Walney v. Swepi LP

THOMAS J. WALNEY and RODNEY A. BEDOW, SR., individually and on behalf of all others similarly situated, Plaintiffs, v. SWEPI LP and SHELL ENERGY HOLDING GP, LLC, Defendants.

CIVIL ACTION No. 13-102 Erie

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA

March 31, 2019

MEMORANDUM OPINION

Susan Paradise Baxter, United States District Judge

In this civil class action, Plaintiffs Thomas J. Walney ("Walney") and Rodney A. Bedow, Sr. ("Bedow") allege, on behalf of themselves and all similarly situated Pennsylvania leaseholders, that Defendants SWEPI LP and its general partner Shell Energy Holding GP, LLC (collectively, "SWEPI" or "Defendants") breached the terms of the class members' oil and gas leases by failing to pay bonus monies that were allegedly owed under the terms of the subject leases.¹ The case was originally assigned to the Honorable Sean J. McLaughlin. On August 28, 2013, the case was reassigned to the Honorable Joy Flowers Conti. ECF No. 21. After extensive pretrial proceedings, the case was transferred to the undersigned on September 17, 2018. ECF No. 221.

Presently pending before the Court are the following motions: Plaintiffs' third and fourth motions to amend the class definition (ECF Nos. 183 and 211); Defendants' motion to decertify the class (ECF No. 196); Plaintiffs' second motion for summary judgment (ECF No. 213); and Defendants' motion to strike the Plaintiffs' Concise Statement of Material Facts (ECF No. 240). For the reasons that follow, Defendants' motion to decertify the class will be granted, and the remaining motions will be denied.

I. FACTUAL BACKGROUND

Because the parties are well-versed in the underlying facts, and because those facts have been recounted in prior opinions,² this Court perceives no need to repeat them at length herein. The relevant claims, set forth in Plaintiffs' Second Amended Complaint ("SAC"), sound in breach of contract. ECF No. 57. In September 2015, Judge Conti certified a class action relative to these claims. See Walney v. SWEPI LP, No. 1:13-cv-102, 2015 WL 5333541 (W.D. Pa. Sept. 14, 2015). As currently defined, the class consists of:

Every person who on or after March 14, 2009, signed a Pennsylvania oil and gas lease (labeled "PA Paid Up Lease Rev. 06.09.2011" or "PA Paid Up Lease Rev. 05.01.2011") and/or memorandum thereof in favor of and recorded by SWEPI, LP and received, in exchange therefore, a draft instrument in the amount of the corresponding lease bonus, which draft was neither paid nor replaced by a subsequently issued draft or check relating to the same (or substantially the same) property.

Exclusions. Notwithstanding the foregoing, there shall be excluded from the Class any Person electing in writing or email to be excluded from the Class, and any Person whose individual claim for payment of the lease bonus has been sustained or denied by a verdict or dispositive order of a court in a separate lawsuit, irrespective of the outcome of any appeal.

ECF No. 133.

The Class's breach of contract claims are predicated on certain materially identical language set forth in SWEPI's form leases, memoranda of leases ("MOLs"), and drafts (collectively referred to as the "Transactional Documents"). Plaintiffs contend that, under the terms of their lease agreements, they were promised bonus monies that were never paid.

II. PROCEDURAL BACKGROUND

In March 2013, Walney commenced this civil action in the Venango County Court of Common Pleas. ECF No. 1-1. The case was then removed to this Court on April 12, 2013. ECF No. 1.

On October 10, 2014, Walney filed his Second Amended Complaint ("SAC"), ECF No. 57, which remains the operative pleading. In his SAC, Walney added Bedow as a putative class representative and asserted claims predicated upon breach of express contract, breach of contract implied in fact, breach of contract implied in law (i.e. unjust enrichment), fraud, and promissory estoppel.

On September 14, 2015, Judge Conti certified a class action pursuant to Federal Rule of Civil Procedure 23(b)(3) relative to the claims for breach of express contract and breach of contract implied in fact. See Walney v. SWEPI LP, No. 1:13-cv-102, 2015 WL 5333541 (W.D. Pa. Sept. 14, 2015). At that point in time, Plaintiffs' position was that no individualized inquiries would be necessary concerning contract formation, breach, defenses, or injury, 2015 WL 5333521 at *11, because, "in each and every case at issue, SWEPI had an absolute and unconditional obligation to pay the bonus monies." Id. at *12. In certifying the class, Judge Conti observed that, "if the court adopts plaintiffs' proposed construction of the agreement, plaintiffs will be able to establish liability on a classwide basis by virtue of nonpayment alone.Thus, plaintiffs' breach of contract theory can potentially be resolved by reference to, and interpretation of, common form documents." 2015 WL 5333541, at *13.

Following extensive pretrial proceedings, the parties filed cross-motions for summary judgment relative to the certified breach-of-contract claims. ECF Nos. 140 and 165. Construing the Transactional Documents in the context of the undisputed facts, Judge Conti determined, as a matter of law, that enforceable contracts existed between SWEPI and the various class members. 311 F. Supp. 3d at 725. She went on to conclude, however, that genuinely disputed issues of material fact precluded a finding that SWEPI had breached its contractual obligations to all class members.

First, Judge Conti decided, as a matter of law, that, under the terms of the lease agreements, "SWEPI expressly reserved the right to refuse payment of the lease bonuses if it discovered title problems during the time periods established on the face of the Drafts." 311 F. Supp. 3d at 726. Thus, "plaintiffs did not demonstrate that the payment condition set forth in the Draft [were] irrelevant as a matter of law." Id. at 728. Because SWEPI had produced evidence that title defects were "pervasive" among the drafts at issue, Judge Conti concluded that "SWEPI may have a potentially viable defense relative to a substantial number of the Drafts held by class members, the merits of which this court cannot presently adjudicate." Id. Second, Judge Conti found that SWEPI had adduced sufficient evidence to establish genuine issues of material fact relative to liability in some 17 transactions wherein it had allegedly surrendered lease agreements at the request of the lessors. Id. at 729-30. Third, Judge Conti found that liability issues existed relative to a number of class members who, it appeared, had never presented their drafts for payment. Id. at 730. Finally, Judge Conti found that genuine issues of fact existed relative tocertain claimants who appeared to fall outside of the class as it is currently defined and/or who had apparently already been paid their bonuses through replacement drafts. Id. at 730-31.

Based on these determinations, Judge Conti granted Plaintiffs' motion for summary judgment to the extent she found that the parties had entered into enforceable contracts; on the issues of contractual liability and damages, however, she denied Plaintiffs' motion. Id. at 730. Because SWEPI's motion for summary judgment was based entirely on its argument that the lease agreements were unenforceable, that motion was denied. Id. at 725.

In the wake of the Court's summary judgment ruling, the parties filed the currently pending motions. On May 21, 2018, Plaintiffs filed their Third Motion to Amend the Class Definition. ECF No. 183. Noting that the class is currently defined in terms of leaseholders whose MOLS were recorded by SWEPI, Plaintiffs now argue that recordation should be eliminated as a criterion for class membership because Judge Conti's ruling established that the lease agreements are enforceable irrespective of recordation.

On July 13, 2018, SWEPI filed the pending motion to decertify the class. ECF No. 196. SWEPI contends that, based on Judge Conti's summary judgment ruling, individualized issues now predominate over common issues of fact and law in this case, making continued certification under Rule 23(b)(3) untenable. SWEPI also asserts that the current case posture no longer supports a finding: (i) that the claims of the named representatives are typical of those of other class members, (ii) that Walney and Bedow can adequately represent the class, or (iii) that class action treatment is superior to other methods of fairly and efficiently adjudicating the case. See Fed. R. Civ. P. 23(a)(3)-(4) and (b)(3).

Plaintiffs responded to SWEPI's motion by filing a Second Motion for Summary Judgment on August 23, 2018, ECF No. 213, along with a Fourth Motion to Amend the ClassDefinition. ECF No. 211. In the latter motion, Plaintiffs seek, in part, to exclude from the class those individual's "whose continuing inclusion would not permit the continuance of certified Class status, as determined by the Court upon judgment." ECF No. 211 at 3.

Plaintiffs' second motion for summary judgment admittedly "hinges on the Court's disposition of SWEPI's Motion for Decertification." ECF No. 212 at 2. It is premised on Plaintiffs' assertion that, even if this Court concludes that decertification is warranted, "there would nevertheless remain, upon appropriate amendment of the class definition, a residue cohort of class members" as to whom class-wide summary judgment is appropriate. Id. In response to Plaintiffs' second summary judgment motion, SWEPI has filed a motion to strike Plaintiffs' Concise Statement of Material Facts and Appendix, ECF No. 240, arguing that the challenged documents were filed belatedly and in violation of the applicable local rules.

On September 17, 2018, this civil class action was transferred to the undersigned. ECF No. 221. Upon review of the extensive filings in this case, it appears that all of the aforementioned motions are adequately joined and ripe for adjudication. The Court's analysis of these motions...