United States District Court, N.D. West Virginia
ARNOLD K. RICHARDS and MARY L. RICHARDS, Plaintiffs,
EQT PRODUCTION COMPANY, Defendant.
OPINION AND ORDER DENYING DEFENDANT'S MOTION FOR JUDGMENT
AS A MATTER OF LAW, FOR NEW TRIAL, AND FOR AMENDMENT OF THE
COURT'S JUDGMENT ORDERS [DKT. NO. 149], GRANTING IN PART
AND DENYING IN PART PLAINTIFFS' MOTION FOR PREJUDGMENT
INTEREST [DKT. NO. 147], AND GRANTING DEFENDANT'S
UNOPPOSED MOTION FOR STAY OF EXECUTION ON JUDGMENTS FOR
THIRTY DAYS [DKT. NO. 151]
M. KEELEY, UNITED STATES DISTRICT JUDGE.
case involves a breach of contract claim related to royalty
payments for natural gas interests. The plaintiffs, Arnold
and Mary Richards (“the Richardses”), are owners
of mineral interests in Ritchie County, West Virginia. In
their complaint, the Richardses alleged that the defendant,
EQT Production Company (“EQT Production”), had
breached the express terms of the relevant oil and natural
gas leases by improperly calculating royalties and making
improper deductions, including wrongful deductions for
severance taxes. EQT Production denied these allegations,
contending that its royalty payments to the Richardses were
in compliance with the lease terms and West Virginia law.
Following the Court's denial of EQT Production's
motion for summary judgment, the case proceeded to trial by
trial, and after the Richardses' case-in-chief, EQT
Production moved for a directed verdict in its favor as to
whether the Richards had met their burden to establish the
market price of the natural gas at the relevant valuation
point and to establish that EQT Production had breached the
relevant lease terms by failing to pay royalties based on the
market value of the gas (Dkt. No. 123). Viewing the evidence
in the light most favorable to the Richardses, and finding
that the jury would have a legally sufficient evidentiary
basis to find in the Richardses' favor on their breach of
contract claim, the Court denied EQT Production's motion
for a directed verdict (Dkt. No. 124). At the close of all
the evidence, EQT Production renewed its motion for a
directed verdict on the Richardses' breach of contract
claim on the same grounds (Dkt. No. 125), which the Court
denied (Dkt. No. 126).
the close of the evidence, the Richardses moved for a
directed verdict in their favor as to whether EQT Production
had impermissibly deducted severance taxes from the their
royalties under the relevant lease terms. Following the
argument of the parties, and after careful consideration, the
Court granted the Richardses' motion for a directed
verdict as to the apportionment of severance taxes and
ordered that they be awarded $42, 540.83 (Dkt. Nos. 127;
jury subsequently returned a verdict in favor of the
Richardses on their breach of contract claim, answering
“Yes” to the question of whether EQT Production
had “breached the terms of the Leases by failing to pay
the Richardses the full amount of royalties due” and
awarding them damages in the amount of $191, 998.61 (Dkt. No.
134). Thereafter, the Court entered judgment orders in favor
of the Richardses on the directed verdict and the jury's
verdict (Dkt. Nos. 137; 138).
pending is EQT Production's Motion for Judgment as a
Matter of Law, For New Trial, and For Amendment of the
Court's Judgment Orders (Dkt. No. 149). EQT Production
moves for judgment as a matter of law pursuant to
Fed.R.Civ.P. 50 and 60, or for a new trial pursuant to
Fed.R.Civ.P. 59, on the Richardses' breach of contract
claim. It also requests a new trial under Rules 59 and 60 on
the issue of EQT Production's apportionment of severance
taxes to the Richardses. Id. at 1. Also pending is
the Richardses' motion for prejudgment interest on both
verdicts (Dkt. No. 147). The motions are fully briefed and
ripe for decision.
RELEVANT FACTS IN EVIDENCE 
Richardses are owners of mineral interests in Ritchie County,
West Virginia, and are lessors to the oil and gas leases at
issue (collectively, “the Leases”) (Dkt. No. 110
at ¶ 3). EQT Production, the sole lessee to the Leases,
has the right to develop and produce natural gas from the
leasehold estates. Id. at ¶ 2. Since at least
the early 1950s, various lessees, including EQT Production,
have produced natural gas from several vertical wells located
on the Lease premises.
Leases include the following royalty provision:
In Consideration of the Premises the said party of the second
part, covenants and agrees: 1st-to deliver to the credit of
the Lessors, their heirs or assigns, free of cost, in the
pipe line to which the Lessee may connect the wells ... the
equal one-eighth (1/8) part of all oil produced and saved
from the leased premises; and second, to pay ...
one-eighth (1/8) of the value at the
well market price of the gas from each and every gas
well drilled on said premises, the product from which is
marketed and used sold off the
premises, said gas to be measured at
by a meter set on the farm.
Dkt. Nos. 51-1; 51-2; 51-3 (strikeout in original) (emphasis
added) (the “Royalty Provision”). Since 1954,
pursuant to the Royalty Provision, the Richardses have
received a one-eighth royalty for natural gas produced from
the vertical wells on the Lease premises. And, although the
Leases were amended in 2014 to allow for pooling and
unitization for horizontal drilling, the Royalty Provisions
have not been modified. See Dkt. No. 110 at ¶
to the amendments, in late 2016, EQT Production drilled six
(6) horizontal wells on “Pullman 96, ” a well pad
located on a tract adjacent to the Lease premises.
Id. at ¶ 8.
wells produce natural gas from the leasehold estates, which
EQT Production sells to an affiliate, EQT Energy, LLC
(“EQT Energy”). Natural gas produced from the
pooled acreage passes through meters located at or near the
wellheads where, pursuant to a Base Contract for Sale and
Purchase of Natural Gas (“Gas Sales Contract”),
EQT Energy takes custody of the gas. Id. at
¶¶ 7, 9. EQT Energy then delivers and sells the gas
to third-party purchasers on the open market.
the Gas Sales Contract establishes a pricing formula whereby
EQT Energy pays EQT Production an amount equal to the first
of the month “index price” applicable to the
interstate pipeline system into which the gas is delivered,
less gathering and compression related charges. The
interstate pipeline into which gas from the Lease premises is
delivered is the Texas Eastern Transmission
(“TETCO”) M2 interstate pipeline system.
Id. at ¶ 6. The index price applicable to the
TETCO M2 system is not determined by EQT Production or any
other EQT entity. Rather, the TETCO M2 index price is a
published market price, which reflects the value of natural
gas sold in the relevant geographical region.
arrive at the price for the point where the gas is sold to
EQT Energy (i.e., at or near the wellheads), EQT
Production utilizes a “net-back” or
“work-back” method, whereby certain
post-production expenses of gathering and compressing the gas
to the downstream interstate pipeline market at TETCO M2 are
deducted from the downstream TETCO M2 index price on a per
unit basis. The Richardses' royalty payments are then
calculated based on the price where the gas is sold to EQT
Energy - at or near the wellhead.
post-production expenses deducted from the TETCO M2 index
price are reflected as “owner deducts” in the
monthly remittance statements provided to the Richardses. The
remittance statements also reflect that EQT Production
allocates to the Richardses a one-eighth share of privilege
taxes owed to the State of West Virginia for engaging in the
business of severing natural gas for sale.
STANDARDS OF REVIEW
Renewed Motion for Judgment as a Matter of Law
Rule of Civil Procedure 50(b) permits a trial court to
“direct the entry of judgment as a matter of law”
upon post-trial renewal of a motion for judgment as a matter
of law. Fed.R.Civ.P. 50(b). Judgment as a matter of law is
appropriate when, “without weighing the credibility of
the evidence, there can be but one reasonable conclusion as
to the proper judgment.” U.S. ex rel. DRC, Inc. v.
Custer Battles, LLC, 562 F.3d 295, 305 (4th Cir. 2009)
(citation omitted). The movant is entitled to judgment
pursuant to Rule 50(b) “if the nonmoving party failed
to make a showing on an essential element of his case with
respect to which he had the burden of proof.”
Russell v. Absolute Collection Servs., Inc., 763
F.3d 385, 392 (4th Cir. 2014) (citation omitted). The Court
reviews “the evidence in the light most favorable to
the nonmoving party” in making this determination.
Myrick v. Prime Ins. Syndicate, Inc., 395 F.3d 485,
490 (4th Cir. 2005).
Motion to Alter ...