Masciantonio v. SWEPI LP, CIVIL ACTION NO. 4:13-CV-797

• Decision Date: 15 July 2016
• Docket Number: CIVIL ACTION NO. 4:13-CV-797
• Citation: 195 F.Supp.3d 667
• Parties: Janet E. MASCIANTONIO, et al., Plaintiffs v. SWEPI LP, Defendant.
• Court: U.S. District Court — Middle District of Pennsylvania

195 F.Supp.3d 667

Janet E. MASCIANTONIO, et al., Plaintiffs

v.SWEPI LP, Defendant.

CIVIL ACTION NO. 4:13-CV-797

United States District Court, M.D. Pennsylvania.

Signed July 15, 2016

Evan S. Williams, III, Casandra K. Blaney, Brann, Williams, Caldwell and Sheetz, Troy, PA, for Plaintiffs.

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

MEMORANDUM

Christopher C. Conner, Chief Judge

This breach of contract action presents a manifold dispute over the proper interpretation of a bonus payment provision in two separate but identical oil and gas leases executed by and between defendant SWEPI LP ("SWEPI") and two plaintiff groups of landowners: Janet E. Masciantonio and Martin J. Masciantonio, ("the Masciantonios"); and Paul R. Latshaw and Paul B. Latshaw, ("the Latshaws"), in their capacities as co-trustees of the Phyllis E. Latshaw Residuary Trust Created Under the Will of Phyllis E. Latshaw ("the Latshaw Trust"). Before the court are the parties' respective cross-motions (Docs. 57, 60) for summary judgment pursuant to Federal Rule of Civil Procedure 56.

I. Factual Background and Procedural History¹

The Masciantonios and the Latshaw Trust jointly own two parcels of land, including the subsurface oil, gas, and mineral rights thereto. (Doc. 58 ¶ 9; see also Doc. 43 ¶ 7; Doc. 45 ¶ 7).² The contiguous parcels are located in Jackson Township, Lycoming County, and have abbreviated tax parcel numbers of 18-148-102 and 18-149-115. (Doc. 58 ¶ 9; see Doc. 61 ¶ 6). The parties agree for purposes of the instant motions that the property has an assessed acreage of 1,036 acres, with tax parcel 18-148-102 encompassing 918 assessed acres and tax parcel 18-149-115 encompassing 118 acres. (Doc. 61 ¶ 8; Doc. 65 ¶ 8; see also Doc. 58 ¶ 9). In 2006, plaintiffs leased the property's oil and gas rights to East Resources, Inc. (Doc. 61 ¶ 21; Doc. 65 ¶ 21). Plaintiffs' lease with East Resources expired on September 30, 2011. (Doc. 61 ¶ 27; Doc. 65 ¶ 27). East Resources did not drill on the property during the primary term of its five-year lease. (Doc. 61 ¶ 26; Doc. 65 ¶ 26).

SWEPI is a limited partnership wholly owned by various subsidiary entities constituting Royal Dutch Shell PLC ("Shell"). (See Doc. 58 ¶¶ 4-5; Doc. 69 ¶¶ 4-5). SWEPI acquired certain of East Resources' assets in 2010, but it is unclear from the parties' submissions whether plaintiffs' prior lease was among the assets acquired. (See Doc. 58 ¶ 18; Doc. 69 ¶ 18). After the East Resources lease expired, plaintiffs entertained competing offers to lease their oil and gas rights: one from Anadarko E & P Company, LP ("Anadarko"), and one from SWEPI. (See Doc. 58 ¶¶ 15-47; Doc. 61 ¶¶ 37-52; Doc. 65 ¶¶ 37-52; Doc. 69 ¶¶ 15-47). Plaintiff Martin J. Masciantonio ("Masciantonio") acted on behalf of, and as the principal contact for, all plaintiffs during these discussions.

(Doc. 58 ¶ 3; Doc. 61 ¶ 45; Doc. 65 ¶ 45; Doc. 69 ¶ 3).

Negotiations began in approximately October 2011, when Anadarko offered to lease plaintiffs' oil and gas rights for $4,000 per net mineral acre and an eighteen percent (18%) royalty. (Doc. 58 ¶ 15; Doc. 69 ¶ 15). Masciantonio knew that SWEPI had acquired the assets of plaintiffs' former lessee, and he contacted SWEPI to determine whether it was interested in leasing plaintiffs' property. (Doc. 58 ¶ 19; Doc. 69 ¶ 19). Masciantonio contacted SWEPI because he believed plaintiffs' prior relationship with East Resources would result in "an easier time" with the leasing process. (Doc. 61 ¶ 42; Doc. 65 ¶ 42). Thenceforth, Masciantonio communicated exclusively with Fred Piombino ("Piombino"), a landman with Long Consulting Group, LLC, who represented SWEPI in the parties' lease negotiations. (See Doc. 58 ¶¶ 7, 20; Doc. 61 ¶¶ 43-44; Doc. 65 ¶¶ 43-44; Doc. 69 ¶¶ 7, 20).

Piombino advised Masciantonio during an inceptive telephone conversation that SWEPI would agree to a lease with a five-year primary term, a $2,000 per acre bonus payment, and a fifteen percent (15%) royalty. (See Doc. 61 ¶ 47; Doc. 65 ¶ 47). However, Piombino offered that the bonus payment would be remitted through an "alternative method," i.e. a payment method other than cashier's check or certified check. (See Doc. 61 ¶ 47; Doc. 65 ¶ 47). Over the next few weeks, Piombino and Masciantonio also discussed the terms of an addendum which would supersede the terms of SWEPI's standard form lease. (Doc. 58 ¶ 21; Doc. 69 ¶ 21). Piombino provided Masciantonio with a form lease to review, in addition to a draft addendum and draft memorandum of lease. (See Doc. 58 ¶¶ 22-24; see also Doc. 69 ¶¶ 22-24). Masciantonio then suggested that Piombino travel to his family's home for additional negotiations.³ (See Doc. 61 ¶ 49; Doc. 65 ¶ 49).

On November 5, 2011, Piombino met in person with the Masciantonios and Paul R. Latshaw ("Latshaw") and presented two proposed paid-up oil and gas leases, addenda, and memoranda of lease. (Doc. 58 ¶ 26; Doc. 69 ¶ 26). SWEPI's preprinted leases and memoranda listed the property's acreage at 1,036 acres. (Doc. 58 ¶ 27; Doc. 69 ¶ 27). During the meeting, Masciantonio provided an unrecorded survey to Piombino indicating that the property contains 1,144 acres. (Doc. 58 ¶ 28; Doc. 69 ¶ 28). Piombino crossed out the assessed acreage in the lease documents and handwrote 1,144 acres into the documents where applicable. (See Doc. 58 ¶ 43; Doc. 69 ¶ 43). Masciantonio also showed Piombino a written offer from Anadarko to lease the property for $4,000 per acre. (Doc. 58 ¶¶ 35-36; Doc. 69 ¶¶ 35-36). Ensuing negotiations resulted in SWEPI's agreement to lease the property at $4,000 per acre for the surveyed 1,144 acres, and a fifteen percent (15%) royalty. (See Doc. 61 ¶ 52; Doc. 65 ¶ 52). Plaintiffs were made aware prior to execution of the leases that the $4,000 per acre bonus payment would be made by "bank draft." (See Doc. 61 ¶ 53; Doc. 65 ¶ 53).

The Masciantonios executed their lease, the addendum thereto, and a memorandum of lease during the November 5, 2011 meeting. (Doc. 58 ¶¶ 11-12; Doc. 61 ¶¶ 75-77; Doc. 65 ¶¶ 75-77; Doc. 69 ¶¶ 11-12). Latshaw executed the Trust's lease, addendum, and memorandum of lease at the same time. (Doc. 58 ¶¶ 11-12; Doc. 61 ¶¶ 78, 81-82; Doc. 65 ¶¶ 78, 81-82; Doc. 69 ¶¶ 11-12). Co-trustee Paul B. Latshaw signed the lease, addendum, and memorandum on or about November 10, 2011. (Doc. 58 ¶ 13; Doc. 69 ¶ 13; see also Doc. 61 ¶ 80; Doc. 65 ¶ 80). Thereafter, Masciantonio promptly informed Anadarko that plaintiffs had leased the property to SWEPI, ceasing competitive negotiations. (See Doc. 58 ¶ 47; Doc. 69 ¶ 47).

SWEPI's attorney-in-fact, F.E. Stacy ("Stacy"), signed the memoranda of lease on SWEPI's behalf. (Doc. 58 ¶¶ 66, 84; Doc. 69 ¶¶ 66, 84). SWEPI recorded the Masciantonio memorandum in Lycoming County on or about November 16, 2011, and recorded the Latshaw Trust memorandum on or about January 10, 2012. (Doc. 58 ¶¶ 65, 83; Doc. 69 ¶¶ 65, 83). The recorded memoranda of lease announce to the public, including competitors, "the existence of an Oil and Gas Lease" between the parties. (See Doc. 56-17 at 1; Doc. 56-18 at 1; Doc. 61 ¶ 136). Each memorandum states that the primary term of the lease is for a period of five years and that said term commenced on November 5, 2011. (See Doc. 56-17 at 1; Doc. 56-18 at 1).

Plaintiffs' leases are substantively identical. (See Docs. 56-15, 56-16). The first paragraph of each lease contains a "granting clause," which provides:

(1) LEASE – In consideration of the bonus consideration paid, the receipt of which is hereby acknowledged, and in further consideration of the covenants and agreements herein contained, Lessor does hereby grant, demise, lease and let exclusively to Lessee, its successors and assigns, the lands hereafter described for the purpose of exploring for, developing, producing and marketing oil, gas or other related substances produced in association therewith by all methods now known or hereafter known or hereafter discovered, in and under the following described land...

(Doc. 56-15 at 1; Doc. 56-16 at 1). The leases set forth a primary term of five years. (See Doc. 56-15 at 1; Doc. 56-16 at 1). Each lease contains a "surrender clause," authorizing SWEPI to surrender the lease at any time "by recording an appropriate instrument of surrender in the proper county," whereupon the lease and any rights, rentals, and obligations thereunder shall terminate. (Doc. 56-15 at 2; Doc. 56-16 at 2). The leases state that no default may be declared against SWEPI for failure to make payment or otherwise perform unless SWEPI "shall refuse or neglect to pay or perform the same for sixty (60) days after having received written notice from" plaintiffs. (Doc. 56-15 at 3; Doc. 56-16 at 3). At plaintiffs' request, Piombino added a handwritten paragraph 19 to each lease, expressly incorporating the attached addenda. (See Doc. 58 ¶ 44; Doc. 69 ¶ 44; see also Doc. 56-15 at 3; Doc. 56-16 at 3).

The opening paragraph of each addendum declares that the terms thereof supersede any inconsistent or conflicting terms in the leases. (See Doc. 56-15 at 6; Doc. 56-16 at 6). Paragraph 22 of the addenda discusses SWEPI's bonus payment obligation as contemplated by the granting paragraph:

22. Payment: In consideration for the attached paid-up Oil and Gas Lease, Lessee hereby agrees to pay Lessor: four thousand and 00/100 dollars ($ 4,000.00) per net mineral acre. Payment shall be due within ninety (90) banking days of the Lessor presenting the Bank Draft to the financial institution of his/her/their choosing. All payment obligations are subject to title verification by Lessee. Said title verification shall be completed within the aforementioned ninety (90) banking day period[.]

(Doc. 56-15 at 8; Doc. 56-16 at 8). The italicized portions of the above-quoted language represent Piombino's handwritten additions to the addenda. The notice provision of each addendum differs slightly from its corresponding lease, providing that, in the event SWEPI...