ERIC F. MELGREN, District Judge.
Plaintiff Paul Atkins filed this lawsuit in state court alleging fraud, fraud on the court, and conspiracy claims under Kansas law. Several Defendants removed the case to federal court. Currently, there are six pending matters before the Court. These motions primarily relate to whether Plaintiff has stated or can state a claim for relief in his Petition or in his proposed Amended Complaint. Because the Court finds that Plaintiff cannot state a plausible claim, the Court grants Defendants' motions for dismissal and denies Plaintiff's
Plaintiff Atkins filed a state court Petition ("Petition") in this case in the District Court of Jefferson County, Kansas on January 6, 2014. He included eleven defendants: (1) Heavy Petroleum Partners, LLC ("HPP"), (2) Cherokee Wells, LLC ("Cherokee Wells"), (3) Robert DeFeo, (4) John Wesley Broomes, (5) Hinkle Law Firm, LLC, (6) Prometheus Petroleum, LLC, (7) David E. Orr, (8) Arden Ellis, (9) Jens Hansen, (10) JAG Petroleum, LLC ("JAG"), and (11) Maclaskey Oilfield Services, Inc.
Atkins' Petition alleged six state law claims arising from a dispute over an oil and gas lease in northeast Kansas. He alleged three fraud claims, two fraud on the court claims, and a conspiracy claim. All of these claims related to incidents that allegedly occurred prior to or during the pendency of a previous lawsuit in which Atkins was a defendant.
Atkins is allegedly the sole owner of a 6.5% overriding royalty interest in an oil and gas lease ("the Noll Lease"). Atkins is also an owner of J.J.R. of Kansas Limited ("J.J.R."). J.J.R. had an ownership interest in a separate oil and gas lease ("the Zachariah Lease"). Generally, Plaintiff alleges in this lawsuit that Defendants fraudulently obtained his interest in both the Zachariah and the Noll Lease. Counts I through III relate to the Zachariah Lease, and Counts IV through VI relate to the Noll Lease. These claims are explained in more detail below when they are relevant to the issues.
In the First Lawsuit, HPP and Cherokee Wells brought an action against J.J.R. and Atkins (as an owner of J.J.R.) alleging that J.J.R. and Atkins had wrongfully interfered with HPP and Cherokee Wells' oil and gas lease interests by shutting-in (turning off) producing oil wells. HPP and Cherokee Wells asserted breach of contract claims and sought to quiet title. On November 16, 2009, J.J.R. and Atkins sought leave to amend their Answer and Counterclaim in the First Lawsuit to assert several counterclaims against HPP and Cherokee Wells, including fraud claims. Specifically, J.J.R. and Atkins alleged:
The magistrate judge denied the motion finding, among other things, that J.J.R. and Atkins' request for leave to assert fraud claims was futile because the claims were "conclusory and lack[ed] the specificity required by [Fed.R.Civ.P.] 9(b)" and therefore would not survive a motion to dismiss.
On June 9, 2010, the district court granted HPP and Cherokee Wells' motion for partial summary judgment and entered summary judgment in favor of HPP and Cherokee Wells on their quiet title claim. In December 2010, the district court held a jury trial on the limited issue of whether J.J.R. and Atkins breached their duty to pay under a contract. A jury found J.J.R. and Atkins liable in the amount of $87,387.03. J.J.R. and Atkins appealed the judgment to the Tenth Circuit Court of Appeals ("First Appeal").
After the December 2010 jury trial and the district court's entry of judgment, and during the pendency of J.J.R. and Atkins' appeal, HPP executed on its judgment. The district court later described the execution as follows:
The Marshal's Sale was held on August 8, 2011. On November 3, 2011, the district court conducted a hearing on HPP and Cherokee Wells' Motion to Confirm Execution Sale. At this hearing, J.J.R. and Atkins appeared through counsel, and Atkins also appeared personally. The following day, on November 4, 2011, the district court entered an order confirming the execution sale.
J.J.R. and Atkins' First Appeal to the Tenth Circuit raised several issues. One of the issues they raised was the magistrate judge's denial of their request for leave to amend to assert counterclaims against HPP and Cherokee Wells. The Tenth Circuit rejected this argument and held that the "district court properly denied leave to amend."
The district court denied J.J.R. and Atkins' motion to amend because they were "woefully out of time."
On May 14, 2013, the district court presided over a bench trial on the quiet title claim, and on July 23, 2013, the district court awarded judgment in favor of HPP and Cherokee Wells and quieted title in their favor. In the Memorandum and Order awarding judgment in favor of HPP and Cherokee Wells, the district court acknowledged that Atkins had recently raised the issue that when HPP executed upon its judgment, HPP allegedly improperly sold Atkins' personal interest in the Noll Lease. The district court recognized that the sale was proper because J.J.R. and Atkins had not requested a stay of execution on the judgment or posted a supersedeas bond.
The district court agreed with HPP that the plain language of the Marshal's Deed stated that the execution applied only to property of J.J.R., but found that the plain language of the deed did not appear to resolve the factual question whether the property was in fact J.J.R.'s interest or Atkins' interest. The district court also noted that the parties agreed that HPP had no right to execute on Atkins' personal property, and HPP specifically stated that it did not intend the Marshal's Deed to convey any interest owned by Atkins personally. Thus, the district court framed the issue as a factual dispute as to whether the property on which HPP had executed was owned by J.J.R. or Atkins. The district court gave the parties 60 days to reach an agreement about the title issue, and if they could not come to an agreement, the district court stated that it would appoint a special master to render a title opinion.
Atkins appealed to the Tenth Circuit a second time ("Second Appeal").
On September 2, 2014, the Tenth Circuit Court of Appeals issued its order on J.J.R. and Atkins' Second Appeal.
Accordingly, the Tenth Circuit only addressed the quiet title issue and ultimately affirmed the district court's memorandum and order quieting title in HPP and Cherokee Wells' favor.
Within this mass of facts and proceedings, Atkins filed his state court Petition on January 6, 2014, asserting fraud, fraud on the court, and conspiracy claims. Atkins' filing prompted Defendants HPP, Cherokee Wells, Robert DeFeo, Jens Hansen, John Wesley Broomes, and Hinkle Law Firm LLC to file a Notice of Removal to federal court.
On September 17, 2014, 2014 WL 4657105, this Court ruled on the Motion to Remand and Motion to Stay Proceedings. In this Order, the Court found that Plaintiff had fraudulently joined three non-diverse Defendants (John Broomes, Hinkle Law Firm, and Maclaskey). Thus, the Court dismissed these Defendants, and the case remained in federal court. In addition, the Court granted Plaintiff's request for stay but lifted the stay when it issued the Order. Thus, the case was stayed from the filing of Plaintiff's motion on February 25, 2014, until September 17, 2014. With regard to the six Defendants' pending Motion to Dismiss, the Court directed Defendants to file an amended brief by October 8, 2014.
On October 8, 2014, Defendants HPP, Cherokee Wells, Defeo, and Hansen ("the Heavy Petroleum Defendants") filed an Amended Motion to Dismiss (Doc. 27) to reflect the dismissal of two Defendants, as well as an accompanying memorandum. In addition, on that same date, Defendant JAG filed a Motion for Judgment on the Pleadings (Doc. 25). Instead of filing a response to these motions, Plaintiff filed an Amended Complaint on October 29, 2014. Plaintiff filed his Amended Complaint stating that he filed it as a matter of right under Fed.R.Civ.P. 15(a)(1). Defendant JAG and the Heavy Petroleum Defendants filed Motions to Strike the Amended Complaint (Docs. 31, 33). In response, Plaintiff filed a Motion for Leave to Amend Plaintiff's Complaint (Doc. 34). The proposed Amended Complaint is identical to the one Plaintiff already filed on October 29, 2014.
In Plaintiff's proposed Amended Complaint, there are eight named Defendants.
In Plaintiff's proposed Amended Complaint, he also adds several additional allegations as to the alleged "timeliness" of his claims and the "procedural history" of the
There are currently seven matters before the Court.
Plaintiff filed an Amended Complaint on October 29, 2014, stating that he filed it as a matter of right under Fed.R.Civ.P. 15(a)(1). Defendant JAG and the Heavy Petroleum Defendants move to strike Plaintiff's Amended Complaint contending that it is untimely and cannot be filed as a matter of right.
Federal Rule of Civil Procedure 15(a)(1) provides
For purposes of this Order, the Court will only consider the 21 day timeframe under
Plaintiff did not seek to amend his complaint as a matter of course prior to October 8 but instead waited until October 29, 2014, to file an Amended Complaint. Thus, measuring the timeframe from JAG's Answer, Plaintiff's Amended Complaint is untimely under Fed.R.Civ.P. 15(a)(1) and could not be filed as a matter of right. Accordingly, the Court grants Defendants' Motions to Strike Plaintiff's Amended Complaint (Docs. 31, 33).
Five Defendants (the Heavy Petroleum Defendants and JAG) seek dismissal of Plaintiff's claims against them.
Under Rule 12(b)(6), a defendant may move for dismissal of any claim for which the plaintiff has failed to state a claim upon which relief can be granted.
Under Federal Rule of Civil Procedure 12(c), a party may move for judgment on the pleadings after the pleadings are closed as long as the motion is made early enough not to delay trial.
Under Federal Rule of Civil Procedure 15(a)(2), once a responsive pleading has been filed, "a party may amend its pleading only with the opposing party's written consent or the court's leave."
The proposed Amended Complaint does not contain any additional claims against these four Defendants. Instead, it only contains some additional alleged factual assertions that attempt to rebut Defendants' reasons for dismissal. Thus, the Court will address both the allegations in the Petition and the proposed Amended Complaint together with regard to the Heavy Petroleum Defendants.
In Count I, Plaintiff alleges that HPP and Cherokee Wells engaged in fraud in 2006 when they allegedly made false misrepresentations to the Kansas Corporation Commission ("KCC") that well 2-84 (on the Zachariah Lease) was suitable for salt water disposal. In addition, Plaintiff alleges that HPP and Cherokee Wells made misrepresentations in filings with the court and in communications with Atkins and J.J.R. that HPP and Cherokee Wells were operating the Zachariah Lease in compliance with the operating agreement. Plaintiff also asserts that "Paul Atkins and JJR of Kansas Limited were foreseeably injured when the KCC ordered well 2-84 closed."
Both Fed.R.Civ.P. 17(a) and K.S.A. § 60-217(a) require that "[a]n action must be prosecuted in the name of the real party in interest." A federal court sitting in diversity must look to state law to determine whether a plaintiff is the real party in interest.
All of the allegations contained in Count I through Count III relate to the Zachariah Lease, which is owned by J.J.R. Because J.J.R. is the owner of the Zachariah Lease, J.J.R. would be entitled to any recovery regarding this lease. Plaintiff attempts to argue in his proposed Amended Complaint that he is the real party in interest because he "is an interest holder in JJR" and receives payments from J.J.R.
In addition, with regard to Count I, Plaintiff fails to state a claim as he fails to adequately allege fraud. A fraud claim requires
In this case, Plaintiff alleges that HPP and Cherokee Wells made false representations of material fact to the KCC. Because those alleged misrepresentations were made to a third party, Plaintiff fails to state claim of fraud. To the extent that the claim could be construed to allege false statements made to Plaintiff, there are no particular allegations as to when false statements were made to Plaintiff or when Plaintiff relied upon such misrepresentations. The only particular misrepresentation raised by Plaintiff is the alleged misrepresentation to the KCC (a third party), and this event allegedly occurred in 2006. Accordingly, Count I fails to state a claim for relief.
Plaintiff alleges in Count II that HPP and Cherokee Wells were parties to a fraud on the court in the First Lawsuit by filing a contract with the Court about steam technology providers.
In addition, Count II fails because Plaintiff does not sufficiently allege a claim for fraud on the court. The Kansas Court of Appeals has defined fraud on the court as "`fraud which is directed to the judicial machinery itself and is not fraud between the parties or fraudulent documents, false statements or perjury.'"
When analyzing fraud on the court claims, Kansas courts look to federal courts for guidance.
With regard to Count II, Atkins alleges that HPP and Cherokee Wells (using Hinkle and Broomes as their agents) "filed" the steam technology contract with the court and "used [it] as an evidentiary exhibit."
In Count III, Atkins asserts that HPP and Cherokee Wells committed fraud by entering into an operating agreement with Atkins and J.J.R. knowing that they would not perform the promises made to Atkins and J.J.R.
Plaintiff also fails to allege with particularity any fraudulent misrepresentations. Notwithstanding Plaintiff's failure to allege fraud with particularity, Count III also fails on the basis of collateral estoppel. "Federal law governs the scope of preclusive effect given to federal-court decisions."
With regard to the first element of whether the previous issue and the current issue are identical, some of the questions to consider include the following.
Element one is met in this case because the issue was previously decided in the First Lawsuit as Atkins repeatedly argued that HPP and Cherokee Wells wrongfully obtained his interest in the Zachariah Lease. In the First Lawsuit, Atkins and J.J.R. argued that "the Farmout required HPP to establish actual production of commercial quantities of oil due solely to steam injection in order for HPP to earn the assignment [of J.J.R.'s interest]."
As to the second element of issue preclusion, it is met in several ways. First, Atkins tried to amend his counterclaim to assert fraud claims against HPP and Cherokee specifically relating to alleged misrepresentations about steam injection technology. The Court denied Atkins' motion finding that amendment would be futile, and the Tenth Circuit affirmed this finding.
The third and fourth elements are also met. Atkins, as a party to the First Lawsuit, asserted that HPP and Cherokee Wells had wrongfully obtained his (or J.J.R.'s) right to the Zachariah Lease. Thus, Atkins had the full and fair opportunity to litigate the issue, and as noted above, the issue was indeed litigated. Accordingly, Atkins fails to state a claim for relief in Count III, and collateral estoppel bars this claim.
In Count IV in the Petition, Atkins claims that HPP and Cherokee Wells committed fraud on the court by procuring an order certifying the Marshal's sale of an interest in the Noll Lease that Atkins claims he owns. Similar to the failures noted above with regard to Atkins' alleged fraud on the court claim in Count II, he fails to sufficiently allege fraud on the court in Count IV. Atkins fails to allege that HPP and Cherokee Wells knew that the Marshal's sale was fraudulent or that they intended to deceive the district court by filing a motion to confirm that sale. Instead, Atkins simply alleges that Broomes, as an agent of HPP and Cherokee Wells, filed documents that were allegedly false. Atkins makes no specific allegations and fails to allege with particularity any intent to deceive the court. Thus, he fails to state a claim in the Petition.
With regard to the proposed Amended Complaint, Atkins attempts to assert several new factual allegations in Count IV specifically against Broomes and Hinkle (who were previously dismissed from the case). Plaintiff contends that Broomes and Hinkle made intentional misrepresentations on behalf of HPP and Cherokee Wells at a confirmation hearing before the Court, on November 3, 2011, regarding an execution sale conducted by the United States Marshal on property belonging to J.J.R. Even if the allegations in the proposed Amended Complaint could be construed to assert with particularity intentional misrepresentations to the Court, Plaintiff's claim still fails.
When bringing an independent fraud on the court claim, the party seeking relief should not find himself in the situation "due to his own fault, neglect or carelessness."
Furthermore, Plaintiff's claim is barred by res judicata. "The doctrines of res judicata, or claim preclusion, and collateral estoppel, or issue preclusion, are closely related."
With regard to the identity of the cause of action, the Tenth Circuit has adopted a "transactional approach" in that "a cause of action includes all claims or legal theories of recovery that arise from the same transaction, event, or occurrence."
The first element is met as there was a final judgment on the merits in the First Lawsuit. The second element is also met. HPP, Cherokee Wells, and Atkins were all parties to the First Lawsuit. Thus, there is an identity of the parties. Finally, there is an identity of the cause of action in both suits. In the First Lawsuit, Plaintiff sought leave to include fraud claims relating to the ownership of the Noll Lease. Indeed, Plaintiff tries to assert the same claims as he did before. And although this Court did not allow Plaintiff to amend his counterclaim to specifically assert those claims, this Court still allowed Plaintiff to present the Noll Lease issue. Specifically, this Court gave Plaintiff time to present the issue at the bench trial. When Plaintiff failed to discuss the Noll Lease during the bench trial, this Court allowed Plaintiff to submit briefing on the Noll Lease issue. This Court then stated in its July 23, 2013, Order in the First Lawsuit that if the parties could not come to an agreement on the Noll Lease
In Count V, Plaintiff alleges that HPP and Cherokee Wells committed fraud in the delivery and taking of Plaintiff's personal ownership in the oil and gas lease recorded at Book 808, Page 237 in the Leavenworth County Register of Deeds. Plaintiff fails to state a claim as he does not adequately allege fraud. As noted above, a key element of a fraud claim is a misrepresentation made to the injured party.
Furthermore, res judicata also bars this claim. This claim relates to Plaintiff's alleged interest in the Noll Lease, and, as noted above, Plaintiff had the opportunity to litigate the Noll Lease issue in the First Lawsuit. Accordingly, Plaintiff fails to state a claim for relief in Count V, and this claim is barred by res judicata.
Finally, in Count VI, Plaintiff asserts a conspiracy claim. This claim alleges that Defendants conspired "to defraud oil lease operators and owners" and "to seize the ownership in JJR's leases through fraud."
In sum, Plaintiff fails to state a claim against the Heavy Petroleum Defendants in his Petition and cannot state a claim in the proposed Amended Complaint. Thus, Plaintiff's request to file an Amended Complaint would be futile. Accordingly, this Court grants the Heavy Petroleum
With regard to Defendant JAG, the Court will address the Petition first and then address the proposed Amended Complaint.
The only claim expressly asserted against Defendant JAG in Plaintiff's Petition is a conspiracy claim (Count VI). This claim alleges that Defendants conspired "to defraud oil lease operators and owners" and "to keep Paul Atkins' proceeds from the oil sold off the Noll Lease even though JAG [] and the conspirators knew the lease was obtained through fraud...."
In Plaintiff's proposed Amended Complaint, he abandons Counts V and VI with regard to JAG.
Defendant JAG contends that although Plaintiff re-characterizes his claims against JAG, the claims still rest on the same fundamental principle that Plaintiff's interest in the Noll Lease was fraudulently taken. JAG argues that because Plaintiff's claims regarding the Noll Lease are barred by res judicata, Plaintiff's proposed new claims, derivative from the Noll Lease fraud claims, are also barred. The Court agrees. Both of Plaintiff's proposed new claims are premised on Plaintiff's theory that his interest in the Noll Lease was obtained unlawfully through fraud. As noted above, res judicata bars these claims.
In sum, Plaintiff fails to state a claim for relief against Defendant JAG in his Petition. And amendment of Plaintiff's Petition
With regard to Defendants Arden Ellis and Prometheus Petroleum, LLC, there is no evidence in the record that these two Defendants were served with the Petition. Federal Rule of Civil Procedure 4(m) provides
This case was filed approximately one year ago. Thus, these Defendants were not effectively served within the timeframe of Fed.R.Civ.P. 4(m).
As to Defendant David Orr, he was served, and Orr, acting as a pro se Defendant, filed a "Response to Summons."
Although sua sponte dismissals are not favored, "a sua sponte dismissal under Rule 12(b)(6) is not reversible error when it is patently obvious that the plaintiff could not prevail on the facts alleged and allowing him an opportunity to amend his complaint would be futile."
Plaintiff also filed a Notice under Federal Rule of Civil Procedure 5.1 that he questions the constitutionality of Federal Rule of Civil Procedure 15(a)(1) when applied to removed state actions. Plaintiff appears to complain about the 21 day timeframe in Fed.R.Civ.P. 15(a)(1)(B) for allowing an amendment to a pleading once as a matter of right. Pursuant to 28 U.S.C. § 2403, and Fed.R.Civ.P. 5.1(b),
On January 29, 2015, Plaintiff filed a Motion to Appoint Counsel. In this motion, he states that he seeks the appointment of counsel because he has been unable to locate counsel to represent him or cannot pay counsel to represent him.
Other allegations appear completely irrelevant to the case at hand. These allegations include that "President George W. Bush's unconstitutionally installed U.S. Attorney for the Western District of Missouri, the Kansas attorney Bradley Schlozman was determined by the USDOJ Inspector General to have repeatedly testified falsely to the U.S. Senate Judiciary Committee." Id. at p. 18, ¶ 64.5. Plaintiff also alleges that Defendants engaged in a "corrupt scheme" to distract Plaintiff's counsel from obtaining appellate review of Noll Lease issues and makes incoherent allegations regarding a case involving Plaintiff's counsel that was decided by the Tenth Circuit approximately six years ago. Id. at pp. 18-20, ¶¶ 64.7-64.13.
Although the motions were not timely opposed, "a district court may not grant a motion to dismiss for failure to state a claim merely because a party failed to file a response.... [E]ven if a plaintiff does not file a response to a motion to dismiss for failure to state a claim, the district court must still examine the allegations in the plaintiff's complaint and determine whether the plaintiff has stated a claim upon which relief can be granted." Issa v. Comp USA, 354 F.3d 1174, 1177 (10th Cir.2003) (quotation marks and citation omitted). Accordingly, the Court must consider whether Plaintiff states a claim even though he failed to timely respond to Defendants' motions.
The Court notes that in J.J.R. and Atkins' First Appeal to the Tenth Circuit, they argued that the JOA was not a valid and binding contract. The Tenth Circuit dismissed this argument finding that J.J.R. and Atkins had waived the issue because they (1) admitted in their answer that the JOA was included with the Farmout agreement, (2) stipulated in the Pretrial order that the Farmout agreement included the JOA, and (3) never raised an objection to the JOA in the district court. Heavy Petroleum I, 457 Fed.Appx. at 741.