Case Energy Servs., LLC v. Padco Pressure Control (In re Padco Energy Servs., LLC), 16-51380
| Decision Date | 29 March 2019 |
| Docket Number | 16-51380,CIVIL ACTION NO: 17-884 SECTION: "S" (2),CIVIL ACTION NO: 17-885 SECTION: "S" (2) |
| Parties | IN RE PADCO ENERGY SERVICES, LLC, Debtor CASE ENERGY SERVICES, LLC v. PADCO PRESSURE CONTROL CASE ENERGY SERVICES, LLC v. PADCO ENERGY SERVICES |
| Court | U.S. District Court — Western District of Louisiana |
Defendant-appellant, Case Energy Services, L.L.C. ("Case") appeals the June 27, 2017 ruling of the bankruptcy court denying its motions to dismiss the claims brought against it by Padco Energy Services, L.L.C, and Padco Pressure Control, L.L.C. and denying its Motion to Transfer to Another Division, in two adversary proceedings, 17-5006 and 17-5007.1 For the reasons that follow, the ruling of the Bankuptcy Court is AFFIRMED.
This matter involves two distinct but related companies, Padco Energy Services, L.L.C. ("Energy"), and Padco Pressure Control ("Pressure"). Pressure, an affiliate ofEnergy, wasformed in April 2015, with members Jason Farnell (40% ownership) and Michael Carr (60% ownership). Farnell was to run the day to day operations of the company, due to his previous experience with the "flowback" process.
Pressure and Energy (hereinafter, collectively sometimes "Padco" or "debtors") allege that from time to time between April 30, 2014 and September 24, 2015, Pressure (but not Energy) purchased materials from Case. In November of 2015, Carr was informed of a potentially suspicious relationship between Case and Farnell. The month before, Carr had hired employees to conduct a review of all Pressure invoices and financial statements. This review revealed numerous discrepancies, including duplicated serial numbers on equipment purchased from Case, double billing, billing for inventory that was never received, and billing statements that did not match the signed invoices for products received - all from Case.
Pressure and Energy further allege that in response to inquiries to Case regarding the discrepancies in invoices and serial numbers, Pressure was given altered invoices, with different serial numbers. However, many of the new serial numbers did not match up with inventory. Notwithstanding these discrepancies, Case issued written demand upon Pressure and Energy for the sum of$l,236,122.69. However, based upon the review of the invoices, Pressure and Energy allege that Case over-billed Pressure by $522,769.69. They further allege that of the $713,353.00 that should have been billed, Case has been paid $805,987.75, representing an overpayment by Pressure of $92,634.75, which Pressure seeks to have returned.
Beginning on May 4, 2016, Case filed liens against both Pressure and Energy (and others), on thirty-six oil and gas wells in various parishes in Louisiana and counties in eastern Texas, each in the amount of $1,200,000.00, for sums allegedly due it by Pressure. Case claimedthat a privilege was established pursuant to La. R.S. 4861, et seq., by virtue of movables which it had sold to an operator or contractor or delivered to a well-site.
In contrast, Pressure and Energy allege that the last materials purchase from Case was on September 24, 2015, the purchase was by Pressure, not Energy, and that the liens, not recorded until May 4,2016 were untimely. Pressure and Energy further allege that the liens were also levied against numerous wells to which Energy never delivered any equipment purchased from Case, and that the liens are therefore invalid and without effect. Pressure and Energy also contend that the liens are invalid because they are not limited to actual work performed on each well, and each lien is for an identical amount of $1.2 million; no lien is allowed for equipment sold if the equipment is merely used on a well and not "consumed" by the well; and in this case, all of the alleged equipment was never "consumed" by or delivered to the liened well by Energy or Pressure, but will presumably last for many years; and the liens contain no allocation of which Pressure equipment was used on which well.
On June 14, 2016, Case filed a petition in the 26th Judicial District Court for the Parish of Bossier against the debtors and other defendants for alleged amounts owed for equipment sold to debtors, as well as alter ego claims and recognition of the liens (the "state court suit"). On October 4, 2016, Energy and Pressure filed for relief under Chapter 11 of the Bankruptcy Code in the Western District of Louisiana, Lafayette Division.
On July 12, 2017, Pressure and Energy each filed adversary proceedings, alleging that Case and Farnell engaged in systematic and ongoing fraudulent business practices in an effort to defraud Pressure. The suits further allege that the liens were wrongfully filed, causing damages due to loss of customers, business, and relationships. Energy and Pressure seek, inter alia,dissolution of all liens wrongfully filed by Case, and damages and attorneys' fees under the Louisiana Unfair Trade Practices Act, La. R.s. 51:1401, et seq. ("LUTPA").
In response, Case filed its motion to dismiss, arguing that the bankruptcy court lacked jurisdiction, that Energy and Pressure lack standing to challenge the liens, and that plaintiff has failed to state a claim under LUTPA or any other viable theory of recovery for damages resulting from the filing of the liens, nor are they entitled to attorney's fees. Case also moved for an intra-district transfer from Lafayette to Shreveport, and for a more definite statement of the fraud claims. The Bankruptcy Court denied all the relief requested, except that it ordered that the fraud claims be re-pleaded with more specificity. The instant timely appeal followed. Finding that the Bankruptcy Court did not err, the court affirms its ruling.
District courts of the United States have jurisdiction to hear appeals from orders of the bankruptcy court. See 28 U.S.C. § 158(a). "[C]onclusions of law are reviewed de novo, findings of fact are reviewed for clear error, and mixed questions of fact and law are reviewed de novo." In re Nat'l Gypsum Co., 208 F.3d 498, 504 (5th Cir. 2000).
The hearing of this matter was held on June 27, 2017, after which the bankruptcy court issued its oral order and reasons from the bench. The bankruptcy court: (1) denied Case's motion to dismiss for lack of subject matter jurisdiction; (2) denied Case's Federal Rule 12(b)(1) motion to dismiss for lack of standing; (3) denied Case's Federal Rule 12(b)(6) motion to dismiss Padco's LUTPA claims and for attorneys' fees; and (4) denied Case's motion for intra-district transfer pursuant to 28 U.S.C. §1404(b).
Case contends that the bankruptcy court lacked jurisdiction over these adversary proceedings because debtors seek dissolution of liens on property which is not owned nor operated by debtors, and thus it is not part of the bankruptcy estate.
Title 28 U.S.C. § 1334(b) provides that "the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11." The district courts may, in turn, refer "any or all proceedings arising under title 11 or arising in or related to a case under title 11. . . to the bankruptcy judges for the district." 28 U.S.C. § 157(a).
The bankruptcy court denied Case's motion to dismiss for lack of subject matter jurisdiction, based on its finding that even if the liened wells were not part of the bankruptcy estate, resolution of the dispute alleged in the adversary proceedings could affect the bankruptcy estate. The bankruptcy court also noted that the debtors' causes of action were part of the estate. This court agrees.
As noted by the Fifth Circuit Court of Appeals, "[t]he scope of property rights and interests included in a bankruptcy estate is very broad: The conditional, future, speculative, or equitable nature of an interest does not prevent it from being property of the bankruptcy estate." Matter of Kemp, 52 F.3d 546, 550 (5th Cir.1995); see also, In re Jazzland, Inc., 322 B.R. 610, 615 (E.D. La. 2005), aff'd, 161 F. App'x 436 (5th Cir. 2006). An adversary proceeding falls within the court's "related to"jurisdiction if the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy." In re Wood, 825 F.2d 90, 93 (5th Cir.1987). Applying this test to the present case, the adversary complaints are sufficientlyrelated to the pending bankruptcy to allow the district court to exercise jurisdiction under section 1334.
As the bankruptcy court observed, Pressure and Energy's adversary complaints allege that when Case filed the liens, the owners/operators of those wells immediately began escrowing money that otherwise would have been paid to Pressure, thus constricting its cash flow and causing damages. Pressure's complaint also seeks a return of overpayments made to Case. Finally, debtors' causes of action are part of the bankruptcy estate. Thus, at a minimum, the bankruptcy court possesses "related to"jurisdiction because adjudication of the claims in the adversary proceedings could conceivably affect Energy and Pressure's bankruptcy estates.
Case also appeals that portion of the bankruptcy court's ruling denying its motion to dismiss debtors' claims for wrongful liens against Case pursuant to 12(b)(1). "Motions filed under Rule 12(b)(1) of the Federal Rules of Civil Procedure allow a party to challenge the subject matter jurisdiction of the district court to hear a case." Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001). "Lack of subject matter jurisdiction may be found in any one of three instances: (1) the complaint alone; (2) the complaint supplemented by undisputed facts evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts." Id. In a 12(b)(1) motion, the party asserting jurisdiction bears the burden of proof that jurisdiction does in fact exists. Id.
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