Opinion
Case No. 4:20-cv-12600
2023-03-31
MICHIGAN GEOSEARCH, INC., Plaintiff, v. TC ENERGY CORPORATION, Defendant.
Amy L. Marino, Marino Law PLLC, Southfield, MI, Andrew Kochanowski, Sommers Schwartz, P.C., Southfield, MI, Brent Taylor Caldwell, Lewis Brisbois, Houston, TX, Matthew J.M. Prebeg, Bayko, Prebeg, Faucett & Abbott PLLC, Houston, TX, for Plaintiff. Jennifer Simon, Kazmarek Mowrey Cloud Laseter LLP, Atlanta, GA, Paul K. Stockman, Kazmarek Mowrey Cloud Laseter LLP, Pittsburgh, PA, Scott A. Storey, Foster, Swift, Lansing, MI, for Defendant.
Amy L. Marino, Marino Law PLLC, Southfield, MI, Andrew Kochanowski, Sommers Schwartz, P.C., Southfield, MI, Brent Taylor Caldwell, Lewis Brisbois, Houston, TX, Matthew J.M. Prebeg, Bayko, Prebeg, Faucett & Abbott PLLC, Houston, TX, for Plaintiff. Jennifer Simon, Kazmarek Mowrey Cloud Laseter LLP, Atlanta, GA, Paul K. Stockman, Kazmarek Mowrey Cloud Laseter LLP, Pittsburgh, PA, Scott A. Storey, Foster, Swift, Lansing, MI, for Defendant. OPINION AND ORDER GRANTING TC ENERGY'S MOTION FOR SUMMARY JUDGMENT (ECF NO. 35) SHALINA D. KUMAR, United States District Judge
The parties in this case are companies in the natural gas industry. Plaintiff Michigan GeoSearch, Inc. ("MGI") is the owner of a natural gas well and reservoir named Pilat 1-24. MGI alleges that natural gas stored underground at the Muttonville storage field, which MGI alleges is owned by defendant TC Energy Corporation ("TC Energy"), is migrating underground to Pilat 1-24, and that TC Energy has failed to address the migration.
Presently before the Court is TC Energy's motion for summary judgment. This motion is fully briefed and the Court held oral argument on March 8, 2023. ECF Nos. 35, 38, 42, 44. For the reasons stated in this opinion and order, the Court GRANTS TC Energy's motion for summary judgment.
I. PROCEDURAL HISTORY
On September 22, 2020, MGI filed this case against TC Energy, alleging that Muttonville storage gas is traveling underground and re-pressurizing the Pilat 1-24 well. MGI asserted claims of de facto taking under 42 U.S.C. § 1983, inverse condemnation under Michigan law, trespass, nuisance, negligence, unjust enrichment, and declaratory judgment under 28 U.S.C. § 2201. ECF No. 1. TC Energy answered on June 29, 2021, denying pressure communication between the Muttonville storage field and the Pilat 1-24 well. ECF No. 17.
On June 8, 2021, the Court issued an opinion and order granting in part and denying in part TC Energy's motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). The Court dismissed MGI's Section 1983 claim, dismissed MGI's trespass, nuisance, and negligence claims as time-barred, and dismissed MGI's declaratory judgment claim which requested a declaration that TC Energy is obligated to pursue an action for adverse condemnation. ECF No. 15.
On July 29, 2022, TC Energy filed its instant motion for summary judgment, asking the Court to dismiss MGI's remaining inverse condemnation and unjust enrichment claims, and dismiss MGI's remaining declaratory judgment claim which requested a declaration that TC Energy is obligated to comply with certain federal regulations. II. FACTUAL BACKGROUND
The parties have prepared statements and counter-statements of facts and submitted supporting exhibits. In this opinion and order, the citations are to the numbered paragraphs in the written briefs. TC Energy's Mot. Br. 3-25 ("DSOF"), ECF No. 35 at PageID.314-336; MGI's Opp'n Br. 1-13 ("PCSOF"), 13-26 ("PSOF"), ECF No. 38 at PageID.1023-1035; TC Energy's Reply Br. 5-13 ("DCSOF"), ECF No. 42 at PageID.1865-1873.
The natural gas operations at issue in this case are located in Lenox Township, Macomb County, Michigan and based on underground rock formations that have been in place for approximately 450 million years. DSOF ¶¶ 1, 4, 19. Muttonville is an underground natural gas storage field that was converted from a production field following commercial depletion of nat ive gas reserves. Id. ¶¶ 4, 6. The Muttonville storage field spans approximately 300 acres and is located approximately 3,000 feet underground. Id. ¶ 4; Compl. ¶ 9, ECF No. 1 at PageID.3. Natural gas is injected into pore spaces located in the underground rock formation during periods of low demand and returned to customers during times of high demand. DSOF ¶ 5.
In 2007, Defendant TC Energy acquired ANR Pipeline Company (named the Michigan Wisconsin Pipe Line Company until 1984) ("ANR"). Answer ¶ 3, ECF No. 17 at PageID.184. ANR operates an interstate pipeline network of natural gas transmission lines and storage fields. DSOF ¶ 14. ANR is a natural gas company within the meaning of the Natural Gas Act ("NGA"). 15 U.S.C. §§ 717 et seq. The NGA is administered by the Federal Energy Regulatory Commission ("FERC"), previously the Federal Power Commission ("FPC"). In 1974, ANR applied to the FPC for a certificate of public convenience and necessity to acquire, construct, and operate Muttonville. DSOF ¶ 7. The FPC granted the certificate in 1975, and ANR has owned and operated Muttonville since its creation. Id. ¶¶ 8, 11.
To be more accurate, ANR Pipeline Company was acquired by TransCanada American Investments Ltd. ANR Pipeline Company is a subsidiary of American Natural Resources Company, which is a subsidiary of TransCanada American Investments Ltd., which is a subsidiary of TransCanada PipeLine USA Ltd., which is a subsidiary of TransCanada PipeLines Ltd., which is a subsidiary of Defendant TC Energy Corporation. DSOF ¶ 14.
The operation of Muttonville involves three distinct operations. PSOF ¶ 16. ANR periodically injects natural gas for storage from July to October, periodically withdraws natural gas for distribution from November to March, and periodically "shuts in" the reservoir from April to June. Id.
The Pilat 1-24 underground reservoir is located half a mile southeast from Muttonville. MGI alleges that the Muttonville storage field and the Pilat 1-24 reservoir communicate through a porous geological "saddle" located approximately 2,800 feet underground. Compl. ¶ 78, ECF No. 1 at PageID.22. MGI alleges that when natural gas is injected and the Muttonville storage field is pressurized, Muttonville storage gas migrates southeast and re-pressurizes the Pilat 1-24 well. Id. ¶ 16, ECF No. 1 at PageID.6.
MGI is an oil and gas exploration and production company solely owned by its president Thomas "Tim" Fodor. DSOF ¶¶ 1-2. MGI acquired Pilat 1-24 in 1989. Id. ¶ 22. Pilat 1-24 was drilled in 1977 and operated until 1985, when the reservoir was thought to be depleted, and the previous operator applied to plug and abandon the well. Id. ¶¶ 17, 20-21. After an investigation for additional gas reserves, MGI determined that the Pilat 1-24 well is located in an isolated rock formation and not connected to a larger rock formation that would support additional drilling. DSOF ¶¶ 23-25; PCSOF ¶¶ 23-25. MGI then planned to convert Pilat 1-24 to a commercial disposal well, assuming that the reservoir was in fact depleted. DSOF ¶ 26; PCSOF ¶ 26. MGI began work on Pilat 1-24 in November 1989, and, after observing increased pressure, put the well into production from June 1990 to June 1994. DSOF ¶¶ 27, 29. During 1994, when Pilat 1-24 was shut in, MGI once again observed increased pressure. Id. ¶ 30. Fodor postulated that Muttonville storage gas was migrating and re-pressurizing Pilat 1-24. PCSOF ¶ 30.
Over the next four years, from 1994 to 1998, MGI consulted with experts John Odinga, M.Y. "Arun" Joshi, and Jack Elenbaas, obtained isotopic analyses from the Isotech laboratory, and corresponded with ANR through its director Richard Gentges. MGI first contacted ANR in December 1994 through Mr. Odinga. PSOF ¶ 26. Explaining that Pilat 1-24 was re-pressurizing from somewhere, MGI provided pressure data and asked whether ANR was interested in acquiring the well. DSOF ¶ 31; PSOF ¶¶ 26-27; DCSOF ¶ 26-27. In February and April 1995, Joshi advised MGI that he concurred with Fodor that Pilat 1-24 was re-pressurizing from an external source, possibly the nearby Muttonville storage field. DSOF ¶ 32.
MGI contacted ANR again in June 1995 through Mr. Fodor. Id. ¶ 34. Providing additional data requested by ANR and citing Joshi's analysis, MGI informed ANR of its opinion that there was "conclusive evidence" that the Pilat 1-24 well is in pressure communication with the Muttonville storage field. Id. MGI explained that nature of the pressure buildup along with the cyclic re-pressurization "virtually eliminates" any other source. Id. MGI concluded by threatening suit. Id. ¶ 35. MGI informed ANR that if it was not interested in acquiring Pilat 1-24, MGI would "continue to produce the well" and "may at some time" pursue "relief from the Michigan Public Service Commission and from the Macomb County Circuit Court for trespass and/or inverse condemnation and/or all available injunctive relief." Id.
ANR responded in July 1995 through Gentges. Id. ¶ 54. In the meantime, ANR internally analyzed the local geology and concluded that the structural data showed the "possibility" of a geologic connection between the reef formations but a "high improbability" of the Muttonville storage field re-pressurizing the Pilat 1-24 reservoir. PSOF ¶ 28; DCSOF ¶ 28. Based on its analysis of pressure data, ANR estimated that the original gas-in-place in the Pilat 1-24 reservoir was higher than previous estimates and anticipated that pressure would continue to increase. PSOF ¶¶ 29-30; DCSOF ¶¶ 29-30. In its July 1995 correspondence, ANR expressed its opinion that the available data showed "no communication" between the Muttonville storage field and the Pilat 1-24 well. TC Energy's Mot. Ex. 32, ECF No. 35-46 at PageID.754. ANR informed MGI that it would not acquire Pilat 1-24 because it had "no interest" in operating the well to recover remaining gas reserves. Id. ANR explained that: "We wish you success in your efforts to sell the well and/or to resume production." Id.
MGI contacted ANR again in February and March 1997 through Odinga. DSOF ¶¶ 39, 41. In the meantime, MGI consulted with Elenbaas. DSOF ¶ 37. After analyzing pressure data and advising MGI that migration of Muttonville storage gas was the "more likely" cause of increased pressure at Pilat 1-24, Elenbaas suggested that MGI obtain a gas analysis. TC Energy's Mot. Ex. 18, ECF No. 35-32 at PageID.653-654. After comparing samples of storage gas, Pilat 1-24 gas, and native gas, Elenbaas advised MGI that the Pilat 1-24 gas sample was 54.7 percent storage gas. Id. Ex. 19, ECF No. 35-33 at PageID.659. In its February 1997 correspondence, MGI informed ANR that it had "consulted with some experts" who advised MGI of their opinion that there has been an "intrusion" of storage gas into Pilat 1-24. DSOF ¶ 39. In its March 1997 correspondence, MGI informed ANR of its opinion that there was "no question" that Pilat 1-24 was re-pressurizing from an external source. Id. ¶ 41.
From June to August 1997, MGI obtained isotopic analyses of Muttonville, Pilat 1-24, and native gas samples from Isotech. Id. ¶¶ 46-49. Isotech advised MGI that the Pilat 1-24 gas sample was "similar" to the Muttonville gas sample, and that it was therefore "quite probable" that the Pilat 1-24 well was producing storage gas. Id. ¶ 47. With additional comparison to the native gas samples, Isotech advised MGI that the native gas samples were "chemically and isotopically quite different" from the Pilat 1-24 and Muttonville gas samples, and that the Pilat 1-24 gas sample was "significantly different" from the native gas samples and "very similar" to the Muttonville gas sample. Id. ¶ 48. Isotech explained that the "most logical explanation" was that the Pilat 1-24 well was producing storage gas. Id. According to MGI, the 1997 isotopic analyses "confirmed" the presence of Muttonville storage gas in the Pilat 1-24 well. Compl. ¶ 29, ECF 1 at PageID.9.
In what would become the last correspondence until 2020, MGI through Fodor contacted ANR again in October 1998, and ANR through its counsel Belinda Friis responded in November 1998. DSOF ¶¶ 51, 54. In its October 1998 correspondence, MGI informed ANR that it was "still of the opinion" that the Pilat 1-24 well is in pressure communication with the Muttonville storage field, an opinion MGI explained was "supported by other extremely knowledgeable parties." DSOF ¶ 51. MGI concluded by offering to supply a Pilat 1-24 gas sample for isotopic analyses. TC Energy's Mot. Ex. 29, ECF No. 35-43 at PageID.750. In its November 1998 correspondence, ANR informed MGI that it was "not willing" to engage in isotopic analyses of either Pilat 1-24 gas samples or Muttonville and native gas samples. Id. Ex. 35, ECF No. 35-49 at PageID.758.
Following the correspondence between MGI and ANR from 1994 to 1998, ANR wrote letters to the Michigan Department of Environmental Quality ("MDEQ") and FERC in November 1998 and July 2000. PSOF ¶¶ 51, 56. In its November 1998 letter to MDEQ, ANR informed the state regulator of MGI's operation of Pilat 1-24 that ANR denied MGI's pressure communication claim. Id. ¶ 52. Specifically, ANR represented that after conducting an "extensive evaluation" of the data provided by MGI and its storage operations at Muttonville, ANR remained "convinced" that there was "no evidence" of pressure communication between the Muttonville storage field and the Pilat 1-24 well. Id. Similar to its July 1995 correspondence with MGI, ANR explained that: "It is ANR's position that MGI is free to either produce the Pilat well in accordance with whatever ability the well may have to produce or plug the well." TC Energy's Mot. Ex. 34, ECF No. 35-48 at PageID.757. In its July 2000 letter to FERC, ANR informed the federal regulator of ANR's operation of Muttonville that ANR denied MGI's migration claim. PSOF ¶ 56. Specifically, ANR represented that its analysis of operating data showed "no evidence" that Muttonville storage gas was migrating to Pilat 1-24. Id.
Over the next nineteen years, MGI put the Pilat 1-24 well back into production, producing over 485 million cubic feet of gas from 2001 to 2013 and 2017 to 2019. DSOF ¶¶ 55, 57-58, 61. Fodor testified that he "believed" that the Pilat 1-24 well is in pressure communication with the Muttonville storage field and that Muttonville storage gas was migrating to Pilat 1-24. DSOF ¶ 56; PCSOF ¶ 56. However, citing ANR's denials to not only MGI, but also MDEQ and FERC, Fodor testified that he did not "know" for sure whether MGI was producing storage gas. Id.
As noted above, MGI filed this case against TC Energy in September 2020. After MGI contacted TC Energy in early 2020, TC Energy agreed to a joint collection of Muttonville and Pilat 1-24 gas samples for isotopic gas analysis by Isotech. Compl. ¶¶ 45-46, ECF No. 1 at PageID.15; Answer ¶¶ 45-46, ECF No. 17 at PageID.208. According to MGI, similar to the 1997 isotopic analyses, the 2020 isotopic analyses "confirms" the presence of Muttonville storage gas in the Pilat 1-24 well. Compl. ¶¶ 47, 49, ECF 1 at PageID.15-16. MGI alleges that it filed this case because Pilat 1-24 was once again re-pressurizing from an external source, and TC Energy continued to deny that the source of re-pressurization was storage gas migrating from Muttonville. Compl. ¶¶ 48-49, ECF 1 at PageID.15-16.
III. SUMMARY JUDGMENT STANDARD
Under Federal Rule of Civil Procedure 56, summary judgment is proper when there is "no genuine dispute as to any material fact" and the moving party is "entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "In deciding a motion for summary judgment, the court must view the evidence in the light most favorable to the non-moving party, drawing all reasonable inferences in that party's favor." Sagan v. United States, 342 F.3d 493, 497 (6th Cir. 2003). "Where the moving party has carried its burden of showing that the pleadings, depositions, answers to interrogatories, admissions and affidavits in the record, construed favorably to the non-moving party, do not raise a genuine issue of material fact for trial, entry of summary judgment is appropriate." Gutierrez v. Lynch, 826 F.2d 1534, 1536 (6th Cir. 1987) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)).
The court does not weigh the evidence to determine the truth of the matter, but rather, to determine if the evidence produced creates a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The moving party discharges its burden by " 'showing'—that is, pointing out to the district court—that there is an absence of evidence to support the non-moving party's case." Horton v. Potter, 369 F.3d 906, 909 (6th Cir. 2004) (quoting Celotex, 477 U.S. at 325, 106 S.Ct. 2548).
The burden then shifts to the non-moving party, who "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The non-moving party must put forth enough evidence to show that there exists "a genuine issue for trial." Horton, 369 F.3d at 909 (citing Matsushita, 475 U.S. at 587, 106 S.Ct. 1348). Summary judgment is not appropriate when "the evidence presents a sufficient disagreement to require submission to a jury." Anderson, 477 U.S. at 251-52, 106 S.Ct. 2505.
The existence of a factual dispute alone does not, however, defeat a properly supported motion for summary judgment—the disputed factual issue must be material. "The judge's inquiry, therefore, unavoidably asks whether reasonable jurors could find by a preponderance of the evidence that the plaintiff is entitled to a verdict—whether there is evidence upon which a jury can properly proceed to find a verdict for the party producing it, upon whom the onus of proof is imposed." Id. at 252, 106 S.Ct. 2505 (quotation and alteration omitted). A fact is "material" for purposes of summary judgment when proof of that fact would establish or refute an essential element of the claim or a defense advanced by either party. Kendall v. Hoover Co., 751 F.2d 171, 174 (6th Cir. 1984) (citation omitted).
IV. ANALYSIS
In its motion for summary judgment, TC Energy asks the Court to dismiss MGI's remaining inverse condemnation, unjust enrichment, and declaratory judgment claims. For purposes of summary judgement, MGI does not dispute that its unjust enrichment claim is merely a variation on its inverse condemnation claim. TC Energy moves to dismiss each of MGI's claims on multiple grounds. Below, the Court addresses each ground separately for clarity to the parties, even if the analysis results in summary judgment for multiple reasons.
As to all of MGI's claims, TC Energy argues that it is entitled to summary judgment because MGI has sued the wrong party. TC Energy has submitted evidence that Muttonville is owned and operated by ANR, not TC Energy. TC Energy argues that it is not liable for the actions of ANR. For the reasons set forth below, the Court finds that TC Energy is entitled to summary judgment dismissing all of MGI's claims.
As to MGI's inverse condemnation and unjust enrichment claims, TC Energy moves for summary judgment on three grounds.
First, TC Energy argues that it is entitled to summary judgment because MGI does not own the allegedly taken subsurface rights, including the right to store foreign storage gas at Pilat 1-24.
Second, TC Energy argues that it is entitled to summary judgment because MGI's claims are barred. Specifically, TC Energy argues that it has a prescriptive easement to store foreign storage gas at Pilat 1-24 and that the relevant statute of limitations and laches bar MGI's claims.
Third, TC Energy argues that it is entitled to summary judgment that MGI cannot recover damages calculated just from the value of remaining recoverable gas in Pilat 1-24 and the lost revenue from using Pilat 1-24 as a commercial disposal well.
For the reasons set forth below, the Court finds that TC Energy is entitled to summary judgment dismissing MGI's inverse condemnation and unjust enrichment claims, as well as summary judgment that MGI cannot recover damages calculated just from the value of remaining recoverable gas and the lost revenue from a commercial disposal well.
As to MGI's declaratory judgment claim, TC Energy argues that it is entitled to summary judgment because the requested declaration would compel Muttonville to comply with inapplicable regulatory provisions. For the reasons set forth below, the Court finds that TC Energy is entitled to summary judgment dismissing MGI's declaratory judgment claim.
A. Parent-Subsidiary Liability
Initially, maintaining that MGI has sued the wrong party, TC Energy argues that it is entitled to summary judgment because TC Energy is not liable for the actions of ANR. As noted above, TC Energy acquired ANR, who owns and operates Muttonville, in 2007. In addition to other evidence, discussed below, TC Energy submits a declaration stating that TC Energy is a Canadian corporation whose operations in the United States are conducted by subsidiaries. TC Energy's Mot. Ex. I (Johnston Decl.) ¶ 2, ECF No. 35-12 at PageID.582. ANR, who operates an interstate pipeline network of natural gas transmission lines and storage fields, is an indirect, fifth-level subsidiary who never transferred ownership or operation of Muttonville to TC Energy. Id. ¶¶ 4-6, ECF No. 35-12 at PageID.583. TC Energy argues that summary judgment is appropriate because MGI has not shown any justification for piercing the corporate veil to hold it liable for the actions of ANR.
See note 2.
In opposition, MGI argues that summary judgment is not appropriate because TC Energy has waived a corporate veil defense. In the alternative, MGI argues that summary judgment is not appropriate because there is a genuine dispute whether TC Energy operates ANR.
"It is a well-recognized principle that separate corporate entities will be respected." Seasword v. Hilti, Inc., 449 Mich. 542, 537 N.W.2d 221, 224 (1995). The "corporate veil" refers to the presumption that "absent some abuse of corporate form, parent and subsidiary corporations are separate and distinct entities." Id. "Consequently, before a corporate parent may be held liable for the actions of its subsidiary, facts that justify piercing the corporate veil must be shown." Bodnar v. St. John Providence, Inc., 327 Mich.App. 203, 933 N.W.2d 363, 378 (2019). "For the corporate veil to be pierced, the plaintiff must aver facts that show (1) that the corporate entity is a mere instrumentality of another entity or individual, (2) that the corporate entity was used to commit fraud or a wrong, and (3) that, as a result, the plaintiff suffered an unjust injury or loss." Dutton Partners, LLC v. CMS Energy Corp., 290 Mich.App. 635, 802 N.W.2d 717, 722 (2010).
As to its waiver argument, MGI maintains that the corporate veil is an affirmative defense that a defendant cannot assert for the first time on summary judgment. According to MGI, TC Energy has waived a corporate veil defense by failing to assert the defense in its answer. While citing Federal Rule of Civil Procedure 8(c) to point out that a defendant risks waiver by failing to assert affirmative defenses in its answer, MGI does not cite any authority for the proposition that the corporate veil is an affirmative defense. Contrary to MGI's argument, piercing the corporate veil is a theory of liability, and it is incumbent upon the plaintiff to make a case for holding a parent corporation liable for the actions of a presumably separate subsidiary corporation. Id. ("the plaintiff must aver facts") (emphasis added). While discussing both TC Energy and ANR in its complaint, MGI only sued TC Energy, and has not moved to join ANR. If MGI is unable to show any justification for piercing the corporate veil, TC Energy may seek summary judgment by "pointing out" the "absence of evidence" for a parent-subsidiary theory of liability. Celotex, 477 U.S. at 325, 106 S.Ct. 2548.
MGI also takes issue with TC Energy raising a parent-subsidiary relationship after close of discovery. According to MGI, TC Energy should have given notice of its argument that TC Energy is not liable for the actions of ANR in its motion to dismiss or its answer. However, to the extent MGI did not conduct discovery on a parent-subsidiary theory of liability, it cannot blame TC Energy. In its answer, TC Energy's defenses and responses to factual allegations put MGI on notice that TC Energy disputed the implication that the Canadian corporation operates Muttonville. Specifically, in addition to failure to join necessary parties, TC Energy asserts a defense that MGI's claims "are barred because they were caused by the conduct of entities or persons other than TC Energy." Answer ¶¶ 107-108, ECF No. 17 at PageID.221. TC Energy admits having a principal place of business in Calgary, Alberta, Canada but denies having any place of business in the United States. Id. ¶ 2, ECF No. 17 at PageID.183. TC Energy denies registering with the Securities and Exchange Commission as a foreign corporation doing business in the United States, admitting only registering securities as a foreign private issuer. Id. Among other corrections about the entities discussed in the complaint, TC Energy notes that ANR was acquired by TransCanada American Investments Ltd., not TC Energy. Id. ¶ 3, ECF No. 17 at PageID.184. With respect to the events of this case, TC Energy denies operating in Lenox Township and denies the description of Muttonville as "Defendant's." Id. ¶¶ 5, 9, ECF No. 17 at PageID.185, 187.
Consistent with its answer, TC Energy submits evidence that demonstrates ANR's separate corporate existence with respect to the ownership and operation of Muttonville. According to several declarations, since its creation in 1975, Muttonville has always been owned and operated by ANR. TC Energy's Mot. Ex. E (Burla Decl.) ¶ 3, ECF No. 35-8 at PageID.574. Correspondingly, since acquiring ANR in 2007, TC Energy has never owned or operated Muttonville. Id. Ex. I (Johnston Decl.) ¶ 3, ECF No. 35-12 at PageID.582. Likewise, ANR has never granted away storage rights to the Muttonville storage field. Id. Ex. J (Simon Decl.) ¶ 19, ECF No. 35-13 at PageID.592-593. In addition, TC Energy submits supporting evidence from federal and state regulators. FERC understands that Muttonville is owned and operated by ANR. ANR Pipeline Co., 149 FERC P62,132, 64342 (2014). In Michigan, ANR holds a certificate of authority to transact business from the Michigan Department of Licensing and Regulatory Affairs. TC Energy's Mot. Ex. 3 (Certificate of Good Standing), ECF No. 35-17 at PageID.627. The Michigan Public Service Commission identifies ANR as the operator of the Muttonville storage field. Id. Ex. 4 (Michigan Natural Gas Active Storage Field Summary), ECF No. 35-18 at PageID.633. ANR holds the permits to the Muttonville wells from the Michigan Department of Environment, Great Lakes, and Energy. Id. Ex. 5 (GeoWebFace Well Map), ECF No. 35-19 at PageID.634.
MGI urges the Court to consider additional evidence, arguing that it precludes summary judgment by creating a genuine dispute whether TC Energy operates ANR, and, more specifically, whether TC Energy controls ANR as a mere instrumentality. "Factors used by courts to determine the propriety of piercing the corporate veil include: (1) whether the corporation is undercapitalized, (2) whether separate books are kept, (3) whether there are separate finances for the corporation, (4) whether the corporation is used for fraud or illegality, (5) whether corporate formalities have been followed, and (6) whether the corporation is a sham." Glenn v. TPI Petroleum, Inc., 305 Mich.App. 698, 854 N.W.2d 509, 520 (2014).
The Court is not persuaded that the evidence precludes summary judgment. Initially, the evidence does not support all of MGI's contentions. For example, MGI cites the TC Energy and ANR websites to maintain that TC Energy does not distinguish between its Canadian and United States operations. However, MGI points to statements that, while discussing both TC Energy and ANR, separately identify ANR as the company who operates an interstate pipeline network under FERC and other federal regulations. PSOF ¶¶ 1-3. Similarly, MGI cites deposition testimony to maintain that after TC Energy acquired ANR in 2007, ANR employees considered themselves TC Energy employees. Id. ¶¶ 5-6. However, one deponent merely consented at the beginning of questioning to a request by MGI's counsel to understand the use of "ANR" as a shorthand for referencing TC Energy and other entities. MGI's Opp'n Ex. C (Gentges Dep.) 6:13-21, ECF No. 38-7 at PageID.1278. And as opposed to the defendant in this case, TC Energy, one deponent testified that he ended his career with TransCanada USA Services, Inc. Id. Ex. A (Nowaczewski Dep.) 8:10-16, ECF No. 38-2 at PageID.1081.
To the extent it supports MGI's contentions, MGI does not explain how the evidence goes to relevant factors for piercing the corporate veil. For example, MGI points to statements on the TC Energy and ANR websites that ANR is "part of TC Energy" and a "member of the TC Energy family." PSOF ¶¶ 1, 3. Similarly, MGI points to a statement on a third-party investment website that TC Energy has an "ownership interest" in FERC-regulated pipelines. Id. ¶ 4. As TC Energy points out, the statements are consistent with a parent-subsidiary relationship, and do not, standing alone, rebut the presumption of ANR's separate corporate existence or create a genuine dispute whether TC Energy controls ANR as a mere instrumentality.
MGI also urges the Court to consider its allegations that ANR employees engaged in fraudulent and wrongful conduct, arguing that they preclude summary judgment by creating a genuine dispute whether TC Energy abused the corporate form. As with the above evidence, the Court is not persuaded that the allegations preclude summary judgment. When considering whether to pierce the corporate veil, courts focus on "the manner in which the entity was employed in the matter at issue," and determine whether "the manner of use effected a fraud or wrong on the complainant" and "the wrong would cause the complainant to suffer an unjust loss." Green v. Ziegelman, 310 Mich.App. 436, 873 N.W.2d 794, 807 (2015). While occurring both before and after TC Energy acquired ANR in 2007, the allegations are directed entirely to ANR and its actions, not TC Energy and its use of ANR. MGI's Opp'n Br. 30-31 (citing PSOF ¶¶ 35, 41, 44-70), ECF No. 38 at PageID.1052-1053. Accordingly, the allegations do not create a genuine dispute whether TC Energy abused the corporate form.
Having considered the evidence submitted by the parties, the Court agrees with TC Energy that MGI has not shown any justification for piercing the corporate veil. Accordingly, the Court finds that TC Energy is not liable for the actions of ANR and is therefore entitled to summary judgment dismissing all of MGI's claims.
B. Subsurface Rights
TC Energy argues that it is also entitled to summary judgment because MGI does not own the allegedly taken subsurface rights at Pilat 1-24. The parties agree that MGI's inverse condemnation and unjust enrichment claims depend on subsurface rights (either by ownership or lease) to Pilat 1-24 and the pore space allegedly occupied by Muttonville storage gas. In the absence of subsurface rights, the pore space could not have been inversely condemned, and MGI could not have conferred a benefit on TC Energy.
The parties explain that as part of its acquisition of Pilat 1-24, MGI obtained seven oil and gas leases from the surface owners in a forty-acre operating unit. As an initial matter, while agreeing that the necessary subsurface rights would derive from the leases, the parties dispute the subsurface rights that MGI obtained. Based on its reading of the leases, TC Energy argues that MGI only has the right to produce gas. Based on its reading of the leases, MGI argues that in addition to the right to produce gas, the leases grant storage and disposal rights to MGI.
The Court agrees with TC Energy that MGI only has the right to produce gas. The general precepts of contract construction apply to oil and gas leases. Schroeder v. Terra Energy, 223 Mich.App. 176, 565 N.W.2d 887, 892 (1997) (citing J.J. Fagan & Co. v. Burns, 247 Mich. 674, 226 N.W. 653, 681 (1929)). Under Michigan law, the goal of contract interpretation is to determine and enforce the intent of the parties. Quality Prods. & Concepts Co. v. Nagel Precision, Inc., 469 Mich. 362, 666 N.W.2d 251, 259 (2003).
Here, all seven of the leases grant MGI exclusive rights to the Pilat 1-24 land:
for the purposes of exploring by geophysical and other methods, drilling, mining, operating for and producing oil and/or gas, together with all rights, privileges and easements useful or convenient in exploring for, drilling for, producing, treating, storing, caring for, transporting and removing production from said land or any other land adjacent thereto, including but not limited to rights to lay pipelines, build roads, establish and utilize facilities for disposition of water, brine or other fluids, and construct
tanks, power and communication lines, pump and power stations, and other structures and facilities.DSOF ¶ 69. Relevant to the intent of the surface owners, in contrast to the royalty terms on the production of oil and gas, the leases do not specify storage or disposal payment terms. Id. ¶ 70. Moreover, three of the leases specify that:
It is understood and agreed between the parties hereto that no gas storage rights are hereby granted for other than those gaseous products produced from the above described lands and/or lands pooled therewith.Id. ¶ 71.
As to storage and disposal rights, MGI appears to base its reading of the leases entirely on the presence of the words "storing" and "disposition." However, read as a whole, the leases do not express any intention by the surface owners to broadly grant storage and disposal rights. Specifically, while permitting storage of gas produced from adjacent land, the leases do not specify storage payment terms or otherwise contemplate a storage operation for injected foreign gas. Similarly, while permitting facilities for disposition of fluids used in connection with producing gas, the leases do not specify disposal payment terms or otherwise contemplate a disposal operation for foreign waste. Accordingly, as to the pore space allegedly occupied by Muttonville storage gas, the Court concludes that MGI does not have the necessary storage or disposal rights under the leases to maintain its inverse condemnation and unjust enrichment claims.
As to the right to produce native gas, the parties agree that the analysis of subsurface rights is controlled by the Michigan Court of Appeals' Goike decision. Dep't of Transp. v. Goike, 220 Mich. App. 614, 560 N.W.2d 365 (1996). Adopting the prevailing American rule, the Michigan Court of Appeals held that mineral rights do not include storage rights. Id. at 365-66. Once underground minerals and gas have been extracted, the resulting storage space belongs to the surface owner, not the mineral rights owner. Id. Before extraction, the mineral rights owner cannot introduce foreign minerals or gas into the storage space. Id. at 366. However, the mineral rights owner may "store" minerals and gas native to the storage space, and the surface owner cannot introduce foreign minerals or gas because they would be impossible to segregate. Id. at 366 n.1. Accordingly, the surface owner only gains the right to use the storage space after the mineral rights owner has extracted the native minerals and gas. Id. at 366.
In accordance with these principles, as long as MGI has not extracted the native gas from the Pilat 1-24 reservoir, MGI would have the necessary right to exclude under the leases to maintain its inverse condemnation and unjust enrichment claims. TC Energy argues that summary judgment is appropriate because ANR has not burdened MGI's right to produce gas for two reasons. First, TC Energy maintains that in 1989, when MGI acquired Pilat 1-24, the reservoir was already depleted. In opposition, MGI argues that summary judgment is not appropriate because there is a genuine dispute whether the Pilat 1-24 reservoir was ever depleted. Second, TC Energy maintains that by consenting to MGI putting the Pilat 1-24 well back into production, ANR has not prevented MGI from producing gas. In opposition, MGI argues that summary judgment is not appropriate because ANR has prevented MGI from producing native gas.
Initially, as to TC Energy's second argument, the Court agrees with MGI that ANR has prevented MGI from producing native gas. To the extent ANR consented to MGI putting the Pilat 1-24 well back into production, the consent was premised on the lack of evidence that Muttonville storage gas was migrating to Pilat 1-24. Assuming a conclusive determination of migration, TC Energy does not suggest that ANR would have consented to MGI producing Muttonville storage gas, or explain why, despite being favorable from a business standpoint, MGI would not nonetheless have the right to exclude the introduction of foreign gas.
As to TC Energy's first argument, viewing the evidence in the light most favorable to the MGI, the Court agrees with MGI that there is a genuine dispute whether the Pilat 1-24 reservoir was ever depleted. Regardless of whether the Pilat 1-24 reservoir was thought to be depleted in 1989, the Pilat 1-24 well re-pressurizes from somewhere and MGI has since produced 600 million cubic feet of gas. DSOF ¶¶ 29, 61. Ultimately, the parties agree that there is a genuine dispute whether Pilat 1-24 re-pressurizes internally or instead with Muttonville storage gas or another external source. For the same reason, there is a genuine dispute whether the Pilat 1-24 reservoir was ever depleted. Accordingly, the Court finds that TC Energy is not entitled to summary judgment dismissing MGI's inverse condemnation and unjust enrichment claims on the ground that MGI does not own the allegedly taken subsurface rights at Pilat 1-24.
C. Bars
TC Energy argues that it is entitled to summary judgment because MGI's inverse condemnation and unjust enrichment claims are barred by a prescriptive easement, the relevant statute of limitations, and laches.
As to a prescriptive easement, TC Energy argues that the alleged use of Pilat 1-24 for gas storage was both open and notorious and actually known by MGI from at least 1997, when MGI confirmed the presence of Muttonville storage gas in the Pilat 1-24 well through isotopic analysis, and that MGI's claims were barred by 2012 at the latest.
As to the relevant statute of limitations, TC Energy argues that MGI's claims accrued at least by 1997, when, as MGI's expert testified, as much as 90 percent of the gas produced by Pilat 1-24 was Muttonville storage gas. They were therefore barred by 2012 at the latest.
As to laches, TC Energy argues that MGI's claims are barred because TC Energy has been prejudiced by the deaths of key witnesses, loss of information from MGI, and Fodor's fading memory in connection with MGI's delay in bringing this lawsuit.
1. Prescriptive Easement
As noted above, TC Energy argues that it is entitled to summary judgment on MGI's inverse condemnation and unjust enrichment claims because ANR obtained a prescriptive easement to store gas at Pilat 1-24.
"Just as ownership of land may be acquired through adverse possession, so too may an easement be acquired through prescription." Marlette Auto Wash, LLC v. Van Dyke SC Props., LLC, 501 Mich. 192, 912 N.W.2d 161, 166 (2018). "The elements necessary to give rise to a prescriptive right are the same as those of title by adverse possession, with the exception that it does not have to be exclusive." Id. (quotation omitted). "It is well settled that in order to establish adverse possession, the true owner must have actual knowledge of the adverse possession, or alternatively, the possession must be so notorious as to raise the presumption to the world that the possessor claims ownership." Rozmarek v. Plamondon, 419 Mich. 287, 351 N.W.2d 558, 561 (1984). "A party claiming adverse possession must show clear and cogent proof of possession that is actual, continuous, open, notorious, exclusive, hostile, and uninterrupted for the relevant statutory period." Marlette, 912 N.W.2d at 166.
"The possession must be so open, visible, and notorious as to raise the presumption of notice to the world that the right of the true owner is invaded intentionally, and with the purpose to assert a claim of title adversely to his, so that if the true owner remains in ignorance it is his own fault." Id. at 171 (quotation omitted). "The evidence offered in support of adverse possession must be strictly construed with every presumption being exercised in favor of the record owner of the land." Rozmarek, 351 N.W.2d at 561.
In the written briefs, the parties focus on whether the presence of Muttonville storage gas in Pilat 1-24 was open and notorious, or alternatively, whether MGI had actual knowledge. In addition, the parties focus on whether the alleged use of Pilat 1-24 was uninterrupted.
Initially, the Court agrees with TC Energy that alleged use of Pilat 1-24 was not uninterrupted. MGI maintains that the cyclical injection, withdrawal, and shut-in operations at Muttonville caused eventual and time-delayed migration of Muttonville storage gas to Pilat 1-24. However, the Michigan Supreme Court has explained that continuity of use "can be stated only with reference to the nature and character of the right claimed." St. Cecelia Soc. v. Universal Car & Serv. Co., 213 Mich. 569, 182 N.W. 161, 164 (1921) (quotation omitted) (holding that easement for a driveway was acquired when plaintiff "has driven over it when occasion required, and it has continuously claimed the right to do so"). As TC Energy points out, cyclical injection, withdrawal, and shut-in operations at Muttonville are the very nature and character of the use of storage formations in underground natural gas storage facilities.
TC Energy argues that the presence of Muttonville storage gas in Pilat 1-24 was open and notorious from at least 1997, when MGI confirmed Muttonville storage gas as the source of re-pressurization through isotopic analysis. TC Energy also argues that the presence of Muttonville storage gas in Pilat 1-24 was notorious because MGI lodged a public complaint with FERC claiming that Muttonville storage gas was migrating to Pilat 1-24. MGI argues that underground migrating gas cannot be open and notorious and, because ANR denied that the storage gas came from Muttonville, the alleged use was not actual and with purpose to assert a claim of title adverse to MGI.
The Court agrees with MGI that the alleged use was not open and notorious. Throughout its motion for summary judgment, TC Energy assumes arguendo that Muttonville storage gas has migrated to Pilat 1-24. On the issue of a prescriptive easement, however, TC Energy must support its defense with clear and cogent proof, Marlette, 912 N.W.2d at 166, with the evidence of record being strictly construed with every presumption in favor of MGI, Rozmarek, 351 N.W.2d at 561. As opposed to supporting its defense of a prescriptive easement, TC Energy long denied that Muttonville storage gas migrated to Pilat 1-24. Similarly, ANR represented in correspondence with MGI, and publicly to state and federal regulators, that there was no evidence of pressure communication between Muttonville and Pilat 1-24 or migration of Muttonville storage gas to Pilat 1-24. Accordingly, TC Energy's pre-litigation position belies its current argument that the alleged use is open and notorious.
Once again pointing out that MGI confirmed Muttonville storage gas as the source of re-pressurization through isotopic analysis, TC Energy argues that the presence of Muttonville storage gas in Pilat 1-24 was actually known from at least 1997. MGI argues Fodor's testimony that he did not know whether the storage gas came from Muttonville creates a genuine dispute whether MGI had actual knowledge.
The Court agrees with MGI that there is a genuine dispute whether MGI had actual knowledge of the alleged use. While TC Energy emphasizes MGI's original position that it confirmed the presence of Muttonville storage gas in the Pilat 1-24 well, Fodor testified that following ANR's denials, he did not know whether MGI was producing storage gas. Accordingly, strictly construing the evidence of record with every presumption in favor of MGI, Rozmarek, 351 N.W.2d at 561, MGI has come forward with evidence demonstrating that there is a genuine dispute whether MGI had actual knowledge of the alleged use.
Because TC Energy has not shown by clear and cogent proof that the alleged use is open and notorious, and MGI has come forward with evidence demonstrating that there is a genuine dispute whether MGI had actual knowledge, the Court finds that TC Energy is not entitled to summary judgment dismissing MGI's inverse condemnation and unjust enrichment claims as barred by a prescriptive easement.
2. Statute of Limitations
As noted above, TC Energy argues that it is entitled to summary judgment because MGI's inverse condemnation and unjust enrichment claims are barred by the relevant statute of limitations. In Michigan, inverse condemnation claims are governed by a fifteen-year statute of limitations, when the owner has a present interest in the property. Difronzo v. Vill. of Port Sanilac, 166 Mich.App. 148, 419 N.W.2d 756, 759 (1988) (citing MICH. COMP. LAWS § 600.5801(4)). The Michigan Supreme Court has held that where plaintiffs allege that their property was taken via a continuous wrong, the statute of limitations does not begin to run until the consequences of the wrong have stabilized. Hart v. City of Detroit, 416 Mich. 488, 331 N.W.2d 438, 445 (1982); see also Mays v. Governor of Mich., 506 Mich. 157, 954 N.W.2d 139, 154 n.10 (2020) (lead opinion affirming stabilization doctrine for inverse condemnation claims following abolishment of continuing violations doctrine). A continuous wrong exists when: (1) the defendants engage in continuing wrongful conduct; (2) injury to the plaintiff accrues continuously; and (3) had the defendants at any time ceased their wrongful conduct, further injury would have been avoided. Kuhnle Bros., Inc. v. Cty. of Geauga, 103 F.3d 516, 522 (6th Cir. 1997). The precise time when the limitations period begins is based on the facts and circumstances of each case. Hart, 331 N.W.2d at 445.
TC Energy argues that, assuming Muttonville storage gas migrated to Pilat 1-24, the evidence of record demonstrates that the migration has been occurring for many years. Specifically, Pilat 1-24 was drilled in 1977 and operated until 1985, when the reservoir was thought to be depleted, and the previous operator applied to plug and abandon the well. However, MGI observed increased pressure when it began work on Pilat 1-24 in 1989. After putting the well into production for four years, MGI once again observed increased pressure during 1994 when Pilat 1-24 was shut in. At that time, Fodor postulated that Muttonville storage gas was migrating and re-pressurizing Pilat 1-24. By 1995, MGI had consulted with experts and formed the opinion that there was "conclusive evidence" that the Pilat 1-24 well is in pressure communication with the Muttonville storage field. Notably, in connection with its opinion, MGI threatened suit against ANR. By 1997, MGI had formed the opinion that there was "no question" that Pilat 1-24 was re-pressurizing from an external source. With the addition of isotopic analyses of Muttonville, Pilat 1-24, and native gas samples, MGI "confirmed" the presence of Muttonville storage gas in the Pilat 1-24 well.
Based on MGI's knowledge in 1997, TC Energy argues that the statute of limitations began to run (i.e., accrued) at least by 1997. In addition to MGI's knowledge, TC Energy points out that MGI's technical expert has effectively conceded that the situation under Pilat 1-24 was stabilized at that point in time. Specifically, MGI's technical expert testified that in 1997, as much as 90 percent of the gas produced by Pilat 1-24 was Muttonville storage gas. PCSOF ¶ 50. Accordingly, MGI waited approximately twenty-three years after confirming the presence of Muttonville storage gas in Pilat 1-24 to file this lawsuit.
In opposition, MGI argues that the statute of limitations did not accrue until "MGI knew enough to sue TCE," which "was when in 2020 TCE agreed to a joint isotopic gas analysis." MGI's Opp'n Br. 43, ECF No. 38 at PageID.1065. "Now it knew for certain," MGI explains, "the gas did not come from elsewhere." Id. In other words, MGI argues that it did not positively know that the source of the gas was Muttonville until 2020.
The Court disagrees with MGI's argument that its claims did not accrue until 2020 when MGI allegedly obtained conclusive proof that it was Muttonville storage gas that was migrating to Pilat 1-24. In effect, MGI argues that a "discovery" rule tolls the statute of limitations. Under the common law, the discovery rule (i.e., when the plaintiff knew or should have known of a claim) may toll a statute of limitations. However, Michigan has abolished the discovery rule. Specifically, in Trentadue, the Michigan Supreme Court held that "the plain language" of a statutory period of limitation to bring an action "precludes the use of a broad common-law discovery rule to toll the accrual date of claims to which this statute applies." Trentadue v. Gorton, 479 Mich. 378, 738 N.W.2d 664, 680 (2007). In Michigan, tolling of a statute of limitations can only occur if a specific statutory tolling provision applies. Id. MGI has not asserted that any specific statutory tolling exception applies.
Pursuant to the stabilization doctrine, an inverse condemnation claim accrues when the consequences of the condemnor's actions have stabilized. Mays, 954 N.W.2d at 154 n.10. The stabilization doctrine originated in the Supreme Court's Dickinson decision. United States v. Dickinson, 331 U.S. 745, 67 S.Ct. 1382, 91 L.Ed. 1789 (1947). Dickinson involved a federal inverse condemnation claim arising out of the construction of a dam followed by successive raising of river levels. Id. at 746-47, 67 S.Ct. 1382. The Supreme Court held that "when the Government chooses not to condemn land but to bring about a taking by a continuing process of physical events, the owner is not required to resort either to piecemeal or to premature litigation to ascertain the just compensation for what is really 'taken.' " Id. at 749, 67 S.Ct. 1382. The Supreme Court held that because the "source of the entire claim—the overflow due to rises in the level of the river—is not a single event," but rather "is continuous," the law permits "postponing suit until the situation becomes stabilized." Id. "Dickinson, therefore, established the principle that for physical takings caused by a gradual, continuous, physical process, rather than a discrete event, accrual of a takings claim can be delayed until the circumstances have stabilized and it is clear that landowners can be compensated for their loss." Etchegoinberry v. United States, 114 Fed. Cl. 437 (2013).
MGI filed this lawsuit in 2020. Accordingly, if the situation under Pilat 1-24 was stabilized and MGI's inverse condemnation claim thereby accrued before 2005, then the statute of limitations would bar MGI's inverse condemnation claim.
Assuming an ultimate determination that Muttonville storage gas is migrating to Pilat 1-24, the Court finds that a reasonable fact finder could only conclude from the evidence of record that the migration was sufficiently definite and stable by 2005 so as to begin the statute of limitations. In light of its own actions and own theory of this case, MGI cannot genuinely dispute that it recognized the migration as a compensable physical taking before 2005. Within a year of observing increased pressure at Pilat 1-24, MGI began consulting with experts, initiated contact with ANR, and threatened to sue ANR for inverse condemnation. MGI pursued the issue with ANR for four years and continued to pursue the issue with state and federal regulators when ANR cutoff communication. As well, MGI cannot genuinely dispute that the migration had stabilized before 2005. MGI's own expert testified in 1997 that as much as 90 percent of the gas produced by Pilat 1-24 was Muttonville storage gas. Moreover, MGI cannot genuinely dispute that it recognized the source of migration before 2005. MGI's own correspondence with ANR states that MGI had formed the opinion that there was conclusive evidence that the Pilat 1-24 well is in pressure communication with the Muttonville storage field. Similarly, MGI's own allegations in this case state that MGI had formed the opinion that isotopic analyses confirmed the presence of Muttonville storage gas in the Pilat 1-24 well.
As opposed to the physical aspects of the migration, MGI's opposition to summary judgment centers entirely on the extent of MGI's knowledge. Specifically, MGI argues that summary judgment is not appropriate because there is a genuine dispute whether and when MGI knew that Pilat 1-24 was being re-pressurized by Muttonville storage gas. MGI maintains that although Fodor believed that Muttonville storage gas was migrating to Pilat 1-24, MGI's inverse condemnation claim did not accrue until 2020 when Fodor knew for sure that Pilat 1-24 was being re-pressurized by Muttonville storage gas.
For two reasons, the Court finds that the extent of MGI's knowledge is immaterial to the accrual of MGI's inverse condemnation claim. First, MGI does not dispute that MGI's inverse condemnation claim had already accrued, or that at the time of accrual, MGI had formed the opinion that isotopic analyses confirmed the presence of Muttonville storage gas in the Pilat 1-24 well. MGI does not explain how a post-accrual change in the extent of a landowner's knowledge somehow resets the statute of limitations.
Second, as noted above, in the absence of an applicable statutory tolling provision, the extent of a landowner's knowledge is simply irrelevant. The caselaw addressing the accrual of inverse condemnation claims under the stabilization doctrine recognizes that it can be difficult to determine the exact moment that condemnor's actions have stabilized. Etchegoinberry, 114 Fed. Cl. at 477. However, the determination does not hinge on the extent of a landowner's knowledge. Rather, the relevant events are the stabilization of a physical taking of the property (i.e., "what is really 'taken,' " Dickinson, 331 U.S. at 749, 67 S.Ct. 1382) and the damages that are reasonably foreseeable (i.e., "it is clear that landowners can be compensated for their loss," Etchegoinberry, 114 Fed. Cl. at 477.
MGI also argues, in passing, that the situation under Pilat 1-24 was not stabilized until 2020 when new federal regulations exposed MGI to potential new costs and liabilities due to the re-pressurization of Pilat 1-24. MGI's Opp'n Br. 43, ECF No. 38 at PageID.1065. MGI does not cite any legal authority for this argument. Id. The Court disagrees with MGI's argument. Under MGI's argument, because a government could issue a regulation at any time in the future, the situation would never be stabilized, and the statute of limitations would never begin to run.
In summary, a reasonable fact finder could only conclude from the evidence of record that the re-pressurization of Pilat 1-24 by Muttonville storage gas was sufficiently definite and stable by 2005 so as to begin the statute of limitations.
As to unjust enrichment, this Court previously determined that MGI's unjust enrichment claim is subject to the same statute of limitations as its inverse condemnation claims. ECF No. 15, PageID.175-76. Accordingly, the Court finds that TC Energy is entitled to summary judgment dismissing MGI's inverse condemnation and unjust enrichment claims as barred by the relevant statute of limitations.
3. Laches
As noted above, TC Energy argues that it is entitled to summary judgment because MGI's inverse condemnation and unjust enrichment claims are barred by laches.
"The doctrine of laches is founded upon long inaction to assert a right, attended by such intermediate change of conditions as renders it inequitable to enforce the right." Angeloff v. Smith, 254 Mich. 99, 235 N.W. 823, 824 (1931). The doctrine "is a tool of equity that may remedy the general inconvenience resulting from delay in the assertion of a legal right which it is practicable to assert." Pub. Health Dep't v. Rivergate Manor, 452 Mich. 495, 550 N.W.2d 515, 520 (1996) (quotation omitted). Laches applies "in cases in which there is an unexcused or unexplained delay in commencing an action and a corresponding change of material condition that results in prejudice to a party." Id. To establish a laches defense, the defendant must prove two elements: (1) that the plaintiff unreasonably delayed in bringing the lawsuit and (2) that the defendant suffered prejudice as a result of the delay. Torakis v. Torakis, 194 Mich.App. 201, 486 N.W.2d 107, 110 (1992).
TC Energy argues that summary judgment is appropriate because deaths of key witnesses, loss of information from MGI, and Fodor's fading memory during the period of delay have prejudiced TC Energy.
The Court agrees with TC Energy. At the outset, it bears emphasis that Fodor is MGI's only percipient witness in this case. TC Energy explains that Fodor cannot recall and has no documentation on the Pilat 1-24 purchase price, which could have been used as evidence of fair market value for the just compensation calculation on MGI's inverse condemnation claim. Similarly relevant to the just compensation calculation, TC Energy explains that certain documents have been lost on MGI's purchase of Pilat 1-24, revenue prior to 2007, operating costs and profits, repairs to Pilat 1-24, and wellhead pressure measurements.
TC Energy explains that Odinga, Joshi, and Elenbaas, who consulted for MGI about the source of re-pressurization in Pilat 1-24, and, in the case of Elenbaas, for both ANR and MGI in a disputed matter, are dead or missing, and therefore cannot testify about their opinions and interactions with the parties. TC Energy also explains that witnesses familiar with the collection of gas samples for analysis and the maintenance, repairs, and observations of the Pilat 1-24 wells are dead. MGI alleges that Bob Calkins collected and arranged for the collection of gas samples for Isotech's 1997 isotopic analyses. Noting that the gas samples were discarded and not archived, TC Energy explains that Calkins, who is deceased, could have testified to the circumstances of their collection, including to inform conflicting accounts from Fodor about whether gas samples were actually collected from Muttonville. TC Energy explains that Ron Copanhagen, also deceased, could have testified about Pilat 1-24 maintenance and repairs and observations on the well.
MGI argues that summary judgment based on laches is not appropriate for four reasons. First, MGI argues that TC Energy did give MGI fair notice of a laches defense. Initially, MGI does not dispute that TC Energy asserts a defense that MGI's claims "for equitable and/or declaratory relief are barred by the doctrine of laches." Answer ¶ 103, ECF No. 17 at PageID.220. According to MGI, TC Energy waived a laches defense by failing to plead prejudice or explain why the timing of this lawsuit entitled TC Energy to assert the defense.
In connection with this argument, MGI basically assumes the application of the heightened pleading standard of Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) and Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). While there is currently a debate whether the heightened pleading standard of Twombly and Iqbal also applies to affirmative defenses, judges in this district have opined that "the better view is that Twombly and Iqbal do not apply to affirmative defenses." Nexterra Sys. Corp. v. DeMaria Bldg. Co., 2017 WL 345682, at *1, 2017 U.S. Dist. LEXIS 9418, at *2 (E.D. Mich. Jan. 24, 2017); see also Recticel Automobilsysteme GmbH v. Auto. Components Holdings, LLC, 2011 WL 5307797, at *9, 2011 U.S. Dist. LEXIS 127261, at *24-*25 (E.D. Mich. Nov. 3, 2011) (denying motion to strike affirmative defenses of laches and estoppel).
Based on the facts of this case, the Court disagrees that MGI was not put on notice of a laches defense. MGI and ANR have disputed whether Muttonville storage gas has been migrating to Pilat 1-24 for over twenty years before the filing of this lawsuit. Given the long history of this dispute it cannot be surprising to MGI that TC Energy is raising a laches defense based on the delay in bringing this lawsuit. If MGI wanted to learn more specific positions and supporting evidence, then it could have conducted discovery on these issues, including submitting contention interrogatories to TC Energy.
Second, MGI argues that TC Energy cannot show prejudice because the dead or missing witnesses would have testified favorably toward MGI. The Court disagrees. The Court will never know whether the witness testimony would favor MGI. The Court finds that the death of Elenbaas, in particular, is prejudicial because he cannot be questioned about the historical facts he witnessed in the context of consulting for both ANR and MGI in a disputed matter.
Third, MGI argues that "there is no evidence that MGI misled TCE into thinking that it had abandoned its claim." MGI's Opp'n Br. 45, ECF No. 38 at PageID.1067. The Court interprets this as an argument that TC Energy has not been prejudiced because MGI never mislead TC Energy into believing that MGI was abandoning its claim. The Court finds that this argument is a red herring. Affirmatively "misleading" is not a required element of laches. TC Energy only needs to establish that MGI unreasonably delayed in bringing this lawsuit and that TC Energy was prejudiced by that delay. Based on the evidence, the Court finds that a reasonable fact finder could only find unreasonable delay and prejudice to TC Energy due to the delay in filing this lawsuit.
Fourth, MGI argues that "by law, if the inverse condemnation claim succeeds, it will be within the statute of limitations and therefore laches would not apply." Id. 46, ECF No. 38 at PageID.1068. The Court disagrees. Laches is an independent doctrine from inverse condemnation with different elements. The Court interprets MGI's argument to mean that if the Court agrees that MGI's inverse condemnation claim did not accrue until 2020, then a laches defense cannot be established. Because the Court has found that MGI's claim accrued at least by 1997, the Court rejects this argument.
In summary, MGI's delay in bringing this lawsuit has prejudiced TC Energy, and the Court is not persuaded by MGI's arguments that summary judgment is not appropriate. Accordingly, the Court finds that TC Energy is entitled to summary judgment dismissing MGI's inverse condemnation and unjust enrichment claims as barred by laches.
D. Damages
The damages issues in this case center on the proper measure of damages for inverse condemnation claims. "Inverse condemnation is a taking of private property for a public use without the commencement of condemnation proceedings." Hart, 331 N.W.2d at 441. "Under the Michigan and United States Constitutions, a victim of such a taking is entitled to just compensation for the value of the property taken." Id. (citing MICH. CONST. 1963, art. X, § 2; U.S. CONST. amend. V). "The purpose of just compensation is to put property owners in as good a position as they would have been had their property not been taken from them." Dep't of Transp. v. VanElslander, 460 Mich. 127, 594 N.W.2d 841, 843 (1999). "[T]he proper measure of damages in a condemnation case involving a partial taking consists of the fair market value of the property taken plus severance damages to the remaining property if applicable." Dep't of Transp. v. Sherburn, 196 Mich.App. 301, 492 N.W.2d 517, 520 (1992).
Fair market value is "the amount of money that a ready, willing, and able buyer would pay for the asset on the open market." Estate of Wolfe-Haddad v. Oakland Cty., 272 Mich.App. 323, 725 N.W.2d 80, 81 (2006) (quotation omitted). The determination of fair market value "is not a matter of formulas or artificial rules, but of sound judgment and discretion based upon a consideration of all the relevant facts in a particular case." Silver Creek Drain Dist. v. Extrusions Div., Inc., 468 Mich. 367, 663 N.W.2d 436, 442 (2003) (quotation and alteration omitted). Accordingly, in determining fair market value, "one must also determine the highest and best use of the property." Detroit/Wayne Cty. Stadium Auth. v. Drinkwater, Taylor & Merrill, Inc., 267 Mich.App. 625, 705 N.W.2d 549, 557 (2005).
As to the proper measure of damages for MGI's inverse condemnation and unjust enrichment claims, TC Energy's motion for summary judgment is directed to a report from MGI's damages expert, William E. Roach. TC Energy's Mot. Ex. 59 (Roach Report), ECF No. 35-73. In his report, Roach assumed that Muttonville storage gas re-pressurizes the Pilat 1-24 well. Id. 1, ECF No. 35-73 at PageID.834. Roach testified that MGI's re-pressurization damages include, in relevant part, two measures of damages: (1) the value of remaining recoverable gas in Pilat 1-24; and (2) lost revenue from using the Pilat 1-24 well as a commercial disposal well. Id. 1-2, ECF No. 35-73 at PageID.834-835.
TC Energy argues that it is entitled to summary judgment because MGI cannot recover damages calculated just from the value of remaining recoverable gas in Pilat 1-24 and the lost revenue from using Pilat 1-24 as a commercial disposal well. As to the value of remaining recoverable gas, TC Energy argues that summary judgment is appropriate because the alleged damages do not take relevant fair market value factors into account. As to the lost revenue from using the Pilat 1-24 well as a commercial disposal well, TC Energy argues that summary judgment is appropriate because the alleged damages incorrectly assume that MGI has disposal rights.
The Court agrees with TC Energy. As to the value of remaining recoverable gas, Roach concededly did not take any fair market value factors into account. More specifically, Roach did not account for standard cost items and operational realities that a willing buyer would incorporate into the valuation of Pilat 1-24. TC Energy's Mot. Ex. D (Roach Dep.) 116:11-15 (testifying that the dollar amount "is clearly just the 348 million standard cubic feet times the BTU adjustment times the Henry Hub price" and "doesn't have any of those things that would make it a fair market valuation included in that price"), ECF No. 35-7 at PageID.560. While arguing that summary judgment is not appropriate, MGI places undue reliance on the principle that fair market value is not determined by fixed formulas. Fair market value is not determined by fixed formulas because the proper measure of damages takes all relevant fair market value factors into account. Here, MGI turns the principle on its head by seeking to avoid relevant fair market value factors that would reduce its alleged damages to the amount a willing buyer would pay for Pilat 1-24.
As to the lost revenue from a commercial disposal well, the Court has concluded above that the leases do not grant disposal rights to MGI. While arguing that summary judgment is not appropriate, MGI places undue reliance on the principle that fair market value is based on highest and best use. To the extent a commercial disposal well represents the highest and best use of the Pilat 1-24 land, the necessary subsurface rights belong to the surface owners, not MGI.
Accordingly, the Court finds that TC Energy is entitled to summary judgment that MGI cannot recover damages for inverse condemnation and unjust enrichment calculated from just the value of remaining recoverable gas, or the lost revenue from a commercial disposal well.
E. Declaratory Judgment
As noted above, as to MGI's declaratory judgment claim, TC Energy argues that it is entitled to summary judgment because the requested declaration would compel Muttonville to comply with inapplicable regulatory provisions.
A brief background is necessary to understand the issues. In February 2020, the Pipeline and Hazardous Materials Safety Administration ("PHMSA") issued minimum safety standards for underground natural gas storage facilities ("UNGSFs"). 49 C.F.R. § 192.12. The PHMSA regulations incorporate by reference the American Petroleum Institute ("API") Recommended Practice ("RP") 1171. Id. § 192.7(11). Relevant to Muttonville, the PHMSA regulations require UNGSFs that use depleted hydrocarbon reservoirs for natural gas storage to meet various API RP 1171 provisions, as well as procedural manual and integrity management program requirements. Id. § 192.12(b)-(d).
Alleging that the equipment at Pilat 1-24 is not designed to safely contain high-pressure storage gas, MGI requests a declaration that TC Energy is obligated to "report and otherwise comply" with the PHMSA "reporting, engineering, and other regulations" with respect to the alleged extension of the Muttonville boundary to Pilat 1-24. Compl. ¶¶ 97, 99, ECF No. 1 at PageID.26-27. TC Energy explains that when it directed interrogatories to the scope of the requested declaration during discovery, MGI referred TC Energy to three paragraphs of its complaint. In the referenced paragraphs, MGI cites particular subsections in API RP 1171 sections 5 and 6. Id. ¶¶ 43-44, 50 (citing API RP 1171 provisions 5.3.2, 5.4.2, 5.4.3, 6.2.3, 6.3.1, 6.6.1, and 6.7.1), ECF No. 1 at PageID.14-16. According to MGI, the subsections are directed to the testing, evaluation, redesign, and construction of wells, remediation measures, plugging and abandonment measures, and recordkeeping on storage field integrity. Id.
Against this background, TC Energy moves for summary judgement for two reasons. First, TC Energy points out that under the PHMSA regulations, API RP 1171 sections 5 and 6 do not apply to either Muttonville or Pilat 1-24. Unlike new constructions that must meet all provisions, UNGSFs constructed on or before July 18, 2017, need only meet API RP 1171 sections 8, 9, 10, and 11. 49 C.F.R. § 192.12(b)(1)-(2). TC Energy argues that summary judgment is thus appropriate because the requested declaration would compel Muttonville to comply with inapplicable regulatory provisions.
Second, TC Energy explains that MGI and ANR have met with PHMSA to discuss MGI's concerns, and PHMSA is still evaluating the matter. TC Energy argues that summary judgment is appropriate because the requested declaratory relief is an "end-around" of the ongoing PHMSA investigation and a disfavored "obey the law" injunction.
While arguing that summary judgment is not appropriate, MGI does not rebut TC Energy's contentions. Most notably, MGI does not offer any clarification on the scope of the requested declaration. Rather, MGI suggests that a declaration should be fashioned ad hoc from any PHMSA regulations that "do and will apply" to Muttonville to relieve MGI from "monitoring," "observing," and "responding to" any "conditions" caused by the migration of Muttonville storage gas to Pilat 1-24. MGI's Opp'n Br. 50, ECF No. 38 at PageID.1072. The "precise terms," MGI argues, can "only follow" a jury determination whether Muttonville storage gas is re-pressurizing the Pilat 1-24 well. Id. However, MGI does not explain why the absence of a jury determination on migration precludes MGI from identifying applicable regulatory provisions and determining their usefulness toward declaratory relief. Absent any explanation to the contrary, the Court is left to assume that the requested declaration would not be useful to clarifying the legal relations between the parties without compelling Muttonville to comply with inapplicable regulatory provisions.
As to the ongoing PHMSA investigation, MGI acknowledges that PHMSA and other federal regulators "have the power" to resolve whether the Muttonville boundary has extended to Pilat 1-24 and enforce the PHMSA regulations. Id. Rather than explaining why the Court should not defer to federal regulators with particular expertise in the natural gas industry, MGI suggests that discretionary considerations are "not relevant" because the Court "has the power" as well. Id.
The Court need not address discretionary considerations because it agrees with TC Energy's main argument that the requested declaration would compel Muttonville to comply with inapplicable regulatory provisions. The Court finds that TC Energy is entitled to summary judgment dismissing MGI's declaratory judgment claim for the simple reason that MGI failed to identify appliable regulatory provisions when TC Energy directed interrogatories to the scope of the requested declaration during discovery.
V. CONCLUSION
For the reasons stated in this opinion and order, the Court will GRANT TC Energy's motion for summary judgment. Having found that TC Energy is entitled to summary judgment dismissing MGI's remaining inverse condemnation, unjust enrichment, and declaratory judgment claims, the Court hereby ORDERS that this case is DISMISSED WITH PREJUDICE.