Mack Energy Co v. Red Stick Energy, LLC et al, No. 6:2016cv01696 - Document 278 (W.D. La. 2019)
Court Description: ORDER AND REASONS denying 266 Motion for Certificate of Appealability ; denying 266 Motion to Stay. Signed by Judge Susie Morgan on 9/13/2019. (crt,Williams, L)
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Mack Energy Co v. Red Stick Energy, LLC et al Doc. 278 U N ITED S TATES D ISTRICT COU RT W ESTERN D ISTRICT OF LOU ISIAN A MACK EN ERGY COMPAN Y, Plain tiff CIVIL ACTION VERSU S N O. 16 -16 9 6 RED STICK EN ERGY, LLC, ET AL., D e fe n d an ts SECTION "E" ( 1) ORD ER AN D REAS ON S Before the Court is a Motion for Certification Under 28 U.S.C. § 1292(b) and Motion for Stay filed by Defendants, Natrona Resources, L.L.C., Dixie Managem ent Services, L.L.C., Albert W. Gunther, J r., as trustee of The R E Trust, Martha Gunther, as trustee of The R E Trust, Old South Mechanical, L.L.C., Old South Ventures, L.L.C., Albert W. Gunther, J r., and Albert W. Gunther, III (collectively, “Movants”). 1 Mack Energy Com pany (“Mack”) opposes this m otion. 2 Movants filed a reply. 3 For the following reasons, Movants’ m otion is D EN IED . BACKGROU N D This case arises out of the drilling of an oil and gas well in the Main Pass 21 Prospect. 4 Mack seeks to recover the costs of drilling, testing, plugging, and abandoning a dry hole. 5 Mack alleges Red Stick Energy, LLC (“Red Stick”) purchased a 26.5% interest in the Main Pass 21 Prospect and entered into a participation agreem ent and a joint operating agreem ent with Mack. 6 Red Stick an d Gunther, J r. allegedly agreed to form an entity, Main Pass 21, LLC (“Main Pass”), to which Red Stick would transfer its 26.5% 1 R. Doc. 266. R. Doc. 271. 3 R. Doc. 277. 4 R. Doc. 191 at ¶ 4. 5 Id. at ¶¶ 37, 38 . 6 Id. at ¶¶ 20 . 2 1 Dockets.Justia.com interest in the Main Pass 21 Prospect. 7 Gunther, J r. an d Red Stick agreed Main Pass would be funded 90 % by Natrona Resources, L.L.C (“Natrona”), of which Gunther, J r. is a m em ber, and 10 % by Red Stick. 8 In its Fifth Am ended and Superseding Com plaint, Mack (1) brings a breach of contract claim against Red Stick, (2) brings a detrim ental relian ce claim against Gunther, J r., and (3) alleges Main Pass assum ed the obligations of Red Stick under the PA and J OA. 9 In response, Gunther, J r. filed a Motion to Dism iss for Failure to State a Claim , or Alternatively Motion for Sum m ary J udgem ent. 10 Red Stick has filed crossclaim s and third party com plaints against Movants. 11 Red Stick alleges: “Subsequent to the determ ination that the well was a dry hole, Defendant Albert W. Gunther, J r. individually and/ or as m anager of Natrona an d Dixie Managem ent Services, L.L.C. [(“Dixie”)], and in turn, Defendant Main Pass, declined to pay any of the rem aining drilling costs for the Main Pass 21 Prospect.”12 Red Stick brings breach of contract and detrim ental reliance claim s against Movants, and seeks to hold Movants liable through piercin g the corporate veil and/ or an alter ego theory of liability. 13 In response, Movants filed a Motion to Dism iss for Failure to State a Claim , or Alternatively, Motion for Sum m ary J udgm ent, as to Red Stick’s am ended crossclaim and second am ended third party com plaint. 14 On J une 3, 20 19, Mack filed a m otion to com pel discovery, requesting Gunther, J r., Gunther, III, Main Pass, Natrona, Dixie, Old South Mechanical, LLC (“Old South 7 Id. at ¶¶ 11-12. Id. at ¶ 13. 9 R. Doc. 191. 10 R. Doc. 199. 11 R. Doc. 169; R. Doc. 170 . 12 R. Doc. 169 ¶ 9; R. Doc. 170 ¶ 9. 13 R. Doc. 169; R. Doc. 170 . 14 R. Doc. 181. 8 2 Mechanical”), Old South Ventures, LLC (“Old South Ventures”), and Gunther, J r. and Martha Gunther as trustees of RE Trust be ordered to supplem ent their responses to written discovery propounded by Mack. 15 Movants opposed this m otion. 16 Mack filed a reply. 17 On J uly 24, 20 19, the Magistrate J udge heard oral argum ent regarding this m otion. 18 Several objections were resolved during oral argum ent, and the Magistrate J udge took under subm ission the rem aining issues concerning whether discovery into the alter ego and corporate veil piercing issues would be allowed. 19 As the Magistrate J udge stated, with respect to these rem aining issues, Mack sought the following inform ation: 1) Identification of the owners of each of the Gunther Parties, their proportionate share of ownership, the consideration paid, and the date each interest was acquired, as well as all docum ents related to the ownership interest or financial or business relationship with such party; 2) As to each of the Gunther Parties except Main Pass, whether the party directly or indirectly funded Main Pass or Barber’s Hill, LLC; 3) Identification of all assets, liabilities, sources of incom e, and net worth of Main Pass; 4) Whether any of the Gunther Entities directly or indirectly funded Main Pass and if so, all docum ents pertaining thereto; 5) Bank statem ents of Main Pass from date of opening through end of March 20 19 (only Decem ber 20 15 and J anuary 20 16 have been produced) and bank statem ents of Natrona, Dixie, and Gunther, J r. from J une 20 15 through the end of March 20 19; 6) 20 15 through 20 18 federal tax returns for Gunther, J r., and the Gunther Entities; 7) Form ation docum ents for Old South Ventures, Old South Mechanical, RE Trust, Natrona, and Dixie (those of Main Pass had already been produced); an d 15 R. Doc. 177. R. Doc. 194. 17 R. Doc. 20 5. 18 R. Doc. 214. 19 Id.; R. Doc. 225 at 1. 16 3 8 ) Identification and description of any transfers or loans between any of the Gunther Parties and any guarantees or cosigns of any obligations of the Gunther Parties along with any docum ents evidencing such loans. 20 On J uly 26, 20 19 the Magistrate J udge granted Mack’s m otion to com pel. 21 Specifically, the Magistrate J udge ordered: “The Gunther Parties shall supplem ent their discovery responses as requested by Mack, except as to the category 1, which requests are narrowed to docum ents reflecting (a) the owner’s investm ents and (b) any funds transferred between the owner and the entity. The Gunther Parties m ay produce their responses pursuant to a protective order lim iting their use and disclosure.” The Magistrate J udge explained: “The court finds that each of these categories seeks inform ation that is relevant to the alter ego claim s. Only one is overbroad—the request for “all docum ents” related to ownership interests or financial or business relationships in category 1.”22 On August 9, 20 19, Movants appealed the Magistrate J udge’s decision. 23 Mack argued the Magistrate J udge’s ruling was correct. 24 During a telephone status conference held on August 28, 20 19, this Court affirm ed in part the Magistrate J udge’s Order and Reasons granting the Motion to Com pel filed by Mack. 25 The Court reversed in part the Magistrate J udge’s Order an d Reasons as follows: 1) Albert Gunther, J r. will not be required to produce his personal incom e tax returns for the years 20 15 through 20 18. Instead, he will produce his Form s 10 40 , with Schedule C, for those years. 2) Albert Gunther, J r. will produce his personal bank statem ents for in -cam era review by the Court by providing a hard copy of an unredacted version of the bank statem ents and a redacted version of the bank statem ents, together with a list of 20 R. Doc. 225 at 12. Doc. 225. 22 Id. at 12. 23 R. Doc. 242. 24 R. Doc. 258 . 25 R. Doc. 262. 21 R. 4 bank account num bers for Albert Gunther, J r. and all entities nam ed in this action. 26 With respect to the first category of docum ents, the Court held irrelevant portions m ay be redacted. 27 The Court ordered both categories of docum ents be produced by no later than Wednesday, Septem ber 18, 20 19 at 5:0 0 p.m . 28 The Court further ordered the parties to file a joint m otion for the entry of a protective order by no later than Friday, August 30 , 20 19 at 5:0 0 p.m . 29 On Septem ber 7, 20 19, Movants filed the instant m otion for certificate of appealability and m otion to stay. 30 Movants ask the Court to certify its August 28, 20 19 discovery order, regarding Movants’ appeal of the Magistrate J udge’s decision granting Mack’s m otion to com pel, to allow an interlocutory appeal. 31 Movants argue they should not be required to produce “confidential tax returns and bank statem ents” that are “based upon conclusory allegations challenged by pending Rule 12(b)(6) m otions.”32 Movants additionally seek a stay of the Court’s ruling while the instant m otion and the interlocutory appeal are pending. 33 LAW AN D AN ALYSIS I. Mo tio n fo r Ce rtificate o f Ap p e alability There are three criteria set forth in 28 U.S.C. § 1292(b) that m ust be m et before the Court can properly certify an interlocutory order for appeal: (1) there m ust be a controlling question of law; (2) there m ust be a substantial ground for difference of 26 Id. at 2. Id. at 2 n.4. 28 Id. at 2. 29 Id. at 1. 30 R. Doc. 266. 31 R. Doc. 266-1 at 1. 32 Id. at 6. 33 Id. 27 5 opinion; an d (3) an im m ediate appeal from the order m ay m aterially advance the ultim ate term ination of the litigation. 34 The m oving party bears the burden of establishing that interlocutory appeal is appropriate. 35 It is within the Court’s discretion to certify an order for interlocutory appeal under Section 1292(b). 36 The “‘general congressional policy against piecem eal review’ should preclude interlocutory review” in m ost instances. 37 To that end, interlocutory appeals are “exceptional” and should not be granted “‘sim ply to determ ine the correctness’ of a ruling.”38 “Each application [of Section 1292(b)] is to be looked at . . . in the light of the underlying purpose reflected in the statute.”39 “‘The m anifest purpose of § 1292(b) is to support appeal from orders that cannot otherwise be reviewed by final judgm ent appeal or interlocutory appeal under som e other provision of § 1292(b).’”40 “It is self-evident that the purpose of § 1292(b) is not to underm ine 28 U.S.C. § 1291’s requirem ent of final judgm ent on the m erits of a case before it m ay be appealed of right.”41 As a prelim in ary m atter, Movants overstate the breadth of the docum ents ordered to be produced. This Court did not order Movants to produce all tax returns and bank 34 28 U.S.C. § 1292(b); Aparicio v. Sw an Lake, 643 F.2d 110 9, 1110 n.2 (5th Cir. 198 1). U.S. ex rel. Branch Consultants, L.L.C. v. Allstate Ins. Co., 668 F. Supp. 2d 78 0 , 8 13 (E.D. La. 20 0 9). 36 W aste Mgm t. of Louisiana, L.L.C. v. Parish, No. CIV. A. 13-6764, 20 14 WL 5393362, at *3 (E.D. La. Oct. 22, 20 14) (“This Court has the discretion to certify its Order and Reasons for interlocutory appeal under 28 U.S.C. § 1292(b).”); In re Chinese Manufactured Dry w all Products Liab. Litig., No. 0 9-4115, 20 12 WL 4928 869, at *7 (E.D. La. Oct. 16, 20 12) (sam e); Copelco Capital, Inc. v. Gautreaux, No. CIV. A. 99-850 , 1999 WL 729248 , at *1 (E.D. La. Sept. 16, 1999) (“The trial judge has substantial discretion in decidin g whether or not to certify questions for interlocutory appeal.”); Sw int v. Cham bers Cnty . Com m ’n, 514 U.S. 35, 47 (1995) (“Congress thus chose to confer on district courts first line discretion to allow interlocutory appeals.”). 37 Com m odity Futures Trading Com m ission v. Preferred Capital Inv. Co., 664 F.2d 1316, 1319 (5th Cir. 1982). 38 Gulf Coast Facilities Mgm t., LLC v. BG LN G Servs., LLC, 730 F. Supp. 2d 552, 565 (E.D. La. 20 10 ) (quotin g Clark– Dietz & Associates– Engineers, Inc. v . Basic Constr. Co., 70 2 F.2d 67, 67– 69 (5th Cir. 1983)). 39 Hadjipateras v. Pacifica, S.A., 290 F.2d 697, 70 2 (5th Cir. 1961) (citations om itted). 40 Castellanos-Contreras v. Decatur Hotels, LLC, 622 F.3d 393, 425 (5th Cir. 20 10 ) (quotin g 16 Charles Alan Wright et al., Federal Practice and Procedure § 3929.1, at 40 0 (2d ed. 1996 & Supp. 20 10 )). 41 Id. 35 6 statem ents. Instead, with respect to Gunther, J r., the Court ordered the production of only his Form s 10 40 , with Schedule C, for years 20 15 through 20 18 , with irrelevant inform ation to be redacted. 42 Further, Gunther, J r.’s personal bank statem ents are to be produced to the Court for in-cam era review. 43 Turning to the application of Section 1292(b), the Court finds Movants have failed to m eet their burden of establishing that interlocutory appeal is appropriate under Section 1292(b). Movants argue the “controlling question of law” is: Should a defendant be required to produce confidential tax returns and bank statem ents based upon conclusory allegations in a com pliant of piercing the corporate veil, for which a m otion to dism iss is pending and which the trial court has not ruled upon? 44 Movants’ argum ent “am ounts to a fact-specific dispute over the application of the discovery rules to this case.”45 “As several courts have recognized, pretrial discovery orders will seldom m eet the requirem ents for interlocutory appeal.”46 This is not one of the “rare case[s] where the issue presented in the context of discovery . . . involves a controlling question of law.”47 Consequently, Movants have not shown Court’s discovery order involved a controlling question of law. 42 R. Doc. 262 at 2. Id. 44 R. Doc. 277 at 2. 45 Fannie Mae v. Hurst, 613 F. App’x 314, 318 (5th Cir. 20 15). 46 Decena v. Am erican Intern. Com panies (AIG), No. 11-1574, 20 12 WL 1640 455, at *2 (E.D. La. May 9, 20 12) (citing Hy de Constr. Co. v. Koehring Co., 455 F.2d 337, 338– 39 (5th Cir. 1972) (notin g that it is a “rare case where the issue presented in the context of discovery . . . in volves a controlling question of law and where an im m ediate appeal m ay m aterially advance the ultim ate term ination of the litigation”); Union Pac. R.R. Co. v. ConAgra Poultry Co., 189 F. App'x 576, at *3 (8th Cir. 20 0 6) (“Pretrial discovery orders are alm ost never im m ediately appealable .”); W hite v. N ix, 43 F.3d 374, 377– 78 (8th Cir. 1994) (noting that “the discretionary resolution of discovery issues precludes the requisite controlling question of law” requirem ent)); see also Dorato v. Sm ith, 163 F. Supp. 3d 837, 880 (D.N.M. 20 15) (“Discovery issues do not often involve controllin g questions of law.”). 47 Hy de Constr. Co., 455 F.2d at 338– 39. 43 7 Further, Movants have failed to show how an im m ediate appeal m ay m aterially advance the ultim ate term ination of the litigation. Movants argue an im m ediate appeal will serve the interest of judicial econom y 48 However, courts have rarely held an im m ediate appeal of discovery orders will m aterially advance the ultim ate term ination of the case. 49 This is because—as is the case here—even if the Court’s discovery order were to be reversed, “it would not term inate this litigation” because “the Court would still be required to resolve the m erits of Plaintiff’s claim s, either at trial or through . . . dispositive pretrial m otions.”50 Finally, no underlying purpose of Section 1292(b) warrants certification. Movants appear to argue an interlocutory appeal is n ecessary to protect the “private” nature of the financial docum ents ordered to be produced because “once the confidential docum ents at issue are produced, the confidential nature will no longer exist and the ‘cat will be out the bag.’”51 Movants’ argument for appellate review of this side issue is rem iniscent of one addressed in In re Air Crash at Belle Harbor, N ew York on N ovem ber 12, 20 0 1. 52 In that case, the Second Circuit considered whether it could exercise appellate jurisdiction over a non-party lawyer's appeal from a district court order directing him to produce docum ents an d appear for a deposition, despite the lawyer’s assertions of various privileges belonging to him self and his client. 53 The lawyer argued appellate jurisdiction could be exercised pursuant to the collateral order doctrine, which allows courts of appeal to hear an appeal from an interlocutory order “if such order (1) ‘conclusively determ ined 48 R. Doc. 266-1 at 9. See, e.g., Fannie Mae, 613 F. App’x at 318; H y de Constr. Co., 455 F.2d at 338 – 39; Decena, 20 12 WL 1640 455 at *2. 50 Decena, 20 12 WL 1640 455 at *2. 51 R. Doc. 266-1 at 9. 52 490 F.3d 99 (2d Cir. 20 0 7). 53 Id. 49 8 the disputed question’; (2) ‘resolved an im portant question com pletely separate from the m erits of the action’; and (3) ‘was effectively unreviewable on appeal from a final judgm ent.’”54 The Second Circuit held this argum ent was foreclosed by the court’s prior holding in Chase Man hattan Bank, N .A., v. Turner & N ew all, PLC, 55 where the Second Circuit “rejected application of the collateral order doctrine in an appeal from a discovery order that required disclosure of thousands of docum ents allegedly protected by attorneyclient privilege.”56 Other courts have confirm ed the m ere fact that relevant docum ents m ay contain personal or private inform ation does not alone m ake an order to produce those docum ents appealable. 57 The Fifth Circuit’s decision in Ram say v. Bailey is one such exam ple. 58 In that case, the Fifth Circuit, in ruling on an appeal of a district court’s order dism issing a case for failure to com ply with a discovery order and a long pattern of conduct am ounting to want of prosecution, discussed the plaintiff’s m otion for interlocutory appeal of the district court’s discovery order to produce the plaintiff’s private diaries as relevant evidence of his m ental state. 59 The Fifth Circuit noted this was clearly a “side issue” in the case and thus the Section 1292(b) m otion was “virtually frivolous.”60 With respect to his appeal of the district court’s order of dism issal, the plaintiff argued the district court’s discovery order to produce his personal diaries violated his “constitutional right to privacy.”61 The Fifth Circuit found this argum ent 54 Id. at 10 9 (quoting SEC v. TheStreet.Com , 273 F.3d 222, 228 (2d Cir. 20 0 1) (quoting W hiting v. Lacara, 187 F.3d 317, 320 (2d Cir. 1999))). 55 964 F.2d 159 (2d Cir. 1992). 56 In re Air Crash, 490 F.3d 99, 10 9. 57 See, e.g., United States v . W oodbury , 263 F.2d 78 4 (9th Cir. 1959) (holding an order to produce docum ents over a claim of privilege is not an appealable order within the m ean ing of Section 1292(b)). 58 531 F.2d 70 6 (5th Cir. 1976). 59 Id. 60 Id. at 70 8. 61 Id. at 70 7. 9 uncom pelling, particularly in light of the fact that the defendant had offered to “keep the contents of the diaries confidential except as to attorneys and parties in the lawsuit, would not perm it copies of the diaries to be m ade, and would return the diaries to plaintiff at the conclusion of the litigation,” but the plaintiff failed to “seek any type of protective order.”62 Movants’ proffered privacy concerns are sim ilarly overstated in this case. The Court has appropriately protected the Movants’ privacy interests in the following m anners. First, the Court has lim ited the types of docum ents to be produced and allowed redaction of irrelevant inform ation in those docum ents. 63 Second, the Court will conduct an in-cam era review of certain docum ents before requiring their production. 64 Third, Movants’ production will be subject to a protective order. 65 In light of these com prehensive protections, allowing im m ediate appeal of the Court’s discovery order would thus only serve to hinder, not advance, the ultim ate term ination of the litigation. Because there is no controlling question of law as to which im m ediate appeal from the Court’s August 28, 20 19 discovery order m ay m aterially advance ultim ate term ination of litigation, certification of the Court’s discovery order for appeal pursuant to 28 U.S.C. § 1292(b) is not warranted. Movants’ privacy concerns do not entitle Movants to an im m ediate appeal, and, m oreover, the Court has im plem ented adequate safeguards to protect Movants. 62 Id. at 70 8. R. Doc. 262. 64 Id. 65 See R. Docs. 273 and 274. 63 10 II. Mo tio n fo r Stay “The decision whether to stay proceedings is discretionary, and the exercise of discretion is guided by the policies of justice and efficiency.”66 Movants request the Court stay its August 28, 20 19 discovery order while it is considering Movants’ request for certification. Because the Court has decided to deny Movants’ request for certification, Movants’ m otion for a stay is accordingly denied as m oot. CON CLU SION IT IS ORD ERED that Movants’ m otion is D EN IED . N e w Orle a n s , Lo u is ian a, th is 13 th d ay o f Se p te m be r, 2 0 19 . _____________________________ SU SIE MORGAN U N ITED S TATES D ISTRICT J U D GE 66 Benjam in v . Bay er Corp., 20 0 2 WL 10 0 9475, at *1 (E.D. La. May 16, 20 0 2) (citin g Calvin Boudreaux v. Metropolitan Life Ins. Co., 1995 WL 8378 8, *1 (E.D. La. 1995)). 11
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