Mack Energy Co v. Red Stick Energy, LLC et al

Filing 265

ORDER AND REASONS denying 197 Motion for Summary Judgment. Signed by Judge Susie Morgan on 9/6/2019. (crt,Whidden, C)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
MACK ENERGY COMPANY,
Plaintiff

CIVIL ACTION

VERSUS

NO. 16-1696

RED STICK ENERGY, LLC, ET AL.,
Defendants

SECTION "E" (1)

ORDER AND REASONS
Before the Court is a Second Motion for Summary Judgment Regarding Litigious
Redemption filed by Cross Claim Defendants, Main Pass 21, L.L.C. and Albert W.
Gunther, III, and Third Party Defendants, Natrona Resources, L.L.C., Albert W. Gunther,
Jr. as trustee of The R E Trust, Martha Gunther, as trustee of The R E Trust, Old South
Mechanical, L.L.C., Old South Ventures, L.L.C., Dixie Management, L.L.C., and Albert W.
Gunther, III (collectively, the “Movers”) against Cross Claim Plaintiff and Third Party
Plaintiff Red Stick Energy, L.L.C (“Red Stick”). 1 Red Stick opposes this motion. 2 Although
the motion was filed only against Red Stick, Plaintiff Mack Energy, LLC (“Mack”) also
opposes the motion. 3 Movers filed a reply. 4 For the following reasons, the motion is
DENIED.
BACKGROUND
This case arises out of the drilling of an oil and gas well in the Main Pass 21
Prospect. 5 Mack seeks to recover the costs of drilling, testing, plugging, and abandoning
a dry hole from Red Stick, Gunther, Jr., and Main Pass. 6 Mack alleges Red Stick purchased

R. Doc. 197.
R. Doc. 213.
3 R. Doc. 210.
4 R. Doc. 232.
5 R. Doc. 191 at ¶ 4.
6 Id. at ¶¶ 37, 38.
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a 26.5% interest in the Main Pass 21 Prospect and entered into a participation agreement
and a joint operating agreement with Mack. 7 Red Stick allegedly assigned all of its interest
in the Main Pass 21 Prospect to Defendant Main Pass. 8 Red Stick owns a 10% interest in
Main Pass. 9 Red Stick has filed an amended cross-claim against Gunther, Jr. and Main
Pass 10 and a second amended third party complaint 11 against Natrona Resources, L.L.C.,
Dixie Management Services, L.L.C., Albert W. Gunther, Jr. and Martha Gunther as
trustees of RE Trust, Old South Mechanical, L.L.C., Old South Ventures, L.L.C., and
Albert W. Gunther, III, seeking reimbursement for any award against Red Stick in favor
of Mack.
It is undisputed that on October 16, 2018 Mack entered into a Confidential
Covenant Not to Execute, Indemnity and Assignment Agreement (the “Settlement
Agreement”) with Red Stick, Thomas Burnett, and Janet Burnett. 12,13 In this Settlement
Agreement, Red Stick and the Burnetts (1) paid Mack $25,000, (2) agreed not to contest
a future motion for summary judgment filed by Mack against Red Stick, and (3) assigned
their rights against the Movers to Mack. 14 In exchange, Mack agreed (1) to release all
claims against the Burnetts; (2) not to execute on any judgment against Red Stick and the
Burnetts; and (3) to provide representation and pay the future court costs and attorneys’
fees associated with the representation of Red Stick and Thomas Burnett in this
litigation. 15 It is undisputed that on that same date, these same parties entered into an
Id. at ¶¶ 20.
Id. at ¶ 36.
9 Id.
10 R. Doc. 169.
11 R. Doc. 170.
12 R. Docs. 197-2, 226, and 227.
13 The members of Red Stick, LLC are Thomas Burnett and Janet Burnett. R. Doc. 191 at ¶ 1(a). Janet Burnett
is not party to this litigation.
14 R. Doc. 197-2.
15 Id.
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Assignment of Claims (the “Assignment Agreement”). 16 In the Assignment Agreement,
Red Stick and the Burnetts, for “good and valuable consideration . . . described in . . . [the
Settlement Agreement],” assigned their rights against the Movers to Mack. 17
On November 12, 2018, counsel for Movers corresponded with counsel for Red
Stick, seeking to exercise the right of litigious redemption. 18 On November 16, 2018,
Movers filed a “Motion for Litigious Redemption.” 19 On March 8, 2019, the Court granted
Movers leave to amend their motion for litigious redemption to comply with the
requirements of Rule 56 and Local Rule 56.1. 20 On March 22, 2019, Movers filed a Motion
for Summary Judgment, seeking judgment as a matter of law that (1) they are entitled to
exercise the right under Louisiana Civil Code article 2652 to redeem the litigious rights
purchased by Mack, and (2) the price paid for the litigious rights assigned to Mack is equal
to all attorneys’ fees and court costs for the representation of Red Stick and Thomas
Burnett from the date of the assignment (October 16, 2018) to the date of demand for
litigious redemption (November 12, 2018). 21 On April 3, 2019, the Court denied this
motion for summary judgment. 22 In so doing, the Court explained Movers were not
entitled to exercise the right of litigious redemption for the price of attorneys’ fees and
costs because “‘redemption should only apply to transfers made in return for the payment
of a certain or determinable amount of money,’” and “[t]he attorneys’ fees and costs

R. Docs. 197-2, 226, and 227.
R. Doc. 197-4.
18 R. Doc. 126-11.
19 R. Doc. 98.
20 R. Doc. 122.
21 R. Doc. 126.
22 R. Doc. 137.
16
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incurred by Mack for its representation of Red Stick and Thomas Burnett is not
determined or determinable at the time.” 23 The Court explained:
The attorneys’ fees and costs associated with Mack’s representation of Red Stick
and Thomas Burnett did not cease on the day Movers made known their intention
to exercise the right of litigious redemption. Rather, the attorneys’ fees and costs
continue to accrue as Mack agreed to represent Red Stick and Thomas Burnett
throughout this litigation. 24
The Court further explained:
Because Red Stick and the Burnetts assigned their rights against Movers to Mack
in exchange for the discharge of a debt, the price Movers owe to redeem the
litigious rights is the amount of the debt discharged by the assignment. 25
On June 11, 2019, Mack and Red Stick entered into an Addendum to the
Confidential Covenant Not to Execute, Indemnity and Assignment Agreement (the
“Addendum”), which “deleted and . . . declared null and void ab initio” the assignment of
claims set forth in the October 16, 2018 Settlement Agreement and Assignment
Agreement. 26 The Addendum further provides the Settlement Agreement “is hereby
amended such that [Mack] agrees that it will limit its execution on any judgment it obtains
against [Red Stick] in the Litigation to those amounts [Red Stick] collects from the other
parties in the Litigation pursuant to [Red Stick’s] cross-claims and third-party claims.” 27
With respect to this limitation, the Addendum additionally provides: “it is the Parties’
intent that the debt owed to [Mack] has not been and shall not be remitted, but that
[Mack] agrees to limit satisfaction and/or collection of any judgment or awarded
rendered herein in favor of [Mack] and against [Red Stick] as set forth [above].” 28 Finally,

Id. at 8-9 (quoting Martin Energy Co. v. Bourne, 598 So. 2d 1160, 1162-63 (La. Ct. App. 1992)).
Id. at 9.
25 Id. at 13 (citing Mervin R. Riseman, The Sale of a Litigious Right, 13 Tul. L. Rev. 448, 454 (1939)).
26 R. Doc. 197-5 at 2.
27 Id.
28 Id. at 2-3.
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“[t]he Parties stipulate that it is the intent of the Agreements as modified by this
Addendum that the amounts [Red Stick and the Burnetts] . . . will pay to [Mack] . . . is
limited to the $25,000 previously paid in accordance with the [Settlement Agreement]
and the amounts collected in this Litigation as set forth [above].” 29
On June 27, 2019, counsel for Movers sent correspondence to counsel for Red Stick
seeking to exercise their right of litigious redemption. 30 Movers allege counsel for Red
Stick did not respond to the correspondence. 31 On June 28, 2019, Movers filed the instant
Second Motion for Summary Judgment Regarding Litigious Redemption against Red
Stick seeking summary judgment that:
[T]here are no material issues of fact that, pursuant to article 2652 of the Louisiana
Civil Code, (1) the doctrine of litigious redemption applies to the claims transferred
from Mack Energy Company to Red Stick Energy, L.L.C. on June 11, 2019, (2) the
price paid for the litigious rights assigned by Mack Energy Company to Red Stick
Energy, LLC is $25,000.00, and (3) Movers are entitled to an opportunity to
redeem those litigious rights for the same price paid by Red Stick Energy, L.L.C. 32
Movers argue that the Addendum “transferr[ed] the claims against Movers from Mack
back to Red Stick” for the price of $25,000, which constituted a sale of litigious rights. 33
LEGAL STANDARD
Summary judgment is appropriate only “if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter
of law.” 34 “An issue is material if its resolution could affect the outcome of the action.” 35
When assessing whether a material factual dispute exists, the Court considers “all of the

Id. at 3.
R. Doc. 197-6.
31 R. Doc. 197-1 at 7.
32 Id. at 15.
33 Id. at 7.
34 Fed. R. Civ. P. 56; see also Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986).
35 DIRECTV Inc. v. Robson, 420 F.3d 532, 536 (5th Cir. 2005).
29

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evidence in the record but refrains from making credibility determinations or weighing
the evidence.” 36 All reasonable inferences are drawn in favor of the nonmoving party. 37
There is no genuine issue of material fact if, even viewing the evidence in the light most
favorable to the nonmoving party, no reasonable trier of fact could find for the nonmoving
party, thus entitling the moving party to judgment as a matter of law. 38
If the dispositive issue is one on which the moving party will bear the burden of
persuasion at trial, the moving party “must come forward with evidence which would
‘entitle it to a directed verdict if the evidence went uncontroverted at trial.’” 39 If the
moving party fails to carry this burden, the motion must be denied. If the moving party
successfully carries this burden, the burden of production then shifts to the nonmoving
party to direct the Court’s attention to something in the pleadings or other evidence in the
record setting forth specific facts sufficient to establish that a genuine issue of material
fact does indeed exist. 40
If the dispositive issue is one on which the nonmoving party will bear the burden
of persuasion at trial, the moving party may satisfy its burden of production by either (1)
submitting affirmative evidence that negates an essential element of the nonmovant’s
claim, or (2) demonstrating there is no evidence in the record to establish an essential
element of the nonmovant’s claim. 41 When proceeding under the first option, if the

Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398 (5th Cir. 2008); see also
Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150–51 (2000).
37 Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994).
38 Smith v. Amedisys, Inc., 298 F.3d 434, 440 (5th Cir. 2002).
39 Int’l Shortstop, Inc. v. Rally’s, Inc., 939 F.2d 1257, 1263–64 (5th Cir. 1991) (quoting Golden Rule Ins. Co.
v. Lease, 755 F. Supp. 948, 951 (D. Colo. 1991)).
40 Celotex, 477 U.S. at 322–24.
41 Id. at 331–32 (Brennan, J., dissenting); see also St. Amant v. Benoit, 806 F.2d 1294, 1297 (5th Cir. 1987)
(citing Justice Brennan’s statement of the summary judgment standard in Celotex, 477 U.S. at 322–24, and
requiring the Movers to submit affirmative evidence to negate an essential element of the nonmovant’s
claim or, alternatively, demonstrate the nonmovant’s evidence is insufficient to establish an essential
element); Fano v. O’Neill, 806 F.2d 1262, 1266 (citing Justice Brennan’s dissent in Celotex, and requiring
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nonmoving party cannot muster sufficient evidence to dispute the movant’s contention
that there are no disputed facts, a trial would be useless, and the moving party is entitled
to summary judgment as a matter of law. 42 When, however, the movant is proceeding
under the second option and is seeking summary judgment on the ground that the
nonmovant has no evidence to establish an essential element of the claim, the nonmoving
party may defeat a motion for summary judgment by “calling the Court’s attention to
supporting evidence already in the record that was overlooked or ignored by the moving
party.” 43 Under either scenario, the burden then shifts back to the movant to demonstrate
the inadequacy of the evidence relied upon by the nonmovant. 44 If the movant meets this
burden, “the burden of production shifts [back again] to the nonmoving party, who must
either (1) rehabilitate the evidence attacked in the moving party’s papers, (2) produce
additional evidence showing the existence of a genuine issue for trial as provided in Rule
56(e), or (3) submit an affidavit explaining why further discovery is necessary as provided
in Rule 56(f).” 45 “Summary judgment should be granted if the nonmoving party fails to
respond in one or more of these ways, or if, after the nonmoving party responds, the court
determines that the moving party has met its ultimate burden of persuading the court that
there is no genuine issue of material fact for trial.” 46

the movant to make an affirmative presentation to negate the nonmovant’s claims on summary judgment);
10A CHARLES ALAN WRIGHT, ARTHUR R. MILLER & MARY KAY KANE, FEDERAL PRACTICE AND PROCEDURE
§2727.1 (2016) (“Although the Court issued a five-to-four decision, the majority and dissent both agreed as
to how the summary-judgment burden of proof operates; they disagreed as to how the standard was applied
to the facts of the case.” (internal citations omitted)).
42 First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 288–89 (1980); Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 249–50 (1986).
43 Celotex, 477 U.S. at 332–33.
44 Id.
45 Celotex, 477 U.S. at 332–33, 333 n.3.
46 Id.; see also First National Bank of Arizona, 391 U.S. at 289.

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“[U]nsubstantiated assertions are not competent summary judgment evidence.
The party opposing summary judgment is required to identify specific evidence in the
record and to articulate the precise manner in which that evidence supports the claim.
‘Rule 56 does not impose upon the district court a duty to sift through the record in search
of evidence to support a party’s opposition to summary judgment.’” 47
LAW AND ANALYSIS
Louisiana Civil Code article 2652 provides, “[w]hen a litigious right is assigned, the
debtor may extinguish his obligation by paying to the assignee the price the assignee paid
for the assignment, with interest from the time of the assignment.” 48 Comment (d) to
article 2652 provides “[t]his Article is inapplicable to transactions that do not, in fact,
import a sale, such as pignorative contracts.” 49,50,51 Louisiana Civil Code article 2439
defines a sale a “a contract whereby a person transfers ownership of a thing to another for
a price in money.” 52
Mack and Red Stick each argue Movers are not entitled to judgment as a matter of
law that they are entitled to exercise the right of litigious redemption under Article 2652

Ragas v. Tenn. Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998) (citing Celotex, 477 U.S. at 324;
Forsyth v. Barr, 19 F.3d 1527, 1537 (5th Cir. 1994) and quoting Skotak v. Tenneco Resins, Inc., 953 F.2d
909, 915–16 & n.7 (5th Cir. 1992)).
48 La. Civ. Code art. 2652.
49 La. Civ. Code art. 2652 cmt. (d) (citing Lerner Shops of Louisiana, Inc. v. Reeves, 73 So.2d 490 (La. App.
1st Cir. 1954)).
50 Under Louisiana law, the starting point for statutory interpretation is the language of the statute itself.
“When the language of the law is susceptible of different meanings, it must be interpreted as having the
meaning that best conforms to the purpose of the law.” La. Civ. Code. art. 10; La. R.S. § 1:3. While “the
Official Revision Comments are not the law, they may be helpful in determining legislative intent.” Tracie
F. v. Francisco D., 2015-1812 (La. 3/15/16), 188 So. 3d 231, 238; State v. Jones, 351 So.2d 1194, 1195 (La.
1977).
51 With respect to the definition of “import,” the Oxford English Dictionary defines the term as “[t]hat which
is implied or signified.” Import, OXFORD ENGLISH DICTIONARY (3d ed. 2015). The one case cited within
Comment (d), Lerner Shops of Louisiana, Inc. v. Reeves, confirms “import” means to signify, or constitute,
a sale. In Lerner Shops, the First Circuit Court of Appeals of Louisiana analyzed whether two contracts
“constitute a sale of land with a right of redemption . . . or a pignorative contract . . .” 73 So.2d at 496
(emphasis added).
52 La. Civ. Code art. 2439.
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because the Addendum did not import or signify a sale, but rather merely voided the
October 16, 2018 assignment of litigious rights. Specifically, Mack argues: “[l]itigious
redemption is not available to the [Movers] in this case because the ‘transfer’ at issue only
returned the claims back to the original assignor (Red Stick), [and,] therefore, the act did
not import a sale.” 53,54 Red Stick argues the Addendum constitutes a “nullification of the
original agreement from Red Stick to Mack.” 55
The “Nullification of Assignment of Claims” section of the Addendum provides the
assignment of claims referenced in the Settlement Agreement and the Assignment
Agreement “shall be deleted and is hereby declared null and void ab initio.” 56 As Mack
correctly points out, Red Stick did not “purchase” its own litigious rights back from
Mack. 57 Instead, by its own express terms, the Addendum nullifies and/or voids the sale
included in the Settlement Agreement and Assignment Agreement. Pursuant to Louisiana
Civil Code article 2029, “[a] contract is null when the requirements for its formation have
not been met.” 58 When a contract or a provision contained therein is declared null, it “is
deemed never to have existed” and accordingly the parties are “restored to the situation
that existed before the contract [or provision] was made.” 59,60 The parties to the

R. Doc. 210 at 6.
The $25,000 paid by Red Stick to Mack was in conjunction with the Settlement Agreement and the
Assignment Agreement. No money was paid by Mack to Red Stick at the time of the Addendum. The Court
has already ruled that, with respect to the Settlement Agreement and Assignment Agreement, the amount
to exercise the right of litigious redemption “is the amount of the debt discharged by the assignment.” R.
Doc. 137 at 13.
55 R. Doc. 213 at 5-6.
56 R. Doc. 197-5 at 2.
57 R. Doc. 210 at 7.
58 La. Civ. Code art. 2029.
59 La. Civ. Code art 2033.
60 “Nullity of a provision does not render the whole contract null unless, from the nature of the provision or
the intention of the parties, it can be presumed that the contract would not have been made without the
null provision.” La. Civ. Code art. 2034. In this case, the “Effect of the terms of the Agreements” section of
the Addendum provides: “[t]he parties agree that all terms in the [Settlement Agreement] and Assignment
Agreement remain in force and effect to the extent that those terms are not inconsistent with the terms and
intent of this Addendum.” R. Doc. 197-5 at 3.
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Settlement Agreement and the Assignment Agreement declared the assignment of claims
null and void. Although the Louisiana Civil Code does not define the term “void,” Black’s
Law Dictionary defines “void” as meaning “null,”61 and accordingly the two terms carry
identical meanings. Whether the assignment is void ab initio—from the assignment date
of October 16, 2018—or from the execution of the Addendum on June 11, 2019, is not
material in this case as no third parties acquired any rights in the interim period. By
nullifying the October 16, 2018 assignment, the Addendum returns Mack and Red Stick
to their pre-assignment positions, as though the assignment had never been made.
Consequently, the Addendum does not import a sale and, instead, nullifies a sale.
Because the Addendum does not import a sale, Movers are not entitled to judgment
as a matter of law that the doctrine of litigious redemption applies.
CONCLUSION
IT IS ORDERED that the Motion for Summary Judgment 62 filed by Movers is
DENIED.
New Orleans, Louisiana, this 6th day of September, 2019.
____________ ________ _______
SUSIE MORGAN
UNITED STATES DISTRICT JUDGE

61
62

Void, BLACK’S LAW DICTIONARY ONLINE LEGAL DICTIONARY (2nd ed).
R. Doc. 197.

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