Ascent Resources LLC has responded to a lawsuit filed by nearly 70 landowners in Southeast Ohio against its predecessor company, American Energy Utica LLC (AEU), seeking to dismiss claims that it owes more than $9.2 million in overdue lease signing bonuses and court fees.
In response to the lawsuit, filed in June in the Jefferson County Common Pleas Court, Ascent argues that it should not be a party to the case because the plaintiffs' allegations "are based solely upon its status as a successor to AEU." The company added that the landowners have failed to plead facts for most of their claims and should therefore be dismissed.
The landowners include a school district and five towns. They're seeking payment of $9.2 million, plus $25,000 or more for each plaintiff in compensatory and punitive damages for breach of contract and unjust enrichment (see Shale Daily, June 12). Their original complaint was filed against the former AEU, its parent company American Energy Partners LP (AELP) and Ohio-based land services firm Greater River Energy LLC. In July, however, the lawsuit was amended to name Ascent as a defendant and add seven new plaintiffs to the case.
AELP was formed by Aubrey McClendon in April 2013 as an operating and asset management company focused on developing affiliates with basin-specific strategies (see Shale Daily, April 17, 2013) Shortly after that, the company created AEU. Earlier this year, AEU was combined with its Marcellus counterpart to form a standalone company that was renamed Ascent Resources (see Shale Daily, June 10).
The landowners allege that shortly after AELP was formed, it contracted with Great River to acquire leasehold for AEU. Acting as a land agent for AEU, Great River entered into leases for the company that were then assigned to it, according to the lawsuit. The plaintiffs said the leases' order of payment required Great River to pay bonuses and fees within 120 days of the signing or identify title defects.
According to the landowners, no title defects were identified and most bonuses and fees were never received, "AEU/AELP intentionally procured the breach of plaintiffs' contracts by [Great River] when it instructed [Great River] not to pay the plaintiffs order of payment despite [Great River's] contractual obligation to tender the order of payment to plaintiffs in accordance with the contracts," the lawsuit said.
Ascent said the plaintiffs knew Great River was acting as a lease agent for its predecessor companies and willingly signed the leases. It also said that only Great River and the landowners are parties to the orders of payment, absolving it of any liability.
"The orders of payment make absolutely no mention of any Ascent defendants, nor is there any indication on the face of the orders of payments that Great River entered into the purported contract as an agent for another," Ascent said in its motion to dismiss. The company said landowner claims that its predecessors acted with malice and intentionally breached the leases were "speculative and conclusory."
The company's arguments reflect its position after the lawsuit was filed, when representatives said Ascent should not be a defendant.
Yet in responding to Ascent's motion, the landowners continue to maintain that Great River -- which state records show was established to do business in Ohio two months after AELP was formed -- worked under the direction of Ascent's predecessors.
"Despite controlling every facet of Great River's leasing efforts and instructing Great River, as its agent, to lease the plaintiffs properties for its benefit, the [Ascent] defendants now seek to avoid all liability associated with the breaches of the orders of payment; breaches that [Ascent] defendants procured when it directed Great River to not pay the plaintiffs despite the clear obligation under the orders of payment to do so," the landowners said. They added that Ascent's motion to dismiss is "nothing more than a thinly veiled corporate shell game" aimed at avoiding liability.
Great River only recently filed its response to the lawsuit. A hearing on Ascent's motion to dismiss is scheduled for Oct. 19.