Mack Energy Co v. Red Stick Energy, LLC et al, No. 6:2016cv01696 - Document 279 (W.D. La. 2019)
Court Description: ORDER AND REASONS denying 198 Motion to Dismiss for Failure to State a Claim. Signed by Judge Susie Morgan on 9/20/2019. (crt,Williams, L)
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Mack Energy Co v. Red Stick Energy, LLC et al Doc. 279 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 Rule 12(b)(6) Motion To Dism iss For Failure To State A Claim For Which Relief Can Be Granted, Or Alternatively Motion For Sum m ary J udgm ent, As To Mack Energy Co.’s Fifth Am ended And Superseding Com plain t filed by Defendant Main Pass 21, L.L.C. (“Main Pass”). 1 Mack Energy Co. (“Mack”) opposes this m otion. 2 Main Pass filed a reply. 3 Mack filed a supplem ental opposition. 4 For the following reasons, Main Pass’s 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 (the “Prospect”). 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 (“PA”) and a joint operating agreem ent (“J OA”) with Mack. 6 According to Mack, Red Stick executed the agreem en ts with the understanding that an entity to be form ed in the future, Main Pass, would be form ed with Natrona Resources, L.L.C. 7 and Red Stick as its 1 R. Doc. 198. R. Doc. 212. 3 R. Doc. 233. 4 R. Doc. 247. 5 R. Doc. 191 at ¶ 4. 6 Id. at ¶ 20 . 7 Gunther, J r. is a m em ber of Natrona Resources, L.L.C. R. Doc. 191 at ¶ 1. 2 1 Dockets.Justia.com m em bers, and Red Stick would then assign its interest in the Prospect to that entity. 8 Mack “paid the costs incurred in drilling, testing, plugging and abandoning the Subject Well,” and, “because Burnett and Gunther, J r. had not yet com pleted the anticipated assignm ent of Red Stick’s interest to Main Pass, Mack issued joint interest billing statem ents to Red Stick for its respective share of said costs.”9 A portion of the joint interest billing statem ents sent to Red Stick rem ains unpaid. 10 On Decem ber 8 , 20 16, Mack filed the instant lawsuit to recover the costs of drilling, testing, plugging, and abandon ing the dry hole. In its original com plaint and first two am ended com plaints, with respect to Main Pass, Mack alleged, am ong other things: Main Pass acquired ninety (90 %) percent of Red Stick’s interest in the Main Pass 21 Prospect and corresponding PA an d J OA and is therefore liable directly to Mack. 11 Mack’s third am ended com plaint brings claim s solely against Gunther, J r. and Martha Gunther, as trustees of RE Trustee, and does not alter the allegations against Main Pass. 12 During a telephone status conference on May 13, 20 19, Mack inform ed the Court and the other parties: [Mack] will file a voluntary dism issal with prejudice by no later than Monday, May 20 , 20 19 of its claim s against Defendants Main Pass 21, L.L.C., Dixie Managem ent Services, L.L.C., Albert W. Gunther, J r., individually and as trustee of the RE trust, Natrona Resources, L.L.C., Old South Mechanical, L.L.C., Old South Ventures, L.L.C., Albert W. Gunther, III, and Martha Gunther, individually an d as trustee of the RE trust, for breach of contract and piercing the corporate veil. 13 On May 20 , 20 19, Mack filed an Unopposed Motion of Voluntary Dism issal, stating: 8 R .Doc. 191 at ¶¶ 13-14. Id. at ¶ 24. 10 Id. at ¶ 26. 11 R. Doc. 1 at ¶ 1 (Com plaint), R. Doc. 20 at ¶ 31 (First Am ended and Supplem ental Com plaint); R. Doc. 67 at ¶ 28 (Second Am ended and Supplem ental Com plain t). 12 R. Doc. 152. 13 R. Doc. 165. 9 2 Mack hereby m oves that the Court dism iss with prejudice Mack’s claim s against Defendants Main Pass 21, L.L.C., Dixie Managem ent Services, L.L.C., Albert W. Gunther, J r., individually and as trustee of the RE trust, Natrona Resources, L.L.C., Old South Mechanical, L.L.C., Old South Ventures, L.L.C., Albert W. Gunther, III, and Martha Gunther, individually and as trustee of the RE trust, under theories of breach of contract and piercing the corporate veil. 14 The Court granted this unopposed m otion, ordering: Defendants Main Pass L.L.C., Dixie Managem ent Services, L.L.C., Albert W. Gunther, J r., individually and as trustee of the RE trust, Natrona Resources, L.L.C., Old South Mechanical, L.L.C., Old South Ventures, L.L.C., Albert W. Gunther, III, and Martha Gunther, individually and as trustee of the RE trust, under theories of breach of contract and piercing the corporate veil be dism issed with prejudice. 15 On the sam e date Mack filed its unopposed m otion of voluntary dism issal, Mack also filed its fourth am ended com plaint. 16 In its fourth am ended com plaint, Mack nam es Main Pass as a defen dant and appears to bring only a detrim ental reliance claim against Main Pass. 17 On J une 18, 20 19, Mack filed its fifth am ended and superseding com plaint, in which it brings a breach of contract claim against Red Stick and a detrim ental reliance claim against Gunther, J r. 18 Additionally, Mack nam es Main Pass as a Defendant and alleges: Main Pass assum ed the obligations of Red Stick under the PA and J OA. Therefore, Main Pass is solidarily liable with Red Stick and Gunther, J r. to Mack for outstanding am ounts, contractual interest, and reasonable attorney’s fees and costs associated with Mack’s efforts to collect the am ounts due under the J OA and PA. 19 In the instant m otion, Main Pass argues “even if Mack can succeed in proving Main Pass 21, L.L.C. assum ed the obligations, Mack has no claim against Main Pass 21, L.L.C. for breach of the assum ed contracts” because “the underlying claim of Mack’s 14 R. Doc. 166. R. Doc. 173. 16 R. Doc. 167. 17 Id. 18 R. Doc. 191. 19 Id. at ¶ 38 . 15 3 ‘assum ption’ claim is a breach of contract claim , which Mack previously dism issed.”20 In response, Mack argues its assum ption of obligations claim is based on Louisiana Civil Code article 1821, and a claim under article 18 21 “is a claim in equity, not breach of contract.”21 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. 22 “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.’”23 “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the m isconduct alleged.”24 The court, however, does not accept as true legal conclusions 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.”25 “[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. 26 In sum m ary, “[f]actual allegations m ust be enough to raise a right to relief above the speculative level.”27 “[W]here the well-pleaded facts do not perm it the court to infer 20 R. Doc. 198-1 at 7. Doc. 212 at 1. 22 Bell Atlantic 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). 23 Ashcroft v. Iqbal, 556 U.S. 662, 678 (20 0 9) (quotin g Tw om bly , 550 U.S. at 570 ). 24 Id. 25 S. Christian Leadership Conference v. Suprem e Court of the State of La., 252 F.3d 781, 786 (5th Cir. 20 0 1) (citing Fernandez-M ontes v. Allied Pilots Ass’n, 987 F.2d 278, 284 (5th Cir. 1993)). 26 Iqbal, 556 U.S. at 663, 678 (citations om itted). 27 Tw om bly , 550 U.S. at 555. 21 R. 4 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.”28 “Dism issal is appropriate when the com plaint ‘on its face show[s] a bar to relief.’”29 LAW AN D AN ALYSIS Main Pass m oves to dism iss Mack’s com plaint on the basis that Mack dism issed with prejudice its breach of contract claim s against Main Pass, and “[t]he claim of ‘assum ption and solidary liability’ is nothing other than a veiled breach of contract claim .”30 In effect, Main Pass asks the Court to hold that res judicata, an affirm ative defense ordin arily required to be raised in an answer pursuant to Federal Rule of Civil Procedure 8(c), bars Mack from bringing this action against Main Pass. The Court first addresses whether it m ay consider res judicata on a m otion to dism iss, and relatedly, whether the Court must convert such a m otion to dism iss as a m otion for sum m ary judgm ent. The Fifth Circuit has explained that a 12(b)(6) m otion to dism iss properly raises res judicata when “the facts are adm itted or not controverted or are conclusively established.”31 “When all relevant facts are shown by the court's own records, of which the court takes notice, the defense [of res judicata] m ay be upheld on a Rule 12(b)(6) m otion without requiring an answer.”32 A court need not convert a m otion to dism iss to a m otion for sum m ary judgm ent, “[e]ven though a court perm its affidavits and other eviden ce to be entered into the record, as long as the court does not base its judgm ent on 28 Id. (quotin g F ED. R. CIV. P. 8(a)(2)). Cutrer v. McMillan, 30 8 F. App’x 819, 8 20 (5th Cir. 20 0 9) (per curiam ) (quotation s om itted). 30 R. Doc. 198-1 at 7. 31 Mey ers v. Textron , Inc., 540 F. App'x 40 8, 410 (5th Cir. 20 13) (quotin g Clifton v. W arnaco, Inc., 53 F.3d 1280 ,1995 WL 295863, at *6 n.13 (5th Cir. 1995) (per curiam )). 32 Id. (citation om itted). 29 5 m atters outside of the pleading.”33 Notably, federal courts are perm itted to refer to m atters of public record when deciding a 12(b)(6) m otion to dism iss without converting the m otion to a m otion for sum m ary judgm en t. 34 In this case, any facts necessary for the Court to decide the applicability of res judicata are agreed upon by the parties. 35 The parties have not subm itted eviden ce outside the pleadings pertain ing to applicability of res judicata, and the Court need not consider any facts outside the Court’s own records, of which the Court takes judicial notice. Mack has not objected to the Court considering the m otion as a m otion to dism iss rather than a m otion for sum m ary judgm ent. 36 Accordingly, it is appropriate for the Court to consider Main Pass’s m otion as a m otion to dism iss. 37 The Court next considers the substance of Main Pass’s m otion under federal law. “Federal law determ in es the res judicata and collateral [estoppel] effect given a prior decision of a federal tribunal, regardless of the bases of the federal court's jurisdiction.”38 “The rule of res judicata encom passes two separate but linked preclusive doctrines: (1) true res judicata or claim preclusion and (2) collateral estoppel or issue preclusion.”39 33 Test Masters Educational Services, Inc. v. Singh, 428 F.3d 559, 570 n .2 (5th Cir. 20 0 5) (citations om itted). See also Davis v. Bay less, 70 F.3d 367, 372 n. 3 (5th Cir.1995) (the presence of affidavits in the record does not convert the m otion to dism iss to a m otion for sum m ary judgm ent); Causey v . Sew ell Cadillac– Chevrolet, 394 F.3d 285, 28 8 (5th Cir. 20 0 4) (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 plain tiff's com plaint and are central to the claim ); Moch v. East Baton Rouge Parish School, 548 F.2d 594, 596 n. 3 (5th Cir. 1977) (“[I]f the trial court has treated the 12(b)(6) m otion [based on res judicata] as one for sum m ary judgm ent, its dism issal under 12(b)(6) is not reversible error.” (citin g Larter & Sons, Inc. v. Din kler Hotels Co., 199 F.2d 854, 855 (5th Cir.1952))). 34 Test Masters, 428 F.3d at 570 n.2 (citin g Cinel v. Connick, 15 F.3d 1338 , 1343 n. 6 (5th Cir.1994)). 35 See R. Doc. 198-2 at ¶ 9 an d R. Doc. 228 at ¶ 1. 36 See R. Doc. 212. In fact, Mack states it is “m ystified by the characterization of Main Pass’s m otion as one alternatively for sum m ary judgm ent. Main Pass does n ot rely on any allegations beyond Mack’s com plaint and the Court’s dism issal with prejudice.” Id. at 2 n.5. 37 See Pipkins v. Stew art, Civil Act. No. 5:15-cv-2722, 20 19 WL 1442218 , at *13 (W.D. La. April 1, 20 19). 38 Freem an v . Lester Coggins Trucking, Inc., 771 F.2d 860 , 862 (citin g Stovall v. Price W aterhouse Co., 652 F.2d 537 (5th Cir. 1981)). 39 Test Masters, 428 F.3d at 570 (citing St. Paul Mercury Ins. Co. v. W illiam son, 224 F.3d 425, 436 (5th Cir. 20 0 0 )). 6 “Claim preclusion, or res judicata, bars the litigation of claim s that either have been litigated or should have been raised in an earlier suit.”40 The party raising the defense of res judicata or claim preclusion bears the burden of proving all four elem ents of res judicata, 41 which include: (1) the parties are identical or in privity; (2) the prior action was rendered by a court of com petent jurisdiction; (3) the prior action was concluded by a final judgm ent on the m erits; and, (4) the sam e claim or cause of action was involved in both actions. 42 The parties do not appear to contest the first three elem ents, which are easily established: (1) the parties, Mack and Main Pass, are identical; (2) the May 22, 20 19 order was rendered by this Court, which has jurisdiction over this m atter; an d (3) the breach of contract action was concluded by a final judgm ent on the m erits. 43 Because the parties do not dispute the first three elem ents are m et, the question of res judicata turns on whether the fourth elem ent is m et. 44 With regard to the fourth elem ent, whether the sam e claim or cause of action was involved in both actions, the Fifth Circuit uses the transactional test. 45 “Under the transactional test, a prior judgm ent’s preclusive effect extends to all rights of the plaintiff with respect to all or any part of the transaction, or series of connected transactions, out of which the origin al action arose.”46 “What grouping of facts constitutes a “transaction” or a “series of transactions” m ust be determ ined pragm atically, giving weight to such considerations as whether the facts are related in tim e, space, origin, or m otivation, 40 Id. (citing Petro– Hunt, L.L.C. v. United States, 365 F.3d 385, 395 (5th Cir. 20 0 4)). v. Sturgell, 553 U.S. 8 80 , 90 7 (20 0 8) (citing 18 Wright & Miller § 440 5, at 83). 42 Procter & Gam ble Co. v. Am w ay Corp., 376 F.3d 496, 499 (5th Cir. 20 0 4). 43 A voluntary dism issal with prejudice operates as an adjudication on the m erits. Fed. R. Civ. P. 41(a)(1)(B) (“Unless the notice or stipulation states otherwise, the dism issal is without prejudice.” A dism issal with prejudice “operates as an adjudication on the m erits.”). 44 See Snow Ingredients, Inc. v. SnoW izard, Inc., 833 F.3d 512, 521 (5th Cir. 20 16). 45 Petro– Hunt, L.L.C. v. United States, 365 F.3d 385, 395 (5th Cir. 20 0 4). 46 Test Masters, 428 F.3d at 571 (citing Petro-Hunt, 365 F.3d at 395-96). 41 Tay lor 7 whether they form a convenient trial unit, and whether their treatm ent as a unit conform s to the parties' expectations or business understanding or usage.”47 “If a party can only win the suit by convincing the court that the prior judgm ent was in error, the second suit is barred.”48 The critical issue is whether the two actions are based on the “sam e nucleus of operative facts.”49 Further, under the transactional test “the critical issue is not the relief requested or the theory asserted but whether the plaintiff bases the two actions on the sam e nucleus of operative facts.”50 “Operative facts” differ from “factual sim ilarities”; although factual sim ilarities are “potentially relevant for purposes of collateral estoppel, [they] are not relevant to res judicata.”51 For instance, in Test Masters, the Fifth Circuit held that, although the first and second tradem ark proceedings at issue “both involve potential custom er confusion stem m ing from [the plaintiff’s] website,” the operative facts between the two actions were not the sam e because: The current action does not involve the legitim acy of [the plaintiff’s] use of the testm asters.com dom ain nam e, which was the central dispute in the previous litigation. Moreover, the nucleus of facts in the current action concerns allegations of intentional fraud and m alice that did not occur at the tim e of the previous action. 52 Sim ilarly, in Sandoz v. United States, J udge Barbier of the Eastern District of Louisian a found that both the first and second litigation involved the sam e claim for “the alleged perm anent disability of the arm and hand resulting from the October 20 11 surgery perform ed at the VA facility in Mississippi,” but the com plaint in the second action also 47 Id. (citing Petro-Hunt, 365 F.3d at 396). Id. (citing N ew York Life Insur. Co. v. Gillispie, 20 3 F.3d 384, 387 (5th Cir. 20 0 0 )). 49 Id. (quoting Gillispie, 20 3 F.3d at 387; citing Davis v. Dallas Area Rapid Transit, 383 F.3d 30 9 (5th Cir. 20 0 4)). 50 Agrilectric Pow er Partners, Ltd. v . Gen. Elec. Co., 20 F.3d 663, 665 (5th Cir. 1994). 51 Test Masters, 428 F. 3d at 572 (quoting Petro– Hunt, 365 F.3d at 396). 52 Id. at 572. 48 8 “raises claim s based on surgeries and treatm ent that occurred after the filing of the original com plaint in the prior action.”53 J udge Barbier held the additional claim s in the second action were not barred by res judicata, but the “claim s based on the October 20 11 surgery in the prior action” were barred by res judicata. 54 In Snow Ingredients, the plaintiff brought a RICO claim in the first action, alleging m ail an d wire fraud as the predicate crim inal activity. 55 This claim was dism issed, an d the plaintiff subsequently brought a new RICO claim in the second action, this tim e alleging obstruction of justice as the predicate crim inal activity. 56 The Fifth Circuit explain ed “[t]he litigation tactics that are the substance of these claim s were the sam e facts [the plaintiff] asserted in the [previous] Cases in support of its m ail and wire fraud RICO claim s.”57 The Fifth Circuit held these claim s were barred by res judicata because the plaintiff “now points to the sam e facts as the basis for its new RICO claim s with obstruction of justice as the predicate crim inal activity.”58 In doing so, the Fifth Circuit explain ed: “[The plain tiff], however, cannot revive old facts under a new legal theory. True res judicata bars recovery when a party seeks to relitigate the sam e facts even when the party argues a novel legal theory”59 This case is like Test Masters, which involved two actions in which the claim s arose from different operative facts, and unlike Snow Ingredients, which involved two actions in which the claim s were both RICO claim s arising from the sam e set of operative facts. In this case, the operative facts in Mack’s dism issed breach of contract claim included 53 Civil Action No. 15-3697, 20 16 WL 1545662, at *5 (E.D. La. April 15, 20 16). Id. 55 833 F.3d at 522. 56 Id. 57 Id. 58 Id. 59 Id. (citing Agrilectric Pow er Partners, 20 F.3d at 665). 54 9 whether Main Pass entered into agreem ents with Mack such that Main Pass could be held directly liable for any breaches of said agreem ents. 60 Mack’s current assum ption of obligation claim stem s from its allegation that Main Pass assum ed the obligations of Red Stick under the PA and J OA, and as a result Main Pass is liable to Mack for breaches of the PA and J OA. 61 Main Pass does not have to convince the Court that the dism issal of Mack’s breach of contract claim was in error to prevail in this action. Accordingly, the Court concludes Mack’s “assum ption of obligations” claim against Main Pass is not barred by Mack’s prior voluntary dism issal with prejudice of its breach of contract claim again st Main Pass. Although Mack m ay not be estopped from bringing its claim under true res judicata, the Court m ust also consider whether Mack m ay be estopped under collateral estoppel (issue preclusion). 62 “Collateral estoppel precludes a party from litigating an issue already raised in an earlier action between the sam e parties only if: (1) the issue at stake is identical to the one involved in the earlier action; (2) the issue was actually litigated in the prior action; and (3) the determ ination of the issue in the prior action was a necessary part of the judgm ent in that action.”63 An issue is “actually litigated” when the issue is “properly raised, by the pleadin gs or otherwise, and is subm itted for determ ination, and is determ ined.”64 An issue is “subm itted and determ ined on a m otion to dism iss for failure to state a claim , a m otion for judgm ent on the pleadings, a m otion for sum m ary judgm ent . . . , a m otion for directed verdict, or their equivalents, as well as 60 R. Doc. 1 at ¶ 1 (Com plaint), R. Doc. 20 at ¶ 31 (First Am ended and Supplem ental Com plaint); R. Doc. 67 at ¶ 28 (Second Am ended and Supplem ental Com plain t). 61 R. Doc. 212 at ¶ 38 . 62 Test Masters, 428 F.3d at 572. 63 Id. (citing Petro– Hunt, 365 F.3d at 397). 64 Restatem ent (Second) of J udgm ents § 27 (198 2). 10 on a judgm ent entered on a verdict.”65 In this case, collateral estoppel does not apply because Mack’s breach of contract claim based on Main Pass’s assum ption of the obligations under the PA and J OA were not “actually litigated.” Accordingly, Mack is not estopped under collateral estoppel. In its reply, Main Pass argues for the first tim e that Mack’s assum ption of obligations claim m ust be dism issed because the alleged assum ption agreem ent was not contained in a writing, as required by Louisiana Code article 1821. 66 However, “[i]t is the practice of [the Fifth Circuit] and the district courts to refuse to consider argum ents raised for the first tim e in reply briefs.”67 Accordingly, the Court declines to address Main Pass’s new argum ents. CON CLU SION IT IS ORD ERED that Main Pass’s m otion to dism iss is D EN IED . N e w Orle a n s , Lo u is ian a, th is 2 0 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 65 Id. R. Doc. 233 at 2-3. 67 Gillaspy v. Dall. Indep. Sch. Dist., 278 Fed. Appx. 30 7, 315 (5th Cir. 20 0 8 ). 66 11
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