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MP Michigan, LLC v. Core Energy, LLC

United States District Court, Western District of Michigan, Southern Division

March 17, 2015

MP MICHIGAN, LLC et al., Plaintiffs,
v.
CORE ENERGY, LLC, Defendant.

OPINION

JANET T. NEFF UNITED STATES DISTRICT JUDGE

Plaintiffs MP Michigan, LLC, MEP III Michigan, LLC, and MEP D-III Michigan, LLC (collectively, “Merit”) filed this action for trespass (Count 1) and quiet title (Count 2) against Defendant Core Energy, LLC, alleging that Plaintiffs’ leasehold interest in a portion of the “Chester 16 Unit” (Chester Township, Otsego County, Michigan) entitles them to the exclusive right to conduct or authorize seismic surveys on the leased premises and that Defendant conducted a seismic survey on the property without Plaintiffs’ consent. Pending before the Court is Defendant’s Motion to Dismiss or Compel Joinder (Dkt 27) with respect to the quiet title claim only. Plaintiffs have filed a Response (Dkt 24), and Defendant has filed a Reply (Dkt 29). Having fully considered the parties’ briefs and the record, the Court concludes that oral argument is unnecessary to resolve the pending motion. See W.D. Mich. LCivR 7.2(d). The Court denies Defendant’s Motion.

I. Factual Background

Plaintiffs allege they are the record owner of oil and gas leases covering oil and gas interests (“Working Interests”) in Tracts 4 and 5 of the Chester 16 Unit pursuant to a December 3, 2003 agreement with various Shell companies (First Amended Complaint (FAC), Dkt 13, ¶¶ 10-11, 17 & Ex. 3). Under the applicable leases, Plaintiffs acquired exclusive rights to both explore for and produce oil and gas from Tracks 4 and 5 (“the Property”) (id. ¶¶ 17, 23 & Ex. 6).

The Chester 16 Unit is a five-tract unit established in 1983 as a common source of oil and gas supply, governed by a Plan of Unitization (“Shell 1983 Unitization”) approved by the Supervisor of Wells (FAC ¶ 10 & Ex. 1). Plaintiffs assert that the effect of the Shell 1983 Unitization was to unitize oil and gas rights only for purposes of cooperative development and operation and it did not transfer or alter any title rights or interest to oil and gas rights (Dkt 24 at 2-3, citing FAC, Ex. 1)

In the spring of 2011, Defendant Core Energy conducted seismic exploration over area that included Tracts 4 and 5 (FAC ¶ 22). After completing its seismic data survey, Defendant sought Plaintiffs’ consent to the seismic exploration (id. ¶ 18). The parties negotiated concerning the terms of an agreement, but no agreement was reached (id. ¶¶ 19-21). Defendant subsequently used the seismic data to seek approval of a new Plan of Unitization for the Chester 16 Unit, as well as reassignment of tract participation percentages which significantly decreased the value of Plaintiffs’ tracts (Dkt 24 at 4, citing FAC ¶ 27 & Ex. 2).

Plaintiffs filed this lawsuit against Defendant, seeking damages for Defendant’s trespass as well as a judgment confirming that Plaintiffs hold full legal and equitable title to leasehold interests in Tracts 4 and 5, which includes the exclusive right to obtain or authorize seismic data measuring and quantifying from Tracts 4 and 5 (FAC at 6-7). After Defendant raised initial jurisdictional and joinder concerns, Plaintiffs agreed to file an amended complaint that included a detailed jurisdictional statement (Dkt 13). The parties resolved the initial issue of jurisdiction, and following a pre-motion conference on the remaining issues, they proceeded with briefing the motion regarding joinder.

II. Discussion

Defendant moves to dismiss Plaintiffs’ First Amended Complaint pursuant to Rule 12(b)(7) and Rule 19 for failure to join all necessary parties. In the alternative, Defendant requests that the Court order Plaintiffs to amend their complaint to add all necessary parties.

Defendant asserts that Plaintiffs’ quiet title claim seeks a determination that Plaintiffs are the sole owner of certain working interests in Tracts 4 and 5 of the Chester 16 Unit and have the exclusive right to obtain or authorize seismic data pertaining to those Tracts. Defendant argues that because a Plan of Unitization exists for Chester 16 Unit, “unitizing” the rights of all interest owners within the Unit as if subject to a single oil and gas lease, all interest owners within the Unit are necessary parties to Plaintiffs’ quiet title action. Defendant contends that in addition to the working interest owners, the owners of fee interests, surface interests, and the pore space within the Chester 16 Unit have the right to authorize seismic data pertaining to the Chester 16 Unit and are necessary parties to Plaintiffs’ quiet title action.

Plaintiffs argue that there are no absent parties that are necessary to this action since complete relief can be afforded between the existing parties without impairing the rights of others. That is, because Plaintiffs are the exclusive owner of oil and gas leases over Tracts 4 and 5, there is no other party that has the ability to give effective consent to seismic operations, and there is no other party that holds a legitimate stake in the pending quiet title action.

Fed. R. Civ. P. 19 governs the required joinder of parties and provides in relevant part:[1]

(a) Persons Required to Be Joined if Feasible.

(1) Required Party. A person who is subject to service of process and whose joinder will not deprive the court of subject-matter ...


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