United States District Court, N.D. West Virginia
MARGARET ANNE WICKLAND, as Trustee for and on Behalf of an Irrevocable Trust Established December 23, 1974, and Revocable Trust Established August 23, 1985; and GUY CORPORATION, Plaintiffs,
AMERICAN MOUNTAINEER ENERGY, INC.; and MURRAY ENERGY CORPORATION, Defendants.
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS' MOTION TO DISMISS [DKT. NO.
M. KEELEY UNITED STATES DISTRICT JUDGE.
reasons stated on the record during the scheduling
conference, and for the reasons discussed below, the Court
GRANTS in part and
DENIES in part the defendants' motion to
dismiss for failure to state a claim (Dkt. No. 19).
FACTUAL AND PROCEDURAL BACKGROUND
December 1, 2017, the plaintiffs, Margaret Anne Wickland, as
Trustee for and on Behalf of an Irrevocable Trust Established
December 23, 1974, and Revocable Trust Established August 23,
1985, and Guy Corporation filed this action against American
Mountaineer Energy, Inc. (“AMEI”), and Murray
Energy Corporation (“Murray”) (Dkt. No. 1). The
facts are taken from the complaint and construed in the light
most favorable to the plaintiffs. See De'Lonta v.
Johnson, 708 F.3d 520, 524 (4th Cir. 2013).
plaintiffs are the sole owners of two grants of right, title,
and interest in and to the mineable and merchantable
Pittsburgh vein or seam of coal underlying two parcels of
land in Harrison County, West Virginia (“the
Premises”). The plaintiffs or their predecessors in
interest originally leased the Premises in 1958 and 1962. On
September 12, 2008, however, AMEI became the lessee of the
Premises pursuant to the assignment of a Consolidated,
Amended and Restated Lease (“Lease”) (Dkt. Nos.
17-1; 17-2). That same day, Murray agreed to guarantee
AMEI's performance under the Lease (Dkt. No. 17 at 6).
Lease had a primary term of 20 years, and the parties agreed
that part of the consideration was the lessee's
“commitment to promptly commence and actively pursue
coal mining operations on the Leased Premises in order to
maximize the benefits of the current coal market
conditions” (Dkt. No. 17-1 at 21). To that end, the
Lease imposed the following schedule on AMEI:
• September 14, 2010: Apply for necessary permits
• September 14, 2013: Receive all permits
• September 14, 2016: Commence substantial construction
• December 31, 2019: Operate longwall mining system
Id. at 22. In 2013, the primary term of the Lease
was extended to 23 years, and these deadlines extended
respectively to 2010, 2016, 2019, and 2022 (Dkt. No. 17-3 at
Lease also contemplated annual “advance recoupable
production royalties” in the amount of $1, 000, 000 or
$2, 000, 000 beginning in 2008. These royalties were not
intended to be penalties against AMEI, but rather were
“compensation to Lessors for the delay in receiving
Production Royalties . . . which were reasonably anticipated
to have been paid if Lessee had timely performed such
conditions and obligations.” Id. at 27-29.
AMEI would have been able to recoup the advance payments once
it actually began production and owed production royalties.
If the Lease terminated for any reason, however, the advance
royalty payments would “be forfeited and retained by
Lessors, if not recouped by Lessee as provided.”
event that the Lease terminated, AMEI agreed “to
cooperate in the timely transfer and/or assignment of any and
all permits, licenses, etc. required for mining or operation
to Lessors or to its designated assignee upon Lessor's
request therefore, to the extent the same are assignable or
transferrable.” Id. at 31. It also agreed to
“promptly deliver to Lessors (or its designee) all
surveys, maps, reports, drilling logs, core samples, coal
analyses, and every other piece of information, document or
instrument.” Id. at 32-33. If AMEI failed to
pay a royalty, the plaintiffs had the right to terminate the
Lease after providing AMEI with written notice and a ten-day
cure period. Id. at 39-40. Upon termination, the
plaintiffs had the right to re-enter the Premises, but AMEI
would remain liable for “the payment of royalties due
at the time of termination or re-entry.” Id.
as relevant to the complaint, the parties “understood
and irrevocably agreed that Lessee shall not have the right
and shall not sell, transfer, mortgage, pledge,
collateralize, pass, assign, sublease or encumber
(collectively ‘Transfer') this Lease or any
interest in the Leased Premises, in whole or in part,
directly or indirectly, without the express prior written
consent of Lessors which may be withheld for any reason, with
or without cause, and Lessee hereby specifically and
irrevocably waives and relinquishes all rights to make any
Transfer without such written consent.” Id. at
44-45. The plaintiffs had the right to terminate the Lease if
this provision was violated. Id. at 45.
and 2015 respectively, Murray acquired Consolidated Coal
Company for $3.5 billion and other coal reserves from
Foresight Reserves, LP for $1.37 billion. It stated by press
release that the purchase would position “these
companies for growth and for continued safe, low-cost coal
production, utilizing the longwall mining method” (Dkt.
No. 17 at 3). On August 31, 2016, Murray and AMEI advised the
plaintiffs that, in order to “conserve cash, ”
AMEI would not make the next scheduled advance royalty
payment or comply with other obligations under the Lease.
AMEI did not pay the scheduled advance royalty on September
14, 2016, the plaintiffs provided a notice of default. When
neither AMEI nor Murray cured the default, the plaintiffs
terminated the Lease on October 4, 2016. Id. at 10.
On October 17, 2016, AMEI acknowledged receipt of the default
and termination letters, but declined to cooperate in the
transfer of mining permits. Id. Thereafter, the
plaintiffs discovered that AMEI and Murray had been pledging,
mortgaging, collateralizing, and encumbering the Lease
without their consent. Id. at 11.
their complaint filed on December 1, 2017, the plaintiffs
make three claims for relief. In Count One, the plaintiffs
allege that AMEI breached the Lease by failing to make a
scheduled $2, 000, 000 advance royalty payment on September
14, 2016; failing to mine the mineable and merchantable coal
during the term of the Lease; pledging, encumbering,
collateralizing, and/or otherwise transferring rights in the
Lease without the plaintiffs' consent; failing to
cooperate in the transfer and assignment of permits,
licenses, other documents, and surface rights; and failing to
provide surveys, maps, reports, drilling logs, and other
documents. Id. at 13-18. As a result of these
alleged breaches, the plaintiffs seek $4 million in advance
royalty payments (the 2016 and 2017 payments), as well as
$267, 820, 000 in lost production royalties and permitting
expenses, with a present value of $110, 980, 000.
Id. at 17-18. They also seek a declaration that
previous advance royalty payments are forfeited. Id.
at 18. In Count Two, the plaintiffs seek specific performance
from AMEI and Murray, including the transfer of permits,
licenses, pending permit applications, and necessary surface
rights. Id. at 19-20. In Count Three, due to
Murray's role as guarantor, the plaintiffs seek to hold
it liable for AMEI's alleged breaches. Id. at
defendants answered the complaint on January 8, 2018 (Dkt.
Nos. 9; 10). Pending is their motion to dismiss portions of
the complaint, which the Court took up at a scheduling
conference held on April 4, 2018 (Dkt. Nos. 19; 23).
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 ...