United States District Court, E.D. Louisiana
ORINOCO NATURAL RESOURCES, INC., MERIDA NATURAL RESOURCES, INC., AND THOMAS M. CLARKE
MODERN AMERICAN RECYCLING SERVICE, INC.
ORDER AND REASONS
S. VANCE UNITED STATES DISTRICT JUDGE.
Court has received the partial Rule 12(b)(6) motion to
dismiss for failure to state a claim from defendant Modern
American Recycling Service, Inc.
(“MARS”). The Court grants the motion in part: the
Court dismisses the recission of contract and unjust
enrichment claim (Counts Four and Five), but denies the
motion as to the conversion claim (Count Two).
case arises from a dispute over the scrapping of drilling
rigs.Plaintiffs-Orinoco Natural Resources, LLC,
Merida Natural Resources, LLC, and Thomas
Clarke-allege that they entered into an agreement
with defendant MARS to share profits from the scrapping of
two rigs,  the Brage and the ENSCO 80. Under the alleged
agreement, plaintiff would finance the purchase of the rigs,
and defendant would conduct the scrapping operation at its
facility in Denmark. To this end, plaintiffs advanced defendant
approximately three million dollars. But plaintiffs contend that
defendant failed to scrap the rigs within the required
plaintiffs allege that defendant entered two agreements
setting deadlines for scrapping the rigs: MARS entered an
agreement with Borr Brage, Ltd., to purchase the Brage and
scrap it by March 8, 2019.MARS also entered into an agreement with
ENSCO Offshore U.K. Ltd. to purchase the ENSCO 80 and scrap
it by August 23, 2019. Plaintiffs state that they
“believed themselves to have a profit-sharing agreement
(in principle, if not necessarily in writing)”
regarding the Brage operation,  and that this agreement
would “serve as a template for future profit-sharing
agreements, . . . including (without limitation) the ENSCO
80.” Defendant allegedly did not timely
execute the written profit-sharing agreements concerning the
Brage and ENSCO 80.
state that following defendant's failure to execute these
agreements, they sent a repudiation letter requesting the
return of the funds they had remitted to
defendant. Although defendant “proposed to
forward a mutually executed copy of one of the underlying
agreements, ” defendant allegedly did not
investment.” Additionally, defendant has not scrapped
either rig. The vessels are allegedly at
defendant's Denmark facility, but at the time of the
complaint, the facility itself was not
filed a complaint and amended complaint in this Court
seeking in the first instance return of their payment, the
fruits of this investment, and damages for breach of
agreement. Defendant moved to dismiss the amended
complaint in part. Additionally, defendant filed
counterclaims,  which plaintiff has moved to
dismiss. Defendant has also asked the Court to
enjoin a parallel proceeding in Denmark. The Court now
addresses defendant's motion to dismiss.
overcome a Rule 12(b)(6) motion, a party must plead
“sufficient factual matter, accepted as true, to
‘state a claim to relief that is plausible on its
face.'” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550
U.S. 544, 570 (2007)). “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.” Id. A
court must “accept all factual allegations in the
complaint as true” and “must also draw all
reasonable inferences in the plaintiff's favor.”
Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 232
(5th Cir. 2009).
legally sufficient complaint must establish more than a
“sheer possibility” that the party's claim is
true. See Iqbal, 556 U.S. at 678. It need not
contain “detailed factual allegations, ” but it
must go beyond “‘labels and conclusions' or
‘a formulaic recitation of the elements of a cause of
action.'” See Id. (quoting
Twombly, 550 U.S. at 555). In other words,
“[t]he complaint (1) on its face (2) must contain
enough factual matter (taken as true) (3) to raise a
reasonable hope or expectation (4) that discovery will reveal
relevant evidence of each element of a claim.”
Lormand, 565 F.3d at 257 (citations omitted). The
claim must be dismissed if there are insufficient factual
allegations “to raise a right to relief above the
speculative level, ” Twombly, 550 U.S. at 555,
or if it is apparent from the face of the complaint that
there is an insuperable bar to relief, see Jones v.
Bock, 549 U.S. 199, 215 (2007).
considering a motion to dismiss for failure to state a claim,
a district court must limit itself to the contents of the
pleadings, including attachments thereto.” Collins
v. Morgan Stanley Dean Witter, 224 F.3d 496, 498 (5th
Cir. 2000). “If, on a motion under Rule 12(b)(6) . . .,
matters outside the pleadings are presented to and not
excluded by the court, the motion must be treated as one for
summary judgment under Rule 56.” Fed.R.Civ.P. 12(d).
“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 her claim.” Causey v. Sewell Cadillac-
Chevrolet, Inc., 394 F.3d 285, 288 (5th Cir. 2004).
moves to dismiss three of the five counts in plaintiffs'
amended complaint: Count Two for conversion, Count Four for
recission of contract, and Count Five for unjust enrichment.
The Court addresses each in turn.
Conversion (Count Two)
argues that plaintiffs have alleged insufficient facts to
satisfy the elements of conversion. Specifically, defendant
contends that plaintiffs have not established any form of
ownership over the property at issue. Because the
complaint states sufficient facts to establish a plausible
ownership interest in the property by way of a joint venture,
the Court rejects this argument.
initial matter, the Louisiana “Civil Code itself does
not identify causes of action for
‘conversion.'” Dual Drilling Co. v. Mills
Equip. Invs., Inc., 721 So.2d 853, 856 (La. 1998). That
said, “causes of action for conversion have been
inferred from the Codal articles providing that the right of
ownership, possession, and enjoyment of movables [is]
protected by actions for the recovery of the movables
themselves, actions for restitution of their value, and
actions for damages.” Id. Here, plaintiffs sue
“to recover either the Vessels, or compensation for
their loss.” To recover movables, a revendicatory
action is available, under which “[t]he owner of a
thing is entitled to recover it from anyone who possesses or
detains it without right.” Gibbs v. Harris,
799 So.2d 665, 670 (La.App. 2 Cir. 2001) (quoting La. Civ.
Code art. 526). To recover damages, “a delictual action
. . . is available to an owner dispossessed as a result of an
offense or quasi-offense or, in other words, a
‘tort.'” Dual Drilling Co., 721
So.2d at 857. Such a delictual action “is grounded on
the unlawful interference with the ownership or possession of
a movable and is frequently termed an action for
‘conversion' in Louisiana.” Id.
other words, under Louisiana law, “conversion consists
of an act in derogation of plaintiff's possessory rights,
and any wrongful exercise or assumption of authority over
another's goods, depriving him of the possession,
permanently or for an indefinite time, is a
conversion.” Tubos de Acero de Mexico,
S.A. v. Am. Int'l Inv. Corp., 292 F.3d 471, 479 (5th
Cir. 2002) (quoting Quealy v. Paine, Webber, Jackson
& Curtis, Inc., 475 So.2d 756, 760 (La. 1985)). Such
an act can occur in a variety of ways:
1) possession is acquired in an unauthorized manner; 2) the
chattel is removed from one place to another with the intent
to exercise control over it; 3) possession of the chattel is
transferred without authority; 4) possession is withheld from
the owner or possessor; 5) the chattel is altered or
destroyed; 6) the chattel is used improperly; or 7) ownership
is asserted over the chattel.
Dual Drilling Co., 721 So.2d at 857. Generally,
though, prevailing on a conversion claim requires a plaintiff
to “prove that (1) [he] owned [property] misused by
[defendant]; (2) the misuse was inconsistent with
[plaintiff's] rights of ownership; and (3) the misuse
constituted a wrongful taking of the [property].”
Chrysler Credit Corp. v. Perry Chrysler Plymouth,
Inc., 783 F.2d 480, 484 (5th Cir. 1986).
argues that plaintiffs have failed to allege facts sufficient
to establish the “ownership” element of
conversion. Specifically, defendant suggests that
plaintiff presents a legal conclusion that they are the
“true owners” of the rigs at issue, but does not
support this conclusion with sufficient facts. According to
defendant, plaintiffs may have helped finance the purchase of
the property, but their “loan” did not confer
any rights of ownership.
complaint, though, avers that the parties formed a business
relationship represented by a contract in which plaintiffs
promised “to finance [MARS's] acquisition” of
two offshore drilling units in exchange for MARS's
agreement to scrap the rigs and share with plaintiffs the
proceeds from the sale of the scrapped
materials. Plaintiffs allegedly advanced MARS $2,
882, 995 for the purchase of the two offshore drilling units
under their agreement. The profit-sharing agreement was not
reduced to writing. Based on these alleged facts, the
complaint asserts that the plaintiffs are the “true
owners” of the drilling units purchased.
Court finds that these facts provide a facially plausible
basis that plaintiffs had some rights of ownership in the
rigs. In particular, the relationship described in the
complaints bears the hallmarks of a joint venture.
“Under Louisiana law, a joint venture requires: (1)
‘[a] contract between two or more persons'; (2)
‘[a] juridical entity or person is established';
(3) ‘[c]ontribution by all parties of either efforts or
resources'; (4) contributions ‘in determinate
proportions'; (5) a ‘joint effort'; (6)
‘a mutual risk [of] losses'; and (7) ‘a
sharing of profits.'” Dragna v. KLLM Transp.
Servs., L.L.C., 638 Fed.Appx. 314, 317 (5th Cir. 2016)
(per curiam) (alterations in original) (citing Cajun
Elec. Power Coop., Inc. v. McNamara, 452 So.2d 212, 215
(La.App. 1 Cir. 1984)).
simply, “[a] joint venture, like a partnership, is a
juridical person, distinct from its partners, created by an
agreement between two or more persons to combine their
efforts or resources in determined proportions and to
collaborate at mutual risk for their common profit or
commercial benefit.” Scheffler v. Adams &
Reese, LLP, 950 So.2d 641, 648 n.2 (La. 2007); see
also La. Civ. Code art. 2801 (stating the same for the
definition of a partnership). An agreement creating a joint
venture can occur orally, and “may be inferred from the
conduct of the parties and other circumstances.”
Riddle v. Simmons, 589 So.2d 89, 92 (La.App. 2 Cir.
1991); see also Cajun Elec., 452 So.2d at 216
(“There are no hard and fast legal rules fixing the
requisites for a joint adventure . . . .”).
plaintiffs alleged that the parties made an
“agreement”whereby plaintiffs would provide
resources in the form of “funds, ”defendants
would apply their efforts in the form of “the actual
scrapping of the rigs, ” and both would “share
the proceeds.” Plaintiffs have therefore pleaded
sufficient facts to allow the Court to infer, for the
purposes of a motion to dismiss, that a joint venture
the essential elements of a joint venture and a partnership
are the same, joint ventures are generally governed by
partnership law.” Broadmoor, L.L.C. v. Ernest N.
Morial New Orleans Exhibition Hall Auth., 867 So.2d 651,
663 (La. 2004); see also Cajun Elec., 452 So.2d at
215.Under Louisiana partnership law, creating
a partnership requires that “the property or stock of
the enterprise must form a community of goods in which each
party has a proprietary interest.” Bulot v.
Welch, No. 15-1158, 2016 WL 3365354, at *3 (E.D. La.
June 16, 2016) (quoting Darden v. Cox, 123 So.2d 68,
71 (La. 1960)). As a result, wherever a partnership exists,
the partners have a proprietary interest in the
partnership's property. Put another way, a partner has
the interest of an “owner.” See Proprietary
Interest, Black's Law Dictionary (11th ed.
said, property can be used in a partnership or joint
venture, but owned by only one of the parties.
See Hayes v. Muller, 158 So.2d 191, 195 (La. 1963).
The parties “do not have to be co-owners of
property used in the business.” Id. (emphasis
added). In other words, “it may not be clear whether
property used extensively in a partnership business has
actually become the property of the partnership itself, or
whether instead, the original owner of the property has
retained its ownership and merely contributed to the
partnership its use.” 7 Glenn G. Morris & Wendell
H. Holmes, Louisiana Civil Law Treatise, Business
Organizations § 3:6 (2d ed. June 2019 update). The
test, therefore, is whether “the behavior of a partner
has caused his partners reasonably to conclude that an item
of property has been contributed to the partnership.”
plaintiffs have raised in their complaint sufficient facts to
state a plausible claim that they reasonably concluded the
rigs had been contributed to the partnership. Plaintiffs
plead that the “contemplated purpose” of the
venture included “purchas[ing] . . . platform drilling
rigs.” To this end, “[p]laintiffs agreed
to provide funds to finance the acquisition of two offshore
drilling units from third parties.” And the
parties made plans regarding any rigs “they might
acquire” Indeed, plaintiffs allege that their
draft profit-sharing agreement “described
Defendant's contractual relationship / obligations as
‘partnering with [Plaintiffs] in the acquisition of
certain specific assets [. . .] to share the profits
from the scrapping of those assets. . .
even if the sales agreements with third parties called for
defendant to conduct the actual purchase of the rigs,
defendant's subsequent “demand that Plaintiffs
advance MARS the . . . purchase price” for one rig,
supports plaintiff's reasonable conclusion that any such
purchase was part and parcel of the parties' joint
venture. Overall, therefore, plaintiff has pleaded sufficient
facts at the motion to dismiss stage to state a plausible
claim of an ownership interest in the rigs. Consequently, the
Court denies the motion to dismiss the conversion claim.
Recission of Contract (Count Four)
argues that plaintiffs have failed to state a claim for
recission of contract, because any allegedly delayed
performance would not constitute impossibility. Defendant is
correct, and ...