Bruzzese v. Chesapeake Exploration, LLC

• Decision Date: 13 February 2014
• Docket Number: Case No. 2:12–cv–167.
• Citation: 998 F.Supp.2d 663
• Parties: Joseph J. BRUZZESE, Jr. and Lisa A. Bruzzese, Plaintiffs, v. CHESAPEAKE EXPLORATION, LLC, Defendant. Chesapeake Exploration, LLC, Counter–Plaintiff, v. Joseph J. Bruzzese, Jr., et al., Counter–Defendants.
• Court: U.S. District Court — Southern District of Ohio

998 F.Supp.2d 663

Joseph J. BRUZZESE, Jr. and Lisa A. Bruzzese, Plaintiffs,

v.CHESAPEAKE EXPLORATION, LLC, Defendant.

Chesapeake Exploration, LLC, Counter–Plaintiff,

v.Joseph J. Bruzzese, Jr., et al., Counter–Defendants.

Case No. 2:12–cv–167.

United States District Court,

S.D. Ohio,

Eastern Division.

Feb. 13, 2014.

Jay Bernard Eggspuehler, Brandon Lee Abshier, Isaac, Wiles, Burkholder & Teetor, LLC, Columbus, OH, Jesse R. Pierce, Nugent Dwayne Beaty, Jr., Pierce & O'Neill LLP, Houston, TX, for Counter–Plaintiff.

Opinion and Order

JAMES L. GRAHAM, District Judge.

This case concerns the enforceability of an agreement signed by landowners to accept a lease offer from Chesapeake Exploration, LLC. Landowners Stephen and Elizabeth Albery signed an Agreement to Accept Lease Offer from Chesapeake on July 16, 2011. Under this Agreement, the Alberys and Chesapeake agreed to execute a 5–year lease for the gas and oil rights to 160 acres of property owned by the Alberys in Tuscarawas County, Ohio, with the Alberys receiving a one-time payment of $2700 per acre plus royalty payments of 17.5%. Chesapeake promised to enter into a lease with such payment terms so long as the property had marketable title and was not “undevelopable.” After signing the Agreement, the Alberys soon learned of a better offer being made by a different energy company and told their attorney on July 24, 2011 that they wanted to terminate the Agreement.

The matter is before the court on cross-motions for summary judgment solely on the issue of the enforceability of the Agreement to Accept Lease Offer. As explained below, the court finds in Chesapeake's favor that the Agreement is enforceable.

I. Background

This suit was originally filed by landowners Joseph J. Bruzzese, Jr. and Lisa A. Bruzzese in the Court of Common Pleas of Jefferson County, Ohio. The Bruzzeses had signed the Agreement to Accept Lease Offer, and the complaint sought declaratory judgment against Chesapeake that the Agreement was not enforceable. Chesapeake removed the action to this court on the basis of diversity jurisdiction. Chesapeake then answered and filed counterclaims for breach of contract, specific performance and declaratory judgment against the Bruzzeses and approximately 75 other landowners in Eastern Ohio who had signed the Agreement. During the course of this litigation, Chesapeake has reached a settlement with all of the landowners except the Alberys. The Alberys have filed counterclaims against Chesapeake for declaratory judgment, quiet title, and slander of title.

On December 20, 2010, the Alberys signed an Agreement to Join the F & M Ohio Valley Landowners Group No. 1.¹See Doc. # 146–17. Two law firms—Fisher, Brown, Peterson & Noble, and Morscyzk & Polochak—organized and represented the landowners group. Under the Agreement to Join, landowners agreed to retain the two firms as legal counsel for the purpose of negotiating gas and oil leases. The Agreement to Join provided that if a group member ultimately signed a lease negotiated by counsel, then counsel would receive a certain rate of compensation; however, group members were not obligated to enter into a lease and could opt out of the group at any time.

Counsel for the landowners group held periodic meetings with current and prospective group members at a local high school. See Dep. of Jeffrey Brown, at 16. Mr. Albery attended such a meeting in January or February 2011. See Albery Dep. at 19. He attended another meeting a month or two later. Id. These meetings were attended by 80 to 100 people, and the discussions concerned which energy companies had shown interest in leasing land, prices per acre, royalty percentages, protecting timber and water interests in the land, the length of leases and the timetable for getting lease deals done. Id. at 19–20, 24–26. A couple more meetings followed in which landowners were updated as to the prices and percentages being offered by interested energy companies. Id. at 34–35, 38.

On April 4, 2011, the Alberys signed the Ohio Valley Landowners (“OVL”) Commitment Agreement. See Doc. # 142–2 at Page 44 of 120. Under the OVL Agreement, the landowner formally committed acreage to the group leasing project, with Fisher, Brown, Peterson & Noble, and Morscyzk & Polochak retained as legal counsel for the project. The landowner agreed to grant exclusive authority to counsel to coordinate and accept price bids for gas and oil leases. As a fee, counsel was to receive 6% of the bonus payments made to landowners for successfully-negotiated leases.

By late spring 2011 counsel for the landowners group determined that Chesapeake had made a suitable offer that counsel could recommend for approval to members of the group. Chesapeake and counsel for the group executed a letter of intent on June 6, 2011. See Doc. # 148–1. Attached to the letter of intent were a sample Agreement to Accept Lease Offer from Chesapeake and a sample Paid–Up Oil & Gas Lease. Id. Mr. Albery recalls attending a meeting in which sample copies of the Agreement to Accept Lease Offer and the Paid–Up Oil & Gas Lease were made available for group members to inspect. See Albery Dep. at 83–86; see also Brown Dep. at 105–06, 113.

A signing event was held at the local high school in mid-June 2011. See Brown Dep. at 36–37. The Agreement to Accept Lease Offer provided that Chesapeake reserved the right to withdraw its offer if landowners did not execute and deliver the Agreement to counsel by June 17, 2011. The Alberys were on vacation and did not attend the event. See Albery Dep. at 52. After returning from vacation on about July 9, 2011, the Alberys called counsel for instructions on how to retrieve lease-related documents from a website. Id. at 52, 54.

On July 16, 2011, the Alberys printed out and signed both the Agreement to Join the F & M Ohio Valley Landowners Group No. 1 and the Agreement to Accept Lease Offer. See Doc. # 142–2 at Page 42 of 120; Doc. # 146–18. On the Agreement to Accept Lease Offer, the Alberys filled in the parcel numbers for the land (totaling 160 acres) that was to be leased. Where the Agreement stated that there would be a one-time bonus payment of $2400 per acre, the Alberys crossed out that amount and wrote in $2700 because they had been informed that counsel had negotiated the higher amount with Chesapeake while the Alberys were on vacation. See Albery Dep. at 52, 54–55. The Alberys then emailed to counsel the signed Agreement to Accept Lease Offer.

Immediately after the Alberys had submitted the signed Agreement, Mrs. Albery's sister told them that she had heard that other energy companies were making better offers to landowners. See Albery Dep. at 59. Under the apparent understanding that they could back out of the Agreement because they believed they could still opt out of the landowners group, see id. at 53, 59–60, 76, the Alberys sent a letter to counsel on July 24, 2011 stating that they wished to terminate the Agreement to Join the F & M Ohio Valley Landowners Group No. 1 and the Agreement to Accept Lease Offer. See Doc. # 146–19.

Chesapeake had prepared a Paid–Up Oil and Gas Lease with accompanying forms for the Alberys to sign. See Doc. # 146–25. The Lease and forms were dated July 25, 2011. See, e.g., Doc. # 146–25 at Page 15 of 32. The Alberys did not receive a copy of the forms that Chesapeake prepared for them to sign. See Albery Dep. at 87.

The Alberys then joined a different landowners group and on October 19, 2011 signed an oil and gas lease with the Shell Exploration & Production Company. See Albery Dep. at 61. On February 28, 2012, Shell informed the Alberys by letter that it had discovered during its title review that the Alberys had entered into the Agreement to Accept Lease Offer with Chesapeake. See Doc. # 146–20. Shell thus terminated the October 19, 2011 oil and gas lease.

II. Standard of Review

Under Federal Rule of Civil Procedure 56, summary judgment is proper if the evidentiary materials in the record show that there is “no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see Longaberger Co. v. Kolt, 586 F.3d 459, 465 (6th Cir.2009). The moving party bears the burden of proving the absence of genuine issues of material fact and its entitlement to judgment as a matter of law, which may be accomplished by demonstrating that the nonmoving party lacks evidence to support an essential element of its case on which it would bear the burden of proof at trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Walton v. Ford Motor Co., 424 F.3d 481, 485 (6th Cir.2005).

The “mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (emphasis in original); see alsoLongaberger, 586 F.3d at 465. “Only disputed material facts, those ‘that might affect the outcome of the suit under the governing law,’ will preclude summary judgment.” Daugherty v. Sajar Plastics, Inc., 544 F.3d 696, 702 (6th Cir.2008) (quoting Anderson, 477 U.S. at 248, 106 S.Ct. 2505). Accordingly, the nonmoving party must present “significant probative evidence” to demonstrate that “there is [more than] some metaphysical doubt as to the material facts.” Moore v. Philip Morris Cos., Inc., 8 F.3d 335, 340 (6th Cir.1993).

A district court considering a motion for summary judgment may not weigh evidence or make credibility determinations. Daugherty, 544 F.3d at 702; Adams v. Metiva, 31 F.3d 375, 379 (6th Cir.1994). Rather, in reviewing a motion for summary judgment, a court must determine whether “the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” An...