Hicks v. FG Minerals, LLC

District Court, E.D. Oklahoma·Decided July 15, 2020·No. 6:19-cv-00203·Unknown

Opinion

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF OKLAHOMA TRUEY DUANE HICKS, ) Plaintiff, Vv. Case No. CIV-19-203-TDD FG MINERALS LLC, et ai., Defendants.

ORDER Before the Court is Defendant FG Minerals, LLC’s Motion to Dismiss First Amended Complaint [Doc. No. 21], filed pursuant to Fed. R. Civ. P. 12(b)(6). Plaintiff has filed a response [Doc. No. 22] in opposition to the Motion, which is fully briefed.! For the following reasons, the Court finds that the Motion should be granted. Factual and Procedural Background This case concerns Plaintiff's overriding royalty interest in the production of sand under a mining lease granted by Sheila Lewis on real property located in Johnston County, Oklahoma. FG Minerals is an assignee of the lease and conducts mining operations on the property. FG Minerals has also acquired nearby properties, which Plaintiff alleges he was involved in identifying and testing under an agreement by which he would earn an overriding royalty interest on sand mined from those properties as well. Plaintiff does not identify a contract or describe specific terms of an agreement with FG Minerals. Plaintiff

1 FG Minerals did not file a reply brief within the time limit set by LCvR 7.1(e).

instead claims that the lease and subsequent assignments entitle him to receive royalties on sand mined from adjoining properties that is processed on the leased land. He alleges that a plant was built on the Lewis property in 2008, that the plant began operating in 2009, and that he received the overriding royalty payments to which he was entitled on production and sales from the plant until March 2018. Plaintiff alleges that royalty payments ceased after FG Minerals purchased part of Lewis’ property, induced her to amend the underlying lease,” and began transporting sand from other properties to be processed at the plant. In April 2019, Plaintiff sued FG Minerals and Lewis in state court asserting claims for breach of contract and fraud. See Compl. [Doc. No. 2-2]. Plaintiff claimed that he had not received all overriding royalty payments to which he was entitled and that Defendants had engaged in conduct designed to deprive him of his royalty interest. FG Minerals timely removed the case to federal court in June 2019, invoking diversity jurisdiction under 28 U.S.C. § 1332 based on allegations that Lewis should be disregarded as a defendant because she was fraudulently joined to defeat diversity of citizenship. See Notice of Removal [Doc. No. 2], §§ 9-11. By the Order of May 1, 2020 [Doc. No. 23], the Court determined that FG Minerals had established its claim of fraudulent joinder and dismissed Plaintiff's action against Lewis. Only his claims against FG Minerals remain pending. FG Minerals first moved to dismiss the action shortly after removal, but Plaintiff amended his pleading and rendered the motion moot. See 9/17/19 Order [Doc. No. 19]. Plaintiff is now proceeding under the Amended Complaint [Doc. No. 20]. By the instant

? Allegations regarding lease amendments were added in an amended pleading, discussed infra.

Motion, FG Minerals seeks a dismissal of all claims against it: 1) breach of contract; and 2) civil conspiracy. See Am. Compl. at 34-37, §§ 44-51, and 39-40, 4 63-66. Plaintiff's Allegations of Fact The Amended Complaint is voluminous and has fourteen attachments, primarily copies of recorded instruments affecting Lewis’ property and other properties. Mindful of the standard of decision, the Court accepts all factual allegations as true, and provides the following summary. Henry McCabe and Truey Dale Hicks (Plaintiffs father) were businessmen with extensive experience in sand mining operations, and they began working together in 2004 to locate suitable land for mining sand to supply a glass manufacturing plant in Durant, Oklahoma. Plaintiff assisted his father to serve as landmen for acquiring tracts of property in Johnston County, and they targeted Lewis as a good prospect for granting a sand mining lease and allowing a sand processing plant to be located on her property adjacent to a state highway. Plaintiff's father negotiated with Lewis to obtain in February 2005 the Sand and Aggregate Mining Lease that is the subject of this case (hereafter, the “Lease”). It identifies Lewis as lessor and McCabe and Plaintiff as joint lessees, using the term “McCabe-Hicks” throughout the document to refer to them.°

> A partial copy of the Lease is Exhibit A to Plaintiff's pleadings. See Compl. [Doc. No. 2- 2] at 22-23 (ECF page numbering); Am. Compl. attach. | [Doc. No. 20-1]. A complete copy appears in other exhibits as attachments to lease assignments, a written agreement, and an affidavit. See, e.g., Compl. at 31-36 (ECF page numbering); Am. Compl. attach. 3 [Doc. No. 20-3] at 6-11, attach. 13 [Doc. No. 20-13] at 18-23 & 34-39, and attach. 14 at 7-12 (ECF page numbering). These copies will be cited collectively as “Lease.”

Plaintiff alleges that his father and Lewis orally agreed she would receive certain advance payments and a royalty of $0.30 per ton of sand mined from her 160 acres and produced from a mining plant to be located on her property, including sand mined from other properties. See Am. Compl. § 13. This was “a typical and usual clause to go in a sand mining lease agreement with the landowner on which the plant is to be located.” Jd. In preparing a document to be signed, McCabe (a non-lawyer) “used prior lease forms to piece together” the Lease; it consists of printed language with typed and handwritten insertions. Jd. § 14. The alleged intent of the Lease was to cover two types of property; it includes a heading, “Tract | Legal description” with a typewritten description of Lewis’ 160 acres and a heading “Tract 2 Legal description” with a blank space, all of which is followed by printed language on the following page. See Lease at 1-2. This language is relevant to the parties’ arguments regarding the scope of the Lease and will be set forth in the discussion, infra. The Lease was executed by Lewis, McCabe, and Plaintiff and filed in Johnston County land records on February 17, 2005. Around this time, “there had been preliminary discussions with owners of adjacent and nearby properties but no leases or purchases had yet been made.” See Am. Compl., § 16. Plaintiff alleges the inclusion of a “Tract 2” in the Lease was intended to cover additional properties that might in the future “be leased or bought for the purpose of bringing sand to the plant to be processed and sold in the same way as the sand brought to the plant from the Sheila Lewis Tract 1.” Jd. § 18. McCabe and Plaintiff allegedly agreed that each would reserve an overriding royalty of $0.30 per ton of all sand production when making an assignment of the Lease. Jd. { 15.

McCabe and Plaintiff in May 2005 executed an Assignment of Sand and Aggregate Mining Lease (hereafter, the ““Assignment’’) to Folsom Quartz Sand L.L.C (“Folsom”), a limited liability company formed by McCabe.* The Assignment conveyed to Folsom all of McCabe’s and Plaintiff's rights and interests under the Lease “covering the following described lands and mineral interest: [stating the legal description of Lewis’ 160 acres] together with all the rights incident thereto, the personal property thereon, appurtenant thereto, or used or obtained in connection therewith (the ‘Property’).” See Assignment at 1.

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Hicks v. FG Minerals, LLC, (E.D. Okla. 2020).

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