Camp Ne'er Too Late, LP v. Swepi, LP, 4:14-cv-01715

• Decision Date: 05 May 2016
• Docket Number: No. 4:14-cv-01715,4:14-cv-01715
• Citation: 185 F.Supp.3d 517
• Parties: Camp Ne'er Too Late, LP, Plaintiff, v. Swepi, LP, Defendant.
• Court: U.S. District Court — Middle District of Pennsylvania

185 F.Supp.3d 517

Camp Ne'er Too Late, LP, Plaintiff,

v.Swepi, LP, Defendant.

No. 4:14-cv-01715

United States District Court, M.D. Pennsylvania.

Signed May 5, 2016

Carl J. Engleman, Jr., Law Offices of Carl Engleman, Jr., LLC, Reading, PA, for Plaintiff.

Jeremy A. Mercer, Norton Rose Fulbright US LLP, Canonsburg, PA, for Defendant.

MEMORANDUM

Matthew W. Brann, United States District Judge

The renowned eighteenth-century English poet Alexander Pope once wrote, "Blessed is the man who expects nothing, for he shall never be disappointed."¹ The dispute presently before the Court was fueled by the outsized and unsupported expectations of landowners who entered into a natural gas lease and subsequent agreements during a time when such exploration was steadily reaching its zenith in Pennsylvania's northern tier counties. As the natural gas boom gradually winnowed, drilling companies, like the one hauled into court here, reacted with contractionary business decisions that included, among other defensive strategies, halting plans for the development of future wells.

The unfolding of this dispute has confirmed the well-established principle that the disappointment and dissatisfaction felt by a natural gas lessor as a result of the lessee's failure to develop its property—what plaintiff's representatives in this case have called their "shattered dreams"—do not afford the lessor a remedy at law if such development is not mandated by the clear text of an agreement between the parties.

Plaintiff, Camp Ne'er Too Late, LP, petitions this Court to extrapolate a set of contractual obligations on the part of Defendant, SWEPI, LP, from a single introductory paragraph of a right-of-way addendum, which Plaintiff's representatives drafted. This Court considers it highly unbefitting for federal judges to substitute their own predilections for those of the litigants who appear before them, particularly when those litigants have already expressed their intentions in the clear text of a bargained-for agreement.

Consequently, because Plaintiff's case theory simply is not borne out either by the text of the parties' agreements or the plain reality of the parties' course of dealings, its request that the Court engage in judicial revisionism of the instant natural gas lease and intervene on its behalf, now having the benefit of hindsight, must be rejected. Instead, this Court will honor the written agreement for which the parties bargained. As such and in accordance with the following reasoning, Defendant's Motion for Summary Judgment is granted and Plaintiff's corresponding Motion for Summary Judgment is denied.²

I. BACKGROUND³

A. Ne'er Too Late Lodge and East Resources, Inc., negotiate and execute the 2008 lease and addendum.

The instant dispute springs from the terms of natural gas lease governing a wooded 230-acre plot of land in Rutland Township, Tioga County, Pennsylvania.⁴ That property, to which the subject lease applies, was acquired by Ne'er Too Late Lodge, a Pennsylvania nonprofit corporation, in 1966.⁵ The nonprofit entity Ne'er Too Late Lodge shares its name with a small cabin that sits on the land in question, land which according to one of Plaintiff's partners, has been used throughout the years for private brook trout fishing, hunting, and similar outdoor activities.⁶

On June 17, 2008, Ne'er Too Late Lodge and SWEPI, LP's predecessor-in-interest, East Resources, Inc., executed the oil and gas lease that ultimately gave rise to the present litigation.⁷ The lease was negotiated on behalf of Ne'er Too Late Lodge by shareholder-brothers Robert A. Schwoyer and David Schwoyer, Sr., both of whom would later become general partners in Camp Ne'er Too Late, LP, the organization formed by Ne'er Too Late Lodge's shareholders to manage the business affairs associated with the lease.⁸ David Schwoyer would also go on to testify in this matter as Plaintiff's Federal Rule of Civil Procedure 30(b)(6) designee.

In 2008, the parties agreed to a "paid-up" lease, meaning that Ne'er Too Late Lodge, solely for entering into the lease, received an up-front payment of $287,500, which compensation was comprised of a bonus and accelerated delay rental fees.⁹ The lease also provided that Ne'er Too Late Lodge would receive as a royalty payment one-eighth of the proceeds realized by East Resources through its sales of natural gas extracted from the property.¹⁰

According to the text of the agreement, Ne'er Too Late Lodge leased the subject land to East Resources "for the purpose of exploring for, developing, producing and marketing oil and gas."¹¹ The parties do not dispute that the lease gave East Resources the authority to place well pads on the leased premises and that nothing in the lease required the drilling of any number of wells.¹² In fact, prior to the expiration of the primary term of the lease, only one well had actually been drilled on the land.¹³

Importantly, the Lease also granted East Resources the right to construct pipelines throughout the leased premises.¹⁴ Specifically, Paragraph 11 of the lease ("Ancillary Rights"), provides that Ne'er Too Late Lodge granted to East Resources "the right of ingress and egress over, under and through said leased premises with the right to conduct such exclusive operations on the leased premises as may be necessary for such purposes, including but not limited to...the constructions and use of roads, pipelines, tanks, water wells, disposal wells injection wills, pits electric and telephone lines, and other facilities."¹⁵

Although the lease provided that such constructions could be made "regardless of the source of such substances," during the course of the negotiations, the parties composed a lease addendum containing twenty additional paragraphs, one of which—Paragraph 12—restricted East Resources from constructing a pipeline on the leased premises unless that pipeline was used to transfer oil and/or gas from one or more wells drilled on the leased premises.¹⁶ In the context of natural gas leases, gas transported across leased premises that is drilled from those same premises is known as "domestic" or "native" gas.¹⁷ The parties attached the addendum to the lease and explicitly incorporated it.¹⁸ The addendum provisions were therefore made effective upon execution of the lease itself. For the record, I will also note that the parties do not dispute either that the lease was a completely integrated document with a standard integration clause or that the lease disclaimed any and all implied obligations.¹⁹

At this juncture, it is also important to note that because Defendant ultimately did construct a pipeline that transported non-native gas over the subject land, the elemental issue in this litigation is whether the text of certain subsequent agreements between the parties incorporated Paragraph 12 of the lease addendum in any manner. Because the text of those agreements indicates otherwise, I conclude in my analysis below that Paragraph 12 of the lease addendum was not so incorporated.

Shortly thereafter, the shareholders of Ne'er Too Late Lodge engaged in the first of two inconsistent transactions. On November 14, 2008, five months after the lease was executed, Ne'er Too Late Lodge assigned all of its rights under the lease to its individual shareholders.²⁰ As part of the assignment, each of Ne'er Too Late Lodge's nine shareholders accepted an interest in the rights under lease in proportion to their ownership share in Ne'er Too Late Lodge.²¹ That assignment was never recorded.²² The second inconsistent transaction would occur in April 2010 and is detailed below in Part I.C.

B. Ne'er Too Late Lodge and East Resources negotiate and execute the 2009 right-of-way agreement.²³

Despite the lease and its addendum having already given East Resources the right to construct a pipeline on the leased premises that carried only domestic gas, the parties nevertheless found it necessary to negotiate two right-of-way agreements that granted East Resources the ability to construct such a pipeline. These two subsequent right-of-way agreements did not include any limitations as to domestic gas or explicit references to Paragraph 12 of the lease addendum. Each of the subsequent right-of-way agreements also entailed additional consideration paid to Plaintiff or its predecessor-in-interest beyond what the lease required. These characteristics of the right-of-way agreements have now led Defendant, quite rightly in this Court's view, to argue that these peripheral agreements effectively granted it greater rights than what its predecessor-in-interest initially enjoyed under the lease, namely, the right to construct a pipeline capable of transporting non-native gas.

Accordingly, in 2009, Ne'er Too Late Lodge and East Resources began negotiating over what would be the first of two pipeline right-of-way agreements that were eventually executed as to the subject land. Though the 2010 right-of-way agreement, due to certain of its unique terms, is the document that largely gave rise to the present dispute, the Court will also briefly review the facts surrounding the execution of the 2009 agreement and 2011 amendment for the sake of completeness.

The 2009 right-of-way agreement was executed on November 28, 2009 and gave East Resources "the right to lay, maintain and remove a pipeline(s) over and through" the leased premises.²⁴ Terry Bryant was the landman, the agent of East Resources with whom Robert A. Schwoyer negotiated.²⁵ During his Rule 30(b)(6) deposition, David Schwoyer, Sr., could not recall any discussions with Mr. Bryant related to how the 2009 right-of-way agreement interacted with the Lease.²⁶

Though nothing in the agreement references the lease or limits the location of the pipeline, a proposed pipeline map was attached to the agreement.²⁷ Nevertheless, during his Rule 30(b)(6) deposition, Mr. Schwoyer admitted that a pipeline was never constructed in the particular way that the map depicted.²⁸

The parties do not dispute that 2009...