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Shell Offshore Inc. v. ENI Petroleum U.S. LLC

United States District Court, E.D. Louisiana

October 25, 2017

SHELL OFFSHORE INC., Plaintiff
v.
ENI PETROLEUM U.S. LLC, ET AL., Defendants

         SECTION: “E” (2)

          ORDER AND REASONS

          SUSIE MORGAN UNITED STATES DISTRICT JUDGE

         Before the Court is Defendants' Second Motion to Dismiss Certain Claims.[1]Pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, Defendants Eni Petroleum U.S. LLC (“Eni-LLC”) and Eni U.S. Operating Co. Inc. (“Eni-Operating”) move to dismiss Shell Offshore Inc.'s (“Shell”) claims for (1) breach of contract against Eni-Operating and (2) open account against both Eni-LLC and Eni-Operating.[2] Shell opposes the motion.[3]

         LEGAL STANDARD

         Pursuant to Federal Rule of Civil Procedure 12(b)(6), a district court may dismiss a complaint, or any part of it, for failure to state a claim upon which relief may be granted if the plaintiff has not set forth factual allegations in support of his claim that would entitle him to relief.[4] “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'”[5] “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 misconduct alleged.”[6]The court, however, does not accept as true legal conclusions or mere conclusory statements, and “conclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to prevent a motion to dismiss.”[7] “[T]hreadbare recitals of elements of a cause of action, supported by mere conclusory statements” or “naked assertion[s] devoid of further factual enhancement” are not sufficient.[8]

         In deciding a 12(b)(6) motion to dismiss, it is well-established that “a district court may not go outside the complaint.”[9] That is, the court should only look to the pleadings, and to any documents or exhibits attached to the pleadings.[10] “Documents that a defendant attaches to a motion to dismiss are considered part of the pleadings if they are referred to in the plaintiff's complaint and are central to [the plaintiff's] claims.”[11] A document in the record that is not referenced in the complaint or attached to the motion to dismiss may not be considered, however.[12] Further, the court may not take into account additional facts asserted in a memorandum opposing the motion to dismiss, because such memoranda do not constitute pleadings under Rule 7(a).[13] Courts may also consider matters of which they may take judicial notice.[14] “A judicially noticed fact must be one not subject to reasonable dispute in that it is either (1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned.”[15]

         In summary, “[f]actual allegations must be enough to raise a right to relief above the speculative level.”[16] “[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not show[n]'-that the pleader is entitled to relief.”[17] “Dismissal is appropriate when the complaint ‘on its face show[s] a bar to relief.'”[18]

         ANALYSIS

         I. Choice of Law

         Shell asserts claims of breach of contract against both Eni-LLC, which is a party to the Unit Operating Agreement (“UOA”), and Eni-Operating, which is not.[19] Shell alleges that Eni-Operating is liable for breach of contract because, though Eni-Operating has no ownership interest in the various leases in the Popeye field, it “acquired contractual obligations related to the Popeye field.”[20] Due to the extensive nature of these alleged obligations, Shell argues Eni-Operating was “functioning as one” with Eni-LLC, and as a result “it is not entitled to the protections of a corporate veil.”[21] Shell contends that Eni-Operating may be held liable under Louisiana's “single business enterprise” doctrine, under which a plaintiff may “disregard the identities of a group of separate corporations.”[22]

         Defendants move to dismiss the breach of contract claim against Eni-Operating, arguing that (1) Eni-Operating is not a party to the UOA and has no ownership interest in the Popeye leases, and (2) Shell has not alleged sufficient facts to pierce Eni-LLC's corporate veil under an alter ego theory.[23] Plaintiff responds that Eni-Operating, by virtue of its deeply intertwined relationship with Eni-LLC, owed “contractual obligations to [Shell]” that give rise to Plaintiff's breach of contract claim.[24]

         The parties agree that the law of Louisiana applies.[25] According to Defendants, Louisiana choice-of-law rules are applicable and require the Court to apply the law of the state of incorporation to any questions of corporate structure, which for Eni-Operating is Delaware.[26] Plaintiff argues that the substantive corporate law of Louisiana applies.[27]

         The Court has subject matter jurisdiction pursuant to the Outer Continental Shelf Lands Act (“OCSLA”).[28] OCSLA generally supersedes the normal choice-of-law rules that the forum would apply.[29] This Court has held that OCSLA's choice-of-law provision does not simply incorporate the conflict-of-law rules of the adjacent state; rather, OCSLA “is itself a choice of law provision which preempts any contrary choice of law provision found in state law.”[30] Accordingly, Shell is correct and the Court will apply the substantive law of Louisiana in this action.

         II. Single Business Enterprise Theory

         Under Louisiana law, the single business enterprise doctrines applies “where two or more business entities act as one. . . . [W]hen corporations integrate their resources in operations to achieve a common business purpose, each business may be held liable for wrongful acts done in pursuit of that purpose.”[31] If a group of corporations constitutes a single business enterprise, “a court may disregard the concept of corporate separateness and extend liability to each of the affiliated corporations for the purpose of preventing fraud or achieving equity.”[32] In determining whether a corporation is part of a single business enterprise, Louisiana courts consider eighteen factors:

1. Corporations with identity or substantial identity of ownership, that is, ownership of sufficient stock to give actual working control;
2. Common directors or officers;
3. Unified administrative control of corporations whose business functions are similar or supplementary; 4. Directors and officers of one corporation act independently in the interest of that corporation;
5. Corporation financing another corporation;
6. Inadequate capitalization (“thin incorporation”);
7. Corporation causing the incorporation of another affiliated corporation;
8. Corporation paying the salaries and other expenses or losses of another corporation;
9. Receiving no business other than that given to it by its affiliated corporations;
10. Corporation using the property of another corporation as its own;
11. Noncompliance with corporate formalities;
12. Common employees;
13. Services rendered by the employees of one corporation on behalf of another corporation;
14. Common offices;
15. Centralized accounting;
16. Undocumented transfers of funds between corporations;
17. Unclear allocation of profits and losses between corporations; and
18. Excessive fragmentation of a single enterprise into separate corporations.[33]

         None of these factors is dispositive.[34] Rather, courts look to the totality of the circumstances.[35]

         Shell correctly points to the 18-factor Green v. Champion Ins. Co. test for application of the single business enterprise theory.[36] The Court has examined Shell's allegations in light of the Green factors to determine whether Shell has alleged sufficient facts to state a cause of action against Eni-Operating for liability for breach of contract under the single business enterprise theory.

         1. Corporations with identity or substantial identity of ownership.

         This factor calls for the Court to inquire into the corporation's legal ownership.[37] Eni-LLC and Eni-Operating are both subsidiaries of Eni Petroleum Co. Inc. (“Eni-Inc.”). 100% of Eni-Operating stock is owned by Eni-Inc. Eni-LLC is wholly owned by Eni-BB, which is wholly owned by Eni-Inc.[38] Accordingly, this factor supports a finding of a single business enterprise.

         2. Common directors or officers.

         Shell alleges that Eni-Operating and Eni-LLC have “common boards of directors, ”[39] and the common board of directors of the Eni corporations meet to discuss assets including Popeye.[40] Shell also alleges Leonardo Stefani, President and CEO of Eni-Operating, “directed non-payment of the Popeye-related AFEs/AFRs at issue.”[41] This factor weighs in favor of a finding that Eni-Operating and Eni-LLC are a single business enterprise.

         3. Unified administrative control of corporations.

         Shell has not alleged any facts in support of this factor.

         4. Directors and officers of one corporation act independently in the interest of that corporation.

         Shell has not alleged any facts in support of this factor.

         5. Corporation financing another corporation.

         Shell alleges the corporate funds of Eni-Operating and Eni-LLC are “commingled.”[42] This factor weighs in favor of a finding that Eni-Operating and Eni-LLC are a single business enterprise.

         6. Inadequate capitalization.

         As noted above, Shell alleges that Eni-Operating and Eni-LLC's corporate funds are undercapitalized. This factor weighs in favor of a finding that Eni-Operating and Eni-LLC are a single business enterprise.

         7. Corporation causing the incorporation of another ...


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