Dochinez v. Mitchell Res., LLC

• Decision Date: 23 September 2013
• Docket Number: 2:11cv984
• Parties: PETER D. DOCHINEZ, BLACK DIAMOND ENERGY, INC. and BLACK DIAMOND ENERGY OF DELAWARE, INC., Plaintiffs, v. MITCHELL RESOURCES, LLC, Defendant.
• Court: U.S. District Court — Western District of Pennsylvania

PETER D. DOCHINEZ, BLACK DIAMOND ENERGY, INC.and BLACK DIAMOND ENERGY OF DELAWARE, INC., Plaintiffs, v. MITCHELL RESOURCES, LLC, Defendant.

2:11cv984

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA

Date: September 23, 2013

Electronic Filing

OPINION

On June 30, 2011, Peter D. Dochinez, Black Diamond Energy, Inc. ("BDE"), and Black Diamond Energy of Delaware, Inc. ("BDE of Delaware") (collectively "plaintiffs") commenced this action against Mitchell Resources, LLC ("defendant"), in the Court of Common Pleas of Allegheny County, Pennsylvania. Defendant removed the action on July 29, 2011. Presently before the court is plaintiffs' motion to enforce a settlement agreement. An evidentiary hearing on the motion was held on August 5, 2013, and the parties submitted supplemental briefs in support of their respective positions on August 7, 2013. For the reasons set forth below, the motion will be granted.

The claims in plaintiff's complaint were predicated on an agreement wherein plaintiffs agreed to raise $1,000,000.00 in order to assist defendant in acquiring all loan instruments and thus control over the underlying assets that BDE, BDE of Delaware, Koval Resources and Koval Energy had pledged to secure loans with S & T Bank. These promissory notes, security agreements, mortgages, assignments, pledges, loan agreements and other instruments weresecured by assets in the form of gas and mineral leases. The leases constituted property rights located in what is known as the Powder River Basin in Northeastern Wyoming. This region has been very active for years in the exploration and extraction of natural gas from tertiary coal seams. In exchange, defendant was to receive $65,000.00, certain leasehold rights to mineral and gas rights in the Powder River Basin and an option to purchase additional mineral rights and gas leases there. See generally Complaint (Doc. No. 1-1) at ¶¶ 2-5, 13-17, 19-23.

Plaintiffs' complaint alleged that the parties had completed the agreement in part. The $1,000,000.00 assertedly had been raised and transferred to S & T Bank, defendant had acquired all of the loan instruments and related chattel paper from S & T Bank and defendant had received half ($32,500.00) of the money it was to be paid. The agreement purportedly broke down prior to final completion and plaintiffs advanced claims for specific performance, breach of contract and fraud.

On August 1, 2011, defendant filed a motion to dismiss based on abstention. On August 26, 2011, defendant's initial counsel filed a motion to withdraw. After a hearing initial defense counsel was permitted to withdraw on November 10, 2011. The motion to dismiss was denied by Memorandum Order issued on February 13, 2012.

On March 19, 2012, defendant attempted to file a "pro se" answer, which plaintiffs moved to strike on March 22, 2012. Discussions with defendant's principal, Robert W. Mitchell ("Mitchell") and plaintiffs' lead counsel led to a determination that a conciliation conference might prove to be beneficial. See Order of April 16, 2012 (Doc. No. 26).

A conciliation conference was held on June 6, 2012, with Peter Dochinez, Eric Koval (the principal for the remain plaintiffs), and Mitchell in attendance.¹ After several hours a tentative settlement was reached among the parties. The essential terms of the settlement were placed on the record. Specifically, the parties stipulated and understood the following to be the contours of their agreement:

Mark Mohney, Law Clerk: We're convened in the case of Peter Dochinez, et al versus Mitchell Resources, LLC. Counsel and principals for the parties have been here working under the Court's supervision, in an effort to find an amicable resolution to the current dispute. They have outlined some material terms of an agreement that they have reached they want to put on the record, and I'll have a little bit more to add at the end. But at this point, Mr. Kaminski, counsel for the plaintiffs, is going to summarize those terms for us.

"Mr. Kaminski: Sure. First off, all assets of Black Diamond Energy and Black Diamond Energy of Delaware . . . related to the production of oil and gas in the following counties, Carbon, Sublette, Johnson, Campbell, Sweetwater, Weston, and Unita [and all] of the Green River Basin will be conveyed to Mitchell Resources or its designee.

This sale shall specifically exclude the Castle Creek Field, Crimson Unit, 29 Stage Trail Road, and the chose-in-action against Encana, E-N-C-A-N-A. The purchase price for the assets will be $18 Million. It will be payable, $2 Million on or before June 30th, and the remainder over a two-year term, with payments of $2Million in each quarter, commencing sometime in the fourth quarter of 2012, on a date to be agreed upon by the parties.

The liens and mortgages that are currently held by Mitchell Resources are to be conveyed as part of this transaction are to remain in place on these assets to secure the obligations, with the holder having a covenant not to foreclosure as long as the payments are current.

The holder is to be an entity under the control of Pete Dochinez.

On or before June 30th, Mitchell Resources will convey what we will refer to as the S&T paper, to the entity controlled by Mr. Dochinez.

As part of the transaction, the parties will enter into mutual and general releases. Mitchell Resources will effectuate the takeover as registered operator of all of the gas wells being transferred by July 31, 2012.

The property is to be conveyed by quit claim deed as is/where is, with no representations or warranties.

The BDE liens on the Marquiss Field are to be released on or before July 5th.

The transaction will be subject to confidentiality provisions. The transaction is being entered into based upon representations made by BDE. The taxes and mechanic's liens on the property are in the vicinity of 1.5 million dollars.

Mark Mohney, Law Clerk: I will add, Defendants, Mr. Mitchell, here for the defendant needs to speak to others before he can give a final confirmation. He has represented that to the best of his abilities, that these terms will be acceptable. He has agreed to do that within the next forty-eight hours.

The Court will schedule and reconvene this conciliation conference for Friday afternoon. In the event Mr. Mitchell is able to convey to the Court, or communicate to the Court that all these terms and conditions are agreed upon and are satisfactory to all entities involved on Mitchell Resources' side of the transaction, then that conference will be cancelled and these will be considered to be the material terms to which each party has bound themselves.

Also, both parties are operating under the assumption that all of this as well as other additional terms and conditions will be reduced to a final settlement agreement."

On June 7, 2012, current defense counsel submitted a letter indicating that Mitchell had spoken to his investor and the only additional requirement was a provision providing a limited warranty with regard to existing equipment at the existing wells within the scope of the conveyance. Specifically, this letter provided in pertinent part:

Pursuant to the understanding reached during the mediation conference yesterday, please be advised my client, Mitchell Resources, LLC reviewed the proposed settlement with it principal investor. The investor is prepared to approve the proposed settlement agreement to contain a clause with one exception. The investor requires the Settlement Agreement to contain a clause substantially in the following form:

The Black Diamond entities shall furnish at the time the Settlement Agreement is executed a list of all equipment existing at each well, which date will appear on the production records filed with the State of Wyoming (Existing Equipment).

Mitchell Resources, LLC shall have thirty (30) days after execution of the Settlement Agreement within which to inspect each well site to determine whether the Existing Equipment remains on each well site as of the [date] of such inspections. To the extent any such Existing Equipment is no longer at the well site, Mitchell Resources shall have the right to replace the missing equipment and deduct the cost thereof from the purchase price and provide the Black Diamond entities a copy of the receipts for the replacement equipment within six (6) months.

On the afternoon and into the evening on June 7, 2012, the mediator conducted additional negotiations between the parties regarding the investor's request for this provision. With one caveat concerning pump jacks that had been removed and sold by BDE in 2010, this language was acceptable to plaintiffs. Mitchell confirmed that he and his investor would accept a carved-out of the 19 pump jacks and thus there was an agreement. All counsel and the parties advised that (1) they were in agreement on terms of the limited warranty provision governing existing equipment, (2) the parties had reached a binding agreement and (3) there was no need to engage in further negotiations. Accordingly, on June 8, 2012, the court concluded that the parties had bound themselves to an enforceable contract of settlement and ordered the case closed statistically. The Order specifically provided in pertinent part:

AND NOW, this 8^th day of June, 2012, the court having confirmed with counsel that both parties have assented to the material terms placed on the record on 6/6/12 and agreed to additional terms negotiated on 6/7/12 and that a settlement has therefore been reached as to all aspects of plaintiffs' complaint and the only remaining matter is the submission of a stipulation for settlement and discontinuance; therefore, with no further action being required by the court at this time, the following order is entered:

IT IS ORDERED that the Clerk of Court mark the above case closed.

* * *

Jurisdiction is retained over the completion and execution of the settlement agreement. Order of June 8, 2012 (Doc. No. 31).

At no time prior to the entry of...