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Kenton Shafer, Theresa Shafer, Arlen Shafer and Sylvia Shafer v. Range Resources-Appalachia

February 16, 2011


The opinion of the court was delivered by: Terrence F. McVerry United States District Judge


Pending now before the Court is DEFENDANT RANGE RESOURCES -- APPALACHIA, LLC'S MOTION TO DISMISS PLAINTIFFS' COMPLAINT (Document No. 4). Defendant ("Range Resources") filed a brief in support, Plaintiffs filed a response in opposition, Defendant filed a reply brief and the motion is ripe for disposition.

Factual and Procedural Background

On August 30, 2010, Plaintiffs filed a one-count Complaint which alleges that Range Resources breached a contract to pay a bonus in exchange for the right to develop oil and gas on their property. Plaintiffs' counsel did not attach the relevant contractual documents. However, Defendant has submitted as exhibits to its motion to dismiss an Oil and Gas Lease, an Addendum, and a Memorandum of Oil and Gas Lease, all dated August 30, 2008 and signed by Plaintiffs. Also attached as exhibits to Range Resources' motion are copies of letters to Plaintiffs (the "DPO Letters"), also dated August 30, 2008, which bear Plaintiffs' signatures.*fn1 The Complaint references these documents and their authenticity has not been disputed. Therefore, the documents will be considered in ruling on the motion to dismiss. See Pension Benefit Guar. Corp. v. White Consol. Industries, Inc., 998 F.2d 1192, 1196 (3d Cir. 1993).

The pertinent facts, as alleged in the Complaint, are relatively straight-forward. Plaintiffs, collectively, own 52.299 acres of land in Monongalia County, West Virginia, including all of the oil and gas rights associated with the property. A representative of Range Resources, or "landman," contacted Plaintiffs in June 2008 to explore a leasing arrangement to produce the oil and gas associated with Plaintiffs' property. At the time, other natural gas producers also contacted Plaintiffs regarding a similar oil and gas production lease.

In July 2008, Range Resources presented a draft lease agreement. Plaintiffs responded with concerns about various terms and Range Resources agreed to modify the draft by including many non-standard provisions and an eighteen percent (18%) royalty. In ¶ 14, Plaintiffs allege that the non-standard provisions "were presented to Range Resources management, who reviewed, redrafted and incorporated the revisions and approved the terms of the lease negotiated by Range's landman." Range Resources presented the revised documents to Plaintiffs. Plaintiffs executed the alleged "final" lease documents and returned them to Range Resources on August 30, 2008. Plaintiffs' signatures on the Oil and Gas Lease and Memorandum of Oil and Gas Lease documents were notarized. However, these documents were not signed by a representative of Range Resources and the signature lines were left blank. The Addendum was signed by Plaintiffs but not notarized, and had no signature line for Range Resources. The term of the proposed lease was five years.

Plaintiffs allege that they chose to do business with Range Resources because it offered an attractive up-front bonus payment. Plaintiffs allege that contemporaneously with entering into the lease, the parties entered into a side agreement (the "DPO Letter") in which Range Resources agreed to pay a total bonus of $130,747.50 ($65,373.75 to each couple) within ninety days. Plaintiffs signed the DPO Letter on August 30, 2008 and then refrained from marketing their property to other oil and gas producers.

The DPO Letter is on Defendant's letterhead and contains the following relevant text:

 "Thank you for entering into an oil and gas lease with our firm. We are pleased to add your property to our exploration and development program!"

 "This [bonus] payment is made after the lease has been properly executed by each interest owner, our representative completes a title check at the courthouse of the county in which your land lies and our management approves the lease." (Emphasis added).

 "Range Resources -- Appalachia, LLC hereby agrees to pay the following oil and gas owner the amount below set forth subject to: 1) approval of title; and 2) management approval of the lease." (Emphasis added).

 "LEASE PAYMENT AMOUNT: $65,373.75, which shall be paid to Lessor within 90 days from lease execution date . . . ."

 "Date of Execution: 8/30/08, by LANDMAN: Taylor A. Harris."*fn2  Finally, there is a heading: "LESSOR: ACCEPTS AND AGREES," immediately above the signature lines for Plaintiffs.

Defendant failed to make a bonus payment within 90 days of August 30, 2008. Plaintiffs contend that this failure constituted a breach of contract. Defendant denies that the parties ever entered into a binding contract. Defendant also contends that approval by its management is a "condition precedent" to payment of any bonus. Finally, ...

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