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Smith, et al. v. Chestnut Ridge Storage, LLC

Updated: Jun 6, 2023





By: Howard M. Persinger, III

Persinger & Persinger, L.C.

237 Capitol Street

Charleston, WV 25301

I am very pleased to report that the West Virginia Supreme Court of Appeals has fully adopted the positions set forth in the amicus, or "friend of the court," brief prepared and filed by WVROA and other organizations in the case of Smith, et al. v. Chestnut Ridge Storage, LLC. On January 27, 2021, Justice Armstead, writing for a unanimous Court delivered an opinion that can only be described from our point of view as a "slam dunk win" strongly upholding the rights of landowners to appear in Courts and Administrative Tribunals to defend their property rights.

You will recall that the Smith case arose out of a dispute between the owners of a 4,572 acre parcel of property located in Monongalia and Preston Counties, West Virginia, and Fayette County, Pennsylvania. In 1987, the Smith Family had executed an oil and gas lease, and later signed an addendum to this lease in 1993, allowing the lessee to use depleted strata in this tract to store natural gas. In December of 2007, the lessee, Chestnut Ridge Storage, LLC, applied to the Federal Energy Regulatory Commission or "FERC" for a certificate of public convenience and necessity to construct and operate a storage field in the Marcellus Shale Formation of a portion of this tract. The Smith Family intervened in that proceeding and objected to Chestnut Ridge's planned storage project arguing that the areas and strata proposed for storage on their property were not yet "depleted" as was required by the lease addendum. Chestnut Ridge did not object to petitioner's intervening in the FERC proceeding and the FERC eventually ruled that Chestnut Ridge was required to negotiate with them and compensate them for the gas and the nondepleted areas as a condition for issuing the certificate of convenience. However, Chestnut Ridge took no action, and, by its own terms, the certificate expired after two years. At this point, Chestnut Ridge went back to FERC and sought a three-year extension to complete the storage project. The Smith Family reappeared in the FERC proceeding and opposed this extension asserting that Chestnut Ridge had failed to take the required steps, including negotiating and paying them for the value of the gas in their nondepleted strata, and the project was therefore not viable. The FERC sided with the landowners and refused to issue the extension.

Thereafter, the landowners filed suit against Chestnut Ridge in the Circuit Court of Monongalia, West Virginia, alleging they had breached the lease and addendum by failing to negotiate and pay for the value of the gas in the nondepleted formations covered by the storage project, and asking the Court for a declaration that Chestnut Ridge was obligated to develop the Marcellus Shale formation within the area and strata designated for storage. Chestnut Ridge then countersued the landowners alleging that they had breached the gas storage addendum and had acted in bad faith and slandered Chestnut Ridge's title through their actions in appearing and making arguments before the FERC. Importantly, all the claims asserted against the Smith Family arose from their actions in simply hiring counsel, intervening in and filing briefs and arguing before the FERC solely in an effort to protect their legitimate property rights.

The Smith Family filed a motion for summary judgment on the counterclaims asserting both: 1) the Noerr-Pennington Doctrine, which provides that a party cannot be sued based upon its mere attempt to petition and/or influence governmental action, and 2) the "litigation privilege," which protects parties in judicial or administrative proceedings such as the FERC proceeding, from being sued for their actions within the Court and administrative proceedings themselves. The purpose underlying this legal privilege is, of course, bolstering the public interest in encouraging access to the court system while facilitating the truth-seeking process that is supposed to occur in such proceedings. The Circuit Court denied this Motion and the Smith Family appealed. Had the court ruled in favor of Chestnut Ridge in this case, it could have had a tremendous chilling effect on the ability and willingness of all landowners in deciding to appear before courts and tribunals and protect their property rights and also the rights of others.

Luckily, however, the Supreme Court of Appeals court ruled in favor of the Smith Family on both the litigation privilege and Noerr-Pennington Doctrine defenses and ordered all the counterclaims against them dismissed. Moreover, very notably on page 13 of its opinion, the Court actually quoted from the amicus brief we submitted and thanked this organization and its co-amici for helping it in arriving at its decision. This is exceedingly rare in my experience for amicus briefs to be quoted and cited in the body of a Supreme Court opinions like this and it is a real testament to the power and credibility of WVROA and its co-amici. As such, I would like to humbly thank all of your for participating in this case with us and trusting me with the responsibility of drafting and filing the brief and making all of this possible. If any of you would like a copy of the opinion, please feel free to contact me at the email address above and I will be happy to send you one.

Thank you.

Mo Persinger

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