Kuhn v. Chesapeake Energy Corp.

• Decision Date: 25 September 2012
• Docket Number: Case No. 1:12-cv-086
• Parties: Jeffrey D. Kuhn and Barbara K. Kuhn, Plaintiffs, v. Chesapeake Energy Corporation, Chesapeake Exploration, L.L.C., Sullivan Land Resources, Inc., and Jeffrey Spears, Defendants.
• Court: U.S. District Court — District of North Dakota

Jeffrey D. Kuhn and Barbara K. Kuhn, Plaintiffs, v. Chesapeake Energy Corporation, Chesapeake Exploration, L.L.C. Sullivan Land Resources, Inc., and Jeffrey Spears, Defendants.

Case No. 1:12-cv-086

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NORTH DAKOTA SOUTHWESTERN DIVISION

Dated: September 25, 2012

ORDER

Before the Court is the "Defendants' Motion to Dismiss" for failure to state a claim upon which relief can be granted filed on July 9, 2012. See Docket No. 3. The Plaintiffs filed a response to the Defendants' motion on July 20, 2012. See Docket No. 5. The Defendants filed a reply brief on August 3, 2012. See Docket No. 7. For the reasons set forth below, the Defendants' motion is granted in part, and denied in part. The claims for breach of contract, unjust enrichment, promissory estoppel, deceit, and civil conspiracy are dismissed. The claims for fraudulent misrepresentation and fraud in the inducement remain. Chesapeake Energy Corporation is also dismissed as a party based on lack of personal jurisdiction.

I. BACKGROUND

The Plaintiffs, Jeffrey D. Kuhn and Barbara K. Kuhn ("the Kuhns"), commenced this action on June 11, 2012 against the Defendants, Chesapeake Energy Corporation ("Chesapeake Energy"), Chesapeake Exploration, L.L.C. ("Chesapeake Exploration"), Sullivan Land Resources, Inc. ("Sullivan"), and Jeffrey Spears ("Spears") (collectively "Defendants"). The Kuhns alleged theDefendants breached a contract to enter into an oil and gas lease covering certain real property located in Stark County and Hettinger County, North Dakota, by cancelling the lease before paying the bonus. See Docket No. 1-1. The Kuhns also alleged claims for unjust enrichment, promissory estoppel, fraudulent misrepresentation and fraud in the inducement, deceit, and civil conspiracy. They requested relief in the amount of the $319,686.00 bonus they allege was payable for the canceled lease, interest, and attorneys fees. The Kuhns also sought the payment of royalties they allege would have been due in the event successful oil and gas wells were drilled on the leased premises.

The matter was removed from the District Court of Stark County in the State of North Dakota to the United States District Court for the District of North Dakota, Southwestern Division, by request of Defendants pursuant to 28 U.S.C. § 1441. See Docket No. 1. This Court has original jurisdiction over the subject matter of the action pursuant to 28 U.S.C. § 1332 and none of the Defendants are citizens of the State of North Dakota. The matter is a civil action between citizens of different states and the amount in controversy exceeds $75,000, exclusive of interest and costs. 28 U.S.C. § 1332.

II. STANDARD OF REVIEW

When considering a motion to dismiss, the Court must construe the complaint liberally and assume all factual allegations to be true. Faibisch v. Univ. of Minn., 304 F.3d 797, 802 (8th Cir. 2002); Goss v. City of Little Rock Ark., 90 F.3d 306, 308 (8th Cir. 1996). Dismissal will not be granted unless it appears beyond a reasonable doubt that the plaintiff can prove no set of facts that would entitle plaintiff to relief. Faibisch, 301 F.3d at 802.

Rule 12(b)(6) of the Federal Rules of Civil Procedure mandates the dismissal of a claim if there has been a failure to state a claim upon which relief can be granted. When considering a motion to dismiss under Rule 12(b)(6), the court must accept all factual allegations in the complaint as true. "'However, the complaint must contain sufficient facts, as opposed to mere conclusions, to satisfy the legal requirements of the claim to avoid dismissal.'" Levy v. Ohl, 477 F.3d 988, 991 (8th Cir. 2007) (quoting DuBois v. Ford Motor Credit Co., 276 F.3d 1019, 1022 (8th Cir. 2002)). The court may generally only look to the allegations contained in the complaint to make a Rule 12(b)(6) determination. McAuley v. Fed. Ins. Co., 500 F.3d 784, 787 (8th Cir. 2007). "[I]n considering a motion to dismiss, the district court may sometimes consider materials outside the pleadings, such as materials that are necessarily embraced by the pleadings and exhibits attached to the complaint." Mattes v. ABC Plastics, Inc., 323 F.3d 695, 697 n.4 (8th Cir. 2003) (citing Porous Media Corp. v. Pall Corp., 186 F.3d 1077, 1079 (8th Cir. 1999)).

Rule 8 of the Federal Rules of Civil Procedure sets forth the federal pleading requirements for civil cases. Rule 8(a) provides that pleadings must contain: "(1) a short and plain statement of the grounds for the court's jurisdiction"; (2) "a short and plain statement of the claim showing that the pleader is entitled to relief"; and (3) "a demand for the relief sought." Fed.R.Civ.P. 8(a). In Ashcroft v. Iqbal, 556 U.S. 662 (2009), the United States Supreme Court clarified the pleading requirements under the Federal Rules of Civil Procedure necessary to survive a motion to dismiss for failure to state a claim. The United States Supreme Court stated,

Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." As the Court held in [Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007)], the pleading standard Rule 8 announces does not require "detailed factual allegations," but it demands more than an unadorned, the defendant-unlawfully-harmed-me accusation. A pleading that offers "labels and conclusions" or a "formulaic recitation of theelements of a cause of action will not do." Nor does a complaint suffice if it tenders "naked assertion[s]" devoid of "further factual enhancement."

To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to "state a claim to relief that is plausible on its face." A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a "probability requirement," but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are "merely consistent with" a defendant's liability, it "stops short of the line between possibility and plausibility of 'entitlement to relief.'"

Ashcroft, 556 U.S. at 677-78 (internal citations omitted).

III. LEGAL DISCUSSION

A. FAILURE TO STATE A CLAIM

Defendants, Chesapeake Energy Corporation, Chesapeake Exploration, L.L.C., and Sullivan Land Resources, Inc., contend the complaint fails to state a claim upon which relief can be granted. See Docket No. 3. Rule 12(b)(6) of the Federal Rules of Civil Procedure mandates dismissal of a complaint if there has been a failure to state a claim upon which relief can be granted. In order to survive a motion to dismiss under Rule 12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 594 (8th Cir. 2009) (quoting Ashcroft, 556 U.S. at 678) (internal quotations omitted). A plaintiff must show "that success on the merits is more than a 'sheer possibility.'" Id. (citing Ashcroft, 556 U.S. at 678). A complaint is sufficient if its "factual content . . . allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (quoting Ashcroft, 556 U.S. at 678). The court must accept all factual allegations as true, except for "legal conclusions or 'formulaic recitation of the elements of a cause of action.'" Id. (quotingAshcroft, 556 U.S. at 681). The determination of whether a complaint states a claim upon which relief can be granted is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. (quoting Ashcroft, 556 U.S. at 679).

1) BREACH OF CONTRACT

The Kuhns assert that Defendants breached the Oil and Gas Leases ("Leases") and the contemporaneously executed Orders of Payment by failing to remit the lease bonuses within sixty days of receipt of the executed Leases and Orders of Payment by Chesapeake Exploration. See Docket No. 1-1. Both parties agree the Leases and Orders of Payment together constitute an enforceable agreement between the Kuhns and the Defendants, and therefore the general rules of contract interpretation apply. See Egeland v. Cont'l Res., Inc., 2000 ND 169, ¶ 10, 616 N.W.2d 861 (citing Johnson v. Mineral Estate, Inc., 343 N.W.2d 778, 789 (N.D. 1984)). The same general rules that govern the interpretation of contractual agreements apply to oil and gas leases. Id. (citing Johnson, 343 N.W.2d at 780).

The Court agrees with the parties that a valid contract existed. The Leases and Orders of Payment were properly signed and executed and promises were exchanged by the parties. See Irish Oil & Gas, Inc. v. Riemer, 2011 ND 22, ¶ 17, 794 N.W.2d 715 (assuming an oil and gas lease together with a bank draft payable in sixty days constituted adequate consideration to form a contract, even though no cash was exchanged). In Irish Oil & Gas, the court "[could not] say, as a matter of law, that the potential for royalty is not sufficient consideration to support the lease." Id. at ¶ 22. The Kuhns promised to permit Chesapeake Exploration to explore for and develop any oil or gas that may be discovered or produced from the Kuhns's land, subject to ChesapeakeExploration's approval of title and payment of the bonuses. See Docket No. 1-1. The Kuhns would then receive bonuses and royalties from the oil. Taken together, the agreements and promises contain the requisite offer, acceptance, and consideration needed to form a valid contract.

Because there is an enforceable contract, "[t]he language of [the] contract is to govern its interpretation if the language is clear and explicit and does not involve an absurdity." N.D.C.C. § 9-07-02; Sorlie v. Ness, 323 N.W.2d 841, 844 (N.D. 1982). "When a contract is reduced to writing, the...