Meier v. Chesapeake Operating L.L.C.

• Decision Date: 13 August 2018
• Docket Number: Case No. CIV-17-703-F
• Parties: Matt MEIER, Sheryl Meier, and Kai Bach, on behalf of themselves and all others similarly situated, Plaintiffs, v. CHESAPEAKE OPERATING L.L.C. ; Devon Energy Production Company, LP; Midstates Petroleum Company LLC ; New Dominion, LLC; Range Production Company, LLC ; Special Energy Corporation ; and White Star Petroleum, LLC, Defendants.
• Court: U.S. District Court — Western District of Oklahoma

324 F.Supp.3d 1207

Matt MEIER, Sheryl Meier, and Kai Bach, on behalf of themselves and all others similarly situated, Plaintiffs,

v.CHESAPEAKE OPERATING L.L.C. ; Devon Energy Production Company, LP; Midstates Petroleum Company LLC ; New Dominion, LLC; Range Production Company, LLC ; Special Energy Corporation ; and White Star Petroleum, LLC, Defendants.

Case No. CIV-17-703-F

United States District Court, W.D. Oklahoma.

Signed August 13, 2018

Carol H. Lahman, Larry D. Lahman, Roger L. Ediger, Mitchell & DeClerck, Enid, OK, Warren T. Burns, Burns Charest LLP, Dallas, TX, for Plaintiffs.

Matthew C. Kane, Phillip G. Whaley, Ryan Whaley Coldiron Shandy PC, John J. Griffin, Jr., Crowe & Dunlevy, Patrick L. Stein, Timothy J. Bomhoff, J. Todd Woolery, McAfee & Taft, April B. Coffin, Robert G. Gum, Gum Puckett & Mackechnie LLP, Mark H. Bennett, Mark H. Bennett PLLC, Dale E. Cottingham, Lewis T. LeNaire, Gable & Gotwals, David L. Kearney, E. Pritchett, Edd, Jr., Durbin Larimore & Bialick, Oklahoma City, OK, Joy C. Fuhr, McGuire Woods LLP, Richmond, VA, Ronald Glenn Franklin, McGuire Woods LLP, Houston, TX, J. Craig Buchan, Michael F Smith, McAfee & Taft, Michael J. McDaniel, Coffey Gudgel & McDaniel PLLC, Bradley Ward Welsh, Tammy D. Barrett, Gable & Gotwals, Tulsa, OK, for Defendants.

ORDER

STEPHEN P. FRIOT, UNITED STATES DISTRICT JUDGE

Before the court are the following motions:

• Defendant Special Energy Corporation's Special Appearance, Motion to Dismiss (doc. no. 65);

• Devon Energy Production Company, L.P.'s Motion to Dismiss (doc. no. 66);

• Defendant Midstates Petroleum Company LLC's Motion to Strike Pre-Effective Date Allegations (doc. no. 67);

• Defendant White Star Petroleum, LLC's Motion to Dismiss for Failure to State a Claim (doc. no. 68);

• Defendant Midstates Petroleum Company LLC's Motion to Dismiss (doc. no. 69);

• Defendant Range Production Company, LLC's Motion to Dismiss (doc. no. 70);

• Defendant Chesapeake Operating, LLC's Motion to Dismiss Plaintiffs' Petition (doc. no. 71); and

• Defendant New Dominion, LLC's Motion to Dismiss Plaintiff's Class Action Petition (doc. no. 72).

Upon due consideration of the parties' submissions regarding all motions, the court makes its determination.

Background

Plaintiffs, Matt Meier, Sheryl Meier and Kai Bach, bring this action on behalf of themselves and others similarly situated, to recover damages consisting of insurance premiums paid for earthquake insurance for homes and property located in Oklahoma. Plaintiffs allege that since 2008, defendants' operation of wastewater disposal wells ("injection wells") drilled into the Arbuckle formation has caused thousands of man-made earthquakes throughout large swaths of Oklahoma, and as a result, many Oklahomans have been forced to purchase earthquake insurance to provide financial protection against damage to their homes and property. In addition, plaintiffs allege that the man-made earthquakes caused by defendants' injection wells have caused the cost of earthquake insurance to soar. Plaintiffs allege that the substantial increase in earthquake activity in Oklahoma has caused earthquake insurance companies to hike their premiums by as much as 260 percent from 2014 to 2017. In this action, plaintiffs, for themselves and others similarly situated, seek to recoup the cost of obtaining and maintaining insurance coverage since 2009 under tort theories of public and private nuisance, ultrahazardous activities and negligence. Specifically, plaintiffs seek the "value of premiums paid to obtain earthquake insurance coverage" and the "excess amount required to maintain earthquake insurance coverage after 2009." Class Action Petition ("complaint"), doc. no. 1-2, ¶¶ 94, 98, 101 and 105. Plaintiffs additionally seek punitive damages, attorneys' fees, expenses, costs and pre-judgment and post-judgment interest.

Plaintiffs' action was originally commenced in the District Court of Payne County, State of Oklahoma. Defendant, Devon Energy Production, L.P., removed the action to this court pursuant to the Class Action Fairness Act, 28 U.S.C. § 1332(d). All named defendants, who according to plaintiffs, are "some of the largest operators of wastewater injection wells in the Arbuckle formation," complaint, doc. no. 1-2, ¶ 3, have now moved, pursuant to Rule 12(b)(6), Fed. R. Civ. P., to dismiss plaintiffs' complaint, on various grounds. In addition, defendant, Midstates Petroleum Company LLC, seeks to dismiss plaintiffs' complaint against it, pursuant to Rule 12(b)(1), Fed. R. Civ. P., because of its bankruptcy case. It has also moved to strike all pre-effective date allegations from plaintiffs' complaint due to the bankruptcy case. Further, defendant, Chesapeake Operating L.L.C., seeks to dismiss plaintiffs' complaint under Rule 12(b)(1) based upon the lack of standing by plaintiffs and the lack of ripeness of their claims. Plaintiffs oppose dismissal on all grounds.

Jurisdictional Issues

Bankruptcy

Midstates Petroleum Company, Inc. and defendant, Midstates Petroleum Company, LLC, filed a voluntary petition for relief in the United States Bankruptcy Court for the Southern District of Texas on April 30, 2016. The bankruptcy court entered its findings of fact, conclusions of law, and an order confirming the Chapter 11 plan of reorganization for both of the Midstates debtors on September 28, 2016. The effective date of confirmation of the plan was October 21, 2016. According to defendant, all claims prior to October 21, 2016 were discharged by the bankruptcy court's order.

In its motion, defendant argues that plaintiffs' claims should be dismissed because the bankruptcy court retained exclusive jurisdiction over all matters arising out of or related to the Chapter 11 proceedings and the plan of reorganization, including any cases, controversies, suits or disputes with respect to discharges, releases and injunctions provided for in the plan. Defendant maintains that plaintiffs' claims implicate the discharge and injunction provisions of the confirmation order and plan. Even if the court were to determine that it has subject matter jurisdiction, defendant argues that plaintiffs cannot assert pre-effective date claims that were discharged as part of the bankruptcy proceedings and those claims should be dismissed. Defendant further argues that all allegations of pre-effective date events should be stricken from the complaint with respect to defendant as plaintiffs are barred from relying on those allegations to support any post-effective date claims, if any.

Plaintiffs, in response, state that defendant believes their claims are based on unidentified earthquakes beginning in 2008 but their "claims are not based on the occurrence of any given or specific earthquake(s) at all." Doc. no. 75, at 37 (emphasis in original). They maintain that their claims are based on the concurrent conduct of defendants in injecting wastewater into the Arbuckle formation – conduct that each defendant continues to engage in to the present day. To that extent, plaintiffs contend that they have alleged that defendant has engaged in post-confirmation conduct for which there is no discharge under the bankruptcy code. Therefore, because the complaint alleges continuing injection activities on the part of defendant, which would include post-confirmation conduct supporting liability for their claims, plaintiffs contend that dismissal is not warranted. According to plaintiffs, the only question will be defendant's share of the harm caused by the concurrent activities.

In addition, plaintiffs contend that the allegations in the complaint should not be stricken because even if no liability can stem from pre-effective date injection activities, the allegations do have evidentiary value and are not irrelevant.

Defendant, in reply, asserts that plaintiffs do not contest that their claims arising out of pre-effective date conduct are barred by the bankruptcy court's order discharging all claims accruing before the pre-effective date of October 21, 2016. Defendant contends that plaintiffs' pre-effective date events have no place in this case, as an evidentiary matter or otherwise, in light of the effect of the discharge and injunction provisions of the bankruptcy court's order. Defendant argues that the authority cited by plaintiffs does not support reliance on allegations as to pre-effective date events. Further, defendant maintains that plaintiffs' allegations do not sufficiently identify post-confirmation activities.

To the extent plaintiffs seek any relief from defendant based upon injection well activities which occurred prior to October 21, 2016, the court agrees with defendant that plaintiffs cannot recover from defendant, given the bankruptcy discharge. Therefore, the court finds that plaintiffs' claims based upon conduct by defendant prior to October 21, 2016 are subject to dismissal without prejudice for lack of subject matter jurisdiction. However, plaintiffs' claims based upon conduct after October 21, 2016 are not subject to dismissal. The court rejects defendant's argument that plaintiffs' allegations, viewed in a light most favorable to plaintiffs, are too vague to support liability post-effective date. The court also concludes that the bankruptcy court does not have jurisdiction over claims based upon conduct after October 21, 2016. The court therefore grants defendant's dismissal motion under Rule 12(b)(1) in part and denies the Rule 12(b)(1) motion in part. Because plaintiffs' claims against defendant for conduct prior to October 21, 2016 are being dismissed, the court finds that defendant's motion to strike pre-effective date allegations (doc. no. 67) should be denied as moot.

Standing and Ripeness

Defendant, Chesapeake Operating, L.L.C., contends that plaintiffs do not have Article III standing to bring their claims because they have not suffered an injury-in-fact. According to Chesapeake, the payment of insurance premiums is not a legally cognizable injury. However, even if it...