Shell Offshore Inc. v. FreePort-McMoran Oil and Gas LLC

Filing 99

ORDER AND REASONS re 88 Motion to Compel. Signed by Magistrate Judge Michael North on 10/10/18. (clc)

SHELL OFFSHORE INC.

VERSUS

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA

FREEPORT-MCMORAN OIL & GAS LLC

CIVIL ACTION

NUMBER: 17-09695
SECTION: “M”(5)

ORDER AND REASONS

Before the Court is the motion to compel jurisdictional discovery and production of

documents filed by Plaintiff, Shell Offshore, Incorporated (“Shell”). (Rec doc. 88). The
motion is opposed by Defendants, Freeport-McMoran Oil & Gas LLC and PXP Gulf Coast LLC
(“Defendants”). (Rec. doc. 93). Shell filed a reply brief (rec. doc. 96) and the Court held oral
argument October 3, 2018. (Rec. doc. 98).

This motion arises out of Defendants’ motion to dismiss for lack of personal

jurisdiction (rec doc. 62) and Shell’s efforts to meet the arguments raised by Defendants
therein. In ruling upon the motion to dismiss, the District Judge 1 found:

Shell has requested leave, however, to conduct jurisdictional
discovery in an effort to establish its alter ego theory of
imputation. The Court is persuaded that Shell has made enough
of a preliminary showing to have its request granted. If Shell can
obtain evidence through discovery to enable it to establish
personal jurisdiction based on its alter ego theory, the Court is
persuaded that exercising jurisdiction over PXP would not
offend traditional notions of fair play and substantial justice.
(Rec. doc. 76 at p. 10).

The District Judge issuing this order was the Honorable Jay C. Zainey. The case has since been transferred to
the Honorable Barry W. Ashe. (Rec. doc. 90).

1

Following through on the Court’s order, Shell propounded numerous interrogatories,

requests for admission, and requests for production of documents in search of support for

its alter-ego theory of imputation. The Defendants answered that discovery in part, but
objected to a great many requests as disproportionate to the needs of the case and outside
what they believe is the proper scope of jurisdictional discovery in this case.

The present motion seeks complete responses to Shell’s discovery requests. Shell

argues that, according to the District Judge’s order, it is entitled to conduct discovery on “its

alter ego theory of imputation,” which it says should be determined according to the “totality
of the circumstances” under relevant Fifth Circuit and Louisiana state-court precedent. (Rec.
doc. 96 at pp. 5-6). Defendants argue that the District Judge’s inquiry on the alter-ego theory

is limited to the seven-factor test set forth in Hargrave v. Fibreboard Corporation 2 and that

Shell’s discovery should be limited by those seven factors. (Rec. doc. 93). Shell responds
that application of Hargrave is not as rigid as Defendants urge because the Hargrave factors
are a “non-exhaustive” list of relevant factors to be considered; Shell cites a number of cases
in which additional factors have been considered by courts analyzing alter-ego issues. (Rec.

doc. 96 at pp. 5-6)(citing Freudensprung v. Offshore Tech. Services, Inc., 379 F.3d 327, 346 (5th

Cir. 2004); Hardware Resources, Inc. v. Lama, D.D., No. 07-CV-1875, 2009 WL 3230596 at *5
(W.D. La. Sept. 30, 2009); Laitram Machinery, Inc. v. Carnitech, No. 92-CV-3841, 1993 WL
370624 at *2 (E.D. La. Sept. 10, 1993); see also Huard v. Shreveport Pirates, Inc., 147 F.3d 406,
409–10 (5th Cir. 1998); United States v. Jon-T Chemicals, Inc., 768 F.2d 686, 691–92 (5th Cir.

1985), cert. denied, 475 U.S. 1014, 106 S.Ct. 1194 (1986); Shell Offshore Inc. v. Eni Petroleum
US LLC, No. 16-CV-15537, 2017 WL 3582486 at *5 (E.D. La. Aug. 17, 2017)).
2

710 F.2d 1154 (5th Cir. 1983).

2

Shell also argues that because this lawsuit was brought under the Outer Continental

Shelf Lands Act (“OCSLA”), which contains a mandatory choice-of-law rule requiring
application of the law of the adjacent state – here Louisiana, the Court would be well within

precedent to apply the non-exhaustive 18-factor test of Green v. Champion Insurance 3 in

determining the alter-ego issue in this case.

The Court has reviewed the subject discovery requests and Defendants’ responses,

along with the caselaw cited by the parties. Based upon that review and its consideration of

the arguments of counsel in brief and at the hearing, the Court finds that the motion is welltaken and should be granted. It is clear to the Court that the District Judge intended to
provide Shell every reasonable opportunity to obtain the information it needs to mount its
alter-ego argument in response to Defendants’ motion to dismiss. Upon review of the

numerous cases cited and discussed by both parties (and listed above), it is clear to the Court

that the discovery requests propounded by Shell are sufficiently tailored to that purpose.
Whether the ultimate analysis conducted by the District Judge involves a seven-factor, 12-

factor, or 18-factor test, it is clear to this Court that these “tests” are rarely if ever rigidly
applied and there is substantial overlap between them.

This Court’s task is not to make the final choice-of-law decision as to which test should

be applied. This is a discovery motion in a case brought under the OCSLA, whose mandatory

neighboring-state choice of law provision at a minimum makes possible the fact that the
District Judge may look to the 18-factor test in Green to resolve the alter-ego issue. For this
reason, the Court finds the contested discovery to be appropriate and will grant the motion
to compel, with two exceptions.
3

577 So.2d 249, 257–58 (La. App. 1st Cir.), writ denied, 580 So.2d 668 (La. 1991).

3

The Court finds that interrogatory number 5 is overly broad and should be more

narrowly tailored. Requesting “every monetary distribution or transfer of funds” for a six-

year period from FMOG to a plethora of individuals and entities, including employees and
attorneys, is far too broad to be acceptable. Shell must narrow the scope of this request.

Similarly, request for production number 32 is overly broad and must be narrowed.

Complying with a request for documents “sufficient to show, generally, what ongoing

business activities [Defendants] are conducting in the United States or elsewhere” is likely
impossible and the Court will not order Defendants to undertake such a task. Relevant
information sought in this request can be obtained via a more focused request for production
and by deposition of the appropriate corporate representative(s).
New Orleans, Louisiana, this 10th day of

October

, 2018.

MICHAEL B. NORTH
UNITED STATES MAGISTRATE JUDGE

4