Roberts v. Unimin Corp.
| Decision Date | 07 December 2015 |
| Docket Number | No. 1:15CV00071 JLH,1:15CV00071 JLH |
| Parties | KATHY ROBERTS; PLAINTIFFS and KAREN MCSHANE v. UNIMIN CORPORATION DEFENDANT |
| Court | U.S. District Court — Eastern District of Arkansas |
Kathy Roberts and Karen McShane bring this action against Unimin Corporation seeking a declaratory judgment that a mineral lease entered into by the parties' predecessors in interest in 1961 is terminable at will or, in the alternative, is unconscionable. The plaintiffs also allege that Unimin has been unjustly enriched and they seek restitution in excess of $75,000. This Court has diversity jurisdiction under 28 U.S.C. § 1332. Unimin has filed a motion to dismiss for failure to state a claim. For the following reasons, the motion to dismiss is denied.
In 1918, J.W. Williamson and Lizzie Williamson entered into a lease that granted Odell-Daly Material Company the right to mine certain property for siliceous materials for a term of twenty years.1 The lease contained a royalty provision that provided:
For the first Five (5) years of said term the royalty shall be five (5) cents per ton on all materials shipped in crude form and three (3) cents per ton on all materials shipped in milled or pulverized form; that during the remainder of said term it is agreed that the royalty shall be five (5) cents per ton on all materials alike.
In 1934, J.W. Williamson entered into another lease for the property with similar royalty language: "Five cents (5￠) per ton on all material shipped, whether in crude form or shipped inmilled or pulverized form." Document #1 at 40. When J.W. Williamson died in 1943, he left the property to his two sons, Ray Williamson and Collie Williamson. Then in 1961, after Collie Williamson's death, a new lease was entered into between Ray Williamson and the devisees of Collie Williamson, as lessors, and the Silica Products Company, Inc. Unimin is the successor in interest to Silica.
The 1961 lease provides for the following royalty structure:
The provision establishing the term of the 1961 lease states:
TO HAVE AND TO HOLD . . . unto the lessee and to its successors and assigns for and during the term beginning the 1st day of March 1961 and ending the 31st day of January, 2007, and as long thereafter as mining and/or mining operations are prosecuted on [the subject property] and/or siliceous materials are hauled, transported over, across or under [the subject property] . . .
Kathy Roberts and Karen McShane now own the subject property and are assignees of the 1961 lease. Document #1 at 2 ¶ 9. Their complaint alleges three counts. Count I seeks a declaratory judgment that after January 31, 2007, the 1961 lease became terminable-at-will uponreasonable notice because the term of the lease became indefinite. Document #1 at 8-9. Count II seeks a declaratory judgment that royalty and term provisions of the 1961 lease are unconscionable because the royalty is grossly inadequate and the term indefinite.2 Document #1 at 10-11. Count III alleges that Unimin has been unjustly enriched by virtue of the royalty and term provisions of the 1961 lease. Document #1 at 11-13. Unimin has moved to dismiss the complaint, arguing that the plaintiffs lack standing because there is no actual controversy, that the plaintiffs' claims are barred by res judicata, that the statute of limitations bars the claims, and that the complaint fails to plead plausible claims.
To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). Although detailed factual allegations are not required, the complaint must set forth "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 1974, 167 L. Ed. 2d 929 (2007). "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." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009). The court must accept as true all of the factual allegations contained in the complaint, Twombly, 550 U.S. at 572, 127 S. Ct. at 1975, and must draw all reasonable inferences in favor of the nonmoving party. Gorog v. Best Buy Co., Inc., 760 F.3d 787, 792 (8th Cir. 2014). The complaint must contain more than labels, conclusions, ora formulaic recitation of the elements of a cause of action, which means that the court is "not bound to accept as true a legal conclusion couched as a factual allegation." Twombly, 550 U.S. at 555, 127 S. Ct. at 1965.
Unimin argues that the plaintiffs' claims are not plausible because the lease has a definite term and is, therefore, not terminable at will. Again, the lease term was from March 1, 1961, until January 31, 2007, and "as long thereafter as mining and/or mining operations are prosecuted." Document #1 at 7 and 19. Unimin argues that this language creates a term for a definite period of time, whereas the plaintiffs argue that this provision creates an indefinite term and is terminable at will.
A lease for an indefinite term is unenforceable. Coley v. Westbrook, 206 Ark. 1111, 178 S.W.2d 991, 992-93 (Ark. 1944). "A lease for an indefinite term, with monthly rent reserved creates a tenancy from month to month." Id. at 993 (quoting 35 C.J. 1106). Cf. Magic Touch Corp. v. Hicks, 99 Ark. App. 334, 335, 260 S.W.3d 322, 324 (2007) ().
The Eighth Circuit, applying Missouri law, found that "a lease which is to end upon the happening of an event certain to occur but uncertain as to the time when it will occur, does not create a valid tenancy for years." National Bellas Hess, Inc. v. Kalis, 191 F.2d 739, 741 (8th Cir. 1951). Likewise, the Alabama Supreme Court held that a provision stating the lease may be renewed "so long as there is recoverable coal remaining in the lands leased hereby" was so incapable of ascertainment that it rendered the lease void as a tenancy for years and a tenancy-at-will was created. Linton Coal Co., Inc. v. South Central Resources, Inc., 590 So.2d 911, 912 (Ala. 1991).
The lease term here - "as long thereafter as mining and/or mining operations are prosecuted"- is similar to the lease terms in these two cases. In Linton Coal, the lease was to end when there was no longer recoverable coal. In National Bellas, the lease was to end when a treaty of peace was signed at the end of World War II. Here, the lease would end when mining or mining operations cease. No one knows when that will occur.
In the cases that Unimin cites to support its position, the issue was not whether the lease term was indefinite. Unimin argues that Mooney v. Gantt should apply and that it is fatal to the plaintiff's claim. 219 Ark. 485, 243 S.W.2d 9 (1951). However, the plaintiffs in Mooney argued the lease lacked mutuality of obligation and consideration, not that the lease was for an indefinite term. 219 Ark. at 487, 243 S.W.2d at 10. In Smith v. Long the issue was whether the lessee was in default for not engaging in production when it would have been unprofitable. 40 Colo. App. 531, 533, 578 P.2d 232, 234 (Colo. App. 1978). And in Bodcaw Oil Co. v. Atlantic Refining Co., the issue was whether the term - "for so long as oil and gas, or either of them, is being produced from the other lands" - were sufficient consideration to support an agreement. 217 Ark. 50, 59, 228 S.W.2d 626, 632 (Ark. 1950).
The plaintiffs' claim for a declaration that the lease is terminable at will is a plausible claim.
The Honorable Kristine G. Baker recently explained Arkansas law with respect to a claim that a contract is unconscionable:
Under Arkansas law, "[i]n assessing whether a particular contract or provision is unconscionable, the courts should review the totality of the circumstances surrounding the negotiation and execution of the contract." State ex rel. Bryant v. R & A Inv. Co., 336 Ark. 289, 985 S.W.2d 299, 302 (1999) (quoting Ark. Nat'l Life Ins. Co. v. Durbin, 3 Ark. App. 170, 623 S.W.2d 548, 551 (1981)). "Two important considerations are whether there is a gross inequality of bargaining power between the parties to the contract and whether the aggrieved party was made aware of and comprehended the provision in question." Id. (quoting Durbin, 623 S.W.2d at 551). Jarrett v. Panasonic Corp. of N. Am., 8...
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