Panhandle Oil & Gas, Inc. v. BHP Billiton Petroleum (Fayetteville), LLC

• Court: Arkansas Court of Appeals
• Writing for the Court: RAYMOND R. ABRAMSON, Judge
• Citation: Panhandle Oil & Gas, Inc. v. BHP Billiton Petroleum (Fayetteville), LLC, 520 S.W.3d 277 (Ark. App. 2017)
• Decision Date: 05 April 2017
• Docket Number: No. CV–16–884,CV–16–884
• Parties: PANHANDLE OIL AND GAS, INC., Appellant v. BHP BILLITON PETROLEUM (FAYETTEVILLE), LLC, Appellee

520 S.W.3d 277

PANHANDLE OIL AND GAS, INC., Appellant

v.BHP BILLITON PETROLEUM (FAYETTEVILLE), LLC, Appellee

No. CV–16–884

Court of Appeals of Arkansas, DIVISION II.

Opinion Delivered: April 5, 2017

Morgan Law Firm, P.A., by: M. Edward Morgan, Clinton; and Fellers Snider Blankenship Bailey & Tippens, P.C., by: Mark K. Stonecipher, Oklahoma City and C. Eric Shephard, pro hac vice.

PPGMR Law, PLLC, by: Julie DeWoody Greathouse and Kimberly D. Logue, Little Rock, for appellee.

RAYMOND R. ABRAMSON, Judge

This is the second time this case is before us on appeal. In the first appeal, our court dismissed for lack of a final order.

Panhandle Oil & Gas, Inc. v. BHP Billiton Petroleum (Fayetteville) LLC , 2016 Ark. App. 376, 499 S.W.3d 667 (Panhandle I ). We now have a final order; appellant Panhandle Oil and Gas, Inc. (Panhandle), has again appealed three dismissals of their claims against appellee BHP Billiton Petroleum Fayetteville (BHP) from the Faulkner County Circuit Court. On appeal, Panhandle argues that the circuit court abused its discretion in granting two motions to dismiss pursuant to Rule 12(b)(6) of the Arkansas Rules of Civil Procedure and that the circuit court erred by dismissing its claims against BHP in the third amended complaint pursuant to Rule 41(b) of the Arkansas Rules of Civil Procedure. For the following reasons, we affirm in part, and reverse and remand in part.

I. Procedural History

As our court noted in Panhandle I , the procedural history of this case is rather complex. We provided a recitation of the facts in that opinion and do so again here. In May 2005, Panhandle and separate defendant Chesapeake Exploration, LLC (Chesapeake), entered into a written agreement (the May 2005 Agreement), which stated that Chesapeake would provide wellbore proposals to Panhandle for oil and gas wells in certain identified sections of land in Arkansas where Panhandle owns forty or more net mineral acres and Chesapeake desires to drill a well. Upon receiving a wellbore proposal, Panhandle would then decide if it wanted to participate in the well. Panhandle argues that the obligations of Chesapeake (and its assigns) included two things: (1) submit a well proposal in the event a well was to be drilled; and (2) in the event Panhandle elected to participate in a well, execute a wellbore assignment of any "Retained Interest," which was a defined term. The contract was designed to allow Panhandle to participate in the development of its minerals even though Panhandle itself would not drill the well.

Panhandle claims that, beginning in 2009, it began experiencing significant delays in receiving well proposals and other pertinent information. In an effort to remedy this, Panhandle and Chesapeake entered into another agreement, which is referred to as "the August 2010 Agreement," in order to establish Panhandle as a record working-interest owner in certain listed sections.¹ On January 1, 2011, Chesapeake assigned its remaining interest in the Panhandle Leases to BHP. On January 14, 2013, Panhandle filed suit against Chesapeake based on Chesapeake's alleged breaches of the May 2005 Agreement and also named BHP as a defendant. In its first amended complaint, filed on June 21, 2013, Panhandle asserted causes of action against BHP for breach of the May 2005 Agreement, specific performance of the same, an equitable accounting, and unjust enrichment.² On July 11, 2013, BHP moved to dismiss the causes of action against it in the first amended complaint under Rule 12(b)(6) of the Arkansas Rules of Civil Procedure for failure to adequately state a claim. BHP argued that the first amended complaint sought to extend the May 2005 Agreement beyond its written terms, failed to allege sufficient facts—including an adequate basis to support successor liability—and failed to allege claims for an equitable accounting or unjust enrichment. After Panhandle responded on July 25, 2013, the circuit court heard oral arguments on the issues raised in the motion and response. On October 31, 2013, the circuit court dismissed BHP from the case by stating, without further explanation, that the Rule 12(b)(6) motion was granted.

On November 21, 2013, Panhandle filed its second amended complaint, pursuant to Rule 15(a) of the Arkansas Rules of Civil Procedure, asserting claims against both BHP and defendant Chesapeake. The claims in the second amended complaint were nearly identical to the claims made in the first amended complaint. The only changes were to include various argumentative and conclusory allegations in response to BHP's previous motion to dismiss and to state new claims for reformation in which Panhandle specifically requested that the terms of the May 2005 Agreement and the August 2010 Agreement be expanded in order to impose new contractual obligations on BHP.³ On December 23, 2013, BHP filed a motion to dismiss Panhandle's second amended complaint pursuant to Rule 12(b)(6) of the Arkansas Rules of Civil Procedure for the same reasons previously argued to the circuit court. Panhandle filed a written response to the motion, and the circuit court held a hearing on February 24, 2014. On March 17, 2014, the circuit court, without further explanation, granted BHP's motion to dismiss the second amended complaint, finding it had failed to state facts upon which relief could be granted as to BHP.⁴

On April 9, 2014, Panhandle filed its third amended complaint. On May 16, 2014, BHP moved to dismiss or strike this third iteration of Panhandle's claims against it because Rule 41(b) of the Arkansas Rules of Civil Procedure directs that the circuit court's second order of dismissal should be deemed as an adjudication on the merits, and consequently is a dismissal with prejudice. Therefore, BHP argued, the circuit court was barred from taking up Panhandle's reasserted allegations. On June 5, 2014, Panhandle filed a response to BHP's motion; within its response was a request that the circuit court reconsider and vacate the March 17, 2014 dismissal.

On December 29, 2014, after the issue was briefed by both parties, the circuit court, in a letter opinion, granted BHP's motion and denied the request for reconsideration of the dismissal of the second amended complaint that was included in Panhandle's response to the motion to dismiss the third amended complaint. After a settlement, Chesapeake was dismissed in August 2015, and the circuit court entered an order and judgment on September 26, 2016, reflecting the contents of the December 29, 2014 letter opinion. This timely appeal is now properly before our court.

In Panhandle's notice of appeal filed September 29, 2016, Panhandle appeals the two consecutive Rule 12(b)(6) dismissals by former Judge Maggio of claims asserted against BHP, and the Rule 41(b) dismissal by Judge Murphy, all of which became ripe for postjudgment appeal after the combination of Panhandle's dismissal of Chesapeake and the order and judgment entered on September 26, 2016.

Panhandle maintains that in order to properly dismiss its claims against BHP under Rule 12(b)(6), Judge Maggio had to find that Panhandle failed to (1) state general facts upon which relief could have been granted against BHP or (2) include specific facts pertaining to one or more of the elements of one of its claims after accepting all facts contained in the complaint as true and in the light most favorable to the non-moving party. Bethel Baptist Church v. Church Mut. Ins. Co ., 54 Ark. App. 262, 265, 924 S.W.2d 494, 496 (1996). Both of the orders dismissing BHP pursuant to Rule 12(b)(6) provide that Panhandle "fail[ed] to state facts upon which relief can be granted against BHP" but provide no further explanation. The circuit court was not specific in either order as to why or how the pleading was inadequate, though we note this is not required when dismissing a case pursuant to Rule 12(b)(6).

II. Standard of Review

This court has often stated the standards to be applied in reviewing a dismissal order under Rule 12(b)(6), and we look to the four corners of the complaint. See Peck v. Peck , 2016 Ark. App. 423, 502 S.W.3d 553. In reviewing a circuit court's decision on a motion to dismiss under Rule 12(b)(6), we treat the facts alleged in the complaint as true and view them in the light most favorable to the plaintiff. Neal v. Wilson , 316 Ark. 588, 873 S.W.2d 552 (1994) ; Gordon v. Planters & Merchants Bancshares, Inc. , 310 Ark. 11, 832 S.W.2d 492 (1992) ; Battle v. Harris , 298 Ark. 241, 766 S.W.2d 431 (1989). In viewing the facts in the light most favorable to the plaintiff, the facts should be liberally construed in the plaintiff's favor. See Biedenharn v. Thicksten , 361 Ark. 438, 206 S.W.3d 837 (2005).

In deciding dismissal motions, the circuit court must look only to the allegations in the complaint. Neal v. Wilson , supra ; Wiseman v. Batchelor , 315 Ark. 85, 864 S.W.2d 248 (1993) ; Deitsch v. Tillery , 309 Ark. 401, 833 S.W.2d 760 (1992). In order to state a cause of action, the complaint must allege facts and not mere conclusions. Ark. R. Civ. P. 8 ; see also Hollingsworth v. First Nat'l Bank & Trust Co. , 311 Ark. 637, 846 S.W.2d 176 (1993) ; Rabalaias v. Barnett , 284 Ark. 527, 683 S.W.2d 919 (1985). When a complaint is dismissed without prejudice, the plaintiff has the option of pleading further or appealing. Hollingsworth , supra.

Arkansas is a fact-pleading state, and this court looks to the underlying facts supporting an alleged cause of action to determine whether the matter has been sufficiently pled. Brown v. Tucker , 330 Ark. 435, 954 S.W.2d 262 (1997). As our supreme court noted in Ballard Group, Inc. v. BP Lubricants USA, Inc. , 2014 Ark. 276 at 5, 436 S.W.3d 445, 449,

[g]enerally speaking, the granting of both a Rule 12(b)(6) dismissal and a Rule 41(b) dismissal are reviewed under the abuse-of-discretion standard. J.B. Hunt, LLC v. Thornton , 2014 Ark. 62, 432 S.W.3d 8 (Rule 12(b)(6) ); Jonesboro Healthcare Ctr., LLC v. Eaton–Moery Envtl. Servs.,

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