Johnson v. Chesapeake La., LP
| Decision Date | 21 March 2019 |
| Docket Number | CIVIL ACTION NO. 16-1543 |
| Parties | ALLEN JOHNSON, ET AL. v. CHESAPEAKE LOUISIANA, LP |
| Court | U.S. District Court — Western District of Louisiana |
Before the Court are two Motions for Partial Summary Judgment. See Record Document 24 & 28. The first is a Motion for Partial Summary Judgment (Record Document 24) filed by Defendants, Chesapeake Louisiana, L.P. and Chesapeake Operating, L.L.C. (collectively "the Chesapeake Defendants"). The second is Cross-Motion for Partial Summary Judgment (Record Document 28) filed by Plaintiffs Allen Johnson, Linda Johnson, Donald A. Crosslin, Jr., Mary Jo Gragg, Rodney M. Hudson, Clifton Layman, Alfred R. Meshell, Sherman R. Meshell, David E. Oliver, Tracy Oliver, Laura S. Pendleton, Andrew L. Piccolo, Karla S. Piccolo, Randall S. Rodgers, Freddie P. Spohrer, Tim G. Taylor, Charles R. Waldon, Rexford Galen White, James Shope, Donna Shope, Charlotte McCune, and Jerry McCune. The motions are fully briefed and the Court heard oral arguments on the cross-motions. The sole legal issue to be decided in the cross-motions is whether Plaintiffs, twenty-two unleased mineral owners (the "UMO Plaintiffs"), are responsible for a proportionate share of post-production costs.1 For the reasons set forth below, this Court holds that under Louisiana Revised Statute 30:10(A)(3), post-production costs cannot be recovered by an operator from an unleasedmineral owner's share of production proceeds. Thus, the UMO Plaintiffs' Cross-Motion for Partial Summary Judgment (Record Document 28) is GRANTED and the Chesapeake Defendants' Motion for Partial Summary Judgment (Record Document 24) is DENIED.
The Chesapeake Defendants were at all times relevant the operator of the Kelley Well, which is the unit well of the HA RA SU86 unit ("the Unit"). The UMO Plaintiffs are landowners within the Unit and own a non-operating, unleased interest in the Unit. In their Petition, the UMO Plaintiffs allege, among other claims, that the Chesapeake Defendants improperly deducted certain post-production costs from the UMO Plaintiffs' share of production proceeds. In particular, Plaintiffs contend that Chesapeake has violated Louisiana law by charging or netting-out post-production costs from Plaintiffs' share of production secured from the Kelley Well. These post-production costs generally include gathering, compression, treatment, processing, transportation, and dehydration costs.
The Chesapeake Defendants moved for partial summary judgment, alleging that their deductions for post-production costs are authorized under general principles of unjust enrichment and, alternatively, co-ownership. See Record Document 24. The Chesapeake Defendants contend that La R.S. 30:10 is inapplicable to the instant matter, as such statute is limited to development and operation costs and does not address post-production costs. The UMO Plaintiffs opposed the motion and filed their own cross-motion, arguing that general principles of co-ownership and unjust enrichment cannot supersede the positive statutory law governing their payment rights. See Record Document 28. They contend that the statutory scheme set forth in La. R.S. 30:10 as awhole governs and that post-production costs are not among the exclusive list of expenses deductible against unleased owners, as set forth in Section 10(A)(3).
Rule 56(a) provides, in pertinent part:
Motion for Summary Judgment or Partial Summary Judgment. A party may move for summary judgment, identifying each claim or defense-or the part of each claim or defense-on which summary judgment is sought. The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.
F.R.C.P. 56(a) (emphasis added); see also Quality Infusion Care, Inc. v. Health Care Serv. Corp., 628 F.3d 725, 728 (5th Cir.2010).2 "A genuine issue of material fact exists when the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Quality Infusion Care, Inc., 628 F.3d at 728. "Rule 56[(a)] mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Patrick v. Ridge, 394 F.3d 311, 315 (5th Cir.2004).
If the movant demonstrates the absence of a genuine dispute of material fact, "the nonmovant must go beyond the pleadings and designate specific facts showing that there is a genuine issue for trial." Gen. Universal Sys., Inc. v. Lee, 379 F.3d 131, 141 (5th Cir.2004). Where critical evidence is so weak or tenuous on an essential fact that it couldnot support a judgment in favor of the nonmovant, then summary judgment should be granted. See Boudreaux v. Swift Transp. Co., 402 F.3d 536, 540 (5th Cir.2005).
"A partial summary judgment order is not a final judgment but is merely a pre-trial adjudication that certain issues are established for trial of the case." Streber v. Hunter, 221 F.3d 701, 737 (5th Cir.2000). Partial summary judgment serves the purpose of rooting out, narrowing, and focusing the issues for trial. See Calpetco 1981 v. Marshall Exploration, Inc., 989 F.2d 1408, 1415 (5th Cir.1993).
La. R.S. 30:10 governs agreements for drilling units and pooling interests.3 Section 30:10(A)(2) provides:
In the event pooling is required, the cost of development and operation of the pooled unit chargeable to the owners therein shall be determined and recovered as provided herein.
La. R.S. 30:10(A)(2) (emphasis added). Thus, under Section 10(A)(2), the costs of development and operation are chargeable to the owners within a unit. An owner is defined in Section 3(8) as "the person, including operators and producers acting on behalf of the person, who has or had the right to drill into and to produce from a pool and to appropriate the production either for himself or for others." La. R.S. 30:8(3). This definition includes unleased mineral owners. All owners, including unleased mineral owners, are responsible for "the actual reasonable expenditures incurred in drilling,testing, completing, equipping, and operating the unit well, including a charge for supervision, together with a risk charge." La. R.S. 30:10(A)(2)(b)(i). Section 10(A)(2)(e) later provides that "the provisions of Paragraph 2(b) above with respect to the risk charge shall not apply to any unleased interest not subject to an oil, gas, and mineral lease." Finally, Section 10(A)(3) provides:
If there is included in any unit created by the commissioner of conservation one or more unleased interests for which the party or parties entitled to market production therefrom have not made arrangements to separately dispose of the share of such production attributable to such tract, and the unit operator proceeds with the sale of unit production, then the unit operator shall pay to such party or parties such tract's pro rata share of the proceeds of the sale of production within one hundred eighty days of such sale.
La. R.S. 30:10(A)(3) (emphasis added).
"It is a fundamental principle of statutory interpretation that when a law is clear and unambiguous and its application does not lead to absurd consequences, the law shall be applied a written, and no further interpretation may be made in search of the intent of the legislature." McLane S., Inc. v. Bridges, 2011-1141 (La. 1/24/12), 84 So.3d 479, 483; see also La. C.C. Art. 9. It is also a "fundamental rule of statutory construction that when two statutes deal with the same subject matter, if there is a conflict, the statute specifically directed to the matter at issue must prevail as an exception to the statute more general in character." Id. at 485. If "the language of the law is susceptible of different meanings, it must be interpreted as having the meaning that best conforms to the purpose of the law." La. C.C. Art. 10. Additionally, La. R.S. 1:3.
The parties agree that the issue before the Court is res nova because there is no controlling Louisiana case law that deals with the specific facts as presented in this case. The key distinction in this dispute is the status of Plaintiffs as unleased mineral owners. The Chesapeake Defendants argue that La. R.S. 30:10 covers costs incurred by the operator prior to, but not beyond, the point of production. They contend that the post-production costs at issue can be assessed against the UMO Plaintiffs pursuant to unjust enrichment or, alternatively, co-ownership. The Chesapeake Defendants rely upon Louisiana Civil Code Articles 4, 2054, and 2055 and Louisiana case law4 to support their unjust enrichment argument. Alternatively, the Chesapeake Defendants point to Amoco Prod. Co. v. Thompson, 516 So. 2d 376 (La. App. 1 Cir. 1987), to support their contention that principles of co-ownership support the right of the operator to be reimbursed for post-production costs. The Chesapeake Defendants argue that any other result would lead to absurd consequences, namely the UMO Plaintiffs enjoying a "free ride."
The UMO Plaintiffs argue that resolution of the instant cross-motions involves a straightforward application of Louisiana statutory law. They ask the Court to compare Section 10(A)(2) and Section 10(A)(3) and note the distinctions between unleasedmineral owners and the nonoperating working interest owners that...
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