Covol Fuels No. 4, LLC v. Pinnacle Mining Company, LLC

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 14-1395
COVOL FUELS NO. 4, LLC, a Utah limited liability company,
Plaintiff – Appellant,
v.
PINNACLE MINING COMPANY, LLC, a Delaware limited liability
company,
Defendant – Appellee.
Appeal from the United States District Court for the Southern
District of West Virginia, at Beckley. Irene C. Berger,
District Judge. (5:12-cv-04138)
Argued: January 28, 2015 Decided: March 3, 2015
Before KING and FLOYD, Circuit Judges, and DAVIS, Senior Circuit
Judge.
Affirmed in part, vacated in part, and remanded by published
opinion. Judge King wrote the majority opinion, in which Senior
Judge Davis joined. Judge Floyd wrote a separate opinion
dissenting in part and concurring in part.
ARGUED: Thomas Vincent Flaherty, FLAHERTY SENSABAUGH BONASSO
PLLC, Charleston, West Virginia, for Appellant. Timothy J.
Downing, ULMER & BERNE LLP, Cleveland, Ohio, for Appellee. ON
BRIEF: Alan L. Sullivan, James D. Gardner, SNELL & WILMER
L.L.P., Salt Lake City, Utah, for Appellant. Wm. Scott
Wickline, Christopher D. Pence, HARDY PENCE PLLC, Charleston,
West Virginia; Joseph A. Castrodale, Paul R. Harris, Matthew T.
Wholey, ULMER & BERNE LLP, Cleveland, Ohio, for Appellee.
KING, Circuit Judge:
From 2008 to 2011, Covol Fuels No. 4, LLC (“Covol”) and
Pinnacle Mining Co., LLC (“Pinnacle”) were parties to a business
agreement wherein Covol conducted coal fines recovery operations
at Pinnacle’s mine in Wyoming County, West Virginia (the
“Pinnacle mine”). After it became economically unfeasible for
Covol to continue those recovery operations, it initiated this
civil action in the Southern District of West Virginia, alleging
claims for breach of contract, tort, and unjust enrichment.
Pinnacle moved for summary judgment, which was awarded as to all
claims. See Covol Fuels No. 4, LLC v. Pinnacle Mining Co., LLC,
14 F. Supp. 3d 724 (S.D. W. Va. 2014) (the “Opinion”). 1 Covol
has appealed the district court’s award of summary judgment on
its contract and tort claims. As explained below, there are
genuine issues of material fact that must be resolved with
respect to Covol’s breach of contract claim. On the other hand,
we agree with the Opinion that Covol’s tort claims are barred by
the so-called “gist of the action doctrine.” We therefore
affirm in part, vacate in part, and remand.
1
The Opinion is found at J.A. 2861-90. (Citations herein
to “J.A. ___” refer to the contents of the Joint Appendix filed
by the parties in this appeal.)
2
I.
A.
The Pinnacle mine includes several stages of operations
through which coal is recovered, beginning with mining coal from
the Pocahontas Number 3 seam. 2 That extracted material goes
through Pinnacle’s “wash” or “prep” plant (the “wash plant”),
which strips coal from waste (the “refuse material”). Pinnacle
then pumps the refuse material through a slurry line and into
its nearby Smith Branch impoundment (the “impoundment”).
The impoundment is a ten-acre, man-made pond created by a
dam on the downstream side of the impoundment, on the Smith
Branch of Pinnacle Creek, near Pineville, West Virginia. It
measures 200-feet deep at the greatest depth, runs nearly a mile
in length, and is between 500- and 1000-feet across. The refuse
material settles into the impoundment, which is filled with
water. Pinnacle is able to pump water out of the impoundment
and into a so-called “toe pond” downstream. From there, the
water may either be pumped into an underground reservoir (and
then back into Pinnacle’s wash plant) or released, where it
flows into Pinnacle Creek, the Guyandotte River, and,
2
We recite the facts in the light most favorable to Covol,
as the nonmoving party. See Durham v. Horner, 690 F.3d 183, 185
n.3 (4th Cir. 2012).
3
eventually, to the Ohio River, the Mississippi River, and the
Gulf of Mexico.
The refuse material contains fine-grained coal (“coal
fines”) not captured by the wash plant. If refuse material is
lifted from the impoundment, it can be processed to extract
those coal fines, which can be sold for various industrial
purposes. 3 In October 2006, Beard Pinnacle, LLC (“Beard”)
initiated coal fines recovery operations at the Pinnacle mine,
wherein it dredged the impoundment for refuse material, which it
processed at an adjacent facility (the “processing facility”).
B.
1.
In February 2008, Covol executed a series of contracts with
various Pinnacle affiliates, whereby Covol took over Beard’s
operations. 4 The principal contract at issue is the Coal
3
The coal fines in the impoundment are apparently of
substantial value, having been extracted from the Pocahontas
Number 3 seam, which contains some of the best coal in the
world. See C. Stuart McGehee, Pocahontas No. 3 Coal Seam, W.
Va. Encyclopedia (Oct. 22, 2010),
http://www.wvencyclopedia.org/articles/1880. See also Castner
v. Coffman, 178 U.S. 168, 173 (1900) (observing that coal from
the Pocahontas Number 3 seam has been “well and favorably known
as a coal of high grade”).
4
Through a series of related agreements, Covol purchased
the processing facility and its assets from Beard; Covol assumed
a lease from Beard Technologies, Inc., in order to operate the
processing facility; and Covol and Pinnacle agreed on a manner
for splitting the profits from the processed coal fines.
4
Purchase and Refuse Recovery Agreement (the “Agreement”). 5 The
Agreement — a fully integrated contract — was executed on
February 15, 2008, and imposed a five-year term, with the option
for the parties to mutually agree to renew for additional one-
year terms. Covol was authorized to unilaterally terminate the
contract under section 12 of the Agreement if its operations
became economically unfeasible. The Agreement designates that
it shall be governed by West Virginia law. See Agreement § 27.
Pursuant to the Agreement, Covol agreed to purchase and
process “all or part of” the refuse material located in the
impoundment, and to handle and process that material “in such a
way which does not interfere with Pinnacle’s Mining Operations.”
See Agreement § 4. Pinnacle disclaimed any representation or
warranty as to the “character or quality or amount of the Refuse
Material Covol removes or receives.” Id. § 20. Pursuant to
section 18 of the Agreement, Pinnacle was required to provide
Covol with: an area near the impoundment where Covol could
install and maintain its equipment; ingress and egress across
Pinnacle’s property; and “any right-of-way reasonably needed”
for Covol to “transport the Refuse Material from the
5
The Agreement is located at J.A. 75-92.
5
[impoundment] to the processing [facility].” 6 Two provisions of
the Agreement — sections 7 and 8 — imposed contractual duties
relating to applicable laws. Section 7 required Covol and
Pinnacle, in performing their obligations under the Agreement,
to “comply in all respects with and undertake all
responsibilities under” applicable state and federal laws. 7
Relatedly, section 8 required the parties to obtain and maintain
any necessary permits or licenses. 8
6
Section 18 of the Agreement, which is titled “Access and
Lease Provisions,” provides, in pertinent part:
Pinnacle shall provide to Covol: (i) a mutually
agreeable area . . . to install and maintain its
Processing Facility . . . ; (ii) any right-of-way
reasonably needed by Covol to transport the Refuse
Material from the [impoundment] to the processing
[facility]; and (iii) ingress and egress over the
property of Pinnacle . . . to support the activities
described in this Agreement. . . .
7
Section 7 of the Agreement, which is titled “Compliance
with Laws,” provides, in pertinent part:
In performing their respective obligations under this
Agreement, Covol and Pinnacle shall comply in all
respects with and undertake all responsibilities under
all applicable . . . rules, regulations, . . . or
other similar requirements of any federal, state, or
local government, agency, court, or public authority
(“Governmental Requirements”), including, but not
limited to, those regulating or otherwise relating to
environmental pollution and environmental control,
safety, health, labor, such as, for example,
Governmental Requirements under . . . the Federal Mine
Safety and Health Act of 1977, as amended[;] . . . .
8
Section 8 of the Agreement, which is titled “Licenses and
Permits,” provides, in pertinent part:
(Continued)
6
The Agreement provided for both Pinnacle and Covol to
profit from the recovered coal fines. Sections 2 and 3 set out
that Covol would sample and test the recovered coal fines to
determine their quality. Depending on the levels of ash and
moisture, the coal fines would be categorized as either “met
coal” or “steam coal.” See Agreement § 2. Met coal — which
contains lower ash and moisture content and is therefore more
valuable — would be purchased by an affiliate of Pinnacle, while
Pinnacle had an option — but no obligation — to purchase steam
coal. See id.
2.
Covol paid $14 million to purchase the processing facility,
and then immediately spent another $4 million renovating it.
Covol’s coal fines recovery operations were under way by the
summer of 2008. A number of issues and events arose in the
following years that ultimately made it economically unfeasible
for Covol to continue in the business. Covol ceased its
operations at the Pinnacle mine in 2012.
Pinnacle shall maintain its existing permits that are
required for its performance under this Agreement.
Any additional permits required by Pinnacle for
Covol’s operations . . . shall be acquired by Pinnacle
. . . .
7
The biggest obstacle Covol faced related to the water level
of the impoundment. To extract the refuse material, Covol
utilized a dredge machine with a mechanical arm that dipped into
the water and dragged refuse material out of the impoundment.
The mechanical arm was 25-feet long, meaning that the dredge
could only reach the top 25 feet of water. Covol requested
several times that Pinnacle adjust the water level so that
Covol’s dredge could capture refuse material located deeper in
the impoundment. Pinnacle, however, declined to do so.
Moreover, in 2011, Pinnacle adopted a new protocol that
prevented it from pumping water out of the impoundment and
lowering the water level (the “water management plan”). 9 Without
those adjustments to the water level, Covol was able to extract
only a portion of the refuse material.
9
West Virginia regulations concerning selenium
contamination of surface water required Pinnacle to change its
operations in order to come into regulatory compliance. See W.
Va. Code R. §§ 47-30-1 to 47-30-15 (2009). Selenium is an
antioxidant that has been naturally found in West Virginia coal,
rocks, and soil. See J.A. 1637. Although humans require a very
small amount of selenium, it “can be toxic in larger amounts and
has been found to cause reproductive problems in some aquatic
animals.” Id. Pinnacle had at least two options: (1) a water
management plan, that would control selenium contamination by
essentially recycling the water in the impoundment, so that it
would not be released; and (2) a water treatment plan, that
would reduce the amount of selenium contained in the water
through a chemical process. Pinnacle selected the water
management plan. See id. at 1652-58.
8
Throughout Covol’s coal fines recovery operations under the
Agreement, the parties were subject to mine plans required by
the federal Mine Safety and Health Administration (the “MSHA”),
see 30 C.F.R. §§ 77.216-77.217 (2008), and operating permits
required by the West Virginia Department of Environmental
Protection (the “WVDEP”), see W. Va. Code R. §§ 38-2-1 to 38-2-
14 (2008). As of 2008, a mine plan was in effect that had been
submitted in 2002 and approved prior to Beard opening the
processing facility (the “Beard mine plan”). Covol operated
under that plan from 2008 until August 2010, when the first two
phases of a modified mine plan (the “modified mine plan”) were
approved by both the MSHA and the WVDEP. 10 During the parties’
relationship under the Agreement, an approved mine plan required
that any mining of the impoundment be performed concomitant with
an incremental lowering of the water level. 11
10
Covol had pursued modifications to the Beard mine plan in
order to conduct the spoil removal project, which is described
infra at 10.
11
The Beard mine plan described two phases of operations
for removing coal fines from the impoundment, and stated that
the water level would be lowered “between 15 and 30 feet” during
phase 1, and “an additional 20 to 30 feet” during phase 2. See
J.A. 2026. The modified mine plan set out six phases of
operations, although only two of those phases were approved by
both the MSHA and the WVDEP. That plan called for the water
level of the impoundment to be lowered in 25-foot increments.
See id. at 2014.
9
Beyond the problems Covol encountered in accessing the
refuse material located deeper than 25 feet below the surface of
the impoundment, it also faced a decline in the quality of coal
fines. When Covol began its operations at the Pinnacle mine,
Pinnacle’s wash plant was relatively inefficient, meaning that
it left a high level of coal in the refuse material. That
remaining coal was of good quality in terms of ash and moisture
content. Covol, then, benefited from the wash plant’s
inefficiency on the front end because it could recover that coal
on the back end. During the negotiations leading up to the 2008
Agreement, Pinnacle was aware that the wash plant was
inefficient and outdated, though it did not inform Covol of any
plans to update the wash plant. In fact, Pinnacle did not
approve that upgrade until 2009. It subsequently notified Covol
of those plans in July 2010. Pinnacle completed its upgrades to
the wash plant in 2011.
In the face of those obstacles to its coal fines recovery
operations, Covol attempted to maximize the areas of the
impoundment that could be mined. Initially, Covol was
restricted as to what portions of the impoundment its dredge
could reach under the Beard mine plan. Once the modified mine
plan was approved, Covol invested $4 million to excavate spoil
material from the banks of the impoundment, giving Covol new
access to millions of tons of coal fines (the “spoil removal
10
project”). That expenditure was properly approved in October
2010 and the project was completed in 2011. Covol realized no
benefit from the spoil removal project, however, because its
coal fines recovery operations had become economically
unfeasible as a result of the static water level of the
impoundment. Therefore, in 2011, Covol was soliciting offers to
sell its business.
C.
Covol filed this civil action against Pinnacle in the
Southern District of West Virginia on August 7, 2012, alleging
four causes of action. First, Covol charged Pinnacle with
breaching the Agreement, maintaining that Pinnacle had violated
its obligations under both the express terms of the Agreement
and the implied covenant of good faith and fair dealing. Covol
claimed damages including lost profits from its share of more
than $100 million worth of coal. Second, Covol asserted a tort
claim for fraudulent concealment, alleging that Pinnacle hid its
intentions to renovate the wash plant and to implement the water
management plan while Covol was spending millions of dollars to
renovate the processing facility and undergo the spoil removal
project. Third, Covol asserted another tort claim for negligent
misrepresentation, predicated on the theory that Pinnacle had
breached its duty to provide Covol with material information by
failing to disclose its plans relating to the wash plant and
11
water management plan. Fourth, Covol alleged an unjust
enrichment claim stemming from the monetary benefit that
Pinnacle received due to Covol’s investment in the spoil removal
project.
After discovery had been completed, on October 17, 2013,
Pinnacle moved for summary judgment on all four claims.
Following briefing, the district court, as explained in its
Opinion, granted Pinnacle summary judgment as to each claim.
With respect to Covol’s breach of contract claim, the
district court determined that the Agreement is not ambiguous,
and thus undertook to identify and enforce its plain and natural
meaning. See Opinion 15. More specifically, the Opinion
rejected Covol’s contentions that sections 1, 4, 8, and 18 of
the Agreement gave Covol a right to access the refuse material.
Id. at 16-19. Alternatively, the court determined that even if
the Agreement did provide such a right, “allowing Covol access
to the bottom of the impoundment pond does not require Pinnacle
to affirmatively lower the water level.” Id. at 17. The court
further reasoned that, as a matter of law, Pinnacle did not
breach the Agreement because “Covol simply had to deal with more
water in the impoundment where the refuse material was located,”
and “the Agreement explicitly disclaims any warranty regarding
the quantity or quality of the refuse material.” Id. at 20-21.
The court surmised that “Pinnacle may have made business
12
decisions that ultimately made Covol’s operations more
difficult, but no evidence indicates that Pinnacle breached the
[Agreement].” Id. at 21. Given that Covol could not succeed on
its contract claim arising under the terms of the Agreement, the
court ruled that Covol’s good faith and fair dealing theory must
similarly fail. That was so because “there is no avenue through
the applicable case law that affords Covol an independent cause
of action for a breach” of that covenant. Id. at 22.
Next, the district court analyzed Covol’s two tort claims
together. The Opinion briefly explained that the claims would
not succeed on their merits, but emphasized that the tort claims
were barred by the gist of the action doctrine because “they
would not arise independent of the existence of the
[Agreement].” See Opinion 26. Finally, the court granted
summary judgment on Covol’s unjust enrichment claim because “the
subject matter of this claim involves the performance of an
express contract,” which “cannot be the basis of an unjust
enrichment claim” under applicable law. Id. at 30.
Covol has timely noticed this appeal, and we possess
jurisdiction pursuant to 28 U.S.C. § 1291.
II.
We review de novo a district court’s grant of summary
judgment. See Desmond v. PNGI Charles Town Gaming, LLC, 630
13
F.3d 351, 354 (4th Cir. 2011). In so doing, “it is elementary
that . . . ‘[t]he evidence of the non-movant is to be believed,
and all justifiable inferences are to be drawn in [its] favor.’”
Greater Balt. Ctr. for Pregnancy Concerns, Inc. v. Mayor of
Balt., 721 F.3d 264, 283 (4th Cir. 2013) (en banc) (quoting
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)).
Summary judgment may be granted only where “there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Libertarian Party of Va. v. Judd,
718 F.3d 308, 312-13 (4th Cir. 2013) (internal quotation marks
omitted). A dispute is genuine if “a reasonable jury could
return a verdict for the nonmoving party.” Dulaney v. Packaging
Corp. of Am., 673 F.3d 323, 330 (4th Cir. 2012). A fact is
material if it “might affect the outcome of the suit under the
governing law.” Anderson, 477 U.S. at 248.
III.
On appeal, Covol contends that the district court erred in
granting summary judgment on its breach of contract claim and on
its tort claims. Covol requests that the judgment be vacated
and the matter remanded for trial.
A.
We begin by addressing Covol’s breach of contract claim.
Covol asserts that Pinnacle breached the Agreement by failing to
14
lower the water level of the impoundment, thereby interfering
with Covol’s ability to access the coal fines contained therein.
Pinnacle, meanwhile, disputes that it was under any obligation
to adjust the water level. Covol maintains that such a duty was
created by both the express terms of the Agreement and by the
implied covenant of good faith and fair dealing. We address
those contentions in turn.
1.
First, whether the terms of the Agreement obliged Pinnacle
to adjust the water level of the impoundment hinges on the
language of that contract. The Agreement makes no explicit
reference to water levels. Covol nevertheless relies on
sections 1, 4, 7, 8, and 18 of the Agreement — individually and
in combination — as bestowing on Covol a right to access the
refuse material in the impoundment and imposing a corresponding
duty on Pinnacle to adjust the water level.
The Supreme Court of Appeals of West Virginia has explained
that, in construing a contract, a reviewing court must first
determine whether the contract is ambiguous, meaning that the
language is “reasonably susceptible of two different meanings,”
or “that reasonable minds might be uncertain or disagree as to
its meaning.” See Syl. Pt. 4, Estate of Tawney v. Columbia
15
Natural Res., LLC, 633 S.E.2d 22, 23-24 (W. Va. 2006). 12 Whether
or not a contract is ambiguous is a question of law. See Syl.
Pt. 5, id. at 24. If the contract is unambiguous, then the
court should enforce its terms according to the plain and
natural meaning of the language used without considering
extrinsic evidence. See Payne v. Weston, 466 S.E.2d 161, 166
(W. Va. 1995). If, however, the contract is ambiguous, then
extrinsic evidence may be consulted to discern what the parties
intended the rights and obligations of the agreement to include.
See id. Importantly, “when the document has been found to be
ambiguous[,] . . . the determination of intent through extrinsic
evidence become[s] a question of fact,” rather than a question
of law. Id.a.
In section 18 of the Agreement, Pinnacle undertakes several
duties regarding Covol’s right to access its property. Relevant
here, section 18(ii) provides that Pinnacle must
provide . . . any right-of-way reasonably needed by
Covol to transport the Refuse Material from the
[impoundment] to the processing [facility].
12
Pursuant to the Constitution of West Virginia, the
Supreme Court of Appeals of West Virginia articulates new points
of law through its syllabus. See W. Va. Const. art. VIII, § 4
(“[I]t shall be the duty of the court to prepare a syllabus of
the points adjudicated in each case in which an opinion is
written in which a majority of the justices thereof concurred,
which shall be prefixed to the published report of the case.”).
16
Section 18(ii) clearly gives Covol a right-of-way relating to
the refuse material. The parties disagree, however, as to the
meaning of the term “from the [impoundment],” and whether that
term required Pinnacle to adjust the water level of the
impoundment. We therefore must determine whether section 18(ii)
is ambiguous on that point.
Covol characterizes section 18(ii) as requiring Pinnacle to
provide a right-of-way within the impoundment itself, such that
Pinnacle must adjust the water level in order for Covol to
retrieve the refuse material. That interpretation is
reasonable, given that the provision obliges Pinnacle to provide
“any right of way reasonably needed.” See Agreement § 18(ii).
Pinnacle maintains that section 18(ii) only speaks to Covol’s
right to transport “over the land from the Impoundment to the
Processing Facility,” suggesting that the right-of-way begins at
the edge of the impoundment. See Br. of Appellee 31. That
interpretation is also reasonable because the term “from the
[impoundment]” makes no explicit reference to the right-of-way
extending into the impoundment. A third reasonable reading of
section 18(ii) could be somewhere in the middle: that it
provides Covol a right-of-way within the impoundment to access
any refuse material that Covol could reach without Pinnacle
manipulating the water level. Thus, there are at least three
17
reasonable interpretations of section 18(ii), indicating that
the provision is ambiguous.
A broader reading of the Agreement underscores the
ambiguity. Section 18(ii) describes Covol’s right with respect
to transporting refuse material, and “refuse material” is
broadly defined in section 1 of the Agreement to include “coal
waste material . . . located at” Pinnacle’s refuse site. In
section 4, Covol undertakes to “purchase . . . all or part of
the Refuse Material produced, previously, currently and any in
the future, from Pinnacle’s Mining Operations in Wyoming
County.” A reasonable construction of the term “refuse
material” can encompass the material as it sits in the bottom of
the impoundment, having been pumped in from Pinnacle’s wash
plant. Section 18(ii) may thus naturally be interpreted as
giving Covol the right-of-way to extract the refuse material
from the impoundment. In all, we are satisfied that section
18(ii) is ambiguous and can be reasonably interpreted in
alternative ways.
Because section 18(ii) is ambiguous, extrinsic evidence may
be considered in order to resolve the factual question of what
the parties intended. If a reasonable jury could decide that
question in favor of Covol, then a genuine dispute of material
fact exists, precluding summary judgment. See Dulaney v.
Packaging Corp. of Am., 673 F.3d 323, 330 (4th Cir. 2012) (“A
18
genuine question of material fact exists where, after reviewing
the record as a whole, a court finds that a reasonable jury
could return a verdict for the nonmoving party.”). Covol relies
on deposition testimony of William Boor, who testified on behalf
of Pinnacle regarding the Agreement, pursuant to Rule 30(b)(6)
of the Federal Rules of Civil Procedure. 13 Boor testified that
Covol’s intent in entering the Agreement was to remove refuse
material from the impoundment. See J.A. 1324. Boor agreed that
“the purpose of the [A]greement” was that “Covol wanted to get
the [coal] fines out of the [impoundment].” Id. at 1325. When
asked whether Covol would have entered into the Agreement if it
would not be given access to the refuse material, Boor replied:
“Yeah, that would be no deal. I mean, the purpose of the deal
was for their business plan to clean coal.” Id. at 1325-26. He
agreed that “to clean the coal you had to have access to the
coal.” Id. at 1326.
In light of that testimony, Covol has established a genuine
dispute of material fact as to whether the parties intended for
the right-of-way granted in section 18(ii) to require Pinnacle
13
Rule 30(b)(6) of the Federal Rules of Civil Procedure
pertains to depositions of organizations, including corporate
entities. The organization is permitted to designate a person
to testify on its behalf, and the organization is bound by that
testimony. See Reilly v. Natwest Markets Grp., Inc., 181 F.3d
253, 268 (2d Cir. 1999).
19
to adjust the water level so that Covol could access the refuse
material located in the impoundment. See Scites v. Marcum, 560
S.E.2d 505, 509 (W. Va. 2002) (explaining that size, location,
and nature of right-of-way are factual questions to be decided
by jury). We must remand because the proper interpretation of
the Agreement can only be resolved by the trier of fact. See
World-Wide Rights Ltd. v. Combe Inc., 955 F.2d 242, 245 (4th
Cir. 1992). 14
b.
Covol also contends that Pinnacle was obliged to adjust the
water level of the impoundment based on the provisions of the
mine plans. That argument relies on sections 7 and 8 of the
Agreement. Section 7 required Pinnacle to comply with the law,
including state and federal regulations. Section 8 required
Pinnacle to “maintain its existing permits” and to acquire any
additional permits needed in order for Covol to conduct its
operations. Reading sections 7 and 8 in tandem, Covol contends
that Pinnacle breached the Agreement when it violated the mine
plans by refusing to lower the water level of the impoundment.
14
The district court’s alternative ruling — that, if Covol
was given some right to access the refuse material, that right
did not encompass all refuse material in the impoundment or
require Pinnacle to adjust the water level — is unpersuasive.
That construction is not clear from the Agreement, and thus
reflects a factual determination that could not be made against
Covol in the summary judgment proceedings.
20
A threshold issue here is whether the mine plans should be
incorporated into the Agreement. In order to incorporate a
separate document into a contract, “a general reference” to the
other document is not enough. See Syl. Pt. 2, State ex rel. U-
Haul Co. of W. Va. v. Zakaib, 752 S.E.2d 586, 589 (W. Va. 2013).
Rather,
(1) the writing must make a clear reference to the
other document so that the parties’ assent to the
reference is unmistakable; (2) the writing must
describe the other document in such terms that its
identity may be ascertained beyond doubt; and (3) it
must be certain that the parties to the agreement had
knowledge of and assented to the incorporated document
so that the incorporation will not result in surprise
or hardship.
Id.Taking the facts in Covol’s favor, the parties were aware
that mine plans — which could be modified — would govern
operations at the Pinnacle mine. Nonetheless, the parties’
awareness of the mine plans is not, by itself, sufficient to
incorporate the terms of those plans into the Agreement. The
Agreement does not clearly reference mine plans, nor does the
contractual language expressly indicate that the parties
intended for the terms of the mine plans to govern their
contractual relationship. Therefore, the Agreement is the sole
document memorializing the parties’ agreements.
Next, Covol contends that, even if the terms of the mine
plans are not incorporated into the Agreement, Pinnacle agreed
21
to abide by the terms of those mine plans, requiring it to
adjust the water level. That argument hinges on section 7’s
provision that Pinnacle comply with all governmental
requirements. Covol, however, did not raise section 7 in its
opposition to summary judgment in the district court. See J.A.
1282-1316. Although that issue has not been squarely preserved
for our review, we observe that whether section 7 obliged
Pinnacle to adhere to the terms of the mine plans, and whether
Pinnacle breached any such obligation, would raise factual
issues that a jury must decide. In any event, a remand is
required on the basis of section 18(ii) of the Agreement.
2.
Beyond the terms of the Agreement, Covol predicates its
claim for breach of contract on a theory that Pinnacle breached
the implied covenant of good faith and fair dealing by
interfering with Covol’s access to the refuse material and the
coal fines contained therein. West Virginia’s Uniform
Commercial Code provides that: “Every contract or duty within
this chapter imposes an obligation of good faith in its
performance and enforcement.” See W. Va. Code § 46-1-304(2006). “Good faith” means “honesty in fact and the observance
of reasonable commercial standards of fair dealing.” Id. § 46-
1-201(b)(20).
22
The district court ruled that Covol could not succeed on
its good faith and fair dealing theory because Covol had not
otherwise raised a genuine issue of material fact as to the
terms of the Agreement. See Opinion 22 (“Having previously
found that Pinnacle did not breach any duty [under the
Agreement], there is no avenue through the applicable case law
that affords Covol an independent cause of action for a breach
of the covenant of good faith and fair dealing.”). In light of
our determination that Pinnacle is not entitled to summary
judgment with respect to Covol’s theory that Pinnacle breached
the Agreement, we are satisfied that summary judgment should not
have been granted as to Covol’s allegation that Pinnacle
breached the implied covenant of good faith and fair dealing.
3.
Overall, then, section 18(ii) of the Agreement is ambiguous
as to whether Covol had the right to access the refuse material
located within the impoundment, thereby requiring Pinnacle to
adjust the water level of the impoundment. We therefore vacate
the district court’s award of summary judgment on Covol’s breach
of contract claim and remand. 15
15
The parties have focused much attention on the reasons
that Pinnacle did not lower the water level of the impoundment,
such as its efforts to comply with state regulations concerning
selenium contamination. But whether Pinnacle was required to
take some action to comply with the law does not affect whether
(Continued)
23
B.
Covol also disputes the district court’s award of summary
judgment as to its tort claims for negligent misrepresentation
and fraudulent concealment. 16 As to both of those claims, Covol
relies on alleged misstatements and concealments by Pinnacle
with respect to Pinnacle’s intention to adjust the water level
of the impoundment and its intention to upgrade the wash plant.
We are satisfied, as was the district court, that Covol’s
tort claims are barred by the gist of the action doctrine. That
doctrine is meant “to prevent the recasting of a contract claim
as a tort claim.” Gaddy Eng’g Co. v. Bowles Rice McDavid Graff
& Love, LLP, 746 S.E.2d 568, 577 (W. Va. 2013). It applies if
any one of four factors is present, including:
(1) where liability arises solely from the contractual
relationship between the parties; (2) when the alleged
duties breached were grounded in the contract itself;
(3) where any liability stems from the contract; and
the Agreement required Pinnacle to adjust the water level of the
impoundment.
16
Under West Virginia law, “[f]raudulent concealment
involves the concealment of facts by one with knowledge or the
means of knowledge, and a duty to disclose, coupled with an
intention to mislead or defraud.” See Trafalgar House Constr.,
Inc. v. ZMM, Inc., 567 S.E.2d 294, 300 (W. Va. 2002). Negligent
misrepresentation, in turn, can be established where a person
“under a duty to give information to another . . . makes an
erroneous statement when he has no knowledge on the subject, and
thereby misleads the other to his injury.” See Folio v. City of
Clarksburg, 655 S.E.2d 143, 151 (W. Va. 2007).
24
(4) when the tort claim essentially duplicates the
breach of contract claim or where the success of the
tort claim is dependent on the success of the breach
of contract claim.
Id. (quoting Star v. Rosenthal, 884 F. Supp. 2d 319, 328-39
(E.D. Pa. 2012)). In Gaddy, the Supreme Court of Appeals of
West Virginia observed that “whether a tort claim can coexist
with a contract claim is determined by examining whether the
parties’ obligations are defined by the terms of the contract.”
Id.The Gaddy decision is instructive here. Gaddy involved a
verbal fee agreement between an attorney and an engineering
company. The company alleged that the agreement included a
promise by the lawyer to pay the company one-third of certain
recovered revenues, but the lawyer disagreed that such a promise
was ever made. The company thereafter brought both contract and
tort claims premised on that asserted recovered-revenue
agreement. The Gaddy court determined that the gist of the
action doctrine barred the company’s tort claim because that
claim “simply redoubled [the company’s] efforts in trying to
prove the existence of the [disputed provision].” Gaddy, 746
S.E.2d at 577. As such, the tort claim was “simply [a] breach
of contract claim[] masquerading as” a tort. Id.
Put succinctly, the same is true here. Covol’s assertions
that Pinnacle made misrepresentations or concealed its intention
25
regarding the water level of the impoundment simply recast
Covol’s claim for breach of contract. And with respect to the
alleged misstatements or concealments as to the wash plant, any
liability would be defined by the Agreement, wherein Pinnacle
expressly disclaimed any warranty as to the quality of refuse
material in the impoundment. See Agreement § 20.
In sum, Covol’s claims for tort liability are barred
because the gist of those actions sounds in contract. The
district court therefore properly granted judgment to Pinnacle
on the fraudulent concealment and negligent misrepresentation
claims.
IV.
Pursuant to the foregoing, we affirm the district court’s
awards of summary judgment as to Covol’s tort claims, vacate
with respect to Covol’s claim for breach of contract, and remand
for such other and further proceedings as may be appropriate.
AFFIRMED IN PART,
VACATED IN PART,
AND REMANDED
26
FLOYD, Circuit Judge, dissenting in part and concurring in part:
In my view, nothing in the Agreement’s plain language
requires Pinnacle to pump water to facilitate Covol’s coal
operations. In holding otherwise, I believe the majority
conjures an ambiguity where there is none, erring in two
fundamental respects. Accordingly, except in regard to Part
III.B of the majority’s opinion, I respectfully dissent.
First, the majority tacitly attributes a meaning to “right-
of-way” that is anything but “plain and ordinary.” Berry v.
Mountain Air Prop. Owners Ass’n, No. 13-1324, 2014 WL 5312274,
at *3 (W. Va. Oct. 17, 2014). A “right-of-way” is “[t]he right
to pass through property owned by another.” Black’s Law
Dictionary 1522 (10th ed. 2014). Although a landowner cannot
interfere with the use of a right-of-way, a landowner has no
duty to maintain or facilitate its use for the grantee’s
benefit. See, e.g., Greiner v. Columbia Gas Transmission Corp.,
41 F. Supp. 2d 625, 631 (S.D. W. Va. 1999); Restatement (Third)
of Property: Servitudes § 4.13(2) (2000); James W. Ely, Jr. &
Jon W. Bruce, The Law of Easements & Licenses in Land § 8.22
(2014). Thus, the pertinent part of § 18 provides Covol only
the right to pass through Pinnacle’s property; it clearly does
not impose an affirmative obligation on Pinnacle to facilitate
Covol’s passage and suit Covol’s changing needs.
27
Second, the majority fails to construe the Agreement “as a
whole, taking and considering all the parts together.” Faith
United Methodist Church & Cemetery of Terra Alta v. Morgan, 745
S.E.2d 461, 481 (W. Va. 2013) (quoting Maddy v. Maddy, 105 S.E.
803, 803 (W. Va. 1921)). Specifically, the majority overlooks
the significance of § 20, which provides:
Pinnacle makes no representation as to the
character or quality or amount of the Refuse
Material Covol removes or receives.
Pinnacle HEREBY DISCLAIMS ANY WARRANTIES,
EXPRESS OR IMPLIED, IN CONNECTION WITH THE
REFUSE MATERIAL. . . . Pinnacle has not
made any representation or warranty to Covol
regarding the suitability or safety of
Pinnacle’s property for the processing of
the Material as contemplated by this
Agreement.
J.A. 85-86 (capitalization in original). Given Pinnacle’s
express disclaimers regarding the amount of material that Covol
should expect to recover and the suitability of Pinnacle’s
property for Covol’s operations, it is hard to see how Pinnacle
had an affirmative obligation to pump water and alter the
conditions of its property simply to allow Covol to access more
material.
In summary, unless one attributes a novel meaning to
“right-of-way” and isolates § 18 from the rest of the Agreement,
the Agreement unambiguously does not impose any obligation on
Pinnacle to pump and lower water for Covol’s benefit. As a
28
result, I respectfully dissent and would affirm the lower
court’s determination in full.
29