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Corder v. Antero Resources Corp.

United States District Court, N.D. West Virginia

June 11, 2018

GERALD W. CORDER, Plaintiff,
v.
ANTERO RESOURCES CORPORATION, a Delaware corporation; ANTERO MIDSTREAM PARTNERS, LP, a Delaware corporation; ANTERO RESOURCES PIPELINE, LLC, a Delaware corporation; and ANTERO RESOURCES INVESTMENT, LLC, a Delaware corporation, Defendants.

         For the purpose of ruling on these motions

          MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF'S MOTION TO AMEND THE COMPLAINT [DKT. NO. 27], [1] GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS [DKT. NO. 16], AND CONSOLIDATING CASES FOR PURPOSE OF RULING ON THESE MOTIONS

          IRENE M. KEELEY, UNITED STATES DISTRICT JUDGE

         On December 6, 2017, 11 identical complaints were filed in the Circuit Court of Harrison County, West Virginia, against Antero Resources Corporation ("Antero"), Antero Midstream Partners LP ("Midstream Partners"), Antero Resources Pipeline LLC ("Pipeline"), and Antero Resources Investment LLC ("Investment") (collectively, "Antero defendants") (Dkt. No. 1-1). Antero and Midstream Partners removed the cases to this Court on February 12, 2018, on the basis of diversity jurisdiction (Dkt. No. 1). The plaintiffs argue that the Antero defendants have been improperly deducting post-production costs from royalty payments due to the plaintiffs under certain oil and gas leases. Finding that these motions involve questions common to all cases, the Court CONSOLIDATES civil action numbers 1:18-CV-30 through 1:18-CV-40 for the purpose of deciding this motion, 1:18-CV-30 to serve as the lead case.

         I. BACKGROUND

         The recitation of the facts is taken from the second amended complaints and is construed in the light most favorable to the plaintiffs. See De'Lonta v. Johnson, 708 F.3d 520, 524 (4th Cir. 2013).

         The plaintiffs allege that they own oil and gas interests which were leased, assigned or otherwise acquired by and presently held by Antero. The lessor's rights and remedies were transferred by heirship, purchase or otherwise to the plaintiffs. Antero purportedly acquired the lessees' rights, duties, and responsibilities by leases and modifications of leases, by assignment, or by Antero's acquisition of leases and rights thereto from previous lessors. As support for these propositions, the plaintiffs attached various royalty statements from Antero, as well as an opinion entered by the Circuit Court of Harrison County describing several of the plaintiffs' interest in certain tracts of real property.

         The plaintiffs allege that Antero had duties and responsibilities to them pursuant to the following leases covering tracts of land situated in Harrison County, West Virginia: (A) 48.69 acres (Deed Book 393, Page 399)

         The lease covering this tract requires Antero to pay a royalty “on gas, including casinghead gas or other gaseous substance, produced from said land and sold or used beyond the well or for the extraction of gasoline or other product, [in] an amount equal to One-Eighth (12.5%) (amended to be 15%) of the net amount realized by Lessee computed at the wellhead from the sale of such substances” (Dkt. No. 27-1 at 25).

         The parties also agreed that “all oil, gas or other proceeds accruing to the Lessor under this lease or by state law shall be without deduction, directly or indirectly, for the cost of producing, gathering, storing, separating, treating, dehydrating, compressing, processing, transporting, and marketing the oil, gas and other products produced hereunder to transform the product into marketable form; however, any such costs which result in enhancing the value of the marketable oil, gas or other products to receive a better price may be deducted from Lessor's share of production so long as they are based on Lessee's actual cost of such enhancements. However, in no event shall Lessor receive a price that is less than, or more than, the price received by Lessee.” Id.

         (B) 50.82 acres (Deed Book 839, Page 23)

         The lease covering this tract requires Antero “to pay one-eighth (1/8) of the value at the well of gas from each and every gas well from which is marketed and used off the premises.” The plaintiff claims that this lease was later amended to require “1/8 of the value of the gas from each well.” Id.

         (C) 54.18 acres (Deed Book 1082, Page 656)

         The lease covering this tract requires Antero to pay “one-eighth of the value at the well of the gas from each and every well.” Id. at 25-26.

         (D) 104.75 acres (Deed Book 1103, Page 733)

         The lease covering this tract requires Antero “to pay 1/8 of the price received by the lessee from the sale of such gas.” Id. at 26.

         (E) 59 acres (Deed Book 1084, Page 203)

         The lease covering this tract requires Antero to pay “1/8 of the gross proceeds received from each and every well drilled on said properties providing natural gas, an amount equal to one-eighth (1/8) of the gross proceeds received from the sale of same at the prevailing price for gas at the well, for all natural gas saved and marketed from the said premises.” Id.

         (F) 105 acres (Deed Book 1084, Page 197)

         The lease covering this tract requires Antero to pay “1/8 of the gross proceeds received from each and every well drilled on said properties providing natural gas, an amount equal to one-eighth (1/8) of the gross proceeds received from the sale of same at the prevailing price for gas at the well, for all natural gas saved and marketed from the premises.” Id.

         (G) 44.4 acres (Deed Book 99)

         The lease covering this tract requires Antero to pay “$100 per year for each and every gas well obtained on the premises.” Id. (H) 50 acres (Deed Book 143, Page 291)

         The lease covering this tract requires Antero to pay “1/8 of the value at the well of the gas from each and every gas well drilled on the premises.” Id. According to the plaintiffs,

Contrary to their contractual, legal, statutory and common law duties and responsibilities, Investment and Antero and/or defendants' subsidiaries, Midstream and Pipeline, and/or defendants' other subsidiaries have and continue to take deductions, reduce plaintiffs' royalty payments, overcharge plaintiffs for the deductions that they do charge plaintiffs, and otherwise reduce and not pay for plaintiffs' royalty on volume and/or price and/or by taking the liquid hydrocarbons which are part of the natural gas extracted from the said gas and subtracting unauthorized deductions therefrom.”

(Dkt. No. 27-1 at 31). More particularly, Antero has “sold plaintiffs' natural gas liquids for money without compensating plaintiffs for same, ” and has deducted expenses and taxes in contravention of West Virginia law. Id. at 31-32. In addition, the plaintiffs allege that Antero charged them “with costs and charges which were unreasonably excessive and not actual.” Id. at 32.

         Specific allegations related to each claim for relief will be discussed below in connection with Antero's motions to dismiss. The plaintiffs make the following claims for relief: 1) Breach of Contract, 2) Breach of Fiduciary Duty, 3) Fraud, and 4) Punitive Damages. Id. at 35-37.

         Pending are motions to dismiss the amended complaint filed by Antero and Midstream Partners, which are fully briefed and ripe for review (Dkt. No. 16). Also pending are the plaintiffs' motions to amend their complaints for a second time (Dkt. No. 27).

         II. JURISDICTION

         As an initial matter, the Court must address whether it has subject matter jurisdiction. Pursuant to 28 U.S.C. § 1332, the Court finds that there is diversity of citizenship based on the citizenship of properly joined parties.

         A. Plaintiffs

         1. Gerald W. Corder resides in West Virginia (1:18-CV-30).

         2. Marlyn Sigmon resides in Virginia (1:18-CV-31).

         3. Garnet Cotrill resides in Florida (1:18-CV-32).

         4. Randall N. Corder resides in West Virginia (1:18-CV-33).

         5. Janet C. Packard and Leroy Packard reside in Florida (1:18-CV-34).

         6. Lorena Krafft resides in Ohio (1:18-CV-35).

         7. Cheryl Morris resides in Tennessee (1:18-CV-36).

         8. Tracy Bridge resides in Ohio (1:18-CV-37).

         9. Angela Nicholson resides in Virginia (1:18-CV-38).

         10. Kevin McCall resides in Ohio (1:18-CV-39).

         11. Brian McCall resides in Ohio (1:18-CV-40).

         B. ...


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