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Northeast Natural Energy LLC v. Larson

United States District Court, W.D. Pennsylvania

September 20, 2019

NORTHEAST NATURAL ENERGY LLC, Plaintiff,
v.
ALAN R. LARSON, JUDITH S. LARSON, ROGER L. LARSON, CATHY R. LARSON, DOUGLAS RYDBERG, MOUNTAIN VIEW CENTER, INC., KARI L. LARSON, ANDREW J. LARSON, EDWARD HOUSTON, CARLENE PEARCE-HOUSTON, MICHAEL RUDELLA, MARY ANN RUDELLA, RHCC, LLC, DORTHY J. MILSPAW, ALDER RUN LAND, LP, ORRIN L. FRENCH, JEFFREY A. DALKE, CATHERINE G. ANDERSON, DAVID K. DAHLGREN, MARJORIE DAHLGREN, BONNIE LOU DAHLGREN PETERS, and TERRY PETERS, Defendants.

          MEMORANDUM OPINION

          KIM R. GIBSON UNITED STATES DISTRICT JUDGE

         I. Introduction

         Pending before the Court is Plaintiff Northeast Natural Energy LLC's Amended Motion to Vacate Arbitration Award (ECF No. 16) and Defendants Alan R. Larson et al.'s Motion to Dismiss and Motion to Confirm Arbitration Award (ECF No. 6). These motions are fully briefed and are ripe for disposition. (See ECF Nos. 7, 17, 18, 19, 22.)

         This case arises from a dispute over the parties' obligations under several oil and gas leases. The parties engaged in arbitration pursuant to an arbitration agreement. The arbitration panel (the "Panel") entered awards in favor of Defendants and Plaintiff filed the Complaint in this Court seeking to vacate the Panel's arbitration award.

         For the reasons that follow, Plaintiff's Amended Motion to Vacate Arbitration Award (ECF No. 16) is DENIED, and Defendants' Motion to Dismiss and Motion to Confirm Arbitration Award (ECF No. 6) is GRANTED in part and DENIED in part.

         II. Jurisdiction and Venue

         Defendants contest subject matter jurisdiction in this case. (See ECF No. 6 ¶ 4.) The Court has diversity jurisdiction over this case pursuant to 28 U.S.C. § 1332 because the parties are diverse and the amount in controversy is more than $75, 000. (See Id . ¶¶ 5-26; ECF No. 16 ¶¶ 3-4.) Plaintiff is a limited liability company whose members are all citizens of West Virginia. (See ECF No. 6 ¶ 25; ECF No. 16 ¶ 4.) None of Defendants are citizens of West Virginia. (See ECF No. 6 ¶¶ 5-24; ECF No. 16 ¶ 3.) Venue is proper in the Western District of Pennsylvania pursuant to 9 U.S.C. § 9, under which venue is proper in the district in which the arbitration award was made. The arbitration award was made in Pittsburgh, Pennsylvania, which is within the Western District of Pennsylvania. (ECF No. 16 ¶ 7; ECF No. 6 ¶ 27.) Venue is also proper under 28 U.S.C. § 1391 because the property that is the subject of the underlying arbitration action is located principally in Clearfield County, Pennsylvania, which is also within the Western District of Pennsylvania. (ECF No. 16 ¶ 7.) Because this Court has subject matter jurisdiction over this case, Defendants' Motion to Dismiss for lack of subject matter jurisdiction is denied.

         III. Procedural History

         Plaintiff initiated this lawsuit by filing the Complaint on November 29, 2018. (ECF No. 1.) Plaintiff seeks vacatur of an arbitration award on the grounds that the Panel exceeded its powers and "manifestly disregarded" the law. (Id. at 2.)

         In response, Defendants filed the Motion to Dismiss and Motion to Confirm Arbitration Award on January 4, 2019, asking the Court to dismiss the Complaint and confirm the arbitration award. (ECF No. 6.) Plaintiff filed a Motion to Vacate Arbitration Award on January 7, 2019. (ECF No. 8.) Plaintiff then voluntarily dismissed its claims against Larson Enterprises, Inc. and Kristi A. Rydberg (collectively the "Dismissed Defendants"). (ECF No. 11.) The Court granted Plaintiff leave to amend its Motion to Vacate and filed the Amended Motion to Vacate Arbitration Award on January 28, 2019. (ECF No. 16.) The briefing and responses on these motions concluded on March 12, 2019. (See ECF Nos. 7, 17, 18, 19, 22.)

         IV. Factual History

         The following facts are undisputed unless otherwise noted.[1]

         Defendants are owners of land in Clearfield and Centre Counties who entered into oil and gas leases (the "Leases") with East Resources, Inc. between 2009 and 2010. (ECF No. 17 at 3.) The primary term of the Leases was 5 years. (ECF No. 1-5 at 8.) The Leases each contained a surrender clause, which stated:

Lessee at any time, and from time to time, may surrender this lease as to all or part thereof by recording an appropriate instrument of surrender in the proper county and thereupon this lease and the rights, rentals and obligations of the parties hereunder shall terminate as to the part so surrendered ...

(Id. at 9.) The Leases were amended in 2011 and in 2012 through an addendum to the Leases (the "Addendum"). (ECF No. 17 at 5.) The Addendum changed the language regarding the rental payments. The original language of paragraph 6, titled "Rental Payments, " stated:

This lease is made on the condition that within [90] days from the Effective Date of this lease, Lessee shall pay to the Lessor the sum of [$250] per acre for the first year. Thereafter, if operations for drilling are not commenced on leased premises or on acreage pooled therewith on or before [1] year from the Effective Date hereof, this lease shall terminate as to both parties unless on or before such Effective Date Lessee shall pay or tender to Lessor the sum of [$250] per acre ....

(ECF No. 1-5 at 9.) In the Addendum, that paragraph was deleted and replaced with a new paragraph titled "Delay Rental and Minimum Annual Payments." (Id. at ...


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