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Curtis R. Lauchle, et al v. the Keeton Group LLC

March 8, 2011

CURTIS R. LAUCHLE, ET AL.,
PLAINTIFFS
v.
THE KEETON GROUP LLC, ET AL., DEFENDANTS GARY K BEACH, ET AL.,
PLAINTIFFS
v.
MK RESOURCE PARTNERS II, L.P., ET AL., DEFENDANTS ANDREW HOOKER,
PLAINTIFF
v.
THE KEETON GROUP LLC, ET AL., DEFENDANTS



The opinion of the court was delivered by: Judge John E. Jones III

Judge John E. Jones III Judge John E. Jones III

MEMORANDUM

Pending before the Court are the parties' cross-Motions for Summary Judgment with Respect to the Chief Defendants' Counterclaims, filed in November 2010. The Chief Defendants*fn1 move the Court to grant judgment in their favor and equitably extend the terms of the Plaintiffs' oil-and-gas leases with the Chief Defendants. Essentially, the Chief Defendants argue that Plaintiffs repudiated their leases when they filed the instant declaratory judgment actions to determine whether their leases were valid under Pennsylvania's Guaranteed Minimum Royalty Act ("GMRA"), 58 P.S. § 33. On October 6, 2010 we issued a Memorandum and Order granting the Defendants' motions to dismiss and upholding the leases as valid under the GMRA. In doing so, we explicitly relied upon the Pennsylvania Supreme Court's rationale in Kilmer v. Elexco Land Services, Inc., 63 MAP, 2009, 2010 Pa. LEXIS 517, *30 (Pa. March 24, 2010). The Chief Defendants now request that we equitably extend the leases to account for the period of time during which the Plaintiffs contested the leases in this Court. For the reasons that follow, the Plaintiffs' Motions for Summary Judgment shall be granted and the Chief Defendants' Motions for Summary Judgment shall be denied.

I. STANDARD OF REVIEW

Summary judgment is appropriate if the record establishes "that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). Initially, the moving party bears the burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The movant meets this burden by pointing to an absence of evidence supporting an essential element as to which the non-moving party will bear the burden of proof at trial. Id. at 325. Once the moving party meets its burden, the burden then shifts to the non-moving party to show that there is a genuine issue for trial. Fed. R. Civ. P. 56(e)(2). An issue is "genuine" only if there is a sufficient evidentiary basis for a reasonable jury to find for the non-moving party, and a factual dispute is "material" only if it might affect the outcome of the action under the governing law. Anderson v. Liberty Lobby, Inc, 477 U.S. 242, 248-49 (1986).

In opposing summary judgment, the non-moving party "may not rely merely on allegations of denials in its own pleadings; rather, its response must ... set out specific facts showing a genuine issue for trial." Fed. R. Civ. P. 56(e)(2). The non-moving party "cannot rely on unsupported allegations, but must go beyond pleadings and provide some evidence that would show that there exists a genuine issue for trial." Jones v. United Parcel Serv., 214 F.3d 402, 407 (3d Cir. 2000). Arguments made in briefs "are not evidence and cannot by themselves create a factual dispute sufficient to defeat a summary judgment motion." Jersey Cent. Power & Light Co. v. Twp. of Lacey, 772 F.2d 1103, 1109-10 (3d Cir. 1985). However, the facts and all reasonable inferences drawn therefrom must be viewed in the light most favorable to the non- moving party. P.N. v. Clementon Bd. of Educ., 442 F.3d 848, 852 (3d Cir. 2006).

Summary judgment should not be granted when there is a disagreement about the facts or the proper inferences that a factfinder could draw from them. Peterson v. Lehigh Valley Dist. Council, 676 F.2d 81, 84 (3d Cir. 1982). Still, "the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; there must be a genuine issue of material fact to preclude summary judgment." Anderson, 477 U.S. at 247-48.

II. FACTS AND BACKGROUND

The material facts in these matters are not in dispute and are summarized as follows. Plaintiffs are landowners who entered into substantially identical oil-andgas leases with the Keeton Group.*fn2 Each lease had a primary term of five years. In each lease, if the lessees were producing oil or gas in paying quantities at the end of the five-year lease term, the lease would automatically be extended for as long as such production continued.

In the late fall of 2008, all three of the above-captioned actions were commenced. As noted above, the Plaintiffs sought a declaration as to whether the leases were valid under the GMRA. In reaction to the litigation, the Chief Defendants ceased any development of drilling on the Plaintiffs' land and filed motions to dismiss. Following oral argument on the motions to dismiss, on June 19, 2010, we stayed these actions pending the Pennsylvania Supreme Court's decision in Kilmer. On March 24, 2010, the Pennsylvania Supreme Court issued its opinion in Kilmer. The Court accepted supplemental briefing by the parties and thereafter, by Memorandum and Order dated October 6, 2010, we granted the Chief Defendants' motions to dismiss.

Following the Kilmer decision, but before our October 6, 2010 ruling, the Chief Defendants filed a Counterclaim against the Plaintiffs. Plaintiffs immediately moved to dismiss the Counterclaim based on their assertion that the leases were invalid under the GMRA. In a companion Order dated October 6, 2010, we denied the Plaintiffs' motions inasmuch as we had found the leases valid under the GMRA in our Memorandum and Order of the same date. Thereafter, the parties filed the instant cross-Motions for Summary Judgment. The Motions have been fully briefed by the parties and are therefore ripe for our review.

III. DISCUSSION

The issue presented to the Court by the Chief Defendants and argued within the instant Motions is one of first impression. In essence, the Chief Defendants invite the Court to hold that a lawsuit to invalidate an oil-and-gas lease constitutes a repudiation of the lease, and that the proper remedy is an equitable extension of the lease term by the length of time the lawsuit was pending.

In support of their claim, the Chief Defendants argue that the declaratory judgment actions initiated by Plaintiffs forced them to forego operations on the subject properties due to uncertainty about the validity of the leases, and as such they were deprived of benefits of each lease's full term. Plaintiffs counter that they did not repudiate the leases by filing these actions, nor did they prevent the Chief Defendants from conducting drilling operations on the land during the pendency of these actions. Plaintiffs further argue that it would be inequitable to require them to extend the leases merely ...


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