Sixth Circuit denies rehearing en banc in False Claims Act lease dispute

A divided panel of the U.S. Court of Appeals for the Sixth Circuit has denied a petition for rehearing en banc of its decision to affirm a district court ruling that Ohio residents failed to assert a claim under the False Claims Act (FCA) in a lawsuit challenging oil and natural gas leases entered into by the Muskingum Watershed Conservancy District, according to Mealey’s Fracking Report. On November 21, 2016, a majority of the Sixth Circuit panel in United States ex rel. Harper v. Muskingum Watershed Conservancy District, 6th Cir., No. 15-4406, had affirmed a ruling by U.S. District Court Judge Sara Lioi to dismiss the plaintiffs’ suit, stating “it was clear the relators were not the ‘model whistleblowers’ contemplated by the FCA.”

As reported in Mealey’s, the residents filed a petition for rehearing, arguing the majority opinion “fundamentally misconstrues the FCA’s scienter requirement and directly contradicts a U.S. Supreme Court decision by requiring the pleading of subjective knowledge in order to state the reckless disregard or knowledge element of an FCA claim.” The Muskingum Watershed Conservancy District argued the rehearing should be denied because the Sixth Circuit panel’s decision does not conflict with any Supreme Court ruling and correctly applies the FCA’s definition of “knowing.” Upon review, the same judges who had issued the majority opinion denied rehearing en banc on the grounds that the issues raised in the petition “were fully considered upon the original submission and decision of the case.”

Ohio, Oil & Gas Litigation

Ohio federal judge: Eclipse Resources did not breach contract by declining to drill wells

A federal judge in Ohio has granted a motion for summary judgment in favor of a group of oil and natural gas companies, “concluding they had the contractual right to decline to drill or complete wells under a lease agreement with a landowner” and were not liable for breach of contract, according to Mealey’s Fracking Report. In Eclipse Resources-Ohio, LLC v. Madzia, S.D. Ohio No. 2:15-cv-00177, Eclipse sued Scott Madzia, the landowner, in January 2015, seeking declaratory relief because Madzia threatened litigation regarding Eclipse’s rights pursuant to an oil and gas lease agreement and amendment. Eclipse argued it “had a contractual right to decline to drill or complete wells” on Madzia’s land.

Madzia then moved for summary judgment, seeking injunctive relief. He maintained that Eclipse was liable for breach of contract because the Ohio Department of Natural Resources (ODNR) had concluded the company had violated Ohio law by submitting a “coal affidavit” to obtain permits for wells on Madzia’s land. Mealey’s says Eclipse argued that ODNR “has not conclusively determined” that the company had violated the law by submitting the coal affidavit. U.S. District Court Judge Algenon L. Marbley agreed with Eclipse, ruling in part that “ODNR had allowed the use of recycled coal affidavits on approximately seventy other occasions” and ODNR’s permitting manager had confirmed it was the department’s practice to accept resubmitted coal affidavits when Eclipse had submitted its permit application for Madzia’s wells.  On February 9, 2017, Madzia filed a notice of appeal to the U.S. Court of Appeals for the Sixth Circuit.

Ohio, Oil & Gas Litigation

Federal judge approves clearing of land, trees for Rover Pipeline

The clearing of land and trees for Energy Transfer Partners’ Rover Pipeline Project, which will bisect Ohio, can begin after Judge Algenon L. Marbley of the U.S. District Court for the Southern District of Ohio granted a preliminary injunction preventing certain landowners from stopping construction crews from entering their property, reports the Columbus Dispatch. The ruling applies to 232 landowners, according to the Dispatch, but it does not give the company permission to enter the property of 21 other owners who have not been properly served with the complaint. For more, read the full story.
 

Ohio, Oil & Gas Litigation

Stone Energy emerges from bankruptcy reorganization

Louisiana-based Stone Energy, which recently sold its Appalachian Basin oil and natural gas assets to ETQ Corp. at a bankruptcy auction, reported on February 28 that it has emerged from Chapter 11 reorganization. A federal judge in Texas had earlier approved a revised, pre-packaged voluntary bankruptcy plan for the company as part of a restructured support agreement with Stone’s key noteholders, according to the Kallanish Energy news site. Stone, which had filed for Chapter 11 reorganization in December 2016, said the bankruptcy plan has eliminated about $1.2 billion in debt. For more, read the full story.

National, Oil & Gas Litigation, Pennsylvania, West Virginia

Chesapeake Energy and McClendon estate reach settlement

Chesapeake Energy Corp. and the estate of the late Aubrey McClendon, the company’s co-founder and former CEO, have agreed to settle a multimillion-dollar dispute over data, stocks and the use of a corporate jet by McClendon, reports the Oklahoman in Oklahoma City. The newspaper says that under terms of a settlement filed in Oklahoma County District court, Chesapeake agreed to pay $3.25 million in legal fees and dropped claims for $445 million related to data that McClendon allegedly took from the company when he was fired in April 2013. In exchange, the McClendon estate agreed to drop claims on remaining compensation from his separation from the company. McClendon died in a car crash on March 2, 2016. For more, read the full story.

National, Oil & Gas Litigation

Appeals court: Ohio residents failed to assert claims on oil and natural gas leases

A divided panel of the U.S. Court of Appeals for the Sixth Circuit has affirmed a lower court’s ruling that three Ohio residents failed to assert a claim under the False Claims Act (“FCA”) in a recent lawsuit challenging oil and natural gas leases entered into by the Muskingum Watershed Conservancy District (“MWCD”). The Sixth Circuit case, United States ex rel. Harper v. Muskingum Watershed Conservancy District, 6th Cir., No. 15-4406, is an appeal from the U.S. District Court for the Northern District of Ohio, in which the relators challenged the MWCD’s leases under the FCA. Mealey’s Fracking Report notes that District Court Judge Sara Lioi had dismissed the suit because “it was clear the relators were not the ‘model whistleblowers’ contemplated by the FCA.”

In their appeal to the Sixth Circuit panel, the relators challenged the district court’s determinations that (1) the relators failed to state a claim under the FCA’s reverse false claim and public-disclosure provisions, and (2) the public-disclosure bar and Federal Rules of Civil of Civil Procedure 9(b)’s heightened pleading requirements applied to the relators’ claims. In affirming the district court’s dismissal of the lawsuit, the majority of the Sixth Circuit panel said the relators “failed to state facts from which MWCD’s awareness of the alleged FCA violations may be inferred even under the more liberal pleading standard set forth in Federal Rule of Civil Procedure 8(a).” For more, read the full Sixth Circuit Ruling.

Ohio, Oil & Gas Litigation

Eastern Ohio couple files arbitration complaint against Chesapeake, Total E&P

Attorneys for a Columbiana County, Ohio couple have filed an arbitration complaint against Chesapeake Energy Corp., two of its subsidiaries and Total E&P USA Inc. for alleged underpayments on oil and natural gas royalties, reports Farm and Dairy. In the complaint filed with the American Arbitration Association, attorneys for Ronald and Joetta Hale of Lisbon, Ohio allege the companies underpaid royalties due the couple for wells in Columbiana and Carroll counties. For more, read the full story.

Ohio, Oil & Gas Litigation

Ohio oil and gas lease holders claim royalties are based on gross proceeds

Contending that four oil and natural gas companies violated the terms of their leases and underpaid royalties, a group of lease holders in eastern Ohio has moved for partial summary judgment in federal district court determining that the royalties are based on gross proceeds and not net proceeds, according to Mealey’s Fracking Report. In Zehentbauer Family Land LP v. Chesapeake Exploration LLC, et al., N.D. Ohio, No. 15-02449, the lease holders argue that Chesapeake Exploration, Total E&P USA Inc., Pelican Energy LLC and Jamestown Resources LLC owe unpaid royalties and damages for the alleged violations of their leases. Mealey’s says the plaintiffs state in their motion for partial summary judgment that “the [District] Court must look no further than the plain language contained in the gross royalty leases and apply the basic rules on contract in interpretation.” The lease holders also contend the Ohio Supreme Court previously rejected Chesapeake’s argument for the “at the well rule” that would permit deductions of post-production costs and trump the express terms of the leases. Mealey’s also reports that in answer to the lease holders’ complaint, Total rejected the allegations and denied the case “is suitable for resolution on a class basis.”

Ohio, Oil & Gas Litigation

Groups threaten lawsuit over oil and gas drilling in Wayne National Forest

Four conservation groups say they will sue the U.S. Forest Service, Bureau of Land Management, and Fish and Wildlife Service in an attempt to ban hydraulic fracturing in the Wayne National Forest in southeast Ohio, reports Cleveland.com. The Bureau of Land Management has scheduled a lease auction on March 23, 2017 for 1,186 acres of forest land in Monroe County, Ohio after conducting a lease auction of 719 acres in the Wayne National Forest in December 2016. Cleveland.com says the conservation groups have also filed an appeal with the U.S. Secretary of the Interior to challenge the December lease sale. For more, read the full story.

Ohio, Oil & Gas Litigation

U.S. Supreme Court denies certiorari for Walker DMA case

Recently, the Supreme Court of the United States denied certiorari for Walker v. Shondrick-Nau (2016-Ohio-5793). The Ohio Supreme Court had previously held on September 15, 2016, that the 1989 version of the Ohio Dormant Minerals Act (DMA) was not self-executing. Using its decision in Corban v. Chesapeake Exploration L.L.C. (2016-Ohio-5796), the Ohio Supreme Court ruled in favor of the mineral owners in eleven other decisions pending before it, including Walker. In response the Walker decision, John Walker, Jr., petitioned the United States Supreme Court to review the case as a violation of the due process clause and the contracts clause of the United States Constitution. The U.S. Supreme Court’s decision, however, to deny certiorari ultimately means that the Corban decision is, therefore, the precedent moving forward. For more, read the full story.

Ohio, Oil & Gas Litigation
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