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Stern v. Columbia Gas Transmission, LLC

United States District Court, N.D. West Virginia

March 2, 2002

GARY STERN and SUSAN STERN, Plaintiffs,
v.
COLUMBIA GAS TRANSMISSION, LLC, CHESAPEAKE APPALACHIA, LLC, COLUMBIA ENERGY VENTURE, LLC and SWN PRODUCTION COMPANY, LLC, Defendants.

          MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFFS' MOTION FOR LEAVE TO FILE FIFTH AMENDED COMPLAINT

          FREDERICK P. STAMP, JR. UNITED STATES DISTRICT JUDGE

         After this Court granted in part and denied in part the defendants' motion to dismiss the plaintiffs' fourth amended complaint, the plaintiffs filed a motion for leave to file a fifth amended complaint. The defendants oppose that motion. For the following reasons, the plaintiffs' motion for leave to file a fifth amended complaint is granted.

         I. Procedural History

         This is a breach of contract case arising out of two oil and gas leases. Columbia Gas Transmission, LLC and Columbia Energy Venture, LLC (collectively "Columbia") hold oil and gas leases in the plaintiffs' two tracts ("the subject leases") . Columbia sublet the subject leases to Chesapeake Appalachia, LLC ("Chesapeake"). Chesapeake has since assigned all of its rights and interests in the subject leases to SWN Production Company, LLC ("SWN").

         The plaintiffs ("the Sterns") originally alleged that the subject leases do not allow for pooling or unitization of their properties with neighboring lands. Chesapeake included portions of the Sterns' properties in a pooled unit known as the "Ray Baker Unit." Chesapeake drilled and began operating a well known as the "Ray Baker #1H" on property, other than the Sterns', in the Ray Baker Unit. The Sterns allege that the Ray Baker #1H well is producing gas from the Sterns' properties through drainage. After Chesapeake assigned all of its rights and interests in the subject leases to SWN, SWN has continued producing gas from the Sterns' properties through the Ray Baker #1H well. The Sterns allege that after they filed this civil action, SWN issued a First Amended Declaration and Notice of Pooled Unit for the Ray Baker Unit, "reconfigur[ing] the boundaries of the Ray Baker Unit ... to exclude the portion of [the Sterns' ] . . . tracts which had previously been included in the Unit by Chesapeake." ECF No. 76 at 8.

         The Sterns' claims against Columbia have been settled and dismissed. However, in their fourth amended complaint, the Sterns continued to allege claims against both Chesapeake and SWN for breach of contract, breach of the implied covenant against drainage, and fraudulent extraction of gas in Count II, trespass and conversion in Counts III and IV, and bad faith pooling and breach of the implied covenant of good faith and fair dealing in Counts V, VI, and VII. Chesapeake and SWN filed motions to dismiss under Rule 12(b) (6) .

         This Court granted in part and denied in part those motions to dismiss. Specifically, this Court concluded that the subject leases did include the right to pool the Sterns' property, eliminating Counts II, III, and IV of the fourth amended complaint. However, this Court concluded that the plaintiffs' bad faith pooling and breach of the implied covenant of good faith and fair dealing claims in Counts V, VI, and VII were not dismissed in so far as they allege breaches not dependent upon the defendants' right to pool. The Sterns have now filed a motion for leave to file a fifth amended complaint. The defendants filed separate oppositions, and the Sterns filed a reply.

         The Sterns' proposed fifth amended complaint includes three counts. Count I alleges that Chesapeake included the Sterns' properties in the Ray Baker Unit but failed to pay the Sterns royalties as required by the subject leases, the subleases, and West Virginia Code § 22-6-8(e), and that Chesapeake's inclusion of the Sterns' properties in the Ray Baker Unit resulted in an oversized unit in violation of the terms of the subleases. They allege that these actions constitute bad faith pooling. Count II alleges that SWN also failed to pay royalties and that SWN's removal of the Sterns' properties from the Ray Baker Unit violated the subleases' unitization provisions, and that these actions constitute bad faith pooling. Count III alleges that Chesapeake and SWN's actions constitute breach of the covenant of good faith and fair dealing.

         II. Applicable Law

         Where a party seeks to amend its pleadings after the deadline for such amendments in the scheduling order has passed, the party must show good cause under Federal Rule of Civil Procedure 16(b)(4) for why the party failed to timely file a motion to amend. Nourison Rug Corp. v. Parvizian, 535 F.3d 295, 298 (4th Cir. 2008) . Good cause requires that the party has been diligent in seeking to abide by deadlines. Cook v. Howard, 484 F.App'x 805, 815 (4th Cir. 2012). If the party demonstrates good cause, the court must then apply the liberal standard for amending provided by Rule 15(a)(2). Johnson v. Oroweat Foods Co., 785 F.2d 503, 509 (4th Cir. 1986).

         III. Discussion

         A. Good Cause Under Rule 16(b)(4)

         "[A]fter the deadlines provided by a scheduling order have passed, [Rule 16(b) (4)'s] good cause standard must be satisfied to justify leave to amend [] pleadings." Nourison Rug Corp. v. Parvizian, 535 F.3d 295, 298 (4th Cir. 2008) . Good cause requires that the party has been diligent in seeking to abide by the applicable deadlines. Cook v. Howard, 484 F.App'x 805, 815 (4th Cir. 2012).

         The Sterns have demonstrated good cause for seeking an out-of-time amendment to their complaint. The Sterns' prior amended complaints were based on a theory that the subject leases did not allow the defendants to pool or unitize their properties with others. This Court found that the subject leases do permit the defendants to pool or unitize the Sterns' properties and, thus, the Sterns' case theory was extinguished. However, this Court did not dismiss the Sterns' remaining breach of contract claims that were not based on the lack of pooling rights. The Sterns' ...


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