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Cole v. Jebf Holdings, LLC

United States District Court, E.D. Louisiana

November 10, 2014

DAVID L. COLE, et al.
v.
JEBF HOLDINGS, LLC, et al.

ORDER

NANNETTE JOLIVETTE BROWN, District Judge.

Before the Court are Defendants Brian Rose's ("Rose") and JEBF Holdings, LLC's ("JEBF") (collectively, "Defendants") "Motion to Dismiss for Failure to State a Claim Upon Which Relief Can be Granted and Alternative Motion for a More Definite Statement"[1] and Defendants "Motion to Strike Plaintiff's [sic] Response Memorandum in Opposition Attached Internet Article."[2] Having considered the motions, the memoranda, and the applicable law, the Court will grant Defendants' Motion to Strike and grant in part and deny in part Defendant' Motion to Dismiss.

I. Background

Plaintiffs David L. Cole and John M. Mulhall (collectively, "Plaintiffs") filed the petition in this matter on December 18, 2013 in the 17th Judicial District Court, Parish of Lafourche, [3] wherein they allege that Rose, JEBF, and Louisiana Delta Oil Co., LLC ("Louisiana Delta") fraudulently converted Plaintiffs' funds. Plaintiffs allege that they each invested $69, 463.50 in an oil well, LDF #4, located in Lafourche Parish, Louisiana and operated by Louisiana Delta.[4] According to the complaint, Plaintiffs purchased these interests from Lux Petroleum, Inc., which is not a party to this lawsuit.[5] Plaintiffs seek a judgment awarding them an ownership interest in LDF #4, an accounting and payment of royalties allegedly owed to them, and a preliminary injunction enjoining Louisiana Delta Oil Co. from disbursing any royalties to Defendants until the final resolution of this litigation.[6]

Defendant Rose was served on January 8, 2014.[7] Defendants removed the case to federal court on February 7, 2014.[8] At that time, neither JEBF nor Louisiana Delta Oil had been served.[9] On March 10, 2014, Defendants filed the pending "Motion to Dismiss for Failure to State a Claim Upon Which Relief Can be Granted and Alternative Motion for a More Definite Statement."[10] Plaintiffs filed a memorandum in opposition on March 27, 2014, [11] and Defendants filed a reply memorandum on April 1, 2014.[12] Also on April 1, 2014, Defendants filed the pending "Motion to Strike Plaintiff's [sic] Response Memorandum in Opposition Attached Internet Article, "[13] which Plaintiffs have not opposed.

II. Parties' Arguments

A. Defendants' Arguments in Support

Defendants argue that Plaintiffs have failed to plead each of the following elements of fraud with respect to Defendants: (1) a misstatement or omission; (2) of material fact; (3) made with the intent to defraud; (4) on which the plaintiff relied; and (5) which proximately caused the plaintiff's injury.[14] According to Defendants, Plaintiffs have failed to articulate who made the alleged fraudulent representations or "what their $69, 463.50 claim was supposed to obtain."[15] Specifically, Defendants argue that Plaintiffs allege fraudulent misrepresentation against Lux Petroleum Inc., but not by the Defendants herein.[16] Also, Defendants aver that Plaintiffs claim both that they paid $69, 463.50 to acquire an interest in LDF #4, and that they paid that sum to acquire an interest in a Limited Liability Partnership, which had an interest in the oil and gas well.[17] According to Defendants, "[t]he Plaintiffs' lack of conformity to Fed.R.Civ.P. 9[] has made it impossible for the Defendants to answer the allegations of the Plaintiff."[18]

Next, according to Defendants, Plaintiffs admit that Defendants had no interest in the Well when Plaintiffs allegedly obtained an interest in that well.[19]Defendants claim that, according to the Petition, Plaintiffs obtained an interest in the Well or Lux-LDF #4 in April 2008, and JEBF did not obtain an interest in that well until October 2008.[20] Accordingly, Defendants aver, the fraud that Plaintiffs allege occurred before JEBF obtained an interest in the Well.

Defendants additionally argue that Brian Rose is not a managing partner of JEBF, as Plaintiffs allege, but is rather a member of JEBF.[21] According to Defendants, "no member, manager, employee, or agent of a limited liability company is liable in such capacity for a debt, obligation, or liability of the limited liability company, " though "a member may be liable for acts of fraud that he committed personally."[22] In order to pierce the veil of liability for an LLC, Defendants aver, the Court must analyze the factors articulated in Ogea v. Merritt: (1) whether a member's conduct could be fairly characterized as a traditionally recognized tort; (2) whether a member's conduct could be fairly characterized as a crime, for which a natural person, not a juridical person, could be held culpable; (3) whether the conduct at issue was required by, or was in furtherance of, a contract between the claimant and the LLC; and (4) whether the conduct at issue was done outside the member's capacity as a member.[23] In this case, Defendants claim, Plaintiffs have failed to assert what conduct Rose committed that would constitute fraud, or that they entered into a contract with JEBF.[24] Defendants submit that Rose has never communicated with or made representations to Plaintiffs, and accordingly cannot be individually liable for the acts of JEBF.[25]

Next, Defendants argue that the operative facts contained in the Petition do not involve Defendants.[26] According to Defendants, Plaintiffs are attempting to impute liability onto JEBF and Rose for the alleged actions of Lux Petroleum and Enterra Energy - entities that Plaintiffs have not made Defendants in this litigation.[27] Defendants also contend that Plaintiffs have failed to plead the Single Business Enterprise Theory, which is "[t]he only legally cognizable theory to make such an imputation of liability."[28] Defendants aver that Louisiana courts have held that a distinct corporate entity may be disregarded when a corporation is so organized and controlled as to make it merely an instrumentality of another corporation.[29] In this case, they argue, the Petition does not allege that Plaintiffs paid money to any Defendant herein to acquire an interest in the Well, and "[t]hus, Plaintiffs are asserting that the alleged actions of Lux Petroleum, Inc. should implicate liability for JEBF Holdings, LLC."[30] However, Defendants contend, Lux Petroleum and JEBF "do not have the sort of connection" that is required to impute liability - in fact, "[t]he only nexus that Plaintiffs rely upon is that a member of Enterra Energy, LLC has a familiar relationship with Brian Rose."[31] It is Defendants' position that Plaintiffs are seeking to hold JEBF liable for the alleged actions of a separate entity solely because of a blood relationship between two members of those separate entities, "which completely ignores the law on Single Business Enterprise Theory."[32]

Defendants next argue that Plaintiff's claims for fraud and underpayment of royalties have prescribed.[33] First, according to Defendants, Plaintiffs' fraud claim is a delictual action that is subject to a one year liberative prescription period, which begins to run from the date of injury - in this case, the date that Plaintiffs allegedly paid to have an interest in the oil well based on the alleged misrepresentation of Lux Petroleum.[34] Defendants aver that Plaintiffs have failed to allege that prescription has tolled under the doctrine of contra non velentum, under which the prescriptive period commences from the date the Plaintiff knew or should have known of the tortious events.[35] Plaintiffs' fraud cause of action is prescribed even if contra non velentum applies here, Defendants argue, because Plaintiffs knew or should have known that they did not receive a royalty after April 2008.[36] Additionally, Defendants aver that Plaintiffs' claim for underpayment of royalties for the production of minerals is subject to a three-year prescriptive period.[37] Defendants therefore contend that Plaintiffs' claims for underpayment of royalties from April 2008 to December 18, 2010 is prescribed.[38]

Defendants alternatively seek a more definite statement pursuant to Fed.R.Civ.P. 12(e). Specifically, "Defendants urge the following defects in the Plaintiffs' Complaint that need clarification: (A) Plaintiffs need to detail ownership interest being alleged; (B) Date ownership interest acquired and from whom; and (C) Vague and ambiguous allegations of fraud."[39] First, Defendants aver that Plaintiffs allege that they purchased an interest in either an oil and gas well, or an interest in an entity called Lux LDF #4, but that "Plaintiffs' contradictory and broad allegations make it impossible to determine the ownership interest being claimed by Plaintiffs in the case at bar."[40] Defendants pose the question "[a]re the Plaintiffs claiming to be an owner of the actual physical well or an owner of some other unnamed mineral interest, which may grant to Plaintiffs the right to participate in the production from the well?"[41] Defendants argue that under Louisiana law, oil and gas are not owned until reduced to possession, and oil and gas are not subject to absolute ownership as specific things apart from the soil of which they form a part.[42] Defendants state:

Plaintiffs' eight paragraph petition makes broad allegations that they purchased an interest in either an oil and gas well (Paragraph 3 of the Plaintiffs' Petition) or an interest in an entity called lux-LDF #4, LLP (Paragraph 5 of the Plaintiffs' Petition). Paragraph 3 of the Plaintiffs' Petition states in relevant part, "Plaintiffs show that in the spring of 2008 each of them invested the sum of... ($69, 463.50) Dollars in an oil well, LDF #4...., " compared to Paragraph 5 that states in relevant part, "Plaintiffs show that on April 28, 2008 each purchased a ½ unit interest in lux-LDF#4, LLP for $69, 463.50...." Plaintiffs' contradictory and broad allegations make it impossible to determine the ownership interest being claimed by Plaintiffs in the case at bar.

Defendants additionally contend that they "are entitled to a more definite statement of not only the type of ownership interest being claimed but the date of the acquisition of such ownership interest and from whom the ownership was acquired."[43] Finally, Defendants argue that Plaintiffs' allegation of fraud is "vague and ambiguous." According to Defendants, Plaintiffs pled that Rose, and/or other members of the Rose family and/or entities they controlled, to wit, Enterra Energy and JEBF, fraudulently converted the Plaintiffs' funds and invested them in LDF #4 in Lafourche Parish, La., for themselves rather than purchasing the interest for Plaintiffs.[44]

B. Plaintiffs' Arguments in Opposition

Plaintiffs argue that:

[I]n 2008 they got involved with entities of the Rose Family and were induced to purchase an interest in an oil and gas well in Lafourche Parish, La. being LDF #4 which, in truth and in fact was operated by Louisiana Delta Oil Co., LLC. Though the plaintiffs payed [sic] the purchase price under their contract with the Rose Family business entity, they never received the property or interests they purchased. Plaintiff [sic] have ...

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