United States District Court, N.D. West Virginia, Clarksburg
WILLIAM L. CATHER, BRENDA L. CATHER, CHARLES H. CATHER, LINDA F. CATHER, EVERET P. BICE, JR. ELIZABETH BICE, ROBERT JUNIOR HEMPHILL, Trustee of Trust A Created Under the Hemphill Family Trust Dated October 17, 1995, as Amended, Plaintiffs,
EQT PRODUCTION COMPANY, EQT GATHERING, LLC, EQT ENERGY, LLC, EQT MIDSTREAM SERVICES, LLC, EQT CORPORATION, and EQUITRANS, L.P., Defendants.
MEMORANDUM OPINION AND ORDER DENYING PLAINTIFFS'
RULE 60 MOTION FOR RELIEF OR, ALTERNATIVELY, RULE 15 MOTION
FOR LEAVE TO AMEND COMPLAINT [ECF NO. 57]
S. KLEEH UNITED STATES DISTRICT JUDGE.
before the Court is Plaintiffs' Rule 60 Motion for Relief
from Final Order or, Alternatively, Motion for Leave to Amend
Complaint [ECF No. 57]. The Motion is fully briefed and ripe
for consideration. For the reasons discussed below, the Court
DENIES Plaintiffs' requests for relief
under both Rule 60 and Rule 15.
Plaintiffs in this action, William L. Cather, Brenda L.
Cather, Charles H. Cather, Linda F. Cather, Everet P. Bice,
Jr., Elizabeth Bice, and Robert Junior Hemphill, Trustee of
Trust A Created Under the Hemphill Family Trust Dated October
17, 1995, as Amended (together, “Plaintiffs”),
are owners of oil and natural gas mineral interests in Taylor
County, West Virginia. They filed a Complaint on December 7,
2017, against EQT Production Company, EQT Gathering, LLC, EQT
Midstream Services, LLC, EQT Corporation, and Equitrans, L.P.
(together, “Defendants”), alleging that they did
not pay Plaintiffs the agreed-upon royalties under the lease
of Plaintiffs' oil and natural gas mineral interests. The
following recitation of the facts is taken from the Complaint
[ECF No. 1].
relevant lease of oil and gas mineral interests (the
“Cather Lease” or the “Lease”)
provides, in part, as follows:
The Lessee shall pay to the Lessor for each and every well
drilled upon said land, which produces Natural Gas and/or
Casinghead Gas in a quantity sufficient for the Lessee to
convey to market, a money royalty computed at the rate of
one-eighth (1/8) of the wholesale market value which is based
on the average current price paid by the Lessee to
independent operators in this general area . . . payment to
be made on or before the 25th day of the month following that
in which the gas has been delivered into the marketing pipe
line . . . .
Compl. at ¶ 8. The Cather Lease also provides
that “the Lessee, at its option, may pay and discharge
any taxes . . . levied, or assessed on or against the land or
gas and/or oil in place under the above-described lands; and
. . . may reimburse itself by applying to the discharge of
any such . . . tax . . . any royalty . . . accruing
hereunder.” ¶ 10.
about March 2012, Defendants began producing oil, gas, and
other hydrocarbons under the Cather Lease. ¶
20. Plaintiffs allege that since that time, Defendants
have been improperly taking significant deductions from the
royalties owed to Plaintiffs and that Defendants have been
issuing to Plaintiffs monthly statements that do not reveal
the nature of, or the manner of calculation of, those
deductions. ¶¶ 21-28, 33-34.
allege that Defendants have engaged in a “pattern and
practice” of underpayment of royalties owed to
Plaintiffs. ¶¶ 24, 28. They believe that
Defendants have knowingly and intentionally calculated
Plaintiffs' royalties based on “sham
transactions” between various related EQT subsidiaries
and/or affiliates; have improperly calculated royalties based
on an “artificial price” created by non-arm's
length transactions between the related entities; and have
unlawfully deducted significant amounts from the royalties
owed to Plaintiffs. ¶¶ 29-30.
Plaintiffs allege that EQT Production Company sells natural
gas to another EQT entity at an artificial price, set by
Defendants, that bears no relationship to the higher price
for which Defendants later sell the gas to a non-EQT entity.
¶ 31. In support of these allegations,
Plaintiffs rely, in part, on a March 2017 letter in which EQT
Production admitted the following:
EQT Production Company sells the majority of the natural gas
it produces at the wellhead to an affiliate, EQT Energy, LLC.
While these sales are to a related entity, EQT Production
Company contracts for an objective index price, less the
necessary costs incurred to transport the gas to downstream
markets. This pricing formula is designed to obtain the best
available wellhead price for both EQT Production Company and
its royalty owners.
¶ 32. Plaintiffs allege that Defendants'
“scheme” was designed to, and does, decrease
royalties paid to Plaintiffs and increase EQT's profit
later when it sells the gas to a non-EQT entity in an
arms-length transaction. ¶ 44.
originally asserted the following claims: Count IV (Alter Ego
to Pierce the Corporate Veil); Count V (Fraud); Count VI
(Civil Conspiracy to Commit Fraud); Count VII (Breach of
Contract); Count VIII (Conversion); Count IX
(Unconscionability and Breach of Duty of Fair Dealing); Count
X (Violation of West Virginia Consumer Credit and Protection
Act, Section 2); Count XI (Violation of West Virginia
Consumer Credit and Protection Act, Section 6); Count XII
(Interest Due to Plaintiffs on Improperly Withheld Royalty
Payments); and Count XIII (Punitive Damages).
February 1, 2018, Defendants filed a Motion for Partial
Dismissal. ECF No. 15. Defendants moved to dismiss
all counts and to dismiss Plaintiffs' request for
attorney's fees. Id. On April 18, 2018, Judge
Keeley held a Scheduling Conference and heard arguments on
the Motion to Dismiss. ECF Nos. 26, 63. She
announced on the record that she would grant in part and deny
in part the Motion, and the following day, she issued a
Summary Order in which she summarized the
findings. ECF No. 27. Judge Keeley
dismissed the following claims: Count V (Fraud); Count VI
(Civil Conspiracy to Commit Fraud); Count VIII (Conversion);
Count IX (Unconscionability and Breach of Duty of Fair
Dealing); Counts X and XI (Violations of the West Virginia
Consumer Credit and Protection Act); and Count XIII (Punitive
Damages). Id. She also dismissed Plaintiffs'
request for attorney's fees. Id. Judge Keeley
denied the dismissal of Counts IV (Alter Ego) and VII (Breach
Keeley issued a Scheduling Order on July 17, 2018. ECF
No. 36. On November 15, 2018, the final day for the
parties to join parties or amend pleadings, Plaintiffs filed
a motion under Rule 60 of the Federal Rules of Civil
Procedure, requesting relief from Judge Keeley's Summary
Order or, alternatively, leave to amend the Complaint via
Rule 15. ECF No. 57. The case was
transferred to United States District Judge Thomas S. Kleeh
on December 1, 2018. ECF No. 65. The pending Rule 60
or Rule 15 Motion is fully briefed and ripe for review.
60(b) of the Federal Rules of Civil Procedure allows the
Court to grant relief in certain circumstances from final
orders, judgments, or proceedings. The United States Court of
Appeals for the Fourth Circuit has written that “[i]n
determining whether to exercise the power to relieve against
a judgment under 60(b), the courts must engage in the
delicate balancing of ‘the sanctity of final judgments,
expressed in the doctrine of res judicata, and the incessant
command of the ...