Source: http://pa.findacase.com/research/wfrmDocViewer.aspx/xq/fac.20180420_0000539.WPA.htm/qx
Timestamp: 2019-04-24 11:58:23+00:00

Document:
SWEPI LP and SHELL ENERGY HOLDING GP, LLC, Defendants.
This class action is being prosecuted by Thomas J. Walney (“Walney”) and Rodney A. Bedow, Sr. (“Bedow”) on behalf of certain Pennsylvania landowners who executed gas and oil leases for the benefit of SWEPI LP. In this action, Walney and Bedow (collectively, “plaintiffs”) allege that SWEPI LP and its general partner, Shell Energy Holding GP, LLC (collectively, “SWEPI” or “defendants”), failed to pay bonus monies that were owed to the various class members under the terms of their respective leases.
Presently pending before the court are cross-motions for summary judgment filed by plaintiffs (ECF No. 140) and SWEPI (ECF No. 156). For the reasons that follow, plaintiffs' motion will be granted in part and denied in part; defendants' motion will be denied.
it was the practice of Southeast's landmen to inform the landowner prior to obtaining the written lease that the payment would be made by a bank draft and not be payable until the expiration of a set number of banking days, usually ninety (90) days, that banking days differ from calendar days, and that ultimate payment would not be made if the title examination during the ninety (90) days did not result in a clean title examination acceptable to SWEPI. It was not the usual practice of Southeast landmen to make any representations or promises about the payment of a SWEPI lease bonus different than the terms reflected in the written bank draft.
In March 2013, Walney commenced this civil class action in the Venango County Court of Common Pleas, asserting claims for breach of contract, fraud, disparagement of title, and promissory estoppel. (Compl. Ex. A, ECF No. 1-1.) The case was subsequently removed to this court (ECF No. 1) and, following various pretrial proceedings,  Walney filed the operative Second Amended Complaint (ECF No. 57), which added Bedow as a co-plaintiff and asserted additional claims for breach of implied contract and unjust enrichment.
On September 14, 2015, this court entered a memorandum opinion and order certifying a class action relative to the breach of contract claims in Counts I and I(A) of the Second Amended Complaint,  pursuant to Rule 23(b)(3). See Walney v. SWEPI, LP, No. 1:13-cv-102, 2015 WL 5333541 (W.D. Pa. Sept. 14, 2015). Having engaged in extensive discovery, the parties now seek a summary judgment ruling relative to the breach of contract claims.
To that end, the parties submitted cross-motions for summary judgment (ECF Nos. 140 and 165) and extensive related filings (see Doc. Nos. 141-145, 149-150, 153, 155, 157-158, 162-164, 166-167, 169, and 171-174). The issues raised in the parties' motions are now sufficiently joined and ripe for disposition.
At issue in this case are certain form documents that SWEPI utilized in connection with its lease acquisitions during the time period in question. Among the relevant documents are two materially identical lease agreements, i.e., “Paid Up Oil and Gas Lease, Rev. 06.09.2011” and “PA Paid Up Lease Rev. 05.01/2011” (ECF Nos. 150-21 and 150-54, hereafter referred to collectively at times as the “Lease(s)” or the “Lease Agreement(s)”).
In consideration of the bonus consideration paid, the receipt of which is hereby acknowledged, and in further consideration of the covenants and agreements herein contained, Lessor does hereby grant, demise, lease and let exclusively to Lessee, its successors and assigns, the lands hereafter described for the purpose of exploring for, developing, producing and marketing oil, gas or other related substances produced in association therewith . . . in and under the following described land . . . .
This lease contains all of the agreements and understanding of the Lessor and Lessee respecting the subject matter hereof and no implied covenants or obligations, or verbal representations or promises have been made or relied upon by Lessor or Lessee supplementing or modifying this lease or as an inducement thereto.
[t]he payor shall have banking days after receipt of this draft by the collecting bank, whether accompanied by other papers or not, for title examination and for payment. Neither forwarding bank nor payee(s) nor the grantor(s) of such lease or conveyance may demand return of this draft or any accompanying papers prior to expiration of the time fixed. Upon payment hereof collecting bank shall deliver this draft and any accompanying papers to payor and remit payment to forwarding bank. No. liability for payment or otherwise shall be attached to any of the parties hereto.
The primary term of the Lease is for a period of Five (5) years commencing on the date immediately set forth above and for so long thereafter as oil, gas or other substances covered by the Lease are capable of being produced in paying quantities from the leased premises or from lands pooled therewith or the Lease is otherwise maintained or prolonged pursuant to the provisions contained in the Lease, including an extension of term contained therein. Lessee may extend the primary term of the Lease for an additional Five (5) years after the end of the primary term, thereby continuing the term of the Lease to the end of the extended primary term.
Plaintiffs contend that - taken together - the Leases, MOLs and Drafts (collectively, the “Transactional Documents”) constituted enforceable contracts as of the time that the documents were signed and exchanged between the various class members and SWEPI's representatives. Plaintiffs theorize that these contracts provided for an unconditional payment of a sum certain (i.e., the amount of the bonus set forth in the draft instrument), deferred to a date certain (i.e., the time period set forth in the draft). According to plaintiffs, SWEPI breached its contracts when it failed to pay the bonuses. Consequently, plaintiffs consider the full amounts of the bonuses to be the correct measure of damages in each instance.
SWEPI contests each element of plaintiffs' claims and also asserts various affirmative defenses. Fundamentally, SWEPI denies that enforceable contracts ever came into existence. Assuming that enforceable contracts did exist, SWEPI denies that it breached the contracts. SWEPI theorizes that good title was a condition of payment in every case and no evidence exists to show that all class members had good title to the lease rights they purported to convey. On the contrary, SWEPI argues that many class members indisputably lacked good title to the gas and oil interests at issue in their leases and, with respect to certain other class members, SWEPI was unable to verify the landowner's title through no fault of its own.
In the alternative, SWEPI challenges plaintiffs' request for summary judgment on the grounds that: (i) factual inquires exist concerning the meaning of the contracts; (ii) class members failed to provide the requisite “written notice” of SWEPI's alleged breach; (iii) SWEPI's payment obligations, if any, were excused in cases where the Leases were surrendered prior to expiration of the time period designated in the Draft Instrument or where they were surrendered at the request of the lessor; and (iv) plaintiffs cannot obtain summary judgment on behalf of landowners who never presented their Drafts for payment or who are not members of the class.
Assuming that its liability can be established, SWEPI contests plaintiffs' calculation of damages. SWEPI maintains that proper measurement is the difference between the contract price (i.e., the bonus amount) and the fair market value of each lease at the time of the alleged breach. SWEPI contends that plaintiffs failed to prove the class's damages because there is no evidence in the record to establish the relevant fair market values of the leases at issue.
Summary judgment is appropriate when “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); see Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). In reviewing the evidence, the court draws all reasonable inferences in favor of the nonmoving party. See Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000) (discussing identical standard of review under Rule 50). The court may not make credibility determinations or weigh the evidence. Id. “Where the record taken as a whole could not lead a reasonable trier of fact to find for the nonmoving party, there is no ‘genuine issue for trial.'” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
Courts are permitted to resolve concurrently cross-motions for summary judgment. Johnson v. Federal Exp. Corp., 996 F.Supp.2d 302, 312 (M.D. Pa. 2014) (citing authority); see Lawrence v. City of Phila., 527 F.3d 299, 310 (3d Cir. 2008) (considering cross-motions for summary judgment under the Fair Labor Standards Act); 10A CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 2720 (3d ed. 2014). “When doing so, the court is bound to view the evidence in the light most favorable to the non-moving party with respect to each motion.” Johnson, 996 F.Supp.2d at 312; see Lawrence, 527 F.3d at 310 (noting that the rule for granting summary judgment “is no different where there are cross-motions for summary judgment.”).
To succeed on a breach of contract claim, a plaintiff must prove: (1) the existence of a contract; (2) the breach of a duty required by the contract; and (3) damages from the breach. Zamos v. McNeil-PPC Inc., a Div. of Johnson & Johnson, 713 Fed.Appx. 133, 135 (3d Cir. 2017) (citing Williams v. Nationwide Mut. Ins., 750 A.2d 881, 884 (Pa. Super. Ct. 2000)). Here, plaintiffs contend that all three elements of the class's claims were established as a matter of law, while SWEPI contends that none of the elements can be established based on the uncontroverted facts.
As a preliminary matter, the court must determine whether plaintiffs can prove the existence of enforceable contracts between SWEPI and the class members. Because oil and gas leases are in the nature of contracts, they are controlled by principles of contract law. See T.W. Phillips Gas & Oil Co. v. Jedlicka, 42 A.3d 261, 267 (Pa. 2012). Under Pennsylvania law, a contract is enforceable where: (1) both parties have manifested an intent to be bound by the terms of the agreement, (2) the contractual terms are sufficiently definite, and (3) consideration exists to support the agreement. Cook v. Gen. Nutrition Corp., No. CV 17-135, 2017 WL 4340664, at *6 (W.D. Pa. Sept. 29, 2017) (citing Johnston the Florist, Inc. v. TEDCO Constr. Corp., 657 A.2d 511, 516 (Pa. Super. Ct. 1995)).
SWEPI denies that the Transactional Documents constituted enforceable contracts. According to SWEPI, the Lease Agreements did not set forth any binding promise on its part to pay the subject bonuses; rather, the parties contemplated that only actual payment of the bonuses would supply the necessary consideration. Because SWEPI opted not to fund the class members' Drafts, it posits that the Lease Agreements fail for lack of consideration or mutuality. Additionally, SWEPI argues that there was no completed offer and acceptance to establish its intent to be contractually bound. Alternatively, SWEPI argues that the agreements contained a condition precedent to contract formation that did not occur - namely verification of good title within the time period specified in each draft.
The parties' competing theories raise questions of contract interpretation, the “paramount goal” of which is “to ascertain and give effect to the intent of the parties.” PBS Coals, Inc. v. Burnham Coal Co., 558 A.2d 562, 564 (Pa. Super. Ct. 1989). “‘[T]he intent of the parties to a written contract is to be regarded as being embodied in the writing itself, and when the words are clear and unambiguous the intent is to be discovered only from the express language of the agreement.'” Jeddo Coal Co. v. Rio Tinto Procurement (Singapore) PTE Ltd., No. 3:16-CV-621, 2017 WL 937737, at *4 (M.D. Pa. Mar. 9, 2017) (quoting Steuart v. McChesney, 444 A.2d 659, 661 (Pa. 1982)). Accordingly, the court must determine what document or documents comprise the alleged “contracts” in this case.
Under Pennsylvania law, “‘[w]here several instruments are made as part of one transaction they will be read together, and each will be construed with reference to the other; and this is so although the instruments may have been executed at different times and do not in terms refer to each other.'” Jeddo Coal Co., 2017 WL 937737, at *4 (quoting Huegel v. Mifflin Const. Co., 796 A.2d 350, 354-55 (Pa. Super. Ct. 2002)); see Kroblin Refrigerated Xpress, Inc. v. Pitterich, 805 F.2d 96, 107 (3d Cir. 1986) (“It is a general rule of contract law that where two writings are executed at the same time and are intertwined by the same subject matter, they should be construed together and interpreted as a whole, each one contributing to the ascertainment of the true intent of the parties.”).

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