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Earnshaw v. Chesapeake Appalachia, L.L.C.

United States District Court, M.D. Pennsylvania

December 23, 2019

WILLIAM N. EARNSHAW and HELEN A. EARNSHAW, Plaintiffs,
v.
CHESAPEAKE APPALACHIA, L.L.C. and EQUINOR USA ONSHORE PROPERTIES, INC. f/k/a USA ONSHORE PROPERTIES, INC., Defendants.

          MEMORANDUM

          A. Richard Caputo United States District Judge

         Presently before me is the Motion to Dismiss Counts I-II of the Complaint (Doc. 6) filed by Defendants Chesapeake Appalachia, L.L.C. (“Chesapeake”) and Equinor USA Onshore Properties, Inc. (“Equinor”) (collectively, where appropriate, “Defendants”). In support of their motion, Defendants submit, inter alia, an oil and gas well production report to support their position that the Lease was held by production. As a result, Defendants conclude that the declaratory judgment claim in Count I and the trespass claim in Count II fail as a matter of law. Plaintiffs William N. Earnshaw and Helen A. Ernshaw (collectively, where appropriate, “Plaintiffs”) object to Defendants' attempt to interject the well production report at this stage of the litigation. Because the truth of the contents of that report cannot be considered on a 12(b)(6) motion, Defendants' motion to dismiss will be denied.

         I. Background

         The facts as alleged in the Complaint are as follows:

         William and Rosemary Shoemaker (the “Shoemakers”) were owners of certain parcels of property (the “Property”) in the Township of Mehopany in Wyoming County, Pennsylvania. (See Compl., ¶ 11). On October 12, 2007, the Shoemakers entered into an Oil and Gas Lease (the “Lease”) with Magnum Land Services, LLC (“Magnum”). (See id. at ¶ 12 & Ex. “B”). Magnum assigned all of its rights, title and interest in and under the Lease to Chesapeake. (See id. at ¶ 13). Chesapeake subsequently assigned an interest in the Lease to Equinor. (See id. at ¶ 14).

         Chesapeake and Equinor are currently the only lessees under the Lease. (See id.). On or about September 14, 2011, the Shoemakers sold, transferred, and conveyed a portion of the Property to Plaintiffs. (See id. at ¶ 15 & Ex. “C”).

         The original primary term of the Lease was for a period of five (5) years, which expired on October 11, 2012. (See id. at ¶ 16; see also id. at Ex. “B”, ¶ 5). The pertinent Lease language provides:

This lease shall continue in force and the rights granted hereunder be quietly enjoyed by the Lessee for a term of five (5) years and so much longer thereafter as oil gas and/or coalbed methane gas or their constituents are produced or are capable of being produced on the premises in paying quantities in the judgment of the Lessee or as the premises shall be operated by the Lessee in the search for oil gas and/or coalbed methane gas and as provided in Paragraph 7 following.

(Id. at Ex. “B”, ¶ 5). Prior to the expiration of the primary term, Defendants exercised their rights under Paragraph 19 of the Lease and extended it for an additional five (5) years. (See Doc. 1, ¶ 16; see also id. at Ex. “B”, ¶ 19 (“This Lease may at Lessee's option be extended as to all or part of the lands covered hereby for one additional primary term of five (5) years commencing on the date that the lease would have expired but for the extension.”)). After the extension of the original primary term of the Lease, “Defendants failed to comply with the terms of the Lease and as such, the Lease expired by its own terms on October 11, 2017.” (Id. at ¶ 16). Specifically, Defendants attempted to “hold the Lease by production” by violating the terms of the Lease, namely, the Lease's unitization provision. (See id. at ¶ 17 & Ex. “B”, ¶ 8).

         Based on the foregoing, Plaintiffs commenced this action by filing a Complaint against Chesapeake and Equinor on August 1, 2019 in the Court of Common Pleas of Wyoming County, Pennsylvania. (See Doc. 1, Ex. “A”). The Complaint contains three causes of action: (1) declaratory judgment (Count I); unlawful trespass on land (Count II); and breach of contract pled in the alternative (Count III). (See id.).

         On August 26, 2019, Defendants removed the action to this Court on the basis of diversity of citizenship. (See Doc. 1, generally). Defendants subsequently filed the instant motion to dismiss Counts I and II of the Complaint. (See Doc. 6, generally). The motion to dismiss has been fully briefed and is now 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 ...


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