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Allegheny Enterprises, Inc. v. J-W Operation Co.

United States District Court, Middle District of Pennsylvania

March 5, 2014




For the reasons that follow, the motion for summary judgment of plaintiff Allegheny Enterprises, Inc. (Jan. 25, 2013, ECF No. 63) is granted in part and denied in part, and the motion for summary judgment of defendant J-W Operating Company (Jan. 28, 2013, ECF No. 66) is granted in part and denied in part, in accordance with the accompanying Order of this date.

I. General Background

This case was removed to this Court on December 15, 2010. The Court’s basis for jurisdiction is the parties’s diverse citizenship. Pennsylvania law applies.

On August 17, 2012, plaintiff Allegheny Enterprises, Inc. (hereinafter, “Allegheny”) filed an amended complaint seeking declaratory judgment (counts I & II), and asserting claims of conversion (count III), intentional interference with contractual relations (count IV), and interference with coal interests (count V) against defendant J-W Operating Company (hereinafter, “J-W Operating”).[1] (Am. Compl., Aug. 17, 2012, ECF No. 53 (hereinafter, “Am. Compl.”)). Allegheny’s claims all substantially rest on its assertion that it owns “the coal, shallow gas and oil and the related rights” under lands that Allegheny refers to as the “Pardee Tract” and the “Jones/McConaghay Properties, ” while J-W Operating owns the “deep gas and related rights” under the same lands, having acquired such rights by assignment from Allegheny. (Am. Compl. ¶¶ 11, 17). Allegheny contends that, by the terms of a series of agreements with J-W Operating, its coal and shallow gas and oil rights are superior to the deep gas rights it assigned to J-W Operating (Id. ¶¶ 36, 42), and that J-W Operating has infringed (and threatens to further infringe) upon Allegheny’s rights by drilling ahead of Allegheny. Moreover, argues Allegheny, J-W Operating must, irrespective of specific terms of the parties’s agreements, compensate Allegheny for the coal J-W Operating’s drilling has rendered inaccessible. (Id. ¶¶ 51-53).

On August 31, 2012, J-W Operating answered and asserted counterclaims against Allegheny, including breach of warranty (counterclaim count I), fraud (counterclaim count II), and requests for declaratory judgment (counterclaim count III) and counsel fees (counterclaim count IV). J-W Operating’s counterclaims all substantially rest on its assertion that, when the series of agreements between J-W Operating and Allegheny are considered together, J-W Operating’s deep gas rights are in no way inferior to Allegheny’s coal and shallow gas and oil rights. To the extent that the Court rejects this assertion, J-W Operating further asserts that various misrepresentations made by Allegheny formed the basis of bargains underlying various agreements between Allegheny and J-W Operating, all to J-W Operating’s detriment. (Answer & Countercl., Aug. 31, 2012, ECF No. 54 ¶¶ 61-86).

On January 25, 2013, Allegheny filed a motion for summary judgment on counts I and II (declaratory judgment), III (conversion), and V (interference with coal interests) of its amended complaint, as well as on J-W Operating’s counterclaims I (breach of warranty) and II (fraud). (ECF No. 63). On January 28, 2013, J-W Operating cross-moved for summary judgment on Allegheny’s counts I, II, III, and IV (intentional interference with contractual relations), and its own counterclaim counts I, II, and III (declaratory judgment). (ECF No. 66).

II. Summary Judgment Standard

Summary judgment is appropriate where “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A fact is “material” where it “might affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute is “genuine” where “the evidence is such that a reasonable jury, ” giving credence to the evidence favoring the nonmovant and making all reasonable inferences in the nonmovant’s favor, “could return a verdict for the nonmoving party.” Id.

For movants and nonmovants alike, the assertion “that a fact cannot be or is genuinely disputed must” be supported by “citing to particular parts of materials in the record, ” or by “showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.” Fed.R.Civ.P. 56(c)(1). “If a party fails to properly support an assertion of fact or fails to properly address another party’s assertion of fact as required by Rule 56(c), the court may . . . consider the fact undisputed for purposes of the motion.” Fed.R.Civ.P. 56(e)(2).

Thus, where the moving party’s motion is properly supported and his evidence, if not controverted, would entitle him to judgment as a matter of law, the nonmoving party, to avoid summary judgment in his opponent’s favor, must answer by setting forth “genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.” Anderson, 477 U.S. at 250. In the face of the moving party’s evidence, the nonmoving party’s mere allegations, general denials or vague statements will not create a genuine factual dispute. See Bixler v. Cent. Pennsylvania Teamsters Health & Welfare Fund, 12 F.3d 1292, 1302 (3d Cir. 1993). Only citation to specific facts is sufficient. Anderson, 477 U.S. at 250.

Where the nonmoving party has had adequate time for discovery and will bear the burden of proof at trial, “a complete failure of proof concerning an essential element of the nonmoving party’s case necessarily renders all other facts immaterial, ” and summary judgment is warranted. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).

When considering cross-motions for summary judgment, the Court considers each motion separately, applying the standard set forth above. See Transportes Ferreos de Venezuela II CA v. NKK Corp., 239 F.3d 555, 560 (3d Cir. 2001) (quoting Rains v. Cascade Indus., Inc., 402 F.2d 241, 245 (3d Cir. 1968) (cross-motions for summary judgment “are no more than a claim by each side that it alone is entitled to summary judgment”); Benckini v. Hawk, 654 F.Supp.2d 310, 315 (E.D. Pa. 2009). The Court cannot view “facts” in the light most favorable to two nonmoving parties simultaneously, and in some cases the best course may be to recite two statements of “facts” for the same case or even to write entirely separate opinions disposing of the respective motions. See Interbusiness Bank, N.A. v. First Nat’l Bank of Mifflintown, 318 F.Supp.2d 230, 236 (M.D. Pa. 2004) (Conner, C.J.). The Court in this case has written a single opinion with a single recitation of the facts because the factual disputes between the parties are few.

III. Facts

By a series of agreements it entered into between 2002 and 2004, Allegheny became the owner of all of the coal under the Pardee Tract, which is located on approximately 8, 791 acres in Cameron and Elk Counties, Pennsylvania. (Allegheny Facts, Jan. 29, 2013, ECF No. 69 ¶¶ 1-3 (hereinafter, “Allegheny Facts”)). Allegheny acquired the oil and gas rights associated with the Pardee Tract in 2005. (Am. Compl. ¶ 8).

On March 27, 2008, Allegheny and J-W Operating entered into a “Lease Purchase and Exploration Agreement” (hereinafter, the “Exploration Agreement”). (Allegheny Facts ¶ 4). In relevant part, the Exploration Agreement provided for J-W Operating to purchase Allegheny’s interest in the “Deep Rights” associated with the Pardee Tract and other properties for $10 million and other consideration from J-W Operating. (Id. ¶ 5; Exploration Agreement ¶¶ 1.1(a), 1.3).

The “Deep Rights” were defined in the Exploration Agreement as:

all of Allegheny’s interests in the oil and gas, the oil and gas leases, lands and related acreage . . . that are below the stratigraphic equivalent of 4, 000 feet below the surface . . ., including all surface rights and privileges necessary to explore and develop such Deep Rights, including but not limited to the use of all roads, sites and pads currently in place.

(Exploration Agreement ¶ 1.1(a)).

The Exploration Agreement also designated a certain “Coal Mining Area, ” or “CMA, ” consisting of an approximately 504 acre piece of the Pardee Tract. (Id. ¶ 13.1; Allegheny Facts ¶ 5). ...

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