CINCINNATI (Legal Newsline) - A federal appellate court has ruled that it is not the court's responsibility to rewrite a complaint to set forth a claim and, because of that, a class action judgment in favor of Magnum Hunter Production Inc. was affirmed.
Circuit judges Martha Craig Daughtrey, Eric L. Clay and Deborah L. Cook voted in the majority and issued a per curiam decision on Nov. 25 for the U.S. Court of Appeals for the Sixth Circuit.
Dennis Cornett, Peggy Cornett, Ida L. Osbourne Middleton, Billy F. Middleton, Sonny Begley and Susan Begley filed their class action lawsuit on June 21, 2013, in Harlan Circuit Court, and it was removed to the U.S. District Court for the Eastern District of Kentucky on July 24, 2013.
The plaintiffs claimed they had entered into leases with the defendant’s predecessor allowing the defendant to remove natural gas from their property.
In return, among other things, the plaintiffs were to be paid one-eighth of the price received for the gas, less certain costs.
Although the plaintiffs received royalties under the lease terms for several years, in 2012 the defendant ceased paying royalties, apparently due to a drop in the market price for natural gas.
The defendant continued to produce natural gas from the properties but after the deduction of costs, it was selling it at a loss.
Since the spring months of 2012, Magnum has allegedly failed to tender or pay any royalty whatsoever to the plaintiffs and other members of the class.
On March 31, the district court ordered that the class action case be dismissed. The plaintiffs filed an appeal on April 3.
"Plaintiffs additionally allege that the district court erroneously credited defendant’s version of the facts in ruling on the motion to dismiss, citing Mediacom Southeast L.L.C. v. BellSouth Telecomm. Inc...." the opinion states. "But they point to no facts set forth in the district court opinion that contradict the allegations in the complaint."
The plaintiffs also argued that if the complaint does not state a claim for waste, it may state a claim for some other cause, and they invited the Sixth Circuit to discern such a claim or to remand for the district court to do so.
"But the complaint is required to state a plausible claim for relief on its face in order to survive a motion to dismiss," the opinion states. "It is not the responsibility of the court to rewrite the complaint to set forth a claim. Because the complaint failed to state a claim of waste, we affirm the district court’s judgment in favor of the defendant."
"Plaintiffs argue that the leases allowed defendant to 'shut in' the wells if the price dropped," the opinion states. "But that provision in the lease was permissive, not mandatory, and was intended to protect defendant from losing its lease."
The plaintiffs also argued that their case is similar to Mullins v. Dees, which held that a claim of waste was stated.
In Mullins, the defendant coal lessee was not mining coal as provided in the lease, but was removing the pillars supporting the roof, thus destroying the mine and causing subsidence of the surface above the mine, according to the opinion.
"Mullins is entirely distinguishable from the case at hand, because defendant continues to produce natural gas as provided in the lease and is not destroying the mine or the property," the opinion states.
The plaintiffs are represented by John C. Whitfield of Whitfield Bryson & Mason in Madisonville, Ky., and George E. Stigger of the Law Office of George E. Stigger in St. Marys, Ga.
The defendant is represented by Anne Adams Chesnut of Bingham Greenebaum Doll in Lexington, Ky., and Harry D. Callicotte in Lexington.
U.S. Court of Appeals for the Sixth Circuit case number: 14-5390
From Legal Newsline: Kyla Asbury can be reached at classactions@legalnewsline.com.