Atkins v. Heavy Petroleum Partners, LLC et al
Filing
24
MEMORANDUM AND ORDER denying 12 Motion to Remand to State Court; granting 13 Motion to Stay Deadlines but the Court terminates that stay by the entry of this Order. See Order for specific filing deadlines. Defendants John Wesley Broomes, Hinkle Law Firm, LLC and Maclaskey Oilfield Services are dismissed from this action without prejudice. Signed by District Judge Eric F. Melgren on 9/17/2014. (cm)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
PAUL ATKINS,
Plaintiff,
v.
Case No. 14-4016-EFM-KGG
HEAVY PETROLEUM PARTNERS,
LLC, et al.,
Defendants.
___________________________________
MEMORANDUM AND ORDER
Plaintiff Paul Atkins filed this lawsuit against Defendants in the District Court of
Jefferson County, Kansas, on January 6, 2014, alleging fraud, fraud on the court, and conspiracy
claims under Kansas law. On February 12, 2014, Defendants Heavy Petroleum Partners, LLC,
Cherokee Wells, LLC, Robert DeFeo, Jens Hansen, John Wesley Broomes, and Hinkle Law
Firm LLC (hereinafter, “the Removing Defendants”) timely filed a Notice of Removal in this
Court. This matter is before the Court on Plaintiff’s Motion to Remand Action to the District
Court of Jefferson County under 28 U.S.C. § 1447(c) (Doc. 12). Also pending before the Court
is Plaintiff’s Motion to Stay Proceedings Until Resolution of the Plaintiff’s Motion to Remand
(Doc. 13). As explained in more detail below, the Court denies Atkins’ Motion to Remand, and
the Court grants, at least temporarily, Plaintiff’s Motion to Stay Proceedings.
I.
Factual and Procedural Background
Plaintiff Atkins filed this action in state court against the following eleven defendants:
(1) Heavy Petroleum Partners, LLC, (2) Cherokee Wells, LLC, (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, and (11) Maclaskey Oilfield
Services, Inc. Atkins’ Petition alleges various state law claims arising from a dispute over an oil
and gas lease in northeast Kansas. The following facts are either taken from the Petition that
Atkins filed in the District Court of Jefferson County, Kansas, on January 6, 2014 (“Plaintiff’s
Petition”), or from the record in a separate lawsuit filed in the District of Kansas styled Heavy
Petroleum Partners, LLC v. Atkins, Case No. 09-1077-EFM (“the First Lawsuit”).
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 a family-owned business, J.J.R. of Kansas
Limited (“J.J.R.”), which had an ownership interest in a separate oil and gas lease (“the
Zachariah Lease”). Late in the pendency of the First Lawsuit, the parties disputed whether J.J.R.
had an ownership interest in the Noll Lease. This dispute is explained in more detail below.
In the present lawsuit, as one of his claims, Atkins asserts that Defendants fraudulently
obtained his interest in the Noll Lease during the pendency of the First Lawsuit.1 Atkins also
1
See Plaintiff’s Petition, Doc. 1-1, p. 2, ¶ 1. Plaintiff Paul Atkins alleged in the Introduction of his Petition
that his “interest in the Noll lease was taken by fraud and without jurisdiction by the defendants during an ongoing
action in the Kansas U.S. District Court against the Kansas corporation JJR of Kansas, LLC, for breach of contract.”
Id. In addition, Plaintiff alleged that “[t]he complained of conduct took place during the conduct of the litigation
Heavy Petroleum Partners, LLC, et al v. Atkins, et al, KS. Dist. Court Case No. 09-1077 where two of the
defendants were plaintiffs.” Plaintiff’s Petition, Doc. 1-1, p. 4, ¶ 19.
The Court notes that when considering removal on the basis of fraudulent joinder, it must resolve factual
and legal issues in favor of the plaintiff. See Dutcher v. Matheson, 733 F.3d 980, 988 (10th Cir. 2013). Upon
allegations of fraudulent joinder, however, the Court may also pierce the pleadings and consider the entire record.
See Dodd v. Fawcett Publ’ns, Inc., 329 F.2d 82, 85 (10th Cir. 1964). In the current lawsuit (Case No. 14-4016), the
allegations are intricately tied to the First Lawsuit (09-1077) and the Court must consider that record as well.
Because the Court presided over the First Lawsuit and is familiar with the record and the proceedings, the Court will
not set forth alleged facts from Plaintiff’s Petition (or his Motion to Remand) that misrepresent the prior litigation or
facts that are false and proven so by the record. For example, in Plaintiff’s Motion to Remand, he alleges several
facts in which he states that the undersigned “expressly declined to address the fraud on the court or the ownership
of the Noll lease and did not resolve the issues despite the court expressly stating Paul Atkins could recover or
obtain redress for the Noll lease.” Doc. 12, p. 3, ¶ 6. In actuality, the Court did not decline to address the Noll lease
issue but instead allowed briefing on the issue. Atkins, through his counsel, then abandoned this issue. In addition,
the Court never made such a finding that Atkins could recover or obtain redress for the Noll lease. Instead, as noted
above, the Court allowed for briefing on the issue.
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alleges various other fraud and conspiracy claims which are described below when they are
relevant to the issues arising on the Motion to Remand.
In the First Lawsuit, Heavy Petroleum Partners LLC (“HPP”) and Cherokee Wells, LLC
(“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 in the First Lawsuit to assert several counterclaims against
HPP and Cherokee Wells, including fraud claims.2 Specifically, J.J.R. and Atkins alleged:
Defendants have been damaged by their reliance upon the false, fraudulent,
intentionally misleading statements and representations of partners, employees
and agents of plaintiffs when defendants detrimentally relied on the statements
that plaintiff Heavy Petroleum Partners, L.L.C. was skilled, experienced and
qualified to conduct heavy petroleum extraction on defendants’ lease with the use
of secondary recovery steam injection technology. This fraud resulted in damages
to defendants due to their detrimental reliance.3
The magistrate judge denied the Motion for Leave to Amend 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.4
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.5 In December 2010, the district court held a jury trial on the limited issue of
2
Case No. 09-1077-EFM, Docs. 69, 69-1.
3
Case No. 09-1077-EFM, Doc. 69-1, pp. 3-4, ¶ 8.
4
Case No. 09-1077-EFM, Doc. 92, p. 4.
5
Case No. 09-1077-EFM, Doc. 98.
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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 $87,387.03.6
J.J.R. and Atkins appealed the judgment to the
Tenth Circuit Court of Appeals.
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:
HPP applied for and received a Writ of Execution to execute on the property of
JJR in order to satisfy the outstanding portion of the judgment. Although
Defendants objected to the sale, and the case was on appeal to the Tenth Circuit,
Defendants did not request a stay of execution on the judgment or post a
supersedeas bond. Thus, the Marshal’s Sale was proper.
HPP executed upon the Noll lease during the Marshal’s Sale . . . .7
The Marshal’s Sale was held on August 8, 2011.8
On November 3, 2011, the district court
conducted a hearing on HPP and Cherokee Wells’ Motion to Confirm Execution Sale.9
At this
hearing, J.J.R. and Atkins appeared through counsel, and Atkins also appeared personally.10 The
following day, on November 4, 2011, the district court entered an order confirming the execution
sale.11
J.J.R. and Atkins’ 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
6
Case No. 09-1077-EFM, Doc. 142.
7
Case No. 09-1077-EFM, Doc. 234, p. 13.
8
Case No. 09-1077-EFM, Doc. 169, p. 2.
9
Case No. 09-1077-EFM, Doc. 174.
10
Case No. 09-1077-EFM, Doc. 175, p. 1.
11
Id.
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held that the “district court properly denied leave to amend.”12
Specifically, the Tenth Circuit
held that the fraud claims relied upon purely conclusory allegations that did not meet the
heightened pleading standard of “particularity” required by Fed. R. Civ. P. 9(b).13 Thus, the
Tenth Circuit concluded that J.J.R. and Atkins’ request for leave to amend to assert the fraud
claims was futile because they were subject to dismissal under Fed. R. Civ. P. 12(b)(6).14
J.J.R.
and Atkins also asserted that the district court erred by granting summary judgment in favor of
HPP and Cherokee Wells on the quiet title claim. The Tenth Circuit agreed and concluded that
the district court should not have quieted title in HPP and Cherokee Wells’ favor, thereby
remanding the action to the district court on this issue.15
Upon remand to the district court, HPP and Cherokee Wells again sought summary
judgment on the quiet title claim, which the district court denied.16 On April 18, 2013, J.J.R. and
Atkins filed a “Second Motion for Leave to Amend under Fed. R. Civ. P. 15 and Fed. R. Civ. P.
18 and Demand for Jury Trial.”17 J.J.R. and Atkins sought Leave to Amend their Answer to
assert five counterclaims: (1) fraud and concealment regarding compliance with the KCC rules
required to protect the defendants’ remaining interest in the lease; (2) fraud on the court through
the Exhibit A contract with steam technology providers; (3) fraud in the inducement through the
operating agreement; (4) fraud on the court through the procurement of the order certifying the
12
Case No. 09-1077-EFM, Doc. 176, p. 11.
13
Id.
14
Id.
15
Case No. 09-1077-EFM, Doc. 176.
16
Case No. 09-1077-EFM, Doc. 198.
17
Case No. 09-1077-EFM, Doc. 211.
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U.S. Marshal sale; and (5) fraud in the delivery of and taking of defendant Paul Atkins
ownership in Leavenworth County Register of Deeds Book 808 page 237.18
The district court denied J.J.R. and Atkins’ motion to amend because they were
“woefully out of time.”19 In that order denying leave to amend, this Court explained that the
case was before it on a remand from the Tenth Circuit on the quiet title issue, that the district
court had recently advised J.J.R. and Atkins that they cannot bring new claims, and that the only
claims pending before this Court were those that the Tenth Circuit had vacated, reversed, and
remanded.20
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.21 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.22 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.23
18
Id. The proposed allegations in J.J.R. and Atkins’ Second Motion for Leave to Amend are substantially
similar to the allegations in Plaintiff’s Petition (Atkins’ current state court Petition). Cf. id. with Case No. 14-4016EFM, Doc. 1-1. The only exception is that Atkins now includes an additional claim of an alleged conspiracy and
includes nine additional parties who were not parties in the First Lawsuit. See Plaintiff’s Petition, Case No. 14-4016EFM, Doc. 1-1.
19
Case No. 09-1077-EFM, Doc. 217.
20
Id.
21
Case No. 09-1077-EFM, Doc. 234.
22
Case No. 09-1077-EFM, Doc. 234, pp. 12–13.
23
Id. at p. 13.
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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.24 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.25 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.26 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.27
Atkins states in his Petition that he took “a timely appeal from the Kansas U.S. District
Court case which is now before the Tenth Circuit Court of Appeals.”28 J.J.R. and Atkins’ Notice
of Appeal stated that they sought review, among other things, of the district court’s decision “not
to [allow them to] amend their answer to include new counterclaims based on subsequent
24
Id. The parties disputed whether J.J.R. had an ownership interest in the Noll Lease. In the First Lawsuit,
HPP and Cherokee Wells asserted that Lloyd and Norma Noll entered into an oil and gas lease with Global Energy
Solutions, Inc. on October 20, 1999, which covered approximately 240 acres in Jefferson and Leavenworth
Counties, Kansas, as described in the lease. This is the “Noll Lease” at issue in the First Lawsuit. Case No. 091077-EFM, Doc. 232, ¶ 1 & Ex. A. HPP and Cherokee Wells next claimed that on January 23, 2001, Global
Energy Solutions, Inc. assigned its interest in the Noll Lease to J.J.R., which was recorded on January 31, 2001. Id.
at ¶ 3 & Ex. B. HPP and Cherokee Wells also claimed that in an instrument dated March 22, 2001, Lloyd and
Norma Noll purported to grant a separate oil and gas lease to Atkins, but at the time of that conveyance, the Nolls
had no interest in the Noll Lease to convey to Atkins other than their possibility of reverter in the lease they assigned
previously to Global Energy Solutions, Inc. (and was later assigned to J.J.R.). Id. at ¶¶ 4, 26 & Ex. C. Conversely,
Plaintiff claimed in the First Lawsuit that J.J.R. had never owned an interest in the Noll Lease. Case No. 09-1077EFM, Doc. 229, p. 2 & Ex. B.
25
Case No. 09-1077-EFM, Doc. 234, p. 14.
26
Id.
27
Id.
28
Plaintiff’s Petition, Doc. 1-1, p. 5, ¶ 26. See also Case No. 09-1077-EFM, Doc. 237.
-7
conduct and newly discovered fraud.”29 Before taking that appeal, however, J.J.R. and Atkins
filed a Motion to Alter or Amend the Judgment under Federal Rule of Civil Procedure 59(e).30
The district court denied that motion and refused to alter or amend the judgment.31
It noted
“one important caveat,” however, about its previous statement that it had retained jurisdiction to
determine whether HPP and Cherokee Wells improperly had executed on Atkins’ personal
ownership in a lease.32 The district court explained that J.J.R. and Atkins had stated in their
Notice of Appeal to the Tenth Circuit that “ ‘[t]he part of the order addressing defendant Atkins’
personal ownership interest that was never before this court is not a remaining issue regarding
the rights of the parties.’ ”33 Thus, the district court concluded that J.J.R. and Atkins had
abandoned their claim about Atkins’ personal ownership interest in the lease.34 Consequently,
the district court vacated its earlier assertion that it would appoint a special master to render a
title opinion if the parties did not reach an agreement within 60 days on the title issue.35
The Tenth Circuit Court of Appeals recently decided J.J.R. and Atkins’ second appeal.36
With regard to the issue of the alleged impropriety of the district court not allowing them to
amend their answer to include counterclaims of fraud, J.J.R. and Atkins apparently failed to brief
this contention or raise any issues with regard to the fraud claims to the Tenth Circuit. Thus, the
29
Case No. 09-1077-EFM, Doc. 237, p. 2, ¶ 8.
30
Case No. 09-1077-EFM, Doc. 235.
31
Case No. 09-1077-EFM, Doc. 251.
32
Id. at p. 2, n. 5.
33
Id. (quoting Doc. 237, p. 1).
34
Id.
35
Id.
36
Heavy Petroleum Partners, LLC v. Atkins, 2014 WL 4290578 (10th Cir. Sept. 2, 2014).
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Tenth Circuit did not address the issue. J.J.R. and Atkins, however, apparently briefed the Noll
lease issue to the Tenth Circuit and claimed that the district court erred when it found in its Order
denying J.J.R. and Atkins’ Motion to Alter or Amend Judgment that they had abandoned the
Noll lease issue. In its Order, the Tenth Circuit pointed out that J.J.R. and Atkins “never filed a
new notice of appeal or an amended notice of appeal relating to the denial of their Rule 59(e)
motion,” thus, the court lacked jurisdiction to consider any challenges to that ruling.37 The Tenth
Circuit also stated that it “lack[ed] jurisdiction over Defendants’ arguments relating to the Noll
lease issue because this was not identified as an issue subject to appeal in Defendants’ notice of
appeal.
Indeed, far from identifying this as an issue for appeal, Defendants affirmatively
disavowed it, explicitly stating in their notice of appeal that this issue was ‘not a remaining issue
regarding the rights of the parties.’ ”38 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.39
It is in this mass of facts and proceedings that Atkins filed his state lawsuit. And Atkins’
filing, in turn, prompted the Removing Defendants’ removal which, in turn, prompted Plaintiff’s
Motion to Remand. There are two motions currently pending before the Court.
Atkins timely filed a Motion to Remand the lawsuit to state court (Doc. 12). In this
motion, Atkins asserts that he properly joined the three Kansas defendants in this action, and
because these three Defendants are Kansas residents, complete diversity does not exist.40
37
Id. at *4.
38
Id. at *4-5 (citations omitted).
39
Id. at *5.
40
In the Notice of Removal, the Removing Defendants additionally argue that Atkins fraudulently joined
Defendant Jens Hansen by alleging incorrectly in the Petition that Hansen is a Kansas citizen. The Removing
Defendants assert that Hansen is a citizen of Texas (Doc. 1, pp. 23–24), and they submitted an affidavit signed by
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Accordingly, Atkins argues that the Court lacks subject matter jurisdiction and should remand
this action to state court. The Removing Defendants filed a response to Atkins’ motion.41 Atkins
filed no reply, and the time for doing so has expired.42 The Court will address this motion in Part
II.
Atkins also filed a Motion to Stay Deadlines, in which he requests that the Court stay
further proceedings, including briefing on Defendants’ Motion to Dismiss, until the Court rules
upon Plaintiff’s Motion to Remand and determines whether or not the Court has jurisdiction over
the case.43 The Court will address Plaintiff’s Motion to Stay Deadlines in Part III of this Order.
II.
Atkins’ Motion to Remand
The Removing Defendants timely removed the action to this Court based on diversity
jurisdiction under 28 U.S.C. §§ 1332, 1441, and 1446. Defendants Jag Petroleum, LLC and
David E. Orr consented to the removal.44 Defendants Arden Ellis, Prometheus Petroleum, LLC,
and Maclaskey Oilfield Services, Inc. had not been served with this lawsuit when the Removing
Defendants filed the Notice of Removal on February 12, 2014. Therefore, pursuant to 28 U.S.C.
§ 1446(b)(2)(A), these three Defendants did not need to consent to the removal.45
Hansen stating that he is a Texas citizen and has never been a Kansas citizen (Doc. 1-2). Atkins does not challenge
Hansen’s Texas citizenship in his Motion to Remand. Consistent with this record, the Court finds that Hansen is a
Texan citizen for diversity of citizenship purposes.
41
Doc. 19.
42
See D. Kan. Rule 6.1(d)(2).
43
The Removing Defendants filed a Motion to Dismiss (Doc. 8). This motion has not yet been fully briefed
due to Atkins’ filing of a Motion to Stay Deadlines (Doc. 13). Defendants also filed a Motion to Transfer Case
(Doc. 14) to the undersigned asserting that the claims in the instant case related to the issues and claims in a
previous case before the undersigned, Case No. 09-1077-EFM. The Court recently granted Defendants’ motion
(Doc. 22).
44
Docs. 1-16, 1-17.
45
See 28 U.S.C. § 1446(b)(2)(A); Sheldon v. Khanal, 502 F. App’x 765, 770 (10th Cir. 2012) (“[T]he clear
statutory language [of 28 U.S.C. §1446(b)(2)(A)] requir[es] only served defendants to consent to removal.”).
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The Removing Defendants acknowledge that Defendants John Wesley Broomes, Hinkle
Law Firm, LLC, and Maclaskey Oilfield Services, Inc. are Kansas residents, and therefore the
parties are not completely diverse, as the governing statute requires for this Court to exercise
subject matter jurisdiction. The Removing Defendants argue, however, that Atkins fraudulently
joined these three Defendants for the purpose of defeating diversity jurisdiction, and
consequently, the Court must disregard them when determining whether subject matter
jurisdiction exists.46 Atkins then timely filed a Motion to Remand to state court asserting that he
did not fraudulently join these three Defendants.
A. Legal Standard
“ ‘Federal courts are courts of limited jurisdiction; they must have a statutory basis for
their jurisdiction.’ ”47 Under the federal removal statute, 28 U.S.C. § 1441, a defendant may
remove to federal court “any civil action brought in a State court of which the district courts of
the United States have original jurisdiction.”48 Here, defendants have removed this lawsuit from
state court asserting that this Court has diversity jurisdiction under 28 U.S.C. § 1332.
Because federal courts are courts of limited jurisdiction, there is “a presumption against
removal jurisdiction.”49 As the party seeking to invoke diversity jurisdiction, the Removing
Defendants bear the burden to establish the existence of diversity at the time of removal.50 To
46
See generally Wilson v. Republic Iron & Steel Co., 257 U.S. 92, 97 (1921) (stating that the right of
removal cannot be defeated by “fraudulent joinder of a resident defendant having no real connection with the
controversy.”).
47
Dutcher, 733 F.3d at 984 (quoting Rural Water Dist. No. 2 v. City of Glenpool, 698 F.3d 1270, 1274
(10th Cir. 2012)).
48
Id. (quoting 28 U.S.C. § 1441).
49
Laughlin v. Kmart Corp., 50 F.3d 871, 873 (10th Cir. 1995).
50
Id.
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invoke diversity jurisdiction, “a party must show that complete diversity of citizenship exists
between the adverse parties and that the amount in controversy exceeds $75,000.”51
In this
case, the parties do not dispute that the amount in controversy exceeds the jurisdictional
threshold. The dispute here centers on whether complete diversity of citizenship exists. The
court lacks diversity jurisdiction when any of the plaintiffs has the same residency as even a
single defendant.52 In this case, Atkins and three of the Defendants are residents of Kansas, and
therefore, complete diversity of citizenship does not exist.
The Removing Defendants assert, however, that Atkins has fraudulently joined the three
Kansas Defendants, and therefore, the Court should ignore these three Defendants when it
evaluates diversity of citizenship. To establish fraudulent joinder, the Removing Defendants
must show either “ ‘(1) actual fraud in the pleading of jurisdictional facts, or (2) inability of the
plaintiff to establish a cause of action against the non-diverse party in state court.’ ”53
The
Removing Defendants bear a “ ‘heavy burden of proving fraudulent joinder, and all factual and
legal issues must be resolved in favor of the plaintiff.’ ”54 When evaluating the proprietary of
removal in the face of a fraudulent joinder allegation, the Tenth Circuit has directed courts to
“pierce the pleadings, consider the entire record, and determine the basis of joinder by any means
available.”55
51
Dutcher, 733 F.3d at 987 (quotation omitted); see also 28 U.S.C. § 1332(a).
52
Id.
53
Id. at 988 (quoting Cuevas v. BAC Home Loans Serv., LP, 648 F.3d 242, 249 (5th Cir. 2011)).
54
Id. (quoting Pampillonia v. RJR Nabisco, Inc., 138 F.3d 459, 461 (2d Cir. 1998)).
55
Dodd, 329 F.2d at 85 (citations omitted).
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The Removing Defendants do not allege that Atkins has recited the jurisdictional facts
fraudulently.56 Instead, the Removing Defendants assert that Atkins has fraudulently joined the
three Kansas Defendants because there is no possibility that Atkins can establish a cause of
action against these three Defendants in state court.
Therefore, the Court must determine
whether there is a “reasonable basis” to believe Atkins may succeed in at least one claim against
one of the three Kansas Defendants.57
If there is, fraudulent joinder does not exist.58
“A
‘reasonable basis’ means just that: the claim need not be a sure-thing, but it must have a basis in
the alleged facts and the applicable law.”59
B. Analysis
The Removing Defendants assert that Atkins fraudulently joined Defendants John
Wesley Broomes (“Broomes”), Hinkle Law Firm, LLC (“Hinkle”), and Maclaskey Oilfield
Services, Inc. (“Maclaskey”). The Court first evaluates whether Atkins might establish a cause
of action in state court against Broomes and Hinkle. The Court next addresses whether Atkins
might establish a cause of action in state court against Maclaskey.
1. Atkins’ Fraud on the Court Claims Against Defendants Broomes and
Hinkle
In his Petition, Atkins asserts two claims against Broomes and Hinkle for fraud on the
court allegedly occurring during the First Lawsuit. Broomes (and the law firm that he worked
for, Hinkle) represented HPP and Cherokee Wells as their counsel of record in the First Lawsuit.
In Count II, Atkins asserts that Broomes and Hinkle committed fraud on the court by filing a
56
The one exception may be the facts as to Jens Hansen. As noted above, Atkins alleged that Mr. Hansen
was a resident of Kansas. Instead, as the record demonstrates, Mr. Hansen is a Texas resident. See supra note 40.
57
Nerad v. AstraZeneca Pharm., Inc., 203 F. App’x 911, 913 (10th Cir. 2006) (citing Badon v. RJR
Nabisco, Inc., 224 F.3d 382, 393 (5th Cir. 2000)).
58
See Dutcher, 733 F.3d at 989.
59
Nerad, 203 F. App’x at 913.
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contract involving steam technology providers which, Atkins contends, HPP and Cherokee Wells
contrived to deceive Atkins and J.J.R. into thinking that oil production on the Zachariah Lease
would be increased by using steam technology. Count IV asserts that Broomes and Hinkle
committed fraud on the court by procuring an order certifying the Marshal’s sale on an oil and
gas lease, i.e. the Noll Lease, which Atkins claims he owns.
The Removing Defendants assert in their Notice of Removal (Doc. 1) that Atkins cannot
establish a claim for fraud on the court against Broomes and Hinkle for five, separate reasons:
(1) issue preclusion bars Atkins’ claims against Broomes and Hinkle; (2) Broomes and Hinkle
are not the proper defendants in an action for fraud on the court because they were not parties to
the underlying judgment which Atkins seeks to set aside; (3) Atkins is not the real party in
interest in his claims against Broomes and Hinkle; (4) Atkins fails to state a claim for relief
against Broomes and Hinkle; and (5) the statute of limitations and/or laches bars Atkins’ claims
against Broomes and Hinkles. Atkins asserts in his Motion to Remand (Doc. 12) that he
sufficiently alleges an independent action for fraud on the court against Broomes and Hinkle.
The Court will first address Atkins’ argument that he is bringing an independent action
against Broomes and Hinkle. Next, the Court will address several of the Removing Defendants’
arguments that the claims against Broomes and Hinkle are not actionable in state court.
a. Atkins Has Not Alleged An Independent Action Against Broomes and
Hinkle.
Federal Rule of Civil Procedure 60 and K.S.A. § 60-260 govern relief from final
judgments. Both Fed. R. Civ. P. 60(d) and K.S.A. § 60-260 “[do] not limit a court’s power to
entertain an independent action to relieve a party from a judgment, order, or proceeding” or “set
aside a judgment for fraud on the court.”60
Because the Kansas Rules of Civil Procedure are
60
Fed. R. Civ. P. 60(d)(1) & (d)(3); K.S.A. § 60-260(d)(1) & (d)(3).
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patterned after the Federal Rules of Civil Procedure, Kansas courts look to federal case law for
persuasive guidance.61 Thus, the Court here looks to federal law to determine whether Atkins
may establish in state court an independent action for fraud on the court against Hinkle and
Broomes.62
The United States Supreme Court has explained that “an independent action should be
available only to prevent a grave miscarriage of justice.”63 Independent actions are “reserved for
those cases of ‘injustices which, in certain instances, are deemed sufficiently gross to demand a
departure’ from rigid adherence to the doctrine of res judicata;” otherwise, the strict requirements
of Rule 60 “would be set at naught.”64
Thus, the Tenth Circuit has explained, an independent
action provides only a “narrow avenue” for relief.65
The Tenth Circuit has set forth several requirements that a party seeking relief under this
rule must satisfy to bring an independent action:
Generally, such an independent action must show a recognized ground, such as
fraud, accident, mistake or the like, for equitable relief and that there is no other
available or adequate remedy. It must also appear that the situation in which the
party seeking relief finds himself is not due to his own fault, neglect or
carelessness. In this type of action, it is fundamental that equity will not grant
relief if the complaining party has, or by exercising proper diligence would have
61
Back-Wenzel v. Williams, 279 Kan. 346, 349, 109 P.3d 1194, 1196 (Kan. 2005); see also Lackey v.
Medora Twp., 194 Kan. 794, 796, 401 P.2d 911, 914 (Kan. 1965) (“Since the foregoing provision was lifted from
rule 60 of the Federal Rules of Civil Procedure we may look to federal cases for its construction and application.”).
62
See Boldridge v. Nat’l City Bank, 313 P.3d 837, 2013 WL 6389341, at *3 (Kan. Ct. App. Dec. 6, 2013)
(unpublished table opinion) (relying on federal law as guidance in determining whether the plaintiff had established
a fraud on the court claim sufficient to set aside a judgment under K.S.A. § 60-260(b)(3)); J-F Oil, LLC v. Lansing
Energy Corp., 108 P.3d 1018, 2005 WL 742073, at *5 (Kan. Ct. App. Apr. 1, 2005) (unpublished table opinion)
(looking to federal case law for guidance when assessing whether the plaintiff was entitled to relief from a judgment
based on fraud on the court under K.S.A. § 60-260).
63
United States v. Beggerly, 524 U.S. 38, 47 (1998).
64
Id. at 46 (quoting Hazel–Atlas Glass Co. v. Hartford–Empire Co., 322 U.S. 238, 244 (1944)).
65
United States v. Buck, 281 F.3d 1336, 1341 (10th Cir. 2002).
- 15
had, an adequate remedy at law, or by proceedings in the original action to open,
vacate, modify or otherwise obtain relief against, the judgment.66
An independent action is an “unusual type of proceeding,” and the granting of relief in such an
action “lies largely within the discretion of the trial judge.”67
Even when taking as true Atkins’ allegations of fraud on the court, Atkins does not allege
“the level of intentional fraud or gross injustice required” to bring an independent action against
Broomes and Hinkle.68 In Haik v. Salt Lake City, the Tenth Circuit recently rejected an attempt
to set aside a judgment based upon fraud on the court pursuant to Fed. R. Civ. P. 60(d)(1) and
(d)(3).69 In that case, the plaintiffs had litigated an earlier lawsuit against two municipalities
seeking to extend water service to their property.70 Plaintiffs lost that first suit, and then brought
a second lawsuit alleging that the municipalities’ continuing denial of water was unlawful
because of several new or newly discovered facts.71
Among several other arguments, the
plaintiffs asserted that defendants had committed fraud on the court in the first lawsuit by
concealing applications requesting changes in water use and by answering dishonestly the district
court’s questions about water availability and plans for future water use.72 The Tenth Circuit
66
Winfield Assoc., Inc. v. Stonecipher, 429 F.2d 1087, 1090 (10th Cir. 1970) (citations omitted); see also
11 Charles Alan Wright, et al., Federal Practice and Procedure § 2868 (3d ed. 2012) (“The indispensable elements
of such a cause of action are (1) a judgment which ought not, in equity and good conscience, to be enforced; (2) a
good defense to the alleged cause of action on which the judgment is founded; (3) fraud, accident, or mistake which
prevented the defendant in the judgment from obtaining the benefit of his defense; (4) the absence of fault or
negligence on the part of the defendant; and (5) the absence of any adequate remedy at law.”)
67
Winfield Assoc., Inc., 429 F.3d at 1090 (citations omitted).
68
See Haik v. Salt Lake City Corp., __ F. App’x __, 2014 WL 2523735, at *12 (10th Cir. June 5, 2014).
69
Id. at *13.
70
Id. at *1.
71
Id.
72
Id. at *13.
- 16
found that failing to disclose these facts did not rise to the level of a fraud on the court.73
And,
“[m]ore importantly,” the Tenth Circuit concluded that “the disclosure of the change applications
would not have influenced the result” in the earlier lawsuit.74
The same is true here. Atkins alleges in Count II that Defendants Broomes and Hinkle
committed fraud on the court by filing a contrived steam technology contract. The filing of this
steam technology contract never influenced the outcome of the First Lawsuit. The district court
found after a full trial that HPP had complied with its obligations under the contracts between the
parties and that HPP was entitled to its interests in the leases at issue.75 In reaching this decision,
the district court did not rely on the contract with steam technology providers. In fact, the
district court’s Memorandum and Order awarding judgment for HPP and Cherokee Wells never
mentions this steam technology contract.76 Therefore, the filing of the contract, even if it was a
fraudulent contract, did not affect the district court’s judgment in the First Lawsuit.
Likewise, Atkins’ allegations against Broomes and Hinkle in Count IV do not rise to “the
level of intentional fraud or gross injustice required to set aside a previous judgment.”77
Atkins
claims that Broomes and Hinkle 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. Addressing this
allegation in the First Lawsuit, the district court cited the language from the Marshal’s Deed
describing the property conveyed in the sale as:
73
Id. (citing Buck, 281 F.3d at 1342).
74
Id.
75
Case No. 09-1077-EFM, Doc. 234, p. 13.
76
See id.
77
See Haik, 2014 WL 2523735, at *12.
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All right, title, and interest of J.J.R. of Kansas Limited, believed to be a
0.06500000 overriding royalty interest, in a certain oil and gas leasehold arising
from an oil and gas lease from Lloyd E. Noll and Norma E. Noll, as lessors, to
Global Energy Solutions, Inc., as lessee, dated October 20, 1999, and recorded at
Book 781, Page 576, of the official records of the Register of Deeds of
Leavenworth County, Kansas, and Book 512, Page 43 of the official records of
the Register of Deeds of Jefferson County, Kansas, covering the west half of the
southwest quarter of Section 3, Township 9 South, Range 20 East, Leavenworth
County, Kansas, and the northeast quarter of Section 9, Township 9 South, Range
20 East, Jefferson County, Kansas.78
The district court agreed with HPP that the plain language of the deed showed that HPP executed
on J.J.R’s property, not Atkins’ personal property.79 In addition, HPP agreed that it had no right
to execute against Atkins’ personal property, and HPP specifically stated that it did not intend for
the Marshal’s Deed to convey any interest owned by Atkins personally.80 Instead, the district
court acknowledged that there was a factual dispute whether the property conveyed in the
Marshal’s sale was owned by J.J.R. or Atkins.81
These facts do not demonstrate that Broomes and Hinkle engaged in intentional fraud by
procuring an order certifying the Marshal’s sale sufficient to support an independent action under
Fed. R. Civ. P. 60(d).
Rather, their client HPP (through Broomes and Hinkle) explicitly
conceded it had no right to execute on Atkins’ personal property and that it did not intend the
Marshal’s Deed to convey any interest owned by Atkins personally. And Atkins’ claims against
Broomes and Hinkle allege no other facts rising to the level of intentional fraud or gross
injustice, as is required to bring an independent action.
78
Case No. 09-1077-EFM, Doc. 234, p. 13 (emphasis added).
79
Id.
80
Id.
81
Id.
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Also, with respect to Count IV, Atkins cannot show that “the situation in which [he] finds
himself is not due to his own fault, neglect or carelessness.”82
Atkins asserts in Count IV that
Broomes and Hinkle committed fraud on the court by procuring an order certifying the Marshal’s
sale on an interest in the Noll Lease, which Atkins claims to own. Atkins raised this argument in
the First Lawsuit, and the district court acknowledged the factual dispute whether the property
conveyed in the Marshal’s sale was owned by J.J.R. or Atkins. In its Memorandum and Order
awarding judgment in favor of HPP and Cherokee Wells, 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 it would appoint a special master to render a title opinion. But J.J.R. and
Atkins abandoned this very issue. When they filed their Notice of Appeal to the Tenth Circuit,
they stated that Atkins’ personal ownership interest was not a remaining issue in the case.83
Relying on this explicit statement, the district court vacated its earlier assertion that it would
appoint a special master to render a title opinion if the parties were unable to reach an agreement
within 60 days.84
Consequently, any hardship Atkins sustained because of the purportedly
unresolved title issue in the Noll Lease was caused by Atkins’ decision not to pursue the title
issue in the district court or his failure to properly raise that issue in his appeal to the Tenth
Circuit.85
In sum, the Court concludes that Atkins fails to show that an independent action is
necessary here to prevent a grave miscarriage of justice. To the contrary, the allegations in
82
Winfield Assoc., Inc., 429 F.3d at 1090 (citations omitted).
83
Case No. 09-1077-EFM, Doc. 237.
84
Case No. 09-1077-EFM, Doc. 251, p. 2, n. 5.
85
In its recent opinion, the Tenth Circuit also determined that J.J.R. and Atkins “affirmatively disavowed”
the Noll lease issue in its Notice of Appeal. Heavy Petroleum, LLC, 2014 WL 4290578, at *2.
- 19
Counts II and IV simply do not met “the high standard for relief” imposed by Fed. R. Civ. P.
60(d)(1) and 60(d)(3).86 Therefore, the Court rejects Atkins’ assertion that he is bringing an
independent action against Broomes and Hinkle in this case.
Because Atkins cannot maintain an independent action against Broomes and Hinkle for
fraud on the court, Atkins cannot establish a cause of action against these Defendants in state
court based on the allegations in Counts II and IV. Thus, Atkins fraudulently joined Broomes
and Hinkle, and the Court concludes it should ignore these two Defendants when evaluating
diversity jurisdiction. The Removing Defendants, however, assert five additional reasons that
Atkins cannot establish a claim against Broomes and Hinkle. The Court finds that three of these
reasons provide additional, independent bases for why Atkins cannot establish a claim against
Broomes and Hinkle in state court. Below, parts b.1, b.2, and b.3 discuss those reasons.
b. Three Additional Reasons Why Atkins Cannot Establish a Claim Against
Broomes and Hinkle
1. Atkins Fails to State a Claim Against Broomes and Hinkle
for Fraud on the Court.
The Removing Defendants also argue that Atkins’ fraud on the court claims against
Broomes and Hinkle are not actionable in state court because he fails to state a claim for relief
against these two Defendants under Kansas law. 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.’ ”87
86
See Haik, 2014 WL 2523735, at *4.
87
J-F Oil, 2005 WL 742073, at *5 (quoting Weese v. Schukman, 98 F.3d 542, 552 (10th Cir. 1996)); see
also Boldridge, 313 P.3d 837, 2013 WL 6389341, at *3 (“Fraud between the parties, perjury, and the nondisclosure
of pretrial discovery does not generally amount to fraud on the court.”) (citing Weese v. Schukman, 98 F.3d 542,
552–53 (10th Cir. 1996); Robinson, 56 F.3d at 1266–67; United States v. Chon, 512 F. App’x 855, 858 (10th Cir.
2013); Fraud on the Court, 47 Am. Jur. 2d, Judgments § 695).
- 20
“Only particularly egregious conduct—such as the fabrication of evidence or the bribery
of the judge or the jury—has been found to support a finding of fraud on the court. In other
words, to prevail on a claim of fraud on the court, one must normally show a deliberate scheme
to corrupt or subvert the basic function of the judiciary, which is the impartial adjudication of
cases.”88
When analyzing fraud on the court claims, Kansas courts look to federal courts for
guidance.89
Fraud on the court “requires a showing that one has acted with an intent to deceive
or defraud the court.”90
In other words, there must “be a showing of conscious wrongdoing—
what can properly be characterized as a deliberate scheme to defraud—before relief from a final
judgment is appropriate” for a fraud on the court.91
Also, K.S.A. § 60-209(b) requires that a party alleging fraud “must state with particularly
the circumstances constituting the fraud . . . . Malice, intent, knowledge, and other conditions of
a person’s mind may be alleged generally.”
The failure to allege fraud with particularity
compels dismissal of the claim.92 Indeed, Atkins is aware of this heightened pleading standard
under the analogous federal rule, Fed. R. Civ. P. 9(b). The Tenth Circuit affirmed the order
denying J.J.R. and Atkins’ request for leave to amend to assert fraud claims in the First Lawsuit
because they were not pleaded with particularly and thus the fraud claims were subject to
dismissal under Fed. R. Civ. P. 12(b)(6).93
88
Boldridge, 2013 WL 6389341, at *3.
89
Id. (citing Cool v. Cool, 203 Kan. 749, 755-56, 457 P.2d 60, 66 (Kan. 1969); J–F Oil, 2005 WL 742073,
90
Robinson, 56 F.3d at 1267.
91
Id.
at *4).
92
See Palmer v. Brown, 242 Kan. 893, 901, 752 P.2d 685, 690 (Kan. 1988); Newcastle Homes, LLC v.
Thye, 44 Kan. App. 2d 774, 789, 241 P.3d 988, 999 (Kan. Ct. App. 2010).
93
Case No. 09-1077-EFM, Doc. 176, p. 13.
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Here, Atkins fails to allege that Broomes and Hinkle intended to commit fraud on the
court by filing the steam technology contract (as alleged in Count II) and procuring the order
confirming the Marshal’s sale (as alleged in Count IV). With regard to Count II, Atkins alleges
that Broomes and Hinkle, as agents for HPP and Cherokee Wells, “filed” the steam technology
contract with the court and “used [it] as an evidentiary exhibit.”94 Atkins makes no allegations
that Broomes and Hinkle knew that the exhibit was fraudulent or that they intended to deceive
the court by submitting the contract as an evidentiary exhibit. Indeed, Atkins alleges that these
documents and misrepresentations were used to deceive Atkins.95 As noted above, fraud on the
court requires intent to deceive the court and is not fraud between the parties or fraudulent
documents. Atkins includes no such allegations in his fraud on the court claim in Count II.
Similarly, in Count IV, Atkins fails to allege that Broomes and Hinkle 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 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.
After reviewing Atkins’ Petition and taking its allegations as true, the Court finds no
factual allegations showing any “conscious wrongdoing” or a “deliberate scheme to defraud” the
district court in the First Lawsuit on the part of Broomes or Hinkle. Because Atkins does not
plead sufficient facts that Broomes and Hinkle knew that they were submitting fraudulent
information to the district court or that they had acted with intent to defraud the court, Atkins
cannot state a claim for relief against these two Defendants in Counts II and IV. Thus, Atkins
fails to state a claim against Broomes and Hinkle in state court in this lawsuit.
94
Plaintiff’s Petition, Doc. 1-1, pp. 18-19, ¶¶ 94–95.
95
See id. at pp. 9, 11, 18-19, ¶¶ 47, 49, 58, 94-95.
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2. Broomes and Hinkle Are Not Proper Defendants in the Fraud on the
Court Claims.
The Removing Defendants argue that Broomes and Hinkle are not proper defendants in
Counts II and IV (which both allege fraud on the court claims) because the only remedy for a
fraud on the court claim is relief from the prior judgment obtained by fraud. Because Broomes
and Hinkle were not parties in the First Lawsuit and thus did not obtain any judgment in their
favor, the remedy (relief from the final judgment) could not be applied to Broomes and Hinkle.
Plaintiff calls this argument “baseless” but does not otherwise substantively respond to this point
in his Motion for Remand.96 This argument is not baseless; instead, it is soundly rooted in
Kansas and federal law.
While the Court has located no Kansas case explicitly holding that the only proper
defendant in a fraud on the court claim is the party who obtained a favorable judgment in a prior
lawsuit, Kansas courts have applied K.S.A. § 60-260 to determine whether a judgment should be
set aside based on fraud on the court. Kansas courts have also recognized that the remedy for a
fraud on the court claim is relief from the prior judgment obtained by fraud.97 Similarly, federal
courts recognize that the proper remedy for fraud on the court is relief from the prior judgment.98
In addition, some federal courts have held specifically that relief from the prior judgment is the
only remedy for fraud on the court and that a fraud on the court claim does not permit the
96
Doc. 12, pp. 7–8.
97
See, e.g., Boldridge, 313 P.3d 837, 2013 WL 6389341, at *3 (stating that a district court may set aside or
reopen a judgment upon a finding of fraud on the court); J-F Oil, 108 P.3d 1018, 2005 WL 742073, at *4
(recognizing that under K.S.A. § 60-260, a court may set aside a judgment obtained by fraud on the court).
98
See, e.g., Haik, 2014 WL 2523735, at *13 (stating that “a judgment can be set aside for fraud on the court
only in cases of the most egregious misconduct”); see also Robinson v. Audi Aktiengesellschaft, 56 F.3d 1259, 1267
(10th Cir. 1995) (stating that a plaintiff is entitled to relief from a final judgment if the plaintiff establishes a fraud
on the court); Superior Seafoods, Inc. v. Tyson Foods, Inc., 620 F.3d 873, 878 (8th Cir. 2010) (“The extraordinary
relief afforded pursuant to Rule 60(d) is more difficult to obtain than relief that might be available through a timely
Rule 60(b) motion, but it remains the same type of relief—relief from an otherwise final judgment.”).
- 23
recovery of money damages.99 Because the Kansas courts look to federal law as persuasive
authority when applying K.S.A. § 60-260,100 this Court concludes that a Kansas state court
would reject Atkins’ fraud on the court claims against Broomes and Hinkle.
In this case, Atkins does not specifically request relief from the prior judgment. Instead,
Atkins seeks injunctive relief and damages.101 This request is not an appropriate one for his
fraud on the court claims. Even if Atkins had requested the appropriate relief, he could not
obtain this relief from these two Defendants.
Broomes and Hinkle were not parties to the First
Lawsuit, and thus, they did not obtain any judgment in their favor. Therefore, Atkins can obtain
no relief against Broomes and Hinkle for a fraud on the court claim, and that makes them
improper parties to the fraud on the court claims asserted in this lawsuit.
3. Atkins is Not the Real Party in Interest for Count II
The Removing Defendants also assert that Atkins cannot establish the fraud on the court
claim in Count II against Broomes and Hinkle because Atkins is not the real party in interest.
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
99
See Ortega v. Young Again Prods., Inc., 2012 WL 3046116, at *4 n.1 (S.D. Tex. July 25, 2012) (an
action for fraud on the court is an action recognized under Fed. R. Civ. P. 60 to set aside a judgment obtained by
fraud on the court; no cause of action exists for fraud on a court against an individual for the recovery of damages);
Chewning v. Ford Motor Co., 35 F. Supp. 2d 487, 489 (D.S.C. 1998) (recognizing that there are procedural and
common law doctrines allowing a court to set aside a judgment but there is “no authority allowing an independent
action[] for damages.”); Florida Evergreen Foliage v. E.I. Du Pont De Nemours, Co., 135 F. Supp. 2d 1271, 1288
(S.D. Fla. 2001) (refusing to recognize a separate action for damages based on fraud on the court); see also Great
Coastal Express, Inc. v. Int’l Bhd. of Teamsters, Chauffeurs, Warehousemen and Helpers of Am., 675 F.2d 1349,
1357–58 (4th Cir. 1982) (an action for fraud on the court is an action in equity).
100
Back-Wenzel, 279 Kan. at 349, 109 P.3d at 1196.
101
See Plaintiff’s Petition, Doc. 1-1, p. 33. At the same time, Atkins argues that he is bringing an
independent action and cites to Fed. R. Civ. P. 60(d) and K.S.A. § 60-260(b) which discuss independent actions to
relieve parties from judgments. The Court notes that Atkins’ arguments and theories are difficult to follow.
- 24
to determine whether a plaintiff is the real party in interest.102
Under Kansas law, the real party
in interest is the one who, by virtue of the substantive law, holds the right sought to be
enforced.103
Here, J.R.R. holds the right that Count II seeks to enforce, not Atkins. Atkins alleges in
Count II that Broomes and Hinkle committed fraud on the court in the First Lawsuit by filing a
contract with steam technology providers which caused the following injury: “PAUL ATKINS
and JJR of Kansas Limited lost the use and enjoyment of the Zachariah Lease along with the oil
production royalty revenue from their ownership interest and operation of the lease . . . .”104 But
it is undisputed that the Zachariah Lease was owned by J.J.R., not Atkins.105 Thus, Atkins is not
the real party in interest for the claim asserted in Count II that alleges injury only to the interest
owner of the Zachariah Lease.106
In his Motion to Remand, Atkins argues that he is the real party in interest because he is
suing Broomes and Hinkle for taking his interest in the Noll Lease.107 That may be the case for
some of the other claims asserted in the lawsuit, but in Count II, Atkins alleges injury in the form
of lost use and enjoyment and lost oil production royalty revenue from the Zachariah Lease.108
102
K-B Trucking Co. v. Riss Int’l Corp., 763 F.2d 1148, 1153 (10th Cir. 1985) (citations omitted).
103
Ryder v. Farmland Mut. Ins. Co., 248 Kan. 352, 366, 807 P.2d 109, 118 (Kan. 1991) (citing 3A James
Wm. Moore et al., Moore’s Federal Practice § 17.02 (2d ed. 1970)).
104
Plaintiff’s Petition, Doc. 1-1, p. 21, ¶ 105 (emphasis added).
105
Id. at p. 6, ¶¶ 31-32.
106
See Ryder, 248 Kan. at 366, 807 P.2d at 119 (holding that the plaintiff was not the real party in interest
when he had no legal interest in the outcome of a dispute over a fee arrangement between two law firms); see also
Star Mfg. Co., Inc. v. Mancuso, 680 F. Supp. 1496, 1499 (D. Kan. 1988) (holding that plaintiff was not the real party
in interest in a tort action because it did not own the substantive right to the claim).
107
Doc. 12, p. 13.
108
Plaintiff’s Petition, Doc. 1-1, p. 21, ¶ 105.
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J.J.R. owns that lease interest, not Atkins.109 Thus, Atkins is not the real party in interest in
Count II, and he cannot establish a claim under Count II against Broomes and Hinkle in state
court.110
c. Conclusion
The Removing Defendants have met their burden of showing fraudulent joinder. As
explained above, the Court finds that there is no possibility that Atkins can establish a claim for
relief against Broomes and Hinkle in state court because: (1) Atkins cannot maintain an
independent action for fraud on the court against these two Defendants; (2) Atkins fails to state a
claim upon which relief can be granted against these two Defendants; (3) these two Defendants
are not the proper defendants to a fraud on the court claim when they were not parties in the First
Lawsuit; and (4) Atkins is not the real party in interest in Count II. Thus, Atkins fraudulently
joined Broomes and Hinkle, and the Court will ignore these two Defendants when evaluating
jurisdiction based on diversity of citizenship.
2. Conspiracy Claim Against Defendant Maclaskey
The Removing Defendants next assert that Atkins fraudulently joined Maclaskey (a
Kansas resident) in the state court lawsuit in an effort to destroy diversity jurisdiction. Atkins
alleges only one claim against Maclaskey in his Petition, a conspiracy claim in Count VI. The
conspiracy claim alleges that nine of the eleven Defendants conspired to “defraud oil lease
operators and owners,”111 that Defendants conspired “to keep [his] proceeds from the oil sold off
109
Id. at p. 6, ¶¶ 31-32.
110
This analysis does not apply to Count IV as Atkins is the real party in interest with regard to Count IV
because Atkins claims that his personal interest in the Noll lease was affected by the marshal’s sale.
111
Plaintiff’s Petition, Doc. 1-1, p. 30, ¶ 154.
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the Noll lease even though . . . the lease was obtained through fraud,”112 and that he was
damaged by the “taking of [his] oil.”113 Because the Court must view the allegations in the light
most favorable to Atkins, the Court construes the conspiracy claim as one against Defendants for
allegedly defrauding Atkins (as an oil lease operator and owner) from his interest in the Noll
lease. The only alleged underlying torts that could support his conspiracy claim are his fraud
claims contained in Count IV and V.114 As noted above, Count IV fails because it is not an
independent action. Thus, the only remaining underlying tort that can be at issue is contained in
Count V.
The Removing Defendants assert that Atkins fails to state a claim for conspiracy against
Maclaskey. The Court applies Kansas law.115 In Kansas, “the elements of a civil conspiracy
include: (1) two or more persons; (2) an object to be accomplished; (3) a meeting of the minds
in the object or course of action; (4) one or more unlawful overt acts; and (5) damages as the
proximate result thereof.”116 “Conspiracy is not actionable without commission of some wrong
giving rise to a cause of action independent of the conspiracy.”117
112
Id. at p. 31, ¶ 161.
113
Id. at p. 32, ¶ 168.
114
The Court notes that although Atkins alleges in his conspiracy count that Defendants conspired to “seize
the ownership interest in JRR’s leases through fraud” (Id. at p. 30, ¶155), Atkins cannot bring a conspiracy claim
based on these allegations to seize the ownership interest in J.J.R.’s leases. J.J.R., not Atkins, is the real party in
interest for such a claim. The Court, therefore, construes Atkins’ conspiracy claim to only address the Noll Lease
and will only address the underlying allegations regarding the alleged taking of oil from the Noll Lease because
Atkins claims a personal ownership interest in that lease. Counts I, II, and III do not relate to the Noll lease. Thus,
Counts IV and V and the only potentially relevant underlying claims for Atkins’ conspiracy claim.
115
See Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938) (explaining that a federal court sitting in diversity
must apply the substantive law of the forum state); Royal Maccabees Life Ins. Co. v. Choren, 393 F.3d 1175, 1180
(10th Cir. 2005) (“A federal court sitting in diversity must apply state law as propounded by the forum’s highest
court.”) (citation omitted).
116
Stoldt v. City of Toronto, 234 Kan. 957, 967, 678 P.2d 153, 161 (Kan. 1984) (quotation omitted); see
also Diederich v. Yarnevich, 40 Kan. App. 2d 801, 811, 196 P.3d 411, 419 (Kan. Ct. App. 2008).
117
Stoldt, 234 Kan. at 967, 678 P.2d at 161.
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The Removing Defendants assert that the conspiracy claim fails to set forth any valid,
underlying cause of action against Maclaskey or the other Defendants. As noted above, the only
underlying tort that the Court considers is Count V. In Count V, Atkins alleges that HPP,
Cherokee Wells, and Defeo made fraudulent misrepresentations to Maclaskey regarding the Noll
lease.118
Thus, if anything, Atkins alleges that Maclaskey was a victim of the alleged
wrongdoing (the underlying tort) and not an active participant in it. Atkins therefore fails to state
a claim against Maclaskey.
In addition, the Removing Defendants contend that Atkins fails to state a claim for
conspiracy against Maclaskey because Atkins does not allege any facts showing that Maclaskey
participated in a meeting of the minds. The Court agrees. Under Kansas law, a plaintiff must
show a meeting of the minds to prove a civil conspiracy.119
In his Petition, Atkins alleges that
Robert DeFeo, David Orr, Arden Ellis, HPP, and Cherokee Wells came to a meeting of the
minds to form and operate a conspiracy in June 2006.120 Atkins further alleges that Jens Hansen
joined the meeting of the minds by June 26, 2006.121 Atkins’ Petition does not contain any
allegations that Maclaskey ever joined a meeting of the minds with any of the other Defendants
or that Maclaskey even knew about the alleged conspiracy. Indeed, Atkins asserts in Count VI
that Maclaskey’s wrongdoing was to purchase oil from an oil and gas lease based upon
118
See Plaintiff’s Petition, Count V, ¶¶ 140-41 (Heavy Petroleum, Cherokee Wells, and Robert Defeo made
fraudulent misrepresentations to Maclaskey regarding the Noll lease).
119
Kincaid v. Dess, 48 Kan. App. 2d 640, 656, 298 P.3d 358, 369 (Kan. Ct. App. 2013).
120
Plaintiff’s Petition, Doc. 1-1, p. 30, ¶ 153.
121
Id. at p. 30, ¶ 157.
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misrepresentations.122 In addition, as noted above, Atkins alleges in Count V that Maclaskey
was the victim of an alleged fraud (the underlying tort), rather than a participant in it or a
participant in a conspiracy to commit the alleged fraud. Thus, Atkins fails to plead sufficient
facts showing that Maclaskey ever participated in a meeting of the minds which is necessary to
state a claim for civil conspiracy.123
The Court concludes that Atkins fraudulently joined Maclaskey in this lawsuit because
Atkins cannot establish a civil conspiracy claim in state court against Maclaskey. Therefore, the
Court ignores Maclaskey, a non-diverse defendant, when evaluating this Court’s jurisdiction
based on diversity of citizenship.
3. These three Defendants are not necessary parties.
Finally, Atkins asserts that Hinkle, Broomes, and Maclaskey are necessary parties
pursuant to Fed. R. Civ. P. 19(a). Atkins contends that they, therefore, must be joined in this
action. Under Fed. R. Civ. P. 19(a), a party is a required party if:
(A) in that person’s absence, the court cannot accord complete relief among
existing parties; or
(B) that person claims an interest relating to the subject of the action and is so
situated that disposing of the action in the person’s absence may:
(i) as a practical matter impair or impede the person’s ability to protect
the interest; or
(ii) leave an existing party subject to a substantial risk of incurring double,
multiple, or otherwise inconsistent obligations because of the
interest.124
122
See id. at pp. 31-32, ¶¶ 159-68 (Maclaskey’s wrongdoing was to purchase oil from the Noll lease based
upon Defeo’s alleged misrepresentations about the lease).
123
To the extent that Plaintiff’s Petition could be construed to possibly state a claim against Broomes and
Hinkle for conspiracy, his claim would fail as well. First, Broomes and Hinkle are not identified as members of the
conspiracy in this count. In addition, Atkins includes no allegations against these two Defendants as to a meeting of
the minds.
124
Fed. R. Civ. P. 19(a)(1).
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If a party is “required,” and joinder is feasible, the party must be joined.125 Here, neither
Broomes, Hinkle, nor Maclaskey are required parties in this lawsuit.
First, their presence is not required to provide complete relief to the remaining parties in
this action. As noted above, even if Atkins could bring an independent action for fraud on the
court, Atkins’ only remedy for those equitable claims is an order setting aside the judgment in
the First Lawsuit. Broomes and Hinkle were not parties to that First Lawsuit, and thus, Atkins
cannot obtain any relief from these two Defendants by the claims asserted against them in the
Petition.126 As for Maclaskey, Atkins claims that his presence is necessary because Atkins seeks
injunctive relief against Maclaskey to stop further conversion of Atkins’ oil and to obtain the
return of the oil taken off the lease by Maclaskey.127 But Atkins’ Petition does not request any
such relief. Rather, the only request for injunctive relief against Maclaskey is for an accounting
of all oil and cash receipts from the Noll Lease that were not authorized by Atkins.128
But
Atkins cannot obtain such relief against Maclaskey in any event because he has failed to state a
claim upon which relief can be granted against Maclaskey.
Second, Broomes, Hinkle, and Maclaskey do not have an interest in this action that
requires their joinder. Atkins’ claims in this lawsuit are premised on alleged fraudulent activity
that occurred during the First Lawsuit. Because of the alleged fraud, Atkins seeks to essentially
125
See id. at 19(a); Rishell v. Jane Phillips Episcopal Mem’l Med. Ctr., 94 F.3d 1407, 1411 (10th Cir.
1996).
126
As noted above, Atkins does not specifically request to have the judgment set aside. He seeks injunctive
relief and monetary damages.
127
Doc. 12, p. 13.
128
Plaintiff’s Petition, Doc. 1-1, p. 33, ¶ 174.
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set aside the district court’s rulings in the First Lawsuit that favored HPP and Cherokee Wells.129
Broomes, Hinkle, and Maclaskey were not parties to that action. Thus, they did not obtain any
judgment in their favor in that First Lawsuit. Therefore, these three parties’ absence from this
case will not impair any interest that they may have in this action.
Finally, the absence of Broomes, Hinkle, and Maclaskey will not leave any existing party
subject to multiple or inconsistent obligations. Therefore, Fed. R. Civ. P. 19 does not apply here
because Atkins fails to show that Broomes, Hinkle, or Maclaskey are required parties.130
Accordingly, the Court rejects Atkins’ argument that Broomes, Hinkle, and Maclaskey are
required parties in this lawsuit.
4. Atkins Fraudulently Joined Broomes, Hinkle, and Maclaskey.
As explained above, the Court finds that Atkins cannot establish a claim in state court
against the three non-diverse defendants, Broomes, Hinkle, and Maclaskey. Therefore, the Court
ignores these three Defendants’ citizenship in its analysis of diversity of citizenship for removal
purposes.131
Disregarding these three Defendants, complete diversity of citizenship exists
between Atkins and the other named Defendants.
Accordingly, the Removing Defendants
properly removed this action to federal court, and the Court denies Atkins’ Motion to Remand.
Because the Court has determined that Atkins fraudulently joined Broomes, Hinkle, and
Maclaskey in this lawsuit, the Court lacks jurisdiction over these Defendants to enter a judgment
129
Again, the Court notes that Plaintiff does not request this relief in his Petition, but he argues that he is
bringing an independent action.
130
See Birmingham v. Experian Info. Solutions, Inc., 633 F.3d 1006, 1021 (10th Cir. 2011).
131
See Brazell v. White, 525 F. App’x 878, 884 (10th Cir. 2013).
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on the merits.132
Consequently, the Court dismisses Defendants Broomes, Hinkle, and
Maclaskey from this case without prejudice.133
5. Request for Attorney Fees
In his Motion to Remand, Atkins requests nominal attorney fees under 28 U.S.C.
§1447(c) of $1.00 because Atkins claims that the Removing Defendants had no objectively
reasonable basis for seeking removal. The Court cannot understand why Atkins would include
such a request and then ask for a one dollar award. Whatever the motive, the Court denies this
aspect of Atkins’ motion because it has likewise denied the predicate remand.
III.
Atkins’ Motion to Stay Proceedings
Plaintiff filed a Motion to Stay Proceedings (Doc. 13) requesting that the Court stay all
further proceedings, including briefing on the Removing Defendants’ Motion to Dismiss (Doc.
8), until the Court determines whether it has jurisdiction over this lawsuit in light of the
arguments presented in Plaintiff’s Motion to Remand. This motion is largely moot as deadlines
on the Motion to Dismiss, and proceedings in this case, were automatically stayed upon Atkins’
filing the Motion to Stay. The Court, however, grants Plaintiff’s Motion to Stay Proceedings
until the Court has ruled on the Motion to Remand. Because the Court now rules upon and
denies Plaintiff’s Motion to Remand in this Order, the Court rules that the stay is terminated by
this Order.
With regard to Defendants’ Motion to Dismiss (Doc. 8), the Court directs Defendants to
file an amended memorandum in support of their Motion to Dismiss based upon the status
132
Id.
133
Id. (citing Albert v. Smith’s Food & Drug Ctrs., Inc., 356 F.3d 1242, 1249 (10th Cir. 2004)).
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of the case as it now exists.134 Defendants’ amended brief should be filed on or before
October 8, 2014. Plaintiff’s response shall be filed within twenty-one days from the filing of
Defendants’ brief. Defendants’ Reply must be filed and served within fourteen days of the
service of Plaintiff’s response.
IT IS THEREFORE ORDERED that Plaintiff’s Motion to Remand Action to the
District Court of Jefferson County Under 28 U.S.C. § 1447(c) (Doc. 12) is DENIED.
IT IS FURTHER ORDERED that Plaintiff’s Motion to Stay Deadlines (Doc. 13) is
GRANTED, but the Court terminates that stay by the entry of this Order. Defendants must file
an amended brief in support of their Motion to Dismiss (Doc. 8) on or before October 8, 2014.
Plaintiff must respond to Defendants’ Motion to Dismiss (Doc. 8) within twenty-one days of
the service of Defendants’ brief. Defendants’ Reply must be filed and served within fourteen
days of the service of Plaintiff’s response.
IT IS FURTHER ORDERED that defendants John Wesley Broomes, Hinkle Law Firm,
LLC, and Maclaskey Oilfield Services are dismissed from this action WITHOUT PREJUDICE
because Plaintiff fraudulently joined them.
IT IS SO ORDERED.
Dated this 17th day of September, 2014.
ERIC F. MELGREN
UNITED STATES DISTRICT JUDGE
134
Several Defendants have now been dismissed (due to this Order), and the Tenth Circuit recently issued
its decision on the appeal of the First Lawsuit, Case No. 09-0177-EFM.
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