Shell Offshore Inc. v. Eni Petroleum US LLC et al, No. 2:2016cv15537 - Document 165 (E.D. La. 2017)

Court Description: ORDER AND REASONS granting in part and denying in part 131 Motion to Dismiss Certain Claims. Signed by Judge Susie Morgan. (bwn)
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Shell Offshore Inc. v. Eni Petroleum US LLC et al Doc. 165 U N ITED S TATES D ISTRICT COU RT EASTERN D ISTRICT OF LOU ISIAN A SH ELL OFFSH ORE IN C., Plain tiff CIVIL ACTION VERSU S N O. 16 -1553 7 EN I PETROLEU M U S LLC, ET AL., D e fe n d an ts SECTION : “E” ( 2 ) ORD ER AN D REAS ON S Before the Court is Defendants’ Second Motion to Dism iss Certain Claim s. 1 Pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, Defendants En i Petroleum US LLC (“Eni-LLC”) and Eni US Operating Co. In c. (“Eni-Operating”) m ove to dism iss Shell Offshore Inc.’s (“Shell”) claim s for (1) breach of contract against EniOperating and (2) open account against both Eni-LLC and Eni-Operating. 2 Shell opposes the m otion. 3 LEGAL STAN D ARD Pursuant to Federal Rule of Civil Procedure 12(b)(6), a district court m ay dism iss a com plaint, or any part of it, for failure to state a claim upon which relief m ay be granted if the plaintiff has not set forth factual allegations in support of his claim that would entitle him to relief. 4 “To survive a m otion to dism iss, a com plaint m ust contain sufficient factual m atter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” 5 “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to 1 R. Doc. 131. R. Doc. 131 at 1. 3 R. Docs. 148 . 4 Bell Atl. Corp. v . Tw om bly , 550 U.S. 544, 555 (20 0 7); Cuvillier v. Tay lor, 50 3 F.3d 397, 40 1 (5th Cir. 20 0 7). 5 Ashcroft v. Iqbal, 556 U.S. 662, 678 (20 0 9) (quotin g Tw om bly , 550 U.S. at 570 ). 2 Dockets.Justia.com draw the reasonable inference that the defen dant is liable for the m isconduct alleged.” 6 The court, however, does not accept as true legal con clusions or m ere conclusory statem ents, and “conclusory allegations or legal conclusions m asquerading as factual conclusions will not suffice to prevent a m otion to dism iss.” 7 “[T]hreadbare recitals of elem ents of a cause of action, supported by m ere conclusory statem ents” or “naked assertion[s] devoid of further factual enhancem ent” are not sufficient. 8 In deciding a 12(b)(6) m otion to dism iss, it is well-established that “a district court m ay not go outside the com plaint.” 9 That is, the court should only look to the pleadings, and to any docum ents or exhibits attached to the pleadings. 10 “Docum ents that a defendant attaches to a m otion to dism iss are considered part of the pleadings if they are referred to in the plaintiff’s com plaint and are central to [the plaintiff’s] claim s.” 11 A docum ent in the record that is not referenced in the com plaint or attached to the m otion to dism iss m ay not be considered, however. 12 Further, the court m ay not take into account additional facts asserted in a m em orandum opposing the m otion to dism iss, because such m em oranda do not constitute pleadings under Rule 7(a). 13 Courts m ay also consider m atters of which they m ay take judicial notice. 14 “A judicially noticed fact m ust be one not subject to reasonable dispute in that it is either (1) generally known within the territorial 6 Id. Christian Leadership Conference v . Suprem e Court of the State of La., 252 F.3d 781, 786 (5th Cir. 20 0 1) (citing Fernandez-Montes v. Allied Pilots Ass’n, 987 F.2d 278, 28 4 (5th Cir. 1993)). 8 Iqbal, 556 U.S. at 663, 678 (citations om itted). 9 Gines v. Horton , 699 F.3d 812, 8 21 (5th Cir. 20 12). 10 Scanlan v. Tex. A&M Univ. 343, F.3d 533, 536 (5th Cir. 20 0 3). 11 Collins v. Morgan Stanley Dean W itter, 224 F.3d 496, 498-99 (5th Cir. 20 0 0 ). 12 Gines, 699 F.3d at 820 fn.9. 13 See, e.g., Pennsy lvania ex rel. Zim m erm an v. Pepsico, Inc., 836 F.2d 173, 181 (3d Cir. 198 8); Morgan Distrib. Co., Inc. v . Unidy n am ic Corp., 868 F.2d 992, 995 (8th Cir. 1989) (“it is axiom atic that a com plaint m ay not be am ended by the briefs in opposition to a m otion to dism iss”). 14 Lovelace v. Softw are Spectrum , 78 F.3d 10 15, 10 17-18 (5th Cir. 1996). 7 S. 2 jurisdiction of the trial court or (2) capable of accurate and ready determ ination by resort to sources whose accuracy cannot reasonably be questioned.” 15 In sum m ary, “[f]actual allegations m ust be enough to raise a right to relief above the speculative level.” 16 “[W]here the well-pleaded facts do not perm it the court to infer m ore than the m ere possibility of m isconduct, the com plaint has alleged—but it has not show[n]’—that the pleader is entitled to relief.” 17 “Dism issal is appropriate when the com plaint ‘on its face show[s] a bar to relief.’” 18 AN ALYSIS I. Choice of Law Shell asserts claim s of breach of contract against both Eni-LLC, which is a party to the Unit Operating Agreem ent (“UOA”), and Eni-Operating, which is not. 19 Shell alleges that Eni-Operating is liable for breach of contract because, though Eni-Operating has no ownership interest in the various leases in the Popeye field, it “acquired contractual obligations related to the Popeye field.” 20 Due to the exten sive n ature of these alleged obligations, Shell argues Eni-Operating was “functioning as one” with Eni-LLC, and as a result “it is not entitled to the protections of a corporate veil.” 21 Shell contends that EniOperating m ay be held liable under Louisiana’s “single business enterprise” doctrine, under which a plaintiff m ay “disregard the identities of a group of separate corporations.” 22 15 Fed. R. Evid. 20 1(b). Tw om bly , 550 U.S. at 555. 17 Id. (quotin g Fed. R. Civ. P. 8(a)(2)). 18 Cutrer v. McMillan, 30 8 F. App’x 819, 8 20 (5th Cir. 20 0 9) (per curiam ) (quotation s om itted). 19 R. Doc. 119 at 2-3 ¶ 7, and 9 ¶¶ 35-41. 20 R. Doc. 119 at 3. 21 R. Doc. 119 at 5. 22 Green v. Cham pion Ins. Co., 90 -0 716 (La. App 1 Cir. 1991); 577 So. 2d 249, 257– 58 . 16 3 Defendants m ove to dism iss the breach of contract claim against Eni-Operating, arguing that (1) Eni-Operating is not a party to the UOA and has no ownership interest in the Popeye leases, and (2) Shell has not alleged sufficient facts to pierce Eni-LLC’s corporate veil under an alter ego theory. 23 Plaintiff responds that Eni-Operating, by virtue of its deeply intertwined relationship with Eni-LLC, owed “contractual obligations to [Shell]” that give rise to Plaintiff’s breach of contract claim . 24 The parties agree that the law of Louisiana applies. 25 According to Defendants, Louisiana choice-of-law rules are applicable and require the Court to apply the law of the state of incorporation to any questions of corporate structure, which for Eni-Operating is Delaware. 26 Plaintiff argues that the substantive corporate law of Louisiana applies. 27 The Court has subject m atter jurisdiction pursuant to the Outer Continental Shelf Lands Act (“OCSLA”). 28 OCSLA generally supersedes the norm al choice-of-law rules that the forum would apply. 29 This Court has held that OCSLA’s choice-of-law provision does not sim ply incorporate the conflict-of-law rules of the adjacent state; rather, OCSLA “is itself a choice of law provision which preem pts any contrary choice of law provision found 23 R. Doc. 131-1 at 1-6. Defendants interpret Shell’s Third Am ended Com plaint to assert liability against EniOperatin g under an “alter ego” theory. Plaintiff has n ot alleged an alter ego theory. The Court need not address this portion of the Defendants’ m otion to dism iss. 24 R. Doc. 148 at 1. 25 In Union Texas Petroleum Corp. v. PLT Engineering, 25 the Fifth Circuit established the requirem ents for applying state law as surrogate federal com m on law under OCSLA. 895 F.2d 10 43, 10 47 (5th Cir. 1990 ). First, “[t]he controversy m ust arise on a situs covered by the OCSLA (i.e. the subsoil, seabed, or artificial structures perm anently or tem porarily attached thereto).” Id. Second, “[f]ederal m aritim e law m ust not apply of its own force.” Id. Third, “[t]he state law m ust not be inconsistent with Federal law.” Id. 26 R. Doc. 131-1 at 5. 27 R. Doc. 148 at 6-7. 28 R. Doc. 119 at 2. See Outer Contin ental Shelf Lands Act, 43 U.S.C. § 1331 et seq., and 43 U.S.C. § 1349 (b)(1) (20 12). 29 Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473, 48 8 (1981). 4 in state law.” 30 Accordingly, Shell is correct and the Court will apply the substantive law of Louisiana in this action. II. Single Business Enterprise Theory Under Louisiana law, the single busin ess enterprise doctrines applies “where two or m ore business entities act as one. . . . [W]hen corporations integrate their resources in operations to achieve a com m on busin ess purpose, each busin ess m ay be held liable for wrongful acts done in pursuit of that purpose.” 31 If a group of corporations constitutes a single business enterprise, “a court m ay disregard the concept of corporate separateness and exten d liability to each of the affiliated corporations for the purpose of preventing fraud or achieving equity.” 32 In determ ining whether a corporation is part of a single business enterprise, Louisiana courts consider eighteen factors: 1. Corporations with identity or substantial identity of ownership, that is, ownership of sufficient stock to give actual working control; 2. Com m on directors or officers; 3. Unified adm in istrative control of corporations whose business functions are sim ilar or supplem entary; 4. Directors and officers of one corporation act independently in the interest of that corporation; 5. Corporation financing another corporation; 6. Inadequate capitalization (“thin incorporation”); 7. Corporation causing the incorporation of another affiliated corporation; 8 . Corporation paying the salaries and other expenses or losses of another corporation; 9. Receiving no business other than that given to it by its affiliated corporations; 10 . Corporation using the property of another corporation as its own; 11. Noncom pliance with corporate form alities; 12. Com m on em ployees; 13. Services ren dered by the em ployees of one corporation on behalf of another corporation; 14. Com m on offices; 30 Tajonera v. Black Elk Energy Offshore Operations, L.L.C., No. CV 13-0 366, 20 15 WL 13533521, at *4 (E.D. La. Feb. 27, 20 15). 31 Brow n v. AN A Insurance Group, 20 0 7-2116 (La. 10 / 14/ 0 8); 994 So. 2d 1265, 1266 n .2 (citing Green v . Cham pion Ins. Co., 577 So. 2d 249 (La. App. 1 Cir. 1991). 32 Aker Sols., Inc. v. Sham rock Energy Sols., 20 16 WL 45298 28, at *2 (E.D. La. Aug. 30 , 20 16). 5 15. Centralized accounting; 16. Undocum ented transfers of funds between corporations; 17. Unclear allocation of profits and losses between corporations; an d 18 . Excessive fragm entation of a single enterprise into separate corporations. 33 None of these factors is dispositive. 34 Rather, courts look to the totality of the circum stances. 35 Shell correctly points to the 18 -factor Green v. Cham pion Ins. Co. test for application of the single business enterprise theory. 36 The Court has exam in ed Shell’s allegations in light of the Green factors to determ ine whether Shell has alleged sufficient facts to state a cause of action against Eni-Operating for liability for breach of contract under the single busin ess enterprise theory. 1. Corporations with identity or substantial identity of ownership. This factor calls for the Court to inquire into the corporation’s legal ownership. 37 Eni-LLC and EniOperating are both subsidiaries of Eni Petroleum Co. Inc. (“Eni-Inc.”). 10 0 % of EniOperating stock is owned by Eni-Inc. Eni-LLC is wholly owned by Eni-BB, which is wholly owned by Eni-Inc. 38 Accordingly, this factor supports a finding of a single business enterprise. 2. Com m on directors or officers. Shell alleges that En i-Operating and Eni-LLC have “com m on boards of directors,” 39 and the com m on board of directors of the Eni corporations m eet to discuss assets including Popeye. 40 Shell also alleges Leon ardo 33 Green v. Cham pion Ins. Co., 90 -0 716 (La. App 1 Cir. 1991); 577 So. 2d 249, 257– 58 . Id. 35 Id. 36 R. Doc. 148 at 9. 37 N ussli US LLC, v. N ola Motorsports Host Com m ittee, Inc., 20 16 WL 40 638 23 (E.D. La. 20 16). 38 See R. Doc. 117 at 7. 39 R. Doc. 119 at 11 ¶ 39(i). 40 R. Doc. 119 at 13 ¶ 39(j). 34 6 Stefani, President and CEO of Eni-Operatin g, “directed non-paym ent of the Popeyerelated AFEs/ AFRs at issue.” 41 This factor weighs in favor of a finding that Eni-Operating and En i-LLC are a single business enterprise. 3. Unified adm inistrative control of corporations. Shell has not alleged any facts in support of this factor. 4. Directors an d officers of one corporation act independently in the interest of that corporation. Shell has not alleged any facts in support of this factor. 5. Corporation financing another corporation. Shell alleges the corporate funds of Eni-Operating and Eni-LLC are “com m ingled.” 42 This factor weighs in favor of a finding that Eni-Operating and Eni-LLC are a single business enterprise. 6. Inadequate capitalization. As noted above, Shell alleges that Eni-Operating and Eni-LLC’s corporate funds are undercapitalized. This factor weighs in favor of a fin ding that Eni-Operating and Eni-LLC are a single business enterprise. 7. Corporation causing the incorporation of another affiliated corporation. Shell has not alleged any facts in support of this factor. 8 . Corporation paying the salaries and other expenses or losses of another corporation. Shell alleges that Eni-Operatin g pays the salaries of Eni-LLC’s board of directors. 43 This factor weighs in favor of finding that Eni-Operating and Eni-LLC are a single business entity. 9. Receiving no business other than that given to it by its affiliated corporations. Shell has not alleged any facts in support of this factor. 41 R. Doc. 119 at 13 ¶ 39(r). R. Doc. 119 at 13 ¶ 39(v). 43 R. Doc. 119 at 11 ¶ 39(f). 42 7 10 . Corporation using the property of another corporation as its own. Shell has not alleged any facts in support of this factor. 11. Noncom pliance with corporate form alities. Shell alleges, “[b]ecause Eni Operating was functioning as one with Eni LLC, and was not exercising the corporate form alities that entitle an entity to protection from piercing the corporate veil, Eni LLC’s obligations extend to Eni Operating.” 44 Shell further alleges, “Eni Operating and Eni LLC did not exercise statutory form alities for incorporating and transacting corporate affairs.” 45 More specifically, Shell alleges that Eni Operating “failed to provide separate bank accounts and/ or other bookkeeping records, and failed to hold regular and separate director m eetings.” 46 This factor weighs in favor of a finding that Eni-Operating and En iLLC are a single busin ess enterprise. 12. Com m on em ployees. Shell alleges that Eni-LLC has no em ployees. 47 As a result, it can have no com m on em ployees with Eni-Operating. The Court concludes that this factor does not support Shell’s single business enterprise theory. 13. Services rendered by the em ployees of one corporation on behalf of another corporation. Shell alleges Eni-Operating perform s extensive services on behalf of EniLLC. For exam ple, Shell states, “Eni Operatin g carries out the busin ess associated with any oil and gas lease held by Eni LLC,” 48 and “Eni Operating handles the day-to-dayoperations for the other Eni affiliates.” 49 Further, Shell alleges “Eni Operating supports Eni LLC in whatever decision Eni LLC wants to carry out,” 50 “Eni operating em ployees 44 R. Doc. 119 at 13 ¶ 39(t). R. Doc. 119 at 13 ¶ 39(u). 46 R. Doc. 119 at 13 ¶ 39(w). 47 R. Doc. 119 at 12 ¶ 39(l). 48 R. Doc. 119 at 11 ¶ 39 (d). 49 R. Doc. 119 at 11 ¶ 39(e). 50 R. Doc. 119 at 12 ¶ 39(m ). 45 8 carry out adm inistrative an d clerical tasks for Eni LLC,” 51 and “em ployees of Eni Operating receive the [Authority for Expenditure disclosures m ade pursuant to the UOA] and review them from a technical and econom ic standpoint.” 52 This factor weighs in favor of a finding that Eni-Operating an d Eni-LLC are a single business enterprise. 14. Com m on offices. The parties concede that Eni-Inc, Eni-BB, Eni-Operating, an d Eni-LLC share the sam e headquarters. 53 This factor weighs in favor of a finding that EniOperating and Eni-LLC are a single busin ess enterprise. 15. Centralized accounting. Shell alleges the corporate funds of En i-Operating and Eni-LLC are “com m ingled.” 54 This factor weighs in favor or a finding that Eni-Operating and En i-LLC are a single business enterprise. 16. Undocum ented transfers of funds between corporations. Shell has not alleged any facts in support of this factor. 17. Unclear allocation of profits and losses between corporations. Shell has not alleged any facts in support of this factor. 18 . Excessive fragm entation of a single enterprise into separate corporations. Shell has not alleged any facts in support of this factor. The Court finds that Shell has pleaded sufficient facts to state a claim for breach of contract against Eni-Operating based on the single busin ess enterprise theory. Accordingly, Defendants’ m otion to dism iss is denied. 51 R. Doc. 119 at 12 ¶ 39(n). R. Doc. 119 at 12 ¶ 39(p). 53 See R. Doc. 117 at 8; R. Doc. 46 at 7-8 (citing R. Doc. 46-2 (Sealed copy of (1) Secretary Certificate, The Managers of En i Petroleum US, L.L.C. and (2) Secretary Certificate of Eni Petroleum Co., Inc.)). 54 R. Doc. 119 at 13 ¶ 39(v). 52 9 III. Open Account Plaintiff also asserts claim s against Eni-LLC and Eni-Operating under Louisiana’s “open account” statute. 55 This statute provides in part: When any person fails to pay an open account within thirty days after the claim ant sen ds written dem an d therefor correctly setting forth the am ount owed, that person shall be liable to the claim ant for reasonable attorney fees for the prosecution an d collection of such claim .” 56 Further: “[O]pen account” includes any account for which a part or all of the balance is past due, whether or not the account reflects one or m ore transactions and whether or not at the tim e of contracting the parties expected future transactions. “Open account” shall include debts incurred for professional services, including but not lim ited to legal and m edical services. 57 Shell avers the fin ancial arrangem ent between it and the Defendants qualifies as an open account under Louisiana Law. 58 Shell argues that it operated in the role of a creditor, providing “the service of a successful com pletion of the four well abandonm ent cam paign on credit” to Eni-LLC, and under its single business enterprise theory, to Eni-Operating. 59 Because paym ent on the joint account is overdue, Shell asserts that a claim under La R.S. § 9:278 1 is appropriate. 60 Citing Louisiana courts, the Fifth Circuit m akes clear that “[a] contract is significantly different from an open account.” 61 “A claim for breach of contract and a claim under the open account statute are considered distinct causes of action.” 62 An open account is an account in which one party has opened a line of credit that is open to future 55 R. Doc. 119 at 15. See LA. R EV. STAT. § 9:2781. LA. R EV. STAT. § 9:2781 (A). 57 LA. R EV. STAT. § 9:2781 (D). 58 R. Doc. 119 at 14. 59 R. Doc. 119 at 14-15. 60 R. Doc. 119 at 18 . 61 Cam bridge Toxicology Group, Inc. v . Exnicios, 495 F.3d 169, 173-74 (5th Cir. 20 0 7). See also Ty ler v. Hay nes, 1999-1921 (La. App. 3 Cir. 5/ 3/ 0 0 ), 760 So. 2d 559, 563. 62 Cam bridge Toxicology Group, Inc., 495 F.3d at 173-74. 56 10 m odification as a result of m utual expectations of prospective business dealings. 63 “A contract, however, is an agreem ent between two or m ore parties in which an offer is m ade by one of the parties and acceptance is m ade by the other party, thereby establishing a concurrence in understanding the term s.” 64 The Louisiana Suprem e Court has warned that the open account statute should be strictly construed, “because the award of attorney fees is exceptional and penal in n ature.” 65 The Fifth Circuit has specifically addressed whether joint operatin g agreem ents like the one at issue in this case qualify as open accounts under Louisiana law. In Caddo Oil v. O’Brien 66 , the Fifth Circuit held that an action for dam ages brought under a joint operating agreem ent is a suit in contract, not a suit on open account. 67 Shell argues the relevant portion of Caddo Oil is “dicta related to statute of lim itations and is inapplicable to the facts presented in the instant m atter.” 68 The Court disagrees. In determ in ing whether to apply the ten-year prescriptive period for breach of contract claim s or the three-year period prescriptive period for open accounts, the Court had to decide whether disputes brought under joint operating agreem ents satisfy the Louisiana open accounts statute. “A suit to recover am ounts due under a written operating agreem ent is a suit in contract, not a suit on an open account.” 69 Courts of other jurisdictions are in accord. Oklahom a courts found that Oklahom a’s open account statute “did not apply to allow recovery of attorney fees by 63 See Cam bridge Toxicology Group, Inc. v . Exnicios, 495 F.3d 169, 173-74 (5th Cir. 20 0 7). Ty ler, 760 So. 2d at 563. 65 Frank L. Beier Radio, Inc. v. Black Gold Marine, Inc., 83-2141 (La. 4/ 2/ 84); 449 So.2d 10 14. 66 90 8 F.2d 13 (5th Cir. 1990 ). 67 Id. at 17. 68 R. Doc. 148 at 11-12. 69 Caddo Oil, 90 8 F.2d at 17. 64 11 nonoperating working interest owner under a joint operating agreem ent.” 70 As in Louisiana, “‘open account’ is defined as unsettled debt arising from item s of work and labor, goods sold and delivered, and other open transactions not reduced to writing and subject to future settlem ent and adjustm ent.” 71 The UOA is not an open account, because the UOA leaves nothing open. Although the UOA provides for ongoing dealings between the parties, it also includes strict provisions for the parties’ financial obligations. This is not a case in which one party has left open a line of credit, subject to future adjustm ent. Rather, the parties, through the UOA, established specific term s for the provision of services by Shell and the subsequent rem uneration by the nonoperating parties. Shell’s open account causes of action again st Eni-Operating and Eni-LLC are thus dism issed with prejudice. CON CLU SION For the foregoing reasons; IT IS ORD ERED that Eni-Inc.’s Second Motion to Dism iss Certain Claim s 72 pursuant to Rule 12(b)(6) is GRAN TED in part and D EN IED in part. N e w Orle a n s , Lo u is ian a, th is 2 5th d ay o f Octo be r, 2 0 17. ________________________________ SU SIE MORGAN U N ITED STATES D ISTRICT JU D GE 70 Oklahom a Oil & Gas Exploration Drilling Program , 8 77 P.2d 60 5, 611 n.8 (Okla. Civ. App. 1994). 71 Id. 72 R. Doc. 131. 12