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Maxwell v. Adapt Appalachia, LLC

United States District Court, W.D. Pennsylvania

March 30, 2015

ADAPT APPALACHIA, LLC and ADAPT ENERGY, INC., their successors And assigns, Defendants.



A. Relevant Procedural History

This case was originally filed in the Court of Common Pleas of Venango County, and it was removed to this Court by Defendants on the basis of diversity jurisdiction. Plaintiffs' Second Amended Complaint [ECF No. 23] is the operative complaint in this case.

This action arises out of the alleged breach of an agreement between Plaintiffs Robert Maxwell and Sandra Maxwell and Defendants Adapt Appalachia, LLC ("Adapt Appalachia") and Adapt Energy, Inc. ("Adapt Energy"). Defendants allegedly induced Plaintiffs to execute an oil and gas lease in their favor by offering to pay Plaintiffs a signing bonus in the amount of $94, 281.00. According to Plaintiffs, they accepted Defendants' offer, complied with the terms of the offer and executed an oil and gas lease in Defendants' favor. Approximately seven months later, and after Defendants' obligation to pay Plaintiffs incurred, Defendants purported to unilaterally cancel the agreement. Plaintiffs seek compensation for the sum due from Defendants pursuant to the agreement and for such equitable relief as specified. ECF No. 23. Plaintiffs raise three separate claims: Count I - breach of unilateral contract; Count II - Unjust Enrichment; and Count III - Equitable Estoppel[2]. These claims are pled in the alternative.

The allegations against each of the two corporate Defendants are less than precise. Plaintiffs aver that Defendants, Adapt Appalachia and Adapt Energy, are Texas corporations having the same business address, and according to Plaintiffs, any reference to "Adapt" in the Second Amended Complaint is intended to include both corporations. Id. at ¶ 4. Such a general reference is problematic in this case where the relationship between the two companies and their employees, as well as privity of contract and the intent of the parties to be bound, are at issue. The lack of clarity as to the relationship between Adapt Appalachia and Adapt Energy informs much of the legal analysis at this early stage of the proceedings.

Defendants, represented jointly, have filed a motion to dismiss under Rule 12(b)(6). ECF No. 24. Plaintiffs have filed a brief in opposition. ECF No. 27. This motion is fully briefed and is ripe for disposition by this Court.

B. Standard of Review

A motion to dismiss filed pursuant to Federal Rule of Civil Procedure 12(b)(6) must be viewed in the light most favorable to the plaintiff and all the well-pleaded allegations of the complaint must be accepted as true. Erickson v. Pardus, 551 U.S. 89, 93-94 (2007). A complaint must be dismissed pursuant to Rule 12 (b)(6) if it does not allege "enough facts to state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570 (rejecting the traditional 12 (b)(6) standard set forth in Conley v. Gibson, 355 U.S. 41 (1957)). See also Ashcroft v. Iqbal, 556 U.S. 662 (2009) (specifically applying Twombly analysis beyond the context of the Sherman Act).

A Court need not accept inferences drawn by a plaintiff if they are unsupported by the facts as set forth in the complaint. See California Pub. Employee Ret. Sys. v. The Chubb Corp., 394 F.3d 126, 143 (3d Cir. 2004) citing Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997). Nor must the Court accept legal conclusions set forth as factual allegations. Twombly, 550 U.S. at 555, citing Papasan v. Allain, 478 U.S. 265, 286 (1986). See also McTernan v. City of York, Pennsylvania, 577 F.3d 521, 531 (3d Cir. 2009) ("The tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions."). A plaintiff's factual allegations "must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 556, citing 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, pp. 235-236 (3d ed. 2004). Although the United States Supreme Court does "not require heightened fact pleading of specifics, [the Court does require] enough facts to state a claim to relief that is plausible on its face." Id. at 570.

In other words, at the motion to dismiss stage, a plaintiff is "required to make a showing' rather than a blanket assertion of an entitlement to relief." Smith v. Sullivan, 2008 WL 482469, at *1 (D. Del.) quoting Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008). "This does not impose a probability requirement at the pleading stage, ' but instead simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of' the necessary element." Phillips, 515 F.3d at 234, quoting Twombly, 550 U.S. at 556 n.3.

The Third Circuit has expounded on the Twombly/Iqbal line of cases:

To determine the sufficiency of a complaint under Twombly and Iqbal, we must take the following three steps: First, the court must tak[e] note of the elements a plaintiff must plead to state a claim.' Second, the court should identify allegations that, because they are no more than conclusions, are not entitled to the assumption of truth.' Finally, where there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief.'

Burtch v. Milberg Factors, Inc., 662 F.3d 212, 221 (3d Cir. 2011) quoting Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010).

To decide a motion to dismiss, a court generally should consider only the allegations in the complaint, exhibits attached to the complaint, matters of public record, and documents that form the basis of a claim. See In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997).

C. Plaintiffs' Allegations

Due to the development of the Marcellus shale formation, producers and speculators flocked into the northwest Pennsylvania area seeking to lease rights to extract natural gas throughout the region. ECF No. 23, ¶ 9. Defendants, the Adapt corporations, acquired over one hundred oil and gas leases in Venango County, Pennsylvania. Id. at ¶ 11.

Plaintiffs are owners of an undivided 2/7 interest in and to the oil, gas and minerals in and under a certain piece of land containing approximately 100 acres situated in Cornplanter Township, Venango County, Pennsylvania. Id. at ¶ 12. As tenants in common with Plaintiffs, David and Sue Straub are the owners of an undivided 3/7 interest in and to the oil, gas and minerals in and under the same property. Id. at ¶ 13. The remaining 2/7 undivided interest is held as tenants in common with Plaintiffs by: Leo Mansfield, Rosemary Straub, J.R. Shantz, and the heirs of Sharon Raines, deceased. Id. at ¶ 14.

In April of 2012, Leo Mansfield informed Plaintiffs that "Adapt" was in Venango County and was negotiating terms of an oil and gas lease with the Straubs. Mansfield told Plaintiffs that the Straubs were to receive a signing bonus from "Adapt" and referred Plaintiffs to Bryant McCrary, a representative of Adapt Energy, Inc. Id. at ¶ 15.

1) Count I - Breach of Contract

Plaintiffs spoke to McCrary about the possibility of leasing their property interest. Id. at ¶ 16. McCrary represented to Plaintiffs that he was a "landman for Adapt Energy, Inc., " a company leasing oil and gas properties in Venango County. McCrary explained that "Adapt" was paying a signing bonus of $3, 300/acre and royalties of 18%. Id. at ¶ 17. McCrary told Plaintiffs that "Adapt" had "lots of money" to offer landowners as an inducement to get Plaintiffs to enter into a lease with "Adapt." Id. at ¶ 18. At no time did McCrary make any reference to Adapt Appalachia, LLC. Id. at ¶ 19.

Plaintiffs told McCrary that they agreed to lease their property interest to "Adapt" on the terms he offered. Id. at ¶ 20. Plaintiffs' agreement to the lease was based upon the signing bonus offered by "Adapt." Id. at ¶ 21. Plaintiffs reasonably believed that they were negotiating with Adapt ...

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