eighteen fifty nine seventy five thomas are back individually and on behalf of other similary situated chesapeake epilate at all arguments not to exceed fifteen minutes per side mr lee for the remoting your honour's michael e for thomas back this case arises from chesapeake's systematic underpayment of royalties to mr back and other kentucky as for gas extracted from their lands just big did this in two ways first it reported a price to mr back another kentucky and that was a different price than chesapeake it actually received for the sale of gas and second it deducted fictitious and overstated expenses off of those rolled the payments to arrive at a wrong number the district court found that mr backes breach of contract claim with a slight modification of mr back in may to the operative complete mr backes fraud claim and mr black's accounting claim were well pled and that the case would continue the court's error its grave astaire wasn't dismissing the entirety of mr banks complaint despite deciding that he had well played claims based on a defense that chesapeake in three motions to dismiss did not itself raise as a dispositive issue i mean but the court does have you know the court can do stuff like that so we have to deal with the merits of this and i agree your honor in the merits of this so that the district court eroni asli dismiss the case on the statute of frauds ground what the court  bottom is it held mr backes complaint to a standard that the statute of frauds itself doesn't hold mr back to it was looking for something in the record that was a single document called a contract that encompass all of the terms and said we sh after pay you the following what the district court ignored was that every item of correspondence exchanged between chesapeake and mr back for the entire time that they had a contractual relationship a decade purported to pay mr back on the basis of the quote sales price received by the lessee chesapeake and deduct from that actually incurred expenses from the gross really gross royalty payment the statute of fr not can we find a single document that encompasses all the terms it is parties are allowed to contract in any manner they want to contract in the statute inquiry is are there sufficient written documents that evidence the concrete material terms of that agreement well let's look at the statements in this case over ten years chesapeake sent mr back statements that had lease numbers well numbers the county the state quote legal code one section thirteen dash i def seven nine end quote all of which information ties to specific parcels of land on which the well leases apply let me ask you one thing here even though you have some statements there are what about the argument that the stature of france would still apply against your client because  each month chesapeake issued a realty statement detailing a gross price the price which it had received declined less to duck shins and attach those royalty statements and check balance was a check signed by chester mr back every single month for ten years signed that check and deposited into the bank where is the evidence on the record of a signed well to begin with going to this case didn't proceed to discovery so he this was a twelve b six motion in the question and told me six of the panel will noses are the allegations mr back plausible and it is plausible and chesapeake does not contend in its motions to dismiss in three motions to dismiss the mr big didn't deposit the money that i gave him every month for today in your complaint did you attach a copy of  shop no your honor the complaint didn't attach documents up party every year i guess it would be part of your claim it would be in rebuttal of defense i think that's right or i mean mr banks claim is that he had an agreement for sales price less reasonable to deductions chesapeake in fact the way that their counsel described the claim below didn't even disagree with that they say that mr back in other kentucky land owners are entitled to twelve point five percent of the revenue from the gas well revenue is money flowing in exchange for the sale of gas not twelve cents times the gas extracted from the white irrespective of what chesapeake paid for it and the statements again tell the real tale chesapeake represented every month that the money it was paying related to the sales price received that is a quote directly out of every single one of the statements that they sent as it has that's the odds with the one nine hundred fifty four lease which is on the record right because that refers to twelve a half or two or twelve cents per thousand cubic feet just a fixed price right but it's true you're out of the ancient leases that mr backes ancestors and chesapeake's ancestors frankly signed was a different deal mr back doesn't allege that that deal is the was the deal changed at some point from the fifty's until when your client's getting the statements correct that's correct your honor what about chesapeake's argument that so that's a modification versus altogether new deal are pleadings please each and alternative ok what about the argument that there if it's a modification there there isn't any consideration for farewell this idea that it was unconscionable or something in there go i mean i don't know that sounds a little shaky to me but you know i mean what do you think the consideration what about well i think that the the certainty and mitigation of business for is the chesapeake enjoy buy or its predecessors remember when chesapeake started its relationship with mr back started its relationship to these leases it continue doing what its predecessor companies had been doing which is to pay in eight of the sales price less deductions it's not the case the chesapeake changed the deal during the course of his performance but i do think that the avoidance of litigation following a kentucky court of appeals case holding that flat rate twelve cent leases from fifty sixty seventy years ago were unconscionable in a kentucky law is consideration mr back i mean for all you know there could have been something analogous to a settlement a green you know there could be could have been a conversation that hey you know this is really at a line with the law it's not forcible there's an easy way and a hard way to change this twelve cents per whatever price and they chose  you know i think to the extent that chesapeake wants to make these arguments those are fine merits arguments to make but we're here on a motion to dismiss where the standard is plausibility and mr banks admits that he easily surpasses that threshold inquiry what about the indispensable parties business i mean why i gather there are a couple of relatives or something who are receiving royalties pursuant to the same agreements let me just talk to him the same agreement from  with the predecessor the same agreement with chesapeake well mr backs property is subject to a splitting agreement and there are other people who take as a result of just  so why aren't they indispensable wouldn't their rights potential if were if if you're construing the contract in this case you're seeking you're seeking a construction of the contract as you understand it doesn't that affect the folks that are receiving royalties as you know a split from the same agreement well you know i would know that the the cases the chesapeake cites on this argument are cases in which the case at issue is seeking a modification of the contract that's not what this case is abou mr banks allegations are that he and chesapeake had an agreement for an eighth of the sales price less of that maybe act they had a special arrangement at some point not so you're on i think what mr bax allegations are are that his agreement was the same as every other kentucky has agreement and so the fact that it's played as a class action whether it's other people in this building agreement or other kentucky and who also had these leases and there are thousands of them they can all be treated on the common questions and common issues as to  whether the agreements for one eighth less deductions were abided by by chesapeake or not and we think discovery will show that it's not an issue of mr back and the people that he splits with had one agreement and somebody else had a different  discovery will show we believe that every single lease in kentucky was treated by chesapeake in exactly the same way purported sales price less reported to duction zz there's some obligation though your complaint that sets forth some facts that would tend to show you this complied with the kentucky statute of frauds i mean the whole idea of us actually are frauds is if the contracts to last more than a year and this is clearly one to last more than a year you're supposed to have a riding signed by the party to be on that's correct your honor and are in our pleading specifically lays out that royalty statements and checks issued over the entire relationship show the following deal in fact your honor chesapeake admitted in a in an answer  correspondence and no obligation and chesapeake did not argue below that the world two statements alleged in the complaint failed the statute of frauds the district court made up that argument on its own and there's no further questions have please the court and donovan for chesapeake let me start that there is a written order when gas lease in this case ok it has an integration clause which the judge also found no we focused on statute of frauds but in her ruling she says moreover the lease contains a clause and states the integration clause so we have a written lease with an integration clause that does not permit any different represent what it actually says any other lyce not contained in this lease are authorized and do not bind the parties i guess you know the sort of the question that is on everyone's mind is ok but so why do they why do they get a computer coding ok it gets into the system most leases are not like mr backs there are in fact where you get a sales price less deduction just like popular critique so a coating error oftentimes this comes up in different states so he gets this but let's do the counter factual let's assume we paid him ten cents per m c f on these checks for ten years you know what i mean what i heard from well i don't know because but but the question a legal question is does that change the lease we have a lease that has why isn't that some kind of evidence that the deal in fact changed at some point you know for me going prior to all this behavior for i think there's three reasons first is like this court in kentucky does it in force is the plain language so we first get that believe me but now i know i'm going to get to the point is it changed they're at they're alleging it change the integration cost as plain language etc he's saying that deal is out look at their behavior that's not what they're doing anymore but then it becomes in remember this was his fourth shot at a complaining because they kept changing all the ok i understand but i'm just saying judge coble to get there finally says and she found on two ground here here's the lease it has an integration clause that's still the lease and he doesn't allege you preach this number two on statute or freddie says there's a different deal knowing that we're kind of talking past each other but he doesn't allege that judge what he alleges is that somehow the checks that were sent pursuant to this lease somehow created a new deal in this lee says it can't in number two this doesn't satisfy close i don't buy that argument about the integration clause where do we go from ok so then we still have to sta in consideration so we have the statute of frauds they didn't say was ever signed and it's not in the complaint after the were tried stone and that's something that their plaintiff in every contract case where the agreement was signed more than a year or two before is that is that something that the plaintiff must affirmatively allege in his complaint you know i've got a case with two big companies tomorrow insurance coverage starting does does the that the insurer deludes on the pleadings if they didn't allege and it's all in writing because i don't remember seeing that like over and over in these cases so this case is somewhat unique i will agree but because there is a written lease and even the case he cites phelps v ham referring to corban says look and i understand why is it is it something in your view is the compliance with the statute of frauds we've got that the requisite writings is that something that a plaintiff in a contract case mosty put in his affirmative allegations in the complaint yes they need to what's what's the authority for that is their rule i mean this is kind of at the heart of the matter i guess was shown i want to get a consideration is i understand he wants ignore this lease he says there's a modified lease or new lease so he needs to allege those elements judge so offer consideration and acceptance new one i get that you know for planning i did and i don't want i want to talk about the merits and not about what opposing counsel is thinking let me go i'm just talking about i mean is this do you have authority that that these things need to be i mean can you give us a case that these things need to be in the complaint well the consideration would judge in order to allege a contract that was breached and that's why my third one which i think is just the death knell is there's no consideration they don't even try to allege any consideration there can't be because there is a lease there is a well it's producing he's being paid there was nothing ever done do and i understand in the papers he says chesapeake money being concerned about these leases we pay other leases ok we pay other leases at the flat rate why this one wasn't but there's no consideration well he was tom at all maybe the consideration as a kentucky court of appeals cases said this is these twelve cents per thousand cubic feet or whatever is unconscionable correct but isn't it he doesn't allege that in the complaint number one number two actually below he didn't say to you but he said the judge called will he admitted in a footnote that subsequent to that case there was actually rejected in a case called cliff b or d p which is two hundred six sixty so there is no i believe you have to plead the contract before you complete the privet case though that's i mean that's that's what i'm asking what not on this issue judge because it's so bedrock that there's no right now we're the only contract that we have an understanding is this one that has an integration plus he then says we have a new contract which i understand what your parents say your client will tacking pursuant to for many years it's not crazy well you know not crazy unless your clients in the business of giving money away it's not crazy but as a practical matter to infer that they reached at some point some predecessors reached a different agreement it is but there's no consideration alleged there's especially here just you have these contracts all ok but the consideration issue is different from the statute of frauds issue well i agree there are two separate points and so i mean if i'm just thinking out loud if he were to get by the statute of frauds and it goes back there could be i mean i don't know there could be discovery that sheds light on the reasons for this i mean they've been waiting two years for discovery responses i understand it's will be six it's a long time to be waiting but you know there might there might be some answers to what actually happened back then you know why is why is chesapeake paying all this money there's got to be a reason there's got to be a reason i thought in judge its computer system that that i mean for us or you know i'm not offering that you think we're going to rule on that kind of speculation and i can't wait i've asked the court to mean these they've been in front of us many times they're pretty sophisticated that one for ten years nobody notices they're overpaying everybody complained he complained one chesapeake's all the interesting judge i want to come back i'm not trying to speculate really not i just go for you and your to that you keep saying your counsel has an agreement on another agreement i thought his position was that  maybe he didn't have an actual written contract but the of agreement so called was the fact that he had billing statements and science checks on documents that he was he saying that's his argument judge called both had to groan she found to dismiss one statute of frauds second is the integration clause in this is it page six precludes some new agreement because it says you can't have a subsequent agreement that's not  writing and says in any future representations can't bind the parties that i want to dress the statute of frauds issue which is does this satisfy statute affronts you get these statements there is no allegation there's no signed copy but more importantly why isn't royalty formula we would have to give the same information because remember it's twelve cents times and these checks as they do in all the case and if they give a lot of information they don't provide the royalty provision you dispute the formula that your coke years of litigation no i said it does appear that will be that we've sold the code i mean basically for our purposes they were they were performing according to that formula that they will be six straight he was getting paid a lot more than twelve cents from c f i mean it was back there's a countercl probably going to a loss of money because of the integration close and to going back to statute fronts nothing sign it also refers to something it says when you call us to discuss this give us your lease number ok there is a lease number on this written lease that's recorded in the county recorder's office not in some hypothetical lease that you would give a lease number he has no writing of any of the provisions which you have to look at that are signed here what's the royalty yes you can do the math degree and try to figure it out well i afraid to get to the necessary and indispensable part of what about the free gas provision ok does that still exist that is his client gets forty thousand per year how well i mean i wonder if if the contract that you're holding actually arguably helps the plaintiffs here i mean they're not somebody who's just coming in off the street and like yeah i had this deal and they haven't performed and so on i mean we do we know that there was an agreement in the first instance and we know for purposes of twelve the six that that chesapeake for whatever reason has started to perform in a different manner that is reflected by a formula shown on statements that go out every month he's accepting that that payment as he signs the check each each month and so we we know there is an agreement between these parties and and we have it so the question isn't whether there is an agreement yes ok let me the question is not whether there's an agreement the question is whether simply whether the agreement was changed and and we have these documents that that show that the parties are certain certainly acting like they did i don't i mean why isn't that a statute i mean why does that satisfy the statute of frauds pretty well i don't think it does because i come back to the first point which is we have a written lease and i believe judge caldwell in also funny was in forcing it just like a lot record fifty four page five twenty six it says there can't be any other representations in any other on authorize so that's step one step two he argues that there's a stat that there's this new contract we don't believe it meets the statute of frauds there's no signature in other words and you have to look at the context these checks were coming pursuant to this lease then why is it the analysis and syria why isn't the analysis we've got an agreement there's no question we've got an original agreement we've got some other stuff but we've got an agreement now whether there there's a plausible breach might be a different matter but you know that's that's a merits question as opposed to a statute of frauds question but that's what the judge said it's not plausible primarily because this is an he admits we paid more than twelve cents profit so if this lease is the right lease and the end of this lee says there can't be any other lease then there's no claim it's a very typical contract will be six he overlaid this is a little different he argues or alleges  part i believe that there's a new contract i understand yeah our first this whole case i know but our first argument judge that he conceded below which kind of gets a little bit lost here is that the he waived that he says yeah you're right if if the judge finds that this lease is still in effect he doesn't allege anything is offered you nothing this morning that's in his complaint that would be consideration for this modified agreement he argued below is modified no no he's saying it's new but he said it's modified there's no consideration alleged and then the fourth point is the necessary  indispensable parties this leases an effective there's three owners ok the lease has to apply the same golf should the district court sort that one out on remain and i mean you know that there are just it's a district court has to make in this  regard if if we were to disagree with the statute of frauds i mean tell me if you think otherwise i would seem like something that really the district court should make the judgment they could i grew that and what i would is is i believe judge and i want to ask you know because it's the losses at page six the judges other finding which happens all the time and contra cases is this is the contract that's in effect the twelve cents for m c s counsel myths that we got we paid more than twelve cents perhaps if that's the in the case if the case goes back judge i would ask that there be a fine is that the court be permitted to review all this because i know it's been for this is i still believe this is the lease in effect regardless of anything else it has a court on it and twenty six i'm just i just don't know how to reconcile that idea with your client's behavior i mean chesapeake's a serious company i am extreme personally i am extremely skeptical that this was a mistake for ten years i just ok i am i mean this is not my first rodeo with them nor with commercial litigation i'm extremely skeptical of that and the idea that we have to kind of accept that as a matter of law and twelve and six and broom a case that's based on behavior to the contrary and documents carefully prepared documents by chesapeake that show a different arrangement i mean that's that's just i'm not asking you judge to believe the mistake at this point because i agree that right you discovered i'm not my  twenty six based which is simply this is the contract in effect and i understand the argument but this happens all the time when there's a integrated contract and someone's making something someone said this to me someone said that to me in a court just kind of enforces it and says not going to dismiss this that's the contract so ok thank you ron thanks for your patience case is to spin out hypotheticals about what might have happened and to argue things that aren't on the record without the advantage of any discovery to convince this panel to reach ultimate conclusions on liability for what was done or what was said without participating in the case at all now in three motions to dismiss and in this appeal chesapeake has not and did not today answer the question of if the agreement with mr back was to pay only twelve cents times the amount of gas extracted why did it always do something different now the lease that mr donovan holds up for twelve cents also doesn't have any provision in it for deduction of expenses but yes if he did that every single moment on the leases as well showing that it abandoned the one nine hundred forty in one thousand nine hundred four leases at some point what point that was isn't really relevant the point today is that for ten years chesapeake in detailed statements did one thing should roll t checks that it's son and that mr back signed in cashed for one third of a purported sales price less reported expenses now to the point of the pleadings you know i would and the district court found that to be the case but i would point to that record fifty one this is the operative complaint page id number four nine three paragraphs thirty and thirty one chesapeake specifically alleges sorry mr beck specifically at ledges the chesapeake has publicly acknowledged that it's under subpoena from the department of justice the u s postal service and various state attorney generals seeking information on a rule to practice that's a quote from chesapeake's a c c statements what does that have to do with anything well it is it supports the idea that to mr donovan's point that we didn't allege anything about the idea of consideration that the reason why chesapeake abandoned the ancient lease is because kentucky case law held on the one hand you can take expenses but on the other hand you have to pay sales price right those are two kentucky cases chesapeake wants this panel to accept the fact that which had argued below it relied on one line of kentucky cases to abandon the leases so that it could take the ducks ins but we should ignore the idea that it followed the other line of kentucky cases that it cannot any longer pay twelve cent flat rate leases it must pay the sales price i don't have your complaint front  d what did you allege regarding sort of the history briefly of this lease i mean i presume you allege that there was that original agreement and then what do you allege as pacifically as you can recall lease but that at all times that mr chesapeake has been the counter party to any agreement with any lessee for gas on the land he has been paid something reflected in royalty statements received from chesapeake and their predecessor companies which is an eighth of the sales honor and you know i don't know that it's necessary for mr back to prove or show or allege certainly how the agreement was changed it is plausible that there was some kind of change given the chesapeake's own conduct was completely contradictory to not only the one thousand nine hundred fifty four releases but to it every but to its arguments on this appeal and by the way chesapeake did not argue this below they didn't argue that they have a twelve cent flat rate lease that insists for all t ime they made different arguments and again in their footnote in one of the briefs they concede they state mr back and others are entitled to zero point five percent of the revenue from the wells well twelve point five percent your honour's expressed as a fraction is one eighth and revenue isn't simply some academic market price that wasn't actually might have had a mistake or well this is the first time the chesapeake has ever articulated that this was