Cameron v. Hess Corp.

• Decision Date: 24 September 2013
• Docket Number: Case No. 2:12–CV–00168.
• Parties: David E. CAMERON, et al., Plaintiffs, v. HESS CORPORATION, et al., Defendants.
• Court: U.S. District Court — Southern District of Ohio

974 F.Supp.2d 1042

David E. CAMERON, et al., Plaintiffs,

v.HESS CORPORATION, et al., Defendants.

Case No. 2:12–CV–00168.

United States District Court,

S.D. Ohio,

Eastern Division.

Sept. 24, 2013.

Christopher J. Gagin, Youngstown, OH, for Plaintiffs.

Philip F. Downey, Vorys, Sater, Seymour and Pease LLP, Akron, OH, Erin L. Dickinson, Akron, OH, Gregory D. Russell, William Darrell Kloss, Jr., Vorys Sater Seymour & Pease, Columbus, OH, Karen E. Kahle, Steptoe & Johnson, Wheeling, WV, Amy M. Smith, Steptoe & Johnson PLLC, Bridgeport, WV, for Defendants.

OPINION & ORDER

ALGENON L. MARBLEY, District Judge.

This matter is before the Court on the Motion of Plaintiffs David Cameron, Melissa Griffith, Stephen J. Griffith, and John and Jane Doe (collectively “Plaintiffs”) for Partial Summary Judgment, (Doc. 37), the Cross–Motion of Defendants Hess Corp., Hess Ohio Developments, LLC, and Hess Ohio Resources, LLC (collectively “Hess”) for Partial Summary Judgment, (Doc. 42), and the Motion of Defendant Mason Dixon Energy, Inc. (“Mason Dixon”) for Summary Judgment, (Doc. 51). For the reasons set forth herein, Plaintiffs' Motion is GRANTED in part and DENIED in part, Hess's Motion is DENIED, and Mason Dixon's Motion is GRANTED in part and DENIED in part.

I. BACKGROUND

A. Factual History

This action arises out of oil and gas leases purportedly executed between Defendant Mason Dixon and Plaintiffs Stephen and Melissa Griffith (the “Griffiths”), and between Mason Dixon and Plaintiff David Cameron (“Cameron”). In the spring of 2007, Mason Dixon approached the Griffiths about an oil and gas lease for their 228.6 acre dairy farm in Jefferson County, Ohio. On June 14, 2007, the Griffithspurportedly executed a written “Oil and Gas Lease” agreement with Mason Dixon (the “Griffiths Lease”), (Doc. 37, Ex. A). Melissa Griffith, however, did not sign the Griffiths Lease. Melissa Griffith Dep. at 36. Rather, Plaintiffs allege that Mason Dixon's representative first directed Stephen to sign on his wife's behalf (which he did) and then notarized the resulting document. Stephen Griffith Dep. at 30–32.

Approximately one year later, Mason Dixon approached Cameron about an oil and gas lease for his 166.36 hay and cattle farm, which adjoins the Griffiths' dairy farm in Jefferson County. On June 27, 2008, Cameron purportedly executed a written “Oil and Gas Lease” agreement with Mason Dixon (the “Cameron Lease”), (Doc. 37, Ex. B). Plaintiffs assert that the Cameron lease was improperly notarized, as the notary was not present at the time the Cameron Lease was executed. Cameron Dep. at 27, 30.

The terms of the Griffith and Cameron Leases, which contain largely identical language, granted the Lessee ¹ “exclusive right to enter upon” certain lands in Mt. Pleasant Township, Jefferson County, Ohio in order “to conduct geological and geophysical surveys and explorations, and to operate for, produce, and save oil and gas ... and to inject gas, air, water or other fluids into the subsurface strata of said lands for the recovery and production of oil and gas, together with the right to drill wells.” Griffiths Lease at ¶ 3; Cameron Lease at ¶ 3.

1. Assignment of Griffiths and Cameron Leases

Both the Griffiths and Cameron Leases allow for the rights of either party to be assigned in whole or in part, provided that no such change, “however accomplished, shall operate to enlarge the obligations or diminish the rights of Lessee.” Griffith Lease at ¶ 11, Cameron Lease at ¶ 11. Pursuant to this clause, on December 15, 2008, Mason Dixon filed two “Assignment of Oil and Gas Leases” with the Jefferson County, Ohio, Recorder: one assigning the property conveyed under the Griffith Lease, identified at OR Volume 867, pages 838–839; and another assigning the property conveyed under the Cameron Lease, identified at OR Volume 867, pages 852–853. See Bowers Aff., Doc. 51–1 (attaching relevant assignments). Through these assignments, Mason Dixon purportedly conveyed all of its “right, title and interest, in and to” the Griffith and Cameron Leases to Marquette Exploration, LLC (“Marquette”), “subject to the terms, provisions, covenants, and royalties” set forth in the original leases. The Griffiths and Cameron Leases were subsequently assigned to Hess Ohio Resources, LLC.

2. Griffiths Lease Term

The Griffiths Lease contains a “habendum clause,” which provides:

It is agreed that this lease shall remain in force for a term of five (5) year(s) from [June 14, 2007], and as long thereafter as oil or gas ... or either of them, is produced from said land by the Lessee, its successors and assigns. Lessee has the option to extend this lease for an additional term of five (5) years(s) from the expiration of the primary term of this lease, and as long thereafter as oil or gas ... or either of them, is produced from said land by the Lessee, its successors and assigns, said extension to be under the same term of this lease. Lessee, it successors or assigns, may exercise this option to extend if on or before the expiration date of the primary term of this lease, Lessee pays or tenders to the Lessor or to the Lessor's credit, an amount per mineral acre equal to two (2) times the amount per net mineral acre paid to Lessor upon the execution of this lease.

Griffith Lease ¶ 2. The parties do not dispute that, pursuant to the habendum clause, the primary term of the Griffiths Lease is five years. Based on the above, the primary term was scheduled to expire in June 2012.

In addition, the Griffith Lease contains a “delay rental” provision, which provides that,

If operations for drilling are not commenced on the leased premises, or on acreage pooled therewith, on or before twelve (12) months from [June 14, 2007], this lease shall then terminate as to both parties unless Lessee, on or before the expiration of said period, shall pay or tender to Lessor the sum of Five and no/100 ($5.00) Dollars per net mineral acre of the associated lease, hereinafter called the “delay rental,” which shall extend for twelve (12) months the time within which drilling operations may be commenced. Thereafter, annually, in like manner and upon like payments or tenders, the commencement of drilling operations may be further deferred for periods of twelve (12) months each during the primary term.

Griffith Lease ¶ 4.

It is undisputed that, to date, no drilling activity of any kind has taken place on the property covered by the Griffiths Lease, and the Griffiths have received no royalties of any kind under the terms of the Griffiths Lease.

After execution of the Griffith Lease, the Lessee made four annual Delay Rental payments, in the amount of $1,143.00 each, in 2008, 2009, 2010, and 2011. Hess asserts that the Lessee thereby satisfied its contractual obligations for the entirety of the primary term of the Griffith Lease, or until June 14, 2012. S. Griffith Depo. at 46–52; M. Griffith Depo. at 45–53, Exs. C, D, E, F. In addition, in May 2012, the Lessee tendered to the Griffiths an extension payment of $13,716, intended to extend the lease term for an additional five years ( i.e., through June 2017), pursuant to paragraph 2 of the Griffith Lease. Countercl., Doc. 32, ¶ 53; Pls.' Answer ¶ 53; Ivy Phillips Aff. at ¶¶ 5–7. For the purposes of Plaintiffs' motion for summary judgment, the Griffiths do not dispute that Hess (or its processor in interest, Marquette) attempted all payments called for under the Griffith Lease. (Doc. 37–1 at 3.) Hess argues that, because the Lessee tendered the payments above, the Griffiths Lease remains in effect, and has not terminated pursuant to the “delay rental” provision.

Plaintiffs argue that the “delay rental” provision gave the Lessee the option to make an annual “delayed rental” payment to the Griffiths, but only “during the primary term.” Plaintiff therefore argues that, upon the expiration of the primary term on June 13, 2012, the Griffiths Lease terminated pursuant to the “delay rental” provision. Notably, the Griffiths have presented evidence that they did not cash the delay payments tendered in 2010 and 2011, nor the extension payment tendered in 2012. Although Hess does not dispute that the Griffiths did not cash the 2011 delay rental check or the 2012 extension payment check, Hess does assert that the Griffiths cashed the check for the 2010 delay rental payment. See S. Griffith Depo. at 46–52; M. Griffith Depo. at 45; Depo. Exs. C, D, E.; S. Griffith Depo. at 52–53; M. Griffith Depo. at 45, 59, Ex. F.

3. Cameron Lease Term

The Cameron Lease also contains a “habendum clause,” which provides:

It is agreed that this lease shall remain in force for a term of five (5) year(s) from [June 27, 2008], and as long thereafter as oil or gas ... or either of them, is produced from said land by the Lessee, its successors and assigns. Lessee has the option to extend this lease for an additional term of five (5) years(s) [sic] from the expiration of the primary term of this lease, and as long thereafter as oil or gas ... or either of them is produced from said land by the Less, its successors and assigns, said extension to be under the same terms and conditions as contained in this lease. Lessee, its successors or assigns, may exercise this option to extend if on or before the expiration date of the primary term of this lease, Lessee pays or tenders to the Lessor or to the Lessor's credit, an amount per net mineral acre covered under that certain un-recorded Bonus and Rental Agreement between Lessor and Less of even date hereof.

Cameron Lease ¶ 2. Under the habendum clause of the Cameron Lease, the Cameron Lease was scheduled to expire on June 27, 2013.

Contemporaneously with the Cameron Lease, Cameron signed an Order of Payment and Bonus and Rental Agreement (“Order of Payment”), (Doc. 37–7), which provides that, “[i]f any of the following [Order of Payment] provisions conflict with or are inconsistent with any of the printed provision or terms of the [Cameron] Lease, the following...