WIM Transportation, Ltd v. Elite Coil Tubing Solutions LLC et al, No. 4:2013cv02198 - Document 37 (S.D. Tex. 2014)
Court Description: MEMORANDUM OPINION AND ORDER denying 13 PARTIAL MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM. (Signed by Judge Sim Lake) Parties notified. (aboyd, 4) Modified on 2/24/2014 (aboyd, 4).
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IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION WIM TRANSPORTATION, LTD., § § § Plaintiff, § § § § § § § v. ELITE COIL TUBING SOLUTIONS, LLC and JAMES P. HARDY, JR., Defendants. CIVIL ACTION NO. H-13-2198 MEMORANDUM OPINION AND ORDER Plaintiff WIM Transportation, Ltd. ("WIM") brought this action against defendants Elite Coil Tubing Solutioris, LLC ("Elite") and James P. Hardy, Jr . (collectively, "Defendants") in the 55th Judicial District Court of Harris County, Texas, where it was filed under Cause No. 2013-39458. court. Defendants removed the action to this Pending before the court is Defendant's Partial Motion to Dismiss Pursuant to Rule 12 [b] [6] (Docket Entry No. 13). For ("Partial Motion to Dismiss") the reasons explained below, Defendants' Partial Motion to Dismiss will be denied. I . Background This case involves an alleged failure by Elite to pay WIM for certain services involving the use of nitrogen to clean coiled tubing used in the oil Original Petition, Elite and gas industry. According to WIM's "is in the business of providing coil tubing material and services in connection with oil and gas The tubing is inserted into the exploration activities. and then removed and recoiled upon completion." l ground for use, However, Elite "lacks the equipment, personnel and experience to remove and/or extract fluids and other unwanted material from tubing when the tubing is taken out of the ground for re-coiling and relocation. th [r] ough 112 [the] So Elite has engaged WIM "to force nitrogen tubing to remove the unwanted materials necessary step to re-coiling the tubing." 3 as a Under this arrangement, "WIM is summoned to the well site and supplies all of the necessary nitrogen (which is expended) and services to enable removal and relocation of Defendant Elite's coil [ed] that Elite has tubing. WIM alleges 114 failed to pay for approximately $37,015 of its services in connection with the cleaning of Elite's coiled tUbing. 5 WIM filed its Original Petition in the 55th Judicial District Court of Harris County, Texas, on July 3, 2013, arguing that it is entitled to recover against Elite under the Texas Trust Fund Act, on sworn account, and in quantum meruit. 6 lPlaintiff's Original Petition, Removal, Docket Entry No. 1-9, p. 2. Defendants removed the Exhibit F to Notice of Exhibit F to Notice of 3Id. 4Id. at 2-3. 5Id. at 5. 6Plaintiff's Original Petition, Removal, Docket Entry No. 1-9. -2- case to this court on July 26, 2013, on the basis of diversity jurisdiction. 7 Defendants filed their Partial Motion to Dismiss on August 23, 2013, seeking dismissal of WIM's claims under the Texas Trust Fund WIM filed a response on October 7, 2013. 9 Act. 8 Defendants filed their reply the same day. 10 II. A motion to dismiss Procedure 12 (b) (6) Applicable Law pursuant to Federal Rule of Civil for failure to state a claim for which relief may be granted tests the formal sufficiency of the pleadings and is "appropriate when a defendant attacks the complaint because it fails legally to state a cognizable Ramming claim." United States, 281 F.3d 158, 161 (5th Cir. 2001). v. The court must accept the factual allegations of the complaint as true, view them in a light most favorable to the plaintiff, and draw all reasonable inferences in the plaintiff's favor. Id. "When a federal court reviews the sufficiency of a complaint, before the reception of any evidence either by affidavit or admissions, its task is necessarily a limited one. The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." 7Notice of Removal, Docket Entry No.1. 8Partial Motion to Dismiss, Docket Entry No. 13. 9Plaintiff's Response to Defendants' Part ial Rule Motion to Dismiss ("Response"), Docket Entry No. 16. 12 (b) (6) lODefendants' Reply Memo in Support of Partial Motion to Dismiss Pursuant to Rule 12 [b] [6] ("Reply"), Docket Entry No. 17. -3- Swierkiewicz v. Sorema N.A., 122 S. Ct. 992, 997 Scheuer v. (1974)). Rhodes, 94 S. Ct. 1683, 1686 (2002) (quoting To avoid dismissal a plaintiff must allege "enough facts to state a claim to Bell Atlantic Corp. v. relief that is plausible on its face." Twombly, 127 S. Ct. 1955, 1974 (2007). Plausibility requires "more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that defendant is liable for the misconduct alleged." complaint pleads facts defendant's liability, possibili ty and (quoting Twombly, omitted) . relief." it 127 S. regarding a are merely stops plausibility " [D] ismissal allegation that Ct. 1S of short entitlement at 1966) proper required if "Where a consistent of the to the with line a between relief." Id. (internal quotation marks the element complaint necessary lacks to an obtain Torch Liquidating Trust ex rel. Bridge Assocs. L.L.C. v. Stockstill, 561 F.3d 377, 384 (5th Cir. 2009). III. Analysis Defendants argue that WIM has failed to state a claim under the Texas Trust Fund Act because "[t]here is no construction or improvement to real property at issue."ll The Texas Trust Fund Act llpartial Motion to Dismiss, Docket Entry No. 13, p. 2; see also Defendant's Memo in Support of Partial Motion to Dismiss (continued ... ) -4- Kelly v. is codified in Chapter 162 of the Texas Property Code. General Interior Const., Inc., 301 S.W.3d 653, 656 (Tex. 2010); Dealers Elec. Supply Co. v. Scroggins Const. Co., Inc., 292 S.W.3d 650, 652 (Tex. 2009). Under § 162.001(a) of the Texas Property Code "[c]onstruction payments are trust funds. are made to a contractor director, or agent of a or subcontractor contractor or if the payments or to an subcontractor, officer, under a construction contract for the improvement of specific real property in this state. Under /I § 162.003 (a) " [a] n artisan, laborer, mechanic, contractor, subcontractor, or materialman who labors or who furnishes labor or material for the construction or repair of an improvement on specific real property in this state is a beneficiary of any trust funds paid or received in connection with the improvement./I Defendants appear to advance two arguments why WIM' s claims do not involve construction or improvements to real property: (1) Elite's coil tubing is not an improvement to real property and (2) § Elite's 162. 0 0 1 (a) activities 12 do not constitute With regard to the first construction argument, under Defendants 11 ( ¢ ¢ ¢ continued) Pursuant to Rule 12 [b] [6] ("Memo in Support of Partial Motion to Dismiss/l), attached to Partial Motion to Dismiss, Docket Entry No. 13 -1, p. 6 ("There is no construction at issue in this litigation. There are no construction payments. There is no construction, improvement or other structure at issue as required under the [Texas Trust Fund Act] ./1) . 12See Memo in Support of Partial Motion to Dismiss, attached to Partial Motion to Dismiss, Docket Entry No. 13-1, pp. 6-10. -5- contend that anything "[t] here connected Distinguishing is to, the no in coiled construction at any degree, tubing from all the a or real drilling repair of property. "13 rig, which Defendants acknowledge "might be an improvement," Defendants argue that here "there is no work or materials supplied to a rig. The alleged service involves blowing nitrogen into a movable and coiled string of tubing which sits on a spool on a 18-wheeler/coil tubing unit. ,,14 In support of their second argument, Defendants cite Holley v. NL Indus./NL Acme Tool Co., 718 S.W.2d 813, App.-Austin 1986, and Endeavor Energy Res., L.P. v. Heri tage WL 4045250, at *9 writ ref'd n.r.e.), Consol., (N.D. LLC, Tex. Aug. No. 9, 3:12-CV-03765-B, 2013), that "drilling is not 'construction' under 815 § (Tex. 2013 for the proposition 162.001[a] ."15 WIM argues in its Response that "[t]here is no decision from the Texas Supreme Court upon the issue raised by Defendants: whether the Texas Trust Fund Act can be applied to oil and gas wells" and that "[a] division of authority exists among lower Texas courts. ,,16 WIM argues that "an oil and gas well is an improvement to real property, ,,17 and cites Painter v. Momentum Energy Corp., 271 l3Id. at 6. l4Id.; see also id. at 9. 15Id. at 10. 16Response, Docket Entry No. 16, p. 2; see also Plaintiff's Brief in Opposition to Rule 12(b) (6) Motion to Dismiss ("Brief in Opposition"), attached to Response, Docket Entry No. 16-1. 17Brief in Opposition, No. 16-1, p. 5. attached -6- to Response, Docket Entry S.W.3d 388 (Tex. App.-El Paso 2008, pet. denied), and Moreno v. BP Am. Prod. Co., No. 04- 08 - 00036 - CV, 2008 WL 4172248, App.-San Antonio Sept. 10, 2008, pet. denied) at * 2 (Tex. (mem. op.), for the proposition that "there are Texas intermediate courts that support the assertion that the drilling process of an oil and gas well consti tutes construction of an improvement to real property. ,,18 WIM acknowledges that neither of these cases interpreted Chapter 162 of the Texas Property Code. 19 Instead, in each case the courts interpreted similar language in 95.002 of the Texas Civil § Practice and Remedies Code and held that oil activity constitutes property. at *2. construction of an and gas drilling improvement to real See Painter, 271 S.W.3d at 399i Moreno, 2008 WL 4172248, Section 95.002 states that it applies only to a claim "that arises from the condition or use of an improvement to real property where the contractor or subcontractor renovates, or modifies the improvement." constructs, Because both the Texas Civil Practice and Remedies Code and Texas Property improvement to Code deal with real property, construction WIM argues that § or § repairs, 95.002 of 162.003 of the repair of an these cases are persuasive evidence of how the Texas Supreme Court might rule on the issue of whether oil and gas drilling activity constitutes 18Id. at 6. 19Id. at 6, 9-10. -7- construction of an improvement to real property for purposes of Chapter 162 of the Texas Property Code. 20 In their Reply, Defendants argue Painter that is distinguishable on its facts because it involved a "rig, which sat upon the ground" and that the court "found that setting casing is part of construction of a rig."21 Defendants argue that "Elite's 18 wheeler tractor and trailer are not fixtures and certainly lack any permanence or annexation to land. "22 A. There is a split of authority on the issue of whether the Texas Trust Fund Act applies to oil and gas drilling activity. The court has found only two Texas cases interpreting the Texas Trust Fund Act in the context of an oil and gas drilling contract. In Triton Oil & Gas Corp. v. E. W. Moran Drilling Co., 509 S.W.2d 678 (Tex. Civ. App.-Fort Worth 1974, writ ref'd n.r.e.), the plaintiff drilling contractor hired third-party subcontractors in order to complete its obligations under a drilling contract after it "encountered heaving shale, or other similar formation" and "the drill pipe became stuck." Id. at 681, 685-87. The court held that former Tex. Rev. Civ. Stat. Ann. art 5472e, § was 162.001 repealed and 162.003, recodified as "created and Tex. imposed upon" Prop. the 20Id. at 9-10. 21Reply, Docket Entry No. 17, p. 3. 22Id. -8- Code drilling §§ I, which to contractor a ~statutory trust" in favor of the subcontractors for any payments the contractor received from the owner of the well. Id. at 687. In Holley the court interpreted the codified version of the same statute and held ~as a matter of law that drilling an oil and gas well is not the construction of an improvement on real property within the meaning of Chapter 162 of the Property Code." 718 S.W.2d at 815. ~construction" Concluding that was not defined ~Texas in the Property Code and unable to locate any Holley, authority addressing the exact issue of whether drilling an oil or gas well is construction of an improvement to real property," the court looked statutory to ~common usage, the common law and former provisions in attempting to discover the meaning of 'construction contract for the improvement of specific real property.'" 814 (quoting ~construction" Tex. Prop. Code § The 162.001). definition of that the court adopted involved the various materials into a permanent structure." Id. at ~assembly of Id. at 815. In examining the former Tex. Rev. Civ. Stat. Ann. art. 5472e, the court determined that the language of art. 5472e ~supports an interpretation of 'construction' which excludes the drilling of oil and gas wells.'" Id. The court noted that ~art. 5472e created a trust for the benefit of contractors and subcontractors 'who may labor or furnish labor or material for the construction or repair of any house, property.'11 § 1). building, Id. or improvement whatever upon such real (quoting Tex. Rev. The court further noted that Civ. Stat. Ann. ~[a]lthough -9- ._------- ... _--........... _-------- art 5472e, this language was omitted from the Property Codet the Code was intended to be topic-by-topic statets revision of the statute law without substantive change. Code Ann. § 1.OOl(a)). tit general Id. and 'a permanent (quoting Tex. Prop. The court ultimately concluded that "[t]he drilling of an oil well does not involve construction t in the sense of assembling materials to make a permanent whole. 1t Id. at 815. In Triton a Texas court of appeals found the Texas Trust Fund Act applicable to create a statutory trust in favor of drilling subcontractors in the context of an oil and gas drilling contract. Triton t 509 S.W.2d at 687. In Holley a Texas court of appeals held that "drilling an oil and gas well is not the construction of an improvement on real property within the meaning of Chapter 162 of the Property Code. 1t HolleYt 718 S.W.2d at 815. There is thus a split of authority on the issue of whether a drilling contract constitutes a "construction contract for the improvement specific real propertylt under the Texas Trust Fund Act. of Tex. Prop. Code § 162.001(a). B. Texas courts have interpreted similar language in the Civil Practice and Remedies Code to find that oil and gas drilling activity constitutes construction or repair of an improvement to real property. WIM argues that because both Practice and Remedies Code and § § 95.002 of the Texas Civil 162.003 of the Texas Property Code are concerned with construction or repair of an improvement to real property, cases interpreting § 95.002 in the context of oil and gas drilling activity are persuasive evidence of how the Texas Supreme -10- Court might rule on the issue of whether oil and gas drilling activity constitutes construction of an improvement to real property for purposes of Chapter 162 of the Texas Property Code. Indeed, at least two Texas courts of appeals have analyzed the opinion in Holley in interpreting See Painter, 95.002. § 271 S.W.3d at 398-99; Francis v. Coastal Oil & Gas Corp., 130 S.W.3d 76, 85 (Tex. App.-Houston [1st Dist.] 2003, no pet.). finds Francis, Credeur, 23 Moreno, The court and Painter to be particularly relevant. In Francis the court held that a "coiled-tubing washout" of a well constitutes "repair or renovation" of an improvement to real property. Francis, 130 S.W.3d at 85. The plaintiff in Francis was inj ured while working "on a coiled-tubing washing of the M. Salinas NO.6 well." Id. at 80. "In this process, an engine pumped debris out of the well and into a receptacle, in this case, an open top tank. The debris included gas, water, and sand." court held that "the coiled-tubing washout Id. at 81. The [Plaintiff] was performing qualified as either repair or renovation of the well." Id. at 85. The Francis court acknowledged the holding in Holley "that \ drilling an oil and gas well improvement on real property' Property Code." Id. is not the construction of an for purposes of chapter 162 of the (quoting Holley, 718 S.W.2d at 85). In 23Credeur v. MJ Oil Inc., 123 F. App'x 585 (5th Cir. 2004). -11- -------------,----------, ------------- reconciling its holding with the reasoning of Holley, the court determined that "Holley focuses solely on whether 'construction,' specifically the activity of drilling, constitutes an improvement under the construction-payment provisions of the Property Code" and drew a distinction between the act of drilling and the well itself. See id. ("In deciding that 'construction' does not constitute an improvement, 'involve however, the structure,' drilling." Holley assembly in of contrast reasons various to (quoting Holley, the that drilling materials well into that a remains 718 S.W.2d at 815)). does not permanent after the Drawing this distinction, the court concluded that "Holley thus conforms with settled law recognizing that mineral wells constitute improvements to real property." 282 S.W.3d Id. 419,426 i see also Wagner (Tex. 2008) & Brown, Ltd. v. Sheppard, ("[O]il and gas wells are improvements to real property.") In Credeur the owner of an oil and gas well contracted with Nabors Drilling, U.S.A., Inc. ("Nabors") to drill a well, and with Newpark Drilling Fluids ("Newpark") "to perform certain services on the well, including mud filtration." An employee of Newpark who was Credeur, 123 F. App'x at 587. "responsible for operating and maintaining the Newpark equipment on the well" was injured when he "partially fell tank." Id. through a grating hatch accessing Nabors' mud The employee argued that Chapter 95 of the Texas Civil Practice and Remedies Code did not apply because his "work on the rig for Newpark was not construction, -12- repair, renovation, or Id. modification." employee, The district court noted that the at 588. "like the plaintiff in Francis, assisted in the active drilling of [the] well by filtering the mud so that it could be injected back into the well to facilitate further drilling" and concluded that "[a] rguably, this work qualifies repair I renovation or modification of" the well. as an ongoing Credeur v. MJ Oil Inc., No. H-01-1377, slip op. at 8 (S.D. Tex. Apr. 13, 2004). Fifth § Circuit 95.003, affirmed, concluding that ~[f]or purposes The of Texas courts have found that acti vi ty facilitating a well's performance is construction, renovation, or modification." Credeur, 123 F. App'x at 588 (citing Francis, 130 S.W.3d at 85). In Moreno a company contracted "to drill and set conductor pipe for a well site. II Moreno, 2008 WL 4172248, at *1. The conductor pipe, was transported to the well site on a flatbed truck in forty-foot sections, each weighing approximately 1,700 pounds. Id. Instead of waiting for a crane, employees used a bobcat to unload and move the pipe. when a section of Id. One of the employees was injured conductor pipe rolled over him. The employee argued that Chapter 95 of the Civil Practice and Remedies Code did not apply "because the conductor pipe that rolled over [him] was not an improvement to real property.1I noted that "Texas courts of appeal, however, Id. have The court unanimously construed Chapter 95 broadly and held that the injury does not have to directly result from the object on which a plaintiff is working in order for Chapter 95 to apply.1I -13- Id. (citing Williamson v. Paccar, Inc., Aug. 2007)). 6, No. 4:06cv282, 2007 WL 2264720, at *3 (E.D. In holding that Chapter 95 applied, Tex. the court noted that it was "undisputed that [the company] was engaged in the construction, repair, renovation, or modification of an improvement to real property, i.e., an oil and gas well." Id. The court in Painter held that drilling operations constitute construction of an improvement to real property for purposes of § 95.002. was Painter, 271 S. W. 3d at 399. In Painter one plaintiff inj ured and the other killed when the blowout preventer at 393. "fell from the top When the accident occurred, depth and . of rotating head on a the preventer. II Id. "the well had reached total employees were in the process of rigging down the drilling rig. II The Id. court Credeur and concluded that analyzed Holley, "in the context of Francis, and section 95.002, [Plaintiffs] were involved in the construction of an improvement to real property." Id. at 399. The court rej ected the argument "distinguish [ing] the act of drilling a well from the construction of a well structure, once drilling is complete," stating that "[i]t is axiomatic that the drilling and the installation of casing is an integral part of the construction of a well drilling, concluded there can be no well." that "[d]rilling and Accordingly, Id. the and that, completion of without the court drilling operations are more properly characterized as an essential part of the construction unrelated task." of a well, as Id. -14- opposed to some preliminary, It is apparent from these cases that in the § 95.002 context Texas courts have interpreted oil and gas drilling activities and the maintenance of oil and gas wells to constitute construction or repair of unclear in Nevertheless , improvements to real property. light interpretations of of Francis those and terms Painter in the whether § the 95.002 it is courts' context are applicable to Chapter 162 of the Texas Property Code. c. The facts as currently pleaded do not lend themselves resolution of this disputed issue of law. to As of noted above, Triton and Holley represent a split authority on the issue of whether a drilling contract constitutes a "construction contract property" under §162.001(a). willing to the for Texas the Trust improvement Fund Act. of specific Tex. Prop. real Code It is clear, however, that Texas courts have been interpret the term "construction" drilling and maintenance of oil and gas wells. to encompass the See Painter, 271 s.w.3d at 399; Moreno, 2008 WL 4172248, at *1; see also Credeur, 123 F. App'x at 588. Furthermore, it is settled law that an oil and gas well is an improvement to real property under Texas law. Wagner & Brown, Ltd., 282 S.W.3d at 426. However, it is unclear how the courts' interpretation of "construction" In the Chapter 95 context would apply to Chapter 162 of the Texas Property Code. The court need not attempt to resolve the questions, however, because the facts are not sufficiently developed to allow the court to apply the law in any meaningful sense. -15- WIM's Original Petition alleges that Elite "is in the business of providing coil tubing material and services in connection with oil and gas exploration activities. u24 The nature of those activities could bear on the applicability of nei ther party the Texas Trust has produced "construction contractU under any § More Fund Act. contract importantly, contended 162.001(a). to be the Plaintiff argues that resolution of this issue should occur "after development of the facts. u25 The court agrees. Accordingly, Defendants' Partial Motion to Dismiss will be denied. IV. Order For the reasons explained above, Defendant's Partial Motion to Dismiss Pursuant to Rule 12 [b] [6] (Docket Entry No. 13) is DENIED. SIGNED at Houston, Texas, on this 24th day of February, 2014. SIM LAKE UNITED STATES DISTRICT JUDGE 24Plaintiff's Original Petition, Removal, Docket Entry No. 1-9, p. 2. Exhibit 25Response, Docket Entry No. 16, p. 2 -16- ~ 2. F to Notice of
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