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Chambers v. Chesapeake Appalachia, L.L.C.

United States District Court, M.D. Pennsylvania

July 12, 2018

WILLIAM A. CHAMBERS, et al., Plaintiffs,
v.
CHESAPEAKE APPALACHIA, L.L.C. and STATOIL USA ONSHORE PROPERTIES INC., Defendants.

          MEMORANDUM

          A. Richard Caputo, United States District Judge

         Presently before me are a Motion to Dismiss (Doc. 10) filed by Defendant Statoil USA Onshore Properties Inc. (“Statoil Properties”) and a Motion to Dismiss (Doc. 11) filed by Defendant Chesapeake Appalachia, L.L.C. (“CALLC”). Plaintiffs commenced this action alleging that Statoil Properties and CALLC violated the terms of the parties' oil and gas leases. Statoil Properties and CALLC have moved to dismiss Plaintiffs' claims for, inter alia, failing to comply with the condition precedent in the leases requiring Plaintiffs to provide Defendants with written notice and an opportunity to cure any alleged breaches prior to commencing litigation. For the reasons that follow, the motions to dismiss will be granted in part.

         I. Background

         Plaintiffs in this action are William A. Chambers, Joseph B. Chambers, Jeanne C. Faux, Barbara C. Henning, Loren Day, Lori A. Day, Samantha Scholz, John D. Witter, and Richard W. Witter (collectively, “Plaintiffs”). (See Compl., ¶¶ 12-21). Plaintiffs are all Lessors of properties pursuant to the terms of Oil and Gas Leases (the “Leases”). (See id. at ¶¶ 22-27). CALLC and Statoil Properties are now the Lessees under the terms of the Leases. (See id.).

         Plaintiffs filed their Complaint in the Court of Common Pleas of Wyoming County, Pennsylvania against Statoil Properties and CALLC on January 24, 2018. (See Doc. 1-1). The Complaint sets forth the following causes of action: (1) Breach of Contract - 160 Acre Well Density Clause Violation (Count I); (2) Breach of Contract - Specific Performance or Termination (Count II); (3) Breach of Contract (In the Alternative) - Bad Faith Pooling (Count III); (4) Breach of Contract - Habendum Clause Violation (Count IV); (5) Breach of Contract - Post-Production Cost Deduction Violation against CALLC only (Count V); (6) Breach of Contract - Affiliate Transfer Violation against Statoil Properties only (Count VI); and (7) Breach of Implied Covenants to Develop and Operate Lesehold for the Mutual Benefit of the Lessor and Lessee and Duty to Market against Statoil Properties only (Count VII).

         On February 21, 2018, CALLC, with the consent of Statoil Properties, removed the action to this Court. (See Doc. 1, ¶ 30; see also id., generally).

         CALLC and Statoil Properties both moved to dismiss the Complaint on March 21, 2018. (See Docs. 10-11, generally). Among other grounds for dismissal, CALLC and Statoil Properties both contend that Plaintiffs' claims should be dismissed because Plaintiffs failed to plead that they satisfied the written notice requirements of the Leases, which Defendants characterize as a condition precedent to the commencement of litigation. (See id.).

         Plaintiffs timely filed a brief in opposition to the motions to dismiss. (See Doc. 20, generally). Therein, Plaintiffs dispute that the Complaint is subject to dismissal for failure to comply with the notice provision of the Leases. (See Doc. 20, 9-13). CALLC and Statoil Properties timely filed replies thereto. (See Docs. 23-24, generally). The motions to dismiss are thus fully briefed and ripe for disposition.

         II. Legal Standard

         Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a complaint, in whole or in part, for failure to state a claim upon which relief can be granted. See Fed. R. Civ. P. 12(b)(6). “Under the ‘notice pleading' standard embodied in Rule 8 of the Federal Rules of Civil Procedure, a plaintiff must come forward with ‘a short and plain statement of the claim showing that the pleader is entitled to relief.'” Thompson v. Real Estate Mortg. Network, 748 F.3d 142, 147 (3d Cir. 2014) (quoting Fed.R.Civ.P. 8(a)(2)).

         When resolving a Rule 12(b)(6) motion, “a court must consider no more than whether the complaint establishes ‘enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary elements' of the cause of action.” Trzaska v. L'Oreal USA, Inc., 865 F.3d 155, 162 (3d Cir. 2017) (quoting Connelly v. Lane Constr. Corp., 809 F.3d 780, 789 (3d Cir. 2016)). In reviewing the sufficiency of a complaint, a court must take three steps: (1) identify the elements of the claim; (2) identify conclusions that are not entitled to the assumption of truth; and (3) assume the veracity of the well-pleaded factual allegations and determine whether they plausibly give rise to an entitlement to relief. See Connelly, 809 F.3d at 787 (citations omitted). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)).

         III. Discussion

         CALLC and Statoil Properties move for dismissal of claims based on Plaintiffs' failure to provide written notice and an opportunity to cure the alleged breaches of the Leases prior to commencing this action. Paragraph 16 of the Leases provides:

In the event Lessor considers that Lessee has not complied with any of its obligations hereunder, either express or implied, Lessor shall notify Lessee in writing setting out specifically in what respects Lessee has breached this contract. Lessee shall then have thirty (30) days after receipt of said notice within which to meet or commence to meet all or any part of the breaches alleged by Lessor. The service of said notice shall be precedent to the bringing of any action by Lessor on said lease for any cause, and no such action shall be brought until the lapse of thirty (30) days after service of such notice on Lessee. Neither the service of said notice nor the doing of any acts by ...

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