United States District Court, E.D. Kentucky, Southern Division, London
MEMORANDUM OPINION AND ORDER
L. Bunning United States District Judge
Production Company was hauled into court six years ago
regarding their rights and ownership in certain oil interests
in southeastern Kentucky. EQT lost in that action and was
forced to convey properties and pay approximately $14 million
in trespass damages. EQT, claiming that their former
attorneys are responsible for those damages, initiated the
instant action. The Court therefore must drill down through
the underlying litigation and explore whether EQT's
attorneys are potentially liable for legal malpractice.
John Keller and Vorys, Sater, Seymour and Pease, LLP
(collectively, “the Vorys Defendants”) and Dale
A. Phillips and Phillips Law Office (collectively, “the
Phillips Defendants”) seek judgment as a matter of law
in their favor on Plaintiff EQT Production Company's
(“EQT”) legal-malpractice claims against them.
Specifically, both the Vorys Defendants and the Phillips
Defendants argue that EQT's legal-malpractice claims are
barred by the statute of limitations and that EQT has failed
to create a genuine issue of material fact regarding whether
the Vorys Defendants or the Phillips Defendants committed
professional negligence in their representation of EQT. The
Court has jurisdiction over this matter pursuant to 28 U.S.C.
FACTUAL AND PROCEDURAL BACKGROUND
spring of 2001, EQT decided to sell certain oil interests on
thousands of noncontiguous acres throughout southeastern
Kentucky-primarily in Leslie, Letcher, and Perry
Counties. (Docs. # 71 at 4; 74 at 6-7). The
contemplated transaction involved three types of property
interests: properties that EQT owned in fee simple,
properties that EQT leased from third-parties, and existing
wells that EQT owned, along with the associated equipment and
pipelines situated on the property. Id. EQT operated
some of these properties with a joint-venture partner, KRCC
Oil and Gas Company (“KRCC”). Id.
preparation for the offering, Joe Morris, EQT's Vice
President of Geoscience, and Lester Zitkus, EQT's Vice
President of Land, drew maps with tract outlines around the
oil fields EQT wished to sell. (Doc. # 74-1 at 4). Several of
these maps outlined in blue ink some of the properties that
EQT owned. (Docs. # 74-2; 74-3; 74-4). EQT also established a
Data Room, which contained a Data Room Summary that detailed
information about the properties and assets offered for sale,
instructions for bidding, a Purchase and Sale Agreement, and
an Assignment. (Doc. # 74-7).
establishing the Data Room, but before the bid deadline, EQT
retained John Keller, a partner at Vorys, Sater, Seymour and
Pease, LLP, to represent EQT in the anticipated
transaction. (Docs. # 71 at 5; 74 at 8; 74-8). On
August 30, 2001, Journey Acquisition-II, LP
(“Journey”) submitted a collective bid of $70,
700, 000, with $64, 090, 000 offered for EQT's interests
and $6, 600, 000 offered for KRCC's interests. (Docs. #
71 at 5; 74 at 8; 74-10). Along with its bid, Journey
presented the draft Purchase and Sales Agreement, with
red-lined comments. (Doc. # 74-10). Because Journey was the
highest bidder, EQT and KRCC accepted Journey's offer.
(Doc. # 74 at 9).
September 3, 2001, Zitkus made additional comments on the
red-lined Purchase and Sales Agreement and faxed the document
to Keller the next day. Id. Of particular relevance,
Zitkus claims he made a note next to Section One of the
Purchase and Sale Agreement (“PSA”), entitled
“Property to be Sold and Purchased, ” instructing
Keller to “Reference Boundaries.” (Doc. # 74-10
September 5, 2001, at EQT's suggestion and with EQT's
consent, KRCC also retained the Vorys Defendants. (Docs. # 74
at 10-11; 74-12; 74-13). Jointly representing the sellers,
Keller amended EQT and KRCC's Joint Venture Agreements,
and also made revisions to both EQT's and KRCC's
PSAs. (Doc. # 74 at 11-17). Over the month of September, EQT,
KRCC, and Journey negotiated the details of the transaction.
(Docs. # 74-6 at 73-75; 74-11; 74-14). At the same time, EQT,
KRCC, and Keller exchanged and revised numerous versions of
the Amended Joint Venture Agreements. (Docs. # 74-6 at
148-51; 74-11; 74-16).
Keller was tasked with drafting and revising the various
agreements, including some of the exhibits, EQT prepared the
maps that were attached to the agreements. (Docs. # 71-2 at
4; 74-6 at 57-58, 141, 194-95). The Blue Line Boundary Maps,
which Zitkus and Morris had prepared for the Data Room, were
attached to the PSAs. When attached to the EQT PSA, the Blue
Line Boundary Maps became Exhibit N. (Docs. # 71-18 at
195-206; 74-19 at 196-207). When attached to the KRCC PSA,
the Blue Line Boundary Maps became Exhibit J. (Doc. # 74-20
September 28, 2001, neither the EQT PSA nor the KRCC PSA
contained references to the Blue Line Boundary Maps in
Section One or Section Eighteen. (Doc. # 74 at 15). Sometime
between September 28 and October 4, 2001, however, KRCC
contacted Keller and requested that he “clarify”
the PSA to limit the transaction to the “properties
within the Blue Line Boundary Maps.” (Doc. # 74 at 15).
Notably, Keller made the requested changes to the KRCC PSA.
Id. Specifically, he added references to Exhibit J
and limiting language to two sections of the KRCC PSA:
Section One, the “Property to be Sold and
Purchased” section and Section 18, the “Further
Assurances Clause.” Id. at 15-16. After the
changes, the relevant portions of those sections read as
1. Property to be Sold and
Purchased. Seller agrees to sell and Buyer
agrees to purchase, for the consideration hereinafter set
forth, and subject to the terms and provisions herein
contained, the following described properties, rights and
The Leasehold Interest, Wells, Pipelines, rights and
interests specified in the foregoing subsections (a), (b),
(c), (d) and (e), exclusive of the properties, rights and
interests excluded herein, are herein sometimes collectively
called the “Oil and Gas Properties, ” or
“Properties”. The Properties do not include, and
there is hereby expressly excepted and excluded therefrom and
reserved to Seller all property not described above or being
included in this Agreement, including but not limited to the
following: … 2) with respect to lands located
outside of the areas shown on Exhibit J and with respect
to deep rights reserved by Seller, all right, title and
interest Seller owns or has a right to acquire under any
agreement covering the Properties (regardless of whether an
assignment has been made to Seller or not as of the date of
(Doc. # 74-20 at 11) (italic emphasis added).
(a) Further Assurances. After the
Closing, Seller and Buyer shall execute and deliver, and
shall otherwise cause to be executed and delivered, from time
to time, such further instruments, notices, division orders,
transfer orders and other documents, and do such other and
further acts and things, as may be reasonably necessary to
more fully and effectively grant, convey and assign the
Properties to Buyer and to otherwise carryout the transaction
contemplated hereby. Without limiting the foregoing, if after
Closing it is determined that Seller owns Property being
hereby sold by Seller to Buyer as described in Section 1(a),
(c), or (d) hereof within the geographic areas outlined
in blue on the map attached hereto as Exhibit
J which were inadvertently omitted from the
Assignment contemplated hereunder, Seller shall convey such
interests to Buyer for no additional consideration, and the
parties will otherwise proceed to take such actions with
respect to such interests as would have occurred if such
interests had been included in the Closing …
Id. at 34 (italic emphasis added).
did not incorporate similar limiting language into the EQT
PSA. (Doc. # 74-6 at 108, 172-175). Nor did he inform EQT
that KRCC had sought such revisions. Id.
October 4, 2001, the EQT PSA was executed. (Docs. # 71 at 5;
74-19). On that same day, EQT and KRCC executed their Amended
Joint Venture Agreements to exclude their joint-venture
properties being sold to Journey. (Doc. # 74-18). The KRCC
PSA was executed several days later, on October 9, 2001.
(Docs. # 71 at 5; 74-20). Immediately thereafter, a
due-diligence period commenced for the Journey Transaction.
(Doc. # 74-6 at 39-40). And on November 30, 2001, the Journey
Transaction closed. (Doc. # 71 at 5).
Journey's agreement was memorialized in three documents:
the PSA, the Master Assignment, and the Oil and Gas Lease.
The PSA sets forth the details of the transaction and
identifies the interests EQT sold to Journey. (Doc. # 74-19).
Several exhibits were attached to and incorporated into the
PSA. Exhibit A lists several hundred property interests and
details the name, acreage, and other information about each
individual interest. Id. at 57-67. The Blue Line
Boundary Maps were attached to the PSA as Exhibit N.
Id. at 196-207. The Master Assignment and the Oil
and Gas Lease were executed at the closing on November 30,
2001. (Docs. # 71-19; 71-20). The Master Assignment grants to
Journey subleases in certain lands that EQT had already
leased from third parties, and the Oil and Gas Lease provides
that EQT would lease certain properties to Journey for at
least five years. Id.
years that followed the 2001 Journey Transaction, both EQT
and Journey continued their respective oil exploration and
drilling operations in southeastern Kentucky. (Doc. # 74 at
20). During this time, EQT sought title opinions from various
attorneys, including the Phillips Defendants, before drilling
additional wells. (Docs. # 73-3; 73-4; 73-5; 73-6; 73-7;
73-8; 73-9; 73-10). When requesting title opinions, EQT did
not inform Phillips about the Journey Transaction. (Doc. #
70-6 at 67-68, 78). And when rendering his title opinions,
Phillips's inquiry stopped when he reached EQT's
acquisition of the lease. (Doc. # 73-1 at 11-12). Put another
way, Phillips did not examine EQT's “title as a
lessee” or attempt to determine “what, if
anything, [EQT] had done with the lease” because his
examination was limited to the “oil and gas
ownership” estate. Id. at 12.
April of 2006, questions arose internally within EQT about
the Fordson Coal Lease. (Doc. # 71-23). Specifically, Sam
Smallwood, a Landman in EQT's Land Department noticed
that the entire leased acreage of the Fordson Coal
Lease-which consists of 6, 333 acres across Perry, Letcher,
and Leslie Counties-was listed on the Perry County
Assignment, but was not listed on the assignments to Journey
that covered Letcher and Leslie Counties. Id. at 2.
Although Smallwood and a member of EQT's Land
Administration Group, Michele Weber, believed that “the
intent was to only sell Journey the acreage of the lease
located in Perry County” and to “keep the acreage
in Letcher and Leslie Counties along with the wells in those
counties, ” they reached out to Zitkus for advice.
Id. Zitkus agreed with Smallwood and Weber's
“collective assessment, ” but thought that EQT
“should confirm the intent” and suggested
contacting Greg Shockley, who worked at Journey, to pursue a
“corrective assignment.” Id.
followed Zitkus's suggestion and met with Shockley on
August 11, 2006. (Doc. # 71-24). During this meeting,
Smallwood and Shockley discussed the Fordson Coal Tract,
among other things. Id. With respect to the Fordson
Coal Tract, Shockley memorialized his discussion with
Smallwood as follows:
We have never claimed the portion in Letcher County. Not in
P&SA, maps, assignments, etc. Probably should have been
excluded in the first place to make clear but I don't see
that we have any claim to this parcel. Told him I thought we
would be willing to execute some type of letter agreement
Id. at 2. Shockley's memorandum regarding his
meeting with Smallwood was forwarded to Journey's
President, Brian Baer, but no curative assignment was
executed. (Doc. # 71-11 at 16).
October 9, 2006, EQT obtained a title opinion from William
Davidson, an attorney in Pikeville, regarding the Letcher
County portion of the Fordson Coal Lease. (Docs. # 71-27 at
42-44; 73-12). Although Smallwood had not informed Davidson
about the potential issues with the Fordson Coal Lease, he
issued a memorandum approving drilling based on the title
opinions, and EQT began drilling wells on the Letcher County
portion of the Fordson Coal Lease in December of 2006. (Doc.
# 71-11 at 69-92).
with the Journey Transaction resurfaced in 2009. (Doc. #
71-25). Specifically, Mary Beth Mazzei, an Accounting/Land
Clerk with Journey, e-mailed Smallwood in February of 2009
regarding missing lease files. Id. at 3. Shawn
Columbus, a Contract Analyst with EQT responded to Mazzei and
informed her that the leases did “not appear to be a
part of the 2001 acquisition.” Id. at 2. In
reply, Mazzei informed Columbus that although the leases did
not appear on the 2001 acquisition, they were
“exhibited on the maps” and
“included” in the PSA. Id.
Mazzei and Columbus exchanged several other e-mails,
detailing their conflicting research and explaining their
positions, higher-ups at EQT and Journey joined the
discussion. (Doc. # 71-15). Again, Smallwood and
Shockley discussed the parties'
“intent” with respect to the Journey Transaction.
Id. at 5. And Shockley reminded Smallwood that they
had “found several errors/omission[s]” in the PSA
and maps, but had “always been able to work [issues]
out in the past.” Id. at 6. Shockley also
suggested that EQT and Journey “document this and the
Fordson Coal Tract Parcel in some fashion.”
Id. As best the Court can tell, these issues were
not resolved, and drilling continued.
2011, Journey contacted EQT regarding alleged trespasses.
(Doc. # 71-14). Specifically, Journey claimed that since
2007, EQT drilled at least fifteen “gas wells on the
property covered by the Fordson Lease that Journey
owns.” Id. at 2. Through the summer of 2012,
EQT and Journey exchanged correspondence and attempted to
resolve the dispute amicably. (Doc. # 71-15). The parties,
however, maintained their positions, with Journey alleging
that EQT had conveyed the entire 6, 333 acres of the Fordson
Coal Lease to Journey, and EQT contending that “it was
the intent of the parties at the time of the 2001 transfer
that only certain” portions of the Fordson Coal
acreage-those in Perry County and not those in Letcher or
Leslie Counties-“would be sold to Journey.”
Id. at 2.
of 2012, EQT reached out to Keller, seeking advice regarding
the dispute over the Fordson Coal Lease and the lease of the
fee tracts. (Doc. # 74-22). By e-mail dated June 8, 2012,
Keller indicated that he had reviewed his Journey files and
relayed his legal opinions:
With respect to Fordson Coal lease, not only is this only
listed on the Perry County assignment, but Ex A to the PSA
lists this lease as only being in Perry County. However, it
lists the entire acreage and the PSA says the seller's
entire interest in the leases will be conveyed. I don't
find anything else about this lease and have no recollection
of this being raised. My sense is that you have a good
argument that what was intended to be included was the lease
insofar as it covers land in Perry County only. This is
certainly the way the parties acted post-closing. I was
hopeful the asset allocation schedule might be helpful, but
that only allocated the purchase price among wells, not
acreage. However, if the only wells on this lease were in
Perry, that is helpful in showing no value was given on lease
rights in the other counties.
Id. at 2.
days later-on June 13, 2012-Journey filed suit against EQT in
the Eastern District of Kentucky, seeking a declaration that
the 2001 transaction transferred to Journey all property
interests described in Exhibit A, regardless of whether those
properties were inside or outside of the blue line boundaries
on Exhibit N. Journey Acquisition-II, L.P. v. EQT Prod.
Co., No. 6:12-cv-108-GFVT-EBA (E.D. Ky. 2012) (Doc. # 1
therein). Journey also alleged that EQT had trespassed by
drilling and operating certain wells on Journey's
property (now known as the “Trespass Wells”).
August 18, 2014, after both EQT and Journey sought summary
judgment, Judge Van Tatenhove ruled in Journey's favor,
finding that the transaction documents unambiguously conveyed
to Journey those properties listed on Exhibit A, and that the
transaction was not limited to the properties depicted within
the blue line boundaries on Exhibit N. Id. (Doc. #
141 therein); Journey Acquisition-II, L.P. v. EQT Prod.
Co., 39 F.Supp.3d 877 (E.D. Ky. 2014). This
interpretation led Judge Van Tatenhove to conclude that EQT
had trespassed on Journey's property. Id.
Nonetheless, genuine issues of material fact precluded
summary judgment, and the question of whether EQT's
trespasses had been committed in good faith was left for a
jury. Id. On September 8, 2014, the jury trial
commenced. Id. (Doc. # 186 therein). Four days
later-on September 12, 2014-the jury found that EQT had
trespassed in bad faith and returned a verdict in favor of
Journey. Id. (Doc. # 195 therein).
24, 2015, Judge Van Tatenhove denied EQT's post-trial
motions, requesting judgment as a matter of law and a new
trial. Id. (Doc. # 220 therein); Journey
Acquisition-II, L.P. v. EQT Prod. Co., No,
6:12-cv-108-GFVT, 2015 WL 3893003 (E.D. Ky. June 24, 2015).
And the next day-June 25, 2015-Judge Van Tatenhove entered
judgment in favor of Journey, awarding Journey an amount of
stipulated damages and prejudgment interest. Id.
(Doc. # 221 therein). Thereafter, Judge Van Tatenhove's
and the parties' attention turned toward the logistics of
enforcing the court's orders and transferring the
property interests. Id. (Doc. # 226 therein);
Journey Acquisitions-II, L.P. v. EQT Prod. Co., No.
6:12-cv-108-GFVT, 2015 WL 9461387 (E.D. Ky. July 24, 2015).
As part of that process, the parties filed a Joint
Stipulation regarding Journey's damages on July 31, 2015.
Id. (Doc. # 227 therein). And finally, on August 5,
2015, Judge Van Tatenhove entered a Final Judgment.
Id. (Doc. # 230 therein); Journey
Acquisitions-II, L.P. v. EQT Prod. Co., No.
6:12-cv-108-GFVT, 2015 WL 4985728 (E.D. Ky. Aug. 5, 2015). On
September 2, 2015, EQT appealed to the United States Court of
Appeals for the Sixth Circuit. Id. (Doc. # 241
therein). Ultimately, that appeal was unsuccessful.
Id. (Doc. # 251 therein); Journey
Acquisitions-II, L.P. v. EQT Prod. Co., 830 F.3d 444
(6th Cir. 2016).
its appeal was pending, EQT filed separate legal-malpractice
actions against the Defendants-first suing the Vorys
Defendants on August 17, 2015, and then suing the Phillips
Defendants almost one year later, on August 2, 2016. On
January 30, 2017, the two cases were
consolidated. (Doc. # 35); see also EQT Prod. Co. v.
Phillips, 7:16-cv-164-DLB-EBA (E.D. Ky. 2016). This
matter is now before the Court upon both the Phillips
Defendants' and the Vorys Defendants' Motions for
Summary Judgment. (Docs. # 70 and 71). Both Motions are fully
briefed (Docs. # 70, 73, 75; 71, 74, 78), and ripe for the
Standard of Review
judgment is appropriate when the record reveals “that
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). A genuine dispute of material fact exists
where “there is sufficient evidence … for a jury
to return a verdict for” the non-moving party.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249
(1986). The “moving party bears the burden of showing
the absence of any genuine issues of material fact.”
Sigler v. Am. Honda Motor Co., 532 F.3d 469, 483
(6th Cir. 2008). Once a party files a properly supported
motion for summary judgment, by either affirmatively negating
an essential element of the non-moving party's claim or
establishing an affirmative defense, “the adverse party
must set forth specific facts showing that there is a genuine
issue for trial.” Anderson, 477 U.S. at 250.
However, “the mere existence of a scintilla of evidence
in support of the [non-moving party's] position will be
insufficient.” Id. at 252.
Court must “accept Plaintiff's evidence as true and
draw all reasonable inferences in [EQT's] favor.”
Laster v. City of Kalamazoo, 746 F.3d 714, 726 (6th
Cir. 2014) (citing Anderson, 477 U.S. at 255). The
Court is not permitted to “make credibility
determinations” or “weigh the evidence when
determining whether an issue of fact remains for
trial.” Id. (citing Logan v. Denny's,
Inc., 259 F.3d 558, 566 (6th Cir. 2001)). “The
ultimate question is ‘whether the evidence presents a
sufficient disagreement to require submission to a jury or
whether it is so one-sided that one party must prevail as a
matter of law.'” Back v. Nestle USA, Inc.,
694 F.3d 571, 575 (6th Cir. 2012) (quoting Anderson,
477 U.S. at 251-52). If there is a dispute over facts that
might affect the outcome of the case under governing law, the
entry of summary judgment is precluded. Anderson,
477 U.S. at 248.
moving parties, the Defendants must shoulder the burden of
showing the absence of a genuine dispute of material fact as
to at least one essential element of EQT's
legal-malpractice claims. Fed.R.Civ.P. 56(c); see also
Laster, 746 F.3d at 726 (citing Celotex Corp. v.
Catrett, 477 U.S. 317, 324 (1986)). Assuming Defendants
satisfy their burden, EQT “must-by deposition, answers
to interrogatories, affidavits, and admissions on file-show
specific facts that reveal a genuine issue for trial.”
Laster, 746 F.3d at 726 (citing Celotex
Corp., 477 U.S. at 324).
considering the issues raised in the Motions for Summary
Judgment, the Court must determine which state's law
governs. As a federal court sitting in diversity, the Court
must apply “the choice of law rules of the forum
state.” Hayes v. Equitable Energy Res.
Co., 266 F.3d 560, 566 (6th Cir. 2001) (citing
Klaxon Co. v. Stentor Elec. Mfg., 313 U.S. 487, 796
(1941)). Therefore, Kentucky choice-of-law rules govern.
the parties do not address the choice-of-law issue in their
briefs, they apparently believe that Kentucky law applies,
and the Court agrees. EQT has alleged that the Defendants are
liable in tort for professional negligence. Because this is a
tort action, Kentucky law will apply “if there are
significant contacts-not necessarily the most significant
contacts-with Kentucky.” Foster v. Leggett,
484 S.W.2d 827, 829 (Ky. 1972); Saleba v. Schrand,
300 S.W.3d 177, 181 (Ky. 2009).
there are significant contacts with Kentucky. Although EQT is
a Pennsylvania corporation with its principal place of
business in Pittsburgh, Pennsylvania (Doc. # 1 at ¶ 1),
Keller is a citizen of Arizona, and Vorys is an Ohio
limited-liability partnership with is principal place of
business in Columbus, Ohio (Doc. # 23 at ¶¶ 1-2),
all other contacts point to Kentucky. Phillips is a citizen
of Kentucky, as is his sole proprietorship, Phillips Law
Office. (Doc. # 23 at ¶¶ 3-4). Furthermore, the
Defendants' alleged malpractice is based on transaction
documents and title opinions that relate to property and oil
wells located in Kentucky, and the underlying
Journey Litigation was filed, tried, and resolved in
Kentucky. Given the strong preference for applying Kentucky
lawand the significant contacts with the
state, Kentucky law applies to this action. Accordingly, the
Court will apply federal procedural law and Kentucky
substantive law to resolve the Motions for Summary Judgment.
Statute of Limitations
establishes a one-year statute of limitations for
professional negligence claims, which includes legal
Notwithstanding any other prescribed limitation of actions
which might otherwise appear applicable … a civil
action, whether brought in tort or contract, arising out of
any act or omission in rendering, or failing to render,
professional services for others shall be brought within one
(1) year from the date of the occurrence or from the date