United States District Court, W.D. Louisiana, Shreveport Division
J & L FAMILY, L.L.C.
BHP BILLITON PETROLEUM PROPERTIES (N.A.), LP., ET AL.
MAGISTRATE JUDGE HORNSBY
ELIZABETH ERNY FOOTE, UNITE STATES DISTRICT JUDGE
BHP Billiton Petroleum Properties (N.A.), L.P., Petrohawk
Energy Corporation, BHP Billiton Petroleum (KCS Resources),
L.L.C, and BHP Billiton Petroleum (TXLA Operating) Company
(collectively "BHP"), have filed a motion to
dismiss the fraud claims raised in the Intervention of
Longleaf Investments, L.L.C. ("Longleaf'). [Record
Document 77]. The parties have filed an opposition and a
reply, both of which have been considered by the undersigned.
[Record Documents 79-80]. For the reasons discussed below,
the motion is GRANTED, the fraud and
Louisiana Unfair Trade Practices Act ("LUTPA")
claims are DISMISSED WITHOUT PREJUDICE, and
Longleaf is granted leave to amend by April 23, 2018
L Family, L.L.C. ("J & L") owns land within two
drilling units created by the Louisiana Commissioner of
Conservation, but J & L's interest is not subject to
any mineral lease. [Record Documents 48-1 at 1-2 and 58-1 at
1-2]. Longleaf is J & L's predecessor in interest.
[Record Document 76 at 2-3]. BHP operates wells on the
drilling units. [Record Documents 48-1 at 2 and 58-1 at 2-3].
Louisiana law, unit operators are allowed to recoup from
unleased owners their proportionate shares of "actual
reasonable expenditures incurred in drilling, testing,
completing, equipping, and operating the subject wells"
("Drilling Costs"). La. Stat. Ann. §
30:10(A)(2)(b)(i) (2017). Unleased owners of mineral
interests are entitled to receive, upon request, reports
detailing the cost of drilling and operating a well.
Id. § 30:103.1. Additionally, if an unleased
owner does not make separate arrangements to market the
production from the well, the operator may market the
production and pay the unleased owner its "pro rata
share of the proceeds of the sale." Id. §
30:10(A)(3). Longleaf alleges that BHP failed to provide
sufficiently detailed reports, improperly calculated Longleaf
s ownership percentage, deducted excessive Drilling Costs,
and improperly deducted costs associated with processing and
transporting the extracted minerals ("Midstream
Costs"). [Record Document 76 at 8-24].
Count VII of the Intervention, Longleaf alleges that BHP
charged Longleaf "fraudulently inflate[d]" Drilling
Costs exceeding those that an operator may charge an unleased
owner. [Id. at 25]. Also in Count VII, Longleaf
alleges that BHP "fraudulently inflate[d] Mid-Stream
costs in order to service its obligations related to a
financing agreement that was entered into with an affiliated
company." [Id.]. Although not specifically
described as such, it appears that Longleaf has also
attempted to state a claim for fraud in Count I, which
concerns BHP's alleged failure to comply with La. R.S.
30:103.1. [Id. at 8-14].
L filed suit raising essentially the same set of allegations
as Longleaf has raised in the Intervention. [Record Document
1-2 at 3-16]. J & L and BHP then moved for summary
judgment on the issue of BHP's compliance with the
reporting requirements of La. R.S. 30:103.1. [Record
Documents 12 and 22]. The Court denied the motions following
oral argument. [Record Document 57]. Shortly before oral
argument, BHP moved for partial summary judgment on the issue
of J & L's ability to recover attorney fees. [Record
Document 48]. The Court granted the motion, finding that
neither BHP's alleged violations of La. R.S. 3L212.21-.23
and La. R.S. 31:212.31 nor its alleged tort and contract
fraud entitled J & L to attorney fees. J & L
Family, L.L. C v. BHP Billiton Petroleum Props. (N.A.),
L.P., No. CV16-1193, 2018 WL 734684 (W.D. La. Feb. 6,
2018). While that motion was pending, Longleaf moved to
intervene. [Record Document 71]. After the Court granted the
motion, BHP moved to dismiss Longleaf s fraud claims. [Record
Documents 75 and 77].
Law and Analysis
A. Standard of Review
survive a motion to dismiss, allegations of fraud must
"state with particularity the circumstances constituting
fraud, " although "intent [and] knowledge . . . may
be alleged generally." Fed.R.Civ.P. 9(b). "A
dismissal for failure to plead fraud with particularity under
Rule 9(b) is treated as a dismissal for failure to state a
claim under Rule 12(b)(6)." United States ex rel
Thompson v. Columbia/HCA Healthcare Cop., 125 F.3d 899,
901 (5th Or. 1997). As it must when considering an ordinary
12(b)(6) motion, a court evaluating a motion to dismiss on
Rule 9(b) grounds must accept all of the plaintiffs factual
allegations as true. See In re Katrina Canal breaches
Litig, 495 F.3d 191, 205 (5th Cir. 2009). Nevertheless,
the heightened pleading requirement of Rule 9(b) is an
"additional burden" that exceeds the general
requirement that a plaintiffs allegations "state  a
legally cognizable claim that is plausible."
Shandong Yinguang Chem. Indus. Joint Stock Co. v.
Potter, 607 F.3d 1029, 1032, 1034 (5th Cir. 2010) (per
curiam) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009); Benchmark Elecs., Inc. v. J.M. Huber Corp.,
343 F.3d 719, 724 (5th Cir.), opinion modified on other
grounds on denial of reh'g, 355 F.3d 356 (5th Cir.