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Clovelly Oil Co. LLC v. BTB Refining, LLC

United States District Court, E.D. Louisiana

October 17, 2019

CLOVELLY OIL CO., LLC
v.
BTB REFINING, LLC, ET AL.

          CARL J. BARBIER, JUDGE

          JANIS VAN MEERVELD MAG. JUDGE

          ORDER & REASONS

         Before the Court is a Motion to Dismiss (Rec. Doc. 242)[1] by BTB Refining, LLC (“BTB”), Global Oil Management Group, Ltd. (“Global Oil”), Global Oil EOR Systems, Ltd. (“Global EOR”), Global Oil Financial Services, LLC (“Global Financial”), and Harry Sargeant, III (“Sargeant”).[2] Several opposition briefs were filed (Rec. Docs. 245, 246, 249, 251, 252, 260), and Defendants filed a reply (Rec. Doc. 263). The Court, having considered the parties' arguments, the applicable law, and the relevant record, denies Defendants' motion for the reasons stated below.

         Background[3]

         On October 15, 2017, an explosion and fire occurred on the West Lake Pontchartrain East Block 41 Oil and Gas Production Facility (“the Platform”), resulting in one death, several injuries, and extensive damage to the Platform. Clovelly Oil Co. LLC (“Clovelly”) owned the Platform, which was located in Lake Pontchartrain approximately one and one-quarter miles from the south shore. (Billiot Compl. ¶ 6, No. 18-9391, Rec. Doc. 1). The Platform was not a vessel under maritime law; functionally it was a “fixed” platform. (Rec. Doc. 412 at 6). The Platform processed oil, gas, and produced water from four wells located various distances from the Platform. (Billiot Compl. ¶ 8). A four-inch diameter flowline connected each of the wells to the Platform. (Billiot Compl. ¶ 9). At the time of the explosion, one or more of the Corporate Defendants were in the process of cleaning the interior of one of the flowlines, as further described below.

         On or around October 2, 2017, Clovelly entered into an oral agreement with one or more of the Corporate Defendants to remove paraffin wax accumulations from three of the four flowlines. (Billiot Compl. ¶ 12). To perform this work, the Corporate Defendants utilized a steam generating machine known as the Hydra Steam Generator NO. 003/Hydra III (“the Hydra”). (Billiot Compl. ¶¶ 14-15). The Corporate Defendants mobilized a tug boat and spud barge preparatory to the commencement of the paraffin wax cleaning service. (Billiot Compl. ¶ 19). Located on the spud barge were the Hydra, equipment that monitored and controlled the Hydra, tanks, pumps, hoses, and other equipment necessary to clean the flowlines. (Billiot Compl. ¶ 20). To clean a flowline, the tugboat would move the spud barge to a well so the Hydra could be connected to the wellhead. (Billiot Compl. ¶ 23). By combining hydrogen peroxide and a catalyst, the Hydra generated steam which was injected into the flowline with the intent of melting the wax accumulations. (Billiot Comp. ¶ 17). The flowline was then pressure flushed, forcing the melted wax and water to discharge into a steel tank located on the Platform. (Billiot Compl. ¶ 19). On October 15, the Corporate Defendants successfully cleaned two of the flowlines in this manner and were in the process of cleaning a third when the explosion occurred on the Platform. (Billiot Compl. ¶ 26).

         Clovelly filed a complaint in this Court to recover for the damage to its platform and consequential economic losses. Davin Billiot, James Bordelon, and Paul Pfister- three workers who were allegedly injured in the explosion (collectively, “Individual Plaintiffs”)-also filed complaints in this Court, which were consolidated with Clovelly's suit.[4] Each of the Plaintiffs sued the four Corporate Defendants, as well as Harry Sargeant, III, who allegedly founded, controls, and dominates the Corporate Defendants. Plaintiffs seek to pierce the Corporate Defendants' veils and hold Sargeant personally liable for the injuries and damages allegedly resulting from the explosion and fire.[5] Defendants filed the instant motion, which seeks to dismiss Plaintiffs' claims against Global EOR, Global Financial, and Sargeant. Defendants concede that Plaintiffs have stated plausible claims against two of the Corporate Defendants, BTB and Global Oil (Rec. Doc. 242 at 7), although they do move to dismiss any claims that attempt to pierce BTB's and Global Oil's corporate veils.

         Legal Standard

         On a motion to dismiss, “[t]he central issue is whether, in the light most favorable to the plaintiff, the complaint states a valid claim for relief.” Gentilello v. Rege, 627 F.3d 540, 544 (5th Cir. 2010) (citations and quotations omitted). More specifically:

To avoid dismissal, a plaintiff must plead sufficient facts to state a claim to relief that is plausible on its face. 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. We do not accept as true conclusory allegations, unwarranted factual inferences, or legal conclusions.

Id. (citations and quotations omitted). Furthermore, “[d]etermining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).

         Discussion

         A. Plaintiffs' Claims Against Global Financial and Global EOR

         Defendants first argue that Plaintiffs fail to plausibly allege any claims against two of the Corporate Defendants, Global Financial and Global EOR. Defendants further argue that if Plaintiffs cannot state a claim directly against Global Financial or Global EOR, then Plaintiffs cannot pierce the veil of these entities to reach the assets of another entity or person. The Court accepts the premise of this argument but finds that Plaintiffs have stated plausible claims for relief against these entities.

         As to Global Financial, Plaintiffs allege that Tim Morrison-the person who provided Clovelly with a presentation on the Hydra in September 2017 and who was present (and tragically died) during the flowline cleaning operation-was employed by Global Financial. (See, e.g., Clovelly 2d Am. Compl. ¶¶ 40-41, Rec. Doc. 199). Plaintiffs further allege that Morrison knew of dangers associated with the Hydra prior to the explosion but did not convey those to Clovelly. (E.g., Clovelly 2d Am. Compl. ¶ 93). To the extent Morrison was acting as Global Financial's employee when he made the presentation to Clovelly or during the flowline cleaning operation, Global Financial may be vicariously liable for any misconduct by Morrison.[6]

         Regarding Global EOR, Plaintiffs allege the following facts to show that EOR owned the Hydra: Global EOR is identified as the “owner” on a placard affixed to the Hydra; Global EOR applied for a patent related to the Hydra; Global EOR provided technical drawings related to the Hydra for a sales and construction proposal and/or contract with Supreme Electrical Services, Inc. d/b/a Lime Instruments, LLC (“Lime”), which allegedly developed software to control and monitor the steam and pressure generated during the flowline cleaning;[7] Global EOR contracted with another entity to furnish labor, equipment, and materials to manufacture and provide equipment related to the Hydra; and Global EOR had marketing materials for the Hydra that reveal knowledge regarding particular dangers associated with the Hydra that were never disclosed to Clovelly. (See, e.g., Clovelly 2d Am. Compl. ¶¶ 20, 80-85). Furthermore, Plaintiffs allege that the explosion was caused by, inter alia, a failure to have adequate and proper equipment to clean the flowline. (Clovelly 2d Am. Compl. ¶ 126). Plaintiffs have alleged plausible claims against Global EOR.

         In contrast to their arguments regarding BTB and Global Oil, Defendants do not discuss what veil piercing standard applies to Global Financial and Global EOR, much less whether Plaintiffs have plausibly alleged claims that, taken as true, satisfy this standard. Accordingly, Defendants' motion is denied insofar as it targets the claims (veil piercing or otherwise) against Global Financial and Global EOR. Defendants are free to re-raise these issues on summary judgment.

         B. Clovelly's Claims Against BTB and Global Oil

         Clovelly and Defendants appear to agree that Texas law supplies the veil piercing standard for BTB, while Bermudan law applies to Global Oil's corporate veil. (Rec. Doc. 251 at 11, 22; Rec. Doc. 263 at 4, 7). This is in contrast to the Individual Plaintiffs, who argue that the veil piercing standard under federal common law, which they contend is lighter than Texas's and Bermuda's standards, applies to their claims. (Rec. Doc. 245 at 6-17). The Court is not required to accept Clovelly and Defendants' agreement as to which law governs, as the Court is not bound by the parties' stipulation of law. See Marden v. Int'l Ass'n of Machinists & Aerospace Workers, 576 F.2d 576, 580 (5th Cir. 1978); see also BAC ...


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