266 F.3d 560 (6th Cir. 2001), 00-5201, Hayes v Equitable Energy Resources Co.

Docket Nº:00-5201
Citation:266 F.3d 560
Party Name:Margaret Hayes, Administratrix of Louisa Hoover and Melvin Hoover, Plaintiff, Wanda Faye Ridge, et al., Plaintiffs-Appellants, v. Equitable Energy Resources Company, Defendant-Appellee, Kentucky West Virginia Gas Company, LLC., Defendant.
Case Date:September 26, 2001
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit

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266 F.3d 560 (6th Cir. 2001)

Margaret Hayes, Administratrix of Louisa Hoover and Melvin Hoover, Plaintiff,

Wanda Faye Ridge, et al., Plaintiffs-Appellants,


Equitable Energy Resources Company, Defendant-Appellee,

Kentucky West Virginia Gas Company, LLC., Defendant.

No. 00-5201

United States Court of Appeals, Sixth Circuit

September 26, 2001

Argued: August 2, 2001

Appeal from the United States District Court for the Eastern District of Kentucky at Pikeville. No. 98-00332, Joseph M. Hood, District Judge.

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Todd B. Portune, COHEN, TODD, KITE & STANFORD, Cincinnati, Ohio, for Appellants.

Wayne F. Collier, Shelby C. Kinkead, Jr., KINKEAD & STILZ, Lexington, Kentucky, for Appellee.

Before: CLAY and GILMAN, Circuit Judges; WISEMAN, District Judge.[*]


CLAY, Circuit Judge.

In this action which was removed pursuant to diversity jurisdiction under 28 U.S.C. §§ 1332 and 1441 et seq., Plaintiffs, Margaret Hayes, et al., appeal from the district court's order awarding Defendant, Equitable Production Company ("Equitable"), f/k/a Equitable Energy Resources Company, summary judgment on Plaintiffs' Kentucky state law claims of breach of contract and trespass, in connection with performance under an oil and gas lease of property located in Kentucky. We AFFIRM the district court's order.


Procedural History

On June 26, 1998, the Estate of Louisa and Melvin Hoover, Margaret Hayes, administratrix ("the Estate"), the original Plaintiff in this case, filed its complaint against Equitable in Kentucky state court, which Equitable then removed to federal court. The original complaint named several

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parties as defendants, including Equitable, and sought damages of royalties and gross values of minerals extracted from several wells under an oil and gas lease ("the Lease"), originally executed on June 6, 1921, and under which Equitable is the current lessee. The original complaint also sought punitive damages in connection with the defendants' alleged misconduct.

On August 3, 1998, Equitable moved to dismiss the original complaint, pursuant to Federal Rules of Civil Procedure 12(b), 12(c), and 56, on, among other grounds, the Estate's failure to state a claim. The Estate replied to Equitable's motion, claiming that the Estate had alleged sufficient facts to state a claim under Rule 12(b), and, alternatively, that material questions of fact existed which precluded an award of summary judgment to Equitable under Rule 56.

The Estate twice amended its complaint, joining several parties as plaintiffs, (the "Hoover Heirs"), all individuals identifying themselves as descendants of Louisa and Melvin Hoover, who obtained title to the oil and gas estates at issue in April of 1911. The Estate also dismissed all corporate defendants aside from Equitable, while adding individual defendants who were also heirs of the Hoover estate. Many of the individual defendants filed a cross-claim against Equitable and certain Hoover Heirs, raising claims parallel to those raised in the second amended complaint. On August27, 1999, Equitable moved to dismiss the second amended complaint and cross-claim under Rules 12(b), 12(c), and 56.

On October 21, 1999, the district court entered an order granting Equitable's motion to dismiss. The court reached its decision on the following grounds: (1) Equitable did not breach the Lease by withholding royalties due unknown lessors because Equitable was entitled to verify that the royalties were paid to the true owners and was entitled to protect itself from multiple liability; and (2) Plaintiffs' claims regarding Equitable's failure to develop the Lease, and failure to market oil and gas, were unavailing because such implied covenants did not apply to a flat-rate lease. The court also found that the appointment of Margaret Hayes as administratrix of the Estate was contrary to Kentucky law, and that Hayes could only represent herself in the action.

Although the district court characterized Plaintiffs' breach of contract claims in terms of failure "to state facts upon which relief may be granted," the court's ultimate conclusion stated that Plaintiffs had presented "no claim upon which to terminate the [L]ease . . . [that] [n]o genuine issue of material fact exists in this matter, and summary judgment is proper pursuant to Fed. R. Civ. P. 56." (J.A. at 600-01.) The district court then ordered Equitable to deposit with the court all royalty payments held in escrow since 1992 for the Lease, ultimately to be issued to the properly identified Hoover Heirs. On December 3, 1999, the court ordered that the royalties be invested in the Court Registry System.

On November 3, 1999, Plaintiffs sought relief from the October 21, 1999 order pursuant to Rule 60(b), and moved to stay the execution of the order pursuant to Rule 62(b). Plaintiffs argued that the district court's decision under Rule 56 should have been deferred until Plaintiffs were given an opportunity to respond to Equitable's August 27, 1999 motion to dismiss and present additional supporting evidence for their claims. On December 14, 1999, the district court stayed execution of the October 21, 1999 order and allowed Plaintiffs until December 30, 1999, to file a response to Equitable's motion to dismiss. On December 30, 1999, Plaintiffs filed their

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response, attaching fourteen exhibits. On January 13, 2000, the court denied Plaintiffs' motion for relief from the October 21, 1999 order, finding that Plaintiffs' response contained no additional information. Plaintiffs now appeal.

On July 3 and August 23, 2000, Equitable filed motions to dismiss Woodrow Hoover, James Allen Hoover, Gary Edward Hoover, and Margaret Hayes as administratrix of the Estate of Melvin and Louisa Hoover, as parties to Plaintiffs' appeal. This Court thereafter granted Equitable's motions. Margaret Hayes continues to represent herself as a plaintiff in this action.

Substantive History

In April of 1911, Louisa Hoover, wife of Melvin Hoover, obtained title to the surface and oil and gas estates at issue in this case. In August of 1913, the Hoovers conveyed the property to Daisy Dudley, apparently reserving the oil and gas rights to themselves, and ultimately obtaining those rights in a 1921 decision by the Floyd Circuit Court in Kentucky, which was later set aside, but ultimately reinstated by the Kentucky Court of Appeals. Hoover v. Dudley, 14 S.W.2d 410 (Ky. Ct. App. 1929).

On June 6, 1921, the Hoovers executed the Lease with the Kentucky Coal and Coke Company, a predecessor in interest to Equitable. The Hoovers then conveyed a one-half interest in the oil and gas estate to third parties in August of 1928 without reserving any of the royalties from the existing oil and gas lease.

Kentucky West Virginia Gas Company ("Kentucky Gas") acquired title to both the Dudley and Hoover leaseholds on December 1, 1927, following years of litigation among the Hoovers, Dudleys, and Keystone Gas Company, to whom the Dudleys had granted a lease interest. Kentucky Gas then paid royalties to the Hoovers and their heirs and assigns from 1927 until January 1, 1986, when Kentucky Gas assigned its leasehold interest to Eastern Kentucky Production Company, which merged into Equitable Energy Resources Company on January 1, 1989, thereby vesting Equitable with full possessory interest in the oil and gas leases. Equitable Energy Resources Company changed its name to Equitable Production Company in 1999. Equitable is a West Virginia for-profit corporation with its principal place of business in Pittsburgh, Pennsylvania.

The Lease established a rental payment of $200.00 per year, per well, drilled on the Hoover mineral estate. Following the Hoovers' conveyance of 50% of their interest in the mineral estate to third parties, the rental payment, as of 1933, was to be divided between the Hoovers ($100) and two other owners ($50 per owner). At various times throughout the course of dealings between the Hoovers and Equitable's predecessors in interest, several wells were in operation on the property. For the fifteen years prior to the filing of the second amended complaint, only one well was in operation on the property. During this same period, there were no exploring, drilling, or other productive activity by Equitable related to the Hoover property or the Lease. The term of the Lease is ten years "and as long thereafter as oil or gas, or either of them, is produced from said land by the Lessee." (J.A. at 697.) Accordingly, Equitable now holds Plaintiffs' mineral estate subject only to the annual $200 rental payments and the requirement that oil or gas continue to be produced on the property.

Plaintiffs contend that Equitable failed to make payments on the Lease from 1966, upon the death of Eva Roberts, until the appointment of George Hoover as administrator in 1980. Plaintiffs maintain that

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