J-A27043-15


NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

BIG & LITTLE OIL, LLC; BIVINS RYAN       IN THE SUPERIOR COURT OF
INVESTMENTS, LLC; BLUE SPHINX
MANAGEMENT LTD; BRYAN WOOD;                   PENNSYLVANIA
BTBA, LLC; CAROLYN BIVINS 1952
TRUST #4; CO-PA, LLC; CORNELIA
WADSWORTH RITCHIE TRUST NO.
FOUR; CUSOLITO PULTORAK, LLC;
DARRELL F. AND SUZANNE H. ABEL;
EDWIN SHELTON PROPERTIES, LLC; EVA
DROBEZKO;      FB.   LAMAR,   LP;   FB
ROHANNA, LP; FHMW, LLP; FINE BUNCH,
LLC;    GALBRAITH      GREENE,    LLP;
GALBRAITH LAMAR, LLP; GALBRAITH
ROHANNA, LLP; GALBRAITH ROHANNA 2
LLP; GEORGE W. ZUNDELL; HOOK
GREENE COUNTY, LLP; HOOK LAMAR,
LLP; HOOK LAMAR 2, LLP; HOOK
ROHANNA 1, LLP; HOOK ROHANNA 2
LLP; HOOK ROHANNA 3 H LLP; JABST
INVESTMENTS, LLC; JOHN & KATHY
MCNAY; JUSKOWICH PULTORAK 1H &
2H, LLP; JUSKOWICH ROHANNA 2H, LLP;
KEENER OIL & GAS, LLP; LIVING GOOD,
LLC; LNR INTERESTS, LP; MARK ERNEST
BIVINS    TRUST;     MARK    E.   FOX,
EXECUTOR OF THE ESTATE OF J.K.
WILLISON,     DECEASED;     MENDICINO
VENTURES, INC.; MG BIG GREEN
VENTURES,       LLC;     MOUNTAINTOP
INVESTORS 2010-1, LLC; MOUNTAINTOP
INVESTORS 2010-2, LLC; MOUNTAINTOP
INVESTORS L2-H, LLC; MOUNTAINTOP
INVESTORS R-2H, LLC; MOUNTAINTOP
INVESTORS PT LLC; ROHANNA IRON &
METAL, INC.; SILVER FOX FARM, LLC;
THOMAS     PEYTON     BIVINS    TRUST;
THOMAS E. & BERTHA M. SCHERICH;
THOMAS     M.    COLELLA    REVOCABLE
TRUST; TRES NGUYEN, LLC; WILLISON
FOX, LLP; AND 1952 ELDER BIVINS
CHILDREN’S EXEMPT TRUST
J-A27043-15




                          Appellees



                    v.



TANGLEWOOD EXPLORATION LLC AND
VANTAGE ENERGY APPALACHIA, LLC



                          Appellants                 No. 1813 WDA 2014



              Appeal from the Order entered October 24, 2014

            In the Court of Common Pleas of Washington County

                         Civil Division at No: 2013-7699



BEFORE: BOWES, OLSON, AND STABILE, JJ.

DISSENTING MEMORANDUM BY STABILE, J.:                  FILED JULY 25, 2016

      I would affirm the trial court’s order based on the plain language of the

Joint Operating Agreements (“JOAs”) and Participation Agreements (“PAs”).

I therefore respectfully dissent.

      As the Majority notes, each of the PAs contains a forum selection

clause: “No proceeding related directly or indirectly to this Agreement shall

be commenced, prosecuted or continued in any court other than the courts

of the State of Texas located in the county of Tarrant.” Appellant’s Amended

Preliminary Objections, 8/8/14, at Exhibit A, [PA] between Tanglewood and




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Big and Little Oil, LLC, at ¶ 15.1    Paragraph fifteen also provides that the

laws of Texas will govern any dispute. Id. The PAs incorporated the JOAs

by reference. Id. at ¶ 2. Essentially, the PAs provide a general outline of

the relationship between the signatory Appellee and Tanglewood.             They

provide that the signatory Appellee (designated in the PA as a “Participant”),

will fund a percentage of Tanglewood’s drilling operations at a given site in

exchange for a percentage interest in the proceeds from that site.         Id. at

¶¶ 1-6.

       The JOAs contain extensive details governing the relationship between

Tanglewood and the signatory Appellees.         In particular, the JOAs detail

Tanglewood’s rights and obligations as driller and operator.         Appellees’

Amended Complaint, 6/23/14, at Exhibit A (A.A.P.L. Form 610-1989 Model

Form Operating Agreement , at Article V-VI).           The JOAs also govern

Tanglewood’s accounting obligations. Id., at Article V, ¶ D.2 and Exhibit C.

The JOAs provide that the governing law will be the “law of the state in

which the Contract Area [i.e., the site of the drilling] is located.”      Id.at

Article XIV, ¶ B. The JOAs do not incorporate the PAs by reference, and they

do not contain a forum selection clause.

       Significantly, JOAs form the basis for all of the causes of action in

Appellees’ amended complaint.        The amended complaint does not allege

causes of action arising under the PAs. The amended complaint states that

1
    As the Majority notes, the PAs and JOAs are substantively identical.


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the JOAs require Tanglewood to “pay to the [Appellees] proceeds from

production and assess the cost of drilling and completion against a joint

account for each JOA (the “Joint Account”) in proportion to the working

interest of each [Appellee].”    Amended Complaint, 6/13/14, at ¶ 69.         The

amended complaint further alleges that the JOAs require Tanglewood to

“keep an accurate record of the joint account hereunder, showing expenses

incurred and charges and credits made and received.” Id. at ¶ 70 (quoting

JOA, at Article V, ¶ D.2). The JOA also gave Appellees “the right to conduct

audits to ensure that production, payments, expenses, [billings], and other

aspects of the financial dealings among the parties are accounted for

properly and accurately according to the terms of the JOAs and otherwise.”

Id. at ¶ 73 (citing JOA, at Article V, ¶ D.5 and Exhibit C).

       Appellees requested an audit, and they allege the audit revealed

improper billings from Tanglewood to the parties’ joint accounts and more

than $2 million in underpayment of proceeds.            Id. at ¶¶ 93-96.      The

amended complaint alleges that Appellants have been selling gas for higher

prices than they have been reporting to Appellees. Id. at ¶ 106. Exhibit C

of the JOA authorizes Appellees to challenge Tanglewood’s charges to the

parties’ joint accounts. Id. at ¶ 98 (citing JOA, at Exhibit C, Article 1, ¶ 4).

       The amended complaint also alleges Tanglewood violated provisions in

the JOAs governing a change of operator, i.e., the entity conducting the

drilling.   Article V, ¶¶ B.1 and B.2 govern removal and replacement of an


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operator. In general, an operator may resign or be removed for good cause,

after which the remaining parties to the contract can choose a successor

operator. JOA, at Article V, ¶¶ B.1 and B.2. The amended complaint alleges

that Tanglewood transferred its interest in the JOAs to Vantage and

“attempted to appoint [Vantage] as successor Operator for the Contract

Area for each of the attached JOAs.” Amended Complaint, 6/13/14, at ¶ 75.

The amended complaint alleges this purported transfer of rights from

Tanglewood to Vantage violates Article V, ¶ B of the JOAs. Id. at ¶¶ 80-91.

The amended complaint also alleges that Tanglewood violated Article XVI

¶ H of the JOAs,2 whereby Tanglewood agreed that either Tanglewood or one

of its affiliates would remain the operator for ten years from the date of the

JOAs. Id. at ¶ 77 (citing JOA, at Article XVI, ¶ H). The amended complaint

alleges that Vantage is not Tanglewood’s affiliate. Id. at ¶ 78.

       “[O]ur standard of review of an order of the trial court overruling or

granting preliminary objections is to determine whether the trial court

committed an error of law.” Richmond v. McHale, 35 A.3d 779, 783 (Pa.

Super. 2012). Appellants objected to venue based on the forum selection

clause in the PAs.      Appellees, however, alleged causes of action arising

solely under the JOAs. Appellants argue we must construe the PAs and the




2
    This provision appears in six of the seven JOAs at issue in this litigation.


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JOAs as a single agreement. Appellants argue the forum selection clause3

applies because the PAs incorporate the JOAs by reference and because the

forum selection clause requires any “proceeding related directly or indirectly

to this Agreement” to be filed in Tarrant County, Texas. PA, at ¶ 15. The

issue before us is therefore one of contract interpretation.

             The interpretation of any contract is a question of law and
      this Court’s scope of review is plenary. Moreover, we need not
      defer to the conclusions of the trial court and are free to draw
      our own inferences. In interpreting a contract, the ultimate goal
      is to ascertain and give effect to the intent of the parties as
      reasonably manifested by the language of their written
      agreement. When construing agreements involving clear and
      unambiguous terms, this Court need only examine the writing
      itself to give effect to the parties’ understanding. This Court
      must construe the contract only as written and may not modify
      the plain meaning under the guise of interpretation.

Southwestern Energy Prod. Co. v. Forest Res., LLC, 83 A.3d 177, 187

(Pa. Super. 2013), appeal denied, 96 A.3d 1029 (Pa. 2014).

      In addition:

            It is a general rule of law in the Commonwealth that where
      a contract refers to and incorporates the provisions of another,
      both shall be construed together. It is well-settled that clauses

3
   “[T]he modern trend is to uphold the enforceability of forum selection
clauses where those clauses are clear and unambiguous.                Patriot
Commercial Leasing Co., Inc. v. Kremer Rest. Enterprises, LLC, 915
A.2d 647, 650 (Pa. Super. 2006), appeal denied, 951 A.2d 1166 (Pa. 2008).
“[A] forum selection clause will be considered unreasonable ‘only where its
enforcement would, under all circumstances existing at the time of litigation,
seriously impair [a party’s] ability to pursue his cause of action.’” Id.
(quoting Central Contracting, Co. v. C.E. Youngdahl & Co., 209 A.2d
810, 816 (Pa. 1965). In light of my conclusion that the PAs are separate
agreements and that their forum selection clauses do not apply to Appellees’
causes of action under the JOAs, the law of forum selection clauses is not
relevant to my analysis.

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J-A27043-15


     in a contract should not be read as independent agreements
     thrown together without consideration of their combined effects.
     Terms in one section of the contract, therefore, should never be
     interpreted in a manner which nullifies other terms in the same
     agreement.

Id. (quoting Trombetta v. Raymond James Fin Servs., Inc., 907 A.2d

550, 560 (Pa. Super. 2006)).     The Southwestern Court also wrote that

“[w]here several instruments are made as part of one transaction they will

be read together, and each will be construed with reference to the other;

and this is so although the instruments may have been executed at different

times and do not in terms refer to each other.”            Id. at 187.     In

Southwestern, the Court considered a lease and a letter agreement, both

executed in 2002.     Id. at 187.    This Court noted the two documents

referenced and incorporated each other “with the clear intent they should be

interpreted as a single agreement.”     Id.   Indeed, the letter agreement

described itself as an amendment of the lease. Id. at 188. Based on the

unequivocal language of the two documents, we interpreted them together

as a single agreement. Id.

     Appellants also rely on Heugel v. Mifflin Constr. Co., Inc., 796 A.2d

350 (Pa. Super. 2002). There, the plaintiff homeowners sued a construction

company and a financing company that loaned plaintiffs money for their

home improvement project. Id. at 352-53. The construction contract gave

the plaintiffs the right to ask the contractor to arrange a construction loan,

and plaintiffs did so.   Id. at 355.     The loan agreement contained an



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arbitration clause, but the construction contract did not. Id. The trial court

overruled      the    defendants’   preliminary    objections   seeking    to   compel

arbitration.    Id.     The trial court found the arbitration clause inapplicable

because the plaintiffs’ causes of action arose from work performed under the

construction contract.        Id. at 354.         The loan agreement attached a

description of the goods and services purchased and provided that payment

of the note was subject to the terms of the contract between the

construction company and plaintiffs. Id. The arbitration clause in the loan

agreement stated: “any and all disputes relating [to] the provisions of, or

obligations or work performed under this Contract shall be submitted to

binding arbitration.” Id.

      This Court concluded the two agreements were part of one transaction,

noting that the loan agreement was “replete with references not only to

[plaintiffs’] obligation to repay the money borrowed, but also to their rights

and obligations for the goods and services purchased.”                    Id. at 356.

Ultimately, the Heugel Court concluded the loan agreement “effectively

incorporated” the construction contract, and that the arbitration clause in the

loan agreement applied to plaintiffs’ causes of action on the construction

contract. Id.

      Appellants argue we must construe the PAs and the JOAs together,

because they plainly relate to the same series of transactions.             Appellants

note that the PAs incorporate the JOAs, and the PAs’ forum selection clauses


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J-A27043-15


apply to any action relating directly or indirectly to the PAs.        I would

conclude Appellants’ argument does not survive close inspection of the PAs

and JOAs.

      As Appellees note, the PAs in several places refers to itself as “this

Agreement” and, in the same paragraph or clause, refers additionally to the

“JOA.”   For example, paragraph 8 of the PA provides as follows:             “8.

Operating Standard.    Tanglewood shall not be liable to the participant for

Tanglewood’s own sole, joint or concurrent negligence or strict liability

arising from its operations under this agreement or the JOA[.]”          PA, at

¶ 8 (emphasis added). Likewise, in paragraph 13:

            13.   Assignment.      Any purported sale, assignment or
      transfer of Participant’s interest [. . .] shall require the written
      consent of Tanglewood [. . .] providing Participant has complied
      with this Agreement and all other agreements including
      the JOA and providing the third party assumes all responsibility
      under this Agreement and the JOA[.]

PA, at ¶ 13 (emphasis added). Thus, paragraph 13 expressly refers to the

JOAs as among a group of “other agreements.”

      With this background, I quote in full the language of the PAs’ forum

selection clause:

            15. Governing Law. This Agreement and any claims
      related directly or indirectly to this Agreement shall be
      governed by, and construed and interpreted in accordance with,
      the laws of the State of Texas. No proceeding related directly or
      indirectly to this Agreement shall be commenced, prosecuted
      or continued in any court other than the courts of the State of
      Texas located in the county of Tarrant.

PA, at ¶ 15 (emphasis added).


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      Thus, the PAs consistently refer to themselves as “this Agreement.”

The PAs consistently and expressly refer to the JOAs as distinct from “this

Agreement.” Most significantly, the PAs forum selection clauses refer only to

“this Agreement.”   If, as Appellants argue, the PA forum selection clauses

applied to the JOAs, I would expect to see the second sentence of paragraph

15 state: “No proceeding related directly or indirectly to this Agreement or

the JOA shall be commenced. . .” It does not. Appellees seem to argue

that the absence of any reference in paragraph 15 creates a latent ambiguity

that renders the forum selection clause unenforceable.      I would conclude

instead that the PAs’ forum selection clauses unambiguously apply only to

actions arising under the PAs. To reach this conclusion, I need only examine

the writing and give effect to its unambiguous terms, in accord with basic

principles of contract interpretation. Southwestern, 83 A.3d 177 at 187.4

      Finally, I believe the facts before us are distinguishable from

Southwestern and Heugel.         In those cases, the agreements at issue

mutually referred to one another. Here the PAs attached and incorporated

the JOAs, but the JOAs do not refer to or incorporate the PAs. Further, as I

have explained, the PAs draw express distinctions between themselves and


4
   In addition, as noted above, the JOAs contain their own governing law
clause, albeit without a forum selection clause. The JOAs provide that
Pennsylvania law governs any dispute arising thereunder. While choice of
law is not directly at issue in this appeal, I believe the contradictory choice
of law provisions in the PAs and JOAs undermine Appellants’ argument that
the parties intended the PAs and the JOAs to be construed together as one
agreement.

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J-A27043-15


the JOAs and treat the JOAs as separate agreements. No such facts were

present in Southwestern and Heugel.

     For the foregoing reasons, I respectfully dissent.




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