Joint Operating Agreement: Audit Court Jurisdiction, Procedure and Review: Federal Court Jurisdiction

摘要

Several oil and gas companies enter into participation and operating agreements relating to the Park City Gas Field in Kentucky. RET is the operator and DMS is one of the non-operators and a plaintiff in this matter. The two agreements call for the development of over 200 prospect wells over a five phase development. For each prospect well identified by RET, DMS is to provide $150,000 in exchange for a 75% working interest and a 65.625% net revenue interest. The plaintiffs allege that they have deposited nearly $2.4 million with RET for purposes of drilling 17 prospect wells. DMS transfers its interest in the Park City Field to Aus-Tex. The non-operators allege that RET has not held the deposited funds in a separate account and has refused to provide regular statements as to the status of the account. They file this action seeking declaratory and injunctive relief seeking among other things an audit of the deposited funds as provided for in the agreements. There are some preliminary issues including RET's claim that plaintiffs have not shown that they meet the $75,000 amount in controversy requirement in order to establish diversity jurisdiction in federal courts. 28 U.S.C. § 1332(a). Where the amount in controversy is challenged, a court will give effect to the amount claimed by the plaintiff, if such claim is made in good faith. Where damages are not sought, as in this case, the amount in controversy is determined by the value of the consequences that may result from the litigation. The alleged harm is clearly in excess of $75,000 since more than $2.4 million has been deposited and not accounted for. The court also rejects RET's claim that Aus-Tex lacks standing to sue since it is not a signatory party to either of the agreements. Applying Kentucky law, there are at least some factual issues as to whether the cause of action held by DMS was assigned to Aus-Tex so that it would be improper to grant RET's motion at this stage of the litigation. The court thus rejects RET's motion to dismiss but allows the plaintiffs' motion to amend their complaint.