United States District Court, S.D. West Virginia, Charleston
WAHOOWA, INC. and SUVAC, INC., Plaintiffs,
CONSOL OF KENTUCKY, LLC, CONSOL ENERGY, INC., and SOUTHEASTERN LAND, LLC, Defendants.
MEMORANDUM OPINION AND ORDER
T. Copenhaver, Jr. United States District Judge.
before the court is the plaintiffs' motion to remand the
case to the Circuit Court of Mingo County, West Virginia,
filed on December 7, 2017.
civil action was initiated with the complaint in that circuit
court on September 15, 2017. On September 22, 2017,
plaintiffs filed their first amended complaint (ECF No. 1-2).
The action was removed to this court on November 29, 2017.
allege that defendant CONSOL Energy, Inc.
(“Consol”) directed and orchestrated an improper
assignment to defendant Southeastern Land, LLC
(“Southeastern”) of a mining lease
(“Wahoowa Lease”) in Harvey District, Mingo
County, West Virginia, under which defendant CONSOL of
Kentucky, LLC (“COK”), Consol's wholly owned
subsidiary, was lessee and the plaintiffs were lessors. First
Am. Compl. at ¶¶ 2, 3, 6, 7, 26. According to
plaintiffs, the transfer to Southeastern not only violated
Section 18(a) of the lease, which governs assignments, but
also amounted to a fraudulent transfer under W.Va. Code
§ 40-1A. Id. at ¶¶ 5, 18, 22-26. In
particular, COK did not obtain the plaintiffs' required
consent before proceeding with the assignment.
assignment was part of a larger transaction for mining tracts
in the area embodied in a purchase and sale agreement between
several Consol subsidiaries, including COK, and Southeastern.
In a filing with the Securities and Exchange Commission,
Consol represented that Southeastern had agreed to assume
approximately $103 million of specified liabilities,
including mine closing and reclamation liabilities, for a
number of coal leases transferred by the Consol subsidiaries
to Southeastern. Id. at ¶¶ 15-16. In
consideration, the Consol subsidiaries were obligated to pay
approximately $44 million to Southeastern, of which $27
million was paid in cash at closing. Id. at 16.
Consol pointed out that the area no longer fit the Consol
portfolio and that its transfer to Southeastern strengthened
Consol's balance sheet “because the area generated
negative earnings.” Id. at ¶ 17.
Plaintiffs allege that this transaction resulted in COK
“not receiving a reasonably equivalent value in
exchange for its rights and benefits under the [Wahoowa]
Lease.” Id. at ¶ 21.
plaintiffs' information and belief, Consol thus engaged
in the asset stripping of COK, such that it is no longer
intended to be an operational company but has rather become a
“shell.” Id. at ¶¶ 15, 24.
While COK gave a guaranty of Southeastern's performance,
plaintiffs are concerned about the viability of such guaranty
and seek a judgment that would disregard COK's corporate
form and obligate Consol as the lessee instead. Id.
at ¶¶ 13-15, 24, 26. In addition to requesting a
declaratory judgment, id. at ¶ 22, plaintiffs
note that the court “may” order the following
relief: avoidance of the assignment, an attachment or other
provisional remedy, and injunctive or other appropriate
relief, id. at ¶ 27.
have moved to remand on the ground that as a purported
diversity action, it does not meet the $75, 000 amount in
controversy requirement necessary for federal jurisdiction
under 28 U.S.C. § 1332.
removing party, defendants bear the burden of proving that
the case meets the amount in controversy requirement.
Plaintiffs assert, and the court agrees, that the appropriate
standard of proof is the preponderance of the evidence.
See Bartnikowski v. NVR, Inc., 307 Fed. App. 730,
734 n. 7 (4th Cir. 2009) (noting that other circuits have
explicitly adopted the preponderance of the evidence standard
where damages are unspecified).
case, there is no ad damnum clause, and the
plaintiffs do not expressly seek monetary relief. The test
for determining the amount in a declaratory action is
“the pecuniary result to either party which [a]
judgment would produce.” Dixon v. Edwards, 290
F.3d 699, 710 (4th Cir. 2002) (quoting Gov't Emps.
Ins. Co. v. Lally, 327 F.2d 568, 569 (4th Cir.1964)).
essentially offer two arguments for remand, which are in
tension with each other: that the value of the lease is not
at issue at all; and that the defendants have not shown that
such value exceeds the jurisdictional threshold. Pffs.'
Br. The second argument has greater ostensible merit, and
plaintiffs appear to back away from the first one in their
first argument - that the value of the lease is not in issue
- rests on the premise that plaintiffs do not request
monetary relief, but rather contest the propriety of the
assignment. Yet, under the “either party” view of
Dixon, itself a declaratory judgment action, it
matters much to Consol on whom plaintiffs would impose the
guaranty given by COK and to Southeastern who may lose its
mining rights under the Wahoowa Lease, particularly inasmuch
as that lease is an integral part of a whole set of mining
leases that it will operate jointly.
contend that they do not aim to deprive Southeastern of the
“ability to mine the premises” because
Southeastern will still be able to seek to enter into a new,
proper agreement with Consol (as noted, plaintiffs assert
that COK is a shell entity whose corporate veil should be
disregarded). ECF No. 20 at 3. However, this contention is
speculative. In actuality, should the plaintiffs prevail in
this action, the lease would revert to COK, scrambling
Southeastern's mining plans. Or, if the veil is pierced
and Consol is deemed the lessee obligated under the lease to
plaintiffs, the value of the lease is enhanced by
Consol's likely superior financial status. ...