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Bounty Minerals, LLC v. Chesapeake Exploration, LLC

United States District Court, N.D. Ohio

December 23, 2019

Bounty Minerals, LLC, Plaintiff,
v.
Chesapeake Exploration, LLC, et al., Defendants

          MEMORANDUM OPINION AND ORDER

          PAMELA A. BARKER JUDGE.

         Currently pending are the following motions: (1) Motion for Leave to file Amicus Curiae Brief filed by the certified class of landowners in Zehentbauer Family Land LP, et al. v. Chesapeake Exploration LLC, et al., Case No. 4:15cv2449 (N.D. Ohio) (Pearson, J.) (Doc. No. 99); and (2) Plaintiff Bounty Minerals' Motion to Strike the Motion for Leave to file Amicus Curiae Brief (Doc. No. 100.) Defendants Chesapeake Exploration, LLC and Chesapeake Operating, LLC (hereinafter “the Chesapeake Defendants”) filed a Response to both motions. (Doc. No. 101.) For the following reasons, the Motion for Leave to file Amicus Curiae Brief (Doc. No. 99) is DENIED and Plaintiff's Motion to Strike (Doc. No. 101) the Motion for Leave is DENIED AS MOOT.

         I. Background

         The factual and procedural background of this matter has been presented in other decisions of this Court and will not be repeated in full herein. Rather, the Court will only recite that factual and procedural history necessary for a resolution of the above motions.

         On July 11, 2017, Plaintiff Bounty Minerals, LLC (hereinafter “Plaintiff” or “Bounty Minerals”) filed a Complaint against Defendants[1] in the Court of Common Pleas of Carroll County, Ohio, seeking to recover royalties it believes it is owed under the terms of several oil and gas leases. (Doc. No. 1-1.) Specifically, of relevance herein, Bounty Minerals sought relief relating to the following six leases:[2] (1) the December 16, 2010 and January 7, 2011 leases between Alan L. Miller and Ohio Buckeye Energy, LLC (hereinafter “the Miller Leases”); (2) the October 8, 2011 lease between Christopher and Sandi Ryland and Chesapeake Exploration (hereinafter “the Ryland Lease”); (3) the March 9, 2011 lease between Dean Cobbs and Chesapeake Exploration (hereinafter “the Cobbs Lease”); (4) the May 3, 2013 lease between Mark and Elizabeth Ingham and Chesapeake Exploration (hereinafter “the Ingham Lease”); and (5) the October 8, 2011 lease between Michael and Dana Ritchie and Chesapeake Exploration (hereinafter “the Ritchie Lease”). (Id.) It is undisputed that Bounty Minerals owns a partial, undivided interest in the Ryland, Ingham and Ritchie leases. Specifically, the deeds associated with these leases show that Bounty owns a 28.3367% interest in the Ryland lease; a 40% interest in the Ingham lease; and a 50% interest in the Ritchie lease. (Doc. Nos. 36-3 at PageID# 1724; 36-7 at PageID# 1779; 36-9 at PageID# 1811.) The record reflects that Bounty Minerals owns 100% of the Miller and Cobbs' leases. (Doc. Nos. 36-1, 36-5.)

         In its original Complaint, Bounty Minerals asserted two breach of contract claims as well as a claim for declaratory judgment pursuant to Ohio Rev. Code § 2721.01 et seq. (Id.) Defendants removed the action to this Court on August 14, 2017, on the basis of diversity jurisdiction. (Doc. No. 1.)

         Although required to do so, Defendants failed to indicate in the Civil Cover Sheet to the Notice of Removal that the instant action was related to an action pending before District Judge Benita Pearson, captioned Zehentbauer Family Land LP, et al. v. Chesapeake Exploration LLC, et al., Case No. 4:15cv2449 (N.D. Ohio) (hereinafter “the Zehentbauer class action”).[3] That case (which remains pending before Judge Pearson) was filed as a Class Action Complaint in the Columbiana County Court of Common Pleas on October 30, 2015 and removed to the Northern District of Ohio on November 30, 2015. (Doc. No. 1.) The Class Complaint in Zehentbauer (1) asserts breach of contract claims against (among others) the same defendants herein (i.e., Chesapeake Exploration LLC and Chesapeake Operating LLC); (2) includes some of the same leases at issue herein; and (3) involves nearly identical lease language to that at issue in the instant case. (Doc. No. 1-1.)

         On July 20, 2018, Judge Pearson certified the following class of landowners in the Zehentbauer class action: “All persons entitled to royalty payments from Chesapeake Exploration, L.L.C., Chesapeake Operating, L.L.C., CHK Utica, L.L.C., Total E&P USA, Inc., Pelican Energy, L.L.C., and/or Jamestown Resources, L.L.C. at any time during the years of 2011 to the present under uniform oil and gas leases, known generally as Gross Royalty Leases, (some originally entered by Buckeye Exploration Corporation) which state that the lessors' royalty shall be the stated percentage of the gross proceeds received by the lessee without any deductions except for a pro-rata share of governmentally imposed taxes and fees, in return for granting rights to produce oil, natural gas, and the constituents thereof from real property located in Ohio. Excepted from the foregoing class are persons who have filed separate actions requesting the relief sought here and those who have resolved claims requesting the relief sought here. . . .” Zehentbauer, Case No. 4:15cv2449 (Doc. No. 123 at p. 18.) The Sixth Circuit later granted discretionary review and affirmed Judge Pearson's class certification decision. See Zehenbauer Family Land LP, et al. v. Chesapeake Exploration LLC, et al., Case No. 18-4139 (6th Cir. Aug. 15, 2019).

         Meanwhile, on February 14, 2018, Bounty Minerals filed its Second Amended Complaint in the instant action. (Doc. No. 36.) The Second Amended Complaint asserts the following alternative claims for relief: (1) breach of contract against all Defendants based on Defendants' alleged breach of the royalties provisions of the Miller, Cobbs, Ryland, Ritchie, and Ingham leases (Count I); (2) breach of contract claims against Defendant Chesapeake Exploration, LLC based on Defendant's alleged breach of the express covenant of good faith and reasonable prudent operator (Count II); and (3) breach of contract against all Defendants based on Defendants' alleged breach of the affiliate sales provisions of the subject leases (Count III). (Id.)

         Subsequently, on August 10, 2018, Bounty Minerals filed another Motion for Leave to Amend Complaint, in which it sought to add several new defendants. (Doc. Nos. 54, 55.) Specifically, Bounty Minerals sought to add CHK Utica, LLC; Total E&P USA, Inc.; and Pelican Energy, Inc., as Defendants, on the grounds that discovery had revealed that these entities have working interests in one or more of the subject leases. Arguing the proposed new defendants would destroy diversity jurisdiction, Bounty Minerals also sought remand to state court. (Id.) On February 26, 2019, the Court (through then-assigned District Judge Sara Lioi) issued an Opinion & Order denying Bounty Minerals' Motion for Leave to Amend and for Remand, finding that “the balance of equities compels the conclusion that Bounty Minerals should not be permitted to further amend its complaint to defeat jurisdiction.” (Doc. No. 70 at p. 9.)

         On April 12, 2019, the Chesapeake Defendants filed a Motion for Summary Judgment as to each of Plaintiff's claims. (Doc. No. 81.) Bounty Minerals filed a Brief in Opposition on May 3, 2019 (Doc. No. 83), to which the Chesapeake Defendants replied on May 17, 2019 (Doc. No. 84.)

         On June 26, 2019, the case was transferred from then-assigned District Judge Sara Lioi to the undersigned pursuant to General Order 2019-13.

         The following month, on July 25, 2019, class counsel in the Zehentbauer action filed, in the Zehentbauer case only, a Motion to Transfer the instant case to Judge Pearson. See Zehentbauer, Case No. 4:15cv2449 (N.D. Ohio) (Doc. No. 170). Therein, class counsel argued that “Bounty Minerals involves the exact same leases certified as subclass B in this case.” (Id.) Specifically, class counsel asserted that, because Bounty Minerals owns only a partial, undivided interest in the Ryland, Ritchie, and Ingham leases, those leases are included in the Zehentbauer certified class. (Id.) Class counsel also argued that, as a result, this Court (i.e., the undersigned) lacks subject matter jurisdiction over the Ryland, Ritchie and Ingham leases in the instant action. (Id.) Judge Pearson summarily denied the motion the same day. (Doc. No. 171.)

         At this point in time, neither the parties to the instant action or class counsel in the Zehentbauer action had thought to notify this Court (i.e., the undersigned or previously assigned Judge Lioi) of the existence of the Zehentbauer case, or the possibility that the pendency of that action deprived this Court of subject matter jurisdiction over the Miller, Cobbs, Ryland, Ritchie, and/or Ingham leases.

         On November 20, 2019, the Court scheduled oral argument regarding Defendants' Motion for Summary Judgment for December 13, 2019. See Non-document Order dated Nov. 20, 2019. On December 5, 2019, the Court issued a Notice advising the parties of the particular issues that it planned to address during oral argument. (Doc. No. 98.)

         On December 10, 2019, just three days prior to oral argument, the Zehentbauer Class filed a Motion for Leave to File Amicus Curiae Brief. (Doc. No. 99.) Therein, the Zehentbauer Class, for the first time, notified the Court of the existence of the Zehentbauer action and argued that “the matter before this Court involves seven of the hundreds of leases certified as subclass B in Zehentbauer.” (Id. at p. 1.) The Class noted that Bounty Minerals owns only a partial, undivided interest in the Ryland, Ritchie, and Ingham leases and asserted that these particular leases involved the same lease language at issue in Zehentbauer and were included in that class action. (Id. at p.2.) The Zehentbauer Class further argued that “given that the Ritchie, Ryland, and Ingham leases are included in the certified class before Judge Pearson, this Court lacks subject matter jurisdiction over at least three of the leases involved in Bounty Minerals because none of those parties sought to add clearly-necessary parties to the case, namely Bounty Minerals' co-lessors.” (Id. at p. 3.)

         Class counsel then argued that they were “deeply concerned about the completeness of the arguments which plaintiff Bounty Minerals has asserted before this Court and are concerned that the briefing here might lead to an adverse decision which, even though based upon incomplete arguments, would be utilized by resourceful defense counsel here to urge a similar decision by Judge Pearson.” (Id. at p. 4.) The Class then proceeded to raise substantive arguments regarding what it believes to be the proper construction of the oil and gas royalty language at issue herein, most of which arguments were not raised by Bounty Minerals herein. (Id. at p. 5-8.) The Class sought leave to file a 25 page amicus brief setting forth its substantive arguments instanter. (Doc. No. 99-10.)

         Bounty Minerals promptly filed a Motion to Strike the Motion for Leave to File Amicus Brief, arguing it was untimely and improper. (Doc. No. 100.) The Chesapeake Defendants filed a Response to both motions, in which it argued that (1) this Court possesses subject matter jurisdiction over the instant action and (2) the Zehentbauer plaintiffs' arguments did not constitute “proper amicus briefing.” (Doc. No. 101.)

         The Court ordered lead counsel for the Zehentbauer Plaintiff Class to attend the oral argument set for December 13, 2019. See Non-Document Order dated December 10, 2019. On that date, the Court heard argument from Bounty Minerals, the Chesapeake Defendants, and Zehentbauer Class counsel regarding the following issues: (1) whether this Court has subject matter jurisdiction over the Ryland, Ritchie, and Ingham leases in light of the certification of the class in Zehentbauer; and (2) whether Bounty Minerals' co-lessors to the Ryland, Ritchie and Ingham leases are indispensable parties pursuant to Fed.R.Civ.P. 19. Both Bounty Minerals and the Chesapeake Defendants argued that the Court has subject matter jurisdiction over the instant action, and that Bounty's co-lessors were not indispensable. The Court also heard oral argument, from Bounty Minerals and the Chesapeake Defendants only, regarding Defendants' Motion for Summary Judgment.

         The Court ordered the parties to submit supplemental briefing limited to the subject matter jurisdiction and indispensable party issues raised by the Zehentbauer class' Motion. As Bounty Minerals and the Chesapeake Defendants hold the same view on these issues, the Court found supplemental briefing from the Zehentbauer Class would assist the Court. Accordingly, the Court also provided the Zehentbauer Class the opportunity to submit supplemental briefing limited to the issues of subject matter jurisdiction and indispensable parties only. ...


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