Eaton v. Ascent Resources-Utica, LLC

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF OHIO

EASTERN DIVISION

BRIAN CHRISTOPHER

EATON, et al.,

Plaintiffs,

Case No. 2:19-cv-03412

v. JUDGE EDMUND A. SARGUS, JR.

Magistrate Judge Chelsey M. Vascura

ASCENT RESOURCES-UTICA,

LLC,

Defendant.

OPINION AND ORDER

This matter is before the Court on a Motion for Partial Summary Judgment (ECF No. 71)

filed by Plaintiffs Brian Christopher Eaton, Cynthia Eaton, and Cunningham Property

Management Trust. Defendant Ascent Resources-Utica, LLC opposes the Motion (ECF No. 84),

and Plaintiffs replied (ECF No. 86). For the reasons below, Plaintiffs’ Motion for Partial Summary

is DENIED. (ECF No. 71.)

BACKGROUND

Ascent is an exploration and production company that contracts with landowners to drill

for oil and natural gas on the leased properties. Plaintiffs are a class of such landowners. Ascent

entered into hundreds of oil and gas lease agreements with Plaintiffs to extract oil and natural gas

from the wells1 placed on their properties, to sell downstream. In exchange, Ascent agreed to pay

Plaintiffs royalties based on the proceeds of the sales from the oil and natural gas produced at each

well. Each lease agreement determines whether Plaintiffs, or Ascent, are responsible for expenses

1 An oil well is used to extract oil and natural gas from the ground. It consists of a wellbore (the

hole drilled through the ground) and a wellhead (the surface equipment). Grissoms, LLC v. Antero

Res. Corp., 133 F.4th 605, 607 (6th Cir. 2025).

incurred after the oil and natural gas is extracted, but before it is sold—i.e., “post-production

deductions.” Plaintiffs assert that Ascent systematically underpaid them royalties by deducting

excessive post-production costs from the proceeds of each well’s production. (See ECF No. 52,

PageID 1293.) Plaintiffs’ partial motion for summary judgment is about who bears the burden of

proving whether the deductions were reasonable. (See ECF No. 71.)

I. The Class Action Complaint

This case involves two consolidated lawsuits brought by Brian and Cynthia Eaton and

Cunningham Property Management Trust, both of whom allowed Ascent to produce oil and natural

gas from their properties under oil and gas leases. (ECF No. 17.) Plaintiffs’ consolidated class

action complaint alleges five causes of action. Plaintiffs first cause of action seeks an order for an

accounting of the royalty payments and the methods of calculating those payments. (ECF No. 21,

¶ 138.) Second, Plaintiffs allege that Ascent breached the operative lease agreements by taking

improper deductions from their royalties. (Id. ¶¶ 139–42.) Third, in the alternative to the breach of

contract claim, Plaintiffs allege that Ascent has been unjustly enriched by retaining royalty

payments that belong to Plaintiffs. (Id. ¶¶ 143–45.) Fourth, Plaintiffs assert that they relied upon

fraudulent misrepresentations made by Ascent regarding their royalty payments. (Id. ¶¶ 146–57.)

Fifth, Plaintiffs seek injunctive and declaratory relief to remedy the underpayments moving

forward. (Id. ¶¶ 158–64.) The parties later agreed to dismiss Plaintiffs’ fraud claim (Count Four),

but Plaintiffs other claims remain pending. (ECF No. 96.)

Plaintiffs’ breach of contract allegations differ based on the provisions of their lease

agreements. The leases are grouped into three categories: “gross proceeds” leases, “net proceeds”

leases, and “market enhancement clause” leases. (ECF No. 52, PageID 1294; Eaton v. Ascent Res.

— Utica, LLC, No. 2:19-cv-3412, 2021 U.S. Dist. LEXIS 145585, at *4 (S.D. Ohio Aug. 4, 2021).)

The Eatons’ lease falls into the “market enhancement clause” category because it contains the

following clause prohibiting Ascent from deducting expenses incurred to transform the gas into

marketable form:

all oil, gas and other proceeds accruing to the Lessor2 under this lease or by state

law shall be without deduction, directly or indirectly, for the cost of producing,

gathering, storing, separating, treating, dehydrating, compressing, processing,

transportation, and marketing the oil, gas and other products produced hereunder to

transform the product into marketable form; however, any such costs which result

in enhancing the value of the marketable oil, gas or other products to receive a better

price may be deducted . . .

(ECF No. 21-1, PageID 256.)

The Cunningham leases are “net proceeds” leases because they allow Ascent to take

deductions, and do not contain a market enhancement clause. (ECF No. 52, PageID 1294.) The

Cunningham leases state that the Lessee (Ascent) agrees to:

(B) To pay to the Lessor, as royalty for the gas marketed and used off the premises

and produced from each well drilled thereon, the sum of one-eighth (1/8) of the

wellhead price paid to Lessee per thousand cubic feet of such gas so marketed and

used, . . .

(ECF Nos. 21-2, ¶ 5; 21-3, ¶ 5.) In other words, Ascent pays royalties based on a portion of the

price of the oil or gas at the wellhead, before it processes or transports it. (Id.)

II. Cunningham Litigation

Before the cases were consolidated, this Court held that the Cunningham leases allowed

Ascent to deduct post-production costs from royalty payments but only to the extent that the

deductions were reasonable. Cunningham Prop. Mgmt. Tr. v. Ascent Res. — Utica, LLC, 351 F.

Supp. 3d 1056, 1062–64 (S.D. Ohio 2018). In reaching this conclusion, the Court explained that

there are two approaches adopted by state courts to calculate royalty payments—depending on

2 Plaintiffs, who are leasing rights to another party to drill for oil and gas on their land, are the

“Lessors” and Ascent, who is leasing rights to extract resources from the land, is the “Lessee.”

when the value of the gas is determined. Id. at 1062. The “at the well” rule assumes that the location

for computing royalty payments occurs at the wellhead. Id. This rule allows the oil company to

deduct post-production costs, but requires those expenses be shared proportionately between the

parties. Id. In comparison, the “marketable product” rule calculates the value of the gas, and the

royalty payments owed, when the gas is made into marketable form. Id.; see also Lutz v.

Chesapeake Appalachia, LLC, 71 N.E.3d 1010, 1013 (Ohio 2016) (Pfeifer, J., dissenting) (“Lutz

I”) (distinguishing the marketable product rule). The marketable product rule restricts the

permissible post-production deductions, causing the oil company to pay most of the post-

production costs. Id.

Rather than adhering to a single rule, under Ohio law, courts look to the words of the

parties’ contract—i.e., the oil and gas lease—to determine which rule applies. Id. (citing Lutz I,

71 N.E.3d at 1012). Because the Cunningham leases referred to the “wellhead price,” this Court

applied the at the well rule to compute royalty payments. Id. But the Court qualified Ascent’s right

to deduct expenses from the royalties by noting that “the taking of post-production expenses at an

unreasonably high amount breaches the lease.” Id. at 1063–64 (citing Lutz v. Chesapeake

Appalachia, LLC, No. 4:09-cv-2256, 2017 U.S. Dist. LEXIS 176898, at *11 (N.D. Ohio Oct. 25,

2017) (“Lutz II”)). Accordingly, the Court preserved Cunningham’s breach of contract claim for

the allegedly unreasonable deductions but dismissed Cunningham’s allegations that Ascent

breached the contract by taking deductions at all. Id. The parties later agreed to dismiss the

remaining fraud clam. (See ECF No. 96.)

III. The Consolidated Action

The Court then consolidated the cases. (ECF No. 17.) Plaintiffs filed an amended

consolidated complaint adding the class action allegations. (ECF No. 21.) Ascent moved to dismiss

that complaint. (ECF No. 23.) In opposition to the motion to dismiss, Plaintiffs urged the Court to

revisit the Opinion above and apply the marketable product rule requiring Ascent to bear the post-

production costs. (ECF No. 27, PageID 383–84.) The Court declined the invitation to revisit its

ruling and reiterated that “[t]he plain text of the [Cunningham’s] royalty provision unambiguously

references the value of the gas at the wellhead[.]” (ECF No. 45, PageID 1227, 1234; Eaton v.

Ascent Res. — Utica, LLC, No. 2:19-cv-3412, 2021 U.S. Dist. LEXIS 42284, at *8 (S.D. Ohio

Mar. 8, 2021).) In congruence with its prior Order, the Court granted Ascent’s motion to dismiss

Cunningham’s breach of contract claim, and preserved the remaining breach of contract claim for

unreasonably high deductions. (Id. at *12.)

Plaintiffs then moved to certify the class. (ECF No. 37.) The Court granted Plaintiffs’

motion for class certification and modified the class definition to consist of one class and five

subclasses. (ECF No. 52, PageID 1317.) Ascent petitioned for interlocutory appeal (ECF No. 55),

and the Sixth Circuit denied Ascent’s petition. (ECF No. 58.)

Ascent then moved in this Court to modify the class definition to exclude class members

with leases containing arbitration clauses. (ECF No. 74.) The Court granted that motion, and

modified the class definition as follows:

All persons or entities (including their predecessors and successors-in-interest) who

have received, or who are entitled to receive, royalty payments from natural gas or

oil wells located in Ohio, who were paid royalties by Ascent at any time since

October 1, 2014, and who fit into one or more of the following subclasses.

Subclass (a): All persons or entities who have had deductions for “gathering” and

“compression” expenses taken from royalty payments by Ascent.

Subclass (b): All persons or entities who have had deductions for “processing”

expenses taken from royalty payments by Ascent.

Subclass (c): All persons or entities who have had deductions for “transportation”

expenses taken from royalty payments by Ascent.

Subclass (d): All persons or entities for which Ascent has classified the lessor as

having a “market enhancement clause” lease who have had deductions for

“processing” expenses taken from royalty payments by Ascent.

Subclass (e): All persons or entities for which Ascent has classified the lessor as

having a “market enhancement clause” lease who have had deductions for

“transportation” expenses taken from royalty payments by Ascent.

Exclusions: Excluded from the Class and each Subclass are Ascent, any of its

affiliates, parents, subsidiaries, officers, directors, employees, legal representatives,

successors, and assigns, and any entity in which Ascent has a controlling interest,

as well as that entity’s officers, directors, employees, legal representatives,

successors, and assigns, in addition to the judicial officers and their immediate

family members and court staff assigned to this lawsuit. Also excluded are those

persons or entities whose royalties are paid per an overriding royalty interest, or

those with working interests, or those whose leases contain governing arbitration

clauses.

(ECF No. 107, PageID 2950–51.)

The subclasses above fall into two of the three categories of oil and gas leases discussed

above: “net proceeds” leases (subclasses (a), (b), and (c)), and “market enhancement clause” leases

(subclasses (d) and (e)). (ECF No. 52, PageID 1294; Eaton v. Ascent Res. - Utica, LLC, No. 2:19-

cv-3412, 2021 U.S. Dist. LEXIS 145585, at *3 (S.D. Ohio Aug. 4, 2021).)

IV. Plaintiffs’ Motion for Partial Summary Judgment3

Plaintiffs move for partial summary judgment arguing that Ascent bears the burden of

proving that the post-production deductions it took from royalties owed to subclasses (a), (b), (c)

and (e) were reasonable. (ECF No. 71; see also ECF No. 124, PageID 3164 (clarifying that the

motion applies to subclasses (a), (b), (c), and (e), but not (d).) Plaintiffs also urge the Court to

“grant them partial summary judgment on their contractual accounting claim and order Ascent to

3 Two other Partial Motions for Summary Judgment (ECF Nos. 85, 115) are pending before the

Court and will be addressed in a forthcoming Opinion and Order. This Opinion and Order

addresses only the Partial Motion for Summary Judgment filed by Plaintiffs (ECF No. 71)

regarding the burden of proof and Plaintiffs’ accounting claim.

provide a full accounting of all post-production expenses taken from royalties, including

establishing why the deductions are reasonable.” (Id. PageID 1383.)

Ascent opposes the Motion and argues that Plaintiffs ask the Court to impermissibly shift

the burden of proof to Ascent to disprove Plaintiffs’ breach of contract claim. (ECF No. 84, PageID

1803.) Ascent maintains that summary judgment on Plaintiffs’ accounting claim is premature

because Plaintiffs will obtain the information that they seek through discovery. (Id. PageID 1802.)

STANDARD OF REVIEW

Summary judgment is appropriate “if the movant shows that there is no genuine dispute as

to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.

56(a). The Court may therefore grant a motion for summary judgment if the nonmoving party who

has the burden of proof at trial fails to make a showing sufficient to establish an element that is

essential to that party’s case. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); see Barnhart v.

Pickrel, Schaeffer & Ebeling Co., 12 F.3d 1382, 1388–89 (6th Cir. 1993).

To avoid summary judgment, the nonmovant “must do more than simply show that there

is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio

Corp., 475 U.S. 574, 586 (1986). “[S]ummary judgment will not lie if the dispute about a material

fact is ‘genuine,’ that is, if the evidence is such that a reasonable jury could return a verdict for the

nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); see also Moore v.

Philip Morris Cos., 8 F.3d 335, 340 (6th Cir. 1993) (finding a genuine issue exists if the nonmoving

party shows “significant probative evidence” that “there is [more than] some metaphysical doubt

as to the material facts.”). When evaluating a motion for summary judgment, the evidence must

be viewed in the light most favorable to the nonmoving party. Moore, 8 F.3d at 340.

The moving party—here, Plaintiffs—bears the initial burden of showing the absence of a

genuine issue of material fact. See Celotex Corp., 477 U.S. at 323–24. The non-moving party—

here, Ascent—then must present sufficient evidence from which a jury could reasonably find for

them. See Anderson, 477 U.S. at 249. The court must determine “whether the evidence presents

sufficient disagreement to require submission to a jury or whether it is so one-sided that one party

must prevail as a matter of law.” Id. at 251–52.

ANALYSIS

Plaintiffs cannot show as a matter of law that Ascent bears the burden of proving that the

deductions from royalty payments owed to Plaintiffs were reasonable. As such, Plaintiffs partial

motion for summary judgment on this issue is denied. Plaintiffs also fail to show that no genuine

issue of material fact exists as to their accounting claim, so summary judgment on that claim is

denied.

I. Plaintiffs have the burden of proving Ascent breached the oil and gas leases.

Plaintiffs assert that Ascent breached the oil and gas leases by taking unreasonably high

post-production deductions from their royalties. The question before the Court is not whether the

post-production deductions were reasonable, but who bears the burden of proving that the

deductions were reasonable. Plaintiffs argue that Ascent should carry the burden of proof and

Ascent argues that Plaintiffs have the burden. Ascent has the better argument.

A. Ohio law suggests that Plaintiffs bear the burden of proof.

The parties agree that their dispute is governed by Ohio law. In Ohio, oil and gas leases are

contracts. Lutz I, 71 N.E.3d at 1012 (explaining that the rights and remedies of the parties are

determined by the terms of the written agreement). A claim that a party violated the terms of an

oil and gas lease is treated as a breach of contract claim. Id.

“To recover for breach of contract under Ohio law, a breach plaintiff must prove the

existence of a contract, performance by the plaintiff, breach by the defendant, and damage or loss

to the plaintiff.” Atlas Indus. Contractors, LLC v. In2gro Techs., No. 2:19-cv-2705, 2021 U.S.

Dist. LEXIS 56630, at *13 (S.D. Ohio Mar. 25, 2021) (Morrison, J.) (citing Ohio law). “Both

parties focus on the breach element. ‘A party breaches a contract if he fails to perform according

to the terms of the contract or acts in a manner that is contrary to it provisions.’” Id. (citing Savedoff

v. Access Grp., Inc., 524 F.3d 754, 762 (6th Cir. 2008)).

The first step to determine which party bears the burden of proof is to look to the terms of

the contract and “ascertain the intent of the parties as expressed” therein. Aero Fulfillment Servs.

Corp. v. Oracle Corp., 186 F. Supp. 3d 764, 771 (S.D. Ohio 2016) (Black, J.) (citations omitted).

“Generally, contracts should be construed in a manner to give effect to the intentions of the

parties.” Hamilton Ins. Servs. v. Nationwide Ins. Cos., 714 N.E.2d 898, 900 (Ohio 1999) (citation

omitted). “If a contract is clear and unambiguous, then its interpretation is a matter of law and

there is no issue of fact to be determined.” Inland Refuse Transfer Co. v. Browning-Ferris Indus.

of Ohio, Inc., 474 N.E.2d 271, 272 (Ohio 1984) (citation omitted). “The fact that the parties fail to

specifically define a term within the contract does not make the term ambiguous.” State ex rel.

Petro v. R.J. Reynolds Tobacco Co., 820 N.E.2d 910, 915 (Ohio 2004) (citation omitted)

(analyzing the ordinary meaning of the terms in the context of the entire instrument).

Here, the leases do not resolve who has the burden of proof. The royalty clauses of the

Eatons’ and the Cunningham leases convey how royalties should be calculated but say nothing

about which party must show whether deductions from those royalties are reasonable. The Eatons’

royalty clause provides that “proceeds accruing to the Lessor [(Eatons)] . . . shall be without

deduction . . . to transform the product into marketable form; however, any such costs which result

in enhancing the value of the marketable oil, gas or other products to receive a better price may be

deduced.” (ECF No. 21-1, PageID 256 (market enhancement clause).) The Cunningham leases

state that Ascent (Lessee) agrees to pay Plaintiffs (Lessor) “the sum of one-eighth (1/8) of the

wellhead price paid.” (ECF Nos. 21-2, ¶ 5; 21-3, ¶ 5.) Nevertheless, just because the leases do not

define who bears the burden of proof does not make the term ambiguous, or raise an issue of fact.

Without contractual language on point, the Court next looks to “the substantive law of the

forum state, Ohio, in accordance with the controlling decision of its highest court.” Lutz v.

Chesapeake Appalachia, LLC, 717 F.3d 459, 464 (6th Cir. 2013) (citation omitted). “If the highest

court has not yet addressed the precise issue at hand, ‘[this Court] must predict how the [state]

court would rule by looking to all the available data,’ including intermediate appellate decisions.”

Id. (citing Berrington v. Wal-Mart Stores, Inc., 696 F.3d 604, 608 (6th Cir. 2012)).

Ohio courts have not addressed the precise question before the Court. But in the context of

royalty disputes, Ohio courts have held that the burden of proof in oil and gas lease cases is “not

controlled by substantive oil and gas law, but, rather, by civil procedure.” Pfalzgraf v. Miley, 116

N.E.3d 893, 897 (7th Dist. Ohio Ct. App. 2018); see also Mauger v. Positron Energy Res., Inc.,

2014-Ohio-4613, ¶ 40 (5th Dist. Ohio Ct. App. 2014) (same) (citing Positron Energy Res., Inc. v.

Weckbacher, 2009-Ohio-1208, ¶¶ 18–19 (4th Dist. Ohio Ct. App. 2009)). Civil procedure dictates

that the party asserting the claim carries the burden of proof. See Jacobs v. Dye Oil, LLC, 147

N.E.3d 52, 64 (7th Dist. Ohio Ct. App. 2019). Therefore, as in any other civil case, the party who

asserts a breach of an oil and gas lease carries the burden of proof. Pfalzgraf, 116 N.E.3d at 897

(concluding that the trial court impermissibly shifted the burden of proof to the defendant to prove

that the well was producing paying quantities and thus the lease had not expired); Jacobs, 147

N.E.3d at 64 (explaining that the plaintiff-appellant bears the burden of proving that a well is not

producing in paying quantities).

A leading oil and gas treatise confirms that generally the plaintiffs bear the burden of

proving a breach of contract in disputes involving royalty payments. See Tennant v. Range Res.–

Appalachia, LLC, 561 F. Supp. 3d 522, 533 (W.D. Pa. 2021) (citing 3 Williams & Meyers, Oil

and Gas Law § 650.3 (2020) (collecting cases)). That treatise explains:

In the event of dispute between a royalty owner or other nonoperator and an

operator concerning payments due the nonoperator, information pertaining to

‘price,’ ‘value,’ or ‘proceeds’ of the nonoperator’s share of production may be more

readily available to the operator than to the nonoperator. Nevertheless, by the

weight of authority, the lessor or other nonoperating owner has the burden of proof

as to such matter.

(Id.) Here, Ascent is the operator, or the party responsible for managing the well and paying

royalties. Plaintiffs are the lessors, or nonoperating owners, who collect royalty payments. So even

though Ascent may have more information than Plaintiffs about production costs, the burden

remains on Plaintiffs to prove payments due in a royalty dispute.

Plaintiffs do not respond or distinguish this case law in their reply brief. (Compare ECF

No. 84, PageID 1807–09 with ECF No. 86.) Instead, to salvage their argument that Ohio law

supports placing the burden of proof on Ascent, Plaintiffs cite to Hanna v. Shorts, 125 N.E.2d 338

(Ohio 1999). (ECF No. 71, PageID 1396.) In that case, the landowner brought a declaratory

judgment action against the oil company asserting that its lease should be declared expired based

on the terms of the lease. Id. at paragraph one of the syllabus. The oil company counterclaimed

seeking to extend the lease. Id. As the Court held, the oil company must affirmatively prove either

(a) some express or implied agreement to extend the term beyond five years or (b) that the oil and

gas was “produced in paying quantity from said land within and beyond said five-year period” or

(c) that oil and gas could have been produced “if the acts of the lessor had not prevented or

interfered with such production.” Id. In other words, the Court put the burden on the oil company

to extend the lease, rather than the plaintiff to show it had expired. See id.

Plaintiffs argue that because the Supreme Court of Ohio placed the burden on the oil

company, “Hanna is indicative of Ohio law shifting the burden when the knowledge is within the

hands of the lessee.” (ECF No. 71, PageID 1396.) But the Court did not shift the burden because

of a knowledge disparity. It shifted the burden of proof because the oil company was asserting a

counterclaim to extend the lease. The lease would have expired, absent the oil company proving

to the contrary that it was or should be extended. A counterclaimant must prove the elements of

their claim just as a plaintiff must prove the elements of its claim. Thus, Hanna does not suggest

that Ascent bears the burden of disproving Plaintiffs’ allegations.

The case law above reveals that although there is no Ohio case on point, if confronted with

the question of who bears the burden of proving that royalties were underpaid, the case law

suggests that the Supreme Court of Ohio would place that burden on the party asserting the breach

of contract claim.

B. Plaintiffs’ arguments to the contrary do not change the Court’s analysis.

To avoid summary judgment on burden shifting, Plaintiffs urge the Court to adopt the

approach followed by other states including Colorado, Arkansas, Kansas, and West Virginia. (ECF

No. 71, PageID 1389–96.) Ascent protests that these states all follow the marketable product rule

and Ohio has not adopted that rule. (ECF No. 84, PageID 1809–11 (citing Lutz II, 2017 U.S. Dist.

LEXIS 176898, at *17–18 (explaining that rather than adopting the at the well or marketable

product rule, Ohio law looks to the language of the leases to determine which rule applies)). Ascent

suggests that Plaintiffs are trying to relitigate whether the marketable product rule applies. (Id.)

The burden of proof on the reasonableness of post-production deductions is a separate issue

from whether the at the well or the marketable product rule should apply. Regardless of which rule

governs, all post-production deductions must be reasonable. See Cunningham, 351 F. Supp. 3d at

1064. Thus, the marketable product versus at the well debate is not instructive of the burden of

proof question.

Because the cases cited by Plaintiffs apply the marketable product rule, those cases do not

assist this Court in determining who has the burden of proving the reasonableness of the

deductions. See Garman v. Conoco, Inc., 886 P.2d 652, 661 (Colo. 1994) (holding that “[t]o the

extent that certain processing costs enhance the value of an already marketable product the burden

should be placed upon the lessee to show such costs are reasonable”); Sternberger v. Marathon

Oil Co., 894 P.2d 788, 800 (Kan. 1995) (explaining that Kansas applies the marketable product

rule and once the marketable product is obtained, “[t]he lessee has the burden of proving the

reasonableness of the costs”); Mittelstaedt v. Santa Fe Minerals, Inc., 954 P.2d 1203, 1208 (Ok.

1998) (citing Garman and Sternberger and holding that the lessee bears the burden of showing

that transportation costs are reasonable); Wellman v. Energy Res., Inc., 557 S.E.2d 254, 265 (W.

Va. 2001) (finding under the implied duty to market gas produced, the lessee must introduce

evidence that the costs were actually incurred and were reasonable).

First, none of these cases is binding on this Court. Second, in each, the marketable product

analysis is intertwined with the burden of proof analysis. Ohio has refused to adopt the marketable

product rule. Therefore, the authorities offered by Plaintiffs do not change the Court’s conclusion

that if presented with the question, the case law indicates that Ohio’s highest court would place

burden upon Plaintiffs to assert a breach of the oil and gas leases.

Courts outside of this Circuit who have addressed the issue have also adopted the opposite

approach from that advocated by Plaintiffs. The Western District of Pennsylvania, for example,

has held that the burden of proof on a breach of contract claim in a royalty dispute stays with the

royalty owner. E.g., Tennant, 561 F. Supp. 3d at 533, mot. for reconsideration denied, 2021 U.S.

Dist. LEXIS 209016 (W.D. Pa. Oct. 29, 2021); see also Slamon v. Carrizo (Marcellus) LLC, 654

F. Supp. 3d 405, 424 (M.D. Pa. 2023) (holding that the general rule in the oil and gas industry is

that a lessor bears the burden of proof). The Court finds these cases more persuasive.

One could read Plaintiffs’ Motion as arguing that the reasonableness of the post-production

deductions is an affirmative defense to liability, excusing Ascent’s obligation to perform under the

leases. As the party raising an affirmative defense, the defendant normally bears the burden of

proving an affirmative defense. Atlas Indus. Contractors, 2021 U.S. Dist. LEXIS 56630, at *15

(collecting cases under Ohio law). But Ascent is not justifying its purported failure to perform.

Ascent argues that it never breached because it properly performed under the leases by deducting

reasonable post-production costs from Plaintiffs’ royalty payments. Since Ascent is not seeking an

excusal for its failure to perform, the Court will not treat the reasonableness of the deductions as

an affirmative defense. Slamon, 654 F. Supp. 3d at 424 (elaborating that because a defendant bears

the burden of proof only when seeking an excusal of an obligation to perform, it is the plaintiff’s

burden to establish a breach of contract).

Finally, Plaintiffs’ argument that the burden should shift to Ascent because the parties are

not on equal footing is unpersuasive. (See ECF No. 71, PageID 1391–95.) Since Ascent controls

the information about the methods for taking deductions from the royalty payments, Plaintiffs urge

the Court to adopt the burden shifting framework applicable to accounting claims, to Plaintiffs’

breach of contract claim. (Id.) To advocate for this approach, Plaintiffs cite cases that address

equitable accounting claims, not breach of contract claims based on an accounting. E.g., Rochow

v. Life Ins. Co. of N. Am., 851 F. Supp. 2d 1090, 1093–94 (E.D. Mich. 2012) (describing the two-

stage burden shifting framework in an equitable suit for an accounting).

The Court recognizes that the parties may not be on equal footing in terms of accessing or

controlling information about deductions. See SWN Prod. Co., LLC v. Kellam, 875 S.E.2d 216,

231 (W. Va. 2022) (Hutchinson, J., concurring) (“[C]ritics of the marketable-product rule . . .

assume that the production of oil and gas is a shared adventure by a lessor and a lessee. But the

facts usually show that the lessor/land-and-mineral owners and lessee/oil-and-gas companies are

not partners or on anything close to resembling an equal footing.”). This power imbalance is better

redressed through Plaintiffs’ accounting claim, or through discovery, not Plaintiffs’ breach of

contract claim.

Plaintiffs assert: “Ascent offers no substantive reason against the burden shift.” (ECF No.

86, PageID 2219 (emphasis added).) This sentence suffers from the same shortcoming as

Plaintiffs’ Motion—it is not Ascent’s burden to refute the requested burden shift, nor is it Ascent’s

burden to disprove the alleged underpayment of royalties. It is Plaintiffs’ burden to show why the

Court should deviate from the general rule requiring a plaintiff to prove its breach of contract

claim. Because they are unable to do so, Plaintiffs bear the burden of showing how Ascent

breached the oil and gas leases.

The question before the Court is not what approach is best, but what approach Ohio’s

highest court would adopt given that there is no case directly on point. The cases cited by Plaintiffs

do not establish that the Supreme Court of Ohio would endorse their proposed burden shifting

framework, if the question was presented. Thus, Plaintiffs have failed to show as a matter of law

that Ascent bears the burden of proving the reasonableness of the post-production deductions.

Plaintiffs’ Partial Motion for Summary Judgment (ECF No. 71) is DENIED on this issue.

II. Plaintiffs are not entitled to summary judgment on their accounting claim.

Count One of the Amended Complaint asserts a claim for an accounting under Ohio law.

(ECF No. 21, ¶¶ 135–38.) According to Plaintiffs, their leases contained a contractual right to an

accounting, and Ascent has refused to provide one. (ECF No. 71, PageID 1396–1400.) Even if the

Court finds no contractual right to an accounting, Plaintiffs argue that they are entitled to an

accounting as an equitable remedy. (Id.) But, in a footnote, Plaintiffs clarify that they “do not

request summary judgment on the equitable accounting claim at this time.” (Id. PageID 1400, n.5.)

A cause of action for accounting seeks a “determination by a court of what may be due to

the respective parties as a result of the relationship between them.” Sabre Energy Corp. v. Gulfport

Energy Corp., No. 2:19-cv-5559, 2021 U.S. Dist. LEXIS 124013, at *11 (S.D. Ohio July 2, 2021)

(Graham, J.) (quoting Moore v. Sweda, 499 N.E.2d 371, 373 (9th Dist. Ohio Ct. App. 1985));

Bradshaw v. Thompson, 454 F.2d 75, 79 (6th Cir. 1972) (“An accounting is a species of disclosure,

predicated upon the legal inability of a plaintiff to determine how much, if any, money is due him

from another.”).

A demand for an accounting normally operates as a remedy, rather than a standalone action.

Mark Termini Assocs. v. Klutch Sports Grp., LLC, No. 1:24 CV 1068, 2024 U.S. Dist. LEXIS

200616, at *17–18 (N.D. Ohio Nov. 5, 2024) (citing Moore Fam. Trust v. Jeffers, 225 N.E.3d 548,

559 (7th Dist. Ohio Ct. App. Sept. 28, 2023)). But “Ohio law recognizes a cause of action for

accounting in royalty disputes arising from oil and gas leases.” Cunningham, 351 F. Supp. 3d at

1064 (collecting Ohio cases). That said, when there is an adequate remedy at law, Ohio courts have

consistently held that an equitable remedy is improper. Id. at 1065 (citing McNulty v. PLS

Acquisition Corp., 2002-Ohio-7220, ¶ 80 (8th Dist. Ohio Ct. App. 2002)); see also Phillippi v. Jim

Phillippi, Inc., No. 2:07-cv-916, 2009 U.S. Dist. LEXIS 66169, at *4 (S.D. Ohio June 26, 2009)

(Holschuh, J.) (quotation omitted) (holding that to prevail on an equitable accounting claim, the

plaintiff must show that other legal remedies are inadequate).

Since Plaintiffs do not move for summary judgment on the equitable accounting claim, the

Court confines its analysis to the breach of contract claim for an accounting. To prove a breach of

contract claim, Plaintiffs must prove the existence of a contract, performance by Plaintiffs, breach

by Ascent, and damage or loss to Plaintiffs. See Atlas, 2021 U.S. Dist. LEXIS 56630, at *13 (citing

Ohio law). The rights of the parties in an oil and gas lease case are determined by the terms of the

written instrument. Harris v. Ohio Oil Co., 48 N.E. 502, 505 (Ohio 1897). Neither party, however,

asserts that the leases included language that expressly gave Plaintiffs a right to an accounting.

Instead, Plaintiffs argue that Ascent’s duty to provide an accounting is implied in the

contract by the implied covenant of good faith and fair dealing. (ECF No. 71, PageID 1398–99.)

To support this argument, Plaintiffs contend that this Court held in Cunningham that the implied

covenant of good faith and fair dealing applied in oil and gas cases and included the right to an

accounting. (Id. PageID 1398 (citing Cunningham, 351 F. Supp. 3d at 1065–66).) This is an

incorrect reading of the Court’s prior decision.

To be sure, the Court held open the possibility that the implied covenant of good faith and

fair dealing could apply to an oil and gas lease. Cunningham, 351 F. Supp. 3d at 1065–66 (citing

Yoder v. Artex Oil Co., 2014-Ohio-5130, ¶¶ 51–52 (5th Dist. Ohio Ct. App. 2014)). But the Court

did not conclude, as Plaintiffs suggest, that the implied covenant of good faith and fair dealing

included a right to an accounting. Id. As the Court explained, oil and gas leases are contracts and

every contract under Ohio law contains an implied covenant of good faith and fair dealing. Id. The

covenant requires that the parties are honest and act reasonably in the enforcement of the contract;

it “emphasizes faithfulness to an agreed common purpose and consistency with the justified

expectations of the other party.” Id. (citations omitted). Because all contracts under Ohio law

contain this covenant, logically, it is possible the oil and gas leases also include such a covenant.

Id. (reasoning that the Court could not say, as a matter of law, that the implied covenant did not

apply). But the Court is not persuaded that the implied covenant of good faith and fair dealing also

includes, as a matter of law, a right to an accounting. See id.

Plaintiffs focus on the phrase “reasonableness in the enforcement” to argue that they have

an implied right to an accounting “because it would be unreasonable to force them into litigation

whenever they want to know if an[] oil and gas company is being honest.” (ECF No. 71, PageID

1399.) But Plaintiffs cite no case law to support this proposition, or the broader proposition that

the implied covenant of good faith and fair dealing includes a right to an accounting. (See id.)

If the right to an accounting is not implied in the contract, or included in the leases, as this

Court has found, then Court cannot conclude that the parties’ agreements included a right to an

accounting. Without showing Ascent agreed to provide an accounting, either by implied covenant,

or through express contractual language, Plaintiffs cannot establish the first element of their breach

of contract claim—the existence of an agreement. See Atlas, 2021 U.S. Dist. LEXIS 56630, at *13.

Since Plaintiffs cannot prove the first element of their breach of contract claim, they cannot prove

that no genuine issues of material fact exist. Accordingly, the Partial Motion for Summary

Judgment (ECF No. 71) must be DENIED on this issue.

CONCLUSION

For the reasons above, Plaintiffs’ Motion for Partial Summary Judgment (ECF No. 71) is

DENIED.

This case is to remain open.

IT IS SO ORDERED.

6/20/2025 s/Edmund A. Sargus, Jr.

DATE EDMUND A. SARGUS, JR.

UNITED STATES DISTRICT JUDGE