Posts Authored by Daniel Gerken
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 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.
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 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.”
West Virginia Supreme Court: Only ‘public use’ pipelines have eminent domain power
In a case that may affect the path of natural gas pipeline development in West Virginia, the state’s Supreme Court has ruled in favor of a Monroe County couple who objected to Mountain Valley Pipeline LLC (MVP) seeking access to their property for survey work, reports the West Virginia MetroNews network. MetroNews says the Supreme Court ruled in Mountain Valley Pipeline LLC v. McCurdy that West Virginia’s eminent domain laws “apply to projects that have a public use, but the proposed Mountain Valley Pipeline doesn’t specifically have a benefit for West Virginia because the natural gas isn’t necessarily going to be used here.” Monroe County residents Bryan and Doris McCurdy had objected to requests by an MVP agent to conduct surveys on their property. In a two-part analysis, the Court held that the state survey-access statute requires a finding of “public use,” and the MVP pipeline will not benefit West Virginia consumers—thus, the MVP pipeline is “not for a public use.” The Court affirmed the lower court’s holding that state law did not authorize MVP to enter the McCurdys’ property. For more, read the full story.
Supreme Court of Pennsylvania strikes down oil and gas law
The Supreme Court of Pennsylvania has decided that Act 13, the state legislature’s 2012 attempt to accommodate the shale gas industry, is an unconstitutional “special law” that benefits specific groups or industries, reports the Pittsburgh Post-Gazette. The newspaper says the Court in Robinson Township v. Commonwealth of Pennsylvania ruled that Act 13’s provisions limiting notification of oil and gas spills and leaks to public water supplies but not private well owners and the act's so-called “physician gag order” violate the state Constitution’s prohibition against special laws. The Court also struck down the law’s provision that allows companies involved in transporting, selling or storing natural gas to seize privately owned subsurface property through eminent domain, according to the Post-Gazette. For more, read the full story.
Ohio Courts of Appeals affirm survey access rights for natural gas pipeline
Two Ohio Courts of Appeals have affirmed that natural gas pipeline company NEXUS Gas Transmission, LLC has legal authority to conduct land surveys for the NEXUS pipeline project. On September 12, 2016, the Ohio Ninth District Court of Appeals affirmed a 2015 ruling from the Medina County Court of Common Pleas, which held that an interstate natural gas pipeline company has authority to access private property to conduct surveys required to construct a 250-mile natural gas pipeline. Earlier this year, the Sixth District Court of Appeals reached a similar conclusion in an appeal from the Erie County Court of Common Pleas. These are the only appellate decisions on the statutory survey access issue. For more, read a summary of the rulings by Bricker & Eckler’s oil and gas team.
Leaseholders seek class arbitration in royalty dispute with Chesapeake
A group of oil and natural gas leaseholders has filed a brief in the U.S. District Court for the Northern District of Ohio, arguing their case against Chesapeake Exploration LLC over contracts for royalty payments should be allowed to proceed to class arbitration, according to Mealey’s Fracking Report. In Chesapeake Exploration v. Henceroth, N.D. Ohio, No. 16-150, Chesapeake had filed a declaratory judgment action against Dale Henceroth and other oil and gas royalty owners, claiming their leases prohibit class arbitration. Mealey’s says the leaseholders had earlier moved for class arbitration of their claims that Chesapeake underpaid them on royalties. In their brief, the leaseholders asked the U.S. District Court to deny Chesapeake’s motion for a summary judgment on the arbitration issue, contending Ohio arbitration law applies to the case. “Moreover, the leaseholders argue that Ohio permits class arbitration where is no class action waiver, as in the case at hand,” Mealey’s says.
Jury orders Cabot Oil & Gas to pay $4.2 million in hydraulic fracturing dispute
A jury in the U.S. District Court for the Middle District of Pennsylvania has ruled that Cabot Oil & Gas Co. must pay more than $4.2 million in damages to two families who claimed the company's hydraulic fracturing operations contaminated their ground water, Reuters reports. The news service says jurors awarded $2.75 million to Dimock Township, Pennsylvania residents Scott Ely, Monica Marta-Ely and their three children and $1.49 million to Ray and Victoria Hubert and their daughter. A Cabot spokesman told Reuters the company was surprised by the verdict and asserted there was no evidence linking contamination of the Ely and Hubert wells to Cabot's hydraulic fracturing operations. For more, read the full story.
Pennsylvania court rules company can't avoid discovery on hydraulic fracturing chemicals
A panel of the Superior Court of Pennsylvania has affirmed a trial court’s ruling and said the engineering firm for a hydraulic fracturing company cannot avoid providing discovery on the chemicals and substances used in the company’s drilling operations, according to Mealey’s Fracking Report. In Haney v. Range Resources Appalachia Inc. v. Haney v. Slomax International Inc., Pa. Super Ct., No. 257 WDA 2015, Stacey Haney and five other plaintiffs sued Range Resources and other companies in Washington County Court of Common Pleas, seeking disclosure of chemicals used or brought to the Yeager Drill Site in Amwell Township, Pennsylvania. Mealey’s says the Washington County court quashed the defendants’ privileged-based objection to service of a subpoena on URS Corp., an engineering firm retained by Range Resources. Range then appealed to the Superior Court, arguing the trial court had erred when it issued an order permitting “an overly broad subpoena” that would require a party’s non-testifying expert to disclosure privileged material and work product in violation of the work product doctrine, attorney-client privilege and Pennsylvania Rule of Civil Procedure 4003.5(a)(3). Mealey’s says the plaintiffs countered that Range Resources had “failed to establish that the requested material was protected.” The Superior Court panel ruled that “upon review we discern no basis for disturbing the trial court’s conclusion that [Range Resources] failed to invoke the protection of [PRCP] 4003.5(a)(3).”