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Magee v. BHP Billiton Petroleum Properties N.A. L.P.

United States District Court, W.D. Louisiana, Shreveport Division

November 13, 2017

JOE D. MAGEE, ET AL.
v.
BHP BILLITON PETROLEUM PROPERTIES N.A., L.P.

          HORNSBY, MAGISTRATE JUDGE.

          MEMORANDUM RULING

          S. MAURICE HICKS, JR., CHIEF JUDGE UNITED STATES DISTRICT COURT.

         Before the Court are three Motions: (1) Plaintiff The Pesnell Law Firm's (“Pesnell”) Motion for Summary Judgment pursuant to Rule 56 of the F.R.C.P. against Defendant BHP Billiton Petroleum Properties (N.A.), L.P. (“BHP”) asserting there is no genuine dispute of material fact with respect to the claims of unpaid bonuses under the terms of the lease (Record Document 27); (2) Plaintiffs Joe D. Magee and Joann Fulmer Magee's, husband and wife (jointly, the “Magees”), Motion for Partial Summary Judgment seeking royalties due for the failure of BHP to timely pay under Article 139 of the Mineral Code (La. R.S. 31:139) and requesting an accounting from BHP (Record Document 27); and (3) BHP's Cross Motion for Partial Summary Judgment asserting it is entitled to a judgment as a matter of law that it (i) does not owe Plaintiffs any damages for nonpayment of royalties under Mineral Code Article 139; (ii) does not owe any additional bonus payments; and (iii) that Plaintiffs' request for an accounting is premature (Record Document 31). For the reasons stated in the instant Memorandum Ruling, Pesnell's Motion for Summary Judgment and the Magees' Motion for Partial Summary Judgment are hereby DENIED. Additionally, BHP's Cross Motion for Partial Summary Judgment is hereby GRANTED.

         FACTUAL AND PROCEDURAL BACKGROUND

         The Magees executed four (4) separate mineral leases (the “Leases”) in favor of Petrohawk[1], to-wit:

(1) That certain oil, gas and mineral lease executed by Joe Magee and Joann Fulmer Magee in favor of Petrohawk under date of August 14, 2009, and recorded in the Conveyance Records of DeSoto Parish, Louisiana, under Registry No. 667517, in Book 1024, at page 750, covering a fifty (50) acre tract of land;
(2) That certain oil, gas and mineral lease executed by Joe Magee and Joann Fulmer Magee in favor of Petrohawk under date of August 14, 2009, and recorded in the Conveyance Records of DeSoto Parish, Louisiana, under Registry No. 668090, in Book 1027, at page 411, covering an undivided one-half interest in the mineral underlying a 93.56 acre tract of land;
(3) That certain oil, gas and mineral lease executed by Joe Magee and Joann Fulmer Magee in favor of Petrohawk under date of August 14, 2009, and recorded in the Conveyance Records of DeSoto Parish, Louisiana, under Registry No. 668092, in Book 1027, at page 423, covering an undivided one-half (½) interest in the minerals underlying a 2.07 acre tract of land; and
(4) That certain oil, gas and mineral lease executed by Joe Magee and Joann Fulmer Magee in favor of Petrohawk under date of August 14, 2009, and recorded in the Conveyance Records of DeSoto Parish, Louisiana, under Registry No. 668094, in Book 1027, at page 435, covering an undivided one-half (½) interest in the minerals underlying a 1.0 acre tract of land.

         Record Document 1-3 at 2. Paragraph 11 of each of the Leases provides as follows:

In case of suit, adverse claim, dispute or question as to the ownership of the royalties (or some part thereof) payable under this lease, Lessee shall not be held in default in payment of such royalties (or the part thereof in dispute) until such suit, claim, dispute or question has been finally disposed of and Lessee shall have thirty (30) days after being furnished with a certified copy of the instrument or instruments disposing of such suit, claim or dispute, or after being furnished with proof sufficient, in Lessee's opinion, to settle such question within which to make payment.

         Record Document 27-6 at 7, 14, 21, 27. Paragraph 29 of the Leases provides, in pertinent part, that:

Lessee agrees that if Lessor establishes that the Mineral Servitude expired prior to the granting of this lease either by a properly executed acknowledgment by the owner of the servitude or by final, unappealable judgment of a court of competent jurisdiction, then Lessee shall pay to Lessor an additional consideration of $4, 975.00 per net mineral acre for all or that portion of the Leased Premises over which the Mineral Servitude has expired. Such additional bonus consideration will be paid to Lessor within 30 days after Lessor has submitted to Lessee a certified copy of such acknowledgment or judgment.

         Record Document 27-6 at 9, 16, 23, 29.

         Petrohawk (BHP) spudded the Murphy 5H No. 1 Well on or about March 18, 2010, which was completed as a gas well capable of producing gas in paying quantities on July 25, 2010. See id. at 3. Pursuant to the Leases, the Magees engaged Pesnell (collectively, the “Plaintiffs”) to file suit on their behalf to obtain a declaratory judgment that the Worley servitude had prescribed.[2] As part of the contingency fee agreement, the Magees executed an Act of Assignment on August 25, 2010, in favor of Pesnell (the “Assignment”). See Record Document 27-5 at 20. The Magees assigned Pesnell their interest to receive “additional cash bonuses or consideration in the amount of $4, 975.00 per net mineral acre under the oil, gas and mineral leases we, as Lessors, have executed in favor of [BHP] covering the following described lands.” See id. Pesnell later filed suit on January 27, 2011 (the “Worley suit”). See Record Document 1-3 at 3. The Forty-Second Judicial District Court in DeSoto Parish, Louisiana, rendered judgment on May 22, 2014, in favor of the Magees, terminating the mineral servitude claimed by the Worleys, effective November 1, 1997, as a result of the accrual of liberative prescription. See id. The Court of Appeal, Second Circuit, affirmed the judgment of the District Court in an opinion handed down on March 4, 2015, which became final on April 6, 2015. See id.

         Shortly after the judgment became final, Pesnell mailed BHP on April 14, 2015, by certified mail, a certified copy of the judgment of the Forty-Second Judicial District Court, a copy of the decision of the Court of Appeal, a copy of each of the Leases executed by the Magees in favor of Petrohawk (BHP), and a copy of the Assignment.[3] See id. at 4. Pesnell requested that BHP pay the Magees the royalties due under the Leases on production from the Murphy 5H No. 1 Well from the date of first production and pay Pesnell the unpaid balances due on agreed bonuses with interest. See id.

         BHP received the letter dated April 14, 2015, on April 22, 2015, but did not pay the royalties due the Magees within thirty days after receipt of the letter, nor did it provide any written reason for its failure. See id. Pesnell wrote BHP and Petrohawk another letter dated June 8, 2015, again requesting payment of the production royalties due the Magees and advising BHP and Petrohawk that they were subject to penalties, interest and attorneys' fees under La. R.S. 31:139 and again requesting payment to Pesnell of the unpaid bonuses due under the Leases with interest. See id. at 4-5. BHP received the letter on June 10, 2015. See id. at 5. In an e-mail dated June 24, 2015, BHP advised Pesnell that “we are just making sure that the Court decision is final and that the ownership status as to the litigated interests is current.” Record Document 27-5 at 60. In a later e-mail dated June 25, 2015, BHP advised Pesnell that “[w]e are having our legal team review the terms of the lease as well as current mineral ownership. It is my understanding that a mineral servitude created by Joe Magee Sr., expired while the well was producing, so we want to be sure the right people are being paid for the right time periods before royalty checks go out the door. I will update you once our title has been supplemented.” Record Document 31-5 at 123.

         Plaintiffs originally filed suit against BHP on June 29, 2015, in the Forty-Second Judicial District Court in DeSoto Parish, Louisiana. See Record Document 1-3. BHP removed the action by a Notice of Removal filed on July 24, 2015, based upon diversity of citizenship. See Document 1. Plaintiffs filed their Motions for Summary Judgment and Partial Summary Judgment on May 26, 2016. See Record Document 27. In the Joint Motion, Pesnell seeks to collect from BHP the unpaid bonuses of $4, 975.00 per acre due under the four mineral leases executed by the Magees in favor of Petrohawk (BHP), together with legal interest from its unpaid bonuses from May 14, 2015, until paid. See id. at 2. The Magees seek partial summary judgment holding that BHP's failure to timely pay the royalties due on production from the Murphy 5H No. 1 Well was willful and without reasonable grounds under Article 139 of the Mineral Code (La. R.S. 31:139). See id. The Magees also seek an order of the Court directing BHP to provide them an accounting with respect to the royalties due. See id.

         BHP filed its Cross Motion for Partial Summary Judgment on June 20, 2016, asserting that it (1) does not owe Plaintiffs any damages for nonpayment of royalties under Mineral Code Article 139; (2) does not owe any additional bonus payments until a certified copy of the judgment of the Second Circuit Court of Appeal in the Worley Suit is provided; and (3) Plaintiffs' request for an accounting is premature at this time. See Record Document 31.

         Subsequent to the filing of these Motions, Plaintiffs sent BHP a certified copy of the judgment of the Second Circuit Court of Appeal on March 6, 2017. See Record Document 68-3. In response, BHP sent Plaintiffs a check in the amount of $489, 117.13, which is in full satisfaction of the principal amount of bonuses owed under the leases. See Record Document 68-4. Accordingly, Pesnell's demand for the unpaid bonus is rendered moot; however, Pesnell still seeks legal interest on its claim from the earliest time supportable by law.

         LAW AND ANALYSIS

         I. LEGAL STANDARDS

         A. SUMMARY JUDGMENT

         Rule 56 of the F.R.C.P. governs summary judgment. This rule provides that the court “shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” F.R.C.P. 56(a). Also, “a party asserting that a fact cannot be or is genuinely disputed must support the motion by citing to particular parts of materials in the record, including . . . affidavits . . . or showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.” F.R.C.P. 56(c)(1)(A) and (B). “If a party fails to properly ...


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