Walney v. Swepi LP, CIVIL ACTION No. 13-102 Erie
| Decision Date | 14 September 2015 |
| Docket Number | CIVIL ACTION No. 13-102 Erie |
| Parties | THOMAS J. WALNEY and RODNEY A. BEDOW, SR., individually and on behalf of all others similarly situated, Plaintiffs, v. SWEPI LP and SHELL ENERGY HOLDING GP, LLC, Defendants. |
| Court | U.S. District Court — Western District of Pennsylvania |
This case involves a putative class action brought by plaintiffs Thomas J. Walney ("Walney") and Rodney A. Bedow, Sr. ("Bedow" and together with Walney, "plaintiffs") against defendants SWEPI LP ("SWEPI") and its general partner and alleged alter ego, Shell Energy Holding GP, LLC (together with SWEPI, "defendants"). The parties' dispute arises out of certain oil and gas leases which plaintiffs signed in favor of SWEPI relative to properties located in Venango County, Pennsylvania. Plaintiffs claim that they are entitled to certain bonus monies1 under the terms of their respective leases, which were never paid. The Second Amended Complaint ("SAC"), plaintiffs' operative pleading, asserts claims for breach of contract (both express and implied), unjust enrichment, fraud, and promissory estoppel on behalfof plaintiffs and other similarly situated Pennsylvania landowners who signed oil and gas leases with SWEPI during the putative class period but were never paid bonus monies.
Pending before the court is plaintiffs' motion for class certification (ECF No. 62). For the reasons that follow, the motion will be granted in part and denied in part.
SWEPI is a limited partnership engaged in the business of oil and gas exploration and production. (SAC ¶2, ECF No. 57; Answer to SAC ¶2, ECF No. 58; Decl. of Ian Haney ¶4, ECF No. 66-1.) Between 2011 and 2013, SWEPI sought to acquire mineral leases in certain parts of Pennsylvania, including Venango County. (Haney Decl. ¶4.) To that end, SWEPI utilized the services of independent contractor land companies to acquire oil and gas leases from Pennsylvania landowners. (Id. ¶1.) Among these companies was Southeast Land Services, LLC ("Southeast"), which served as SWEPI's principal independent contractor for lease acquisitions in Butler and Venango Counties. (Haney Decl. ¶1; Decl. of Eric Jenevein ¶1, ECF No. 66-2.) Ultimately, Southeast helped SWEPI obtain more than 2,800 oil and gas leases. (Jenevein Decl. ¶2.)
SWEPI provided an account of its normal lease acquisition practices, as set forth in the declarations of Ian Haney, senior land representative for SWEPI (ECF No. 66-1), and Eric Jenevein, vice president and regional manager of Southeast's Appalachian Region (ECF No. 66-2). Those unchallenged declarations establish that, in 2011, Southeast's landmen began contacting individual landowners who, based on county property records, appeared to own oil and gas interests in Butler and Venango Counties. (Haney Decl. ¶6; Jenevein Decl. ¶6.) Based upon their initial contact with landowners, the landmen would determine whether the property in question was already under lease to another company and, if not, whether the landowner wasinterested in entering into a lease with SWEPI. (Id.) If the landowner expressed interest, the landman and landowner would discuss possible bonus amounts or other potential terms of the lease. (Id.) During late 2011 and 2012, landowners were often negotiating with other oil and gas companies at the same time that they were negotiating with SWEPI's contracted landmen, because other companies in competition with SWEPI were actively leasing in the same area during that time frame. (Id.)
Once lease terms were finalized, the landman would meet again with the interested landowner. At that time, the landman would obtain the signed lease and a signed memorandum of lease ("MOL") in exchange for a draft instrument issued in the amount of the agreed upon bonus. (Haney Decl. ¶¶ 4, 10; Jenevein Decl. ¶9.) The drafts were payable through SWEPI's bank, Amegy Bank N.A. ("Amegy"), and typically allowed ninety banking days (or sometimes thirty banking days) for payment once the draft was submitted by the landowner's bank to Amegy for collection. (Haney Decl. ¶8.) The landmen would return the signed lease and MOL to Southeast's or SWEPI's administrative offices for processing, and the MOL would normally be recorded in the county records office within a few days' time. (Haney Decl. ¶10; Jenevein Decl. ¶10.)
Following recordation, Southeast would undertake an in-depth records search to confirm that title to the oil and gas interest was in the acreage amount represented and that no other problems existed with respect to the chain of title. (Id.) Upon completion of its search, Southeast would provide SWEPI a confidential mineral interest ownership report, title run sheet, and associated analysis relative to each parcel of property in question in order to identify whether a failure of title existed as to the particular property and, if so, whether curative action was required. (Haney Decl. ¶12; Jenevein Decl. ¶11.) Sometimes the title problems could be curedby having the landowner execute a new lease reflecting the correct acreage or the correct ownership names; this curative action would involve cancellation of the original draft and issuance of a new one, if the landowner was agreeable. (Haney Decl. ¶14; Jenevein Decl. ¶13.) In cases where there was a title problem that could not be readily cured, SWEPI would cancel the bank draft and surrender the lease back to the landowner. (Id.) In any event, the final decision about what action to take in the case of a title problem was made by SWEPI's own landmen, based upon Southeast's completed title work and analysis. (Haney Decl. ¶ 12; Jenevein Decl. ¶11.)
Walney and Bedow are residents of Venango County, Pennsylvania, who were contacted by Southeast's landmen and signed leases in favor of SWEPI in early 2012. (SAC ¶1; Answer to SAC ¶1; SAC Ex. 1, ¶ 1, ECF No. 57-1; Pls.' Mot. for Class Certification., Ex. 1-2, ECF Nos. 63-1 and 63-2.) Each of the leases in question is a form "Paid Up Oil and Gas Lease" containing the following provision:
(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 ... in and under the following described land....
(SAC Ex. 1, ¶ 1; Pls.' Mot. Ex. 1-2.) Paragraph 3 of the document establishes the primary lease term of five years which, at SWEPI's option, could be extended "by paying or tendering to Lessor an extension payment of [ insert ] per acre payable at any time prior to the expiration of the primary term." (Id. ¶ 3.) Paragraph 4 spells out the lessor's entitlement to a percentage royalty payment for oil and gas produced and marketed from the leased premises. (Id. ¶ 4.) The document addresses the parties' various rights and responsibilities with respect to the subjectproperties and SWEPI's operations on them. Paragraph 10 of the lease provides that: "Lessee at any time, and from time to time, may surrender this lease as to all or any part thereof by recording an appropriate instrument of surrender in the proper county and thereupon this lease and the rights, rentals and obligations of the parties hereunder shall terminate as to the part so surrendered." (Id. ¶ 10.)
Plaintiffs also executed, with respect to each of their leases, a standard MOL form indicating that: "THIS MEMORANDUM OF LEASE has been made to indicate the existence of an Oil and Gas Lease ("Lease") dated [ Insert ] by and between [ Insert ], as Lessor and SWEPI, LP...." (SAC Ex. 2, ECF No. 57-2, Pl.s' Mot. Ex. 1-2.) The document provides that: "Lessor did grant, demise, lease and let exclusively to Lessee, its successors and assigns, the rights to explore, develop, produce and market oil and gas from [the subject property] subject to the provisions contained in the Lease...." (Id.) The MOL also provides that it "has been executed for the purpose of providing notice... of the existence of the Lease and shall not be considered in any way a modification or alteration of the Lease." (Id.)
Plaintiffs contend that they signed the form leases and MOLs based upon the promise that they would be paid bonus monies, as set forth in Paragraph 1 of the lease. (Walney Decl. ¶2, ECF No. 63-1; Bedow Decl. ¶2, ECF No. 63-2.) Walney maintains that in January 2012 he signed a lease agreement covering 42.18 acres of land in exchange for a promised bonus of $137,085.00. (SAC ¶¶ 17-18 and SAC Ex. 3.) Bedow signed three lease agreements in January 2012 which he claims covered 215.897 acres of land. (SAC ¶17, Pl.'s Mot. to Certify Ex. 2, ECF No. 63-2.) Bedow maintains that he was promised bonuses totaling $701,666.88. (See SAC ¶18, SAC Ex. 3.)
At the time they signed their respective leases and MOLs, plaintiffs were given drafts in the amount of the bonus payments that had allegedly been promised to them. (Walney Decl. ¶3; Bedow Decl. ¶3.) Each of the draft instruments provided that "[t]his draft when paid is payment in full for lease or conveyance covering the following described land...." (SAC Ex. 3; Pls.' Mot. Ex. 1-2.) The drafts further provided:
To continue reading
Request your trial