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Bond v. Antero Resources Corp.

United States District Court, S.D. Ohio, Eastern Division

June 28, 2018

JEFFREY T. BOND, Plaintiff,



         This matter, in which the parties have consented to the jurisdiction of the Magistrate Judge pursuant to 28 U.S.C. § 636(c) (Docs. 16, 22), is before the Court on a Partial Motion to Dismiss filed by Defendant Antero Resources Corporation pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. (Doc. 47). For the reasons that follow, Defendant's Partial Motion to Dismiss is GRANTED.

         I. BACKGROUND

         This putative class action was brought by mineral rights owners on behalf of three subclasses of Plaintiffs who have entered into leases with Defendant for the production of oil and gas. Relevant here, Plaintiffs allege in Count Four of the Second Amended Class Action Complaint that Defendant breached the leases by improperly deducting natural gas transportation charges from their royalty payments. (Doc. 45 at ¶¶ 80-85). Defendant has moved to dismiss that portion of Count Four. (Doc. 47 at 1-2). Plaintiffs filed an Opposition (Doc. 51), and Defendant filed a Reply (Doc. 54). Thus, the Partial Motion to Dismiss is now ripe for resolution.


         Federal Rule of Civil Procedure 12(b)(6) requires that a complaint “state a claim to relief that is plausible on its face” to survive a motion to dismiss. Ashcroft v. Iqbal, 556 U.S. 662, 663-64, 678 (2009); Bell Atlantic Corp v. Twombly, 550 U.S. 544, 570 (2007). In reviewing the complaint, a court must construe it in favor of the plaintiff and accept all well-pleaded factual allegations as true. Twombly, 550 U.S. at 57. “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (emphasis added) (citing Twombly, 550 U.S. at 556).

         On the other hand, a complaint that consists of “labels and conclusions” or “a formulaic recitation of the elements of a cause of action” is insufficient. Twombly, 550 U.S. at 555; see also Brown v. Matauszak, 415 Fed.Appx. 608, 613 (6th Cir. 2011) (Plaintiff must give specific, well-pleaded facts, not just conclusory allegations). In other words, while “detailed factual allegations” are not required under Fed.R.Civ.P. 8(a)(2)'s “short and plain statement” rule, the law “demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Iqbal, 556 U.S. at 677-78, quoting Twombly, 550 U.S. at 555 (citing to Papasan v. Allain, 478 U.S. 265, 286 (1986)).


         It is well established that the substantive law of the forum state applies to matters before the court pursuant to its diversity jurisdiction. See Davis v. Sears, Roebuck and Co., 873 F.2d 888, 892 (6th Cir. 1989). “Under Ohio law, an oil and gas lease is a contract subject to the traditional rules of construction.” Lutz v. Chesapeake Appalachia, L.L.C., 71 N.E.3d 1010, 1011 (Ohio 2016). The Sixth Circuit has succinctly explained Ohio's rules of construction.

Under Ohio law, “[w]hen confronted with an issue of contract interpretation, [a court's] role is to give effect to the intent of the parties.” Sunoco, Inc. (R&M) v. Toledo Edison Co., 129 Ohio St.3d 397, 953 N.E.2d 285, 292 (2011). To that end, courts should examine the contract as a whole and presume that the intent of the parties is reflected in the language of the contract. In addition, [courts should] look to the plain and ordinary meaning of the language used in the contract unless another meaning is clearly apparent from the contents of the agreement. When the language of a written contract is clear, a court may look no further than the writing itself to find the intent of the parties. Id. Courts may examine extrinsic evidence to ascertain the parties' intent only if the contract is ambiguous. Shifrin v. Forest City Enters., 64 Ohio St.3d 635, 597 N.E.2d 499, 501 (1992).

Eastham v. Chesapeake Appalachia, L.L.C., 754 F.3d 356, 361 (6th Cir. 2014). Contract language is ambiguous if it cannot be assigned a “definite legal meaning.” Id. Or, put another way, a contract provision is ambiguous if it is amenable to “more than one reasonable interpretation.” Id. (citing Lager v. Miller-Gonzalez 896 N.E.2d 666, 669 (Ohio 2008)). The Ohio Supreme Court has explained that “[o]nly when a definitive meaning proves elusive should rules for construing ambiguous language be employed. Otherwise, allegations of ambiguity become self-fulfilling.” Id. (citing State v. Porterfield, 829 N.E.2d 690, 692-93 (Ohio 2005)).

         Here, Defendant contends that “[a]ll of the identified leases and their respective Market Enhancement clauses specifically and unambiguously authorize the transportation charges Plaintiffs challenge” because they resulted in an increase in the value of the product. (Doc. 47 at 3). Three lease provisions are relevant to this argument:

Market Enhancement clause for Sub-Class 1:
Market Enhancement Clause. It is agreed between the Lessor and Lessee that, notwithstanding any language contained in A) and B) above, to the contrary, all royalties 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 proportionally deducted from Lessor's share of production so long as they ...

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