Louisiana Oil & Gas Interests, L.L.C. v. Shell Trading U.S. Co., 021220 FED5, 19-30396

Docket Nº:19-30396
Opinion Judge:W. EUGENE DAVIS, CIRCUIT JUDGE
Party Name:LOUISIANA OIL & GAS INTERESTS, L.L.C., Plaintiff - Appellant v. SHELL TRADING U.S. COMPANY; GULFPORT ENERGY CORPORATION, Defendants - Appellees
Judge Panel:Before DAVIS, SMITH, and STEWART, Circuit Judges.
Case Date:February 12, 2020
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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LOUISIANA OIL & GAS INTERESTS, L.L.C., Plaintiff - Appellant

v.

SHELL TRADING U.S. COMPANY; GULFPORT ENERGY CORPORATION, Defendants - Appellees

No. 19-30396

United States Court of Appeals, Fifth Circuit

February 12, 2020

Appeal from the United States District Court for the Western District of Louisiana

Before DAVIS, SMITH, and STEWART, Circuit Judges.

W. EUGENE DAVIS, CIRCUIT JUDGE

In this diversity case, Plaintiff, Louisiana Oil & Gas Interests, L.L.C. ("LOGI"), appeals the district court's Rule 12(b)(6) dismissal of its complaint for failure to state a claim. The magistrate judge and district court determined that Plaintiff did not provide Defendants, Shell Trading U.S. Company ("Shell") and Gulfport Energy Corporation ("Gulfport"), with notice under Article 137 of the Louisiana Mineral Code of their alleged failure to pay royalties timely and properly and that Plaintiff consequently was barred from recovering under Article 138. For the reasons set forth below, we AFFIRM.

I. Background

In its complaint, Plaintiff alleged that on December 23, 2013, it acquired a 20.6% undivided interest in a mineral lease by way of a transfer and assignment from Thomas Barr IV Louisiana Properties-General, Limited Liability Company ("Properties-General"). Thomas Barr, IV, is the sole member and manager of both Plaintiff and Properties-General. Plaintiff further alleged that on January 17, 2014, it sent a letter to Shell informing Shell of the change in ownership and requesting Shell to remit all royalty payments in the name of Plaintiff instead of Properties-General. A copy of the transfer and assignment agreement between Plaintiff and Properties-General was enclosed. In response, Shell stated that before it could implement such a change, Plaintiff needed to submit a copy of the recorded transfer and assignment agreement.

Plaintiff did not forward a copy of the recorded agreement to Shell at that time. During the next year, Shell continued to remit royalty checks payable to Properties-General, and Plaintiff never wrote to Shell complaining that the payee on the checks was incorrect. According to Plaintiff, its bank allowed Plaintiff to deposit the royalty checks in its account "as an accommodation," even though the checks were made payable to Properties-General.

Sometime in late February or early March 2015, however, Plaintiff changed banks and was no longer able to deposit the checks for collection because they were not made payable to Plaintiff. Plaintiff (through Barr) telephoned Shell, requesting that Shell implement the change in payee as Plaintiff had requested over a year earlier. On March 10, 2015, Shell emailed Plaintiff, reiterating that Shell required a copy of the recorded transfer and assignment agreement in order to make a change in the payee. On April 21, 2015, Plaintiff faxed Shell a copy of the recorded transfer and assignment agreement. Two days later, on April 23, 2015, Plaintiff wrote a letter to Shell, enclosing two checks it had received in March and April 2015 made payable to Properties-General and was unable to deposit. Plaintiff requested reissuance of the checks in its name. The letter provided: Enclosed please find the following checks returned to Shell Trading for reissuance in the new name Louisiana Oil & Gas Interests, LLC, as is evidenced by the Transfer and Assignment faxed to you.

0000289629 3/19/2015 $54, 410.35 Owner#420540 Citibank 0000295338 4/19/2015 $45, 345.48 Owner#420540 Citibank

Thank you for your assistance in the re-issuance of these checks as soon as possible.

Sincerely,

Thomas Barr, IV

Plaintiff contended that Shell did not issue a replacement check for the above checks in the total amount of $99, 755.83 "until on or after June 1, 2015," which was more than thirty days after April 21, 2015, the date Shell acknowledged receipt of the recorded assignment.

On September 1, 2015, Plaintiff sent a letter to Shell in which it "made demand" for the payment of damages, attorney's fees, and interest for Shell's failure to pay royalty payments timely and properly under Article 140 of the Louisiana Mineral Code. On September 25, 2015, Shell denied any liability and contended that it timely and properly rendered all royalty checks due.

On March 2, 2018, Plaintiff filed the instant complaint in federal district court asserting claims against Defendants, Shell and Gulfport, 1 under the Louisiana Mineral Code for failure to pay royalty payments.2 Plaintiff contended that Defendants had thirty days after receipt of its payee change request on January 24, 2014, to pay royalties due. Plaintiff further contended that it should have received the April 2015 royalty payment by May 20, 2015, but that it did not receive that payment until June 2, 2015.3 Plaintiff asserted that, under Articles 139 and 140 of the Louisiana Mineral Code, it was entitled to $270, 612.62, which is twice the amount of the February, March, and April 2015 royalty payments, plus reasonable attorney's fees and costs.

In response, Shell and...

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