Partnerships — State Court Clarifies Partnership Law

Valentine v. Sugar Rock Inc. (Lawyers Weekly No. 001-066-15, 6 pp.) (King, J.) No. 12-2273, April 2, 2015; USDC at Clarksburg, W.Va. (Keeley, J.) 4^th Cir.

Holding: The 4^th Circuit vacates summary judgment for a plaintiff pursuing an accounting of four mining partnerships and remands this matter, in light of the response of the Supreme Court of Appeals of West Virginia to a question of state law certified by the 4^th Circuit to the state high court.

Plaintiff alleges he owns fractional working interests in four mining partnerships, which in turn own six oil and gas wells on four separate leaseholds located in Ritchie County. Named as defendants in plaintiff’s lawsuit are Sugar Rock Inc., and two of its officers. Plaintiff demands an accounting of the four partnerships and seeks compensatory and punitive damages, together with reimbursement of his attorney fees and litigation costs. Sugar Rock answered plaintiff’s complaint and filed a counterclaim for the cumulative operating expenses attributable to plaintiff’s asserted working interests in the partnerships.

The district court granted summary judgment to Sugar Rock, holding that, under West Virginia law, a mining partnership requires each partner to be a co-owner of the property that is the subject of the partnership. The court concluded that plaintiff’s assertion of interests in the four mining partnerships failed because he could not produce a writing that evidenced, in conformance with the statute of frauds, his co-ownership of the subject leases or wells. The court also denied plaintiff’s motion to voluntarily dismiss his complaint without prejudice so he could join a putative class action in the Circuit Court of Ritchie County.

We asked the Supreme Court of Appeals of West Virginia to exercise its discretion to decide a question of state law. The Supreme Court of Appeals of West Virginia exercised its discretion to accept and rephrase our certified question of law. That court held that a person can only be a partner in a mining partnership if he/she is a co-owner of the mineral interest with the other partners, and that proving a partnership interest in the mining partnership requires first proving the person has a deed, will or other written instrument showing partial ownership of the mineral interest in the land. The court also held that, under the Revised Uniform Partnership Act, general partnership property belongs solely to the partnership and not to the partners, and that a person does not need a deed, will or other written instrument to establish a partnership stake in the general partnership, even if the general partnership owns an interest in real property.

The West Virginia high court’s Nov. 14, 2014, opinion contains a series of original syllabus points concerning, on the one hand, common law mining partnerships as defined in and governed by the West Virginia Revised Uniform Partnership Act.

In view of, and having hereby adopted, the Nov. 14, 2014 opinion of the Supreme Court of Appeals of West Virginia reformulating and answering our certified question of law, we vacate the district court judgment and remand for additional proceedings. Although we concomitantly affirm the district court’s denial of plaintiff’s motion to voluntarily dismiss his complaint without prejudice, we express no view as to how the court should rule on remand if plaintiff renews his effort to join a related action in the Circuit Court of Ritchie County.