United States District Court, N.D. West Virginia
FRED B. GAMES, MARY V. GAMES AND VALLIE J. WEST, PLAINTIFFS,
CHESAPEAKE APPALACHIA, LLC and SWN PRODUCTION COMPANY, LLC, Defendants.
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT
CHESAPEAKE APPALACHIA LLC'S MOTION TO DISMISS AMENDED
FREDERICK P. STAMP, JR. UNITED STATES DISTRICT JUDGE
defendants, Chesapeake Appalachia, LLC
(“Chesapeake”) and SWN Production, LLC
(“SWN”), removed this civil action to this Court
from the Circuit Court of Marshall County, West Virginia. The
plaintiffs, Fred B. Games, Mary V. Games, and Vallie J. West,
then amended their complaint. The plaintiffs' amended
complaint alleges that plaintiffs Fred and Mary Games, along
with James Riley West and Phyllis J. West, entered into oil
and gas leases with Chesapeake on December 5, 2008. Both
couples signed separate, identical leases, but both leases
covered the same property, which, at the time, the four
individuals jointly owned. After the couple signed the
leases, the Wests' son, plaintiff Vallie J. West,
inherited his parents' interest in the property. SWN
acquired all of Chesapeake's interests in the alleged
December 5, 2008 leases through one or more assignments
and/or purchase agreements entered into between Chesapeake
plaintiffs seek a declaration that the December 5, 2008
leases expired at the end of the primary term and that the
leases have not been extended into any alleged secondary
terms by any “Delay in Marketing” payments the
defendants have attempted to make. Specifically, the
plaintiffs allege that the “Delay in Marketing”
clause requires that a well must be located on the leasehold
or lands pooled with the leasehold that is “capable of
production” and that there were no such wells at the
time the primary term of the leases expired. The plaintiffs
also allege that the defendants “violated their duties
and implied covenants to market oil and gas by not reasonably
making efforts to market oil and gas pursuant to the terms of
the lease agreements which are the subject of this
matter” and “violated their duties of good faith
and their duties to act as reasonably prudent oil and gas
operators when they attempted to extend the subject oil and
gas leases through the payment of ‘Delay in
Marketing' payments when there were no oil and gas wells
which were capable of production.” ECF No. 9 at 4. The
plaintiffs also ask for punitive damages.
has filed a motion to dismiss the plaintiffs' amended
complaint against it. Chesapeake first argues that the claim
for declaratory judgment should be dismissed as to Chesapeake
because Chesapeake has no interest in the leases, which have
been assigned to SWN. Chesapeake argues that this case is
analogous to Dwyer v. Range Res.-Appalachia, No.
5:14CV21, 2014 WL 1648272 (N.D. W.Va. Apr. 24, 2014), where
this Court found that a lessee that assigned its interest in
a lease was not sufficiently interested in a declaratory
judgment claim regarding the continuing validity of that
lease. Next, Chesapeake argues that the plaintiffs'
claims related to the implied duty to market and the implied
covenant of good faith and fair dealing are not pled with
sufficient specificity to enable Chesapeake to respond.
Lastly, Chesapeake argues that the plaintiffs' claim for
punitive damages should be dismissed because it is a
stand-alone claim and is without merit.
plaintiffs filed a response to Chesapeake's motion. In
response, the plaintiffs argue that Chesapeake ignores parts
of the amended complaint that clearly allege that Chesapeake
“owed duties and covenants to the Plaintiffs and that
Defendant Chesapeake violated those duties through its
actions in improperly attempting to extend its leasehold with
the Plaintiffs and, thereby, have caused the Plaintiffs
damage including a cloud on title of the Plaintiffs' oil
and gas interests.” ECF No. 18 at 2. The plaintiffs
concede that it may be improper to include Chesapeake in an
action seeking only declaratory relief, but that, in this
civil action, the plaintiffs also properly assert both
contractual and tort claims against Chesapeake. The
plaintiffs contend that they alleged in their complaint that
Chesapeake's actions have resulted in damages and have
“created a cloud upon the title to the Plaintiffs'
oil and gas rights, which are the subject of this
action.” ECF No. 18 at 5. Thus, the plaintiffs conclude
that their amended complaint seeks much more than declaratory
relief regarding the lease agreement. The plaintiffs further
argue that the Dwyer case cited by Chesapeake did
not assert the type of allegations related to the breach of
duties and obligations that are alleged in this case.
filed a reply to the plaintiffs' response in opposition.
In reply, Chesapeake points out the plaintiffs'
acknowledgment that Chesapeake no longer has an interest in
the leases. Thus, Chesapeake argues that, as it has not had
an interest in the leases for more than two years, the
plaintiffs “cannot properly raise either a declaratory
judgment or a tort claim against Chesapeake.” ECF No.
21 at 1. Chesapeake also contends that no breach of contract
claim is pled in the amended complaint. The plaintiffs allege
that Chesapeake violated the “duty to market” and
the “duty of good faith and fair dealing.”
However, Chesapeake argues that “West Virginia law does
not recognize an independent cause of action for a breach of
duty of good faith and fair dealing separate and apart from a
breach of contract claim.” ECF No. 21 at 2. Next,
Chesapeake argues that the plaintiffs cannot state a
plausible claim for breach of an implied duty to market
because Chesapeake's actions were expressly authorized
under the leases. Lastly, Chesapeake points out that, while
the plaintiffs' response speaks of tort recovery, the
amended complaint does not plead any tort claim.
following reasons, the motion to dismiss the amended
complaint must be granted as to Chesapeake.
assessing a motion to dismiss for failure to state a claim
under Rule 12(b)(6), a court must accept all well-pled facts
contained in the complaint as true. Nemet Chevrolet, Ltd
v. Consumeraffairs.com, Inc, 591 F.3d 250, 255 (4th Cir.
2009). However, “legal conclusions, elements of a cause
of action, and bare assertions devoid of further factual
enhancement fail to constitute well-pled facts for Rule
12(b)(6) purposes.” Id. (citing Ashcroft
v. Iqbal, 129 S.Ct. 1937, 1949 (2009)). This Court also
declines to consider “unwarranted inferences,
unreasonable conclusions, or arguments.” Wahi v.
Charleston Area Med. Ctr., Inc., 562 F.3d 599, 615 n.26
(4th Cir. 2009).
purpose of a motion under Rule 12(b)(6) is to test the formal
sufficiency of the statement of the claim for relief; it is
not a procedure for resolving a contest about the facts or
the merits of the case. 5B Charles Alan Wright & Arthur
R. Miller, Federal Practice and Procedure §
1356 (3d ed. 1998). The Rule 12(b)(6) motion also must be
distinguished from a motion for summary judgment under
Federal Rule of Civil Procedure 56, which goes to the merits
of the claim and is designed to test whether there is a
genuine issue of material fact. Id. For purposes of
the motion to dismiss, the complaint is construed in the
light most favorable to the party making the claim and
essentially the court's inquiry is directed to whether
the allegations constitute a statement of a claim under
Federal Rule of Civil Procedure 8(a). Id. §
complaint should be dismissed “if it does not allege
‘enough facts to state a claim to relief that is
plausible on is face.'” Giarratano v.
Johnson, 521 F.3d 298, 302 (4th Cir. 2008) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). “Facial plausibility is established once the
factual content of a complaint ‘allows the court to
draw the reasonable inference that the defendant is liable
for the misconduct alleged.'” Nemet
Chevrolet, 591 F.3d at 256 (quoting Iqbal, 129
S.Ct. at 1949). Detailed factual allegations are not
required, but the facts alleged must be sufficient “to
raise a right to relief above the speculative level.”
Twombly, 550 U.S. at 555.
plaintiffs concede in their response to Chesapeake's
motion to dismiss that Chesapeake assigned the leases to SWN.
ECF No. 18 at 2-3 (“The Plaintiffs do not dispute that
it may be the case that a defendant such as Chesapeake may
not be properly included in an action seeking mere
declaratory relief.”). This Court finds that the
transfer of title to SWN is fatal to the plaintiffs' suit
to quiet title against Chesapeake. In order to assert a
declaratory judgment action against a defendant, the
defendant must be sufficiently interested in the subject
matter of the action. 28 U.S.C. § 2201(a). In
Dwyer, this Court ruled that a lessee that assigned
its interest in an oil and gas lease to another party was not
sufficiently interested in a declaratory judgment claim
regarding the continuing validity of that lease.
Dwyer, 2014 WL 1648272, at *3 (finding that the
defendant would not be affected by the declaratory judgment
claim because it “no longer has an interest in the
leases due to its assignment of such interest to [another
party]”). Because Chesapeake does not have an interest
in the leases, the declaratory judgment claim against
Chesapeake does not satisfy the “case of actual
controversy” requirement of ...