI Mining. Mark K. Stonecipher and Lance E. Effel of Fellers, Snider, Blankenship, Bailey & Tippens in Oklahoma City represent TXD Transport. Harold E. Heath of Harold Heath Law Offices in Holdenville, Okla., repre- sents C&C Tank Service. Robert M. Honea of Hardin, Jesson & Terry in Fort Smith, Ark., represents XTO Energy, Cholla Petroleum and Hogback Exploration. Defense Counsel C. Michael Daily of Daily & Woods in Fort Smith represents Hanna Oil & Gas and Shields Operating. Pine Drewyor of Kendall Drewyor Law Firm in Rogers, Ark., and Sherry P. Bartley of Mitchell Williams Law in Little Rock represent Farrell-Cooper Mining and Brazil Creek Minerals. Charles D. Neal, Gary C. Crapster and Rachel D. Parrilli of Steidley & Neal in Tulsa, Jeff A. Woods, Justin W. Ross and Courtney Ross Samford of Wyatt, Tarrant & Combs in Louisville, Ky., and George P. Sibley III, Robert M. Rolfe, D. Alan Rudlin and Joshua P. Hanbury of Hunton & Williams in Richmond, Va., represent Marine Coal Sales, Interna- tional Coal Group and Hunter Ridge Coal. Steven E. Holden and Ryan C. Harper of Holden & Carr in Tulsa and Jason T. Seay of Tulsa represent Eastern Tank Service. L. Mark Walker and C. Miles Tolbert of Crowe & Dunlevy in Oklahoma City repre- sent A&A Tank Truck. Timothy J. Bomhoff and Jodi W. Disman of McAfee & Taft in Oklahoma City in represent Chesapeake Operating, Petrohawk Operating, SEECO and Ross Explorations. William S. Leach and Jessica L. Dickerson of McAfee & Taft in Oklahoma City represent Ross Explorations. Michael J. McDaniel, Robert P. Coffey Jr., Philard L. Rounds Jr. and David C. Senger of Brennan, Smith & Cherbini in Muskogee represent C&C Tank Truck Services. Philip O. Watts of Oklahoma City, Allison J. Maynard of Wilson, Elser, Moskowitz, Edelman & Dicker in Dallas and Sean M. Higgins of Wilson Elser in Houston represent Ash Grove Resources. Daniel K. Zorn and Stephen R. Palmer of Collins, Zorn & Wagner in Oklahoma City represent Big Mack Tank Trucks. Shannon H. Ratliff and Lisa A. Paulson of Ratliff Law Firm in Austin, Texas, and Andrew D. Sims, Russel R. Barton and Michael V. Fitzpatrick of Harris, Finley & Bogle in Fort Worth, Texas, represent XTO Energy. Additional Defense Counsel R. Stratton Taylor, Clint Russell and Sean Burrage of Taylor, Burrage, Foster, Mallett, Downs, Ramsey & Russell in Claremore, Okla., represent Stephens Pro- duction. Neal Tomlins of Tomlins Law in Tulsa rep- resents Sinclair Trucking. Jared D. Giddens and J. Dillon Curran of Conners & Winters in Oklahoma City represent Graco Fishing & Rental Tools. William D. Perrine, Reagan L. Madison and James N. Crews of Pittman, MacIsaac & Roy in Calgary, Alberta, Canada, represent PX Transportation. Thomas M. Ladner of Ladner, Little & Eldredge in Tulsa and Stephen M. Ryan of DLA Piper in Houston MEALEY’S Fracking Report Vol. 1, #1 May 2014 17
  • 18. represent Highland Oil & Gas. Truman B. Ruckler Jr. of Tulsa in represents Sedna Energy. Rick D. Wescott of Wescott Law Office in Tulsa represents Hogback Exploration. Ian P. Faria of Coats Rose in Houston represents Big Mac Tank. I Texas Supreme Court Remands Attorney Fee Award Dispute Arising From Royalty Suit AUSTIN, Texas — The Supreme Court of Texas issued a per curiam opinion on April 25 remanding an attorney fee dispute with instructions for the trial court to develop a record sufficient to calculate attorney fees with the lodestar method; the disputed attorney fees are from a lawsuit to enforce an assignment of working interests in oil and natural gas producing wells (Larry T. Long, et al. v. Robert M. Griffin, et al., No. 11- 1021, Texas Sup.). (Opinion available. Document #15-140506-061Z.) Robert M. Griffin, Robert M. Griffin Jr., Marvin and Marie Ogilvie and Charles Conrad sued Larry T. Long, L. Allan Long and B. Virginia Long in their capacities as the trustees of the Lawrence Allan Long Trust, the Charles Edward Long Trust, the Larry Thomas Long Trust and the John Stephen Long Trust in the 124th District Court in Gregg County (No. 97-1009) in con- nection with oil and natural gas ventures. Working Interest The plaintiffs allege that the trusts failed to assign the working interest due them under assignment agree- ments in which the plaintiffs agreed to pay a portion of drilling and operating costs in exchange for partial working interests in producing wells. The plaintiffs filed an affidavit in 2001 supporting a request for attorney fees of $100,000 for 644.5 hours worked by two attorneys on their behalf. The plaintiffs averred that 30 percent of the time was spent on the assignment claim but argued that the assignment issue was ‘‘inextricably intertwined’’ with other claims against the trusts on which the attorneys spent 95 percent of the time. Following a 2003 bench trial, Judge Nathan E. White ruled for the plaintiffs and awarded them $35,000 in fees. On appeal, the 12th District Court of Appeals affirmed the judgment with modifications (144 S.W.3d 99). The Texas Supreme Court reversed the appeals court (222 S.W. 3d 412 [Texas 2006]) after concluding that the assignment agreements did not comply with the statute of fraud and could not be enforced on future wells and that the plaintiffs are not entitled to prevail on a separate claim involving a litigation agreement with the trusts. The case was remanded to the trial court to determine the attorney fee award. On remand, the trial court awarded the plaintiffs $30,000 in fees and post-judgment interest accruing from the date of final judgment in 2009. The court of appeal affirmed the trial court judgment with respect to the attorney fee award in May 2011 but modified the judgment to accrue interest from the 2003 judg- ment of the trial court (No. 09-260, Texas App., 12th Dist.; 2011 Tex. App. LEXIS 10143). Lodestar Calculation In the instant appeal, the trusts aver that the evidence does not support the amount of the attorney fee and that post-judgment interest should accrue from the 2009 final judgment. ‘‘Because the Griffins offered no evidence of the time expended on particular tasks, as we have required when a claimant elects to prove at- torney’s fees via the lodestar method, we agree with the Long Trusts that the Griffins did not provide the trial court with legally sufficient evidence to calculate a rea- sonable fee,’’ according to the court. ‘‘We explained in El Apple I, Ltd. v. Olivas that general- ities about the tasks performed provide insufficient information for the fact finder to meaningfully review whether the tasks and hours were reasonable and neces- sary under the lodestar method. 370 S.W.3d 757, 763 (Tex. 2012),’’ according to the court. ‘‘Sufficient evi- dence includes, at a minimum, evidence ‘of services performed, who performed them and at what hourly rate, when they were performed, and how much time the work required.’ Id. at 764.’’ ‘‘Likewise, in City of Laredo v. Montano, we reversed and remanded to redetermine attorney’s fees when the attorney testified to the time expended and the hourly rate but failed to provide evidence of the time devoted tospecifictasks. 414S.W.3d731, 736-37(Tex.2013).’’ ‘‘Here, as in El Apple and Montano, the affidavit sup- porting the request for attorney’s fees only offers gen- eralities,’’ according to the court. Vol. 1, #1 May 2014 MEALEY’S Fracking Report 18
  • 19. ‘‘We note that here, as in El Apple, contemporaneous evidence may not exist. But the attorneys may recon- struct their work to provide the trial court with suffi- cient information to allow the court to perform a meaningful review of the fee application. El Apple, 370 S.W.3d at 764.’’ Alternatively, the plaintiffs argue that the 35 percent contingency fee agreement is sufficient to establish that the claim for attorney fees is reasonable and customary, according to the court. The argument is without merit, according to the court. Contingency Fee ‘‘Even if supporting evidence is not required for the contingency fee method of proof (as it is for the lodestar method), the contingency fee method cannot support the trial court’s fee award because the final judgment awarded no monetary relief except for attorney’s fees. Because the contingency method cannot support the trial court’s fee award, and no legally sufficient evidence supports the award under the lodestar method, we remand to redetermine attorney’s fees.’’ The court did not reach the assignment of error related to the accrual of interest. ‘‘We are confident that, on remand, the lower courts will apply the principles we clarified in Long v. Castle Texas Production Limited Part- nership, __ S.W.3d __ (Tex. 2014) [2014 Tex. LEXIS 252], to properly assess the date from which postjudg- ment accrues,’’ according to the court. F. Franklin Honea of Law Offices of F. Frank Honea in Dallas, Ronny Lee Adkison of The Adkison Law Firm in Henderson, Texas, and Mike A. Hatchell and Thomas F. Loose of Locke Lord in Dallas represent the trusts. Rex A. Nichols Sr. of Nichols & Nichols in Longview, Texas, and Andrew George Khoury of Longview represent the plaintiffs. I Natural Gas Operator Held Liable To Indemnify Driller For Contamination Litigation COLUMBUS, Ohio — A natural gas operating com- pany sued by a drilling company with which it con- tracted to spud wells in West Virginia is liable under the drilling contract to reimburse settlement and litigation costs for a related well-water contamination lawsuit naming both companies as defendants, the presiding U.S. District Court for the Southern District of Ohio judge ruled April 16 (Warren Drilling Inc. v. Equitable Production Co., No. 12-425, S.D. Ohio; 2014 U.S. Dist. LEXIS 52064). (Order available. Document #15-140506-006R.) Warren Drilling Co. Inc. sued Equitable Production Co. and Ace American Insurance Co. in April 2012 in the Nobel County, Ohio, Court of Common Pleas (No. 12-85) for breach of contract and indemnification for contamination of the land surface or water pursuant to a March 2006 drilling contract with respect to Jack- son County, W.Va., natural gas wells. Equitable Pro- duction removed the action in May 2012 to the Southern District of Ohio and filed cross-claims against Warren Drilling. Underlying Lawsuit Warren Drilling performed drilling operations on three natural gas wells from November 2007 to February 2008 in Jackson County on property owned by Dennis and Tamera Hagy. The Hagys sued Equitable Pro- duction and Warren Drilling, BJ Services Corp. USA and Halliburton Energy Services, which were hired by Equitable Production to conduct natural gas well drilling operations, in the U.S. District Court for the Southern District of West Virginia for contaminating a water well on which they depend for domestic water (Dennis Hagy et al. v. Equitable Production Co., et al., No. 10-1372, S.D. W.Va.; 2012 U.S. Dist. LEXIS 91773; See 7/17/12, Page 6). They allege that Equita- ble Production owned and operated the natural gas wells. The claims against Halliburton and Warren Drilling were resolved by settlement. The claims against Halli- burton were dismissed May 17, 2012. The claims against Warren Drilling were dismissed April 24, 2012, in accord with a $40,000 settlement. Equitable Production was granted summary judgment May 17, 2012. A unanimous Fourth Circuit U.S. Court of Appeals panel affirmed summary judgment Oct. 8 for Equitable Production (Dennis Hagy, et al. v. Equitable Pro- duction Co., et al., No. 12-1926, 4th Cir.; 2013 U.S. App. LEXIS 20478; See 10/15/13, Page 24). MEALEY’S Fracking Report Vol. 1, #1 May 2014 19
  • 20. Warren Drilling filed a claim in November 2010 against Ace American Insurance Co. for coverage and a defense in the Hagy litigation under a commercial general liabi- lity policy it obtained pursuant to the drilling contract with Equitable Production. Ace American Insurance denied coverage April 15, 2011. Warren Drilling noti- fied Equitable Production in May 2011 of the denial and asserted an obligation under the March 2006 dril- ling contract to indemnify for all costs of defending the Hagy litigation. Equitable Production did not in- demnify Warren Drilling. In addition to $40,000 for the settlement, Warren Dril- ling seeks to recover $155,000 it alleges it spent defend- ing the Hagy litigation. Warren Drilling settled with Ace American Insurance in April 2013. Warren Drilling and Equitable Production filed cross-motions for summary judgment in November and October 2013. 3 Issues In Dispute Pennsylvania law applies under a choice-of-law provi- sion in the March 2006 drilling contract, according to Judge James L. Graham. ‘‘Three distinct issues are in dispute here: (1) which party has a right to indemni- fication under the Drilling Contract; (2) whether that party must prove that the claim made against it by the Hagys was legally valid; and (3) whether its expenses in the Hagy litigation were reasonable,’’ according to Judge Graham. Warren Drilling and Equitable Production argue that the other party bears the duty to indemnify under the contract. Equitable Production cites Section 11.5 of the drilling contract; Warren Drilling cites Section 11.6 of the drilling contract. For Section 11.5 to apply, the contamination must originate on or above the surface or from a liquid or solid in the control of Warren Drilling, according to Judge Graham. ‘‘The record before the court demon- strates that neither requirement is satisfied.’’ ‘‘The court does find as a matter of law that § 11.6 applies here,’’ according to Judge Graham. ‘‘Under this section EQT [Equitable Production] must indem- nify Warren for claims of pollution or contamination to the extent that they are: (1) ‘not assumed by Cont- ractor [Warren] in Subparagraph 11.5,’ (2) not covered by Warren’s insurance, and (3) not caused by the neg- ligence or misconduct of Warren or its employees.’’ ‘‘None of these limitations come into play here.’’ ‘‘EQT argues that even if § 11.6 does apply, Warren is not entitled to indemnification because Warren has not demonstrated the validity of the Hagys’ underlying claim against Warren,’’ according to Judge Graham. ‘‘Warren contends that the Drilling Contract required EQT to defend and indemnify Warren against all claims, not just claims for which Warren was actually liable,’’ according to Judge Graham. ‘Plain Language’ ‘‘The court finds that the Drilling Contract contains plain language by which EQT’s duty to indemnify was triggered by the making of a claim for contami- nation against Warren.’’ ‘‘To hold otherwise would render § 11.6 meaningless,’’ according to Judge Graham. With respect to the reasonableness of the settlement amount and Warren Drilling’s litigation expenses, Warren Drilling has not met its burden, according to Judge Graham. ‘‘Though it has submitted evidence that it reached a $40,000 settlement with the Hagys, it has not provided any analysis as why that amount was reasonable, other than to vaguely assert that a trial would have been expensive. Further, Warren has merely alleged that it expended $155,000 in attorneys’ fees and costs in connection with the Hagy litigation, without submitting any evidence to substantiate that amount.’’ ‘‘Accordingly, the court will instruct the parties to submit additional evidence and briefing on the issues of the reasonableness of the settlement amount and the litigation expenses.’’ With respect to the reasonableness of Warren Dril- ling’s request for fees and costs under section 11.6 of the drilling contract for the instant litigation, Judge Graham noted that Equitable Production offered no argument in opposition. ‘‘Accordingly, the court will also instruct the parties to submit additional evidence and briefing on the issue of the reasonableness [of] those fees and costs,’’ according to Judge Graham. Colleen Elizabeth Cook, Daniel Patrick Corcoran and James Scott Huggins of Theisen, Brock, Frye, Erb & Vol. 1, #1 May 2014 MEALEY’S Fracking Report 20
  • 21. Leeper in Marietta, Ohio, represent Warren Drilling. Lyle B. Brown and J. Kevin West of Steptoe & John- son in Columbus represent Equitable Production. Dar- ius N. Kandawalla and Sabrina Christine Haurin of Bailey Cavalieri in Columbus represent Ace American Insurance. I Pennsylvania Federal Judge Rules Gas Well Activity Did Not Extend Term Of Lease WILLIAMSPORT, Pa. — Lycoming County, Pa., property owners seeking a declaratory judgment against a natural gas extraction company in the U.S. District Court for the Middle District of Pennsylvania were granted summary judgment April 30; the judge con- cluded that the oil and natural gas lease expired under its own terms because the extraction activity occurred on an adjacent property in violation of the unambiguous lease (Thomas A. Neuhard, et uxor v. Range Resources- Appalachia, No. 11-1989, M.D. Pa.; 2014 U.S. Dist. LEXIS 59602). (Order in Section C. Document #15-140506-053R.) Range Resources-Appalachia and Thomas and Barbara Neuhard are litigating whether a five-year oil and nat- ural gas lease executed in June 2006 expired because a natural gas well was not developed on the surface of the Neuhards’ 47-acre property in Lycoming County during the term of the lease. Notice Of Removal TheNeuhardsfiledsuitinSeptember2011intheLycom- ing County Court of Common Pleas (No. 11-1738). Range Resources-Appalachia filed notice in October 2011 to remove the lawsuit to the Middle District of Pennsylvania. Summary judgment discovery commenced in February 2012 on cross-motions filed by the plaintiffs and Range Resources-Appalachia. ‘‘The Court held oral argument on the motions on March 26, 2014,’’ according to Judge Matthew W. Brann. ‘‘There are no material facts in dispute, and the issues before the Court involve interpretation of contract provisions as a matter of law.’’ The disputed oil and natural gas was executed June 21, 2006, according to Judge Brann. ‘‘The Lease provided Range the rights to procure oil and gas from forty-seven (47) acres owned by the Neuhards situate[d] in Lewis Township, Lycoming County, Pennsylvania. The Lease contains a primary term of five years calculated from June 21, 2006. Unless extended by the com- mencement of drilling operations or as otherwise pro- vided, the Lease would expire by its own terms on June 21, 2011.’’ Range Resources-Appalachia executed a designation of unit document June 13, 2011, creating the Null Eugene A Unit, which includes the Neuhards’ tract, according to Judge Brann. ‘‘The language of the Lease, Range’s activities, and the positions of the parties raise three legal issues,’’ accord- ing to Judge Brann. The issues are whether Range Resources-Appalachia began activities before the lease expired, whether the unit created for extraction exceeded the lease and whether drilling a well on the adjacent Null property satisfied the lease, according to Judge Brann. ‘Commencement’ ‘‘First, did Range’s activities prior to June 21, 2011, the expiration date of the Lease’s primary term, constitute the ‘commencement of a well’ as a matter of law?’’ ‘‘This Court recently decided this particular issue in Roe v. Chief Exploration & Development LLC [No. 11-816, M.D. Pa., Aug. 13, 2013; 2013 U.S. Dist. LEXIS 113914] finding that activity undertaken in good faith in preparation to drill satisfied a lease’s com- mencement clause,’’ according to Judge Brann. ‘‘Pennsylvania cases adopt this posture as well,’’ accord- ing to Judge Brann. Range Resources-Appalachia’s activities before June 21, 2011, included obtaining permits from government agencies, staking a location for a well site, negotiating well-drilling operation agreements with the plaintiffs and neighboring land owners, obtaining easements, removing timber and constructing an access road and pad site, according to Judge Brann. ‘‘These activities are sufficient to constitute the commencement as a matter of law. [Pemco Gas Inc. v Bernardi, 1977 Pa. Dist. & Cnty. Dec. LEXIS122, Dec. 30, 1977].’’ MEALEY’S Fracking Report Vol. 1, #1 May 2014 21
  • 22. ‘‘Even though Range’s activities in beginning the well on the neighboring Null property satisfied the com- mencement clause as a matter of law, by the terms of the Lease those drilling activities must have been per- formed wither ‘on the Leased Properties or on a spacing unit containing a portion of the Leased Properties’ in order to extend the Lease. Lease § 8.1,’’ according to Judge Brann. ‘‘The concrete issue before the Court is whether Range’s designation of a unit of approximately three hundred ninety-five (395) acres exceeded its unitization author- ity under the Lease.’’ Unit Size ‘‘The Neuhards submit that, by the plain language of the lease, the acreage amounts articulated in Section 9.2 operate so as to limit the maximum extent of a unit’s size to the 350 acres surrounding each well, based on the allusion to section 9.2 in section 12.1,’’ according to Judge Brann. ‘‘The Court holds that Range’s unit designation violates its unitization authority under the plain and unambig- uous terms of the Lease, because the Lease is clear that a unit cannot be larger than 350 acres surrounding each well in the unit, and a unit cannot contain more than one well without the permission of the Lessor, which Range did not obtain.’’ ‘‘Although Range undoubtedly commenced a well prior to the expiration of the primary term, it did not do so on the Leased premises, but on a premises adjacent to the Leased Premises that was not unitized according to the Lease,’’ according to Judge Brann. ‘‘Under a plain read- ing of the Lease, Range’s activities on the Null Property adjacent to the Leased Premises did not constitute dril- ling activities ‘on the Leased Premises.’ Nor was there a sufficient modicum of activity in preparation for dril- ling on the Leased Premises during the primary period to extend the Lease — the operative activity was per- formed on the Null Property.’’ ‘‘In sum, Range commenced a well before the expira- tion of the Lease’s primary term,’’ according to Judge Brann. ‘‘That well, however, was neither ‘on the Leased Premises’ nor ‘on a unit containing a portion of the Leased Premises.’ Range exceeded its unitization authority under the plain and unambiguous language of the Lease and did not commence a well on the Neuhard’s property. Consequently, the Lease expired by its own terms on June 21, 2011.’’ Michael A. Dinges of Elion, Wayne, Grieco, Carlucci, Shipman & Irwin in Williamsport represents the plain- tiffs. Andrew D. Sims and Troy Okruhlik of Harris, Finley & Bogle in Fort Worth, Texas, and J. David Smith of McCormick Law Firm in Williamsport repre- sent Range Resources-Appalachia. I Pennsylvania Federal Judge Denies Summary Judgment In Natural Gas Lease Dispute PITTSBURGH — A magistrate judge’s recommen- dation in the U.S. District Court for the Western Dis- trict of Pennsylvania to deny summary judgment in a natural gas lease dispute was adopted April 16 by the presiding judge over the objection of the defendants, who are accused of allowing the disputed lease to expire (Rugh A. Mason, et uxor v. Range Resources- Appalachia, et al., No. 12-369, W.D. Pa.; 2-14 U.S. Dist. LEXIS 53195). (Order available. Document #15-140506-031R.) Rugh and Sherry Mason sued Range Resources-Appa- lachia and NiSource Energy Ventures in February 2012 in the Washington County, Pa., Court of Common Pleas (No. 12-1159) to stop the companies from ob- taining production rights for natural gas under their land. The defendants removed the declaratory judg- ment lawsuit March 26, 2012, to the Western District of Pennsylvania. Declaratory Judgment The plaintiffs seek a declaration that they rather than the defendants own all drilling and production rights to the natural gas associated with the land. The plaintiffs further allege that Range Resources-Appalachia inter- fered with Rugh Mason’s relationship with his em- ployer after he refused to amend and ratify a March 1961 lease or to enter into a new lease for gas produc- tion rights with the company. The Masons own 151 acres of a 165-acre tract in Washington County that is the subject of a March 22, 1961, lease executed by John Burig, Flora Burig Vol. 1, #1 May 2014 MEALEY’S Fracking Report 22
  • 23. and Anna C. Burig with The Manufacturers Light and Heat Co. John and Anna Burig are deceased; it is pre- sumed Flora Burig is also deceased because John, her husband, was born in 1889. The Masons succeeded to ownership of the subject land though Sherry Mason, who has been the owner of the land since at least the execution of a lease in October 1984 but did not object to the lease for more than 25 years. Columbia Gas Transmission and NiSource Energy Ventures have succeeded to the Manufacturers Light’s rights under the lease. The primary term of the lease was 10 years. A provision of the lease extended the lease as long as the lessee operates any portion of the subject land in search of or by production of natural gas and oil or if the land is part of a production unit or a natural gas storage field. The lessee is granted in the lease sole authority to deter- mine if the operation satisfies the conditions and if the royalties paid are adequate compensation. There is no evidence that the Burigs ever considered the lease forfeited or terminated. Nor is there evidence that the Masons have demanded Columbia Gas Transmis- sion or its assignees drill a well on the subject property, according to Jeffrey Kramer, the Range Resources- Appalachia landman responsible for land and lease acquisitions in Washington County. Columbia Gas Transmission operates the Donegal Sto- rage Field created by Manufacturers Light and Heat Co., which includes the subject property. 2005 Sublease Columbia Gas Transmission entered into a sublease in December 2005 with Range Resources-Appalachia predecessor Great Lakes Energy Partners for gas devel- opment and production rights in the Donegal Storage Field except for the sandstone gas storage formation. The sublease includes any rights remaining under the 1961 lease. Columbia Gas Transmission assigned to NiSource Energy Ventures in December 2009 all of its rights and interests as sublessor under the 2005 sublease with Great Lakes Energy Partners. NiSource Energy Ventures sublet to Range Resources-Appalachia the production rights for all formations below the top of the Rhinestreet formation in the Donegal Storage Field pursuant to the gas storage leases, including the 1961 lease. The Masons allege since 1961, no entity has paid any consideration for oil and natural gas productions rights that may still exist under the 1961 lease. They also allege neither Great Lakes nor Range Resources- Appalachia has paid royalties or other consideration except for delay rental paid in 2007. Meanwhile, Range Resources-Appalachia has begun operations within the Donegal Storage Field and as of Jan. 7, 2014, placed approximately 53 natural gas wells into production. Magistrate Judge Robert C. Mitchell issued a report and recommendation Feb. 26 to deny the plaintiffs’ Dec. 23, 2013, motion for summary judgment in part. The plaintiffs argue the payment of delay rental cannot, as a matter of Pennsylvania law, extend the lease beyond its primary term, according to Magistrate Judge Mitchell. ‘‘Plaintiffs have presented no evidence of abandonment, and the equitable defenses of laches, waiver and estoppel raise fact issues for trial,’’ according to Magistrate Judge Mitchell. Joint Objection The defendants filed a joint objection March 12. Judge Joy Flowers Conti adopted the report and re- commendations on April 16. ‘‘In their objections, Defendants contend that the magistrate judge in the R&R [report and recommendations] erroneously con- cluded that there are genuine issues of material fact on the issue of severability of the gas production rights and storage rights by reason of: (i) the lease’s assign- ment clause; (ii) production rights under the lease being subleased to Range Resources, and the sublease being subsequently assigned to NEVCO [NiSource Energy Ventures]; and (iii) Range Resources’ consum- mation of a ‘top lease’ with Plaintiffs in 2007,’’ accord- ing to Judge Conti. Contrary to the defendants, ‘‘[t]he R&R did not reach any conclusion with respect to the issue of severability,’’ according to Judge Conti. ‘‘The R&R merely noted that, although Defendants had argued that dual pur- pose leases in general appear compatible with the notion of severability of storage and production rights, MEALEY’S Fracking Report Vol. 1, #1 May 2014 23
  • 24. Defendants had not discussed the assignment clause in the lease, the history of the separate assignments of the production rights or the lease consummated with Plaintiffs in 2007.’’ ‘‘It is noted that, had Defendants’ wished to file a motion for summary judgment arguing that they were entitled to judgment as a matter of law on the question of who owns the product rights to the natural gas reserves on Plaintiffs’ land, they could have done so,’’ according to Judge Conti. ‘‘Because they chose not to file a motion, the magistrate judge in the R&R merely pointed out an issue that remains to be resolved at trial.’’ The plaintiffs of Claysville, Pa., are pro se. Laura A. Lange and Paul K. Stockman of McGuireWoods in Pittsburgh and James W. Pfeifer of Pepper Hamilton in Pittsburgh represent Nisource Energy Ventures. Donald T. Dulac Jr. and Kenneth J. Witzel of Barnes Dulac Watkins in Pittsburgh represent Range Resources-Appalachia. I April Trial Stayed Pending Dispositive Motion Ruling In Pennsylvania Federal Court WILLIAMSPORT, Pa. — Natural gas operators sued in the U.S. District Court for the Middle District of Pennsylvania filed a supplemental authority on April 28 in support of dismissing a strict liability claim as a matter of law; the trial anticipated to start April 21 was stayed in March pending a ruling on dispositive defense motions (Edward E. Kamuck v. Shell Energy Holdings, et al., No. 11-1425, M.D. Pa.). (Motion for stay available. Document #94-140513- 028M. Supplemental authority available. Document #94-140513-029B.) Edward Kamuck owns 93 acres that were once part of the Copp property in Tioga County, Pa. The entire tract was subject to an oil and gas lease, according to the record. The original Copp lease did not address the extraction of natural gas from Marcellus Shale forma- tions, however, according to the record. Lease Holders Shell Holdings GP, Shell Holdings LP and Shell Wes- tern Exploration & Production were lessees under the Copp lease and in 2010 sought to expand their mineral rights to include Marcellus Shale natural gas extraction, according to the record. Kamuck declined to amend the Copp lease, but the other owners agreed, according to the record. The ori- ginal 10-year lease on Kamuck’s property expired June 12, 2011, according to the record. After the defendants commenced natural gas extraction on the adjoining land, Kamuck sued. In the complaint filed in August 2011, Kamuck sued for breach of con- tract, a declaratory judgment against the companies for hydraulic fracturing and for damages in torts. The defendants moved to dismiss under Federal Rule of Civil procedure 12(b)(6) for failing to state a claim and to strike the claims under Rule 12(f). The motion was granted in part in April 2012, leaving only private nuisance, negligence and strict liability causes of action. The defendants on Jan. 17, 2014, moved to dismiss the remaining claims pursuant to Federal Rule of Civil Procedure 41(b) for failure to prosecute or, alterna- tively, for summary judgment. In support of this motion, the defendants filed a supplemental authority on April 28 from Ely v. Cabot Oil & Gas (No. 0902284, M.D. Pa.). ‘‘On April 23, 2014, Judge John E. Jones, III issued an Order adopting this Court’s Report and Recommendation in its entirety, granting summary judgment in favor of the defendants in that case on the issue of strict liability,’’ according to the defendants. ‘‘The issue of whether Defendants natural gas drilling operations are subject to strict liability was briefed by the parties in the instant case, and the Defendants relied specifically upon the analysis contained in this Court’s Report and Recommendation in the Ely mat- ter,’’ according to the defendants. Strict Liability Magistrate Judge Martin C. Carlson issued the report and recommendation on April 21, according to the defendants. Magistrate Judge Carlson ruled as a matter of law, natural gas drilling activities are not subject to strict liability, according to the defendants. Meanwhile, the defendants filed an unopposed motion on March 19 to stay the trial set to begin April 21. Vol. 1, #1 May 2014 MEALEY’S Fracking Report 24
  • 25. Citing the Rule 41(b) motion to dismiss or, in the alternative, for summary judgment, the defendants argue that a ruling on the motion could resolve all the remaining issues in their favor. ‘‘Without knowing the outcome of the pending Dis- positive Motion, it is extremely difficult for the parties to prepare intelligently and efficiently for the impend- ing trial, should any claims survive the Dispositive Motion,’’ according to the defendants. The stay entered March 19 applies not only to the trial, but also to pending motions in limine and pretrial brief- ing deadlines. Alan S. Fellheimer of Fellheimer & Eichen in Philadel- phia and Judith E. Fellheimer of Fellheimer, Eichen & Braverman in Philadelphia represent Kamuck. Stefanie A.Lepore andJeremy A. Mercer ofFulbright& Jaworski in Canonsburg, Pa., and William D. Wood of Ful- bright & Jaworski in Houston represent the defendants. I March 2015 Royalty Trial Set In Arkansas; Some Claims Dismissed In January Order LITTLE ROCK, Ark. — A putative class action filed in the U.S. District Court for the Eastern District of Arkansas seeking recovery of royalties from a natural gas company is scheduled for trial in March 2015; certain of the causes of action were dismissed in January 2014 for failure to state a claim (Joe Rath, et al. v. BHP Billiton Petroleum (Arkansas) Inc., et al., No. 13-602, E.D. Ark.). (Scheduling order available. Document #94-140513- 005R. Brief in support of motion to dismiss class claims available. Document #94-140513-006B. Order granting in part motion to dismiss available. Docu- ment #94-140513-007R.) Joe Rath filed a class action complaint in October 2013 against BHP Billiton Petroleum (Arkansas) Inc., BHP Billiton Petroleum (Fayetteville) Inc. and BHP Billiton Petroleum Marketing Inc. Rath alleges that the defen- dants engaged in deceptive or fraudulent practices to deprive him and a putative class of royalties owed under an oil and natural gas lease. Class Definitions The defendants are operators and working interest partners who depend on well operators to provide the names of leasors to whom royalties are owed, according to Rath. Rath proposes a class of mineral interest own- ers who are owed royalties by the defendants as opera- tors (Class I) and a class of mineral interest owners who are owed royalties by the defendants as working interest partners (Class II). Rath avers that the defendants are liable under theories of fraud, constructive fraud and fraudulent conceal- ment; breach of contract; violation of the Arkansas Deceptive Trade Practices Act (Arkansas Code Anno- tated Sections 4-88-107[a][1], [8], [10] and [b]); breach of statutory duty of prudent good faith operator (Arkansas Code Annotated Section 15-73-207); unjust enrichment; conversion; civil conspiracy; and equitable accounting. Rath alleges that the defendants improperly deduct post-production expenses from royalties, fail to pay royalties as required by the leases, pay for volumes less than actually metered and conceal from royalty owners that royalties are paid on the volume sold rather than the volume produced. Rath seeks disgorgement, treble damages, compensa- tory and punitive damages, a declaratory judgment with respect to underpayment of royalties and a per- manent injunction against future underpayment of royalties. The motion for class certification is due by Oct. 22, pursuant to the case management order entered Feb. 27. A trial before Judge Brian S. Miller is sched- uled for March 16. The defendants on May 8 moved to dismiss and to strike the class of mineral owners in which the defen- dants are not operators (Class II). Rath alleges member- ship in Class I, according to the defendants. Working Interest Class ‘‘Nowhere does he allege that he is an integrated mineral interest owner in a section in which BHP is a non- operating working interest party,’’ according to the defendants. ‘‘As such, Mr. Rath cannot meet the first qualification of class representation — being a member of the class — as to Class II. Conversely, Class II has been pleaded without any class representation.’’ MEALEY’S Fracking Report Vol. 1, #1 May 2014 25
  • 26. ‘‘Because Mr. Rath’s Complaint contains allegations on behalf of a class without proper representation and cannot be certified, BHP respectfully requests that the Court strike all allegations pertaining to Class II pursuant to [Federal Rule of Civil Procedure] Rule 23(d)(1)(D).’’ The causes of action alleged against the defendants were limited by Judge Miller in a Jan. 16 order dismissing the prudent operator, unjust enrichment, equitable ac- counting and civil conspiracy claims. The defendants moved to dismiss on Dec. 4. Rath sufficiently pleaded the alleged violations of the Arkansas Deceptive Trade Practices Act and fraud, con- structive fraud and fraudulent concealment claims, according to Judge Miller. ‘‘Here, Rath sets forth spe- cific factual allegations that BHP engaged in fraudulent conduct,’’ according to Judge Miller. ‘‘BHP’s motion to dismiss Rath’s breach of contract claim is denied because Rath has set forth sufficient allegations in support of his claim that BHP breached the lease by failing to properly pay royalty owners.’’ By the same reasoning, Rath’s claim for treble damages under Arkansas Code Annotated Section 15-74-708 survives the motion to dismiss, according to Judge Miller. The motions to dismiss the request for injunctive relief and damages under the theory of conversion are also denied, according to Judge Miller. ‘‘Rath has pled suffi- cient facts to support a claim that BHP has improperly calculated and paid royalties and should therefore be enjoined from doing so in the future.’’ Conversion Dismissed ‘‘BHP’s motion to dismiss the conversion claim is also denied because Rath’s allegations that BHP converted funds owed to royalty owners are sufficient to overcome a motion to dismiss,’’ according to Judge Miller. ‘‘BHP’smotiontodismissRath’sclaimundertheprudent operator standard is granted,’’ according to Judge Miller. ‘‘Although Rath alleges that BHP violated the prudent operator standard in performing the lease obligations, these allegations are essentially part of Rath’s breach of contract claim and not a separate cause of action.’’ Rath’s unjust enrichment claim fails because Rath does not plead facts to support the conclusion the contract between the parties is not legal or binding, according to Judge Miller. ‘‘The doctrine of unjust enrichment generally does not apply where there is a binding, legal contract.’’ Equitable accounting is a remedy available only when there is no remedy available at law, according to Judge Miller. ‘‘Rath has not alleged or shown in any way that the accounts are so complicated that they can only be sorted by a court in equity,’’ according to Judge Miller. ‘‘Therefore, this claim is dismissed.’’ Rath fails to state a claim for civil conspiracy, according to Judge Miller. ‘‘Here, Rath simply states in a single sentence that defendants are affiliate companies that acted in concert to deprive him of royalties. This con- clusory statement is insufficient to support a plausible claim or to withstand a motion to dismiss.’’ Charles R. Hicks of Little Rock and Keith L. Grayson of Grayson & Grayson in Heber Springs, Ark., repre- sent Rath. John F. Peiserich, Julie DeWoody Great- house and Kimberly Logue of Perkins Peiserich Greathouse Morgan Rankin in Little Rock represent the defendants. I Gas Well Operator Objects To Order Denying Dismissal In Texas Federal Court FORT WORTH, Texas — XTO / Exxon Energy Inc. filed objections April 29 to an order denying its motion to dismiss a lawsuit in the U.S. District Court for the Northern District of Texas seeking $9 million for wrongful death and property damage allegedly caused by the release of chemicals used in hydraulic fracturing to complete natural gas wells; the order was entered April 15 by a magistrate judge (Daniel W. Nicholson v. XTO / Exxon Energy Inc., No. 13- 899, N.D. Texas). (Order available. Document #94-140513-002R. Objection available. Document #94-140513-003B.) Daniel Nicholson filed the lawsuit in November 2013. XTO filed a motion to dismiss on Jan. 6, which Magis- trate Judge Jeffrey L. Cureton denied Feb. 3. Magistrate Vol. 1, #1 May 2014 MEALEY’S Fracking Report 26
  • 27. Judge Cureton granted Nicholson leave to amend by Feb. 24 to cure defects in the complaint. Amended Complaint Nicholson filed an amended complaint on Feb. 21 alleging negligence for wrongful death, gross negligence and property damage for failing to protect Vera Nichol- son, his mother, from the effects of drilling and compres- sion venting near his mother’s residence in Arlington, Texas. Nicholson also alleges that his brother, sister and her children, who also live in the mother’s residence, were exposed to the chemicals. ‘‘Defendant[s] knew they were creating a high degree of risk and were indifferent to the precautions to elim- inate this risk,’’ according to Nicholson. ‘‘This reckless disregard and breach of duty has taken the life of plain- tiff’s mother, Vera Nicholson.’’ XTO argued in the motion to dismiss filed March 7 that the amended complaint does not cure the defects identified by Magistrate Judge Cureton. ‘‘In the amended complaint, Nicholson claims that ‘Defendant XTO/Exxon Energy Inc. failed in the duty to protect Vera Nicholson[,] Plaintiff’s Mother and family from effects coming from close proximity of drilling and compression venting operations,’ ’’ according to Magistrate Judge Cureton. ‘‘In additional documents attached to the amended complaint, Plain- tiff alleges claims of negligence and gross negligence against Defendants, setting forth various facts in sup- port of his claims.’’ To survive a motion to dismiss for failing to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6), the plaintiff must state a claim that is plausible on its face, and the allegations must raise a right of relief above the level of speculation (Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 570 [2007]; Ashcroft v. Iqbal, 566 U.S. 662, 678 [2009]), according to Magis- trate Judge Cureton. ‘Not Convinced’ ‘‘Based on a review of the Plaintiff’s amended complaint and attached documents, all of which comprise the Plaintiff’s amended complaint, the Court is not con- vinced at this early juncture that Plaintiff can prove no set of facts that would entitle him to relief. Conse- quently, the Court concludes that Defendant’s Motion to Dismiss Plaintiff’s Amended Complaint should be DENIED. In addition, the Court concludes that Defendant’s Motion to Stay Discovery should also be DENIED.’’ In the objection filed April 29, XTO notes it has not consented to the referral of the case to Magistrate Judge Cureton. ‘‘Pursuant to 28 U.S.C. § 636 [28 U.S. Code Section 636], a motion to dismiss for failure to state a claim may only be decided by a magistrate judge with the consent of the parties,’’ according to XTO. ‘‘Where, as here, all parties have not consented to the transfer of the lawsuit to a magistrate judge for all purposes, the magistrate judge is limited to entry of a report and recommendation to the Article III judge. Accordingly, the Magistrate Judge’s Order denying XTO’s Motion to Dismiss for Failure to State a Claim should be treated as a report and recommendation and reviewed by the Court de novo.’’ The amended complaint should be dismissed on the merits, according to XTO. ‘‘The Amended Complaint is replete with conclusory, unsubstantiated allegations that XTO caused or contributed to the death of Vera Nicholson.’’ ‘‘Plaintiff must do more than generally allege that XTO’s operations resulted in injury to Ms. Nicholson. Plaintiff does not allege what operations were per- formed in a manner contrary to the standards of a reasonably prudent operator under the same or similar circumstances, how such operations deviated from the standards of a reasonably prudent operator, how any ‘chemicals’ or ‘silica’ allegedly utilized in hydraulic fracturing operations approximately a mile below the surface of the earth could have resulted in Ms. Nichol- son’s death, or how any ‘compressed gas operations’ resulted in Ms. Nicholson’s death.’’ ‘Legal Duty’ ‘‘In Texas, an actionable claim for negligence requires proof of a legal duty owed by Defendant to the Plaintiff, a breach of that duty, and damages proximately result- ing from that breach. Lane v. Halliburton, 529 F.3d 548, 565 (5th Cir. 2008). A claim for gross negligence requires further proof of ‘an extreme degree of risk’ and ‘conscious indifference to that risk.’ Id. (citing Mobil Oil Corp. v. Ellender, 968 S.W.2d 917, 921 (Tex. 1998)),’’ according to XTO. MEALEY’S Fracking Report Vol. 1, #1 May 2014 27
  • 28. ‘‘Given the absence of any factual, nonconclusory alle- gations to support the claim, Plaintiff is inviting the Court to infer that the alleged injuries possibly resulted from some wrongful act or omission of Defendant. Yet, such an invitation to infer the possibility of wrongful conduct is insufficient to state a plausible claim for relief.’’ ‘‘The Court should not adopt the Magistrate Judge’s Order because the Amended Complaint does not con- tain sufficient factual allegations to state a plausible claims for relief,’’ according to XTO. Nicholson of Phoenix is pro se. Matthew S. Wolcott of XTO in Fort Worth and Jon-William Nathaniel Jones and Andrew D. Sims of Harris, Finley & Bogle in Fort Worth represent XTO. I Gas Well Operators Seek Order To Support Claims Before Summary Judgment Discovery WILLIAMSPORT, Pa. — Natural gas extraction companies accused of contaminating water wells in northern Pennsylvania filed a reply April 8 in support of a case management order requiring the plaintiffs in a lawsuit removed Jan. 28 to the U.S. District Court for the Middle District of Pennsylvania to make a prima facie case for their claims before the beginning of dis- covery; the plaintiffs responded March 25 to the motion filed March 12 (Sheila Russell, et al. v. Chesa- peake Appalachia, et al., No. 14-148, M.D. Pa.). (Brief in support of Lone Pine order available. Docu- ment #94-140513-023B. Response to motion for Lone Pine order available. Document #94-140513- 024B. Reply in support of Lone Pine order available. Document #94-140513-025B.) Chesapeake Appalachia and Nabors Completion & Production Services Co., incorrectly named as Superior Well Services Inc. in the complaint, filed a joint notice of removal Jan. 28 in the lawsuit filed Dec. 27 in the Dauphin County Court of Common Pleas (No. 13- 11291) by Sheila Russell and 16 other plaintiffs for contamination of their domestic water wells in Brad- ford Co., Pa. Causes Of Action The plaintiffs aver they are the owners of recreational property, certified organic farms and residences in Bradford County. The plaintiffs allege property dam- age and personal injuries and seek to recover compen- satory and punitive damages under theories of private nuisance, negligence, negligence per se and private tem- porary nuisance. Chesapeake Appalachia and Nabors Completion filed a joint motion March 12 for a case management order modeled on Lore v. Lone Pine Corp. (1985 N.J. Super. LEXIS 1626). Federal district courts have broad authority under Federal Rule of Civil Procedure 16(c)(2)(L) ‘‘to ‘[adopt] special procedures for mana- ging potentially difficult or protracted actions that may involve complex issues, multiple parties, difficult legal questions or unusual proof problems,’ ’’ according to the defendants. ‘‘It is from this language that a district court’s authority to issue Lone Pine orders is derived. Roth v. Cabot Oil & Gas Corp., 287 F.R.D. 293, 298 (M.D. Pa. 2012).’’ The claims in the instant complaint have been verified only by Carol French, who resides on one of the subject properties, according to the defendants. ‘‘Although she may be competent to verify the Complaint on behalf of Claude and Lynsey Arnold, who also reside on that property, there are not facts pled indicating that she possesses the requisite personal knowledge or infor- mation and belief to verify the allegations of the remain- ing plaintiffs. There is also no evidence in the record that any of the other plaintiffs endorsed the facts. Because only Carol French was willing to verify the most basic facts, Plaintiffs should be required to set forth proof that the factual and legal allegations in their complaint are supportable.’’ ‘‘Defendants respectfully request that this Court order Plaintiffs to provide: (1) the identity of the ‘toxic and/or radioactive substances’ each Plaintiff was exposed to, the dates of exposure, and the amount of each chemical to which Plaintiffs were exposed; (2) the precise disease or illness from which Plaintiffs suffer; (3) evidence sup- porting causation between Defendants’ actions and the injuries in question; and (4) a description of the dam- ages to land each Plaintiff sustained, the dates of dam- age, and evidence Defendants caused the damage.’’ Lone Pine The plaintiffs aver in the response filed March 25 the instant case is distinguishable from Lore v. Lone Pine. Vol. 1, #1 May 2014 MEALEY’S Fracking Report 28
  • 29. ‘‘In Lone Pine, plaintiffs brought suit against 464 defen- dants who were involved in the management of a land- fill and the generation and hauling of toxic waste. Plaintiffs’ claims were for damage to property and var- ious personal injury claims based on water contami- nation. When the court entered its famous order, plaintiffs’ case had been on file for nine months. In that time plaintiffs had only served a handful of defen- dants and had failed to identify through discovery which defendants were responsible for which harms. Additionally, defendants had presented the court with studies conducted by the EPA which cast serious doubt on plaintiffs’ claims of pollution damage.’’ ‘‘Plaintiffs’ case does not provide any of the circum- stances warranting entry of a Lone Pine order,’’ accord- ing to the plaintiffs. ‘‘Plaintiffs’ case has only just begun, there is no cause to regard Plaintiffs’ claims as dubious at this point, and it is not a case for complicated medical claims or property valuations. Despite Defendants’ mis- leading arithmetic and creative summarization of Plain- tiffs’ Complaint, Plaintiffs present straightforward and properly pleaded claims sounding in simple nuisance, negligence, and negligence per se. As such, there is no justification for subjecting Plaintiffs to a standard beyond that required under the Federal Rules of Civil Procedure.’’ In the reply filed April 8, the defendants argue that the plaintiffs failed to address the grounds cited for entry of a Lone Pine order, including misjoinder. In their response, the plaintiffs abandoned their claims for med- ical damages, according to the defendants. ‘‘Although discovery into medical issues is now unnecessary in this case, a Lone Pine case management order is still appro- priate to address the myriad of other discovery issues resulting from Plaintiffs’ misjoinder.’’ Improper Joinder ‘‘Recognizing the complex factual, legal and discovery issues that arise when multiple plaintiffs are improperly joined in a single action when their claims do not arise out of the same transaction, occurrence, series of trans- actions or occurrences, or do not present a common question of law or fact, Defendants sought an order granting a Motion for Severance and requested this Court sever the cases in the same manner Plaintiffs set forth their allegations in the Complaint — by household,’’ according to the defendants. ‘‘If this Court is not inclined to grant the Motion for Severance, Defendants argue, in the alternative, that a Lone Pine case management order is necessary to handle the com- plex issues in this case.’’ ‘‘Each of the 8 households claims exposure to different combinations of wells, and some families complain of injuries arising from as many as 13 wells,’’ according to the defendants. ‘‘Plaintiffs’ complaint alleges 101 ways Defendants’ actions interfered with Plaintiffs’ use and enjoyment of land, including allegations of wells with integrity issues, leaking or releasing natural gas and other toxic and/or radioactive substances into the air, ground, and waterways; damages to land, excessive noise; excessive lights; releases of silica and other dusts; releases of methane; excessive traffic; excessive and offensive odors; and the very ambiguous ‘hostile and harassing environment. Assuming these allegations are true, each household’s use and enjoyment was uniquely affected by Defendants’ activities, because Plaintiffs own or live on 8 non-contiguous tracts of lane (located in 3 townships) and each parcel of land was affected by different well sites and has its own unique topography and characteristics (varying in size, landscape, geological features, structures, access to roads, and proximity to water).’’ ‘‘Plaintiffs also assert that they sustained 156 harms, including economic losses, damages to property, perso- nal injuries, and any combination of the like,’’ accord- ing to the defendants. Amend Complaint ‘‘DespiteDefendantsdrawingPlaintiffs’attentiontothese problems, Plaintiffs have not yet sought to amend their complaint, agreed to severance, or agreed to the proposed case management order.’’ ‘‘For the above mentioned reasons, and those discussed in the Brief in Support of the Motion for Lone Pine Case Management Order, this Court must grant Defendants’ Motion for Lone Pine Case Management Order.’’ Edward J. Ciarimboli and Clancy Boylan of Fellerman & Ciarimboli in Kingston, Pa., and Charles F. Speer, Peter B. Bieri and Andrew R. Klonowski of Speer Law Firm in Kansas City, Mo., represent the plaintiffs. Michael P. Leahey of Jackson Kelly in Pittsburgh rep- resents Chesapeake Appalachia. Daniel R. Michelmore of Jackson Kelly in Pittsburgh represents Superior Well Services. I MEALEY’S Fracking Report Vol. 1, #1 May 2014 29
  • 30. Discovery Dispute Reported By Oilfield Well Operators In Arkansas Injection Suit LITTLE ROCK, Ark. — Natural gas extraction com- panies sued in the U.S. District Court for the Eastern District of Arkansas by Faulkner County, Ark., couples alleging property damage from hydraulic fracturing waste disposal in injection wells filed a status report on May 5 describing Phase 1 discovery disagreements with respect to the plaintiffs’ requests for seismic data and depositions of corporate representatives (Bobbie Hill, et al. v. Southwestern Energy Co., No. 12-500, E.D. Ark.). (Amended class action complaint available. Docu- ment #94-140513-001C. Status report available. Document #94-140513-010R. Order available. Docu- ment #94-140513-011R.) Bobbie and Gwenna Hill and Joseph and Catherine Smith filed the putative class action on Aug. 10, 2012. They initially alleged claims against only South- western Energy Co., the operator of the so-called Underwood injection well. The plaintiffs added Che- sapeake Energy and XTO Energy plus 11 plaintiffs in an amended complaint filed in October 2012; the com- plaint was dismissed in part on Sept. 26, 2013 (2013 U.S. Dist. LEXIS 139917). Defendants The plaintiffs filed a second amended class action com- plaint on Jan. 10, 2014. The defendants joined in the amended complaint are Southwestern Energy, its sub- sidiary SEECO Inc., Chesapeake Energy and XTO Energy. The plaintiffs name the Hills and Smiths, six additional couples, a living trust and four individuals as claimants in the amended complaint. Southwest Energy and SEECO operate the so-called Underwood and Griffin Mountain Nos. 1 and 2, and Campbell injection wells, according to the plaintiffs. Chesapeake Energy operates the Cotton Hill (SRE 8- 12) and Trammel injection wells, according to the plaintiffs. XTO Energy operates the Ferguson injection well, according to the plaintiffs. The fracking fluid used to finish a well by hydraulic fracturing is describedby the Arkansas Oil andGas Com- mission (AOGC) as a mixture of water and substances including formaldehyde, hydrochloric acid, distillates of petroleum, ethylbenzene, benzyl chloride, tirehanolamne, ethylene glycol, 1,2,4 trimethylbenzene, ammonium chloride, magnesium hydroxide, potassium hydroxide, divinylbenzene,lightaromaticnaphtha,methanol,isopro- nanol, oxyalkylated alcohol, akyl dimethyl benzyl ammo- nium chloride, ammonia, mineral oil, naphthalene, ethoxylateed alchohol and vinyl copolymer, according to the plaintiffs. Some 10 percent of the fracking fluid flows back to the surface as waste, which the defendants inject into vertical waste wells. The plaintiffs propose a class comprising the residents and property owners within three miles of disposal wells operated by the defendants in Arkansas. Under theories of trespass, unjust enrichment and intentional and reckless conduct, the plaintiffs seek an injunction ordering the defendants to monitor waste well fluid migration, replevin of all profits derived by the defen- dants and $2 million in compensatory and $15 million in punitive damages for each property of the named plaintiffs. Reckless Conduct Judge D.P. Marshall Jr. entered an order on Feb. 14 granting in part a motion to dismiss the amended class action complaint filed by the defendants. The inten- tional and reckless conduct claim is dismissed because it was filed without authorization of the court, accord- ing to Judge Marshall. In addition, the claim fails because it appears to be based on Arkansas Code Annotated Section 15-73- 207, the statute obliging prudent and reasonable opera- tion of wells, according to Judge Marshall. ‘‘This is akin to the duty implied in all contracts to do things one promised fairly and in good faith. No stand-alone claim exists.’’ In addition, the intentional and reckless conduct claim is duplicative of the trespass claim, according to Judge Marshall. The plaintiffs may use the evidence of alleged intentional and reckless conduct in support of the claim for punitive damages. ‘‘Those allegations, though, are not accepted as a belated new claim. About eighteen months in, we’ve finally got this lawsuit focused. It needs to stay focused,’’ according to Judge Marshall. The defendants filed a status report on May 5, but they were unable to reach a consensus with the plaintiffs. Vol. 1, #1 May 2014 MEALEY’S Fracking Report 30
  • 31. ‘‘Plaintiffs provided their proposed changes to the draft Joint Status Report on May 5, 2014, and inserted Plaintiffs’ position on the status of discovery which raised new arguments including individualized argu- ments about each Defendant,’’ according to the defen- dants. ‘‘Given the breadth and nature of Plaintiffs’ changes to the format and substance of the Report, the Parties were unable to reach an agreement on a Joint Status Report and Defendants did not have an opportunity to consider and respond to the arguments raised by Plaintiffs in advance of the Court’s deadline.’’ Rule 26(a)(1) Disclosures The first phase of discovery is limited to the migration of waste fluid to the subsurface strata of the plaintiffs’ real property, according to the defendants. The parties made Federal Rule of Civil Procedure Rule 26(a)(1) initial disclosures on Nov. 15, 2013. The plaintiffs have not produced any documents for Phase 1 discov- ery, according to the defendants. The defendants object to the April 17, 2014, request by the plaintiffs for seismic data on the grounds that it is proprietary and outside the scope of the Dec. 19 status report and conference. ‘‘Plaintiffs have already received ample geologic information,’’ according to the defendants. ‘‘The scope of Phase 1 discovery regarding geologic information is, and should remain, limited to the sub- surface geology of the injection wells, for which Defen- dants have produced responsive information. ‘‘A fishing expedition of Defendants’ highly confiden- tial information that has no bearing on the Phase 1 issue is simply not appropriate,’’ according to the defendants. No depositions have occurred, according to the de- fendants. ‘‘The parties have a dispute over the scope of depositions allowed in Phase 1. ‘‘In total, Plaintiffs’ omnibus April 28, 2014 deposition request would result in more than 30 depositions in Phase 1 of this action alone,’’ according to the defen- dants. ‘‘Those depositions would take several months to conduct given the number of Defendants and the various locations of the individuals listed in the De- fendants’ Initial Disclosures. Plaintiffs’ overly broad request is contrary to their recognition, as evidenced by their Rule 26(f) Report, that the scope of discovery required in Phase 1 is narrow. The number of deposi- tions necessary and the scope of the testimony in Phase 1 is similarly limited.’’ Counsel John R. Holton and Timothy R. Holton of Deal Cooper Holton in Memphis, Tenn., and Michael P. McGartland of McGartland & Borchardt in Fort Worth, Texas, represent the plaintiffs. Michele R. Blythe and Michael D. Morfey of An- drews Kurth in Houston and R. Scott Morgan, G. Alan Perkins and James D. Rankin III of PPGMR Law in Little Rock represent Southwestern Energy and SEECO. Adria W. Conklin and Lyn Peeples Pruitt of Mitchell, Williams, Selig, Gates & Woodyard in Little Rock and Michelle P. Cullen of Chesapeake Energy in Oklahoma City represent Chesapeake Energy. Andrew D. Sims, Russell R. Barton and Michael V. Fitzpatrick of Harris, Finley & Bogle in Fort Worth, Texas, and Robert M. Honea of Hardin, Jesson & Terry in Fort Smith, Ark., represent XTO Energy. I New Mexico Property Owners Amend Complaint In Suit Challenging Fracking Ban ALBUQUERQUE, N.M. — New Mexico prop- erty owners and a hydrocarbon extraction trade group seeking a declaratory judgment against Mora County, N.M., officials in the U.S. District Court for the Dis- trict of New Mexico for violating their constitutionally protected civil and property rights by the enactment of a ban on hydraulic fracturing and hydrocarbon extraction filed an amended complaint Jan. 10; a case management order filed March 20 includes a February 2015 deadline for the parties to submit a consolidated, final pretrial order (Mary L. Vermillion, et al. v. Mora County, N.M., et al., No. 13-1095, D. N.M.). (Case management order available. Document #94- 140513-031R. First amended complaint available. Document #94-140513-032C.) MEALEY’S Fracking Report Vol. 1, #1 May 2014 31
  • 32. Mary L. Vermillion, JAY Land Ltd. Co., Yates Ranch Property and the Independent Petroleum Association of New Mexico seek declaratory and injunctive relief against Mora County and county officials for the en- actment of Mora County Ordinance 2013-01, which prohibits all hydrocarbon extraction in the county. In the lawsuit filed in November 2013, the plaintiffs allege that the ordinance violates their civil rights under the U.S. and New Mexico constitutions. County Ordinance The Mora County Board of Commissioners adopted the Mora County Community Water Rights & Local Self-Government Ordinance on April 29, 2013, (Ord. 2013-01) to prevent the development of oil and natural gas reserves, to ban hydraulic fracturing and to elimi- nate the constitutional rights and privileges of corpora- tions, according to the plaintiffs. The ban is a violation of the U.S. Constitution 14th Amendment due process clause, the Fifth Amendment taking clause and the First Amendment guarantee of the exercise of speech, of the press, of assembly and to petition government for the redress of grievances, according to the plaintiffs. The plaintiffs aver that they own mineral estates in Mora County and that the ordinance prevents them from leasing their minerals to a corporation for the purpose of oil and natural gas extraction. ‘‘The Ordinance does not serve a compelling state in- terest,’’ according to the plaintiffs. Contrary to the pre- amble of the ordinance, the purpose is to prevent the lawful development of oil and natural gas reserves and to ban hydraulic fracturing. ‘‘If Defendants’ true goal was to protect surface and groundwater supplies within the County, the Ordi- nance would address other industries that are known sources of water pollution such as the agriculture in- dustry,’’ the plaintiffs say. ‘‘Even if the goal of protecting water sources is taken as sincere and found to be sufficiently compelling, the blanket elimination of the First and Fifth Amendment rights of corporations engaging or seeking to engage in activities prohibited by the Ordinance is not narrowly tailored to achieving that interest,’’ according to the plaintiffs. Nor is it rationally related to the state interest of protecting water sources. Preemption The plaintiffs also aver that the ordinance is invalid because it is preempted by New Mexico statute. ‘‘Under the Enabling Act of 1910, the New Mexico Constitution, and the statutes based thereupon, the Commissioner of Public Lands has the authority and duty to lease and sell State lands, including issuing oil and gas leases, for the benefit of the common schools, other educational institutions, and other worthy state functions that benefit less fortunate citizens of the State of New Mexico,’’ they say. The New Mexico Oil and Gas Act (New Mexico Sta- tutes Sections 70-2-4 and 70-2-5) confers authority over oil and natural gas extraction to the Oil Conserva- tion Commission and Oil Conservation Division, according to the plaintiffs. ‘‘This authority includes the ability to enact rules to ‘protect fresh water, public health, safety and the environment.’ N.M. Code R. [New Mexico Code Revised] § 19.15.39, and to ‘estab- lish safety procedures for drilling and production of oil and gas wells.’ N.M. Code. R. §’’ The parties consented in February to have Magistrate Judge Carmen E. Garza conduct dispositive proceed- ings. Other matters are referred to Magistrate Judge Gregory B. Wormuth. Magistrate Judge Wormuth issued an order March 20 setting pretrial deadlines and a briefing schedule. Dis- covery is to be completed by Nov. 13, according to Magistrate Judge Wormuth. The plaintiffs have until June 16, 2014, to identify experts; all other parties have until July 16 to identify experts. Summary Judgment Motions for summary judgment from the plaintiffs are due Nov. 13 and from the defendants by Dec. 15. Responsive and reply briefing from the plaintiffs is due Jan. 15 and on Feb. 15 from the defendants. The plaintiffs are to submit a final pretrial order by Jan. 18 to the defendants, according to Magistrate Judge Wormuth. The defendants have until Feb. 11 to file with the court a final, consolidated pretrial order. Vol. 1, #1 May 2014 MEALEY’S Fracking Report 32
  • 33. Andrew J. Cloutier of Hinkle, Hensley, Shanor & Mar- tin in Roswell, N.M., and Steven Lechner and Jaimie N. Cavanaugh of Mountain States Legal Foundation represent the plaintiffs. Eric D. Jantz of New Mexico Environmental Law Center in Santa Fe, N.M., Tho- mas Linzey of Community Environmental Legal in Mercersburg, Pa., and Daniel E. Brannen Jr. of Bran- nen Law in Santa Fe represent the defendants. I Gas Pipeline Operator Seeks Declaratory Judgment, Removal Of Bull From Easement COVINGTON, Ky. — Columbia Gas Transmission filed a declaratory judgment complaint and motion for a temporary restraining order April 14 in the U.S. Dis- trict Court for the Eastern District of Kentucky against a Foster, Ky., property owner who refuses to restrain an aggressive bull and dogs on his property to allow entry to a natural gas pipeline right of way (Columbia Gas Transmission v. Gary Galloway, No. 14-77, E.D. Ky.). (Complaint available. Document #15-140506-011C. Motion for temporary restraining order available. Document #15-140506-012M.) ‘‘This case arises from Defendant Gary Galloway’s unreasonable interference with Columbia’s rights under an easement, namely to access and maintain a pipeline on Mr. Galloway’s property,’’ according to Columbia Gas Transmission. Aggressive Animals Galloway refuses to temporarily pen his bull and cows, which he advises are aggressive, and dogs on the prop- erty, according to Columbia Gas Transmission. Columbia Gas Transmission avers that it has an ease- ment through Galloway’s property based on a June 6, 1946, agreement executed by Galloway’s predecessors in interest, Albert and Louise Galloway, and Cincinnati Gas Transmission Co., the predecessor to Columbia Gas Transmission. The subject pipeline is the primary feed to Cincinnati and a part of the pipelines that provide service to the eastern seaboard of the United States, according to Columbia Gas Transmission. The pipeline is undergoing maintenance in accordance with a Federal Energy Regu- latory Commission 7(c) certificate in conjunction with KO Transmission, a subsidiary of Duke Energy, accord- ing to Columbia Gas Transmission. In the course of completing a survey of the easement April 2, 2014, on Galloway’s property, Columbia Gas Transmission representatives asked Galloway to pen the aggressive animals. In response to repeated requests since, Galloway avers that damages would be due under the easement agreement if he were required to pen the bull, according to Columbia Gas Transmission. ‘‘Mr. Galloway has consistently refused to pen, or other- wise remove from the easement area, the bull or other aggressive animals,’’ according to Columbia Gas Transmission. Declaratory Judgment Columbia Gas Transmission seeks declaratory judg- ment that the right of way agreement expressly grants it the right to lay, maintain and remove the natural gas pipeline and to enter to the right of way. In addition, Columbia Gas Transmission seeks a declaration that Galloway’s refusal to pen the aggressive animals is an unreasonable burden and interference with its rights under the agreement and that Galloway is required to provide reasonable access by removing from the ease- ment any aggressive animals. Columbia Gas Transmission seeks a temporary restrain- ing order requiring Galloway to remove the aggressive animals from the easement, temporary injunction grant- ing relief pending final judgment and entry of a perma- nent injunction. J. Brian Jackson of McGuireWoods in Charlottesville, Va., represents Columbia Gas. I Pennsylvania Plaintiffs Sue Well, Pipeline Operators For Loss Of Property Value SCRANTON, Pa. — A natural gas extraction company and a natural gas pipeline company were sued April 9 in the U.S. District Court for the Middle District of Pennsylvania for loss of use by property owners; the defendants have yet to file an appearance in the lawsuit MEALEY’S Fracking Report Vol. 1, #1 May 2014 33
  • 34. assigned April 11 to Judge Malachy E. Mannion (Tho- mas Chaffee, et al. v. Talisman Energy USA Inc, et al., No. 14-690, M.D. Pa.). (Complaint available. Document #94-140513-008C.) Thomas and Carol Chaffee, Bill and Alicia Ferullo and Lois Klotz are residents or owners of real property in Bradford County, Pa. They sued Talisman Energy USA Inc. and Central New York Oil and Gas Co. Inc. on April 9 for damages under theories of private, continu- ing and abatable nuisance and negligence/recklessness for natural gas extraction and pipeline activities that have allegedly damaged the real properties and reduced the plaintiffs’ enjoyment of the real properties. Drilling Activities Beginning in late 2010, Talisman Energy began or had others begin drilling activities in close proximity to their residences and real properties, according to the plain- tiffs. The plaintiffs identify seven natural gas wells out of some 41 natural gas wells near their properties spudded and finished by hydraulic fracturing. The drilling and hydraulic fracturing caused ‘‘very loud, intermittent, and unpleasant noise’’ that could be heard from hundreds of feet away ‘‘and disturbed Plaintiffs’ daily activities,’’ according to the plaintiffs. In addition, flaring at the well pads ‘‘released toxic and hazardous smoke into the air and ground of the sur- rounding area,’’ according to the plaintiffs. ‘‘Defendant Talisman’s natural gas activities also inter- mittently create a strong and unpleasant chemical odor which can often be smelled, and even tasted, from Plain- tiffs’ properties. ‘‘The increased traffic caused by Defendant Talisman caused and continues to cause substantial intermittent dust and diesel fumes to enter Plaintiffs’ properties,’’ according to the plaintiffs. After the completion of the so-called Young 1 well, Klotz and the Chaffees noticed a ‘‘dramatic change in the quality of their water supplies,’’ according to the plaintiffs. ‘‘The water coming from the water well located on the Chaffees’ property thereafter frequently turned milky white in color with an oily sheen that would eventually settle into small clumps in the water. Additionally, Plaintiff Klotz subsequently had the water coming from the water well located on her property tested anddiscovered the presence of methane.’’ Water Well Vent Talisman installed a vent on the Chaffees’ water well in February 2013 to vent methane and provided a water buffalo to supply them potable water, according to the plaintiffs. Activities at the Young well pad cause the release of hazardous materials including silica, benzene, ethylben- zene, trimethylbenzene, toluene and xylene, according to the plaintiffs. Klotz and the Chaffees experience burning eyes, throat and lungs; headaches, dizziness and nausea; irritated skin; and a persistent metallic taste in the mouth, according to the plaintiffs. The Chaffees moved out of their home on March 13, 2013, in fear for their lives, and return only to perform maintenance tasks, according to the plaintiffs. Central New York Oil constructed the so-called Stage- coach Pipeline, a 30-inch natural gas transmission line, in 2001. The pipeline is within 1,200 feet of the Fer- ullos’ property, according to the plaintiffs. Central New York vented natural gas and other hazar- dous or radioactive chemicals from the pipeline Sept. 7, 2011, for 10 hours, according to the plaintiffs. In addi- tion to releasing the hazardous materials and natural gas, the venting created a sound like a jet engine. ‘‘The Fer- ullos have no way of knowing if or when Defendant Central New York might vent the Stagecoach Pipeline in the future.’’ Operation and maintenance of the pipeline causes ‘‘intermittent, extremely disruptive, and extremely dan- gerous’’ large truck and heavy machinery traffic on the rural roads around their properties, according to the plaintiffs. Gathering Pipelines Talisman Energy owns or operates at least four gather- ing pipelines within 1,800 feet of the Ferullos’ property, according to the plaintiffs. The gathering pipelines cause additional dangerous traffic and generate dust and diesel fumes, according to the plaintiffs. Vol. 1, #1 May 2014 MEALEY’S Fracking Report 34
  • 35. Tallisman also operates impoundments within four miles of their properties, according to the plaintiffs. Tallisman stores produced water from natural gas wells and fresh water in the impoundments, according to the plaintiffs. The produced water contains signifi- cant amounts of toxic, radioactive or otherwise hazar- dous substances, according to the plaintiffs. Edward J. Ciarimboli of Fellerman & Ciarimboli in Kingston, Pa., represents the plaintiffs. I Natural Gas Pipeline Operator Appeals $78,000 Award In Pennsylvania Easement Suit PHILADELPHIA — A natural gas pipeline company ordered to pay a Pike County, Pa., property owner $78,545 in compensation Feb. 24 in the U.S. District Court for the Middle District of Pennsylvania in an eminent domain condemnation action to allow con- struction of a second pipeline in an existing right-of- way filed notice of appeal April 7 in the Third Circuit U.S. Court of Appeals (Tennessee Gas Pipeline Co. v. Permanent Easements, et al., No. 14-1821, 3rd Cir.). (Summary of case available. Document #94-140513- 022B.) Tennessee Gas Pipeline Co. filed a condemnation action against Fox Hollow Estates under the Natural Gas Act (15 U.S. Code Section 717) in January 2011 to acquire permanent and temporary easements (Tennes- see Gas Pipeline Co. v. Permanent Easements, et al., No. 11-28, M.D. Pa.; 2014 U.S. Dist. LEXIS 23895). Judge A. Richard Caputo conducted a bench trial in November 2013 and issued these findings of fact and law on Feb. 24. Pike County Fox Hollow Estates owns 298.97 acres in Shohola Township, Pike County, Pa. Fox Hollow Estates acquired the property in May 2005 for $1,875,000 with the intention to subdivide and sell single-family residences. Fox Hollow Estates has not developed the tract or received subdivision or development approval from Shohola Township officials. Tennessee Gas Pipeline’s predecessor, Tennessee Gas Transmission Co., was granted an easement and right- of-way in 1955 to operate and maintain a pipeline on the subject property. Tennessee Gas Pipeline received a certificate of public convenience and necessity on May 14, 2010, from the Federal Energy Regulatory Com- mission to construct a new pipeline and compressors and to modify existing facilities on its so-called 300 Line, which includes the pipeline in the right-of-way on the Fox Hollow Estates tract. Tennessee Gas Pipeline filed a complaint in condemna- tion on Jan. 5, 2011, to condemn permanent rights-of- way and easements of 25 feet in width and comprising 1.732 acres of the Fox Hollow Estates tract. Tennessee Gas Pipeline sought to widen the right-of-way from 50 feet to 75 feet. Tennessee Gas Pipeline also sought temporary easements of 5.413 acres on the Fox Hollow Estates tract to create workspace it required to construct the second pipeline on the right-of-way. Tennessee Gas Pipeline avers that the temporary and permanent ease- ments are necessary to construct, operate and maintain the pipeline approved in the May 14, 2010, certificate. Tennessee Gas Pipeline and Fox Hollow Estates entered into a stipulation on Feb. 18, 2011, agreeing to the entry of an order granting Tennessee Gas Pipe- line immediate possession of the rights-of-way upon posting of a bond to secure just compensation. Fox Hollow Estates reserved the right to challenge the amount of compensation offered by Tennessee Gas Pipeline. Construction Complete Tennessee Gas Pipeline completed construction of the secondpipelineandrestoredthetemporaryright-of-way. The fair market value of the Fox Hollow Estates tract decreased by $20,000 as a result of the taking of the permanent easement. Before the taking, the temporary easement was covered with trees. The restored temporary easement has been graded, mulched and seeded. To replace the trees removed from the temporary easement, 155 trees are needed. The cost of 155 trees is $6,885 plus $290 per tree for replanting for a total cost of $44,950 to restore the temporary easement. In the summary of the case filed April 16 by Tennessee Gas Pipeline, three issues are identified for appeal. MEALEY’S Fracking Report Vol. 1, #1 May 2014 35
  • 36. The company avers admission of testimony by Stephen Sameroff, a Fox Hollow representative, and its experts, Michael Weeks and James Leary, to determine that compensation for the alleged taking was in error. The company also avers that the court erred by awarding compensation for the cost of replanting trees and restor- ing the temporary easement to pre-taking condition. Finally, Tennessee Gas Pipeline avers that it was in error to award $51,835 for replanting and restoring the tem- porary easement because the amount exceeds the mar- ket value of the temporary easement. Elizabeth U. Witmer, James G. Rosenberg and Sean T. O’Neill of Saul Ewing in Wayne, Pa., and Matthew M. Haar and Patrick F. Nugent of Saul Ewing in Harris- burg represent Tennessee Gas Pipeline. John T. Stieh of Levy, Stieh & Gaughan in Milford, Pa., represents Fox Hollow Estates. I Pennsylvania Physician Argues 1st Amendment Standing To Challenge Trade Secrets Act SCRANTON, Pa. — The Pennsylvania physician suing the state attorney general and secretary of the Department of Environmental Protection in the U.S. District Court for the Middle District of Pennsylvania for relief from statutory restrictions on his ability to discover the chemicals in proprietary hydraulic fractur- ing fluids used in natural gas extraction he alleges violate his civil rights under the First and 14th amendments to the U.S. Constitution and expose him to professional disciplinary action by the American Medical Associa- tion filed a brief April 30 opposing motions to dismiss on the grounds he lacks standing (Dr. Alfonso Rodri- guez, M.D., v. Michael L. Krancer, et al., No. 12-1458, M.D. Pa.). (Response to motion to dismiss available. Document #94-140513-020B. Amicus curiae brief in support of motion to dismiss available. Document #94-140513- 021M.) Alfonso Rodriguez, M.D., is a nephrologist and physi- cian specializing in the treatment of renal diseases, hypertension and advanced diabetes, according to the record. Rodriguez directs several hemodialysis units from his medical practice in Dallas, Pa. Declaratory Judgment Rodriguez filed a declaratory judgment action in July 2012 against Michael L. Krancer, the secretary of the Pennsylvania Department of Environmental Protec- tion (DEP), Robert F. Powelson, chairman of the Pennsylvania Public Utility Commission, and the attorney general of Pennsylvania in their official capacities. When the suit was filed in July 2012, Linda L. Kelly was the attorney general. Kathleen G. Kane was sworn is a Pennsylvania attorney general in January 2013 and automatically substituted for Kelly in the action, according to the record. Krancer has resigned and been replaced by E. Christopher Abruzzo as DEP secretary. Rodriguez avers that it is common knowledge in the natural gas industry fracking fluids contain a mixture of chemicals including benzene, toluene, ethylbenzene, xylene, microbiocides, gylcols, glycol ethers and petro- leum products. Rodriguez alleged two counts against the defendants with respect to the adoption in February 2012 by the Pennsylvania General Assembly of Act 13. By adop- tion of Act 13, the General Assembly amended the Oil and Gas Act (Pennsylvania Combined Statutes 58:3222.1[b][11] 2012) to limit physicians treating patients exposed to fracking fluids from discovering what chemicals are in the fluids designated as trade secrets by a company, according to Rodriguez. Rodri- guez refers to Act 13 as the Medical Gag Act. Physicians, Scientists & Engineers for Health Energy filed a brief on Jan. 23, 2013, in support of Rodriguez. Judge Richard A. Caputo concluded that Rodriguez lacks standing and granted defense motions to dismiss on Oct. 23, 2013 (2013 U.S. Dist. LEXIS 152207). In response to a motion to reconsider, Judge Caputo granted Rodriguez leave to file the amended complaint filed Jan. 31, 2014. Powelson, the chairman of the Pennsylvania Public Utility Commission, was dismissed by stipulation on Feb. 7. Vol. 1, #1 May 2014 MEALEY’S Fracking Report 36
  • 37. Amended Complaint The amended complaint does cure the deficiencies in the pleadings because Rodriguez has not alleged an injury, Rodriguez does not have standing to challenge the Act 13 provisions codified at Pennsylvania Conso- lidated Statutes 58:3222.1(b)(10) and (b)(11), accord- ing to Abruzzo. Abruzzo’s argument is contrary to U.S. Supreme Court precedent, according to Rodriguez. ‘‘The Supreme Court of the United States has established that standing to maintain a pre-enforcement anticipatory challenge to laws restricting First Amendment speech need not implicate criminal sanctions. The threat of criminal, civil and/or employment jeopardy provide a sufficient basis for a plaintiff to establish standing to challenge a law restricting First Amendment speech without the need to the plaintiff to first subject himself to civil or employment jeopardy. ‘‘Plaintiff can only gain access to the needed informa- tion under Act 13 by signing a broad and vaguely defined confidentiality agreement that prohibits medi- cal communications required to be made by plaintiff by ethical rules that govern plaintiff’s medical practice,’’ according to Rodriguez. ‘‘Under these facts, every possible component necessary to satisfy a pre-enforcement anticipatory First Amend- ment challenge to Act 13’s non-emergency medical gag rule is present to reject defendants’ motion to dismiss for lack of standing.’’ Halliburton Energy Services Inc. (HESI), which was granted leave April 3, 2014, to file an amicus curiae brief in support of the defendants’ motions to dismiss, challenges Rodriguez’s claims on the merits rather than the affirmative defense of standing. HESI avers in the petition for leave filed March 31 that it has invested millions of dollars in the development of proprietary hydraulic fracturing technology that is threatened by Rodriguez’s challenge of Act 13. ‘‘The amended complaint of Dr. Alfonso Rodriguez represents a direct assault on the protection of intellec- tual property held by HESI and other similarly situated entities,’’ according to HESI. ‘Overbroad View’ ‘‘Contrary to Plaintiff’s overbroad view of his First Amendment rights, where potential disclosure threa- tens to destroy the value of trade secrets, courts have found that statutes, in particular the Uniform Trade Secrets Act (which has been adopted in Pennsylvania), that authorize enjoining speech that would dis- close trade secrets do not impermissibly infringe upon First Amendment rights. See DVD Copy Control Ass’n, Inc. v. Bunner, 31 Cal. 4th 864 (Cal. 2003) (prelimin- ary injunction issued pursuant to California trade secret law did not violate First Amendment rights); see also Home Line Furniture, Inc. v. Bonner Retail Marketing, LLC, 630 F.Supp.2d 527 (E.D. Pa. 2009) (enjoining defendants from disclosing trade secrets under the PUTSA [Pennsylvania Uniform Trade Secrets Act]). Because the Commonwealth can clearly impose directly upon Plaintiff, through the PUTSA and other vehicles, the same type of restrictions that Plaintiff asserts are unconstitutional conditions, none of the counts in the amended complaint states a valid claim.’’ The court may not as a matter of law grant the relief Rodriguez seeks, according to HESI. ‘‘Under Pennsyl- vania’s Statutory Construction Act, severability is not appropriate where the valid provisions of a statute ‘are so essentially and inseparably connected with, and so depend upon, the void provision or application, that it cannot be presumed the General Assembly would have enacted the remaining provisions without the void one;’ or where the court finds that the remaining provisions, standing alone, ‘are incomplete and incap- able of being executed in accordance with the legislative intent.’ 1 Pa. C.S.A. [Consolidated Statutes Annotated] § 1925. ‘‘Here, the Court may not rewrite Act 13 as Plaintiff seeks,’’ according to HESI. ‘‘Accordingly, the Court should dismiss Plaintiff’s claims to the extent he seeks the disclosure of trade secrets to health professionals without any corresponding requirement to maintain the confidentiality of those trade secrets.’’ Counsel Michael M. Melloy, Lynn R. Rauch and Todd D. Kantorcyk of Manko, Gold, Katcher & Fox in Bala Cynwyd, Pa., and Steven Leifer and Thomas C. Jackson of Baker Botts in Washington, D.C., repre- sent HESI. MEALEY’S Fracking Report Vol. 1, #1 May 2014 37
  • 38. Change is the only constant in the legal profession. Navigate your way with confidence with resources from LexisNexis® Matthew Bender® , Mealey’s™, Michie™ and Shepard’s® . Explore a variety of primary law and secondary law analytical resources serving your practice area and jurisdictional needs. Visit the LexisNexis® Store today at LexisNexis, Shepard’s and the Knowledge Burst logo are registered trademarks and Michie is a trademark of Reed Elsevier Properties Inc., used under license. Matthew Bender is a registered trademark of Matthew Bender Properties Inc. © 2012 LexisNexis. All rights reserved. OFF01902-0 2012 LexisNexis® Store Vol. 1, #1 May 2014 MEALEY’S Fracking Report 38
  • 39. Paul Anthony Rossi of Kennett Square, Pa., repre- sents Rodriguez. Joshua John Voss of Conrad O’Brien in Harrisburg and Mark E. Seiberling and Matthew H. Haverstick of Conrad O’Brien in Philadelphia represent Abruzzo. Kane, Howard G. Hopkirk and Gregory R. Neuhauser of the Pennsylvania Office of Attorney General represent Kane. Jordan B. Yeager of Curtin & Heefner in Doylestown, Pa., repre- sents Physicians, Scientists & Engineers for Health Energy. I MEALEY’S Fracking Report Vol. 1, #1 May 2014 39
  • 40. Mealey’s™ Online Access additional documents not found in this report. Perform headline searches on any Mealey title. View and download full-text court documents. Search the Mealey editorial archives as far back as the 1980s. LexisNexis and the Knowledge Burst logo are registered trademarks of Reed Elsevier Properties Inc., used under license. © 2012, LexisNexis. All rights reserved. OFF02215-0 2012 Visit Vol. 1, #1 May 2014 MEALEY’S Fracking Report 40
  • 41. Documents STATEOFLOUISIANA COURTOFAPPEAL,THIRDCIRCUIT 13-1196 CARLOSBOONE,ETUX. VERSUS CONOCOPHILLIPSCOMPANY,ETAL. ********** APPEALFROMTHE FIFTEENTHJUDICIALDISTRICTCOURT PARISHOFVERMILION,NO.92292 HONORABLEJOHNDAMIANTRAHAN,DISTRICTJUDGE ********** ULYSSESGENETHIBODEAUX CHIEFJUDGE ********** CourtcomposedofUlyssesGeneThibodeaux,ChiefJudge,SylviaR.Cooks,and JohnE.Conery,Judges. AFFIRMED. WarrenA.Perrin Perrin,Landry,deLaunay,Dartez&Ouellet 251LaRueFrance Lafayette,LA70508 Telephone:(337)237-8500 COUNSELFOR: Plaintiffs/Appellants-CarlosBooneandLoriTheriotBoone MorganJ.Wells,Jr. Larzelere,Picou,Wells,Simpson,Lonero,LLC 3850N.CausewayBoulevardSuite1100 Metairie,LA70002 Telephone:(504)834-6500 COUNSELFOR: Defendant/Appellee-EmerQuestOil&Gas,LLC MichaelGregoryStag SmithStag,LLC 365CanalStreetSuite2850 NewOrleans,LA70130 Telephone:(504)593-9600 COUNSELFOR: Plaintiffs/Appellants-CarlosBooneandLoriTheriotBoone RebeccaH.Dietz King,Krebs&Jurgens,PLLC 201St.CharlesAvenue45th Floor NewOrleans,LA70170 Telephone:(504)582-3800 COUNSELFOR: Defendant/Appellee-ConocoPhillipsCompany THIBODEAUX,ChiefJudge. Theplaintiffs,CarlosandLoriBoone,appealfromamotionfor summaryjudgmentandexceptionofprescriptiondecidedadverselytothemand filedbyEnerQuestOil&Gas,LLC, property.Findingthattheplaintiffsfailedtocarrytheirburdenofprovingavalid rightofactionintortorcontract,weaffirmthejudgmentdismissingEnerQuest fromtheplaint I. ISSUES Wemustdecide: (1)whetherthetrialcourterredingrantingsummaryjudgmentto EnerQuest;and (2) exceptionofprescription. II. FACTSANDPROCEDURALHISTORY InAugustof2005theBoonespurchased18.66acresofland encumberedbymineralreservationsandoilandgasleases;thesalepricewas $120,000.00.Thesellers,PrimeauxProperties,Inc.,hadpurchasedthe encumberedpropertyin2003fromAaronLagneauxandEricLagneauxfor $105,000.00.Oilandgasoperationsonthepropertyallegedlydatebackto1972. TheLagneauxacquisitionwasviagenerationalinheritancesdatingbackto1971, anditapparentlyincludedthemineralsbecauseLagneauxspecificallyres BOONEv.CONOCOPHILLIPS A-1 MEALEY’S Fracking Report Vol. 1, #1 May 2014
  • 42. 2 2003. Thedefendantoilandgasoperator,EnerQuest,hadpurchasedthe wellsandoperatingrightsfromPhillipsPetroleumCompanyin2000.EnerQuest soldallofitsoperatingrightsandinterestintheproperty,alongwithallofits restore,thesurfaceoftheproperty. InMayof2010,theBoones,assertingcontaminationandproperty damage,filedsuitagainstsixoilandgasoperators,includingCONOCOPHILLIPS , TheBoonesassertedthattheyhadwithinthelastyearfoundabandoneddebrisand equipmentandassertedafailuretoproperlycleanandrestoretheproperty.Ina firstamendedpetitioninJulyof2012,theBoonesidentifiedthreeoffivewellson thepropertyt. EnerQuestfiledamotionforsummaryjudgmentassertingthatthe Booneswereprecludedbylawfromassertingatortorcontractclaimforproperty damagethatpre-datedtheir2005acquisitionofthepropertywithoutaspecific assignmentofthatrightfromtheformerowner.Amongitsexhibits,EnerQuest thatEnerQuestdidnotconductanyoperationsonthepropertyafterApril30,2004, , alsoattachedtheactofsalefromPrimeauxtotheBoonesdatedAugust26,2005, showingthatnoassignmentofpre-acquisitiondamagerightswereconveyedtothe Boonesbythepreviousowner,Primeaux. 3 includednewly-obtainedassignmentsofrightsfromthepreviousowners, PrimeauxandLagneaux.EnerQuestassertedthattheassignmentswereinvalid andthatanytortclaimstheysoughttotransferwereprescribedsinceLagneaux soldthepropertyin2003andPrimeauxsoldthepropertyin2005. ThetrialcourtallowedtheBoonespermissiontofileasecond supplementalandamendingpetitionassertingtheirrightasassigneestotherights ofthepreviousowners;claimsforfraudandconspiracy,aswellasthesolidary summaryjudgmentandexceptionofprescription. III. STANDARDOFREVIEW Thegrantordenialofamotionforsummaryjudgmentisreviewedde whethersummaryjudgmentisappropriate;i.e.whetherthereisanygenuineissue ofmaterialfact,andwhetherthemovantisentitledtojudgmentasamatterof Samahav.Rau,07-1726,pp.3-4(La.2/26/08),977So.2d880,882-83 peremptoryexception,withevidencebeingintroducedatthehearingonthe tothemanifesterror-SpecializedLoan ServicingLLCv.January,12-2668,pp.3-4(La.6/28/13),119So.3d582,584 (citationsomitted). 4 IV. LAWANDDISCUSSION grantingthemotionforsummaryjudgmentandtheexceptionofprescriptionfiled thattheBoones(1)havenovalidcontractclaimsagainstEnerQuestbecausethe subsequentpurchaserdoctrineinvalidatestheirclaimsforpre-acquisitionproperty damage;theplaintiffsarenotapartytoanylease,assignment,orothercontract withEnerQuest;andtheplaintiffsdidnotobtainanassignmentofanycontractual rightsfromthepreviousowners.EnerQuestfurtherassertsthattheBoones(2) havenoclaimsintortbecauseanytortclaimsacquiredfromthepreviousowners donotrelatebacktotheoriginalpetition;andEnerQuestisnotsolidarilyliable withPetroEforanyactionabletortclaims. TheBoonesarguethat(1)theircontractclaimsarevalidbecausethe subsequentpurchaserdoctrinedoesnotapply;therelevantcontractsgivethema rightofactiontosuefordamagesandrestorationoftheproperty;andthecontract claimshavenotprescribedbecauseEnerQuestoperatedundermineralleasesuntil 2004,andthesurfaceleasewasineffectuntil2012.Astothetortclaims,the Boonesarguethat(2)theytimelyassertedtortclaimsagainstsolidaryand/orjoint tortfeasors;theyobtainedvalidassignmentsofthetortclaimsatthetimeofthe damage;andtheirsecondsupplementalpetitionrelatesbacktothefilingoftheir originalpetitionfordamages. Webeginwithareviewofthesubsequentpurchaserruleordoctrine. A-2 MEALEY’S Fracking Report Vol. 1, #1 May 2014
  • 43. 5 SubsequentPurchaserDoctrine Thesubsequentpurchaserruleisajurisprudential rulewhichholdsthatanownerofpropertyhasnorightor actualinterestinrecoveringfromathirdpartyfor damagewhichwasinflictedonthepropertybeforehis purchase,intheabsenceofanassignmentorsubrogation oftherightsbelongingtotheownerofthepropertywhen thedamagewasinflicted. EaglePipeandSupply,Inc.v.AmeradaHessCorp.,10-2267,p.8(La.10/25/11), 79So.3d246,256-57. Inarticulatingtheapplicationandsourceofthesubsequentpurchaser doctrine,theLouisianaSupremeCourtinEaglePipeandSupply,Inc.provideda thoroughanalysisofthepertinentprinciplesofLouisianapropertylawand sintheLouisianaCivilCode.Relevanttoour inquirieshere,arealrightisnotdefinedbytheCivilCodebuthaslongbeenheld ofmantothingsandmay,therefore,bEaglePipe andSupply,Inc.,79So.3dat259(quotingHarwoodOil&MiningCo., 652,124So.2dat767(1958)).Arealrightandarealobligationbothattachtoa thing.Id.at261;La.Civ.Codeart.1764,RevisionComments--1984,(b).1 Thelegalrightthatapersonhasagainstanotherpersonto demandtheperformanceofanobligationiscalleda personalright.Distinctfromarealright,whichcanbe assertedagainsttheworld,apersonalrightiseffective relationshiptomanandrefersmerelytoanobligation oneowestoanotherwhichmaybedeclaredonlyagainst 1 Arealobligationistransferredtotheuniversalorparticularsuccessorwhoacquiresthe movableorimmovablethingtowhichtheobligationisattached,withoutaspecialprovisionto thateffect. Butaparticularsuccessorisnotpersonallybound,unlessheassumesthepersonal obligationsofhistransferorwithrespecttothething,andhemayliberatehimselfofthereal obligationbyabandoningthething.La.Civ.Codeart.1764. 6 HarwoodOil&MiningCo., 651,124So.2dat767[citingReagan[v.Murphy,235 La.[529],541,105So.2d[210],214[(1958))]. .... [acontractaboutproperty]doesnotconveyanyrealright ortitl Richardv.Hall,2003-1488,p.17-18(La.4/23/04),874 Reagan,[105So.2dat]214. .... Realrights,andrealobligationspasstoa subsequentacquirerofthethingtowhichitisattached withouttheneedofastipulationtothateffect.La. C[iv.Code]art.1764,RevisionComments--1984,(c).A personalright,bycontrast,cannotbeassertedbyanother intheabsenceofanassignmentorsubrogation.La.C.C. art.1764,RevisionComments--1984,(d)and(f). EaglePipeandSupply,Inc.,79So.3dat261-62(footnotesomitted). Basedupontheforegoing,realrightsandobligationsattachtothe thing,whilepersonalrightsandobligationsattachtotheperson.Further,andmore specifically,therealrightsandobligationsofownershipattachtoapieceof propertywhenitissoldwithouttheneedofastipulation,butthepersonalrights andobligationsarisingfromaleasebetweentheformerownerandthelesseefor eventsoccurringbeforethesaledonotpasstothenewownerunlesstheyare specificallyassigned. AsillustratedbyEaglePipeandSupply,Inc.throughitsanalysisof Clarkv.J.L.WarnerCo.etal.,6La.Ann.408(1851)andsubsequent jurisprudence,theformerownerretainstherighttorecoverthedamagescausedby arisesbecausehisrealrightsinthe 7 ownershipofthepropertyhavebeendisturbed--hisuse,enjoymentordisposalof EaglePipeandSupply,Inc.,79So.3dat264.Thecourtfurther stated: Clarkexplicitlystates[that]thepersonalrightofthe propertyownertodemanddamagesfortheinjurytothe propertymustbeassignedorsubrogatedifthepersonal rightistosurviveachangeofownershipintheproperty: plaintiffisintheusualformforthe conveyanceofrealestateandits appurtenances.Itdoesnottransferherclaim fordamages,expressly,noristhereanything initwhichindicatesatransferby implication.Therightsandappurtenances mentionedinthebillofsalehavealways beenconsideredrealrights.Itdoesnot appear,therefore,eitherbylaworcontract, thattheplaintiffhasanyclaimfordamages previoustothe16thofMay,1848,whenhe purchasedtheproperty. EaglePipeandSupply,Inc.,79So.3dat264-65(quotingClark,6La.Ann.at409). Here,theactofsalefromPrimeauxtotheBoonesonAugust26, anddeliver[s]withfullguaranteeoftitleandfreefromallencumbrancesandwith 18.66-acretractoflandinthelegaldescription.Likewise,thepreviousactofsale fromLagneauxtoPrimeauxin2003containedalmostidenticallanguage.Under ClarkandEaglePipe,thislanguageisgenerallanguageandintheusualformfora lesseefordamagealreadydonetotheland. A-3 MEALEY’S Fracking Report Vol. 1, #1 May 2014
  • 44. 8 Primeauxissubjecttomineralreservationsandleases.The2005Primeauxactof saletotheBoonesreferencesthepriorsalefromLagneauxtoPrimeauxin2003 andprovidestherecordationinformation.Bothactsofsalestatethatthesaleis ctingtheproperty.Thus,bothdocuments indicatethatmineralrightsandleaseshavebeenreservedandencumbertheland, fordamages. Thesubsequentpurchaserdoctrineisnotlimitedtoapparentdamages; itappliestoprohibitsuitagainstthelesseewhetherthepre-acquisitiondamageis apparentornot.EaglePipeandSupply,Inc.,79So.3d246.Ifdamagetothe propertyisapparent,thepurchaserispresumedtoknowitsconditionandtohave negotiatedasalepricetakingthedefectsintoconsideration.Id.Ifthedamageis notapparent,thepurchaserhasacauseofactioninredhibitionagainstthesellerfor rescissionofthesaleorreductionofthesaleprice,buthedoesnothavearightof . Thesubsequentpurchaserdoctrineisnotlimitedtotortclaims,as showninClark,6La.Ann.408,anditisnotlimitedtocasesinvolvingexpired leases,assuggestedbytheBoones.Initscomprehensiveanalysisofthedoctrine, thecourtinEaglePipeandSupply,Inc.,79So.3dat266(emphasisadded) (footnoteomitted),discussedfurtherjurisprudencethatincludedtherelevant issues,asfollows: InMatthewsv.Alsworth,45La.Ann.465,12So. 518(1893),propertywassoldsubjecttoanexisting lease.Thenewownerfiledsuitagainstthelesseefora hisobligations,forcompensationforthediminutionin 9 thevalueofthepro property,andfortherentfortheyearwhichaccruedin theyearbeforethesale.Thiscourtfoundthenewowner hadnorightofactiontosuefordamagesfromthelessee fordamagetothepropertybeforethesale,eitherunder theleasecontractorintort.Instead,therighttosuefor damagetothepropertyinflictedbeforethesalewasa personalrightoftheformerowner/lessorwhicharose theleaseduringthetimethelesseeowedthose obligationstotheformerowner/lessor. Theformerownerhadnotassignedorsubrogated thispersonalrighttothenewownerintheactofsale. Thedeedcontainedthefollowinglanguage: Saidleaseandallthe rightsin,to,orunderthesameare transferredhereby,andsimultaneously herewith,totheconveyeeherein.This conveyanceismadewithcompletetransfer andsubrogationofallrightsandallactions ofwarrantyorotherwiseagainstallformer claimants,proprietors,tenants,orwarrantors ofthepropertyhereinconveyed. Bythislanguage,thecourtheldthenewowner/lessor wassubrogatedtotheleaseprovisions,butonlyfromthe dateofhispurchaseofthepropertyisliable onthecovenantsofhislease,andtothese, unquestionably,plaintiff[thenewpropertyowner]is subrogatedfromthedateofhispurchase.Bytheuseof didnotbecomeanassigneeofdamagesofdatepriorto Matthews,45La.Ann.at469,12So.at519. Thepersonalrightoftheownertosuefordamages wasnotexplicitlyassignedintheactofsale,and additionallywasnotanaccessoryrightwhichpassed withthetitlewithoutdescriptionof,orreferenceto,the claim.Intheactofsale,thepropertywasspecifically described,andtherewasnomentionofaclaimfor wereadditionalrightsinthenatureofdamages,thedeed Matthews, 469,12So.at519.Matthewsreinforcestheproposition thatpersonalrightsoftheformerownerdonotpasswith thepropertyinanactofsaleunlessspecificallyassigned orsubrogatedtothenewowner. 10 Thus,evenwhenpropertyisconveyedduringthetermofalease,the purchasercannotrecoverfromthelesseefordamagesaccruingpriortothesale. SeealsoPradosv.SouthCentralBellTel.Co.,329So.2d744(La.1975).In Matthews,12So.518,becausethedeedofsalealsoconveyedtheleaseandthe againstthelessee,butonlyfordamagesarisingafterthedateofsale. Inthepresentcase,theactsofsalefailtotransferanypre-acquisition rightstothenewownersfordamagescausedbythelesseepriortotheactofsale andspecificallywithholdthemineralsandallleasesfromtheactofsale. Lagneauxreservedtherightsforhimselfin2003,andin2005Primeaux,who neverobtainedthemfromLagneaux,referencedthemineralandleasereservations initssaletotheBoonesandpointedtheBoonestotherecordedprioractofsale fromLagneaux.Accordingly,theBoonesknewthatthelandwasencumberedby reservedmineralrightsandleases.Underthesubsequentpurchaserdoctrine,they donothavearightofactiontosuethelesseefordamagesoccurringpriortotheir acquisitionoftheproperty. TheAssignments InSeptemberof2012,theBoonesobtainedassignmentsfromformer owners,LagneauxandPrimeaux,inattemptstoobtaintherighttosueEnerQuest fordamagesthattheactofsaledidnotconvey.Wefindthattheassignmentsalso failtoprovidetheplaintiffswitharightofactionforpre-acquisitiondamages againstEnerQuest.TheLagneauxassignmentattemptstoassignallpersonaland tortcausesofaction,includinginheritedrights,totheBoones.Liketheactofsale, however,theassignmentspecificallyexcludesmineralandcontractualrightsand A-4 MEALEY’S Fracking Report Vol. 1, #1 May 2014
  • 45. 11 leases.TheLagneauxassignmentstatesinthefourteenthparagraph(emphasis added):NothinghereinshallaffectandthisAgreementspecificallyexcludesthe mineralrightsand/orcontractualrights,including,butnotlimitedto,leases,ofthe Parties hadtakenalowerpricefromPrimeauxbecauseofdamagecausedtothelandby EnerQuest,Lagneauxwouldhaveknownthisatleastbythetimeofsale.Thus, underLa.Civ.Codeart.2315,andunderLa.Civ.Codeart.3493specifically governingdamagetoimmovableproperty,Lagneauxhadoneyear,oruntilMarch of2004tobringsuitagainstEnerQuest.Therefore,in2012,Lagneauxhadno rightofactionintorttoas prescribedeightyearsearlier. WithregardtotheassignmentbyPrimeaux,alsoinSeptember2012, PrimeauxcouldnotassigncontractualrightsundertheleasesbecausePrimeaux didnotacquirecontractualrightsuponitspurchasefromLagneauxin2003.If PrimeauxthoughtithadtotakealowersalepricefromBooneinAugustof2005 becauseofdamagebyalessee,itwouldhaveacquiredthatknowledgeatleastby thetimeofsaleandwouldhavehadayear,oruntilAugustof2006,tobringits tortsuit.However,Primeauxdidnottakealowerprice;sinceitpaidonly $105,000.00forthepropertyin2003andsoldittotheBoonesfor$120,000.00in 2005,therehadbeennodiminutionofvalue.Inanyevent,whenPrimeaux executedtheassignmentin2012,ithadnorightofactiontoassigntotheBoones. Accordingly,theBoonesdidnotobtainanytortorcontractrightsfromthe previousownersviatheassignmentstosuefordamagescausedpriortotheactof salein2005. 12 TheBoonessignedaffidavitsstatingthatLagneauxandPrimeaux intendedtoassigncontractualrightstotheBoonesintheassignmentswherethey referencedallrightsandcausesofaction.Thatisnotwhattheseassignments,the wordsofacontractareclearandexplicitandleadtonoabsurdconsequences,no art.2046.WhenEnerQuestassertedinitsmotionforsummaryjudgmentthatthe BooneswouldnotbeabletoprevailonitsclaimsfordamagesagainstEnerQuest, theburdenshiftedtotheBoonestoshowthattheycouldprevailattrial: Theburdenofproofremainswiththemovant. However,ifthemovantwillnotbeartheburdenofproof attrialonthematterthatisbeforethecourtonthe motionfsburdenon themotiondoesnotrequirehimtonegateallessential elementsoftheadverssclaim,action,ordefense, butrathertopointouttothecourtthatthereisanabsence offactualsupportforoneormoreelementsessentialto iftheadversepartyfailstoproducefactualsupport sufficienttoestablishthathewillbeabletosatisfyhis evidentiaryburdenofproofattrial,thereisnogenuine issueofmaterialfact. TheonlyevidenceadducedbytheBoonesaretheeleventh-hour assignmentswhichdonotconveyanyvalidtortorcontractclaimstotheBoones. Accordingly,wefindthattheassignmentsdonotprovidetheBooneswitharight ofactionintortorincontracttosueEnerQuestfordamagestothepropertypriorto theBoonesacquisitionoftheproperty. 13 StipulationPourAutrui TheBoonesassertthattheircontractclaimsarestillvalidbecause, whilenotactualparties,theyarethirdpartybeneficiariestothesurfaceleasethat LagneauxgrantedtoEnerQuestin2002,pursuanttoLa.Civ.Codeart.1978.2 They citeHazelwoodFarm,Inc.v.LibertyOil&GasCorp.,02-266(La.App.3Cir. 4/2/03),844So.2d380,writsdenied,03-1585and03-1624(La.10/31/03),857 So.2d476.There,theoriginal1926leaseprovided(emphasisadded): shallberesponsibleforalldamagescaused foundtocreateastipulationpourautruiinfavoroftheHazelwoodcorporation, whichacquiredownershipin1991(HazelwoodwasownedbytheEdmunston familywhohadownedthepropertysince1968).ThecourtinHazelwoodFarm, Inc.,844So.2d380,explainedthatthisfindingwasthelawofthecasebasedupon apriorappeal,whichmorethoroughlyanalyzedtheissue. Morespecifically,inHazelwoodFarm,Inc.v.LibertyOil&Gas Corp.,01-345(La.App.3Cir.6/20/01),790So.2d93,writdenied,01-2115(La. 7/26/01),794So.2d834,theplaintiffwasfoundtohavenorightofactionasa partyto,orasanassigneeof,amineralleasebecause,ashere,thevendorbefore ghtstohimself.Thecourtdid, however,findthatthelanguageoftheoriginallease,obligatingthegrantee/lessee topayforalldamagescausedbyitsoperations,conferredabenefitonthecurrent owner,Hazelwood: Ourjurisprudencerecognizesseveralfactorswhichmust beconsideredindeterminingwhetheracontractprovides 2 Acontractingpartymaystipulateabenefitforathirdpersoncalledathirdparty beneficiary.Oncethethirdpartyhasmanifestedhisintentiontoavailhimselfofthebenefit,the partiesmaynotdissolvethecontractbymutualconsentwithoutthebenefsagreement. La.Civ.Codeart.1978. A-5 MEALEY’S Fracking Report Vol. 1, #1 May 2014
  • 46. 14 forastipulationpourautrui.Thesefactorsare enumeratedinAndrepontv.AcadiaDrillingCo.,231 So.2d347,351,255La.347(1969)as: (1)Theexistenceofalegalrelationship betweenthepromiseeandthethirdperson involvinganobligationowedbythe promiseetothebeneficiarywhich performanceofthepromisewilldischarge; (2)theexistenceofafactualrelationship betweenthepromiseeandthethirdperson, where(a)thereisapossibilityoffuture liabilityeitherpersonalorrealonthepartof thepromiseetothebeneficiaryagainst whichperformanceofthepromisee(sic) willprotecttheformer;(b)securingan advantageforthethirdpersonmay beneficiallyaffectthepromiseeinamaterial way;(c)therearetiesofkinshiporother circumstancesindicatingthatabenefitby wayofgratuitywasintended.SeeSmith, ThirdPartyBeneficiariesinLouisiana:The StipulationPourAutrui,11Tul.L.Rev.18, 58(1936). HazelwoodFarm,Inc.,790So.2dat100. TheHazelwoodcourtdidnotspecificallyapplytheindividualfactors above,butratherfocuseduponlanguageoftheleaseinAndrepont,andthealmost identicallanguageintheleaseinHazelwood.InAndrepont,asharecroptenant andthelandownerenteredintoaverballeasewhereinthelandownerallowedthe tenanttofarmsoybeansonthelandinreturnfortwentypercentofhiscrop.Later, theowneralsograntedtheoilandgasdefendantalease;buttheownernegotiated broaderlanguagesothatthefinalversionoftheleaseprotectednotjustthe owner/lessorbutalsoprotectedthefarmer/lessee,Mr.Andrepont: Theprintedformusedastheoilandgasleaseinitially timberandgrowingcropsoftheLessorcausedby Id 15 Id. Uponreviewingthislanguage,theLouisiana SupremeCourtfoundittocreateastipulationpour autrui seekingtoenforceabenefitstipulatedinhisfavorbythe landownerlessorasaconditionofacommutative contractbetweenthelandownerlessorandtheoilandgas lessee.Defendants,asassigneesoftheoilandgaslessee, are,therefore,partiestothecontractinwhichthe Id.at350.Therefore,the courtreasonedthatAndrepont,asbeneficiaryofthe stipulation,hadadirectrightofactionagainstthelessee torecoverhisdamages. HazelwoodFarm,Inc.,790So.2dat100-01. Becausethelanguageintheleasewasstrikinglysimilartothatin Andrepont,theHazelwoodcourtinterpretedtheleaseasprovidingastipulation pourautruiinfavorofHazelwood.Likewise,inMagnoliaCoalTerminalv. PhillipsOilCompany,576So.2d475,477(La.1991)(emphasisadded),alsocited foralldamagescausedby MagnoliaCoal,576So.2d475,ahighlydistinguishablecase,didnot discussstipulationpourautruibutdidallowthenewlandowner,Magnolia,to recoveragainstthecurrentlessee,PhillipsOil,quotingtheabovelanguagefrom themineralleaseretainedbytheoriginalowners.Thesuitwasforcontinuing damagecausedbytheimproperpluggingofawellthatwasleakingagallonofoil Aminoil,whichlatermergedwithPhillips,tookresponsibilityforpluggingthe wellandcleaningtheproperty;anditagreedinwritingtotakecareoftheproblem. TwoyearsafterMagnoliaspentalmost$12milliontopurchaseandbegin developingthe2,200-acretract,Aminoilabandoneditsefforts,butoilpockets 16 reappearedtwomonthslater.Magnolialostitsfinancialsupportonan$86million terminalandstoppedconstructionduetocontractfailures.TheLouisianaSupreme CourtawardedMagnolia$2.1millionforsurfacedamages. Indiscussingjurisdictionalconflicts,wherethecommissionerof conservationhadwronglyfoundthewelltohavebeenproperlyplugged,thecourt causeofactionnotinthepurviewofthemineralcode.Thecourtthenstated: ertyrightarisingoutoftheoriginal Id.at483.ThecourtcitedAndrepont,231 So.2d347,forthisproposition.SinceAndrepontdoesnotcontainthislanguage, righttoreceiveitspartofthe damagesbeforeorseparatelyfromthedamagespaidtothesharecropper, Andrepont,bytheoilandgaslessee,pursuanttoLa.R.S.9:3204.Inspiteofthe contextualdissimilarities,itisthisquotefromMagnoliaCoalthattheplaintiffs havecrypticallyandimprovidentlypulledfromthecasewithoutfurtheranalysis andwithoutreconcilingitwithEaglePipetwentyyearslater. Here,thedefendantEnerQuest,predecessorofthedefendantPetro ythingontheproperty,butrather,completelyvacated thepropertyandsoldallofitsassetsandobligationsayearbeforetheBoones purchasedtheproperty,asdiscussedfullybelow.Moreover,theBoonesdidnot introducethemineralleaseforacomparisonofthelanguage.Andhere,therewas nocontinuingdamagebyEnerQuest,asacontinuingtortisoneinwhichthe EaglePipe,79So.3dat279.Wefindnosupportforth MagnoliaCoalcase. A-6 MEALEY’S Fracking Report Vol. 1, #1 May 2014
  • 47. 17 TheonlyleaseintherecordbetweenaformerownerandEnerQuest, isthe2002surfaceleasegrantedbyLagneauxbeforeitssaleofthepropertyto Primeauxin2003.ThesurfaceleasethatLagneauxgrantedtoEnerQuestdidnot containlanguagesimilartotheabovelanguageoraddressdamagesinanymanner. ItallowedEnerQuesttousethesurfaceofthelandforconstructingandaccessing itsfacilitiesandobligatedEnerQuesttoremoveitsfixturesandrestorethelandas nearlyaspracticabletoitsoriginalconditionwithinsixmonthsafterthelease expired.Itacknowledgedthereceiptofadequateandsufficientconsiderationfor thisaccess,presumablytheleasepaymentsandanyotherincomefromthe mineralsbywhichLagneauxwouldprofitwhenEnerQuestbroughttheproductto thesurface.Itextendedtheprovisionsoftheleasetotheheirs,devisees, executors,administrators,representatives,successors,andassignsofthelessorand thelessee.However,theprovisionsitextendeddidnotincludemoneydamagesor propertydamages. Norcouldthepartieshaveintendedin2002forabenefittoinuretoa futurepurchaserwhoownednomineralrightsandwhostoodtogainnothingbyan ofconsiderationreceivedinsuchscenario.Moreover,undertheAndrepont factors,therewasnolegalorfactualrelationshipbetweenEnerQuestandthe Boones.Mr.BooneadmittedinhisdepositionthathehadnevermetLagneaux. Theintentionofthepartiesandthelanguageregardingdamagesis paramountinthejurisprudenceonstipulationspourautrui.InBroussardv. NorthcottExplorationCo.,Inc.,481So.2d125,127(La.1986),theLouisiana SupremeCourtfoundnostipulationpourautruiinfavoroftheplaintiffeven thoughanattempttomodifythelanguage,similartoAndrepont,wasmade.The 18 courtreiteratedthatastipulationpourautruiexistswhensomeadvantagetoathird personiscreatedasaconditionorconsiderationofacommutativecontract: Inordertodetermineifastipulationexists,wemustlook totheintentionofthepartiesatthetimetheminerallease wasnegotiated.Thiscanbestbeaccomplishedby comparingthestandarddamageclausefoundinthe originalversionofthemineralleasetothemodified versionagreedtobytheparties.Theunmodifiedversion oftheDamageClausereadasfollows: damagestotimberandgrowingcropsof Innegotiatingthemineralleasetheparties However,theydidnotmodifythemineralleaseto on,wecaneasily distinguishAndrepontv.AcadiaDrillingCo.,255La. 347,231So.2d347(1969),andHargroderv.Columbia GulfTransmissionCo.,290So.2d874(La.1974). Likewise,inLejeuneBros.,Inc.v.GoodrichPetroleumCo.,06-1557, p.8(La.App.3Cir.11/28/07),981So.2d23,29,writdenied,08-298(La.4/4/08), 978So.2d327,thecourtcomparedtheleaseatissuetotheleaseinBroussardand foundnostipulationpourautruiinfavoroftheplaintiffs: AsinBroussard,thedamageclauseintheBaez Leasewassimilarlymodified.Theoriginaldamage damagestotimberandgrowingcropsofLessorcaused the alldamagestoLessorca Thus,justasinBroussard,thedamagespermittedbythe BaezLeasewerelimitedtothedamagessufferedbythe Lessor,Mr.Baez.Thetrialcourtdidnoterrinfinding LeJeuneBrotherswasnotathirdpartybeneficiaryofthe BaezLease. 19 InWagonerv.ChevronUSAInc.,45,507(La.App.2Cir.8/18/10)55 So.3d12,writdenied,10-2773(La.3/2/12),83So.3d1032,whichwefind particularlyillustrativeduetothefactualsimilaritiesinvolvingthesamelegal issuesasthoseherein,thesecondcircuitfoundnostipulationpourautruiinfavor mineralleasewithaformer owner.Baseduponthesubsequentpurchaserdoctrine,findingnoconveyanceof rightsintheactsofsale,andfindingnolanguageconferringthirdpartyrightssuch asthelanguageinMagnoliaCoalTerminal,theWagonercourtfoundthatthe plaintiffhadnorighttosueforpre-acquisitiondamagesunderthemineralleases obtainedbythreeformeroilandgaslessees.Theassignees/lesseeswhowerestill ot dismissedinthejudgmentaffirmed. MorerecentlythanAndrepont,theLouisianaSupremeCourthas identifiedthreecriteriafordeterminingwhethercontractingpartieshaveprovided abenefitforathirdparty: 1)thestipulationforathirdpartyismanifestlyclear;2) thereiscertaintyastothebenefitprovidedthethird party;and3)thebenefitisnotamereincidentofthe contractbetweenthepromisorandthepromisee.... Themostbasicrequirementofastipulationpour autruiisthatthecontractmanifestaclearintentionto benefitthethirdparty;absentsuchaclearmanifestation, apartyclaimingtobeathirdpartybeneficiarycannot meethisburdenofproof.Astipulationpourautruiis neverpresumed.Thepartyclaimingthebenefitbearsthe burdenofproof. Josephv.HospitalServiceDist.No.2ofParishofSt.Mary,05-2364,pp.8-9(La. 10/15/06),939So.2d1206,1212(citationsomitted)(footnoteomitted); La.Civ.Codeart.1978;La.Civ.Codeart.1831;seealsoEaglePipeandSupply, A-7 MEALEY’S Fracking Report Vol. 1, #1 May 2014
  • 48. 20 Inc.,79So.3d246.Forthereasonssated,wefindthattheplaintiffshavenotmet theirburdenofprovingthattheyarethirdpartybeneficiariesunderthecontractsas asserted. The2002SurfaceLease TheBoonesarguethatthe2002surfaceleasebetweenLagneauxand EnerQuesthadaten-yearterm;thatitwaseffectiveuntil2012whichincludedthe ownershipoftheBooneswhopurchasedthepropertyinAugust,2005;andthat therewasnoevidencethatitwasassignedtoanotheroperator.Wedisagree.As previouslydiscussed,Lagneauxwithhelditsleasesandcontractualrightsfromthe assignmenttotheBoones,andinanyeventthesurfaceleasedidnotprovidefor damages.Itonlyprovidedforrestorationwhichwasnotdueuntilsixmonthsafter theleaseexpired.Alsoasdiscussed,theBooneswerenotpartiestothelease,and theleasedidnotprovideastipulationpourautruiinfavoroftheBoones. Moreover,theleasehadaneffectivedateofAugust1,2002,meaningthatitwould haveexpiredasofAugust1,2012,andtheBoonesdidnotobtaintheassignments SeeLejeuneBros.,Inc.,981So.2dat28. InadditiontotherebeingnovalidassignmentfromLagneaux,the recordisclearthatEnerQuestceaseditsoperationsonthepropertyasofApril30, 2004,andsoldallofitsphysicalandcontractualrights,includingitsleases,to .OnAp salealsoincludedallpersonalproperty,fixtures,facilities,tanks,pumps, equipment,machinery,wells,wellheads,licenses,permits,easements,rightsof 21 relatingtotheproperties.ThissalewaseffectiveonMay1,2004. Temphasisadded) includingwithoutlimitation,allrightswith respecttotheuseandoccupationofthesurfaceofandthesubsurfacedepthsunder gandabandon allwellsasrequiredbyregulatoryauthorities,tolevelalldumps,fillinallpits, removealldebris,andotherwiserestorethesurfaceofthelandasrequiredinthe mineralservitudeorleases,andtocomplywithallapplicableordersand regulations.Thus,thesurfaceleaserightsandobligationsweresoldandassigned , property,physical,contractual,orotherwise,afterApril30,2004,overayear beforetheplaintiffspurchasedthepropertyonAugust26,2005. TheBoonesarguethatEnerQuestoperatedonthepropertyuntil2004, andthatapersonalactionhasaliberativeprescriptionoftenyearsunder legislation,apersonalactioniss La.Civ.Codeart.3499.Thisarticlefollowsnumerousotherarticlesprovidingfor shorter,morespecificprescriptiveperiods,includingpreviouslydiscussedarticle 3492whichgovernsclaimsforpropertydamageandprovidesaone-year prescriptiveperiod.Withregardtoaten-yearprescriptiveperiodforapersonal actionarisingincontract,wehavealreadyfoundthattheBooneshavefailedto introduceanyevidenceofacontractbyEnerQuestthatgrantsthemarightof actionagainstEnerQuest.Accordingly,theBooneshavenotproducedevidence thatprovidesthemarightofactionintortorcontractagainstEnerQuest. 22 RelationBack InSeptember2012,twoandahalfyearsafterfilingsuitinMay2010, theBoonesfiledasecondsupplementalpetition.Thepetitionattachedthenewly obtainedassignments,attemptedtocreaterightsintheBoonesasassigneesofthe formerowners,reiteratedtheearliercausesofaction,andaddedcausesofaction forfraud,conspiracy,concertedaction,andconcealment.Forthefirsttime,it allegedacauseofactionundertheLouisianaEnvironmentalQualityAct,La.R.S. 30:2271-2281.TheBoonesassertthatthenewpetitionrelatedbacktotheoriginal petitionin2010.Wemustdisagree. EveniftheSeptember2012assignmentsfromthepreviousowners hadconferredvalidandtimelyrights,theassignmentsarosetwoandahalfyears aftertheoriginalpetitionwasfiledinMayof2010.Asdiscussed,thetortrights hadprescribedbeforetheoriginalpetitionwasfiled,andtheassignmentsdidnot conferarightofactionincontract.Therightssoughttobebestowedinthe assignmentswerenotexigibleatthetimeofsuitin2010.Therefore,theclaimsin thenewpetitionweresupplemental,notamending,nomatterhowthecaptionof thepetitionreads, amendingpetitions.Smithv.CutterBiological,99-2068(La.App.4Cir.9/6/00), 770So.2d392.3 - Allenv.State,Dept.ofPublicSafety& Corrections,12-430,p.6(La.App.3Cir.11/7/12),107So.3d106,110(quoting 3,apartymayamenditspetitionifthenewclaims accruedpriortofilingtheoriginalsuit;underArticle1155,apartymaybepermittedtofilea supplementalpetitionsettingforthrelateditemsofdamageorcausesofactionthatbecame exigibleaftertheoriginalpetitionwasfiled;buttherelationbackofArticle1153appliesonlyto theamendedpetition.SeeCutterBiological,770So.2dat411-12. A-8 MEALEY’S Fracking Report Vol. 1, #1 May 2014
  • 49. 23 CutterBiological,770So.2dat413).Nordoesanoriginalpetitionfiledbyaparty withoutarightofactiontofileit.SeeNaghiv.Brener,08-2527(La.6/26/09),17 So.3d919. InTCCContractors,Inc.v.HospitalServiceDist.No.3ofParishof Lafourche,10-685,p.22-23(La.App.1Cir12/8/10),52So.3d1103,1116-17,the firstcircuitfoundthatclaimsarisingviaanassignmentdidnotbecomeexigible priortothedateoftheassignment: [O]urlaw,asinterpretedinthejurisprudence,holdsthat inorderforthedoctrineofrelationbacktoapplyandto circumventtheeffectofprescription,anewcauseof actionassertedinanamendedpetition(1)musthave beeninexistenceatthetimetheoriginalpetitionwas filed;(2)musthavebeenvestedintheplaintiffsatthat oroccurrencesetforthorattemptedtobesetforthinthe Becauseacivilactionbydefinitioncanbebrought onlybyapersonhavingarightofaction,itstandsto reasonthatanactioninstitutedbyapersondeterminedto legallyviableclaimtowhichthepleadingcanrelate back.Naghiv.Brener,08-2527,p.10(La.6/26/09),17 So.3d919,925.... characteroftherightto socanbegivenlegaleffectonlyfromtheeffectivedate oftheassignment,andtheassignmentcouldnot retroactivelycuretheinitialabsenceofarightofaction bytheplaintiffs. 24 Accordingly,theclaims petitiondonotrelatebacktotheoriginalpetition.4 Moreover,asfullydiscussed above,theassignmentsdonotconferexistingrights.Additionally,theBoones havenotshownthattheyhadanexigibleclaimunderLa.R.S.30:2276atthetime oftheoriginalpetitionoratthetimetheLEQAclaimwasfirstallegedinthe secondsupplementalpetition.Contrarytotheallegationsinthepetitions,Mr. BoonetestifiedinhisdepositiononMay8,2013,thathehadnotincurredany remediationcostsasrequiredbyLa.R.S.30:2276(G)(3).SeeMargone,LLCv. AddisonResources,Inc.,04-70(La.App.3Cir.12/15/04),896So.2d113,writ denied,05- assertionsinbrief,theoriginalandfirstsupplementalpetitionsdonotassert solidaryliability,andtheadditionalclaimsandcausesofactioninthesecond supplementalpetitiondonotrelatebacktotheoriginalpetition. V. CONCLUSION Baseduponthe grantingthemotionforsummaryjudgmentandexceptionofprescriptioninfavor ofEnerQuestOil&Gas,LLC.Costsofthisappealareassessedtotheplaintiffs, CarlosandLoriBoone. AFFIRMED. 4 tionoftheirstatuschangeasoneofasimplechangein capacityandthereforeanalogoustoGiroirv.SouthLouisianaMedicalCenter,Div.ofHospitals, 475So.2d1040(La.1985),ismisplaced.Thewrongfuldeathclaimthatwasallowedtorelate backinGiroirhadaccruedpriortothetimeofthefilingoftheoriginalpetition. A-9 MEALEY’S Fracking Report Vol. 1, #1 May 2014
  • 50. PARRv.ARUBAPETROLEUMPLTFVERDICT B-1 MEALEY’S Fracking Report Vol. 1, #1 May 2014
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  • 53. B-4 MEALEY’S Fracking Report Vol. 1, #1 May 2014
  • 54. INTHEUNITEDSTATESDISTRICTCOURT FORTHEMIDDLEDISTRICTOFPENNSYLVANIA THOMASA.NEUHARDand:CaseNo.4:11-cv-01989 BARBARAS.NEUHARD,: : Plaintiffs,: : v.:(JudgeBrann) : RANGERESOURCES–: APPALACHIA,LLC,: : Defendant.: MEMORANDUM April30,2014 Thiscaseconcernsadisputeoveranoilandgasleaseexecutedbythe Parties.ThomasA.NeuhardandBarbaraS.Neuhard(“Plaintiffs”or“the Neuhards”or“Lessors”)initiatedthecasebyfilingaComplaintintheCourtof CommonPleasofLycomingCountyonSeptember28,2011(ECFNo.1,Ex.A). TheNeuhardsseekaDeclaratoryJudgmentclarifyingthattheoilandgaslease (“Lease”)thattheyenteredintowiththeDefendant,RangeResources–Appalachia, LLC(“Defendant”or“Range”or“Lessee”)expiredbyitsownterms.1 OnOctober28,2011,theDefendantremovedthiscasetoFederalCourt 1 TheDefendantwasGreatLakesEnergyPartners,LLCatthetimethePartiesexecuted theLease.TheDefendantlaterchangeditsnametoitscurrentform:Range Resources—Appalachia,LLC. 1 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page1of37 basedondiversityjurisdiction,pursuantto28U.S.C.§1332and28U.S.C.§1441 (ECFNo.1).2 Then-ChiefUnitedStatesDistrictCourtJudgeYvetteKane presidedoverthecaseuntilitwasreassignedtoUnitedStatesDistrictCourtJudge RobertD.MarianionNovember16,2011.Thecasewassubsequentlyreassigned totheundersignedonJanuary17,2013. TheDefendantfiledanAnswerwithaffirmativedefenses,andmadea counterclaimseekingadeclaratoryjudgmentthattheLeaseisvalid(ECFNo.7). ThePlaintiffsfiledananswertothecounterclaim(ECFNo.8).Discoverywas thenconducted. ThecaseispresentlybeforetheCourtontheParties’crossmotionsfor summaryjudgment(ECFNos.22,23,24,25,26,27,28,29,30,31,32,33,34). TheCourtheldoralargumentonthemotionsonMarch26,2014.Thereareno materialfactsindispute,andtheissuesbeforetheCourtinvolveinterpretationof contractprovisionsasamatteroflaw.ThePartieshavefullybriefedtheissuesand thecaseisnowripe.Consequently,thecaseisamendabletodispositioninits currentposture. Aselaboratedbelow,theNeuhards’MotionforSummaryJudgmentshould 2 ThePlaintiffsarecitizensofPennsylvania.TheDefendantisalimitedliability companyorganizedunderthelawsofthestateofDelaware. 2 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page2of37 begranted.RangeResource’sMotionforSummaryJudgmentshouldbedenied. I.BACKGROUND OnJune21,2006,thePartiesexecutedanOilandGasLease.Pls.’ StatementMaterialFacts¶1,Dec.14,2012,ECFNo.23[hereinafter“Pls.’SOF”]. TheLeaseprovidedRangetherightstoprocureoilandgasfromforty-seven(47) acresownedbytheNeuhardssituateinLewisTownship,LycomingCounty, Pennsylvania.3 Id.¶4.TheLeasecontainsaprimarytermoffiveyearscalculated fromJune21,2006.Pls.’Br.Supp.Mot.Summ.J.Ex.1,Dec.14,2012,ECFNo. 26[hereinafterPls.’Br.Supp.].Unlessextendedbythecommencementofdrilling operationsorasotherwiseprovided,theLeasewouldexpirebyitsowntermson June21,2011. OnJune13,2011,RangeexecutedaDesignationofUnitdocumentforthe “NullEugeneAUnit,”whichitfiledwiththeLycomingCountyRecorderof DeedsonJune15,2011.Def.’sStatementMaterialFacts¶28,Dec.14,2012,ECF No.27[hereinafter“Def.’sSOF”].TheDesignationofUnitDocumentindicates that“byvirtueoftheauthorityconferredbythetermsoftheleases”itcreatesa 3 AtsomepointduringtheperiodbetweenJune21,2006andJune21,2011,the Neuhardsweredivorced.Inthepropertysettlementagreement,BarbaraNeuhardbecamethe soleownerofthesurfaceofthe47acres,andThomasandBarbaraNeuhardretained,equally, theirownershipinterestsinthesubsurfacerightstotheproperty;theserightsincludetheoiland gascontemplatedintheLease. 3 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page3of37 NEUHARDv.RANGERESOURCES C-1 MEALEY’S Fracking Report Vol. 1, #1 May 2014
  • 55. 395.0638acreproductionunitcomprisedofnineseparatelyownedparcelsofland thatincludestheNeuhards’47acres.Def.’sBr.Supp.Mot.Summ.J.,Ex.2(T), Dec.14,2012,ECFNo.26[hereinafterDef.’sBr.Supp.].Anon-materialfact remainsdisputedwhetherRangenotifiedtheNeuhardsoftheunitplanandtheir filingtheDesignationofUnitdocumentpriortoJuly7,2011. Rangedid,however,acquireaRoadRightofWayAgreementsignedby BarbaraNeuhardonJune16,2011.Def.’sSOF,¶30.TheAgreementprovided Rangetherighttowidenandgradeaturnonalocalroadtomakeiteasierfor Range’strucktraffictoaccessthesurfacelocationfromwhichtheyintendedto drillthe“1H”gaswellontheNullproperty.RangepaidBarbaraNeuhard$3,000 asconsiderationforthisAgreement.Id.¶¶31,41. Rangeengagedinnumerousotherpreparatoryactivitiespriortodrilling throughoutthespringof2011.Rangeobtainedseveralmandatorypermitsfrom stateandlocalregulatoryagencies,includingdrilling,zoning,anddevelopment permits.Id.¶¶11,13,14,16–18,22,24.Rangecontractedwithanengineering firmtodesignagradinganderosioncontrolplanforthewellpadsite,andentered intovariousagreementswithotherlandownersregardingitsconstruction.Id.¶¶9, 23,26.OnMay28,2011Rangebeganconstructingtheaccessroadsandpadsite forthewell.Id.¶25. 4 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page4of37 OnJuly1,2011,theNeuhards,byandthroughcounsel,notifiedRangethat itwastheNeuhards’positionthatRangehadfailedtocommenceawellonthe Neuhards’“LeasedPremises,”withinthefiveyearprimarytermoftheLease,and therefore,thattheLeaseexpiredbyitsownterms.Pls.’SOF,¶12.Range respondedbyletterdatedJuly7,2011,statingthatitbelievedthatitmaintainedthe LeasebythecommencementofawellonacreageunitizedwiththeNeuhards’ LeasedPremisespriortotheexpirationoftheLease’sprimaryterm. Rangethencontinueditsdevelopmentoftheproperties.BetweenMay28 andSeptember15,2012,Rangedrilledthreewellsthatextendindifferent directionsfromthesameinitialwellpad,utilizingcontemporaryhorizontaldrilling technologynotavailableinPennsylvaniaatthetimetheLeasewassigned.See Def.’sSOF,¶¶32–51.Thewellboresoftwoofthethreewellspassunderand throughtheNeuhards’47acres.Id.¶51.AsofDecember2012,Rangehad expendedapproximately$4,000,000inconnectionwithdrillingandcompletingthe wells.Id.¶49. II.DISCUSSION A.LegalStandards 1.SummaryJudgmentStandard Summaryjudgmentisappropriatewhen“thereisnogenuinedisputeasto 5 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page5of37 anymaterialfactandthemovantisentitledtoajudgmentasamatteroflaw.”FED. R.CIV.P.56(a);CelotexCorp.v.Catrett,477U.S.317,330(1986).Agenuine issueofmaterialfactexistsonlyif“theevidenceissuchthatareasonablejury couldfindforthenonmovingparty.”Andersonv.LibertyLobby,Inc.,477U.S. 242,248(1986).Whenthecourtconsiderstheparties’arguments,“[t]heevidence ofthenon-movantistobebelievedandalljustifiableinferencesaretobedrawnin hisfavor.”Id.at255. Theburdenofestablishingthenonexistenceofa“genuineissue”isonthe partymovingforsummaryjudgment.InreBressman,327F.3d229,237(3dCir. 2003)(internalcitationsomitted).Themovingpartymaymeetthisburdenby either(1)submittingpositiveevidencethatnegatesanessentialelementofthe nonmovingparty’sclaim;or(2)demonstratingthatthenonmovingparty’s evidenceisinsufficienttoestablishanessentialelementofthenonmovingparty’s case.Id.at331. Indecidingthemeritsofaparty’smotionforsummaryjudgment,thecourt’s roleisnottoevaluatetheevidenceanddecidethetruthofthematter,butto determinewhetherthereisagenuineissuefortrialorwhetherjudgmentasamatter oflawisproper.Anderson,477U.S.at249.Thestandardbywhichthecourt decidesasummaryjudgmentmotiondoesnotchangewhenthepartiesfilecross- 6 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page6of37 C-2 MEALEY’S Fracking Report Vol. 1, #1 May 2014
  • 56. motions.Weissmanv.UnitedStatesPostalServ.,19F.Supp.2d254,259(D.N.J. 1998).Whenrulingoncross-motionsforsummaryjudgment,thecourtmust considerthemotionsindependently,Williamsv.PhiladelphiaHousingAuthority, 834F.Supp.794,797(E.D.Pa.1993),aff’d,27F.3d560(3dCir.1994),andview theevidencepresentedforeachmotioninthelightmostfavorabletothe nonmovingparty.SeeMatsushitaElec.Indus.Co.,Ltd.v.ZenithRadioCorp., 475U.S.574,587(1986). 2.RulesofContractConstruction TheCourtexercisesdiversityjurisdictionoverthiscase,andthereforestate substantivelawapplies.4 See,e.g.,ErieR.Co.v.Tompkins,304U.S.64,91–92 (1938).UnderPennsylvanialaw,“aleaseisinthenatureofacontractandis controlledbyprinciplesofcontractlaw.”T.W.PhillipsGas&OilCo.v.Jedlicka, 615Pa.199,208,42A.3d261,267(2012).Accordingly,“[t]heobjectin interpretinginstrumentsrelatingtooilandgasinterests,likeanywritten instrument,‘istoascertainandeffectuatetheintentionoftheparties.’” 4 “IntheabsenceofacontrollingdecisionbytheSupremeCourtofPennsylvania,a federalcourtapplyingthatstate’ssubstantivelawmustpredicthowPennsylvania’shighestcourt woulddecide”anissue.Berrierv.SimplicityMfg.,Inc.,563F.3d38,45–46(3dCir.2009).“In predictinghowthehighestcourtofthestatewouldresolvetheissue,[theCourt]mustconsider relevantstateprecedent,analogousdecisions,considereddicta,scholarlyworks,andanyother reliabledatatendingconvincinglytoshowhowthehighestcourtinthestatewoulddecidethe issueathand.”Id.at46(internalquotationsomitted). 7 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page7of37 Szymanowskiv.Brace,2009Pa.Super.218,987A.2d717,720(Pa.Super.Ct. 2009)(quotingHessv.Jones,335Pa.569,7A.2d299(1939)). “Itisagenerallyacceptedpropositionthatwhenthetermsofawritingare plainandunambiguous,thereisnoroomforinterpretationorconstructionsince theonlypurposeofjudicialconstructionistoremovedoubtanduncertainty.”11 RICHARDA.LORD,WILLISTONONCONTRACTS§30:4(4thed.2013);seealso Steuartv.McChesney,498Pa.45,48–49,444A.2d659,661(1982).“The meaningofanunambiguouscontractpresentsaquestionoflaw....”Leskov. FrankfordHosp.–BucksCnty.,609Pa.115,124,15A.3d337,342(2011).The “focus...isuponthetermsoftheagreementasmanifestlyexpressed,ratherthan as,perhaps,silentlyintended.”Steuart,444A.2dat661. Acourtmustconsiderthetextasawholewhenconstruingthelanguage’s operativeeffect.Contrans,Inc.v.RyderTruckRental,Inc.,836F.2d163,169(3d Cir.1987).“[A]llprovisionsintheagreementwillbeconstruedtogetherandeach willbegiveneffect...wewillnotinterpretoneprovisionofacontractina mannerwhichresultsinanotherportionbeingannulled.”LJLTransp.,Inc.v.Pilot AirFreightCorp.,599Pa.546,560,962A.2d639,647–48(2009)(internal citationsomitted).“[A]contractshouldbereadsoastogivemeaningtoallofits termswhenreadasanentirety.”Contrans,836F.2dat169. 8 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page8of37 TheCourtassumesgenerallythatthepartiesusedwordsintheir“commonly acceptedandplainmeaning.”Steuart,444A.2dat661.TheCourtalso recognizes,however,“thateveryagreementismadeandtobeconstruedwithdue regardtotheknowncharacteristicsofthebusinesstowhichitrelates...andhence thelanguageusedinacontractwillbeconstruedaccordingtoitspurportinthe particularbusiness.”FranklinSugarRef.Co.v.Howell,274Pa.190,118A.109, 110(1922).TheCourtwillnot“relyuponastrainedcontrivancy”toestablish ambiguity.Steuart,444A.2dat663.Rather,theCourtseekstobefaithfultothe meaningthatthepartieswouldhavegiventhelanguageatthetimeofcontracting, giventheirrespectivepositions.FelmontOilCorp.v.Cavanaugh,300Pa.Super. 520,525,446A.2d1280,1283(Pa.Super.Ct.1982). B.TheMerits ThelanguageoftheLease,Range’sactivities,andthepositionsofthe Partiesraisethreelegalissues.Theissuesareinterrelated,astheresolutionofthe firstissuenecessarilyimpactstheresolutionofthesecondandthirdissues. First,didRange’sactivitiespriortoJune21,2011,theexpirationdateofthe Lease’sprimaryterm,constitutethe“commencementofawell”asamatteroflaw? IfRange’sactivitypriortoJune21,2011constitutedthecommencementofawell asamatteroflaw,thentoextendtheLeaseeither:second,Rangemusthave 9 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page9of37 C-3 MEALEY’S Fracking Report Vol. 1, #1 May 2014
  • 57. validlyunitizedtheNehaurds’propertyundertheLease’sterms,or,third,Range’s actualdrillingactivitythatwassufficienttoconstitutethecommencementofawell wasdone“ontheLeasedPremises.”5 TheCourtfirstarticulatesthematerialportionsoftheLeaseandtheir operation,andthenaddressesthesethreeissuesseriatim. 1.MaterialProvisionsoftheLease Oilandgasleasestypicallycontainaprimarytermoffixedduration, expressedasanumberofyears.Thehabendumclauseofanoilandgaslease, whichgenerallyestablishestheprimaryterm,describes“thedurationoftheinterest granted,subjecttomodificationbyotherprovisionscontainedintheleasewhich mayprovideforanextensionofthelease.”3-27EUGENEKUNTZ,ETAL.,KUNTZ, LAWOFOILANDGAS§27.1(2013).Suchaleasewillterminateattheexpiration ofitsprimarytermiftheLesseehasnotengagedinthoseactsprescribedinthe leasethatmodifythedurationoractivateasecondaryterm. TheLeasesubjudicearticulatesitsprimarytermasfollows: 1.1ItisagreedthatthisAgreementshallremaininforceforaterm offiveyearsfromthedatefirstwrittenabove(hereinafterdesignated “PrimaryTerm”),andshallcontinuefromyeartoyearthereafterfor solongas...theLesseeisengagedinabonafideattempttosecure 5 Theissuesinthiscaserelateasalogicalconjunctionasillustrated: ExtensionofLease=CommencementAND(onvalidUnitORonLeasedPremises). 10 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page10of37 orrestoretheproductionofoil,gasand/orcoalbedmethanegasor otherliquidhydrocarbonsbyconductingdrillingorreworking operationsontheLeasedPremises.... Def.’sBr.Supp.Ex1,at2,§1.1[hereinafterLease]. ThecommencementclauseoftheLeasebothprescribestheLease’s automaticterminationattheendofitsprimaryterm(absenttheLessee’sactionto extendtheLease)andprovidesthemeansbywhichtheLesseecanactivatethe secondarytermoftheLease: 8.1Unlesssoonerterminatedasotherwisehereinprovided,Lessee shallcommenceawellontheLeasedPremisesoronaspacingunit containingaportionoftheLeasedPremises,withinfive(5)years fromthedatefirstwrittenaboveandshalldrillsaidwellwithdue diligence.Intheeventtheaforesaidwellisnotcommencedwithin suchfive(5)yearperiod,thisAgreementshallbeautomatically terminatedinitsentirety,unlessLessorapprovesinwriting,thirty (30)daysinadvanceoftheanniversarydateofthisAgreement,the continuationofthisAgreementonayear-to-yearbasis. Lease,§8.1(emphasisadded). Readtogether,thesetwoprovisionsallowtheLesseetoextendtheprimary termoftheLeasebeyondJune21,2011iftheLesseecommencedawellonthe LeasedPremisesoraunitcontainingaportionoftheLeasedPremisesbeforethe expirationoftheprimaryterm.6 IftheLesseedidnotfulfillthoseconditions,the 6 TheLesseedidnotseekanextensionoftheLeaseinwritingnordidtheLessorapprove anysuchextension.ThepossibilityofextendingtheLeaseinthismannerisnotatissue. 11 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page11of37 Leaseexpiredbyitsowntermsattheendoftheprimaryterm. 2.Range“CommencedaWell”asaMatterofLaw Thephrases“conductdrillingoperations”and“commenceawell,”as utilizedinthisLease,areconstruedbroadlytoincludeactivitiesoftenperformedin preparationfordrilling—thephysicalactofdrillingbeforetheexpirationofthe primarytermisnotanecessaryprerequisitetoextendalease.ThisCourtrecently decidedthisparticularissueinRoev.ChiefExploration&DevelopmentLLC, 4:11-cv-00816,2013WL4083326(M.D.Pa.Aug.13,2013),findingthatactivity undertakeningoodfaithinpreparationtodrillsatisfiedalease’scommencement clause.TheCourtcitedtolearnedtreatisesthatexplain: Thegeneralruleisthatactualdrillingisunnecessary,butthelocation ofwellsites,haulinglumberonthepremises,erectionofderricks, providingawatersupply,movingmachineryonthepremisesand similaractspreliminarytothebeginningoftheprocessofdrilling, whenperformedwiththebonafideintentiontoproceedwithdiligence towardthecompletionofthewell,constituteacommencementor beginningofawellordrillingoperationswithinthemeaningofthe lease. NANCYSAINT-PAUL,SUMMERSOILANDGAS§15:10(3ded.2013);seealso PemcoGas,Inc.v.Bernardi,5Pa.D.&C.3d85,92,1977WL260(Pa.Com.Pl. 1977).Anothertreatisestates: Althoughthereissomelimitedauthoritytothecontrary,ingeneralit appearsthatthecourtshavebeenreadytofindthecommencementof operations(orthepursuitofdrillingoperations)whereonlythemost 12 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page12of37 C-4 MEALEY’S Fracking Report Vol. 1, #1 May 2014
  • 58. modestpreparationsfordrillinghavebeenmade... ... Inbrief,drillingoperationsmaybedescribedasanyworkoractual operationsundertakenorcommencedingoodfaithforthepurposeof carryingoutanyoftherights,privilegesordutiesofthelesseeundera lease,followeddiligentlyandinduecoursebytheconstructionofa derrickandothernecessarystructuresforthedrillingofanoilandgas well,andbytheactualoperationofdrillingintheground. PATRICKH.MARTIN&BRUCEM.KRAMER,WILLIAMS&MEYERS,OILANDGAS LAW§618.1(2013). Pennsylvaniacasesadoptthispostureaswell.See,e.g.,Hendersonv. Ferrell,183Pa.547,38A.1018(1898);Bernardi,5Pa.D.&C.3dat92–96;see alsoGoodWillHuntingClub,Inc.v.RangeRes.-Appalachia,LLC,4:11-CV- 1152,2013WL2297170,*17–18(M.D.Pa.May24,2013).Forexample,inthe nowseminalcaseofPemcoGas,Inc.v.Bernardithatcourtheldthatthedefendant “hadcommencedoperationswithinthegenerallyacceptedmeaningofthatphrase.” Bernardi,5Pa.D.&C.3dat95.Intheperiodfromthreemonthspriortothe expirationofthatleasetothedaytheprimarytermexpired,thedefendantsurveyed thesite,begannegotiationsconcerningthelocationofthesiteandthelocationof theright-of-waywiththeplaintiffs,acquiredaright-of-wayoveraneighboring property,hiredcontractorstodotheexcavationanddrillingwork,appliedforand 13 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page13of37 acquiredadrillingpermit,andplacedpipeonthesite.7 Id.at95–96. Similarly,theSupremeCourtofPennsylvaniahasheldthatthepreparatory actionsofstakingthelocationofawellandattemptingtounloadlumberatthesite onthefinaldayoftheprimarytermconstituteddrillingoperationssufficientto extendthelease.Henderson,38A.at1019.Thisactivitycomprisedthe commencementofdrillingoperationsasamatteroflaw.Id. InthecasebeforetheCourt,Range’sactivitiesbeforetheexpirationofthe Lease’sprimarytermonJune21,2011included,butwerenotlimitedto:(1) obtainingregulatorypermitsandapprovalsfromgovernmentagencies;(2)staking thelocationforthewelldrillsite;(3)negotiatingagreementswithPlaintiffsand neighboringlandownersregardingdrillingoperations;(4)obtainingeasements;(5) removingtimber;and(6)constructingroadaccessandthepadsiteforthewellto begindrilling.Theseactivitiesaresufficienttoconstitutethecommencementofa wellasamatteroflaw.8 See,e.g.,Bernardi,5Pa.D.&C.3dat95–96;Henderson, 38A.at1018–19;SUMMERSOILANDGAS§15:10;WILLIAMS&MEYERS,OILAND 7 AdditionalcasesofpersuasiveauthoritydiscussedbythecourtintheBernardidecision include:Allenv.Cont’lOilCo.,255So.2d842(La.1971);Waltonv.Zatkoff,372Mich.491, 127N.W.2d365(1964);Petersonv.RobinsonOil&GasCo.,356S.W.2d217(Tex.1962); Jonesv.Moore,338P.2d872(Okla.1959). 8 ThePlaintiffsdonotcontestthattheDefendant’sactionsweredoneingoodfaithand thattheDefendantdiligentlycontinuedthedrillingoperations. 14 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page14of37 GASLAW§618.1. 3.Unitization EventhoughRange’sactivitiesinbeginningthewellontheneighboring Nullpropertysatisfiedthecommencementclauseasamatteroflaw,bytheterms oftheLeasethosedrillingactivitiesmusthavebeenpreformedeither“onthe LeasedPremisesoronaspacingunitcontainingaportionoftheLeasedPremises” inordertoextendtheLease.Lease,§8.1.Range’sactivitiespriortothe expirationoftheprimarytermwerenot“ontheLeasedPremises.”9 Id. Consequently,theymusthavebeenperformed“onaspacingunitcontaininga portionoftheLeasedPremises”inordertoextendtheLease.Id. Unitization,acommonpracticeoftheoilandgasindustrythatcreatesunits contemplatedintheLease,“referstotheconsolidationofmineralorleasehold interestsinoilorgascoveringacommonsourceofsupply.”10 AmocoProd.Co.v. Heimann,904F.2d1405,1410(10thCir.1990).Theconsolidatedunitof “leaseholdinterestscoveringallorpartofacommonsourceofsupply...[serves] 9 TheCourtelaboratesonthisissueinthefinalsubsection(4)below. 10 “Althoughtheterms‘pooling’and‘unitization’arefrequentlyusedinterchangeably, moreproperly‘pooling’meansthebringingtogetherofsmalltractssufficientforthegrantingof awellpermitunderapplicablespacingruleswhereas‘unitization’...meansthejoinoperation ofallorsomepartofaproducingreservoir.”6-9WILLIAMS&MEYERS,OILANDGASLAW§ 901. 15 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page15of37 C-5 MEALEY’S Fracking Report Vol. 1, #1 May 2014
  • 59. tomaximizeproductionbyefficientlydrainingthereservoir.”1B.KRAMER&P. MARTIN,THELAWOFPOOLINGANDUNITIZATION§1.02(3ded.2013). Furthermore,“thegoalsofunitizationareconservingresourcesbypreventing wasteandprotectinglandowners’correlativerights.”11 Heimann,904F.2dat 1410–11. Underatypicaloilandgaslease,absentgovernmentinvolvement,the lessee’sonlyauthoritytounitizetheleasedpremiseswithotherlandsisderived fromthepermissiongrantedtothelesseebythelessor,expressedinthetermsof theleaseagreement.Amoco,904F.2dat1411(citingKRAMER&MARTIN,§8.01). Oncealessorgrantsthelesseethatinterestinalease,however,thelesseepossess thepowertounitizethelessor’sinterestwithoutfurtherconsent.Id. Consequently,alessorcanlimitthatauthorityinanywayinthetermsofthe agreementtoprotectitsinterests.Thelesseeretainsfreedomofcontractandisnot obligedtocontractwithalessordemandingunreasonableorobjectionable unitizationconditions.Nevertheless,whenalesseesignsanoilandgaslease,its unitizationauthorityextendsonlysofarasthetermsofthatleaseprovide. “Despitetheattitudethatthepoolingclauseistobeliberallyconstrued,each 11 “Correlativerightsarerightswhichoneownerpossessesinacommonsourceofsupply inrelationtothoserightspossessedbyotherownersinthesamecommonsourceofsupply.” Heimann,904F.2dat1411n.4(quotingUnitedPetroleumExplorationv.PremierRes.,511F. Supp.127,129(W.D.Okla.1980))(internalquotationsomitted). 16 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page16of37 poolingclausemustbecarefullyexaminedforspecificprovisionsthatrestrictthe power,prescribethemannerinwhichitmaybeexercised,anddescribethe consequenceofitsexercise.”4-48KUNTZ,LAWOFOILANDGAS§48.3(a)(1). TheconcreteissuebeforetheCourtiswhetherRange’sdesignationofaunit ofapproximatelythreehundredninety-five(395)acresexceededitsunitization authorityundertheLease.TheNeuhardscontendthatRangewaslimitedto creatingaunitof350acresbythetermsoftheLease. I.MaterialProvisionsRegulatingUnitizationAuthority andWellSpacing TheunitizationportionoftheLeaseprovides: Lesseeshallhavetherightatanytimeortimestopooland consolidatetheLeasedPremises,inwholeorinpartorastoany stratumorstrata,withlandsorleasesadjacenttoorintheimmediate vicinityoftheLeasedPremises,soastoconstituteaunitorunitsfor thepurposeofentering,withtheownersand/orlessees,intojoint operatingagreementsprovidingforthejointoperationand developmentoftheLeasedPremisesorportionsthereofwith adjoininglandstopreventthedrillingofanexcessnumberofwellsor ofwellslocatedtooclosetotheboundaryoftheLeasedPremises, providingthatsaidunitorpoolisnotarbitraryandtheacreage constitutingtheunitorpooliscomprisedofaminimumof50%ofthe Lessor’sacreageORLessorhasapprovedsuchunitizationinwriting toLessee.Intheabsenceofanyspacingorder,rule,orregulationof thePennsylvaniaDepartmentofEnvironmentalProtection,anysuch unitorunitsshallbelimitedinsizetotheareasurroundingeachwell providedforinSection9.2above. Lease,§12.1. 17 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page17of37 Section12.2furtherprovidesthat“drilling...operationsupon...anysuch unitshallbetreated,forallpurposeshereunder,asoperationsupon...theLeased Premises.”Lease,§12.2.Section9.2,however,limitsthemaximumsizeofeach unitcreatedundertheLease,asitreads: Lesseeshallnotberequiredunderthisprovisiontodrillmorewells thanrequiredorallowedunderanyspacingorder,rule,orregulation ofthePennsylvaniaDepartmentofEnvironmentalProtection,orin theabsenceofanysuchorder,morethanonewellinthe...(iv) threehundredfifty(350)acresaroundeachwellfromwhichgasis beingproducedastheprincipalproductfromdepthsabovethetopof theOnondagaFormation. Lease,§9.2(emphasisadded). TheNeuhardssubmitthat,bytheplainlanguageofthelease,theacreage amountsarticulatedinsection9.2operatesoastolimitthemaximumextentofa unit’ssizetothe350acressurroundingeachwell,basedontheallusiontosection 9.2insection12.1.Underthisconstruction,Rangeexceededitsunitization authority.12 Incontrast,Rangecontendsthatreadingsections9.2and12.1together limitsRange’spoolingauthorityinthreeways:(1)theunitmustnotbearbitrary; (2)thepooledunitmustbecomprisedofaminimumof50%oftheNeuhards’ 12 TheNeuhardsdidnotapproveRange’sunitizationinwritingascontemplatedbythe Lease. 18 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page18of37 C-6 MEALEY’S Fracking Report Vol. 1, #1 May 2014
  • 60. acreage;and,(3)thetotalacreageintheunitmustnotexceed350acres surroundingeachwellintheunit.Rangesubmitsthatbasedonthislanguage,it hasauthoritytocreateaunitcontainingthreewellswithanacreagelimitationof 1050acres(theproductof3wellswith350acresaroundeach).UnderRange’s interpretation,theexerciseofitsunitizationauthoritywasproper. TheLeasedoescontemplatethepossibilityofmorethanonewellperunit, suchthatRange’sinterpretationisplausible.TheLease,however,requiresthe LesseetoobtaintheLessor’spermissioninordertodrillmorethanonewellper unit.TheLeaseprovides: Wellspacingshallnotbecloserthanone(1)wellperspacingunitas indicatedinSection9.2,unlessLesseehasobtainedwrittenapproval fromtheLessor,whichshallnotbeunreasonablywithheldordelayed .... Lease,§10.2. ii.RangeExceededItsUnitizationAuthority EachParties’constructionoftheLeaseispartlyaptandpartinerror.The Lease’sprovisions,particularlyconcerningunitizationandwellspacing,manifest atleastthreeintereststhatconflictinthecurrentdispute:(1)theNeuhards’interest inensuringtheirmineralestatecomprisesanappropriatepercentageofanyunit 19 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page19of37 producingoilorgas,sothattheirroyaltiesarenotdiluted;13 (2)allParties’ (primarilythelandowners)interestsinminimizingsurfacedisruptionfrom drilling;14 and,(3)Range’sinterestindrillingwellsasefficientlyaseconomically possible.15 Allthreeoftheseinterestsarerepresentedinvaryingdegreeindifferent termsoftheLease,andtheconfluenceoftheseinterestsisthefocalpointfor resolutionofthecurrentdispute. a.TheLease’sPlainTermsLimitMaximumUnit Sizeto350AcresAbsentPermission TheCourtholdsthatRange’sunitdesignationviolatesitsunitization authorityundertheplainandunambiguoustermsoftheLease,becausetheLeaseis clearthataunitcannotbelargerthan350acressurroundingeachwellintheunit, andaunitcannotcontainmorethanonewellwithoutthepermissionoftheLessor, 13 ThisinterestiseffectuatedintheoperationoftheLease’sterms,forexample, construingtogethersections12.1,9.2,and10.2,astheCourtsubsequentlyelaborates. 14 ThisinterestisexpressedintheLease’slanguage,forexample:“Lesseeagreestodrill suchwellsasareasonablyprudentoperatorwoulddrill...todevelopandproducefromthe LeasedPremisesefficiently,economically,withoutwaste,andtothebestadvantageofLessor.” Lease,§10.1.Theinterestisalsoexpressedinthislanguage:“[t]heLeasedPremisesare continuouslyusedfordomestic,agriculture,recreational,andotherpurposes,andmanyactivities maybeinprogressonthelands.Hence,Lesseeshallconductitsoperationssoastominimize interferencewiththeotheractivitiesontheseLeasedPremises.”Lease,§7.1. 15 ThisinterestisevidentasatextualmatterthroughouttheLease,mostpertinentlyinthe introduction:“LesseeisdesirousofleasingLessor’soil,gasandcoalbedrightscontainedin,on, andundertheLeasedPremisesforthepurposeofexploringfor...drilling,operating,producing andremovingoil,gas,coalbedmethanegasandliquidhydrocarbonstherefrom.”Lease, Introduction. 20 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page20of37 whichRangedidnotobtain.Steuart,444A.2dat661;seealsoTrans-Western Petroleum,Inc.v.U.S.GypsumCo.,584F.3d988,994–95(10thCir.2009) (Holloway,J.)(affirmingadistrictcourt’sdecisionfindingaleaseexpiredbyits termsattheendofitsprimarytermbecausethedefendant’sunitizationscheme contradictedtheunambiguoustermsofthelease). TheNeuhards’interestinensuringtheirland(androyaltypayment) comprisesanappropriatepercentageofanyunitproducingoilandgastois protectedbymultipleprovisions,boththosemandatingaminimumutilizationof theNeuhards’land(section12.1)andamaximumsizeofanyunit(section9.2). Section12.1createstheunambiguousrequirementthattheLesseeuseaminimum of50%oftheNeuhards’47acresinanyunitincludingtheNeuhards’land.This ensuresthattheNeuhards’landwillbeincludedinaunitinatleastaminimum amounttheNeuhards’deemedsufficientatthetimeofsigningthecontract,namely 50%oftheir47acres. Furthermore,readingsections9.2and10.2together,itiscleartheLeasee cannotcreateaunitlargerthan350acresbydrillingmorethanonewellwithout theNeuhards’permission.ThisprovisionprotectstheNeuhards’interestfrom dilutionbypreventingRangefromincludingtheNeuhards’landinaunitlarger 21 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page21of37 C-7 MEALEY’S Fracking Report Vol. 1, #1 May 2014
  • 61. thanthe350acreunitscontemplatedbytheLeasewithouttheNeuhards’consent.16 b.EnforcingtheLease’sPlainTermsDoesNotLead toAbsurdResultsandIsHarmoniouswiththe LeaseasaWhole RangearguesthatthisreadingoftheLease’splaintermsisinappropriate becauseitconflictswiththesecondandthirdinterestsenumeratedabove,namely theParties’interestinminimizingsurfacedisruptionandRange’sinterestin developingresourcesinthemosteconomicallyefficientmanner.These considerationsareinterrelated.RangeassertstheCourt’sreadingoftheLease underminesthoseinterestsandleadstoanabsurdresult.TheCourt’sconstruction oftheLeaseis,however,bothaproperreadingoftheLease’sclearand unambiguousterms,anddoesnotleadtoabsurdresultswhenconstruingtheterms inthecontextofthetimethatthePartiessignedtheLease.SeeCavanaugh,446 A.2dat1283(“[I]tistheintentionofthepartiesatthetimeofenteringinthereto thatgoverns,andsuchintentionistobegatheredfromareadingoftheentire contract.”). Theinterestinminimizingsurfacedisruptionfromdrillingisexpressedin aspirationallanguagethroughouttheLease.Forexample,section10.1chargesthe 16 Rangealsocontinuallyassertsthat“capping[a]unitsizeat350acresisarbitraryinand ofitself.”Def.’sBr.Opp’n9,Jan.4,2013,ECFNo.29.Thisargumenthasnomeritin considerationoftheunambiguouslanguagetheParties’agreedtoatthetimeofsigningthe Lease. 22 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page22of37 Lesseewithadutyto“developandproducefromtheLeasedPremisesefficiently, economically,withoutwaste,andtothebestadvantageoftheLessor.”Section 12.1articulatesadesireto“preventthedrillingofanexcessivenumberofwellsor ofwellstooclosetotheboundaryoftheLeasedpremises.”Consistentwiththis expressedaspirationalpurpose,Rangearguesthat“theintentforSection10.2of theLeaseistoprotecttheLessorsfromunreasonablesurfaceintrusionsresulting fromtheconstructionandoperationofnumerouspadsitesontheleasedpremises.” Def.’sBr.Supp.,at17. ItisclearfromthelanguageoftheLeasethatthePartiesintendedto minimizesurfacedisruption.ConstruingtheLeaseasawhole,however,itisalso clearthattherequirementofpermissioninsection10.2notonlyencourages minimalsurfacedisruption,butalsounmistakablyprotectstheNeuhards’interest frombeingdilutedinaunitlargerthan350acreswithouttheirpermission.A singletermmayservemultiplepurposes.Moreover,whenthewordsareclearand unambiguous,aCourtwillnotenforceoneparty’srenderingofaprovision’sintent overtheclearlanguageofthecontract.See,e.g.,Steuart,444A.2dat661. Range’sargumentrestsonlyonthecontinuedassertionthatthepermission provisionismeaninglessbecausenoneofRange’sactualdrillingactivitieshave impactedthesurfaceoftheNeuhards’property.Nevertheless,Rangedoesnot 23 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page23of37 addresstheprovision’sprotectionoftheNeuhards’proportionofanyunitcreated underthelease,northeparamountconsideration:theplainandunambiguous wordsoftheLeaserequiringpermission.Seeid. ItistruethattheNeuhards’maynothavebeenabletoreasonablywithhold consentbasedonsurfacedisruptionmotives,andthattheymayhavegivenconsent todrillmorethanonewellifasked.Thesefacts,however,donotobviatethe Lease’sexpressrequirementforpermission,norwassurfacedisruptiontheonly interestprotectedbythepermissionrequirement.17 IntheDefendant’sownwords, “[a]contractshouldnotbeinterpretedinamannerthatrendersprovisions meaningless,superfluous,unreasonable,contradictory,orwouldleadtoabsurd results.”Def.’sBr.ReplyPls.’Br.Opp’n6,Jan.18,2013,ECFNo.33(citing, interalia,Lesko,15A.3dat342–43).Dismissingtheplainlanguageofthe permissionrequirementwouldbecontrarytofirmlyestablishedlawbyrendering theprovisionmeaningless,andtheCourtdeclinestodoso. Moreover,evenifpermissionwasunnecessarybytheLease’slanguageorif itwasgranted,Rangehasnotdemonstrateditscurrentunitconfigurationis 17 ThePartiesdisputewhethertheNeuhardswouldhavegivenconsenttoallowmore thanonewellinaunit.BarbaraNeuhardindicatesshewouldhaverequiredmoreinformation anddeliberationbeforedecidingthematter.SeePls.’Br.Supp.,Ex.F,Dep.BarbaraNeuhard, 52–53.Moreover,itappearstheNeuhards’couldhavereasonablywithheldconsentforthe purposeofprotectingagainsttheperceiveddilutionoftheirinterestinaunit. 24 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page24of37 C-8 MEALEY’S Fracking Report Vol. 1, #1 May 2014
  • 62. appropriateunderitsownconstructionoftheLease.TheLeaseallowsforunits largerthan350acresiftheunitcontainsmorethanonewell,becauseunitsare limitedinsizetothe“threehundredfifty(350)aroundeachwell.”Lease,§9.2. “Around”isnotatermofart,andisdefinedinitsnormalusageas:“acircleorin circumference...onallorvarioussides.”MERRIAM-WEBSTER(11thed.).18 ReadingtheplaintermsoftheLeaseintheirordinaryusage,then,theLease seemstosuggestthatthe350acresaroundeachwellwouldextendoutwardinan approximatecircle,oratleastgenerallyinalldirections,withthewellasthe epicenterandeachpointontheextremitygenerallyequidistantfromthewellatthe approximatecenter.TheCourtiscognizantthatunitsarenotgenerallyconcentric circlesandthatanacreisasquareunitofmeasurement.19 Nevertheless,thewell wouldnotbelocateddramaticallyatonesideofthe350acresbutattherelative centerwiththeacreage“around”thewell,especiallyinlightoftheLease’sterms andthedrillingtechnologyavailableatthetimetheLeasewassigned.The350 acreunitcontemplatedbytheLeaseisaroundaverticalwell,nottravelingalong 18 Indefiningthisandothertermsthroughouttheopinion,theCourtreliesonthe dictionaryasupdatedtodate,notadictionaryfrom2006.Althoughwhenconstruingtermsitis generallyappropriatetoinvoketheircontemporarymeaningtotheextentpossible,theCourtis confidentthatthemeaningsoffundamentalpropositionsandadjectivesintheEnglishlanguage havenotchangedasdramaticallysince2006as,forexample,drillingtechnologyhas. 19 Acreisdefinedas:“aunitintheUnitedStatesandEnglandequalto43,560square feet.”MERRIAM-WEBSTER. 25 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page25of37 thewellboreofahorizontalwellmadepossiblebydrillingtechnologyutilizedafter theLeasewasexecuted.See,e.g.,Pls.’Br.Supp.,Ex.H,Dep.CarlSteinle,at 73–74[hereinafterDep.CarlSteinle]. Therefore,tocontainaunitaslargeas1,050acresasRangearguesthatthe Leaseallows,thethreewellsofthatunitmustbegenerallyspacedoutsuchthatthe wellsitesarelocatednearthegeneralcenterofthe350acreareasaroundeach well,withminimaloverlapwithanotherwell’ssurroundingacreageandina fashionthatharmonizestheotherprovisionsoftheLeaseaswellaspossible.To formthe395acreunitRangeconstructed,itappearsfromthelanguageofthe Leasethatthewellsmustbespacedinsuchawaythatthe350acresaroundeach wellastheepicenterextendsoutwardtoincludetheextra45acresofthelarger unit.Rangehasnotdemonstratedthatthethreewellslocatedonthesamewellpad site,withinseveraldozenfeetofeachother,comportwiththisconstruction. RangefurtherarguesthatthisinterpretationoftheLeasefrustratesboththe interestsinminimizingsurfacedisruptionanddevelopingtheresourcesmost economically,becauseitrequirestheconstructionofmultiplewellsitesspacedin suchawaytoachievethedesiredunitsize.Thisspacingisnotnecessaryinlight ofcurrenthorizontaldrillingtechnology,whichallowsRangetodrillthreewells fromthesamewellsite.Consequently,Rangearguesthisconstructiondoesnot 26 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page26of37 makethemosteconomicsenseinthecontextofhorizontaldrilling. Thismaybetruetoday,butitwasnottrueatthetimethePartiessignedthe Lease.Thehorizontaldrillingtechnologynowreadilyinusewasnotthen availableinPennsylvania,andnotpresumablycontemplatedbytheparties.The CourtisboundtoconstruetheLeaseatthetimeofsigning,and,consequentlyin thecontextofthen-availabledrillingtechnology.SeeCavanaugh,446A.2dat 1283.Generaltermsofacontractmayembracelatertechnologies,buttheterms themselvesarestillappliedaccordingtotheirordinarymeaningatthetimethey wereused.Seeid. CarlSteinle,LandManagerforRange,statedathisdepositionthattheLease “wasmadeforverticalwellbores.TherewerenohorizontalwellboresthatIknow ofintheStateofPennsylvaniaatthetimetheleasewasexecuted.”Dep.Carl Steinle,at52–53.Consequently,theCourt’sconstructionleadstoanordinaryand appropriate,ratherthanabsurdresult,whenconsideringtheLease“withdueregard totheknowncharacteristicsofthebusinesstowhichitrelates”atthetimeof signing.FranklinSugarRef.Co.v.Howell,274Pa.190,194,118A.109,110 (1922);Cavanaugh,446A.2dat1238;seealsoUnitedStatesv.Rabinowitz,339 U.S.56,70(1950)(Frankfurter,J.,dissenting)(“Wordsmustbereadwiththe glossoftheexperienceofthosewhoframedthem.”). 27 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page27of37 C-9 MEALEY’S Fracking Report Vol. 1, #1 May 2014
  • 63. Finally,Rangearguesthatfindingitexceededitsunitizationauthorityunder theLeaseisagainsttheNeuhards’interestbecauseRangewouldnotuseallofthe Neuhards’47acresinanewlydesignatedunitbasedonthe350acrecap.This maybetrue,buttheargumentisunpersuasiveforseveralreasons.First,the Neuhardsbroughtthisactionandarepresumablyawareofpossible consequences—itisnotforRangeortheCourttodecidethewisdomorprudence oftheNeuhards’decisionsinpursuingtheirfutureeconomicinterests.Second, Rangepresentedtwoalternateunitconfigurationsthatdonotutilizeall47acres, butthatdoesnotmeantherearenotpossibleconfigurationsthatareboth economicallybeneficialanddoutilizeall47acres;Rangehaslittleincentiveto demonstratethoseconfigurationsnow.Third,inlightofthefactthatthisLease expiredandthatRangehasutilizeddrillingtechnologynotcontemplatedbyits terms,itwouldseemappropriateforthePartiestonegotiateanewLeasewith termsamenabletocurrentcircumstancesandwithoutthe350acrecap,ifthisisthe coursetheywishtotake. TheCourtiscognizantoftheramificationsofenforcingtheLease’sterms. Thisisnotanacademicexerciseofhyper-technicaltrivialities,butrathera decisionwitheminentpracticaleffect.Rangehasinvestedsubstantialsumsof moneyintotheprojectandthisdecisiondoeshaveeconomicramifications. 28 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page28of37 Thoseramifications,however,extendbeyondtheimmediaterelationship betweentheparties.“Themostimportantfunctionofcontractlawistoprovidea legalremedyforbreachinordertoenhancetheutilityofcontractingasamethod oforganizingeconomicactivity....”RichardA.Posner,TheLawandEconomics ofContractInterpretation,83TEX.L.REV.1581,1582(2005)[hereinafter Posner].Thisfunctionmaybeindependentofinterpretingcontractterms,butitis alsorealizedwhencourtsenforcecontractsaswrittenand,consequently,providea stableandpredictablecontractingenvironmentforthateconomicactivityto flourish.20 Enforcingcontractsaswrittenmayalsoencouragebetterdraftsmanshipin thefirstinstance.Whenitisclearthatcontractswillbeenforcedaccordingtotheir terms,partiesknowtheycannotwriteambiguitiesintoagreementssothattheycan actastheywishwithoutregardtothetermsofthebargainand“idlyassumethat judgeswillsavethemfromtheirblunders.”ANTONINSCALIA&BRYANA. 20 TheCourtisawarethatshiftingthecostsofwritingclearandmorethoroughly prospectivecontractstothepartiesonthefrontend,ratherthanexpendingthosecostson litigationtoresolvedisputesaftertheyoccurmay,insomeinstances,resultinamorecostlyand lessefficientoutcome.See,e.g.,RichardA.Posner,TheLawandEconomicsofContract Interpretation,83TEX.L.REV.1581,1583–84,1608–14(2005)(articulatingthevariablesthat imposecostsintheprocessofdrafting,litigating,andinterpretingcontracts,anddemonstrating thevariousimplicationsofshiftingthiscostburden).Nevertheless,theCourtispersuadedthat thebenefitofsoundcontractlawandaclearruleunderwhichpartiesmaybargainfacilitates stablefoundationsforafountainheadofeconomicactivity. 29 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page29of37 GARNER,READINGLAW:THEINTERPRETATIONOFLEGALTEXTSxxviii(2012).21 Evenwhencontractsareenforcedaswritten,however,partiesmaystill choosetorelyonambiguousformcontractsandchancethehazardsoflitigation. Thatisaneconomicdecisionthatdependsontheparticularsofeachsituation.See, e.g.,Posner,at1583–84,1608–14.Regardlessofanindividual’schoiceonthat matter,however,whencourtsenforcecontractsaccordingtotheirtermspartiescan generallypredictacourt’sdecisionbasedoncleartextintheeventoflitigation. Thisprovidesameasureofstabilityforonevariableinthecalculusoftheparties’ economicdecision-making.Seeid. Inthiscase,insteadofproceedingwithaquestionableplaninlightofthe Lease’slanguageandchangedtechnology,Rangecouldhaverenegotiatedthe languageandenteredanewagreement.Transactioncostsaside,nothingprevented thiscourseofaction.Furthermore,nothingpreventsthePartiesfromrenegotiating inthewakeofthisdecision. ThisCourtwillnotrefusetoenforceaclearandunambiguouscontractand willnotnullifyitstermssimplybecauseapartydisregardedtheagreementor formulatedastrainedcontrivanceofitstermsandmadeabusinessdecisionto 21 SeealsoFelixFrankfurter,ASymposiumonStatutoryConstruction:Foreward,3 VAND.L.REV.365,368(1950)(“Judicialexpansionofmeaningbeyondthelimitsindicatedis reprehensiblebecauseitencouragesslipshodnessindraftsmanshipandirresponsibilityin legislation.Italsoenliststooheavilytheprivatesocialandeconomicviewsofjudges.”) 30 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page30of37 C-10 MEALEY’S Fracking Report Vol. 1, #1 May 2014
  • 64. proceedwithsubstantialinvestment.SeeDep.CarlSteinle,at67–68.TheLease wasdraftedwithexpressedlimitationsthatfrustrateRange’sabilitytoutilize modernhorizontaldrillingtechniques.Whilethismaybetrue,itdoesnotchange thelanguageoftheLease.Range’sproperremedyforthisproblemwasto negotiateanewleasethatallowedRangetodevelopthepropertyinthemanner desired.Enforcingcontractsaswrittenprovidesaclearfoundationuponwhich partiescanconductthisbargainingefficientlyandcarefully,andrestassuredtheir termswillbehonored. 4.DrillingAdjacenttoPremisesDidNotExtendLease InafinalattempttosavetheLease,Rangearguesthatitsactivitiesonthe NullPropertypriortotheexpirationoftheLease’sprimarytermconstitutedrilling operationssufficienttopreservetheLease,becausethedrillingresultingfrom thoseinitialoperationswouldeventuallypassonorundertheNeuhards’property. Thisargumentisalsounavailing. TheLeaseunambiguouslyrequiresLesseeto“commenceawellonthe LeasedPremisesoronaspacingunitcontainingaportionoftheLeasedPremises.” Lease,§8.1(emphasisadded).AlthoughRangeundoubtedlycommencedawell priortotheexpirationoftheprimaryterm,itdidnotdosoon22 theLeased 22 Theword“on”isnotatermofart,andisdefinedinitsnormalusageasapreposition meaning,interalia:“afunctionwordtoindicatepositionoverandincontactwiththatwhich 31 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page31of37 premises,butonapremisesadjacent23 totheLeasedPremisesthatwasnotunitized accordingtotheLease.UnderaplainreadingoftheLease,Range’sactivitieson theNullPropertyadjacenttotheLeasedPremisesdonotconstitutedrilling activities“ontheLeasedPremises.”Norwasthereasufficientmodicumof activityinpreparationfordrillingontheLeasedPremisesduringtheprimaryterm inordertoextendtheLease—theoperativeactivitywasperformedontheNull Property.Merepermittingandtraversingwithoutmoreisinsufficient,particularly underthelanguageofthisLease.See,e.g.,Bernardi,5Pa.D.&C.3dat92–96; SUMMERSOILANDGAS§15:10(listingphysicalactivitiesastheprimaryoperative actsofcommencingdrillingoperations). Inadvancingitsargument,Rangereliesontwonon-bindingcasesthatare readilydistinguishablefromthecurrentscenario.InA&MOil,Inc.v.Miller,11 Kan.App.2d152,154–55,715P.2d1295,1296–97(1986),aKansascourtfound thattheclear“languageofthedrillingoperationsclause”andthedefendant’s activityduringtheprimarytermthatcommencedoperationstodrillawellona neighboringpropertythatwouldeventuallypassundertheleasedpremiseswere supportsfrombeneath...usedasafunctionwordtoindicateapresencewithin.”MERRIAM- WEBSTER. 23 “Adjacent”isanadjectivedefinedas,interalia:“havingacommonborder:abutting, touching.”MERRIAM-WEBSTER. 32 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page32of37 sufficienttoextendthelease.Thedrillingoperationsclauseatissueinthatcase provided: [I]tisexpresslyagreedthatiflesseeshallcommenceoperationsfor drillingatanytimewhilethisleaseisinforce,thisleaseshallremain inforceanditstermsshallcontinuesolongassuchoperationsare prosecutedand,ifproductionresultstherefrom,thenaslongas productioncontinues. A&MOil,Inc.v.Miller,11Kan.App.2d152,152,715P.2d1295,1296(1986). ThebroadlanguageofthedrillingoperationsclauseatissueinMilleris distinctlydifferentfromtheclauseatissueinthecasebeforetheCourt.InMiller theoperationsclausecontainednotemporalorgeographiclanguagequalifyingthe phrase“lesseeshallcommenceoperationsfordrillingatanytime.”Miller,715 P.2dat1296.Accordingly,thecourtfoundthattherewasnorequirementthat thoseoperationstakeplaceontheplaintiff’sleasedpremises. Inthecasesubjudice,bycontrast,thedrillingoperationsclauseisexplicit that“LesseeshallcommenceawellontheLeasedPremises.”Lease,§8.1.The languagequalifyingthelocationofLessee’sactivitiesrenderstheLeaseatissue sufficientlydistinctfromtheleaseinMillersuchthattheoutcomeofthatcaseis notpersuasiveonthisCourt’sultimateholding.Thecourt’sdecisioninMilleris persuasive,however,inreinforcingtheblackletterlawthatwhentheunambiguous 33 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page33of37 C-11 MEALEY’S Fracking Report Vol. 1, #1 May 2014
  • 65. languageisclear,anagreement’stermsshouldbeenforcedaccordingly.24 1296–97. InManzanoOilCorp.v.ChesapeakeOperating,Inc.,178F.Supp.2d1217, 1220(D.N.M.2001),whichRangealsocitesforsupport,aUnitedStates MagistrateJudgeintheUnitedStatesDistrictCourtfortheDistrictofNewMexico heldthat,underNewMexicolaw,thedefendantwhobegandrillingonathreeacre propertyadjacenttotheleasedpropertyduringtheprimarytermextendedthelease onthepropertyatissue.Inthatcase,thedefendantcouldnotdrillontheleased propertywithoutfirstobtainingaspecialzoningpermitorvariancethatwas difficulttoacquire,sothedefendantpurchasedtheadjacentthreeacrepropertyon whichdrillingwasallowedandcommencedawell.ManzanoOilCorp.v. 24 Furtherapplyingthisprincipleoflaw,anotherconsiderationinconstruingthisLeaseis whetherdrillingundertheLeasedPremiseswouldevensatisfythedrillingoperationsclauseas written.IntheLease,thedrillingoperationsclauseonlycontemplatesdrilling“ontheLeased PremisesoronaspacingunitcontainingaportionoftheLeasedPremises.”Lease,§8.1. ElsewhereintheLease,however,thedrafterdistinguishedbetweenthe“Lessor’soil,gasand coalbedmethanegasrightscontainedin,on,andundertheLeasedPremiseforthepurposeof... drilling,operating,producingandremovingoil,gas,coalbedmethanegas,andliquid hydrocarbonstherefrom.”Lease,Introduction. TheLeasedrafterrecognizedadistinctionbetweentheprepositionsin,on,andunder, andonlyused“on”inthedrillingoperationsclause.Thedoctrineofexpressiouniusestexclusio alteriusinstructsthatwhencertainwordsareusedinacontractandotherwordsomitted,it impliestheintentionalexclusionoftheomittedterms.See,e.g.,Linan-FayeConst.Co.,Inc.v. Hous.Auth.ofCityofCamden,49F.3d915,936(3dCir.1995);BLACK’SLAWDICTIONARY (9thed.2009).Applyingthisprinciplehere,drilling“under”theLeasedPremiseswouldnot necessarilysatisfythedrillingoperationsclausethatusedonly“on,”whenbothwordswereused togetherearlierinthedocument.Thisconstructionalsomakessenseinthecontextofdrilling technologyavailableatthetimetheLeasewassigned.SeeDep.CarlSteinle,at70–72. 34 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page34of37 ChesapeakeOperating,Inc.,178F.Supp.2d1217,1218–19(D.N.M.2001).The defendant’sdrillingplanwouldeventuallycrossontothesubterraneanportionof theleasedproperty,butnotuntilaftertheexpirationoftheprimaryterm.Id. Relyingonthebroadlanguageofthelease’spoolingclause,thecourtwrote:“I findthatadjacentpropertyandtheLeasepropertywere‘pooled’or‘combined’in suchawayasto”extendtheleasebythecommencementofdrilling.25 Id.at1220. ThedecisioninManzanoOilCorp.isalsodistinguishablefromthecase beforetheCourt,becausethecourtinManzanobaseditsholdingonthecritical factthattheadjacentlandandleasedlandwerepooledvalidlybytheauthority grantedunderthelease,regardlessoftheplannedeventualdrillingbeneaththe leasedpremises.Seeid.Thedrillingundertheleasedpropertyaftertheprimary termexpireddidnotimpactthecourt’sholding,and,consequently,thecasedoes notsupportRange’sposition.Seeid. 25 Thecourtdescribedthelease’spoolingclause,writing: ParagraphfiveoftheLeaseprovides,inpertinentpart,thatDefendant,thelessee, is“grantedtheright...topoolorcombinethislease,thelandcoveredbyitor anypartorhorizonthereofwithanyotherland,leases,mineralestatesorparts thereoffortheproductionofoilorgas.”Paragraphfivealsocontainsthe followinglanguage,towit: Drillingoperationsonorproductionfromanypartofanysuchunitshallbe consideredforallpurposes,exceptthepaymentofroyalty,asoperations conducteduponorproductionfromthelanddescribedinthislease. ManzanoOilCorp.,178F.Supp.2dat1219. 35 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page35of37 Accordingly,theclearandunambiguouslanguageoftheLeasecontrols. Steuart,444A.2dat661.Rangedidnot“commenceawellontheLeased PremisesoronaspacingunitcontainingaportionoftheLeasedPremises,”before theexpirationoftheprimaryterm.Asaconsequence,theLeaseexpiredbyitsown terms. III.CONCLUSION Insum,RangecommencedawellbeforetheexpirationoftheLease’s primaryterm.Thatwell,however,wasneither“ontheLeasedPremises”nor“ona unitcontainingaportionoftheLeasedPremises.”Rangeexceededitsunitization authorityundertheplainandunambiguouslanguageintheLeaseanddidnot commenceawellontheNeuhards’property.Consequently,theLeaseexpiredby itsowntermsonJune21,2011. TheNeuhards’MotionforSummaryJudgmentisgranted.Range’sMotion forSummaryJudgmentisdenied. AnappropriateOrderfollows. BYTHECOURT: s/MatthewW.Brann MatthewW.Brann UnitedStatesDistrictJudge 36 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page36of37 C-12 MEALEY’S Fracking Report Vol. 1, #1 May 2014
  • 66. 37 Case4:11-cv-01989-MWBDocument40Filed04/30/14Page37of37 INTHEUNITEDSTATESDISTRICTCOURT FORTHEMIDDLEDISTRICTOFPENNSYLVANIA THOMASA.NEUHARDand:CaseNo.4:11-cv-01989 BARBARAS.NEUHARD,: : Plaintiffs,: : v.:(JudgeBrann) : RANGERESOURCES–: APPALACHIA,LLC,: : Defendant.: ORDER April30,2014 ANDNOW,inaccordancewiththeMemorandumofthissamedate,ITIS HEREBYORDEREDTHAT: 1.DefendantRangeResources–Appalachia,LLC’sMotionforSummary JudgmentisDENIED(ECFNo.25). 2.PlaintiffThomasA.NeuhardandBarbaraS.Neuhard’sMotionfor SummaryJudgmentisGRANTED(ECFNo.22). 3.TheOilandGasLeaseofJune21,2006enteredintobytheParties expiredbyitsowntermsonJune21,2011. 4.TheclerkisdirectedtoenterjudgmentinfavorofthePlaintiffsand closethecasefile. BYTHECOURT: s/MatthewW.Brann MatthewW.Brann UnitedStatesDistrictJudge Case4:11-cv-01989-MWBDocument41Filed04/30/14Page1of1 UNITEDSTATESDISTRICTCOURT FORTHEMIDDLEDISTRICTOFPENNSYLVANIA ThomasA.Neuhardand: BarbaraS.Neuhard: : Plaintiffs:CivilActionNo.4:11-CV-1989 : vs.: : RangeResources-Appalachia,LLC: : Defendant.: JUDGMENTINACIVILACTION TheCourthasorderedthat(checkone): ___theplaintiff_______________________________________________recoverfromthe defendant_____________________________________________________theamountof $____________________________________dollars($),whichincludesprejudgment interestattherateof__________percent,pluspostjudgmentinterestattherateof_________ perannum,alongwithcosts. ___theplaintiffrecovernothing,theactionbedismissedonthemerits,andthedefendant _____________________________________recoverycostsfromtheplaintiff _____________________________________. XOTHER:JudgmentisherebyenteredinfavorofthePlaintiffspursuanttoMemorandumand Order,bothdatedandenteredonthedocketonApril30,2014. Dated:April30,2014GaryL.Hollinger,ActingClerkofCourt By:s/LisaA.Gonsalves,deputy Case4:11-cv-01989-MWBDocument42Filed04/30/14Page1of1 C-13 MEALEY’S Fracking Report Vol. 1, #1 May 2014
  • 67. INTHEUNITEDSTATESCOURTOFAPPEALS FORTHEFIFTHCIRCUIT No.13-40458 CHESAPEAKELOUISIANA,L.P., Plaintiff-Appellee v. BUFFCOPRODUCTION,INC.;TWINRESOURCES,LLC;WAYNEE. FREEMAN;FREEMANCAPITAL,LTD.;FREEMANRESOURCES,LTD.; FRMGP,LLC, Defendants-Appellants FRANKM.BUFKINIII, IntervenorDefendant-Appellant v. HARLETONOIL&GAS,INCORPORATED, Intervenor-Appellant-Appellee AppealsfromtheUnitedStatesDistrictCourt fortheEasternDistrictofTexas USDCNo.2:10-CV-359 BeforeHIGGINBOTHAM,DAVIS,andHAYNES,CircuitJudges. PERCURIAM:* *Pursuantto5THCIR.R.47.5,thecourthasdeterminedthatthisopinionshouldnot bepublishedandisnotprecedentexceptunderthelimitedcircumstancessetforthin5TH CIR.R.47.5.4. UnitedStatesCourtofAppeals FifthCircuit FILED May7,2014 LyleW.Cayce Clerk Case:13-40458Document:00512621558Page:1DateFiled:05/07/2014 No.13-40458 Assertingdiversityjurisdiction,ChesapeakeLouisiana,L.P. (“Chesapeake”)broughtseveralstate-lawclaimsagainst(1)FreemanCapital, Ltd.(“FreemanCapital”);(2)BuffcoProduction,Inc.andTwinResources,LLC (collectively,“Buffco”);and(3)WayneE.Freeman,FreemanResources,Ltd., andFRMGP,LLC(collectively,“Freeman”)seekingtorecoveritsalleged overpaymentforanassignmentofthedeeprightsintheGeislerUnitproperty. Buffco,Freeman,andFreemanCapitalcounterclaimed,allegingthat Chesapeakewasrequiredtopurchasetheirinterestsinvariousproperties referredtoastheBowen,Hemby,andYowUnits.HarletonOil&Gas,Inc. (“Harleton”),theholderof50%ofthedeeprightsintheGeislerUnit, intervenedandassertedvariousclaimsagainstChesapeake,Freeman,and Buffco. ThedistrictcourtgrantedsummaryjudgmentinfavorofChesapeake andHarletonwithrespecttotheGeislerUnitclaimsandinfavorof ChesapeakewithrespecttotheclaimsconcerningtheBowen,Hemby,andYow Units.However,becauseHarleton’sproperalignmentasaplaintiff-intervenor destroyssubject-matterjurisdiction,weVACATEthedistrictcourt’ssummary judgmentdecisionwithrespecttotheGeislerUnitclaimsandREMANDthe matterforadeterminationofwhetherHarletonisanindispensableparty.We AFFIRMthecourt’sdecisionwithrespecttotheBowen,Hemby,andYow Units,astowhichanindependentgroundforjurisdictionexists. I.FactualandProceduralBackground ChesapeakesuedFreemanandBuffco,1essentiallyseekingtorecoveran overpaymentithadmadetothem.Thisallegedoverpaymentinvolveda transactionthataroseoutofaJuly31,2008LetterAgreement(the“Letter 1ChesapeakealsosuedFreemanCapitalbutsubsequentlyabandoneditsclaimafter discoveringthatFreemanCapitalhadnotreceivedanyportionofthe$13.6millionthat ChesapeakehadpaidfortheGeislerUnit. 2 Case:13-40458Document:00512621558Page:2DateFiled:05/07/2014 No.13-40458 Agreement”)enteredintobetweenChesapeakeandBuffco.TheLetter AgreementprovidedthatChesapeakewouldpayapproximately$232million toacquireanassignmentofBuffco’sworkinginterestsinthedeeprightsof severaloilandgaspropertiesinTexasforaperiodofthreeyears.These propertiesincluded,amongothers,theGeislerUnitandtheBowen,Hemby, andYowUnits.TheLetterAgreementcontaineda“Non-OpsClause”through whichChesapeakeagreedtomakethesameoffer(withthesameterms)tothe ownersofthenon-operatingworkinginterestsoftheseproperties.Thenon- operatingworkinginterestownersincludedFreeman,FreemanCapital,and Harleton. BasedonfaultyinformationfromathirdpartytotheeffectthatBuffco andFreemaneachowned50%interestsintheGeislerUnit,Chesapeakepaid BuffcoandFreeman$6.8millioninexchangeforwhatChesapeakebelieved was100%ofthedeeprightsbelowtheGeislerUnit.Thepartiesnowagree thattheproperallocationoftheworkinginterestsintheGeislerUnitwas actually:Buffcowith25%,Freemanwith22%,FreemanCapitalwith3%,and Harletonwith50%.Asaresult,Chesapeakeonlyreceiveda47%interestin thedeeprightsoftheGeislerUnit.ChesapeakeandBuffcoagreednottogo forwardwiththetransactioninvolvingtheBowen,Hemby,andYowUnits, whichwasscheduledforalaterclosingdate. AfterChesapeakesuedtorecoveritsoverpayment,Freeman,Freeman Capital,andBuffcocounterclaimed,allegingthatChesapeakebreachedthe LetterAgreementbyfailingtopurchasetheBowen,Hemby,andYowUnits. FreemanCapitalalsoclaimedthatChesapeakebreachedtheLetter Agreementbyfailingtopurchaseits3%interestintheGeislerUnit. HarletonintervenedpursuanttoFederalRuleofCivilProcedure 24(a)(2).Boileddowntoitsessentials,Harletonsought50%ofthe$13.6 millionChesapeakepaidtoBuffcoandFreeman,andinexchangeHarleton 3 Case:13-40458Document:00512621558Page:3DateFiled:05/07/2014 CHESAPEAKELOUISIANAv.BUFFCOPRODUCTION D-1 MEALEY’S Fracking Report Vol. 1, #1 May 2014
  • 68. No.13-40458 wouldconveyitsinterestintheGeislerUnittoChesapeake.Harletonalso assertedvariousfraudclaimsagainstBuffcobasedonBuffco’salleged misrepresentationstoChesapeakeconcerningitsinterestsintheGeislerUnit andtoHarletonconcerningitsoffertopurchaseHarleton’sinterestsinthe GeislerUnit.NopartyassertedaclaimorcounterclaimagainstHarleton. ChesapeakeandBuffcosettled,andthedistrictcourtdismissedallthe claimsbetweenthem.Thedistrictcourtthenenteredsummaryjudgment basedontheparties’variousmotions,rulingthat:(1)Freeman,Freeman Capital,andHarletonwerethird-partybeneficiariesoftheLetterAgreement suchthattheycouldenforcethe“Non-OpsClause”;(2)BuffcoandFreeman wereunjustlyenrichedbytheportionofthe$13.6millionpaymentfrom Chesapeakethatisattributabletothe53%oftheGeislerUnitownedby HarletonandFreemanCapitalandthataconstructivetrustshouldbeimposed onthatportionofthefunds;(3)HarletonandFreemanCapitalshouldconvey theirinterestsintheGeislerUnittoChesapeakeafterreceivingthefundsfrom BuffcoandFreeman;(4)Chesapeakewasnotentitledtoanyrepaymentofthe $13.6million;(5)FreemanandFreemanCapital’sclaimsagainstChesapeake concerningtheBowen,Hemby,andYowUnitsfailedasamatteroflaw;(6) Harleton’sfraudclaimsagainstBuffcosurvive;2and(7)HarletonandFreeman Capitalareentitledtorecoverpre-judgmentinterestagainstBuffcoand Freeman. Followingthedistrictcourt’ssummaryjudgmentruling,Freemanand FreemanCapitalfiledaMotiontoDismissforLackofSubjectMatter Jurisdiction,assertingthatHarleton’sinterventiondestroyeddiversity becauseitisproperlyalignedasaplaintiffanditsstatusasanindispensable 2Inenteringfinaljudgment,thedistrictcourtseveredHarleton'sfraudclaimsandmadethem thesubjectofaseparateaction. 4 Case:13-40458Document:00512621558Page:4DateFiled:05/07/2014 No.13-40458 partyrequiredthecourttodismisstheaction.Themotionassertedthatthe districtcourtlackedjurisdictionovertheclaimsrelatedtotheGeislerUnitand theBowen,Hemby,andYowUnits. Thedistrictcourtdeniedthemotion,aligningHarletonasadefendant- intervenor.Asaresult,thecourtconcluded,federaljurisdictionexistedunder 28U.S.C.§1332and,therefore,ananalysisofwhethersupplemental jurisdictionaroseunder28U.S.C.§1367wasunnecessary.Freeman, FreemanCapital,Buffco,andHarleton3timelyappealed. II.GeislerUnitClaims Asacourtoflimitedjurisdiction,wemustfirstsatisfyourselves, independentofthedistrictcourt’sdetermination,thatsubject-matter jurisdictionexistsovertheparties’claimsrelatedtotheGeislerUnit.See Kokkonenv.GuardianLifeIns.Co.ofAm.,511U.S.375,377(1994);Silver StarEnters.,Inc.v.M/VSaramacca,19F.3d1008,1013n.6(5thCir.1994). Asproponentsofjurisdiction,ChesapeakeandHarletoncarrytheburdenof establishingjurisdiction.SeeKokkonen,511U.S.at377.Here,onlytwo potentialsourcesofjurisdictionexist:§1332(diversity)and§1367 (supplemental).Asthepartiescorrectlyacknowledge,diversityjurisdiction existedoverthesuitpriortoHarleton’sintervention;4however,wemust considerwhetherHarleton’sinterventiondestroyeddiversitysuchthatthe districtcourtlackedjurisdictionoverthismatter. WebeginbydeterminingwhetherHarletonisproperlyalignedasa defendant-intervenor(asthedistrictcourtconcluded)oraplaintiff-intervenor. Ourgenerallyacceptedtestforalignmentplacesthepartieswiththesame 3Harletonalsoassertedanalternativeclaimthatwedonotreachduetoour jurisdictionalruling. 4Specifically,ChesapeakewasacitizenofOklahomaandFreeman,FreemanCapital, andBuffcowerecitizensofTexasandtheamountincontroversyexceeded$75,000. 5 Case:13-40458Document:00512621558Page:5DateFiled:05/07/2014 No.13-40458 “ultimateinterests”inthelitigationonthesameside.Griffinv.Lee,621F.3d 380,388(5thCir.2010).Tothatend,wemust“lookbeyondthepleadings,and arrangethepartiesaccordingtotheirsidesinthedispute”toensurethatthe partieshavea“collisionofinterest[s]”overthe“principalpurposeofthesuit” andthe“primaryandcontrollingmatterindispute.”CityofIndianapolisv. ChaseNat’lBankofCityofN.Y.,314U.S.63,69(1941)(citationandinternal quotationmarksomitted);seealsoGriffin,621F.3dat388. Here,theprincipalpurposeofthesuitandtheprimaryandcontrolling matterindisputesuggestthatHarletonisaplaintiff.Thedistrictcourt concludedthatHarletonwasadefendantafternotingthat“Harletonand Chesapeakecouldnotbeclassifiedassharingthesameinterestinthesuit becausebothareopenlycompetingtocapturethesamepotofmoney.” However,theconclusionthatChesapeakeandHarletonwereadversein seekingtorecoverthe“samepotofmoney”beliesthefactthatbothpartiesonly wantedtorecovermoneyfromBuffcoandFreemantoensurethatHarleton receivedpaymentandChesapeakereceivedHarleton’sinterestintheGeisler Unit.WhetherthiswasdonedirectlybyBuffcoandFreemanpayingHarleton whowouldthenconveyitsinteresttoChesapeakeorbyrefundingpartof Chesapeake’spaymentsuchthatChesapeakecouldthenpurchaseHarleton’s interestinpracticalitydidnotmattertoChesapeakeandHarleton. Harleton’sproperalignmentasaplaintiff-intervenorisfurther illustratedbythefactthatthesummaryjudgmentorderawardedrelieftoboth HarletonandChesapeake,andbothHarletonandChesapeakeareessentially alignedonappealinseekingaffirmanceoftheorder.5Further,Harleton 5Indeed,thedistrictcourt’sawardofsummaryjudgmentreliefagainstFreemanand BuffcoinfavorofHarletonrendersunavailingHarleton’sargumentthatitshouldbealigned asadefendantbecauseitsclaimsagainstFreemanandBuffcoaremerely“collateraltothe principaldispute—theenforceabilityofthecontract.”Harleton’sclaimsagainstFreeman andBuffcocannotbemerelycollateralforpurposesofdeterminingjurisdictionwhenthey 6 Case:13-40458Document:00512621558Page:6DateFiled:05/07/2014 D-2 MEALEY’S Fracking Report Vol. 1, #1 May 2014
  • 69. No.13-40458 affirmativelyseekstobealignedwithChesapeakeincertaincircumstances, suchaswhenitarguesthatitsunjustenrichmentclaimistimelybecauseits claimcanrelatebacktothetimelyunjustenrichmentclaimfiledby Chesapeake.Finally,whileHarletonbroughtaclaimagainstChesapeake,6 Buffco,andFreeman,nopartyhasbroughtaclaimagainstHarleton,and Harletonhasnopotentialforliability.Suchalackofpotentialforliability againstapartysuggeststhatthepartyshouldbealignedasaplaintiff.See16 JAMESWM.MOOREETAL.,MOORE’SFEDERALPRACTICE§106.46(3ded.2013) (“Theintervenormustbepotentiallyliabletotheplaintiffontheprimaryclaim inordertobetreatedasadefendanttowhomsupplementaljurisdictionmay applyunderSection1367(b).Aninterveningplaintiffwithinthesubsectionis apartywhovoluntarilychoosestointerveneinanongoingfederalactionto assertitsownaffirmativeclaims.”).Indeed,Harletonintervenedtoseek affirmativerelief,nottoprotectitsinterestsasadefendant.Therefore,based onthenatureofHarleton’sclaim,itispropertoalignitwithChesapeakeasa plaintiff-intervenor. HavingdeterminedthatHarletonshouldhavebeenalignedasa plaintiff-intervenor,weareboundtoconcludethatthedistrictcourtlacked aretheprincipalsourceofreliefforHarletonunderthesummaryjudgmentorder.See Indianapolis,314U.S.at69(observingthatinaligningtheparties,courtsmustlooktothe “realitiesoftherecord”and“lookbeyondthepleadingsandarrangethepartiesaccordingto theirsidesinthedispute”). 6ThefactthatHarletonfiledaclaimagainstChesapeakedoesnotmeanthatthe parties’interestswerenotoverallalignedvis-à-visFreemanandBuffco.Forinstance,in Griffin,anattorneyseekingtorecoverfeesforhisrepresentationofabeneficiarythrougha lienonthebeneficiary’strustwasproperlyalignedwiththebeneficiaryasaplaintiff- intervenorasbothpartiessoughtrecoveryfromthetrust.SeeGriffin,621F.3dat383,388. Thisalignmentwasappropriatedespitethefactthattheattorneyalsosoughtrelieffromthe beneficiary.Seeid.;seealsoDev.Fin.Corp.v.AlphaHous.&HealthCare,Inc.,54F.3d156, 159-60(3dCir.1995)(althoughtheinterestsoftheoriginalplaintiffandintervenorwere “nominally”inconflict,theintervenorwasstillbestalignedasaplaintiffwhenthe“actual adversityofinterest”pittedtheintervenoragainsttheoriginaldefendants). 7 Case:13-40458Document:00512621558Page:7DateFiled:05/07/2014 No.13-40458 diversityjurisdictionovertheGeislerUnitclaims.First,originaljurisdiction under§1332wasdestroyedbecausethepartieswerenolongerdiverse— specifically,Harleton(plaintiff)andBuffcoandFreeman(defendants)areall citizensofTexas.SeeExxonMobilCorp.v.AllapattahServs.,Inc.,545U.S. 546,553(2005)(“Inacasewithmultipleplaintiffsandmultipledefendants, thepresenceintheactionofasingleplaintifffromthesameStateasasingle defendantdeprivesthedistrictcourtoforiginaldiversityjurisdictionoverthe entireaction.”).Second,§1367(a)’ssupplementalsubject-matterjurisdiction provisiondoesnotaffordjurisdictionovertheGeislerUnitclaimsbecause Harleton’sparticipationasaplaintiff-intervenorwouldbeinconsistentwith therequirementsof§1332.See§1367(b);seealsoGriffin,621F.3dat386–87 (“[W]hileCongresscodifiedtheconceptsofpendentandancillaryjurisdiction in§1367(a),itapparentlychosetocircumscribesuchjurisdictionin§1367(b) withrespecttoplaintiffintervenors.”). Therefore,becausetherewasnosubject-matterjurisdictionoverthe parties’GeislerUnitclaimsfollowingHarleton’sintervention,wemustvacate thegrantofsummaryjudgmentwithrespecttotheGeislerUnitclaims.We remandtheseclaimstoallowthedistrictcourttoconsiderinthefirstinstance whetherHarletonisanindispensablepartysuchthatdismissaloftheentire actionconcerningtheGeislerUnitisrequired.SeeBrownv.Pac.LifeIns.Co., 462F.3d384,393–94(5thCir.2006)(“IfapersonwhoqualifiesunderRule 19(a)cannotbemadeapartybecause,forexample,joinderwoulddestroy subject-matterjurisdiction,afederalcourtmustdeterminewhetherthat personis‘indispensable.’”). III.Bowen,Hemby,andYowUnitsClaims Weturnnexttothedistrictcourt’sdenialofreliefonFreemanand FreemanCapital’scounterclaimswithrespecttotheBowen,Hemby,andYow 8 Case:13-40458Document:00512621558Page:8DateFiled:05/07/2014 No.13-40458 Units.7FreemanandFreemanCapitalacknowledgeonappealthattheyhave waivedanyargumentconcerningthemeritsofthedistrictcourt’sdecision, arguinginsteadthattheBowen,Hemby,andYowUnitsarecompulsory- counterclaimsthatmustbedismissedbecausesubject-matterjurisdictionis lackingwithrespecttotheGeislerUnitclaims. Whenanindependentbasisforjurisdictionexistswithrespecttoa counterclaim,afederalcourtmayadjudicatetheclaimeveniftheoriginal claimwasdismissedforlackofsubject-matterjurisdiction.McLaughlinv. Miss.PowerCo.,376F.3d344,355(5thCir.2004);seealsoKuehne&Nagel (AG&Co)v.Geosource,Inc.,874F.2d283,291(5thCir.1989);86CHARLESA. WRIGHT,ARTHURR.MILLER,&MARYKAYKANE,FEDERALPRACTICEAND PROCEDURE§1414,at130(3ded.2010)(“Ifthecounterclaimdoespresentan independentbasisoffederaljurisdiction,however,thecourtmayadjudicateit asifitwereanoriginalclaimdespitethedismissalofplaintiff’sclaim.”). 7Notably,Harletondidnotassertanyinterestinorclaiminvolvingtheseunits,nor hasanypartysuggestedthatHarletonisanindispensablepartywithrespecttotheseclaims. Therefore,ouranalysisofHarleton’sinterventionhasnoeffectonourconsiderationof FreemanandFreemanCapital’sclaimsregardingtheBowen,Hemby,andYowUnits. 8FreemanandFreemanCapitalurgethatwenotrelyonKuehne,arguingthatit conflictswithourearlier-decidedopinioninCityofHoustonv.Standard-TriumphMotorCo., 347F.2d194(5thCir.1965).However,Kuehnedoesnotconflictwithandindeedcitesto Standard-TriumphMotor,amongothercases,forthepropositionthatacounterclaimneed notbedismissedwhensupportedbyanindependentgroundforjurisdiction.SeeKuehne,874 F.2dat291.Eveniftheydidconflictwithrespecttowhetheracounterclaimcanproceed whensupportedbyanindependentbasisforjurisdiction,ourruleoforderlinessrequiresus tofollowtheearlier-decidedcaseofHabermanv.EquitableLifeAssuranceSocietyofthe UnitedStates,224F.2d401(5thCir.1955),whereweheldthatacompulsorycounterclaim couldproceedtoafinaljudgmentonthemerits,evenifthecourtlackedjurisdictionoverthe primaryclaim,becausediversityjurisdictionsupportedthecounterclaim.See224F.2dat 409(“[E]venifthecomplaintbedismissed,acompulsorycounterclaimisnotrequiredtobe dismissedwhereitissupportedbyapropergroundoffederaljurisdiction.”);seealsoUnited Statesv.Wheeler,322F.3d823,828n.1(5thCir.2003)(explainingthatwhen“twoprevious holdingsorlinesofprecedentconflict,theearlieropinioncontrolsandisthebinding precedentinthecircuit”(citationandinternalquotationmarksomitted)). 9 Case:13-40458Document:00512621558Page:9DateFiled:05/07/2014 D-3 MEALEY’S Fracking Report Vol. 1, #1 May 2014
  • 70. No.13-40458 Here,anindependentbasisforsubject-matterjurisdictionbasedon §1332existsfortheBowen,Hemby,andYowUnitsclaims.Thepartieswere completelydiverseasFreemanandFreemanCapitalwerecitizensofTexas andChesapeakewasacitizenofOklahoma.Harletondidnotdestroydiversity withrespecttotheseclaimsbecauseitsclaimswerelimitedtotheGeislerUnit. Further,theamountincontroversywithrespecttotheseclaimsexceeded $75,000.Therefore,becauseFreemanandFreemanCapital’sonlychallenge onappealrestsontheirjurisdictionalargument,weaffirmthedistrictcourt’s decisionconcerningtheBowen,Hemby,andYowUnits. IV.Conclusion WeVACATEandREMANDthedistrictcourt’ssummaryjudgment decisionwithrespecttotheGeislerUnitclaimsandAFFIRMthecourt’s decisionwithrespecttotheBowen,Hemby,andYowUnitsclaims. 10 Case:13-40458Document:00512621558Page:10DateFiled:05/07/2014 D-4 MEALEY’S Fracking Report Vol. 1, #1 May 2014
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  • 78. LexisNexis and the Knowledge Burst logo are registered trademarks of Reed Elsevier Properties Inc., used under license. © 2012, LexisNexis. All rights reserved. OFF02212-0 2012