Anadarko E & P Co. LP v. Northwood Energy Corp.

970 F. Supp. 2d 764, 2013 WL 4766733, 2013 U.S. Dist. LEXIS 126354
CourtDistrict Court, S.D. Ohio
DecidedSeptember 4, 2013
DocketCase No. 2:12-cv-938
StatusPublished
Cited by4 cases

This text of 970 F. Supp. 2d 764 (Anadarko E & P Co. LP v. Northwood Energy Corp.) is published on Counsel Stack Legal Research, covering District Court, S.D. Ohio primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Anadarko E & P Co. LP v. Northwood Energy Corp., 970 F. Supp. 2d 764, 2013 WL 4766733, 2013 U.S. Dist. LEXIS 126354 (S.D. Ohio 2013).

Opinion

OPINION AND ORDER

EDMUND A. SARGUS, JR., District Judge.

This matter is before the Court on Defendant’s Motion for Judgment on the Pleadings as to the Complaint and Partial Judgment on the Pleadings as to the Counterclaim (ECF No. 30), and on Plaintiffs’ Motion for Partial Judgment on the Pleadings as to the Counterclaim (ECF No. 24).

I.

Defendant Northwood Energy Corporation (“Defendant or Northwood”) engages in subsurface oil and gas development in Ohio. At a time of widespread interest in acquiring oil and gas leases in the Utica shale strata in eastern Ohio, Northwood had assembled for sale a portfolio of nearly 34,000 acres of leases on behalf of landowners in that area. In recognition of the significant capital requirements and specific technological expertise required to develop the “deep rights” commonly associated with horizontal exploration for oil and gas in the Utica shale strata, Northwood sought to enter into a relationship with another company to develop the deep rights in the Ohio oil and gas leases.

On September 30, 2011, Northwood entered into a letter of intent agreement (“Letter of Intent”) with Plaintiff Anadarko E & P Company LP (“Plaintiff or Anadarko”) for development of these deep rights in the Utica shale strata. The Letter of Intent set forth the terms on which Anadarko would acquire a 90% interest in Northwood’s oil and gas leases in, inter alia, Coshocton, Belmont, Noble and Holmes Counties at a purchase price of $2,500 per net mineral acre. The Letter of Intent contemplated that Anadarko would perform customary and usual due diligence prior to the execution of a mutually agreeable purchase and sale agreement.

The principal terms of the agreement between Anadarko and Northwood were ultimately set forth in the contemplated purchase and sale agreement (“PSA”). The PSA is a 52-page, single spaced document, with four exhibits consisting of an additional 324 pages. (ECF No. 45-1, 45-2, 45-3, 45-4, 45-5.1)

In advance of executing the PSA, Anadarko sought additional time to investigate whether there were title defects with respect to certain leases. To provide Anadarko with the requested time to complete its investigation, the parties agreed to establish the Closing as December 28, 2011, as defined by § 9.1 of the PSA, and the Final Closing, as defined by § 9.4(b) of the PSA, as not later than sixty days following the Closing. Because the Closing was December 28, 2011, the Final Closing could be held no later than February 26, 2012. (Counterclaim ¶ 7, ECF No. 7.)

[767]*767Plaintiff Anadarko alleges that during its due diligence review, it discovered oil and gas leases that' contained provisions that prohibited their assignment without the prior consent of-the respective lessors, and that many such consents had not been obtained by the December 28, 2011, Closing. As a result, the parties entered two separate agreements at the Closing. (Comp. ¶ 7, ECF No. 1.)

The first agreement executed on December 28, 2011, is the PSA. Plaintiff Anadarko paid Defendant Northwood approximately 31.5 million dollars for the partial (90%) conveyance of 14,000 acres of oil and gas leases, which were listed in Exhibit A of the PSA (“Exhibit A Leases”).

The second agreement entered into at the Closing is the Letter Agreement, which both parties agree is a binding contract. (Counterclaim, Ex. A; ÉCF No. 7-1.) The Letter Agreement dealt with oil and gas leases that may have had unresolved title issues with respect to consents to assign such interest at the Closing. These leases were identified in Exhibit A-2 (“Exhibit A-2 Leases”), which the parties “understood and agreed ... may have existing or remaining title issues with respect to consents to assign such interest such that [Northwood] is currently attempting to resolve.” (Compl. ¶ 9; Letter Agreement, at 1.) The Exhibit A-2 Leases encompassed 20,000 acres of oil and gas leases, which had an approximate value of 44.7 million dollars pursuant to the agreed-upon price in the PSA. Because the parties “reasonably believe[d]” that the title matters would be resolved on or before the Final Closing of the PSA, Northwood conveyed the Exhibit A-2 Leases to Anadarko on December 28, 2011 at the Closing, and Anadarko paid Northwood a 15% earnest money deposit of $6,707,699.78, with the remaining 85% “to be paid when the title matters were resolved.” (Letter Agreement, at 2.)

The Letter Agreement provides that, notwithstanding the assignment to Anadarko of the Exhibit A-2 Leases, Anadarko reserved its rights to elect to treat any lease as defective through a specific notice provision in the PSA. The Letter Agreement also provides that if the title issues were not mutually resolved by the Final Closing, Northwood reserved the right to have the Exhibit A-2 Leases reassigned to it in exchange for return of the earnest money.

The Final Closing did not occur. Currently, Anadarko is in possession of the conveyed Exhibit A-2 Leases and North-wood is in possession of the 6.7 million dollar earnest money payment.

On October 12, 2012, Anadarko filed this breach of contraci/declaratory judgment action, alleging that Northwood breached the Letter Agreement by demanding re-conveyance of the Exhibit A-2 Leases without offering to fulfill its reciprocal obligation to return the 15% earnest money.

On November 29, 2012, Northwood filed an Answer and Counterclaim. (ECF No. 7.) In its counterclaim, Northwood alleges that the title issues were mutually resolved before the date the Final Closing was to occur, and that Anadarko breached the PSA and the Letter Agreement by refusing to perform its contractual obligation to consummate the transaction. Northwood avers that it and the landowners it represents have been damaged by Anadarko’s breach because Northwood conveyed 20,-000 acres of oil and gas leases in Exhibit A-2 have not been paid for, and the acres have had no potential of development during this contractual dispute.

On February 15, 2013, Anadarko filed its Motion for Partial Judgment on the Pleadings, requesting judgment only on the re[768]*768quested damages portion of Defendant’s breach of contract counterclaim. (ECF No. 24.) On March 11, 2013, Northwood filed its Motion for Judgment on the Pleadings as to the Complaint and Partial Judgment on the Pleadings as to the Counterclaim (ECF No. 30), addressing only the liability portion of its breach of contract counterclaim. Both of these motions are ripe for review.

II.

A. Standard

The Court reviews motions made under Fed.R.Civ.P. 12(c) in the same manner it would review a motion made under Fed.R.Civ.P. 12(b)(6). Vickers v. Fairfield Med. Ctr., 453 F.3d 757, 761 (6th Cir.2006). In evaluating a complaint to determine whether it states a claim upon which relief can be granted under Rule 12(b)(6), the Court must construe it in favor of Plaintiff, accept the factual allegations contained in it as true, and determine whether the factual allegations present any plausible claim. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-557, 127 S.Ct.

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Bluebook (online)
970 F. Supp. 2d 764, 2013 WL 4766733, 2013 U.S. Dist. LEXIS 126354, Counsel Stack Legal Research, https://law.counselstack.com/opinion/anadarko-e-p-co-lp-v-northwood-energy-corp-ohsd-2013.