Opinion · District Court, S.D. Ohio
J&R Passmore, LLC v. Rice Drilling D, LLC
j-and-r-passmore-llc-v-rice-drilling-d-llc-10384376-8ef9fae16db0baec-2024-03-29
- Type
- Opinion
- Court
- District Court, S.D. Ohio
- Jurisdiction
- Ohio
- Date
- 2024-03-29
- Topic
- general
IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF OHIO EASTERN DIVISION J&R PASSMORE, LLC et al., : : Plaintiffs, : Case No. 2:18-cv-01587 : v. : Chief Judge Algenon L. Marbley : RICE DRILLING D, LLC et al., : Magistrate Judge Kimberly A. Jolson : Defendants. : OPINION & ORDER This matter is before this Court on four motions for summary judgment—Ascent and XTO’s Motion for Summary Judgment (ECF No. 443); Defendants’ Motion for Summary Judgment (ECF No. 444); Gulfport’s Motion for Summary Judgment (ECF No. 445); and Plaintiffs’ Motion for Summary Judgment (ECF No. 447)—and Plaintiffs’ Motion to Stay or in the Alternative for Leave to File Supplemental Motion for Summary Judgment (ECF No. 477). For the reasons set forth infra, this Court orders as follows: Threshold Matters. o Issue Preclusion as to Count I: Plaintiffs’ motion is DENIED on this issue as to all Defendants. o Gulfport’s Bankruptcy Settlement: Summary judgment is appropriate on Plaintiffs’ claims against Gulfport for damages that accrued before May 17, 2021, so Gulfport’s motion is GRANTED. o Passmore and XTO’s Joint Operating Agreements: XTO’s request for summary judgment on joint operating agreement grounds is DENIED. 1 o Joint Venture Theory as to Ascent and XTO: Consistent with the carve outs and clarifications in this Court’s opinion, infra Section III.A(4), Ascent and XTO’s motion for summary judgment on this issue is GRANTED IN PART AND DENIED IN PART. Count I – Declaratory Judgment. Summ…
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
J&R PASSMORE, LLC et al., :
:
Plaintiffs, : Case No. 2:18-cv-01587
:
v. : Chief Judge Algenon L. Marbley
:
RICE DRILLING D, LLC et al., : Magistrate Judge Kimberly A. Jolson
:
Defendants. :
OPINION & ORDER
This matter is before this Court on four motions for summary judgment—Ascent and
XTO’s Motion for Summary Judgment (ECF No. 443); Defendants’ Motion for Summary
Judgment (ECF No. 444); Gulfport’s Motion for Summary Judgment (ECF No. 445); and
Plaintiffs’ Motion for Summary Judgment (ECF No. 447)—and Plaintiffs’ Motion to Stay or in
the Alternative for Leave to File Supplemental Motion for Summary Judgment (ECF No. 477).
For the reasons set forth infra, this Court orders as follows:
Threshold Matters.
o Issue Preclusion as to Count I: Plaintiffs’ motion is DENIED on this issue as to
all Defendants.
o Gulfport’s Bankruptcy Settlement: Summary judgment is appropriate on
Plaintiffs’ claims against Gulfport for damages that accrued before May 17, 2021,
so Gulfport’s motion is GRANTED.
o Passmore and XTO’s Joint Operating Agreements: XTO’s request for summary
judgment on joint operating agreement grounds is DENIED.
1
o Joint Venture Theory as to Ascent and XTO: Consistent with the carve outs and
clarifications in this Court’s opinion, infra Section III.A(4), Ascent and XTO’s
motion for summary judgment on this issue is GRANTED IN PART AND
DENIED IN PART.
Count I – Declaratory Judgment. Summary judgment is:
o DENIED as to Plaintiffs; and
o DENIED IN PART AND GRANTED IN PART as to Defendants. It is
GRANTED only as to the following four parcels based on the Schusters’
November 12, 2021 lease language—14-00372.000; 14-00075.000; 26-03329.000;
and 26-03298.000—and DENIED as to the rest.
Count II – Trespass. Summary judgment is:
o DENIED as to Plaintiffs; and
o GRANTED IN PART AND DENIED IN PART as to Defendants. It is
GRANTED only as to the following properties and DENIED as to the rest:
Tracts 2, 7, 13, and 44 of the Bennington Units;
Tract 22 of the Marcum East Unit;
Tract 14 of the Heller B Unit; and
Tracts 5 and 21 of the Heller A Unit.
Counts III & IV – Conversion & Unjust Enrichment. Summary judgment is:
o GRANTED IN PART as to Defendants regarding the following properties:
Tracts 2, 7, 13, and 44 of the Bennington Units;
Tract 22 of the Marcum East Unit;
Tract 14 of the Heller B Unit; and
2
Tracts 5 and 21 of the Heller A Unit.
o DENIED as to all other issues.
Affirmative defenses. Plaintiffs’ Motion is DENIED as to all affirmative defenses.
Plaintiffs’ Motion to Stay. Plaintiffs’ motion to stay is GRANTED.
I. BACKGROUND
A. Factual Background
Plaintiffs J&R Passmore, LLC (“Passmore”); Bruce and Jennifer Schuster; Brent and
Doreen Butler; and Ryan and Cheryl Feiock (collectively, “Plaintiffs”) own various pieces of
property in Belmont County, Ohio, as well as the oil and gas rights to these properties. (ECF No.
38, ¶¶ 1–4). Defendant Rice Drilling D, LLC, (“Rice”) entered into leases with Plaintiffs for the
development of oil and gas minerals on Plaintiffs’ properties. (Id., ¶¶ 31–37).
Rice and Defendant Gulfport Energy Corporation (“Gulfport Energy”) subsequently came
to an agreement whereby they agreed to drill wells in Belmont County. (Id., ¶ 46). Pursuant to this
agreement, each drilled wells on Passmore’s property, while Rice drilled additional wells on the
Schusters’, Butlers’, and Feiocks’ properties. (Id., ¶¶ 49–50, 62, 71, 80). Rice and Gulfport Energy
shared in the revenue produced from the sale of oil, gas, and other hydrocarbons from the wells on
each of these properties. (Id., ¶¶ 54–58, 65–66, 74–75, 82–83). Rice also assigned certain interests
it had in its lease with Passmore and in certain leases with other then-putative class members to
Defendant Gulfport Appalachia, LLC (“Gulfport Appalachia”). (ECF No. 262 at 1).
XTO Energy Inc. (“XTO”) and Ascent Resources–Utica, LLC (“Ascent”) agreed to share
the burden of the funding, exploration, and development of their jointly owned interests in Belmont
County. (ECF No. 38, ¶ 92). XTO and Ascent also have agreements with Rice to allow XTO and
Ascent to drill wells on the Passmore and Schuster properties. (Id., ¶ 93). Pursuant to these
3
agreements, XTO drilled wells on the Passmore and Schuster properties. (Id., ¶¶ 96, 107). XTO
and Ascent share in the revenue produced from the sale of oil, gas, and other hydrocarbons
produced from the wells on these properties. (Id., ¶¶ 97, 100–05, 108, 111–14). Additionally, XTO
has acquired interests in four leases containing the contract language at-issue in this matter. (ECF
No. 391 at 3).
While the parties and their respective experts agree that the Marcellus Shale, Utica Shale,
and Point Pleasant are separate geological formations, the parties disagree on what the relevant
contract language within the leases intended to convey to Defendants versus reserve to Plaintiffs.
Plaintiffs allege that Defendants have infringed on Plaintiffs’ mineral rights by drilling on and
producing from property that they are not entitled to drill—specifically, the Point Pleasant—
outside of the terms of their leases. (ECF No. 38, ¶¶ 51–52, 63–64, 72–73, 80–81, 98–99, 109–
10). Defendants allege that at the time of the contract negotiations, the Point Pleasant formation
was understood to be part of the Utica Shale, and therefore, the language in the leases allows them
to drill into the Point Pleasant formation.
B. Procedural Background
Plaintiffs filed this action on December 6, 2018 (ECF No. 1), and subsequently filed an
amended Complaint a few months later. (ECF No. 38). The Defendants then filed a series of
Motions to Dismiss (ECF Nos. 47–49), in response to which this Court: (1) denied Rice’s Motion
to Dismiss; (2) granted Ascent and XTO’s Motions to Dismiss as to the Butlers and Feiocks; (3)
denied Ascent and XTO’s Motions to Dismiss as to Passmore and the Schusters; and (4) dismissed
the Butlers’ and Feiocks’ claims against Ascent and XTO. (ECF No. 82 at 15). In July 2021,
Plaintiffs filed and were granted an unopposed Motion to add Gulfport Appalachia, LLC as a
defendant, because Gulfport Appalachia was assigned some of Rice’s interests in the leases and in
4
light of Gulfport Energy’s recent bankruptcy proceedings (together, “Gulfport”). (ECF No. 262 at
1; ECF No. 264).
Plaintiffs requested to proceed with their claims as a class action, but this Court denied
class certification after oral argument. (ECF Nos. 382, 430, 437). This Court subsequently received
four motions for summary judgment: one from Ascent and XTO (ECF No. 443), one from all the
Defendants (ECF No. 444, 471), one from Gulfport (ECF No. 445), and one from the Plaintiffs
(ECF No. 447). Plaintiffs filed an omnibus opposition to all three cross-motions (ECF No. 451),
and Defendants opposed Plaintiffs’ motion (ECF Nos. 450, 452, 453). Plaintiffs also sought leave
to amend, and thereafter amended, their complaint to clarify the properties at issue. (ECF Nos.
458, 465, 466). This Court held oral argument on all four summary judgment motions (ECF No.
480), which are now ripe for review. Additionally, prior to this Court’s oral argument on the
summary judgment motions, Plaintiffs sought to stay this case in light of Gulfport’s filing of a
motion for contempt in the United States Bankruptcy Court for the Southern District of Texas
(“Bankruptcy Court”) (ECF No. 477), which Gulfport agrees is the best course of action (ECF No.
479). This motion is now also ripe for review.
II. STANDARD OF REVIEW
Summary judgment is appropriate “if the movant shows that there is no genuine dispute as
to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a); Maben v. Thelen, 887 F.3d 252, 258
(6th Cir. 2018). The court’s function at the summary judgment stage is “not [] to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc.,477 U.S. 242, 249
(1986). The court thus asks “whether ‘the evidence presents a sufficient disagreement to
require submission to a jury or whether it is so one-sided that one party must prevail as a matter of
5
law.’” Patton v. Bearden, 8 F.3d 343, 346
(6th Cir. 1993) (quoting Anderson, 477 U.S. at 251– 52). Ultimately, “summary judgment will not lie if the dispute is about a material fact that is ‘genuine,’ that is, if the evidence is such that a reasonable jury could return a verdict for the non- moving party.” Anderson,477 U.S. at 248
. That is, “there is no issue for trial unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party.”Id. at 250
. Evidence that is “merely colorable” or “not significantly probative,” however, is not enough to defeat summary judgment.Id.
at 249–50
The party seeking summary judgment carries the initial burden of presenting the court with
law and argument in support of its motion, as well as identifying the relevant portions of “‘the
pleadings, depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any,’ which it believes demonstrate the absence of a genuine issue of material fact.”
Celotex Corp. v. Catrett, 477 U.S. 317, 323
(1986) (quoting Fed. R. Civ. P. 56). If this initial burden is satisfied, then the burden shifts to the nonmoving party to set forth specific facts showing that there is a genuine issue for trial. See Fed. R. Civ. P. 56(e); see also Anderson,477 U.S. at 250
.
Importantly, at the summary judgment stage, the court must “view[] factual evidence in the
light most favorable to the non-moving party and draw[] all reasonable inferences in that party’s
favor.” Barrett v. Whirlpool Corp., 556 F.3d 502, 511
(6th Cir. 2009). Accordingly, at this stage in the litigation, the court must accept the non-moving party’s version of events without weighing the evidence or assessing the credibility of prospective witnesses. Cordell v. McKinney,759 F.3d 573, 578
(6th Cir. 2014). But, “[t]he mere existence of a scintilla of evidence to support [the non- moving party’s] position will be insufficient; there must be evidence on which the jury could reasonably find for the [non-moving party].” Copeland v. Machulis,57 F.3d 476, 479
(6th Cir. 1995) (citing Anderson,477 U.S. at 252
).
6
III. LAW & ANALYSIS
A. Threshold Matters
1. Issue Preclusion
Unsurprisingly, Plaintiffs seek to preclude Defendants from asserting that: (1) the leases
conveyed Plaintiffs’ rights to the Point Pleasant to Defendants; and (2) any trespass was innocent.
In arguing as much, they allege that an Ohio state court decision “addressed the precise issue set
forth in Count I; namely, did Rice and Gulfport have the rights to drill and produce the Point
Pleasant Formation?” (ECF No. 447 at 40 (discussing Tera, LLC v. Rice Drilling D, LLC, 2023-
Ohio-273, P51, 205 N.E.3d 1168, 1184
(7th Dist. 2023))). In response, Defendants point to this Court’s prior decision in the TERA II litigation to assert that “Ohio law does not permit non-mutual offensive issue preclusion—the theory upon which Plaintiffs rely—in this case.” (ECF No. 450 at 2 (citing TERA II, LLC v. Rice Drilling D, LLC, No. 2:19-cv-02221,2023 WL 4236670
, at *6
(S.D. Ohio June 28, 2023))).
While Defendants are partially correct inasmuch as “Ohio courts generally require
mutuality of parties to apply collateral estoppel,” this Court recently elaborated on the limited
exceptions where non-mutual offensive collateral estoppel is permitted—“where the defendant
‘clearly had his day in court on the specific issue brought into litigation within the later proceeding,
[then] the non-party plaintiff [can] rely upon the doctrine of collateral estoppel to preclude the
relitigation of that specific issue.’” TERA II, 2023 WL 4236670
, at *5 (quoting In re: E.I. Dupont de Nemours and Co. C-8 Personal Injury Litig.,54 F.4th 912, 922
(6th Cir. 2022)). The
relationship between the Passmore litigation and the TERA, LLC state litigation mirrors that of the
relationship between the TERA II litigation and the TERA, LLC state litigation and, as was the case
in TERA II, “[h]ere, Plaintiffs attempt to stop Defendants from relitigating the issues which
7
defendants previously litigated and lost against another plaintiff.” Id. at *6. Considering this Court
did not find an exception to the general mutuality-of-parties requirement to be warranted in TERA
II where the parties were even more similar, “the application of non-mutual offensive collateral
estoppel would be unfair to Defendants” as to different plaintiffs. Id. at *6. As such, this Court
DENIES Plaintiffs’ request for summary judgment on preclusion.
2. Gulfport’s Bankruptcy Settlement (ECF No. 445)
While Gulfport joined and incorporated the broader motion for summary judgment on
behalf of all Defendants (ECF No. 444), Gulfport separately moved for partial summary
judgment “on all claims for damages that accrued before May 17, 2021” based on Gulfport’s
interpretation of the parties’ settlement agreement. (ECF No. 445 at 1).
The settlement agreement in question splits Plaintiffs’ claims against Gulfport into two
categories: settled claims and reserved claims. (ECF No. 445-3 at PageID 43305). Settled claims
pre-date Gulfport’s bankruptcy “emergence date”—May 17, 2021—while reserved claims are
those that accrued on or after this date, regardless of whether such claims had already been
asserted. (Id.).
Plaintiffs agree that any of their claims—be it declaratory judgment, trespass, conversion,
or unjust enrichment—for Gulfport’s actions prior to May 17, 2021, have been settled, such that
“Gulfport has no liability for those claims prior to that time” and owes no damages for that period
of time. (ECF No. 451 at 56). Where Plaintiffs appear to disagree is regarding whether “Plaintiffs
release all claims they asserted … against Gulfport before May 17, 2021,” as Plaintiffs maintain
that claims they previously asserted against Gulfport extend past May 17, 2021, and those claims
are still live. (Id.). This Court interprets Plaintiffs’ argument as emphasizing that the temporal
8
element relevant to the settled versus reserved divide hinges on the time of the conduct or at
issue in a given claim, not when Plaintiffs brought that claim.
This Court agrees, and finds there to be a clear overlap of the parties’ perspectives on the
impact of the settlement agreement: Plaintiffs’ claims for damages that accrued before May 17,
2021, were “settled” by the post-bankruptcy settlement agreement, but Plaintiffs’ claims for
damages that accrued (and conduct that occurred) on or after May 17, 2021, were “reserved” in
the settlement agreement, even if the foundation of such claims was asserted prior to this date.
This understanding is in line with this Court’s prior articulations of the impact of this same
settlement agreement. (See TERA II, No. 2:19-cv-02221, Jury Instructions, ECF No. 687 at 36,
44, 45). Summary judgment is therefore appropriate on Plaintiffs’ claims against Gulfport for
damages that accrued before May 17, 2021, so Gulfport’s motion is GRANTED. But out of an
abundance of caution, this Court emphasizes that Plaintiffs are correct that their claims for
damages against Gulfport accruing after May 17, 2021 are fair game for this Court and a potential
jury to consider, particularly in light of Gulfport’s admission of production after this date. (See
ECF No. 477 at 7).
3. Passmore and XTO’s Joint Operating Agreements
XTO claims that even if the Passmore leases do not permit production from the Point
Pleasant, XTO nonetheless “had the right to drill through and produce from the Point Pleasant
beneath the Passmore tracts in the Heller A and Heller B Units” pursuant to Passmore and XTO’s
joint operating agreements (“JOAs”). (ECF No. 443 at 5). In XTO’s view, if the Passmore leases
did not grant the right to drill the Point Pleasant, then the Point Pleasant beneath Heller A and B
is an “unleased … mineral interest[]” that is therefore subject to the depth-restriction-free JOA
lease, under which XTO can develop that land.
9
In response, Plaintiffs assert that the JOAs do not solve XTO’s problem, as they
“encumber[] parcels of land not at issue in this lawsuit[.]” (ECF No. 451 at 52). In support of this,
Plaintiffs explain that “the leases and interests subject to the JOA are identified on Ex. ‘A’” which,
in Passmore’s view, shows that the JOAs “appl[y] solely to Passmore’s unleased interest in Parcels
35-00196.000, 35-00196.001, 36-00134.000, and 35-90010.000 – NOT to Parcels 35-00172.000,
36-00134.000 and 35-00175.000.”1 (Id. at 53). To make their point, Plaintiffs give an example of
how Passmore’s working interest in the Heller B Unit was calculated and explain that this
calculation would be incorrect under Defendants’ theory. Plaintiffs also show that Exhibit A to the
Heller B Unit JOA refers to relevant tracts as being part of an “Oil and gas Lease[] Subject to
Agreement” such that, in their view, this land cannot be understood to be “unleased” as Defendants
argue.2 (Id. (citing ECF No. 493-14 at 41422–23)).
Based on the parties’ briefing, this Court understands the lay of the land as to this argument
to be as follows:
1 The Court notes that Plaintiffs included parcel number 36-00134.000 in both categories, and this Court understands
this parcel number to cover tracts in different units, but this Court understands Plaintiffs to be asserting that the entire
parcel is unleased.
2 In making this argument, Plaintiffs state that “Ex. A reflects that Parcels 35-00172.000, 35-00173.000 and 35-
00175.000 were contributed leases by XTO” but then connect the tracts listed in Exhibit A (Tracts 13, 14, and 15, of
Heller B) to “Parcels 35-00172.000, 36-00134.000 and 35-00175.000.” But other information connects Tract 14 of
Heller B to 35-00173.000, not 36-00134.000. (See ECF No. 454 at 2). As this other information aligns with this Court’s
understanding, this Court therefore interprets Plaintiffs’ reference to 36-00134.000 as it relates to Heller B Tract 14
to be a clerical error.
10
XTO
argues
Parcel Parcel Tract
Unit Wellbore? subject
Owner Number Number
to JOA
lease?
36-00133.000 7 No No
Bennington Passmore 36-00460.000 13 No No
Unit B 36-00134.000 2 No No
Schusters 14-00252.000 44 No No
35-00172.000 21 No Yes
Heller Unit A Passmore 36-00134.000 27 Yes Yes
35-00175.000 5 No Yes
35-00172.000 13 Yes Yes
Heller Unit B Passmore 35-00173.000 14 No Yes
35-00175.000 15 Yes Yes
Oral argument on this issue was instructive, as there is not a lot of on point case law in
Ohio. Based on the evidence, the arguments of counsel, and viewing the evidence in the light most
favorable to the nonmovant—which, on this issue, is Plaintiffs—the JOAs function as follows.
The “contract area” of the JOAs defines the parties’ “contributions” to the JOA, which are then
subject to the accompanying JOA lease. Before the JOAs, Passmore had some properties that were
already leased with Rice and some that were not. After reaching an impasse on an agreement about
the properties not yet leased to Rice, conversations shifted to the potential of forced unitization.
As a way to avoid this, Passmore contributed some of these unleased properties to the JOAs. XTO
also contributed some properties to the JOAs. So, this Court understands that the JOAs cover these
specifically dedicated plots of land—land that is not otherwise subject to a lease with Rice. Based
on this understanding and without a clear explanation contradicting this, this Court cannot then
make sense of the argument that any unleased interest—such as for the Point Pleasant, if the Smith-
Goshen leases are not found to have granted that interest—is somehow subsumed into the JOA
and its related lease. As such, summary judgment on JOA grounds is DENIED.
11
4. Joint Venture Theory for Ascent and XTO
In their summary judgment motion, Ascent and XTO claim that Plaintiffs failed to plead
joint venture and that, regardless, they hold no leases and operated no units or wells subject to the
Passmore or Schuster leases. (ECF No. 443 at 2). To the contrary, Plaintiffs assert that Ascent and
XTO may be jointly and severally liable for all of Plaintiffs’ potential damages pursuant to Ohio
Revised Code § 2307.22(A)(1), which Plaintiffs allege requires any party with more than a 50%
working interest in a pooled unit to be held jointly and severally liable in tort for all damages
relating to that pooled unit. (ECF No. 451 at 51–52).
Whether a joint venture exists is a question of fact, guided by the five O’Toole factors: 1)
existence of a joint contract; 2) Defendants’ intent to form a joint venture; 3) a “community of
interest and control, including contributions to the joint venture”; 4) Defendants’ “mutual right to
direct and control the purpose of the joint venture”; and 5) Defendants’ agreement to share in the
profits and the losses. Anchor v. O’Toole, 94 F.3d 1014, 1024
(6th Cir. 1996); Bennett v. Sinclair Ref. Co.,57 N.E.2d 776, 782
(Ohio 1944). Ohio law is clear that each party who has entered into a joint venture agreement is “liable for the negligent and tortious acts of the other members, pursuant to the venture, that result in injury to third persons.” Hulett v. Am.’s Finest Serv. Co., No. 1:03-cv-2497,2005 WL 2233261
, at *12 (N.D. Ohio Sept. 14, 2005); Ohio Rev. Code §
2307.22(A)(1).
This Court first addressed the issue of joint liability at the motion to dismiss stage of this
litigation in regard to Ascent, in which this Court explained that “Plaintiffs have pleaded sufficient
facts to allege a plausible claim of a joint venture and that Defendants may therefore be liable for
the negligent and tortious acts of their co-adventurers.” (ECF No. 82 at 13). Put differently, where
a Plaintiff has alleged that one Defendant physically trespassed onto its property, “it is immaterial
12
whether [another Defendant] physically trespassed”—that other Defendant can be liable vis-à-vis
a joint venture. (ECF No. 82 at 5). But a joint venture only covers so much, and this Court
determined that “XTO and Ascent cannot be liable for any of Rice’s drilling activities on the Butler
and Feiock properties,” thereby dismissing those claims against Ascent and XTO. (Id. at 6).
Before laying out the analysis as to Passmore and the Schusters, a few things are worthy
of mention. First, this Court does not read the Ohio joint and several tort liability statute quite the
same as Plaintiffs do, so this Court refrains from holding that a 50% working interest automatically
equals 50% liability. (See ECF No. 451 at 50–52). Second, when this Court reviewed joint and
several liability at the summary judgment stage in the related TERA II litigation, XTO had been
dismissed, hence the lack of discussion about XTO’s potential liability there. TERA II, 2023 WL 4236670
, at *6. Also, Plaintiffs properly pled the existence of a joint venture in their operative
complaint. (ECF No. 38 at 18). Lastly, XTO and Passmore’s joint operating agreements regarding
the Heller A and Heller B Units come back into play here. Supra Section III.A(3).
As to the relevant facts, Defendants have drilled wells into and extracted oil and gas from
the Point Pleasant via fourteen different pooled units that include Plaintiffs’ property. (ECF No.
446 at 3–12). While different individual Defendants have drilled into or hold varying interests in
the pooled units, as this Court has explained, “Rice and Gulfport have an agreement to drill wells
… ; in turn, Rice has business agreements with XTO and Ascent; and XTO and Ascent have a
business agreement with each other.” (ECF No. 82 at 6; ECF No. 447-21). Therefore, regardless
of whether XTO or Ascent has or could have physically trespassed upon the Passmore or Schuster
land, they could be found liable by nature of a joint venture if Plaintiffs allege sufficient facts as
to that Defendant’s connection to the underlying unit.
13
A review of Plaintiffs’ documentation of the Defendants’ respective working interests in
pooled units still at issue reveals that XTO held more than a 50% working interest in each pooled
unit other than the Heller B Unit. (See generally ECF No. 447-16; ECF No. 447 at 3–12). Based
on this, XTO could be held jointly and severally liable for these units as a result of a potential joint
venture, so XTO’s request for summary judgment as to its involvement in a joint venture regarding
these units is DENIED. See TERA II, 2023 WL 4236670
, at *8.
As to Ascent, it is true that Ascent was not assigned XTO’s rights, titles, and interests in
the units at issue here until July 1, 2022. (ECF No. 443 at 4; ECF No. 447 at 4–12). But Ascent
held a working interest, albeit a smaller one than XTO, in some of the Passmore and Schuster
property before then—specifically, the Bennington B Unit, the Heller A Unit, the Heller B Unit,
and the Kemper Unit. (ECF No. 447 at 4; ECF No. 447-21 (Ascent’s admission of these interests);
see, e.g., ECF No. 447-16 at PageID 44655–56, 44665–66); see TERA II, 2023 WL 4236670
, at
*7 (finding no plausible joint venture where the relevant defendants “either never held leases or
did not have a working interest in these units, or they assigned those interests to the other
Defendants prior to the completion of the drilling of the wells”). And as distinct from TERA II,
Ascent’s working interest in Heller A and B nullifies any argument that Ascent could not be held
liable as a result of not being part of the joint operating agreements. As such, prior to its assignment
of XTO’s rights in July 2022, Ascent could be held jointly and severally liable for the other
Defendants’ conduct as to the Bennington B Unit, the Heller A Unit, the Heller B Unit, and the
Kemper Unit if a joint venture is found.
So, this Court must assess if there exists a genuine dispute of material fact regarding
whether (1) XTO operated a joint venture as to the Heller B Unit, and (2) Ascent operated a joint
venture as to the Bennington B Unit, the Heller A Unit, the Heller B Unit, and the Kemper Unit.
14
As to XTO and Heller B, between XTO’s working interest in Heller B (ECF No. 447-16 at
36) and the joint operating agreement that provides for pooling and unitization rights (ECF No.
443-14), there exists no genuine dispute of material facts that XTO was involved in a joint venture,
so XTO’s motion for summary judgment as to a joint venture with Heller B is DENIED. See Cosic
v. Kronberg, 2012-Ohio-5982
, ¶ 18,984 N.E.2d 414
(Ohio Ct. App. 2012) (finding a joint venture
where there was joint profit resulting from combined business efforts).
Also, neither parties’ arguments and supporting records allow this Court to determine one
way or the other whether Ascent operated a joint venture as to the Bennington B Unit, the Heller
A Unit, the Heller B Unit, and the Kemper Unit, so Ascent’s request for summary judgment on its
involvement in a joint venture as to these units is DENIED.
To be clear, the Court reiterates that both XTO and Ascent can only be held liable under a
joint theory of liability for the periods in which they held an ownership or working interest in the
pooled units. The above analysis of XTO’s potential liability applies to XTO prior to its assignment
of its rights and interests to Ascent in July 2022. Before this assignment, Ascent only had a working
interest in the Bennington B Unit, the Heller A Unit, the Heller B Unit, and the Kemper Unit, so
Ascent can only be found to have engaged in a joint venture as to these units. But after XTO’s
assignment, Ascent assumes the same level of liability as XTO had which, as analyzed above, may
provide for joint and several liability as to all of the units. After this assignment, XTO “no longer
operates nor holds an interest in the Bennington Unit B, Heller Unit A, Heller Unit B, or Kemper
A Unit,” so XTO cannot be held jointly and severally liable as to these units after July 2022. (ECF
No. 443-1). Summary judgment is therefore GRANTED as to XTO after the July 2022
reassignment of rights.
15
B. Count I: Declaratory Judgment
The parties submitted cross-motions for summary judgment on Plaintiffs’ request for a
declaratory judgment. Plaintiffs’ request seeks three things:
(1) Plaintiffs … specifically reserved in the subject leases the right to all products
contained in any formation below the base of the Utica Shale, including, but not
limited to the Point Pleasant formation,
(2) the Point Pleasant formation is a separate and distinct formation from the Utica
Shale, and lies below the base of the Utica Shale formation; and
(3) Rice, Gulfport, XTO and Ascent do not have the right under the subject leases
to produce oil, natural gas, or other hydrocarbon products from any formation
below the Utica Shale including, but not limited to, the Point Pleasant formation.
(ECF No. 38 at 29). Defendants argue that this Court should grant summary judgment in their
favor because the terms of the leases grant Defendants the authority to drill into the Point Pleasant.
(ECF No. 444 at 18). But before getting to the substance, Defendants have two threshold concerns:
that (1) Plaintiffs seek state law relief that the federal court is unable to provide, and (2) the Court
should decline jurisdiction over the request for relief.
1. Relief Sought by and Jurisdiction Over Declaratory Judgment
As a federal court sitting in diversity to adjudicate state law claims, the federal Declaratory
Judgment Act—a procedural law—controls requests for declaratory relief. Skelly Oil Corp. v.
Phillips Petroleum Co., 339 U.S. 667, 671
(1950). In this way, Defendants are correct that Plaintiffs are necessarily seeking a declaratory judgment from this Court under federal law, and Plaintiffs’ citations to state declaratory judgment law on this matter are irrelevant. But Plaintiffs need not say some magic word to trigger this Court’s review; Plaintiffs request a declaratory judgment in federal court, and such requests are addressed under the Declaratory Judgment Act. See28 U.S.C. § 2201
(a) (requiring only “an appropriate pleading”).
16
So this Court considers whether an exercise of its discretionary jurisdiction is appropriate
based on the five “Grand Trunk factors”:
(1) whether the declaratory action would settle the controversy; (2) whether the
declaratory action would serve a useful purpose in clarifying the legal relations in
issue; (3) whether the declaratory action remedy is being used merely for the
purpose of “procedural fencing” or “to provide an arena for res judicata;” (4)
whether the use of the declaratory action would increase friction between our
federal and state courts and improperly encroach on state jurisdiction; and (5)
whether there is an alternative remedy which is more effective.
Travelers Indem. Co. v. Bowling Green Pro. Assoc., PLC, 495 F.3d 266, 271
(6th Cir. 2007) (quoting Grand Trunk W. R.R. Co. v. Consol. Rail Co.,746 F.2d 323, 326
(6th Cir. 1984)).
Factors one and two weigh in favor of jurisdiction. While a declaratory judgment would
not resolve the entire controversy, “resolution of Plaintiffs’ declaratory judgment claim would
settle the threshold, and crucial, matter of whether Defendants acted outside the bounds of the
lease.” TERA II, 2023 WL 4236670
, at *12. Either outcome clarifies the parties’ legal relationship, mitigating the risk of future litigation.Id.
(citing In re Murray Energy Holdings Co.,637 B.R. 820
, 824 (Bankr. S.D. Ohio 2022); J.M. Smucker Co. v. Promotion in Motion, Inc.,420 F. Supp. 3d 646
, 663 (N.D. Ohio 2019)). Factors three and four are neutral, as neither party provides evidence one way or the other. And as to factor five, this Court must resolve the question Plaintiffs seek an answer to in this request in order to grant any remedy for either party, which nullifies any argument of judicial-resource-saving by not considering Plaintiffs’ request.Id.
at *13 (citing Adrian Energy Assocs. v. Michigan Pub. Serv. Comm’n,481 F.3d 414
, 422–23 (6th Cir. 2007)).
This Court is sensitive to the fact that Passmore and TERA II are distinct cases brought by
distinct plaintiffs, and makes clear where these cases differ throughout this opinion. But this
jurisdictional hurdle is not one of those places, as the cases are effectively on all fours as to the
Defendants’ arguments against exercising jurisdiction under the Declaratory Judgment Act. This
17
Court’s view of the matter has not changed since this Court addressed these same declaratory
judgment arguments in TERA II, and Defendants cite no compelling reason this should come out
differently from that analysis. As such, as the Grand Trunk factors weigh in favor of exercising
jurisdiction over this declaratory judgment request as well, Defendants’ motion as it pertains to
this issue is DENIED.
2. Summary Judgment as to Declaratory Judgment
As authority or lack thereof is relevant to all of Plaintiffs’ claims, the answer to the question
posed in order to evaluate this request for a declaratory judgment—whether there is a genuine
dispute of material fact regarding the proper interpretation of the parties’ lease language—applies
beyond a declaratory judgment. Bear in mind that this is not this Court’s first rodeo in tackling
such a question, as this Court was confronted with the same question as applied to slightly different
factual circumstances in TERA II. There, this Court was understandably presented with similar
arguments from both parties as to the appropriate contract interpretation. See TERA II, 2023 WL 4236670
, at *13–15.
And as noted there, this Court is still without guidance from the Ohio Supreme Court on
the at-issue contract language, so this Court must once again predict how the court would rule.
Allstate Ins. Co. v. Thrifty Rent-A-Car Systems, Inc., 249 F.3d 450
, 453–54 (6th Cir. 2001). This
Court therefore proceeds according to the road map laid out in TERA II.
In Ohio, oil and gas leases are “contract[s] subject to traditional rules of interpretation and
construction.” Shanesville Investments LLC v. Eclipse Resources I, LP, 358 F. Supp. 3d 665
, 669– 70 (S.D. Ohio 2018). As such, summary judgment is inappropriate where there exists a “genuine issue of material fact regarding ambiguous terms in the contract.” Royal Ins. Co. of Am. v. Orient Overseas Container Line Ltd.,525 F.3d 409, 422
(6th Cir. 2008). In determining if the contract
18
language is ambiguous, the court asks whether such language is susceptible to two reasonable
interpretations. Schachner v. Blue Cross & Blue Shield of Ohio, 77 F.3d 889, 893
(6th Cir. 1996). Only if the court finds the provision to be ambiguous based on the face of the contract does the court then move on to “use traditional methods of contract interpretation to resolve the ambiguity, including drawing inferences and presumptions and introducing extrinsic evidence.”Id.
The ambiguity decision is a question of law for the court, while the meaning of the ambiguous language is a question of fact for the jury. Ohio Hist. Soc’y v. Gen. Maint. & Eng’g Co.,65 Ohio App. 3d 139, 146
,583 N.E.2d 340, 344
(Ohio 1989).
Thus, this Court must first decide if the lease language is ambiguous as to whether Plaintiffs
granted or reserved the rights to the Point Pleasant. This Court’s analysis of this question is
bifurcated, as one of the Schusters’ leases—the November 12, 2012 lease—is different from all
the others (the “Smith-Goshen leases”). And again, “[u]nfortunately, the leases do not define
independently the phrase and the parties disagree on its meaning.” TERA II, 2023 WL 4236670
, at *15. As to the legal landscape to guide this Court’s analysis of this question, not much has changed since the TERA II discussion, as this Court still “lacks a wealth of Ohio caselaw on which it can rely.” TERA II,2023 WL 4236670
, at *16. But one important thing differs here as compared to TERA II: the grant clauses of the at-issue leases. In the TERA II leases, the grant clause provides Defendants the right to drill “in the formations commonly known as the Marcellus Shale and the Utica Shale.”Id.
at *2 (quoting TERA II, No. 2:19-cv-02221, ECF No. 302; ¶ 50). But here, as to
the Smith-Goshen leases, the text provides no such grant. Instead, Plaintiffs granted the lessee the
rights to explore, drill, operate, produce and gather oil, gas and other hydrocarbons “other than as
reserved unto Lessor below.” (ECF No. 447-1 at 22) (emphasis added). As a result, the rub between
the Passmore parties’ views is not about whether the subsurface territory “commonly known as
19
the Utica Shale” was understood to include the Point Pleasant, as the Plaintiffs’ grant clause here
is not defined in that way. Rather, the Smith-Goshen grant clause directs us to the reservation
clause, which is broken into three separate subsets of rights reserved to Plaintiffs:
(1) from the surface of the leased Premises to the top of the formation commonly
known as the Marcellus Shale, (2) in any and all formations below the base of the
Marcellus Shale to the top of the formation commonly known as the Utica Shale,
and (3) in all formations below the base of the Utica Shale.
(Id. at 23).
One can hardly forget, but this dispute is about the Point Pleasant, which this Court
understands neither party disagrees is stratigraphically below the Utica. Based on the above
reservation clause subsets, then, this Court must decide whether the third subset reserved Plaintiffs’
rights to the Point Pleasant. Importantly, not only does the “commonly known as” language not
arise in the grant of rights, it also does not modify “Utica Shale” in the relevant reservation bucket.
At oral argument, Defendants argued to the contrary, attempting to import the “commonly
known as” modifier from the second subset of reserved rights into the third. But that is not what
the plain text provides. The parties are not arguing about a formation at the top of the Utica Shale,
so what lies at the top of what is “commonly known as the Utica Shale”—the second subset—is
not relevant to this dispute. Instead, the parties are arguing about a formation at the bottom of the
Utica Shale. This brings us to a different question than the one in TERA II, in which this Court
evaluated whether the Point Pleasant is part of what is “commonly known as the Utica Shale,”
given that those rights were specifically granted to those defendants. But here, the question is
whether the Point Pleasant is part of “the Utica Shale,” as Plaintiffs reserved their rights in the
Smith-Goshen leases to anything below the base of the Utica Shale—not what was commonly
20
known as the Utica Shale. The Point Pleasant is below the Utica, so if the Point Pleasant is not part
of the Utica Shale, then the Point Pleasant is below it.
This train of thought does not, however, apply to the Schusters’ November 10, 2012 lease,
which controls four properties and was amended in a way relevant to this dispute. (ECF No. 444
at 18–20). Previously, the reservation clause in this lease mirrored the other Smith-Goshen leases,
reserving the Schusters’ rights “in all formations below the base of the Utica Shale”—as discussed
supra. But this Schuster lease as amended instead reserves the Schusters’ rights “in all formations
200’ below the base of the formation commonly known as the Utica, defined herein as the
stratigraphic equivalent of 200’ below the top of the Curdsville member of the Lexington
formation[.]” (ECF No. 444-28 at 2). Defendants rely on Mr. Schuster’s testimony to assert that,
as a result, “this amendment permits the Defendants to act within the Point Pleasant[.]” (ECF No.
444 at 19 (citing Schuster Dep., ECF No. 444-9, at 95:21–25)).
While Defendants do not appear to provide a visual that would enable this Court to make
an independent judgment about the impact of the amended lease language, Plaintiffs submitted an
ODNR Type Log that includes the aforementioned layers. (See ECF No. 447 at 27). And even
applying the above definition to the Type Log in a light most favorable to Plaintiffs, this Court
agrees that, in accordance with the specifically amended language present only in the Schusters’
November 10, 2012 lease, the Schusters did not reserve their rights to the Point Pleasant as to these
four properties. Understanding this may be a snippet of a longer Type Log, based on the scale, the
top of the chart to the line above the Curdsville is no more than approximately four hundred feet.
So, two hundred feet below the top of the Curdsville cannot be said to incorporate the Point
Pleasant, which sits approximately fifty feet above the Curdsville. As to these four of the
Schusters’ properties, then, Plaintiffs’ reservation clause interpretation falls apart. This Court
21
therefore finds that there is no genuine dispute of material fact as to whether the Schusters’
November 12, 2012 lease reserved their rights to the Point Pleasant, so summary judgment in favor
of the Defendants as to the four properties controlled by that lease—14-00372.000; 14-00075.000;
26-03329.000; and 26-03298.000—is appropriate. Defendants motion is therefore GRANTED on
in this limited way.
Having aligned on what language this Court is to analyze as to the Smith-Goshen leases,
this Court turns to the parties’ arguments. Plaintiffs’ unambiguity argument primarily turns on two
related points: that (1) the Point Pleasant is a separate geological formation from the Utica Shale;
and (2) the lease’s granting clause must be read in context of the reservation clause, under which
the Plaintiffs served the rights to “all formations below the base of the Utica Shale.” In Plaintiffs’
view, combining these two points leads to the only reasonable conclusion in light of the grant
clause’s deference to the reservation clause here as opposed to that in TERA II: that Plaintiffs
reserved all of the oil and gas in the Point Pleasant because the Point Pleasant is a distinct formation
that sits below the base of the Utica Shale. In support of this, Plaintiffs walk through (1) the
stratigraphic definition of “formation” via their expert; (2) the Ohio Department of Natural
Resources’ (ODNR) analysis of wells in Eastern Ohio depicting the Point Pleasant as separate
from and below the Utica Shale; (3) the Ohio Legislature’s delineation of Point Pleasant and Utica
in its definition of “horizontal well”; and (4) the Well Completion Reports required by ODNR
upon the drilling and fracking of a well, which also lists the Point Pleasant as distinct from and
below the Utica. (ECF No. 447 at 24–28).
Defendants find the lease to be unambiguous in its conclusion to the contrary. Defendants
emphasize the requirement of using the ordinary, not stratigraphic, understanding of the word
“formation”; the role of the phrase “commonly known as” in the reservation clause; and the impact
22
of these two things on the term “Utica Shale”—which, together, Defendants say, confirm that
Plaintiffs did not reserve their rights to the Point Pleasant. (ECF No. 444 at 23–25). To elucidate
the plain meaning of the contract, Defendants point to lay witness testimony, online oil and gas
forums, and contemporaneous media information. (Id. at 26–28). Defendants also provide industry
and expert views from Ohio’s former State Geologist and ODNR employee and the Energy
Information Administration that align with their argument of the plain meaning. (Id. 28–30).
In surveying relevant or helpful precedent, this Court has even less to rely on here than in
TERA II given the related underlying state court proceedings in that case. Yet even there, this Court
found that “the Ohio Court of Appeals’ decision provides little substantive guidance in this matter
as the circumstances of the cases are different.” TERA II, 2023 WL 4236670
, at *16.
This dearth of case law combined with the different grant and reservation clauses here
results in a closer call on the ambiguity question than this Court faced in TERA II. Here,
Defendants’ request for summary judgment is rife with references to the “commonly known as”
language, as it understandably was in TERA II.3 Indeed, Defendants characterize Plaintiffs’ claims
as “depend[ing] on the assertion that the Point Pleasant is not part of the formation commonly
known as the Utica Shale,” and analyze the plain meaning of “formation commonly known as the
Utica Shale.” (Id. at 10, 22). But as a result of the structure of the Smith-Goshen lease’s grant and
reservation clauses discussed supra, this Court is not interpreting what is “commonly known as
the Utica Shale.” To be sure, even when this Court was interpreting the “commonly known as”
language, this same argument was not persuasive enough to overcome summary judgment. TERA
3 (E.g., ECF No. 444 at 2 (discussing the history of “[t]he formation commonly known as the Utica Shale”), 3
(discussing “the public’s perception” of formations), 3–4 (discussing the components of what was “commonly known
as the Utica Shale”), 5 (discussing the “common understanding of the Utica Shale”), 8 (quoting Wickstrom discussing
what was “widely and commonly applied” as part of the Utica Shale)).
23
II, 2023 WL 4236670
, at *16. So it certainly is not persuasive enough here in light of the Plaintiffs’
stronger arguments to the contrary based on the Smith-Goshen lease language. That said, a jury is
free to consider Defendants’ arguments regarding what was “commonly known as the Utica Shale”
in its interpretation of what is “below the Utica Shale,” as the former may be helpful in defining
the latter.
Regardless, the parties’ arguments again reveal ambiguity in the proper interpretation of
the relevant lease provision, albeit in a different way than in TERA II. Here, both parties support
their arguments as to whether “the Utica Shale” includes the Point Pleasant with definitions and
explanations from qualified individuals ranging “across the scientists, landowners, and drilling
companies that make up the oil and gas industry.” Id.
But here, Plaintiffs’ interpretation is
compelling based on the specific lease provisions at issue. In a light most favorable to the
nonmovant, however, this Court cannot conclusively determine whether the phrase “below the
Utica Shale” includes the Point Pleasant. Therefore, both requests for summary judgment are
DENIED as to a declaratory judgment based on the unamended Smith-Goshen lease containing
the aforementioned reservation clause language.
Because this Court’s conclusion as to authority and contractual ambiguity as to all of the
other leases applies with equal force to all of Plaintiffs’ substantive claims, this Court need not
rehash those arguments below, and instead rests on this analysis. But any reference to authorization
under the lease does not apply to the four properties controlled by the November 12, 2012 Schuster
lease.
C. Count II: Trespass
Trespass requires (1) an unauthorized intentional act, and (2) entry upon land in the
possession of another. Georgetown of the Highlands Condo. Owners’ Ass’n v. Nsong, 2018-Ohio-
24
1966, ¶ 36, 113 N.E.3d 192
, 199–200 (Ohio Ct. App. 2018). As explained supra Section III.B,
there exists a genuine dispute of material fact as to whether the leases grant Defendants the
authority to drill and extract minerals from the Point Pleasant—that is, whether Defendants’
drilling was authorized or unauthorized. Because of this, there logically exists a genuine dispute
of fact as to whether Defendants trespassed on Plaintiffs’ property by drilling into the Point
Pleasant below those properties, and this dispute is material: If the Defendants have the authority
to drill, Plaintiffs’ claim for trespass would fail, but if Defendants do not have authority to drill,
Plaintiffs’ trespass claim could—but would not necessarily—succeed.
What is more, Plaintiffs seek to satisfy an even higher burden, as they assert that
Defendants not only trespassed, but did so in bad faith—that is, “with the knowledge that [they
were] invading the rights of another, or under such circumstances as to charge [them] with
knowledge of the character of [their] act[.]” (ECF No. 447 at 35–38). As this Court finds that a
reasonable jury could find in favor of either party as to the authority question, this Court is not in
a position to determine a subsequent and potentially unnecessary question of whether, should the
act be found to be unauthorized, it was also done knowingly unauthorized. For this reason alone,
this Court cannot conclusively determine that Defendants, in fact, trespassed, let alone did so in
bad faith, so Plaintiffs’ motion for summary judgment as to trespass—including as to bad faith
trespass—is DENIED regarding all Defendants.
But deciding if this Court can determine whether Defendants conclusively did not trespass
requires more analysis. This Court starts with what it finds to be factually clear and established.
Based on the evidence submitted by the parties, there is no question that Plaintiffs have established
their ownership rights to the minerals underlaying the properties they allege have been impacted
by Defendants’ actions. And there is no question that Defendants entered the properties crossed
25
by a well or wellbore intentionally, as Defendants appear to admit that they drilled into and
produced gas from the Point Pleasant. (ECF No. 447-18–21).
Even as to subsurface trespass, a plaintiff must still demonstrate “some type of physical
damages or interference” such that they were deprived of “reasonable and foreseeable use of the
subsurface.” Baker v. Chevron U.S.A. Inc., 533 Fed. App’x 509, 521–22 (6th Cir. 2013) (quoting
Chance v. B.P. Chemicals, Inc., 77 Ohio St.3d 17
,670 N.E.2d 985
, 992–93 (1996)). In Ohio, invasion by wellbore satisfies this physical-invasion requirement, Chance,670 N.E.2d at 993
, as the requirement applies even as to pooled units where a landowner receives royalties for all the oil and gas from a well within that unit, regardless of if the oil and gas is drained from that landowner’s well, see TERA II,2023 WL 4236670
, at *19–20 (citing Golden Eagle Resources II, LLC v. Rice
Drilling D, LLC, Case No. 2:22-cv-2374, ECF No. 22 at 13 (S.D. Ohio Feb. 10, 2023)).
Here, Plaintiffs have easily satisfied this requirement as to some of Plaintiffs’ plots of land
the via plat maps, declarations of pooling, geosteering reports, and well completion reports that,
combined, reveal where wellbores cross Plaintiffs’ properties and where Defendants drilled. (See
ECF No. 447 at 4–12 (evaluating these documents as to each unit)). But physical invasion by
fracking poses a slightly different question: whether the wellbore fractures actually physically
intersect those properties not crossed by a wellbore. Plaintiffs attempt to answer this question
through geosteering reports, microseismic data, and well completion reports, which provide,
among other things, that “the fractures extend 500 feet from both sides of the wellbore” and that
“the vast majority of the wells at issue are drilled at 1000 foot spacing consistent with the
microseismic data.” (ECF No. 451 at 42–43). Plaintiffs conclude that application of these two
statements to the specifics of Plaintiffs’ property records confirm that “Plaintiffs’ [p]roperty is
within 500 feet of a wellbore in each unit, except as [sic] the Bennington Units (Tracts 2, 7, 13,
26
44), Marcum East Unit (Tract 22), Heller B (Tract 14), Heller [sic] [A] (Tracts 5, 21).” (Id. at 43
(citing ECF No. 447-6)). Under their view, all other tracts were therefore either physically invaded
by wellbore or by fracking.
Based on a review of the non-wellbore parcels, this Court finds that Plaintiff has presented
sufficient evidence for a reasonable juror to find that at least some of the non-wellbore parcels
were physically invaded by the fractures. But, as Plaintiffs admit, this is not the case for all tracts.
Accordingly, Defendants’ request for summary judgment on Plaintiffs’ trespass claim is
GRANTED only as to the following properties4 and DENIED as to the rest.
Tracts 2, 7, 13, and 44 of the Bennington Units;
Tract 22 of the Marcum East Unit;
Tract 14 of the Heller B Unit; and
Tracts 5 and 21 of the Heller A Unit.
D. Count III & IV: Conversion & Unjust Enrichment
Plaintiffs claim that, because of their possessory interest in the Point Pleasant and the
revenues generated therefrom, Defendants have unlawfully converted their property and have been
unjustly enriched as a result.
To establish conversion, a plaintiff must prove: “(1) plaintiff’s ownership or right to
possession of the property at the time of conversion; (2) defendant’s conversion by a wrongful act
or disposition of plaintiff’s property rights; and (3) damages.” 6750 BMS, L.L.C. v. Drentlau, 2016-
Ohio-1385, ¶ 28, 62 N.E.3d 928
, 934 (Ohio Ct. App. 2016). And for a resulting unjust enrichment,
a plaintiff must show: “(1) a benefit conferred by a plaintiff upon a defendant; (2) knowledge by
4 This Court understands all tracts as to which summary judgment is granted to be XTO-drilled wells. (See ECF No.
454 at 1).
27
the defendant of the benefit; and (3) retention of the benefit by the defendant under circumstances
where it would be unjust to do so without payment.” Padula v. Wagner, 2015-Ohio-2374
, ¶ 47,37 N.E.3d 799
, 813 (Ohio Ct. App. 2015) (quoting Hambleton v. R.G. Barry Corp.,12 Ohio St.3d 179, 183
,465 N.E.2d 1298
(Ohio 1984)). As previously established, although one can only assert a claim of conversion for personal property, “subsurface minerals … become personal property immediately upon severance.” TERA II,2023 WL 4236670
, at *20–21 (quoting Schlabach v. Kondik,2017-Ohio-8016, ¶ 23
,98 N.E.3d 1048, 1055
(Ohio Ct. App. 2017)). So, conversion, and therefore unjust enrichment, is appropriate in the oil and gas context. See First Fed. Bank v. Angelini,2007-Ohio-6153, ¶ 8
,2007 WL 4090767
(Ohio Ct. App. 2007).
In their opposition to Plaintiffs’ conversion and unjust enrichment claims, Defendants
rightfully do not take issue with Plaintiffs’ lodging of these claims for subsurface minerals
generally. Instead, Defendants import their challenges to Plaintiffs’ trespass claim in full, and only
add that they never admitted to having extracted gas from Plaintiffs’ Point Pleasant and that there
is no evidence of such. Ascent and XTO additionally argue that the rule of capture bars Plaintiffs’
claims for conversion and unjust enrichment because they “were authorized to drill into and
produce from the Point Pleasant beneath all wellbore tracts in the Bennington B, Heller A, Heller
B, and Kemper A Units, meaning the rule of capture permits any drainage that may have occurred
from Plaintiffs’ properties.” (ECF No. 443 at 12).
As an initial matter, Ascent and XTO’s “rule of capture” argument has been implicated by
a few aspects of the above analysis. Based on this Court’s analysis thus far, this Court rejects any
rule of capture argument premised on a grant of rights to the Point Pleasant via either (1) the JOAs
and the accompanying JOA leases, supra Section III.A(3); or (2) the text of the unamended Smith-
Goshen leases at issue, supra Section III.B. As was the case in TERA II, application of the rule of
28
capture “in the manner put forth by the Defendants requires this Court to assume that Defendants
had the authority to drill into the Point Pleasant adjacent to Plaintiffs property.” TERA II, 2023 WL 4236670
, at *22. But “because there exists a genuine issue of material fact as to whether Defendants acted wrongfully in the first place,” summary judgment in favor of either party is inappropriate.Id.
Having concluded as much, it bears mentioning that finding the rule of capture
may apply in some way, shape, or form is distinct from the rule of capture applying in the precise
way put forth by a party. This Court, therefore, takes issue with the Defendants’ reference to the
TERA II grant of summary judgment in their favor regarding the former concept as support for the
idea that the rule of capture therefore bars Plaintiffs’ conversion and unjust enrichment claims
here, despite it not barring the plaintiffs’ claims there. (See ECF No. 443 at 13).
Moving on to more general issues, Defendants are correct that many of the issues lurking
under the trespass claim also arise as to the conversion claim. Indeed, this Court has already found
that prong one—plaintiff’s ownership or right to possession of the property—is established. And
two aspects of this Court’s analysis above apply to prong two, which requires defendant’s
conversion by a wrongful act or disposition of plaintiff’s property rights. First, the literal
conversion of Plaintiffs’ property occurred when the subsurface minerals were severed from the
land. Any arguments that Defendants did not actually drain or produce from Plaintiffs’ Point
Pleasant (other than those ruled out for defendant- or property-specific issues) are not persuasive.
(See, e.g., ECF No. 443 at 14 (arguing no proof of drainage)). Second, as to any “wrongfulness,”
there exists a genuine issue of material fact as to whether Defendants acted without authorization
in the first place, and this authorization question is a prerequisite to a finding of wrongful conduct.
As such, this Court’s analysis of the authority question, supra, forecloses summary judgment on
conversion in favor of either party. Summary judgment is therefore DENIED.
29
E. Affirmative Defenses
Defendants advance many affirmative defenses, and Plaintiffs seek summary judgment in
their favor for the following: (1) laches; (2) estoppel and quasi-estoppel; (3) consent; (4)
ratification; (5) accord and satisfaction; (6) unclean hands; and (7) waiver. (ECF No. 447 at 45–
51). As a threshold matter, Plaintiffs apply the correct standard to this issue in their motion,
concluding that “the material facts are not in dispute and Plaintiffs are entitled to judgment as a
matter of law as to these affirmative defenses.” (Id. at 45; contra ECF No. 450 at 21).
Unsurprisingly, and understandably given that Passmore and TERA II are effectively on
all fours as it pertains to this issue, Plaintiffs assert virtually identical arguments against
Defendants’ affirmative defenses here as were presented in TERA II. The only differences here are
that the unclean hands defense is separated from laches and waiver is broken out on its own. For
the sake of efficiency, this Court repeats only its bottom-line conclusions as to why summary
judgment on any of the aforementioned defenses is inappropriate.
As to laches, there remains a question of fact about whether Defendants were prejudiced
by Plaintiffs’ delay in bringing suit considering that Defendants continued to profit from their
activity on Plaintiffs’ property. TERA II, 2023 WL 4236670
, at *28. But as the nonmovant, interpreting the facts through the summary judgment lens, there is a world in which Defendants can “prove that the amount of money spent to continue extraction and drill new holes would not have been spent had the lawsuit been initiated earlier by Plaintiffs” such that “the money spent may amount to loss of funds and material prejudice against Defendants sufficient to require dismissal under the defense of laches.”Id.
And the unclean hands defense depends on a finding
that Defendants acted wrongfully which, as discussed supra, this Court cannot determine at this
point.
30
Estoppel and quasi-estoppel require too fact-intensive of an inquiry to conclude at this stage
that no reasonable juror could find that Plaintiffs are not estopped from bringing their claims. It is
worth noting that regardless of the outcome on the authorization question, Plaintiffs’ acceptance
of royalties is not inconsistent with a legal position challenging the conduct that resulted in the
royalties. See Sims v. Anderson, 2015-Ohio-2727
,38 N.E.3d 1123
, 1132 (Ohio Ct. App. 2015); Bonner Farms, Ltd. v. Fritz, 355 Fed. App’x 10, 16 (6th Cir. 2009). This sentiment also applies to Plaintiffs’ waiver argument, as whether acceptance of royalties functions as a waiver depends on whether Plaintiffs’ acceptance was in line with their arguments about the issues with Defendants’ underlying conduct. TERA II,2023 WL 4236670
, at *29.
Due to the identical nature of the arguments made here to those made in TERA II, Plaintiffs
fail to address the consent defense, so Plaintiffs’ request for summary judgment on that defense is
denied on that ground alone. Similarly, as was the case in TERA II, this Court does not have the
information necessary to resolve the factual questions underlying Defendants’ ratification and
accord and satisfaction defenses, including whether these defenses apply in the first place.
In summary, there are material questions of genuine fact as to each affirmative defense
challenged by Plaintiffs, so summary judgment in their favor is DENIED.
F. Plaintiffs’ Motion to Stay (ECF No. 477)
As the motivating factor behind their motion to stay, Plaintiffs express concern over the
risk of an adverse judgment and sanctions resulting from Gulfport’s motion for contempt. (ECF
No. 477 at 2). In its motion, Gulfport asked the Bankruptcy Court to hold the Passmore Plaintiffs
in contempt of the parties’ settlement agreement, arguing that Plaintiffs are violating the parties’
agreement by litigating their claims in this Court. See supra Section III.A(2) (discussing the
settlement agreement). Gulfport sought similar redress in TERA II, and both motions for contempt
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remain pending in the Bankruptcy Court as of the parties’ briefing on Plaintiffs’ motion to stay.
(ECF No. 477 at 7).
Substantively, as noted supra, this Court agrees with Plaintiffs that some of their claims
against Gulfport are live here: those for damages that accrued after May 17, 2021. And in absence
of a conclusion that none of the claims could possibly have accrued after this date, this Court will
not find good faith litigation of these claims to be improper. That being said, this Court appreciates
the procedural complexities involved in parallel litigation of the same issues, and therefore
considers the five stay factors: “(1) the need for a stay; (2) the stage of litigation; (3) whether the
non-moving party will be unduly prejudiced or tactically disadvantaged; (4) whether a stay will
simplify the issues; and (5) whether burden of litigation will be reduced for both the parties and
the court.” Zimmers v. Eaton Corp., No. 15-CV-2398, 2016 WL 1322343
, at *2 (S.D. Ohio Apr.
5, 2016).
That the Plaintiffs—the party bringing this case—seek the stay and that Gulfport agrees
weigh in favor of granting a stay, particularly in light of the dollar figure penalty Plaintiffs may
face should the Bankruptcy Court disagree with this Court’s assessment of the scope of the
settlement agreement. (See ECF No. 477 at 8–9). The same goes for the stage of litigation, as
Plaintiffs are correct that this case would likely be heading toward a jury trial, during which that
penalty would increase substantially by nature of trial preparation expenses. (Id. at 9). Considering
Gulfport consents to a stay, this Court finds no potential prejudice in so granting. And as to factors
four and five, a stay both simplifies the issues and reduces the burden of litigation by militating
the risk of dual-track litigation on the same issues. Therefore, following the entry and effect of the
above conclusions, this litigation is STAYED pending resolution of Gulfport’s motion for
contempt in the Bankruptcy Court.
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IV. CONCLUSION
For the reasons stated above, this Court rules as follows:
Ascent and XTO’s Motion for Summary Judgment (ECF No. 443) is GRANTED IN
PART AND DENIED IN PART as to potential joint venture liability consistent with the
above opinion, and DENIED on all other grounds, including as to the effect of the joint
operating agreements and the rule of capture in this case.
Defendants’ Motion for Summary Judgment (ECF No. 444) is GRANTED IN PART
AND DENIED IN PART. This Motion is GRANTED only as to the following:
o On Count I as to the four parcels subject to the Schusters’ November 12, 2012
amended lease—14-00372.000; 14-00075.000; 26-03329.000; and 26-03298.000;
and
o On Counts II, III, and IV as to the following properties:
Tracts 2, 7, 13, and 44 of the Bennington Units;
Tract 22 of the Marcum East Unit;
Tract 14 of the Heller B Unit; and
Tracts 5 and 21 of the Heller A Unit.
Gulfport’s Motion for Partial Summary Judgment (ECF No. 445) is GRANTED
consistent with the above opinion.
Plaintiffs’ Motion for Summary Judgment (ECF No. 447) is DENIED as to all issues,
including affirmative defenses.
Plaintiffs’ Motion to Stay (ECF No. 477) is GRANTED.
Therefore, following the entry and effect of the above conclusions, this litigation is STAYED
pending resolution of Gulfport’s motion for contempt in the Bankruptcy Court. The parties are
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ORDERED to alert this Court of such a resolution or any other related actions that could disrupt
or delay the lifting of the stay on the litigation in this Court.
IT IS SO ORDERED.
)
ALGENON [4 MARBLEY—
CHIEF UNITED STATES DISTRICT JUDGE
DATE: March 29, 2024
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