Cinco Bayous, LLC v. Samson Expl., LLC

• Decision Date: 20 August 2020
• Docket Number: CIVIL ACTION NO. 1:19-CV-452
• Parties: CINCO BAYOUS, LLC, JIM WINGATE, TANYA WINGATE, and WILLIAM WINGATE, Plaintiffs, v. SAMSON EXPLORATION, LLC, Defendant.
• Court: U.S. District Court — Eastern District of Texas

CINCO BAYOUS, LLC, JIM WINGATE, TANYA WINGATE,and WILLIAM WINGATE, Plaintiffs, v. SAMSON EXPLORATION, LLC, Defendant.

CIVIL ACTION NO. 1:19-CV-452

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF TEXAS

August 20, 2020

MEMORANDUM AND ORDER

Pending before the court is Plaintiffs Cinco Bayous, LLC ("Cinco Bayous"), Jim Wingate, Tanya Wingate, and William Wingate's (collectively, "Plaintiffs") Motion for Leave to File Amended Pleading (#19) and Defendant Samson Exploration, LLC's ("Samson") response in opposition (#23). Having reviewed the pending motion, the submissions of the parties, the pleadings, and the applicable law, the court is of the opinion that Plaintiffs' motion should be DENIED.

I. Background

This case concerns a disputed oil and gas lease between Plaintiffs and Samson, which was originally filed in the 58th Judicial District Court of Jefferson County, Texas, on August 1, 2019. Samson filed a notice of removal on September 24, 2019. At the time of removal, complete diversity of citizenship existed, as Plaintiffs Jim, Tanya, and William Wingate are citizens of the State of Texas, Cinco Bayous is a Texas limited liability company whose members are citizens of Texas, making Cinco Bayous a citizen of Texas. Samson is a limited liability company whose members are citizens of the State of Delaware or the State of Oklahoma; thus, Samson is a citizen of Delaware or Oklahoma.

This dispute originates from seismic surveys conducted in 2008 ("2008 Seismic Surveys"). In 2008, Samson, formerly known as Samson Lone Star, LLC, conducted eleven seismic surveys which covered approximately 2,040 square miles. Plaintiffs and Samson negotiated six, twelve-month seismic permits ("2008 Seismic Permits") that covered various tracts of land, notably the Sara Miles Survey, A-173, ("Sara Miles") and J.C. Grant Survey,¹ A-128, ("J.C. Grant"), where Plaintiffs are listed as minority owners. According to Samson, one of the 2008 Seismic Surveys, the Willow Marsh Survey, consisted of 215 square miles in total and Plaintiffs' property comprised less than one percent of the entire survey. Samson maintains that the terms of the 2008 Seismic Permits did not require Samson to share or transmit any of the seismic data collected with Plaintiffs.² Samson licensed the data collected in the 2008 Seismic Surveys ("2008 Survey Data") to Hilcorp Energy Company ("Hilcorp") in 2008.

In August 2012, the parties negotiated six oil, gas, and other hydrocarbon leases³ ("2012 Leases"), wherein Samson, in exchange for the right to develop the mineral estate, agreed to pay a 1/4 royalty and furnish seismic data collected during the term of the 2012 Leases. The parties agree that Samson did not collect any seismic data during the 2012 Leases. Nonetheless, Plaintiffsassert that they are entitled to the 2008 Survey Data Samson collected pertaining to the Sara Miles and J.C. Grant surveys. Furthermore, Plaintiffs claim to have detrimentally relied on obtaining the 2008 Survey Data when negotiating the 2012 Leases. In early 2020, Samson sold the 2008 Survey Data to Zachry Seismic, LLC ("Zachry Seismic"). Plaintiffs contend that at the Status Conference on January 6, 2020, they first learned that Samson had sold the 2008 Survey Data.

In their First Amended Complaint (#10), Plaintiffs claim Samson breached the 2012 Leases by withholding the 2008 Survey Data. Plaintiffs also allege that Samson fraudulently induced Plaintiffs to enter into the 2012 Leases, knowing Plaintiffs' desire to obtain the 2008 Survey Data when entering into the 2012 Leases. Additionally, Plaintiffs contend that Samson's refusal to provide the 2008 Survey Data amounts to common law civil conversion of Plaintiffs' property. Samson denies all aforementioned allegations in its First Amended Answer (#11).

In the present motion, Plaintiffs seek leave to amend their pleadings to add Hilcorp, Zachry Exploration, LLC ("Zachry Exploration"), and Zachry Seismic (Zachry Exploration and Zachry Seismic will be referred to collectively as "Zachry") as defendants upon learning that the 2008 Survey Data was licensed to Hilcorp and sold to Zachry. If joined, at least one of the new parties would destroy complete diversity of citizenship. According to Plaintiffs, Hilcorp is a corporation organized under the laws of the State of Texas, with a principal place of business in Houston, Texas, and is, therefore, a citizen of Texas. Zachry Exploration and Zachry Seismic are limited liability companies ("LLC"); although Plaintiffs maintain that each entity has purposefully engaged in business in the State of Texas, that assertion is not determinative of the LLCs' citizenship. See Settlement Funding, L.L.C. v. Rapid Settlements, Ltd., 851 F.3d 530, 536 (5th Cir. 2017) ("[T]he citizenship of a LLC is determined by the citizenship of all [or each] of itsmembers."). The citizenship of Zachry Exploration and Zachry Seismic's members was not provided.

Plaintiffs' proposed Second Amended Complaint (#20) seeks to add breach of contract and conversion claims against Hilcorp and Zachry. Plaintiffs also include an additional claim to quiet title against Samson for failing to file releases of the 2012 Leases in the official records of Jefferson County, Texas. Samson argues that Plaintiffs' claims against Samson, Hilcorp, and Zachry are time-barred and/or moot.

II. Analysis

A. Joinder of Nondiverse Defendant After Removal

"If after removal the plaintiff seeks to join additional defendants whose joinder would destroy subject matter jurisdiction, the court may deny joinder, or permit joinder and remand the action to the State court." 28 U.S.C. § 1447(e); accord Powerex v. Reliant Energy Servs., Inc., 551 U.S. 224, 232-33 (2007); Borden v. Allstate Ins. Co., 589 F.3d 168, 171-72 (5th Cir. 2009); Perry v. Hartford Ins. Co., 196 F. Supp. 2d 447, 449 (E.D. Tex. 2002). When faced with an amended pleading naming a new, nondiverse defendant in a removed case, the district court "should scrutinize that amendment more closely than an ordinary amendment." Hensgens v. Deere & Co., 833 F.2d 1179, 1182 (5th Cir. 1987), cert. denied, 493 U.S. 851 (1989); accord Allen v. Walmart Stores, L.L.C., 907 F.3d 170, 185 (5th Cir. 2018); Priester v. JP Morgan Chase Bank, N.A., 708 F.3d 667, 679 (5th Cir.), cert. denied, 571 U.S. 941 (2013); LJH, Ltd. v. Comerica Inc., No. 4:15-cv-639, 2016 WL 69912, at *1 (E.D. Tex. Jan. 6, 2016). "In this situation, justice requires that the district court consider a number of factors to balance the defendant's interests in maintaining the federal forum with the competing interests of not havingparallel lawsuits." Hensgens, 833 F.2d at 1182; accord Priester, 708 F.3d at 679. Nevertheless, "[w]hen an amendment would destroy jurisdiction, most authorities agree that leave should be denied unless there exist strong equities in its favor." LJH, Ltd., 2016 WL 69912 at *1 (quoting Whitworth, 914 F. Supp. at 1435).

The Fifth Circuit has indicated that a district court should evaluate the following factors when determining whether to permit joinder of a nondiverse defendant in a removed case: (1) whether the primary purpose of the amendment is to defeat diversity jurisdiction; (2) whether the plaintiff was diligent in requesting amendment; (3) whether the plaintiff will be prejudiced if amendment is denied; (4) and "any other factors bearing on the equities." Hensgens, 833 F.2d at 1182; accord Allen, 907 F.3d at 185; Moore v. Mans, 732 F.3d 454, 456 (5th Cir. 2013); Priester, 708 F.3d at 679. These factors are commonly referred to as the " Hensgens factors." Although Hensgens was decided prior to the enactment of § 1447(e), the Fifth Circuit has held that district courts should continue to apply the Hensgens factors. Wilson v. Bruks-Klockner, Inc., 602 F.3d 363, 368 (5th Cir. 2010) (stating that "when a plaintiff seeks to add a non-diverse defendant whose joinder would defeat diversity jurisdiction, the district court must consider the Hensgens factors"); see Cobb, 186 F.3d at 677 (noting that "§ 1447(e), adopted after [the Fifth Circuit] decided Hensgens, is a codification of Hensgens's holding"). Consequently, joinder of a nondiverse defendant after removal is controlled by 28 U.S.C. § 1447(e) and the Hensgens factors, not Rule 15 of the Federal Rules of Civil Procedure. Respco, LLC v. Wells Fargo USA Holdings, Inc., EP-18-CV-260-PRM, 2018 WL 7350766, at *2 (W.D. Tex. Nov. 26, 2018) (citing Priester, 708 F.3d at 679); Anzures v. Prologis Tex. I LLC, 886 F. Supp. 2d 555, 562 (W.D. Tex. 2012); Smith v. Robin Am., Inc., No. H-08-3565, 2009 WL 2485589, at *4 (S.D. Tex. Aug. 7, 2009),aff'd, 484 F. App'x 908 (5th Cir. 2012); Whitworth, 914 F. Supp. at 1435; see 6 CHARLES ALAN WRIGHT, ARTHUR R. MILLER & MARY K. KANE, FEDERAL PRACTICE AND PROCEDURE § 1477 (3d ed. 2010) ("[A] party may not employ Rule 15(a) to interpose an amendment that would deprive the district court of jurisdiction over a removed action."). If, after considering the Hensgens factors, the district court permits joinder of a nondiverse defendant, it must remand the case back to state court. Cobb, 186 F.3d at 677 (citing 28 U.S.C. § 1447(e)); Gill v. Michelin N. Am., Inc., 3 F. Supp. 3d 579, 583 (W.D. Tex. 2013).

1. Purpose of the Amendment

Certain circumstances are indicative of a plaintiff's desire to defeat federal jurisdiction by joining a nondiverse party after removal. For example, where the plaintiff knew or should have known the identity of the nondiverse defendant at the time of the lawsuit's original filing in state court, an attempt to join the defendant after removal is viewed with "much suspicion" and suggests an effort to frustrate diversity jurisdiction. O'Connor v. Auto. Ins. Co. of Hartford, 846 F. Supp. 39, 41 (E.D. Tex. 1994); see LJH, Ltd., 2016 WL 69912, at *2 (citing Tomlinson v. Allstate Indem. Co., No. 06-0617, 2006 WL 1331541, at *3 (E.D. La. May 12, 2006)); Boyce v. CitiMortgage, Inc., 992 F. Supp. 2d 709, 717 (W.D. Tex. 2014); Martinez...