Fieldwood Energy Offshore LLC et al v. Prime Offshore LLC et al

RESPONSE in Opposition to 23 MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM , 24 MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM

S.D. Tex.March 21, 2019

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION FIELDWOOD ENERGY OFFSHORE LLC, § FIELDWOOD ENERGY LLC, § -and- § CASTEX OFFSHORE INC. § § Plaintiffs, § § v. § CIVIL ACTION NO. § 4:18-CV-03218 PRIME OFFSHORE LLC, § SUMITOMO CORPORATION § JURY TRIAL DEMANDED OF AMERICAS, § SUMITOMO CORPORATION, § -and- § SUMMIT SHALE INTERNATIONAL § CORPORATION, § § Defendants. § PLAINTIFFS’ RESPONSE IN OPPOSITION TO DEFENDANT SUMMIT SHALE INTERNATIONAL CORPORATION’S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM AND DEFENDANT SUMITOMO CORPORATION OF AMERICAS’ MOTION FOR JUDGMENT ON THE PLEADINGS Plaintiffs Fieldwood Energy Offshore LLC, Fieldwood Energy LLC, and Castex Offshore Inc. (collectively, “Plaintiffs”) file this response in opposition to Sumitomo Corporation of Americas (“SCA”) Motion for Judgment on the Pleadings and Summit Shale International Corporation’s (“SSIC”) Motion to Dismiss. In support thereof, Plaintiffs respectfully show the Court as follows: Case 4:18-cv-03218 Document 28 Filed on 03/21/19 in TXSD Page 1 of 20 2 SUMMARY OF ARGUMENT SCA and SSIC’s (collectively, “Defendants”) Motions rely on mischaracterizations of the law governing Plaintiffs’ claims and the facts alleged in the First Amended Complaint. First, Defendants’ assertions related to the applicability of Rule 9(b) misstate federal pleading standards and applicable alter ego law. Next, the First Amended Complaint alleges sufficient facts to support Plaintiffs’ claims against Defendants, including Plaintiffs’ claim that Defendants were the alter ego of Summit Gulf Ventures, LLC (“Summit Gulf”). Specifically, the First Amended Complaint asserts that Summit Gulf was the alter ego of SCA and SSIC, that SSIC in turn was the alter ego of SCA, that SCA and SSIC used this corporate fiction to evade legal obligations related to the plugging and abandoning of the properties at issue through the premature and improper dissolution of Summit Gulf in violation of the Delaware Limited Liability Company Act’s mandate to make appropriate provision for claims such as those made in this lawsuit, and that Summit Gulf’s under-capitalization, insolvency, and dissolution would create an injustice through Sumitomo, SCA, and SSIC avoiding their contractual and federal duty to pay Summit Gulf’s share of the plugging and abandoning expenses. These allegations are sufficient to allege a plausible alter ego claim against SCA and SSIC. FACTUAL AND PROCEDURAL BACKGROUND The alter ego lawsuit against SCA was based on Summit Gulf’s shuttering Case 4:18-cv-03218 Document 28 Filed on 03/21/19 in TXSD Page 2 of 20 3 without making provision for liabilities related to the Lease. In the course of discovery, SCA and SSIC have produced documents that trace Summit Gulf’s ownership through a series of corporate entities. Following is an organizational chart revealing the relationships: Exhibit D, Chart Produced in Discovery (green arrows added). Summit Gulf was the entity that held the interest in the Lease, and the ownership interest can be traced up through Petro Summit Investment USA Corporation (which later changed its name to SSIC1), then to Petro Summit Investment Corporation, and then finally up to Sumitomo Corporation (the ultimate Japanese parent company). To see how these 1 Exhibit E, SSIC’s Answers to Plaintiffs’ First Set of Interrogatories, at Interrogatory No. 10 (“In 2012, Petro Summit legally changed its named to Summit Shale International Corporation, and ceased to operate as Petro Summit.”). Case 4:18-cv-03218 Document 28 Filed on 03/21/19 in TXSD Page 3 of 20 4 entities were relied upon as a corporate fiction, one need only follow the money. First, $516,585.36 in net proceeds from the sale of the Lease assets in question to a third party were paid up the ladder to Petro Summit Investment USA Corporation on September 30, 2009. Exhibit A, SCA’s Answers to Plaintiffs’ First Set of Interrogatories, at Interrogatory No. 7; Exhibit F, Letter Regarding Distribution. Then, just fifteen days later, Petro Summit Investment USA Corporation passed along that same exact amount ($516,585.36 to the penny, as shown by the green arrows on the previous page) further up the ladder to Sumitomo Corporation at the top of the organizational structure: Exhibit C (red boxes added). Defendants’ recent productions of documents like those excerpted above confirm that the Defendants disregarded corporate fictions to Case 4:18-cv-03218 Document 28 Filed on 03/21/19 in TXSD Page 4 of 20 5 pass money up the corporate chain. They now rely on those same fictions to attempt to avoid liability in this dispute. It is remarkable that Defendants are attempting to dodge this suit by claiming that Plaintiffs’ pleadings lack specificity, even as they are providing the information that confirms the basis for Plaintiffs’ alter ego claim. In fact, just last week, SSIC acknowledged in interrogatory responses that the payment reflected in Exhibit C was to “pay down a loan” made by Sumitomo Corporation to SSIC. Exhibit E, SSIC’s Answers to Plaintiffs’ First Set of Interrogatories, at Interrogatory No. 17. This complicated system of ownership and loans is again reflected in a document produced just last week. Exhibit G. Discovery is just now scratching the surface of the web of financial relationships that Sumitomo and its subsidiaries used to avoid liability for Lease Case 4:18-cv-03218 Document 28 Filed on 03/21/19 in TXSD Page 5 of 20 6 expenses. ARGUMENT AND AUTHORITIES I. Legal Standards A court, when ruling on a motion for judgment on the pleadings pursuant to Rule 12(c), applies the same standard as that used for a motion to dismiss under Rule 12(b)(6) for failure to state a claim upon which relief can be granted. Doe v. MySpace, Inc., 528 F.3d 413, 418 (5th Cir.2008) (citation omitted); Great Plains Trust Co. v. Morgan Stanley Dean Witter, 313 F.3d 305, 313 n. 8 (5th Cir.2002) (citation omitted). A complaint survives a motion to dismiss under Rule 12(b)(6) if its factual allegations “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). This test is met if “the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). This test is generous to the plaintiff: “Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Twombly, 550 U.S. 544, 570; see also Bosarge v. Mississippi Bureau of Narcotics, 796 F.3d 435, 439 (5th Cir. 2015) (explaining that in considering a motion to dismiss, all factual allegations from the complaint must be taken as true and construed favorably to the plaintiff). Case 4:18-cv-03218 Document 28 Filed on 03/21/19 in TXSD Page 6 of 20 7 Additionally, Rule 9(b) sets forth separate pleading requirements when a plaintiff has alleged a claim of fraud. FED. R. CIV. P. 9(b). A plaintiff must state with particularity the circumstances constituting fraud or mistake. Id. While the particularity required by Rule 9(b) is dependent on the facts of each case, a plaintiff should generally allege with specificity allege the statements considered to be fraudulent, the identity of the person making the representations, and the content of the misrepresentation. Dorsey v. Portfolio Equities, Inc., 540 F.3d 333, 339 (5th Cir. 2008). II. Alter Ego a. Under either Louisiana or Delaware law, Plaintiffs’ alter ego claims are adequately pled. In the past, this Court has held that where an alter ego claim is intertwined with fraud and breach of contract claims, OCSLA’s choice-of-law provision calls for the law of the state adjacent to the lease in question (Louisiana) to govern the alter ego determination. See Tana Expl. Co. LLC v. Implicit Oil & Gas, L.P., No. CV H-13-334, 2015 WL 13697932, at *2 (S.D. Tex. Mar. 30, 2015) (finding that Louisiana law applied to Plaintiff’s alter ego claim pursuant to the OCSLA choice- of-law provision); see also Union Texas Petroleum Corp. v. PLT Eng'g, Inc., 895 F.2d 1043, 1050 (5th Cir. 1990). Alternatively, because SSIC and Summit Gulf were both formed as Delaware companies, some courts have held that a choice-of- law analysis may call for application of the law of that state. See Alberto v. Case 4:18-cv-03218 Document 28 Filed on 03/21/19 in TXSD Page 7 of 20 8 Diversified Group, Inc., 55 F.3d 201, 203–208 (5th Cir. 1995) (finding that Texas’ choice of law rules dictate application of the state of incorporation’s substantive law to an alter ego claim); see also Tex. Bus. Orgs. Code Ann. § 1.104. Regardless, as shown below, Delaware and Louisiana law command the same result. As such, a determination regarding which law applies is not required at this stage. b. Plaintiffs properly provided notice of its claims under Rule 8. Defendants urge that because Plaintiffs allege that SCA and SSIC used Summit Gulf to perpetrate fraud, they must satisfy Rule 9(b) to survive a 12(b)(6) or 12(c) motion on their alter ego claim. The problem with Defendant’s argument is that, when it comes to piercing the corporate veil on an alter-ego basis, “fraud is not essential.” Hillman Lumber Products, Inc. v. Webster Mfg., Inc., No. CIV.A. 06-1204, 2007 WL 1266124, at *5 (W.D. La. Apr. 27, 2007), report and recommendation adopted, No. CIV A 06-1204, 2007 WL 1672199 (W.D. La. June 6, 2007). Because it is not necessary for Plaintiffs to prove fraud to prevail, it certainly is not necessary to plead it with specificity. See id. (stating that because fraud is not required regarding an alter ego claim under Louisiana law, Rule 8(a) notice pleading is sufficient); White Rosebay Shipping S.A. v. HNA Group Co. Ltd., No. 2:12-CV-00096, 2013 WL 441014, at *4 (S.D. Tex. Feb. 5, 2013) (rejecting argument 9(b) standard was applicable to alter ego claim because federal common law does not require a showing of actual fraud to pierce the Case 4:18-cv-03218 Document 28 Filed on 03/21/19 in TXSD Page 8 of 20 9 corporate veil); McBeth v. Porges, 171 F. Supp. 3d 216, 233 (S.D.N.Y. 2016) (“[W]here an alter ego claim does not sound in fraud, it is not subject to the particularity requirement of Rule 9(b)”). Neither of the potential bodies of law governing the alter ego claims in this case require proof of fraud as a condition of piercing the corporate veil. See Hollowell v. Orleans Reg'l Hosp. LLC, 217 F.3d 379, 386 (5th Cir. 2000) (stating that Louisiana law does not require proof or allegations of fraud to pierce the corporate veil); McBeth v. Porges, 171 F. Supp. 3d 216, 233 (S.D.N.Y. 2016) (“[T]he Second Circuit has explained that, under Delaware [alter ego] law, ‘a plaintiff need not prove that there was actual fraud but must show a mingling of the operations of the entity and its owner plus an overall element of injustice or unfairness.’”) (quoting NetJets Aviation, Inc. v. LHC Commc'ns, LLC, 537 F.3d 168, 176 (2d Cir. 2008)). As Plaintiffs’ allegations state a plausible claim even without potential fraud, Rule 9(b) plays no rule in the determination of the pending motions. 2 c. Plaintiffs have alleged sufficient facts related to the alter ego claim. Plaintiffs have sufficiently pled their alter ego allegations. There are two bodies of law potentially applicable to the alter ego allegations in this case: Delaware 2 If the Court disagrees regarding the applicability of Rule 9(b), Plaintiffs request the opportunity to replead. As shown throughout this Response, recent discovery responses from the Defendants confirm specific details regarding the injustice perpetrated by their acts. Adding those details to the pleading should readily satisfy Rule 8 and Rule 9(b). Case 4:18-cv-03218 Document 28 Filed on 03/21/19 in TXSD Page 9 of 20 10 and Louisiana. The elements applicable to piercing the corporate veil are similar under the law of both states. Under Delaware law, plaintiffs must show (1) that the individual defendants “operated as a single economic entity” and (2) that an “overall element of injustice or unfairness .... [is] present.” Harper v. Delaware Valley Broadcasters, Inc., 743 F.Supp. 1076, 1085 (D.Del. 1990). “[I]n order to determine whether two entities functioned as a single economic entity, the court should consider if any of following factors have been pled: ‘(1) undercapitalization; (2) failure to observe corporate formalities; (3) nonpayment of dividends; (4) the insolvency of debtor corporation at the time; (5) siphoning of the corporation’s funds by the dominant stockholder; (6) absence of corporate records; and (7) the fact that the corporation is merely a facade for the operations of the dominant stockholder or stockholders.’” Compagnie des Grands Hotels d'Afrique S.A. v. Starwood Capital Group Glob. I LLC, CV 18- 654-RGA, 2019 WL 148454, at *3–4 (D. Del. Jan. 9, 2019) (citing Trevino v. Mersorp, Inc., 583 F. Supp. 2d 521, 529 (D. Del. 2008)). Delaware courts generally apply the same standards to pierce the veil of an LLC as they apply to pierce the veil of a corporation. See NetJets Aviation, Inc. v. LHC Communications, LLC, 537 F.3d 168, 176 (2d Cir. 2008) (noting that courts generally apply the same standard and applying the same principles to a Delaware LLC). Case 4:18-cv-03218 Document 28 Filed on 03/21/19 in TXSD Page 10 of 20 11 Under Louisiana law, there are two methods for piercing the corporate veil, alter ego and the “single business enterprise” theory. Green v. Champion Ins. Co., 577 So.2d 249, 257–58 (La.Ct.App. 1991). The factors to be considered to determine whether one entity is an alter ego of another or whether two entities are a “single business enterprise” are similar. Green v. Champion Ins. Co., 577 So.2d 249, 257–58 (La.Ct.App.1991). They include, but are not limited to, common ownership, directors and officers, employees, and offices; unified control; inadequate capitalization; noncompliance with corporate formalities; centralized accounting; unclear allocation of profits and losses between corporations; one corporation paying the salaries, expenses, or losses of another corporation; and undocumented transfers of funds between entities. See Hollowell v. Orleans Reg'l Hosp. LLC, 217 F.3d 379, 385–89 (5th Cir. 2000); Green, 577 So.2d at 258. No one factor is dispositive. Green, 577 So.2d at 258. As in Delaware, Louisiana courts generally apply the same standards to pierce the veil of an LLC as they apply to pierce the veil of a corporation. Fausse Riviere, L.L.C. v. Snyder, 2016-0633 La. App. 1 Cir. 2/15/17, 5, 211 So. 3d 1188, 1193. Plaintiffs have pled a plausible alter ego claim under both potentially applicable standards. Specifically, the First Amended Complaint asserts that Summit was the alter ego of SCA and SSIC, that SCA and SSIC used this corporate fiction to evade legal obligations related to the plugging and abandoning of the Case 4:18-cv-03218 Document 28 Filed on 03/21/19 in TXSD Page 11 of 20 12 properties at issue through the premature and improper dissolution of Summit Gulf in violation of the Delaware Limited Liability Company Act’s mandate to make appropriate provision for claims such as those made in this lawsuit, and that Summit Gulf’s inadequate capitalization, insolvency, and dissolution create injustice by allowing SCA and SSIC to reap the benefits of lease ownership in the Gulf of Mexico while avoiding the contractual and federal burdens related to plugging and abandoning costs at the expense of future lease holders. These allegations invoke several of the above factors. Equally as important, these allegations establish facts at the heart of every alter ego determination—injustice. Lease owners in the Gulf of Mexico are aware of and rely on the fact that federal regulations dictate continued liability associated with plugging and abandoning a lease even after you assign your interest. See 30 C.F. R. § 256.62 (“You, as assignor, are liable for all obligations that accrue under your lease before the date that the Regional Director approves your request for assignment of the record title in the lease.”). SCA and SSIC received the benefits of lease ownership in the Gulf of Mexico and received benefits from the sale of these interests for $10,000,000.00 to Tammany Oil & Gas LLC. Ex. A , at Interrogatory No. 7. They are now attempting to skirt the obligations associated with this ownership through the inappropriate dissolution of Summit Gulf at the direction of the “Sumitomo Corporation Group.” Exhibit B, Letter to U.S. Securities and Exchange Case 4:18-cv-03218 Document 28 Filed on 03/21/19 in TXSD Page 12 of 20 13 Commission by Sumitomo Corporation Announcing the Choice to Dissolve Summit Gulf. Further, discovery has shown that both Sumitomo and SSIC received funds associated with this sale. Ex. A, at Interrogatory No. 7. Sumitomo, SCA, and SSIC are essentially trying to reap the benefits of federal lease ownership without the liabilities by using a subsidiary to hold assets related to federal leases in the Gulf of Mexico and then dissolving the subsidiary once the leases are assigned (and benefits received by Sumitomo, SCA, and SSIC). This scheme is further evidenced by the fact that SSIC has likewise been dissolved within the last two years. Allowing such a shell game to avoid federally dictated liability would result in Plaintiffs paying a disproportionate share of the plugging and abonnement expenses associated with the lease at issue. Alter ego law was developed to avoid this exact type of injustice. Tellingly, Defendants do not dispute that the allegations contained within the First Amended Complaint appropriately allege alter ego liability. Instead, Defendants contend that these satisfactory assertions are nevertheless deficient because they are “conclusory” rather than allegations setting forth precise details about the corporate fiction created by Defendants. SCA’s Mot. at 5; SSIC’s Mot. at 5. But “the pleading standard Rule 8 announces does not require ‘detailed factual allegations.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)); see also Arnoult v. CL Med. Sarl, 1:14CV271-KS-MTP, 2015 WL 12916429, at *2 (S.D. Miss. Dec. 9, 2015) (“[T]he Case 4:18-cv-03218 Document 28 Filed on 03/21/19 in TXSD Page 13 of 20 14 standard from Twombly and Iqbal does not require a high level of detail in the allegations of a complaint.”). Rather, a plaintiff need only “‘give the defendant fair notice of what the plaintiff’s claim is and the grounds upon which it rests.’” Brooks v. Firestone Polymers, LLC, 1:12-CV-325, 2014 WL 4792653, at *21 (E.D. Tex. Sept. 24, 2014) (quoting Gilbert v. Outback Steakhouse of Fla. Inc., 295 F. App’x 710, 713 (5th Cir. 2008)). Accordingly, the Fifth Circuit has upheld complaints that lack a high level of specificity against Rule 12(b)(6) challenges. See, e.g., Wooten v. McDonald Transit Associates, Inc., 788 F.3d 490, 498 (5th Cir. 2015) (upholding complaint that alleged the defendant “discriminated and retaliated against [plaintiff], and created a hostile work environment” even though it did not “specif[y] the nature of the discrimination and the retaliation he experienced”); see also Hoffman v. Cemex, Inc., CIV.A. H-09-3144, 2009 WL 4825224, at *3 (S.D. Tex. Dec. 8, 2009) (holding that complaint stated claim even though it was “not replete with detailed factual allegations”); Diamond Services Corp. v. Oceanografia, S.A. De C.V., 10- CV-00177, 2011 WL 938785, at *6 (W.D. La. Feb. 9, 2011), report and recommendation adopted, 10-CV-00177, 2011 WL 917825 (W.D. La. Mar. 15, 2011) (denying a 12(b)(6) motion relating to an alter ego claim because most of the missing factual details were in the exclusive control of the opposing party). If such details were required to be specifically pled at this stage of the case, alter ego claims could hardly ever survive a motion to dismiss because the necessary facts are almost Case 4:18-cv-03218 Document 28 Filed on 03/21/19 in TXSD Page 14 of 20 15 always in the sole possession of the defendant. Such a situation is precisely the reason the Court in Iqbal specifically recognized that whether a complaint states a plausible claim for relief is a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. Iqbal, 556 U.S. at 679. As shown above, the allegations in the First Amended Complaint are sufficient under the applicable standard and Defendants’ Motions should be denied. See Diamond Services Corp., 2011 WL 938785 at *6 (denying a 12(b)(6) motion relating to an alter ego claim because most of the missing factual details were in the exclusive control of the opposing party). Insofar as the Court disagrees, amendment, not dismissal, is appropriate. FED. R. CIV. P. 15(a). Discovery has already revealed common ownership between the entities at issue; the exchange of money from Summit Gulf to SCA, SSIC, and, eventually, Sumitomo Corporation; and common direction between Sumitomo Corporation, SCA, SSIC, and Summit Gulf. See Ex. A (noting the receipt of $516,585.36 by SSIC and $137,031.67 by SCA from Summit Gulf); Ex. B (noting Summit Gulf was “wholly owned by the Sumitomo Corporation Group,” and noting that Sumitomo Corporation decided to “dissolve and liquidate” Summit Gulf); Ex. C (showing $516,585.36, the exact amount that went from Summit Gulf to SSIC, went from SSIC to Sumitomo Corporation); and Ex. D (showing the complicated ownership web between the multiple entities). Further, SSIC’s Answers to Plaintiffs’ Case 4:18-cv-03218 Document 28 Filed on 03/21/19 in TXSD Page 15 of 20 16 First Set of Interrogatories revealed that Sumitomo Corporation was funding the operations of SSIC through inter-company loans. See Ex. E, at Interrogatory No. 17 (stating that SSIC transferred money to Sumitomo Corporation to “pay down a loan” made by Sumitomo Corporation to SSIC); Ex. G (showing complicated web of loans and ownership). Similarly, SSIC and SCA were funding Summit Gulf through the same type of inter-company loans. See Ex. A, at Interrogatory No. 8 (stating that at the time of Summit Gulf’s dissolution “[SSIC] and [SCA] both forgave [Summit Gulf]’s loan repayment obligations”). Though this information has not yet been fully explored through depositions, it appears clear that the “Sumitomo Corporation Group” controlled Summit Gulf, funneled Summit Gulf’s assets back to Sumitomo Corporation through a facade of corporate entities/subsidiaries and inter-company loans, and improperly dissolved Summit to avoid federally mandated liability. Such a scheme more than merits the continuation of this lawsuit. As such, if the Court is inclined to require more detailed allegations, Plaintiffs ask for the opportunity to amend their Complaint to add the specific facts uncovered thus far during the course of this lawsuit (some as recently as last week). III. Remaining Claims Defendants rest their Motions exclusively on the argument that Plaintiffs’ alter ego allegations are insufficient. Accordingly, Defendants’ arguments regarding the remaining claims fail because Plaintiffs have sufficiently alleged alter ego. To Case 4:18-cv-03218 Document 28 Filed on 03/21/19 in TXSD Page 16 of 20 17 remove all doubt, where alter ego has been sufficiently alleged it is appropriate to lump defendants together in relation to the remaining allegations. See Infomart (India), Pvt., Ltd. v. Metrowerks Corp., No. Civ.A.3:04–CV–1299–N, 2005 WL 292433, at *4 (N.D. Tex. Feb.7, 2005) (citations omitted). Accordingly, Plaintiffs have sufficiently pled claims against SCA and SSIC. LEAVE TO AMEND Plaintiffs have sufficiently pled all of their claims against Defendants, negating the need for an amended pleading. However, should the Court believe that additional detail is warranted, Federal Rule of Civil Procedure 15(a) states that “leave to amend shall be freely given when justice so requires,” and should be granted absent some justification for refusal. Foman v. Davis, 371 U.S. 178 (1962). Should the Court find any merit to Defendants’ motion to dismiss, Plaintiffs respectfully request leave to amend the complaint in order to address any concerns of this Court. As explained on pages 3 through 5 of this Response, recent discovery responses have revealed facts that provide strong support for Plaintiffs’ alter ego claims. Those specific facts can be added to Plaintiffs’ pleadings, leaving no doubt that both Rule 8(a) and Rule 9(b) have been satisfied. See Clapper v. Am. Realty Inv'rs, Inc., 3:14-CV-2970-D, 2016 WL 302313, at *5 (N.D. Tex. Jan. 25, 2016) (noting that it does not have to decide if Rule 9(b) applies to plaintiffs’ alter ego claim because plaintiffs’ allegations were sufficient to meet the heightened standard Case 4:18-cv-03218 Document 28 Filed on 03/21/19 in TXSD Page 17 of 20 18 where plaintiffs alleged: (1) defendant had an undisclosed ownership in and a unity of interest with the entity defendants; (2) that defendant was the controlling decisionmaker for the entity defendants and used the assets of the entity defendants as his own; (3) the assets and accounting records of the entity defendants were commingled; and (4) defendant directed the entity defendants to effectuate the alleged wrong).3 Defendants suggest that leave should be refused because “Plaintiffs were put on notice of the deficiency of their alter ego allegations by [SCA’s] counsel before they filed their First Amended Complaint.” This assertion does not come close to a 3 Similarly, “Sumitomo Corporation Group” controlled Summit Gulf, funneled Summit Gulf’s assets back to Sumitomo Corporation through a facade of corporate entities/subsidiaries and inter-company loans, and improperly dissolved Summit to avoid federally mandated liability. See Ex. A, at Interrogatory No. 7 (noting the receipt of $516,585.36 by SSIC and $137,031.67 by SCA from Summit Gulf); Ex. B (noting Summit Gulf was “wholly owned by the Sumitomo Corporation Group,” and noting that Sumitomo Corporation decided to “dissolve and liquidate” Summit Gulf); Ex. C (showing $516,585.36, the exact amount that went from Summit Gulf to SSIC, went from SSIC to Sumitomo Corporation); Ex. D (showing the complicated ownership web between the multiple entities); Ex. G (chart showing complicated web of loans and ownership); Ex. E, at Interrogatory No. 17 (stating that SSIC transferred money to Sumitomo Corporation to “pay down a loan” made by Sumitomo Corporation to SSIC); and Ex. A, at Interrogatory No. 8 (stating that at the time of Summit Gulf’s dissolution “[SSIC] and [SCA] both forgave [Summit Gulf]’s loan repayment obligations”). Any additional details would be in the exclusive control of Defendant and necessitate continued discovery. U.S. ex rel Russell v. Epic Healthcare Management Group, 193 F.3d 304, 308 (5th Cir. 1999) (“We have held that when the facts relating to the alleged fraud are peculiarly within the perpetrator's knowledge, the Rule 9(b) standard is relaxed, and fraud may be pled on information and belief, provided the plaintiff sets forth the factual basis for his belief.”). Case 4:18-cv-03218 Document 28 Filed on 03/21/19 in TXSD Page 18 of 20 19 showing that an amendment would “prejudice the nonmoving party or impose unwarranted burdens on the court.” Mayeaux v. Louisiana Health Serv. & Indem. Co., 376 F.3d 420, 427 (5th Cir. 2004). Leave to amend, to the extent necessary, is appropriate. CONCLUSION For the foregoing reasons, Defendants’ Motions should be denied. In the alternative, Plaintiffs request permission to replead. Respectfully submitted, BECK REDDEN LLP By: /s/ Geoff A. Gannaway Geoff A. Gannaway Texas State Bar No. 24036617 Federal I.D. No. 37039 1221 McKinney St., Suite 4500 Houston, Texas 77010-2010 Telephone: (713) 951-3700 Facsimile: (713) 951-3720 ATTORNEY-IN-CHARGE FOR FIELDWOOD ENERGY OFFSHORE LLC, FIELDWOOD ENERGY LLC, AND CASTEX OFFSHORE INC. Alex B. Roberts Texas State Bar No. 24056216 Hannah L. Roblyer Texas State Bar No. 24106356 BECK REDDEN LLP 1221 McKinney St., Suite 4500 Houston, Texas 77010-2010 Telephone: (713) 951-3700 Case 4:18-cv-03218 Document 28 Filed on 03/21/19 in TXSD Page 19 of 20 20 Facsimile: (713) 951-3720 OF COUNSEL FOR PLAINTIFFS FIELDWOOD ENERGY OFFSHORE LLC, FIELDWOOD ENERGY LLC, AND CASTEX OFFSHORE INC. CERTIFICATE OF SERVICE I hereby certify that I caused a true and correct copy of the foregoing instrument to be served on the following counsel of record in accordance with the Federal Rules of Civil Procedure on this 21st day of March, 2019, by electronic mail: Counsel for Defendant Prime Offshore LLC: Larry R. Veselka lveselka@skv.com Austin R. Kreitz akreitz@skv.com SMYSER KAPLAN & VESELKA, L.L.P. 700 Louisiana, Suite 2300 Houston, Texas 77002 Counsel for Defendants Sumitomo Corporation of Americas & Summit Shale International Corporation: Michael D. Morfey michaelmorfey@HuntonAK.com M. Kaylan Dunn kaylandunn@HuntonAK.com HUNTON ANDREWS KURTH LLP 600 Travis, Suite 4200 Houston, Texas 77002 /s/ Geoff A. Gannaway Geoff A. Gannaway Case 4:18-cv-03218 Document 28 Filed on 03/21/19 in TXSD Page 20 of 20