OSI LLC v. Balaskonis

No. 23-522, Francis Kaess v. BB Land, LLC FILED June 6, 2025 Walker, Justice, dissenting, and joined by Justice Bunn: released at 3:00 p.m. C. CASEY FORBES, CLERK SUPREME COURT OF APPEALS OF WEST VIRGINIA In this certified question proceeding, the majority opinion applies an implied duty to market to an oil and gas lease that contains an in-kind royalty provision. It goes on to hold that the requirements for the deductions of post-production expenses from Wellman1 and Tawney2 apply to the lease. With respect for my colleagues in the majority, I dissent. As explained below, the majority’s analysis does not withstand scrutiny primarily because it muddles the distinction between different types of leases. As a result, the majority effectively rewrites the leases to take money from the producers to give it to the royalty owners. But it is not the province of this Court to rewrite an oil and gas lease to 1 See Syl. Pt. 4, Wellman v. Energy Res., Inc., 210 W. Va. 200, 557 S.E.2d 254 (2001) (“If an oil and gas lease provides for a royalty based on proceeds received by the lessee, unless the lease provides otherwise, the lessee must bear all costs incurred in exploring for, producing, marketing, and transporting the product to the point of sale.”). 2 See Syl. Pt. 10, Estate of Tawney v. Columbia Natural Res., 219 W. Va. 266, 633 S.E.2d 22 (2006) (“Language in an oil and gas lease that is intended to allocate between the lessor and lessee the costs of marketing the product and transporting it to the point of sale must expressly provide that the lessor shall bear some part of the costs incurred between the wellhead and the point of sale, identify with particularity the specific deductions the lessee intends to take from the lessor’s royalty (usually 1/8), and indicate the method of calculating the amount to be deducted from the royalty for such post- production costs.”). 1 reflect the Court’s view of a fair bargain. We certainly would not go to such extreme measures to rewrite contracts in any other context.3 I would have held that for leases that contain an in-kind royalty provision, there is no implied duty to market arising from the lease/contract and the requirements of Wellman and Tawney for the deductions of post-production expenses are inapplicable. As explained below, an implied duty to market is only triggered when a royalty owner does not or cannot take physical possession of its royalty share of the production; when that occurs, the producer must market and sell the royalty owner’s share of the production to avoid waste and loss, and the producer may properly charge the royalty owner his share of any post-production costs. One of the most contentious legal issues in the oil and gas industry is the dispute concerning the deductibility of post-production costs from royalty payments owed to lessors.4 At the risk of oversimplification, most royalty clauses generally fall into one 3 When examining a contract in an employment dispute, this Court stated that: “Our task is not to rewrite the terms of contract between the parties; instead, we are to enforce it as written.” Fraternal Ord. of Police, Lodge No. 69 v. City of Fairmont, 196 W. Va. 97, 101, 468 S.E.2d 712, 716 (1996). In the same way, we have held parties to a contract dispute involving an insurance policy to the plain language in the policy and noted that: “‘We will not rewrite the terms of the policy; instead, we enforce it as written.’” Auto Club Prop. Cas. Ins. Co. v. Moser, 246 W. Va. 493, 500, 874 S.E.2d 295, 302 (2022) (quoting Payne v. Weston, 195 W. Va. 502, 507, 466 S.E.2d 161, 166 (1995)). 4 See William T. Silvia, Slouching Toward Babel: Oklahoma’s First Marketable Product Problem, 49 Tulsa L. Rev. 583 (Winter, 2013) (outlining the “minefield of judicial interpretations among the major oil and gas-bearing states[,]” including West Virginia); 2 of two broad categories: “proceeds” royalty provisions, which provide for the mineral owner to receive a royalty consisting of a monetary share of the proceeds the producer receives from the sale of the oil and gas produced under the lease, and “in-kind” royalty provisions, which provide for the mineral owner to receive a royalty consisting of a portion of the physical oil and gas produced, tendered at the wellhead. This Court has stated that

Case: 24-20386 Document: 102-1 Page: 1 Date Filed: 06/10/2025 United States Court of Appeals for the Fifth Circuit United States Court of Appeals Fifth Circuit ____________ FILED June 10, 2025 No. 24-20386 Lyle W. Cayce ____________ Clerk In the Matter of National CineMedia, L.L.C. Debtor, Cinemark Media Incorporated; Cinemark USA, Incorporated, Appellants, versus National CineMedia, L.L.C., Appellee, __________________________________________________ In the Matter of National CineMedia, L.L.C. Debtor, Cinemark USA, Incorporated, Appellant, versus National CineMedia, L.L.C., Case: 24-20386 Document: 102-1 Page: 2 Date Filed: 06/10/2025 Appellee. ______________________________ Appeal from the United States District Court for the Southern District of Texas USDC Nos. 4:23-CV-2414, 4:23-CV-2485 ______________________________ Before Jones, Southwick, and Oldham, Circuit Judges. Per Curiam: * This court has carefully considered this appeal in light of the briefs, oral argument, and pertinent portions of the record. Having done so, we substantially adopt the analysis of the district court’s opinion, which affirmed the bankruptcy court’s rulings. 1 Accordingly, the Most Favored Nations (“MFN”) clause in Cinemark’s Exhibitor Services Agreements (“ESA”) with the debtor National CineMedia LLC (“NCM”) was not triggered by Regal’s entry into a Network Affiliate Transaction Agreement (“NATA”) with NCM. The MFN clause in Cinemark’s ESA provided it the right to match the terms of an “agreement, amendment or extension” between Regal and NCM “which amends any term” of Regal’s ESA. Regal, while itself a debtor in bankruptcy, terminated its ESA with NCM through a Termination Settlement Agreement (“TSA”). Regal then entered into the NATA with NCM. The TSA did not amend any term of Regal’s ESA because it _____________________ * Pursuant to 5th Circuit Rule 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5th Circuit Rule 47.5.4. 1 This court reviews the NCM bankruptcy court’s “Settlement Order” under Bankruptcy Rule 9019 for abuse of discretion. In re Moore, 608 F.3d 253, 257 (5th Cir. 2010). No abuse occurs unless the court made an error of law or clear error of fact. In re Yorkshire, LLC, 540 F.3d 328, 331 (5th Cir. 2008). Case: 24-20386 Document: 102-1 Page: 3 Date Filed: 06/10/2025 terminated the ESA, whereas “amend” contemplates modification of an ESA’s term that nevertheless preserves the agreement’s existence. The NATA did not amend any term of Regal’s ESA because the TSA had terminated Regal’s ESA, and the ESA must exist for the NATA to amend any of its terms. The MFN clause in Cinemark’s ESA was not triggered. 2 The judgments of the bankruptcy and district courts are AFFIRMED. _____________________ 2 NCM and AMC, the other party to the appeal, agreed to dismiss the appeal as to AMC by a joint motion for dismissal.

USCA4 Appeal: 23-1733 Doc: 46 Filed: 08/08/2025 Pg: 1 of 14 UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 23-1733 J.H., by and through their Guardian Ad Litem, Erica Chambers; E.H., by and through their Guardian Ad Litem, Erica Chambers; ERICA CHAMBERS, individually, Plaintiff - Appellees, v. HARFORD MUTUAL INSURANCE GROUP, INC., Defendant - Appellant. Appeal from the United States District Court for the Middle District of North Carolina, at Greensboro. Thomas D. Schroeder, District Judge. (1:21-cv-00856-LPA) Argued: March 18, 2025 Decided: August 8, 2025 Before HEYTENS and BERNER, Circuit Judges, and John A. GIBNEY, JR., Senior United States District Judge for the Eastern District of Virginia, sitting by designation. Affirmed by unpublished per curiam opinion. ARGUED: William A. Bulfer, Asheville, North Carolina, Daniel Thomas Strong, TEAGUE CAMPBELL DENNIS & GORHAM, LLP, Raleigh, North Carolina, for Appellants. Coleman Cowan, LAW OFFICES OF JAMES SCOTT FARRIN, Durham, North Carolina, for Appellees. ON BRIEF: Kaitelyn E. Fudge, LAW OFFICES OF JAMES SCOTT FARRIN, Durham, North Carolina, for Appellees. Unpublished opinions are not binding precedent in this circuit. USCA4 Appeal: 23-1733 Doc: 46 Filed: 08/08/2025 Pg: 2 of 14 PER CURIAM: Erica Chambers was driving with her two minor children on the highway in North Carolina when they were hit by a truck owned by Big Boss Construction, Inc. After bringing suit against Big Boss and several other parties involved in the accident, Chambers filed a declaratory judgment action to establish that Big Boss’s $2 million commercial excess insurance policy—issued by Harford Mutual Insurance Group, Inc.—provided coverage for the accident. The district court sided with Chambers and concluded that the accident fell within the scope of the policy’s coverage. The district court further determined that Chambers and her children were entitled to pre- and post-judgment interest under the policy. We affirm both rulings. I. Background 1 On October 27, 2018, Erica Chambers and her children were severely injured in an automobile accident as they drove south on North Carolina Highway 49. A truck owned by Big Boss Construction, Inc. crossed the center of the highway and struck Chambers head on. The driver of the truck was unauthorized to operate a motor vehicle, as he lacked a valid driver’s license. The parties agree that at the time of the accident, the driver was an agent of Big Boss acting within the scope of his employment. The driver was on his way 1 In the litigation agreement discussed infra, the parties “agree[d] that all facts and conclusions of law pled in the Second Amended Complaint in the Underlying Litigation are deemed admitted” for the purpose of this declaratory judgment action. J.A. 207. We thus recite the facts as alleged in that complaint. 2 USCA4 Appeal: 23-1733 Doc: 46 Filed: 08/08/2025 Pg: 3 of 14 to complete a job for a different company, NC Champions Construction, Inc., which was using the truck with Big Boss’s permission. Chambers and her children incurred astronomical medical bills as a result of the accident. Chambers spent 34 days in the hospital recovering from broken bones throughout her body. She endured multiple surgeries and remains under medical care for her injuries, some of which are permanent. One of Chambers’s children suffered a head injury and continues to experience memory problems. Her other child suffered a broken leg. In total, the family’s medical bills have exceeded $500,000. Chambers and her children (collectively, Chambers 2) filed suit in North Carolina state court against the driver, Big Boss, and NC Champions. The suit alleged, among other claims, that Big Boss was liable for negligently entrusting its truck to the driver. At the time of the accident, Big Boss carried multiple insurance policies, including a commercial excess umbrella policy (the Excess Policy) issued by Harford Mutual Insurance Group, Inc. The Excess Policy had a liability limit of $2 million. It co

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to revision until final publication in the Michigan Appeals Reports. STATE OF MICHIGAN COURT OF APPEALS DESIREE DURGA and JUSTIN DURGA, UNPUBLISHED August 13, 2025 Plaintiffs-Appellees, 9:04 AM v No. 371891 Benzie Circuit Court MEMBERSELECT INSURANCE COMPANY, LC No. 23-012025-CZ Defendant-Appellant. Before: O’BRIEN, P.J., and BOONSTRA and WALLACE, JJ. PER CURIAM. This action arises out of a motor vehicle accident that occurred in June 2023, when plaintiff Desiree Durga was driving a Chevrolet Silverado that was involved in a collision with another motor vehicle. This accident resulted in extensive damage to the Silverado, which was insured by defendant MemberSelect Insurance Company (MemberSelect). Plaintiffs alleged that defendant breached their automobile insurance contract when it rescinded their policy based upon an allegation that Desiree Durga made a fraudulent misrepresentation in the application process. The trial court entered a July 2, 2024 amended order granting plaintiffs’ motion for summary disposition on their breach of contract claim pursuant to MCR 2.116(C)(10) and denying defendant’s cross-motion for summary disposition in which it had argued that it was entitled to rescind the policy. On July 9, 2024, the court entered an order of judgment in favor of plaintiffs in the amount of $82,476.04, and this appeal of right by defendant followed. We affirm. I. FACTS As a result of plaintiff Justin Durga having two or more substance abuse convictions in seven years, his Michigan operator’s license was mandatorily revoked from June 9, 2007 “until requirements have been met.” MCL 257.303(2)(c). -1-  In June 2012, plaintiff Justin Durga’s wife, Desiree, applied to obtain automobile insurance from defendant MemberSelect for a Jeep Grand Cherokee that she owned.1 According to plaintiff Desiree Durga, “[a]t that time I fully disclosed to AAA that my husband, Justin Durga, did not have a valid driver’s license.”2 Defendant’s insurance records reflect that plaintiffs have been “AAA Insured” since June 29, 2012. While defendant MemberSelect claims that Desiree Durga’s application for insurance contained a material misrepresentation, it has not produced a copy of her June 2012 application in this case. In response to a request for production of documents seeking to have defendant “[p]roduce the application for insurance that Plaintiff(s) filed with Defendants for the Policy,” defendant responded “This application for insurance no longer exists.” In the lower court, MemberSelect relied upon two documents, a “New Declaration Certificate” (certificate), and an “Automobile Application Addendum and Authorization” (addendum), the latter of which was only signed by AAA sales representative, Jeanine Michalski, at 9:53AM on February 25, 2013. Under a line item labeled “Driver Type,” the certificate states that Desiree Durga is “ASSIGNED”3 and Justin Durga is “NOT LICENSED”; and under another line item labeled “Years Licensed” it states “7” for Desiree Durga and “0” for Justin Durga. Contrarily, in the addendum, next to a line asking “Do all drivers have a valid driver’s license including drivers 16 years of age with a graduated license?” the box marked “Yes” is checked. Again, the addendum reflects a signature by Jeanine Michalski on the “Sales Representative” line, but the “Signature of Applicant” line above it is blank. In her affidavit, Desiree Durga’s avers that “I never stated that Justin Durga had a valid driver’s license, nor did I ever prepare or sign this Addendum.” The addendum indicates that the Durgas carried automobile insurance with Farmers Insurance Exchange through March 15, 2013, and consistent with the certificate, it appears MemberSelect first insured Desiree Durga’s Jeep for the February 25, 2013-August 25, 2013 policy term. This policy was renewed and continued for ten years through the February 25, 2023- August 25, 2023 term at issue in this litigation. Desiree Durga’s affidavit also avers that “every renewal from AAA or MemberSelect continued to state that Justin Durga was not licensed—as 1 The policy of insurance that was in effect on the date of the accident was issued by defendant MemberSelect. In various documents prepared by defendant in this matter, including documents sent to plaintiffs, it refers to itself as “MemberSelect Insurance Company,” “AAA In

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to revision until final publication in the Michigan Appeals Reports. STATE OF MICHIGAN COURT OF APPEALS DART BANK, UNPUBLISHED August 13, 2025 Plaintiff-Appellee, 10:57 AM v No. 368841 Ingham Circuit Court POLLICELLA PLLC, LC No. 23-000495-CB Defendant-Appellant. Before: K. F. KELLY, P.J., and MARIANI and ACKERMAN, JJ. PER CURIAM. Defendant, Pollicella PLLC, was the victim of an advance-fee scam. The money it lost came out of its account with plaintiff Dart Bank. When defendant’s account balance became negative, plaintiff invoked the mediation and arbitration provisions of the agreement governing the account. The arbitrator ruled in favor of plaintiff, and the trial court confirmed the award. We affirm. I. BACKGROUND Defendant is a law firm, and a significant portion of its clients are marijuana businesses. When defendant opened an account with plaintiff, the parties executed a marijuana-related business (MRB) addendum, which included a provision that required arbitration for disputes arising out of the agreement. In 2021, defendant was contacted by a person posing as a client who wanted defendant to broker a sale of heavy machinery. Acting in accordance with its correspondence with this supposed client, defendant deposited several Canadian checks into its account with plaintiff and then wired funds to a New York bank account, which in turn sent the money to an entity in Lagos, Nigeria. Defendant wired approximately $650,000 in total before the first check was rejected as fraudulent. Once the checks were rejected, and accounting for the outgoing wire transfers, defendant’s account had a deficit of $372,859.19. The parties attempted mediation, but it was unsuccessful. They then entered binding arbitration as required by the MRB addendum. The arbitrator awarded $372,859.19 to plaintiff— -1- in effect, holding defendant responsible for the entire loss. When defendant did not pay the award, plaintiff brought an action in the trial court for a judgment against defendant in the amount of the arbitrator’s award as well as attorney’s fees, expert witness costs, and other costs incurred. Plaintiff moved to modify the arbitrator’s award, confirm the award as modified, and enter a corresponding judgment. Defendant moved to vacate the award. The trial court granted plaintiff’s motions and denied defendant’s motion. This appeal followed. II. ANALYSIS “We review de novo a trial court’s decision to enforce, vacate, or modify a statutory arbitration award.” Tokar v Albery, 258 Mich App 350, 352; 671 NW2d 139 (2003). However, “[a] court may not review an arbitrator’s factual findings or decision on the merits.” Police Officers Ass’n of Mich v Manistee Co, 250 Mich App 339, 343; 645 NW2d 713 (2002) (citation omitted). “Instead, a court may only review an arbitrator’s decision for errors of law.” TSP Servs, Inc v Nat’l-Standard, LLC, 329 Mich App 615, 620; 944 NW2d 148 (2019). As a result, notwithstanding our de novo review of the trial court’s decision, “[a] court’s power to modify, correct, or vacate an arbitration award . . . is very limited.” Gordon Sel-Way, Inc v Spence Bros, Inc, 438 Mich 488, 495; 475 NW2d 704 (1991). Defendant raises two arguments, but both rest on the premise that plaintiff had an obligation to protect defendant from its own mistakes and that the arbitrator erred in failing to recognize that obligation. Defendant’s arguments have no merit. A. ARBITRATOR’S AUTHORITY Defendant first argues that the arbitrator exceeded his authority by failing to address the MRB addendum. “The scope of an arbitrator’s remedial authority is limited to the contractual agreement of the parties.” Nordlund & Assoc Inc v Hesperia, 288 Mich App 222, 228; 792 NW2d 59 (2010) (quotation marks and citation omitted). “Arbitrators exceed their power when they act beyond the material terms of the contract from which they primarily draw their authority, or in contravention of controlling principles of law.” Id. (cleaned up). This Court therefore “must apply the same legal principles that govern contract interpretation to the interpretation of an arbitration agreement.” Beck v Park West Galleries, Inc, 499 Mich 40, 45; 878 NW2d 804 (2016). Our primary task in construing a contract is