Lehman v. Gulfport Energy Corporation

CourtDistrict Court, S.D. Ohio
DecidedMay 1, 2023
Docket2:20-cv-03053
StatusUnknown

This text of Lehman v. Gulfport Energy Corporation (Lehman v. Gulfport Energy Corporation) 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
Lehman v. Gulfport Energy Corporation, (S.D. Ohio 2023).

Opinion

20UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF OHIO EASTERN DIVISION

GARY H. LEHMAN, et al.,

Plaintiffs, Case No. 2:20-cv-3053 v. JUDGE EDMUND A. SARGUS, JR. Magistrate Judge Kimberly A. Jolson

GULFPORT ENERGY CORP., et al.,

Defendants.

This matter is before the Court on Defendants Gulfport Energy Corporation and Gulfport Appalachia LLC’s (collectively, “Gulfport”) Motion for Judgment on the Pleadings (ECF No. 9) and Plaintiffs Gary H. Lehman and Laura J. Lehman, Trustees of the Lehman Family Trust, dated 1/19/01 and Gary H. Lehman and Laura J. Lehman, Trustees of the Lehman Family Farm Trust’s (collectively, “Plaintiffs”) Motion for Judgment on the Pleadings as to Count I of the Complaint (ECF No. 10). For the reasons stated herein, the Court GRANTS Gulfport’s motion (ECF No. 9) and DENIES Plaintiff’s motion (ECF No. 10). I. BACKGROUND A. Factual Background This contractual dispute arises from an oil and gas lease (the “Lease”) that Gulfport entered into with Plaintiffs on May 23, 2013. (Compl. ¶¶ 8, 13, ECF No. 4.) The Lease, located in York Township, Belmont County, Ohio, covered a total of 231.812 acres. (Lease ¶ 2, ECF No. 9-1.)1

1 The Court may properly consider the Lease in deciding the parties’ Rule 12(c) motions. See Greenberg v. Life Ins. Co., 177 F.3d 507, 514 (6th Cir. 1999) (holding that “a document not formally incorporated by reference or attached to a complaint may still be considered part of the pleadings” if the document “is referred to in the complaint and is central to the plaintiff’s claim”) (citation omitted); see also Gascho v. Glob. Fitness Holdings, LLC, 918 F. Supp. 2d 708, 719 (S.D. Ohio 2013) (applying Greenburg to a motion for judgment on the pleadings). Here, although Plaintiffs did not attach the Lease to their Complaint, Plaintiffs’ Complaint directly quotes several provisions of the Lease, and the Lease—which Gulfport allegedly breached—is central to Plaintiffs’ claims. The property at issue in this case, however, concerns approximately 86.13 undeveloped acres that Gulfport released on April 18, 2018 (the “Property”). (Compl. ¶¶ 1, 44, ECF No. 4.) The Lease contains a Reasonable Development clause, which provides: 40. REASONABLE DEVELOPMENT. If oil or gas, are discovered on the leased premises subject to this Lease, Lessee shall develop the leased premises as a reasonable and prudent operator and exercise due diligence in drilling such additional well or wells and market any saleable products produced on the leased premises as may be necessary to fully develop the leased premises. Lessee shall protect the oil and gas in and under the leased premises from drainage by wells on adjoining or adjacent tracts or leases, including but not limited to those held by the Lessee or any Affiliate of Lessee. If oil or gas should be produced in paying quantities from a well on adjacent acreage that is draining any acreage of the leased premises that is not pooled or unitized with that well or already within a producing well Unit or pooled production Unit, Lessee shall within six (6) months after the earlier of: (1) notice from the Lessor of such producing well or (2) Lessee’s knowledge of such well having been drilled, begin in good faith and pursue diligently operations leading to the drilling of an offset well and such well shall be drilled to such depth as may be necessary to prevent drainage of the leased premises, and Lessee shall use all means necessary in a good faith effort to make such well produce oil or gas in paying quantities. Any well with a casing passing within five hundred (500) feet of the leased premises shall be presumed to be draining the leased premises, unless the Ohio Department of Natural Resources, or other governmental agency of the State of Ohio at that time has lessened State set back rules to less than 500 feet, in which case such lesser number will apply for purposes of this paragraph. Lessee may rebut this presumption only with evidence acceptable to Lessor, not to be unreasonably rebutted or refuted by Lessor. The requirements of this paragraph shall be subject to the rules and regulations of the State of Ohio. Payment of the bonus, royalties to be paid, shut-in payments, or other amounts due hereunder shall not relieve Lessee from its obligations under this paragraph. In no circumstance, however, will there be any drainage claim or obligation to drill an offset well hereunder if the leased premises or any part thereof is included in a Unit that is producing oil or gas in paying quantities.

(Id. at ¶ 40.) The Lease also includes a Release clause: 61. RELEASE. Notwithstanding anything herein to the contrary, Lessee may at any time and from time to time execute and deliver to Lessor or file for record a release of this Lease as to all or any part of the land covered thereby or any substance or horizon thereunder, and thereby be relieved of all obligations as to the released acreage or interest. (Id. at ¶ 61.) In 2017, within 500 feet of the Property’s northern boundary line, XTO Energy, Inc. drilled two wells: the Schnegg Unit B 9H Well and the Schnegg Unit C 7H Well. (Ex. 1 to Compl., ECF No. 4–1.) And in 2018, within 500 feet of the Property’s southern boundary line, CNX Gas

Company, LLC drilled the Switz9HHSUU Well. (Id.; Compl. ¶¶ 31–33, ECF No. 4.) According to ODNR records attached to the Complaint, the Schnegg 7H Well was the first of these wells to produce gas, beginning in Q1 of 2018. (Ex. I to Compl., ECF No. 4–1.) The other two wells, the Schnegg 9H Well and the Switz9HHSU Well, did not start production until Q4 of 2018 and Q1 of 2019, respectively. (Exs. H, K to Compl., ECF No. 4–1.) Thus, when Gulfport released the Property on April 18, 2018, just the Schnegg 7H Well had produced gas, albeit only recently. B. Procedural History On May 14, 2020, Plaintiffs filed this action against Gulfport in the Belmont County Common Pleas Court, asserting two counts: (1) a claim pursuant to Ohio Revised Code § 2721.03 seeking a declaration from the court that the Lease requires Gulfport to drill an offset well under

the Property, and (2) breach of contract for Gulfport’s failure to drill an offset well and protect the land from drainage. (See Notice of Removal, ECF No. 1.) On June 15, 2020, Gulfport removed this action to the Southern District of Ohio on diversity grounds. (Id.) On July 10, 2020, Gulfport moved for judgment on the pleadings. (ECF No. 9.) Plaintiffs timely filed their opposition (ECF No. 11), to which Gulfport replied (ECF No. 14.) On July 28, 2020, Plaintiffs moved for a partial judgment on the pleadings as to Count I of their Complaint (declaratory judgment). (ECF No. 10.) Gulfport opposed this motion (ECF No. 16), and Plaintiffs replied (ECF No. 18). Prior to adjudicating these motions, Gulfport notified the Court on November 19, 2020, that it had filed for bankruptcy in the United States Bankruptcy Court for the Southern District of Texas, and it invoked a stay of this action pending completion of the bankruptcy. (ECF No. 19.) Accordingly, on November 23, 2020, the Court stayed this action pursuant to Section 362(a) of

the Bankruptcy Act, 11 U.S.C. § 362(a). (ECF No. 20.) On February 2, 2022, Gulfport alerted the Court that litigation could resume in this case (ECF No. 21), and the Court lifted the stay thereafter (ECF No. 22.) Sitting before the Court are the parties’ motions for judgment on the pleadings; they are fully briefed and ripe for review. II. STANDARD OF REVIEW The

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Bluebook (online)
Lehman v. Gulfport Energy Corporation, Counsel Stack Legal Research, https://law.counselstack.com/opinion/lehman-v-gulfport-energy-corporation-ohsd-2023.