Peaker Energy Group, LLC et al v. Cargill, Incorporated et al
Filing
34
ORDER and REASONS - IT IS ORDERED that Defendants' motions (Rec. Docs. 6 and 8) are GRANTED IN PART and DENIED IN PART. IT IS FURTHER ORDERED that these rulings are without prejudice to Plaintiffs' right to attempt to cure the identified de ficiencies by amendment filed no later twenty (20) days from the entry of this Order and Reasons. Any such amendment is to be set forth in a second amended and superseding complaint, as stated within document. Signed by Judge Kurt D. Engelhardt on 8/14/2015. (cbs)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
PEAKER ENERGY GROUP, LLC &
ENERGY COAST LOGISTICS TERMINAL, LLC
CIVIL ACTION
VERSUS
NO. 14-2106
CARGILL, INCORPORATED &
LOUISIANA SUGAR REFINING, LLC
SECTION "N" (3)
ORDER AND REASONS
Presently before the Court are motions to dismiss filed by Defendants Cargill, Inc.
and Louisiana Sugar Refining, LLC, pursuant to Rule 12 (b)(6) of the Federal Rules of Civil
Procedure. Having carefully considered the parties’ supporting and opposing submissions, and
applicable law, IT IS ORDERED that Defendants’ motions (Rec. Docs. 6 and 8) are GRANTED
IN PART and DENIED IN PART as stated herein.
To the extent that Defendants’ motions are granted, IT IS FURTHER ORDERED
that these rulings are without prejudice to Plaintiffs' right to attempt to cure the identified
deficiencies by amendment filed no later twenty (20) days from the entry of this Order and Reasons.
Any such amendment is to be set forth in a second amended and superseding complaint. The second
amended and superseding complaint must include all of the allegations from Plaintiffs' first amended
complaint (Rec. Doc. 4) on which they continue to rely, as well as their amended and added
allegations, such that the case can proceed on the basis of the second amended and superseding
complaint without requiring further reference to prior pleadings. Should Plaintiffs fail to timely
1
make the necessary amendment, the Court shall, upon properly supported motion by the Defendants,
order that the affected claims be dismissed with prejudice.
BACKGROUND
Louisiana Sugar Refining, LLC (“LSR”), a joint venture between Defendant Cargill,
Inc. (“Cargill”) and Sugar Growers and Refiners, Inc. ("SUGAR"), operates a white sugar refinery
in Gramercy, Louisiana.1 Cargill and SUGAR each possess a 50 percent interest in the sugar
refinery. SUGAR is a cooperative association. Plaintiffs, Peaker Energy Group., LLC (“Peaker”)
and Energy Coast Logistics Terminal, LLC (“ECLT”), characterize Cargill as a privately held
business with worldwide operations in a variety of markets, including agriculture commodity trading
and processing, food ingredients and applications, farmer services, animal feed and nutrition, energy
and industrial services, and financial services.2
Plaintiff Peaker describes itself as having special expertise in rail and shipping
terminals for crude oil, biofuels, natural gas liquids, and refined products, and Peaker, its agents, and
consultants have used that expertise to develop, design, and manage such terminals throughout North
America. Because LSR's facility enjoys important connections to both water and rail shipping, has
an existing dock, is in close proximity to oil refineries, and is adjacent to farm land suitable for
industrial development, Peaker devised a plan, referred to by Plaintiffs as the "Project," premised
upon using LSR's terminal site as a distribution point for crude oil, refined products, natural gas
liquids and biofuels. Peaker's sole member, Matthew Goitia, formed a limited liability company,
1
LSR is a Delaware limited liability company. Its principal place of business is in
Louisiana. See Amended Complaint, Rec. Doc. 4, ¶ 4.
2
Cargill was incorporated in a Delaware, is registered to do business in Louisiana, and
has its principal place of business in Minnesota. Id. at ¶ 3.
2
Plaintiff ECLT, to execute that plan.
Seeking to move forward with the Project, Plaintiffs then approached LSR, on August
13, 2013, to propose that Plaintiffs lease certain assets at LSR's facility (referred to by Plaintiffs as
the "Terminal Site"), including LSR’s dock, and be allowed to utilize LSR's rail connections, in
return for LSR's receipt of certain fees and certain upgrades of its infrastructure. According to
Plaintiffs, the proposal to LSR included the execution of the Project at LSR's Terminal Site through
ECLT.
In support of their claims, Plaintiffs also allege the following relative to the Project
and their dealings with Defendants LSR and Cargill:
Plaintiffs’ business plan for the Project was an extremely valuable asset – as
conceived, the Project was valued at nearly $1 billion. In order to ensure that the
very valuable proprietary business plan for the Project would remain confidential,
Peaker and LSR entered into a Non-Disclosure Agreement (“NDA”), entitled
“Confidentiality Agreement – Site Business Development,” dated August 20, 2013
(herein, “LSR NDA”), which was initially drafted and presented by LSR.
The LSR NDA was intended to protect Plaintiffs from having their
prospective business partner, LSR, usurp the Project or Plaintiffs' plans for the
Project, and to prevent LSR from sharing with any third parties confidential
information relating to the Project. The LSR NDA specifically precluded LSR
from any "attempt in any manner to contact or deal with any . . . individuals or
companies identified in the confidential information in connection with or related to
the project or business plan proposed by the company [Peaker]" and from acting to
"by-pass, compete, avoid, circumvent, or attempt to circumvent the company
[Peaker] relative to the proposed project . . . ." Thus, the LSR NDA created an
obligation in perpetuity on LSR’s part not to disclose the plans for the Project or use
those plans to arrogate the Project to itself.
After Peaker and LSR executed the LSR NDA, between August 2013 and
January 2014, Plaintiffs and LSR engaged in detailed discussions about the Project
and conducted numerous meetings with each other to further the Project. [] Between
August 2013 and January 2014, on numerous occasions and with LSR’s full
knowledge and cooperation (and at Plaintiffs’ expense), Plaintiffs and their agents,
consultants, and/or contracted third parties traveled to the Terminal Site, where they
performed activities in support and development of the Project [and explained to
LSR their business plan and the contemplated infrastructure changes.] Throughout
3
that period, LSR expressed enthusiasm for the Project and reassured Plaintiffs that
the Project would go forward once LSR and Plaintiffs finalized the terms of the
agreement to effectuate the Project (the "Deal"). Further, on several occasions, LSR
stated that it had obtained board approval for the Project and all that remained for the
Project to be finalized was to present an agreement acceptable to LSR’s Chief
Executive Officer and General Manager, Larry Faucheux.
Plaintiffs and LSR worked together to finalize the terms of the Deal,
exchanging at least five rounds of term sheets for the Deal between October 20, 2013
and December 9, 2013. LSR’s executives represented that they had been working
with local community leaders, politicians, and landowners to advance the Project;
thus, LSR became deeply involved in the joint effort between Plaintiffs and LSR to
bring the Project to fruition. LSR represented to Plaintiffs that it either possessed
title, or had options that ensured its ability to acquire title, to adjacent lands that fell
within the Project's proposed footprint. Subsequently, Plaintiffs learned that LSR
misrepresented its rights to the lands and their title." [Additionally,] Plaintiffs hired
engineering firms and coordinated with LSR to plan surveys of the site where the
proposed terminal would be located. Plaintiffs [also] provided LSR with a detailed
bullet-point summary of the survey requirements and attached sketches for the site
that Peaker’s rail and engineering teams had prepared.
***
While negotiating with LSR, Plaintiffs – expending the combined
reputational capital and acquired goodwill that their agents and consultants had built
up in the energy industry through many years – worked steadily towards securing
the other aspects and requirements of the Project such as acquiring the proper
permits and licenses, obtaining financial backing, and soliciting customers. In sum,
LSR worked jointly with Plaintiffs towards development and realization of the
Project, and throughout that process indicated to Plaintiffs that finalizing the terms
of the Dealwould be a mere formality.
Just prior to reaching agreement with LSR on the terms for the deal, Plaintiffs
arranged a meeting with Cargill, [which] had been suggested to Plaintiffs as a
potential customer for the Project because of Cargill's interest in the energy industry
through its Energy, Transportation, Metals division. On or about December 31,
2013, Goitia spoke by telephone with Gaston Garrido, Cargille's ETM business
development manager, and presented a highly generalized description of the Project.
During that conversation, Goitia mentioned that Cargill was a one-half owner of the
LSR site – a fact that Garrido did not know.
On January 2, 2014, Goitia and Garrido met, at which time Goitia made a
detailed presentation of the Project. Again, Garrido expressed surprise that Cargill
had not heard about the Project before, given Cargill's one-half interest in LSR. At
that time, Garrido also disclosed to Goitia that Cargill had been trying unsuccessfully
4
to develop a project similar to Plaintiffs at the site of another Cargill asset several
miles down the Mississippi River from the LSR site. At that January 2, 2014
meeting, Goitia also disclosed to Garrido the existence of the LSR NDA. Upon
learning of the LSR NDA, Garrido admitted that Cargill would be bound to work
with Plaintiffs on the Project as a result of that document. Cargill also expressed
interest in becoming an equity partner in the Project. As the meeting concluded,
Garrido indicated that his next step would be to introduce the Project idea to a bigger
group within Cargill.
Shortly after leaving the meeting with Cargill, Goitia received a telephone
call from Scott MacKenzie ("MacKenzie"), LSR's Business Development
Consultant, requesting a meeting, and expressly asking him to come alone. On
January 3, 2014, Goitia met with Faucheux and MacKenzie. The principal topic
discussed was the Deal. And at that time, Goitia, Faucheux, and MacKenzie reached
a verbal agreement on the Deal, which agreement incorporated and built upon the
most recent term sheet that they had exchanged. Also at the January 3, 2014
meeting, Goitia told Faucheux and MacKenzie that he had met with representatives
of Cargill. MacKenzie mentioned that LSR had conducted discussions with other
transload companies, which prompted Goitia to remind him that such discussions
constituted a violation of the terms of the LSR NDA. By the time Plaintiffs reached
agreement on the terms for the Deal with LSR, Plaintiffs had secured BBVA
Compass Bank to arrange the equity and debt aspects of the Project and had secured
numerous customer commitments, including one major refinery which had
committed to a five-year deal for 10,000 barrels of crude oil per day to be processed
through the terminal Project.
After the January 3, 2014 meeting, MacKenzie sent Goitia a project
evaluation form, which according to MacKenzie had to be completed on all
co-located opportunities at Cargill properties, and asked that Goitia complete the
form. The completed form was returned to MacKenzie by January 6, 2014.
[] On January 7, 2014, Goitia again met with Garrido, at which time Cargill
again expressed interest in participating in Plaintiffs' Project as a joint venture and
requested additional data on the Project, including financial and engineering models.
At the January 7, 2014 meeting, Goita informed Garrido that Plaintiffs and LSR had
reached an agreement on the Deal at the meeting between Goitia, MacKenzie and
Faucheux on January 3, 2014, and reminded Cargill about the LSR NDA and also
requested that Cargill execute a similar agreement. After the January 7, 2014
meeting, Cargill sent Peaker a proposed NDA, which Peaker reviewed, edited, and
returned with its comments to Cargill on January 8, 2014. On January 8, 2014,
Goitia sent an email to Faucheux and MacKenzie, again reminding them of the
obligations contained in the LSR NDA.
All dealings up to this point had been amicable and positive, and LSR had
repeatedly assured Plaintiffs that the Deal for the Project would be consummated.
5
Indeed, LSR and Plaintiffs had agreed to terms for the Deal at their January 3, 2014
meeting. But once the details of the Project became known within Cargill, LSR, of
which Cargill holds a one-half interest, began to back away from its previous
commitments to Plaintiffs.
[Specifically, on] January 9, 2014, Goitia received a frantic telephone call
from Faucheux and MacKenzie, expressing shock and concern that Goitia had
discussed the Project with Cargill, despite Goitia having informed Faucheux and
MacKenzie of those discussions during the meeting that occurred at LSR on January
3, 2014. In that January 9, 2014 telephone call, Faucheux and MacKenzie expressed
panicked concern for their jobs and told Goitia that Peaker must step aside so that
Cargill could take on the Project at the LSR site instead of Plaintiffs and without
Plaintiffs' involvement. Because LSR and Plaintiffs had come to an agreement
during their January 3, 2014 meeting, Goitia informed Faucheux and MacKenzie that
he intended to continue with the Deal as agreed with LSR.
Shortly after that January 9, 2014 telephone call with MacKenzie and
Faucheux, MacKenzie sent Goitia a lengthy email filled with misrepresentations to
make it appear as though LSR had not agreed to the terms for the Deal. For instance,
MacKenzie listed a number of purported "development gaps between LSR's position
and Peaker's" which were completely fictitious and contrary to the prior agreement
and understanding between LSR and Plaintiffs. LSR had never before mentioned
any such "gaps", as Goitia later explained in a point-by-point email rebutting each
of MacKenzie's spurious claims.
In a telephone conversation on January 12, 2014, MacKenzie stated to Goitia
that, despite the misrepresentations contained in his January 9 email to Goitia, the
real issue was that Plaintiffs had discussed the Project with Cargill. Although
Plaintiffs repeatedly communicated to LSR that they stood prepared to continue with
the partnership that Plaintiffs and LSR had agreed upon, Faucheux, in an email dated
February 3, 2014, stated that LSR had “terminated negotiations” with Plaintiffs.
Prior to Faucheux’s purported “termination” of the relationship, Cargill and
Peaker entered into a Non-Disclosure Agreement entitled "Mutual Confidentiality
Agreement," dated January 14, 2014 ("Cargill NDA")."The Cargill NDA is
retroactive, relating to "[a]ny information exchanged by or between the Parties
before the Effective Date," and it therefore extends to the initial discussions with
Cargill described herein on December 31, 2013.
Upon information and belief, LSR and Cargill violated the terms of their
respective NDA's described herein by sharing information about the Project that the
NDAs required to be maintained confidential. LSR and Cargill each failed to
observe the terms of the NDAs that they signed with Peaker, which failure, at the
very least, constitutes a breach of their respective duties of business honesty, good
faith, and fair dealing. LSR, through its continuous dealings with Plaintiffs and the
6
representations and assurances it made to Plaintiffs throughout those dealings, upon
which Plaintiffs relied to make substantial investments toward the Project, became
a de facto partner of Plaintiffs. LSR violated its duties as Plaintiffs' partner by
impermissibly sharing information and misleading Plaintiffs.
LAW AND ANALYSIS
I.
Rule 12(b)(6) Principles
Rule 12(b)(6) authorizes the filing of motions to dismiss asserting, as a defense, a
plaintiff's "failure to state a claim upon which relief can be granted." See Fed. R. Civ. P. 12(b)(6).
Thus, claims may be dismissed under Rule 12(b)(6) “on the basis of a dispositive issue of law.”
Neitzke v. Williams, 490 U.S. 319, 326 (1989). Dismissal under Rule 12(b)(6) also is warranted if
the complaint does not contain sufficient factual matter, accepted as true, to "state a claim to relief
that is plausible on its face." Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570).
In evaluating motions to dismiss filed under Rule 12(b)(6), the Court "must accept
all well-pleaded facts as true, and . . . view them in the light most favorable to the plaintiff."
Campbell v. Wells Fargo Bank, N.A., 781 F.2d 440, 442 (5th. Cir.), cert. denied, 476 U.S. 1159
(1986). Further, "[a]ll questions of fact and any ambiguities in the controlling substantive law must
be resolved in the plaintiff's favor." Lewis v. Fresne, 252 F.3d 352, 357 (5th Cir. 2001). On the other
hand, courts “are not bound to accept as true a legal conclusion couched as a factual allegation.”
Papasan v. Allain, 478 U.S. 265, 286 (1986); see also Iqbal, 556 U.S. at 678 (“tenet that a court
must accept as true all of the allegations contained in a complaint is inapplicable to legal
conclusions.”). “Nor does a complaint suffice if it tenders ‘naked assertion[s]’ devoid of ‘further
factual enhancement.’” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 557); see also
Christopher v. Harbury, 536 U.S. 403, 416 (2002) (elements of a plaintiff's claim(s) “must be
addressed by allegations in the complaint sufficient to give fair notice to a defendant”).
7
Where the well-pleaded facts of a complaint do not permit a court to infer more than
the mere possibility of misconduct, the complaint has alleged – but it has not ‘show[n]’ – “that the
pleader is entitled to relief.’” Iqbal, 556 U.S. at 678 (quoting Fed. Rule Civ. P. 8(a)(2)). Thus, a
complaint’s allegations "must make relief plausible, not merely conceivable, when taken as true."
United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 186 (5th Cir. 2009); see also Twombly,
550 U.S. at 555 (“Factual allegations must be enough to raise a right to relief above the speculative
level . . . on the assumption that all the allegations in the complaint are true (even if doubtful in
fact).”).
“The plausibility standard is not akin to a ‘probability requirement,’ but it asks for
more than a sheer possibility that a defendant has acted unlawfully.” Id. Factual allegations that are
“merely consistent with a defendant's liability, stop short of the line between possibility and
plausibility of entitlement to relief,” and thus are inadequate. Id. (internal quotations omitted).
Thus, the requisite facial plausibility exists “when the plaintiff pleads factual content that allows the
court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.
(emphasis added). “Determining whether a complaint states a plausible claim for relief” is “a
context-specific task that requires the reviewing court to draw on its judicial experience and
common sense.” Iqbal, 556 U.S. at 679 (internal citations omitted). See also Robbins v. Oklahoma,
519 F.3d 1242, 1248 (10th Cir. 2008) (degree of required specificity depends on context, i.e., the
type of claim at issue).
In addition to Rule 8(a)(2)’s pleading demands, Rule 9(b) supplements Rule 8(a), if
fraud is alleged, by requiring circumstances allegedly constituting fraud be stated with particularity.
See Fed. R. Civ. Proc. 9(b); Grubbs, 565 F.3d at 185. Thus, Rule 9(b) generally requires the
plaintiff to set forth the “who, what, when, where, and how” of the alleged fraud.” See, e.g., United
8
States ex rel. Steury v. Cardinal Health, Inc., 625 F.3d 262, 266 (5th Cir. 2010); see also Sullivan
v. Leor Energy, LLC, 600 F.3d 542, 550-51 (2010) (claimant must "specify the statements contended
to be fraudulent, identify the speaker, state when and where the statements were made, and explain
why the statements were fraudulent"). Significantly, however, courts must realistically observe that
“there is no single construction of Rule 9(b) that applies in all contexts.” Grubbs, 565 F.3d at 188.
Indeed, the Fifth Circuit has explained that the “‘time, place, contents, and identity’ standard is not
a straitjacket for Rule 9(b).” Id. at 190. “Rather, the rule is context specific and flexible . . . .” Id.
On the other hand, a relator cannot bypass Rule 9(b)’s pleading requirements simply by premising
its allegations “on information and belief.” Thompson, 125 F.3d at 903. To the contrary, though
fraud may be alleged on information and belief if the “facts relating to the fraud are peculiarly within
the perpetrator’s knowledge,” the complaint nevertheless “must set forth a factual basis for such
belief.” Id.
In determining whether a plaintiff's claims survive a Rule 12(b)(6) motion to dismiss,
the factual information to which the Court addresses its inquiry is limited to the (1) the facts set
forth in the complaint, (2) documents attached to the complaint, and (3) matters of which judicial
notice may be taken under Federal Rule of Evidence 201. See Norris v. Hurst Trust, 500 F.3d 454,
461, n.9 (5th Cir. 2007); R2 Invs. LDC v. Phillips, 401 F.3d 638, 640, n.2 (5th Cir. 2005). When
a defendant attaches documents to its motion that are referred to in the complaint and are central to
the plaintiff’s claims, however, the Court can also properly consider those documents. Causey v.
Sewell Cadillac–Chevrolet, Inc., 394 F.3d 285, 288 (5th Cir. 2004); In re Katrina Canal Breaches
Litig., 495 F.3d 191, 205 (5th Cir. 2007). “In so attaching, the defendant merely assists the plaintiff
in establishing the basis of the suit, and the court in making the elementary determination of whether
a claim has been stated.” Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 499 (5th Cir. 2000).
9
This Court, therefore, may properly consider the documents referenced in the Amended Complaint.
II.
Application of Rule 12(b)(6) Principles
In this action, Plaintiffs' Amended Complaint asserts ten claims for relief. Plaintiffs'
characterize their eight claims against LSR as "centered on two distinct agreements: (1) the August
20, 2013 Non-Disclosure Agreement, titled "Confidentiality Agreement - Site Business
Development" ("LSR NDA"), and (2) the January 3, 2014 verbal agreement between LSR and the
Plaintiffs to engage in a business venture to create a first-of-its-kind distribution point and
transportation hub for crude, refined projects, natural gas liquids, and biofuels at the ideally situated
property owned by LSR at its Terminal Site on the Mississippi River in Gramercy, Louisiana
("January 3 Verbal Agreement")."3
With respect to Defendant Cargill, Plaintiffs' claims are premised upon Cargill's
alleged "misappropriation" of the Project.4 More specifically, Plaintiffs contend that, upon learning
the details of the Project, Cargill, which previously had unsuccessfully tried to develop a similar
project at another site, concluded that it wanted the Project for itself, and thus caused LSR (the joint
venture between Cargill and SUGAR) to reverse course and terminate its relationship with
Plaintiffs.5 In other words, Plaintiffs maintain: "Cargill worked behind the scenes to sabotage the
Project, which by all claims from LSR – prior to Cargill's involvement – had received the green
light."6
3
See Plaintiffs' Memorandum in Opposition to LSR Motion to Dismiss (hereinafter,
“Plaintiffs' LSR Opp."), Sealed Rec. Doc. 15-2, p. 7 of 39.
4
See Plaintiffs' Memorandum in Opposition to Cargill's Motion to Dismiss
(hereinafter, “Plaintiffs' Cargill Opp."), Sealed Rec. Doc. 16-2, p. 7 of 36.
5
Id. at p. 8 of 36 - p. 12 of 36.
6
Id. at p. 12 of 36.
10
Plaintiffs' eight claims against LSR are: (1) Violation of the Louisiana’s Unfair
Trade Practices Act (“LUTPA”) (Claim One); (2) Intentional and Negligent Misrepresentation
(Claim Two); (3) Fraud (Claim Three); (4) Breach of the LSR NDA (Claim Four); (5) Breach of
the January 3 Verbal Agreement (Claim Five); (6) Breach of the Implied Duty of Good Faith and
Fair Dealing (Claim Six); (7)Detrimental Reliance (Claim Seven); and (8) Unjust Enrichment
(Claim Ten).
Plaintiffs' six claims against Cargill are: (1) Violation of the Louisiana Unfair Trade
Practices Act ("LUTPA") (Claim One); (2) Breach of the Cargill NDA (Claim Four); (3) Breach
of the Implied Duty of Good Faith and Fair Dealing (Claim Six); (4) Tortious Interference with
Contract (Claim Eight); (5) Tortious Interference with Business Relationship (Claim Nine); and (6)
Unjust Enrichment (Claim Ten).7
A.
Breach of Contract - LSR NDA and Cargill NDA (Claim Four)
Focusing first on Plaintiffs' breach of contract claims relative to Defendants' alleged
breaches of the "confidentiality" and "non-circumvention" provisions of the August 20, 2013 LSR
NDA8 and the January 14, 2014 Cargill NDA,9 and applying the foregoing legal principles to those
7
Plaintiffs' unjust enrichment claims are asserted in the alternative; that is, to the extent
that the Court concludes that Plaintiffs are not entitled to relief relative to any of their other claims,
Plaintiffs seek an award of damages under the law of unjust enrichment. See Amended Complaint,
Rec. Doc. 4, ¶¶ 113-115.
8
As set forth above, the LSR NDA specifically precluded LSR from any "attempt in
any manner to contact or deal with any . . . individuals or companies identified in the confidential
information in connection with or related to the project or business plan proposed by the company
[Peaker]" and from acting to "by-pass, compete, avoid, circumvent, or attempt to circumvent the
company [Peaker] relative to the proposed project . . . . See Amended Complaint, Rec. Doc. 4, ¶¶
23-25; see also LSR’s Memorandum in Support (“LSR’s Mem.”), Sealed Rec. Doc. 6-6, p. 5
9
Pursuant to the Cargill NDA, "Evaluation Material" was furnished to Cargill "subject
to, and in consideration of [Cargill's] agreement to maintain its confidentiality, to use it solely for
evaluation of a possible business transaction, and for no other purpose, including any way, directly
11
claims, the Court concludes that Defendants' motions to dismiss should be granted in part and denied
in part relative to Claim Four of the Amended Complaint.
Specifically, LSR’s motion maintains, as an initial matter, that Plaintiff ECLT lacks
standing relative to the LSR NDA because the text of that document describes the agreement as one
between Peaker and LSR and fails to expressly identify any other legal entity as a party thereto.
Disagreeing, Plaintff ECLT contends that the contractual language in the LSR NDA, when
considered together with the Amended Complaint’s averments that Goitia formed ECLT for the sole
purpose of executing the Project at LSR, and advised LSR’s representatives of ECLT’s intended
role as part of the proposal made to it by Plaintiffs on August 13, 2013, sufficiently allege that the
contracting parties, Peaker and LSR, granted third-party beneficiary status, via stipulation pour
autri,10 to ECLT such that ECLT is entitled to demand performance from LSR. See La. Civ. Code
arts. 1978 - 1982. Given that instant motion is directed to the Plaintiffs’ allegations in the Amended
Complaint, rather than a summary judgment motion, urged with the benefit of discovery and proper
citation of legal authority, the Court presently declines to dismiss the breach of contract claim that
Plaintiff ECLT asserts relative to the LSR NDA. Thus, Defendant’s motion relative to ECLT’s
standing is denied.
LSR's motion is granted, however, to the extent that Plaintiffs’ claims rest on the
or indirectly detrimental to [Peaker], or any of its affiliates or subsidiaries.” Evaluation Material is
defined as “certain information (written and oral) respecting the business, property, business and
development plans, locations or prospective locations of project development and business plans and
ideas, and operations of the Disclosure and those of its affiliates and subsidiaries.” See Plaintiffs'
Cargill Opp., Sealed Rec. Doc. 16-2, pp. 33; see also Amended Complaint, Rec. Doc. 4, ¶¶ 67-68.
10
For a contract to establish an enforceable third party benefit: (1) the third party
benefit must be manifestly clear; (2) the benefit provided to the third party must be certain; and (3)
the benefit cannot be a mere incident of the contract between the promisor and the promisee. See
Joseph v. Hospital Service District No. 2, 05-2364 (La. 10/15/06); 939 So.2d 1206, 1212.
12
assertion that "LSR's Business Development Consultant, Scott MacKenzie [], admitted at a January
3, 2014 meeting . . . that LSR had conducted discussions with other transload companies, which
prompted Goitia to remind him that such discussions constituted a violation of the LSR NDA."11
Because the Amended Complaint does not allege that LSR's discussions with other transload
companies occurred on a date subsequent to the August 20, 2013 effective date of the LSR NDA,
or the alleged content of the discussions, it is not apparent that such discussions yield a viable breach
of contract claim.
Conversely, for essentially the reasons set forth by Plaintiffs in opposition to
Defendants' motions,12 both motions are denied to the extent that dismissal of Plaintiffs' claims under
the Cargill NDA and the LSR NDA is sought relative to alleged communications between LSR and
Cargill regarding the Project and the anti-circumvention provisions of the agreements. In short,
construing the allegations of Plaintiffs' Amended Complaint regarding Defendants' averred conduct,
together with pertinent language of the NDA's, the Court presently is not persuaded that Plaintiffs’
breach of contract claims, premised upon the confidentiality and anti-circumvention provisions of
the NDA’s, fail as of a matter of law. And, insofar as Defendants contend that further pleading
clarity relative to the factual bases of these claims is required, they can obtain such information via
discovery and then, if warranted, file a motion for summary judgment regarding the claims.
B.
Breach of Contract - “January 3 Verbal Agreement” (Claim Five)
Plaintiffs’ Amended Complaint also purports to state a breach of contract claim
11
See Plaintiffs’ LSR Opp., Sealed Rec. Doc. 15-2, p. 10 of 39; see also Amended
Complaint, Rec. Doc. 4, ¶ 50.
12
See Plaintiffs’ LSR Opp., Sealed Rec. Doc. 15-2, pp. 9 of 39 - 14 of 39; Plaintiffs’
Surreply Memorandum in Opposition (hereinafter “Plaintiffs’ LSR Surreply”), Sealed Rec. Doc.
28, pp. 1-2; Plaintiffs’ Cargill Opp., Sealed Rec. Doc. 16-2, p. 13 of 36 - p. 15 of 36.
13
against LSR that is premised upon the “binding verbal agreement” allegedly reached by Plaintiffs
(through Goitia) and LSR (through MacKenzie and Faucheaux), on January 3, 2014 (the “January
3 Verbal Agreement”), and LSR’s subsequent refusal to move forward with the Project. Regarding
the existence of a binding agreement, Plaintiffs allege that "the agreement between LSR and
Plaintiffs to pursue the Project together was finalized on January 3, 2014," that is, "on January 3,
2014 . . . Goitia, Faucheaux, and MacKenzie reached a verbal agreement on the Deal."13 The Deal
is defined, in the Amended Complaint, as "the terms of the agreement to effectuate the Project."14
In seeking dismissal of this claim, LSR contends that the alleged January 3 Verbal
Agreement is legally unenforceable because the Project contemplates certain transfers and
encumbrances of immovable property and the January 3 Verbal Agreement lacks the written form
required, under Louisiana law, for such transactions.15 Plaintiffs disagree, urging that the January
13
See Plaintiffs’ LSR Opp., Sealed Rec. Doc. 15-2, p. 15 of 3p. 14-17.
14
See Amended Complaint, Rec. Doc. 4, ¶¶0.
15
See, e.g., La. Civ. Code art. 518 (“ownership of an immovable is voluntarily
transferred by a contract between the owner and transferee that purports to transfer the ownership
of the property”); arts. 533 and 534 (“There are two kinds of servitudes: personal servitude and
predial servitude.”); art. 639 (“personal servitude of right of use confers in favor of a person a
specified use of an estate less than full enjoyment”); art. 645 (right of use is regulated by application
of the rules governing habitation and predial servitudes to the extent their applications is compatible
with the rules governing a right of use servitude); art. 708 (establishment of a predial servitude by
title is an alienation of part of the property to which the laws governing alienation of immovables
apply); art. 722 (predial servitude established by all acts by which an immovable may be transferred)
art. 1839 (transfer of immovable property must be in writing absent actual delivery of the property
accompanied by the transferor’s recognition of the validity of the transfer under oath); art. 2440 (sale
or promise of sale of an immovable must be made authentic act or by act under private signature
except as provided in Article 1839); art. 2620 (option to buy or sell must set forth the thing and the
price and meet the formal requirements of the sale it contemplates); art. 2623 (bilateral promise of
sale, or contract to sell, must set forth the thing and the price and meet the formal requirements of
the sale it contemplates); art. 2442 (parties to an act of sale or promise of sale of immovable property
are bound from the time the act is made); see also Jones v. Hospital Corp. 516 So.2d 1175, 1177
(La. App. 2 Cir. 1987) (construing pacte de preference (right of first refusal) regarding an
14
3 Verbal Agreement is properly characterized as an agreement to “engage in a business venture” and
“in its simplest terms, a business deal, and agreement to go into business together,” rather than an
agreement to encumber, purchase, or sell immovable property, such that it is enforceable
notwithstanding the absence of a written contract.16 And, while acknowledging that the Project
contemplates the parties entering into a lease relative to Plaintiffs' use of LSR’s terminal site,
Plaintiffs emphasize that Louisiana law excepts leases from the transactions involving immovable
property that must be in writing to be enforceable.
"Unless the law prescribes a certain formality for the intended contract," a contract
is formed by the consent of the parties established through offer and acceptance made orally, in
writing, or by action or inaction that under the circumstances is clearly indicative of consent. .See
La. Civ. Code art. 1927; see also Hanger One MLU, Inc. v. Unopened Succession of Rogers, 981
So.2d 175 (La. App. 2 Cir. 2008) (formation of a valid and enforceable contract under Louisiana law
requires capacity, consent, a certain object, and lawful cause; consent requires a meeting of the
minds of the parties). Plaintiffs are correct that leases of immovable property generally are not
required by law to be in writing to be enforceable between the parties thereto.17
On the other hand, as additionally urged by both LSR and Cargill, where a written
contract is not mandated by law, but the contracting parties "have contemplated a certain form, it
is presumed that they do not intend to be bound until the contract is executed in that form."18 See
immovable as contract to sell an immovable, which must be in writing).
16
See Plaintiffs’ LSR Opp., Rec. Doc. 15-2, p. 7 of 39 and p. 23 of 39.
17
See La. Civ. Code art. 2681 (leases may be made orally or in writing, but are
ineffective as to third persons "until filed for recordation in the manner prescribed by legislation").
18
See La. Civ. Code art. 1947.
15
La. Civ. Code art. 1947. Further, a “contract to enter into a lease at a future time is enforceable by
either party if there was agreement as to the thing to be leased and the rent, unless the parties
understood that the contract would not be binding until reduced to writing or until its other terms
were agreed upon. See La. Civ. Code art. 2670 (emphasis added). Consistent with these articles,
Defendants contend that Plaintiffs and LSR were not bound to any agreement regarding the terms
of the Deal and the Project unless and until a written contract setting forth the terms of the parties'
agreement was executed by the parties – and no such document ever was executed. Having carefully
reviewed the parties' memoranda, the Amended Complaint, and the documents submitted by the
parties,19 the Court agrees with Defendants that the allegations of the Amended Complaint do not
sufficiently establish the contrary. Under the circumstances, the Court likewise finds the factual
information presently set forth in the Amended Complaint, particularly when considered in light of
the December 9th Term Sheet, insufficient to support a reasonable inference that LSR and Plaintiffs,
both sophisticated business entities, actually reached a meeting of the minds, in writing or verbally,
regarding the essential components of the alleged Deal, i.e. the key elements necessary to implement
Plaintiffs' plan (the Project) to use LSR's terminal site as a water and rail distribution point for crude
oil, refined products, natural gas liquids and biofuels.20
In support of these conclusions, the Court notes that the Amended Complaint’s
averment that the binding January 3 Verbal Agreement, "incorporated and built upon the most recent
19
Although not attached to the Amended Complaint, the documents are referenced
therein.
20
See Carter v. Financial Advisor & Consulting, 44 So.2d 646, 647 (La. App. 1 Cir.
1983), writ denied, 446 So.2d 313 (La. 1984) (“Both parties must agree to the substantial elements
of a contract in order to have a binding obligation.”).
16
term sheet that they had exchanged."21 LSR asserts, and Plaintiffs do not deny, that the most recent
term sheet was exchanged by the parties on December 9, 2013.22 That term sheet ("December 9th
Term Sheet"), which is a document entitled "Gramercy, Louisiana Land Lease Consideration and
Key Terms," characterizes the December 9th Term Sheet as "non-binding" and "presented for
discussion purposes only," except with respect to the "Exclusivity," "Confidentiality" and "Access"
provisions, which "shall be binding upon execution of [the December 9th Term Sheet].23 The
December 9th Term Sheet, however, is unsigned.
The December 9th Term Sheet further states: "This Term Sheet is not an offer
capable of being accepted and the proposed Transaction (defined below) is subject in all respects
to further due diligence by the Parties, the approval of each Party's respective Board of Directors (or
similar governing body), and the Parties' execution of a definitive and written Lease Agreement that
will formalize the projected Transaction."24 In addition to the execution of a written lease
agreement, the December 9th Term Sheet identifies a number of other transactions to be completed
relative to the creation or transfer of interests in immovable property, including (1) an "option to
purchase" theLSR land to be leased, and the dock to be used; (2) easements to LSR land that is not
part of the lease and a separate easement agreement (the "LSR Easements"); (3) an option to
purchase rail road tracks, pipelines and other unspecified improvements; (4) an easement and access
21
See Amended Complaint, Rec. Doc. 4, ¶ 49.
22
Id. at Amended Complaint, Rec. Doc. 4, ¶32 ("Plaintiffs and LSR worked together
to finalize the terms of the Deal, exchanging at least five rounds of term sheets for the Deal between
October 20, 2013 and December 9, 2013.").
23
See LSR’s Mem., Sealed Rec. Doc. 6-7, p. 2 of 13 and 8 of 13..
24
Id. at 2 of 13.
17
right to the "KCS property."25 It also states that "ECLT will require the use and eventual ownership
of parcels of land and/or improvements thereon adjacent to the LSR Land not currently owned by
LSR" and identifies obtaining, relative to that adjacent land, "the same or substantially similar
purchase option rights and right of first refusal rights as to ECLT's rights to the LSR Land" as one
of LSR's obligations.26
Notwithstanding the foregoing, and Plaintiffs' characterization of their business plans
for the Project as "an extremely valuable asset . . . valued at nearly $1 billion," the Amended
Complaint's only description of the terms of the allegedly binding verbal agreement, reached on
January 3rd, is that it "incorporated and built upon the most recent term sheet that they had
exchanged."27 Significantly, the Amended Complaint does not provide even a general explanation
of how the December 9th Term Sheet was "built upon," and fails to affirmatively allege that the
parties expressly agreed to dispense with the December 9th Term Sheet's writing requirements and
the necessity of obtaining the approval of each party's respective Board of Directors (or comparable
governing body). Nor do Plaintiffs explain how Faucheaux, LSR’s Chief Executive Officer and
General Manager, and MacKenzie, LSR’s Business Development Consultant had authority to
obligate LSR to such an agreement.28 Plaintiffs' allegations similarly fail to offer a reasonable
25
Id. at 2 of 13 - p.3 of 13.
26
Id. at p. 3 of 13 and p. 6 of 13.
27
See Amended Complaint, Rec. Doc. 4, ¶49.
28
Certain requirements exist relative to a business entity acting through an agent. Civil
Code article 2996 requires a mandatary's authority to "alienate, acquire, encumber, or lease a thing
be given expressly. " See La. Civ. Code art. 2996. Further, pursuant to La. R.S. 12:317,
"alienation, lease, or encumbrance of its immovables" are excluded from the matters in the ordinary
course of a limited liability company's business for which "each member of a limited liability
company, if management is reserved to the members, or manager, if management is vested in one
18
explanation for such an extreme and sudden change of course.
Given the foregoing, the Court finds the allegations of the Amended Complaint,
relative to the January 3 Verbal Agreement, insufficient to state a viable breach of contract claim
upon which relief can be granted. Accordingly, LSR's motion to dismiss is granted relative to Count
Five of the Amended Complaint.
C.
Intentional and Negligent Misrepresentation/Fraud/Detrimental Reliance
(Claims Two, Three, and Seven)
In Claims Two, Three, and Seven of the Amended Complaint, Plaintiffs seeks an award of
damages against LSR on grounds of negligent and intentional misrepresentation, fraud, and
detrimental reliance. In paragraphs 80 and 81 of the Amended Complaint, Plaintiffs refer
specifically to (1) LSR’s representations of authority to agree to the terms of the Project29 and (2)
LSR’s representations of its ability to acquire immovable property adjacent to its immovable
property.
In their opposition memorandum, however, Plaintiffs characterize additional
representations (set forth in other paragraphs in the Amended Complaint) as being fraudulent
or more managers pursuant to R.S. 12:1312, is a mandatary of the limited liability company[,] unless
such mandate is restricted or enlarged in the articles of organization or unless such member or
manager lacks the authority to act for the limited liability company and the person with whom he
is dealing has knowledge of the fact that he lacks such authority." See La. R.S. 12:317. Finally,
although "the contract of mandate is not required to be in any particular form"[,] when the law
prescribes a certain form for an act, a mandate authorizing the act must be in that form. See La. Civ.
Code art. 2993.
29
Paragraphs 30 and 31 of the Amended Complaint (Rec. Doc. 4) state: “Throughout
that period, LSR expressed enthusiasm for the Project and reassured Plaintiffs that the Project would
go forward once LSR and Plaintiffs finalized the terms of the agreement to effectuate the Project (the
Deal). Further, on several occasions, LSR stated that it had obtained board approval for the Project
and all that remained for the Project to be finalized was to present an agreement acceptable to LSR’s
Chief Executive Officer and General Manager, Larry Faucheux."
19
misrepresentations.30
To prevail on a claim for negligent misrepresentation, Plaintiffs must prove that: (1) LSR
supplied false information in the course of its business or other matters in which it had a pecuniary
interest; (2) LSR had a legal duty to supply correct information to the Plaintiffs; (3) LSR breached
that duty by omission or affirmative misrepresentation; and (4) Plaintiffs suffered damages or
pecuniary loss as result of its justifiable reliance upon LSR’s omission or affirmative
misrepresentation. See Hardy v. Hartford Ins. Co., 236 F.3d 287, 292 (5th Cir. 2001). To establish
a intentional misrepresentation claim, Plaintiffs must prove that: (1) LSR made misrepresentation
of material fact; (2) the misrepresentation was made with the intent to deceive; and (3) Plaintiffs
justifiably relied on the misrepresentation which caused injury. Kadlec Medical Center v. Lakeview
Anesthesia Associates, 527 F.2d 412, 418 (5th Cir. 2008).
With respect to fraud, Louisiana Civil Code article 1953 provides that “[f]raud is a
misrepresentation or a suppression of the truth made with the intention either to obtain an unjust
advantage for one party or to cause a loss or inconvenience to the other. Fraud may also result from
silence or inaction.” La. Civ. Code art. 1953.31 “Fraud cannot be predicated on statements that are
promissory in nature or relating to future events. ” Taylor v. Dowling Gosslee & Associates, Inc.,
44,654 (La. App. 2d Cir. 10/7/09); 22 So. 3d 246, 255; see also Metropolitan Life Ins. Co., 158 F.3d
484, 1998 WL 648603, *6 (5th Cir. 1998) (unpub.) (“As a general rule, the failure to perform the
terms of a contract is breach of contract, not a tort.”). Fraud “can be predicated[, however,] on
30
Plaintiffs’ LSR Opp. Sealed Rec. Doc. 15-2, p. 22 of 39 - p. 23 of 39.
31
Fraud may vitiate consent. See La. Civ. Code art. 1948. Such vitiation does not
occur, however, “ when the party against whom fraud was directed could have ascertained the truth
without difficulty, inconvenience or special skill,” unless “a relation of confidence induced a party
to rely on the other’s assertions or representations.” La. Civ. Code art. 1954.
20
promises made with the intention not to perform at the time the promise is made.” Benton v. Clay,
123 So.3d 212 La. App. 2 Cir. 2013 (citing Automatic Coin Enter., Inc. v. Vend–Tronics, Inc., 433
So.2d 766 (La. App. 5th Cir.1983), writ denied, 440 So.2d 756 La.1983)). Failure to perform as
promised, or nonperformance of an agreement to do something at a future time, however, is alone
not evidence of fraud. Taylor, 22 So. 3d at 255. Recovering tort damages for fraud requires
proving an intent to defraud and actual or potential loss or damage. Id. at 255.
“Detrimental reliance is designed to prevent injustice by barring a party from taking a
position contrary to his prior acts, admissions, representations, or silence.” Benton v. Clay, 201348,245 ( La. App. 2d Cir. 08/07/13), 123 So.3d 212, 222. To establish a viable detrimental reliance
claim, a plaintiff must prove: (1) the defendant's representation by conduct or word; (2) justifiable
reliance; and (3) a change in position to one's detriment because of the reliance. Id. Because
detrimental reliance is not based upon the intent to be bound, prevailing on a detrimental reliance
claim does not require proof of a formal, valid, and enforceable contract. Id. (citing Suire v.
Lafayette City–Parish Consol. Gov't, 2004–1459 (La. 4/12/05), 907 So.2d 37; Allbritton v. Lincoln
Health Syst., Inc., 45,537 (La. App. 2d Cir.10/20/10), 51 So.3d 91). “Rather, the basis of
detrimental reliance is the idea that a person should not harm another person by making promises
that he will not keep.” Id. Thus, the focus of analysis of a detrimental reliance claim is not whether
the parties intended to perform, but, instead, whether a representation was made in such a manner
that the promisor should have expected the promisee to rely upon it, and whether the promisee so
relies to his detriment.” Id.
As explained above, Federal Rule of Civil Procedure 9(b) requires that fraud or mistake be
plead with particularity. As such, a plaintiff pleading fraud must “specify the statements contended
21
to be fraudulent, identify the speaker, state when and where the statements were made, and explain
why the statements were fraudulent.” Dorsey v. Portfolio Equities, Inc., 540 F.3d 333, 339 (5th Cir.
2008). Rule 9(b) requires a plaintiff to plead specific facts that support an inference of fraud;
merely alleging that a defendant possessed fraudulent intent is insufficient. Id. The Fifth Circuit
has also subjected ruled negligent misrepresentation claims to Rule 9(b)’s heightened pleading
requirements when the plaintiff’s focus rests on the same facts for both fraud and misrepresentation
claims. See Benchmark Electronics, Inc. v. J.M. Huber Corp., 343 F.3d 719, 723-24 (5th Cir.
2003); Williams v. WMX Techs., Inc., 112 F.3d 175, 177 (5th Cir. 1997).
LSR’s motion asserts that Plaintiffs have not met the Rule 9(b) requirement, and instead have
simply made conclusory allegations regarding the elements for a cause of action for fraud and
misrepresentation. LSR also argues that Plaintiffs could not reasonably rely on LSR agents’ alleged
verbal representations of LSR’s ability to acquire ownership of neighboring property, without
further inquiry, because such transactions require a writing. And, finally, LSR contends that
Plaintiffs could have ascertained the truth of the alleged false statements without difficulty and were
not excused from such due diligence by virtue of a relation of confidence that has reasonably
induced a party to rely on the other's assertions.
Plaintiffs’ allegations relative to these claims are deficient for a number of related reasons.
First, Plaintiffs’ factual assertions fail to support a reasonable inference that LSR’s alleged
misrepresentations regarding its authority to enter into a binding agreement with Plaintiffs and/or
the LSR’s ability to acquire neighboring properties, were made with the intent to deceive. Indeed,
Plaintiffs’ allegations maintain that all was going as planned between them and Defendant LSR until
Defendant Cargill became aware of the proposed Project, and wanting to have the benefits of the
22
proposed arrangement for itself, used its influence and power as a 50% owner of LSR to sabotage
LSR’s and Plaintiffs’ dealings. Plaintiffs’ assertions relative to LSR’s alleged misrepresentations
of its ability to acquire ownership of neighboring property are similarly lacking.
Second, Plaintiffs’ allegations regarding these claims do not sufficiently set forth the nature
and extent of their alleged reliance on LSR representations, or the reasonableness of that reliance.
Indeed, though Plaintiffs purport to have relied on representations by LSR that “it had obtained
board approval for the Project and all that remained for the Project to be finalized was an agreement
acceptable to LSR’s Chief Executive Officer and General Manager, Larry Faucheaux,” Plaintiffs
do not identify the person(s) purportedly making such statements on LSR’s behalf or their date(s).
Nor is it evident to the Court, given the apparent lack of certainty regarding the remaining key
components of the Project, as described above, and as evidenced by the December 9th Term Sheet
and the January 2014 email between Goitia, Faucheaux, and MacKenzie, exactly what terms
Plaintiffs reasonably believed LSR’s Board had approved or could have approved at that juncture.
Further, as stated above, regarding the January 3 Verbal Agreement, Plaintiffs offer no explanation
why it was reasonable for them to believe that Faucheaux, LSR’s Chief Executive Officer and
General Manager, and MacKenzie, LSR’s Business Development Consultant – neither of whom are
alleged to be members or managers of the LSR – had authority to obligate LSR to such an agreement
and why it was reasonable for Plaintiffs to invest substantial resources into the Project without
receiving some written evidence of the Board’s approval. The same is true relative to Plaintiffs’
assertions of reliance on representations (by unnamed person(s)) that LSR either presently owned,
or had options to buy, the additional neighboring property that Plaintiffs sought to utilize for the
Project. Given the form requirements for transfers of immovable property, including options thereto,
23
written evidence of these alleged rights should have been readily available for Plaintiffs’ review in
as part of its own due diligence inquiry.32
Third, Plaintiffs’ allegations do not support a fair inference that a relation of confidence
existed between them and LSR such that Plaintiffs were not obligated to make a reasonable inquiry
regarding the validity of LSR’s agents' alleged misrepresentations.
Although the LSR NDA
imposed a duty of confidentially on both parties, that duty existed only relative to the proper use of
the confidential information that the parties shared with each other and is not reasonably construed
as transforming LSR and Plaintiffs’ arms-length business negotiation into a relationship for which
due diligence was no longer required. Indeed, contrary to Plaintiffs’ assertion that LSR became
Plaintiffs’ de facto partner relative to the Project, the LSR NDA specifically provides that neither
it or the prior relationship between the parties creates or has created “a relationship of agency,
partnership, joint venture, or license” between the parties.33
Fourth, although Plaintiffs’ ability to establish their reasonable reliance relative to certain
elements of their damage claims is not entirely inconceivable, the allegations of their Amended
Complaint, in their present state, fail to adequately convey that message. For instance, Plaintiffs do
not adequately explain the chronology of pertinent events, including the timing of and reasoning
behind the incurrence of the claimed expenses, in such a manner that a reasonable inference
regarding the propriety of Plaintiffs' alleged reliance can be drawn. Nor do Plaintiffs identify which
expenses they allegedly would have not incurred but for LSR’s representations versus those
independently undertaken by Plaintiffs as part of its own evaluation of the suitability of LSR’s
32
See footnote 28, supra.
33
See LSR’s Mem., Sealed Rec. Doc. 6-6, p.5 of 7.
24
Terminal Site for the Project. See Sun Drilling Prod. Corp. v. Rayborn, 00-1884 (La. Ct. 4th Cir.
10/3/01); 798 So. 2d 1141, 1153 (“for fraud or deceit to have caused plaintiff’s damages, he must
at least be able to say that had he known the truth, he would have not acted as he did to his
detriment”). Accordingly, the Court finds the present allegations of Plaintiffs’ Amended Complaint
inadequate to state viable claims of intentional or negligent misrepresentation, fraud, or detrimental
reliance.
D.
Breach of the Implied Duty of Good Faith and Fair Dealing (Claim Six)
In Claim Six of the Amended Complaint, Plaintiffs avers that Defendants LSR and
Cargill breached implied duties of good faith and fair dealing arising from the LSR NDA and the
Cargill NDA. The claim asserted against LSR is premised upon the covenant of good faith and fair
dealing that Louisiana law recognizes as implied in every contract, and, importantly, dictates the
elements of recoverable breach of contract damages. See La. Civ. Code art.1983 (“Contracts must
be performed in good faith.” ); art. 1994 (“obligor is liable for the damages caused by his failure
to perform”); art. 1996 (“obligor in good faith is liable only for the damages that were foreseeable
at the time the contract was made”); and art. 1997 (“obligor in bad faith is liable for all damages,
foreseeable or not, that are direct consequence of his failure to perform”).
As LSR contends, without an enforceable contract, there can be no breach of an
implied contractual duty of good faith. See, e.g., Spillway Investments, L.L.C. v. Pilot Travel
Centers LLC, No. 04-cv-2451, 2005 WL 517498 * 7 (E.D. La. Feb. 22, 2005) (Engelhardt, J.);
Adams v. Autozoners, Inc., No. 98-cv-2336, 1999 WL 744039, *7 (Sept. 23, 1999) (Vance, J.). , the
statutory good faith obligation, which arises only in the context of performance of a contract, cannot
be used to create a contract where none exists. See, e.g. Domed Stadium Hotel v. Holiday Inns, Inc.,
25
732 F.3d 480, 485 (5th Cir. 1984); Jones v. Honeywell Int'l Inc., 295 F. Supp.2d 652, 671-72 (M.D.
La.2003). Accordingly, because the Court did not find Plaintiffs’ allegations sufficient to establish
the existence of an enforceable contract, based on the January 3 Verbal Agreement, much less that
it was breached, a corresponding breach of the implied obligation of good faith and fair dealing is
likewise unavailing. Conversely, as set forth above, the Court has found Plaintiffs to have stated
a viable breach of contract claim relative to the LSR NDA and, in paragraph 92 of the Amended
Complaint, Plaintiffs assert, relative to the NDA's, that LSR and Cargill breached their contractual
obligations in bad faith. Thus, the Court must determine whether Plaintiffs have plead facts
sufficient to permit a reasonable inference that a viable claim for breach of the obligation of good
faith and fair dealing has been stated relative to that contract.34
A contracting party’s mere failure to fulfill an obligation imposed by contract does
not automatically breach its duty of good faith and fair dealing. See, e.g., Administrators of the
Tulane Educational Fund, 2011 WL 3268108, *5 (E.D. La. July 28, 2011) (Vance, J.). Rather, bad
faith requires more than “mere bad judgment or negligence, it implies the conscious doing or a
wrong for dishonest or morally questionable motives.” Id. (citing Industrias Magromer Cueros y
Pieles S.A. v. Louisiana, 293 F.3d 912, 922 (5th Cir. 1992)). Thus, to establish such a breach, a
party must allege the defendant’s actions were prompted by fraud, ill will, or sinister motive. Id.;
see also Bd. of Supr.'s of Louisiana State Univ. v. Louisiana Agr. Fin. Auth., 07–0107 (La. App. 1
34
Although a breach of the duty of good faith and fair dealing is designated as a
separate claim for relief (Claim Six) from Plaintiffs' breach of contract claims (Claims Four and
Five), the Court, with respect to the LSR NDA, is construing Claim Six to simply seek the measure
of damages, allowed by Louisiana Civil Code article 1997, for bad faith breaches of contract. See
La. Civ. Code art. 1997. To the extent that Plaintiffs believe Louisiana law allows such a breach to
constitute an independent claim for relief, Plaintiffs have not cited any supportive legal authority.
26
Cir. 2/8/08), 984 So.2d 72, 80 (bad faith generally implies actual or constructive fraud or a refusal
to fulfill contractual obligations, not an honest mistake as to actual rights or duties); Gross v. RSJ
Intern., LLC, No. 11-cv-83, 2012 WL 729955, *4 (E.D. La. March 6, 2012) (Vance, J.)
(Homeowner's allegation that defendants defaulted on their obligations when they “walked off the
job” upon receipt of what they knew to be the last of homeowner's Road Home monies was
sufficient to raise an inference of bad faith).35
Here, Plaintiffs allege that LSR breached the LSR NDA by disclosing confidential
information to Cargill without authority and, at Cargill's bidding, purposely acted to avoid or
circumvent Plaintiffs relative to the proposed Project. At this stage of the proceeding, it is not
apparent to the Court that such allegations, if proven at trial, are necessarily insufficient, as a matter
of law, to render LSR a "bad faith obligor" for purposes of the enhanced damages allowed by Civil
Code article 1997.
Regarding Cargill, the Court has likewise concluded that Plaintiffs have pled a viable
breach of contract claim against Cargill relative to the Cargill NDA. Significantly, however, as
Plaintiffs acknowledge, under Texas law, an implied duty of good faith and fair dealing is not
imposed upon all contractual relationships. See, e.g., Subaru of America, Inc. v. David McDavid
Nissan, Inc., 84 S.W.3d 212 (Tex. 2002) (citing Great Am. Ins. Co. v. North Austin Mun. Util. Dist.
No. 1, 908 S.W.2d 415, 418 (Tex.1995)). Rather, such a duty may be intentionally created by
35
See also La. Civ. Code art. 1997, cmt. (c)(" In the context of vices of consent, 'fraud'
means a stratagem or machination to take unfair advantage of another party. 'Bad faith' better
conveys the intended meaning here, that is, an intentional and malicious failure to perform. []A truly
fraudulent failure to perform of course, would constitute bad faith under this Article."); La. Civ.
Code art. 1770, cmt. (e) ("party to requirements contract that chooses to terminate it because he has
an opportunity to sell the same things elsewhere at a higher profit could violate the good faith
requirement if the other party cannot find an alternative source of supply").
27
express language in a contract or simply may arise as a result of a special relationship between the
parties governed or created by a contract. See Bradley v. Phillips Petroleum Co., 527 F. Supp.2d
661, 686-87 (S.D. Tex. 2007) (quoting Arnold v. Nat'l County Mut. Fire Ins. Co., 725 S.W.2d 165,
167 (Tex.1987) and Lovell v. Western Nat'l Life Ins. Co., 754 S.W.2d 298, 302 (Tex.App.-Amarillo
1988)).
"The special relationship necessary to create [this duty] either arises from the element
of trust necessary to accomplish the goals of the contract, or has been imposed by the courts because
of an imbalance of bargaining power.” Bradley, 527 F. Supp. 2d at 686-87 ((quoting Lovell, 754
S.W.2d at 302) (citing English v. Fischer, 660 S.W.2d 521, 524 (Tex.1983))). Other relationships
giving rise to such a duty involve “long standing personal or social relationships,” or proof of
“dealings of long standing to justify reliance by the complaining party.” Id. (quoting Lovell, 754
S.W.2d at 302 (internal citations omitted).
Although Plaintiffs' now urge, in their opposition memorandum that an "apparent
degree of unequal bargaining power existed between Plaintiffs, described as "two upstart, single
member entities," and Cargill described as "one of the largest privately-held corporate entities in the
world with operations that span nearly every major market."36 The Rule 12(b)(6) inquiry is directed
to the allegations of a plaintiff's complaint, however, not a plaintiff's opposition memorandum, and,
as set forth by Cargill in its reply memorandum, the allegations of the Amended Complaint hardly
suggest that Plaintiffs can fairly be characterized as simply "two upstart, single member entities."37
Nor, also for the reasons stated by Cargill, is the Court presently convinced that the mere existence
36
See Plaintffs’ Cargill Opp., Sealed Rec. Doc. 16-2, p.16 of 36.
37
See Cargill’s Reply Mem., Sealed Doc. 24, p. 7 of 15.
28
of the Cargill NDA, despite imposing a duty of confidentiality and limiting the uses for which the
parties were to use information disclosed thereto with the other, or the limited course of dealings
between Cargill and Plaintiffs during the timeframe at issue, warrant imposition of an implied duty
that Texas courts have hesitated to extend.38 Accordingly, the Court finds no basis to conclude that
Plaintiffs have stated a viable claim against Cargill, under Texas law, for breach of an implied duty
of good faith and fair dealing.
Given the foregoing, LSR's motion is granted in part (regarding the January 3 Verbal
Agreement) and denied in part (regarding the LSR NDA) relative to an implied duty of good faith
and dealing. Cargill's motion is granted with respect to this claim.
E.
Louisiana's Unfair Trade Act ("LUTPA") (Claim One)
In Claim One, Plaintiffs seek relief under the Louisiana Unfair Trade Practices Act
("LUTPA"), La. R.S. 51:1405, et seq., from both LSR and Cargill. In Cheramie Services, Inc. v.
Shell Deepwater Production, 09-1633, pp. 10-11 (La.4/23/10), 35 So.3d 1053, 1059-60, the
Louisiana Supreme Court described the applicability of this statute as follows:
The applicable theory of recovery before this court is provided in LUTPA.
Louisiana Revised Statutes § 51:1405(A) prohibits any “unfair or deceptive acts or
practices in the conduct of any trade or commerce,” and § 51:1409(A) grants a right
of action to “[a]ny person who suffers any ascertainable loss” from a violation of this
prohibition. It has been left to the courts to decide, on a case-by-case basis, what
conduct falls within the statute's prohibition. Dufau v. Creole Engineering, Inc., 465
So.2d 752, 758 (La. App. 5 Cir.), writ denied, 468 So.2d 1207 (La.1985) (In order
to recover under LUTPA a plaintiff must prove “some element of fraud,
misrepresentation, deception, or other unethical conduct” on the part of the
defendant.).
The courts have repeatedly held that, under this statute, the plaintiff must
38
See Cargill’s Memorandum (“Cargill’s Mem.”), Sealed Rec. Doc. 8-2, p. 19 of 34 22 of 34; Cargill’s Reply Mem., Sealed Doc. 24, p. 7 of 15 - 8 of 15.
29
show the alleged conduct “offends established public policy and . . . is immoral,
unethical, oppressive, unscrupulous, or substantially injurious.” Moore v. Goodyear
Tire & Rubber Company, 364 So.2d 630, 633 (La. App. 2 Cir. 1978) (Applying
common meanings to the words of the statute, the court held a debtor had a right of
action under LUTPA to recover actual damages for wrongful repossession of
movables.); see also Lilawanti Enterprises, Inc. v. Walden Book Company, Inc.,
95–2048 p. 6, 670 So.2d 558, 561 (Conclusory allegation by prospective subtenant
of unethical, oppressive, unscrupulous or substantially injurious conduct on the part
of a landlord were not supported by the record and did not controvert landlord's
affidavits that showed economic reasons for not accepting sublease.); Bolanos v.
Madary, 609 So.2d 972, 977 (La. App. 4 Cir. 1992), writ denied, 615 So.2d 339
(La.1993) (Defendant's letters to government agencies did not fall to level of
unethical, oppressive, unscrupulous, or substantially injurious practice and thus, did
not constitute unfair trade practice.).
[T]he range of prohibited practices under LUTPA is extremely narrow. In
Turner v. Purina Mills, Inc., 989 F.2d 1419, 1422 (5th Cir.1993), the court
explained:
LUTPA does not prohibit sound business practices, the
exercise of permissible business judgment, or appropriate free
enterprise transactions. The statute does not forbid a business to do
what everyone knows a business must do: make money. Businesses
in Louisiana are still free to pursue profit, even at the expense of
competitors, so long as the means used are not egregious. Finally, the
statute does not provide an alternate remedy for simple breaches of
contract. There is a great deal of daylight between a breach of
contract claim and the egregious behavior the statute proscribes.
[Citations omitted.]
Further, "an intent to eliminate the competition does not by itself violate LUTPA.
Rather, the statute forbids businesses to destroy each other through improper means." Turner, 989
F.2d at 1423.
Plaintiffs' LUTPA claim against LSR, as presently alleged, suffers the same
shortcomings set forth above relative to their claims of negligent and intentional misrepresentation,
fraud, and detrimental reliance. With respect to Cargill, Plaintiffs' LUTPA claim is essentially
identical to its tortious interference with contract claim against that defendant, which is not actionable
30
under Louisiana law, because it fails to comport with the narrow confines of the limited tortious
interference with contract cause of action established in 9 to 5 Fashions, Inc. v. Spurney, 538 So. 2d
228 (La. 1989). LUTPA cannot apply to activity that is not otherwise actionable under Louisiana
law. See American Waste and Pollution Control Co., v. Browning-Ferris, Inc., 949 F.2d 1384, 138692 (5th Cir. 1991). Accordingly, on the showing made, Defendants' motions are granted relative to
Plaintiffs' claims for relief asserted under LUTPA.
F.
Tortious Interference with Contract (Claim Eight)
In Claim Eight of the Amended Complaint, Plaintiffs purport to assert a tortious
inference of contract claim against Cargill based on Cargill's alleged interference with the January
3 Verbal Agreement. As an initial matter, Plaintiffs and Cargill disagree whether, under the
applicable choice of law provision, this claim is governed by Louisiana or Texas substantive law
principles. In this instance, however, the Court does not have to resolve the choice of law question.
Because the Court has determined that Plaintiffs have not sufficiently alleged the existence of a
binding contract relative to the January 3 Verbal Agreement, they likewise cannot establish a tortious
interference claim against Cargill relative to that contract. Accordingly, Cargill's motion to dismiss
is granted relative to Claim Eight.
G.
Tortious Interference with Business Relationship (Claim Nine)
The tortious interference with business relationship claim that Plaintiffs have asserted
against Cargill, however, does require the Court to resolve the choice of law dispute. Although the
parties agree that Civil Code article 3543 is determinative of this issue,39 the parties disagree as to
39
Article 3543 provides:
31
the location of the alleged conduct and alleged injury. Construing the allegations of Amended
Complaint in Plaintiffs' favor, the Court concludes that Cargill's alleged wrongful conduct – even if
properly characterized as being directed toward Louisiana, by virtue of LSR's Terminal Site being
there – is most appropriately viewed as having occurred in Texas. In support of this conclusion, the
Court notes that Cargill does not dispute Plaintiffs' contention that Cargill's ETM business
development manager, Gaston Garrido, is based in Houston, Texas, from where he made phone calls
and sent emails regarding the Project, and that he and Goitia, Plaintiffs' sole shareholder and a Texas
domiciliary, twice met at Cargill's Houston office to discuss Cargill's potential role in the Project.
Accordingly, because the tortious interference with business relationship claim permitted by Texas
law "provides for a higher standard of conduct"40 than the more limited cause of action authorized
Art. 3543. Issues of conduct and safety
Issues pertaining to standards of conduct and safety are governed by the law
of the state in which the conduct that caused the injury occurred, if the injury
occurred in that state or in another state whose law did not provide for a higher
standard of conduct.
In all other cases, those issues are governed by the law of the state in which
the injury occurred, provided that the person whose conduct caused the injury should
have foreseen its occurrence in that state.
The preceding paragraph does not apply to cases in which the conduct that
caused the injury occurred in this state and was caused by a person who was
domiciled in, or had another significant connection with, this state. These cases are
governed by the law of this state.
See La. Civ. Code art. 3543.
40
Id.
32
by Louisiana law,41 the first sentence of Article 3543 dictates the application of Texas law regardless
of whether Plaintiffs' injury is alleged to have occurred in Louisiana or Texas.
Under Texas law, "[t]o prevail on a claim for tortious interference with prospective
business relations, a plaintiff must establish that (1) there was a reasonable probability that the
plaintiff would have entered into a business relationship with a third party; (2) the defendant either
acted with a conscious desire to prevent the relationship from occurring or knew the interference was
certain or substantially certain to occur as a result of the conduct; (3) the defendant's conduct was
independently tortious or unlawful; (4) the interference proximately caused the plaintiff injury; and
(5) the plaintiff suffered actual damage or loss as a result. See Coinmach Corp. v. Aspenwood
Apartment Corp., 417 S.W.3d 909 (Tex. 2013) ((citing Wal–Mart Stores, Inc. v. Sturges, 52 S.W.3d
711, 726 (Tex.2001) (addressing requirement of predicate tort or unlawful conduct)). Establishing
that defendant's conduct was independently tortious or wrongfu, does not require that the plaintiff be
able to prove an independent tort. See Wal–Mart Stores, Inc, 52 S.W.3d 726. Rather, proof that the
defendant's conduct would be actionable (as to someone) under a recognized tort is sufficient. Id.42
41
Under Louisiana law, establishing a tortious interference with business relations
claim requires proof that the defendant "improperly and maliciously influenced others not to deal
with plaintiff." See Hardy v. Easterling, 47-950, pp. 11-12 (La. App. 2d Cir. 4/27/13), 113 So.3d
1178, 1186-87. Louisiana jurisprudence has viewed the claim with disfavor and construed the malice
element require plaintiffs to show a defendant acted with "actual malice," that is, "spite or ill will,
which is difficult (if not impossible) to prove in most commercial cases in which conduct is driven
by the profit motive, not by bad feelings." Id. (quoting Bogues v. Louisiana Energy Consultants,
LLC, 46,434 (La. App.2d Cir.08/10/11), 71 So.3d 1128, 1134). The only motive fairly attributed
to Cargill by the allegations of the Amended Complaint is one of profit. Thus, as stated, the
allegations set forth in Claim Nine are not sufficient to state a tortious interference with business
relations under Louisiana.
42
As explained by the Wal-Mart court:
33
On the present showing made, the Court is unable to definitively conclude that
Plaintiffs' allegations fail, as a matter of law, to state a claim for interference with business relations
under Texas law. Rather, for the reasons set forth in Plaintiffs' memoranda, it appears plausible, at
this stage of the proceeding, that Cargill's alleged conduct, while favorable to Cargill, could
nevertheless breached a fiduciary duty owed to LSR or SUGAR, thus rendering Cargill's conduct
independently tortious or unlawful for purposes of Plaintiffs' interference with business relations
claim.43
H.
Unjust Enrichment (Claim Ten)
As acknowledged by the parties, an unjust enrichment claim asserted under Louisiana
or Texas law has five elements: (1) an enrichment; (2) an impoverishment; (3) a connection between
the enrichment and resulting impoverishment; (4) an absence of “justification” or “cause” for the
enrichment and impoverishment; and (5) the absence of another remedy at law. See, e.g. JP Mack
"Thus, for example, a plaintiff may recover for tortious interference from a defendant
who makes fraudulent statements about the plaintiff to a third person without proving
that the third person was actually defrauded. If, on the other hand, the defendant's
statements are not intended to deceive . . ., then they are not actionable. Likewise,
a plaintiff may recover for tortious interference from a defendant who threatens a
person with physical harm if he does business with the plaintiff. The plaintiff need
prove only that the defendant's conduct toward the prospective customer would
constitute assault. Also, a plaintiff could recover for tortious interference by
showing an illegal boycott, although a plaintiff could not recover against a defendant
whose persuasion of others not to deal with the plaintiff was lawful."
See Wal-Mart, 52 S. W. 3d at 726.
43
See Plaintiffs' Cargill Opp., Sealed Rec. Docs. 16-2, p. 26 of 36 - p. 30 of 36:
Plaintiffs’ Cargill Surreply, Sealed Rec. Doc. 30, p. 4 of 6 - p. 6 of 6.
34
Indus. LLC v. Mosaic Fertilizer, LLC, 970 F. Supp. 2d 516, 520-21 (E.D. La. 2013). Given the nature
of Plaintiffs' other claims, and the factual scenario involved here, it presently is not apparent to the
Court, to any reasonable likelihood, that an unjust enrichment remedy could eventually be established
in this matter. Although Plaintiffs have alleged unjust enrichment in the alternative, the “mere fact
that a plaintiff does not successfully pursue another available remedy does not give the plaintiff the
right to recover under the theory of unjust enrichment.” See JP Mack Indus. LLC, 970 F. Supp. 2d
at 521. According, the Court grants Defendants' motions relative to Plaintiffs' unjust enrichment
claims (Claim Ten).
CONCLUSION
As stated herein, IT IS ORDERED that Defendants’ motions (Rec. Docs. 6 and 8)
are GRANTED IN PART and DENIED IN PART. IT IS FURTHER ORDERED that these
rulings are without prejudice to Plaintiffs' right to attempt to cure the identified deficiencies by
amendment filed no later twenty (20) days from the entry of this Order and Reasons. Any such
amendment is to be set forth in a second amended and superseding complaint. Lastly, in denying
Defendants' motions to dismiss, in part, the Court emphasizes that the instant ruling certainly does
not insulate those aspects of Plaintiffs' claims from dismissal by means of a properly supported
motion for summary judgment. Rather, the Court rules on Defendants' motions considering the
information presently available to it and the principles of law establishing the parameters of the
Court's resolution of motions filed pursuant to Rule 12(b)(6).
New Orleans, Louisiana, this 13th day of August 2015.
_________________________________
KURT D. ENGELHARDT
35
United States District Judge
36
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