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Western Leasing, inc. v. Western Mineral Development, LLC

United States District Court, W.D. Kentucky, Owensboro Division

October 24, 2018

WESTERN LEASING, INC. and SAMUEL S. FRANCIS, as trustee of the WESTERN KENTUCKY ROYALTY TRUST PLAINTIFFS
v.
WESTERN MINERAL DEVELOPMENT, LLC, CERALVO HOLDINGS, LLC, and THOROUGHBRED RESOURCES L.P. DEFENDANTS

          MEMORANDUM OPINION AND ORDER

          JOSEPH H. MCKINLEY, JR., CHIEF JUDGE UNITED STATES DISTRICT JUDGE

         This matter is before the Court on a motion by Defendants, Western Mineral Development, LLC, Ceralvo Holdings, LLC, and Thoroughbred Resources L.P., to dismiss Plaintiffs' complaint [DN 13]; on a motion by Plaintiffs, Western Leasing, Inc. and Samuel S. Francis, as Trustee of Western Kentucky Royalty Trust, for partial summary judgment [DN 15]; on a motion by Plaintiffs to take judicial notice [DN 16]; on a motion by Defendant, Ceralvo Holdings, LLC, for leave to file under seal a settlement agreement [DN 33]; and on a motion by Defendant, Ceralvo Holdings, LLC, to allow time for discovery pursuant to Fed.R.Civ.P. 56(d) [DN 35]. Fully briefed, these matters are ripe for decision.

         I. Background

         Plaintiff, Western Kentucky Royalty Trust (“WKRT”), is a trust for which Samuel S. Francis is the trustee. Francis is also the President and owner of Plaintiff, Western Leasing, Inc. (“Western Leasing”). Francis has been in the business of acquiring and selling coal properties for over thirty years. In the fall of 2006, Francis began acquiring various mining properties located in Muhlenberg and Ohio Counties for what became known as the Armstrong Project. In consideration of Francis's role in the acquisition of these properties, various companies affiliated with the Armstrong Project granted him an overriding royalty on certain coal that was mined and sold from the properties. A dispute arose, and Francis sued Armstrong Coal Company, Western Land Company, and other Armstrong Parties, including Ceralvo Holding, LLC. In order to settle their dispute, the parties entered into a Settlement Agreement on July 25, 2008. The parties also entered into additional Royalty Agreements on that same date.

         In 2011, a dispute again arose between these parties regarding the payment of royalties. The dispute occurred due to the parties' differing interpretations of the 2008 Settlement Agreement and the 2008 Royalty Agreements. See Western Kentucky Royalty Trust v. Armstrong Coal Reserves, Inc., et al, Case No. 4:11-CV-00114 (W.D. Ky. filed Sept. 20, 2011). The Court in its summary judgment orders and final judgment in that action resolved issues related to when and under what circumstances a royalty would be due from the defendants in that case for the mining of certain coal reserves and the use of the certain identified surface properties. Id. at ¶ 82, DN 103, DN 134.

         Other disputes have arisen over the last five years and have been resolved by the parties without intervention of this Court. However, on April 12, 2018, Plaintiffs filed this suit against Defendants, Western Mineral Development, LLC (“Western Mineral”), Ceralvo Holdings, LLC (“Ceralvo”), and Thoroughbred Resources L.P. (“Thoroughbred”), asserting claims of breach of the 2008 Settlement Agreement and the 2008 Royalty Agreements, trespass, unjust enrichment, tortious interference with contracts, and declaratory relief against Western Mineral. Specifically, Plaintiffs allege Defendants have breached § 4 of the 2008 Settlement Agreement[1] which restricts the Armstrong Parties (Ceralvo), their successors and assigns (Western Mineral and Thoroughbred), from mining coal which they did not own (but merely leased) from beneath 1, 840 acres of surface property owned by Francis (“Restricted Property”) and from consenting to the mining of any coal beneath the Restricted Property by any third party until 2025. Additionally, Plaintiffs contend that the Defendants are contractually obligated to pay certain specified royalty payments under the 2008 Royalty Agreements which they are not currently paying. Plaintiffs also allege various tort claims relating to Defendants' actions on the property.

         Defendants now move to dismiss Plaintiffs' complaint for failure to state a claim. Plaintiffs filed a cross-motion for partial summary judgment against Ceralvo on the breach of the 2008 Settlement Agreement claim alleged in Count I of the complaint. In addition to the response to the motion for partial summary judgment, Ceralvo filed a motion to allow time for discovery pursuant to Fed.R.Civ.P. 56(d). The Court will address these motions in turn.

         II. Standard of Review

         A. Motion to Dismiss

         Upon a motion to dismiss for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6), a court “must construe the complaint in the light most favorable to plaintiff, ” League of United Latin Am. Citizens v. Bredesen, 500 F.3d 523, 527 (6th Cir. 2007) (citation omitted), “accept all well-pled factual allegations as true[, ]” id., and determine whether the “complaint states a plausible claim for relief[, ]” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). Under this standard, the plaintiff must provide the grounds for his or her entitlement to relief which “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). A plaintiff satisfies this standard only when he or she “pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. A complaint falls short if it pleads facts “merely consistent with a defendant's liability” or if the alleged facts do not “permit the court to infer more than the mere possibility of misconduct.” Id. at 678, 679. Instead, the allegations must “‘show[ ] that the pleader is entitled to relief.'” Id. at 679 (quoting Fed.R.Civ.P. 8(a)(2)).

         B. Motion for Summary Judgment

         Before the Court may grant a motion for summary judgment, it must find that there is no genuine dispute as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). The moving party bears the initial burden of specifying the basis for its motion and identifying that portion of the record that demonstrates the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Once the moving party satisfies this burden, the non-moving party thereafter must produce specific facts demonstrating a genuine issue of fact for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986).

         Although the Court must review the evidence in the light most favorable to the non-moving party, the non-moving party must do more than merely show that there is some “metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Instead, the Federal Rules of Civil Procedure require the non-moving party to present specific facts showing that a genuine factual issue exists by “citing to particular parts of materials in the record” or by “showing that the materials cited do not establish the absence . . . of a genuine dispute[.]” Fed.R.Civ.P. 56(c)(1). “The mere existence of a scintilla of evidence in support of the [non-moving party's] position will be insufficient; there must be evidence on which the jury could reasonably find for the [non-moving party].” Anderson, 477 U.S. at 252.

         III. ...


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