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Prime Rock Energy Capital, LLC v. Vaquero Operations, Ltd.

Superior Court of Delaware

October 26, 2017


          Submitted: September 11, 2017

          Seth A. Niederman, Esquire, and Courtney A. Emerson, Esquire, of Fox Rothschild, LLP, of Wilmington, Delaware. Attorneys for Plaintiff.

          Matthew L. Miller, Esquire, Kevin G. Abrams, Esquire, John M. Seaman, Esquire, and E. Wade Houston, Esquire, of Abrams & Bayliss, LLP, of Wilmington, Delaware. Attorneys for the Defendant.


          Vivian L. Medinilla, Judge.


         This is a dispute concerning the sale of mineral rights of a property located in Texas, wherein Plaintiff seeks to recover deposit monies from failed contract transactions between the parties. Specifically, Plaintiff Prime Rock Energy Capital, LLC ("Plaintiff) filed suit in Delaware against Defendant Vaquero Operations, Ltd. ("Defendant") for breaches of contracts, quantum meruit, quantum valebant, unjust enrichment, negligent and/or fraudulent inducement, negligent and/or fraudulent misrepresentation, and violation of the Delaware Securities Act. Defendant moves to dismiss under Superior Court Civil Rule 12(b) on the basis of lack of personal jurisdiction, failure to state a claim, the doctrine of forum non conveniens, and, alternatively, for a stay of action. After consideration of the parties' briefings and oral arguments, for the reasons stated below, Defendant Vaquero Operations, Ltd.'s Motion to Dismiss is DENIED.


         Plaintiff is a Delaware limited liability company.[1] In September of 2016, Plaintiff entered into a brokerage agreement ("Brokerage Agreement") with Case Energy Partners, LLC ("Case Energy"), a Texas limited liability company. The Brokerage Agreement provided that Case Energy would identify and purchase mineral rights for the benefit of Plaintiff. Under the Brokerage Agreement, Plaintiff had the opportunity to exercise a right of first refusal to purchase any mineral rights acquired by Case Energy.[2]

         In October of 2016, CEP Minerals, LLC ("CEP"), a Delaware limited liability company and affiliate of Case Energy, entered into a Purchase and Sale Agreement ("PSA") with Defendant, concerning the oil, gas, and other mineral rights located on approximately 507 acres in Glassrock County, Texas.[3] Plaintiff exercised its right of first refusal under the Brokerage Agreement to purchase Case Energy's interest in the property.[4]

         CEP made a deposit of $130, 000 towards the purchase of the property, pursuant to Paragraph 3 of the PSA. The PSA also detailed a title review phase prior to the specified closing date.[5] During the title review period, Plaintiff claims that numerous title issues arose regarding the property. As such, the parties agreed to extend the closing date to December 20, 2016, in exchange for a $100, 000 increase in the purchase price and an additional deposit of $100, 000.[6] After the additional deposit was made, CEP advised Defendant that a 128-acre portion of the property, referenced by the parties as the "Cox Tract, " violated the conditions of the PSA. Defendant subsequently terminated the PSA on December 20, 2016.[7]

         On December 22, 2016, the parties executed a second contract, known as the Indication of Interest ("101"). Under the terms of the IOI, Plaintiff would directly purchase the mineral rights in the property. Plaintiff deposited an additional $50, 000 to the already-existing $230, 000 deposit, bringing the total to $280, 000.[8] The deposits were to be credited towards the purchase price at closing, with the difference for a lower purchase price returned to Plaintiff.[9]

         Key to this dispute, the IOI contains a choice of law and forum selection clause. Paragraph 9 of the IOI states:

This letter shall be governed and construed under the laws of the State of Delaware and the parties hereto agree that any action or claim pursuant to this letter shall be brought in the state courts (or federal courts if appropriate jurisdiction exists) sitting in Wilmington, Delaware.[10]

         Plaintiff made an offer to purchase 289.4 acres on January 17, 2017, with a closing date of January 30, 2017. The Cox Tract and an additional 90 acres were omitted from the offer, per the terms of the IOI.[11] On January 29, 2017, Plaintiff provided Defendant with a "Settlement Statement, " detailing the terms of the transaction. On January 30, the date of closing, Defendant rejected the terms of the Settlement Statement and, again, terminated the agreement; this time the IOI.[12]None of the deposit monies have been returned to Plaintiff or to CEP.[13]

         Plaintiff filed this action on April 6, 2017, seeking a return of the deposit monies and has asserted seven counts: (1) breach of the PSA;[14] (2) breach of the IOI;[15] (3) quantum meruit/quantum valebant;[16] (4) unjust enrichment;[17] (5) negligent and/or fraudulent inducement;[18] (6) negligent and/or fraudulent misrepresentation;[19]and (7) violation of the Delaware Securities Act.[20] Defendant filed this Motion to Dismiss on July 7, 2017 and its opening brief on July 24, 2017. Defendant filed for dismissal under Superior Court Civil Rules 12(b)(2), 12(b)(3) based on the doctrine of forum non conveniens, 12(b)(5), [21] and 12(b)(6). Alternatively, Defendant seeks a stay. Plaintiff filed its Answering Brief in Opposition to Defendant's Motion to Dismiss and Stay on August 11, 2017 and Defendant filed its Reply Brief on August 25, 2017. A hearing was held on September 11, 2017. The matter is ripe for review.

         12(b)(2) ANALYSIS

         Standard of Review

         On a motion to dismiss pursuant to Superior Court Civil Rule 12(b)(2) for lack of personal jurisdiction over a defendant, the plaintiff "bear[s] the burden to articulate a non-frivolous basis for this court's assertion of jurisdiction."[22] Although the factual record is read in the light most favorable to the plaintiff in ruling on the motion, "the plaintiff must plead specific facts and cannot rely on mere conclusory assertions."[23] "A court cannot grant a motion under Rule 12(b)(2) simply by accepting the well pleaded allegations of the complaint as true, because the pleader has no obligation to plead facts that show the amenability of the defendant to service of process."[24] The plaintiff can satisfy his or her burden on a Rule 12(b)(2) motion "by making a prima facie showing that jurisdiction is conferred by statute" or is otherwise conferred.[25]


         Delaware has long recognized that forum selection clauses in freely negotiated contracts subject the parties to personal jurisdiction.[26] In order to escape such a clause, parties must meet a heavy burden of proof in showing that the clause is unreasonable or otherwise the product of fraud, undue influence, or uneven bargaining power.[27] However, forum selection clauses "almost always involve parties being subject to personal jurisdiction in the chosen forum over a particular class of claims-that is, they involve consent to specific jurisdiction as to the claims outlined in the agreement."[28]

         This Court find that Plaintiff has made a prima facie showing that the exercise of personal jurisdiction over Defendant Vaquero is appropriate. The IOI contains a forum selection clause and choice of law clause expressly selecting not only Delaware, but New Castle County as indicated by the naming of Wilmington as the city of choice. Defendant argues that the forum selection and choice of law clauses apply only to disputes or deposits made under the IOI and not to the deposits made under the PSA, even though the record reflects that the IOI references a sum total to include the PSA deposits previously made.[29]

         Defendant further asserts that the forum selection and choice of law clauses only apply to specific provisions within the IOI. Perhaps this argument might be successfully argued on another day. However, Paragraph 9 of the IOI does not expressly limit the contract provisions as Defendant wishes the Court to interpret them today. Rather, it indicates that "[t]his letter, " or the IOI in its entirety, is to be governed by Delaware law. Paragraph 9 also states that any claims arising from "this letter" will be brought in Wilmington, Delaware. Thus-at least on its face- the forum selection and choice of law provisions appear to extend personal jurisdiction over the full amount in dispute. It is not appropriate at this juncture in the proceedings to delve further into what the parties contemplated. Where Defendant has not satisfied the heavy burden of showing that the forum selection clause is unreasonable or otherwise the product of fraud, undue influence, or uneven bargaining power, dismissal of this matter based on lack of personal jurisdiction is not warranted.


         Standard of Review

         Forum non conveniens ("FNC") is a common law, judicially created doctrine; it allows courts to exert some control over a foreign plaintiffs access to our forum.[30]The decision of whether to grant dismissal under this doctrine lies within the trial court's sound discretion.[31] Under Delaware law, the Court may dismiss a complaint under FNC if the moving defendant demonstrates that it would face "overwhelming hardship" if required to defend itself in this forum.[32] Albeit stringent, the overwhelming hardship standard is not preclusive.[33] Thus, "the Court should not base its conclusion on whether it is more difficult to litigate in Delaware than in another jurisdiction, for the premise of [FNC] is whether the defendant would face overwhelming hardship in a Delaware forum."[34] ...

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