United States District Court, N.D. West Virginia
OPINION AND ORDER GRANTING IN PART AND DEFERRING IN PART
DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT, GRANTING
DEFENDANT'S SUPPLEMENTAL MOTION FOR PARTIAL SUMMARY
JUDGMENT, DEFERRING RULING ON PLAINTIFFS' MOTION FOR
PARTIAL SUMMARY JUDGMENT AND DEFERRING RULING ON
INTERVENOR-DEFENDANT'S MOTION FOR PARTIAL SUMMARY
FREDERICK P. STAMP, JR. UNITED STATES DISTRICT JUDGE.
a commercial contract dispute arising out of a joint venture
for the acquisition, exploration, and development of oil and
gas leases. The parties have filed cross-motions for partial
summary judgment. For the following reasons, the
defendant's motion for partial summary judgment is
granted in part and deferred in part and the defendant's
supplemental motion for partial summary judgment is granted.
This Court defers ruling on the plaintiffs' motion for
partial summary judgment and the intervenor-defendant's
motion for partial summary judgment pending those
parties' settlement of Count Two.
plaintiffs, Dean Patrick Decker and Loretta Decker ("the
Deckers"), claim entitlement to overriding royalty
interests in oil and gas leases held by defendant Statoil USA
Onshore Properties, Inc. ("Statoil") and
intervenor-defendant EQT Production Company ("EQT")
. The Deckers' claims arise out of a 2011 agreement
between Decker Energy, LLC ("Decker Energy") and
PetroEdge Energy, LLC ("PetroEdge") called the
"Participation Agreement." ECF No. 143-3. Dean
Decker was the sole member of Decker Energy. ECF No. 146-1 at
59 (providing a signature line for Decker Energy listing Dean
Decker as Decker Energy's "Sole Member") . At
that time, Decker Energy held oil and gas leases in Tyler
County, West Virginia and was investigating title to leases
in properties in Tyler and Wetzel Counties for later
acquisition. ECF Nos. 143-1 at 2; 145-1. Through the
Participation Agreement, Decker Energy and PetroEdge sought
to cooperate in the acquisition and development of these
leases. ECF No. 145-1 at 2.
Participation Agreement had three principal parts. First,
Decker Energy agreed to sell to PetroEdge interests in a set
of oil and gas leases held by Decker Energy called the
"Initial Leases, " identified in Exhibit A-l to the
Participation Agreement. ECF No. 143-3 at 5, 10, 12, 14. For
each Initial Lease, Decker Energy was to transfer 90% of its
working interest to PetroEdge while retaining 10% of its
original working interest. Id. at 6. Further, Decker
Energy would receive an overriding royalty
interest called the "Initial Lease ORRI."
Id. at 10. If Decker Energy held more than an 83%
working interest in an Initial Lease, Decker Energy was
entitled to an overriding royalty interest in the amount of
the percentage difference between the percentage of Decker
Energy's working interest and 83%. Id. Thus, if
Decker Energy held an 87% working interest in an Initial
Lease, it would be entitled to an overriding royalty interest
of 4% in that lease. See ECF No. 204-6 at 7. Decker
Energy was also "entitled to assign the Initial Lease
ORRI or cause the Initial Lease ORRI to be paid to [the
Deckers]." ECF No. 143-3 at 23.
Decker Energy and PetroEdge agreed that PetroEdge would
investigate certain properties identified in Exhibit A-3 to
the Participation Agreement, called the "Target
Leases." Id. at 33. PetroEdge could then
acquire the Target Leases. Id. Upon acquiring a
Target Lease, PetroEdge was to "assign to Decker
[Energy] an undivided working interest in such Target
Lease" and an overriding royalty interest in that lease.
Id. As with the Initial Lease ORRI, Decker Energy
was "entitled to assign such overriding royalty or cause
such overriding royalty to be paid to [the Deckers]."
Decker Energy and PetroEdge agreed to create an "Area of
Mutual Interest" ("the AMI"), which included
the Initial Leases, the Target Leases, and other adjacent
properties. Id. at 6, 34. The parties agreed that if
one of them sought to acquire a lease within the AMI, the
other party would have a right of first refusal to acquire
that lease on the same terms. Id. at 34-35. In
effect, this prevented Decker Energy and PetroEdge from
competing for leases within the AMI.
later pooled and unitized a set of leases, including one of
the Initial Leases called "the Welch Lease,
" into a pooled unit known as "the Ball
Unit." ECF Nos. 145-2, 146-5 at 4. PetroEdge then
drilled a well on the Ball Unit known as "Ball Unit
1H" and began making royalty payments directly to the
Deckers. ECF Nos. 145-2 at 2-3; 143-6 at 1. There is no
evidence of a written assignment from Decker Energy to the
Deckers or of a written invocation of Decker Energy's
right to cause the payments to be directed to the Deckers.
Rather, the parties informally understood that the royalties
would be paid directly to the Deckers. ECF No. 204-6 at 9.
Energy and PetroEdge then executed an "Amendment to the
Participation Agreement" ("the Amendment").
ECF No. 146-2. Under the Amendment, Decker Energy was to
receive a 1% overriding royalty interest in each Target Lease
acquired by PetroEdge, which was to be conveyed directly to
the Deckers rather than Decker Energy within ninety days of
PetroEdge's acquisition of the lease. ECF No. 145-3 at 4.
It also amended Exhibits A-l and A-3 identifying the Initial
Leases and the Target Leases respectively. See ECF
No. 155-1 at 4, 9-16.
later acquired all of PetroEdge's West Virginia assets,
including those under the Participation Agreement and the
Amendment. ECF Nos. 146-3 at 18-22; 143-9. Under § 15.4
of the Participation Agreement, Decker Energy had the right
to "tag along" with PetroEdge's sale to Statoil
and sell its assets relating to the Participation Agreement
to Statoil on the same terms as PetroEdge. ECF No. 143-3 at
40. Decker Energy exercised that right and conveyed all of
its interests, including "any royalty interests, "
in leases identified at Exhibit A, Schedule 1 to the
parties' Purchase and Sale Agreement ("the
PSA") along with Decker Energy's interests in the
Participation Agreement and the Amendment. ECF Nos. 146-4 at
17-21, 66-68, 72; 143-10; 145-4. The Deckers maintain that,
based on their communications with PetroEdge, Decker Energy
conveyed all of its interests in the Initial Leases and
Target Leases except for its overriding royalty interest and
its working interest in Ball Unit 1H. ECF No. 143-10; 145-4.
However, Exhibit A, Schedule 1 to the PSA lists the Welch
Lease and Decker Energy's overriding royalty interest in
that lease as one of the assets being purchased. ECF No.
204-4 at 66. Further, Exhibit A, Schedule 1 expressly
excludes Decker Energy's 10% working interest in Ball
Unit 1H. Id. at 68.
these acquisitions, Statoil made royalty payments to the
Deckers for production from Ball Unit 1H. ECF No. 145-5 at
2-3; 143-13. However, Statoil later notified the Deckers that
they were no longer entitled to royalties because Decker
Energy conveyed all of its interests in the Initial Leases
and the Ball Unit to Statoil, and Statoil stopped making
payments to the Deckers. ECF No. 143-15. Statoil later assigned
to the Deckers overriding royalty interests in eighteen
leases that Statoil claims are acquired Target Leases. ECF
No. 145-6. Then, after the Deckers filed this civil action,
EQT acquired Statoil's interests in the Target Leases.
This Court has, thus, allowed EQT to intervene in this civil
action as a defendant.
Deckers allege that PetroEdge and Statoil failed to pay
royalties to the Deckers or to assign to them overriding
royalty interests in the Initial Leases, Target Leases
acquired by PetroEdge or Statoil, and the Ball Unit and Ball
Unit 1H-Counts One, Two, and Three respectively. The Deckers
also allege in Count Four a claim for unjust enrichment
against Statoil. The Deckers seek a declaration that they
hold or are entitled to hold overriding royalty interests in
the Initial Leases, the acquired Target Leases, and the Ball
Unit and Ball Unit 1H. They also seek an accounting of the
development and production on each lease and the appointment
of a special commissioner to execute and deliver assignments
of interests in the leases to them. Further, the Deckers
request a judgment for all unpaid royalties on the leases and
for their unjust enrichment claim.
seeks summary judgment as to all counts and the Deckers and
EQT each seek summary judgment as to Count Two. The parties
have since indicated that the Deckers and EQT have settled
Count Two regarding the Target Leases pending a period of due
diligence to conclude on July 3, 2017. See ECF No.
205. This Court will defer ruling on all motions as to Count
Two until that time. Thus, this Court considers only
Statoil's motion for partial summary judgment and
supplemental motion for partial summary judgment as to Counts
One, Three, and Four.
Federal Rule of Civil Procedure 56, this Court must grant a
party's motion for summary judgment if "there is no
genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law." Fed.R.Civ.P.
56(a). A fact is "material" if it might affect the
outcome of the case. Anderson v. Liberty Lobby, 477
U.S. 242, 248 (1986) . A dispute of material fact is
"genuine" if the evidence "is such that a
reasonable jury could return a verdict for the non-moving
party." Id. If the nonmoving party "fails
to make a showing sufficient to establish the existence of an
element essential to that party's case, and on which that
party will bear the burden of proof at trial, " summary
judgment must be granted against that party. Celotex
Corp. v. Catrett, 477 U.S. 317, 322 (1986) . In
reviewing the supported underlying facts, all inferences must
be viewed in the light most favorable to the party opposing
the motion. See Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986) .
party seeking summary judgment bears the initial burden of
showing the absence of any genuine issues of material fact.
See Celotex, 477 U.S. at 322-23. "The burden
then shifts to the nonmoving party to come forward with facts
sufficient to create a triable issue of fact."
Temkin v. Frederick County Comm'rs, 945 F.2d
716, 718 (4th Cir. 1991), cert, denied, 502 U.S.
1095 (1992). However, "a party opposing a properly
supported motion for summary judgment may not rest upon the
mere allegations or denials of his pleading, but . . . must
set forth specific facts showing that there is a genuine
issue for trial." Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 256 (1986) . Moreover, "[t]he
nonmoving party cannot create a genuine issue of material
fact through mere speculation or the building of one
inference upon another." Othentec Ltd. v.
Phelan, 526 F.3d 135, 140 (4th Cir. 2008) (internal
quotation marks omitted). The nonmoving party must produce