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Canfield v. Statoil USA Onshore Properties Inc.

United States District Court, M.D. Pennsylvania

June 12, 2017

CHERYL B. CANFIELD, Plaintiff,
v.
STATOIL USA ONSHORE PROPERTIES INC., Defendant.

          MEMORANDUM

          MALACHY E. MANNION UNITED STATES DISTRICT JUDGE

         Currently before the court is a motion for reconsideration filed by plaintiff Cheryl B. Canfield (“Canfield”). (Doc. 75). Canfield requests that this court reconsider its March 22, 2017 order and memorandum. (Docs. 72-73). Specifically, Canfield requests that this court reconsider dismissing the first and second claim for relief in Canfield's complaint, (Doc. 1), against remaining defendant Statoil USA Onshore Properties, Inc. (“SOP”).[1] Based on the foregoing, Canfield's motion is DENIED.

         I. BACKGROUND

         Canfield owns property in the Marcellus Shale region within Pennsylvania. On May 6, 2008, Canfield entered into an oil and gas lease with Cabot Oil & Gas Corporation (“Cabot Oil”) for the exploration of oil and natural gas on her land. Her lease was subsequently acquired, in part, by defendant SOP. Her dispute with SOP primarily revolves around the royalty clause in her lease agreement.

         In her complaint, Canfield challenged SOP's calculation of royalties. SOP's calculation is based on the sale of Canfield's natural gas at the well, with that sale price calculated using an index price. SOP takes title to its in-kind percentage of the natural gas extracted at the well and immediately sells the natural gas to an affiliate, Statoil Natural Gas LLC (“SNG”), pursuant to an agreement between the two entities. Under this agreement, SNG takes title to the raw product at the wellhead and then contracts with third parties for post-production services. SNG also contracts with pipeline companies to transport the natural gas through the interstate pipeline system and, ultimately, resells the final product to third-party buyers at receipt/delivery gates along the interstate system. Thus, SOP holds the lease interests for immediate sale and SNG serves as a marketing company, taking title at the well, transforming the product into a finished one, and then selling the post-production product to distribution companies, industrial customers, and power generators downstream.

         At issue in this action is the agreement between SOP and SNG for the price of the raw natural gas at the wellhead where title is transferred from SOP to SNG. Their agreement fixes the price of the natural gas to a uniform hub price or index price for natural gas, regardless of whether the natural gas is ever delivered to that particular hub on the interstate pipeline system. These index prices are influential in natural gas markets and purport to represent the price of natural gas at different delivery points in the country. In or around April 2010, SOP and SNG began using a chosen index price as opposed to what Canfield described as an “actual negotiated price.” (Doc. 1 ¶26). SOP does not dispute that it fixes the price at the wellhead to an index price.

         On January 15, 2016, Canfield filed a putative class action complaint against SOP, SNG, and the indirect parent of these entities, Statoil ASA. Canfield brought six separate claims against SOP specifically. In her first claim, Canfield alleged that SOP breached the express terms of the royalty clause in her lease agreement by using an index price. In her second claim, Canfield alleged that SOP breached the lease by engaging in an affiliate sale with SNG. In her fourth claim, Canfield alleged that SOP breached the implied covenant of good faith and fair dealing in the lease by engaging in an affiliate sale. In this claim, she also alleged that SOP “had an obligation to use reasonable best efforts to market the gas to achieve the best price available.” (Id. ¶50). The court construed this fourth claim as a duty of good faith claim and/or a duty to market claim. Canfield also alleged civil conspiracy (third claim) and unjust enrichment (fifth claim). She also requested an accounting as a specific form of relief (seventh claim).

         On July 9, 2016, SNG filed a motion to dismiss Canfield's complaint. (Doc. 25). Also on July 9, 2016, SOP and Statoil ASA, collectively, filed a motion to dismiss. (Doc. 31). On March 22, 2017, the court granted SNG's motion and dismissed all claims against SNG with prejudice. The court granted in part and denied in part SOP's and Statoil ASA's joint motion. The court dismissed all claims against Statoil ASA with prejudice, finding that the entity was a Norwegian entity immune from suit under the Foreign Sovereign Immunities Act of 1976 (“FSIA”), Pub. L. No. 94-583, 90 Stat. 2891 (codified at and amending scattered sections of 28 U.S.C.). The court dismissed some, but not all of the claims against SOP.

         As against SOP, the court dismissed with prejudice the first, second, third, fifth, and sixth claims for relief. (See Doc. 73). The court allowed the implied breach claim, the fourth claim, to proceed. The court determined that Canfield had pled a plausible breach of the implied duty to market, though not a plausible good faith claim under Pennsylvania law. In addition, because Canfield has asserted a plausible contract claim the court allowed her request for an accounting, her seventh claim, to proceed.

         On April 5, 2017, Canfield filed the current motion for reconsideration and brief in support. (Docs. 75-76). On April 26, 2017, after requesting and receiving an extension of time, SOP filed a brief in opposition. (Doc. 81). Canfield filed a reply on May 10, 2017, (Doc. 82), rendering her motion ripe for review. Canfield specifically seeks reconsideration of the court's March 22, 2017 decision with respect to her express breach of contract claims-her first and second claims for relief. In the alternative, she seeks reconsideration of the court's decision to dismiss those claims with prejudice and requests leave to amend her complaint. SOP argues that reconsideration is not warranted.

         II. LEGAL STANDARDS

         A. Motions for Reconsideration

         A motion for reconsideration may be used to seek remediation for manifest errors of law or fact or to present newly discovered evidence which, if previously discovered, might have affected the court's decision. United States el rel. Schumann v. Astrazeneca Pharmaceuticals, L.P., 769 F.3d 837, 848 (3d Cir. 2014) (citing Max's Seafood Café v. Quineros, 176 F.3d 669, 677 (3d Cir. 1999)); Harsco Corp. v. Zlotnicki, 779 F.2d 906, 909 (3d Cir. 1985). A party seeking reconsideration must demonstrate at least one of the following grounds: (1) an intervening change in the controlling law; (2) the availability of new evidence that was not available when the court granted the motion; or (3) the need to correct a clear error of law or fact or to prevent manifest injustice. Lazaridis v. Wehmer, 591 F.3d 666, 669 (3d Cir. 2010); Max's Seafood Café, 176 F.3d at 677 (citing North River Ins. Co. v. CIGNA Reinsurance Co., 52 F.3d 1194, 1218 (3d Cir. 1995)). However, “[b]ecause federal courts have a strong interest in the finality of judgments, motions for reconsideration should be granted sparingly.” Continental Casualty Co. v. Diversified Indus. Inc., 884 F.Supp. 937, 943 (E.D. Pa. 1995).

         Reconsideration is generally appropriate in instances where the court has “misunderstood a party, or has made a decision outside the adversarial issues presented to the [c]ourt by the parties, or has made an error not of reasoning, but of apprehension.” York Int'l Corp. v. Liberty Mut. Ins. Co., 140 F.Supp.3d 357, 360-61 (3d Cir. 2015) (quoting Rohrbach v. AT & T Nassau Metals Corp., 902 F.Supp. 523, 527 (M.D. Pa. 1995)). It may not be used as a means to reargue unsuccessful theories that were presented to the court in the context of the matter previously decided “or as an attempt to relitigate a point of disagreement between the [c]ourt and the litigant.” Id. at 361 (quoting Ogden v. Keystone Residence, 226 F.Supp.2d 588, 606 (M.D. Pa. 2002)). The “motion will not be granted merely because a party is dissatisfied with the court's ruling, nor will a court consider repetitive arguments that were previously asserted and considered.” Frazier v. SCI Med. Dispensary Doctor 2 Staff Members, No. 1:07-194, 2009 WL 136724, at *2 (M.D. Pa. Jan. 16, 2009) (collecting cases).

         B. Leave to Amend

         The filing of an amended complaint is governed by Federal Rule of Civil Procedure 15. Where the time to amend as a matter of right has expired, [2] “a party may amend its pleading only with the opposing party's written consent or the court's leave.” Fed. R. Civ. P. 15(a)(2). “The court should freely give leave when justice so requires.” Fed. R. Civ. P. 15(a). In the spirit of Rule 15, the United States Court of Appeals for the Third Circuit has adopted a liberal approach to the amendment of pleadings in order to ensure that “a particular claim will be decided on the merits rather than on technicalities.” Dole v. Arco Chem. Co., 921 F.2d 484, 486-87 (3d Cir. 1990).

         Amendment, however, is not automatic. See Dover Steel Co., Inc. v. Hartford Accident and Indent., 151 F.R.D. 570, 574 (E.D. Pa.1993). Leave to amend will not be granted if there is “undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of the allowance of the amendment, futility of amendment, etc.” Foman v. Davis, 371 U.S. 178, 182 (1962); see also Oran v. Stafford, 226 F.3d 275, 291 (3d Cir. 2000).

         The court's dismissal of Canfield's first and second claim for relief with prejudice was premised on futility.

Futility means that the complaint, as amended, would fail to state a claim upon which relief could be granted. The standard for assessing futility is the same standard of legal sufficiency as applied under Federal Rule of Civil Procedure 12(b)(6). In other words, the District Court determines futility by taking all pleaded allegations as true and viewing them in the light most favorable to the plaintiff.

Great W. Mining & Mineral Co. v. Fox Rothschild LLP, 615 F.3d 159, 175 (3d Cir. 2010) (internal quotation marks, citations, and original alterations omitted). If the proposed amendment “is frivolous or advances a claim or defense that is legally insufficient on its face, the court may deny leave to amend.” Harrison Beverage Co. v. Dribeck Imp., Inc., 133 F.R.D. 463, 468 (D.N.J.1990).

         III. DISCUSSION

         Canfield challenges the dismissal of her express breach of contract claims on two primary grounds. First, she alleges that the court's construction of her lease agreement was incorrect, an error of law. Canfield proposes a new interpretation of her lease that was not previously proposed to the court. Second, she alleges that the court misconstrued her second claim for relief, a factual error that warrants a different result ...


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