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Stone v. Elexco Land Services

June 1, 2009

GARY S. STONE, AND BARBARA J. STONE, PLAINTIFFS
v.
ELEXCO LAND SERVICES, INC., AND SOUTHWESTERN ENERGY PRODUCTION COMPANY, DEFENDANTS



The opinion of the court was delivered by: Judge James M. Munley United States District Court

(Judge Munley)

MEMORANDUM

Before the court is defendants' motion to dismiss the instant complaint. Having been briefed, the matter is ripe for disposition.

Background

This case arises out of a lease entered into between the plaintiffs and Defendant Elexco Land Services, Inc. (See Complaint (hereinafter "Complt.") (Doc. 1-2)). Plaintiffs and Defendant Elexco Land Services, Inc. entered into a preprinted form Paid Up Oil and Gas Lease prepared by the defendant on November 8, 2007. (Id. at ¶ 5). The parties signed a memorandum of lease, which defendant prepared, on the same day. (Id. at ¶ 6). As inducement for signing this oil and gas lease, Defendant authorized its agents to tell plaintiffs that Elexco would pay plaintiffs $225.00 per acre. (Id. at ¶ 8). The property in question consisted of approximately 142.51 acres, and defendants thus offered plaintiffs $32,064.75 as consideration for the lease. (Id. at ¶¶ 4, 9). During the negotiations surrounding the lease, defendant's agent told the plaintiffs that "'Defendant would never pay any more than $225.00 per acre so they better take the $225.00 per acre and that the Plaintiffs will never get anymore." (Id. at ¶ 10). Plaintiffs later learned that this representation was false, and that Defendant Elexco had paid neighbors more than $225.00 per acre for leases. (Id. at ¶ 11).

On January 8, 2009, plaintiffs filed a complaint in the Court of Common Pleas of Susquehanna County, Pennsylvania. Defendants filed a notice of removal(Doc. 1) with this court on February 9, 2009. Plaintiffs' complaint raises two causes of action. Count I alleges that plaintiffs were fraudulently induced by defendants' agent's knowingly false representation that Elexco would never pay more than $225.00 an acre to sign the lease for their land. Plaintiffs also allege that defendants' agent falsely told them they would receive a royalty of one-eighth of the amount realized from sale of gas at the well, when the lease deducted certain costs downstream from the wellhead before payment. Count II seeks a declaration from the court voiding the lease. The plaintiffs allege that the gas lease is invalid because it failed to provide for the minimum royalty payment required under Pennsylvania law.

Defendants then filed a motion to dismiss the case (Doc. 2). Both sides briefed the issues, bringing the case to its present posture.

Jurisdiction

This Court has jurisdiction pursuant to the diversity jurisdiction statute, 28 U.S.C. § 1332. The plaintiffs are Pennsylvania residents. Defendant Elexco Land Services, Inc. is a New York Corporation with its principal place of business in that state. Defendant Southwestern Energy Production Company is a Texas corporation with its principal place of business in Texas. The amount in controversy exceeds $75,000.

Legal Standard

This case is before the court pursuant to defendants' motion to dismiss the case for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6). When a 12(b)(6) motion is filed, the sufficiency of a complaint's allegations are tested. The issue is whether the facts alleged in the complaint, if true, support a claim upon which relief can be granted. In deciding a 12(b)(6) motion, the court must accept as true all factual allegations in the complaint and give the pleader the benefit of all reasonable inferences that can fairly be drawn therefrom, and view them in the light most favorable to the plaintiff. Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997).

Discussion

Defendants seek dismissal of each of the complaint's counts. The court will address each in turn.

1. Validity of the Lease

Plaintiffs seek a declaration from the court that the lease the parties signed is invalid under Pennsylvania law because it does not provide the minimum royalty required by statute. Defendants ...


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