Regis Lutz v. Chesapeake Appalachia, L.L.C.
2013 U.S. App. LEXIS 10733
| 6th Cir. | 2013Background
- Plaintiffs are owners/lessors of natural gas royalty interests in Trumbull and Mahoning Counties, Ohio.
- In 1985 CNR entered leases with plaintiffs; royalties were 1/8 of gas value, calculated monthly.
- Plaintiffs allege 1993 onward underpayment via deductions, rate/price manipulation, and reduced volumes, with falsified check stubs.
- From 1999–2000, CNR used forward sales to Mahonia II at a fixed low price, masking true market prices.
- Chesapeake Appalachian, as successor lessee, allegedly continued the scheme through at least January 2007.
- District court dismissed the breach claim as time-barred under ORC 2305.041 and held tort claims duplicative; plaintiffs appealed focusing on breach of contract; other claims were abandoned.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the contract is divisible for accrual purposes. | Leases divisible; separate accrual with each underpayment. | District court correctly treated as a continuing violation; no separate accrual. | Divisibility supported; suit allowed for underpayments within four years prior to filing. |
| Whether ORC 2305.041 adopts a discovery rule tolling four-year period. | Discovery rule tolls accrual. | No discovery rule under the statute. | Discovery rule not applicable to ORC 2305.041. |
| Whether fraudulent concealment tolling applies to extend the limitations period. | Fraudulent concealment tolls limitations. | Not adequately pled or applicable. | Pleading sufficient to survive dismissal; tolling issue to be addressed on remand. |
| Whether equitable tolling due to fraudulent concealment applies despite a strict discovery-rule absence. | Fraudulent concealment evidence can justify equitable tolling. | Claims must show due diligence and concealment. | Factors require further factual development; remand appropriate. |
Key Cases Cited
- Freeman Indus. Prods., LLC v. Armor Metal Group Acquisitions, Inc., 952 N.E.2d 543 (Ohio Ct. App. 2011) (divisible contracts; severability affects accrual for contract claims)
- Armstrong Petroleum Corp. v. Tri-Valley Oil & Gas Co., 116 Cal. App. 4th 1375 (Cal. Ct. App. 2004) (monthly payments/divisible accrual under contract)
- Hondo Oil & Gas Co. v. Texas Crude Operator, 970 F.2d 1433 (5th Cir. 1992) (breach accrues when monthly payments are due under continuing contracts)
- Dayco Corp. v. Goodyear Tire & Rubber Co., 523 F.2d 389 (6th Cir. 1975) (fraudulent concealment pleading requirements; discovery not automatic)
- Au Rustproofing Ctr., Inc. v. Gulf Oil Corp., 755 F.2d 1231 (6th Cir. 1985) (duty to investigate; discovery rule triggered by concealment)