CEH Energy, LLC, et al v. Kean Miller LLP et al

Filing 45

ORDER & REASONS that Stephen C. Hanemann's 27 Motion to Dismiss for Failure to State a Claim and Kean Miller LLP's 29 Motion to Dismiss for Failure to State a Claim are GRANTED. Plaintiff's claims against Stephen Hanemann and Kean Miller are DISMISSED WITH PREJUDICE. Signed by Judge Eldon E. Fallon on 11/20/17. (dno)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA

CEH ENERGY, LLC ET AL.

CIVIL ACTION

V.

NO. 17-8274

KEAN MILLER LLP ET AL.

SECTION "L" (2)

ORDER & REASONS
Before the Court are Defendants Stephen Hanemann and Kean Miller’s Motions to
Dismiss. R. Docs. 27, 29. Plaintiffs oppose the motions. R. Doc. 31. The Court held oral
argument on this matter on November 15, 2017. Having considered the parties’ arguments,
submissions, and the applicable law, the Court now issues this Order and Reasons.
I.

BACKGROUND
This lawsuit arises from the representation by Defendants of Plaintiffs when they

invested in Louisiana oil prospects. Plaintiff CEH Energy, LLC (“CEH Energy”) is a Delaware
corporation, wholly owned and created by Plaintiff Shenzhen Careall Investment Holdings
Group Co., Ltd. (“Careall”), for the purpose of investing in Louisiana oil prospects. R. Doc. 1 at
1-2. Plaintiffs invested a total of $2.1 million in two oil prospects. R. Doc. 1 at 5. The oil
prospects were owned by Intrepid Drilling, LLC (“Intrepid”), which is owned by Bill Simmons.
R. Doc. 1 at 2. Plaintiffs allege that the investments were fraudulent. R. Doc. 1 at 25-26.
Plaintiffs have filed a lawsuit in federal court in Mississippi against Intrepid and Bill Simmons
claiming that these defendants failed to disclose material omissions, including a $205 million
outstanding RICO judgment, and defrauded Plaintiffs. R. Doc. 1 at 5, 10-11.

1

Defendants in the present lawsuit are Kean Miller LLP (“Kean Miller”) and Stephen
Hanemann. R. Doc. 1. Stephen Hanemann is a partner at Kean Miller. R. Doc. 1 at 3. Stephen
Hanemann was engaged by Plaintiffs, at the suggestion of Bill Simmons, to represent them
regarding their investments in Louisiana oil prospects. R. Doc. 1 at 2-3. Plaintiffs allege that
Kean Miller and Stephen Hanemann already were, and had been, representing Intrepid and Bill
Simmons. R. Doc. 1 at 4. Plaintiffs allege that Kean Miller and Stephen Hanemann had a conflict
of interest, failed to disclose material omissions regarding the investment, and breached their
fiduciary duties. R. Doc. 1 at 5-6, 30.
Plaintiffs claim that had they known about the conflict of interest they would have hired
different representation. R. Doc. 1 at 7. Plaintiffs further allege that competent counsel would
have discovered and/or disclosed the judgments against Intrepid and Bill Simmons and therefore,
Plaintiffs would not have made the oil prospect investments. R. Doc. 1 at 7. Plaintiffs bring the
following claims against Kean Miller and Stephen Hanemann: breach of fiduciary duty,
conspiracy, conversion, negligent misrepresentation, unjust enrichment, violation of Louisiana
Unfair Trade Practices Act (“LUTPA”), detrimental reliance, and fraud. R. Doc. 1 at 39-48.
Plaintiffs request damages in the amount of their investment as well as attorney fees. R. Doc. 1 at
39-48.
II.

PENDING MOTIONS
Defendant Stephen Hanemann moves to dismiss for failure to state a claim upon which

relief can be granted. R. Doc. 27. Defendant argues that each claim made by Plaintiff is
insufficient or barred by preemption or estoppel. R. Doc. 27-1 at 1-2. Therefore, Defendant asks
that the Court dismiss Plaintiffs’ claims against him. R. Doc. 27.
Defendant Kean Miller also moves to dismiss all of Plaintiffs’ claims against it for failure

2

to state claims upon which relief can be granted. R. Doc. 29. Defendant avers that Plaintiffs’
claims are either barred by res judicata, perempted, and/or not well pleaded. R. Doc. 29-1 at 1.
Defendant also alleges that Plaintiffs had decided to invest in the oil prospects before contacting
Kean Miller and Stephen Hanemann and that Plaintiffs’ retention of Defendants was limited to
reviewing the agreement to participate in the oil prospects. R. Doc. 29-1 at 2-3.
Plaintiffs respond in opposition to Defendants’ motions. R. Doc. 31. Plaintiffs allege that
all of their claims are timely. R. Doc. 31-1 at 11. Plaintiffs submit that all of their claims are
based on alleged fraudulent actions by the Defendants and so are not perempted because they fall
into an exception. R. Doc. 31-1 at 11-12. Plaintiffs allege that, because the fraud exception
applies, normal prescriptive periods apply to their claims. R. Doc. 31-1 at 13. Plaintiffs allege
that all relevant actions of Defendants took place within the prescriptive periods and even if they
did not, the claims would not be prescribed because they relate back to the complaint filed in
Mississippi court. R. Doc. 31-1 at 16. Plaintiffs claim that they are not suing for malpractice but
rather all of their claims are based on Defendants’ alleged fraud. R. Doc. 31-1 at 21.
III.

LAW & ANALYSIS
a. Motion to Dismiss Standard
The Federal Rules of Civil Procedure permit a defendant to seek a dismissal of a

complaint based on the “failure to state a claim upon which relief can be granted.” Fed. R. Civ.
P. 12(b)(6). A complaint should not be dismissed for failure to state a claim “unless it appears
beyond doubt that the plaintiff can prove no set of facts in support of his claim which would
entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 47 (1957). Generally, when evaluating a
motion to dismiss pursuant to Rule 12(b)(6), the court should not look past the pleadings.
“To survive a motion to dismiss, a complaint must contain sufficient factual matter,

3

accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The
district court must construe facts in the light most favorable to the nonmoving party and must
accept as true all factual allegations contained in the complaint. Ashcroft, 556 U.S. at 678. “A
claim has facial plausibility 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. A court
“do[es] not accept as true conclusory allegations, unwarranted factual inferences, or legal
conclusions.” Plotkin v. IP Axess Inc., 407 F.3d 690, 696 (5th Cir. 2005).
b. Peremption & Prescription
Plaintiffs’ claims, however couched, are actions against an attorney arising out of an
engagement to provide adequate legal services. Louisiana Revised Statute 9:5605 provides
particular peremptive and prescriptive periods for all “action[s] for damages against any attorney
[or law firm] arising out of an engagement to provide legal services.” Such claims are
traditionally referred to as legal malpractice claims. Under Louisiana law, legal malpractice
claims are perempted 1 “unless filed in a court of competent jurisdiction . . . within one year from
the date of the alleged act, omission, or neglect, or within one year from the date that the alleged
act, omission, or neglect is discovered or should have been discovered.” Gorman v. Billingsley,
1999 WL 1240817, at *1 (5th Cir. 1999); La. Rev. Stat. § 9:5605. Louisiana also places an
absolute limit on legal malpractice claims through a three-year peremptive period that runs from
the date of the act, omission or neglect giving rise to the claim. La. Rev. Stat. § 9:5605(A). A
peremptive period “is a period of time fixed by law for the existence of a right[;]” unlike a

1

La. Rev. Stat. § 9:5605(B). “[These] periods are expressly peremptive.” Jennifer
Thornton, Comment, Louisiana Revised Statute Section 9:5605: A Louisiana Lawyer’s Best
Friend, 74 Tul. L. Rev. 659, 661-62 (1999).
4

prescriptive period, the running of a peremptive period destroys the cause of action including the
natural obligation. La. Civ. Code arts. 1762, 3458.
For purposes of discovery, the period begins to run when a client knew or should have
known of facts that would have enabled him to state a cause of action for malpractice, even if the
client has a limited ability to comprehend and evaluate those facts. Turnbull v. Thensted, 757
So.2d 145, 150 (La. App. 4 Cir. 2000). A client is considered to have discovered potential
malpractice once he hires an attorney to represent him in a malpractice action. Id. The actual date
of discovery is prior to hiring, however, because a client has formed an awareness of potential
malpractice prior to that date. Id.
However, the statute provides for an exception to the peremptive periods in cases of
fraud. La. Rev. Stat. § 9:5605 (E). The Louisiana Supreme Court has held that “none of the time
periods in the statute can be applied to legal malpractice claims once fraud ha[s] been
established.” Lomont v. Bennett, 2014-2483 p. 23 (La. 6/30/15), 172 So.3d 620, 636. When the
fraud exception applies, the claim is subject to the ordinary prescription period. Id. Thus, a client
who discovers an attorney's fraud may bring his action more than three years from the date of the
fraudulent act, so long as the action is brought within one year from the date the client
discovered the fraud. La. Rev. Stat. § 9:5605(E); Broussard v. Toce, 746 So.2d 659 (La. App. 3
Cir. 1999).
Fraud is a misrepresentation or suppression of the truth made with the intent to gain an
unjust advantage or to cause another loss or inconvenience. La. Civ. Code art. 1953. To prove
fraud, a plaintiff must show that the defendant had an intent to defraud; a showing of negligence
is not enough. Cortes v. Lynch, 846 So.2d 945, 950 (La. App. 1 Cir. 2003). In addition, fraud
must be pleaded with particularity. La. Code Civ. Proc. art. 856.

5

c. Discussion
Here, Plaintiffs are suing Defendants based on alleged actions that occurred during or
because of Defendants’ legal representation of Plaintiffs. Therefore, all of Plaintiffs’ claims fall
under Louisiana Revised Statute 9:5605 because all of the claims are against an attorney or law
firm, arising out of the provision of legal services. The representation of Plaintiffs by Hanemann
and Kean Miller took place in November 2013. Plaintiffs state that they discovered the alleged
bad actions in January 2015. This lawsuit was filed on August 25, 2017. Plaintiffs knew the facts
enabling them to state a cause of action more than two years before filing this claim.
Accordingly, Plaintiffs’ claims would be perempted under 9:5605.
In addition to their other claims, Plaintiffs have brought a claim for fraud, and state that
all of their claims are based on fraud, and thus, the peremptive periods of 9:5605 do not apply.
Nonetheless, the action remains subject to the one-year fraud prescriptive period from the date
the Plaintiffs knew or should have known of the alleged fraudulent acts. In Lomont v. Bennett,
the Louisiana Supreme Court held that “in cases where fraud is established pursuant to La. Rev.
Stat. 9:5605(E), a legal malpractice claim is governed by the one-year prescriptive period set
forth in La. Civ. Code art. 3492.” 2014-2483 p. 24 (La. 6/30/15); 172 So.3d 620, 637 (quoting
Braud v. New England Ins. Co., 576 So.2d 466, 468 (La. 1991)).
Applying the prescriptive period for fraud, Plaintiffs’ claims have prescribed on their
face. Therefore, Plaintiffs have the burden to demonstrate that the claims have not prescribed.
Plaintiffs have not demonstrated any reason why they should not or could not have filed these
claims within the prescriptive period. Further, Plaintiffs have not shown, and the Court has not
found, any reason to apply the doctrine of contra non valentum to these claims. 2

2

The Louisiana Supreme Court has recognized four factual situations in which contra
6

Plaintiffs claim that this fraud claim should sound in contract because it arises out of a
contractual attorney-client relationship. If so, Plaintiffs argue, the prescriptive period is ten years.
However, the logical result of this argument is absurd because all claims against attorneys arising
out of the provision of legal services are based on a contractual attorney-client relationship.
Thus, such an interpretation would render La. 9:5605 meaningless. Courts have routinely
categorized claims against attorneys as delictual claims “unless an attorney ‘expressly warrants a
particular result.’” See, e.g., B. Swirsky & Co., Inc. v. Bott, 598 So.2d 1281, 1282-83 (1992)
(quoting Cherokee Restaurant, Inc. v. Pierson, 428 So.2d 995, 999 (La. App. 1 Cir. 1983))
(holding that an attorney who state he would file insurance paperwork did not make an express
warranty and the claim against him was delictual). Here, Defendants did not expressly warrant a
result. Therefore, Plaintiffs claims cannot sound in contract.
Next, Plaintiffs argue that, under Federal Rule of Civil Procedure 15(c), their claims
should relate back to the date they file the lawsuit in Mississippi. This argument is without merit
because the present complaint is not an amendment of the Mississippi complaint. Furthermore,
filing the complaint in federal court in Mississippi cannot toll the prescriptive period against
these Defendants because the Mississippi court is not a court of competent jurisdiction as to

non valentum prevents the running of liberative prescription:
(1) Where there was some legal cause which prevented the courts or their officers from
taking cognizance of or acting on the plaintiff's action;
(2) Where there was some condition coupled with a contract or connected with the
proceedings which prevented the creditor from suing or acting;
(3) Where the debtor himself has done some act effectually to prevent the creditor from
availing himself of his cause of action;
(4) Where the cause of action is not known or reasonably knowable by the plaintiff, even
though his ignorance is not induced by the defendant.
Fontenot v. ABC Ins. Co., 95-1707 p.4 (La. 6/7/96); 674 So.2d 960. 963.

7

them. 3
Plaintiffs have also argued that, because they have alleged fraud, the prescriptive periods
for each individual claim should apply. However,
the rationale for the fraud exclusion . . . is that a plaintiff may be prevented by
fraudulent acts from ever knowing the existence of a claim. Once a person has
notice of a claim, it no longer matters if the claim sounds in fraud or some other
theory such as negligence: the plaintiff is on notice and must act.
George Denègre, Jr. & Shannon S. Holtzmann, Professional Malpractice Peremption:
Clarified Through Adversity, La. B.J. Oct.-Nov. 2011 at 176, 178. The purpose of the
exception is to soften the peremptive period in situations where plaintiffs would have a
claim perempted because an attorney continued to conceal fraud of malpractice with
additional fraud or deceit. In this way, the fraud exception is similar to the doctrine of
continuous representation in that it acts to transform the peremptive period into a
prescriptive period and suspend prescription until the discovery of fraud, at which time
the plaintiff is likely to terminate the attorney-client relationship. The Court has found no
examples of courts applying prescriptive periods other than that for fraud under
9:5605(E). Furthermore, the Court does not believe that the purpose of the exception
necessitates this interpretation. Therefore, Plaintiffs have not met their burden to
demonstrate that the prescriptive period has not run against their claims and all of
Plaintiffs claims against Defendants Hanemann and Kean Miller are prescribed.
IV.

CONCLUSION
For the foregoing reasons,

IT IS ORDERED that Defendants Stephen Hanemann and Kean Miller’s Motions to Dismiss,
R. Docs. 27, 29, are GRANTED. Plaintiff’s claims against Stephen Hanemann and Kean Miller

3

Plaintiffs’ claims against Defendants were dismissed by the Mississippi court for lack of
8

are DISMISSED WITH PREJUDICE.

New Orleans, Louisiana this 20th day of November, 2017.

________________________________
UNITED STATES DISTRICT JUDGE

personal jurisdiction.
9