Mack Energy Co v. Red Stick Energy, LLC et al, No. 6:2016cv01696 - Document 265 (W.D. La. 2019)
Court Description: ORDER AND REASONS denying 197 Motion for Summary Judgment. Signed by Judge Susie Morgan on 9/6/2019. (crt,Whidden, C)
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Mack Energy Co v. Red Stick Energy, LLC et al Doc. 265 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 Second Motion for Sum m ary J udgm ent Regarding Litigious Redem ption filed by Cross Claim Defendants, Main Pass 21, L.L.C. and Albert W. Gunther, III, and Third Party Defendants, Natrona Resources, 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., Dixie Managem ent, L.L.C., and Albert W. Gunther, III (collectively, the “Movers”) against Cross Claim Plain tiff and Third Party Plaintiff Red Stick Energy, L.L.C (“Red Stick”). 1 Red Stick opposes this m otion. 2 Although the m otion was filed only again st Red Stick, Plaintiff Mack Energy, LLC (“Mack”) also opposes the m otion. 3 Movers filed a reply. 4 For the following reasons, the 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. 5 Mack seeks to recover the costs of drilling, testing, plugging, and abandon ing a dry hole from Red Stick, Gunther, J r., and Main Pass. 6 Mack alleges Red Stick purchased 1 R. Doc. 197. R. Doc. 213. 3 R. Doc. 210 . 4 R. Doc. 232. 5 R. Doc. 191 at ¶ 4. 6 Id. at ¶¶ 37, 38 . 2 1 Dockets.Justia.com 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. 7 Red Stick allegedly assigned all of its interest in the Main Pass 21 Prospect to Defendant Main Pass. 8 Red Stick owns a 10 % interest in Main Pass. 9 Red Stick has filed an am ended cross-claim against Gunther, J r. and Main Pass 10 and a second am ended third party com plaint 11 against Natrona Resources, L.L.C., Dixie Managem ent Services, L.L.C., Albert W. Gunther, J r. and Martha Gunther as trustees of RE Trust, Old South Mechanical, L.L.C., Old South Ventures, L.L.C., and Albert W. Gunther, III, seeking reim bursem ent for any award against Red Stick in favor of Mack. It is undisputed that on October 16, 20 18 Mack entered into a Confidential Covenant Not to Execute, Indem nity and Assignm ent Agreem ent (the “Settlem ent Agreem ent”) with Red Stick, Thom as Burnett, and J anet Burnett. 12,13 In this Settlem ent Agreem ent, Red Stick and the Burnetts (1) paid Mack $ 25,0 0 0 , (2) agreed not to contest a future m otion for sum m ary judgm ent filed by Mack against Red Stick, and (3) assign ed their rights against the Movers to Mack. 14 In exchange, Mack agreed (1) to release all claim s against the Burnetts; (2) not to execute on any judgm ent against Red Stick and the Burnetts; and (3) to provide representation and pay the future court costs and attorneys’ fees associated with the representation of Red Stick and Thom as Burnett in this litigation. 15 It is undisputed that on that sam e date, these sam e parties entered into an 7 Id. at ¶¶ 20 . Id. at ¶ 36. 9 Id. 10 R. Doc. 169. 11 R. Doc. 170 . 12 R. Docs. 197-2, 226, and 227. 13 The m em bers of Red Stick, LLC are Thom as Burn ett an d J anet Burnett. R. Doc. 191 at ¶ 1(a). J anet Burn ett is not party to this litigation . 14 R. Doc. 197-2. 15 Id. 8 2 Assignm ent of Claim s (the “Assignm ent Agreem ent”). 16 In the Assignm ent Agreem ent, Red Stick and the Burnetts, for “good an d valuable consideration . . . described in . . . [the Settlem ent Agreem ent],” assigned their rights against the Movers to Mack. 17 On Novem ber 12, 20 18, counsel for Movers corresponded with counsel for Red Stick, seeking to exercise the right of litigious redem ption. 18 On Novem ber 16, 20 18 , Movers filed a “Motion for Litigious Redem ption.”19 On March 8, 20 19, the Court granted Movers leave to am end their m otion for litigious redem ption to com ply with the requirem ents of Rule 56 and Local Rule 56.1. 20 On March 22, 20 19, Movers filed a Motion for Sum m ary J udgm ent, seeking judgm ent as a m atter of law that (1) they are entitled to exercise the right under Louisiana Civil Code article 2652 to redeem the litigious rights purchased by Mack, and (2) the price paid for the litigious rights assigned to Mack is equal to all attorneys’ fees and court costs for the representation of Red Stick and Thom as Burnett from the date of the assignm ent (October 16, 20 18) to the date of dem and for litigious redem ption (Novem ber 12, 20 18). 21 On April 3, 20 19, the Court denied this m otion for sum m ary judgm ent. 22 In so doing, the Court explained Movers were not entitled to exercise the right of litigious redem ption for the price of attorneys’ fees and costs because “‘redem ption should only apply to transfers m ade in return for the paym ent of a certain or determ inable am ount of m oney,’” and “[t]he attorneys’ fees an d costs 16 R. Docs. 197-2, 226, and 227. R. Doc. 197-4. 18 R. Doc. 126-11. 19 R. Doc. 98. 20 R. Doc. 122. 21 R. Doc. 126. 22 R. Doc. 137. 17 3 incurred by Mack for its representation of Red Stick and Thom as Burnett is not determ ined or determ inable at the tim e.”23 The Court explained: The attorneys’ fees and costs associated with Mack’s representation of Red Stick and Thom as Burnett did not cease on the day Movers m ade known their intention to exercise the right of litigious redem ption. Rather, the attorneys’ fees and costs continue to accrue as Mack agreed to represent Red Stick and Thom as Burnett throughout this litigation. 24 The Court further explained: Because Red Stick and the Burnetts assigned their rights against Movers to Mack in exchange for the discharge of a debt, the price Movers owe to redeem the litigious rights is the am ount of the debt discharged by the assignm ent. 25 On J une 11, 20 19, Mack and Red Stick entered into an Addendum to the Confidential Covenant Not to Execute, Indem nity and Assignm ent Agreem ent (the “Adden dum ”), which “deleted and . . . declared null and void ab initio” the assignm ent of claim s set forth in the October 16, 20 18 Settlem ent Agreem ent and Assignm ent Agreem ent. 26 The Addendum further provides the Settlem ent Agreem ent “is hereby am ended such that [Mack] agrees that it will lim it its execution on any judgm ent it obtains against [Red Stick] in the Litigation to those am ounts [Red Stick] collects from the other parties in the Litigation pursuant to [Red Stick’s] cross-claim s and third-party claim s.”27 With respect to this lim itation, the Addendum additionally provides: “it is the Parties’ intent that the debt owed to [Mack] has not been and shall not be rem itted, but that [Mack] agrees to lim it satisfaction and/ or collection of any judgm ent or awarded rendered herein in favor of [Mack] and against [Red Stick] as set forth [above].”28 Finally, 23 Id. at 8-9 (quotin g Martin Energy Co. v. Bourne, 598 So. 2d 1160 , 1162-63 (La. Ct. App. 1992)). Id. at 9. 25 Id. at 13 (citing Mervin R. Risem an, The Sale of a Litigious Right, 13 Tul. L. Rev. 448, 454 (1939)). 26 R. Doc. 197-5 at 2. 27 Id. 28 Id. at 2-3. 24 4 “[t]he Parties stipulate that it is the intent of the Agreem ents as m odified by this Adden dum that the am ounts [Red Stick and the Burnetts] . . . will pay to [Mack] . . . is lim ited to the $ 25,0 0 0 previously paid in accordance with the [Settlem ent Agreem ent] and the am ounts collected in this Litigation as set forth [above].”29 On J une 27, 20 19, counsel for Movers sent correspondence to counsel for Red Stick seeking to exercise their right of litigious redem ption. 30 Movers allege counsel for Red Stick did not respond to the correspondence. 31 On J une 28, 20 19, Movers filed the instant Second Motion for Sum m ary J udgm ent Regarding Litigious Redem ption against Red Stick seeking sum m ary judgm ent that: [T]here are no m aterial issues of fact that, pursuant to article 2652 of the Louisiana Civil Code, (1) the doctrine of litigious redem ption applies to the claim s transferred from Mack Energy Com pany to Red Stick Energy, L.L.C. on J une 11, 20 19, (2) the price paid for the litigious rights assigned by Mack Energy Com pany to Red Stick Energy, LLC is $ 25,0 0 0 .0 0 , and (3) Movers are entitled to an opportunity to redeem those litigious rights for the sam e price paid by Red Stick Energy, L.L.C. 32 Movers argue that the Addendum “transferr[ed] the claim s against Movers from Mack back to Red Stick” for the price of $ 25,0 0 0 , which constituted a sale of litigious rights. 33 LEGAL STAN D ARD Sum m ary judgm ent is appropriate only “if the m ovant shows that there is no genuine dispute as to any m aterial fact and the m ovant is entitled to judgm ent as a m atter of law.”34 “An issue is m aterial if its resolution could affect the outcom e of the action.”35 When assessing whether a m aterial factual dispute exists, the Court considers “all of the 29 Id. at 3. R. Doc. 197-6. 31 R. Doc. 197-1 at 7. 32 Id. at 15. 33 Id. at 7. 34 Fed. R. Civ. P. 56; see also Celotex Corp. v. Catrett, 477 U.S. 317, 322– 23 (1986). 35 DIRECTV Inc. v. Robson, 420 F.3d 532, 536 (5th Cir. 20 0 5). 30 5 eviden ce in the record but refrains from m aking credibility determ inations or weighing the evidence.”36 All reasonable inferences are drawn in favor of the nonm oving party. 37 There is no genuine issue of m aterial fact if, even viewing the evidence in the light m ost favorable to the nonm oving party, no reasonable trier of fact could find for the nonm oving party, thus entitling the m oving party to judgm ent as a m atter of law. 38 If the dispositive issue is on e on which the m oving party will bear the burden of persuasion at trial, the m oving party “m ust com e forward with evidence which would ‘entitle it to a directed verdict if the evidence went uncontroverted at trial.’”39 If the m oving party fails to carry this burden, the m otion m ust be denied. If the m oving party successfully carries this burden, the burden of production then shifts to the nonm oving party to direct the Court’s attention to som ething in the pleadings or other evidence in the record setting forth specific facts sufficient to establish that a genuine issue of m aterial fact does indeed exist. 40 If the dispositive issue is one on which the nonm oving party will bear the burden of persuasion at trial, the m oving party m ay satisfy its burden of production by either (1) subm itting affirm ative eviden ce that negates an essential elem ent of the nonm ovant’s claim , or (2) dem onstrating there is no evidence in the record to establish an essential elem ent of the nonmovant’s claim . 41 When proceeding under the first option, if the 36 Delta & Pine Land Co. v. N ationw ide Agribusiness Ins. Co., 530 F.3d 395, 398 (5th Cir. 20 0 8 ); see also Reeves v . Sanderson Plum bing Prods., Inc., 530 U.S. 133, 150 – 51 (20 0 0 ). 37 Little v. Liquid Air Corp., 37 F.3d 10 69, 10 75 (5th Cir. 1994). 38 Sm ith v. Am edisy s, Inc., 298 F.3d 434, 440 (5th Cir. 20 0 2). 39 Int’l Shortstop, Inc. v. Rally ’s, Inc., 939 F.2d 1257, 1263– 64 (5th Cir. 1991) (quoting Golden Rule Ins. Co. v. Lease, 755 F. Supp. 948, 951 (D. Colo. 1991)). 40 Celotex, 477 U.S. at 322– 24. 41 Id. at 331– 32 (Brennan, J ., dissenting); see also St. Am ant v. Benoit, 80 6 F.2d 1294, 1297 (5th Cir. 1987) (citing J ustice Brennan’s statem ent of the sum m ary judgm ent standard in Celotex, 477 U.S. at 322– 24, and requirin g the Movers to subm it affirm ative evidence to negate an essential elem ent of the nonm ovant’s claim or, alternatively, dem onstrate the non m ovant’s evidence is insufficient to establish an essential elem ent); Fano v. O’N eill, 80 6 F.2d 1262, 1266 (citing J ustice Brennan’s dissent in Celotex, and requirin g 6 nonm oving party cannot m uster sufficient eviden ce to dispute the m ovant’s contention that there are no disputed facts, a trial would be useless, and the m oving party is entitled to sum m ary judgm ent as a m atter of law. 42 When, however, the m ovant is proceeding under the second option and is seeking sum m ary judgm ent on the ground that the nonm ovant has no evidence to establish an essential elem ent of the claim , the nonm oving party m ay defeat a m otion for sum m ary judgm ent by “calling the Court’s attention to supporting eviden ce already in the record that was overlooked or ignored by the m oving party.”43 Under either scenario, the burden then shifts back to the m ovant to dem onstrate the inadequacy of the evidence relied upon by the nonm ovant. 44 If the m ovant m eets this burden, “the burden of production shifts [back again] to the nonm oving party, who m ust either (1) rehabilitate the evidence attacked in the m oving party’s papers, (2) produce additional eviden ce showing the existence of a genuin e issue for trial as provided in Rule 56(e), or (3) subm it an affidavit explaining why further discovery is necessary as provided in Rule 56(f).”45 “Sum m ary judgm ent should be granted if the nonm oving party fails to respond in one or m ore of these ways, or if, after the nonm oving party responds, the court determ ines that the m oving party has m et its ultim ate burden of persuading the court that there is no genuine issue of m aterial fact for trial.”46 the m ovant to m ake an affirm ative presentation to negate the nonm ovant’s claim s on sum m ary judgm ent); 10 A CHARLES ALAN W RIGHT, ARTHUR R. M ILLER & M ARY KAY KANE , F EDERAL P RACTICE AND P ROCEDURE §2727.1 (20 16) (“Although the Court issued a five-to-four decision, the m ajority an d dissent both agreed as to how the sum m ary-judgm ent burden of proof operates; they disagreed as to how the standard was applied to the facts of the case.” (internal citations om itted)). 42 First N ational Bank of Arizona v. Cities Service Co., 391 U.S. 253, 28 8– 89 (1980 ); Anderson v. Liberty Lobby , Inc., 477 U.S. 242, 249– 50 (1986). 43 Celotex, 477 U.S. at 332– 33. 44 Id. 45 Celotex, 477 U.S. at 332– 33, 333 n.3. 46 Id.; see also First N ational Bank of Arizona, 391 U.S. at 289. 7 “[U]nsubstantiated assertions are not com petent sum m ary judgm ent evidence. The party opposing sum m ary judgm ent is required to identify specific eviden ce in the record and to articulate the precise m anner in which that evidence supports the claim . ‘Rule 56 does not im pose upon the district court a duty to sift through the record in search of evidence to support a party’s opposition to sum m ary judgm ent.’”47 LAW AN D AN ALYSIS Louisiana Civil Code article 2652 provides, “[w]hen a litigious right is assigned, the debtor m ay extinguish his obligation by payin g to the assignee the price the assignee paid for the assignm ent, with interest from the tim e of the assignm ent.”48 Com m ent (d) to article 2652 provides “[t]his Article is inapplicable to transactions that do not, in fact, im port a sale, such as pignorative contracts.”49,50 ,51 Louisiana Civil Code article 2439 defines a sale a “a contract whereby a person transfers ownership of a thing to another for a price in m oney.”52 Mack and Red Stick each argue Movers are n ot entitled to judgm ent as a m atter of law that they are entitled to exercise the right of litigious redem ption under Article 2652 47 Ragas v. Tenn. Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998 ) (citing Celotex, 477 U.S. at 324; Forsy th v. Barr, 19 F.3d 1527, 1537 (5th Cir. 1994) an d quoting Skotak v. Tenneco Resins, Inc., 953 F.2d 90 9, 915– 16 & n .7 (5th Cir. 1992)). 48 La. Civ. Code art. 2652. 49 La. Civ. Code art. 2652 cm t. (d) (citing Lerner Shops of Louisiana, Inc. v. Reev es, 73 So.2d 490 (La. App. 1st Cir. 1954)). 50 Under Louisiana law, the starting point for statutory interpretation is the language of the statute itself. “When the language of the law is susceptible of different m eanings, it m ust be interpreted as having the m eaning that best conform s to the purpose of the law.” La. Civ. Code. art. 10 ; La. R.S. § 1:3. While “the Official Revision Com m ents are not the law, they m ay be helpful in determ inin g legislative intent.” Tracie F. v. Francisco D., 20 15-18 12 (La. 3/ 15/ 16), 18 8 So. 3d 231, 238; State v. Jones, 351 So.2d 1194, 1195 (La. 1977). 51 With respect to the defin ition of “im port,” the Oxford English Dictionary defines the term as “[t]hat which is im plied or sign ified.” Im port, OXFORD ENGLISH DICTIONARY (3d ed. 20 15). The one case cited within Com m ent (d), Lern er Shops of Louisiana, Inc. v. Reeves, confirm s “im port” m eans to signify, or constitute, a sale. In Lern er Shops, the First Circuit Court of Appeals of Louisiana analyzed whether two contracts “constitute a sale of land with a right of redem ption . . . or a pignorative contract . . .” 73 So.2d at 496 (em phasis added). 52 La. Civ. Code art. 2439. 8 because the Addendum did not im port or signify a sale, but rather m erely voided the October 16, 20 18 assignm ent of litigious rights. Specifically, Mack argues: “[l]itigious redem ption is not available to the [Movers] in this case because the ‘transfer’ at issue only returned the claim s back to the original assignor (Red Stick), [and,] therefore, the act did not im port a sale.”53,54 Red Stick argues the Addendum constitutes a “nullification of the original agreem ent from Red Stick to Mack.”55 The “Nullification of Assignm ent of Claim s” section of the Addendum provides the assignm ent of claim s referenced in the Settlem ent Agreem ent and the Assignm ent Agreem ent “shall be deleted and is hereby declared null and void ab initio.”56 As Mack correctly points out, Red Stick did not “purchase” its own litigious rights back from Mack. 57 Instead, by its own express term s, the Addendum nullifies and/ or voids the sale included in the Settlem ent Agreem ent and Assignm ent Agreem ent. Pursuant to Louisiana Civil Code article 20 29, “[a] contract is null when the requirem ents for its form ation have not been m et.”58 When a contract or a provision contained therein is declared null, it “is deem ed n ever to have existed” and accordingly the parties are “restored to the situation that existed before the contract [or provision] was m ade.”59,60 The parties to the 53 R. Doc. 210 at 6. The $ 25,0 0 0 paid by Red Stick to Mack was in conjunction with the Settlem ent Agreem ent and the Assignm ent Agreem ent. No m oney was paid by Mack to Red Stick at the tim e of the Addendum . The Court has already ruled that, with respect to the Settlem ent Agreem ent and Assignm ent Agreem ent, the am ount to exercise the right of litigious redem ption “is the am ount of the debt discharged by the assignm ent.” R. Doc. 137 at 13. 55 R. Doc. 213 at 5-6. 56 R. Doc. 197-5 at 2. 57 R. Doc. 210 at 7. 58 La. Civ. Code art. 20 29. 59 La. Civ. Code art 20 33. 60 “Nullity of a provision does not render the whole contract null unless, from the nature of the provision or the intention of the parties, it can be presum ed that the contract would not have been m ade without the null provision .” La. Civ. Code art. 20 34. In this case, the “Effect of the term s of the Agreem ents” section of the Addendum provides: “[t]he parties agree that all term s in the [Settlem ent Agreem ent] and Assign m ent Agreem ent rem ain in force and effect to the extent that those term s are not inconsistent with the term s and intent of this Addendum .” R. Doc. 197-5 at 3. 54 9 Settlem ent Agreem ent and the Assignm ent Agreem ent declared the assignm ent of claim s null and void. Although the Louisiana Civil Code does not define the term “void,” Black’s Law Dictionary defines “void” as m eaning “null,”61 and accordingly the two term s carry identical m eanings. Whether the assignm ent is void ab initio—from the assignm ent date of October 16, 20 18—or from the execution of the Addendum on J une 11, 20 19, is not m aterial in this case as no third parties acquired any rights in the interim period. By nullifying the October 16, 20 18 assignm ent, the Addendum returns Mack and Red Stick to their pre-assignm ent positions, as though the assignm ent had never been m ade. Consequently, the Addendum does not im port a sale and, instead, nullifies a sale. Because the Adden dum does not im port a sale, Movers are not entitled to judgm ent as a m atter of law that the doctrine of litigious redem ption applies. CON CLU SION IT IS ORD ERED that the Motion for Sum m ary J udgm ent 62 filed by Movers is D EN IED . N e w Orle a n s , Lo u is ian a, th is 6 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 61 Void, 62 BLACK’S LAW DICTIONARY ONLINE LEGAL DICTIONARY (2nd ed). R. Doc. 197. 10
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