Anadarko Petroleum Corp. v. Commonwealth

• Decision Date: 15 March 2019
• Docket Number: No. 60 C.D. 2018,No. 58 C.D. 2018,58 C.D. 2018,60 C.D. 2018
• Court: Pennsylvania Commonwealth Court
• Parties: ANADARKO PETROLEUM CORPORATION and Anadarko E&P Onshore LLC, Appellants v. COMMONWEALTH of Pennsylvania; Chesapeake Energy Corporation; Chesapeake Appalachia, LLC; Chesapeake Operating, LLC ; Chesapeake Energy Marketing, LLC Chesapeake Energy Corporation; Chesapeake Appalachia, LLC; Chesapeake Operating, LLC ; and Chesapeake Energy Marketing, L.L.C., Appellants v. Commonwealth of Pennsylvania

206 A.3d 51

ANADARKO PETROLEUM CORPORATION and Anadarko E&P Onshore LLC, Appellants
v.
COMMONWEALTH of Pennsylvania; Chesapeake Energy Corporation; Chesapeake Appalachia, LLC; Chesapeake Operating, LLC ; Chesapeake Energy Marketing, LLC

Chesapeake Energy Corporation; Chesapeake Appalachia, LLC; Chesapeake Operating, LLC ; and Chesapeake Energy Marketing, L.L.C., Appellants
v.
Commonwealth of Pennsylvania

No. 58 C.D. 2018
No. 60 C.D. 2018

Commonwealth Court of Pennsylvania.

Argued November 14, 2018
Decided March 15, 2019

Stephen A. Cozen, Philadelphia, for designated appellant Anadarko Petroleum Corporation and Anadarko E&P Onshore LLC.

Daniel T. Donovan, Washington, DC, for designated appellant Chesapeake Energy Corporation.

Daniel T. Brier, Scranton, for designated appellant Chesapeake Energy Marketing, LLC

BEFORE: HONORABLE RENÉE COHN JUBELIRER, Judge, HONORABLE ROBERT SIMPSON, Judge, HONORABLE P. KEVIN BROBSON, Judge, HONORABLE PATRICIA A. McCULLOUGH, Judge, HONORABLE ANNE E. COVEY, Judge, HONORABLE MICHAEL H. WOJCIK, Judge, HONORABLE ELLEN CEISLER, Judge

OPINION BY JUDGE CEISLER

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In these combined interlocutory appeals by permission, we address two issues of first impression pertaining to Pennsylvania's Unfair Trade Practices and Consumer Protection Law (Law or UTPCPL).¹ The first is whether Appellee Commonwealth of Pennsylvania, Office of Attorney General (Attorney General), can bring a cause of action against lessees pursuant to the UTPCPL, due to allegedly wrongful conduct perpetrated by the lessees in the context of leasing subsurface mineral rights from private landowners. The second issue is whether the Attorney General can bring a cause of action against those lessees, pursuant to the UTPCPL, for alleged violations of antitrust law. The Court of Common Pleas of Bradford County (Trial Court) answered both questions in the affirmative; however, after thorough consideration, we affirm in part and reverse in part.

The Attorney General filed suit in the Trial Court against Appellants Anadarko Petroleum Corporation and Anadarko E & P Onshore LLC (Anadarko), as well as Chesapeake Energy Corporation, Chesapeake Appalachia, LLC, Chesapeake Operating, LLC, and Chesapeake Energy Marketing, LLC (Chesapeake), (collectively, Appellants). In the complaint, the Attorney General alleges that, pursuant to both the UTPCPL and Pennsylvania antitrust common law, Appellants acted unlawfully by using deceptive, misleading, and unfair tactics, and committed antitrust violations, in their efforts to secure subsurface mineral rights leases from private landowners. See Second Amended Complaint at 1-4, 29-105.² These leases allow Appellants to extract natural gas from the Marcellus Shale formations underneath these private landowners' properties, in exchange for royalties and other types of payments. Id. at 14-28.

The Attorney General alleges that Appellants agreed to split the portion of "northeast Pennsylvania within the Marcellus Shale gas play" between them, so that Anadarko and Chesapeake would each effectively have exclusive areas in which to

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seek mineral rights leases, without the fear that the other would tender competing offers to private landowners who were prospective lessors. See Second Amended Complaint at 62-76.

In response to the Attorney General's Second Amended Complaint, Appellants each filed preliminary objections. As part of their overall preliminary objections, Appellants made two arguments that are relevant to these interlocutory appeals. First, they demurred³ on the basis that the Attorney General could not state claims against them under the UTPCPL, because this law could only be applied to address the allegedly deceptive or unfair conduct of sellers in the context of a consumer transaction. Anadarko's Preliminary Objections at 11; Chesapeake's Preliminary Objections at 2-3. Since they had leased subsurface mineral rights, Appellants argued that they were effectively buyers in these transactions, and that their conduct was thus not actionable under the terms of the UTPCPL. Anadarko's Preliminary Objections at 11-13; Chesapeake's Preliminary Objections at 3. Second, they demurred on the grounds that antitrust claims could not be made under the UTPCPL, as this law was not designed to be an antitrust statute. Anadarko's Preliminary Objections at 28-32; Chesapeake's Preliminary Objections at 5-6.

The Trial Court sustained Appellants' Preliminary Objections in part and overruled them in part. Of relevance to these interlocutory appeals, the Trial Court held that the Attorney General could sue Appellants pursuant to the UTPCPL, since the companies were conducting trade or commerce, as those terms were defined in the Law, and determined that the Law permitted the Attorney General to pursue antitrust claims against these companies under the UTPCPL. Tr. Ct. Op. at 16-33, 47-50. After making these rulings, the Trial Court sua sponte certified these issues for interlocutory appeal, recognizing that they are questions of first impression in which different interpretations of the law were being debated. Id. at 73-75, 79, 81-82. Appellants then filed separate petitions for permission to appeal on an interlocutory basis,⁴ which the Honorable Bonnie Brigance Leadbetter granted, consolidating Appellants' respective appeals and limiting them to the following two questions:

1. Whether a cause of action may be brought under the [UTPCPL] for alleged wrongful conduct by lessees in oil and gas lease transactions.

2. Whether a cause of action may be brought under the [UTPCPL] for alleged antitrust violations.

Commonwealth Court Order, 3/12/18, at 2-3. The parties subsequently filed responsive briefs and appeared for en banc argument. These issues are now ready for our consideration.⁵

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The UTPCPL

The Legislature sought by the [UTPCPL] to benefit the public at large by eradicating, among other things, ‘unfair or deceptive’ business practices. Just as earlier legislation was designed to equalize the position of employer and employee and the position of insurer and insured, this Law attempts to place on more equal terms seller and consumer. These remedial statutes are all predicated on a legislative recognition of the unequal bargaining power of opposing forces in the marketplace.

Instantly, the Legislature strove, by making certain modest adjustments, to ensure the fairness of market transactions. No sweeping changes in legal relationships were occasioned by the [Law], since prevention of deception and the exploitation of unfair advantage has always been an object of remedial legislation.

Although the [UTPCPL] did articulate the evils desired to be remedied, the statute's underlying foundation is fraud prevention....

Since the [UTPCPL] was in relevant part designed to thwart fraud in the statutory sense, it is to be construed liberally to effect its object of preventing unfair or deceptive practices.

Com., by Creamer v. Monumental Props., Inc. , 459 Pa. 450, 329 A.2d 812, 815-17 (1974) (footnotes and internal citations omitted).

Per the UTPCPL's express language, the General Assembly has "declared unlawful" 21 separate categories of "[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce[,]" as well as any acts or practices designated as such by the Attorney General through the administrative rulemaking process. Section 3 of the UTPCPL, 73 P.S. § 201-3 ; see Sections 2(4) and 3.1 of the UTPCPL, 73 P.S. §§ 201-2(4), 201-3.1.⁶ Of relevance here is the subsection that prohibits "[e]ngaging in any other fraudulent or deceptive conduct which creates a likelihood of confusion or of misunderstanding." Section 2(xxi) of the UTPCPL, 73 P.S. § 201-2(xxi).

The Law defines " ‘trade’ and ‘commerce’ " as "the advertising, offering for sale, sale or distribution of any services and any property, tangible or intangible, real, personal or mixed, and any other article, commodity, or thing of value wherever situate, and includes any trade or commerce directly or indirectly affecting the people of this Commonwealth." Section 2(3) of the UTPCPL, 73 P.S. § 201-2(3). In addition, the UTPCPL authorizes actions by private parties and imbues the Attorney General, as well as district attorneys throughout this Commonwealth, with the power to file suit if they "[have] reason to believe that any person is using or is about to use any method, act or practice declared by [ 73 P.S. § 201-3 ] to be unlawful, and that proceedings would be in the public interest[.]" Section 4 of the UTPCPL, 73 P.S. § 201-4.

The Attorney General's UTPCPL Claims Against Appellants

In this interlocutory appeal, Appellants argue that the Trial Court erred by holding that the Attorney General could sue

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them pursuant to the UTPCPL. According to Appellants, since they merely leased subsurface mineral rights from private landowners, they were not selling or distributing anything and consequently, the UTPCPL does not apply to their conduct, as the lease transactions do not satisfy the statutory definition of ‘trade or commerce[.]’ " Appellants' Br. at 13, 18-19...