Citations
- 27 F. Supp. 3d 1188
Full opinion text
MEMORANDUM OPINION AND ORDER
JAMES O. BROWNING, District Judge.
THIS MATTER comes before the Court on the Defendants’ Motion to Dismiss Claims in Plaintiffs’ Fourth Amended Complaint, filed October 18, 2013 (Doe. 145)(“MTD”). The Court held a hearing on February 21, 2014. The primary issues are: (i) whether the Court, should convert the MTD into a motion for summary judgment, and whether it should consider check stubs attached by the Defendants or deposition transcripts and miscellaneous exhibits attached by the Plaintiffs in ruling on the MTD; (ii) whether the Court should dismiss the first, second, fifth, eleventh, and twelfth claims in the Plaintiffs’ Fourth Amended Complaint for Underpayment of Oil and Gas Royalties, filed September 27, 2013 (Doc. 129)(“FAC”), pursuant to New Mexico’s statutes of limitations, to the extent that those claims cover conduct that occurred more than four to six years before the lawsuit’s filing, i.e., should the Court cut off damages incurred before four to six years ago on those claims; and (iii) whether the Court should dismiss Plaintiffs’ twelfth claim, breach of the implied covenant to market, on the ground that it is not recognized under New Mexico law. The Court will not convert the MTD into a motion for summary judgment, but will consider the check stubs, because they are documents referenced in the FAC, they are central to the Plaintiffs claims, and the parties do no dispute their authenticity; it will not consider the Plaintiffs’ deposition transcripts and exhibits, because they were produced in litigation. The Court will not dismiss any claim, in whole or in part, on limitations grounds, because the Plaintiffs have alleged facts that might reasonably establish that the discovery rule delayed the accrual of the statutes of limitations. The Court will, however, dismiss the twelfth cause of action, because the United States Court of Appeals for the Tenth Circuit has held that the theory underpinning the claim — the marketable condition rule — has no basis in New Mexico law. The Court will also dismiss the ninth cause of action without prejudice for failure to plead with particularity pursuant to the heightened pleading requirement of rule 9(b) of the Federal Rules of Civil Procedure; it will also dismiss the tenth cause of action with prejudice, because it is not an independent claim upon which relief can be granted, but rather an attempt to recite facts to establish two tolling doctrines.
FACTUAL BACKGROUND
This matter arises from a dispute over the royalty payments that the Defendants, producers of oil and gas in New Mexico and Colorado, and working interest holders on oil and gas leases belonging to the Plaintiffs, owe to the Plaintiffs, royalty interest holders on the leases.
The San Juan Basin, one of the largest natural gas producing fields located in northwest New Mexico and southwest Colorado, was originally developed in the early 1950’s by El Paso Natural Gas Company.... The natural gas produced in the San Juan Basin is conventional gas which contains methane (natural gas) and entrained natural gas liquids (“NGLs”), such as ethane and butane. In order to make the gas safe to enter the interstate pipeline, the NGLs must be removed from the gas stream.
Elliott Indus. LP v. BP Am. Prod. Co., 407 F.3d 1091, 1099 (10th Cir.2005). As this matter comes before the Court on a Motion to Dismiss, the Court will assume that all facts in the FAC are true. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)(stating that, to survive a motion to dismiss, “[f]actual allegations must be enough to raise a right to relief above the speculative level ... on the assumption that all the allegations in the complaint are true (even if doubtful in fact)”).
The Plaintiffs in this matter all own interests in hydrocarbons derived from wells in the States of New Mexico and Colorado. See FAC ¶¶ 1-7, at 2-3. The Plaintiffs reside in the southwestern part of the United States of America, specifically, in the states of Utah (Anderson Living Trust), Colorado (Pritchett Living Trust), Texas (Sadler), and New Mexico (Scanlon Living Trust and Robert Westfall). See FAC ¶¶ 1-7, at 2-3. Defendants WPX Energy Production, LLC, fik/a WPX Energy San Juan LLC, Williams Production Company, LLC, and WPX Energy Rocky Mountain, LLC, f/k/a Williams Production RMT Company, LLC (“WPX”) are producers and vendors of conventional natural gas, originating from the Fruitland coal formation; of coalbed methane (“CBM”) natural gas; and of other petroleum hydrocarbons from wells in which the Defendants own lease-hold interests. See FAC ¶ 9, at 4. “Plaintiffs each own a non-cost bearing interest in the revenues derived from the production and sale of hydrocarbons pursuant to the terms of oil and gas leases owned or partially owned by” the Defendants in the “subject wells,” save for Scanlon Living Trust, which owns no interest in WPX lease-hold interests. FAC ¶ 10, at 4. The "subject wells” are “all wells in the States of New Mexico and Colorado in which [the Defendants own] all or a portion of the oil and gas leases under which non-cost bearing, royalty and/or overriding royalty payments are/were owed, and which produce or produced hydrocarbons.” FAC ¶ 11, at .4. The Plaintiffs bring this action as a class against the Defendants on behalf ■ of all owners of “non-cost bearing” royalty interests in the subject wells. FAC ¶ 13, at 6.
The Plaintiffs, or their predecessors, acquired their interests in the hydrocarbon revenues from the subject wells through executing oil-and-gas mining leases or permits with the Defendants. See FAC ¶ 11, at 4. All the leases were executed between October 17, 1945, and October 6, 1948, see FAC ¶ 26, at 10-12, meaning that the most recent lease was executed over sixty-three years before the Plaintiffs filed this lawsuit, see First Amended Complaint for Underpayment of Oil and Gas Royalties, filed in state court on December 5, 2011, filed in federal court on January 12, 2012 (Doc. 1-1). Under the leases, the Defendants owe the Plaintiffs a “duty to pay royalties on all hydrocarbons” for the value or price which the Defendants do or should receive from the “arm’s length” sale of the hydrocarbons. FAC ¶ 12, at 5. The leases give the Plaintiffs a right to royalties in the “drip cqndensate,” a liquid product which is recovered during the Defendants’ oil and gas mining processes. FAC ¶28, at 12-13. The leases do not provide for the Defendants to calculate the Plaintiffs’ royalty-payments using the average sale price of a mixture of hydrocarbons from wells in which the Plaintiffs own a royalty interest and other wells in which the Plaintiffs do not own royalty interests. See FAC ¶ 12, at 5-6.
The Defendants have not credited the Plaintiffs with the revenue derived from the drip condensate. See FAC ¶ 29, at 13. Currently, the Defendants calculate the Plaintiffs’ royalty interests on the sale price received from the Defendants’ affiliated intermediaries for hydrocarbons from wells in which the Plaintiffs own royalty interests, mixed with hydrocarbons from other wells in which the Plaintiffs do not own royalty interests. See FAC ¶¶ 33-34, at 14. The Defendants’ affiliated intermediaries sell the hydrocarbons at a significant profit, a profit which the Defendants do not pass on to the Plaintiffs. See FAC ¶ 33, at 14. Additionally, the Defendants’ royalty payments to the Plaintiffs have not been consistent. On “numerous instances,” the Defendants have waited longer than forty-five or even ninety days after receiving revenue from the Plaintiffs’ shares to pay the Plaintiffs their royalty interest. FAC ¶¶ 57-60, at 20-21.
. The Defendants have not always disclosed to the Plaintiffs the gross volume of gas produced from the Plaintiffs’ wells, the gross revenue or value the Defendants obtain from the gross production of gas, and the extent of costs that are deducted from the Plaintiffs’ royalty payments. See FAC ¶ 38, at 15-16. One such cost that is deducted from the Plaintiffs’ royalty payments is the cost of rendering marketable the natural gas and other hydrocarbons taken from the subject wells. See FAC ¶ 51, at 18.
PROCEDURAL BACKGROUND
The Plaintiffs assert nine causes of action that are either new to the FAC or have survived dismissal, see Memorandum Opinion, filed June 28, 2013 (Doc. 108)(“Memo. Opinion”), and are carried over from previous iterations of the complaint: (i) the first cause of action, “failure to pay royalty on volumes of hydrocarbons, including drip condensate,” FAC ¶¶ 22-30, at 10-13 (title case omitted); (ii) the second cause of action, “breach of the duty of good faith and fair dealing,” FAC ¶¶ 31^42, at 14-17 (title case omitted); (iii) the fourth cause of action, “violation of the New Mexico Oil and Gas Proceeds Payment Act” N.M. Stat. Ann. §§ 70-10-1 _to - 6 (“NMOGPPA”), a pre-existing claim, and “interest due under Colorado law,” a new claim the Plaintiffs raise for the first time in the FAC, FAC ¶¶ 56-61, at 20-21 (title case omitted); (iv) the fifth cause of action, “bad faith, breach of contract,” FAC ¶¶ 62-66, at 21-22 (title case omitted); (v) the sixth cause of action, a claim for declaratory relief, which is new.and unique to the FAC, see FAC ¶¶ 67-70(b), at 22-23; (vi) the ninth cause of action, “fraudulent concealment,” a new claim unique to the FAC, FAC ¶¶ 84-92, at 26-28 (title case omitted); (vii) the tenth cause of action, “estop-pel and continuing wrong,” a new claim unique to the FAC, FAC ¶¶ 93-97, at 28-29 (title case omitted); (viii) the eleventh cause of action, “breach of fhe duty to market hydrocarbons — Colorado,” a new claim unique to the FAC, FAC ¶¶ 98-101, at 30-31 (title case omitted); and (ix) the twelfth cause of action, “implied covenant to market — unreasonable expenses,” a new claim unique to the FAC, FAC ¶¶ 102-104, at 32-33 (title case omitted).
1. The Defendants File the MTD.
The Defendants filed their MTD pursuant to rule 12(b)(6) of the Federal Rules of Civil Procedure to dismiss, in part, the “Plaintiffs’ first, second, fourth, fifth, eleventh, and twelfth causes of action” based upon the applicable statutes of limitations. See MTD at 1 (title case omitted). The MTD also seeks the dismissal of the Plaintiffs’ twelfth cause of action in its entirety for failure to state any claim upon which relief can be granted, contending that under the Tenth Circuit’s interpretation of New Mexico law in Elliott Industries LP v. BP America Production Co., the Defendants have not breached the implied duty to market hydrocarbons. See MTD at 1, 21-24 (citing Elliott Indus. LP v. BP Am. Prod. Co., 407 F.3d at 1091).
The Defendants argue that the statutes of limitations bar: (i) all of the Plaintiffs’ claims founded upon breach of written contracts — to the extent that the claims seek relief for any such breach occurring on or before October 20, 2005, i.e., more than six years before the Plaintiffs filed their initial complaint on October 20, 2011 — because New Mexico has a six-year statute of limitations on actions based on a written contract, see MTD at 2 (citing N.M. Stat. Ann. § 37-1-3); and (ii) all of the Plaintiffs’ claims founded upon violation of the NMOGPPA, breach of the duty to market under Colorado law, breach of the implied covenant to market under New Mexico law, the claim for “interest due under Colorado law,” and breach of the implied covenant of good faith and fair dealing — to the extent that the claims seek relief for any such violation occurring on or before October 20, 2007, ie., more than four years before the Plaintiffs filed their initial complaint — because New Mexico has a four-year statute of limitations for actions on unwritten contracts and actions whose limitation period is not otherwise specified by statute, MTD at 2 (citing N.M. Stat. Ann. § 37-1-4). The Defendants contend that New Mexico law supplies the controlling statutes of limitations even for the “interest due under Colorado law” component of the fourth cause of action and the eleventh and twelfth causes of action, which the Defendants assert all arise under Colorado law, see MTD at 4, because “ ‘[a] federal court hearing a diversity action applies the statute of limitations which would be applied by a court of the forum state,’ ” and “ ‘[u]nder New Mexico choice of law principles, a statute of limitations is procedural,’ ... [and] applies ‘even where the applicable substantive law is that of another state.’ ” MTD at 3, 3^4 (first and second alterations in original)(quoting Porcell v. Lincoln Wood Prods., Inc., 713 F.Supp.2d 1305, 1316 (D.N.M.2010) (Armijo, J.)).
The Defendants contend that all of the claims that arise under Colorado law are subject to the shorter four-year limitation period set out by N.M. Stat. Ann. § 37-1-4, see MTD at 4, because the eleventh and twelfth causes of action allege breach of the implied covenant to market, and “the New Mexico Supreme Court made explicitly clear that it has ‘held that the implied covenant to market is an implied covenant at law’ ... [, with] ‘origins not in the parties’ agreement, but rather in law.’ ” MTD at 4 (quoting ConocoPhillips Co. v. Lyons, 2013-NMSC-009, ¶¶ 63, 62, - N.M.-, 299 P.3d 844, 860). The Defendants likewise argue that the four-year statute of limitations governs the second cause of action, breach of the implied duty of good faith and fair dealing: “[F]or the six-year statute of limitations in Section 37-1-3 to apply, ‘the nature of the right sued upon must be based on the breach or nonperformance of a term in a written contract.’ ” MTD at 5 (quoting Martinez v. Cornejo, 2009-NMCA-011, ¶ 29, 146 N.M. 223, 208 P.3d 443 (N.M.Ct.App.2009)).
The Defendants next argue that, “[u]n-der New Mexico law, the statute of limitations in a breach of contract action ... ‘begins to run from the time of the breach.’ ” MTD at 7 (quoting Welty v. W. Bank of Las Cruces, 1987-NMSC-066, ¶ 8, 106 N.M. 126, 740 P.2d 120, 122). They contend that “[t]he Tenth Circuit has recognized that ‘New Mexico has refined this rule by holding the cause of action accrues at the time of injury.’ ” MTD at 7 (quoting Zamora v. Prematic Serv. Corp., 936 F.2d 1121, 1123 (10th Cir.1991)). The Defendants assert that the FAC “avoid[s] alleging the specific dates on which [the Plaintiffs] contend they first suffered injury in fact,” but that their “artful pleading is insufficient to avoid dismissal of the claims barred by the applicable statutes of limitations,” because, “despite the absence of specific dates, it is indisputably clear ... that Plaintiffs seek to recover for injury or loss allegedly incurred more than four years, and more than six years, before the filing of their initial complaint.” MTD at 7-8.
The Defendants assert that “New Mexico applies the ‘discovery rule,’ which means that the statute of limitations ‘commences when an injury manifests itself and is ascertainable.’ ” Great Am. Ins. Co. v. Crabtree, No. CIV 11-1129, 2012 WL 3656500, at *13 (D.N.M. Aug. 23, 2012) (Browning, J.). They argue:
Under the discovery rule, when a defendant “makes a prima facie showing that a claim is time barred,” ... “a plaintiff attempting to invoke the discovery rule has the burden of ‘demonstrating] that if [he or] she had diligently investigated the problem [he or] she would have been unable to discover’ the facts underlying the claim.”
MTD at 9 (alterations in original)(quoting Butler v. Deutsche Morgan Grenfell, Inc., 2006-NMCA-084, ¶ 28, 140 N.M. 111, 140 P.3d 532, 539). They further contend that “this burden applies ‘at the motion to dismiss stage.’ ” MTD at 9 (quoting Butler v. Deutsche Morgan Grenfell, Inc., 2006-NMCA-084, ¶ 28, 140 P.3d at 539). The Defendants argue that the FAC “contains no factual allegations to satisfy the discovery rule.” MTD at 9. They argue that no Plaintiff has shown that he or she made a diligent investigation, and “each of them would have been able to discover the facts underlying each claim alleged.” MTD at 9.
The Defendants then argue that the Plaintiffs, “[h]aving ignored the discovery rule entirely, ... have resorted instead ... to allegations of fraudulent concealment, equitable estoppel, and continuing wrong in an effort to avoid the bar of limitations.” MTD at 9. The Defendants attempt to rebut the three tolling theories asserted by the Plaintiffs. To rebut the fraudulent concealment argument, the Defendants argue that the Plaintiffs must demonstrate either that the Defendants “engaged in affirmative acts of misrepresentation intended to conceal ... a potential cause of action,” or that “the Defendants had an affirmative obligation,” arising from a special relationship, “to make any disclosure or share information outside of that required by the terms of the underlying contracts.” MTD at 10. The Defendants contend'that, “because a claim of fraudulent concealment is grounded in fraud, the facts giving rise to such a claim must satisfy the heightened pleading requirements of Fed. R.Civ.P. 9(b).” MTD at 10. They assert that the FAC “fails to meet these standards.” MTD at 11.
The Defendants argue that they had no special duty to disclose, and attempt to rebut what they maintain is the FAC’s contention that such a duty “arose ‘by virtue "of the superior knowledge available to Williams [sic]- all material times,’ ” MTD at 11 (alteration in original)(quoting FAC ¶ 85, at 26), and because the Plaintiffs’ “ ‘placed trust and reliance in Williams,’ ” MTD at 11 (quoting FAC ¶ 85, at 26). The Defendants contend that, “[u]nder New Mexico law, ‘absent a fiduciary duty to speak on the part of the defendants ..'. silence, nondisclosure, or denial of alleged fraudulent concealment so as to toll a statute of limitations.’ ” MTD at 11 (quoting Cont’l Potash, Inc. v. Freeport-McMoran, Inc., 1993-NMSC-039, 115 N.M. 690, 701, 858 P.2d 66, 77 (N.M.1993)). The Defendants argue that “this Court has already recognized that nó such duty exists.” MTD at 12 (referring to the Memo. Opinion).
The Defendants argue that the allegation that they misrepresented deducted expenses in check-stubs.sent to the Plaintiffs is not pled with the specificity that rule 9(b) requires. See MTD at 14 (citing FAC ¶ 87, at 27). They contend that the Plaintiffs must allege “ ‘who, what, when, where and how1 ” the fraud occurred, MTD at 14 (quoting United States ex rel. Sikkenga v. Regence Bluecross Blueshield of Utah, 472 F.3d 702, 727 (10th Cir.2006)), and assert that the Plaintiffs did not “plead how any ‘volume’ or ‘price’ or ‘expense’ information is inaccurate or misleading,” MTD at 14 (quotations unattributed). The Defendants additionally argue that the FAC fails to allege that the causes of action were not discoverable through due diligence, see MTD at 15, arguing that “ ‘[i]t [is] incumbent upon Plaintiff[s] to demonstrate that if she diligently investigated the problem, she would have been unable to discover the cause of her injury.’ ” MTD at 15 (first and second alterations in original)(quoting Martinez v. Showa Denko, K.K., 1998-NMCA-111, ¶ 22, 125 N.M. 615, 964 P.2d 176, 181).
The Defendants also argue that the Plaintiffs have failed to adequately allege equitable estoppel. See MTD at 17. The Defendants contend that
equitable estoppel “assumes that the plaintiff is aware of the facts underlying his or her cause of action, but is persuaded to forego filing suit by virtue of the defendant’s actions.” Accordingly, equitable estoppel applies in the situation where the plaintiff is induced [by the defendant] not to file the complaint sooner.
MTD at 17 (quoting Skyberg v. United Food & Commercial Workers Int’l Union, 5 F.3d 297, 302 (8th Cir.1993), relied upon by Tiberi v. Cigna Corp., 89 F.3d 1423, 1430 (10th Cir.1996)). The Defendants contend that, “[b]ecause Defendants’ monthly statements were submitted to Plaintiffs every month for many many years, long before the Plaintiffs filed their complaint, these monthly statements could not have caused any Plaintiff, aware of his cause [of] action, to refrain from filing suit.” MTD at 18.
The Defendants further argue that the continuing wrong doctrine does not apply, primarily because it applies only “ ‘in the context of tort liability,’ and not in breach of contract cases.” MTD at 18-19 (quoting Jeffers v. Butler, 762 F.Supp. 308, 309 (D.N.M.1990) (Mechem, J.))(citing McNeill v. Rice Eng’g & Operating, Inc., 2006-NMCA-015, ¶ 25, 139 N.M. 48, 128 P.3d 476, 482-83). They also argue that the Plaintiffs’ claims “allege no more than a breach which begins at a single point in time and then has continuing effects.” MTD at 21.
Last, the Defendants contend that the Plaintiffs failed to state a proper claim in their twelfth cause of action. See MTD at 21. The contend that the Memo. Opinion and Elliott Industries LP v. BP America Production Co. foreclose relief. See Memo. Opinion; Elliott Indus. LP v. BP Am. Prod. Co., 407 F.3d 1091, 1113-14 (10th Cir.2005). They argue that, although the restyling of the Plaintiffs
previous allegations concerning “unreasonable expenses” were not “specifically addressed” in the Memorandum Opinion ..., the allegations on which Plaintiffs’ Twelfth Cause of Action depends were specifically addressed by the Tenth Circuit in Elliott Indus. LP v. BP America Prod. Co., on which this Court specifically relied when it dismissed Plaintiffs’ claim for breach of the implied covenant to market, and which specifically requires dismissal of Plaintiffs’ repetitious implied covenant to market claim in the” FAC.
MTD at 22 (emphasis in original) (citation omitted). They assert that the Court “expressly held that oil and gas lessees who, like WPX in this case, ‘were and are actively producing gas, processing the gas, and selling the refined natural gas and NGLs,’ are in compliance ‘with the implied duty to market as articulated by the New Mexico courts.’ ” MTD at 24 (emphasis in original)(quotation unattributed).
2. The Plaintiffs File Their Response and Supplemental Brief.
The Plaintiffs responded to the MTD twenty days later. See Plaintiffs’ Response to Defendants’ Motion to Dismiss Claims in Plaintiffs’ Fourth Amended Complaint, filed November 8, 2013 (Doc. 156)(“Response”). They first argue that the MTD is more aptly styled as a motion for summary judgment under rule 56, because it “requests] the Court to consider and evaluate evidentiary materials that were not made a part of, or incorporated into,” the FAC. Response at 2. They contend that the Court should deny the MTD. See Response at 3. They assert that “[t]he inclusion of the check stub in Defendants’ motion may affect the Court’s determination of the merits of the motion.” Response at 4. Although they acknowledge that “the Court may consider on a motion to dismiss ‘undisputed documents central to the allegations in Plaintiffs’ complaint,” they contend that, because “there are potentially thousands of check stubs that will be examined at trial and that no one, single check stub is ‘central’ to the case,” what is really happening is that the Court is being asked to consider extrinsic evidence. Response at 5. They argue that, if the Court chooses to convert the motion into one for summary judgment, it should also consider the five documents they attach to their Response: (i) the Affidavit of Bradley Brickell Pursuant to Fed.R.Civ.P. 56(d) in Support of Plaintiffs’ Response to Defendants’ Motion to Dismiss Claims in Plaintiffs’ Fourth Amended Complaint, filed November 8, 2013 (Doc. 156-1); (ii) five pages of the transcript of a Deposition of Sheryl Ward, taken March 1, 2013, filed November 8, 2013 (Doc. 156-2); (iii) an additional five pages from the second portion of the same Deposition of Sheryl Ward, filed November 8, 2013 (Doc. 156— 3); (iv) what appears to be a check stub, the first page of a rule 30(b)(6) deposition notice, and three pages of a document entitled “Exhibit B,” Fourth Attachment to Response, filed November 8, 2013 (Doc. 156-4); and (v) what appear to be the fourth through eighth pages of the same document, “Exhibit B,” Fifth Attachment to Response, filed November 8, 2013 (Doc. 156-5).
The Plaintiffs also argue that they have pled sufficient facts for a jury to reasonably conclude that the statutes of limitations have been tolled and attempt to justify all three tolling doctrines. See Response at 7. In this brief, they do not dispute that New Mexico law supplies all the relevant statutes of limitations. See Response at 7 n. 2. They assert that the FAC alleges fraudulent concealment by alleging that the Plaintiffs “placed trust and reliance on Defendants as lessees of the oil and gas leases,” and that the Defendants’ “ ‘superior knowledge’ regarding their production of hydrocarbons from Plaintiffs’ wells” imparts an obligation of “a ‘full and fair disclosure of the true and complete facts of all hydrocarbons produced from the subject wells.’ ” Response at 7 (quoting FAC ¶85, at 26). They further assert that the Defendants affirmatively concealed facts underlying the causes of action in their monthly statements, which: (i) “contain ‘erroneous and misinformation about the volumes, values, prices, and types of hydrocarbons produced, used or sold from [the] subject wells,’” Response at 7-8 (alteration in original)(quoting FAC ¶ 86, at 26); (ii) do not represent “ ‘the values of hydrocarbons based on arms’ length transfers/contracts,’ ” Response at 8; and (iii) “misrepresent ] and omit[] that ‘certain types and amounts of expenses were deducted for certain services,’ ” Response at 8 (quoting FAC ¶ 87, at 27).
The Plaintiffs also argue that they have properly pled equitable estoppel. See Response at 8. They support this contention by pointing to allegations in the FAC and by characterizing the delivery of false monthly statements as a “ ‘continuing wrong.’ ” Response at 8-9 (quoting FAC ¶ 94, at 28). They point to the contention in the FAC that “the class members ‘did not discovery [sic] and could not have reasonably discovered their claims as alleged herein of underpayments,’ ” as a properly pled allegation of due diligence. Response at 9.
The Plaintiffs additionally rely upon the discovery rule, which they contend “is raised more in the context of tort cases, [but] can certainly be used in eases of fraudulent concealment and in other cases involving fraudulent concealment, as pled herein.” Response at 9-10. They assert that they properly “allege that they did not discover Defendants’ wrongful conduct until they filed suit as a result of Defendants’ fraudulent concealment and principles of equitable estoppel, which toll the statute of limitations.” Response at 10. The Plaintiffs argue that they have also pled fraudulent concealment under the similar Colorado law. See Response at 10-11.
The Plaintiffs argue that the question whether they exercised reasonable diligence to ascertain the facts that underlie their claims is fundamentally a question for the jury, is inappropriate on summary judgment, and certainly not appropriate on a rule 12(b)(6) motion. See Response at 12 (citing Maestas v. Zager, 2007-NMSC-003, ¶ 25, 141 N.M. 154, 152 P.3d 141). They argue, contrary to the Defendants’ contention, that there was a special relationship between the parties “by virtue of the leases,” and that a fiduciary relationship, per se, is not required. Response at 12.
Last, the Plaintiffs argue that they have stated a proper claim for breach of the implied covenant of marketability. See Response at 13. They contend that,
contrary to the Defendants’ assertion in the moving papers, Elliott Indus. LP v. BP America Prod. Co., 407 F.3d 1091 (10th Cir.2005), does not support dismissal. Elliott does not hold that a producer can charge unreasonable expenses. Nothing in the Elliott decision precludes a party, from claiming breach of the implied duty to market when the royalties paid the mineral owners are based on unreasonable or phantom expenses and deductions. The Elliott court did not reach the issue of reasonableness of the defendant’s expenses because the Elliott plaintiff dismissed its claim for breach of contract. The court found that the plaintiff [sic] failure to assert a cause of action for breach of contract rejects “the very foundation” of its relationship with the lessee.
Response at 14 (emphasis in original). They further assert- that “the New Mexico Supreme Court in ConocoPhillips Co. v. Lyons, 2013-NMSC-009, 299 P.3d 844, held that the deductions used in calculating Lessees’ royalty obligations must be reasonable even though ... [they] need not be ‘actual.’ ” Response at 14-15 (emphasis in original).
3. The Defendants File Their Reply.
The Defendants replied to the Plaintiffs’ Response before the Plaintiffs filed the supplement to their Response. See Defendants’ Reply in Support of Motion to Dismiss Claims in Plaintiffs’ Fourth Amended Complaint, filed December 4, 2013 (Doc. 172)(“Reply”). The Defendants argue that the Court may consider the exhibit they attached to their MTD, “as it is central to Plaintiffs’ claims,” but that the Court should disregard the extrinsic materials submitted by the Plaintiffs “in a transparent effort to convert this motion into one for summary judgment.” Reply at 1-2. They contend that, under Tenth Circuit law, “if a document ‘is referred to in the complaint and is central to the plaintiffs claim, a defendant may submit an indisputably authentic copy to the court to be considered on a motion to dismiss.’ ” Reply at 3 (quoting GFF Corp. v. Associated Wholesale Grocers, Inc., 130 F.3d 1381 (10th Cir.1997)). They assert that the “Defendants’ monthly statements, which include Exhibit A, repeatedly are referred to, directly and indirectly,” in the FAC. Reply at 3. They further contend that the monthly statements are “central,” because “a document attached to a motion to dismiss is ‘central’ to the plaintiffs’ claims if the claims, ‘at least in part,’ are based on the document.” Reply at 4 (quoting Jornigan v. N.M. Mut. Cas. Co., No. CIV 03-0813, 2004 WL 3426437, at *6 (D.N.M. April 19, 2004)(Browning, J.)). They also argue that, although the FAC “does not allege the specific date'that Defendants or their predecessors ‘first initiated delivery of monthly statements,’ that omission does not per force establish that Plaintiffs’ claims, as alleged, are not time-barred.” Reply at 2 (emphasis in original)(quoting FAC ¶ 94, at 28).
The Defendants then argue that the Court should not convert the MTD into one for summary judgment. Reply at 6. They address what they characterize as an attempt by the Plaintiffs to convert the motion by way of documents attached to their Response:
Plaintiffs further argue that they may effect conversion of Defendants’ motion into one for summary judgment simply by their submission of materials outside the pleadings.... “[B]ecause the Court is asked to consider extrinsic evidence (■including deposition testimony and interrogatory answers Plaintiffs attach in opposition to the motion), the motion must be converted into one for summary judgment.” •
Reply at 6 (emphasis in original)(quoting Response at 5). They assert that this attempt is “in clear conflict with the Tenth Circuit’s decision in Geras v. IBM Corp., 638 F.3d 1311 (10th Cir.2011).” Reply at 6. The Defendants acknowledge that “a motion to dismiss under Rule 12(b)(6) must, in general, be treated as a motion for summary judgment under Rule 56 if ‘matters outside the pleadings are presented to and not excluded by the court.’” Reply at 6 (emphasis in original)(quoting Fed.R.Civ.P. 12(d)). They contend, however, “that the district court is not required to accept evidence proffered by the plaintiff in response to a motion to dismiss.” Reply at 7 (emphasis in original).
The Defendants next address the equitable tolling doctrines that the Plaintiffs allege apply in the case. See Reply at 8. They state that, “[although Plaintiffs label these allegations as ‘causes of action,’ in this case they are not.” Reply at 8-9. See Reply at 9 & n. 1. The Defendants contend that equitable estoppel is inapposite, because “a central.element to any assertion of equitable estoppel is the plaintiffs awareness of his cause of action,” and the FAC not only fails to allege this knowledge, but “it does exactly the opposite.” Reply at 10 (citing FAC ¶ 96, at 29). They repeat their contention from the MTD that the continuing wrong doctrine applies only in tort cases. See Reply at 10-11. They oppose the Plaintiffs’ allegations of fraudulent concealment on the ground that the allegations are not plead with particularity as rule 9(b) requires, see Reply at 15, and on four substantive grounds: (i) that they fail to allege a fiduciary relationship between the Plaintiffs and the Defendants, .see Reply at 11-13; (ii) that the Plaintiffs have not alleged an affirmative act of concealment, which the Defendants contend is necessary to make out a claim of fraudulent concealment in the absence of a fiduciary relationship, see Reply at 13-14; (iii) that the Plaintiffs have not alleged how they exercised the due diligence that the Defendants contend is an essential element of a fraudulent concealment claim, see Reply at 14; and (iv) that BP America Production Co. v. Patterson is inapposite, because the procedural posture of that case “was an appeal of a class certification decision under the Colorado rule corresponding to Rule 23,” and has “no relevance to the question whether Plaintiffs have properly pled fraudulent concealment in this case,” Reply at 15-16 (citing BP Am. Prod. Co. v. Patterson, 263 P.3d 103 (Colo.2011)).
The Defendants address the viability of the Plaintiffs’ twelfth cause of action by arguing that the “‘conception of the implied duty to market’ ” upon which the Plaintiffs rely “‘finds no support within New Mexico case law.’ ” Reply at 17 (quoting Elliott Indus. LP v. BP Am. Prod. Co., 407 F.3d at 1114). They contend that, “[i]n Elliott, plaintiff asserted that the implied duty to market under New, Mexico law not only does not permit lessees ‘to deduct costs incurred before a gas is in a marketable condition,’ but also does not permit them ‘to deduct costs that are not actually incurred or are unreasonable.’ ” Reply at 18 (emphasis in original)(quoting Elliott Indus. LP v. BP Am. Prod. Co., 407 F.3d at 1111). They assert that “the Tenth Circuit rejected this claim, holding, as this Court recognized, that oil and gas lessees who ‘are actively producing gas, processing the gas, and selling the refined natural gas and NGLs ... have complied with [the] implied duty to market as articulated by the New Mexico courts.’ ” Reply at 18 (omission in original)(quoting Elliott Indus. LP v. BP Am. Prod. Co., 407 F.3d at 1113). They assert that the Plaintiffs falsely allege that “ ‘the Elliotft] court did not reach the issue of reasonableness of the defendant’s expenses because the Elliot[t] plaintiff dismissed its claim for breach of contract,’ ” Reply at 18 (alterations in originalXquoting Response at 14), and that “this argument is simply a rehash of the same argument Plaintiffs made when this Court dismissed this same claim in the Memorandum Opinion,” Reply at 18. They quote the Court: “ ‘That the Plaintiffs have put their leases at issue in this case does not provide them a safety-hatch from the Tenth Circuit’s explanations of New Mexico law in Elliott Indus.’ ” Reply at 18 (quoting Memo. Opinion at 132).
The Defendants also counter Plaintiffs’ “seeming reliance” on ConocoPhillips Co. v. Lyons, 2013-NMSC-009, 299 P.3d 844, noting that the Supreme Court of New Mexico’s holding “with respect to the lessees’ right to deduct ‘reasonable’ costs of post-production services in paying royalty was based not on the implied covenant to market, but rather on the express royalty terms in state leases.” Reply at 19 (emphasis in original)(quoting ConocoPhillips Co. v. Lyons, 2013-NMSC-009, ¶¶ 20, 24, 68, 299 P.3d at 851, 852-53, 861).
Last, the Defendants contend that the “Plaintiffs’ submission of a Rule 56(d) affidavit and their assertion that the determination of Defendants’ motion to dismiss would be ‘premature’ is improper and should be disregarded,” because the MTD “ ‘tests the sufficiency of the allegations within the four corners of the complaint.’ ”• Reply at 20 (quoting Mobley v. McCormick, 40 F.3d 337, 340 (10th Cir.1994)).
4. The Court Holds a Hearing on the MTD.
The Court held a hearing on the MTD a week before the Plaintiffs submitted their Response Supp. See Transcript of Hearing at 12-80, taken February 21, 2014 (“Tr.”). The Defendants first attempted to clarify that the FAC referred to the check stubs which they attached to their MTD, and stated that they believed that these check stubs were attached to the monthly statements referenced in ¶ 96 on page 29 of the FAC. See Tr. at 12:15-14:2 (Court, Sheridan). The Court stated that it was inclined to consider the check stubs that the Defendants attached, but not the documents that the Plaintiffs attached to their Response, and that it would not convert the MTD into a motion for summary judgment. See Tr. at 16:8-14 (Court).
The Court first clarified with the Defendants that what they mean when they refer to dismissing claims “in part” is “just cutting off damages” past four-to-six years before the filing of the case; the Defendants confirmed this characterization. Tr. at 17:8-14 (Court, Sheridan). As the Defendants outlined their analysis, starting with what they contend are the applicable six-year and four-year statutes of limitations, the Plaintiffs for the first time — as this hearing was before the Response Supp. was filed — asserted that Colorado law might supply the statutes of limitations for the claims under Colorado law. See Tr. at 19:9-20:22 (Court, Briekell). The Plaintiffs acknowledged that, “in general, [statutes of] limitations [are] viewed as procedural,” Tr. at 20:21-22 (Brickell), but contended that Phillips Petroleum v. Shutts directs the Court “to look at the issue of whether each state’s law should apply or not,” Tr. at 19:24-25 (Brickell) (citing 472 U.S. 797, 105 S.Ct. 2965, 86 L.Ed.2d 628 (1985)). The Defendants opposed this contention, citing Porcell v. Lincoln Wood Products, Inc., 713 F.Supp.2d at 1305, from the District of New Mexico and Elm Ridge Exploration Co., LLC v. Giant Exploration & Production Co., 721 F.3d 1199 (10th Cir.2013), from the Tenth Circuit for the proposition that the Court should apply New Mexico’s statutes of limitations to all claims. See Tr. at 21:18-22:22 (Sheridan, Brickell). The Defendants also characterized Phillips Petroleum v. Shutts as inapposite, stating that the Supreme Court óf the United States had found that a Kansas court’s application of Kansas substantive law — not a Kansas statute of limitations — to royalty interests and wells almost entirely outside Kansas violated the Due Process Clause of the Fourteenth Amendment to the Constitution of the United States of America. See Tr. at 22:25-25:5' (Sheridan). They concluded by asserting that “[t]he U.S. Supreme Court did not impose a choice of law rule on that matter.” Tr. at 24:19-20 (Sheridan).
The discussion then turned to the tolling doctrines, see Tr. at 25:6-7 (Court), and the Defendants first addressed equitable estoppel, arguing again that the doctrine “assumes that the plaintiff is aware of the facts underlying his or her cause of action, but is persuaded to forego filing suit by virtue of the defendant’s actions.” Tr. at 26:4-7 (Sheridan)(purporting to quote Ti-beri v. Cigna Corp., 89 F.3d 1423 (10th Cir.1996), but the Court can find no such quote). They assert that in the Plaintiffs’ Response “at page 10 ... they say [that] ... they did not discover defendant’s wrongful conduct until they filed suit. So if that is to be accepted as true, ... then they do not .have an equitable estop[pel] claim.” Tr. at 26:20-27:3 (Sheridan).
The Plaintiffs stated that they “have a totally different read of the [Tiberi v. Cigna Corp.] case.” Tr. at 28:1-2 (Brickell). They assert that, in “paragraph 31,” Tr. at 28:8 (Brickell), the case sets out the elements of equitable estoppel: (i) “[c]on-duct which amounts to a false representation [or] a concealment of material facts ... which is calculated to convey the impression that [Qacts are ... inconsistent with [those that] the party subsequently attempts to assert,” Tr. at 28:10-15 (Bric-kell); (ii) “intention that the conduct be acted upon by the other "party,” Tr. at 28:15-16 (Brickell); (iii) “knowledge, actual or constructive,] of the real facts,” Tr. at 28:16-17 (Brickell); (iv) “lack of knowledge or means of knowledge of the truth” on the part of the party asserting estoppel, Tr. at 28:18-19 (Brickell); (v) “reliance” on the part of that party, Tr. at 28: 20 (Brickell); and (vi) “action based there[]upon” by that party, Tr. at 28:20 (Brickell). The Plaintiffs assert that they “have set those forth in spades in [their] complaint.” Tr. at 28:22-23 (Brickell).
The Defendants responded first by voicing their displeasure at the Plaintiffs raising an issue that they seemingly forfeited in their Response, noting that, although they “know that this Court ... places great importance on making the right answer, ... it seems to [them] that it’s not appropriate to be making arguments ... in oral argument here based on cases that [the Defendants] briefed in [their MTD, but that] they never responded to in their response.” Tr. at 29:17-23 (Sheridan). The Defendants argued the issue on the merits, however, asserting that, “[u]nder New Mexico law, fraudulent concealment is a species of equitable estoppel.” Tr. at 29:25-30:2 (Sheridan). They argue that, for all equitable estoppel that is not fraudulent concealment, actual knowledge of the party asserting estoppel must be alleged; they cite Village of Angel Fire v. Board of County Commissioners of Colfax County, 2010-NMCA-038, 148 N.M. 804, 242 P.3d 371, in support of this contention. See Tr. at 30:13-31:25 (Sheridan).
The Defendants then moved to the doctrine of continuing wrong, which they asserted “is not a tolling doctrine as such, [but rather] relates to when a statute of limitations actually begins to run as opposed to being tolled, and it is a tort law doctrine.” Tr. at 33:2-6 (Sheridan). They assert that Tiberi v. Cigna Corp. “[specifically mentions that where a tort involves a continuing or repeated injury,” the continuing wrong doctrine applies. Tr. at 33:9-10 (Sheridan). They noted that in McNeill v. Rice Engineering & Operating, Inc., 2003-NMCA-078, 133 N.M. 804, 70 P.3d 794, the Court of Appeals of New Mexico “rejected the continuing wrong doctrine in the context of a trespass and nuisance action.” Tr. at 33:16-17 (Sheridan). They also cited a case, Bishop v. Evangelical Lutheran Good Samaritan Society, 2010 WL 3998030, at *8 (N.M.Ct. App. Feb. 9, 2010), in which the Defendants assert that the Court of Appeals of New Mexico ruled that, in
situations] in which the defendant has a repeating obligation of performance of one type or another, [such as to] make contribution[s] to[ ] a pension plan ... [or a] health care benefits [fund], ... the cause of action accrues with the first time, with the decision when the defendant failed to make the payment.
Tr. at 34:18-35:4 (Sheridan).
The Plaintiffs half-heartedly defended the FAC’s assertion of the continuing wrong doctrine:
We have pled the continuing wrong doctrine in order to ... make sure that we have completely pled the issues that concern fraudulent concealment. In some instances it has been referred to as a continuing wrong doctrine, and therefore I feel like it falls under fraudulent concealment in this particular case. Such as announced in [CJontinental [P]ot. [AJsh. As this Court analyzed in the Great American case and those issues. I just did not want to leave that stone unturned as some courts refer to that as a continuing wrong if it occurs on numerous occasions which we’ve alleged it occurs every month, and so that’s why we characterize that cause of action [as a] continuing wrong. I don’t know if per se that is, maybe the correct nomenclature for it or not, but if it calls under a number of fraudulent concealment then I’m prepared to address that right now.
Tr. at 36:17-37:10 (Brickell). When asked if they “kn[e]w of any Supreme Court ease in New Mexico that applies the continuing wrong to a contract case,” the Plaintiffs answered that they “do not.” Tr. at 37:23-38:1 (Court, Brickell). The Plaintiffs asserted, however, that Oklahoma has applied the continuing wrong doctrine to contract cases, see Tr. at 39:2-3 (Brickell), and cited without discussing a case called Tull v. City of Albuquerque, 1995-NMCA-123, 120 N.M. 829, 907 P.2d 1010, see Tr. at 39:19 (Brickell). The Court concluded the discussion of the continuing wrong doctrine by noting that it was “inclined to think that this is more of a kind of accrual.... It doesn’t sound like it’s a primary doctrine the plaintiffs are relying upon anyway.” Tr. at 40:21-22 (Court); id. at 41:5-6 (Court).
Turning to the fraudulent concealment issue, the Defendants first argued that the FAC “is wholly lacking in the who, what, when, where, how, and why allegations necessary to properly alleged fraudulent concealment to equitably toll a statute of limitations,” but “[bjeyond the pleading failures, ... there are some substantive problems as well.” Tr. at 41:19-41:24 (Sheridan). They contend that, “to the extent that it is based upon a nondisclosure, ... [i]n the absence of a duty to disclose, there cannot be fraudulent concealment.” Tr. at 41:25-42:3 (Sheridan). They assert that the Plaintiffs rely upon ■this theory in ¶ 85 of the FAC, which they characterize as stating that the “class members have placed trust and reliance in Williams by virtue of the superior knowledge available to Williams[;] at all material times plaintiffs [and] class members are owed a full and fair disclosure.” Tr. at 42:6-10 (Sheridan). The Defendants contend that a duty to disclose arises only from a fiduciary relationship and that “there are two types of fiduciary duties”: “there are duties which are fiduciary as a matter of law, [such as] a situation involving a lawyer and a client, a doctor and a patient, priest and penitent, [or a] principal and agent”; and “[t]here are other situations where a relationship between parties can rise to the level of being a fiduciary duty in fact” — “those are relationships that are typically the subject of special trust and confidence,” with the “classic example [being] the widow and the housekeeper where the housekeeper attend[s] to all of the widow’s needs[,] living with her 24 hours a day[,] tak[ing] care of her[,] and then the widow changes her will and leaves everything to the housekeeper[,] disinheriting the children.” Tr. at 42:18-43:8 (Sherfdan). The Defendants assert that there is no legally recognized fiduciary duty between an oil lessee and lessor, and that “[t]here are no facts alleged ... that in any way establish any kind of relationship of special trust or confidence.” Tr- at 43:12-14 (Sheridan). They asserted that “[a]ll of the plaintiffs have received their interest subsequently” — i.e., none of them were the original signatories to their leases — and “almost every case through inheritance.” Tr. at 46:16-22 (Sheridan). They concluded their nondisclosure argument by noting that “there is simply nothing that’s alleged ... that creates any sort of special trust or confidence between somebody who gets a check once a month 45[] years after the contract was entered into and the parties sending the check.” Tr. at 46:23-47:2 (Sheridan).
The Defendants then argued that the FAC alleges no. affirmative act of concealment. See Tr. at 47:8-9 (Sheridan). They contended that “[w]hat has to be concealed is the cause of action,” Tr. at 47:13-14 (Sheridan), “[a]nd there aren’t any allegations in the complaint to show that the cause of action could not have been discovered by the exercise of due diligence,” Tr. at 48:14-16 (Sheridan). The Defendants last contended that, under Tenth Circuit law, “the absence of an allegation regarding how and when [the plaintiff] learned of the alleged misconduct forecloses a claim that defendantsf] fraudulent concealment prevented [the plaintiff] from discovering defendant’s involvement.” Tr. at 49: 13-17 (Sheridan) (citing Dummar v. Lummis, 543 F.3d 614, 622 (10th Cir.2008) (Hartz, J.)).
The Plaintiffs contended that the Defendants took on a special duty to disclose when they started sending monthly statements to the Plaintiffs. See Tr. at 51:11— 20 (Brickell). They acknowledged that “[t]here may not have been a duty to send them at all,” Tr. at 51:19-20 (Brickell), but that, once they sent the statements, “those statements [must] be truthful and accurate,” Tr. at 51:19 (Brickell)(citing FAC ¶ 39, at 16). They asserted that “[t]hese statements failed. to disclose what the gross volume, and value and character/type of all hydrocarbons produced, processed, used, traded, and sold from plaintiffs wells.” Tr. at 52:1-4 (Brickell). The Plaintiffs then illustrated how they contend the fraudulent concealment was executed:
And what I’d like to do, Your Honor[,] is direct your attention to the check stub that Your Honor recognized as part of their motion to dismiss the complaint, which is the very last page or denoted as Exhibit A. All right, now if I can direct the Court’s attention to the ... middle of the page there are certain letter initials that are used to describe certain things within the check stub itself. You’ll notice, Your Honor, that the second definition is called G gas. C, condensate. Tax, taxes, TRN, field transportation. Now, Your Honor if I can walk you across one of the check stub lines here, let’s just take, now, this is a very small check stub, so a lot of the numbers are very small on this thick one, but believe me there are a lot bigger ones than this. But let’s look at this one here on the ... [GJubenator Number 1 MV, and it shows for first' of all the date of sale, it says is September of 2003. And then, Your Honor, as you come across, you see the next thing which says PC at the top column and you come down it’s a G for gas. Your Honor, we’re alleging that that is not all gas. That initial that month they ... sold natural gas liquids but failed to inform Mr. Anderson about that. Let’s go over to the price. 4 dollars 63 [cents]. Your Honor, we are alleging that that is not the value that was received in that sale by the defendants Williams [Production Coley which by the way Your Honor is a name change into WPX the current defendant name. We allege that that is some initial index or posted price, not reflective of what they received for the gas, much less the natural gas liquids that were processed out of that gas. Your Honor, the reason why we know that there were natural gas liquids that month is because we see after the word [G]ubenator Number 1, we see an MV. The MV stands for Mesa Verde. Your Honor, that’s a conventional gas zone and that area is productive of ... gas that will contain inert quantities of large amounts of natural gas liquids. We come on across and we see that they’ve combined the price and the quantity of 366.00 to come up with a value of 1693.42. Your Honor, we’re alleging that that 366 is not the true quantity of gas that was produced at the wellhead. In fact, that it was larger than that; that they are not informing Mr. Anderson of what ... the volume of gas that was produced from his well was. And that is not the quantity of gas that was actually sold or used by the defendant. Next, we come on across and we see that there is a TRN deduction of 6 cents. Now, 6 cents doesn’t seem like much. But when you look at it in the context of the total value on this very small interest on this particular check stub of 59 cents, you can see that’s 10 percent. We are alleging that in fact that 6 cents was not a transportation charge but that is a number made up by the Williams companies that they have just decided that that’s the amount they’re going to charge, and including things like home office overhead, including things like return on investment is the way that is calculated. As we then state in paragraph number 40 [and] 39 on page 16, Williams intended for the plaintiffs to rely upon its written statements sent to plaintiffs. These statements knowingly failed to disclose excessive and impermissible charges. That’s what I’m talking about, Judge, depreciation, profit, return on investment. And reductions imposed by Williams payment methods as well as the gross volume, value and type of all hydrocarbons produced, used, sold or traded indirect violation of Williams’ statutory and common law ditties to properly report the same and to act in good faith and fair dealing. The same constitutes fraudulent concealment. Your Honor, in this particular instance, this is their own attachment is a good illustration of what we are saying constitutes fraudulent concealment and it shows the specific nature of our allegations, and how exactly specific we are.
Tr. at 53:7-56:7 (Briekell). The Plaintiffs also argued that, even though none of the Plaintiffs were the original signatories to their leases, they are parties by succession and should be treated the same as if they had signed the leases themselves. See Tr. at 60:23-61:4 (Briekell).
The Defendants, after providing a brief summary of what they considered “this case is about,” Tr. at 65:7-66:20 (Sheridan), argued that “fraudulent breach of a contract does not give rise to an action for fraud,” Tr. at 67:3-4 (Sheridan). They further argued: “There is a difference between fraud in^the inducement and fraud in the performance of a contract, okay. There is no cause of action for fraud in the performance of a contract. You have a claim for breach of contract.” Tr. at 67:12-16 (Sheridan)(citing Brick v. Cohn-Hall-Marx Co., 276 N.Y. 259, 11 N.E.2d 902 (1937)).
The Court interjected to opine that, as far as it could tell, “this isn’t really a nondisclosure] case.... [T]he duty is sort of a red herring here. Once you start sending out the statements you’ve got to be accurate. That’s what the case is about, isn’t it, it’s not a nondisclosure, it’s not a duty.” Tr. at 71:24-25 (Court); id. at 72:8-12 (Court). The Defendants responded that “[i]t has to rise to the level of being fraudulent.” Tr. at 72:12-15 (Sheridan). They last argued that, because the Court had previously dismissed the standalone claim for fraud, the same facts could not suffice to toll the. statute by way of fraudulent concealment. See Tr. at 72:17-73:2 (Sheridan). The Court stated that it would take the matter under advisement. See Tr. at 79:12-14 (Court).
5. The Plaintiffs File a Supplement to Their Response.
The Plaintiffs filed a supplemental brief to their Response a week after the hearing and almost three months after the Defendant filed their Reply. See Supplemental Brief in Response to Defendants’ Motion to Dismiss — Application of Forum State’s Statute of Limitations, filed February 28, 2014 (Doc. 215)(“Response Supp.”). The Response Supp. first argues that the Court “should determine whether it would be fundamentally unfair to apply the New Mexico statute of limitations to the Plaintiffs’ and Class Members’ claims under wells in Colorado,” Response Supp. at 2 (citing Lujan v. Regents of the Univ. of Cal., 69 F.3d 1511, 1515-16 (10th Cir.1995)), and, if so, apply the relevant Colorado statute of limitations — which the Plaintiffs assert is six years, see Response Supp. at 4 — to the claims arising under Colorado law, see Response Supp. at 2. They argue that the fraudulent concealment and equitable tolling doctrines of both states are similar, citing Continental Potash, Inc. v. Freeport-McMoran, Inc., 1993-NMSC-039, 115 N.M. 690, 858 P.2d 66, from New Mexico, and BP America Production Co. v. Patterson, 263 P.3d 103 (Colo.2011), from Colorado.
LAW REGARDING RULE 12(b)(6)
Rule 12(b)(6) authorizes a court to dismiss a complaint for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). “The nature of a Rule 12(b)(6) motion' tests the sufficiency of the allegations within the four corners of the complaint after taking those' allegations as true.” Mobley v. McCormick, 40 F.3d 337, 340 (10th Cir.1994). The sufficiency of a complaint is a question of law, ánd when considering a rule 12(b)(6) motion, a court must accept as true all well-pled factual allegations in the complaint, view those allegations in the light most favorable to the non-moving party, and draw all reasonable inferences in the plaintiffs favor. See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007)(“[0]nly if a reasonable person could not draw ... an inference [of plausibility] from the alleged facts would the defendant prevail on a motion to dismiss.”); Smith v. United States, 561 F.3d 1090, 1098 (10th Cir.2009)(“[F]or purposes of resolving a Rule 12(b)(6) motion, we accept as true all well-pled factual allegations in a complaint and view these allegations in the light most favorable to the plaintiff.” (citing Moore v. Guthrie, 438 F.3d 1036, 1039 (10th Cir.2006))).
A complaint need not set forth detailed factual allegations, yet a “pleading that offers labels and conclusions or a formulaic recitation of the elements of a cause of action” is insufficient. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)(citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Ashcroft v. Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. “Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Bell Atl. Corp. v. Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (citation omitted).
To survive a motion to dismiss, a plaintiffs complaint must contain sufficient facts that, if assumed to be true, state a claim to relief that is plausible on its face. See Bell Atl. Corp. v. Twombly, 550 U.S. at 570, 127 S.Ct. 1955; Mink v. Knox, 613 F.3d 995, 1000 (10th Cir.2010). “A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (citing Bell Atl. Corp. v. Twombly, 550 U.S. at 556, 127 S.Ct. 1955). “Thus, the mere metaphysical possibility that some plaintiff could prove some set of facts in support of the pleaded claims is insufficient; the complainant must give the court reason to believe that this plaintiff has a reasonable likelihood of mustering factual support for these claims.” Ridge at Red Hawk, LLC v. Schneider, 493 F.3d 1174, 1177 (10th Cir.2007)(emphasis omitted). The Tenth Circuit stated:
“[Plausibility” in this context must refer to the scope of the allegations in a complaint: if they are so general that they encompass a wide swath of conduct, much of it innocent, then the plaintiffs “have not nudged their claims across the line from conceivable to plausible.” The allegations must be enough that, if assumed to be true, the plaintiff plausibly (not just speculatively) has a claim for relief.
Robbins v. Oklahoma, 519 F.3d 1242, 1247 (10th Cir.2008) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. at 570, 127 S.Ct. 1955) (internal citations omitted).
Although affirmative defenses must generally be pled in the defendant’s answer, not argued on a motion to dismiss, see Fed.R.Civ.P. 8(c), there are exceptions where: (i) the defendant asserts an immunity defense — the courts handle these cases differently than other motions to dismiss, see Glover v. Gartman, 899 F.Supp.2d 1115, 1137-39, 1141