Saap Energy, Inc. v. Bell

• Decision Date: 26 August 2020
• Docket Number: CIVIL ACTION NO. 1:12-CV-00098-JRW-HBB
• Parties: SAAP ENERGY, INC., et al. PLAINTIFFS v. RICKY E. BELL, et al. DEFENDANTS
• Court: U.S. District Court — Western District of Kentucky

SAAP ENERGY, INC., et al. PLAINTIFFS v. RICKY E. BELL, et al. DEFENDANTS

CIVIL ACTION NO. 1:12-CV-00098-JRW-HBB

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF KENTUCKY

August 26, 2020

MEMORANDUM OPINION AND ORDER

After eight years, over four hundred docket entries, and almost nine thousand pages in the record, the remaining defendants in this multi-million-dollar RICO and legal malpractice case are Danny Basil; I.A.T., Inc.; and John Prior, who all move for summary judgment.¹

A. The Court GRANTS:

1. Prior's summary judgment motion (DN 329).

? The Court DISMISSES Plaintiffs' claims against Prior with prejudice.

2. Basil's motion to exclude Plaintiffs' expert witness Harry Callicotte (DN 324).

? The Court excludes Callicotte from testifying at trial.

B. The Court GRANTS in part and DENIES in part:

3. Basil's motion for summary judgment on Plaintiffs' other claims (DN 323).

? The Court DISMISSES Plaintiffs' fraud and fraud by omission claims against Basil with prejudice.

? The Court DISMISSES Saibabu Appalaneni's individual claims for lack of standing.

? Counts I, IV, and V against Basil may proceed to trial.

4. Plaintiffs' motion to exclude Basil's expert witness J. Duncan Pitchford and for partial summary judgment on their legal malpractice claim (DN 316).

? The Court excludes Pitchford from testifying at trial.

? The Court otherwise denies Plaintiffs' motion for partial summary judgment on their legal malpractice claim.

C. The Court DENIES:

5. Basil's motion to exclude Plaintiffs' expert Peter Ostermiller (DN 318).

6. I.A.T., Inc.'s summary judgment motion (DN 319).

? Plaintiffs' claims against IAT may proceed to trial.

7. Basil's motion for sanctions against Plaintiffs (DN 320).

8. Basil's motion for partial summary judgment on Plaintiffs' legal malpractice claim (DN 321).

? Count X against Basil may proceed to trial.

9. Basil's supplemental motion for summary judgment (DN 397).

D. The Court DENIES as moot:

10. Plaintiffs' motion to amend the consent judgment (DN 385).

E. The Court ORDERS:

11. Plaintiffs to file either a (a) notice saying that they intend to continue pursuing their claims against Yvette Kleinman (as personal representative of Martin Kleinman's estate) and Falcon Energy, LLC; or (b) proposed order dismissing those defendants with prejudice.

12. The remaining parties to file a joint status report notifying the Court if (a) they would like another settlement conference before trial; or (b) their availability for trial.

The parties' deadline for these filings is September 25, 2020.

I. Background

"This lawsuit involves five (5) separate transactions consummated in the fall of 2011 through January 2012 for the sale of interests in oil wells located in south central Kentucky." (DN 34 at #313). After a complicated procedural history, we arrive at the latest in this ongoing saga. As an overview, Plaintiffs allege:²

In 2009, Martin Kleinman ("Martin")³ incorporated Defendant Falcon Energy Group, Inc. to raise money from investors for drilling and reworking oil and gas wells. (Id. ¶ 17). Martin and Falcon Energy entered into a joint venture agreement with Ricky Bell ("Ricky") and Ricky's Rebell Oil businesses to raise money for Ricky and Rebell Oil's drilling and reworking operations. (Id. ¶ 18). In July 2011, Martin met with two associates of Capital Business Solutions, Robert Caputo and Patrick Gagliardi, and agreed that Capital Business Solutions would create online solicitations to attract potential oil and gas lease and well investors. (Id. ¶¶ 19-20). After this meeting, Martin, Ricky, and Ricky's brother Max Bell ("Max") allegedly "began to compile false information" for Capital Business Solutions to use in its solicitations. (Id. ¶ 21).

Plaintiff Saibabu Appalaneni first learned of the solicitations in September 2011. (Id. ¶ 24). This sparked conversations with Capital Business Solutions, Martin, Ricky, and Max about buying rights to oil leases. (Id. ¶¶ 24-29). Appalaneni was informed that Danny Basil, a lawyer, could help Appalaneni with certain legal matters related to the oil lease purchases. (Id. ¶ 33). Basil then assisted Appalaneni in creating Plaintiff SAAP Energy, Inc., the entity that would hold the purchased leases. (Id. ¶ 34).

The first purchases occurred in October 2011. (Id. ¶ 39). Appalaneni, on SAAP's behalf, met with Basil to close on three sets of leases. (Id. ¶¶ 39, 40, 44, 62). In November 2011, Plaintiffs closed on the North Edmonton lease assignments. (DN 34 ¶ 72). In January 2012, Plaintiffs closed on the Green County leases. (Id. ¶¶ 77, 79; DN 123 ¶ 75).

Plaintiffs allege that Ricky, individually and through Rebell Oil, provided "bogus" profit and oil production information to attract buyers for the leases. (DN 34 ¶ 16). After the sales were complete, Ricky would increase profits by servicing the oil wells at "inflated costs, under the guise that the work would drastically improve production while transferring the environmental and permitting liabilities to the investors." (Id.). Plaintiffs allege that the defendants in this action were either a part of or benefitted from Ricky's scheme. (Id.). The defendants include Basil, Basil's company I.A.T., Inc., and John Prior, who bought one of the leases. (Id.; DN 123 ¶ 12(a); DN 190 ¶ 12(b); DN 329-1 at #7229).

Plaintiffs asserted sixteen different counts against the several Defendants. (DN 190 ¶¶ 242-256; DN 34 ¶¶ 82-241).

Following a settlement conference, the Magistrate Judge reported that Plaintiffs' claims against Ricky and Rebell Oil had been resolved, that the settling parties would submit a consent judgment, and that the remaining claims would continue. (DN 374 at #8727). The Court then approved a consent judgment, entitling Plaintiffs "to recover from the Defendants, Ricky E. Bell, Rebell Oil of KY, LLC, and Rebell Oil of KY, Inc., jointly and severally, a judgment" for $9,861,151.20 at 12% interest until satisfied. (DN 378 ¶ 1).

Oral argument is unnecessary, and the Court is ready to rule on all outstanding motions.

II. Standard of Review

On summary judgment, the Court decides if there is any genuine issue of material fact and if the movant is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(a). The moving party must identify evidence in the record that demonstrates the absence of a material factual dispute. See Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). If the moving party satisfies its burden, the non-moving party must identify specific evidence in the record showing that a genuine factual dispute exists for trial. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986).

III. Basil's Supplemental Summary Judgment Motion and Plaintiffs' Motion to Amend

the Consent Judgment

Basil essentially believes that the consent judgment (DN 378) ended this litigation. (DN 397-1). As explained below, Basil misinterprets the Court's consent judgment.

In May 2017, Plaintiffs filed a notice in which they estimated their damages as $9,861,151.20 but reserving "their right to modify claimed damages, as warranted by fact or as permitted by the Court." (DN 373 at #8723). Then, the Court entered the consent judgment that is the subject of Plaintiffs' motion to amend and Basil's supplemental motion for summary judgment. The consent judgment states, in part:

This cause is before the Court upon confession of judgment by the Defendant, Ricky E. Bell, individually, and as the sole member of Rebell Oil of KY, LLC and sole officer of Rebell Oil of Ky, Inc., made in open court following a settlement conference conducted on May 12, 2017, and further memorialized by the signatures of the parties herein. The Court having considered the matter and otherwise being fully and sufficiently advised, it is HEREBY ORDERED AND ADJUDGED as follows:

1. Plaintiffs are entitled to recover from the Defendants, Ricky E. Bell, Rebell Oil of KY, LLC, and Rebell Oil of KY, Inc., jointly and severally, a judgment in the amount . . . of $9,861,151.20, together with post-judgment interest at the legal rate of 12% per annum until satisfied.

. . .3. The Defendant Ricky E. Bell agrees to cooperate in this matter, including appearing as a witness at any trial.

. . .

5. The Court will retain jurisdiction over the enforcement of this consent judgment.

6. There being no just cause [for] delay, Plaintiffs may have immediate execution on this judgment.

(DN 378).⁴ The judgment was signed only by Ricky, on behalf of himself and Rebell Oil. (Id.).

Basil first argues that because the consent judgment awarded Plaintiffs all the damages they requested and established Ricky's and Rebell Oil's liability for those damages, there is nothing left in this litigation to adjudicate. (DNs 397-1 & 399). Basil conflates establishing liability against Bell with satisfying Plaintiffs' claims — including the claims against Basil. Simply because the consent judgment established Ricky's and Rebell Oil's liability and allowed Plaintiffs to recover nearly $10 million from Ricky and Rebell Oil does not mean that the consent judgment foreclosed Plaintiffs' claims against any non-party to the settlement.

To start, interpreting the consent judgment as allocating all fault to Ricky and Rebell Oil is inconsistent with the statement within the consent judgment that "Defendant Ricky E. Bell agrees to cooperate in this matter, including appearing as a witness at any trial." (DN 378 ¶ 3). If the consent judgment allocated all fault to only Ricky and Rebell Oil, then there would be no need for a trial and no need for Ricky's testimony.

Basil's interpretation also contradicts the Magistrate Judge's report which says, "The remaining claims in this case will continue for further adjudication." (DN 374 at #8727). Ifresolving Plaintiffs' claims against Ricky and Rebell Oil resolved all claims, there wouldn't be any claims left to adjudicate.

Finally, if Ricky and Rebell Oil were the only ones at fault in this case, an order dismissing all of Plaintiffs' claims against all other defendants in this case would have...