Walney v. SWEPI LP (311 F. Supp. 3d 696, 2018)

Joy Flowers Conti, Chief United States District Judge

This class action is being prosecuted by Thomas J. Walney ("Walney") and Rodney A. Bedow, Sr. ("Bedow") on behalf of certain Pennsylvania landowners who executed gas and oil leases for the benefit of SWEPI LP. In this action, Walney and Bedow (collectively, "plaintiffs") allege that SWEPI LP and its general partner, Shell Energy Holding GP, LLC (collectively, "SWEPI" or "defendants"), failed to pay bonus monies that were owed to the various class members under the terms of their respective leases.

Presently pending before the court are cross-motions for summary judgment filed by plaintiffs (ECF No. 140) and SWEPI (ECF No. 156). For the reasons that follow, plaintiffs' motion will be granted in part and denied in part; defendants' motion will be denied.

I. Factual and Procedural Background

SWEPI LP is a limited partnership engaged in the business of oil and gas exploration and production. (PCSF ¶ 2.) Beginning in 2011, SWEPI sought to acquire mineral leases in certain parts of Pennsylvania with the help of independent contractors, including Southeast Land Services, LLC ("Southeast"), who acted as SWEPI's agents. (PCSF ¶¶ 4, 5.) Ultimately, Southeast helped SWEPI obtain more than 2,800 oil and gas leases. (Id. ¶ 5)

An account of SWEPI's lease acquisition practices is set forth in the declarations of Ian Haney ("Haney"), a Senior Land Representative in SWEPI's Land Department, and Eric Jenevein ("Jenevein"), manager of Southeast's Appalachia Region. (See ECF Nos. 163-9, 163-10, and 150-1.) According to Haney and Jenevein, in 2011, Southeast's "landmen" began contacting individual landowners who, based on county property records, appeared to own oil and gas interests in Butler and Venango Counties. (First Haney Decl. ¶ 6, ECF No. 163-9; Jenevein Decl. ¶ 6, ECF No. 163-10.) Based upon their initial contact with landowners, the landmen would determine whether the property in question was already under lease to another company and, if not, whether the landowner was interested in entering into a lease with SWEPI. (Id. ) If the landowner expressed interest, the landman and landowner would discuss possible bonus amounts or other potential terms of the lease. (Id. ) Negotiations might occur over the course of days, weeks, or months. (Id. ) During late 2011 and 2012, other companies in competition with SWEPI were actively leasing in the same area. (Id. ) Consequently, landowners often negotiated with other oil and gas companies at the same time that they were negotiating with SWEPI's contracted landmen. (Id. )

Most landowners verbally inquired during the course of negotiations about how and when they would be paid their lease bonus. (Jenevein Decl. ¶ 8.) With respect to these inquiries, Southeast instructed its landmen to explain that payment would be made by a bank draft rather than a check. (Id. ) According to Jenevein,

it was the practice of Southeast's landmen to inform the landowner prior to obtaining the written lease that the payment would be made by a bank draft and not be payable until the expiration of a set number of banking days, usually ninety (90) days, that banking days differ from calendar days, and that ultimate payment would not be made if the title examination during the ninety (90) days did not result in a clean title examination acceptable to SWEPI. It was not the usual practice of Southeast landmen to make any representations or promises about the payment of a SWEPI lease bonus different than the terms reflected in the written bank draft.

(Id. )

Once lease terms were finalized, the landman would meet again with the interested landowner, usually at the office of a notary public. At that point, the landman would obtain the signed lease and a signed memorandum of lease ("MOL") in exchange for a draft instrument issued in the amount of the agreed upon bonus. (First Haney Decl. ¶¶ 4, 10; Jenevein Decl. ¶ 9.) The lease, MOL and bank draft were usually executed and exchanged at the same time. (Jenevein Decl. ¶ 9.) The amount of the lease bonus was normally not specified in the lease agreement itself; instead, it was reflected in the bank drafts that landmen issued on behalf of SWEPI. (First Haney Decl. ¶ 8; Jenevein Decl. ¶ 7.) The drafts were payable through SWEPI's bank, Amegy Bank N.A. ("Amegy"), and typically allowed 90 banking days (or sometimes 30 banking days) "for title examination and for payment" once the draft was submitted by the landowner's bank to Amegy for collection. (ECF No. 150-30; see First Haney Decl. ¶ 8; Jenevein Decl. ¶ 7.) The drafts also included the statement: "No liability for payment or otherwise shall be attached to any of the parties hereto." (Id. )

After the landmen obtained the signed leases and MOLs from the landowners, they would return those documents to Southeast's or SWEPI's administrative offices for processing. (First Haney Decl. ¶ 10; Jenevein Decl. ¶ 10.) The MOL would typically be recorded in the county records office within a few days thereafter. (Id. )

Following recordation, Southeast would undertake an in-depth records search to confirm that title to the oil and gas interest was in the acreage amount represented and that no other problems existed with respect to the chain of title. (First Haney Decl. ¶ 10; Jenevein Decl. ¶ 10.) Upon completion of its search, Southeast would provide SWEPI a confidential report and analysis relative to each parcel of property in question in order to identify whether a failure of title existed as to the particular property and, if so, whether curative action was required. (First Haney Decl. ¶ 12; Jenevein Decl. ¶ 11.) Sometimes the title problems could be cured by having the landowner execute a new lease reflecting the correct acreage or the correct ownership names; this curative action would involve cancellation of the original draft and issuance of a new one, if the landowner was agreeable. (First Haney Decl. ¶ 14; Jenevein Decl. ¶ 13.) In cases where there was a title problem that could not be readily cured, SWEPI would cancel the bank draft and surrender the lease back to the landowner. (Id. ) When drafts were cancelled prior to payment and no substitute draft was issued for the same lease, SWEPI or its contract landmen would file written surrenders of the oil and gas lease in the county records. (First Haney Decl. ¶ 21.)

According to SWEPI, the title examination process was both cumbersome and time consuming, as it required substantial manual research. (First Haney Decl. ¶ 13; Jenevein Decl. ¶ 12.) In the first half of 2012, the Venango county courthouse experienced significant congestion, as dozens of oil and gas leasing companies undertook title searches and competed for access to public records. (Id. ) By April 2012, the congestion in the courthouse had become so severe that the Venango County commissioners restricted access to the register and recorder's offices. (Id. ) As a result of these restrictions, Southeast's landmen were substantially delayed in their efforts to complete their title searches for Venango County properties. (Id. ) In many cases, landmen could not complete their title searches in Venango County, or SWEPI could not complete its evaluation of Southeast's title analysis, within the time frame specified in the drafts. (Id. ) Because of these difficulties, SWEPI decided, in or around June 2012, to stop acquiring new leases in most of Venango County and to cancel any outstanding drafts that had not already been paid. (First Haney Decl. ¶ 20.)

Between December 2010 and November 2013, SWEPI funded approximately 4,927 drafts and paid lease bonuses totaling approximately $313,000,000.00. (Second Haney Decl. ¶ 23, ECF No. 150-1.) Approximately 283 drafts that were issued during this time frame (the "Claimed Class Drafts") were never funded for various reasons. (ECF Nos. 150-7; Second Haney Decl. ¶ 23.)

Typically, SWEPI made its decision about whether to fund a draft prior to the draft's due date (usually 90 banking days). (Second Haney Decl. ¶ 23.) The most common reason for SWEPI's refusal to fund drafts was a perceived problem with the lessor's chain of title to the underlying minerals. (Id. ¶¶ 24, 28.) SWEPI, however, cites other reasons for refusing to fund class members' drafts. In 17 instances, funds were not paid because SWEPI surrendered the underlying lease at the landowner's request. (Id. ¶ 31.) In addition, "the inability of [SWEPI's] contract landmen at Southeast to complete courthouse title searches due to difficulty accessing the courthouse in the Spring and Summer of 2012 was a substantial reason why many drafts in Venango County were canceled and not paid." (Id. ¶ 25.) SWEPI also acknowledges that, by June 2012, a drop in the commodity price of natural gas made leasing in Venango County "less attractive," and this-together with the difficulty of completing timely title analysis-played into its decision to cancel some of the unpaid drafts. (Id. )

Plaintiffs Walney and Bedow are among those landowners who signed lease agreements and MOLs in favor of SWEPI but were never paid. (ECF No. 57 ¶ 1; ECF No. 58 ¶ 1; ECF Nos. 150-21, 150-54, 150-56, and 150-60.) Walney alleges that, in January 2012, he signed a lease agreement covering 42.18 acres of land in exchange for a promised bonus of $137,085.00. (ECF

No. 57 ¶¶ 15, 17-18; ECF No. 63-1.) Bedow signed multiple lease agreements in 2011 and early 2012, which he claims covered 215.897 acres of land. (ECF No. 57 ¶ 17; ECF No. 63-2.) Bedow maintains that he was promised bonuses totaling $701,666.88. (ECF No. 57 ¶ 18; ECF No. 63-2.)

In March 2013, Walney commenced this civil class action in the Venango County Court of Common Pleas, asserting claims for breach of contract, fraud, disparagement of title, and promissory estoppel. (Compl. Ex. A, ECF No. 1-1.) The case was subsequently removed to this court (ECF No. 1) and, following various pretrial proceedings, Walney filed the operative Second Amended Complaint (ECF No. 57), which added Bedow as a co-plaintiff and asserted additional claims for breach of implied contract and unjust enrichment.

On September 14, 2015, this court entered a memorandum opinion and order certifying a class action relative to the breach of contract claims in Counts I and I(A) of the Second Amended Complaint, pursuant to Rule 23(b)(3). See Walney v. SWEPI, LP , No. 1:13-cv-102, 2015 WL 5333541 (W.D. Pa. Sept. 14, 2015). Having engaged in extensive discovery, the parties now seek a summary judgment ruling relative to the breach of contract claims.

To that end, the parties submitted cross-motions for summary judgment (ECF Nos. 140 and 165) and extensive related filings (see Doc. Nos. 141-145, 149-150, 153, 155, 157-158, 162-164, 166-167, 169, and 171-174). The issues raised in the parties' motions are now sufficiently joined and ripe for disposition.

II. The Transactional Documents

A. The Form Lease Agreements

At issue in this case are certain form documents that SWEPI utilized in connection with its lease acquisitions during the time period in question. Among the relevant documents are two materially identical lease agreements, i.e. , "Paid Up Oil and Gas Lease, Rev. 06.09.2011" and "PA Paid Up Lease Rev. 05.01/2011" (ECF Nos. 150-21 and 150-54, hereafter referred to collectively at times as the "Lease(s)" or the "Lease Agreement(s)").

The introductory clause of each form Lease stated: "This Lease Agreement is made and entered into this [enter date] between [enter landowner's name] as Lessor (whether one or more), and SWEPI LP , having an office at 190 THORN HIILL ROAD, WARRENDALE, PENNSYLVANIA 15086 , as Lessee." (ECF No. 150-21 (emphasis in the original).) Paragraph 1 of the Lease Agreement stated, in relevant part:

In consideration of the bonus consideration paid, the receipt of which is hereby acknowledged, and in further consideration of the covenants and agreements herein contained, Lessor does hereby grant, demise, lease and let exclusively to Lessee, its successors and assigns, the lands hereafter described for the purpose of exploring for, developing, producing and marketing oil, gas or other related substances produced in association therewith ... in and under the following described land....

(Id. ) Paragraph 3 of the Lease established a primary lease term of five years which, at SWEPI's option, could be extended if SWEPI made a specified extension payment, calculated on a "per acre" basis, prior to the expiration of the primary term. (Id. ¶ 3.) Paragraph 4 set forth the lessor's entitlement to an 18% royalty payment for oil and gas produced and marketed from the leased premises. (Id. ¶ 4.) Paragraph 10 of the Lease provided, in part, that: "Lessee at any time, and from time to time, may surrender this lease as to all or any part thereof by recording an appropriate instrument of surrender in the proper county and thereupon this lease and the rights, rentals and obligations of the parties hereunder shall terminate as to the part so surrendered." (Id. ¶ 10.) Paragraph 14 set forth a "force majeure" clause. (Id. ¶ 14.) Paragraph 15 ensured that "[n]o default shall be declared against the Lessee for failure to make payment or perform any conditions provided for herein unless the Lessee shall refuse or neglect to pay or perform the same for sixty (60) days after having received written notice from Lessor." (Id. ¶ 15.) Paragraph 17 acknowledged:

This lease contains all of the agreements and understanding of the Lessor and Lessee respecting the subject matter hereof and no implied covenants or obligations, or verbal representations or promises have been made or relied upon by Lessor or Lessee supplementing or modifying this lease or as an inducement thereto.

(Id. ¶ 17.)

B. The Form Draft Instrument

Also relevant is the form draft instrument (hereafter, "Draft(s)" or "Draft Instrument(s)") that SWEPI issued to landowners in exchange for the signed Leases. Each Draft Instrument contained standard language stating: "This draft when paid is payment in full for lease or conveyance covering the following described land: [enter description]." (ECF No. 150-30.) Each instrument contained the language "No Protest" and "Not a Cash Item." (Id. ) The Drafts further provided that:

[t]he payor shall have ___ banking days after receipt of this draft by the collecting bank, whether accompanied by other papers or not, for title examination and for payment. Neither forwarding bank nor payee(s) nor the grantor(s) of such lease or conveyance may demand return of this draft or any accompanying papers prior to expiration of the time fixed. Upon payment hereof collecting bank shall deliver this draft and any accompanying papers to payor and remit payment to forwarding bank. No liability for payment or otherwise shall be attached to any of the parties hereto.

(Id. )

C. The Memorandum of Lease

The third standard document is the form MOL that class members executed and delivered to SWEPI's landmen along with their signed Leases. The first two sentences of each MOL state that: "THIS MEMORANDUM OF LEASE has been made to indicate the existence of an Oil and Gas Lease ("Lease") dated [ enter date] by and between [landowner] of [subject property], as Lessor and SWEPI, LP ... as Lessee. Lessor did grant, demise, lease and let exclusively to Lessee, its successors and assigns, the rights to explore, develop, produce, and market oil and gas from [the subject property] subject to the provisions contained in the Lease...." (ECF No. 150-23.) Paragraph 1 of the MOL further provides that:

The primary term of the Lease is for a period of Five (5) years commencing on the date immediately set forth above and for so long thereafter as oil, gas or other substances covered by the Lease are capable of being produced in paying quantities from the leased premises or from lands pooled therewith or the Lease is otherwise maintained or prolonged pursuant to the provisions contained in the Lease, including an extension of term contained therein. Lessee may extend the primary term of the Lease for an additional Five (5) years after the end of the primary term, thereby continuing the term of the Lease to the end of the extended primary term.

(Id. ) Elsewhere, the MOL acknowledges that its intended purpose is to "provid[e] notice in the Recorders Office of [enter county] County, Commonwealth of Pennsylvania, of the existence of the Lease," and it "shall not be considered in any way a modification or alteration of the Lease." (Id. )

III. The Parties' Respective Arguments

Plaintiffs contend that-taken together-the Leases, MOLs and Drafts (collectively, the "Transactional Documents") constituted enforceable contracts as of the time that the documents were signed and exchanged between the various class members and SWEPI's representatives. Plaintiffs theorize that these contracts provided for an unconditional payment of a sum certain (i.e., the amount of the bonus set forth in the draft instrument), deferred to a date certain (i.e., the time period set forth in the draft). According to plaintiffs, SWEPI breached its contracts when it failed to pay the bonuses. Consequently, plaintiffs consider the full amounts of the bonuses to be the correct measure of damages in each instance.

SWEPI contests each element of plaintiffs' claims and also asserts various affirmative defenses. Fundamentally, SWEPI denies that enforceable contracts ever came into existence. Assuming that enforceable contracts did exist, SWEPI denies that it breached the contracts. SWEPI theorizes that good title was a condition of payment in every case and no evidence exists to show that all class members had good title to the lease rights they purported to convey. On the contrary, SWEPI argues that many class members indisputably lacked good title to the gas and oil interests at issue in their leases and, with respect to certain other class members, SWEPI was unable to verify the landowner's title through no fault of its own.

In the alternative, SWEPI challenges plaintiffs' request for summary judgment on the grounds that: (i) factual inquires exist concerning the meaning of the contracts; (ii) class members failed to provide the requisite "written notice" of SWEPI's alleged breach; (iii) SWEPI's payment obligations, if any, were excused in cases where the Leases were surrendered prior to expiration of the time period designated in the Draft Instrument or where they were surrendered at the request of the lessor; and (iv) plaintiffs cannot obtain summary judgment on behalf of landowners who never presented their Drafts for payment or who are not members of the class.

Assuming that its liability can be established, SWEPI contests plaintiffs' calculation of damages. SWEPI maintains that proper measurement is the difference between the contract price (i.e., the bonus amount) and the fair market value of each lease at the time of the alleged breach. SWEPI contends that plaintiffs failed to prove the class's damages because there is no evidence in the record to establish the relevant fair market values of the leases at issue.

IV. Standard of Review

Summary judgment is appropriate when "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) ; see Celotex Corp. v. Catrett , 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In reviewing the evidence, the court draws all reasonable inferences in favor of the nonmoving party. See Reeves v. Sanderson Plumbing Prods., Inc ., 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000) (discussing identical standard of review under Rule 50). The court may not make credibility determinations or weigh the evidence. Id. "Where the record taken as a whole could not lead a reasonable trier of fact to find for the nonmoving party, there is no 'genuine issue for trial.' " Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp ., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

Courts are permitted to resolve concurrently cross-motions for summary judgment. Johnson v. Federal Exp. Corp ., 996 F.Supp.2d 302, 312 (M.D. Pa. 2014) (citing authority); see Lawrence v. City of Phila ., 527 F.3d 299, 310 (3d Cir. 2008) (considering cross-motions for summary judgment under the Fair Labor Standards Act); 10A CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 2720 (3d ed. 2014). "When doing so, the court is bound to view the evidence in the light most favorable to the non-moving party with respect to each motion." Johnson, 996 F.Supp.2d at 312 ; see Lawrence , 527 F.3d at 310 (noting that the rule for granting summary judgment "is no different where there are cross-motions for summary judgment.").

V. Discussion

To succeed on a breach of contract claim, a plaintiff must prove: (1) the existence of a contract; (2) the breach of a duty required by the contract; and (3) damages from the breach. Zamos v. McNeil-PPC Inc., a Div. of Johnson & Johnson , 713 Fed.Appx. 133, 135 (3d Cir. 2017) (citing Williams v. Nationwide Mut. Ins. , 750 A.2d 881, 884 (Pa. Super. Ct. 2000) ). Here, plaintiffs contend that all three elements of the class's claims were established as a matter of law, while SWEPI contends that none of the elements can be established based on the uncontroverted facts.

A. Whether Enforceable Contracts Existed

As a preliminary matter, the court must determine whether plaintiffs can prove the existence of enforceable contracts between SWEPI and the class members. Because oil and gas leases are in the nature of contracts, they are controlled by principles of contract law. See T.W. Phillips Gas & Oil Co. v. Jedlicka , 615 Pa. 199, 42 A.3d 261, 267 (2012). Under Pennsylvania law, a contract is enforceable where: (1) both parties have manifested an intent to be bound by the terms of the agreement, (2) the contractual terms are sufficiently definite, and (3) consideration exists to support the agreement. Cook v. Gen. Nutrition Corp. , No. CV 17-135, 2017 WL 4340664, at *6 (W.D. Pa. Sept. 29, 2017) (citing Johnston the Florist, Inc. v. TEDCO Constr. Corp ., 441 Pa.Super. 281, 657 A.2d 511, 516 (1995) ).

Plaintiffs contend that-taken together-the Leases, MOLs and Drafts constituted enforceable contracts. They argue that the contracts came into existence when the parties signed and exchanged the Transactional Documents-an event which plaintiffs liken to a real estate "closing."

SWEPI denies that the Transactional Documents constituted enforceable contracts. According to SWEPI, the Lease Agreements did not set forth any binding promise on its part to pay the subject bonuses; rather, the parties contemplated that only actual payment of the bonuses would supply the necessary consideration. Because SWEPI opted not to fund the class members' Drafts, it posits that the Lease Agreements fail for lack of consideration or mutuality. Additionally, SWEPI argues that there was no completed offer and acceptance to establish its intent to be contractually bound. Alternatively, SWEPI argues that the agreements contained a condition precedent to contract formation that did not occur-namely verification of good title within the time period specified in each draft.

The parties' competing theories raise questions of contract interpretation, the "paramount goal" of which is "to ascertain and give effect to the intent of the parties." PBS Coals, Inc. v. Burnham Coal Co ., 384 Pa.Super. 323, 558 A.2d 562, 564 (1989). " '[T]he intent of the parties to a written contract is to be regarded as being embodied in the writing itself, and when the words are clear and unambiguous the intent is to be discovered only from the express language of the agreement.' " Jeddo Coal Co. v. Rio Tinto Procurement (Singapore) PTE Ltd ., No. 3:16-CV-621, 2017 WL 937737, at *4 (M.D. Pa. Mar. 9, 2017) (quoting Steuart v. McChesney , 498 Pa. 45, 444 A.2d 659, 661 (1982) ). Accordingly, the court must determine what document or documents comprise the alleged "contracts" in this case.

Under Pennsylvania law, " '[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.' " Jeddo Coal Co. , 2017 WL 937737, at *4 (quoting Huegel v. Mifflin Const. Co. , 796 A.2d 350, 354-55 (Pa. Super. Ct. 2002) ); see Kroblin Refrigerated Xpress, Inc. v. Pitterich , 805 F.2d 96, 107 (3d Cir. 1986) ("It is a general rule of contract law that where two writings are executed at the same time and are intertwined by the same subject matter, they should be construed together and interpreted as a whole, each one contributing to the ascertainment of the true intent of the parties.").

Here, it is undisputed that the Transactional Documents were typically signed and exchanged contemporaneously as part of a singular transaction between SWEPI and the various class members. In addition, the documents reference one another. The Leases expressly acknowledge the lessor's receipt of a "bonus" in an unspecified amount. (ECF Nos. 150-21, 150-60). The Draft Instruments indicated that, when funded, they would constitute "payment in full for lease or conveyance" covering the specific parcel in question. (ECF No. 163-4). Each MOL was expressly intended to provide public notice of the existence of the corresponding oil and gas lease. (ECF No. 163-3). Because the Leases, Drafts, and MOLs expressly reference each other and were exchanged contemporaneously as part of a singular transaction, the court will construe the writings together for the purpose of ascertaining the parties' intent.

The next question to be answered is whether the Transactional Documents give rise to enforceable agreements in the context of this case. In analyzing the documents, this court must be guided by the plain meaning of the language employed by the parties rather than their "silent intentions." Jedlicka , 42 A.3d at 267. If the contractual terms are clear and unambiguous, then the intent of the parties must be gleaned from the agreement itself. Hutchison v. Sunbeam Coal Corp., 513 Pa. 192, 519 A.2d 385, 390 (1986). If the contractual terms are ambiguous, however, the court may examine extrinsic evidence to resolve the ambiguity. Id.

A contract is ambiguous when its terms are "reasonably susceptible of different constructions and capable of being understood in more than one sense." Hutchison, 519 A.2d at 390. " 'This question, however, is not resolved in a vacuum. Instead, contractual terms are ambiguous if they are subject to more than one reasonable interpretation when applied to a particular set of facts.' " Lee v. Sixth Mount Zion Baptist Church of Pittsburg , No. CV 15-1599, 2017 WL 3608140, at *21 (W.D. Pa. Aug. 22, 2017) (quoting Murphy v. Duquesne Univ. of the Holy Ghost , 565 Pa. 571, 777 A.2d 418, 429-30 (2001) ), appeal docketed , No. 17-3086 (3d Cir. Sept. 25, 2017). "The court, as a matter of law, determines the existence of an ambiguity and interprets the contract whereas the resolution of conflicting parol evidence relevant to what the parties intended by the ambiguous provision is for the trier of fact." Hutchison, 519 A.2d at 390 ; see Wert v. Manorcare of Carlisle PA, LLC , 633 Pa. 260, 124 A.3d 1248, 1259 (2015) ("Issues of contractual interpretation are questions of law.");

Mason v. Range Res.-Appalachia LLC , 120 F.Supp.3d 425, 440 (W.D. Pa. 2015) ("The trier of fact resolves conflicting parol evidence to determine the intent of the parties.").

Under Pennsylvania law, contractual ambiguities are construed against the drafter. Wert, 124 A.3d at 1260 (citing Shovel Transfer and Storage, Inc. v. Pennsylvania Liquor Control Bd ., 559 Pa. 56, 739 A.2d 133, 139 (1999) ); see Restatement (Second) of Contracts § 206 (1981) ("In choosing among the reasonable meanings of a promise or agreement or a term thereof, that meaning is generally preferred which operates against the party who supplies the words or from whom a writing otherwise proceeds."). In the context of an oil and gas lease, ambiguities are generally construed in favor of the lessor and against the lessee. See Mason, 120 F.Supp.3d at 440. These rules of construction only apply, however, where an examination of the parol evidence fails to resolve the ambiguity. See Hutchison, 519 A.2d at 390 n.5 ; Mason, 120 F.Supp.3d at 440.

Here, SWEPI's motion for summary judgment is predicated solely on the theory that no enforceable contracts existed as between itself and any class member. Accordingly, the court will initially consider whether the alleged agreements fail as a matter of law due to inadequacy of consideration, an absence of contractual intent, or the failure to satisfy a condition precedent to contract formation. In undertaking this analysis, the court is mindful that

the judicial construction of instruments involving oil and gas is particularly troublesome. Pennsylvania case law evidences a long and tortured trail of attempts to make sense of phrases, parts of phrases, and words of art sometimes used in a common sense manner and sometimes used with a precise technical meaning, and all used in documents sometimes drafted with care and sometimes quickly scribbled by the litigants themselves.

The legal effect of words clearly understood when used in other contexts, therefore, becomes murky when considered in the context of oil and gas instruments.... Applying the literal meaning to words and phrases found in oil and gas documents is fraught with the opportunity for injustice.

As a result, we must be mindful that the object in interpreting instruments relating to oil and gas interests, like any written instrument, is to ascertain and effectuate the intention of the parties.

Swepi LP v. Wood , No. 1945 MDA 2015, 2016 WL 5929602, at *3-4 (Pa. Super. Ct. Sept. 7, 2016) (citation omitted) (ellipsis in the original).

1. Consideration

"The requirement of consideration is nothing more than the requirement for a bargained for exchange." EBC, Inc. v. Clark Bldg. Sys. , No. CIV.A. 05-CV-01549, 2007 WL 4563518, at *4 (W.D. Pa. Dec. 21, 2007) (citing Estate of Beck , 489 Pa. 276, 414 A.2d 65 (1980) ). " 'Consideration consists of a benefit to the promisor or a detriment to the promisee.' " Id. (quoting Weavertown Transport Leasing, Inc . v. Moran , 834 A.2d 1169, 1172 (Pa. Super. Ct. 2003) ). However, " '[i]f the promise is entirely optional with the promisor, it is illusory, lacks consideration, and is unenforceable.' " Hampton Gardens Assocs. v. Kearny Bank , Civil Action No. 16-323, 2016 WL 3576684, at *4 (E.D. Pa. June 29, 2016) (quoting Lackner v. Glosser , 892 A.2d 21, 31 (Pa. Super. Ct. 2006) ).

SWEPI posits that, in the context of this case, it could have provided consideration for the Leases in one of two ways: by rendering a performance (i.e., actually paying the bonus amounts) or by making a binding promise to pay. Since there is no dispute that SWEPI did not pay the bonuses, the only question is whether the Transactional Documents evidence a binding promise to pay. SWEPI insists they do not.

In arguing that it made no binding promise of payment, SWEPI points first to Paragraph (1) of the Lease, which references "bonus consideration paid, the receipt of which is hereby acknowledged." According to SWEPI, this language "plainly demonstrates that the parties intended that actual payment by SWEPI-not an executory promise-would complete the required exchange of consideration. Thus, by its own terms, the lease would become valid and enforceable if and when SWEPI paid the lease bonus-not a moment before." (Defs.' Br. Opp. Pls.' Mot. Summ. J. at 9-10, ECF No. 153.)

SWEPI next points to language in the Draft stating that "[n]o liability for payment or otherwise shall be attached to any of the parties hereto." (ECF No. 150-30.) According to SWEPI, "[t]his exculpatory language plainly allows [it] to cancel the draft without liability, and it therefore negates any possibility that the draft itself constitutes a promise to pay." (Defs.' Br. Opp. At 11.) Thus, even if the Draft contains a promise to pay, SWEPI insists that the "no liability" clause renders any such promise illusory. (Id. at 11 n.10.) In support of its position, SWEPI relies on Spellman v. Lyons Petroleum, Inc., 709 S.W.2d 295 (Tex. App. 1986), and Arabella Petroleum Co. v. Baldwin, No. 04-11-370-CV, 2012 WL 2450803 (Tex. App. 2012), two decisions wherein the Texas Court of Appeals found a lack of mutuality based on similar exculpatory language.

In light of the legal standards discussed above, SWEPI is entitled to summary judgment only if its proffered construction of the Transactional Documents is the only reasonable one. In the circumstances of this case, however, the phrase "bonus consideration paid, the receipt of which is hereby acknowledged" most logically referred to SWEPI's contemporaneous conferment of the Draft which expressly stated that, "when paid," it would constitute "payment in full" for the associated Lease. (ECF No. 150-30.) As discussed, each Draft expressly gave SWEPI a specified number of banking days "for title examination and for payment." (Id. ) When the Transactional Documents are construed collectively, the Drafts can reasonably be viewed as supplying the contractual terms of payment, pursuant to which SWEPI promised to pay the bonus amounts by the end of the time period specified in the Draft, unless it determined within that time that the lessors lacked sufficiently clean title to the underlying gas and oil interests. Viewed in this light, the Transactional Documents provided valid consideration to each class member in the form of a conditional promise of future payment. See In re Estate of Rosser , 821 A.2d 615, 623 (Pa. Super. Ct. 2003) ("A mutuality of obligation exists when both parties to the contract are required to perform their respective promises.") (citation omitted).

The second interpretation is consistent with other language in the Transactional Documents indicating that valid bilateral contracts existed as of the date the documents were signed and exchanged. The Lease, by its terms, was deemed to be "made and entered into" by the parties as of the date the landowner signed the Lease and provided it to SWEPI's agent. (ECF No. 150-21.) Each MOL similarly acknowledged "the existence of an Oil and Gas Lease" whose primary term commenced on the same date that the Lease Agreement was executed. (ECF No. 150-23.) The MOLs further stated that the "Lessor did grant, demise, lease and let exclusively to Lessee ... the rights to explore, develop, produce, and market oil and gas from the premises described below subject to the provisions contained in the Lease...." (Id. (emphasis added).) SWEPI's interpretation, on the other hand, is at odds with this language, and thus runs afoul of the principle that contractual provisions should be construed in harmony with one another, if possible. Lenau v. Co-eXprise, Inc., 102 A.3d 423, 430 (Pa. Super. Ct. 2014) ("[I]t is axiomatic that contractual clauses must be construed, whenever possible, in a manner that effectuates all of the clauses being considered.") (internal quotation marks and citation omitted).

SWEPI's interpretation of the Transactional Documents poses another illogicality: it assumes that the class members, in executing each Lease, expressly acknowledged that bonus consideration had been paid when, in fact, it had not. Indeed, because the Drafts expressly reserved time for SWEPI to perform its title search, bonus payments could not feasibly be made contemporaneously with the lessor's execution of the Lease. SWEPI's proffered interpretation nevertheless assumes that lessors had to acknowledge SWEPI's full monetary performance before it had actually been rendered, leaving the lessors at risk that SWEPI might speculate with their mineral interests while holding itself out as party to a valid and binding agreement. When construing a contract, the court should "adopt an interpretation which under all circumstances ascribes the most reasonable, probable, and natural conduct of the parties, bearing in mind the objects manifestly to be accomplished." Am. Winter Servs., LLC v. Limerick Vill., LP , No. 947 EDA 2017, 2017 WL 6351308, at *2 (Pa. Super. Ct. Dec. 13, 2017) (internal quotation marks and citations omitted). SWEPI's proposed construction runs afoul of this principle by inferring improbable, if not unreasonable, conduct on the part of the class members.

SWEPI's proposed interpretation of the "bonus consideration paid" clause also runs counter to its own professed understanding of the Lease's "surrender clause." According to Haney, "SWEPI believed it had a right to cancel any drafts prior to the expiration of the ninety (90) banking days allowed by the bank drafts ... and to exercise its surrender rights of the associated leases as provided in paragraph 10 of the [Lease Agreement]." (Second Haney Decl. ¶ 25.) "Once the lease surrender was recorded, the landowner was typically notified by letter of the surrender, and then they were free to re-lease the oil and gas rights to another company." (Id. ¶ 26.) This argument only makes sense, however, if the Lease Agreements were binding contractual documents supported by valid consideration. If the signed Lease Agreements were mere "offers" unsupported by consideration, then the contracts-including the "surrender" provision-would never have come into effect. Additionally, there would be no need to "surrender" the Leases because lessors would have been free, at any point prior to payment of the Draft, to simply revoke their "offers" and lease their properties to another company. Similarly, it would make no sense for SWEPI to honor a landowner's "request" for a "surrender" of the Lease-as SWEPI claims it did with respect to certain class members-if no binding agreement had ever come into existence.

Two decisions that SWEPI points to as supportive of its position- Masciantonio v. SWEPI, LP, 195 F.Supp.3d 667 (M.D. Pa. 2016) , and Cardinale v. R.E. Gas Development LLC, 74 A.3d 136 (Pa. Super. Ct. 2013) -are in fact easily reconcilable with the view that enforceable contracts existed here. Masciantonio , like the instant case, involved claims by certain Pennsylvania landowners that SWEPI breached the terms of their oil and gas leases by failing to pay promised bonuses. The two groups of plaintiffs in Masciantonio had signed form lease agreements that were substantially similar to the ones at issue in this case with one notable difference: the Masciantonio leases contained addenda that included a paragraph ("Paragraph 22") which specifically discussed SWEPI's payment obligation relative to the disputed bonuses. Paragraph 22, entitled "Payment," stated:

In consideration for the attached paid-up Oil and Gas Lease, Lessee hereby agrees to pay Lessor: four thousand and 00/100 dollars ($4,000.00 ) per net mineral acre. Payment shall be due within ninety (90) banking days of the Lessor presenting the Bank Draft to the financial institution of his/her/their choosing. All payment obligations are subject to title verification by Lessee. Said title verification shall be completed within the aforementioned ninety (90) banking day period.

195 F.Supp.3d at 675 (italicized in the original to denote handwritten additions to the lease addenda).

In Masciantonio, SWEPI asserted-as it has here-that the subject leases were unenforceable because payment of the lease bonuses was the sole form of consideration contemplated by the parties; absent such payment, SWEPI argued, the leases failed for lack of consideration. 195 F.Supp.3d at 679. The district court rejected this argument, reasoning that payment of the bonuses was a "post-formation performance obligation," rather than an element of consideration. Id. The court concluded that, "[s]ubject only to title verification, SWEPI promised to pay bonus consideration in exchange for its right to possess, explore, and develop plaintiffs' subsurface oil and gas estate.... Hence, SWEPI's consideration [was] its promise to perform-not performance itself." Id. (emphasis in the original).

In arriving at this conclusion, the Masciantonio court rejected SWEPI's contention that the granting clause of the leases required an immediate exchange of consideration, rather than an exchange of promises to perform. The court explained that SWEPI's proffered construction would require the court to examine the granting clause in isolation, separate from the terms of Paragraph 22, which expressly superseded any conflicting terms of the lease. Doing so, the court noted, would "flout[ ] the maxim that all provisions of a contract must be read together and 'given effect.' " 195 F.Supp.3d at 680 (quoting Camp Ne'er Too Late, LP v. SWEPI, LP , 185 F.Supp.3d 517, 544 (M.D. Pa. 2016) ).

SWEPI insists that the promissory language in the Masciantonio lease addenda materially distinguishes those agreements from the Lease Agreements at issue here and dictates a different outcome in the instant case-namely, a determination that only payment of the bonuses could serve as valid consideration because the Leases in this case contained no executory promise of payment. To buttress this argument, SWEPI relies on footnote 4 in the Masciantonio decision which, it insists, leaves "no doubt that the promissory language in the [ Masciantonio ] leases was key to [the court's] decision."

SWEPI's argument is unpersuasive. Though it is true that the court in Masciantonio distinguished the Walney leases in footnote 4, it did so in the context of determining whether the Masciantonio plaintiffs were impacted by the class action proceedings in this court by virtue of having signed similar leases. Because class certification under Rule 23(b)(3) depends on the plaintiff's ability to establish claims on the basis of class-wide proof, the Masciantonio court correctly considered whether any unique provisions in the Masciantonio leases might require a substantially different analysis than would apply to the claims asserted in Walney. The fact that the Masciantonio leases are materially distinguishable for class litigation purposes does not necessarily mean that different outcomes must ensue with respect to the substantive claims asserted by class members; the distinction simply means that the court in Masciantonio needed to consider an important contractual provision that was not common to the Walney class members and would not inform the court's breach of contract analysis in this case. Importantly, the court in Masciantonio did not purport to offer any definitive opinion concerning the proper construction of the Leases sub judice -a function which falls to this court alone.

To the extent the court's analysis in Masciantonio is informative in this case, it in no way conflicts with this court's determination that the subject leases are supported by valid consideration. In Masciantonio, the plaintiffs' leases-with the benefit of the superseding payment provision in Addenda Paragraph 22-unambiguously expressed a promise on SWEPI's part to pay the subject lease bonuses by the end of the 90-day period, subject only to title verification. See Masciantonio, 195 F.Supp.3d at 690 ("The language of the lease agreements sub judice is plain and unambiguous, susceptible of only one reasonable interpretation: SWEPI was bound to pay bonus consideration upon execution of the leases, subject only to the condition of title verification.") (citations to the record omitted). In the instant case, this court concludes that the standard contract language, though perhaps less clear, must logically be interpreted in the same manner.

For the same reason, the class members' claims are not in conflict with the ruling in Cardinale. There, the plaintiffs' lease agreement stated: "Within sixty (60) days from the date of execution of this lease, Lessee agrees to pay to the Lessor the sum of One Hundred Five Thousand Eight Hundred Seventy-five and 00/100 Dollars $(105,875.00) as full and complete bonus payment for this lease for the entire primary term of this lease. This is a paid-up lease and no delay rentals shall be due." 74 A.3d at 140. The Pennsylvania Superior Court found that this language "strongly indicate[d] ... that valid consideration existed." Id. Although the evidence of consideration may have been stronger in Cardinale because of the explicit promissory language set forth in the lease, it does not follow that consideration is lacking in the instant case. For the reasons discussed, the contract as a whole is most logically interpreted as incorporating a promise by SWEPI of a future payment, albeit one conditioned on verification of clean title.

SWEPI nevertheless maintains that any promise of payment is rendered illusory by virtue of the Draft's exculpatory clause, which states: "No liability for payment or otherwise shall be attached to any of the parties hereto." (ECF 150-30.) According to SWEPI, this language "plainly allows it to cancel the draft without liability," and "therefore negates any possibility that the draft itself constitutes a promise to pay." (Defs.' Mem. Supp. Defs.' Mot. Summ. J. at 9, ECF 158.) See Geisinger Clinic v. Di Cuccio , 414 Pa.Super. 85, 606 A.2d 509, 512 (1992) ("If the promise is entirely optional with the promisor, it is said to be illusory and, therefore, lacking consideration and unenforceable. The promisor has committed him/herself to nothing."); Restatement (Second) of Contracts § 77 cmt. a ("Words of promise which by the terms make performance entirely optional with the 'promisor' do not constitute a promise.... Where the apparent assurance of performance is illusory, it is not consideration for a return promise."). Under this view of the contract, either party could have abandoned the Lease Agreement with impunity unless and until SWEPI paid the bonus money.

The court is not persuaded that SWEPI's proposed interpretation reflects the unambiguous intent of the parties, particularly when the "no liability" clause is read in the context of the contract as a whole. As discussed, both the Lease and the MOL contain language indicating that an agreement was formed, and the primary lease term began to run, on the date that the Transactional Documents were signed and exchanged. The Draft expressly afforded SWEPI a specified number of banking days following presentment "for title examination and for payment." (ECF No. 150-30.) During this time, "[n]either forwarding bank nor payee(s) nor the grantor(s) of such lease or conveyance [could] demand return of this draft or any accompanying papers...." Id. The Draft further provided that, "when paid" (not "if" paid), it would constitute "payment in full" for the corresponding "lease or conveyance." All these provisions are rendered superfluous if SWEPI's proposed interpretation is adopted.

Well established principles of contract interpretation counsel against such a result if there is another reasonable interpretation of the exculpatory clause that gives meaning and effect to the contract as a whole. See Hampton Gardens Assocs. v. Kearny Bank, No. CV 16-323, 2016 WL 3576684, at *4 (E.D. Pa. June 29, 2016) ("[C]ourts should 'avoid constructions of contracts that would render promises illusory because such promises cannot serve as consideration for a contract.' ") (quoting M&G Polymers USA, LLC v. Tackett, --- U.S. ----, 135 S.Ct. 926, 936, 190 L.Ed.2d 809 (2015) ); Com. ex rel. Kane v. UPMC, 634 Pa. 97, 129 A.3d 441, 467-68 (2015) ("[W]e do not countenance the interpretation of a contract which would render it illegal or incapable of performance, but, rather, construe a contract to give legal effect to every provision therein,....");

Restatement (Second) of Contracts § 203(a) ("In the interpretation of a promise or agreement or a term thereof, ... an interpretation which gives a reasonable, lawful, and effective meaning to all the terms is preferred to an interpretation which leaves a part unreasonable, unlawful, or of no effect...."). Consequently, the more logical construction of the "no liability" language is that it signifies a narrower intent-namely, an intent to preclude any liability predicated on the instrument itself in the event it was returned unpaid.

The latter interpretation was adopted by the court in Masciantonio. There, the court considered the effect of a "no liability" clause that was identical to the one at issue in this case. The court rejected SWEPI's argument that the clause voided its contractual obligations and concluded that "the 'no liability' language most logically pertains to the draft itself, precluding independent litigation thereon." 195 F.Supp.3d at 685. The court noted that "[t]he majority of courts presented with this question have reached the same result." Id. (citing Smith v. Arrington Oil & Gas, Inc. , 664 F.3d 1208 (8th Cir. 2012), Davis v. Meagher Oil & Gas Props., Inc ., No. 08-1638, 2010 WL 819403, at *4 (W.D. La. Mar. 4, 2010) ; and St. Romain v. Midas Expl., Inc ., 430 So.2d 1354, 1357-58 (La. Ct. App. 1983), but acknowledging a contrary ruling in Spellman v. Lyons Petroleum Inc ., 709 S.W.2d 295 (Texas App. 1986) ). The court found the reasoning of the Eighth Circuit Court of Appeals and the Louisiana courts to be "persuasive and most consistent with Pennsylvania's rules of contract interpretation," id. (citations omitted), which require courts to construe all terms of an agreement in conjunction with one another, "giving full and fair effect to each provision." Id. (citing Jacobs v. CNG Transmission Corp ., 332 F.Supp.2d 759, 790-91 (W.D Pa. 2004) ).

In Smith v. Arrington Oil & Gas, Inc. -the Eighth Circuit Court of Appeals' decision cited in Masciantonio , the draft contained an exculpatory clause which read, "In the event this draft is not paid within [the designated time period], the collecting bank shall return the same to forwarding bank and no liability for payment or otherwise shall be attached to any of the parties hereto." 664 F.3d at 1211. The defendant lessee argued, unsuccessfully, that this language precluded either party to the lease agreement from having any contractual obligations, unless and until the drafts were paid. The court rejected the defendants' proposed interpretation because it was "belied" by other terms in the agreement:

For example, the lease agreements recite an immediate exchange of the lease "for and in consideration of a cash bonus in hand paid, the receipt of which is hereby acknowledged." Furthermore, the duration of the lease and the renewal periods, recited respectively in Paragraphs 1 and 21, begin to run on the date of execution. The lease agreements affirmatively declare in Paragraph 13 that "[t]his lease shall be effective as to each Lessor on execution hereof as to his or her interest and shall be binding on those signing." The lessors' obligations upon signing included the duty in Paragraph 15 to warrant and defend the title to the property and the duty in Paragraph 16 to give [the defendant] "a reasonable period of time within which to comply with [any] covenant, condition, obligation, or requirement" of the lease before terminating the lease. Viewing the contract as a whole, these provisions indicate that a contract was formed when the landmen accepted the lease agreements in exchange for the bank drafts.

664 F.3d at 1213-14. Whereas the defendant's reading of the exculpatory clause would have negated the foregoing provisions, in Arrington Oil & Gas the court adopted an alternative construction which allowed it to "harmonize" the exculpatory clause with the other lease terms in compliance with Arkansas' principles of contract interpretation: i.e., the court viewed the exculpatory language as "most naturally appl[ying] only to eliminating any potential liability created by return of the draft, something analogous to 'returned check' liability." 664 F.3d at 1214. Adhering to this construction, the court held that the defendant was obligated under the leases to pay the promised cash bonuses unless it disapproved of title in good faith within the time prescribed on the face of each bank draft. 664 F.3d at 1213.

In contrast to Masciantonio and Arrington Oil & Gas are two decisions rendered by the Texas Court of Appeals, Spellman v. Lyons Petroleum Inc ., 709 S.W.2d 295 (Texas App. 1986), and Arabella Petroleum Co., LLC v. J.H. Baldwin , No. 04-11-00370-CV, 2012 WL 2450803 (Tex. App. June 27, 2012), wherein the courts determined that a "no liability" clause in a draft instrument caused the corresponding leases to fail for lack of mutuality. Both Spellman and Arabella involved draft instruments which provided: "In the event this draft is not paid within said time, the collecting bank shall return the same to forwarding bank and no liability for payment or otherwise shall be attached to any of the parties hereto." Spellman, 709 S.W.2d at 297 ; Arabella Petroleum Co., 2012 WL 2450803, at *1. In both cases, the courts construed the drafts in conjunction with the leases and determined that the "no liability" language rendered the contracts unenforceable. See Spellman, 709 S.W.2d at 297-98 ; Arabella Petroleum Co., 2012 WL 2450803, at *4-5. Because the Leases and Drafts in this case are likewise being construed together as part of a single transaction, SWEPI urges this court to follow the rulings of Spellman and Arabella.

This court declines to do so, because it is questionable whether Pennsylvania courts would adopt the reasoning of the Texas Court of Appeals in the context of the present litigation. In Spellman and Arabella, the drafts were expressly made payable upon the lessor's approval of the lease agreement as well as approval of title. See Spellman, 709 S.W.2d at 296-97 ; Arabella Petroleum Co., 2012 WL 2450803, at *1. The drafts further provided that they were "subject alone to the acceptance of payment" by the "drawee" within a specified time frame. Spellman, 709 S.W.2d at 297 ; Arabella Petroleum Co., 2012 WL 2450803, at *1. In the context of these contractual provisions, which vested complete discretion in the oil and gas company relative to acceptance of the lease and payment of the corresponding draft, the courts appropriately determined, as a matter of law, that the exculpatory clauses evidenced a lack of mutuality. Notably, the subject contracts did not impose a duty upon the lessor to make a reasonable effort to perform, and no such duty could be implied under Texas law. See Spellman, 709 S.W.2d at 297 ; Arabella Petroleum, Co., 2012 WL 2450803, at *4. Indeed, in Arabella the court conceded that, "[h]ad the draft or the lease contractually imposed such a good faith or reasonable effort requirement, the outcome of this case might be different." 2012 WL 2450803, at *4.

Critically, however, Pennsylvania appears to apply a different legal standard relative to the duty of good faith and fair dealing. Although the Pennsylvania Supreme Court has not expressly decided the matter, the Third Circuit Court of Appeals has concluded that Pennsylvania courts recognize an inherent duty of good faith and fair dealing in all contracts governed by Pennsylvania law. See, e.g., Tuno v. NWC Warranty Corp., 552 Fed.Appx. 140, 144 (3d Cir. 2014) ("Pennsylvania courts have recognized 'the general duty of contracting parties to perform their contractual obligations in good faith.' ") (quoting Baker v. Lafayette Coll ., 350 Pa.Super. 68, 504 A.2d 247, 255 (1986) ); W. Run Student Hous. Assocs., LLC v. Huntington Nat. Bank , 712 F.3d 165, 170 (3d Cir. 2013) (" '[E]very contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement....' ") (quoting Kaplan v. Cablevision of PA, Inc ., 448 Pa.Super. 306, 671 A.2d 716, 722 (1996) ); Northview Motors, Inc. v. Chrysler Motors Corp., 227 F.3d 78, 91 (3d Cir. 2000) ("Pennsylvania courts have cited Restatement (Second) of Contracts § 205 for the proposition that every contract has an implied term that the parties will perform their duties in good faith...."); Restatement (Second) of Contracts § 205 ("Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement."). Consequently, this court is not persuaded that the Pennsylvania Supreme Court would adhere to the reasoning of Spellman and Arabella in the context of this case.

While this court construes the Drafts and the Leases together as part of the same transaction, it does not necessarily follow that the "no liability" clause negates all contractual obligations set forth in the Lease. Unlike SWEPI, this court does not view the Draft in mutually exclusive terms, i.e., either as a medium of payment or as a contractual document; rather it is both. The Draft sets forth the amount of the bonus as well as the terms of payment, and thereby supplies important contractual terms, but it is also a specific and distinct medium of payment. As the courts recognized in Masciantonio and Smith , construing the "no liability" clause in a limited manner-i.e., pertaining to the Draft only as the medium of payment and precluding independent litigation thereon-is consistent with Pennsylvania principles of contract construction inasmuch as it allows the various terms of the agreement to be construed together, giving "full and fair effect to each provision." Masciantonio, 195 F.Supp.3d at 685 (citing Jacobs, 332 F.Supp.2d at 790-91 ).

SWEPI contends, however, that its interpretation of the Transactional Documents is the only one that is consistent with Pennsylvania industry practice and, thus, the only one that reflects the parties' true, objective intent. Under Pennsylvania law, "custom in the industry or usage in the trade is always relevant and admissible in construing commercial contracts," even where no ambiguity otherwise exists. Sunbeam Corp. v. Liberty Mut. Ins. Co., 566 Pa. 494, 781 A.2d 1189, 1193 (2001). In support of its motion, SWEPI submitted the declaration of Lisa C. McManus, Esq., a lawyer engaged in the area of Pennsylvania oil and gas industry, who attests that:

[ ] Certified checks or cashier checks are not usually given upon the execution of an oil and gas lease because leases are generally conditioned upon the ability of the lessee to proceed with development, as that is the intent of the parties to the lease. As a result, lessees, in lieu of a check, usually provide an Order of Payment or bank draft that contains terms that allow for a delay while the lessee investigates whether to proceed with the lease and provides for a definite time at which the payment is due, should all conditions set forth in the Order of Payment or draft be met.

[ ] Often the language in an Order of Payment or bank draft fails to protect the lessor. Nonetheless, an Order of Payment or bank draft could be negotiated by the lessor to allow for greater protections for the lessor.

[ ] My experience with drafts in Pennsylvania is that many include "No Protest" notices and language that provides that "no liability for payment or otherwise shall be attached to any of the parties" to the draft, like the bank drafts in this case. In other words, that draft language, which is construed in conjunction with the other lease instruments, means that the lessee may opt not to fund the draft and will not be liable for any payment to the lessor, as a matter of industry custom, usage, and practice. The use of a bank draft to pay a bonus allows the lessee to cancel, void, or surrender the lease and not pay the bonus, with no consequences or liability, where the draft utilizes the term "No Protest" and contains language absolving all parties of liability, according to Pennsylvania oil and gas industry custom, usage, and practice.

(McManus Decl. ¶¶ 25-27, ECF No. 150-3.)

The Pennsylvania Supreme Court has instructed t