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Lucey v. SWN Production Company, LLC.

United States District Court, N.D. West Virginia, Wheeling

February 7, 2018




         This matter is before this Court for consideration of Defendant Chesapeake Appalachia, LLC's Motion to Dismiss Pursuant to Fed.R.Civ.P. 12(b)(6) [Doc. 18], filed November 30, 2017. The matter is fully briefed and ripe for review.


         This action involves the interpretation of an oil and gas lease. On August 22, 2006, Daniel and Colleen Lucey ("the Luceys") and Abel Lucey (collectively, "the plaintiffs") each entered into an Oil, Gas and Coalbed Methane Lease with SWN Production Company, LLC ("SWN") and/or its successor in interest, Chesapeake Appalachia ("Chesapeake"), with a primary term of five years [No. 5:12-CV-39, Doc. 1; No. 5:12-CV-40, Doc. 1]. The lease was set to expire on August 21, 2011, but could be renewed by Chesapeake under certain conditions. Chesapeake attempted to extend the lease, but the extension was rejected by the plaintiffs for various reasons. Ultimately, the plaintiffs filed actions in this Court, which were subsequently consolidated, seeking a declaration that the lease had terminated. The matter was settled and dismissed by joint stipulation.

         The terms of the resulting settlement agreements[1" name="FN1" id="FN1">1] are now at issue. The settlement agreements state, in relevant part, that:

In addition, Chesapeake agreed to pay Releasors an additional $500.00/acre for 203.39 acres, totaling $101, 695.00 ("Additional Consideration") if there is not a commencement of two (2) wells within one (1) year of the effective date of this agreement. Forthe purposes of this agreement, commencement of a well is defined consistent with the terms of the Lease.

[Doc. 14-3, ¶1]. The lease provides that, "[a] well shall be deemed commenced when preparations for drilling have been commenced." [Doc. 14-1, ¶2]. The lease also grants Chesapeake the right to "consolidate the leased premises or any part thereof... for the purpose of drilling a well thereon." [Doc. 14-1, ¶3]. The settlement agreements were signed on October 29, 2012.

         Chesapeake consolidated various properties, including the plaintiffs', into a pooled unit. Pursuant to the terms of the lease agreement, Chesapeake recorded a Declaration and Notice of Pooled Unit-Michael Dunn Southwest Unit ("Dunn Unit") on January 3, 2013, which identified the plaintiffs' property as part of the unit. In late 2012, Chesapeake applied for permits to drill four wells that would be located in the Dunn Unit, and received the permits shortly after. The permits were applied for prior to the signing of the settlement agreement, although subsequent activity on the permits, including the spud date and revisions, occurred after the agreement was signed. See WVDEP Oil and Gas-Permit Search, West Virginia Department of Environmental Protection, Office of Oil and Gas, (last visited Feb. 5, 2018).

         On May 17, 2017, the Lucey plaintiffs filed a complaint against SWN in the Northern District of West Virginia [No. 5:17-CV-66, Doc. 1]. The Lucey plaintiffs alleged four counts against SWN: (1) breach of contract, (2) declaratory judgment, (3) trespass, and (4) private nuisance. On September 29, 2017, they filed an Amended Complaint [Id., Doc. 14], in which Chesapeake was named as a defendant, as SWN's successor in interest.

         On August 10, 2017, Abel Lucey filed a complaint against SWN in the Northern District of West Virginia [No. 5:17-CV-126, Doc. 1]. The complaint was substantially the same as that of the Lucey plaintiffs, and alleged the same four counts. Abel Lucey filed an amended complaint on September 29, 2017 [Id., Doc. 3], and named Chesapeake as a defendant, as SWN's successor in interest.

         On November 30, 2017, Chesapeake filed a Motion to Dismiss for Failure to State a Claim [No. 5:17-CV-66, Doc. 18; No. 5:17-CV-126, Doc. 9] in both actions. On December 6, 2017, the plaintiffs filed a motion to consolidate the two civil actions because they present identical legal issues. This Court granted the motion on December 11, 2017, and ordered the actions consolidated and designated the first-filed action, No. 5:17-CV-66, as the lead case [Doc. 22].[2]


         In reviewing the sufficiency of a complaint under Fed.R.Civ.P. 12(b)(6), a district court must accept the factual allegations in the complaint as true. Zak v. Chelsea Therapeutics Int'l, Ltd., 780 F.3d 597, 601 (4th Cir. 2015) (citing Matrix Capital Mgmt Fund, LP v. BearingPoint, Inc., 172');">576 F.3d 172, 176 (4th Cir. 2009)). While a complaint does not need detailed factual allegations, a plaintiffs obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Bell Atl, Corp. v. Twombly, 550 U.S. 544, 555 (2007). Indeed, courts "are not bound to accept as true a legal conclusion couched as a factual allegation." Papasan v. Allain, 478 U.S. 265, 286 (1986).

         A complaint must be dismissed if it does not allege "enough facts to state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 555. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). This requires "more than a sheer possibility that a defendant has acted unlawfully." Id. However, when reviewing the sufficiency of a complaint, a court may also consider "documents incorporated into the complaint by reference, and matters of which a court may take judicial notice." Tellabs, Inc. v. Makor Issues & Rights, Ltd.,1 U.S. 308');">551 U.S. 308, 322 (2007); see also Marsh v. United States, 2016 WL 247563, at *2 (D.Md. 2016) (considering public records on government website on motion to dismiss). A court may consider documents attached to a motion to dismiss when they are ...

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