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Mills Wetzel Land, Inc. v. EQT Production Co.

United States District Court, N.D. West Virginia

January 22, 2019

MILLS WETZEL LANDS, INC., Plaintiff,
v.
EQT PRODUCTION COMPANY, EQT GATHERING, LLC d/b/a “EQT MIDSTREAM”, EQT ENERGY, LLC, EQT MIDSTREAM SERVICES, LLC and EQT CORPORATION, all of which are foreign business entities operating and doing business within the State of West Virginia, Defendants.

          MEMORANDUM OPINION AND ORDER DENYING IN PART AND GRANTING IN PART AS FRAMED DEFENDANTS' MOTION FOR PARTIAL DISMISSAL

          FREDERICK P. STAMP, JR. UNITED STATES DISTRICT JUDGE.

         I. Background

         This is a property case arising out of a dispute regarding the proceeds from the sale of oil, natural gas and natural gas liquids from certain leaseholds located in Wetzel County, West Virginia. This matter concerns the following lease agreements pertinent to plaintiff's oil and gas rights in various properties: (1) the Richwood I Lease, (2) the Richwood II Lease, and (3) the Stone Lease. The leases cover over 6, 900 net mineral acres. Plaintiff Mills Wetzel Lands, Inc. (“Mills Wetzel”) is the lessor under the Richwood I Lease, Richwood II Lease, and the Stone Lease. EQT Production Company is the current lessee under the Richwood I Lease, the Richwood II Lease, and the Stone Lease.

         Plaintiff, Mills Wetzel, filed its complaint (ECF No. 1) against the defendants, EQT Production Company, EQT Gathering, LLC, EQT Energy, LLC, EQT Midstream Services, LLC, and EQT Corporation (hereinafter, collectively “defendants”), in this Court and asserts the following causes of action against each of the defendants: alter ego (Count IV); breach of contract (Count V); fraud (Count VI); conversion (Count VII); breach of the implied duty of good faith and fair dealing (Count VIII); interest on improperly withheld royalty payments (Count IX); and punitive damages (Count X).

         Plaintiff seeks a variety of damages including, but not limited to, a “decree that EQT has breached its contract with Mills Wetzel, has acted fraudulently, has converted Mills Wetzel property to its own use, and has violated the covenant of good faith and fair dealing”; “all monies unlawfully withheld and/or deducted and retained by EQT from Mills Wetzel's royalty interests . . . ”; compensatory damages; punitive damages; an accounting; pre-judgment and post-judgment interest; “legal fees and costs incurred”; and “such other and further relief, both general and special, ” as the Court deems just and proper.” ECF No. 1 at 28-29. All defendants, EQT Production Company, EQT Gathering, LLC, EQT Energy, LLC, EQT Midstream Service, LLC, and EQT Corporation, respectively, filed answers to the plaintiff's complaint. ECF Nos. 6, 7, 8, 9, and 10.

         Defendants also filed a motion for partial dismissal (ECF No. 11) and memorandum in support (ECF No. 12). Specifically, all defendants move to dismiss plaintiff's claims for alter ego (Count IV), fraud (Count VI), conversion (Count VII), breach of the implied duty of good faith and fair dealing (Count VIII), and punitive damages (Count X). All defendants except EQT Production Company, namely, EQT Gathering, LLC, EQT Energy, LLC, EQT Midstream Services, LLC, and EQT Corporation (the “non-lessee entities”), move to dismiss plaintiff's claims for breach of contract (Count V) and request for attorneys' fees pursuant to its tort claims and breach of contract claim.

         In support, defendants assert that plaintiff has failed to allege facts which create a facial plausibility of a basis to impose alter ego liability, and that plaintiff's claims for fraud and conversion are barred by the gist of the action doctrine. ECF No. 12 at 4, 6. Further, defendants state that even if plaintiff's claim for fraud was not so barred, it is not pled with the requisite degree of particularity and must be dismissed. Id. at 6. Further, defendants contend that, in West Virginia, there is “no independent claim for a breach of the common law duty of good faith” because a claim for breach of the covenant of good faith and fair dealing is really a claim for breach of contract as a matter of law. Id. at 12. Lastly, defendants assert that there is no set of facts upon which plaintiff can establish its breach of contract claim against the non-lessee entities and that plaintiff cannot recover punitive damages and cannot recovery attorneys' fees for its tort claims or its breach of contract claim against the non-lessee entities. Id. at 13, 14. Based on the foregoing, defendants move that the following claims be dismissed as a matter of law because they fail to state a claim upon which relief may be granted: (1) alter ego; (2) breach of contract and attorneys' fees as to the non-lessee entities; (3) fraud; (4) conversion; (5) breach of the implied duty of good faith and fair dealing; and (6) punitive damages.

         After this Court entered several orders approving the parties' joint stipulations extending the time for plaintiff to respond (ECF Nos. 17, 19, 28), plaintiff filed a response in opposition to the defendants' motion for partial dismissal. ECF No. 37. Plaintiff opposes the defendants' motion seeking partial dismissal and contends that no claim in the complaint is properly dismissible because all claims are sufficiently pleaded and appropriately postured for discovery. ECF No. 31 at 1-2. Plaintiff contends that it has pleaded more than sufficient factual content to allow the Court to draw the reasonable inference that the EQT defendants are alter egos of each other and, as a result of the alleged conduct, plaintiff's breach of contract and alter ego claims each have facial plausibility against all EQT defendants and must survive the motion to dismiss. Id. at 17. At the very least, plaintiff contends, discovery is required to flesh out the relationships among the various EQT defendants to determine whether all EQT defendants are alter egos of each other and whether the non-EQT production defendants also breached the terms of plaintiff's leases. Id. Further, plaintiff asserts that the gist of the action doctrine does not bar the plaintiff's claim for fraud and conversion and that plaintiff's claims, including breach of implied duty of good faith and fair dealing as well as breach of contract, are sufficiently pleaded and should not be dismissed. Lastly, plaintiff contends that it can recovery attorneys' fees and punitive damages pursuant to its torts claims and that its claims are sufficiently pleaded and should not be dismissed. Id. at 34. Plaintiff requests that this Court deny defendants' motion for partial dismissal in all respects.

         After this Court entered an order approving the parties' joint stipulation extending the time for defendants to reply to plaintiff's response in opposition (ECF No. 33), defendants filed a reply, again asserting that plaintiff's claim for alter ego is insufficiently plead and that this Court should dismiss plaintiff's breach of contract claim against the non-lessee entities. ECF No. 34. Defendants further state in response that the gist of the action doctrine bars plaintiff's claims for fraud, conversion, and breach of the implied duty of good faith and fair dealing. Id. at 6. Moreover, defendants contend that plaintiff's claims for fraud do not satisfy the requirements of Rule 9(b) of the Federal Rules of Civil Procedure and that this Court should dismiss plaintiff's claims for attorneys' fees and punitive damages in that plaintiff's complaint fails to set forth a viable “independent, intentional tort” that would entitle plaintiff to recover punitive damages for its breach of contract claim. Id. at 14. Defendants request this Court dismiss plaintiff's claim for alter ego, breach of contract as to the non-lessee entities, fraud, conversion, breach of the implied duty of good faith and fair dealing, punitive damages, and plaintiff's claim for attorneys' fees related to its tort claims as well as its breach of contract claim against the non-lessees. Id. at 15.

         Now pending before the Court is the defendants' fully briefed motion for partial dismissal of the plaintiff's complaint (ECF No. 11). For the reasons set forth below, this Court denies in part and grants in part as framed the defendants' motion for partial dismissal.

         II. Applicable Law

         In assessing a motion to dismiss for failure to state a claim under Rule 12(b)(6), a court must accept all well-pled facts contained in the complaint as true. Nemet Chevrolet, Ltd v. Consumeraffairs.com, Inc, 591 F.3d 250, 255 (4th Cir. 2009). However, “legal conclusions, elements of a cause of action, and bare assertions devoid of further factual enhancement fail to constitute well-pled facts for Rule 12(b)(6) purposes.” Id. (citing Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009)). This Court also declines to consider “unwarranted inferences, unreasonable conclusions, or arguments.” Wahi v. Charleston Area Med. Ctr., Inc., 562 F.3d 599, 615 n.26 (4th Cir. 2009).

         It has often been said that the purpose of a motion under Rule 12(b)(6) is to test the formal sufficiency of the statement of the claim for relief; it is not a procedure for resolving a contest about the facts or the merits of the case. 5B Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1356 (3d ed. 1998). The Rule 12(b)(6) motion also must be distinguished from a motion for summary judgment under Federal Rule of Civil Procedure 56, which goes to the merits of the claim and is designed to test whether there is a genuine issue of material fact. Id. For purposes of the motion to dismiss, the complaint is construed in the light most favorable to the party making the claim and essentially the court's inquiry is directed to whether the allegations constitute a statement of a claim under Federal Rule of Civil Procedure 8(a). Id. § 1357.

         A complaint should be dismissed “if it does not allege ‘enough facts to state a claim to relief that is plausible on its face.'” Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “Facial plausibility is established once the factual content of a complaint ‘allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.'” Nemet Chevrolet, 591 F.3d at 256 (quoting Iqbal, 129 S.Ct. at 1949). Detailed factual allegations ...


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