McEvoy v. Diversified Energy Co.

• Decision Date: 03 April 2023
• Docket Number: Civil Action 5:22-CV-171
• Parties: MARK McEVOY, et al., Plaintiffs, v. DIVERSIFIED ENERGY COMPANY PLC, et al., Defendants.
• Court: U.S. District Court — Northern District of West Virginia

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MARK McEVOY, et al., Plaintiffs, v. DIVERSIFIED ENERGY COMPANY PLC, et al., Defendants.

Civil Action No. 5:22-CV-171

United States District Court, N.D. West Virginia, Wheeling

April 3, 2023

MEMORANDUM OPINION AND ORDER

JOHN PRESTON BAILEY UNITED STATES DISTRICT JUDGE

Pending before this Court is Defendants'^[1] Motion to Dismiss Second Amended Complaint [Doc. 104], filed January 18, 2023. A Response [Doc. 126] was filed on February 1, 2023. A Reply [Doc. 134] was filed on February 8, 2023. The Gas and Oil Association of WV, Inc. filed an Amicus Curiae Brief [Doc. 160] on February 23, 2023. Plaintiffs filed a Response to Amicus Curiae Brief [Doc. 181] on March 7, 2023. Having been fully briefed, the Motion to Dismiss is ripe for adjudication.

This Court held a hearing on the Motion on March 16, 2023. See [Doc. 161].

For the reasons that follow, this Court will deny Defendants' Motion to Dismiss Second Amended Complaint.

BACKGROUND

This case stems from thousands of abandoned gas wells in West Virginia that plaintiffs allege Diversified Defendants had a duty to plug and decommission. Moreover, this case also concerns alleged fraudulent transfers made between Diversified Defendants and EQT Defendants. A Second Amended Class Action Complaint [Doc. 96] was filed on January 5 2023. Plaintiffs bring this action under Federal Rules of Civil Procedure 23(b)(2), (b)(3), and (c)(4) on behalf of the following proposed classes:

The Voidable Transfer Class, consisting of all persons or entities that own property in West Virginia on which Diversified owns a well, regardless of whether the wells are currently abandoned or non-producing; and

The Common Law Class, consisting of all persons or entities who own land in West Virginia containing at least one well that (1) is not producing and/or has not produced oil or gas for 12 consecutive months, (2) is currently owned or operated by Diversified, and (3) has not been plugged or properly decommissioned.

[Doc. 96 at 64-65]. In the Second Amended Complaint plaintiffs assert five causes of action:

Count I - Trespass by Diversified (Common Law Class only) [Doc. 96 at 68-69];

Count II - Nuisance by Diversified (Common Law Class only) [Id. at 69-70];

Count III - Negligence by Diversified (Common Law Class only)

[Id. at 70];

Count IV - Avoidance and Recovery of a Voidable Transfer as the Result of an Actual Fraudulent Transfer (Voidable Transfer Class only) [Id. at 71-72]; and

Count V - Avoidance and Recovery of Voidable Transfer as the Result of a Constructive Fraudulent Transfer (Voidable Transfer Class only) [Id. at 73-74].

For relief, plaintiffs seek the following:

1. Pursuant to Federal Rules of Civil Procedure 23(b)(2) (b)(3) and (c)(4), certify the proposed class for the purpose of determining Defendants' liability to Plaintiffs;

2. Enforce the Plaintiffs' and class members' private property rights by declaring that Diversified's failure to promptly plug its abandoned wells on Plaintiffs' and class members' properties constitutes trespass, nuisance and negligence such that Plaintiffs and class members are entitled to appropriate damages necessary to remedy their injuries;

3. Award Plaintiffs and class members damages from Diversified to compensate them for trespass (calculated at the cost of plugging, remediation, and demolition of the abandoned wells), nuisance, and negligence;

4. Declare that Diversified's July 2018 Voidable Transfer of nearly $523.4 million to EQT and the assumption of plugging obligations in exchange for approximately 11,000 wells is avoided as a fraudulent transfer as defined by the Alabama UFTA; 5. Declare that Diversified's May 2020 Voidable Transfer of nearly $114.5 million to EQT and the assumption of plugging obligations in exchange for approximately 900 wells is avoided as fraudulent transfer as defined by Alabama UVTA;

6. Direct the recovery of the assets Diversified transferred to EQT and reimpose the plugging and decommissioning obligations incurred by Diversified in the July 2018 and May 2020 Voidable Transfers back onto the transferor, EQT, to the extent necessary to satisfy Plaintiffs' claims under Sections 8-9A-7 and 8-9B-8 of the Alabama Code or under otherwise applicable fraudulent transfer laws, or, alternatively, in accordance with Alabama Code §§ 8-9A-7 and 8-9B-9, enter Judgment for the value of the property transferred and the obligations incurred by Diversified up to the amount necessary to satisfy Plaintiffs' claims;

7. Create a fund from the damages awarded from EQT to be used to plug and otherwise decommission Class Members' wells in West Virginia;

8. Create a separate fund from damages awarded from Diversified to be used to plug and otherwise decommission Class members' wells;

9. Appoint a receiver to take charge of and administer both of those funds;

10. Award attorney's fees as appropriate; and

11. Grant Plaintiffs and all Class members such other and further relief as is just and equitable under the circumstances.

[Doc. 96 at 74-76].

On January 18, 2023, defendants filed their Motion to Dismiss Second Amended Complaint [Doc. 104] and accompanying Memorandum of Law in Support [Doc. 105]. Therein, defendants assert that “[a]ll claims in Plaintiffs' Second Amended Class Action Complaint . . . depend on the theory that Diversified must plug natural gas wells on plaintiffs' land pursuant to West Virginia Code Section 22-6-19.” See [Doc. 104 at 1]. Defendants argue because Diversified has no existing duty to plug the wells on plaintiffs' property, plaintiffs' tort claims based on the alleged breach of that purported duty fail as a matter of law. Furthermore, defendants argue because plaintiffs do not have any valid tort claims against Diversified, plaintiffs cannot maintain their derivative claims for fraudulent transfer against any of the defendants as a matter of law.

STANDARD OF REVIEW

A complaint must be dismissed if it does not allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); see also Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008) (applying the Twombly standard and emphasizing the necessity of plausibility). When reviewing a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, the Court must assume all of the allegations to be true, must resolve all doubts and inferences in favor of the plaintiff, and must view the allegations in a light most favorable to the plaintiff. Edwards v. City of Goldsboro, 178 F.3d 231, 243-44 (4th Cir. 1999).

When rendering its decision, the Court should consider only the allegations contained in the Complaint, the exhibits to the Complaint, matters of public record, and other similar materials that are subject to judicial notice. Anheuser-Busch, Inc. v. Schmoke, 63 F.3d 1305, 1312 (4th Cir. 1995). In Twombly, the Supreme Court, noted that “a plaintiff's obligation to provide the ‘grounds' of his ‘entitlement] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. . . .” Twombly, 550 U.S. at 555, 570 (upholding the dismissal of a complaint where the plaintiffs did not “nudge[ ] their claims across the line from conceivable to plausible.”).

“[M]atters outside of the pleadings are generally not considered in ruling on a Rule 12 Motion.” Williams v. Branker, 462 Fed.Appx. 348, 352 (4th Cir. 2012). “Ordinarily, a court may not consider any documents that are outside of the Complaint, or not expressly incorporated therein, unless the motion is converted into one for summary judgment.” Witthohn v. Fed. Ins. Co., 164 Fed.Appx. 395, 396 (4th Cir. 2006). However, the Court may rely on extrinsic evidence if the documents are central to a plaintiff's claim or are sufficiently referred to in the Complaint. Id. at 396-97.

DISCUSSION

Plaintiffs assert that West Virginia Code § 22-6-19 imposes a duty on Diversified to plug wells on their property. West Virginia Code Section 22-6-19 states:

Any well which is completed as a dry hole or which is not in use for a period of twelve consecutive months shall be presumed to have been abandoned and shall promptly be plugged by the operator in accordance with the provisions of this article, unless the operator furnishes satisfactory proof to the director that there is a bona fide future use for such well.

Based on this duty, plaintiffs assert common law claims for trespass, nuisance, and negligence against Diversified.

West Virginia has adopted an administrative scheme to oversee drilling and plugging of natural gas wells, including those on plaintiffs' land. Under West Virginia Code § 22-6-28, West Virginia has appointed its Office of Oil and Gas (“OOG”) to “exercise supervision over the drilling, casing, plugging, filling and reclamation of all wells and shall have access to the plans, maps and other records and to the properties of the well operators as may be necessary or proper for this purpose....” W.Va. Code § 22-6-28(a). “[A]ny operator or coal operator adversely affected by a final decision or order of the director, may appeal in the manner prescribed in section four, article five, chapter twenty-nine-a of this code.” Id. at § 22-6-28(b).

West Virginia's administrative scheme “permit[s] any aggrieved person to file before the director, a formal complaint charging any well operator with not drilling or casing, or not plugging or filling, or reclaiming any well....” Id. at § 22-6-28(a). Moreover “[a]t the time and place fixed for hearing, full opportunity shall be given any person so charged or complaining to be heard and to offer such evidence as desired, and after a full hearing, . . . the director shall make findings of fact and enter such order in...