Case No. 17-0847 V
DO NOT REMOVE fILE COpy FROM FILE IN THE SUPREME COURT OF APPEALS OF WEST VIRGI
THE BRUCE MCDONALD HOLDING COMPANY, DAVID B. MCDONALD LAND COMPANY, OAKLEY, LLC, S. E. MCDONALD, LLC, C B MORRIS, LLC, L.O.U., LLC, GLENN T. YOST, as attorney-in-fact for Ernest Phipps Credit Shelter Trust, and CDC REAL ESTATE, LLC,
Petitioners, Case No. 17-0847 v. (Appeal from final order of Logan County Circuit Court Business Court Division, 16-C-70) ADDINGTON, INC., THE BRINK'S COMPANY, and PITTSTON COAL COMPANY,
Respondents.
Petitioners' Brief
Brian A. Glasser (WVSB #6597) Sharon F. Iskra (WVSB #6582) Bailey & Glasser LLP 209 Capitol Street Charleston, West Virginia 25301 (304) 345-6555 telephone (304) 324-1110 facsimile [email protected] [email protected] Counsel for Petitioners TABLE OF CONTENTS
I. ASSIGNMENTS OF ERROR ...... 1 II. STATEMENT OF THE CASE ...... 2 A. Preamble ...... 2 B. Factual Background ...... 3 1. The McDonald Family contracts with the largest metallurgical coal exporter in the United States to mine and sell its coal...... 3 2. The McDonald-Pittston Lease clearly specifies throughout its 38 separately numbered Articles that Pittston is required to actually mine the coal...... 5 3. The McDonald Family is forced to bring suit against Pittston in 1984 to prevent Pittston from terminating the Lease ...... 8 4. Pittston, after its failed attempt to terminate the Lease, prepares mine plans, but is not required to implement them due to depressed coal markets ...... 9 5. Pittston informs the McDonald Family that it intends to exit the coal business amid a market boom, but then prevents mining from occurring in exchange for millions of dollars from A.T. Massey Coal Company ...... 10 6. The McDonald Family continually objects to Pittston's lack of development in correspondence and negotiations, but those efforts fail to produce a resolution ...... 12 C. Procedural History ...... 14 III. SUMMARY OF ARGUMENT ...... 18 IV. STATEMENT REGARDING ORAL ARGUMENT AND DECISION ...... 21 V. STANDARD OF REVIEW ...... 21 VI. ARGUMENT ...... 21 A. The circuit court's summary judgment order ignores nearly 100 years of precedent that a coal lessor has a valid claim for damages against a derelict coal lessee for failure to diligently develop coal reserves ...... 21 B. The applicable standard of care is that of the reasonably prudent operator, and this standard does not impose "partnership status" on the lessor-lessee relationship, as erroneously ruled by the circuit court ...... 25 C. The oil and gas cases cited herein are wholly applicable to this case, since none ofthem involve drainage or the fugacious nature of those minerals ...... 27 D. The minimum royalty provision is not in lieu of the duty to diligently mine. It is expressed in tons instead of dollars as a result of this Court's opinion in Babcock Coal & Coke ...... 28 E. The circuit court's waiver decision was, as the court admitted, an improper resolution of a disputed factual issue ...... 31 F. The circuit court applied "practical construction" to an unambiguous Lease, in violation of this Court's precedent, and it resolved disputed facts to do so ...... 33 G. Even if the Lease contains no duty to diligently mine enforceable in damages, the the minimum royalty calculation on a going-forward basis cannot be avoided by Pittston's own conduct...... 34 H. The circuit court's diametrically opposed decisions on res judicata and collateral estoppel are impossible to reconcile, and the correct decision is reflected in the circuit court's first order in the case ...... 36 1. The circuit court's ruling on tortious interference, which was wholly derivative of its other rulings, should be reversed ...... 39 VII. CONCLUSION ...... 39 T ABLE OF AUTHORITIES Cases Abadir v. Dellinger, 227 W. Va. 388, 709 S.E.2d 743 (2011) ...... 38 Babcock Coal & Coke Co. v. Brackens Creek Coal Land Co., 128 W. Va. 676, 37 S.E.2d 519 (1946) ...... 30 Bradford v. Blair, 113 Pa. 83,4 A. 218 (Pa. 1886) ...... 26 Chertkofv. Southland Corp., 280 Md. 1,371 A.2d 124 (Md. 1977) ...... 32 Citibank, NA. v. Perry, 238 W. Va. 662, 797 S.E.2d 803 (2016) ...... 32 Coal Res., Inc. v. Gulf & Western Indus., Inc., 865 F.2d 761 (6th Cir. 1989) ...... 29 Cotiga Dev. Co. v. United Fuel Gas Co., 147 W. Va. 484, 128 S.E.2d 626 (1962) ...... passim Dan Ryan Builders, Inc. v. Crystal Ridge Dev., Inc., 803 S.E.2d 519 (W. Va. 2017) ...... 36 Grass v. Big Creek Dev. Co., 75 W.Va. 719, 84 S.E. 750 (1915) ...... passim Hamrickv. Nutter, 93 W. Va. 115, 116 S.E. 75 (1923) ...... passim Hoffman v. Wheeling Sav. & Loan Ass 'n, 133 W. Va. 694, 57 S.E.2d 725 (1950) ...... 31 Huntington Water Corp. v. City ofHuntington, 115 W.Va. 531, 177 S.E.290 (1935) ...... 23 In re Buffalo Coal Co., Inc., 2011 WL 917717 (N.D.W. Va. Mar. 8,2011) ...... 32 Jane Doe-J v. Corp. ofPresident of The Church ofJesus Christ ofLatter-day Saints, 239 W. Va. 428,801 S.E.2d 443 (2017) ...... 3 Jennings v. Carbon Co., 73 W. Va. 215, 80 S.E. 368 (1913) ...... 25, 26 John D. Stump & Associates, Inc. v. Cunningham Mem'l Park, Inc., 187 W. Va. 438,419 S.E.2d 699 (1992) ...... 34 Lane v. Williams, 150 W.Va. 96, 144 S.E.2d 234 (1965) ...... 38 McGinnis v. Cayton, 173 W.Va. 102,312 S.E.2d 765 (1984) ...... 23 North Star Co. v. Howard, 341 S.W.2d 251 (Ky. 1960) ...... 29 Pittston Co. v. United States, 199 F.3d 694 (4th Cir. 1999) ...... 36 Potesta v. Us. Fid. & Guar. Co., 202 W. Va. 308, 504 S.E.2d 135 (1998) ...... 31 Slider v. State Farm Mut. Auto. Ins. Co., 210 W.Va. 476, 557 S.E.2d 883 (2001) ...... 36 St. Luke's United Methodist Church v. CNG Dev. Co., 222 W. Va. 185,663 S.E.2d 639 (2008) 24 Stanley's Cafeteria, Inc. v. Abramson, 226 Va. 68, 306 S.E.2d 870 (1983) ...... 32 Waddy v. Riggleman, 216 W. Va. 250, 606 S.E.2d 222 (2004) ...... 10,20,35 Watson v. Buckhannon River Coal Co., 95 W.Va. 164, 120 S.E. 390 (1923) ...... 34 Wellman v. Bobcat Oil & Gas, Inc., 2010 WL 2720748 (S.D.W. Va. July 8,2010) ...... 19 Wood v. Sterling Drilling & Prod. Co., Inc., 188 W. Va. 32,422 S.E.2d 509 (1992) ...... 30 Statutes W. Va. Code § 46-2-723 ...... 35 Other Authorities Bryan A. Gamer, Shall We Abandon Shall?, A.B.A.J., (August 2012) ...... 21 Richard J. Bolen, Coal Lease Terminations: Minimizing the Pain of Untying the Knot, 25 Energy & Min. L. Inst. 262 (2005) ...... 29 Treatises Black's Law Dictionary (10th ed. 2014) ...... 21 I. ASSIGNMENTS OF ERROR
1. FOR NEARLY 100 YEARS, WEST VIRGINIA LAW HAS AUTHORIZED A CAUSE OF ACTION FOR DAMAGES FOR A COAL LESSEE'S FAILURE TO DILIGENTLY MINE, EVEN WHEN THE LEASE CONTAINS A MINIMUM ROYALTY PAYMENT. THE CIRCUIT COURT ERRED IN IGNORING THIS PRECEDENT AND IN GRANTING SUMMARY JUDGMENT TO THE COAL LESSEE ON PETITIONER'S CAUSES OF ACTION FOR FAILURE TO DILIGENTLY MINE.
2. ON A MOTION FOR SUMMARY JUDGMENT, A CIRCUIT COURT CANNOT TRY ISSUES OF FACT; IT CAN ONLY DETERMINE WHETHER THERE ARE ISSUES TO BE TRIED. IN THIS CASE, THE CIRCUIT COURT WRONGLY RESOLVED FACTUAL DISPUTES WHEN IT GRANTED SUMMARY JUDGMENT TO RESPONDENTS ON THE CONTESTED AFFIRMATIVE DEFENSE OF WAIVER, AS APPLIED TO THE FAILURE TO DILIGENTLY MINE CLAIM.
3. THE CIRCUIT COURT APPLIED A PRACTICAL CONSTRUCTION TO THE LEASE EVEN THOUGH IT DID NOT FIND ANY PROVISION OF THE LEASE TO BE AMBIGUOUS, AND IT RESOLVED DIPSUTED FACTS TO DO SO.
4. A BEDROCK PRINCIPLE OF CONTRACT LAW IS THAT A PARTY CANNOT RENDER ITSELF UNABLE TO PERFORM A CONTRACT, AND THEN CLAIM THAT THE SELF-INFLICTED INABILITY TO PERFORM IS A DEFENSE TO LIABILITY. THE CIRCUIT COURT ERRED IN IGNORING THIS PRECEDENT, RULING THAT THE COAL LESSEE CAN USE ITS UNILATERAL DECISION TO EXIT THE COAL BUSINESS AS A DEFENSE TO PAYING AN APPROPRIATE MINIMUM ROY ALTY PAYMENT.
5. RES JUDICATA OR COLLATERAL ESTOPPEL APPLY ONLY WHEN THE CLAIMS OR ISSUES IN SUCCESSIVE CIVIL ACTIONS ARE IDENTICAL. THE CIRCUIT COURT ERRED IN FINDING THAT CLAIMS BROUGHT IN THIS CASE ARE BARRED BY RES JUDICATA AND COLLATERAL ESTOPPEL, EVEN THOUGH THE CLAIMS IN THIS CASE ARE BASED ON EVENTS 30 YEARS REMOVED FROM THE PRIOR LITIGATION.
6. THE COURT'S RULING ON TORTIOUS INTERFERENCE IS PURELY DERIV ATIVE OF THE RULINGS ON THE ISSUES ABOVE, AND A REVERSAL ON ANY OF THOSE ISSUES SHOULD REVERSE THE RULING ON TORTIOUS INTERFERENCE. II. STATEMENT OF THE CASE
A. Preamble
The circuit court below granted summary judgment and dismissed Petitioners' claims for, among other things, Respondents' breach of an express promise to diligently prosecute its operations under a coal mining lease. The circuit court held that no such claims exist as a matter of law. In doing so, the circuit court did not engage in a reasoned analysis of precedent. In fact, it cited none of this Court's cases on point in its 16-page judgment order. 1
Simply put, the court did not want to conduct a trial without first having legal issues decided by this Court, even though this Court has already definitively approved a claim for breach of the duty of diligent mining. For example, this Court's opinion in Hamrick v. Nutter held, "[T]he lessor in a coal mining lease may maintain an action of assumpsit for breach of lessee's covenant to properly and diligently develop the mine property." Syl. pt. 1, Hamrick v. Nutter, 93 W. Va.
115, 116 S.E. 75 (1923). Hamrick so held even though the parties to the coal mining lease in that case had also agreed upon a minimum royalty. The Lease2 at issue here, like the Lease in Hamrick, contains express promises to both diligently prosecute operations and pay a minimum royalty.
Nevertheless, at a hearing explaining its rationale, the circuit court stated, "All the issues that were raised I wanted to make some [mdings on whether I had to get to them or not, really, to reach an ultimate decision." (J.A. 7555). It did so because, "I was just basically trying to save some effort and time and it was part of my reasoning, so I wanted to include that in my findings because it at least was obvious to me that I wasn't going to have the final say in this." (Id.)
1 The order under appeal is the judgment order entered by the circuit court on August 25, 2017. (l.A. 7534 - 7549).
2 A full copy of the Lease and its 1998 Addendum were submitted to the circuit court below attached to the Petitioners' Motion for Summary Judgment on Count I and is referred to herein as the "Lease." (l.A. 4543 -4613). 2 Later, the Court explained again that, even though it did not need to reach all the issues, it was simply trying to get as many issues as it could before the Supreme Court so that "if 1 am incorrect that we're not here on remand and have to bite some of these apples again" because it was going to "take three people in Charleston to figure it out now." (J.A. 7577, 7584). In fact, the circuit court was so intent on avoiding a trial that when Petitioners pointed out to the circuit court that it was resolving disputed factual issues, the circuit court frankly stated, "I mean, 1 know it's disputed and 1 think they could appeal that and say 1 made a wrong decision." (J.A. 7583).
Accordingly, this Court should view the appealed order through the prism of the court below passing the buck to this Court for plenary decision, rather than review of a trial court first calling balls and strikes for itself. While its goal of efficiency and avoiding expense of a trial is laudable, "[ s ]kirting its duty to allow a jury to address the multitude of disputed factual issues present in this case, the circuit court wrongly invaded the jury's province by resolving these factual disputes[.]" Jane Doe-J v. Corp. ofPresident of The Church ofJesus Christ ofLatter-day Saints,
239 w. Va. 428,801 S.E.2d 443,474 (2017).
B. Factual Background
1. The McDonald Family contracts with the largest metallurgical coal exporter in the United States to mine and sell its coal.
This is a case about promises made and promises broken. Petitioners (collectively referred to herein as "the McDonald Family") bring their appeal to this Court seeking to be made whole on unfulfilled promises made to them by Respondents3 in a Lease signed nearly 40 years ago, on June
19, 1978. (J.A. 3034). The Petitioners are comprised of a series of small, family-owned land
3 The Respondents are collectively referred to herein as "Pittston" unless it is necessary to distinguish among them.
3 holding companies that own acreage of surface and minerals in Logan County. (J.A. 3031 - 3033).
Only members of the McDonald Family are entitled to hold interests in the Petitioner companies.
The McDonald Family leased roughly 3,300 acres of coal lands surrounding Huff Creek in
Logan County, WV, to Pittston. 4 (J.A. 3034). Those lands contain tens of millions of tons of mineable and merchantable, high-quality, high-volatile metallurgical coal. (J.A. 5099 - 5110).
In 1978, Pittston was the largest exporter of metallurgical coal operating in the United
States. (J.A. 3033). In the Buffalo Creek and Huff Creek areas of Logan County, Pittston had substantial reserves, active mines, preparation plants, and rail loadouts that made it the biggest player in coal mining in Logan County, if not in West Virginia as a whole. (J .A. 5100). Thus, in
Pittston, the McDonald Family had found a mining behemoth with the unquestionable wherewithal to mine and sell their coal.
Pittston negotiated and signed this Lease with its eyes wide open. Prior to signing on the dotted line, between 1975 and 1978, Pittston engaged in nearly three years of physical due diligence on the property, including drilling and analyzing core holes and performing feasibility studies. (J.A. 6983). In addition to the extensive exploratory work, Pittston engaged in fifteen months of negotiations over the terms of the Lease. (J.A. 6984). Over that time period, three separate in-house lawyers at Pittston and eight of its mining executives reviewed and approved the terms and conditions of the Lease, with the ultimate corporate blessing coming from the CEO of the entire Pittston organization in Greenwich, Connecticut. (Jd.) From top to bottom, Pittston knew it was signing a serious commitment to mine coal.
4 Respondent, The Brink's Company, fonnerly known as, The Pittston Company, is primarily liable under the Lease pursuant to a Parent Company Guaranty signed on June 22, 1978. (J.A. 7536). Pittston Coal Company is not in the chain of lease or guaranty obligations and is a defendant on the tortious interference claim, only. 4 2. The McDonald-Pittston Lease clearly specifies throughout its 38 separately numbered Articles that Pittston is required to actually mine the coal.
A fair reading of multiple provisions of the Lease demonstrate that Pittston is required to conduct mining operations. On the very first page, Pittston and the McDonald Family agreed:
It is the mutual intent of all parties hereto that the Lessee shall properly prospect and engineer such property, and that the Lessee herein shall systematically mine such property by multi-level deep, strip, and auger mining in such a manner as to ensure that all the merchantable and mineable coal in all of the seams hereby leased as provided in Article X of this Lease, is mined and that all such coal so mined will be prepared, marketed, and sold by such means and methods as will ensure the highest available sales prices therefor. (J.A. 4543 - 4544). Importantly, Article X, mentioned on that first Lease page, states:
[Pittston] will diligently prosecute its operations on the premises hereby leased so that all the merchantable and mineable coal herein provided to be mined shall be mined and royalties therefor paid to McDonalds.
(J.A. 4574).
The language of diligence expressed in Article X is materially the same as the language at issue in this Court's decision in Hamrick. Hamrick, 116 S.E. at 76. In Hamrick, the lessee promised:
reasonably and diligently to develop the said coal, and in like manner to produce the said coal, so that plaintiff might receive and have the income and royalties therefrom which the defendant covenanted, promised, and agreed to pay for the privileges so granted to him[.]
Id. Clearly, the drafters of the McDonald-Pittston lease were aware of the magic words used in
Hamrick, and they were aware of the import of using those magic words. With the express promise to "diligently prosecute its operations," Pittston agreed to meet the standard of diligence set forth in existing West Virginia law, and if Pittston so failed, it agreed to be subject to a claim for damages as approved by this Court in Hamrick. !d. at syl. pt. 1.
Other provisions of the Lease clearly confirm the intent of the parties that mining must actually occur. To read the Lease as merely a mining option in favor of the Lessee, as the circuit
5 court did, renders some 90% of the paragraphs of the Lease devoid of meaning. (J.A.7455). For example, in Article III of the Lease, Pittston promised to mine all the merchantable and mineable coal according to mine plans that it was required to develop. (J.A. 4557 - 4561). Pittston even agreed to "employ an experienced and competent engineer" to prepare and manage those mining plans. (l.A. 4574 - 4575) Why would a Lease require detailed mining plans be drawn up by
Pittston's own experienced and competent engineer, but no mining?
Looking deeper into Article III, Pittston agreed that it "shall be liable for royalties on unmined mineable and merchantable coal" if it unreasonably fails to mine such coal according to its mine plans. (J.A. 4559 - 4560). Later in Article III, the parties agreed that any royalties paid as a result of Pittston's unreasonable failure to mine the merchantable and mineable coal would be credited against future production, echoing this Court's 1962 opinion in Cotiga. 5 (J.A. 4560)
("Lessee shall thereafter, during the original term of this Lease and not otherwise, have the right to mine and remove such coal free of royalty payment.").
In Article VII, "Term," the parties agreed that the term of the Lease would end when
Pittston has mined and removed "all of the merchantable and mineable coal contemplated to be mined by this leasing agreement[.]" (J.A. 4567) (emphasis added). The same language appears in
Article XIII, where the parties agreed to continue the minimum royalty payment obligation "until all the merchantable and mineable coal herein contemplated to be mined shall have been mined and removed from the demised premises." (J.A. 4577). In their own words, the parties wrote that
5 Syl. pt. 7, Cotiga Dev. Co. v. United Fuel Gas Co., 147 W. Va. 484, 485, 128 S.E.2d 626,629 (1962) ("Payment of such damages by the assignee shall be deemed in effect, a payment pro tanto by the assignee for gas not yet extracted and marketed pursuant to the terms of the lease; and the assignee shall be entitled to credit for such sum, dollar for dollar without interest, in the settlement and payment for gas next thereafter extracted and marketed[.],,) 6 the coal under the Lease was "contemplated to be mined." Why would the parties have written those words, if, as the circuit court ruled, the Lease never contemplated that mining was required?
Similarly, Article XXXI states, "[A]t all times prior to the term of this Lease by the exhaustion of all the merchantable and mineable coal required to be mined by Lessee, Lessee shall keep on the premises sufficient mining machinery, equipment, tools, and supplies required to be used hereunder." (J.A. 4600) (emphasis added). Likewise, in a 1998 Addendum to the Lease, the parties reiterated that the McDonald Family had reserved certain rights for the purpose of"ensuring that Lessee will mine and remove and pay royalties on the maximum amount of merchantable and mineable coal recoverable under this Lease." (J.A. 4608). Many other articles of the Lease contain similar language acknowledging that this Lease contemplated active mining operations. (J.A. 4540
- 4542).
Further into Article XIII of the Lease, the parties detailed how to calculate the minimum royalty payment due under the Lease. As described by Pittston's own expert, the minimum royalty payment is made through periods of non-production, to keep the Lease alive, or otherwise, the lessor can terminate the agreement. (J.A. 5647 - 5648). For all years relevant to this case, the minimum royalty should have been, but was not, calculated by multiplying 250,000 tons times
the average sales price at which the same quality of coal was sold by Lessee to consumers by arm's length transactions from the same preparation plant from which Lessors' said coal, hereby Leased, was sold, which average price shall be obtained by the use of the monthly sales average for such quality of coal sold from said preparation plant during the last three (3) months of the year in which the deficiency occurred.
(J.A. 4576 - 4577). This provision obviously presumes that mining will be occurring under the
Lease.
Despite all of the above, Pittston has admittedly not mined a single ton of coal in the 40 years it has held this Lease, and Pittston now admits that it never intends to mine any coal under
7 the Lease. (J.A. 7537 -7539). Instead, Pittston intends to again shirk its obligations by attempting to tenninate the Lease in 2018 without ever mining any coal, fourteen years earlier than the Lease's ultimate expiration in 2032. (J.A. 6659 - 6668).
3. The McDonald Family is forced to bring suit against Pittston in 1984 to prevent Pittston from terminating the Lease.
In 1984, the McDonald Family sued Pittston in order to prevent Pittston from prematurely and wrongfully tenninating the Lease and for damages for missed minimum royalty payments (the
"Prior Litigation"). (J.A. 183 - 189). The McDonald Family won that litigation, preserving the existence of the Lease. (J.A. 648 - 667).
In awarding judgment to the McDonald Family in the Prior Litigation, the court found,
"inasmuch, however, as said minimum annual royalty is, by Article XIII of the Lease, to be based upon sale prices for other comparable coals sold by the Lessee," it needed to set a separate "inquiry on damages" to hear evidence on sales prices of comparable quality of coal. (J.A. 665 - 666).
Again, the Court was only focused on fixing damages for the payments that Pittston had refused to make in the past, not setting the minimum royalty for all time. In fact, there would have been no need for the circuit court in the Prior Litigation to conduct an "inquiry on damages" in which it entertained evidence of comparable coals, if it had done as Pittston argued and the circuit court in this case ultimately agreed, and fixed $2.00 per ton as the minimum royalty as a matter of law or
Lease interpretation.
At the inquiry on damages in the Prior Litigation, the circuit court found the evidence of
"comparable coals" lacking, and thus, it set the minimum royalty multiplier at $2.00 per ton, the
"floor" royalty rate in Article VIII of the Lease. Explaining its decision, the circuit court in the
Prior Litigation stated:
8 I'd be more prone to agree with [the McDonald Family] if we had like coal, but we don't have like quality. We have a better quality, as I recall, on Huff Creek under this lease than we do on Rum Creek. Too, there's no evidence before me that would indicate the coal under this lease would be sold for an amount equal to or greater than what is now being sold at the Rum Creek plant ....
[A ]nd this is solely because there's a comparison here, but it's not the kind of comparison I like because it's a higher grade of coal against a sub-standard grade of coal and the coal from Huff Creek I should suspect would go on the met market."
(l.A. 548-549). Because of a lack of evidence - and not as a matter of law - the court in the Prior
Litigation applied the $2.00 per ton floor rate to the minimum royalty obligation. The Prior
Litigation ultimately concluded in 1991 when Pittston paid the judgment rendered by the circuit court.
4. Pittston, after its failed attempt to terminate the Lease, prepares mine plans, but is not required to implement them due to depressed coal markets.
In 1991, following the conclusion of the Prior Litigation, Pittston finally submitted the mine plan required by Article III of the Lease (the "1991 Mine Plan"). The 1991 Mine Plan acknowledged that multiple coal mines could feasibly be installed on the 3,300-acre property and that over 15 million tons of high-quality metallurgical coal could be extracted. (l.A.3040-3041).
However, at that time, Pittston said it would not be profitable to mine pursuant to the 1991 Mine
Plan, due to a poor market for metallurgical coal that existed in the early 1990s. (l.A. 3040 -
3046). The market conditions for metallurgical coal remained relatively flat between 1991 and the early 2000s, and, therefore, the profitability of the 1991 Mine Plan likewise remained unchanged throughout that time period.
Accordingly, for those years in which mining would have been unprofitable, Pittston's obligation was to make a minimum royalty payment, which it did. Each year from 1991 through
2006, Pittston sent the McDonald Family a minimum royalty payment of $500,000, calculated at
250,000 tons times $2.00 per ton. (l.A. 7539). The McDonald Family accepted these payments
9 without objecting to the manner in which the payment was calculated, erroneously believing that the court's order in the Prior Litigation had fixed the minimum payment at $2.00 per ton for all years into the future, rather than just those years at issue in the Prior Litigation. (ld.)
5. Pittston informs the McDonald Family that it intends to exit the coal business amid a market boom, but then prevents mining from occurring in exchange for millions of dollars from A. T. Massey Coal Company.
On May 10, 2006, Pittston sent the McDonald Family a letter stating that Pittston, as an organization, had the strategic goal of exiting the coal business entirely, in an effort to minimize its health and retirement liabilities to coal miners. (l.A. 2697). In this case, Pittston would use its self-imposed exit from the mining business as a defense. Specifically, under Article XIII, Pittston argued, and the circuit court agreed, that the Lease requires actual sales of coal by Pittston itself in order to set the minimum royalty. (J.A. 7544 - 7545). Pittston's argument and the circuit court's decision violate West Virginia law, which states, "A party cannot by its own act place itself in a position to be unable to perform a contract, then plead that inability to perform as an excuse for nonperformance." Waddy v. Riggleman, 216 W. Va. 250,262,606 S.E.2d 222,234 (2004).
Pittston's letter further stated that it had engaged in an effort to locate interested parties to whom it could assign the McDonald Family's Lease, but it found none. (l.A. 2697). Instead,
Pittston offered to negotiate a resolution of Pittston's remaining obligations under the Lease. (ld.)
This letter touched off ten years of ultimately fruitless communications between the parties aimed at an out-of-court separation.
Ironically, about the time of Pittston's May 10, 2006 letter, the market for metallurgical coal began to skyrocket. According to Pittston's own expert, the price of metallurgical coal generally increased by 600%. (l.A. 5900). In response to the scorching hot market, Central
Appalachia experienced one of the most expansive buildouts of metallurgical coal mines in the
10 history of the coal industry. (J.A. 5103). In fact, drastic development of coal reserves occurred literally surrounding the McDonald property, and those operations later sold for hundreds of millions of dollars. (J.A. 3042 - 3046). And, the McDonald property is significantly advantaged by its geology, with materially thicker coal seams, when compared to the surrounding coal mines that were developed by companies other than Pittston. (J.A. 510 1). Because of its five-foot-thick metallurgical coal seams, the McDonald property has been called "the last, best virgin block of coal in Logan County." (Jd.) Unquestionably, then, given the sea change in the market for metallurgical coal, mining would have been profitable under the Lease following Pittston's May
10, 2006letter. (J.A. 5099 - 5105).
Rather than complying with its obligation under the Lease to "diligently prosecute its operations" in response to these record prices, in 2008, pursuant to a conditional Asset Purchase
Agreement, 6 Pittston allowed A. T. Massey Coal Company to ice development of the McDonald property in exchange for a cash payment. (J.A. 3048 - 3049). In discovery in this case, the
McDonald Family obtained internal Massey memoranda explicitly stating that Massey's intention was "to prevent others from gaining a competitive foothold in close proximity to Massey," and
"most importantly," to "control[J" the asset and take it "off the market." (J.A. 3049, 3060 - 3061).
From November 2008 through December 2010, Pittston effectively locked out any other mining operator from opening mines on the Leased premises, in the midst of a great metallurgical coal boom. In this period, at least two operators inquired about the McDonald property but were turned away by Pittston, as it had already been paid by Massey to put the property on ice. (J.A. 3060).
6 Prior to the effective date of any definitive Asset Purchase Agreement between Pittston and Massey, the McDonald Family was asked whether it would consent to an assignment of the Lease from Pittston to Massey, and the McDonald Family agreed to an assignment to Massey, if Massey would commit to mining the property and agree to increasing minimum royalty payments if it failed to begin mining in 30 months. Massey and Pittston refused. 11 In 2010, after the Massey deal ended, the McDonald Family offered on multiple occasions
to consent to assignments or subleases of the coal reserves to other operators in the area who were
hungry to mine the coal, so long as the original terms and intent of the Lease were preserved. (J.A.
3055 - 3056). Also, the McDonald Family repeatedly encouraged Pittston to live up to its promise
to diligently prosecute its operations by exercising its unilateral right to hire any contract miner it
wanted to use to mine the property, but Pittston declined all these overtures and refused to
commence production. (ld.)
6. The McDonald Family continually objects to Pittston's lack of development in correspondence and negotiations, but those efforts fail to produce a resolution.
Throughout the time period in question, the McDonald Family continually made known to
Pittston, and Pittston clearly understood the McDonald Family's position, that Pittston had "huge" liabilities for failing to actually mine the coal. The McDonald Family repeatedly objected to
Pittston's failure to commence and diligently prosecute mining operations. In October 2008, the
McDonald Family wrote to Pittston that it objected to "the continued holding of the leasehold without mining taking place on the property." (J.A. 2699). On February 3,2009, the McDonald
Family bluntly informed Pittston in a letter that it required assurances that "operations would be promptly commenced and diligently pursued upon the leasehold estate as contemplated by the
Lease Agreement." (J.A.2782).
In a response letter dated February 19,2009, Pittston told McDonald that it had engaged
Massey as a "contract miner" to mine the McDonald property, noting, "The Lease Agreement clearly provides that Lessee has the right to enter into contract mining arrangements without Lessor consent and that has been done." (J.A. 2708 - 2713). In that same letter, Pittston flatly (but falsely, given the scheme to ice the property) assured the McDonald Family that "[Pittston] and/or its contractors, including Massey, will implement a plan for mining both the deep and surface coal
12 consistent with the Lease Agreement." (l.A. 2712). Nowhere in Pittston's February 19, 2009 letter did it remotely try to challenge or refute the assertion that it had a duty to mine the property.
(l.A. 2708 - 2713).
Between 2012 and 2014, the McDonald Family engaged Pittston in a series of meetings in which it advised Pittston of its massive liability for failure to mine. (J.A. 2788 - 2789). The
McDonald Family told the executives at Pittston that, "the Lease required [Pittston] to mine the premises or to compensate Lessors for the failure to do so. We explained that if [Pittston] didn't believe that its Lease obligations exceeded the annual minimum rental and royalty payments, then we did not think further discussions would be productive." (l.A. 2788). According to the
McDonald Family's accounts of the meetings, Pittston admitted that its liability was not limited to the annual minimum royalties under the Lease. (l.A. 2789).
At the same time the McDonald Family was holding these meetings, Pittston was conducting parallel negotiations with a man named Michael Bauersachs over a potential transaction related to the Lease. In a letter to the McDonald Family, dated January 15,2015, Mr.
Bauersachs recounted Pittston's admitted desire was, in part, to "reduce (although likely not eliminate) exposure, if any, to some sort of diligent development and/or lost coal claim." (l.A.
2747 - 2748). Additionally, all 6 witnesses, from both parties, who testified about this time period
(2006 to 2015) agreed that the McDonald Family consistently conveyed to Pittston that it objected to the lack of mining. (l.A. 5802 - 5803). One Pittston witness acknowledged, "[T]hat was their drumbeat all along." (l.A. 5846-5847). The evidence is clear and unmistakable that the McDonald
Family made repeated, specific objections to the lack of mining under the Lease, and Pittston was clearly aware of the potential for these claims. Somehow, the court below ignored all this evidence
13 in fmding that the McDonald Family waived all its rights by accepting the minimum royalty payments until 2015.
Ultimately, in March 2016, the McDonald Family instituted this suit. From 2006 through
2015, the McDonald Family accepted minimum royalty payments calculated at $2.00 per ton times
250,000 tons. However, prior to this suit, not one payment in the history of this Lease has ever been communicated to the McDonald Family as a payment intended as "payment in full" or as a payment "in lieu of mining." (J.A. 4880). In fact, after instituting this suit, lawyers for Pittston sent the McDonald Family a letter in connection with the 2016 annual minimum royalty payment stating that the check was intended to "represent full payment." (J.A. 5808). The McDonald
Family responded, "This is the first time in the long history of the Lease that Addington and Brink's
[collectively, "Pittston"] have issued the minimum royalty check with a statement that they view the check as fully discharging all of their obligations under the Lease." (J.A. 5810). Thus, the
McDonald Family rejected the 2016 payment, stating, "In light of [Pittston's] decision to unilaterally change the conditions of this payment, Lessors are returning the check to you, enclosed with this letter." (Jd.) The payment due in 2017 was likewise rejected.
C. Procedural History
In the First Amended Complaint, Count I seeks a declaration that Pittston owes the
McDonald Family a duty to diligently prosecute its operations under the law and the terms of the
Lease, and Count II seeks damages for a breach of that duty for the time period 2006 - present.
(J.A. 3056 - 3058). Count III seeks a declaration that the minimum royalty provision ofthe Lease should be recalculated every year, based upon the selling price of the same quality of coal, and not frozen at $2.00 per ton for all time. (J.A. 3058 - 3059). In the event that the McDonald Family is not made whole on the diligent mining claims, Count IV alternatively asks for payment of the
14 appropriate minimum royalty from the date this action was filed in 2016 and going forward. 7 (J.A.
3059). Count V asserts a claim for tortious interference against Pittston Coal Company, a non- party to the Lease, or Guarantee, for locking the reserves away in an anti-competitive agreement with Massey. (J.A. 3059 - 3061).
Pittston's first move in this case was to file a Motion for Summary Judgment based upon res judicata and/or collateral estoppel. (J.A. 83 - 84). Pittston also filed a Rule 12(b )(6) motion, arguing that the Lease contains no duty to mine the coal at all, only a duty to pay a minimum royalty. (Id.) The court denied both motions. (J.A. 2816 - 2821).
With respect to res judicata and collateral estoppel, the circuit court denied Pittston's motion because, "Defendants are unable to show that the case and issues being litigated now are identical to the case and issues litigated in the previous proceedings." (J.A. 2818). The court wrote:
In Counts I and II of the Plaintiffs' Complaint, Plaintiffs seek declaratory judgment alleging Defendants have breached Article X of the Lease between the Parties. Plaintiffs contend Defendants have failed to diligently mine coal and no such cause of action was ruled upon in the prior litigations. Even if the prior litigations between the parties had been decided on the issue regarding the duty of Defendants to diligently mine coal, Article X of the Lease could have continued to reqUIre Defendants to diligently mine coal in the future.
(J.A. 2818 - 2819) (internal references omitted).
Regarding the claims in Counts III and IV involving the calculation of the minimum royalty payment, the circuit court recognized that it must be recalculated each year, and the Prior Litigation could not have determined the calculation in future years:
Very simply, the evidence of what the minimum royalty may be now was not available to the Court at that time. Additionally, the Court at the time of the November 1, 1988 Judgment Order attempted to apply the methodology required by Articles VIII and XIII of the Lease, but was simply unable to do so because of
7 Because the McDonald Family does not appeal the circuit court's retrospective waiver, payment and acceptance, accord and satisfaction, and estoppel decisions as it relates only to the amount of minimum royalties prior to 2016, Count IV now asks for redetermination of the minimum royalty for 2016 and thereafter, time periods where the McDonald Family refused payment because it was too low. 15 a lack of evidence .... Furthennore, it would have been impossible to for the previous court to have issued a decision in regards to the calculation of minimum royalties as per the tenns of the lease the amount to be paid per ton was to be recalculated every year.... Accordingly, even if the court had the necessary evidence to set the minimum royalty in 1988, it could not have had sufficient evidence to set the rate going forward .... Based upon an unambiguous reading of the lease the Court is of the opinion that it is impossible to set a prospective per ton rate for minimum royalties.
(J.A. 2819 - 2820). Accordingly, the circuit court denied Pittston's motion for summary judgment based on res judicata and/or collateral estoppel. (J.A. 2819).
Pittston, under Rule 12(b)( 6), also attacked the legal sufficiency of Counts I and II, related to the duty of diligent mining, arguing, "There is no basis for this claim under either the express provisions of the Lease or the applicable case law." (J.A. 2803). However, the circuit court, in ruling on the legal sufficiency of the Complaint, correctly denied Pittston's Motion for Failure to
State a Claim for Additional Royalties. (J.A. 2820). Based upon the circuit court's rulings allowing all claims to proceed, the parties expended substantial time and effort discovering the facts and litigating the issues. Without explaining why, at the summary judgment proceedings in
August 2017, the circuit court reversed itself on both of these prior rulings.
By July 2017, the parties had conducted extensive discovery, including taking the depositions of the seven (7) expert witnesses proffered by Pittston. Both parties sought summary judgment from the Court. The McDonald Family moved for summary judgment on Count I of its
First Amended Complaint, which sought a declaration that the Lease imposes a duty to actually and diligently mine the coal under the Lease. (J.A. 4620 - 4632).
The McDonald Family also moved for Summary Judgment on Count III of the First
Amended Complaint, seeking a declaration that the minimum royalty calculation should be based on the "average sales price at which the same quality of coal was sold," as required by Article XIII of the Lease, and not $2.00 per ton. (J.A. 4942 - 4948). It is clear in the First Amended Complaint
16 and in all the pleadings below that the McDonald Family does not believe it is contemporaneously entitled to both increased minimum royalty payments and damages for failure to diligently mine.
Count IV was thus pled in the alternative to the claims based on the duty to mine. Pittston also moved for Summary Judgment.
Fairly summarized, the rulings from the [mal judgment order of the court below are as follows:
1. The Lease contains no duty to mine, only descriptions of how mining has to happen if the
Lessee, in its unbridled discretion, ever chooses to commence mining. (J.A. 7542 - 7543).
2. The minimum royalty had to be calculated at $2.00 per ton, rather than on "the average
sales price at which the same quality of coal was sold." Without explanation for its 180-
degree flip-flop, 8 the circuit court held, "This issue was decided in the Prior Litigation."
Further, the Court held that only actual sales of actual McDonald coal by Pittston itself - a
company that ceased mining and selling coal and continually refuses to mine the McDonald
Family's coal- could re-price the minimum royalty. (J.A. 7544 - 7545).
3. Alternatively, the circuit court ruled that if any ambiguity exists in the Lease, the practical
construction or course of performance of payment by Pittston and acceptance by the
McDonald Family of$500,000 per year confirms the Lessee's obligations to only make an
annual payment of$2.00 per ton times 250,000 tons and never mine any coal. (J.A. 7545).
8 Compare order entered on July 26, 2016, holding that the court in the Prior Litigation "could not have had sufficient evidence to set the rate going forward;" "it would have been impossible for the previous court to have issued a decision in regards to the calculation of minimum royalties as per the terms of the lease as the amount to be paid per ton was to be recalculated every year;" and "it is impossible to set a prospective per ton rate for minimum royalties;" with order entered on August 25, 2017, "This issue was decided in the Prior Litigation." (Compare J.A. 2819 - 2820 (July 26,2016 order), with J.A. 7544 (August 25, 2017 order)).
17 4. Pittston was entitled to summary judgment on the McDonald Family's diligent mining
claim based upon its affIrmative defense of waiver. (Id.)
5. The defenses of res judicata and collateral estoppel also bar both the diligent mining and
minimum royalty claims. (l.A. 7546); and
6. Since the circuit court found no breach of Lease had occurred, it held that Pittston Coal
Company could not have engaged in tortious interference in locking the property away
with Massey. (Jd.)
The McDonald Family appeals each of these rulings. The court below did not reach the issue of any affIrmative defenses of any rejected or future payments. (l.A. 7580) ("[T]he thing 1 left open because I'm not sure of the issue is if you waive it did you waive it forever .... [I]t rolls around every - you know, in other words, each year is a new kind of thing to the Court and, you know, can you waive a right until it occurs. And 1 wasn't certain and 1 didn't need to get there, so
1 didn't make that fmding."). Thus, the McDonald Family maintains its claim for increased minimum royalties for any payments not accepted, to the extent they are not made whole by their claim for Pittston's breach of its duty to diligently mine.
III. SUMMARY OF ARGUMENT
Under West Virginia law, a coal lessor may maintain an action for breach of its lessee's covenant to properly and diligently develop the mine property. Syl. pt. 1, Hamrick, 116 S.E. at
75. This is true even if the lease contains a minimum annual royalty payment. Jd. at 76-77. The parties who drafted this Lease were well aware of the law of this State, as announced in Hamrick.
They clearly relied on it by using the "magic words" of diligent prosecution, as used in the lease at issue in Hamrick. The parties further relied on Hamrick by including the minimum royalty provision, knowing that under this Court's precedent, both promises would be enforceable.
18 The standard of care against which the lessee's diligence (or lack thereof) is measured, and that which the parties incorporated into the Lease with their express promise of diligence, is "that degree of diligence which, surrounding circumstances and conditions being considered, would reasonably be expected of operators of ordinary prudence, experienced and engaged in the same business, having due regard for the interests and advantage of themselves and their lessors."
Syllabus, Grass v. Big Creek Dev. Co., 75 W.Va. 719, 84 S.E. 750 (1915). "This standard of ordinary prudence remains effective today." Wellman v. Bobcat Oil & Gas, Inc., 2010 WL
2720748, at *3 (S.D.W. Va. July 8,2010).
The measure of damages for breach of a duty to diligently develop is the royalty that would have been earned "during the period in question but for the dereliction" of the lessee. Syl. pt. 7,
Cotiga Dev. Co. v. United Fuel Gas Co., 147 W. Va. 484,485, 128 S.E.2d 626,629 (1962). In order to prevent double-recovery, Cotiga commands that any damages paid as a result of the breach be treated as pre-paid royalties, and the lessee is thereafter entitled to a dollar-for-dollar credit for payment against the royalties next generated by production under the lease. Id.
The circuit court erred in its judgment order by failing to apply this longstanding, syllabus point law to the facts of this case. Tellingly, the circuit court did not cite a single case anywhere in its judgment order dealing with the nature of a claim for failure to diligently prosecute mining operations, and it did nothing to address or distinguish the cases from this Court cited by the
McDonald Family in support of their claim. (J.A. 7534 -7549).
In rendering a wholly unnecessary summary judgment on the diligent mining claims using
Pittston's affinnative defense of waiver, the circuit court acknowledged it was resolving a disputed fact issue, but it was so detennined to avoid a trial, the circuit court resolved the issue anyway.
The court stated, "I mean, I know it's disputed and I think they could appeal that and say I made a
19 wrong decision." (J.A. 7583). Because the court below knew it was granting summary judgment in the face of an acknowledged dispute over material facts, this Court should reverse the waiver ruling, and it need not even reach the course of performance or practical construction ruling, since the Lease is not ambiguous.
The circuit court further erred by holding that pricing the minimum royalty above the $2.00 floor requires an actual sale of coal mined from the McDonald property, sold by Pittston itself.
The court ruled this way despite acknowledging that "during the time at issue in this case,
Defendants were no longer actively engaged in business of producing and selling coal from which markets could be determined." (J.A. 7538 -7539). Accordingly, the circuit court allowed Pittston to benefit from its self-rendered impossibility to perform the contract. This violates West Virginia law, which states, "A party cannot by its own act place itself in a position to be unable to perform a contract, then plead that inability to perform as an excuse for nonperformance." Waddy, 606
S.E.2d at 234.
The circuit court already ruled at the beginning of the case that the claims and issues in this case are not identical to the claims in the Prior Litigation. There was no claim at all in the Prior
Litigation involving the duty to diligently mine, and given the distinct time periods at issue, the circuit court here ruled that the court in the Prior Litigation had not prospectively set the minimum royalty for any years into the future. But, without explanation or any express findings, the circuit court completely reversed itself on both points and wrongly ruled that the entire complaint is barred by res judicata or collateral estoppel.
Finally, in the event this Court reverses the rulings of the circuit court with respect to the duties under the Lease, it should likewise reverse the ruling of the court below regarding tortious
20 interference, which was based solely on the fact that the court found the Lease imposes no duty to mme.
Accordingly, through this appeal, the McDonald Family asks this court to reverse the circuit court's judgment order and to remand this case for a trial.
IV. STATEMENT REGARDING ORAL ARGUMENT AND DECISION
Because the principle issues in this case involve assignments of error in the application of settled law, this case is appropriate for Rule 19 oral argument. However, the case is not appropriate for a memorandum decision, given the significant issues involved and the provisions of Rule 19, which state that reversal by memorandum decision is not favored. W. Va. R. App. P. 19(d).
V. STANDARD OF REVIEW
This Court should review the circuit court's summary judgment order de novo. Jackson v.
Brown, 239 W. Va. 316, 801 S.E.2d 194, 199 (2017).
VI. ARGUMENT
A. The circuit court's summary judgment order ignores nearly 100 years of precedent that a coal lessor has a valid claim for damages against a derelict coal lessee for failure to diligently develop coal reserves.
In clear, unmistakable language in Article X of the Lease, Pittston made the following promise: "[Pittston] will diligently prosecute its operations on the premises hereby leased so that all the merchantable and mineable coal herein provided to be mined shall be mined and royalties therefor paid to McDonalds." (J.A. 4574). "In American English, 'will' is the ordinary verb of promise." Bryan A. Gamer, Shall We Abandon Shall?, A.B.A.J., August 2012, at 26, 28 (2012).
"Prosecute" means "to commence and carry out" and "to engage in; carry on." Black's Law
Dictionary (lOth ed. 2014). So, Pittston promised (by using the verb "will") to diligently
21 commence and carry out (by using the language "prosecute") coal mining operations under the
Lease.
Despite this clear promise, the circuit court ruled that Pittston never has to commence and carry out operations, let alone to do so diligently. Instead, the circuit court interpreted this language to describe only "how mining is to be conducted when undertaken." (J.A. 7542). The circuit court cited no case law to support that conclusion of law. In fact, the circuit co~rt ignored
West Virginia precedent on this precise issue.
In Hamrick v. Nutter, this Court considered a coal mining lease which contained materially the same language now contained in the McDonald-Pittston Lease. In Hamrick, the lessee:
covenanted, promised, and agreed reasonably and diligently to develop the said coal, and in like manner to produce the said coal, so that plaintiff might receive and have the income and royalties therefrom which the defendant covenanted, promised, and agreed to pay for the privileges so granted to him[.]
Hamrick, 166 S.E. at 76. In the McDonald-Pittston Lease, the language is materially the same:
"[Pittston] will diligently prosecute its operations on the premises hereby leased so that all the merchantable and mineable coal herein provided to be mined shall be mined and royalties therefor paid to McDonalds." (J.A. 4574). In Hamrick, viewing the language of diligence that the
McDonald-Pittston Lease would later employ, this Court held, "there can be no doubt" that a cause of action in damages will lie in favor of the lessor against the lessee for failure "to mine or develop coal lands." Hamrick, 116 S.E. 2d at 77. Hamrick so held even though lease in that case contained a minimum royalty payment. Id.
The parties were aware of Hamrick and its magic words of diligence when they negotiated and drafted the McDonald-Pittston Lease, and they consciously chose to include the express promise of diligence. In fact, "all of the general legal principles affecting contracts at the time a particular agreement is entered into form a part of that contract as fully as if they were specifically
22 expressed within it[.]" McGinnis v. Cayton, 173 W. Va. 102,105,312 S.E.2d 765, 768 (1984)
(citing Huntington Water Corp. v. City of Huntington, 115 W. Va. 531, 177 S.E. 290 (1935)).
Inarguably, then, the parties incorporated the duty of diligence expressed by this Court in Hamrick into the Lease.
In an earlier case, dealing with an oil and gas lease, this Court stated that a lessee must,
"exercise due and reasonable diligence in prosecuting operations thereunder for the mutual benefit of himself and his lessor; and, if he unreasonably fails or refuses so to do, damages therefor are recoverable against him in an appropriate action at law." Syllabus, Grass, 84 S.E. at 750. Grass was reaffirmed fifty years later in Cotiga, when this court was interpreting similar diligence language in a gas lease. Syl. pt. 7, Cotiga, 128 S.E.2d at 629.
In Cotiga, the language required the lessee of gas reserves "to proceed with due diligence to develop the same, and market the production therefrom to the end that the Lessor and the Lessee may derive the speediest return practicable for the oil and gas recoverable thereunder, due consideration being always given to the condition of the industry as a whole." Id. This Court, in
Cotiga, expressly reaffirmed the availability of a cause of action based upon the "dereliction" of the lessee to develop and market the leased mineral. Id. ("[A]n action for damages may be maintained by the lessor against an assignee of the lease for a failure to market the production of gas from wells on the leased premises in conformity with the requirement of such covenant.").
Again, the lease in Grass contained a minimum annual payment per well, and the lease in Cotiga likewise contained a "guaranteed annual minimum." Grass, 84 S.E. at 750; Cotiga, 128 S.E.2d at
630. So, in those cases, the minimum royalty did not supplant the duty of diligence.
Here, the circuit court did nothing to address any of this 100 years' worth of black-letter, syllabus point law in its judgment order. It does not even cite these cases or attempt to distinguish
23 them. Instead, the circuit court distorted the plain language of the promise to diligently prosecute operations, creating conditional language ("when undertaken") that does not exist in the Lease.
The McDonald-Pittston Lease is devoid of any conditional language in the promise to diligently prosecute operations. Article X ofthe Lease does not contain the words "if' or "when," only the unequivocal promise to diligently prosecute operations on the leased premises so that all the merchantable and mineable coal is mined and royalties are paid to the McDonald Family. The circuit court reads a condition into that promise, finding that it applies only "when" Pittston decides to undertake mining. There is no textual basis for that misreading of the diligent prosecution clause.
Further, the circuit court's conditional re-interpretation completely disregards the public policy pronounced by this Court in St. Luke's. In that case, the Supreme Court reaffirmed the public policy ofthis State, which
discourages tying up and rendering unproductive the vast fields of mineral wealth, construes every contract and lease as to both lessor and lessee so as to best promote production, development and progress, and frowns upon every attempt to evade it as being in contravention of both good morals and public policy.
St. Luke's United Methodist Church v. CNG Dev. Co., 222 W. Va. 185, 192,663 S.E.2d 639,646
(2008) (citation omitted). That public policy, which puts miners to work and produces tax revenue for the Counties and the State, ought not be abandoned by this Court.
The circuit court read the Lease, effectively, to grant to Pittston a mining option, and one that is exercisable in Pittston's unbridled discretion and under which Pittston owes the McDonald
Family no duty to ever mine any coal. Under the circuit court's decision, the McDonald Family has no recourse at all against a derelict operator who blatantly wastes an opportunity to create hundreds of local jobs and millions in tax revenue by mining and selling the coal under the Lease.
That is simply not the law in West Virginia. As discussed in the following section, a lessee must
24 adhere to an objective standard of care, acting as a reasonably prudent operator, similarly situated, would act. The Supreme Court should reverse this ruling of the circuit court, and hold that the
Lease imposes a duty to diligently prosecute operations, when it would be profitable to do so.
B. The applicable standard of care is that of the reasonably prudent operator, and this standard does not impose "partnership status" on the lessor-lessee relationship, as erroneously ruled by the circuit court.
The standard of care, as it relates to development of mineral resources, has been on the books for over 100 years. And, the standard does not impose "partnership" duties between lessor and lessee, as posited by the circuit court. In Grass, this court defmed the standard of care as
that degree of diligence which, surrounding circumstances and conditions being considered, would reasonably be expected of operators of ordinary prudence, experienced and engaged in the same business, having due regard for the interests and advantage of themselves and their lessors.
Syllabus, Grass, 84 S.E. at 750. If the operator fails to adhere to this standard of diligence,
"damages therefor are recoverable against him in an appropriate action at law." !d. "This standard of ordinary prudence remains effective today." Wellman, 2010 WL 2720748, at *3.
Again, the circuit court ignored this law, instead wrongly concluding that the McDonald
Family wanted to impose partnership status, and all the attendant duties of partners, upon the lessee. (J.A. 7543). That is simply not the case and was not even an argument made below by
Pittston. The standard, as clearly expressed in the briefmg below, is based on Grass and its progeny. The operator must act with reasonable prudence in its development decisions. And, if the lessee breaches that standard, as it has here, then it owes damages to the lessor.
This principle grows out of the underlying purpose of a mineral lease, which is to have operations carried out for the mutual benefit of the lessor and lessee. Grass, 84 S.E. at 753 (citing
Jennings v. Carbon Co., 73 W. Va. 215, 80 S.E. 368,370 (1913)). The lessor enters into a lease
25 for a royalty stream, and the lessee enters into a lease for the rights to mine and sell the mineral and retain all the profits from the operation. Thus, the lessee
must deal with the leased premises, not exclusively to serve his own peculiar and selfish interests, unmindful of his obligations to the source from which his authority is derived, but so as to promote the mutual advantage and profit of himself and the lessor.
Jennings, 80 S.E. at 370. In other words, "To allow [the lessee] to direct developments in the manner adapted only to the promotion of his gain and effectually to the impoverishment of the lessor's estate in oil and gas cannot in reason be deemed as even remotely contemplated by either party at the inception of the lease." Id.
As a corollary, the law will not force the lessee to carry on operations at a loss solely for the benefit of the lessor's royalty interest. Grass, 84 S.E. at 753 (citing Bradford v. Blair, 113 Pa.
83,4 A. 218 (Pa. 1886) (if the economic circumstances "were such that the business could not then be carried on with a profit to the defendant after giving to the plaintiff the agreed royalty, then we think the defendant was not bound to prosecute the same to any greater diligence than was done.")).
Rather, the duty arises "[a]s in all other contracts, so [the lessee] must act and perfonn the contract so as to sub serve the original purpose and intention of the parties." Jennings, 80 S.E. at 370.
Pittston has failed to meet this standard of care. It failed to prosecute its operations in response to record prices, which would have inured to the mutual benefit of both parties. Even though it unilaterally chose to sell all of its coal mining assets, Pittston has had, and continues to have, every opportunity to engage any company it wishes as a contract miner to mine under the
McDonald Lease. The McDonald Family has agreed to subleases, assignments, and full-out releases of portions of the property, asking only that the original intent of the Lease be observed in those proposed transactions. Under any of these arrangements, Pittston could mitigate any damages it might incur in this case. In any event, under Cotiga, if Pittston is liable in damages for
26 failure to diligently develop, it could mine the coal itself or use a contract mining arrangement
over the next 15 years remaining on the Lease to mine the coal royalty-free, treating the damages
paid as pre-paid royalties.
C. The oil and gas cases cited herein are wholly applicable to this case, since none of them involve drainage or the fugacious nature of those minerals.
Not only is there a coal leasing case directly on point - Hamrick v. Nutter - that should have controlled the outcome in this case, but the oil and gas cases are consistent on, and persuasively support, the relevant point, given that the decisions in those cases were not dependent upon on the fugacious nature of oil and gas. Cotiga expressly approved a claim for failure to diligently develop and market a mineral, and set the measure of damages therefor, even though the mineral would remain in the ground and not be lost to drainage. Co tiga , 128 S.E. 2d at 637. Likewise, Grass, which pronounces the duty of the operator to exercise reasonable prudence and answer in damages if it breaches that duty, was not concerned with drainage. "Weare not now speaking of what is the measure of damages recoverable for drainage through wells operated on other lands near plaintiffs boundary line. That question, as heretofore observed, is not before us." Grass, 84 S.E. at 754.
As described in Cotiga, there are two (2) sets of circumstances giving rise to failure to develop claims.
Two factors are involved in the requirement, whether express or implied, that the mineral resources of the lessor shall be developed with reasonable diligence: (1) the desire of the lessor to convert his subterranean assets into cash and not to be unduly delayed in the process; (2) the possibility of loss by drainage through adjacent or neighboring lands.
Cotiga, 128 S.E.2d at 636 (citing Robert T. Donley, The Law ofCoal, Oil and Gas in West Virginia
and Virginia, § 108 (1951)). Cotiga, again, which upheld and expanded Grass, states, "The
element of drainage appears not to be a consideration in the present case[,J" and went on to uphold
a claim for failure to develop or market the mineral, nonetheless. Id. Like Cotiga, the duty to
27 develop in this case is driven by the first factor, the lessors' interest in converting assets to cash through a royalty stream.
Accordingly, there is a robust body of West Virginia case law in both the coal and oil and gas context that expressly approves of the claim brought by the McDonald Family in this case.
The circuit court not only failed to apply the precedent from this Court; it did not even bother to address or distinguish those cases. For these reasons, the circuit court's rulings on the duty to diligently mine should be reversed.
D. The minimum royalty provision is not in lieu of the duty to diligently mine. It is expressed in tons instead of dollars as a result of this Court's opinion in Babcock Coal & Coke.
A minimum royalty clause does not supplant or extinguish the duty to diligently mine. In
Hamrick v. Nutter, this Court held that both clauses - minimum royalty and diligent prosecution - were enforceable in damages. The lease in Hamrick included an obligation "to pay the plaintiff a minimum royalty for the use of said premises of $5 per acre per year, whether the quantity of coal mined and coke manufactured should produce that amount of royalty or not." Hamrick, 116 S.E. at 76. In fact, the Court noted that the claims in Hamrick were "to recover rentals accruing under the minimum royalty provision of a coal mining lease, and also for damages for failure to develop the mine as provided therein." Id. at 75 (emphasis added). Even in the presence of the minimum royalty provision, this Court held that the coal lessee had "particularly breached his covenants to pay the royalties as they accrued, and properly and diligently to develop the seams of coal, or either of them, for coal mining purposes as required by the lease." Id. at 77 (emphasis added).
Likewise, in Co tiga , the lease contained "a guaranteed annual minimum," whether a sufficient amount of gas was produced or not. Cotiga, 128 S.E.2d at 630. The Cotiga court noted that the parties had included an annual minimum royalty in the lease because "the intent and effect
28 [was] that Cotiga shall receive at least that sum[.]" Id. And, "If royalties exceed that sum, Cotiga is entitled to receive the excess[.]" Id. Given those facts, this Court had little trouble finding that damages were available for breach of a duty to develop and market the mineral over and above an amount that would meet the minimum royalty provision. Id. at syl. pt. 7.
Clearly, then, under West Virginia law, a minimum royalty prOVISlOn does not automatically override a duty to diligently develop. The duty to diligently develop has not only been a part of West Virginia jurisprudence for over 100 years, but it remains a valid principle of mineral law, as expressed by scholarly articles and recent decisions from other jurisdictions.
"[W]here a coal lease contains ... a substantial minimum royalty requirement and also an express due diligence provision ... the lessee is exposed to the possibility of a claim for failure to diligently mine, which could result in a verdict for the payment of substantial damages." Richard J. Bolen,
Coal Lease Terminations: Minimizing the Pain of Untying the Knot, 25 Energy & Min. L. Inst.
262, 269 (2005). Put differently, "the leases involved herein provided for both a minimum royalty and diligent development of the mines. Therefore, the payment of minimum royalties does not satisfy the duty of diligent development." Coal Res., Inc. v. Gulf & Western Indus., Inc., 865 F.2d
761,766 (6th Cir. 1989) (applying Virginia law). "The parties to the lease obviously did not intend the minimum royalty provision as a limitation on the specific covenant requiring [Lessee] to mine diligently. Any other interpretation would render the requirement of diligence meaningless." North
Star Co. v. Howard, 341 S.W.2d 251, 254 (Ky. 1960).
The McDonald-Pittston Lease contains both a minimum royalty provision and an express promise to diligently prosecute operations. Under the authorities cited above, both of those clauses are enforceable. In fact, a cardinal rule of construction is that
the language of a lease agreement must be considered and construed as a whole, giving effect, if possible, to all parts of the instrument. Accordingly, specific words
29 or clauses of an agreement are not to be treated as meaningless, or to be discarded, if any reasonable meaning can be given them consistent with the whole contract.
Wood v. Sterling Drilling & Prod. Co., Inc., 188 W. Va. 32, 34, 422 S.E.2d 509, 511 (1992).
In addition, Pittston's 30(b)(6) witness admitted that there is no express language in the
McDonald-Pittston Lease to even suggest that the minimum royalty is the measure of diligence or
is "in lieu of' any duty of diligent development. (J.A. 6425 - 6426). It is beyond argument, then, that the minimum royalty provision in the McDonald-Pittston Lease ought not be an impediment
to the diligent mining claim.
The fact that the minimum royalty is expressed in tons, as opposed to dollars, is of no moment. In Babcock Coal & Coke Co. v. Brackens Creek Coal Land Co., this Court stated
[M]any leases contain a provision that minimum royalty shall be paid regardless of whether coal is actually mined. These provisions are classified: (1) Those requiring payment of minimum royalty regardless of the amount of minerals mined, and (2) those requiring that a stipulated amount of minerals shall be mined. If the stipulation is of the first class a lessee is liable for the payment of minimum royalty although no minerals are or could be mined; if of the second class and the lessee did not assume the risk of the exhaustion of the minerals, his obligation to pay the minimum royalty is discharged if the minerals do not exist.
Babcock Coal & Coke Co. v. Brackens Creek Coal Land Co., 128 W. Va. 676, 682, 37 S.E.2d 519,
522 (1946). Thus, there is a completely rational basis for the McDonald-Pittston Lease's expression of the minimum royalty payment in tons, rather than in dollars. Stating the minimum in terms of tons extinguishes the Lessee's obligation to pay a minimum royalty once the coal reserves are exhausted.
That is as far as it goes, however. Because the minimum royalty is expressed in tons says nothing about whether Pittston has diligently prosecuted its operations as a reasonably prudent operator would. Consider the fact that the Lease is nearing 40 years old. Modern mining methods have increased productivity to such an amazing extent that tonnage figures in older leases,
30 including this one, are now nowhere near the amount a reasonably prudent operator could produce in a year, and thus, cannot be the full extent of the lessee obligation. (See, J .A. 5100).
Imagine that the Lease had been written in 1928 but remained in existence today, and further imagine the Lease, in addition to the express obligation of diligent prosecution of operations, stated that the lessee "shall produce one mule-pulled car of coal per week, and if not, pay a minimum royalty measured by the deficiency in such weekly production." There could be no rational basis to conclude that all that is required of a lessee in that example is to pay the value of one mule-car per week. Instead, the lessee's duty it to act as a reasonably prudent operator would act, given modem methods, equipment, and markets, and the minimum royalty is not a limitation upon that duty.
E. The circuit court's waiver decision was, as the court admitted, an improper resolution of a disputed factual issue.
In addition to ruling that the McDonald Family had no right to require diligent mining under the Lease, the circuit court ruled that, even if the McDonald Family had such rights, it waived them. In order to establish waiver, it must be shown by clear and convincing evidence that the waiving party (1) had the knowledge of the existence of the right and (2) had the voluntary intention to relinquish the right. Hoffman v. Wheeling Sav. & Loan Ass 'n, 133 W. Va. 694, 713,
57 S.E.2d 725, 735 (1950). Pittston has the burden of proof on this defense, and its burden is extremely high. Id. ("A waiver of legal rights will not be implied except upon clear and unmistakable proof of an intention to waive such rights."). "There must be clear and convincing evidence of the party's intent to relinquish the known right." Potesta v. us. Fid. & Guar. Co., 202
W. Va. 308, 315, 504 S.E.2d 135, 142 (1998) (emphasis added).
Specifically, "The elements of waiver are two-fold: (1) "knowledge of the facts basic to the exercise of the right [waived]" and (2) "the intent to relinquish that right." In re Buffalo Coal
31 Co., Inc., 2011 WL 917717, at *8 (N.D.W. Va. Mar. 8,2011) (see also, Citibank, N.A. v. Perry,
238 W. Va. 662, 666, 797 S.E.2d 803, 807 (2016) (finding that the intentional relinquishment element was not present). "[S]tanding alone, an obligee's acceptance ofless than full performance by the obligor does not prove intent to relinquish the right to enforce full performance." Id. 2011
WL 917717, at *8 (citing Stanley's Cafeteria, Inc. v. Abramson, 226 Va. 68, 74, 306 S.E.2d 870,
873 (1983)) (emphasis added).
As discussed at length in Section II.B.5 and 6, supra, the record in this case is replete with evidence that the McDonald Family repeatedly and continually demanded that mining occur, going so far as to hold face to face meetings with Pittston in which the McDonald Family asserted that
Pittston had "huge" liabilities over and above their minimum royalty payment. (J.A. 2787 - 2789).
Pittston clearly understood this position, as set forth in Mr. Bauersachs' letter, in which he recounted Pittston's desires to "reduce (although likely not eliminate) exposure, if any, to some sort of diligent development and/or lost coal claim." (J.A. 2747). This evidence undoubtedly negatives any "intent" of the McDonald Family to relinquish its diligent mining claim.
Pittston's entire waiver defense is premised on the McDonald Family's acceptance of annual rent. However, acceptance of rent, by itself, is not enough to constitute waiver as a matter of law, and instead, waiver by acceptance of rent "is a question of intent based on the particular facts of the case." Dunbar Hous. Auth. v. Nesmith, 184 W. Va. 288, 292, 400 S.E.2d 296,300
(1990) (citing with approval, inter alia, Chertkofv. Southland Corp., 280 Md. 1, 371 A.2d 124,
127 (Md. 1977) ("The important point to be made is that the acceptance of rent, even though it accrues after the breach of covenant, does not establish waiver as a matter oflaw.")). Even without the massive factual dispute generated by the McDonald Family's evidence of its repeated objections and demands, Pittston utterly failed to support its waiver defense as it relates to the
32 diligent mining claim with any evidence - let alone clear and convincing evidence - that would meet the law set forth above. Pittston relies entirely on acceptance of a silent annual rent check to support its waiver defense, and, prior to this suit, not one such check was ever transmitted by
Pittston with the notation or description that the check was offered in "full payment" or "in lieu of mining," words that might somehow show the McDonald Family's intent in acceptance. (J.A.
4880).
Clearly, at a minimum dispute over the material facts related to waiver exists. In fact, the circuit court acknowledged the dispute, but said it would grant summary judgment anyway, and the McDonald Family could appeal it. "I mean, 1 know it's disputed and 1 think they could appeal that and say 1 made a wrong decision." (J.A. 7583). The circuit court obviously erred, then, in resolving this issue against the McDonald Family on summary judgment. Accordingly, the
Supreme Court should reverse the circuit court's decision on waiver as it applies to the diligent mining claims.
F. The circuit court applied "practical construction" to an unambiguous Lease, in violation of this Court's precedent, and it resolved disputed facts to do so.
This Court has previously held:
The rule relating to practical construction of provisions of a written instrument by the conduct of the parties thereto, like other rules of construction, may be resorted to by a court only when the parties have failed to express their intent in clear and unambiguous language; and such rule of construction can never be used to change the legal effect of clear and unambiguous language.
Syl. pt. 4, Cotiga, 128 S.E.2d at 628-29. The court below made no finding that the Lease was ambiguous. Instead, it ruled "[I]f and to the extent there is any ambiguity," it would then apply practical construction. However, the Lease is not ambiguous as it relates to diligent mining or the minimum royalty provision. In fact, the circuit court so held in its first substantive order in the case. (J.A. 2820) ("Based upon an unambiguous reading of the lease ....").
33 Even still, when it delved into parol evidence to detennine the "practical construction," the circuit court again resolved disputed fact issues. (l.A. 7545) (citing cherry-picked documents and testimony). While not conceding that the Lease was ambiguous, the McDonald Family submitted mountains of parol evidence that reveals the intent of the parties when entering the Lease. (l.A.
6785 - 6795). This evidence included admissions by Pittston that it "entered into the Lease with the purpose and intention of mining the merchantable and mineable coal in and underlying the subject premises" and in another admission that Pittston "entered into the lease with the purpose and intention of mining the coal so long it was profitable for [it] to do so." (l.A. 6793 - 6794).
While the circuit court should not have even resorted to parol evidence (given unambiguous provisions of the Lease at issue) to come up with a "practical construction," it further erred in resolving a factual dispute related to the parol evidence.
If the parol evidence be not in conflict, the court must construe the writing; but if it be conflicting on a material point necessary to interpretation of the writing, the question of its meaning should be left to the jury under proper hypothetical instructions.
Syl. pt. 4, Watson v. Buckhannon River Coal Co., 95 W. Va. 164, 120 S.E. 390 (1923); John D.
Stump & Assocs., Inc. v. Cunningham Mem'l Park, Inc., 187 W. Va. 438, 446, 419 S.E.2d 699,
707 (1992). Accordingly, this Court should reverse the circuit court's judgment related to practical construction because (a) the Lease provisions at issue were already ruled to be unambiguous, and
(b) even if it were dealing with an ambiguous lease, the parol evidence conflicted on this point, and the court cannot resolve conflicting evidence at summary judgment.
G. Even if the Lease contains no duty to diligently mine enforceable in damages, the minimum royalty calculation on a going-forward basis cannot be avoided by Pittston's own conduct.
The circuit court ruled that only sales by Pittston itself could meet the standard of proof of
"average sales price at which the same quality of coal was sold by Lessee to consumers in anns'
34 length transactions" contained in Article XIII of the Lease, for calculating the minimum royalty payment. In the same order, the circuit court acknowledged that Pittston had unilaterally chosen to exit the coal mining business, and thus, Pittston was "no longer actively engaged in business of mining and selling coal from which markets could be determined." (J.A. 7538 - 7539).
Accordingly, the circuit court set a standard of proof (only sales by Pittston itself) that it acknowledged was impossible to meet by Pittston's own choosing. Pittston completely holds the keys to the castle, then, and it claims it can avoid meeting its obligations under the Lease by using its own self-inflicted exile from the coal mining business as a defense, even though it is free under the Lease to engage a contract miner to mine, remove, and sell the coal. In fact, Pittston has turned down multiple chances to have the property mined under the terms of the Lease because it wants to continue to use its self-created impossibility as a defense.
West Virginia law does not permit a party to a commercial agreement to claim its own fault as an excuse to liability. "A party cannot by its own act place itself in a position to be unable to perform a contract, then plead that inability to perform as an excuse for nonperformance." Waddy,
606 S.E.2d at 234. This makes perfect sense, because otherwise, a contract would be an illusory document, subject only to the subjective whims of the counterparty.
Rather, the proper standard of proof is just as it states in the Lease and ruled by the circuit court in the Prior Litigation, the "average sales price of the same quality of coal." The McDonald
Family gathered the evidence of the sales price of the same quality of coal, including from mining ongoing in the same exact seams in adjacent properties. (J.A. 5108 - 5109). Pittston presented counterevidence of the average sales price of the same quality of coal. (J.A. 3021 - 3022). The average sales price of the same quality of coal is easily determined, and the determination is often
35 accomplished in not only the coal business, but in commercial agreements across the country. See, e.g., W. Va. Code § 46-2-723 (Uniform Commercial Code, "Proof of Market Price").
Accordingly, for any minimum royalty payments which have not been accepted by the
McDonald Family, this Court should reverse the circuit court's standard of proof that is rendered impossible to meet by Pittston's own unilateral conduct. Instead, it should apply the plain language of the Lease that requires the minimum payments be set at the average sales price of the same quality of coal. In this case, that number will be easy to determine as neighboring operators are currently mining the same exact coal seams in adjacent mines.
H. The circuit court's diametrically opposed decisions on res judicata and collateral estoppel are impossible to reconcile, and the correct decision is reflected in the circuit court's first order in the case.
"When considering res judicata or claim preclusion, West Virginia applies a narrow 'same evidence' test which examines whether 'the same evidence would support both actions or issues. '"
Dan Ryan Builders, Inc. v. Crystal Ridge Dev., Inc., 803 S.E.2d 519, 528 n.26 (W. Va. 2017)
(citing Syl. pt. 4, Sliderv. State Farm Mut. Auto. Ins. Co., 210 W. Va. 476, 557 S.E.2d 883 (2001)).
West Virginia's test is narrower than the test applied by federal courts, which is "a broader 'same transaction' test which examines whether 'the new litigation arises out of the same transaction or series of transactions as the claim resolved by the prior judgment. '" Id. (citing Pittston Co. v.
United States, 199 F.3d 694, 704 (4th Cir. 1999)). A key consideration is whether the claims are generated from the same "time, space, and origin." Id. at 530.
In this case, both claims involve vastly different evidence, and evolve out of a time period
30 years removed from the Prior Litigation. The Prior Litigation resolved two questions: (1) Could
Pittston terminate the Lease due to a downturn in the coal market, rendering the leasehold
"unmineable and unmerchantable"? The circuit court answered, "No." And, (2) what did Pittston
36 owe the McDonald Family for the annual minimum royalty payments due for the years (1984 -
1988) that had elapsed during the pendency of the Prior Litigation? In answering the second question, the circuit court found that the McDonald Family had presented evidence of dissimilar qualities of coal, and the court found that evidence insufficient to meet the standard of "average sales price of the same quality of coal." (l.A. 548). ("I'd be more prone to agree with [the
McDonald Family] if we had like coal, but we don't have like quality. We have a better quality, as I recall, on Huff Creek under this lease than we do on Rum Creek.").
The Prior Litigation did not decide any claims regarding Article X of the Lease, nor could it have. The circuit court made that exact fmding in its order on July 26, 2016:
Plaintiffs contend Defendants have failed to diligently mine coal and no such cause of action was ruled upon in the prior litigations. Even if the prior litigations between the parties had been decided on the issue regarding the duty of Defendants to diligently mine coal, Article X of the Lease could have continued to require Defendants to diligently mine coal in the future.
(l.A. 2818 - 2819). In fact, the evidence would be markedly different, since the claim at issue in this case involves Pittston's failure to develop coal reserves during the metallurgical coal price boom that occurred between 2006 - 2016, 20 to 30 years after the events giving rise to the Prior
Litigation. Even Marty McFly, with his Back to the Future DeLorean, could not have litigated this claim in the 1980s.
Likewise, for the purposes of Count IV regarding the annual minimum royalty payment due under the Lease, the evidence of the average sales price of the same quality of coal during the time period at issue here (2016 and 2017) was not available to the court in the Prior Litigation. In fact, again, the circuit court so held: "It would have been impossible for the previous court to have issued a decision in regards to the calculation of minimum royalties as per the terms of the lease the amount to be paid per ton was to be recalculated every year." (l.A. 2819). The circuit court
37 made no rulings or findings in its judgment order as to why it believed its earlier pronouncements in the July 26,2016 order were somehow wrong or misapplied the law. Instead, the circuit court here simply wanted to avoid a trial at all costs, and it committed error in its decision on res judicata to do so.
Collateral estoppel is even more strict in its application than res judicata. Collateral estoppel requires an exactly identical issue to have been "actually litigated in the former proceeding, as distinguished from those matters that might or could have been litigated therein."
Abadir v. Dellinger, 227 W. Va. 388,393, 709 S.E.2d 743, 748 (2011) (citing Lane v. Williams,
150 W. Va. 96, 100, 144 S.E.2d 234, 236 (1965)). In Abadir, this court defined the level of identicality required so specifically that "actual authority" and "apparent authority" were viewed as non-identical issues. Id. at 394, 709 S.E.2d at 749.
Viewed from that perspective, any issues regarding diligent mining were clearly not decided by the Prior Litigation. Thus, there is no identity of issues that were actually litigated.
And, as detailed at length above, the only question presented to the circuit court regarding Article
XIII was, what should the price be for only the past years at issue in that case. In fact, the circuit court in this case definitively ruled that the court in the Prior Litigation did not "set the rate going forward." (J.A. 2819). There is nothing in the judgment order of the court in the Prior Litigation that sets, prospectively, the minimum royalty due. (J.A. 648 - 667). As the circuit court in the present case noted, that would have been impossible under the unambiguous terms of the Lease.
(J.A. 2819 - 2820). Therefore, the Prior Litigation did not answer question of what should the minimum royalty be for the years 2016, 2017, and on into the future, and thus, there is no bar to that issue through the doctrine of collateral estoppel.
38 I. The circuit court's ruling on tortious interference, which was wholly derivative of its other rulings, should be reversed.
The circuit court did not pass on any issues related to the McDonald Family's claim for tortious interference. It only addressed the claim as a derivative of the breach of Lease claims.
(J.A. 7546) ("Because [Pittston has] not breached the Lease, the Court concludes that the
McDonald [Family] does not have a claim against Pittston Coal for tortious interference with the
Lease."). To the extent this court finds that Pittston owes the McDonald Family a duty to mine their coal, then it should reverse this derivative ruling and allow this claim to proceed as no independent basis for its dismissal was addressed below.
VII. CONCLUSION
When this Lease was signed, Jimmy Carter was the President. Donald Trump was 32 years old, married to his first wife, Ivana, and had just completed his first major real estate transaction, buying a half-share of the Commodore Hotel. Pittston was the country's largest exporter of metallurgical coal, and it affixed its corporate seal to the Lease with the McDonald Family, solemnly promising them to mine, remove, and sell their valuable metallurgical coal reserves, when it was profitable to do so. Forty years later, Donald Trump is now the seventh President to live in the White House during the term of this Lease, and Pittston still has not, and will not, live up to its promise. The fmancialloss to the McDonald Family as a result of Pittston's inexcusable delay and intransigence is immense and meaningful to the members of the family.
The McDonald Family asks this court to do justice in this case, by simply making Pittston live up to its promises, and where it has failed to do so, to answer in damages, just like any other party to a contract. This Court should reverse the summary judgment wrongfully entered by the circuit court and remand the case with instructions to proceed consistent with this Court's opinion.
39 Respectfully submitted,
Petitioners,
By Counsel.
Brian A. Glasser (WVSB #6597) Sharon F. Iskra (WVSB #6582) Bailey & Glasser LLP 209 Capitol Street Charleston, West Virginia 25301 (304) 345-6555 telephone (304) 324-1110 facsimile [email protected] [email protected]
Counsel for Petitioners