United States District Court, N.D. West Virginia
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANT'S MOTIONS TO DISMISS [DKT. NO.
M. KEELEY, UNITED STATES DISTRICT JUDGE.
a joint scheduling conference in these consolidated cases on
March 12, 2018, the Court GRANTED in part
and DENIED in part the
defendant's motions to dismiss. This Memorandum Opinion
and Order explains the Court's reasoning in support of
facts are taken from the amended complaints and, as they must
be, are construed in the light most favorable to the
plaintiff. See De'Lonta v. Johnson, 708 F.3d
520, 524 (4th Cir. 2013). On November 6, 2017, the plaintiff,
Bounty Minerals, LLC ("Bounty"), filed two related
cases in the Circuit Court of Monongalia County, West
Virginia, against the defendant, EQT Production Company
("EQT") (Dkt. No. 1-3). EQT is the record lessee of
two tracts in which Bounty owns a mineral interest, but
Bounty alleges that the relevant leases have terminated for
lack of production. (Dkt. No. 15 at 2-5). The complaints make
claims for relief based on the alleged lease terminations,
including 1) declaratory judgments that the relevant leases
and their amendments have terminated, 2) ejectment, 3)
slander of title, 4) breach of the implied covenant of
further exploration, and 5) breach of the implied covenant of
removed the cases to this Court on December 18, 2017, based
on the Court's diversity jurisdiction (Dkt. No. 1). On
December 26, 2017, EQT moved to dismiss the complaints (Dkt.
No. 5). When Bounty filed amended complaints on January 12,
2018 (Dkt. No. 15), the Court denied EQT's motions to
dismiss as moot (Dkt. No. 16). Then, on January 16, 2018, EQT
moved to dismiss Bounty's amended complaints (Dkt. No.
17). At a joint scheduling conference on March 12, 2018, the
Court consolidated the cases and granted in part and denied
in part EQT's motions (Dkt. No. 34).
STANDARD OF REVIEW
Civ. P. 12(b)(6) allows a defendant to move for dismissal on
the grounds that a complaint does not “state a claim
upon which relief can be granted.” When reviewing a
complaint, the Court “must accept as true all of the
factual allegations contained in the complaint.”
Anderson v. Sara Lee Corp., 508 F.3d 181, 188 (4th
Cir. 2007) (quoting Erickson v. Pardus, 551 U.S. 89,
94 (2007)). “While a complaint . . . does not need
detailed factual allegations, a plaintiff's obligation to
provide the ‘grounds' of his ‘entitle[ment]
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) (internal citation omitted).
is “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 contain ‘enough facts to state a claim to relief
that is plausible on its face.'” Anderson,
508 F.3d at 188 n.7 (quoting Twombly, 550 U.S. at
547). “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). A motion to dismiss
“does not resolve contests surrounding the facts, the
merits of a claim, or the applicability of defenses.”
Republican Party of N.C. v. Martin, 980 F.2d 943,
952 (4th Cir. 1992).
deciding the motion, the court need not confine its inquiry
to the complaint; it 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., 551 U.S. 308,
322 (2007). “A copy of a written instrument that is an
exhibit to a pleading is a part of the pleading for all
purposes.” Fed.R.Civ.P. 10(c). The court may also
consider documents attached to the motion to dismiss, so long
as they are integral to the complaint and authentic.”
Philips v. Pitt Cty. Mem'l Hosp., 572 F.3d 176,
180 (4th Cir. 2009).
Termination for Lack of Production
Counts One through Three of the amended complaint, Bounty
seeks a declaratory judgment that the relevant leases and
their amendments have terminated for lack of production and
are no longer enforceable, as well as an order ejecting EQT
from the tracts at issue. (Dkt. No. 15 at 5-6). In its motion
to dismiss, EQT argues that, under West Virginia law,
“production is irrelevant when determining whether a
lease with a flat-rate provision or a shut-in royalty
provision is abandoned or terminated" (Dkt. No. 26 at
5). Given that Bounty has not offered a compelling reason to
depart from existing precedent in West Virginia and the
Fourth Circuit, the Court agrees with EQT that Bounty's
claims for declaratory relief and ejectment fail as a matter
controlling West Virginia precedent on this matter is
Bruen v. Columbia Gas Transmission Corp., 426 S.E.2d
522 ( W.Va. 1992). The habendum clause in that case provided
that the lease would be "for the term of ten years (and
so long thereafter as oil or gas is produced from the land
leased and royalty and rentals paid by lessee
therfore)." Id. at 523 (emphasis supplied in
original). The lease provided for an enumerated royalty for
oil, as well as an "annual rent of $200 for each gas
well ‘from the time and while the gas is
marketed." Id. Critically, the lease also
contained the following "flat-rate" provision:
Lessee agrees to pay Lessor Twelve Hundred Dollars ($1200.00)
per year net rental until the royalties and rentals reserved
in this lease exceed that amount unless lease be surrendered
before said time as above provided.
Id. at 524.
the lessee, Columbia Gas, faithfully tendered the $1200
annual "net rental, ” the lessors alleged that the
lease had terminated due to an "alleged failure to
produce oil and gas in paying quantities." Id.
at 523. The Supreme Court of Appeals rejected the
lessors' argument, concluding that the "quantity of
production is irrelevant" in the case of a flat-rate
lease. Id. at 524-25 (citing Goodwin v.
Wright, 255 S.E.2d 924 ( W.Va. 1979); Ketchum v.
Chartiers Oil Co., 5 S.E.2d 414 ( W.Va. 1939);
McCutcheon v. Enon Oil & Gas Co., 135 S.E. 238 (
W.Va. 1926); Bassell v. West Virginia Central Gas
Co., 103 S.E. 116 ( W.Va. 1920); McGraw Oil Co. V.
Kennedy, 64 S.E. 1027 ( W.Va. 1909)). The court further
reasoned that the express terms of the lease did not require
any particular amount of production, but instead required
"‘flat' payments of rental in the amount of
$1200 per year, regardless of production." Id.
at 525 (emphasis in original). The court held unequivocally:
If an oil and gas lease contains a clause to continue the
lease for a term "so long thereafter as oil and gas is
produced, " but also provides for "flat-rate"
rental payments, then quantity of production is not relevant
to the expiration of the term of the lease if such