United States District Court, N.D. West Virginia
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFFS'
MOTION FOR LEAVE TO FILE FIFTH AMENDED COMPLAINT
FREDERICK P. STAMP, JR. UNITED STATES DISTRICT JUDGE
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.
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
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.
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) .
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.
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.
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
Good Cause Under Rule 16(b)(4)
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).
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