Mack Energy Co v. Red Stick Energy, LLC et al, No. 6:2016cv01696 - Document 285 (W.D. La. 2019)
Court Description: ORDER AND REASONS granting in part and denying in part 181 Motion to Dismiss for Failure to State a Claim. Signed by Judge Susie Morgan on 10/2/2019. (crt,Williams, L)
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Mack Energy Co v. Red Stick Energy, LLC et al Doc. 285 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 Red Stick Energy, L.L.C.’S Am ended Cross-Claim And Second Am ended Third-Party Com plaint, filed by Cross-Claim Defendants, Main Pass 21, L.L.C and Albert W. Gunther, J r.; and Third-Party Defendants, Dixie Managem ent Services, L.L.C., Natrona Resources, L.L.C., Old South Mechanical, L.L.C., Old South Ventures, L.L.C., Albert W. Gunther, III, Albert W. Gunther, J r., as trustee of The RE Trust, and Martha Gunther, as trustee of The RE Trust (collectively, “Movants”). 1 Movants seek an order dism issing Red Stick’s crossclaim s and third party claim s against Movants. 2 Red Stick Energy, LLC (“Red Stick”) opposes this m otion. 3 Movants filed a reply. 4 For the following reasons, Movants’ m otion is GRAN TED IN PART and D EN IED IN PART. MOTION TO D ISMISS Movants style the instant m otion as a m otion to dism iss for failure to state a claim , or, alternatively, m otion for sum m ary judgm ent. 5 A threshold inquiry thus is whether 1 R. Doc. 181. R. Doc. 169; R. Doc. 170 . 3 R. Docs. 20 9 and 249. 4 R. Doc. 224. 5 R. Doc. 181. 2 1 Dockets.Justia.com Movants’ m otion is properly treated as a m otion to dism iss or a m otion for sum m ary judgm ent. The Court construes Movant’s m otion as a m otion to dism iss, for the following reasons. First, although Movants attached the October 20 18 Confidential Covenant Not to Execute, Indem nity, and Assignm ent Agreem ent 6 and Assignm en t of Claim s 7 to their m otion to dism iss, the Court need not consider these m aterials in deciding the m otion to dism iss because, as discussed below, these agreem ents have been nullified. Federal Rule of Civil Procedure 12(d) provides attachm ents not considered do not convert a m otion to dism iss to a m otion for sum m ary judgm ent. Sim ilarly, Red Stick attached the Decem ber 3, 20 15 em ail exchange between Burnett and J ill Czapla to its response to Movants’ m otion to dism iss. 8 The Plaintiff, Mack, referenced and incorporated this em ail exchange into its com plaint. 9 “When considering a m otion to dism iss, courts m ay rely upon docum ents incorporated into the com plaint by reference, an d m atters of which a court m ay take judicial notice.”10 As a result, Red Stick’s subm ission of the em ail exchange with its opposition does not convert the instant m otion to a m otion for sum m ary judgm ent. Second, Movants’ m otion focuses on the sufficiency of the allegations m ade in Red Stick’s am ended crossclaim and second am ended third party com plaint, 11 which is the essen ce of a m otion to dism iss for failure to state a claim . 12 Third, “[s]um m ary judgm ent 6 R. Doc. 181-3. R. Doc. 181-4. 8 R. Doc. 249-1. 9 R. Doc. 191 at ¶ 11; R. Doc. 191-1. 10 Thom as v. Low e's Hom e Centers, Inc., Civil Action No. 13– 0 779, 20 14 WL 5458 62, at *2 n.5 (W.D. La. Feb. 10 , 20 14) (internal quotations m arks and citation om itted). 11 See R. Doc. 181-1 at 16-17 (arguin g Red Stick has “failed to allege the elem ents of a breach of contract claim ”). 12 See Bell Atl. Corp. v . Tw om bly , 550 U.S. 544, 555 (20 0 7) (“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.’”). 7 2 should not . . . ordinarily be granted before discovery has been com pleted.”13 This is because litigants should generally first be allowed an opportunity to obtain “the proof necessary to ward off sum m ary judgm ent.”14 Discovery has not been com pleted in this m atter, and accordingly ruling on a m otion for sum m ary judgm ent at this point would be prem ature. 15 BACKGROU N D This case arises out of the unsuccessful drilling of an oil and gas well in the Main Pass 21 Prospect. 16 Mack Energy Co. (“Mack”) seeks to recover the costs of drilling, testing, plugging, and abandon ing the dry hole. 17 Mack alleges 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. 18 According to Mack, Red Stick executed the agreem ents with the understanding that an entity to be form ed in the future, Main Pass 21, L.L.C. (“Main Pass”), would be form ed with Natrona Resources, L.L.C. (“Natrona”) and Red Stick as its m em bers, and Red Stick would then assign its interest in the Prospect to that entity. 19 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 en t 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.”20 A portion of the joint interest billing statem ents sent to Red Stick rem ains unpaid. 21 13 Alabam a Farm Bureau M ut. Casualty Co. v. Am erican Fidelity Life Ins. Co., 60 6 F.2d 60 2, 60 9 (5th Cir. 1979), cert. denied, 449 U.S. 8 20 , 10 1 S.Ct. 77 (1980 ) (citations om itted). 14 See Murrell v. Bennett, 615 F.2d 30 6, 310 (5th Cir. 198 0 ). 15 This action was filed in 20 16, but discovery only recently com m enced. 16 R. Doc. 191 at ¶ 4. 17 Id. at ¶¶ 37, 38 . 18 Id. at ¶¶ 20 . 19 R .Doc. 191 at ¶¶ 13-14. 20 Id. at ¶ 24. 21 Id. at ¶ 26. 3 On Septem ber 21, 20 18, Thom as Burnett and Red Stick filed a crossclaim against Main Pass, Dixie Managem ent Services, L.L.C. (“Dixie”), and Albert W. Gunther, J r. 22 On May 20 , 20 19, Red Stick filed an am ended cross-claim against Gunther, J r. and Main Pass, seeking a court order that “Main Pass and Albert W. Gunther, J r. m ust reim burse Red Stick for any am ounts awarded against Red Stick in favor of Mack for the Main Pass Prospect.”23 On Septem ber 28, 20 18, Burnett and Red Stick filed a third party com plaint against Natrona, RE Trust, Old South Mechanical, L.L.C. (“OSM”), Old South Ventures, L.L.C. (“OSV”), and Albert W. Gunther, III. 24 On April 23, 20 19, Burnett and Red Stick filed an am ended third party com plaint against Natrona, RE Trust, Old South Mechan ical, L.L.C., and Albert W. Gunther, III. 25 On May 20 , 20 19, Red Stick filed a second am ended third party com plaint against Natrona, Dixie, Gunther, J r. and Martha Gunther as trustees of RE Trust, OSM, OSV, and Gunther, III, seeking reim bursem ent for any award against Red Stick in favor of Mack. 26 Red Stick alleges that, prior to Red Stick’s execution of the PA and J OA with Mack, Red Stick, Gunther, J r., Natrona, Dixie, and/ or Main Pass all orally agreed that Red Stick would assign its interest in the Main Pass 21 Prospect to Main Pass such that “Natrona, Albert W. Gunther, J r. and/ or its m em bers [would be] responsible for 90 % of the costs claim ed by Mack.”27 Main Pass’s m em bers are Natrona, which holds 90 % of Defendant Main Pass’s m em bership interest, and Red Stick (which holds 10 % of Defendant Main 22 R. Doc. 63. R. Doc. 169 at ¶ 11. 24 R. Doc. 65. 25 R. Doc. 157. 26 R. Doc. 170 . 27 R. Doc. 169 at ¶¶ 5, 8; R. Doc. 170 at ¶¶ 5, 8. 23 4 Pass’s m em bership interest. 28 According to Red Stick, “[s]ubsequent to the determ in ation 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., an d in turn, Defendant Main Pass, declined to pay any of the rem aining drilling costs for the Main Pass 21 Prospect.”29 Red Stick brings identical causes of action against the cross claim and third party defendants. Red Stick labels these causes of action: (1) breach of contract, (2) detrim ental reliance, and (3) veil piercing. 30 With respect to its breach of contract and detrim ental reliance claim s, Red Stick alleges Movants: [A]greed that Red Stick would assign all of its interest in the Main Pass 21 Prospect to Defendant Main Pass in order to shift all of the drilling costs and benefits attributable to Red Stick to Defendant Main Pass an d its m em bers such that Natrona, as a 90 % interest owner in Defendant Main Pass, and/ or Albert W. Gunther, J r., would be responsible for 90 % of the drilling costs related to the Main Pass 21 Prospect and the Subject Well. 31 Red Stick alleges Movants breached this agreem ent and Red Stick suffered dam ages as a result, and/ or Red Stick reasonably relied on Movants’ representations to its detrim ent. 32 With respect to its veil piercing “claim ,” Red Stick alleges: Red Stick can recover directly from Albert W. Gunther, J r. as well as Natrona, 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. (herein after collectively, the “Gunther Entities”) and Albert W. Gunther, III because, upon inform ation and belief, Defendant Albert W. Gunther, J r., the Gunther Entities and/ or other m em bers or m anagers of the Gunther Entities im properly used the Gunther Entities and Defendant Main Pass to perpetrate an actual fraud on Red Stick prim arily for their direct personal ben efit by prom ising that Defendant Main Pass would purchase Red Stick’s interest in the Main Pass 21 Prospect without the intent to follow through in the event the well was a dry hole. ... 28 R. Doc. 169 at ¶¶ 5, 8; R. Doc. 170 at ¶¶ 5, 8. R. Doc. 169 at ¶ 9; R. Doc. 170 at ¶ 9. 30 R. Doc. 169; R. Doc. 170 . 31 R. Doc. 169 at ¶¶ 14-17, 18-22; R. Doc. 170 at ¶¶ 14-17, 18-22. 32 Id. 29 5 Defendant Albert W. Gunther, J r., the Gunther Entities and/ or other m em bers or m anagers of the Gunther Entities are so unified with each other and have m isused the corporate form in such a way that the separate corporate structure of these entities and their m em bers an d m anagers has ceased and m ust be disregarded. 33 In the instant m otion, Movants first argue Red Stick’s claim s against them should be dism issed because Red Stick assigned all of the claim s of Red Stick in this m atter to Mack. 34 Movants next argue Red Stick’s breach of contract claim should be dism issed. 35 Movants argue Red Stick’s breach of contract claim should be dism issed with respect to all Movants other than Main Pass because only Main Pass was a party to the proposed assignm ent from Red Stick to Main Pass. 36 Movants additionally argue the breach of contract claim should be dism issed with respect to all Movants because the proposed assignm ent was an oral agreem ent assigning m ineral rights, and as a result is unenforceable. 37 Movants alternatively argue the breach of contract claim should be dism issed because the PA requires Mack’s prior written consent to assign any working interest, and Red Stick did not obtain Mack’s prior written consent to assign its interest to Main Pass. 38 Next, with respect to all Movants other than Main Pass, Movants argue Red Stick’s detrim ental reliance claim should be dism issed because only Main Pass was a party to the proposed assignm ent from Red Stick to Main Pass. 39 With regards to Main Pass, Movants argue Red Stick’s detrim ental reliance claim should be dism issed because Red Stick’s 33 R. Doc. 169 at ¶¶ 24, 26; R. Doc. 170 at ¶¶ 24, 26. R. Doc. 181-1 at 15. 35 Id. 36 Id. at 16. 37 Id. at 17. 38 Id. at 19. 39 Id. at 20 -22. 34 6 alleged detrim ent is “not the result of a change in position by Main Pass 21, L.L.C., but rather Red Stick’s own failure to obtain Mack’s “prior written consent” to the proposed assignm ent.”40 Lastly, with respect to Red Stick’s pierce the veil claim , Movants argue Red Stick has not sufficiently alleged actual fraud, which is a requisite to piercin g the corporate veil under Texas law. 41 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. 42 “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.’”43 “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.”44 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.”45 “[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. 46 40 Id. at 23. at 25. 42 Tw om bly , 550 U.S. at 555; Cuvillier v. Tay lor, 50 3 F.3d 397, 40 1 (5th Cir. 20 0 7). 43 Ashcroft v. Iqbal, 556 U.S. 662, 678 (20 0 9) (quotin g Tw om bly , 550 U.S. at 570 ). 44 Id. 45 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)). 46 Iqbal, 556 U.S. at 663, 678 (citations om itted). 41 Id. 7 In sum m ary, “[f]actual allegations m ust be enough to raise a right to relief above the speculative level.”47 “[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.”48 “Dism issal is appropriate when the com plaint ‘on its face show[s] a bar to relief.’”49 “Motions to dism iss under Rule 12(b)(6) are viewed with disfavor and are rarely granted.”50 LAW AN D AN ALYSIS I. As s ign m e n t o f Claim s to Mack Movants first argue Red Stick executed an agreem ent that “assigns all of the claim s of Red Stick in this m atter to Mack” and “[a]s a result, Red Stick no longer possesses any claim s against Cross Claim Defendants or Third Party Defendants.”51 Since Movants filed the instant m otion, Red Stick and Mack entered an adden dum to the agreem ent nullifying the assignm ent of claim s. 52 Accordingly, Movants’ argum ent with respect to the assignm ent of claim s is m oot. II. Bre ach o f Co n tract With respect to Red Stick’s breach of contract claim , Movants first argue Red Stick’s breach of contract allegations involve only Red Stick’s proposed assign m ent to Main Pass, and therefore, the rem aining Movants cannot be held liable for breach of contract because no contract with them is alleged. 53 Movants m isconstrue the claim . Red Stick’s breach of contract claim is not based solely on Main Pass’s failure to enter the 47 Tw om bly , 550 U.S. at 555. Id. (quotin g F ED. R. CIV. P. 8(a)(2)). 49 Cutrer v. McMillan, 30 8 F. App’x 819, 8 20 (5th Cir. 20 0 9) (per curiam ) (quotation s om itted). 50 Lorm and v. US Un w ired, Inc., 565 F.3d 228 , 232 (5th Cir. 20 0 9) (citation om itted). 51 R. Doc. 181-1 at 8. 52 See R. Doc. 197-5. 53 R. Doc. 181-1 at 16. 48 8 proposed assignm ent agreem ent. Instead, the claim is based on Defendants Main Pass, Natrona, Dixie, and Gunther, J r.’s alleged oral agreem ent to form Main Pass, for Natrona to be a 90 % owner of Main Pass, and for Natrona and Gunther, J r. to supply the funds necessary to pay 90 % of the costs. 54 Moreover, Red Stick alleges that m ore parties than just Main Pass were involved in the “agreem ent to enter the agreem ent.” Specifically, in its Cross-Claim against Cross-Claim Defendants Main Pass and Gunther, J r., Red Stick alleges: [I]n connection with the Main Pass 21 Prospect negotiations, Red Stick, Natrona and Defen dant Main Pass, through Dixie Managem ent Services, L.L.C., and Albert W. Gunther, J r., agreed that Red Stick would assign all of its interest in the Main Pass 21 Prospect to Defendant Main Pass in order to shift all of the drilling costs and ben efits attributable to Red Stick to Defendant Main Pass and its m em bers such that Natrona, as a 90 % interest owner in Defendant Main Pass, and/ or Albert W. Gunther, J r., would be responsible for 90 % of the drilling costs related to the Main Pass 21 Prospect and the Subject Well. 55 Sim ilarly, in its Third-Party Com plaint against Third-Party Defendants Natrona, Dixie, Gunther, J r. and Martha Gunther as trustees of the RE Trust, OSM, OSV, and Gunther, III., Red Stick alleges: [I]n connection with the Main Pass 21 Prospect negotiations, Red Stick, Natrona and Defen dant Main Pass, through Dixie Managem ent Services, L.L.C., and Albert W. Gunther, J r., agreed that Red Stick would assign all of its interest in the Main Pass 21 Prospect to Defendant Main Pass in order to shift all of the drilling costs and ben efits attributable to Red Stick to Defendant Main Pass and its m em bers such that Natrona, as a 90 % interest owner in Defendant Main Pass, and/ or Albert W. Gunther, J r., would be responsible for 90 % of the drilling costs related to the Main Pass 21 Prospect and the Subject Well. 56 However, although Red Stick alleges only that Natrona, Main Pass, Dixie, and Gunther, J r. were parties to the agreem ent to enter the agreem ent, Red Stick seeks to hold “Defendant Main Pass, Albert W. Gunther, J r., and all Third-Party Defendants” liable for 54 R. Doc. 169 at ¶ 14; R. Doc. 170 at ¶ 14. R. Doc. 169 at ¶ 14. 56 R. Doc. 170 at ¶ 14. 55 9 breach of contract. 57 Red Stick clearly has n ot alleged OSM, OSV, Gunther, III, and Martha Gunther as trustee of the RE Trust, en tered into and breached an agreem ent with Red Stick. Accordingly, to the extent Red Stick brings breach of contract claim s again st OSM, OSV, Gunther, III, and Martha Gunther as trustee of the RE Trust, the m otion to dism iss is granted and these claim s are dism issed. Red Stick did nam e Gunther, J r., but it is not clear whether he is n am ed only in his individual capacity or also in his capacity as trustee of the RE Trust. For purposes of the m otion to dism iss, the Court m ust take Red Stick’s allegations as true, 58 and draw all inferences in favor of Red Stick. 59 As a result, although a close question, drawing all inferences in favor of Red Stick, the Court finds Red Stick has alleged Gunther, J r. entered into and breached an agreem ent with Red Stick, in his individual capacity an d/ or in his capacity as trustee of the RE Trust. Movants also argue Red Stick’s breach of contract claim should be dism issed in its entirety because the agreem ent had to be in writing to be enforceable, and the alleged agreem ent regarding the assignm ent was an oral agreem ent. Specifically, Movants argue Louisiana Civil Code article 18 39 prohibits oral agreem ents assignin g m ineral rights and working interests, and, as a result, Red Stick’s breach of contract claim s are based upon an invalid oral assignm ent. 60 However, Red Stick’s breach of contract claim s are based on an agreem ent to form Main Pass, for Natrona to be a 90 % owner of Main Pass, and for 57 R. Doc. 170 at ¶ 16 (em phasis added). Kennedy v. Chase Manhattan Bank USA, N A, 369 F.3d 833, 839 (5th Cir. 20 0 4) (“In considerin g a m otion to dism iss, the district court m ust take the facts as alleged in the com plaint as true, and m ay not dism iss the com plaint ‘unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.’” (quoting Brow n v. N ationsbank Corp., 18 8 F.3d 579, 58586 (5th Cir. 1999)). 59 See, e.g., Leleux v. United States, 178 F.3d 750 , 754 (5th Cir. 1999) (“When considerin g a Rule 12(b)(6) dism issal, we construe the com plaint liberally in favor of the plaintiff, taking all facts as true.” (citin g Low rey v. Texas A & M Univ. Sy s., 117 F.3d 242, 247 (5th Cir. 1997)). 60 R. Doc. 181-1 at 17 (citing La. Civ. Code art. 1839). 58 10 Natrona and Gunther, J r. to supply the funds necessary to pay 90 % of the costs. 61 The alleged agreem ent is not an assignm ent of a m ineral right or a working interest. Accordingly, Movants’ reliance on the writing requirem ent of article 1839 is m isplaced, and Red Stick’s breach of contract claim will not be dism issed for lack of a writing. Movants additionally argue the proposed assignm ent is unenforceable because the PA between Mack and Red Stick requires Mack’s “prior written consent” to any assignm ent of any working interest, and Mack did not provide any written consent to Red Stick before Red Stick assigned its working in terest to Main Pass. 62 The PA provides: Prior to the drilling of the [Well] Buyers shall not assign this Agreem ent or any of its rights or obligations under this Agreem en t without obtaining the prior written consent of Seller . . . 63 Whether Mack consen ted to the proposed assignm ent, or not, is irrelevant to the claim s brought by Red Stick. The assignm ent never took place, and as a result Mack’s “prior written consent” is irrelevant. Red Stick’s breach of contract claim s are based on an alleged agreem ent to form Main Pass, for Natrona to be a 90 % owner of Main Pass, and for Natrona and Gunther, J r. to supply the funds necessary to pay 90 % of the costs. 64 Red Stick alleges the agreem ent to form Main Pass, and for Natrona an d Gunther, J r. to supply the funds necessary to pay 90 % of the costs, was breached. As a result, Red Stick argues there was no assignm ent and consent by Mack never becam e an issue. The Court finds this argum ent is correct. 61 R. Doc. 169 at ¶ 14; R. Doc. 170 at ¶ 14. R. Doc. 181-1 at 19 (citing R. Doc. 97-4 at 8 (Article IX, General Provision s, ¶ 3, Assignm ent of Agreem ent)). 63 R. Doc. 97-4 at 8. 64 R. Doc. 169 at ¶ 14; R. Doc. 170 at ¶ 14. 62 11 Accordingly, Movants’ m otion to dism iss Red Stick’s breach of contract claim against Natrona, Main Pass, Dixie, and Gunther, J r., in his individual capacity and in his capacity as trustee of the RE trust, is denied. III. D e trim e n tal Re lia n ce J ust as Movants argued with respect to Red Stick’s breach of contract claim , Movants argue Red Stick’s detrim ental reliance allegations involve only Red Stick’s proposed assignm ent to Main Pass, and therefore, the rem aining Movants cannot be held liable for detrim ental reliance. 65 Again, Movants m isconstrue the basis of the claim . Red Stick’s detrim ental reliance claim is based on representations to Red Stick that Main Pass would be form ed, Red Stick’s interest would be assigned to Main Pass, and “Natrona, Albert W. Gunther, J r. and/ or its m em bers [would be] responsible for 90 % of the costs claim ed by Mack.”66 Red Stick alleges that parties in addition to Main Pass were involved in the “prom ise to agree.” Specifically, in its Cross-Claim against Cross-Claim Defendants Main Pass and Gunther, J r., Red Stick alleges: [I]n connection with the Main Pass 21 Prospect negotiations, Red Stick, Natrona and Defen dant Main Pass, through Dixie Managem ent Services, L.L.C., and Albert W. Gunther, J r., agreed that Red Stick would assign all of its interest in the Main Pass 21 Prospect to Defendant Main Pass in order to shift all of the drilling costs and ben efits attributable to Red Stick to Defendant Main Pass and its m em bers such that Albert W. Gunther, J r., individually and/ or through Natrona, as a 90 % interest owner in Defendant Main Pass, would be responsible for 90 % of drilling costs. Defendant Main Pass and Albert W. Gunther, J r., now refuse to contribute to drilling costs in accordance with this agreem ent despite dem ands by Mack and/ or Red Stick. 67 65 R. Doc. 181-1 at 21. R. Doc. 169 at ¶¶ 5, 8; R. Doc. 170 at ¶¶ 5, 8. 67 R. Doc. 169 at ¶ 19. 66 12 Sim ilarly, in its Third-Party Com plaint against Third-Party Defendants Natrona, Dixie, Gunther, J r. and Martha Gunther as trustees of the RE Trust, OSM, OSV, and Gunther, III., Red Stick alleges: [I]n connection with the Main Pass 21 Prospect negotiations, Red Stick, Natrona and Defendant Main Pass, through Dixie Managem ent Services, L.L.C., and Albert W. Gunther, J r., agreed that Red Stick would assign all of its interest in the Main Pass 21 Prospect to Defendant Main Pass in order to shift all of the drilling costs and ben efits attributable to Red Stick to Defendant Main Pass and its m em bers such that Albert W. Gunther, J r., individually and/ or through Natrona, as a 90 % interest owner in Defendant Main Pass, would be responsible for 90 % of drilling costs. Defendant Main Pass, Natrona, Dixie Managem ent Services, L.L.C. and Albert W. Gunther, J r., now refuse to contribute to drilling costs in accordance with this agreem ent despite dem ands by Mack and/ or Red Stick. 68 Although Red Stick alleges only that Natrona, Main Pass, Dixie, and Gunther, J r. m ade prom ises to Red Stick, Red Stick also seeks to hold “Third-Party Defendants” liable for detrim ental reliance. 69 Red Stick clearly has not alleged OSM, OSV, Gunther, III, and Martha Gunther as trustee of the RE Trust were involved in any prom ises m ade to Red Stick. Accordingly, to the extent Red Stick brings detrim ental reliance claim s against OSM, OSV, Gunther, III, and Martha Gunther as trustee of the RE Trust, the m otion to dism iss is granted and these claim s are dism issed. For purposes of the m otion to dism iss, and drawing all inferences in favor of Red Stick, Red Stick has alleged sufficient facts to support its detrim ental reliance claim against Gunther, J r. individually and as a trustee of the RE trust. Movants also argue Red Stick’s detrim ental reliance claim should be dism issed in its entirety as “detrim ental reliance requires ‘a change in position to the plaintiff's detrim ent as a result of the reliance,’” but “[t]he change in Red Stick’s position is not a 68 69 R. Doc. 170 at ¶ 19. R. Doc. 170 at ¶ 20 (em phasis added). 13 result of any reliance, but rather a result of the failure of Red Stick to obtain the ‘prior written consent’ of Mack required by the Participation Agreem ent.”70 Mack’s prior written consent is irrelevant as the assignm ent never occurred. Further, on a m otion to dism iss, courts accept as true the factual allegations as pleaded. 71 Red Stick has alleged “the above prom ises . . . induce[d] Red Stick to rely on them to its detrim ent because Red Stick . . . acquir[ed] its interest in the Main Pass Prospect based on this agreem ent, which was intended to reduce Red Stick’s potential liability for drilling costs.”72 Red Stick’s allegations contain sufficient factual m atter, accepted as true, to state a detrim ental reliance claim that is plausible on its face. Accordingly, the Court denies Movants’ m otion to dism iss Red Stick’s detrim ental reliance claim against Natrona, Main Pass, Dixie, and Gunther, J r., in his individual capacity and in his capacity as trustee of the RE Trust. IV. Pie rcin g th e Co rp o rate Ve il Movants allege “Red Stick fails to adequately plead the doctrine of piercing the corporate veil” and seek dism issal of this claim against all Movants. 73 Specifically, Movants argue Texas law applies to Red Stick’s veil piercing claim s, Texas law requires a showing of “actual fraud” to pierce the corporate veil, and Red Stick has failed to properly plead actual fraud. 74 As a prelim inary m atter, the Court notes a request to pierce the corporate veil is not an indepen dent cause of action “but rather is a m eans of im posing liability on an 70 R. Doc. 181-1 at 22. Iqbal, 556 U.S. at 678 (20 0 9). 72 R. Doc. 169 at ¶ 20 ; R. Doc. 170 at ¶ 20 . 73 R. Doc. 181-1 at 23. 74 Id. at 23-25. 71 See 14 underlying cause of action.”75 If a plaintiff successfully pierces the corporate veil of a lim ited liability com pany, the plaintiff m ay hold individual m em bers of the lim ited liability com pany liable for actions of the lim ited liability com pany. 76 Likewise, a lim ited liability corporation can be held liable for the actions of its m em bers if the plaintiff successfully pierces the corporate veil in reverse. 77 Thus, Red Stick’s veil piercing claim is a m ean s by which Red Stick seeks to hold Movants directly liable for dam ages caused by the underlying breach of contract and detrim ental reliance claim s against entities or individuals with which the Movants are affiliated. 78 In this case, Red Stick alleges underlying causes of action, nam ely, breach of contract and detrim ental reliance. Movants argue Red Stick’s veil piercing claim s should be dism issed against all Movants because Red Stick did not allege actual fraud. 79 “Actual fraud” m ust be established to pierce the veil under Texas law. However, Louisiana law does not require a finding of fraud in order to pierce the corporate veil in a contract action. 80 “[W]hen fraud is not alleged, a plaintiff seeking to pierce the corporate veil bears a heavy burden of proof in dem onstrating that the corporate form has been disregarded, but [] Louisiana law indicates that the corporate veil m ay be pierced without the presence of fraud.”81 Thus, in order to address the sufficiency of Red Stick’s allegations with respect to piercing the 75 Peacock v. Thom as, 516 U.S. 349, 354 (1996); see also In re Grothues, 266 F.3d 334, 337– 38 (5th Cir. 20 0 0 ) (recogn izing that the alter ego theory is a rem edy to enforce a substantive right, not an independent cause of action). 76 See, e.g., Martin v. Spring Break 83 Production, LLC, 797 F.Supp.2d 719, 724-25 (E.D. La. 20 11). 77 See, e.g., In re Moore, 60 8 F.3d 253, 257 (5th Cir. 20 10 ). 78 “[I]f a com plaint attem pts only to state a veil-piercin g claim , and not an underlying cause of action, it m ust be dism issed.” M ey er v. Bay les, Civil Action No. 12– 0 0 43, 20 12 WL 25228 96, at *4 n .4 (W.D. La. May 31, 20 12) (citations om itted), adopted 20 12 WL 2513511 (W.D. LA. J une 28 , 20 12). 79 R. Doc. 181-1 at 25-27. 80 Hollow ell v. Orleans Regional Hosp. LLC, 217 F.3d 379, 38 6 (5th Cir. 20 0 0 ) (“Even if the defendants are correct that a WARN action is m ost akin to a contract action, they are m istaken that Louisiana law requires a findin g of fraud in order to pierce the corporate veil in a contract action.”). 81 Id. (internal quotation m arks and citation om itted). 15 corporate veil, the Court m ust first determine which state’s law governs the issue. “Choice-of-law decisions can be resolved at the m otion to dism iss stage when factual developm ent is not necessary to resolve the inquiry.”82 Otherwise, they cannot. For instance, in Floy d v. CIBC W orld Markets, Inc., the United States District Court for the Southern District of Texas declined to decide choice of law on a m otion to dism iss because “[t]he Court lacks evidence at this stage of the proceedings to properly analyze all the Restatem ent factors,” which courts in Texas analyze to determ in e the governing law. 83 By contrast, in Energy Coal, S.p.A. v. CITGO Petroleum Corp., the United States District Court for the Western District of Louisiana found it appropriate to decide choice of law on a m otion to dism iss because: [T]he issue is fully briefed and no further factual developm ent is n ecessary. [The plaintiff’s] petition and m otion papers exhaustively detail the parties’ relationships with the candidate states and the dispute. [The defendant] does not dispute the accuracy of Energy Coal's factual assertions, and instead only disputes that those facts establish that Louisiana law governs. Accordingly, the court finds that there are no unknown facts which could alter the conflict-of-laws analysis. 84 When jurisdiction is based on diversity of citizenship, the law of the forum state governs the choice of law inquiry. 85 Louisiana Civil Code article 3515 “sets forth the general principles from which the m ore specific conflict articles derive. Thus, if any other article is found to be applicable to a particular case or issue, that article prevails.”86 Article 3537 is the m ore specific article that applies to a breach of an obligation. Article 3537 provides: 82 Energy Coal v. CITGO Petroleum Corp., 836 F.3d 457, 459 (5th Cir. 20 16) (citing Fortune v . Tay lor Fortune Grp., LLC, 620 F. App’x. 246, 247– 48 (5th Cir. 20 15)). 83 426 B.R. 622, 641 (S.D. Tex. 20 0 9). 84 No. 2:14– CV– 0 30 92, 20 15 WL 5123867, at *2 n.5 (W.D. La. Aug. 31, 20 15). 85 See Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 496 (1941). 86 N orAm Drilling Co. v . E & PCo Intern., LLC, 131 So.3d 926, 929 (La. App. 2 Cir. 20 13). 16 Except as otherwise provided in this Title, an issue of conventional obligations is governed by the law of the state whose policies would be m ost seriously im paired if its law were not applied to that issue. That state is determ ined by evaluating the strength and pertin ence of the relevant policies of the involved states in the light of: (1) the pertinent contacts of each state to the parties and the transaction, including the place of negotiation, form ation, and perform ance of the contract, the location of the object of the contract, and the place of dom icile, habitual residen ce, or business of the parties; (2) the nature, type, and purpose of the contract; and (3) the policies referred to in Article 3515, as well as the policies of facilitating the orderly planning of transactions, of prom oting m ultistate com m ercial intercourse, and of protecting one party from undue im position by the other. 87 The “policies referred to in Article 3515” in clude: [T]he policies and needs of the interstate and international system s, including the policies of upholding the justified expectations of parties and of m inim izing the adverse consequences that m ight follow from subjecting a party to the law of m ore than one state. 88 In this case, the parties have not fully discovered or briefed the parties’ relationships with the candidate states, Texas and Louisiana. Neither have they briefed the relationship of the alleged agreem ent to the forum state; the nature and purpose of the alleged agreem ent and how the nature an d purpose weigh towards application of one candidate state’s laws over another; how application of one state’s law over another’s is com patible with the policies and needs of the interstate and in ternational system s, including the policies of upholding the justified expectations of parties and of m inim izing the adverse consequences that m ight follow from subjecting a party to the law of m ore than one state; or how application of one state’s law over another’s is com patible with the policies of facilitating the orderly planning of transactions, of prom oting m ultistate com m ercial intercourse, and of protecting one party from undue im position by the other. 87 88 La. Civ. Code art. 3537. La. Civ. Code art 3515. 17 Like Floy d, in this case the Court has been provided insufficient inform ation to properly analyze the article 3537 factors. Accordingly, it is prem ature to determ ine the governing law at this stage. The m otion to dism iss is den ied. Finally, the fact that the Court has dism issed Red Stick’s direct breach of contract and detrim ental reliance claim s against Martha Gunther as trustee of RE Trust, Old South Mechanical, L.L.C., Old South Ventures, L.L.C., and Albert W. Gunther, III does not m ean Red Stick cannot attem pt to recover from these Third-Party Defendants by piercing the corporate veil. The m otion to dism iss is den ied with respect to all Movants. CON CLU SION IT IS ORD ERED that Movants’ m otion to dism iss is GRAN TED IN PART and D EN IED IN PART. IT IS FU RTH ER ORD ERED that, to the extent Red Stick brings breach of contract and detrim ental reliance claim s against Martha Gunther as trustee of RE Trust, Old South Mechanical, L.L.C., Old South Ventures, L.L.C., and Albert W. Gunther, III, Movants’ m otion is GRAN TED and these claim s are D ISMISSED W ITH PREJU D ICE. 89 IT IS FU RTH ER ORD ERED that Movants’ m otion to dism iss Red Stick’s veil piercing claim s as to Cross-Claim Defendants Main Pass 21, L.L.C and Albert W. Gunther, J r.; and Third-Party Defendants, Dixie Managem ent Services, L.L.C., Natrona Resources, L.L.C., Old South Mechanical, L.L.C., Old South Ventures, L.L.C., Albert W. Gunther, III, 89 Red Stick has already been given an opportunity to am end its crossclaim and third party com plaint. See R. Doc. 169 (Am ended Crossclaim ) and R. Doc. 170 (Second Am ended Third Party Com plaint). 18 Albert W. Gunther, J r., as trustee of The RE Trust, and Martha Gunther, as trustee of The RE Trust, is D EN IED . IT IS FU RTH ER ORD ERED that Movants’ m otion to dism iss Red Stick’s breach of contract an d detrim ental reliance claim s against Natrona, Main Pass, Dixie, and Albert Gunther, J r., in his individual capacity and in his capacity as trustee of the RE Trust, is D EN IED . N e w Orle a n s , Lo u is ian a, th is 2 n d d ay o f Octo be r, 2 0 19 . _____________________________ SU SIE MORGAN U N ITED S TATES D ISTRICT J U D GE 19
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