Friday, June 29, 2012

Summary 2012 WY 84

Summary of Decision June 15, 2012

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Summaries are prepared by Law Librarians and are not official statements of the Wyoming Supreme Court

Case Name: Black Diamond Energy Partners v. S & T Bank

Citation: 2012 WY 84

Docket Number: S-11-0206


Appeal from the District Court of Johnson County, The Honorable John G. Fenn, Judge

Representing Appellants (Plaintiffs): Greg L. Goddard of Goddard, Wages & Vogel, P.C., Buffalo, Wyoming; Mark A. Waller of Sneed Lang Herrold PC, Tulsa, Oklahoma. Argument by Mr. Goddard.

Representing Appellee (Defendant): Stuart R. Day and Ryan Schwartz of Williams, Porter, Day & Neville, P.C., Casper, Wyoming; John B. Joyce and Andrew G. Dittoe of Grenen & Birsic, P.C., Pittsburgh, Pennsylvania. Argument by Mr. Joyce.

Date of Decision: June 15, 2012

Facts: Appellants are Nevada limited partnerships which own interests in coal bed methane wells located in Wyoming. Appellants are comprised of approximately 3800 limited partners and two general managing partners (a Wyoming corporation and a Delaware corporation) who reside in various states, including Pennsylvania and Wyoming. The two general managing partners (the Wyoming and Delaware corporations) are wholly owned subsidiaries of a Nevada limited liability company.

The limited liability company (LLC) entered into a loan agreement in Pennsylvania with Appellee, a regional state bank with offices only in Pennsylvania. At the time the loan agreement was executed, the two owners (who were also principal officers and directors) were residents of Pennsylvania. The loan agreement and note provided that they were governed by and to be construed in accordance with Pennsylvania law and, in the event of a dispute, The LLC consented to the “non-exclusive jurisdiction” of a Pennsylvania court. Between 2002 and 2009, Appellee and the LLC executed nine amendments to the original loan agreement and note.

The LLC ultimately defaulted on the loan. Appellants (the limited partnerships) filed a complaint in Wyoming against Appellee alleging negligence, breach of fiduciary duty, breach of the implied covenant of good faith and fair dealing and other claims. Appellee moved to dismiss the complaint, asserting Wyoming lacked personal jurisdiction because Appellee did not have sufficient contacts with the State to establish personal jurisdiction. The district court granted Appellee’s motion. Appellants appealed, claiming the district court erred in concluding it did not have personal jurisdiction over Appellee.

Issue: Whether the district court correctly concluded it did not have personal jurisdiction over Appellee.

Holdings: The Court concluded Appellee purposefully and voluntarily elected to accept as collateral property located in Wyoming and the payments Appellee received on the loans were earned in Wyoming based on oil and gas operations here. It was reasonable under the circumstances that Appellee should have foreseen there would be consequences here.

The Court further concluded the cause of action arose from the consequences of Appellees’ activities in Wyoming, including: accepting as collateral property located exclusively in Wyoming; using money loaned as working capital for the managing partners’ Wyoming operations; receiving payments on the loans from money earned in Wyoming; visiting Wyoming to inspect the property; employing a Wyoming petroleum engineer to evaluate the property; exercising control over whether the property could be sold, received and holding the proceeds from such sales; and employing a consultant to come to Wyoming to oversee liquidating the property.

Finally, the Court concluded Appellee’s activities had a substantial enough connection to Wyoming to make the exercise of jurisdiction by Wyoming courts reasonable. All of the collateral for the loan agreements was located in Wyoming, thereby making Wyoming the state with the greatest interest in the transaction. The collateral consisted of oil and gas interests located in Wyoming in which the State has a strong interest.

The Court noted this case was brought by the Appellant partnerships, who were not parties to the Pennsylvania loan agreements, against Appellee for actions it took with respect to property located in Wyoming which, they claim, adversely and improperly affected their financial interests. In that context, and in light of the undisputed facts concerning Appellee’s activities in Wyoming, the Court concluded the exercise of personal jurisdiction is appropriate in Wyoming.

Reversed and remanded to district court for further proceedings consistent with the opinion.

C.J. Kite delivered the opinion for the court.

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