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Louisiana Oil & Gas v. Shell Trading U.S. Co.

United States District Court, W.D. Louisiana, Lake Charles Division

February 26, 2019

LOUISIANA OIL & GAS INTERESTS, LLC
v.
SHELL TRADING U.S. CO., ET AL.

          SUMMERHAYS MAGISTRATE JUDGE

          REPORT AND RECOMMENDATION

          KATHLEEN KAY JUDGE

         Before the court is a motion to dismiss filed by defendant Gulfport Energy Corporation (hereafter “Gulfport”). Doc. 32. Also before the court is a motion to dismiss filed by defendant Shell Trading (U.S.) Company (hereafter “Shell”). Doc. 33. Both motions are filed pursuant to Rule 12(b)(6');">6) of the Federal Rules of Civil Procedure. Docs. 32, 33. Plaintiff Louisiana Oil & Gas Interests, LLC opposes both motions. Docs. 38, 39.

         The matter has been referred to the undersigned for review, report, and recommendation in accordance with the provisions of 28 U.S.C. § 6');">636');">6. For the reasons stated below, IT IS RECOMMENDED that the Motion to Dismiss filed by Gulfport be GRANTED, the Motion to Dismiss filed by Shell be GRANTED, and that all claims be DISMISSED WITH PREJUDICE.

         I.

         Facts and Procedural History

         This case arises from royalty payments owed under a mineral lease that plaintiff asserts were not paid within the time periods required under the Louisiana Mineral Code, La. R.S. § 31:1, et seq. Doc. 31, pp. 6');">6-7. Under this mineral lease, royalties accrued by the interest holder are remitted partially by Gulfport, and partially by Shell on Gulfport's behalf. Doc. 31, att. 8. On April 28, 2008, Thomas Barr IV Louisiana Properties-General Limited Liability Company (hereafter “Properties-General”) acquired an interest in this lease, and on December 23, 2013, that interest was transferred to Louisiana Oil & Gas Interests, LLC (hereafter “plaintiff”)[1]. Doc. 31, att. 4.

         On January 17, 2014, plaintiff sent a letter to Shell requesting that future royalty checks be made payable to it rather than to Properties-General (hereafter “Payee Change Request”). Id. at att. 1. Four days later plaintiff received an email from Shell detailing the requirements for changing a payee; these requirements included, providing Shell with a copy of the document transferring the interest and furnishing proof of its filing in the parish conveyance records. Id. at att. 2. Shell sent a second email on March 10, 2015, again explaining what information was required to change the payee. Id. at att. 3. On April 21, 2015 [id. at att. 6');">6, p. 2], plaintiff faxed to Shell a certified copy of the transfer document filed into the conveyance records of Cameron Parish. Id. at att. 4. This transfer document bears a seal that shows it was filed February 21, 2014. Id.

         During the time that plaintiff corresponded with Shell regarding the proper payee, Shell continued to issue royalty checks made payable to Properties-General. See Doc. 31, p. 4. According to plaintiff, its original bank allowed it to deposit the checks but, after changing banks, it was no longer able to do so. Id. On April 23, 2015, plaintiff returned two checks[2] to Shell and requested that they be reissued as payable to “Louisiana Oil & Gas Interests, LLC” (hereafter “Reissuance of Check Request”). Id. at att. 5. On June 1, 2015, the manual replacement check in the amount of $99, 755.83 was sent to plaintiff by Shell. Doc. 31, p. 5. On September 1, 2015 plaintiff sent a “demand letter” to Shell. Id. at att. 7. In the letter plaintiff demanded “damages pursuant to La RS 31: 140.” Id. at 2.

         Shell responded to plaintiff's demand via certified letter on September 25, 2015, explaining its position that the royalty checks for February, March, and April 2015[3] were timely issued. Id. at att. 6');">6. It stated that the February and March checks were originally made payable to Properties-General because it was the proper payee at those times insofar as Shell had not receive the recorded transfer agreement until April 21, 2015. Id. It further noted that the April check was sent as payable to Louisiana Oil & Gas Interests, LLC, and that it had since reissued the February and March payments in a single check made payable to the same. Id. According to Shell's records, plaintiff cashed the replacement check for the February and March 2015 production periods, as well as the original check for the April 2015 cycle, on July 29, 2015. Id.

         On March 2, 2018, plaintiff filed suit in this court naming Shell and Gulfport as defendants. Doc. 1. It asserts that defendants failed to make all three payments within the period required under the penalty provisions of the Louisiana Mineral Code, La. R.S. §§ 31:138-141. See Doc. 31, p. 6');">6. Thus, plaintiff seeks to recover double the amount of the allegedly late royalties, in addition to attorney's fees, interest, and costs. Id. at p. 7.

         On September 14, 2018, Gulfport and Shell filed the instant motions. Docs. 32, 33. Both defendants assert that plaintiff did not provide either defendant with the required written demand for royalty payments prior to filing suit. Doc. 32, att. 1, pp. 11-15; Doc. 33, att. 1, pp. 13-17. Alternatively, Gulfport asserts if the written demand was provided to Shell, that does not constitute notice to Gulfport. Doc. 32, att. 1, pp. 11-13. Plaintiff opposes both motions. Docs. 38, 39. It asserts that communications made between it and Shell are sufficient to satisfy the demand requirement [doc. 38, att. 1, pp. 18-22; doc. 39, att. 1, pp. 16');">6-24] and that a demand made to Shell constitutes a notice to Gulfport. Doc. 38, att. 1, pp. 11-17.

         II. LAW & APPLICATION

         A. Rule 12(b)(6' ...


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