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J & L Family, L.L.C. v. BHP Billiton Petroleum Properties (N.A.), L.P.

United States District Court, W.D. Louisiana, Shreveport Division

March 22, 2018





         Defendants, 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 .

         I. Background

         A. Factual Background

         J & 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].

         Under 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].

         In 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].

         B. Procedural History

         J & 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].

         II. Law and Analysis

          A. Standard of Review

         To 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. 2003)).

         B. Pleading ...

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