Pemex Exploracion y Produccion v. BASF Corporation et al

Filing 607

MEMORANDUM OPINION AND ORDER granting 475 Defendant Plains Marketing L.P.'s Motion for Summary Judgment, granting in part and denying in part 479 Defendant Murphy Energy Corporation's Motion for Final Summary Judgment, granting in part and denying in part 481 Third-Party Defendant Donald Schroeder's Motion for Partial Summary Judgment, granting 486 Defendant Superior Crude Gathering, Inc. and Jeff Kirby's Motion for Summary Judgment, granting in part and denying in pa rt 489 BASF Corporation and BASF FINA Petrochemicals Limited Partnership's Motion for Summary Judgment, granting 517 Defendants RGV Energy Partners, LLC and F&M Transportation, Inc.'s Motion for Summary Judgment, granting in party and d enying in part 492 Plaintiff's Dispositive Motion, mooting as to Plains All-American Pipeline, L.P. and denying without prejudice as to Plains Marketing, L.P. 473 Defendants Plains All-American, L.P. and Plans Marketing L.P.'s Motion to Exclude Expert Testimony of Joseph Wilkinson and Brent Bersin, mooting as to Plains All-American Pipeline, L.P., Superior Crude Gathering, Inc., and Jeff Kirby, and denying without prejudice all other movants 476 Defendants BASF Corporation, et al 's Motion to Strike Alejandro Valle Corona's New Expert Report and Exclude his Expert Testimony, mooting 477 Defendants High Sierra Crude Oil & Marketing, LLC et al's Motion to Exclude Expert Testimony of Brent Bersin and Joseph Wilk inson, denying without prejudice 478 Defendants BASF Corporation, et al's Motion to Exclude Expert Testimony of Brent Bersin and Joseph Wilkinson, mooting as to Highe Sierra Crude Oil & Marketing, LLC, Plains All-American Pipeline, L.P., Jeff Kirby, and Superior Crude Gathering, Inc. and denying without out prejudice as to all other movants 482 Defendants BASF Corporation, et al's Motion to Exclude Expert Testimony of Ana Maria Salazar Slack, denying without prejudice 483 Plainti ff's Motion to Exclude the Expert Testimony of K. Scott Van Meter, CPA, mooting 485 Defendants RGV Partners, LLC and F&M Transportation, Inc.'s Motion to Join All Defendants' Motions to Strike Expert Reports and Exclude Expert Testim ony, denying without prejudice 495 Plaintiff's Motion to Exclude Defendants' Expert David G. Ownby, denying without prejudice 496 Plaintiff's Motion to Exclude Defendants' Expert Frank L. Holder, granting 426 Defendants BASF Corporation and BASF FINA Petrochemicals Limited Partnership's Amended Motion for Leave to Designate Responsible Third Parties, mooting 442 Defendant Superior Crude Gathering, Inc.'s Motion for Leave to Join Defendant High Sierra Oil & M arketing, LLC's Second Motion for Leave to Designate Responsible Third Parties, mooting 537 Defendants Plains Marketing, L.P., et al's Objections to Plaintiff's Summary Judgment Evidence, mooting 548 Plaintiff's Objections to Summary Judgment Evidence, mooting 565 Defendant Plains Marketing, L.P.'s Objections to Evidence Submitted in Support of Plaintiff PEP's Opposition to Defendants' Dispositive Motions, mooting 566 Superior Crude Gathering, Inc. and Jeff Kirby's Objections to Evidence Submitted in Support of Plaintiff's Opposition to Defendants' Dispositive Motions, mooting 575 Superior Crude Gathering, Inc. and Jeff Kirby's Objections to Evidence, mooting 583 Defendants BASF Corporation and BASF FINA Petrochemicals Limited Partnership's Objections to Evidence Submitted in Support of Plaintiff's Opposition to Defendants' Dispositive Motions, mooting 585 Defendant Murphy Energy Corporation's Obje ctions to Evidence Submitted in Support of Plaintiff's Opposition to Defendants' Dispositive Motions. All objections to evidence not referred to herein are over-ruled. (Joint Pretrial Order due by 11/1/2013. Docket Call set for 11/8/2013 at 03:00 PM in Courtroom 9B before Judge Sim Lake.) (Signed by Judge Sim Lake) Parties notified. (aboyd, 4)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
PEMEX EXPLORACION Y PRODUCCION,
Plaintiff,

§
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§
§
§
§

v.
BASF CORPORATION; BASF FINA
PETROCHEMICALS LIMITED
PARTNERSHIP; MURPHY ENERGY
CORPORATION; BIO-NU SOUTHWEST,
INC. d/b/a VALLEY FUELS; US
PETROLEUM DEPOT, INC.; ARNOLDO
MALDONADO; JONATHAN DAPPEN;
STEPHEN PECHENIK; TIMOTHY L.
BRINK; CONTINENTAL FUELS, INC.;
and HIGH SIERRA CRUDE OIL &
MARKETING, LLC, Successor to
PETRO SOURCE PARTNERS, LP,
Defendants.
PEMEX EXPLORACION Y PRODUCCION,
Plaintiff,

v.
BIG STAR GATHERING LTD L.L.P.;
F&M TRANSPORTATION, INC.;
JAMES JENSEN; JOPLIN ENERGY,
LLC f/k/a HUTCHISON HAYES
ENERGY, LLCi JEFF KIRBY;
PLAINS ALL-AMERICAN PIPELINE,
L.P.; SAINT JAMES OIL, INC.;
SUPERIOR CRUDE GATHERING, INC.;
TRANSMONTAIGNE PARTNERS, L.P.;
and WESTERN REFINING COMPANY,
L.P. ,
Defendants.

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CIVIL ACTION NO. H-IO-1997

CIVIL ACTION NO. H-11-2019

MEMORANDUM OPINION AND ORDER

iff, PEMEX Exploraci6n y Producci6n ("PEP")
suit

multiple

defendants

two

separate

I

has brought
but

now

consolidated -

actions

for

claims

arising

from

sales

in

the

United States of natural gas condensate allegedly stolen from PEP
in Mexico. 1

Pending before

the

court

are

five

categories

motions:
(1)

motions for summary judgment filed by defendants
(a) Plains Marketing l L.P. (Docket Entry No. 475);
(b) Murphy Energy Corp. (Docket Entry No. 479);
(c) Superior Crude Gathering l Inc. and Jeff Kirby
(Docket Entry No. 486); (d) BASF Corp. and BASF
FINA Petrochemicals l L.P. (Docket Entry No. 489);
and
(e)
RGV Energy
Partners
LLC
and
F&M
Transportation l Inc. (Docket Entry No. 517);
I

(2)

third-party defendant Donald Schroeder1s motion for
partial summary judgment on cross-claims asserted
against him by Murphy Energy and by BASF FINA
Petrochemical Limited Partnership (Docket Entry
No. 481);

(3)

PEp/s Dispositive Motion (Docket Entry No. 492);

(4)

motions to exclude and/or strike expertsl testimony
and/or reports l including l
(a) motions to exclude expert testimony of Joseph
Wilkinson and Brent Bersin filed by Plains AIIAmerican Pipeline l L.P. and Plains Marketing l L.P.
(Docket Entry No. 473); by High Sierra Crude oil &
Marketing
LLC
Jeff Kirby
and Superior Crude
Gathering
Inc. (Docket Entry No. 477); and by
BASF Corp.
BASF FINA Petrochemicals
L. P.
and
Murphy Energy Corp. (Docket Entry No. 478);
I

I

I

ll

I

I

I

(b) motion to strike expert report and testimony of
Alejandro Valle Corona filed by BASF Corp.
BASF
FINA Petrochemicals l L,P'
Murphy Energy Corp.
Plains All-American Pipeline l L,P' Plains Marking l
L. P.
Superior Crude Gathering
Inc.
and Jeff
Kirby (Docket Entry No. 476);
I

I

I

I

I

I

I

(c) motion to exclude expert testimony of Ana Maria
Salazar Slack filed by BASF Corp.
BASF FINA
I

lCivil Action No. H-10-1997.
-2-

of

Petrochemicals r L.P. r High Sierra Crude Oil &
Marketing r LLC r Jeff KirbYr Murphy Energy Corp. r
Plains
All-American
Pipeline r
L.P. r
Plains
Marketing r L.P. r and Superior Crude Gathering r Inc.
(Docket Entry No. 482) i
(d) motion to join all defendants r motions to
strike experts r reports and exclude expertsr
testimony filed by RGV Energy Partners and F&M
Transportation (Docket Entry No. 485) i
(e) PEprs motions to exclude expert testimony of
K. Scott Van Meter r CPA (Docket Entry No. 483) r
David G. Ownby (Docket Entry No. 495) r and Frank L.
Holder (Docket Entry No. 496) i and
(5)

motions to designate responsible third-parties
filed by defendants BASF Corp. and BASF FINA
Petrochemicals r L.P. (Docket Entry No. 426) r and by
defendant Superior Crude Gathering r Inc. (Docket
Entry No. 442).

In addition r most parties have submitted objections to the
evidence cited in support of the various dispositive motions.
~r

See

Defendants Plains Marketing L.P. r Superior Crude Gathering r

Jeff KirbYr Murphy Energy Corporation r BASF Corporation r and BASF
FINA Petrochemicals Limited Partnershiprs Objections to Plaintiff
PEpr s

Summary

Obj ections

of

Marketing r L.P.

Judgment
PEP

to

Evidence

the

(Dkt. 475)

Superior Crude Gathering r

(Docket

Entry

Summary Judgment
r

No.

Evidence

537)
of

i

The

Plains

Murphy Energy Corporation (Dkt. 479)
Inc.

and Jeff Kirby

(Dkt.

486)r

r

BASF

Corporation and BASF FINA Petrochemicals r LP (Dkt. 489) rand RGV
Energy
(Docket

PartnerS r
Entry

LLC

No.

and

F&M

Transportation r
Plains

(Dkt.

517)

Marketing

L.p.rs

Objections to Evidence Submitted in Support of Plaintiff

[Docket

548) i

Defendant

Inc.

Entry No. 545] PEprs Opposition to Defendants r Dispositive Motions
-3-

(Docket Entry No.

or Crude Gathering,

565) i

[Docket

to Defendants' Dispositive Motions

Entry No. 545] PEP's Opposit
566)

and Jeff

Submitted in Support of

Kirby's Obj ections to

(Docket Entry No.

Inc.

Objections of Plaintiff PEP to the

i

by Superior Crude Gathering,

Summary Judgment Evidence Submit

, and BASF FINA Petrochemicals Limited

Jeff Kirby, BASF Corporat

Partnership With Their Joint

to Plaintiff's Dispositive

Motion (Dkt. 542) and Plains Market

Inc. With Its Response to

Plaintiff's

536)

Dispositive

Motion

(Dkt.

Corporation With Its Response to
(Dkt. 541)
BASF

FINA

(Docket Entry No. 575)
Petrochemicals

and

Murphy

Energy

aintiff's Dispositive Motion
De

i

s BASF Corporation and

Limi

's

Objections

to

Evidence Submitted in Support of [Docket Entry No. 545] Plaintiff
PEP's Opposition to Defendants' Disposit

Motions (Docket Entry

No. 583); and Defendant Murphy Energy

's Objections to

Evidence Submitted in Support of [Docket Entry No. 545] Plaintiff
PEP's Opposition to Defendants' Disposit

Motions (Docket Entry

No. 585).
Background

I .

There are two live complaints in this consolidated action:
PEP's Third Amended Complaint (Docket Entry No. 220) filed in Civil
Action No. H-10-1997 (the \\BASF Action")
Complaint
2019

(Docket Entry No. 378)

(the "Big Star Action

fl

).

i

filed in
Each
4-

PEP's First Amended
1 Action No. H-11
two 1

complaints

asserts claims against different defendants
from the use
enrichment,

stolen property

money

violation of

had

and

I

conversion arising

for equit

received,

(unjust

constructive

and

relief

trust),

Texas Theft Liability Act, and civil conspiracy.

The Third Amended Complaint filed in the BASF Action also asserts
claims

for violations of

Organizat

Act (RICO)

I

the Racketeer

I

luenced and Corrupt

18 U.S.C. § 1962{c)

of defendants referred to as the

"Conspi

(d) against a group
Defendants."

On

October 20, 2011, the court issued a Memorandum Opinion and Order
(Docket Entry No. 292) denying PEP's Mot

Determination of

Foreign Law (Docket Entry No. 236), and granting the motions of
Murphy

Corporation (Docket Entry No. 221), BASF Corporation

(Docket Entry No. 253), and BASF FINA (Docket Entry No. 261) for
leave to

signate responsible third parties.

the court

issued a Memorandum Opinion and Order

No.

377)

On April 10, 2012,
(Docket Entry

denying PEP's Motion for Leave to File Fourth Amended

Complaint

the BASF Action (Docket

No. 338) and granting in

part PEP's Motion to File First Amended Complaint
No.

339)

the

Big

Star Action

to

low

(Docket Entry

Plains

Marketing,

St. James Energy Operation, and RGV Energy Partners to be added as
defendants.

The pleading history and the live claims

against the remaining defendants are summarized below.
A.

The BASF Action

PEP
and

tially filed suit on June 7, 2010, alleging conversion
equitable

claims

under
-5

Texas

law

against

e

BASF Corp.; Murphy Energy Corp.;

defendants:
Inc.;

Bio-NU Southwest,

Inc.

Trammo Petroleum,

d/b/a Valley Fuels;

US

Petroleum

Depot, Inc.; Donald P. Schroeder, Jr.; Arnoldo Maldonado; Jonathan
ki

Dappen; Stephen
(the "BASF Action,,).2

Timothy L. Brink; and Joshua Crescenzi
its First

On September IS, 2011, PEP fil

Amended Complaint (Docket Entry No. 59), which added two additional

Marketing

Fuels,

Cont

defendants:

(successor

to

June 6,

2011,

Petro

and High Sierra Crude Oil&

Source

Partners,

L.P.).

On

court issued an Order Dismissing Defendant

November 5, 2010,
Trammo Petroleum,

Inc.

Inc. With Prejudice (Docket Entry No. 95).

the court issued orders instructing

enter default judgments against defendants US Petroleum

On

erk to
, Inc.

(Docket Entry No. 198) and Timothy L. Brink (Docket Entry No. 199).
On November

24,

(Docket Entry No.

2010,

PEP

108).

filed

its

On June 17,

Amended Complaint

Entry No.

BASF FINA Petrochemi

Sl

L.P.

Second Amended Complaint
2011,

220),

PEP filed its Third

which added

and Continental Fuels,

endant
Inc.

On

March 14, 2013, the court entered an Agreed Stipulation and Order
of Dismissal of Claims Against High Sierra Crude Oil &

ing,

LLC (Docket Entry No. 527) dismissing with prejudice "all claims
[that PEP] asserted, or
Crude Oil & Marketing, LLC.

d have [] asserted" against
The defendants remaining

BASF

2See Plaintiff PEp s Original Complaint ("Original Compl
),
Docket Entry No.1;
PEP's Amended Complaint ( "Amended
Complaint II), Docket Entry No. 59 i and Plainti f f PEP's Second Amended
Complaint ("Second Amended Complaint"), Docket Entry No. 108.
l

6-

BASF Corp.

Action are:

t

cal

BASF FINA

L. P.,

Murphy

EnergYt Bio-NU Southwest, Inc., Donald P. Schroeder t Jr. t Arnoldo
Maldonado, Jonathan Dappen, Stephen Pechenik t Joshua Crescenzi t and
Continental Fuels, Inc.
B.

The Big Star Action

On May 29,

2011,

PEP

filed

a

t

second

against

eleven

defendants:

Big Star Gathering, Ltd. L.L.P.; F&M Transportation,

Inc.;

Jensen;

James

Joplin Energy,

LLC

(f/k/a

Energy); Jeff Kirby; Plains All-American
L. P. ;

James

Saint

Inc.

i

Hutchison Hayes

ine, L.P.; SemCrude,

Superior

Gathering;
Co ., L. P . (the

TransMontaigne Partners, L.P.; and Western
"Big Star Action").
Complaint

On April 20, 2012, PEP fil

(Docket Entry No.

378)

added two additional defendants:
Partners, LLC.
following

in the

its

Star Action,

have

since

been dismi

pursuant to agreed stipulations and orders of di
court:

Western Refining Co., L.P.

July 17, 2012)

i

which

Plains Marketing, L.P. and RGV

The claims that PEP has

defendants

rst Amended

against the
prejudice
ent

by

(Docket Entry No. 398 dated

TransMontaigne Partners, L.P. (Docket Entry No. 463

dated January 22, 2013)

i

Plains All-American Pipeline, L.P. (Docket

Entry No. 533 dated March 15, 2013); and Big Star Gathering, Ltd.,
L.L.P., James Jensen, and St. James Energy Operating, Inc.
Entry No. 603 dated May 30, 2013).
Star Action are:

(Docket

The defendants remaining in the

F&M Transportation, Inc.; Joplin Energy, LLC

-7-

Hutchison

Energy);

Superior Crude Gathering,

Inc.;

(f/k/a

Jeff

Kirby;

SemCrude,

Plains Marketing,

L.P.;

L.P.;
and RGV

Energy Partners, LLC.
II.

sses trade in the United States of natural

This action

Mexico, transported to Texas, and sold to

gas condensate
end-users.

Factual Allegations 3

are individuals and entities alleged to

The

have traded stolen Mexican condensate within the United States from
August of 2006 to at least mid-2011.4

PEP alleges that most of the

defendants

in

knew

acknowledges that

were
a

trading

stolen

few did not know that

bought and sold was stolen.
absent knowledge or

Nevertheless,

condensate,

but

the condensate they
PEP alleges that even

, the defendants' use, purchase, and sale

of stolen Mexican

in the United States was without right

or title from the

government and, therefore, wrongful under
United States. 5

the laws of Mexico and
petrochemical
purchase

Asserting that I

that use condensate will

stolen products,

PEP alleges

that

not knowingly

selling the

3S ee Third Amended Complaint, Docket Entry No. 220, pp. 5 10,
and First Amended Complaint (Big Star Action), Docket Ent
No. 378, pp. 5 11.
4First Amended
No. 378, p. 7 ~ 30.

Complaint

(Big

Star Action),

Docket

5S ee Third Amended Complaint, Docket Entry No. 220, p. 10
and First Amended Complaint (Big Star Action), Docket Ent
No. 378, p. 10 ~ 51.
~ 55,

-8-

to pass

the

racy in the Unit

a coordinated

condensate requi
stolen

condensate

across

alleges

that

this

border,

conspiracy was

"Conspiring Defendants" who were (1)

managed and

St.

James,

Superior

its

operated by

1 of the defendants named in

the BASF Action except BASF and BASF FINA,6 and
Jensen,

launder

en condensate to end-users.

source, and distribute and sell the
PEP

the

States

Crude,

Kirby,

Star,

(2)

RGV,

and

F&M

Transportation named in the Big Star Action.7
that the existence of the marketing scheme in the

PEP al

United States is well established
law enforcement agencies,

including the Immigrat

Enforcement Agency ("ICE"), and
( "DRS").

PEP

gating the
Texas,

Dappen,

leges that both ICE and the DRS have

transport

and sale

§§

investi-

stolen Mexican condensate

in

have resulted in criminal

and Brink.

PEP alleges that these defendants

have been convicted of receiving and selling,

have been

and Customs

this court against defendants Schroeder, Maldonado,

Pechenik,

receive and

States

Department of Homeland Security

and that their invest

convictions

well known to Unit

or conspiring to

I, stolen PEP condensate knowing the condensate to
en or unlawfully converted in violation of 18 U.S.C.

371 and 2315.

6Third Amended Complaint, Docket Entry No. 220, p. 12
7First

Amended

~ 68.

Complaint (Big Star Action), Docket Entry
No. 378, p. 20 ~ 108. Note, however, that at p. 10 ~~ 51 and 53,
PEP identifies only Big Star,
Superior Crude,
and F&M as
"Conspiring Defendants."
9

III.

A.

Applicable Law for Claims Asserted and
Limitations Defense

Claims Asserted

PEP's

complaints

(for

relief

unjust

assert

claims

enrichment,

for

money

conversion,

had

and

equitable

received,

and

constructive trust), violation of the Texas Theft Liability Act,
and civil conspiracy.

PEP's Third Amended Complaint filed in the

BASF Action also asserts claims for violation of RICO, 18 U.S.C.
1962 (c) - (d), against the "Conspiring Defendants.

also assert

claims

for unlawful

PEP's complaints

possession and use of Mexican

sovereign property in violation of Mexican law.
2011,

If

§

But on October 20,

the court entered a Memorandum Opinion and Order

(Docket

Entry No. 292) denying Plaintiff PEP's Motion for Determination of
Foreign Law (Docket Entry No. 236) after concluding that Mexican
law does not apply to this action.
1.

Conversion

PEP alleges that
120.

All Defendants took possession of and utilized
sovereign property of the United Mexican States,
without title or right. According to Mexican law,
the stolen property was the sole and excl usi ve
property of PEP.

121.

All Defendants have refused to return Mexico's
property or to reimburse Mexico for its use.

122.

The Defendants' improper assumption and exercise
of dominion and control over PEP's property has
and will continue to interfere with and diminish
PEP's rights in that property.
-10-

PEP
is
damages.

123.

ent

in denial

over another's

recover

actual

its

of or inconsistent

with

Mayo v. Hartford Life Ins. Co., 354 F.3d 400, 410

Cir. 2004)
3 84 , 3 91

to

wrongful exercise of dominion and control

"Conversion is

rights."

led
8

s
(5th

Green International Inc. v. Solis, 951 S.W.2d

(quot

(Tex. 1997».

See also Waisath v. Lack's Stores, Inc.,
1971) .

474 S.W.2d 444, 447
possession, or

"Texas cases require ownership,

of immediate possession to

conversion claim."

il on a

United States v. Boardwalk Motor Sports { Ltd.,

692 F.3d 378, 381 82 (5th

r.2012),

Plains

Capital Corp. v. United States, 133 S.Ct. 2854 (2013)

(cit

of Wichita Falls v. ITT Commercial Finance Corp., 827 S.W.2d 6, 8
(Tex.App.-Fort Worth 1992),
S.W.2d 65 (Tex. 1992)
of immediate

rev'd in part on other grounds,

("Either ownership, possession, or

ion of the property to the party

a requirement

an action in conversion./I).

of the property converted,
S.W.2d 538,

539

Hughs Blanton.

(Tex.App.-Dallas 1979,

Inc.

v.

no writ),

right
eved is

The pI

conversion case also bears the burden of establishing

835

iff in a
identity

Shannon,

581

and damages.

United Mobile Networks. L.P. v. Deaton, 939 S.W.2d 146, 147 (Tex.
1997 (cit
"Generally,

Prewitt v. Branham, 643 S.W.2d 122, 123 (Tex. 1982».
measure of damages

for

on is the

fair

8First Amended Complaint (Big Star Act
), Docket Entry
No. 378, pp. 21 22 ~~ 120-123. See also
Amended Complaint,
Docket Entry No. 220, pp. 33-34 ~~ 188-191.
-11-

market

value

of

the

property

However,

conversion.

at

damages are

sustained

as

and

a

and

limited to

proximate

at 148.

defendant's conversion."
ther

unjustly enrich

time

place
the

of

amount

iff for the actual losses or

necessary to compensate
inj uries

the

result

of

the

"A conversion should not

wrongdoer or the complaining party."

Id.
Minerals

already

from

personal property, not

the

n.r.e.).

353 S.W.2d 870

are

considered

Humble Oil & Refininq Co. v.

ty.

West, 508 S.W.2d 812, 817 (Tex. 1974)
Murchison,

ground

(Tex.

(citing Lone Star Gas Co. v.

.App.-Dallas 1962,

writ ref'd

See also Phillips Petroleum Co. v. Adams, 513 F.2d 355,

363 (5th Cir.),

, 96 S.Ct. 281 (1975).

PEP may, thus,

establish that the defendants converted its natural gas condensate
under Texas law by proving:

(1) the defendant wrongfully exercised

dominion

property

or

control

over

inconsistent with PEP's rights;

"Demand" and

Christian,

exclusion

In re Moody,

of,

899 F.2d 383,

(citing Bishop v. Geno Designs,

581, 584 (Tex.App.

elements of a

the

or

(2) the identity of the property

convertedi and (3)
(5th Cir. 1990)

to

385

Inc., 631 S.W.2d

er 1982, no writ)).
1/

are sometimes identified as addit
See,~,

conversion claim.

257 S.W.3d 748,

759

Khorshid,

(Tex.App.-Dallas 2008,

Inc.
no

(identifying two additional elements of a conversion claim as
plaintiff demanded return of the propertYi and . . . the
12 -

v.
.)

refused to return the property") .

Permian Petroleum Co.

v. Petroleos Mexicanos, 934 F.2d 635, 651 (5th Cir. 1991)

s possession of personalty,

Texas law, when a party lawfully
conversion

generally

occurs

property and a refusal.")

upon

a

demand

for

(cit

Cooper,

refusal are merely evidence

the

However, when a

elements need not be met.

284 S.W.2d 138,

of

ear repudiation of the plaintiff's

a

rights, the demand and
v.

return

, 519 S.W.2d 955,

958 (Tex.Civ.App.-Texarkana 1975, writ dism'd)).
possessor's acts mani

("Under

141

(Tex.

1955)

Presley

("Such a demand and

a conversion, and where a conversion

by the bailee cannot otherwise be shown than by his refusal to
comply with the demand
are necessary.

pos

on, such a demand and refusal

But they are not necessary if the other evidence

establishes an act of conversion.").

See also National Union Fire

Ins. Co. of Pittsburgh, Pa. v. Care Flight Air Ambulance Service,
Inc., 18 F.3d 323, 328 (5

r. 1994)

necessary if demand would

useless, or if the possessor's acts

amount to clear repudiat
Wrongful
essential

intent

of the owner's rights).

to

ementi

convert

another's

property

is

not

an

defendant need only intend to do an act

amounting to conversion.
(Tex.Civ.App.

(demand and refusal are not

McVea v. Verkins,

Christi 1979, no writ) .

unauthorized retent

"[A] good

531

th but

of property can be a conversion."

~====~~~~~~~~~~~~~,

Dallas 1980, no writ).

587 S.W.2d 526,

599 S.W.2d 646, 651 (Tex.Civ.App.

If a defendant is a bona fide purchaser
-13-

value,
Carter v.

has an affirmative

fense against a conversion claim.

Cookie Coleman Cattle Company,

Inc.,

858 & n.3 (Tex.App.-Amarillo 2008, no pet.).
a party asserting an affirmat
defense.

prove

271 S. W. 3d 856,

It is the burden of

defense to sufficiently plead and

Quantum Chemical Corp. v. Toennies, 47 S.W.3d

473, 478 (Tex. 2001).
2.

Equitable Relief: Unjust Enrichment,
Received, and Constructive Trust

PEP

leges that

103.

All Defendants utilized the sovereign property of
Mexico without right or title.
As a result, all
Defendants were unjustly enriched by any
its,
commissions, or other benefits received by the use
of PEP's condensate.
This is true even if the
Defendants did not know the condensate was
en. 9

125.

All Defendants
ited from their improper
dominion of PEP's property, and there
they
hold money that in equity and good conscience
belongs to PEP.

126.

lowing the Defendants to retain the benefits
received as a result of their acts would unjustly
fit the Defendants at PEP's expense.

127.

PEP is entitled to a recovery of all money from
all Defendants that
equity and good conscience
ongs to PEP.

128.

As to the Conspiring Defendants,
PEP
imposition of a constructive trust over
property deriving from the use of such monies in
order to maintain and remit to PEP the monies

9First Amended Complaint (Big
No. 378, p. 19 ~~ 103, 125-28.
Docket Entry No. 220, p. 31 ~ 172.
-14-

Money Had

and

Star Action), Docket Entry
Third Amended Complaint,

improperly collected by and maintained by the
Conspiring Defendants through their wrongful trade
in stolen PEP condensate. 10
"A party may recover under the unjust enrichment theory when
one person has obtained a benefit from another by fraud, duress, or
the taking of an undue advantage."

Heldenfels Brothers,

City of Corpus Christi, 832 S.W.2d 39, 41 (Tex. 1992)

Inc. v.

(citing Pope

v. Garrett, 211 S.W.2d 559, 562 (Tex. 1948), and Austin v. Duval,
735 S.W.2d 647, 649 (Tex.App.-Austin 1987, writ denied)).
Unjust enrichment is an equitable principle holding that
one
who
receives
benefits
unjustly
should
make
restitution for those benefits.
"Unjust enrichment" occurs when the person sought to be
charged has wrongfully secured a benefit or has passively
received one which it would be unconscionable to
retain.
"Unj ust enrichment" characteri zes the
result 0 [f] failure to make restitution of benefits
received under such circumstances as to give rise to
implied or quasi-contract to repay . . . It has also been
said that recovery under unjust enrichment is an
equitable right and is not dependent on the existence of
a wrong.
Villarreal

v.

Grant

Geophysical,

Inc.,

(Tex.App.-San Antonio 2004, pet. denied)

136

S.W.3d

265,

(citations omitted).

270
When

unjust enrichment is proved, defendants must make restitution of
benefits wrongfully received.

Id.

A claim for money had and received
belongs
conceptually
enrichment.

to

the

doctrine

of

unjust

l°First Amended Complaint (Big Star Action), Docket Entry
No. 378, pp. 22-23 ~~ 125-128. See also Third Amended Complaint,
Docket Entry No. 220, p. 34 ~~ 193-196.
-15-

The doctrine of unjust enrichment applies the principles
of restitution to disputes that are not governed by a
contract between the parties.
. It characterizes the
result
of
a
failure
to
make
restitution
under
circumstances that give rise to an implied or quasicontractual obligation to return those benefits.
Edwards v. Mid-Continent Office Distributors, L.P., 252 S.W.3d 833,
837

(Tex.App.-Dallas 2008, pet. denied)

(citations omitted).

An

action for restitution for money had and received "seeks to restore
money where equity and good conscience require restitution.
is not premised on wrongdoing,
party,

in equity,

justice,

. . it

but seeks to determine to which

and

law,

the

money

(citing Staats v. Miller, 243 S.W.2d 686, 687

belongs."

Id.

(Tex. 1951)).

Such

claims seek "to prevent unconscionable loss to the payor and unjust
enrichment to the payee."

Id.

at 837

(citing Bryan v.

National Bank in Abilene, 628 S.W.2d 761, 763

Citizens

(Tex. 1982))

As these broad and general descriptions demonstrate, a
cause of action for money had and received is "less
restricted
and
fettered
by
technical
rules
and
formalities than any other form of action.
It aims at
the abstract justice of the case, and looks solely to the
inquiry, whether the defendant holds money, which.
belongs to the plaintiff."
Id.

(quoting Staats, 243 S.W.2d at 687-88).

See also United States

v. Jefferson Electric Manufacturing Co., 54 S.Ct. 443, 449 (1934)
(describing action "for money had and received" as "an equitable
action .

[that]

is less restricted and fettered by technical

rules and formalities than any other form of action.

It aims at

the abstract justice of the case, and looks solely to the inquiry,
whether the defendant holds money, which ex aequo et bono belongs

-16-

Thus,

to the plaintiff.") .

to prove a claim for money had and

received "a plaintiff must show that a defendant holds money which
in equity and good conscience belongs to him."
at 837

(citing Best Buy Co. v.

(Tex. 2007)

Barrera,

Edwards, 252 S.W.3d

248 S.W.3d 160,

162-63

(per curiam), and Staats, 243 S.W.3d at 687).

A constructive trust is an equitable remedy created by the
courts to prevent unjust enrichment and may be imposed based on a
fiduciary or confidential

relationship or when there

actual fraud.

Swinehart v.

Browder,

48 S.W.3d 865, 878

Inc.,

Stubbeman, McRae,

has

been

Laughlin &

Sealy,

(Tex.App.-Houston [14th Dist.]

2001, pet. denied)

(citing Meadows v. Bierschwale, 516 S.W.2d 125,

128 (Tex. 1974))

To establish a constructive trust the proponent

must

prove

(1)

relationship

or

the

breach

actual

or

of

a

constructive

enrichment of the wrongdoer; and
res.

special

(3)

trust

fraud;

or

(2)

fiduciary
the

unjust

tracing to an identifiable

Hubbard v. Shankle, 138 S.W.3d 474, 485 (Tex.App.-Fort Worth

2004, pet. denied).
F.3d 524, 529

See also American Cancer Society v. Cook, 675

(5th Cir. 2012).

The Texas Supreme Court has held

that "the policy against unjust enrichment mandates that [a third
party]

not

be

beneficiary of
S.W.2d 724,728
559, 561-62

allowed

to

retain

[another party's]
(Tex.

1984)

(Tex. 1948)).

property

fraud."

he

received

Ginther v.

(citing Pope v. Garrett,

Taub,

as

a
675

211 S.W.2d

The decision to impose a constructive

trust is entrusted to the courts' discretion.
529.
-17-

Cook,

675 F.3d at

3.

Texas Theft Liability Act

PEP alleges that the "Conspiring Defendants" named in each
action violated the Texas Theft Liability Act ("TTLA"), Tex. Civ.
Prac. & Rem. Code

§§

134.001-.005.

PEP alleges that

198.

The
TTLA prohibits
unlawfully
appropriating
property as defined in the Texas Penal Code.
Pursuant to the Texas Penal Code appropriation of
property is unlawful if "the property is stolen
and the actor appropriates the property knowing it
was stolen by another."

199.

The Conspiring Defendants repeatedly violated the
provisions of the TTLA.

200.

PEP is entitled to recover its actual damages, up
to $1,000 in additional damages assessed by the
trier of fact as to each Conspiring Defendant[],
and its attorney's fees pursuant to Tex. Civ.
Prac. & Rem. Code § 134.005. 11

The Texas Theft Liability Act ("TTLA") provides a civil cause
of action to victims of theft, as defined by the Texas Penal Code.
See Tex. Civ. Prac. & Rem. Code

§§

134.001-.005.

The TTLA allows

for the recovery from a person who commits "theft" actual damages,
up to $1000 in additional damages, court costs, and reasonable and
necessary attorney's fees.

Tex. Civ. Prac. & Rem. Code

§

134.005.

The TTLA defines "theft" as "unlawfully appropriating property or
unlawfully obtaining services as described by Section 31.03, 31.04,
31.06, 31.07, 31.11, 31.12, 31.13 or 31.14, Penal Code."
Prac.

& Rem. Code

§

134.002(2).

Tex. Civ.

The penal provision implicated

11Third Amended Complaint, Docket Entry No. 220, pp. 34-35
198-200.
TTLA is also asserted in the Big Star Action.
See
First Amended Complaint, Docket Entry No. 38, p. 23 ~~ 129-31.
~~

-18-

here is

§

31.03, which provides that "[a] person commits an offense

if he unlawfully appropriates property with

to deprive the

owner of property."

The Penal Code

Tex. Penal Code § 31.03(a)

defines "appropriate" as "to bring about a trans
transfer of t
whether

to

Ie to or other nonpossessory interest in property,

t

actor

or

another i

or

to

acquire

(1)

31.01 (4).

§

or

otherwise
Tex.

property. "

exercise control over property other than
Penal Code

or purported

"Appropriation of

is unlawful if:

it is without owner's effective consent;

(2)

the property is

stolen and the actor appropriates the property knowing it was
stolen by another."

Tex. Penal Code

§

ements of a cause of action

The

31.03 (b) (1) - (2).
the TTLA are:

plaintiff had a possessory right to property;

(2)

(1) the

the defendant

unlawfully appropriated property in violation of the Texas Penal
Code; and (3)
theft.

the plaintiff sustained damages as a result of the

Tex. Civ. Prac. & Rem. Code §§ 134.002(2), 134.003; Tex.

Penal Code

§

31.03(a).

The plaintiff must also prove that the

defendant possessed an intent to

the plaintiff of

property permanently or for an extended
Code

§

31.03.

of time.

the

Tex. Penal

Deprive means "to withhold property from the owner

permanently or for

so extended a

period of

time

that

a

or

portion of the value or enjoyment of the property is lost to
owner."

Tex. Penal Code

======~-=~~,

§

31.01.

Olufemi-Jones v. Bank of

2013 WL 1482544, *3 (N.D. Tex. 2013).

19

4.

PEP alleges:
201.

The Conspiring Defendants conspired to accomplish
unl
purposes in relation to condensate stolen
from PEP.
These Defendants had the object
of
committing
common
law
conversion
PEP's
e and the defrauding of end-users which
would not have knowingly purchased stolen product.
Conspiring Defendants had a meeting of the
minds on those objectives, committed unlawful,
overt acts in furtherance of their object
and
proximately caused PEP to suffer damages as a
t .

202.

PEP is, therefore, entitled to recover from the
ring Defendants,
jointly and
ly,
PEP's actual and exemplary damages resulting from
conspiracy. 12

"An actionable civil conspiracy is a combination of two or
more persons to accomplish an unlawful purpose or to accomplish a
lawful purpose by unlawful means."
S.W.2d 932,

934

(Tex.

conspiracy claim are:
be accompli
action;

1983).

"(1) two or more persons;

(2) an object to

(3) a meeting of minds on the object or course of

t."

Id.

759, 791 (S.D. Tex. 2010)

itself,

The essential elements of a civil

(4) one or more unlawful, overt acts; and (5) damages as a

proximate

~~~,

Massey v. Armco Steel Co., 652

See also

~~~~~~~~~,

(citing Insurance Co. of North America v.

981 S.W.2d 667, 675 (Tex. 1998)).
but

an

injury

733 F.Supp.2d

to

the

plainti

It

not the agreement
ting

from

the

12Third Amended Complaint, Docket Entry No. 220, p. 35, ~~ 201202.
First Amended Complaint (Big Star Action), Docket
Entry No. 378, pp. 22-23, ~~ 132-133.
-20-

underlying tort, that gives rise to a cause of action for c
conspiracy.
925

(Tex.

1

Carroll v. Timmers Chevrolet, Inc., 592 S.W.2d 922,
1979).

Since

conspiracy

is

a

derivative

tort,

plaintiff must plead facts supporting a claim that at least one
the de
26

s is also liable for an underlying tort.

1 conspiracy 'came to be used to extend liability

("[C]

beyond the active wrongdoer to those who have merely

tort .

planned, assisted, or encouraged
is proven, each co-conspirator 'is
any

Id. at 925

conspirators

of

,"

combinat

in

s acts.'").

"Once a conspiracy

ible for all acts done by
furtherance

of

the

unlawful

Id. at 926 (quoting State v. Standard Oil Co., 107

S.W.2d 550, 559 (Tex. 1937)).

, to survive summary judgment on

the conspiracy claims asserted

this action,

PEP must present

evidence that is sufficient to create genuine issues of material
fact on

underlying torts as well as the conspiracy.

TMIRS

Enterprises, Ltd. v. Godaddy.com. Inc., 2010 WL 3063659, *4 (S.D.
Tex. 2010).
5.

RICO

PEP alleges
Action,

i.e.,

BASF Corp.

that

the

in

BASF

all of the defendants named in that action except

and BASF FINA,

§§ 1962(c) and (d) by creat

by

"Conspiring Defendants"

violated the provisions of 18 U.S.C.
an association in

enterprise,

icipating directly and indirectly in the conduct of the
se's affairs through a pattern of racketeering activity,
-21

and by knowingly conspiring to participate in the operation of the
association-in-fact

enterprise by committing predicate

acts of

importing and selling in the United States millions of dollars
worth of condensate stolen from Mexico's Burgos Field.13
RICO provides civil causes of action for recovery of treble
damages for "[a]ny person injured in his business or property by
reason of a violation of section 1962 of this chapter. u
§

Plaintiffs have alleged that defendants have violated

1964 (c) .

§§

18 U.S.C.

1962(c) and (d).

These subsections state:

(c)

It shall be unlawful for any person employed by or
associated with any enterprise engaged in, or the
activities of which affect, interstate or foreign
commerce, to conduct or participate, directly or
indirectly, in the conduct of such enterprise's
affairs through a pattern of racketeering activity
or collection of unlawful debt.

(d)

It shall be unlawful for any person to conspire to
violate any of the provisions of subsection .
(c) of this section.

18 u. S . C .

§§

1 962 (c)

and ( d) .

The Fifth Circuit has interpreted

these subsections to mean that "a person who is employed by or
associated with an enterprise cannot conduct the affairs of the
enterprise through a pattern of racketeering activity[, and that]
a person cannot conspire to violate subsection []
St.

Paul Mercury Insurance Co. v. Williamson,

(5th Cir.

~~

2000).

(c)

224 F.3d 425,

U

439

To establish a RICO violation plaintiff must

13Third Amended Complaint,
203-226.

Docket Entry No.
-22-

220,

pp.

35-39

prove facts showing:
racketeering

act

"(1) a person who engages in (2) a pattern of
(3 )

ty

connected

to

acquisition,

the

establishment, conduct, or control of an enterprise. II
Delta Truck & Tractor,

Inc. v. J.I. Case Co.,
1 0 9 S. Ct. 153 1

(5th Cir. 1988),

(quoting

855 F.2d 241, 242
( 198 9) } .

St. Germain v. Howard, 556 F.3d 261, 263 (5th Cir.),
129 S.Ct. 2835 (2009).
the plaintiff must

Once these three elements are

establish the substantive

respective subsect
B.

the statute.

ished
each

elements

rd.

Limitations Defense

All defendants who have filed motions for summary judgment
seek summary judgment that the Texas state law claims asserted
against them are barred by the two-year statute of 1
contained in Texas Civil Practice & Remedies Code

§

ations

16.003(a).

alleges that
109.

This suit was brought within two years after PEP
knew, or by
exercise of reasonable dil
should
known, of the facts giving
nst the Defendants.
limitations have been tolled as to those claims by
the "discovery rule. H

110.

The conversion and theft of PEP's condensate was
a decept
and fraudulent act. Moreover, it was
inherently undiscoverable that the Defendants had
taken dominion in the United States of Mexico's
sovereign property without right or title,
the
resulting
injury from the Defendants'
wrongful dominion over the sovereign property
Mexico is objectively verifiable.

-23-

PEP

111.

The Conspiring Defendants actively concealed their
and therefore
conspiracy and illegal actions
by
the
doctrine
of
limi tations
is
tolled
"fraudulent concealment.
l

1I

never
stolen

112.

Mexico and PEP, as sovereign entities
abandoned their sovereign rights in the
condensate. 14

1.

The Limitations Period for State Law Claims is Two Years

l

Under Texas law the statute of limitations for PEp/s claims
for

conversion

unjust

l

constructive trust

l

enrichment

TTLA violations

l

money

1

had

and

received

l

and civil conspiracy is the

two-year period provided by Texas Civil Practice and Remedies Code
§

16.003

1

which states:

[A] person must bring suit for trespass for injury to the
estate or to the property of another
conversion of
personal property
taking or detaining the personal
property of another personal injurYI forcible entry and
detainer and forcible detainer not later than two years
after the day the cause of action accrues.
1

1

l

l

Tex.

Civ.

Prac.

& Rem.

Code Ann.

§

16.003(a).

The parties all

agree that PEp/s claims are governed by this two-year statute of
limitations .15

See

Mayo

354

1

F.3d

at

410

("The

applicable

14First Amended Complaint (Big Star Action)
Docket Entry
No. 378
p. 20 ~~ 109-112.
See also Third Amended Complaint
Docket Entry No. 220 p. 32 ~~ 177-180.
1

1

1

1

1

15Seel ~I Defendant Plains Marketing
L.P. s Motion for
Summary Judgment ("Plains Marketing/s MSJ
Docket Entry No. 475
p. 28 (agreeing that applicable statute of limitations is that
stated in Tex. Civ. Prac. & Rem. Code § 16.003) i and PEp/s
Dispositive Motion Docket Entry No. 492 p. 31 and The Opposition
of Plaintiff Pemex Exploraci6n y Producci6n to the Disposi ti ve
Motions of Defendants ("PEp s Opposition to Defendants Dispositive
(continued ... )
1

l

II

l

1

)

1

1

1

1

1

-24-

period for [plaintiff's] claim-whether it is formally

limitat

labeled 'unjust enrichment' or 'convers
at 409

, - is two years.H);

(recognizing that claims for constructive trust are not

causes of action but, instead, claims for remedial relief, and that
the

limitations

period

to

be

applied must

be

determined with

reference to the theory on which a constructive trust is sought)
Elledge v.
(Tex.

Friberg-Cooper Water Supply Co.,

2007)

240 S.W.3d 869,

i

870

(recognizing that the limitations period for unjust

enrichment claims is the two-year period provided by Tex.
Prac. & Rem. Code

§

Ci v.

16.003(a)); Kingyision Pay-Per-View, Ltd. v.

Betancourt, Civil Action No. H-11-0236, 2011 WL 1900166, *5 (S.D.
Tex. May 19,

2011)

(recognizing that the limitations period

TTLA claims is the two-year period provided by Tex. Civ. Prac. &
Rem. Code

§

16.003(a))

i

Navarro v. Grant Thornton, LLP, 316 S.W.3d

715, 719 (Tex.App.-Houston [14th Dist.] 2010, no pet.)

(recogniz

that civil conspiracy claims are subject to the two-year statute
limitations provided by Tex. Civ. Prac. & Rem. Code
2.

§

16.003(a)).

The Limitations Period Begins When Legal Injury Occurs

"When the legislature employs the term 'accrues' without an
accompanying definition, the courts must determine when the cause
of

action

accrues

and

thus

when

the

statute

of

limitations

continued)
Motions")
Docket Entry No. 545, p. 26 (recognizing that Texas'
statute of limitations for conversion is two years) .
15 ( • • •
t

-25

commences to run."
351 (Tex. 1990).

Moreno v. Sterling Drug, Inc., 787 S.W.2d 348,
The traditional rule in Texas is that a cause of

action accrues and the limitations period begins to run as soon as
the

owner

suffers

some

becomes discoverable.

injury,

Id.

regardless

of

when

the

See also Mayo, 354 F.3d at 410

injury
("Texas

follows the 'legal injury' test, under which' [a] cause of action
generally accrues, and the statute of limitations begins to run,
when facts come into existence that authorize a claimant to seek a
judicial
Energy,

remedy.'
Inc.,

Johnson

Higgins of Texas,

&

962' S. W. 2d 507,

514

(Tex.

Inc.

1998)")

v.

Kenneco

This is true

"even if the fact of injury is not discovered until later," S.V. v.
R.V., 933 S.W.2d 1, 4 (Tex. 1996), "even if all resulting damages
have not yet occurred," id.,
have not been identified.

and even if the alleged wrongdoers
Russell v.

S.W.2d 343, 344 n.3 (Tex. 1992)
fact of injury is known .
identified").
1977)

Ingersoll-Rand Co.,

841

("limitations begin to run when the

. not when the alleged wrongdoers are

See also Robinson v. Weaver, 550 S.W.2d 18, 20 (Tex.

(recognizing that "preclusion of a legal remedy alone is not

enough

to

justify

a

judicial

exception

to

the

statute

limitations] ) .
The Texas Supreme Court has explained that
[t]he test to determine when the statute of limitations
begins to run against an action sounding in tort is
whether the act causing the damage does or does not of
itself constitute a legal injury, that is, an injury
giving rise to a cause of action because it is an
invasion of some right of plaintiff.
If the act is of
-26-

[of

itself not unlawful in this sense, and plaintiff sues to
recover
damages
subsequently
accruing
from,
and
consequent on, the act, the cause of action accrues, and
the statute begins to run, when, and only when, the
damages are sustained; and this is true although at the
time the act is done it is apparent that injury will
inevitably result.
If, however, the act of which the injury is the
natural sequence is of itself a legal injury to
plaintiff, a completed wrong, the cause of action accrues
and the statute begins to run from the time the act is
committed, even where little, if any, actual damages
occurs immediately on commission of the tort.
Atkins v. Crosland, 417 S.W.2d ISO, 153 (Tex. 1967)

This "legal

injury" rule is often traced to Houston Water-Works Co. v. Kennedy,
8 S.W.

36

(1888).

(Tex. 1997).

See Murphy v.

Campbell,

964 S. W. 2d 265,

In Kennedy the defendant cut an arch in plaintiff's

building while installing a water pipe In 1884.
concealed,

270

was not discoverable until

building to settle and crack.

The arch, being

it eventually caused the

Plaintiff brought his negligence

action in 1887, three years after the alleged negligence but within
two years after the injury became manifest. The Court concluded
that the action was barred by limitations:
If
the act of which the injury was the natural
sequence was a legal inj ury,
by which is meant an
injury giving cause of action by reason of its being an
invasion of a plaintiff's right, - then, be the damage
however slight, limitation will run from the time the
wrongful act was committed, and will bar an action for
any damages resulting from the act. . . [A] mere want of
knowledge by the owner of injury to his property does not
prevent the running of the statute.
8 S.W. at 37-38.

In other words, because the negligently cut arch

constituted a legal injury, limitations began to run immediately.
-27-

Texas jurisprudence, however, creates two limited exceptions to the
legal

inj ury test described in Atkins and Kennedy:

concealment and the discovery rule.

fraudulent

See S. V., 933 S. W. 2d at 4 ("We

observe the distinction between the two categories because each is
characterized by different substantive and procedural rules.").
3.

Exceptions to the Legal Injury Rule
(a)

Fraudulent Concealment

Fraudulent concealment of material facts underlying a cause of
action by a defendant may prevent the defendant from relying on the
statute of limitations.
(Tex. 1983).

See Borderlon v. Peck, 661 S.W.2d 907, 908

In Borderlon the Texas Supreme Court noted that where

a defendant is under a duty to make disclosure but fraudulently
conceals the existence of a cause of action from the party to whom
it belongs, the defendant is estopped from relying on the defense
of limitations until the party learns of the right of action or
should have

learned thereof through the exercise of reasonable

diligence.

Id.

See also Velsicol Chemical Corp. v. Winograd, 956

S.W.2d 529,

531

(Tex. 1997)

(recognizing that in cases involving

fraud or fraudulent concealment,

accrual is deferred "until the

fraud is discovered or could have been discovered with reasonable
diligence").

The doctrine of fraudulent concealment defers accrual

because a person cannot be permitted to avoid liability for his
actions by deceitfully concealing wrongdoing until limitations has
run.

S.V.,

933

S.W.2d

at

6.
-28-

A party

asserting

fraudulent

concealment bears the burden of raising it in response to a summary
judgment motion and of coming forward with evidence raising a fact
issue

with

regard

to

each

of

the

(1) existence of an underlying tort;
the tort;

following

four

elements:

(2) defendant's knowledge of

(3) defendant's use of deception to conceal the tort; and

(4) plaintiff's reasonable reliance on the deception.

See Jones v.

Thompson, 338 573, 583 (Tex.App.-El Paso 2010, pet. denied)

(citing

KPMG Peat Marwick v. Harrison County Housing Finance Corp.,

988

S. W. 2d 746, 748 (Tex. 1999)).
(b)

The Discovery Rule

The discovery rule defers the running of limitations if "the
nature of the injury incurred is inherently undiscoverable and the
evidence of injury is objectively verifiable."
6.

S.V., 933 S.W.2d at

"An injury is inherently undiscoverable if it is by nature

unlikely to be discovered within the prescribed limitations period
despite due diligence."
International,
1996)).

Inc.

Altai.

at

7

Inc.,

(citing Computer Associates
918

S.W.2d 453,

456

(Tex.

The discovery rule is applied to categories of cases where

the nature of

the

particular cases.
886

v.

Id.

(Tex.

1998).

inj ury is

inherently undiscoverable,

HECI Exploration Co. v. Neel,
The

objectively

verifiable

not

to

982 S.W.2d 881,
element

of

the

discovery rule is typically satisfied when the facts upon which
liabili ty
evidence.

is

asserted can be
The Texas

demonstrated by direct,

physical

Supreme Court has held that expert
-29-

testimony is not sufficient to satisfy the objective verification
prong of the discovery rule,
21),

but that confessions,

written

statements

id.

(citing Robinson,

criminal convictions,

showing

contemporaneous

550 S.W.2d at
and records or

physical

injury

resulting from the alleged conduct can be sufficient to satisfy the
objective verification prong of the discovery rule.

Id. at 15.

The discovery rule only defers running of limitations until
"the plaintiff knew or in the exercise of reasonable diligence
should have known of the wrongful act and resulting injury.1I
at 4

(citing Trinity River Authority v.

Texas,

889

S. W. 2d 259,

262

(Tex.

referred to this exception as the
Smith, 417 S.W.2d 577, 578

1996))

URS Consultants,
See

id.

'discovery rule'

(Tex. 1967)).

("We

Id.
Inc.first

in Gaddis v.

See also Colonial Penn

Ins. v. Market Planners Ins. Agency Inc., 157 F.3d 1032, 1034 (5th
Cir. 1998)

(acknowledging that the discovery rule only delays the

running of the statute of limitations until the claimant knows or
should know the facts that could support a cause of action).

The

party seeking to benefit

the

from the discovery rule

"bear [s]

burden of proving and securing favorable findings thereon."
v. William M. Mercer, Inc., 769 S.W.2d 515, 518
(c)

Woods

(Tex. 1988)

Applying Exceptions to the Legal Injury Rule in
the Summary Judgment Context

A Texas rule of summary judgment procedure requires the moving
party to negate

the application of

the doctrine

of

fraudulent

concealment and/or the discovery rule by proving as a matter of law
-30-

that no issue of material fact exists concerning when the plaintiff
discovered or should have discovered its cause of action.
Woods, 769 S.W.2d at 518 n.2.

Federal courts, however, follow the

federal rule of summary judgment procedure.
York,

991 F.2d 216, 220

2704

(1994)

(ci ting

See

F.D.I.C. v. Shrader &

(5th Cir. 1993), cert. denied, 114 S.Ct.

Impossible

Electronic

Techniques,

Inc.

v.

Wackenhut Protective Systems, Inc., 669 F.2d 1026, 1036 n.10 (5th
Cir. 1982)).

~[W]here

the nonmoving party will bear the burden of

proof at trial on a disposi ti ve issue," the nonmoving party must go
~beyond

the

designating

pleadings"
~'specific

and

produce

summary

evidence

facts showing that there is a genuine issue

for trial. ' "

Id.

2553

(quoting Fed. R. Civ. P. 56 (e))

(1986)

judgment

(citing Celotex Corp. v. Catrett, 106 S.Ct. 2548,
~The

plaintiff is

required to act with diligence in seeking to discover fraud after
being put on inquiry; and if it failed to do so under all of the
facts and circumstances of the case, the [running of the] statute
[of limitations] will not be [deferred]."
Inc. v. Placid Oil Co.
(5th Cir. 1991)
612, 613

Professional Geophysics,

(In re Placid Oil Co.),

932 F. 2d 394, 399

(quoting Pan Am. Petroleum Corp. v. Orr, 319 F.2d

(5th Cir. 1963)).

Thus, while defendants relying on the

affirmative defense of limitations bear the burden of proving all
the elements of limitation, plaintiff bears the burden of producing
summary judgment evidence capable or raising a genuine issue of
material

fact

as

to

whether

fraudulent

concealment

and/or

discovery rule applies to defer the running of limitations.
-31-

the

IV.

Defendants' Motions for Summary Judgment

Pending before the

court are motions

filed by the following defendants:
L.P.'s

Motion

for

Summary

for

summary judgment

(1) Defendant Plains Marketing,

Judgment

(Docket

Entry

No.

475);

(2) Defendant Murphy Energy Corporation's Motion for Final Summary
Judgment

(Docket Entry No.

Gathering,
(Docket

Inc.

Entry

and
No.

Jeff
486);

(3)

479);

Kirby's
(4)

Defendants Superior Crude

Motion

BASF

for

Summary

Corporation

and

Judgment

BASF

FINA

Petrochemicals Limited Partnership's Motion for Summary Judgment
(Docket Entry No. 489); and (5) Defendants RGV Energy Partners, LLC
and F&M Transportation, Inc.'s Motion for Summary Judgment (Docket
Entry No.

517).

These defendants all seek summary judgment on

claims that they argue are time barred by the applicable two-year
statute of limitations because limitations began to run more than
two years before PEP filed suit against them.

These defendants

also seek summary judgment on PEP's substantive claims by arguing
that these claims fail as a matter of law because PEP is unable to
present evidence on one or more of the elements of each of these
claims.

PEP

responds

that

the

defendants

moving

for

summary

judgment are not entitled to summary judgment on any of the claims
alleged against them because the claims are neither time barred nor
subject to failure as a matter of law. 16

16PEP's Opposition to Defendants' Dispositive Motions, Docket
Entry No. 545.
-32-

A.

Standard of Review

Summary judgment is authorized if the movant establishes that
there is no genuine dispute about any material fact and the law
entitles it to judgment.
material

facts

are

Fed. R. Civ. P. 56(c)

"genuine"

if

the

Disputes about

evidence

is

such

that

a

reasonable jury could return a verdict for the nonmoving party.
Anderson v. Liberty Lobby, Inc., 106 S.Ct. 2505, 2511 (1986).

The

Supreme Court has interpreted the plain language of Rule 56(c) to
mandate the entry of summary judgment "after adequate time for
discovery and upon motion,
showing

sufficient

to

against a party who fails to make a

establish

the

existence

of

an

element

essential to that party's case, and on which that party will bear
the burden of proof at trial."

Celotex Corp., 106 S.Ct. at 2552.

A party moving for summary judgment "must 'demonstrate the absence
of a genuine issue of material

fact,'

elements of the nonmovant's case."
F.3d 1069,
S.Ct.

at

by

(5th Cir.

2553-2554)

Rule 56(c)
show

1075

If

1994)

but need not negate the

Little v. Liquid Air Corp., 37
(en banc)

(quoting Celotex,

the moving party meets

this

106

burden,

requires the nonmovant to go beyond the pleadings and
affidavits,

admissions on file,

depositions,

answers

to

interrogatories,

or other admissible evidence that specific

facts exist over which there is a genuine issue for trial.

Id.

(citing

the

Celotex,

106

S.Ct.

at

2553-2554)

In

reviewing

evidence "the court must draw all reasonable inferences in favor of
the nonmoving party, and it may not make credibility determinations
-33-

or weigh the evidence."

Reeves v.

Sanderson Plumbing Products,

Inc., 120 S.Ct. 2097, 2110 (2000). Factual controversies are to be
resol ved in favor of the nonmovant,

both

"but only when

parties have submitted evidence of contradictory facts."

Little,

37 F.3d at 1075.
B.

Plains Marketing, L.P.

PEP

first

asserted

claims

against

Plains

Marketing

April 20, 2012, when PEP filed a First Amended Complaint

on

(Docket

Entry No. 378) in the Big Star Action, Civil Action No. H-11-2019.
PEP specifically alleges that
80.

Plains
is
a
large,
publicly-traded
limited
partnership that markets hydrocarbons and then
transports them through a sister company.

81.

PEP does not allege that Plains acted with intent
or knowledge or that it was a part of any
conspiracy.

82.

Although PEP's investigation continues, Plains
purchased and subsequently resold millions of
dollars of stolen condensate.
For example, In
2008, Plains purchased at least $700,000 worth of
condensate from Kemco at its George West facility,
which Kemco had purchased from Arnoldo Maldonado
and F&M.
Plains sold this and other amounts to
Valero.
There were other transactions, and on
information and belief, much more condensate was
purchased and sold by Plains.

83.

Plains is liable for all of its transactions
involving the stolen property of Mexico. 17

17First Amended Complaint
No. 378, p. 16 ~~ 80-83.

(Big
-34-

Star Action),

Docket

Entry

Based on these

ions of fact, PEP has asserted claims against

I

theories

of

Plains

on

conversion, and for equitable relief

plains Market
money

had

Marketing

received

argues

that

and

it

unj ust

is

enrichment. 18

entitled

to

summary

the claims asserted against it in PEP's

judgment on all
Amended Compl

and

nt

filed

in the

Big Star Action

(Docket

No. 378)
(i) PEP cannot meet its burden under Texas law to show
that
hydrocarbons purchased by Plains Marketing are
the identi
hydrocarbons allegedly stolen from PEP,
(ii)
Marketing was a good-faith purchaser
obtained good tit
to the hydrocarbons it purchased,
(iii) any of Plains Marketing's alleged purchases of
stolen Mexican condensate that occurred prior to
April 20, 2010 are time-barred, and (iv) PEP's money had
and
and unjust enrichment claims fail as a
matter of law. 19
PEP responds that the defendants named in this action,

including

Marketing, are not entitled to summary judgment
on any of

claims alleged against them because PEP need not show

that the hydrocarbons purchased and sold by the defendants are the
identical hydrocarbons stolen from PEP,
obtain good t
claims aris
years

the defendants did not

to the stolen hydrocarbons that they purchased,
from alleged purchases that occurred more

two

PEP filed suit against any of the defendants are not

PEP does not allege that Plains Marketi
Defendant," PEP has not asserted a
trust against Plains Marketing.
I

Marketing's MSJ, Docket Entry No. 475, pp. 1 2.
-35-

is a
for

equitable reI

time barred, and the claims

f asserted in

action do not fail as a matter of law. 20
1.

Plains Marketing is Entitled to Summary Judgment on
PEP's Equitable Claims for Unjust Enrichment and Money
Had and Received
PEP's money had and received

Plains Marketing argues
claim fails on its face because

[t] here is no evidence
Plains Marketing has any
money
in good conscience belongs to PEP, a requisite
element of PEP's money had and received claim.
Additionally, PEP does not
lege that Plains Marketing
perpetrated any kind of
or duress on PEP, or that
Plains Marketing took undue advantage of PEP
allegedly
purchasi
stolen PEP condensate, which would be required
to prove an unjust enrichment claim. 21
Quoting Heldenfels Bros.!

Inc.

v.

City of Corpus Christi,

832

S.W.2d 39, 41 (Tex. 1992), Plains Marketing asserts that "[a] party
may recover under the unjust

chment theory when one person has

obtained a benefit from another by fraud, duress, or the taking of
an undue advantage. 1122

Plains Marketing argues that PEP's unjust

enrichment claim fails on its

because

[i]n this case, PEP does not
and could not
allege
that Plains Marketing perpetrated any kind of fraud or
duress on PEP, or that Plains Marketing took undue
advantage of PEP in allegedly purchasing stolen Mexican
condensate. To the contrary, "PEP does not allege that
Plains acted with intent or knowledge or that it was a

2°PEP's opposition to Defendants' Dispositive Motions, Docket
Entry No. 545.
21Plains Market

's MSJ, Docket Entry No. 475, p. 5.

22Id. at 39.
-36-

part of any conspiracy." [PEP's First Amended Complaint,
Docket Entry No. 378, , 81.] PEP's pleadings constitute
binding admissions that Plains Marketing acted without
any intent to
raud or take undue advantage of PEP, and
there are no allegations to support a f
of
23
duress.
Citing the Texas Court of Appeals decision in
of Corpus Christi v.

Heldenfels Bros.,

Inc.,

===:::.:::::...:::::.=::::-

802 S.W.2d 35,

"[u]njust

i 1990), for its statement

(Tex.App.-Corpus

40

enrichment occurs when the party sought to be charged wrongfully
secures

a

unconscionable
Marketing's

or

benef
for

lack

passively

him

of

to

receives

retain,"

fraudulent

intent

one

PEP

which

argues

does

not

would

that

be

Plains

prejudice

the

viability of its equitable claims for unjust enrichment and money
had and received. 24

PEP argues that if it "is incorrect

owns its proportionate
the

technical

trac

recover under an unjust

of a commingled mass, and cannot prove
needed

for

conversion,

PEP

could

nei ther alleged nor produced evidence of any facts

against Plains Market

still

chment theory. ,,25

The court is not persuaded by PEP's arguments

establishing claims for

it

it has
capable of

ust enrichment or money had and received
Based on the facts alleged

PEP's

First Amended Complaint filed in the Big Star Action and contained

23Id.
24PEP'S Opposition to Defendants' Dispositive Motions, Docket
Entry No. 545, p. 37.
25Id.

-37-

in the summary judgment record, the court concludes that PEP's only
claim against Plains Marketing is for conversion.
Conversion is the wrongful exercise of dominion and control
over another's property in denial of,
other's rights.

or inconsistent with,

the

Mayo, 354 F.3d at 410; Bandy, 835 s.W.2d at 622.

PEP alleges and cites evidence that it contends establishes that
Plains Marketing purchased condensate from Kemco and STUSCO that
was

stolen from PEP,

condensate to Valero.

and that

Plains Marketing then sold that

A party who purchases and then sells stolen

property is subject to a cause of action for conversion.
Sandford v. Wilson,

2 Willson 188,

1884 WL 8120,

*1

(Tex.

See
1884)

("When the possession of personal property is wrongfully acquired
in the first instance, and is transmitted successively to several
[parties], each possession is a new conversion.I/).
alleges

that

all

defendants,

including

inter

Although PEP
alia,

Plains

Marketing, "were unjustly enriched by any profits, commissions, or
benefits received by use of PEP's condensate,I/26 and that "[a] 11
defendants profited from their improper dominion of PEP's property,
and therefore, they hold money that in equity and good conscience
belongs to PEP,I/27 PEP has failed either to allege any facts or to
present

any evidence

capable

26First Amended Complaint
No. 378, p. 19 ~ 103.
27Id.

~

of

proving

(Big

125.
-38-

that

Plains

Star Action),

Marketing

Docket

Entry

profited from its use of PEP's condensate, or received money that
in equity and good conscience belongs to PEP.
court

concludes

that

Plains

Marketing

is

Accordingly,

entitled

to

the

summary

judgment on PEP's equitable claims for unjust enrichment and money
had and received.
Plains Marketing Is Not Entitled to Summary Judgment on
PEP's Conversion Claims as a Good-Faith Purchaser

2.

Citing Texas Business and Commerce Code

2.403, and asserting

§

that PEP has no evidence tying the hydrocarbons purchased by plains
Marketing to any theft, Plains Marketing argues that it is entitled
to summary judgment on PEP's conversion claims because it purchased
hydrocarbons for value and, therefore, received good title to the
hydrocarbons

as

a

good-faith

purchaser

for

value. 28

Plains

Marketing argues that PEP has not alleged that Plains Marketing
"acted

with

intent

or

knowledge

or

that

conspiracy,"29 and that Kemco and STUSCO Plains

Marketing

allegedly

purchased for value
Marketing. 30

purchased

the hydrocarbons

it

part

of

any

the sellers from whom

stolen
that

was

condensate

they sold to

each
Plains

Plains Marketing argues that Kemco and STUSCO had at

28Plains Marketing's MSJ, Docket Entry No. 475, pp. 26-27.
29Id. at 27 (citing First Amended Complaint (Big Star Action) ,
Docket Entry No. 378, p. 16 ~ 81).
30Id. (citing Exhibit 39, Deposition of STUSCO trader Ed Vrana,
pp. 27, 70 (stating that STUSCO purchased condensate from JAG and
AGE Refining and sold condensate to Plains) i and Exhibit 32,
(continued ... )
-39-

least voidable title and that Plains Marketing therefore received
good title to the hydrocarbons purchased from Kemco and STUSCO.
Thus,

Plains

Marketing

argues

that

it

is

entitled to

summary

judgment on PEP's conversion claims because PEP cannot prove that
PEP had superior title or right of possession to the property at
issue. 31
A bona fide purchaser for value has an affirmative defense
against a conversion claim.

Carter, 271 S.W.3d at 858 & n.3.

A

party asserting an affirmative defense must sufficiently plead and
prove the defense.
is

not

Quantum Chemical, 47 S.W.3d at 478.

persuaded by

Plains

Marketing's

contention

The court
that

it

is

entitled to summary judgment as a good-faith purchaser for value
because Plains Marketing has failed to cite any evidence capable of
establishing

that

opposed to void -

Kemco

and/or

STUSCO

acquired

voidable

title to the hydrocarbons at issue.

as

Section

2.403(a) of the UCC as codified in the Texas Business and Commerce
Code provides:
(a)

A purchaser of goods acquires all title which his
transferor had or had power to transfer except
that a purchaser of a limited interest acquires
rights only to the extent of the interest
purchased. A person with voidable title has power
to transfer a good title to a good faith purchaser

30 ( ... continued)
Deposition of Kemco Vice-President, Kyle May, pp. 10-12, 22
(stating that Kemco purchased product from St. James at Swinney
Switch, and sold product to Plains at George West) .
31Plains Marketing's MSJ, Docket Entry No. 475, p. 27.
-40-

for va
When goods have been delivered under
a transaction of purchase the purchaser has such
power even though
(I)

the transferor was deceived
identity of the purchaser, or

as

to

(2)

the delivery was in exchange
which is later dishonored, or

for

(3)

was agreed that the transaction was to be
a -cash sale", or

(4)

delivery was procured through
punishable as larcenous under the
law.

a

(b)

Any

entrusting of possession of goods to a
who deals in goods of that kind
him
power to transfer all rights of the entruster to
a buyer in ordinary course of business.

(c)

-Entrusting"
includes any delivery and any
acquiescence in retention of possession regardless
of any condition expressed between the part s to
the
livery or acquiescence and regardless of
whether the procurement of the entrusting or the
possessor's disposition of the goods have been
as to be larcenous under the criminal law.

Plains Marketing neither argues nor presents any
of

establ

STUSCO, or any
and STUSCO

that

PEP created apparent authority

Kemco,

the entities from which PEP contends that Kemco
condensate sold to Plains Marketing.

Plains Marketing cited any evidence
action to c

capable

that

PEP took

Kemco, STUSCO, or any of their

indicia of ownership."

Nor has
firmative
"with the

Absent evidence that PEP ever entrusted

condensate to Kemco or STUSCO, or to any sel

from whom Kemco or

STUSCO

Marketing,

Marketing

condensate

sold

failed to raise a
-41-

to
fact

Plains

Plains

issue as to whether its

sellers possessed voidable as opposed to void title.
Plains

Marketing

has

not

offered

any

evidence

Moreover,
capable

of

establishing that the condensate it purchased was not stolen.
If,

as

PEP

contends,

Plains

Marketing

purchased

stolen

condensate from Kemco and/or STUSCO, then those purchases would not
qualify as
U.C.C.,

transactions of purchase within the meaning of the

and Plains Marketing would not qualify as a good-faith

~~~~~~~~,

1999, no

See A. Benjamini,

value who acquired good ti

purchaser

.).

2 S.W.3d 611, 614 (Tex.App.-Houston [14th Dist.]
In Benjamini an employee stole property and sold

amini.

it to Mr.

The Texas Court

Appeals affirmed an order

returning the property to the owner even though Mr.

Benj amini

claimed a right to the property under the U.C.C.'s protection
good

purchasers.

The

court

held

that

"[a]

thief

who

wrongfully takes goods against the will of the owner does not take
the goods through a transaction
section 2.403
const

purchase within the meaning

[of the U.C.C.]

Only voluntary transfers can

transactions of purchase,

under section 2.403.".

See Kotis v.

a thief is not a
Nowlin Jewelry,

Inc.,

844

S.W.2d 920, 923 (Tex.App.-Houston [14th Dist.] 1992, no writ).
Olin Corp.

v.

Cargo Carriers.

Inc.,

(Tex.App.-Houston [14th Dist.] 1984, no writ)
purchases stolen property from a
acquires no title in the property).

673

S.W.2d 211,

216

(holding that one who

, no matter how innocently,
If,

as PEP contends,

the

condensate purchased by Plains Marketing was stolen, then no one
-42-

the chain of title following the alleged thieves could transfer
title to a subsequent purchaser like Plains Marketing.
Texas
property,

law
no

is

well

matter

how

settled

that

innocently,

property; title remains in the owner.
S.W.2d 144,

146

(Tex.

1945)

one

who

purchases

acquires

no

title

stolen
to

the

See McKinney v. Croan, 188

("[I]t is well settled that one in

rightful possession of personal property may maintain an action for
This

its recovery against a thief or one holding under him.").

principle of Texas law and the policy supporting it has been aptly
stated many times.

See Sinclair Houston Federal Credit Union v.

Hendricks, 268 S.W.2d 290, 295
ref'd n. r. e. )

("The

general

(Tex.Civ.App.-Galveston 1954, writ
rule

is

that

the

owner of

stolen

property can recover it or its value from anyone who has received
it and exercised dominion over it."); Olin, 673 S. W. 2d at 214 (rule
that one who purchases stolen property from a thief, no matter how
innocently,

acquires

no

title,

places

the

responsibility

of

ascertaining true ownership on the purchaser); Benjamini, 2 S.W.3d
at 613 ("One who purchases stolen property from a thief, no matter
how innocently, acquires no title in the property; title remains in
the owner.").

In Olin a jury found that Ragsdale was a good-faith

purchaser for value of Olin's fertilizer.

Nevertheless, the

court sustain[ed Olin's] third point of error because
this finding [of a good-faith purchaser for value] is
immaterial to [Olin's] right to recover the value of its
stolen goods from the purchasers thereof.
One who
purchases stolen property from a thief, no matter how
innocently, acquires no title in the property; title
remains in the owner.
This rule places the responsibility of ascertaining true ownership on the purchaser.
-43-

Appellee, Ragsdale, asserts that he falls within the
exception to the common law rule that if an owner of
property, by some act has vested the possess
and right
to the property apparently in the seller,
thereby
estops himself from setting up a claim to the property as
against the purchaser for value without not
This
exception does not apply to appel
Tinney and
Ragsdale, because
is no evidence that
. the
owner of the fertilizer, by some act ve
possession
and right to the property apparently in the
lers...
Although a seller may have possession and represents that
he has title to the property, an innocent purchaser still
cannot defend aga st the true owner, unless there has
been some [J a
rma ti ve act by the owner whi ch ei ther
creates apparent au
ty to sell the
the
seller or cl
the seller with
of
ownership.
Olin, 673 S.W.2d at 216 (emphasis added) .
Plains Market
good-faith purchaser

value who received good title to the

hydrocarbons at issue,
summary

judgment

Therefore,

that it was a

led to establish

on

or that Plains Market

PEP's

conversion

Plains Marketing's argument

claims
that

is entitled to
on

this

basis.

is entitled to

summary judgment on PEP's conversion claims because it is a goodfaith purchaser for value has no merit.
3.
Plains

Whether PEP Can Trace Stolen
Marketing Is a Fact Issue
Marketing

argues

that

it

is

Property
entitled

to
to

Plains
summary

judgment on PEP's conversion claim because PEP cannot provide any
competent evidence that Plains Marketing
purchased t
identical condensate
legedly stolen from
PEP. PEP has
led to provide any competent evidence of
such identif
ion, either by tracing the allegedly
stolen hydrocarbons from PEP to PI
Marketing or by
showing that the hydrocarbons allegedly stolen from PEP
-44-

and
hydrocarbons purchased by Plains Marketing share
the same distinctive and unique charact
st S.32
this argument,

In support

Plains Marketing cites a number of
iffs asserting

cases in which Texas courts have held that pI

claims for conversion must specifically identify what property was
stolen

that

and

the

defendant

(Tex.Civ.App.-Amarillo 1943, writ denied (cattle)
580 S.W.2d 91
1979, writ denied)
581
denied)

same

Satterfield v. Knippel, 169 S.W.2d 795, 796

property.

Dist.]

very

converted

S.W.2d

538,

1

Shaw's D.B. &

94 (Tex.Civ.App.-Houston [1st

(silverware)
539

i

i

(Tex.Civ.App.

las

1979,

writ

(tools)
ting

~==~~-=====~I

108 S.W.2d 954, 955-56 (Tex.Civ.App.

Waco 1937, no writ), Plains Marketing contends that "a conversion
plaintiff

has

the

burden

of

showing

the

allegedly taken wi th \ reasonable certainty.

quantity

'1133

product

Assert

that PEP

does not know how much condensate was stolen, does not know when
its condensate was stolen, does not know from where
was stolen,

s condensate

and does not know who stole its condensate,

Marketing

PEP is using assumptions

meet its burden

proof.

Plains

not

to

Plains Marketing also cites

contradicting PEP's contention that no gas condensate was 1

ly

exported from Mexico to the United States from August of 2006 to

32Plains Market
33

's MSJ, Docket Entry No. 475, pp. 3 4.

at 6-7.
-45-

mid 2011. 34
admiss

Finally,

Plains Marketing argues

that

is no

the condensate it purchased from

evidence showing

Kemco or STUSCO consisted of Mexican condensate stolen from PEP or,
if so, how much.

Plains Marketing argues that the evidence,

fact, shows that it purchased naphtha and crude oil
STUSCO and not gas condensate. 35

in

Kemco and

Plains Marketing argues that

is not enough for PEP to show that there is some
probability or possibil
that Plains Marketing received
some barrels of condensate stolen from PEP,
icularly
when the facts in evidence lead to multiple equally
possible inferences as to whether Plains Marketing
any such condensate and if so, how much.
PEP
must have some evidence
a specific number
barrels
actually received by
Marketing are actually PEP's
condensate. PEP has no
evidence. 36
PEP responds that
the issue is not molecules, but ownership.
PEP is not
required to prove that
defendants converted the exact
same molecules stolen by the Cartel. Instead, as stated
in defendants' own authority, PEP has to prove that it
"had, at the time of
alleged conversion, acquired
some right or title to the identical goods or chattels
claimed to have been converted."
O'Connor [v. Fred M.
Manning, Inc., 255 S.W.2d 277,] 278 [(Tex.Civ.App.Eastland 1953)]. With
ly identifiable goods, there
is no distinction between the identical property and the
property owned. With fungible goods, however, ownership
does not necessarily
low molecules of oil or water, or
grains of sand or wheat, but flows through transactions
and transfers of t
Ie according to property rules
codi f ied in the UCC. 37

34

at 15-16.
at 17-26.
at 24.

's Opposition to Defendants' Dispositive Motions, Docket
Entry No. 545, p. 5.
-46

As PEP recognizes,

" [r]esolution of this argument is critical to

determination of this case,"38 because it
permeates defendants' factual challenges, particularly
the repeated claim that PEP cannot trace its property.
For example, if Big Star filled its single sales tank
with a mixture of 25% stolen condensate and 75% legal
crude, Plains argues that it is mere assumption that the
deliveries out of that tank to Plains contained 25% of
stolen condensate.
As a matter of chemistry, Plains
might be correct; it is highly doubtful, but at least
theoretically possible, that Plains fortuitously received
no hydrocarbon molecules traceable to PEP's Burgos Field.
According to the UCC and property law rules
explained at length in PEP's dispositive motion, however,
as a matter of law, PEP owns 25% of the commingled mass,
precisely because individual molecules are mixed together
and no longer separable.
Since PEP owns a fixed
percentage of a combined mass, when defendants bought a
portion of the combined mass they took possession of
PEP's property without paying PEP for that property.
In other words,
the issue is one of legal
ownership, not chemistry.
And, PEP's ownership is
determined by the same rules and practices that govern
defendants'
many daily transactions in crude and
condensate.
Ignoring their own trade practices and the UCC's
property law governing ownership of commingled goods, the
defendants ask this Court to adopt an impossible proof
standard
that
requires
PEP
to
trace
individual
hydrocarbon molecules.
The proposed rule is directly
contrary to established law.
In fact, Corpus Juris
Secundum states:
"Other claims which are not a defense
[to conversion] include.
. commingling of the property
with other property before the conversion."
90 C.J.S.
Trover and Conversion § 68 (2013) (footnotes omitted) .
On the other hand, the defendants cite no opinions
denying recovery for conversion because the goods
converted were fungible and tracing required use of
circumstantial evidence. The law of conversion clearly
encompasses goods that, according to the defendants, are
not identifiable.

38Id.
-47-

Applying Texas'
actual legal rules governing
ownership of goods, as set out in the UCC, however, PEP
can and has traced its title to the condensate from
wi thin Mexico into the defendants' hands. The defendants
cannot defeat this proof by referencing irrelevant law
related to a different type of property. 39
Missing from PEP's argument quoted above is any cite to Texas
law

or

to

a

Texas

case

that

has

applied

proportionate ownership on which PEP relies
conversion.

the

principles

of

in the context

of

Instead, citing Humble Oil and Refining Co. v. West,

508 S.W.2d 812

(Tex.

1974), Ortiz Oil Co. v.

Luttes,

141 S.W.2d

1050 (Tex.Civ.App.-Texarkana 1940, writ dism'd by agr.), and Mooers
v.

Richardson

Petroleum

Co.,

201

134

(Tex.Civ.App.-

rev'd in part,

San Antonio 1946), aff'd in part.

S.W.2d

204 S.W.2d 606

(Tex. 1947), PEP asserts that "hydrocarbons can be converted, and
there is a well-established legal regime for determining ownership
in such cases.

,,40

But none of the cases PEP cites absolved the

plaintiff from having to identify the converted property; at issue
was only the amount of property converted.

These cases all stand

for the principle that where there has been a conversion of goods
through intentional commingling,

and the evidence establishes a

reasonably certain estimate of the amount of property converted,
judgment should be entered on the basis of that amount, even though
the precise amount cannot be ascertained with reasonable certainty.
See Exxon Corp. v. West, 543 S.W.2d 667, 673 (Tex.Civ.App.-Houston

39Id.

at 6-7.

-48-

1976)

Ortiz Oil

(cit

Co.

v.

Luttes,

141

S.W.2d 1050,

1055

(Tex.Civ.App.-Texarkana 1940, writ dism'd by agr.).
PEP

seeks

to

avoid

the

identification

requirement

by

that the requirement should not apply to fungible

contending ei

goods, or that under the confusion of goods doct

, once PEP has

shown that it owns a fixed percentage of a combined mass,

it is

entitled to a presumption that any defendant who bought a portion
of that combined mass took possession of a proportionate percentage
of PEP's property_
has

merit.

The court is not persuaded that either argument

Texas

courts

have

not

made

an

exception

to

the

identification requirement for fungible goods, and this court is
unwilling to create such an exception.

Moreover, PEP has not cited

- and the court has not found - any Texas case that has applied a
proport

e percentage of ownership presumption to a conversion

claim as

against a defendant who purchased or acquired a

portion of a commingled mass.
PEP's proportionate percentage argument is based on the legal
principle that where one wrongfully confuses and commingles his
goods with

goods of another, the wrongdoer bears the burden of

pointing out his own goods and unless he does so, he is liable for
the whole mass.

See Holloway Seed Co. v. City National Bank, 47

S.W. 95 (Tex. 1898).

In Holloway the Texas Supreme Court expl

that
[t]
rule as to the confusion
goods is merely a rule
of evidence.
The wrongful mingling of one's own goods
with
those
of
another,
when
the
question
of
-49

identification of the property
ses, throws upon the
wrongdoer the burden of pointing out his own goods, and,
if this cannot be done, he must bear the loss which
results from it.
It is but an application of the
e that all things are presumed against the
spoi
i that is to say,
t one who wrongfully
destroys or suppresses evidence.
Id.

at

97.

While

this

principle may be

defendants such as Big Star who are
condensate stolen from PEP with

appl icable

against

leged to have commingl
hydrocarbons, the principle

has no application against Plains Marketing because there are no
or evidence that PI

allegat

Marketing commingled PEp 1 s

condensate, much less that Plains Marketing did so wrongfully.
~~~~~~~~~I

174 S.W.2d 110, 112 (Tex.Civ.App.-Beaumont 1943,

w.o.m.) .

writ

In Kenyon two junk dealers,
converted plaintiffs'

and Feldman, wrongful

dragline by cutting it

into scrap metal.

Defendants Eisen, Sampson, and Sampson, purchased scrap metal from
the two junk dealers.

Plaintif

purchasers for conversion.

The

sued the junk dealers and
court instructed a verdict

favor of the purchasers upon finding that the evidence raised no
issue as to them
jury.

l

and submitted the case against the dealers to a

aintiffs appealed the di

purchasers.

The appeals court af

verdict entered for
rmed the directed verdict upon

concluding that the evidence showed the tonnage, and the value
the junk metal that the defendants purchased from the dealers, "but
was also shown that scrap metal purchased from the garbage dump
of

City of Vinton

l

Louisiana, was included and it was nowhere
50

shown

of

what

dragline.

said

tonnage

came

plaintiff[ s]

principle that one who

the full amount based on

recover

[the

they were entitled to

Plaintiffs argued

1I

from

wrongfully confuses and commingles his goods with the goods
another

the burden of pointing out his own goods or being

held liable for the whole mass.

The court rej ected

s

argument because there was no evidence either that the purchasers
- as opposed to the junk dealers

had commingled scrap from

plaintiff [s dragline with scrap from another source.

Nor was

any evidence that the purchasers had knowledge or notice that
dealers from whom they purchased the scrap did not own all of it.
On rehearing[ however, the court concluded that the issue
purchasers [
because

liability

there

finding

was

should have

testimony that

been

presented

could have

to

the

jury

warranted a

jury

all of the scrap metal purchased from the dealers came

from the plaintiff [s dragline.

court explained that

"even

though Sampson et al purchased without notice that the metal had
been wrongfully taken by the sellers, they are liable to appellants
for the junk value of the metal purchased from appellants
as of

time it was received by them./I
illustrates that plaint

unless

fendants liable based on
(1)

goods [ or

machine [

Id.

in a conversion action must

trace the property actually converted to the defendant
hold

l

l

and may not

confusion of goods principle[

the defendants themselves wrongfully commingled
(2)

the defendants acquired the commingled goods with
-51

notice that the sellers from whom they purchased did not own all of
the goods.

to hold Plains Marketing liable for

Therefore, in

that was actually stolen from

conversion, PEP must trace

PEP must also present evidence

it in Mexico to Plains Market

certain estimate of the

from which the jury could form a
amount

of

purchased.
not

stolen
See

required

condensate,

==~~-===,

to

be

if

any,

that

141 S.W.2d at 1055.

proven

with

exact

Plains

Marketing

These issues are

certainty,

only

with
115

reasonable certainty.
S.W.2d 1097 (Tex. 1938).
The only evidence that PEP cites that would allow a
finder

to

conclude

that

PI

Marketing purchased

fact-

reasonably

certain amounts of stolen condensate is cited in PEP's Dispositive
Motion (Docket Entry No. 492).

, PEP argues that

on one occasion, around October 2008, F&M purchased
$539,479 in stolen condensate from Continental.
Exhibit 32 at 104 (deposition
Frank del Angel, Jr.) i
Exhibit 33:695 (relevant invoice).
F&M resold this stolen condensate to a company
called Kemco Resources (Exhibit 32 at 105-106; see also
Exhibit 34:199), which then
d
to Plains Marketing.
Exhibit 35 at 29 30, 32 (deposition
Kyle May, Kemco's
president); see also exhibit 36 (invoices produced by
Kemco showing the sale to
ains) .41
Exhibit 33 is a Continental Fuels
November

6,

Transportation,

2008,
Inc.

showing

ce
s

$539,479.25, dated
condensate

that occurred on October 30-31,

to

F&M

2008,

and

41PEP's Dispositive Motion, Docket Entry No. 492, pp. 7-8.
-52

November 1-6, 200B.

Exhibit 34 is a Bill Payment Stub showing that

On November 20, 200B, Kemco paid F&M Transportation $590,09B.61 for
FMS100-100B dated October 31,

200B.

Exhibit 36 consists of two

invoices showing quantities and prices of "Crude Oil" that Plains
Marketing purchased from Kemco in October and December of 200B.42
As evidence that the products being sold by Continental Fuels,
including that which made its way to Plains Marketing in October
and

December

of

200B,

was

stolen

from

Mexico,

deposition of Timothy Brink of Continental Fuels.

PEP

cites

the

Brink testified

that in July of 2008 his employee, Josh Crescenzi,

told him that

the product he was purchasing was stolen from Mexico. 43

Brink also

testified that once he looked closely at the paperwork documenting
shipments of product that he bought from Mexico,

the number of

discrepancies he spotted caused him to realize that the product was
stolen. 44

PEP also cites the transcript from the court proceeding

in which Arnoldo Maldonado of Y Oil & Gas pleaded guilty for his
role in supplying stolen Mexican condensate to Continental Fuels. 45

42Exhibi t 36 to PEP's Disposi ti ve Motion, Docket Entry No. 49324.
43PEP's Dispositive Motion, Docket Entry No. 492, p. 4 (citing
Deposition of Timothy Brink, Exhibit 10, Docket Entry No. 492-12,
pp. 13 -14)
44See Plaintiff PEP's Reply in Support
Motion [Dkt. 492] ("PEP's Reply in Support
Motion"), Docket Entry No. 577, pp. 15-16.

of
of

Its
Its

Disposi ti ve
Disposi ti ve

45PEP's Dispositive Motion, Docket Entry No. 492 (citing
Transcript of Rearraignment, Exhibit 12, Docket Entry No. 492-14,
p. 20).
-53-

the invoices

Although not dispositive, this evidence together wi
in

Exhibits

33-34,

and

36

to

PEP's

Dispositive

Motion,

2008

October

sufficient to raise a fact issue as to whether

is

ains Marketing purchased reasonably ascertainable quantities
condensate stolen from PEP in Mexico.
court concludes

However, for the reasons explained below,

that claims arising from purchases made by Plains Marketing before
May

29,

2009,

are

Therefore,

time-barred.

because

the

only

finder could conclude

purchases cited by PEP from which a

Plains Marketing purchased reasonably certain amounts of stolen
e

condensate would not be admi

to support

PEP's conversion

claim, Plains Marketing is entitled to summary judgment on PEP's
conversion

claim because

PEP

cannot

trace

condensate

actually

stolen from it in Mexico to Plains Marketing in Texas.
4.

Conversion Claims Arising from Purchases that Occurred
Before May 29, 2009, Are Time Barred

Asserting that

PEP did not

April 20, 2012, when PEP filed its
Big Star Action (Docket Entry No.

name

it

as

a

defendant

until

rst Amended Complaint in the
378),

ains Marketing argues

that all of the conversion claims that PEP has asserted against it
injuries arising from purchases alleged to have occurred more
than two year s
barred. 46
t

ier,

i.e.,

before April

20,

2010,

are time

ains Marketing argues that PEP's conversion claims are

barred because those claims accrued when the condensate was

46Plains Market

's MSJ, Docket Entry No. 475, p. 4.
-54-

initially stolen.

Acknowledging that PEP has pleaded the discovery

rule in an attempt to avoid

time bar imposed by Texas' two-year

statute of limitations,

Marketing argues that the discovery

rule is inapplicable to PEP's claims because the injuries that PEP
leged wrongdoing were not inherently

suffered as a result of its
undiscoverable,

because

condensate

being

was

United States

PEP

has

stolen

and

April

long

admitted

knowing

converted

20,

by

that

sale

in

and because

2010,

its
the

Plains

Marketing did not conceal PEP's claims. 47
PEP responds that t

aims asserted against Plains Marketing

are not time barred because they all relate back to May 29, 2011,
i.e.,

the date that

PEP filed

Action No. H-l1 2019 (B
claims

its Original

Star Action)

asserted

ains

.48

Complaint

in Civil

PEP also argues that

Marketing

are

not

time

barred

because they did not accrue until PEP demanded return of and/or
compensation for its condensate from Plains Marketing, and Plains
Marketing had a
Alternatively,
because

the

47Id.

PEP

di

e

time to investigate that demand. 49
that

e

its claims are not

and/or

the

doctrine

of

time
fraudulent

at 5.

4BpEP's Opposi t
Entry No. 545, p. 38.

to Defendants' Dispositive Motions, Docket

49PEP's Dispos
Motion, Docket Entry No. 492, pp. 30 31i
PEP's Opposition to Defendants' Dispositive Motions, Docket Ent
No. 545, pp. 22 25.
-55-

concealment toll the limitations period for these claims. 50
reasons explained below,
against

Marketing

PI

Original Compl

nt

the court concludes that
relate

back

to

the

For the

PEP's claims

filing

of

PEP's

the Big Star Action, i.e., to May 29, 2011,

but that all of the claims arising from purchases that accrued over
two years before that date, i.e., all of the claims

the

May 29, 2009, are time barred and

purchases made
doctrine

prevents

fraudulent concealment nor the discovery

Plains Market
to bar

from

s

from relying on Texas' two-year limitations
claims.

(a)

PEP's Claims Against Plains Marketing Relate Back
to the Filing of the Original Complaint
Star Action on May 29, 2011

PEP argues that the claims asserted against Plains Marketing
in the First Amended Complaint filed in the Big Star Action are not
barred by limitations because they relate back to the date on which
Complaint, i.e., May 29, 2011. 51

it filed its
(1)

Applicable Law

A party who timely files a complaint may amend t

complaint

by adding new parties after the applicable statute of limitations
has run if

requirements of Federal Rule of

I

Procedure

's Disposit
Motion, Docket Entry No. 492,
. 30-31;
PEP's Opposition to Defendants' Dispositive Motions, Docket Entry
No. 545, pp. 25-28.
51

-56-

15(c) are met.

See Krupski v. Costa Crociere S. p. A., 130 S.Ct.

2485, 2496 (2010)
fendant

added

(addressing when claims asserted against a newly
relate back to a

a

suit filed

party).

If the requirements of Rule 15(c)

compl

will "relate back" to the date the original complaint was

filed.

are met,

related

the amended

Rule 15(c) states:

(1)

When

an Amendment

pleading relates
pleading when:

Re~ates

back to

Back.

the

An

date

amendment to a
of the original

(A)

the law that provides the applicable statute
of limitations allows relation back;

(B)

the amendment asserts a claim or defense that
arose out of
conduct, transaction, or
occurrence set out or attempted to be set
out--in the original pleading; or

(C)

the amendment changes the party or the naming
of the party against whom a claim is
asserted, if
15 (c) (1) (B) is satisfied
and if, within the period provided by Rule
4(m) for serving the summons and complaint,
the party to be brought in by amendment:
(i)

received
notice of the action that
it will not be prejudiced in defending on
the merits; and

(ii) knew or should have known that the action

would have
brought against it, but
for a mistake concerning the
party's identity.
Fed. R. Civ. P. 15(c).

The Supreme Court has stated

"[t]he

question under Rule 15(c) (1) (C) (ii) is not whether [the plaintiff]
knew

or

should

defendant]

have

known

identity

of

[the

newly

named

as the proper defendant, but whether [the newly named
-57-

defendant] knew or should have known that it would have been named
as a defendant but for an error.

Rule 15 (c) (1) (C) (ii)

asks what

the prospective defendant knew or should have known during the
Rule 4( m) period."

Krupski, 130 S.Ct. at 2493-94.

Information in

the plaintiff's possession is relevant only as it relates to the
defendant's understanding of whether there was a mistake concerning
the

proper

party's

identity.

The

proper

inquiry

under

Rule 15(c) (1) (C) (ii) is whether the newly named defendant knew or
should have known that but for the plaintiff's mistake, the action
would have been brought against him.
(2)

Id.

Original Pleadings

PEP's Original Complaint filed on May 29,
Star Action,

2011,

in the Big

Civil Action No. H-11-2019, asserted against Plains

All-American Pipeline, L.P. the same claims based on the same facts
that PEP asserted against Plains Marketing in PEP's First Amended
Complaint filed on April 20, 2012. 52

(3)

Analysis

PEP argues that Rule 15(c) 's requirements for relation back
are satisfied as to Plains Marketing because (1) PEP added Plains
Marketing

as

a

defendant

after

Plains

All-American

complained that it was not the proper party,

(2)

Pipeline

Plains Marketing

52See Original Complaint, Docket Entry No. 1 filed in Civil
Action No. H-11-2019 (Big Star Action), pp. 4, 15 and 20-23.
-58-

sing from the same factual

is being sued for the same claims

All-American Pipeline was sued in PEP/s Original

is as PIa
Complaint 1

and

(3)

Plains

Pipeline are related ent

Marketing

and

Plains

All-American

ies that share legal counsel.

PEP argues

that these factors "demonstrat[e] the requisite knowledge / " i.e. ,
that Plains Marketing received notice of the original action within
4(m) for serving summons and complaint

the period provided by

such that it will not be prejudiced in defending on the meritsi and
that

ains Market

would

have

been

action

knew or should have known that
brought

but

against

for

PEP/ s

mistake

concerning the proper party/s identity. 53
Plains Market

opposes PEP/s relation back argument based

solely on PEP's failure to dismiss the claims asserted against
Plains All-American Pipeline , L.P. when PEP filed its
Complaint.

Citing

two

unpublished

cases ,

Trigo

t Amended
v.

TDCJ-CID

Officials 1 Civil Action No. H 05-2012, 2010 WL 3359481 1 *18 (S.D.
Tex.
No.

August

24,

2010)

1

CIVASA02CA0663 XR ,

and Hansen v.
2003

ASAP

WL 22249767

Consultants!

(W.D.

Tex.

Inc.,

August

29 1

2003),

Plains Marketing argues that the claims asserted against

do not

relate back to

the

filing

of

PEP's

Original

Complaint

because
[t]he adding of a previously-unidentified party to a case
is not a "mistake" under Rule 15 (c) (1) (C) (ii) that

53PEP's Opposition to Defendants' Disposit
Entry No. 545, p. 38.
-59-

Motions, Docket

qualifies for relation back
original claims. The statute
running on PEP's claims
PEP filed suit against
2012. 54

new claims to the
limitations did not stop
Plains Marketing until
Marketing on April 20,

Plains Marketing argues that
PEP's conduct demonstrates that, when it amended its
complaint in April 2012,
was not merely correcting
mistake as to the proper name or the identity of Plains
All-American Pipeline vs.
ains Marketing. PEP intended
to add a second PI
entity as a separate defendant,
and both Plains All
can Pipeline and Plains
Marketing subsequently
ipated in the substance of
thi s case. 55
Missing from Plains Marketing's opposition is any argument or
evidence from which the court could conclude that the requirements
of

Rule

15 (c)

have

not

been

satisfied

either

because

Plains

Marketing did not receive timely notice of this lawsuit as required
by Rule 15(c) (1) (C) (i)

or

Plains Marketing did not know

that this action would have been brought against it but for a
mistake

concerning the

Rul e 15 (c) (1) (C) (i i) .

party's

ion to PEP's relation back argument

are distinguished from
No.

H-05 2012,

required by

unpublished cases that Plains Marketing

cites in support of its

Action

identity as

s of this case.
2010

WL

3359481,

at

In Trigo , Civil

*14-15,

the

court

rejected the plaintiff's attempt to have claims asserted against
newly added defendants relate back to the original filing

54Plains Market
,L. P. 's Reply in Support of Motion for
Summary Judgment, Docket Entry No. 567, p. 22.
55Id. at 21-22.
-60

there was no evidence that the newly named defendants received
timely not

of the lawsuit, or that the newly named defendants

knew that but for a mistake concerning the proper party's identity,
the action would have been brought

against

them.

In

No. CIVASA02CA0663 XR, 2003 WL 22249767, at *1-*2, the court held
that c

asserted against the plaintiff's co-worker did not

relate back to the claims asserted

the plaintiff's employer

complaint because

plaintiff's failure to name

in the

the supervisor in the original compl

was not a mistake.

PEP's First Amended Complaint added Plains Marketing without
dismissing Plains All-American Pipeline,
PEP's

I-American Pipeline, L.P. (Docket Entry No. 533) signed by

the court on March 15, 2013, all

the claims asserted

Plains All-American Pipeline have
has

prospect
Rule

explained,

"Rule
knew

defendant

4{m)

All
and

but pursuant to

Stipulation and Order of Dismissal of Claims Against

Plains

Court

L.P.,

period."

dismissed.

15 (c) (1) (C) (ii)

or

Krupski,

should
130

can Pipeline, L.P. and PI
are

represented by

the

same

have

S.Ct.

at

As the Supreme
asks

known

what
during

2493-94.

Marketing have similar names
counsel.

Similar

names

and

interrelationship "heighten the expectation that [Plains Marketing]
should suspect a mistake has been made when [Plains All
Pipel

] is named in a complaint that actually describes [Plains

Market's] activities."

Id. at 2498.

A party who timely fi

a complaint may amend the complaint by adding new parties
61

the

applicable statute of limitations has run provided the requirements
Krupski,

of Federal Rule of Civil Procedure 15(c) are met.
s.Ct. at 2496.

130

Here, the court has no basis on which to conclude

that the Rule 15(c) requirements are not satisfied.
(4)

Conclusion

Because the factual basis and the claims asserted against
Plains Marketing in PEP's First Amended Complaint are virtually
identical to the factual basis and the claims asserted against
Plains All-American

Pipeline

in

PEP's

Original

Complaint,

and

because Plains Marketing does not dispute that the requirements of
Rule 15

(c)

are satisfied,

the court

concludes

that

the claims

asserted against Plains Marketing in PEP's First Amended Complaint
filed in the Big Star Action relate back to the date that PEP's
Original Complaint was filed in that action, i.e., May 29, 2011.
(b)

PEP's Conversion Claims Accrued When Plains
Marketing Purchased Allegedly Stolen Condensate

Arguing that PEP alleges that it is liable for purchases of
allegedly stolen Mexican condensate that occurred from April 2006
to July 2010, and recognizing that Texas applies a "legal injury"
test

to

determine when a

cause

of

action has

accrued,

Plains

Marketing argues that the claims asserted against it in this action
are all time barred because "PEP's claims accrued when the thefts
first occurred. ,,56

PEP argues that the claims asserted against

Plains Marketing are not time barred because
56Id.

-62-

limitations d[id] not begin to run when PEP's property
was stolen or when the defendants [- including inter alia,
ains Marketing -] obtained it, but when the defendants
knew of and resisted PEP's ownership.
The defendants
present no evidence that they knew of PEP's claims more
than two years before sui t .57
For

the

reasons

explained

below,

the

court

limitations did not begin to run when the the
PI

Marketing argues,

concludes

that

s first occurred as

or when Plains Marketing knew of and

resisted PEP's ownership as PEP argues but, instead, when Plains
Marketing purchased allegedly stolen condensate.
(1)

The Limitation Period Did Not Start When the
Thefts First Occurred

Plains Marketing
04-0383,
pet.)

Ayers v. Erickson, Civil Action No. 07-

2006 WL 435026,

at *2

(Tex.Civ.App.-Amarillo 2006,

no

in support of its argument that PEP's claims accrued and

limitations began to run when the thefts occurred.

In Ayers the

court held that limitations on claims for conversion of firearms
began to run on the date the firearms were stolen even though the
plaintiff

did not

know

the

thieves'

ities.

Because

the

defendants in Ayers were individuals said to be connected to the
of

the

purchasers

firearms

like

Plains

support Plains Market

and

were

Marketing,

not

identified

the

holding

subsequent
does

not

's argument that PEP's claims against it

accrued and limitations began to run on
ts.

Ayers

as

Instead, the Ayers holding stands

date of the original
the well-established

57 PEP 's
Reply in Support of Its Disposi ti ve Motion,
Entry No. 577, p. 11.

-63-

Docket

rule of Texas law that "[i]n most cases, a cause of action accrues
when a wrongful act causes an injury, even if the fact of injury is
not discovered until later and even if all resulting damages have
yet to occur."

Id. at *1 (citing Childs v. Haussecker, 974 S.W.2d

31, 36 (Tex. 1998), and S.V. v. R.V., 933 S.W.2d 1, 4 (Tex. 1996)).
(2)

The Limitation Period Did Not Start When
Plains Marketing Knew of and Resisted PEP's
Ownership

Arguing that its claims against a particular defendant did not
accrue until it could have sued that defendant for a legal injury,
PEP asserts
[t]hat, of course, occurred at the earliest when the
defendant exercised control over PEP's property.
But
. PEP's legal rights were not invaded by defendants'
innocent possession of PEP's property.
Rather, PEP was
legally wronged (and defendants' possession of PEP's
property unlawful) only after PEP had demonstrated its
ownership of the condensate, and the defendants refused
to return or pay for the property. 58
Citing Sandford v. Wilson, 2 Willson 188, 1884 WL 8120 (Tex. 1884),
PEP

argues

that

"[a] n

innocent

buyer of

stolen goods

has

not

committed conversion until the buyer unreasonably refuses to return
the goods on demand of the owner,,,59 and citing Textile Supplies,
Inc. v. Garrett, 687 F.2d 123, 128 (5th Cir. 1982), PEP argues that
Up] er the DCC,
faith

from

a

\ the mere purchase of personal property in good
person

who

has

no

right

to

sell

it

is

not

a

58PEP's Opposition to Defendants' Dispositive Motions, Docket
Entry No. 545, p. 23.
59PEP's Dispositive Motion, Docket Entry No. 492, p. 29.
-64-

conversion. '

iance on Sandford,

PEP's

,,60

Garrett,

and some

unidentified provisions

Uniform Commercial Code (U.C.C.) to

support its contention

the claims asserted against Plains

Marketing did not accrue and limitations did not start running
until Plains Marketing knew of and resisted PEP's ownership has no
merit because purchases of stolen property are not governed by the
U.C.C.

Sandford and Garrett cases on which PEP

and because

relies are factually and legally distinguishable.
PEP's reliance on
in Garrett that \\
faith

from

a

U.C.C. and the Fifth Circuit's statement
mere purchase of personal property in good

person

who

has

no

right

to

sell

it

is

not

conversion," 687 F.2d at 128, is misplaced because assuming
PEP alleges -

that

as

condensate was stolen, subsequent purchases

of that condensate by
purchase within

a

ains Marketing were not transactions of

meaning of the UCC.

See A. Benjamini, Inc. v.

Dickson, 2 S.W.3d 611, 614 (Tex.App.-Houston [14th Dist.] 1999, no
pet.) .
Mr.

In

an employee stole property and sold it to

Benj amini .

The Texas Court of Appeals

affirmed an order

returning the property to the owner even though Mr.
claimed a right to
good-faith

purchasers.

Benj

property under the U.C.C.'s protection
The

court

held

that

\\ [a]

f

wrongfully takes goods against the will of the owner does not

60PEP's Opposition to Defendants' Dispositive Motions,
Entry No. 545, p. 24.
65-

who

the goods through a transaction of purchase within the meaning of
section 2.403

can

Only voluntary trans

[of the U.C.C.]

transactions of purchase, and a thief is not a purchaser

const

See Kotis v. Nowlin Jewelry,

under section 2.403.").

Inc.,

844

S.W.2d 920, 923 (Tex.App.-Houston [14th Dist.] 1992, no writ).
Olin Corp.

v.

Cargo Carriers.

Inc.,

(Tex.App.-Houston [14th Dist.] 1984, no writ)

673

S.W.2d 211,

216

one who

(holding

, no matter how innocently,

purchases stolen property from a

Because PEP alleges that the

acquires no title in the property)

condensate was stolen, there is no transaction of purchase to which
the U.C.C. applies; thus, no one in the chain of title following
the al

thieves could trans

like

Marketing.
The

fth

Circuit's

title to a subsequent purchaser

statement

in Garrett

that

"

mere

purchase of personal property in good faith from a person who has
no right to sell it is not a conversion,
law which
settled

l

II

was based on Mississippi

the Fifth Circuit explained, differed from "[t]

legal

proposition

that

'ordinarily when

one

well

buys

any

consumer chattels which belong to another he becomes a converter
and must pay for his conversion regardless of his good faith.'"
687 F.2d at 128 & n.13 (quoting First Camden National Bank & Trust
==~~-=~~~==~=-~~,

122 F.2d 826,

826-27

(3d Cir. 1941)).

Texas law is in accord with the "well settled legal proposition"
referenced in Garrett.

See Sandford, 1884 WL 8120, *1 ("When

-66

possession of personal property is wrongfully acquired in the first
and

instance,

is

transmitted

possession is a new conversion.

successively
If)

to

several,

each

•

PEP cites Sandford, 1884 WL 8120, in support of its contention
that

Texas

law

distinguishes

between

an

innocent

purchaser's

possession of stolen goods and a wrongful converter's possession of
stolen goods.

PEP explains that

Hodge stole Sandford's horse and sold it to Wilson. When
Sandford asked Wilson to return the horse, Wilson
demanded that Sandford prove his ownership.
Even then,
Wilson refused to return Sandford's horse until Sandford
produced the thief so Wilson could get his money back.
Then, the horse was stolen again, this time from Wilson's
stable.
The court ruled that, although Hodge, as a horse
thief, did not transfer title to Wilson, Wilson's initial
possession "was lawful and not a conversion per se. If Id.
at 189.
Wilson did not commit conversion until he
unreasonably refused to return the horse after Sandford
established his ownership. Id. at 191. In other words,
"Wilson had the right to refuse delivery until Sandford
established his ownership in some way.1f
Id. at 191.
The rule of Sandford is well-recognized and
logical, because it affords innocent purchasers of stolen
goods an opportunity to preemptively cure a conversion
claim. . . According to this rule, an innocent purchaser
has done nothing wrong until the purchaser is shown that
the item is stolen: "Until demand and refusal, the
purchaser in good faith is not considered a wrongdoer. If
DeWeerth, 836 F.2d at 106 (citing Gillet, 57 N.Y. at
28) . 61
PEP argues that

"aside from the few defendants that admit they

bought stolen goods (none of whom filed dispositive motions), the

61Id.

at 24-25.
-67-

defendants continue to claim that they lack sufficient information
to determine that they took possession of PEP's property, so they
cannot claim that conversion occurred years ago.

1162

PEP's reliance on Sandford in support of its contention that
defendants'

possession of its condensate was not unlawful until

defendants unreasonably refused PEP's demand either to return or
pay

for

PEP's

property

is

misplaced because

Sandford

factually and legally distinguishable from this case.

is

Sandford is

legally distinguishable because limitations was not at
Sandford

is

discovered

factually
the

distinguishable

conversion,

the

because

defendant

converted property, i.e., Sandford's horse.
demand

that

the

defendant

return

the

still

both

issue.

when

Sandford

possessed

the

Thus, Sandford could

horse.

Only

after

the

defendant refused to return the horse did Sandford seek damages for
conversion.

Here, in contrast, PEP asserts that it did not know

that Plains Marketing had converted its condensate until May of
2011,63 but offers no evidence showing that by that date Plains
Marketing continued to possess any stolen condensate.
summary

judgment

evidence

that

PEP

has

provided

The only
of

Plains

Marketing's purchases of stolen condensate are two invoices showing

62Id. at 25.
63PEP's Second Supplemental and Amended Answers and Objections
to Defendant
Plains All-American Pipeline's First
Set of
Interrogatories to PEP ("PEP's Second Supplemental Answers and
Objections"), Exhibit 43 to PEP's Dispositive Motion, Docket Entry
No. 493-31, p. 6 ("PEP discovered in or around May 2011 that Plains
had purchased stolen condensate. ") .
-68-

that Plains Marketing purchased "Crude oil" from Kemco in October
and December of 2008.

Assuming that the "Crude Oil" referenced on

the two invoices was - as PEP contends - stolen condensate, since
PEP alleges that Plains Marketing sold and transferred the "Crude
Oil" to Valero soon after purchasing it, any demand that PEP could
have made for the condensate's return in or after May of 2011 would
have

been useless

because

condensate to return.

Plains

Marketing

no

longer

had

the

Under these circumstances demand and refusal

are neither conditions precedent to nor required elements of a
conversion claim.
In Presley v. Cooper,

284 S.W.2d 138,

141

(Tex.

1955),

the

Texas Supreme Court explained that
a demand and refusal are merely evidence of a conversion,
and where a conversion by the bailee cannot otherwise be
shown than by his refusal to comply with the demand for
possession, such a demand and refusal are necessary. But
they are not necessary if the other evidence establishes
an act of conversion. The rule is well expressed by the
Supreme Court of Delaware in Mastellone v. Argo Oil
Corp., 7 Terry 102, 46 Del. 102, 82 A.2d 379, 384, in
this language:
"To us the purpose of the \ demand and
refusal' rule, in those cases where it
applies, is simply to settle whether there
has been a conversion or not. If from other
circumstances it is clear that the tort has
been committed,
the question needs no
further settlement, and the court moves on
to whatever other questions are in the
case."
See also Bures v. First National Bank, Port Lavaca, 806 S.W.2d 935,
938 (Tex.Civ.App.-Corpus Christi 1991, no pet.)

("We recognize the

rule that a demand and refusal is usually required to establish
-69-

conversion if possession is acquired lawfully; however, there are
exceptions.

II

);

McVea v. Verkins, 587 S.W.2d 526, 531 (Tex.Civ.App.-

Corpus Christi 1979, no writ)

("demand and refusal are not required

after the conversion has become complete, or where it is shown that
a demand would have been useless");

Loomis v.

Sharp,

955, 958 (Tex.Civ.App.-Texarkana 1975, writ dism'd)

519 S.W.2d

("refusal and

demand are not necessary when the circumstances and the acts of the
possessor authorize a finding, as they do here, of a clear repudiation of the owner's rights and are tantamount to a refusal after
demand");

Neyland v.

Brammer,

73 S.W.2d 884,

Galveston 1933, writ dismissed)

888

(Tex.Civ.App.-

("any necessity for a demand had

been obviated; the conversion having become complete") .
PEP's

contention

that

Plains

Marketing's

purchase

and

subsequent sale of the allegedly stolen condensate was not wrongful
until

PEP

informed Plains Marketing of

interest lacks support in Texas law.

its

superior ownership

As recognized by the court in

Sandford, 1884 WL 8120, *1,
[i]t is settled law that no man can be divested of his
property without his consent, and, consequently, even the
honest purchaser under a defective title cannot hold
against the true proprietor.
With regard to sales of
personal property, the rules of law with regard to market
overt, as known to the common law, do not apply in this
state.
See also Olin,
that

one

wrongfully.

who

673 S.W.2d at 216.
takes

property

The corollary to this law is
without

title

takes

property

See Cotten v. Heimbecher, 48 S.W.2d 402, 405 (Tex.Civ.

App.-Amarillo 1932, no writ)

("Since . . . neither Bowman nor Aetna
-70-

Company

had

any

acqui

title

to

the

tile,

the

and

t

appropriation thereof by Cotten and his second contractors was
wrongful and in such case a demand is not a condition precedent to
the right
established

Texas

law

so

acknowledged but

Marketing

PEP's
did

that

one

who

purchases

relied upon by PEP

contention

not

accrue
its

compensation

that
until

stolen

its
PEP

against

demanded

property

efing. 64

in its

claims

and

stolen

is not only

takes the property without tit

property from a

Therefore,

holding

long

The existence

conversion] .").

to sue

return

Plains
of

or

endants

the

unreasonably refused that demand has no merit.
The Texas Supreme Court has explained that
[t]he test to determine when the statute of limitations
begins to run against an action sounding in tort is
whether
act causing the damage does or does not of
itself constitute a legal injury, that is, an
ury
giving
se to a cause of action because
is an
invasion
some right of plaintiff.
Atkins,

417

exception

S.W.2d at

to

s

153.

general

tortfeasor's

Texas
rule

in

courts

have

conversion

zed an
cases

where

a

possession is lawful - for example, under a

bailment contract

in which case a claim for convers

accrues

when the true owner, or one claiming superior possessory rights,
demands that the goods be returned and the tort
return the property.
450

(5th

r.

1966).

refuses to

Las Mendozas, Inc. v. Powell, 368 F.2d 445,
But where a tort feasor originally gains

64PEP's Dispositive Motion, Docket Entry No. 492, p. 29.
-71-

possession of property without legal authority,

by

for

purchasing stolen property from a thief or another person or entity
without title, the legal injury occurs when the act of conversion
is complete.

Bodin v. Gulf Oil Corp., 707 F.Supp. 875, 884-85

(E.D. Tex. 1988)

Nothing in Sandford contradicts this principle

of Texas of law.

On the contrary, Sandford expressly states that

"[w]hen the possession of personal property is wrongfully acquired
in the first instance, and is transmitted successively to
a new conversion."

each possession
(3)

Sandford, 1884 WL 8120, *1.

Conclusions

Applying long-established Texas law the court concludes that
Plains Marketing arising from purchases of

PEP's claims

allegedly stolen condensate did not accrue when the condensate was
originally s

as Plains Marketing argues, and did not accrue

upon demand for return and refusal as PEP argues.
against

Marketing accrued,

a

purchased and took possession of
condensate

because

that

is

when

instead, when Plains Marketing
the

allegedly

Plains

Market

exercised dominion and control over the condensate
and/or inconsistent with PEP's rights,
legal inj ury . 65

Mayo,

PEP's claims

Mexican
wrongfully
denial of

and when PEP suffered a

354 F.3d at 410i

951 S.W.2d at

PEP's Opposition to Defendants'
spositive Motions,
Docket Entry No. 545, p. 23 (recognizing that "PEP's claims against
a particular defendant accrued when PEP could have sued the
defendant for a legal injury.
That, of course, occurred at the
earliest
when the defendant
exercised control
over PEP's
property.") .
-72-

391; Atkins, 417 S.W.2d at 153.
S.W.3d 438, 450

See also Pipes v. Hemingway, 358

las 2012, no pet.)

(Tex.App.

(citing Autry v.

Dearman, 933 S.W.2d 182, 193 (Tex.App.-Houston [14th Dist.] 1996,
writ denied)

(recognizing that well settled Texas law holds that
a conversion claim begins to run at the

the limitations period
time of conversion,
because

that

Enters.,

is

i. e.,

when

at

the time of the unlawful taking,
injury

1

Inc., 930 S.W.2d 157, 166

occurs)

i

Rogers

v.

Ricane

(Tex.App.-Amarillo 1996, writ

denied) .
(c)

PIa
Marketing's Purchases of Allegedly St
Condensate Evidenced in Summary Judgment Record
Barred
Are

The only evidence
allegedly

specific purchases by Plains Marketing of

stolen condensate

record consists

of

two

motion that show PI

contained

in

the

invoices attached to

summary

judgment

PEP's dispositive

Marketing purchased "Crude Oil" from Kemco
2008. 66

in October and December

Assuming that the "Crude Oil"

Plains Marketing purchased from Kemco was -

as PEP contends

stolen condensate, claims arising from the purchases reflected on
the

two

invoices

are

time

barred because

those

purchases

1

occurred more than two years before May 29, 2011, the day PEP fi
its Original Complaint
which the court
Marketing

the Big Star Action,

and the date to

concluded that PEP's claims against
back.

Tex. Civ. Prac. & Rem. Code

§

16.003.

66Invoices, Exhibit 36 to PEP's Dispositive Motion,
Entry No. 493-24.
-73-

Docket

Citing Pan American Petroleum Corp. v. Orr, 319 F.2d 612, 617
(5th Cir.

1963),

that

scovery

the

expressly
" 67 and

rule to conversions by a

applies Texas's di
argues

t

PEP asserts that "the Fifth

rule

applies

to

running

de

of

had sufficient facts to support claims against

limitations until

the individual defendants including, inter alia, Plains Marketing.
ies to

In support of its argument that the discovery
s action including,

claims asserted in
arising

to claims

from Plains Marketing's purchases

of

allegedly

stolen

condensate, PEP argues that
this case is permeated with fraudulent and
conduct des
to launder the condensate and
source and the scheme itself hidden-bribery and
s
to PEMEX empl
and border guards, falsif
of
export
documents
on
PEMEX
letterhead,
fraudulent
mislabeling
product to avoid detection. 68
PEP's citation to
with

fraudulent

and contention that this case is permeated
and

deceptive

conduct

raises

the

issue

of

fraudulent concealment, not the discovery rule.
(1)

Fraudulent
Concealment
Does
Not
Limitations on PEP's Conversion Claims

Defer

Fraudulent concealment and the discovery rule are distinct
concepts both procedurally and substantively.
Oil,

932

F.2d at

concealment is an

399.

Unlike

the discovery rule,

rmative defense to the statute of 1

67PEP's Opposition to Defendants' Dispositive Mot
Entry No. 545, p. 26.
6BId. at 28.
-74-

ions

, Docket

Id.

that must be pleaded and proved by the plaintiff.
Weaver v. Witt, 561 S.W.2d 792, 793 (Tex. 1977)

(citing

(per curiam)).

In

addition,
[t]he plaintiff must prove that the defendant had actual
concealed and a fixed

knowledge of the
purpose to conceal
consti tute
udulent concea
the statute of limitations;

rather I the plaintiff is
VLJJ:;;.......,.J..e diligence to discover

under a duty to exercise
its cause of action.
Id.

Because PEP has not c

any evidence showing that Plains

Marketing concealed any
had a

Mere concealment does not
t for purposes of tolling

s

fixed purpose to

from PEP, or that Plains Marketing
the wrongs alleged and,

states in its pleadings

instead,

"PEP does not allege that Plains acted

with intent or knowledge or that it was a part of any conspiracy,
PEP has failed either to

1

Jl69

or raise facts capable of showing

that the limitations period for its claims against Plains Marketing
are

subj ect

to

deferral

because

Plains

Market ing

fraudulently

concealed facts from PEP.

(2)

The Discovery Rule Does Not Defer Limitations
on PEP's Conversion Claims

PEP has not cited and the court has not

found any case in

which a Texas court has applied the discovery rule the doctrine

as opposed to

concealment - to a case such as this

which the defendant's initial possession of the property at
was unlawfully

as opposed to lawfully -

69First Amended
No. 378, p. 16 , 81.

Complaint

(Big

75-

acquired.

Star Action),

Docket

Ent

Exploration Co. v. Neel

982 S.W.2d 881 1 886 (Tex. 1998)

l

rule is applied to categories

cases

~~~~~~~~~I

1

ed)

writ
cases:

126 S.W.3d 623

(discovery

not to particular cases)

l

i

626-27 (Tex.App.-Beaumont 2004 1

(distinguishing between two classes of conversion

one where defendant's initial possession of property was

lawfully

acquired

and

l

another

where

cases where the defendant/s init
acquired

Elgin-Butler

l

Brick

e. g.

Co.,

case because defendants
In this

was

possession of the property was
lment

I

834

Christi 1992, no writ) .

unlawful.

possession

The discovery rule applies in conversion

unlawfully acquired).

lawful

initial

S.W.2d

cases.
409 1

Hofland
414

v.

(Tex.App.-Corpus

scovery rule does not apply in this
initial possession of

I

type

case

the

claims

property was
accrued,

and

the

limitations period began to runl when the legal injury occurred.
Sunwest Bank of EI Paso v. Basil Smith Engineering Co., Inc.,
939 S.W.2d 671, 674 (Tex.App.

Paso 1996, writ denied)

(discovery

rule not applicable to injury caused by embezzelment}i Autry v.
933
1996,

writ

S.W.2d 182,

denied)

192-93

(Tex.App.-Houston

(discovery rule not

[14th Dist.]

applicable to cause of

action for conversion of lawsuit proceeds subject to subrogation)
930

S. W. 2d

at

166

(discovery

rule

not

applicable

conversion of oil and gas produced under void lease); Ayers
Act

No. 07-04-0383, 2006 WL 435026, at *2

applicable to toll lirnitat

I

i

to

Civil

(discovery rule not

until plaintiff learned identity of

thief) .
-76-

Even if this were a case to which the discovery rule applied

l

that rule would not defer running of the limitations period for
Marketing because PEP has

PEp/s conversion claims against

evidence capable of raising a

neither alleged facts nor
s issue.

fact issue for trial on

Because PEP has invoked the

discovery rule as a means to avoid being barred by limitations

l

PEP

scovery rule applies to this case

is required to show that t

l

evidence capable of establishing

and is also required to

being put on inquiry notice.

that PEP acted with dil
Here

l

PEP alleges that it brought suit "within two years after PEP

knew

I

or by the exercise

reasonable diligence should have known

l

of the facts giving rise to PEp/s claims against the Defendants.
Therefore

I

limitations have

'discovery rule.
until

it

had

I

PEP

"70

an

tolled as to those claims by the
that limitations should be tolled

opportunity

condensate had been st
the responsible part

to

discover

not

only

that

its

and converted but also the identities of
s.

Under Texas law all that is required to

commence the running of

limitations period is the discovery of

an injury and its general cause, not the exact cause in fact and
the specific part

ible.

See Russell

l

841 S.W.2d at 344

n.3 ("limitations begin to run when the fact of injury is known,
Moreno

787 S.W.2d at 351,

I

identified") .

II

not when the alleged wrongdoers are

974 S. w. 2d at 40

7CFirst Amended Complaint
No. 378 p. 20 ~~ 109 112.

(Big

1

-77

(discovery rule delays

Star Action),

Docket

Entry

accrual of cause of action until plaintiff knew or should have
known of its injury, not
Al ternati vely,

identity of the wrongdoer) .

the discovery rule does not apply to defer

limitations for PEP's claims against Plains Marketing because both
PEP's injury and its
PEP filed suit against

cause were known by PEP long before
ains Marketing.

The extent of PEP's

knowledge is evidenced by PEP's responses to Plains Marketing's
interrogatories:
INTERROGATORY NO.1:
Wi th respect to each instance in which Plains
purchased or received Natural Gas Condensate that you
believe was stolen from PEP . . . identify the following:

c.

The date on which you discovered that the Natural
Gas condensate was stolen;

PEP first
scovered in or around May 2011 that
Plains had purchased condensate that was stolen from
Mexico.
As explained in its Answer to Interrogatory
No. 1 (a) PEP does not, and cannot, know when each barrel
of stolen condensate purchased by PI ns was stolen from
Mexico.
I

To the best of PEP's knowledge, PEP learned of
some, but not
I, of the thefts wi thin days of the
individual incidents of theft. There are however almost
certainly incidents of theft that PEP still has not
uncovered.
PEP was aware in general that
was a victim of
theft - without knowing the full extent of the thefts
by at least 2006.71

71pEP's Second Supplemental Answers and Objections, Exhib
to PEP's Dispositive Motion, Docket Entry No. 493-31, p. 4.
-78-

43

d.
The volume of Natural Gas Condensate purchased or
received;
Quantified Purchases

PEP's information to date shows that Plains
purchased approximately 100,888 known barrels
stolen
condensate from STUSCO and Kemco Resources, valued at
$7,920,079.
of Plains'
t 1 shows PEP's current knowl
stolen condensate from Kemco Resources.
purchased approximately 84,394 barrels
stolen
condensate from Kemco, valued at $6,991,601.
Exhibit 2 shows PEP's current knowledge
ains'
purchases of stolen condensate from STUSCO.
Plains
purchased approximately 16,490 barrels
stolen
condensate from STUSCO, that STUSCO had purchased from
JAG
, valued at $928,478.

The date on which you discovered that Plains . . .
had come into possession of the Natural Gas Condensate;
i .

PEP discovered in or around May 2011 that Plains
had purchased stolen condensate.
j.
Each individual or entity that had possession or
ownership of the Natural Gas Condensate from the time of
its alleged theft in Mexico until it was sold or
transferred to Plains . . .

All
the condensate sold to Kemco by F&M had
been purchased by F&M from Continental Fuels. Although
Continental
s' records are incomplete and unclear,
Continental's President, Tim Brink, confessed to trading
in stolen goods, and in his sworn deposition confirmed
[th]at all condensate purchased and sold by Continental
was form Mexico, was purchased without title, and was
stolen. All of Continental's records known to exist have
been produced.
-79-

Al though Y Gas & Oil's records are incomplete,
Arnoldo Maldonado, Y Gas & Oil's owner, confessed to
trading in stolen goods, and in his sworn deposition
confirmed [th]at all condensate purchased and sold by
Y Gas & Oil was from Mexico. All of Y Gas & Oil records
known to exist have been produced.

1.
Each individual or entity to whom Plains
transferred possession of the Natural Gas Condensate; and

Plains sold the stolen condensate to Valero.
m.
The dates on which Plains
possession of the Natural Gas Condensate.

transferred

Plains transferred the stolen condensate to Valero
shortly after Plains' purchase from suppl
72

INTERROGATORY NO.6:
Describe how you, or any individual or entity acting on
your behalf, discovered that Plains . . . had possession
of Natural Gas Condensate stolen from PEP.
In your
answer, include the identity of the individuals involved
in the discovery and the date on which the discovery
occurred.
ANSWER:

. PEP discovered in or around May 2011 that
Plains had been purchasing stolen condensate.
The
discovery was made by analyzing instant message and other
transcript s, all of which have been produced to all
defendants.
Counsel
PEP also obtained this
information by speaking with Josh Crescenzi in May
2011.73

72Exhibit 43 to Plaintiff's Dispositive Motion, Docket Entry
No. 493-31, pp. 3-4.
73PEP's Second Supplement
Answers and Objections, Exhibit 43
to Plaintiff's
spositive Motion, Docket Ent
No. 493-31, p. 16.
-80

PEP's answers to Plains Marketing's interrogatories and the
exhibits presented by PEP in support of its Dispositive Motion show
that (1) PEP was aware that its condensate was being stolen by at
least 2006;

(2)

PEP learned of some,

within days

of

the

individual

but not all,

incidents

of

of the thefts

theft;

(3)

Plains

purchased allegedly stolen condensate from Kemco in October and
December of 2008;74 (4) Plains sold the stolen condensate to Valero;
and (5) Plains transferred the stolen condensate to Valero shortly
after

purchasing

it.

Al though

PEP

contends

that

it

did

not

discover that Plains Marketing had purchased and sold its stolen
condensate until May of 2011, and that PEP made this discovery by
analyzing instant messages and other transcripts and by having its
counsel

talk

to

Josh Crescenzi,

PEP

present any evidence from which a

fails

either to argue

reasonable

or

fact-finder could

conclude that despite knowing since 2006 that its condensate was
being stolen in Mexico and converted in the United States, PEP did
not and could not have learned facts that would have entitled it to
bring suit against Plains Marketing before May of 2011.
In Childs, 974 S.W.2d at 40, the Texas Supreme Court held that
even under the discovery rule once a person "discovers or in the
exercise of reasonable diligence should have discovered the injury
and that it was likely caused by the wrongful acts of another," a

74Exhibit 36 to PEP's Dispositive Motion, Docket Entry No. 49324.
-81-

plaintiff does not know the

cause of action accrues, "even if
exact

identity of the wrongdoer.

that

II

subsequent purchasers of its

discover the identities of all

condensate or mixtures thereof until

over two years after the

limitations from running.

conversions occurred did not
Russell, 841 S.W.2d at 344 n.3.

The court has concluded
Marketing

condensate.

accrued

conversion) .
PEP's conversion claims against

when

Marketing

PEP's knowledge of

United

States

l

limitations because

purchased

the

s shortly after they occurred,

and knowledge that its
the

See

Steinhagen, 126 S.W.3d at

626 (applying this rule to a claim

Plains

PEP did not

was being converted by sale in

is

sufficient

to

trigger

by PEp/s own admissions -

the

running

of

PEP was aware of

its injury and the cause at or near the time of the conversions.
Moreover

l

although PEP contends that it did not learn that Plains

Marketing purchased and sold its stolen condensate until May of
PEP has failed ei

to argue or to present any evidence

from which a reasonable

finder could conclude that had PEP

exercised reasonable dil

PEP could not have discovered Plains

2011

1

Marketings

I

purchases wi thin the two-year period following the

dates on which
defers accrual until
operate to toll the
time as plaintiff

purchases occurred.

The discovery rule only

discovery of the inj ury i

it does not

of the limitations period until
scovers all of the elements of a cause

82-

See Bayou Bend Towers Council of Co-Owners v. Manhattan

action.

866 S.W.2d 740,
1993,
C.

743

(Tex.App.-Houston

[14th Dist.]

denied) .
BASF Corporation and BASF FINA Petrochemicals L.P.

PEP first asserted claims against BASF on June 7, 2010, when
its Original Complaint (Docket Entry No.1) in the BASF

PEP fi
Action,

Civil

Action

No.

H-10-1997.

PEP

added

BASF

FINA

Petrochemicals Limited Partnership ("BFLP") as a defendant when it
filed

its

Third Amended

June 17, 2011.

Complaint

(Docket

Entry No.

220)

PEP's Third Amended Complaint alleges that

59.

BASF is the self described "world's leading
chemical company" with world-wide operations and
more than 100,000 employees.
In Port Arthur
Texas, BASF through BASF FINA operates the world's
largest steam
BASF is an end user of
condensate in its chemical operations.

60.

BASF purchased
condensate,
without knowing it was stolen.

61.

PEP does not allege
knowledge or that

62.

Between April 2007 and March 2009, BASF purchased
more than $44 million of stolen PEP condensate.
The stolen condensate was purchased directly from
Trammo Petroleum Corp.
Trammo Petroleum has
admitted in a related criminal proceeding
it
acquired the condensate illegally, knowing
was
stolen property.

63.

According to information provided by Trammo
Petroleum Corp., BASF Sabon LT std made the
following purchases
stolen condensate:

apparently

BASF acted with intent or
was a part of any conspiracy.

-83-

on

Trammo
Petroleum's
Source

Date

Barrels

Cost per
Barrel

Total Price

Continental
Sales

April 2007

15,430

$66

$1,016,521.00

May 2007

19,981

$65

$1,306,886.00

June 2007

31,332

$70

$2,185,207.00

July 2007

19,729

$79

$1,567,753.00

August 2007

39,984

$77

$3,072,683.00

September 2007

9,926

$85

$840,846.00

October 2007

19,874

$90

$1,790,189.00

November 2007

30,082

$100

$2,997,744.00

August 2008

4,932

$112

$554,279.00

May 2007

19,577

$65

$1,280,403.00

June 2007

8,408

$70

$586,443.00

July 2007

39,435

$78

$3,084,323.00

August 2007

22,214

$77

$1,707,111.00

September 2007

29,693

$83

$2,477,979.00

October 2007

21,084

$90

$1,903,966.00

November 2007

9,971

$100

$993,677.00

December 2007

12,121

$97

$1,171,356.00

February 2009

16,038

$43

$689,769.00

March 2009

19,803

$52

$1,034,872.00

March 2009

14,464

$52

$749,341.00

March 2007

38,421

$62

$2,387,748.00

May 2007

83,155

$65

$5,436,642.00

October 2007

38,955

$91

$3,554,123.00

December 2008

24,021

$47

$1,118,671.00

February 2009

16,813

$44

$737,976.00

Murphy Energy

Petro Source,
predecessor of
High Sierra
Crude Oil &
Marketing, LLC

Total

64.

$44,246,508.00

None of BASF's purchases carried title from Mexico
or from PEP.

-84-

65.

Based on

BASF has refused to return PEP's condensate or to
reimburse PEP for the condensate BASF received
without title or right. 75
allegations PEP asserts claims against BASF Corp.

and BFLP for conversion and for equitable relief based on
of money had and received and unjust enrichment. 76
BASF and BFLP argue that they are entitled to summary judgment
on all of PEP's claims because (1) PEP's money had and received and
unjust
convers

chment

claims

fail

as

a

matter

of

law;

(2)

PEP's

claims against BASF fail as a matter of law because BASF

never exercised dominion or control over the condensate at issue;
all of the complained of transactions were with BFLP, not BASFi
(3) BFLP was a good-faith purchaser that obtained good title to the
hydrocarbons it purchased;

(4)

PEP cannot meet its burden under

Texas law to show that the hydrocarbons purchased by BFLP are the
identi

hydrocarbons

allegedly

stolen

from

PEP;

(5)

claims

arising from any of BFLP's alleged purchases of stolen Mexican
condensate that occurred before June 7, 2008, are time barred. 77
BASF and BFLP also argue that
[o]ther than the two 2008 transactions and the February
2009 transaction
. all
the [ alleged] transactions

75Third Amended Compl
~~ 60 65.

Docket Entry No.

220,

pp.

10-12

76Because PEP does not allege that either BASF or BASF FINA is
a "Conspiring Defendant, /I PEP has not asserted a claim for
constructive trust against these defendants.
77BASF Corporation and BASF FINA Petrochemicals Limited
Partnership's Motion for Summary Judgment ("BASF and BFLP's MSJ") ,
Entry No. 489, pp. 3 5.
-85

are either time-barred on their face or have
judicially admitted as being fully restituted. 78
PEP

responds

defendants

that

named

in

been

this

action,

including inter alia BASF and BFLP, are not entitled to summary
judgment because the claims for equitable reli
do not fail

act

as a matter of law,

the

asserted in this
fendants did not

obtain good title to the stolen hydrocarbons that they purchased,
PEP

not show that the hydrocarbons purchased and sold by the

defendants are the identical hydrocarbons stolen from PEP,

and

claims arising from alleged purchases that occurred more than two
years before PEP filed
time barred. 79

against any of the defendants are not

PEP also

responds that even if BFLP and not BASF

purchased the stolen condensate, BASF can still be held liable
BFLP's

purchases

because

BFLP

had

no

employees,

all

of

its

operations were run by employees of two joint venture partners BASF and Total Petrochemicals - and BASF employed the individuals
who arrange for the purchases at issue. Bo
1.

BASF and BFLP Are Entitled to Summary Judgment on PEP's
Equitable Claims for Unjust Enrichment and Money Had
and Received

Citing Bank of Saipan v. CNG Fin. Corp.,
Cir. 2004), for

7Bld.

principle that a

380 F.3d 836, 840

aim for money had and

at 6.

79PEP's Opposition to Defendants' Dispositive Motions, Docket
Entry No. 545.
BOld.

at 38-39.
-86-

received

ses when the defendant obtains money that in equity and
belongs to the plaintiff , BASF and BFLP argue that

good consc

Is on its face because

PEP/s money-had-and-received claim

[in]
s case , PEP alleges that Defendants were endusers
condensate sold to it by Trammo.
(See Dkt.
No. 220
3d Am. Compl. ~ 59.)
Because they were
according to PEP/s own allegations , end-users , not
lers , of allegedly stolen condensate Defendants do
not have any money that they received , much less any
money that in good conscience belongs to PEP.
Accordingly
PEP s claim for money had and received
should be dismissed. 81
I

1

I

I

Quoting

=-,==':::====1

I

832 S.W.2d at

411

for the principle that" [a]

party may recover under the unjust enrichment theory when one
person has obtained a benefit from another by fraud , duress , or
BASF and BFLP argue that PEP ' s

taking

an undue advantage

unjust

chment claim fails on its face because

I

1182

[i]n this case , PEP does not-and could not-allege that
endants perpetrated any kind of fraud or duress on
PEP , or that Defendants took undue advantage of PEP in
legedly purchasing stolen PEP condensate.
To the
contrary, PEP specifically all
s that "BASF [and BFLP]
purchased stolen condensate apparently without knowing
was stolen.
(Dkt. No. 220 1 3d Am. Compl. ~ 60.)
"PEP does not allege that BASF [or BFLP] acted
with intent or knowledge
[they were] part of any
conspiracy.
(Id. ~ 61.)
PEP/s pleadings constitute
binding admissions that Defendants acted without any
to defraud or take undue advantage of PEP , and
are no allegations to support a finding
duress . . . . Accordingly, PEP/s unjust enrichment claim
Is as a matter of law. 83
I

1I

I

II

and BFLP/s MSJ , Docket Entry No. 489
82

at 23.

83

at 23-24.
-87

1

pp. 22 23.

Citing the Texas Court
of Corpus Christi v.

Appeals decision ln ==-::====

Heldenfels Bros.,

Inc.,

802 S.W.2d 35,

40

(Tex.App.-Corpus Christi 1990), for its statement that "[u]njust
occurs when the party sought to be charged wrongfully
secures

a

benefit

vely

pa

or

fraudulent

intent

one

which

would

be

," PEP argues that defendants' lack

unconscionable for him to
of

receives

does

not

prejudice

the

viability

equitable claims for unjust enrichment and money had and

its
84

that it owns its proportionate

PEP argues that if it "is

of a commingled mass, and cannot prove the technical tracing
needed for conversion,

PEP could still recover under an unjust

chment theory. 1185
PEP has neither alleged nor produced evidence of any facts
capable of establishing claims for unjust enrichment or money had
and received against BASF or BFLP.

Based on the facts

in

PEP's Third Amended Complaint and contained in the summary judgment
record, the court concludes that PEP's only claim against BASF and
BFLP is for conversion.
dominion and control
inconsistent with,

Conversion is the wrongful

over

's property in denial

the other's rights.

Bandy, 835 S.W.2d at 622.

PEP

Mayo,

se of
or

354 F. 3d at 410;

leges and cites evidence

it

contends establishes that BASF - or BFLP acting on BASF's behalf -

's Opposition to Defendants' Dispositive Motions, Docket
Entry No. 545, p. 37.

-88-

purchased condensate from Continental Fuels,

and

Murphy

that

Petro Source that was stolen from PEP and that BASF
condensate in its chemical operations.

A party who purchases and

then uses stolen property is subj ect to a

See Parker v. Kangerga, 482 S.W.2d 43, 47

conversion.
er

App.
applying

1972,

writ

ref'd n.r.e.)

removing

timber

guilty of conversion. ") .

PEP alleges that all defendants 1
1

("In

(Tex.Civ.

Although

including inter alia BASF and

"profited from their improper dominion of PEP ' s property
they hold money

belongs to PEP,

1186

and

ter it had been severed from the

to their own uses

land, said parties were .

BFLP

cause of action for

I

and

in equity and good conscience

PEP has failed either to allege any

s or to

present any evidence capable of proving that BASF or BFLP profited
from its use of PEP/s condensate or received money that in equity
and good conscience belongs to PEP.

Accordingly, these

are

on

entitled

to

summary

judgment

PEP ' s

fendants

claims

unjust

enrichment and money had and received.
2.

BASF Is Not Entitled to Summary Judgment on PEP ' s
Conversion Claim on Grounds That It Never Exercised
Dominion or Control Over PEP/s Condensate

BASF argues that it is entitled to summary judgment because it
has conclusively established that it never exerci
cont

over PEP's condensate.

dominion or

In support of this argument 1 BASF

that

rd Amended Compl

1

Docket Entry No. 220
89-

1

p. 34

~

193.

all of the condensate that PEP alleges BASF purchased
"directly from Trammo" was purchased by BFLP as the
"BUYER.
(Dkt. No. 220, 3d Am. Compl. ~ 63.) Trammo and
BFLP,
a
j oint
venture
between
BASF
and
Total
Petrochemicals & Refining USA, Inc., entered into a
master contract, called a Crude Oil Sale Confirmation, to
govern the sale of "crude oil and condensate" by Trammo.
(See,
e.g., Ex.
57, Oct. 2, 2006 Crude Oil Sale
Confirmation between Trammo and BFLP.)
The contract
identifies the "Buyer" as BFLP and specifically provides
that delivery shall be "into Buyer's or Buyer's
assignee's designated carrier at the deliver point (the
'Delivery Location') (A) and (B) into BFLP leased tankage
at Sun Nederland."
(Id. at 1, 5.)
II

BASF has made the distinction between itself and
BFLP known to PEP since BASF filed its Original Answer.
(See Dkt. No.5, BASF Answer and Cross-Claims ~ 3 ("BASF
denies that it purchased condensate for use in its
Port Arthur, Texas plant: that plant is an asset of the
BASF FINA Petrochemicals Limited Partnership.")
And,
BASF continues to assert the corporate separateness of
BASF and BFLP as a defense to PEP's claims.
(See Dkt.
No. 229, BASF Answer to 3d Am. Compl. and Cross-Claims at
41 (asserting as its "Third Defense" that "Plaintiff's
claims against BASF are barred because BASF is not a
condensate purchaser from,
or counterparty to any
condensate
purchasing
agreements
with,
any
other
defendants.") . )
To the extent any BASF employees made purchases of
condensate, they did so on behalf of and for the benefit
of BFLP. 87
Citing

the

deposition

of

BASF

employee,

David

Zani,

PEP

responds that BASF is not entitled to summary judgment on its
conversion claim because

Zani

negotiated and arranged for

purchases of stolen condensate.

the

Zani also testified that all of

his purchases were made on behalf of BFLP, a joint venture between

87BASF and BFLP's MSJ, Docket Entry No. 489, pp. 37-38.
-90-

BASF and Total Petrochemicals that had no employees of its own. 88
BASF does not dispute that Zani was its employee, that he arranged
for

the

condensate

purchases

employees of its own.

at

issue,

or

that

BFLP

had

no

Instead, BASF argues that because Zani's

purchases were all made on behalf of BFLP, that BASF cannot be held
liable

for

those purchases unless

partner of BFLP.
of

Texas

cases

PEP

sued BASF

as

a

general

In support of this argument, BASF cites a number
as

standing

for

the

principle

that

Texas

law

requires a plaintiff suing under an alter ego theory to separately
plead each basis for disregarding the corporate fiction. 89

The

court is not persuaded that this argument has merit because the
cases that BASF cites are either distinguishable,

i.e., at issue

are debts or other contractual obligations, or not supportive of
BASF's argument.

For example,

in No Barriers.

Chili's Tex .. Inc., 262 F.3d 496, 499
stated that

"Texas law requires that,

Inc.

v.

Brinker

(5th Cir. 2001), the court
to impose liability on a

general partner of a limited partnership, the plaintiff must plead
and prove a cause of action against that entity in its capacity as
the general partner,
capaci ty

in

which

II

the

but that statement was dicta because the
defendants

had

been

sued

had

not

been

88Deposition of David R. Zani, Exhibit 59 to PEP's Opposition
to Defendants' Dispositive Motions, Docket Entry No. 546-31,
pp. 9-11.
89Defendants' Reply in Support of Motion for Summary Judgment,
Docket Entry No. 580, pp. 24-25.
-91-

challenged.

since the undisputed summary judgment evidence is that

zani was responsible for
issue

and

that

Zani

was

iating and arranging the purchases at
employed

by

BASF,

the

court

is

not

persuaded that BASF is entitled to summary judgment even if Zani
made the purchases on behalf of BFLP.
3.

BASF and BFLP Are Not Entitled to Summary Judgment on
PEP's Conversion Claims as Good-Faith Purchasers

Citing Texas common law and the Texas Business and Commerce
Code

§

and asserting that PEP has failed to produce any

2.403

evidence tying the hydrocarbons purchased by BASF and/or BFLP to
any theft, BASF and BFLP argue that they are entitled to summary
judgment

on

PEP's

conversion

hydrocarbons for value and,

claims

because

BFLP

purchased

fore, received good title to the

hydrocarbons as a good-faith purchaser for value. 90

In support of

s argument BASF and BFLP argue that the undisputed evidence
shows that they purchased the condensate at issue from Trammo in
good

ith

and

for

valuable

consideration

without

or

constructive knowledge of any outstanding claims by a third-party.
BASF and BFLP also argue that PEP has not alleged that e

of

them acted "with intent or knowledge or that it was part

any

conspiracy. 1191

Thus, BASF and BFLP argue that they are ent

led to

90BASF and BFLP's MSJ, Docket Entry No. 489, pp. 35 37.
at 37 (citing Third Amended Complaint
No. 220, p. 10 , 61) .
92-

I

Docket Entry

summary judgment on PEP's conversion claims because PEP cannot
prove that PEP had superior title or right of possession to
property at issue.
A bona fide purchaser for value has an affirmative
against a conversion claim.
burden of

is
suff

a

Carter, 271 S.W.3d at 858 & n.3.
firmative

party asserting an

defense

Quantum Chemical

iently plead and prove the defense.

It
to
47

I

The court is not persuaded by BASF and BFLP's

S.W.3d at 478.

contention that they are entitled to summary judgment as good-faith
purchasers for value under either the common law of Texas or
V.C.C.

because they have failed to cite any evidence capable

establishing that the condensate they purchased was not stolen.
Moreover
PEP

I

for the reasons explained below, the court concludes that
submitted

evidence

capable

of

establishing

that

condensate BASF and BFLP purchased from Trammo was stolen.
If,

as

PEP

contends,

the

condensate

that

BASF

and

BFLP

purchased from Trammo was stolen, BASF and BFLP would not quali
as good-

ith purchasers

value under ei

Texas or the V.C.C. because no one in the chain

the common law
title following

a thief could transfer good title to a subsequent purchaser I
BASF or BFLP.

Texas law is well settled that one who purchases

stolen propertYI no matter how innocently, acquires no title to
propertYi title remains in the owner.
S.W.2d 144,

146

(Tex.

1945)

See McKinney v. Croan

l

188

(\\[I]t is well settled that one in

93 -

rightful possession of personal property may maintain an action for
its recovery against a thief or one holding under him. II) •

policy supporting it has been aptly

e of Texas law and

princ

stated many times.
~====~='

This

See Sinclair Houston Federal Credit Union v.

268 S.W.2d 290, 295 (Tex.Civ.App.-Galveston 1954, writ

ref'd n.r.e.)

("The general

rule

is

that

the

owner of

stolen

property can recover it or its value from anyone who has received
exercised dominion over it. II)

i

Olin, 673 S. W. 2d at 214 (rule

that one who purchases stolen property from a thief, no matter how
innocently,

acquires

no

t

Ie,

places

the

responsibility

ascertaining true ownership on the purchaser) .
S.W.3d
§

at

IV. B. 2,

614,
above,

and

discussion

where

by Plains Market
to

the

of

court

the

Benjamini, 2

U.C.C.

rej ected

of

requirements

the

same

in

argument

Because BASF and BFLP have failed

ish that the condensate they purchased was not stolen,

their argument that they are entitled to summary judgment on PEP's
conversion claims because

are good-faith purchasers for value

has no merit.
4.

Conversion Claims Arising from Purchases that Occurred
Before June 7, 2008, Are Time Barred

Citing the two-year statute of limitations provided by Texas
I Practices and Remedies Code

§

16.003(a), BASF and BFLP argue

that PEP's conversion claims arising from purchases of allegedly
stolen condensate that occurred prior to June 7, 2008, i.e., more

- 94-

than two years before PEP filed suit on June 7,

2010,

are time

barred. 92
PEP responds that the claims asserted against BASF and BFLP
are not t

barred because they did not accrue until PEP demanded

return of and/or compensation for its condensate, and defendants
had a reasonable time to investigate that demand.
PEP

argues

discovery

that

its

claims

are

not

time

§

Alternatively,

barred

because

the

and/or the doctrine of fraudulent concealment toll

the limitations period for these claims. 94
in

93

IV.B.4(b),

above,

the court has al

For the reasons stated
concluded that the

92In
reply brief (Docket Entry No. 580 at pp. 11-14),
BASF and BFLP argue for the first time that the conversion claims
asserted against BFLP in PEP's Third Amended Complaint do not
relate back to the filing of PEP's Original Complaint because PEP
has not substituted BFLP for BASF but, instead, simply added BFLP
as a defendant.
Defendants argue that Rule 15(c) (1) (C) does not
apply when a party adds a new defendant instead of substituting a
misidentif
defendant. The court will not consider this argument
because in addition to being raised
the first time in
defendant's reply brief, it conflicts with the relief requested in
their motion for summary judgment where defendants argue only that
claims arising from transactions that occurred prior to June 7,
2008, are time barred. See Docket Entry No. 489, p. 8. Moreover,
even if
court were to consider this argument, the court would
grant PEP's request to add BFLP for largely the same reasons that
the court previously allowed PEP to add
ains Marketing as a party
defendant over similar objections from
Marketing and Plains
All-American Pipeline.
See Memorandum Opinion and Order, Docket
Entry No. 377, pp. 22-25.
's Dispositive Motion, Docket Entry No. 492, pp. 30 31;
PEP's Opposition to Defendants' Dispositive Motions, Docket Entry
No. 545, pp. 22-25.
's Dispositive Motion, Docket Entry No. 492, pp. 30 31;
PEP's Oppos ion to Defendants' Di
tive Motions, Docket Entry
No. 545, pp. 25 28.
-95-

ions

conversion claims asserted in this action accrued and I

stolen

For

condensate.

the

legedly

defendants purchased

started to run on the dates that

reasons

stated

court

below,

concludes that neither fraudulent concealment nor the discovery
the limitations period from running on PEP's conversion

rule

claims against BASF and BFLP.
PEP's

Third

Amended

Complaint

contains

a

long

list

of

allegedly stolen condensate that BASF made from Trammo

purchases
Petroleum.

The list identifies

dates the purchases were made,

the quantity of condensate purchased,

and the price paid.

The

majority of these transactions occurred in 2007 and are, therefore,
time barred because they occurred more than two years be

PEP

filed

PEP

t

on June 7,

2010.

Citing Orr,

319 F.2d at 617,

asserts that "the Fifth Circuit expressly applies Texas' s
rule to conversions by a thief,
rule

appl

sufficient

s

to

facts

defer
to

defendants including,

support

action

including,

of

limitations

claims

~~~~~~,

argument that the discovery

and argues that the discovery

,,95

running

scovery

against

BASF and BFLP.

until
the

claims

In support of its

arising

purchases of allegedly stolen condensate, PEP

had

individual

applies to claims assert
to

it

from

in this
BASF's

that

s case is permeated wi th fraudulent and deceptive
conduct designed to launder the condensate and keep its

's Opposition to Defendants' Disposit
Entry No. 545, p. 26.
96-

Motions, Docket

source and the scheme itself hidden
bribery and threats
to PEMEX employees and border guards, falsification of
export
documents
on
PEMEX
letterhead,
fraudulent
mislabeling of the product to avo
detection. 96
PEP's citation to Orr and contention that this case is permeated
with

fraudulent

and

deceptive

conduct

raises

the

issue

of

fraudulent concealment, not the discovery rule.
(a)

Fraudulent Concealment Does Not Defer Limitations
on PEP's Conversion Claims

As explained in
is

an

firmative

§

IV.B.4(c) (1), above, fraudulent concealment

defense

to

the

statute

of

limitations

that

requires the plaintiff to
prove that the defendant had actual knowledge of the
facts allegedly concealed and a
purpose to conceal
the wrong.
Mere concealment does not constitute
udulent concealment for purposes of tolling the
statute of limitations; rather, the plaintiff is under a
duty to exercise reasonable diligence to discover its
cause of action.
Matter of Placid Oil, 932 F.2d at 399.

PEP has neither alleged nor

ci ted any evidence

ishing that

capable of

BASF or BFLP

concealed any facts from PEP or had a fixed purpose to conceal
wrongs
does not

leged.
1

Instead,

PEP states in its pleadings that "PEP

that BASF acted with intent or knowledge or that it

was a

of any conspiracy.n9?

to al

or raise facts capable

96

PEP has .therefore failed e
showing that the limitations

at 28.

97Third Amended Complaint,

Entry No. 220, p. 10 , 61.
97

its claims against BASF or BFLP are subject to deferral

period

because either of them fraudulently concealed facts from PEP.
(b)

tations on

The Discovery Rule Does Not Defer
PEP's Conversion Claims

As explained in

IV. B. 4 (c) (2), above, PEP has not c

§

ed and

the court has not found any case in which a Texas court has applied
the

scovery rule -

concealment -

fraudulent

as opposed to the doctrine

to a case such as this in which the defendant's

possession of the property at issue was unlawfully -

init

opposed to lawfully (discovery

rule

particular cases)

is
i

acquired.

applied

See HECI,

to

categories

of

S.W.2d at
cases,

Steinhagen, 126 S.W.3d at 626-27}

ing between two classes of conversion cases:
init

982

not

as
886
to

(distinguish-

one where defendant's

possession of property was lawfully acquired and another

where initial possession was unlawfully acquired).

Conversion

cases to which the discovery rule has been applied are cases where
the

fendant's

initial possession of the property at issue is

lawfully acquired, e.g., bailment cases.

See

=======,

834 S.W.2d

at 414.

The discovery rule does not apply to this case because it

belongs

to

the

class

of

cases

where

possession of the property was unlawful.

the

defendants'

initial

In this type of case the

claims accrued and the limitations period began to run when the
legal

injury occurred.

Sunwest

Bank,

939

S.W.2d at

674

(discovery rule not applicable to injury caused by embezzelment)
~==~,

i

933 S.W.2d at 192-93 (discovery rule not applicable to cause
98-

of

action

for

subrogation);

conversion

Rogers,

930

of

lawsuit

S.W.2d

at

proceeds

166

subject

(discovery

to

rule

not

applicable to conversion of oil and gas produced under void lease) .
Ayers,

Civil

Action

No.

07-04-0383,

2006

WL

435026,

at

*2

(discovery rule not applicable to toll limitations until plaintiff
learned identity of thief).
Even if this were a case to which the discovery rule applied,
that rule would not defer running of the limitations period for
Because PEP has

PEP's conversion claims against BASF and BFLP.

invoked the discovery rule as a means to avoid being barred by
limitations, PEP is not only required to show that the discovery
rule applies to this case, but also to present evidence capable of
establishing that
inquiry notice.

PEP acted with diligence after being put on

Here, PEP alleges that it brought suit "within two

years after PEP knew, or by the exercise of reasonable diligence
should have known, of the facts giving rise to PEP's claims against
the Defendants.
those

claims

limitations

Therefore,
by

the

should

be

limitations have been tolled as to

'discovery
tolled

rule.,"98

until

it

had

PEP
an

argues

that

opportunity

to

discover not only that its condensate had been stolen and converted
but also the identities of the responsible parties.
under Texas law all that is required to commence the running
of the limitations period is the discovery of an injury and its
general cause, not the exact cause in fact and the specific parties

98 I d . at 3 2

~

177 .
-99-

841 S.W.2d at 344 n.3

responsible.
begin to run when the
at 351

t

injury is known t

("limitations
787 S. W. 2d

Moreno t

It

not when the alleged wrongdoers are identified tt

)

i

974 S.W.2d at 40 (discovery rule delays accrual of cause of action
until plaintiff knew or should have known of its injurYt not the
identity of the wrongdoer).

The discovery rule does not apply to

defer limitations for PEpts claims against BASF and BFLP because
both PEpts injury and its general cause were known by PEP long
before PEP filed suit against these defendants.
PEpts knowledge that

had been injured by the conversions of

gas condensate in the United Sates is evidenced by PEpts responses
to the following requests

admissions:

REQUEST FOR ADMISSION NO. 11:

Admit that you were aware
from you was being sold

2007 that condensate stolen
the U.S. market.

RESPONSE TO REQUEST FOR ADMISSION NO. 11:

[Subject to objections] . . . this request for admission
is ADMITTED. 99
This

admission

establishes

that

condensate was being sold in
2007.

PEP

was

aware

that

United States at least as

stolen
as

PEP fails either to argue or to offer any evidence from

which a reasonable fact finder could conclude that despite knowing
s

2007 that

its condensate was being stolen in Mexico and

converted in the United States t

PEP did not and could not have

99Plaintiff PEpts Responses to BASF Corporationts Requests for
Admission ("PEP t S Responses to BASF t S Requests for Admission tt ) t
Exhibit 8 to BASF and BFLpts MSJ t Docket Entry No. 489-9 p. 7.
t

-100

learned facts that would have entitled it to bring suit against
BASF before June of 2010.

In Childs, 974 S.W.2d at 40, the Texas

Supreme Court held that even under the discovery rule once a person
"discovers or in the exercise of reasonable diligence should have
discovered the injury and that it was likely caused by the wrongful
acts of another," a cause of action accrues "even if the plaintiff
does not know the exact identity of the wrongdoer."
PEP did not

discover

the

identities

of

all

of

The fact that
the

subsequent

purchasers of its condensate or mixtures thereof until more than
two years after some of the conversions occurred did not prevent
limitations from running.

See Russell,

Steinhagen, 126 S.W.3d at 626

841 S.W.2d at 344 n.3;

(applying this rule to a claim for

conversion)
PEP's knowledge that its condensate was being converted by
sale in the United States is sufficient to trigger the running of
limitations because - by PEP's own admissions -

PEP was aware of

its

the

injury and

conversions.

the

See

general

cause

at

IV.B.4(c) (2), above.

§

or near

time

of

the

Moreover, PEP has failed

either to argue or to present any evidence from which a reasonable
fact-finder

could

conclude

that

had

PEP

exercised

reasonable

diligence PEP could not have discovered BASF's and BFLP's purchases
within the two-year period following
purchases occurred.
the discovery of

the dates

on which those

The discovery rule only defers accrual until

the

injury;

it

does not

operate

to

toll

the

running of the limitations period until such time as plaintiff
-101-

a cause of action.

discovers all of the elements

Towers Council of Co-Owners v. Manhattan Const. Co.
(Tex.App.-Houston

743

[14th

866 S. W. 2d 40

I

writ

Dist . ]

I

ed) .

AccordinglYI the court concludes that the discovery rule does not
apply to defer the running of limitations for PEp s
l

conversion

claims against BASF and BFLP.
5.

Whether PEP Can Trace Stolen Property to BASF and BFLP
Is a Fact Issue for Trial

As stated in

§

IV.B.3 1 above

defendant liable for conversion

order to hold any individual

I

PEP must trace condensate that was

l

actually stolen in Mexico to the individual defendant.
evidence

also

from

which

a

fact - finder

PEP must

could

form

reasonably certain estimate of the amount of stolen condensate
each defendant converted.

anYI
1055.

Ortiz Oil

l

I

a
if

141 S.W.2d at

amount of condensate converted is not required to

proven with exact certainty
=:'=':===-';;:=-=~::::"==..l.-I

I

only with reasonable certainty.

115 S. W. 2d at 1097.

PEp s contention that "when
l

the defendants mixed PEp/s condensate with other hydrocarbons

l

PEP

became owner of its proportionate share of the mixed product as a
whole

I

Mexican

not

just
1,11100

the

individual

molecules

that

were drawn from

does not absolve PEP from having to identify

stolen condensate and trace it to the individual defendants.

IS Reply in Support
Entry No. 577, p. 3.

Its Dispositive Motion,
102

Docket

BASF and BFLP argue that they are entitled to summary judgment
on PEP's conversion claims because
PEP has no evidence that BFLP actually purchased Mexican
condensate from Trammo, or that any Mexican condensate
that BFLP purchased (if any) was the identical condensate
stolen from PEP.
PEP and its witnesses have admitted
that PEP cannot trace any specific condensate stolen from
PEP to any specific purchase of hydrocarbons by BFLP or
any other defendant, and PEP has no other evidence to
show that the hydrocarbons purchased by BFLP are the same
barrels of condensate stolen from PEP.
. As a result,
PEP cannot satisfy its burden of proof and its conversion
claims against BFLP should be dismissed. 101
In

§

IV.C.4, above, the court concluded that conversion claims

asserted against BASF and BFLP arising from purchases made more
than two years before PEP filed its Original Complaint are time
barred.

Thus, only six of the BASF purchases listed in PEP's Third

Amended Complaint remain viable,

i.e., one purchase in August of

2008 of condensate alleged to have originated from Continental
Fuels; one purchase in December of 2008 of condensate alleged to
have originated from Petro Source;

two purchases in February of

2009, one of which allegedly originated from Petro Source and one
of which allegedly originated from Murphy Energy; and two purchases
in March of 2009 of condensate alleged to have originated from
Murphy Energy.
a

The only evidence that PEP cites that would allow

reasonable fact-finder to conclude that the six purchases of

condensate that BASF and BFLP made from Trammo in 2008 and 2009
that are not time-barred were purchases of stolen condensate is
cited in PEP's Dispositive Motion (Docket Entry No. 492).

lOlBASF and BFLP's MSJ, Docket Entry No. 489, p. 24.
-103-

In

its

Disposi ti ve

Motion

PEP

cites

evidence

capable

of

establishing that the condensate BASF purchased from Trammo was
stolen Mexican condensate that Trammo acquired from defendants
Continental

Fuels

and

Murphy

Energy.

As

condensate being sold by Continental Fuels,

evidence

that

the

including that which

made its way to BASF in August of 2008 via Trammo Petroleum, was
stolen from Mexico, PEP cites the deposition of Timothy Brink of
Continental
employee,

Fuels.

Josh

Brink testified that

Crescenzi,

told

him

that

purchasing was stolen from Mexico. 102

in July of
the

product

2008

his

he

was

Brink also testified that

once he looked closely at the paperwork documenting shipments of
product that he bought from Mexico the number of discrepancies he
spotted caused him to realize that the product was stolen .103

As

additional evidence that the product being sold by Continental
Fuels was stolen, PEP cites the transcript from the guilty plea of
Arnoldo Maldonado, which included facts about the role that he and
his

company,

Y Gas

&

Oil,

played in

supplying

stolen Mexican

condensate to Continental Fuels. 104
PEP also cites the guilty plea and the deposition of Trammo's
president,

Donald

Schroeder,

who

not

only

confirmed

that

102PEP's Dispositive Motion, Docket Entry No. 492, p. 4 (citing
Deposition of Timothy Brink, Exhibit 10, Docket Entry No. 492-12,
pp. 13 -14) .
103See PEP's Reply in Support of Its Dispositive Motion, Docket
Entry No. 577, pp. 15-16 (citing Deposition of Timothy Brink,
Exhibit 39 to PEP's Opposition to Defendants' Dispositive Motions,
Docket Entry No. 546-10, pp. 33-44).
104Id.

(citing Exhibit 12 in Docket Entry No. 492).
-104-

Continental was dealing in stolen condensate, but also that Trammo
sold to BASF the stolen Mexican condensate that it purchased from
Continental Fuels. 105

During his guilty plea Schroeder admitted

that the following facts stated by the Assistant United States
Attorney were true:
[V]arious companies imported Mexican condensate stolen
from PEMEX into the United States. The stolen condensate
was sold by these import companies to other U.S.
companies such as the following companies: Continental
Fuels, Murphy Energy Corporation, and Trammo Petroleum.
These companies were in the United States. The companies
just mentioned then sold the condensate to larger
companies in the United States, such as the company BASF.
The import companies sent semi-truck tankers loaded with
stolen condensate from Mexico into the U.S. via border
ports of entry. The import companies then directed the
tanker trucks to deliver the condensate to U. S. companies
like Continental Fuels, which was located inside the Port
of Brownsville, Texas.
The import companies were then
paid by wire transfer to various accounts.
Under the arrangement of this case in 2009,
Continental Fuels paid the importers of the stolen
Mexican condensate.
Continental Fuels then stored the
product until there was a sufficient quantity of
condensate to load on a barge and deliver to an end user,
which in this case was BASF. Generally, the condensate
physically stayed with Continental Fuels, or at least in
their tanks, until it was delivered to BASF, though the
condensate was sold to intermediaries, such as Murphy
Energy and Trammo Petroleum.
One of the intermediaries, Trammo Petroleum,
through arrangements made by Mr. Donald Schroeder,
purchased the stolen Mexican condensate in 2009, which
was ultimately sold to BASF.
Mr. Schroeder, working
through Trammo Petroleum,
sold the stolen Mexican
condensate in the barge operation beginning in January
2009 to BASF.

105PEP's
guilty plea
No. 492, pp.
Docket Entry

Dispositive Motion, Docket Entry No. 492, p. 5 (citing
of Donald Schroeder, Exhibit 14-72 in Docket Entry
19-21; Deposition of Donald Schroeder, Exhibit 15 in
No. 492, pp. 46-47).
-105-

As an example of this, on or about February 7th,
2009, Mr. Schroeder and others were responsible for the
condensa te in
loading
a barge containing
transported the
Brownsville, Texas.
The barge
stolen condensate to Port Arthur, Texas where it was
ultimately sold to BASF.
Mr. Schroeder and others were responsible for the
sale and barging of about 2 million [dollars] in stolen
condensate in 2009, though the profits received by Trammo
corporation were about 150,000.
The United States can show that Mr. Schroeder had
knowledge that the condensate transactions described
above involved stolen condensate from Mexico through a
of recorded conversations
2008 and 2009, ln
which arrangements for the sale and transport were
discussed. 106
PEP asserts, and BASF does not dispute, that documents from Trammo
confirm that

1 but one of Continental's

es to Trammo were sold

to BASF .10 7
As additional evidence that the condensate purchased by BASF
was stolen Mexican condensate, PEP c
Energy' s

Executive Vice- President

I

s the affidavit of Murphy

Greg Westfall,

who described

purchases of Mexican condensate that Murphy made in 2009:
13.

In early 2009, Donald Schroeder-the then-president
of Trammo-contacted Murphy Energy via instant
message (under the username "big_daddy77079 11 )
stating that condensate was about to start flowing
across
the
United
States
border
again
at
Brownsville,
Texas.
Schroeder states that,
al though Continental Fuels
Inc. had suppliers
lined up, it did not have the cash liquidity to
purchase the condensate on a daily basis.
Schroeder
asked
whether
Murphy
Energy
was
interested in purchasing the condensate under the
I

I

106Transcript from Guilty Plea
Donald Schroeder, Exhibit 14
72 to PEP's Dispositive Motion, Docket Entry No. 492-16, pp. 19 21.
's Dispositive Motion, Docket Entry No. 492.
-106-

same commercial conditions as before, except that
the storage facility would be that owned by
Continental Fuels, Inc. in Brownsville, Texas
instead of the TransMontaigne facility previously
used by Murphy Energy.
Schroeder also informed
Murphy Energy that Trammo would purchase the
condensate delivered to Port Arthur, Texas under
terms essentially the same as before.
14.

Both Tim Brink, President of Continental, and Josh
Crescenzi,
Vice
President of Operations of
Continental, contacted Murphy Energy immediately
the discussions with Schroeder and described
the potential transaction in a similar way.

15.

In 2009,
follows:

Murphy Energy purchased condensate as

Date

Purchase Price

9

17,745.29

$625,589.38

February 2009

30,276.04

$1,051,523.15

March 2009

20,854.34

$843,465.07

TOTAL:

16.

Volume (Barrels)

68,875.67

$2,520,577.60

Murphy Energy sold the condensate it purchased in
2009 for a total of
,066,903.00.
108

BASF obj ects to Westfall's
knowledge,

but

only

testimony as not based on personal

challenges

Westfall's

testimony

that

the

condensate was stolen; BASF does not challenge Westfall's testimony
about the details of Trammo's purchases from Continental and sales
to BASF on which the court is relying here. 109
Although BASF and BFLP argue that "PEP cannot, however, prove
that the hydrocarbons purchased by BFLP from Trammo consisted, in

l06Declaration of Greg Westfall, Exhibit
Dispositive Motion, Docket Entry No. 493-1, p. 3

21 2

to

PEP's

~~ 13-16.

l09Defendants' Reply in Support of Motion for Summary Judgment,
Docket Entry No. 580, p. 23.
-107-

whole or in any identifiable part
condensate

I

It

110

I

of

legedly stolen Mexican

the evidence quoted above regarding BASF I s purchases

of condensate from Trammo that originated with Continental Fuels
and Murphy Energy is sufficient to create a fact issue for trial as
to whether at least four of BASF/s non time barred purchases were
purchases of stolen Mexican condensate.

AccordinglYI

the court

concludes that BASF and BFLP are not entitled to summary judgment
on PEp/s conversion claim on grounds that PEP is unable either to
trace the stolen condensate to these defendants or to establish a
reasonably certain estimate of the amount of stolen condensate

I

if

anYI that they converted.
6.

BASF and BFLP are Not Entitled to Summary Judgment on
Transactions for Which PEP Has Received Restitution

BASF and BFLP argue that they are entitled to summary judgment
for the
Trammo

three complained of 2009 purchases of
through

Murphy

Energy

restitution for those purchases.

because

PEP

condensate from

has

received

full

The transactions for which BASF

and BFLP seek summary judgment are identified on the transaction
table in PEp/s Third Amended Complaint as

lows:

Trammo
Petroleum/s
Source

Date

Barrels

Cost per
Barrel

Total Price

Murphy Energy

February 2009

16,038

$43

$689,769.00

Murphy Energy

March 2009

19,803

$52

$1,034,872.00

Murphy Energy

March 2009

14,464

$749,341. 00

Total

110BASF and BFLP's MSJ

$2 / 473 / 982.00

I

Docket Entr Y No . 489
-108-

I

p.

29 .

In support of this argument BASF and BFLP cite PEp/s sworn
answer to Interrogatory No. 10 and PEp/s response to request for
admissions

BASF and BFLP argue

35 1

that

they are

entitled to

summary judgment on the conversion claims arising from these three
transactions because PEP has already received restitution for them
from Trammo.

In a sworn interrogatory answer / ll1 PEP stated that

it
received the following monies things of value
restitution
or settlement payments 1
or insurance
payments with regard to condensate that was stolen from
PEP
2007 1 2008 1 or 2009.
Some or all of the stolen
PEP condensate in question was ultimately purchased by
BASF entity.
1

1

l

payment on or About

Payment Amount

Payment Description

August 10, 2009

$2,415,635.72

Cashier's check from Trammo
Petroleum, Inc.

June 18, 2010

$40,130.45

Check from the United States
Treasury in payment of claim in
civil forfeiture action related
to defendant Continental Fuels,
Inc. (Civil Action No. 09-cv1564, Southern District of
Texas, Houston Division)

August 2010

$118,109.28

Check from the United States
Treasury in payment of claim in
civil forfeiture action related
to Sun Petroco, LLC and Luis
Ariel Rivera (Civil Action No.
09-cv-286, Southern District of
Texas, Houston Division)

October 29, 2010

$1,000,000

Settlement Amount from Trammo
Petroleum, Inc.

In response to a request for admission dated January 19

1

2011 1 PEP

stated:

aintiff PEp/s Responses to BASF Corporation/s First Set of
Interrogatories
("PEp/s
s
to
BASF/s
Interrogatories") Exhibit 1 to BASF and BFLP's MSJ, Docket
No. 489-2, pp. 18-19 Interrogatory No. 10.
1

1

-109

REQUEST FOR ADMISSION NO. 35:

Admit that you received $2.4 million in restitution for
the $2.4 million of stolen condensate referenced in
~ 94(H) of the Complaint.
RESPONSE TO REQUEST FOR ADMISSION NO. 35:

[T]his request for admission is ADMITTED.1l2
On January 19, 2011, the live complaint in the BASF Action was
PEP's Second Amended Complaint
November 24, 2010.

(Docket Entry No.

108)

filed on

Paragraph 94(H) of that complaint alleged:

[oln or about January-March 2009, Donald Schroeder, Jr.
and Trammo Petroleum and their co-conspirators knowingly
arranged for Trammo Petroleum's sale of at least $2.4
million worth of stolen PEP condensate to Defendant BASF
Corporation, knowing the condensate in question to have
been stolen from PEP in Mexico. PEP does not allege that
Defendant BASF knew that the condensate in question was
stolen. 113
BASF's and BFLP's argument that they are entitled to summary
judgment because PEP has already been compensated for at least
three of the transactions for which they have been sued raises the
applicability of Texas'

one satisfaction rule to PEP's claims.

"Under the one satisfaction rule,
recovery

for

any

damages

a plaintiff is entitled to one

suffered.

II

Crown

Life

Ins.

Co.

v.

112Plaintiff PEP's Responses to BASF's Requests for Admission,
Exhibit 8 to BASF and BFLP's MSJ, Docket Entry No. 489-9, p. 18.
113Second Amended

Complaint,

Docket

Entry

No.

108,

p.

27

~ 94.H.
See also Original Complaint, Docket Entry No.1, p. 24
~ 88.H (same) i Amended Complaint, Docket Entry No. 59, p. 26 ~ 94.H

(same) i and First Amended Complaint (Big Star Action), Docket Entry
No. 378, p. 27 ~ 160.i (same)
-110-

Casteel, 22 S.W.3d 378, 390 (Tex. 2000)

(citing Stewart Title Guar.

Co.

(Tex.

v.

Sterling,

822

S.W.2d

1,

7

"The

1991)).

one

satisfaction rule is grounds for summary judgment in cases in which
(1)

the one satisfaction rule applies,

(2)

the settlement credit

entirely sets-off the maximum amount of liability claimed by the
plaintiff, and (3) punitive damages are not an issue.

1I

Nowak v.

Pellis, 248 S.W.3d 736, 741 (Tex.App.-Houston [1st Dist.] 2007, no
pet.)

(citing Cohen v. Arthur Andersen.

L.L.P.,

106 S.W.3d 304,

309-10 (Tex.App.-Houston [1st Dist.] 2003, no pet.)).
The undisputed summary judgment evidence cited by BASF and
BFLP shows that Trammo has paid PEP approximately $2.4 million, but
that the amount PEP claims it is owed as a result of Trammo's sales
of stolen condensate to BASF and BFLP is substantially more than
the $2.4 million.

Because Trammo's payment of $2.4 million to PEP

does not entirely set-off the maximum amount of liability claimed
by PEP, BASF and BFLP are not entitled to summary judgment on any
individual transactions.

The issue of allocation of settlement

credits, if any, is an issue to be reached at trial, not on summary
judgment.

Accordingly, the court concludes that BASF's and BFLP's

argument that they are entitled to summary judgment because PEP has
already been

compensated

for

damages

caused by

some

of

their

purchases of stolen Mexican condensate has no merit.
D.

RGV Energy Partners LLC and F&M Transportation

PEP first asserted claims against F&M Transportation in the
Original Complaint filed on May 29, 2011,
-111-

in the Big Star Action

(Docket Entry No.1) in Civil Action No. H-II-2019.

PEP added RGV

Energy as a defendant in PEP's First Amended Complaint in the Big
Star Action filed on April 20, 2012

(Docket Entry No. 378).

alleges that
70.

F&M voluntarily joined the conspiracy to market
and distribute stolen PEP condensate.

71.

F&M played an important role in the US conspiracy.
F&M both bought and sold condensate and also
transported much of condensate bought and sold by
other members of the conspiracy.

72.

For example, F&M bought condensate from, and
brokered contracts for, Continental Fuels, whose
president has confessed its role in the illegal
scheme, and Y Oil and Gas, operated by Arnoldo
Maldonado,
who also confessed to,
and was
convicted of, trafficking in condensate stolen
from PEP.

73.

F&M bought and sold at least $20 million dollars
worth of stolen condensate.
For example, in
October 2008 F&M purchased 8,500 barrels of
~Petroleum Condensate"
from Continental Fuels.
F&M knew that it was purchasing stolen goods from
Continental.
F&M sold the condensate to Kemco
Resources,
Inc.
(~Kemco"),
which sold it to
Plains, which sold it to Valero. F&M bought this
stolen condensate for $539,000, and sold it for a
substantial profit without informing its customer
that the condensate was stolen.

74.

F&M knew that the condensate it purchased and
resold was stolen. In the alternative, F&M either
consciously
disregarded
the
fact
that
the
condensate was stolen or should have known that
the condensate was stolen.

75.

As to each of its purchases and sales of PEP
condensate, F&M committed at least the following
acts
in
furtherance
of
the
conspiracy:
(a) defrauded the ultimate purchaser of the source
and patrimony of the condensate in violation of
state law and the federal mail and wire fraud
statutes,
18
U.S.C.
§§
1341
and
1343;
(b) knowingly engaged in transactions involving
-112-

PEP

stolen goods in violation of 18 U.S.C. §§ 2314 and
2315 and the Texas Theft Liability Act (or
Tex. Civ. Prac. & Rem. Code § 134.001 .005i and
(c) committed money laundering in violation of 18
U.S.C. § 1956.
76.

F&M also provided transportation and brokerage
services to the conspiracy knowing that the
condensate it was transporting was stolen. While
transporting the condensate, F&M took possession
of stolen condensate, knowing it was stolen.
In
the
ternative,
F&M
either
consciously
disregarded the fact that the condensate was
stolen or should have known that the condensate
was stolen.
For example, in February 2009, F&M
transported more than 21,000 gallons of "petroleum
distil
es"-a euphemism for condensate
signed
to disguise its source-from Y Oil and Gas, the
seller, to Continental
s, the buyer.

77.

As to its transportation services, F&M likewise
commi tted specific acts in furtherance of the
conspiracy, including violations of 18 U.S.C.
§§
2314-which applies to "Whoever transports,
transmits, or transfers in interstate or foreign
commerce any goods .
knowing the same to have
been
en, converted or taken by fraud"-and
2315-which applies
to taking possession of
property "knowing the same to have been stolen,
unlawfully converted, or taken"-and the Texas
Theft Liability Act (or TTLA) , Tex. Civ. Prac. &
Rem. Code § 134.001-.005.

78.

F&M was aware that the conspiracy was much larger
than its individual part ipation and that for the
conspiracy to succeed, additional criminal conduct
was needed to conceal the conspiracy from PEP and
from US and Mexican authorities, including the
bribery of government
ficials and the forging of
documents.

79.

F&M is responsible for
1 damages inflicted on
PEP from the larger conspiracy.
Alternatively,
F&M is liable for
1 of its transactions
involving the stolen property of Mexico, including
the transactions in which it transported or
brokered sales. 114

114First Amended Complaint
No. 378, pp. 13-15 " 70-79.
-113

Star Action),

Docket Entry

s specific to

The First Amended Complaint does not allege any
RGV's

alleged

involvement

in

the

trade

of

stolen

Mexican

only reference to RGV in PEP's pleadings is as one

condensate.

of the "Conspiring Defendants:"
108.
Conspiring Defendants-.
Crude
Kirby, RGV, and F&M-are also responsible
actions
of all members of the conspiracy, whether named in this
action [or] not, and they are therefore
the value
all condensate stolen from PEP
the
currently estimated to be more than
I

$300

Based on

legations of facti PEP has

claims against

F&M Transportation and RGV Energy Partners and F&M Transportation
for conversion

l

for equitable relief including constructive trust

based on theories of money had and received and unjust enrichment,
for civil conspiracy, and for violation of the TTLA.
F&M Transportation and RGV Energy argue that they are each
entitled to summary judgment because
[t] here is no evidence that RGV had any connection
whatsoever to PEP's condensate after April 20, 2010 (two
years before it was sued in PEp/s
Amended
Complaint). Similarly there is no evidence that F&M had
any connection whatsoever to PEP's condensate after
May 29, 2009 (two years before it was sued in PEP's
Original Complaint) .116
I

In support

the argument that PEP's claims against them are time

barred, these defendants assert that "[a]ll

the alleged facts

at 20 , 108.
s RGV Energy Partners, LLC and F&M Transportation,
Inc. s Motion for Summary Judgment ("RGV and F&M's MSJ") , Docket
Entry No. 517, p. 3.
I

-114-

relating to their involvement with PEP's condensate occurred well
outside the two-year limitations period." 1l7

I legal arguments and

adopt and incorporate

"express

These two defendants

submitted by all other defendants on this issue,
related to the discovery rule .
PEP

acknowledges

governed by Texas'

in

its

including those

and fraudulent concealment.
response

that

its

claims

two-year statute of limitations,

/I

are

lIB

all

and PEP does

not dispute RGV and F&M's assertions that neither of them had any
connection with PEP's condensate in the two years preceding the
filing

suit against them.

Moreover, in its Disposit

PEP acknowledges that the "Two Year Amount" of damages
"$0." 119

Motion
F&M is

PEP's only argument against granting these two defendants

summary judgment based on limitations is that the claims asserted
against them are not time barred because the running of limitations
is

by fraudulent concealment and the discovery

e.

Based on the legal analysis stated in §§ IV.B.4 and IV.C.4,
the court concludes that the claims asserted against RGV Energy and
F&M

Transportation

are

all

limitations and that all
time barred because PEP has

governed

by

a

two-year

statute

of

claims asserted against them are
led to allege facts or present any

117Id. at 5.
118

119PEP's Opposition to Defendants' Disposit
No.

545, p.

31.
115-

-------_.__._-_.._-.._.-._----

Motions, Docket

of these defendants

evidence capable of establishing that

had any connection to stolen condensate within two years of the
dates on which PEP filed suit against them.

Fraudulent concealment

does

from

not

prevent

these

two

defendants

relying

on

the

limitations defense because PEP has ne

alleged nor cited any

evidence capable of establishing that

of them concealed any

facts

from

PEP or had a

fixed

purpose

to

conceal

the

wrongs

alleged.
The undisputed evidence shows that F&M Transportation provided
PEP

affiliate

PMI

information

that

was

exporting

Mexican

condensate during the period that PEP contends Mexican condensate
could not legally be exported from Mexico.

Because this evidence

shows that PEP knew or with the exercise of reasonable dil
should have known that F&M Transportation was dealing in Mexican
condensate long before PEP filed
already

in

§§

1

and because the evidence

IV.B.4{c) (2) and IV.C.4{c)

1

shows that PEP was

well aware that Mexican condensate was being stolen in Mexico and
converted
any

de

the United States
the

before it filed suit

di scovery

e

does

not

preclude

F&M

Transportation or RGV Energy from relying on limitations to bar the
claims asserted against them in this action.

Accordingly

1

court concludes that F&M Transportation and RGV Energy are entitl
to summary judgment because the claims alleged against them are
barred by the two-year statute of limitations.

116

I

E.

Murphy Energy

PEP first asserted claims against Murphy Energy on June 7,
2010, when PEP filed its

Complaint (Docket Entry No.1) in

the BASF action, Civil Action No. H-10-1997.

PEp/s Third Amended

Complaint alleges that:
80.

Murphy
Energy
provides
producer
services l
marketing
and transportation services
for various hydrocarbons
including crude oil
condensate, and
gas liquids.
I

I

81.

Murphy Energy voluntari
joined the conspiracy to
market and distribute stolen PEP condensate.

82.

Murphy Energy distributed stolen PEP condensate
that it purchased from
Continental Fuels
and sold stolen PEP
to at least Trammo
Petroleum.

83.

the condensate it
Murphy Energy knew that
In the
purchased and
d was stolen.
alternative, Murphy Energy
ther consciously
disregarded the fact that the condensate was
stolen or should have known
the condensate
was stolen.

84.

In February 2009, certain Murphy Energy employees
met at a Houston-area restaurant with Defendant
Brinkl of Defendant Continent
Fuels, Inc., and
others. The conversation was recorded by federal
officers.
During the meet
the participants
discussed several subjects,
luding that (a) PEP
condensate was not legally exported from Mexico;
(b) Mexican drug cartels
the delivery of
the PEP condensate that Murphy
and others
purchased and resold in Texas;
(c)
the PEP
condensate was purposefully misidentified so it
could be smuggled out of Mexico; and (d) customs
officials were being bribed at the border to
smuggle the PEP condensate into the United States.
I

85.

The tone of the conversation makes clear that the
information discussed in
meeting was no
surprise to Murphy Energy. Murphy Energy had been
-117-

dealing with these same people regarding
condensate since at least late 2006.

PEP

86.

Murphy Energy's knowledge is also demonstrated by
its attempt to manufacture false proof that PEP
was aware of its activities.
In early January
2008, Murphy Energy twice tried to deliver emails
to a "Vallin Rivero" at "gas .pemex. com."
The
email address indicates that, at best, Mr. Rivero
worked for Pemex Gas y Petroquimica Basica, a
different entity, albeit a Pemex subsidiary.
In
any event,
the emails bounced back.
These
original two emails contained nothing that would
implicate Murphy Energy in any wrongdoing. After
the emails were rejected, and Murphy Energy knew
its email would not reach anyone at any Pemex
affiliate, Murphy Energy drafted a much longer
email, sent to the same bad address, purporting to
inform Pemex of Murphy's purchases and sale of
Mexican condensate in the United States.

87.

Al though
neither
PEP
nor
PMI
are
secret
organizations, Murphy Energy never sought to
communicate with an actual person at either.
Murphy Energy never spoke to anyone at any Pemex
affiliate or with the Mexican government.

88.

PEP was never informed by Murphy Energy of its
trading in PEP's stolen condensate, and PEP never
approved that conduct.

89.

As to each of its purchases and sales of PEP
condensate, Murphy Energy committed at least the
following acts in furtherance of the conspiracy:
(a) defrauded the ultimate purchaser of the source
and patrimony of the condensate in violation of
the mail and wire fraud statutes, 18 U.S.C.
§§
1341 and 1343;
(b) knowingly engaged in
transactions involving stolen goods in violation
of 18 U.S.C. §§ 2314 and 2315 and Texas Theft
Liability Act (or TTLA) , Tex. Civ. Prac. & Rem.
Code § 134.001-.005; and (c) committed money
laundering in violation of 18 U.S.C. § 1956.

90.

Murphy Energy also was aware of the conduct of
others necessary for the conspiracy to succeed,
including the bribery of government officials and
the forging of documents.
-118-

Murphy Energy was aware that the conspiracy was
much larger than its indi vidual involvement. 120

91.

Based on these allegations of fact PEP has asserted claims against
Murphy

Energy

for

conversion,

for

equitable

relief

including

constructive trust based on theories of money had and received and
unjust enrichment, civil conspiracy, and TTLA and RICO violations.
Murphy Energy argues that it is entitled to summary judgment
on all of PEP'S claims because
equitable relief,

(1)

PEP's claims for conversion,

and violation of the Texas Theft Liability Act

arising from acts that occurred before June 7,
barred;
meet

(2)

2008,

are time-

PEP's conversion claim is barred because PEP cannot

its burden under Texas

law to show that

the hydrocarbons

purchased by Murphy Energy are the identical hydrocarbons allegedly
stolen from PEP; (3) PEP's conspiracy claim is barred because there
is no evidence that Murphy had knowledge of a conspiracy to convert
PEP's

condensate

and

defraud

end

users;

(4)

PEP's

claim

for

violation of the Texas Theft Liability Act is barred because there
is no evidence that Murphy formed the requisite intent to violate
the

Act;

evidence
(6)

(5)

PEP's

that

RICO

Murphy

claim

engaged

is

barred because

in

racketeering

there

is

activity;

no
and

Texas' one-satisfaction rule bars Murphy Energy from being held

liable for losses for which PEP has already received restitution. 121

120Third Amended Complaint, Docket Entry No.

220,

pp.

14-16,

80-91.

121Defendant
Summary Judgment

Murphy Energy Corporation's Motion for Final
("Murphy's MSJ"), Docket Entry No. 479, pp. 2-3.
-119-

PEP disputes that Murphy Energy is entitled to summary judgment on
any of the claims asserted against it. 122
1.

PEP's Claims for Conversion, Equitable Relief, and
Violation of the Texas Theft Liability Act Arising from
Acts that Occurred Before June 7, 2008, Are Time Barred

Citing the two-year statute of limitations provided by Texas
I Practice and Remedies Code

§

16.003(a), Murphy Energy argues
ion

that PEP's claims for conversion, equitable relief, and

of the Texas Theft Liability Act arising from acts that occurred
to June 7, 2008, i.e., more than two years before PEP fi
on June 7, 2010, are time
that

the

The parties do not dispute

two-year limitations

od contained

in

§

16.003 (a)

governs all of the state law claims asserted in this action.
PEP responds that the claims asserted against all defendants
including,

inter alia, Murphy Energy are not time barred

did not accrue and limitat

did not start running until PEP

demanded return of and/or compensation for its condensate,
defendants had a reasonable t
Alternatively,

PEP argues

because the defendants'

and

to investigate that demand .123

that

its claims are not

time barred

fraudulent concealment of their actions

and/or the discovery rule defer the start of the limitations period

's Opposition to Defendants'
Entry No. 545.
's Dispositive Motion, Docket
PEP's Opposition to Defendants' Dispos
No. 545, pp. 22-25.
-120-

spositive Motions, Docket
No. 492, pp. 30-31;
Motions, Docket Entry

until PEP identified the entities and individuals who conspired to
convert its condensate

the United States. 124

For the reasons stated in
al

concl uded that

the

§

IV.B.4(b),

above,

conversion claims

the court has

asserted

in this

action accrued and limitations started to run on the dates that the
defendants purchased allegedly stolen condensate because that is
the date that the defendants caused the legal injury for which PEP
The limitations period on PEP's claims for equitable

seeks reli
relief,

civil

conspiracy,

and

violation

of

the

Texas

Liability Act also begins to run when legal injury occurs, i.e.,
when defendants' conduct invades PEP's legal interest causing loss
Nelson v. American National Bank of Gonzales, 921

and damage.
S.W.2d 411,
Cathey v.

415

(Tex.App.-Corpus Christi 1996,

First City Bank of Aransas Pass,

(citing

758 S.W.2d 818,

(Tex.App.-Corpus Christi 1988, writ denied)).
to an exception,

no pet.)

822

Thus, unless subject

PEP's claims for conversion,

equitable relief,

civil conspiracy, and violation of the TTLA arising from any act
committed more than two years prior to the filing of suit are
barred by limitations.

Autry v. Dearman, 933 S.W.2d 182, 191

(Tex.App.-Houston [14th Dist.] 1996, writ denied)
unjust

enrichment

based

on

allegations

of

(causes of action
money

had

and

received arise when money is paid); Carroll v. Timmers Chevrolet,

124PEP's Dispositive Motion, Docket Entry No. 492, pp. 30 31;
PEP's Opposition to Defendants' Dispositive Motions, Docket Ent
No. 545, pp. 25-28.
-121-

Inc.,

592 S.W.2d 922,

itself,

but

an

925

injury

to

(Tex.
the

1979)

(It is not the agreement

plaintiff

resulting

from

the

underlying tort that gives rise to a cause of action for civil
conspiracy.) .

For the reasons stated below, the court concludes
e defer

that neither fraudulent concealment nor the discovery

the limitations period from running on PEP's conversion claims
against Murphy Energy.
(a)

Fraudulent Concealment Does Not Defer PEP's Claims

PEP argues that the defendants'
their wrongful acts and
1

tations period.

fraudulent
1

fraudulent

concealment of

ies defers the beginning of the

When applicable the equitable doctrine

concealment

estops

ions as a defense.

a

defendant

from

relying

on

In Borderlon, 661 S. W. 2d at 908, the

Texas Supreme Court noted that where a defendant is under a duty to
make disclosure but fraudulently conceals the existence of a cause
action from the party to whom it belongs,
estopped from relying on the
learns of

the defendant is

of limitations until the

the right of action or should have

through the exercise of reasonable diligence.

learned
The doctrine is

limited to those situations in which the defendant has a duty of
disclosure, such as a physician to a
client, or a fiduciary relationship
S.W.2d at 531,
invol ving

fraud

ient, or an attorney to a
sts.

In Velsicol, 956

the Texas Supreme Court explained that in cases
or fraudulent

concealment

-122-

accrual

is deferred

"until the fraud is discovered or could have been discovered with
reasonable diligence."

PEP has neither alleged nor presented any

evidence capable of establishing that Murphy Energy had a duty of
disclosure

to

The

PEP.

doctrine

of

fraudulent

concealment,

therefore, is inapplicable to PEP's claims against Murphy Energy.
(b)
When

The Discovery Rule Does Not Defer PEP's Claims

the

nature

of

the

injury

incurred

is

inherently

undiscoverable and the evidence of injury is objectively verifiable
courts have applied the discovery rule as an exception to the
"legal injury" rule of accrual.
See also S.V.,
Altai,

Inc.,

See Childs, 974 S.W.2d at 36-37.

933 S.W.2d at 4; Computer Assocs.

918

S. W. 2d 453,

456

(Tex.

1996).

Int'l,

Inc. v.

Asserting that

" [k]nowing that property was stolen is not the same as knowing who
bought

the

stolen goods,

which could be

decades

later," 125

PEP

offers public policy arguments why the running of the limitations
period should be deferred until PEP discovered the tortfeasors'
identities.
As explained ln

§§

IV.B.4(c) (2) and IV.C.4(b), above, PEP has

not cited and the court has not found any case in which a Texas
court has applied the discovery rule to a case such as this in
which the defendants' initial possession of the property at issue
was unlawfully - as opposed to lawfully - acquired.

See HECI, 982

125PEP's Opposition to Defendants' Dispositive Motions, Docket
Entry No. 545, p. 29.
-123-

S.w.2d at 886

(discovery rule is applied to categories of cases,

not to particular cases)

i

Steinhagen, 126 S.W.3d at 626-27 denied)

(distinguishing between two classes of conversion cases:

one where

defendant's initial possession of property was lawfully acquired,
and another where initial possession was unlawfully acquired).
Conversion cases to which the discovery rule has been applied are
cases where the defendant's initial possession of the property at
issue is lawfully acquired, e.g., bailment cases.
S.W.2d at 414.

See Hofland, 834

The discovery rule does not apply to this case

because it belongs to the class of cases where the defendants'
initial possession of the property was unlawful.

In this type of

case the claims accrued and the limitations period began to run
when the legal injury occurred.
674

(discovery

embezzelment) ;

rule
Autry,

not
933

See Sunwest Bank,

applicable
S.W.2d at

to

192-93

939 S.W.2d at

injury

caused

by

(discovery rule not

applicable to cause of action for conversion of lawsuit proceeds
subject to subrogation)

i

Rogers, 930 S.W.2d at 166 (discovery rule

not applicable to conversion of oil and gas produced under void
lease).

Ayers, Civil Action No. 07-04-0383, 2006 WL 435026, at *2

(discovery rule not applicable to toll limitations until plaintiff
learned identity of thief) .
Even if this were a case to which the discovery rule applied,
that rule would not defer running of the limitations period for
PEP's conversion claims against Murphy Energy.

Because PEP has

invoked the discovery rule as a means to avoid being barred by
-124-

limitations, PEP is not only required to show that the discovery
rule applies to this case, but also to present evidence capable of
establishing that
inquiry notice.

PEP acted with diligence after being put on

Here, PEP alleges that it brought suit "within two

years after PEP knew, or by the exercise of reasonable diligence
should have known, of the facts giving rise to PEP's claims against
Therefore,

the Defendants.
those

claims

limitations

by

the

should

be

limitations have been tolled as to

\ discovery
tolled

rule.' ,,126

until

it

had

PEP
an

argues

that

opportunity

to

discover not only that its condensate had been stolen and converted
but also the identities of the responsible parties.
Under Texas law all that is required to commence the running
of the limitations period is the discovery of an injury and its
general cause, not the exact cause in fact and the specific parties
responsible.

See Russell,

841 S.W.2d at

344 n.3

("limitations

begin to run when the fact of injury is known," Moreno, 787 S.W.2d
at 351, not when the alleged wrongdoers are identified") i Childs,
974 S.W.2d at 40 (discovery rule delays accrual of cause of action
until plaintiff knew or should have known of its injury, not the
identity of the wrongdoer).

The discovery rule does not apply to

defer limitations for PEP's claims against Murphy Energy because
both PEP's injury and its general cause were known by PEP long
before PEP filed suit against these defendants.

126Id. at 32

~

177.
-125-

PEP's knowledge that its condensate was being converted by
sale in the

States is sufficient to trigger the running of

t

limitations because - by PEP's own admissions
its

injury and the

conversions.
present any

general

Moreover,

cause at

PEP has

time of

or near

failed

dence from which a

PEP was aware of

ei

to

argue

the

or to

-finder could

reasonable

PEP could not

conclude that had PEP exercised reasonable dil

have discovered BASF's and BFLP's purchases within the two-year
period following the dates on which those

occurred.

discovery rule only defers accrual until

discovery of

not operate to toll the running

injurYi it

period until such time as plaintiff discovers
of a cause

action.

The
the

the limitations
I of the elements

See Bayou Bend Towers Council of Co-Owners
866

S.W.2d 740,

[14th Dist.] 1993, writ denied).

743

(Tex.App. Houston

Accordingly, the court concludes

that the discovery rule does not apply to defer the running of
limitations

PEP's conversion claims aga

Murphy Energy.

Whether PEP Can Trace Stolen Property to Murphy Is a
Fact Issue for Trial

2.

As

in

§

IV.B.3, above, in order to hold any individual

defendant liable for conversion PEP must trace condensate that was
actually stolen in Mexico to the individual defendant.
also

present

evidence

from

which

a

fact f

could

PEP must
form

a

reasonably certain estimate of the amount of stolen condensate, if
any, that
1055.

defendant converted.

See

==~~-===,

141 S.W.2d at

The amount of condensate converted is not required to be
-126-

proven with exact certainty, only with reasonable certainty.
Southwest Battery, 115 S.W.2d at 1097.
the

See

PEP's contention that "when

fendants mixed PEP's condensate with other hydrocarbons, PEP

became owner of its proportionate share of the mixed product as a
whole,

not

just the

individual molecules

that were drawn from

Mexican soil,"127 does not absolve PEP from having to ident ify its
stolen condensate and trace it to the defendants.
Murphy Energy argues that it is entitled to summary judgment
on PEP's conversion claims because
PEP alleges that Murphy purchased stolen Mexican
condensate from July 2006 through March 2009, from
suppl iers Cont
aI, Hutchison Hayes, M&B Trading,
Trinity Partners/Alliance Energy Corp. and Valley Fuels.
. . . PEP has no evidence that Murphy actually purchased
Mexican condensate from any of these entities, or that
any Mexican condensate that Murphy purchased (if any) was
the identical condensate stolen from PEP.
PEP and its
witnesses have admitted that PEP cannot trace any
condensate stolen from PEP to any specific purchase of
hydrocarbons by Murphy, and PEP has no other evidence to
show that the hydrocarbons purchased by Murphy are the
same barrels of condensate stolen from PEP.
. As a
result, PEP cannot satisfy its burden of proof and its
conversion and constructive trust claims should be
dismissed. 128
The

court

for

has

concluded that

conversion,

violation of the TTLA

PEP's

equitable relief,

claims

against

Murphy

civil conspiracy,

and

ing from acts that occurred more than two

years before PEP filed suit against Murphy Energy are time barred.
Therefore, only three

the BASF purchases of condensate allegedly

127PEP's Reply in Support of Its Dispositive Motion,
Entry No. 577, p. 3.
128Murphy's MSJ, Docket Entry No. 479, p. 20.
-127-

Docket

supplied to Trammo by Murphy Energy listed in PEP's Third Amended
Complaint remain viable, i.e., one purchase in February of 2009 and
two purchases in March
that would allow a

2009.

The only evidence that PEP cites

reasonable fact-finder to conclude that

condensate that Murphy Energy supplied to Trammo was stolen is
ive Motion (Docket Entry No. 492).

cited in PEP's

Motion PEP cites the deposition testimony

In its Dispos

of Continental Fuels president,
Murphy Energy acqui

Timothy Brink,

as evidence that

the condensate that it sold to Trammo from

Continental Fuels, and that all of the condensate that Continental
Fuels sold to Murphy Energy was stolen Mexican condensate.
testified that

Brink

July of 2008 his employee, Josh Crescenzi, told

him that the product he was purchasing was stolen from Mexico. 129
Brink also testified that once he looked closely at the paperwork
documenting shipments of product that he bought from Mexico the
number of discrepancies he spotted caused him to realize that the
product was st
being

sold

by

130

As additional evidence that

Continental

Fuels

was

stolen,

PEP

product
cites

the

transcript from the court proceeding in which Arnoldo Maldonado of

129PEP's
Deposition
pp. 13 14).

spositive Motion, Docket Entry No. 492, p. 4 (citing
Timothy Brink, Exhibit 10, Docket Entry No. 492-12,

PEP's Reply in Support of Its
itive Motions,
Docket Entry No. 577, pp. 15-16 (citing Deposition of Timothy
Brink, Exhibit 39 to PEP's Opposition to Defendants' D~spositive
Motions, Docket Entry No. 546-10, pp. 33 44).
-128-

Y Gas & Oil pleaded guilty for his role in supplying stolen Mexican
condensate to Continental Fuels. lE
amount of stolen condensate that Murphy

As evidence for
Energy purchased,

PEP

cites

the

affidavit

of

Murphy Energy's

Executive Vice-President, Greg Westfall, who described purchases of
Mexican condensate that Murphy made in 2009:
13.

In early 2009, Donald Schroeder-the then-president
of Trammo-contacted Murphy Energy via instant
message (under the username "big_daddy77079"),
stating
condensate was about to start flowing
across
Uni ted
States
border
again
at
Brownsville,
Texas.
Schroeder states that,
al though Continental Fuels, Inc. had suppl
lined up, it did not have the cash liquidity to
purchase the condensate on a daily basis.
Schroeder
asked
whether
Murphy
Energy
was
interested
purchasing the condensate under the
same commercial conditions as before, except that
the
facility would be that owned by
Cont
Fuels, Inc. in Brownsville, Texas
the TransMontaigne facility previously
used by Murphy Energy.
Schroeder also informed
Murphy Energy that Trammo would purchase the
condensate delivered to Port Arthur, Texas under
terms essentially the same as before.

14.

Both Tim Brinkl President of Continental, and Josh
Vice
President of Operations of
, contacted Murphy Energy immediately
discussions with Schroeder and described
the potential transaction in a similar way.

15.

In 2009
follows:

I

Murphy Energy purchased condensate as

131Id. (citing Transcript of Arnoldo Maldonado Rearraignment l
Exhibit 12 to PEP's Dispositive Motion[ Docket Entry No. 492-14).
-129-

-----------------'

Purchase Date

Purchase Price

January 2009

17,745.29

$625,589.38

February 2009

30,276.04

$1,051,523.15

March 2009

20,854.34

$843,465.07

TOTAL

16.

Volume (Barrels)

68,875.67

$2,520,577.60

Murphy Energy sold the condensate it purchased in
2009 for a total of $3,066,903.00.
132

Although not dispositive, this evidence is sufficient to raise a
fact

issue

as

to

whether

Murphy

Energy

purchased

reasonably

ascertainable quantities of stolen Mexican condensate

in 2009.

Accordingly, the court concludes that Murphy Energy is not entitled
to summary judgment on grounds that PEP is unable either to trace
the stolen condensate to it or to establish a reasonably certain
estimate of the amount of stolen condensate,

if any,

that Murphy

Energy converted.
3.

Murphy Energy Is Not Entitled to Summary Judgment on
PEP's Claims for Civil Conspiracy

"An actionable civil conspiracy is a combination of two or
more persons to accomplish an unlawful purpose or to accomplish a
lawful purpose by unlawful means."
PEP alleges that

Massey,

the obj ect and purpose of

652 S.W.2d at 934.
the conspiracy was

"committing of common law conversion of PEP's condensate and the
defrauding of end-users which would not have knowingly purchased

132Declaration of Greg Westfall,
Exhibit
Dispositive Motion, Docket Entry No. 493-1, p. 3
-130-

21-2 to
~~ 13-16.

PEP's

Murphy

argues that it is entitled to

summary judgment on PEP / s c

conspiracy because " [t]here is

stolen product. 11133

no evidence that Murphy had knowledge of a conspiracy to convert
PEP's

condensate

and

defraud

end

users.

There

is,

however /

overwhelming evidence that Murphy never believed that the product
11134

that it was buying was

PEP responds that not only is

there ample evidence that Murphy knew the condensate was stolen/
but that the same evidence

ishes a conspiracy.

PEP explains

that "[t]hese defendants knew they were buying and selling stolen
goods.

Knowing the goods were stolen/ the defendants had to know

that someone stole the goods/ and with that knowledge/ they agreed
to buy the goods and join

the conspiracy.II13S

As evidence that Murphy Energy knew about the conspiracy to
convert PEP's condensate and defraud end users,
deposition of Continental

S /

president,

PEP cites the

Timothy Brink,

who

named Murphy Energy's president, Greg Westfall, as one of his coconspirators: 136

133Third Amended Complaint, Docket Entry No. 220, p. 35 , 201.
134Murphy's MSJ, Docket Entry No. 479, p. 30.
135PEP's Opposit
Entry No. 545, p. 33.

to Defendants' Dispositive Motions, Docket

136PEP'S Opposition to Defendants' Dispositive Motions, Docket
Entry No. 545, p. 32
(citing Deposition of Timothy Brink,
Exhibit 39, Docket Entry No. 546 10, p. 29).
-131-

by
Judge, of the
The elements, as outl
crime of dealing in
conspiracy to commit
One, that two or more
stolen products were:
to commit the crime of
persons made an
ling stolen goods as
receiving, possessing or
charged.

Q.

Was that true, that you had two or more persons
that made such an
?
A.

Yes.

Q.

Were the individuals who made that agreement the
ones you just ment
Greg Westfall, Don
Schroeder,
Steve
[and]
Arnoldo
Maldonado?

A.

Yes. 137

Q.

Is there any doubt
your mind of the people that
you named as your co-conspirators, Greg Westfall,
Don Schroeder, Arnoldo Maldonado and the Marin
brothers, that they knew there was a criminal
conspiracy to import stolen Mexican condensate?

A.

Absolutely none .138

PEP cites the depos

testimony of Murphy's Greg westfall

as evidence that Murphy admitted that it sold Mexican condensate
after

receiving

stolen.

credible

Westfall

testif

information
that

in

that
April

the
of

condensate
2009

was

Murphy's

customer, Trammo, informed Murphy that it would no longer accept
delivery of condensate from Murphy unless Murphy could provide a

137Deposition of Timothy Brink, Exhibit 39 to PEP'S Opposition
Defendants'
itive Motions, Docket Entry No. 546-10,
p. 29:3-14.
to

B8ld.

at 75:25 76:6.
132

certificate
Westfall

of

origin and proof

of

title

explained that Trammo's refusal

condensate

followed

Trammo's

receipt

to

the

condensate.

to accept

delivery of

notice

of

from

the

United States government that Murphy's condensate had been stolen
from

Pemex.139

westfall

testified

that

Murphy

had

neither

certificates of origin nor proofs of title for the condensate that
it had sold to Trammo. 140

Westfall also testified that following

Trammo's refusal to accept delivery of condensate Murphy had in
storage,

Murphy

sold

telling AGE Refining

that
that

condensate
Murphy had

to

AGE

Refining

received notice

without
that

the

condensate had been stolen from Pemex:
Q.

. When Trammo advised Murphy in April of 2009
that the U.S. government had advised Trammo that
PEMEX had advised the U. S. government that the
condensate had been stolen, Trammo notified Murphy
of those facts -- of those allegations?

A.

Trammo notified Murphy of what they said they had
been told, yes.

Q.

And at that point Murphy still had some condensate
that it had purchased from Continental but not yet
sold to Trammo. Correct?

A.

Correct.

Q.

And, in fact, in that same notification Trammo
said it would not purchase the condensate because
of those facts that the U.S. government had told

139Deposition of Gregory A. Westfall, Exhibit 36 to
Opposition to Defendants'
Dispositive Motions,
Docket
No. 546-7, pp. 109-114.
14°rd. at 114:1-7.
-133-

PEP's
Entry

- or allegations that the
Trammo. Correct?

u.s.

government had told

A.

I believe that's correct.

Q.

And then Murphy
that remaining condensate
to AGE refinery?
after receiving that not

A.

Yes.

Q.

Now, at the time that Murphy sold that to AGE
refinery, did Murphy
I AGE what Murphy had
learned from Trammo?

A.

No.

Q.

Before that time, it is your testimony that Murphy
that anyone was
had no idea, no
claiming that the condensate Murphy was purchasing
had been stolen from PEP?

A.

That's correct .141

Murphy Energy/s contention that

had no knowledge that the

condensate it was purchasing was stolen from PEP is contradicted by
the presence and participation of West

I and two other Murphy

employees in a lunch meeting with Cont
and Josh Crescenzi,
February 3, 2009.

employees Tim Brink

and Trammo president,

Donald Schroeder I

on

The conversation at the lunch was taped during

the United States' criminal investigation: 142
Josh
Crescenzi: Yeah. I mean the biggest problem down there
right now is a lot
guys who used to
run the product. M&B. Uh, they aren't doing

141Id. at 123:12-124:15.
142Transcript of Taped Conversation Tuesday, February 3 1 2009,
Exhibit 41 to PEP's Opposition to Defendants'
spositive Motions 1
Docket Entry No. 546-12.
l

-134

it anymore. Ah, they've pretty much gone in
and the Cartel has switched up everybody who
was running product.
It's all new people.
They're very inexperienced.
Ah, they're
pulling, ah, all
we're going to send
you a truck with 12 inches of water and, and
so I say, you send me a truck that's fine,
I'm gonna refuse it and they don't understand
that you just go down the street.
You open
your valve.
You drain your water out and
bring it back.
I mean, it's, it's bullshit
and I'm basically retraining a bunch of drug
dealers, I mean.
West

1:

Josh
Cre

The Cartel probably kicked everybody out that
are having all the problems with volumes or
and everything else.
Exactly.

Tim Brink: You know the other guys at least, you know.
Josh
Crescenzi: They were semi-businessmen.
m Brink: They were smart enough to know and they
didn't care, you know, if they had water
their truck, before they crossed the border,
they would, you know, dump the water. Cause
sometimes (inaudible) water.
Josh
Crescenzi: Now the other big problem that they are
experiencing
now is, ah, all
gove rnment 0 f f i
s that are, you know,
getting the bribes.
They haven't dropped
their price down, so they're still getting
paid based on $140 oil, so.
Greg
Westfall:

Oh, God!

Josh
Crescenzi: B a s i c a l l y ' s very little profit for
those guys to actually bring the product over
to us, because.
135-

Tim Brink: Like I say, they're, they're getting better
now. We talked to them and they're, they're
actually starting to save these guys some
prices like, you know, there's a guy at the
bridge, you know, ah, you know, who only
makes 2,000 bucks a crossing,l4)
of the February 3, 2009, lunch

When asked about the t
meeting, Tim Brink test if
Q.

Did you have enough discussions with Greg Westfall
to recognize his voice?

A.

Oh, yeah, absolutely.

Q.

Was Greg West
1
the person who said,
as
indicated by
transcript, "The cartel probably
kicked everybody out they were having all the
problems with, volumes or everything else"?

A.

Yeah, that was Greg's voice.

Q.

Do you have any memory of whether Greg Westfall
expressed surprise that the cartels were involved
in the importation of Mexican condensate?

A.

No.
I don't think anybody at
surprised about anything.

Q.

Okay. Was this discussion part of the conspiracy
to import
product?

A.

Yes.

Q.

Did was - - was Greg Westfall the person who
exclaimed, "Oh, God," after discussing the amount
of the bribes being paid by officials?

A.

Yes.

Q.

Did you have an impression at the time whether he
was
about the fact that bribes were
being paid or the amount of the bribes?

A.

The amount

I know Greg.

the bribes.

143Id. at 19-20.
-136-

that

table was

Q.

Okay. You understood that bribes were being paid
by the people bringing the condensate --

A.

Yes.

Q.
A.

- over to you?
Yes.
Objection

Q.

Do you believe that it was true that bribes were
paid to get the condensate out of Mexico and into
the United States?
. Objection, form.

A.

Had to be.

Q.

Okay.

A.

No other way to do it.

Q.

All right.
Did you have discussions with Greg
Westfall, Don Schroeder, and Steve Pechenik about
the fact that bribes were being required to be
paid to get the product in? Not that you paid
them, but that somebody paid them?

A.

Yes .144
evidence quoted at length above

ses fact issues for

trial that preclude the court from granting Murphy Energy summary
judgment on PEP's civil conspiracy claim.
4.

Murphy Energy Is Not Entitled to Summary Judgment on
PEP's Claims for Violation of the TTLA

To prevail on its claim for violation of the TTLA PEP must
show that

(1)

PEP had a possessory right to property;

(2) Murphy

144Deposition of Timothy Brink, Exhibit 39 to PEP'S Opposition
to Defendants' Dispositive Motions, Docket Entry No. 546-10,
pp. 59:19-61:25.
-137

unlawfully appropriated property in violation of the Texas
Code; and (3) PEP sustained damages as a result of the theft.
Tex. Civ. Prac. & Rem. Code
§

31.03(a).

§§

134.002(2), 134.003; Tex. Penal Code

Murphy Energy argues that it is entitled to summary

judgment on PEP's claim for violation of the TTLA because \\the
evidence shows that Murphy did not know the product was stolen. 145
It

evidence cited at length in

§

IV.E.2-3, above, also raises fact

issues that preclude the court from granting Murphy Energy summary
judgment on PEP's claim for violation of the TTLA because,
believed,

this evidence would

if

low a reasonable fact-finder to

conclude that Murphy Energy unlawfully appropriated property in
violation of the Texas Penal Code to which PEP had a possessory
right and that Murphy Energy's actions damaged PEP.
5.

Murphy Energy Is Not Entitled to Summary Judgment on
Transactions for Which PEP Has Received Restitution

Citing

, 822 S.W.2d at 7, Murphy Energy

argues that it is entitled to summary judgment on PEP's conversion,
equitable relief,

and TTLA claims

statute of limitations.

that

are

not

barred by the

Murphy Energy argues that

PEP, by its own calculations, received $2,415,635.72 in
resti tution for the $2,415,635.72 worth of PEP condensate
that was sold to BASF during January-March 2009. Ex. N

145Murphy's MSJ,
Docket Entry No.
479,
p.
28
(citing
Depositions
Gregory A. Westfall, Exhibit 00, Docket Entry
No. 479-40, pp. 86:8-16, 124:1115, 133:14-19, 159:1721, and
162:15-21; Carter Simmons, Exhibit PP, Docket Entry No. 479-41,
pp. 50:9-25; and Grant Simmons, Exhibit QQ, Docket Entry No. 47942, p. 16:16 19).
-138-

at Response to Interrogatory No. 10i Ex. L. at Response
No. 35.
According to PEP, this is the same condensate
that Murphy purchased from Continental and sold to
Trammo, who subsequently sold the condensate to BASF.
refore received full restitution for the
PEP has
condensate Murphy purchased and sold to Trammo in 2009
and is therefore prohibited from seeking a further
recovery. _46
that PEP has been compensated for damages

Murphy Energy

ed States

traceable to Murphy Energy by sums received from the
Treasury

in

connection

with

civil

forfeitures

involving

Sun

Petroco, LLC and Luis Ariel Rivera, Trammo, and TransMontaigne. 147
in

For the reasons s

§

IV.C.6, above, with respect to the same

argument made by BASF and BFLP, Murphy Energy is not entitled to
summary

judgment

on

this

basis.

The

allocation

of

settlement

credits, if any, is an issue to be reached at trial, not on summary
judgment.
Summary Judgment on PEP's

6.

RICO provides

I causes of action for recovery

damages for "[a] ny

injured in his business or property by

reason of a violation
§

1964(c}.

section 1962 of this chapter.·

PEP all

that the Conspiring Defendants c

association-in fact ent
distinct

purpose-to

t

import,

se and that

18 U.S.C.
an

"[t] he enterprise had a

distribute and

fraudulently market

stolen condensate in the United Sates and then to launder the

146Murphy's MSJ, Docket Entry No. 479, pp. 36-37.
147Id.

139-

-----_.__ _._ -._---------..

..

proceeds of those illegal sales. 11148

PEP alleges that the conduct

the Conspiring Defendants violates 18 U.S.C.

1962(c) and (d).

§§

subsections state:
(c)

It shall be unlawful
any person employed by or
associated with any enterprise engaged
or the
activit s of which af
interstate or foreign
commerce to conduct or participate directly or
indirectlYI in the conduct of such enterprise/s
affairs through a pattern of racketeering activity
or collection of unlawful debt.
I

I

I

(d)

18 U.S.C.

l

It shall be unlawful for any person to conspire to
violate any of the provisions of subsection . . .
(c)
this section.
1962 (c)

§§

and

To

(d).

pursuant to any RICO subsection
establishing

\\ (1)

racketeering
establishment

a

person

activi ty
I

conduct

I

(3)

l

who

engages

(5th

(1989) ) .

(2)

to

a

Cir.

l

Energy argues

that

claim

pattern
acquisition

the

or control of an enterprise.'1

1988),

224 F.3d 425

l

1

Inc. v. J.I.

cert.

denied,

St.

l

Paul

439 (5th Cir.
Case CO'

109

S.Ct.

I

855

1531
(5th

129 S.Ct. 2835 (2009).

Citing Reves v. Ernst & Young
to

hold

it

I

113 S.Ct. 1163 (1993), Murphy

liable

for

a

substantive

RICO

PEP must produce evidence that Murphy Energy played

"some part in directing the enterprises's af

~

facie

St. Germain v. Howard, 556 F.3d 261, 263

Cir.), cert. denied

violation,

in

connected

2000) (quoting Delta Truck & Tractor,
242

prima

PEP must allege facts capable

Mercury Insurance Co. v. Williamson

F.2d 2411

state a

148Third Amended Complaint,
205.

rs . . . . It is not

Docket Entry No.
140-

220

1

pp.

35-36

enough to show that Murphy provided services that were used by the
purported enterprise, because that is not the same as directing the
affairs of the enterprise. ,,149

In Reves the Supreme Court held that

\\ \ to conduct or participate, directly or indirectly, in the conduct
of such enterprise's affairs,'

1962(c), one must participate in

§

the operation or management of the enterprise itself."
1173.

Without

citing any specific evidence,

PEP asserts

that

Murphy bought and sold millions of dollars in condensate and met
directly with other members of the association-in-fact enterprise
to coordinate their illegal conduct.

In this way, Murphy partici-

pated in the scheme, as that term is defined in Reves. ,,150

Evidence

showing that Murphy Energy bought and sold millions of dollars of
condensate

and

met

with

others

to

coordinate

their

sales

and

purchases merely show that Murphy conducted its commercial business
of buying, selling, transporting, and storing hydrocarbons; it is
not

evidence

influencing

that
the

Murphy Energy had any part
affairs

of

the

purported

in directing or

RICO

enterprise.

Accordingly, the court concludes that Murphy Energy is entitled to
summary judgment on PEP's substantive RICO claim.
Al ternati vely,
entitled

to

summary

the

court

judgment

concludes
on

PEP's

that

Murphy

substantive

Energy
RICO

is

claim

because PEP has failed to cite evidence capable of establishing

149Murphy Energy's MSJ, Docket Entry No. 479, p. 32.
150PEP's Opposition to Defendants' Dispositive Motions, Docket
Entry No. 545, p. 34.
-141-

RICO.

that Murphy's conduct was the cause of PEP's injuries
The RICO

causation analysis

focuses

on

"the

directness of

the

relationship between the conduct and the harm."
City

of

New

York,

N.Y.,

130

S.Ct.

983,

990

(2010).

PEP

acknowledges that there is no direct relationship between Murphy
Energy's conduct and the thefts of PEP condensate.
conduct was not
Murphy was, at

Murphy Energy's

cause of PEP's injuries under RICO because
, several transactions removed from the theft of

condensate that actually injured PEP.

See ide at 992

(dismissing

RICO claims on causation grounds because the plaintiff's "theory of
liability rests on the independent actions of

rd and even fourth

parties") i Proctor & Gamble Co. v. Amway Corp., 242 F.3d 539, 565
(5th Cir.), cert. denied, 122 S.Ct. 329 (2001)

ury to plaintiff

did not flow directly from defendant's conduct,

and thus "there

[were] too many

ervening factors for proximate causation to be

proven") .
"To demonstrate a civil RICO conspiracy, a
that:

aimant must show

(1) two or more persons agreed to commit a substantive RICO

offense, and (2)
object

the defendant knew of and

of the RICO offense."

667 F.3d 539, 551 (5th Cir. 2012)

to the overall

See Davis-Lynch, Inc. v. Moreno,
(citing Chaney v. Dreyfus Service

Corp., 595 F.3d 219, 239 (5th Cir. 2010)).
A person need not commit or agree to commit the requisite
two or more predicate acts of 'racketeering activity' to
be held
nally liable as a conspirator under RICO.
To
standing to establish a civil Rrco conspiracy,
however, a claimant must allege injury from an act that
-142-

is independently wrongful under RICO.
Injury caused by
acts that are not racketeering activities or otherwise
wrongful under RICO will not establish a viable civil
RICO claim.
Id. at 551-52 (citing Beck v. Prupis

l

120 S.Ct. 1608

1

1616 (2000)

plaintiff cannot bring suit under RICO based

("[A] civil conspi

that

on injury caused by any act in furtherance of a conspi
plaintiff injury.

might have caused

Rather

l

such plaintiff

must allege injury from an act that is analogous to an 'ac[t] of a
tortious character

. meaning an act that is independently

l
l

wrongful under RICO. II) •

The Fifth Circuit has stated that "the

core of a RICO civil conspiracy is an agreement to commit predicate
acts 1

[therefore] a RICO civil conspiracy complaint 1 at the very

least 1

must

specifically such an agreement.

Services, Inc. v. TBS International, Inc'
Cir.

1992).

PEP

has

failed

to

l

offer

II

975 F.2d 1134 1 1140 (5th
evidence

from

reasonable fact finder could conclude that Murphy
commit a substant
overall object

of the RICO offense.

930

(acknowledging
elements

to the
PEp/s

Absent such

Is as a matter

Nolen v. Nucentrix Broadband Networks Inc'
(5th

Cir. )
that

I

cert.

failure

denied

to

plead

l

123
and

another § 1962 violation impli

cannot plead a conspiracy to violate that sect

a

agreed to

RICO offense and knew of and

claim against Murphy Energy for RICO conspiracy
of law.

which

S.Ct.

293 F.3d

l

600
the

(2002)

requisite

tly means plaintiff
under

§

1962(d)).

AccordinglYI Murphy Energy is entitled to summary judgment on PEp/s
RICO conspiracy claim.
-143-

F.

Superior Crude and Jeff Kirby

PEP first asserted claims against Superior Crude Gathering and
its owner operator, Jeff Kirby, in the Original Complaint filed on
May 29, 2011,

Big Star action,

Action No. H 11 2019).

(Docket Entry No. 1 in Civil

PEP alleges that

84.

Superior Crude is owned and operated by Kirby.
Kirby is individually liable for Superior Crude's
actions because no corporate dist
ion should be
recognized between themi they are and were alter
, in part because Superior Crude was utilized
an illegal purpose and as a sham to perpetrate
a
Kirby also actively part ipated in, and
directed, Superior Crude's conduct.

85.

Superior Crude voluntarily joined
conspiracy
to market and distribute stolen PEP condensate.

86.

Superior Crude bought and sold stolen condensate
worth at least $52 million.

87.

In addition, Superior was a major distributor of
PEP condensate. Superior Crude distributed
en condensate worth millions
dollars.
Superior operated barges and tugs to transport the
en condensate from storage facilit s in
Brownsville,
Texas and Rio Hondo,
Texas to
purchasers'
facilities in Sun Nederland and
Port Arthur, Texas.
The coordinator for these
shipments was usually Donald Schroeder of Trammo
Petroleum. Schroeder has pleaded guilty to felony
conspiracy to receive and sell
property,
ifically Mexican condensate,
his role as
ident of Trammo Petroleum.

88.

Additionally, Superior Crude brokered transactions
involving the sale and purchase of
stolen
condensate.

89.

A typical transaction in which Superior Crude
profited from shipping stolen condensate is its
shipment, on behalf of Trammo Petroleum, of over
24,000 barrels to Port Arthur in December 2008.

90.

Superior Crude knew that the condensate it was
buying, selling and distributing was stolen.
In
-144-

the alternative, Superior Crude either consciously
disregarded the fact that the condensate was
stolen or should have known that the condensate
was stolen.
91.

92.

As to its transportation services, Superior Crude
likewise committed specific acts in furtherance of
the conspiracy, including violations of 18 U.S.C.
§§
2314-which applies to "Whoever transports,
transmits, or transfers in interstate or foreign
commerce any goods .
knowing the same to have
been stolen, converted or taken by fraud"-and
2315-which applies
to
taking possession of
property "knowing the same to have been stolen,
unlawfully converted, or taken"-and the Texas
Theft Liability Act (or TTLA) , Tex. Civ. PRac. &
Rem. Code § 134.001-.005.

93.

Superior Crude was aware that the conspiracy was
much larger than its individual participation and
that for the conspiracy to succeed, additional
criminal conduct was needed to conceal the
conspiracy from PEP, its customers, and from US
and Mexican authorities, including the bribery of
government officials and the forging of documents.

94.

~~

As to each of its own purchases and sales of PEP
condensate, Superior Crude committed at least the
following acts in furtherance of the conspiracy:
(a) defrauded the ultimate purchaser of the source
and patrimony of the condensate in violation of
state law and the federal mail and wire fraud
s tat ute s ,
18 U . S . C .
§§
13 4 1 and 13 4 3 ;
(b )
knowingly engaged in transactions involving stolen
goods in violation of 18 U.S.C. § 2314 and 2315
and the Texas Theft Liability Act (or TTLA) , Tex.
Civ. Prac. & Rem. Code § 134.001-.005; and (c)
committed money laundering in violation of 18
U.S.C. § 1956.

Superior Crude is responsible for all damages
inflicted on PEP from the larger conspiracy.
Alternatively, Superior Crude is liable for all of
its transactions involving the stolen property of
Mexico, including the transactions in which it
transported or brokered sales. 151

151First Amended Complaint,
84-94.

Docket Entry No.

-145-

378,

pp.

16-18

Based on these allegations of fact, PEP has asserted claims against
Superior Crude Gathering, Inc. and Jeff Kirby for conversion, for
equitable relief including constructive trust based on theories of
money had and received and unjust enrichment, civil conspiracy, and
violation of the TTLA.
Superior Crude Gathering and Jeff Kirby argue that they are
each entitled to summary judgment because
[t]he undisputed evidence in this case establishes that
all of Superior's alleged purchases and sales of Mexican
condensate occurred by December 10, 2008 at the latest.
Accordingly, and because PEP did not file suit against
Superior until May 29, 2011, all of its claims are timebarred as a matter of law.
Al though PEP pleads the discovery rule in an
attempt to avoid the obvious time bar, that doctrine
applies only if the nature of the injury incurred is
inherently undiscoverable and the injury is objectively
verifiable.
Here, the discovery rule is inapplicable
because PEP's injuries are not inherently undiscoverable
under Texas law. And, even if the discovery rule could
apply to PEP's claim, PEP has admitted that it knew that
its condensate was being stolen and sold in the United
States long before May 29, 2009 . . . Finally, there is no
evidence that Superior fraudulently concealed any of its
activities, so that avenue of rescuing time-barred claims
is unavailable to PEP as well. 152
In support of the argument that PEP's claims against them are
time barred, these defendants argue that PEP "claims that Superior
is

liable

for

numerous

alleged

stolen

condensate

sales

purchases occurring between October 2006 and December 2008.

and
See

152Defendants Superior Crude Gathering, Inc. and Jeff Kirby's
Motion for Summary Judgment ("Superior's and Kirby's MSJ") , Docket
Entry No. 486, p. 3.
-146-

Ex. A at pp. 516:25-518:1i Ex. B at p. 21 ~~ 52-53." 153
is

the

Expert

Report

of

PEP

experts

wilkinson, dated October 8, 2012.

Brent

Bers

Exhibit B
and Joseph

Regarding the purchases made by

Superior the Expert Report states:
52.

We have examined documents related to Superior,
including invoices and settlement summaries. For
purposes of our analysis, we have assumed that any
references
to products
sourced
from Mexico
reflected in Superior's invoices represent Mexican
Condensate.

53.

Based
on
our
analysis,
Superior
purchased
approximately
312,000
barrels
Mexican
Condensate totaling over $27.4 million from
October 2006 to December 2008 (See Exhibit I).

54.

We have also identified about 342,000 barrels
totaling
approximately
$28.1
million
of
potentially Mexican Condensate
purchased by
Superior (See Exhibit I).
To the extent that
Superior blended or purchased blended product
which included the Mexican Condensate, at this
time we do not have sufficient information to
determine the amount of Mexican Condensate which
comprises the blended product. 154

Exhibit

A

is

the

deposition

of

PEP's

expert

Joseph

L.

Wilkinson who testified that he had no reason to believe that in
2006, 2007, or 2008 Jeff Kirby or other representatives of Superior

knew that the condensate they were purchasing was stolen, and that
his comments about whatever Superior did or did not do all
wi th conduct and purchases that occurred be

t

December of 2008. 155

153Id. at 8.
154Expert Report of Brent Bersin & Joseph Wilkinson, Exhibit B
to Superior's and Kirby's MSJ, Docket Entry No. 486, pp. 21 22.
155Deposition of John L. Wilkinson, Exhibit A to Superior's and
Kirby's MSJ, Docket Entry No. 486, pp. 516 18.
-147-

Although PEP cites to Kirby's deposition as evidence that Kirby
the government

"admits to having bought and sold condensate
informed

him

that

it

was

stolen,

,,156

that

testimony

confirms

Wilkinson's testimony that Superior has not engaged in any conduct
re

to sales or purchases of stolen Mexican condensate since

December of 2008:
Q.

Okay.
When was your
Mexican condensate?

last

purchase

of

A.

In December of 2008.

Q.

Okay.

A.

I -- I don't remember exactly the date, but we
were put on notice somewhere around December the
8th to the 10th, 2008.

Q.

Did you purchase any Mexican condensate after you
were put on notice?

A.

Not with

Q.

Okay. Did you purchase from any
the - did you
purchase anything from any of the suppliers who
had been sell
Mexican condensate to you prior
to December
2008

A.

The PEPC05

Q.

-- after the notice?

A.

The PEPCOs and Ys?

Q.

Any suppl
that supplied Mexican condensate to
you before December of 2008, did you purchase
anything from them

A.

Not that I'm aware of.

Q.

-- after McAllister's notice?

Do you remember what date, more or less?

not that we were aware

156PEP's Opposition to Defendants' Disposi ti ve Motions, Docket
Entry No. 545, p. 33.
-148-

A.

Not that we're aware of.

Q.

Is the first time that DOJ or ICE, or any part of
the U.S. Government, put you on notice regarding
the condensate, was that
was the first time
that ever happened in December 8th or 10th, 2008?

A.

No, it was late October 2008. 157

PEP acknowledges in its response that

the claims asserted

against Superior and Kirby are governed by Texas' two-year statute
of limitations, Tex. Civ. Prac. & Rem. Code § 16.003(a)i and PEP
does not dispute Superior's and Kirby's assertions that neither
them had any connection with PEP's condensate in the two years
before PEP filed against them,
only

argument

against

i.e.,

granting

after May 29,
two

2009.

defendants

PEP's
summary

judgment based on limitations is PEP's general argument that
claims asserted against all the defendants named in this action are
not t

barred because the running

limitations is de

fraudulent concealment and the discovery rule.

by

Based on the

analysis stated in §§ IV.B.4(c}, IV.C.4(a}, and IV.E.l, the court
concludes that the claims asserted
and

f Kirby are time barred

Superior Crude Gathering
PEP has failed to allege

facts or present any evidence capable of establishing that e
of
two

defendants had any connection to stolen condensate within
of the dates on which PEP filed suit against them.

tion of Jeff Kirby, Exhibit 43 to PEP's Opposition to
Defendants' Dispositive Motions, Docket Entry No. 546, pp. 183:8
184:10.
149-

Fraudulent

concealment

does

not

prevent

Superior

Crude

Gathering or Jeff Kirby from relying on the limitations
because PEP has neither alleged nor

ted any evidence capable of

establishing that either of them concealed any facts from PEP or
had a fixed purpose to conceal the wrongs alleged.

Moreover, PEP's

expert, Joseph Wilkinson/ testified at his deposition that
no reason to believe that in 2006,

2007,

had

or 2008 Jeff Kirby or

other representatives of Superior knew that the condensate they
were purchasing was stolen. 158
discovery rule does not prevent Superior Crude or Jeff
Kirby from relying on the limitations defense because the evidence
already cited in

§§

IV.B.4 (c) (2),

IV.C.4 (b),

and IV.E.1 (b)

shows

that PEP was well aware that Mexican condensate was being stolen in
Mexico and converted in the United States more than two years
before PEP filed suit against Superior Crude Gathering and Jeff
Kirby.
impli

The critical inquiry

accrual when the discovery rule is

is when the claimant discovered or using reasonable

diligence should have discovered the wrongfully caused injury.

See

KPMG Peat Marwick v. Harrison County Hous. Fin. Corp./ 988 S.W.2d
746, 749 (Tex. 1999).

For the reasons explained above, the court

concludes that PEP has failed either to allege any facts or to cite
any evidence capable of establishing that PEP did not know or with

158Deposition of John L. Wilkinson, Exhibit A to Superior's and
Kirby's MSJ, Docket Entry No. 486, pp. 517-18.
-150-

the exercise of reasonable diligence could not have known about the
for

inj

which

is

being

sought

this

action.

Accordingly, the court concludes that Superior Crude Gathering and
Jeff Kirby are entitled to summary judgment because the claims
alleged against them are

I barred by Texas' two-year statute of

limitations.
G.

Third-Party Defendant Donald Schroeder's Motion for Partial
Summary Judgment
Third-party defendant Donald Schroeder

partial summary

judgment on cross-claims asserted against him by Murphy Energy and
BFLP for indemnity, contribution, and breach of warranty.
PEP alleged claims against Schroeder in the Original Complaint
fi

in the BASF action.

guilty

to

condensate.
its

knowingly

On May 29,

conspiring

to

2009,

receive

Schroeder pleaded
and

sell

stolen

In September of 2010 PEP voluntarily dismissed all of

aims against Schroeder. 159

Shortly thereafter, PEP agreed to

dismiss all of its claims against Schroeder's employer, Trammo."6Q
Murphy Energy and BFLP asserted cross-claims

inst Schroeder.

PEP's Not
of Voluntary Dismissal of Defendant
Donald P. Schroeder, Jr. Pursuant to Rule 41(a) (1) (A) (i) ("PEP's
Notice of Voluntary Dismissal"), Docket Entry No. 54; Order, Docket
Entry No. 60. Schroeder is not named as a defendant in PEP's Third
Amended Complaint, Docket Entry No. 220.
16°Joint Motion to Dismiss Defendant Trammo Petroleum, Inc.
With Prejudice ("Joint Motion to Dismiss"), Docket Entry No. 87;
Order Dismissing Defendant Trammo Petroleum, Inc. With Prejudice,
Docket Entry No. 95.
-151-

Murphy Energy's Cross-Claims

1.

Schroeder:

Murphy Energy asserts four cross-claims
"contribution and/or indemnitYi"

(1) a claim

(2)

"knowing participation in breach of fiduciary dutYi"

a claim for
(3)

a claim

for "fraud by nondisclosurejll and (4) a claim

civil conspiracy

and

leged breach of

three

for

contribution arising

from

fiduciary duty, fraud, and conspiracy. 161

an

The

t three claims all

have subheadings that state "Against Schroeder
Schroeder

Contribution") .

that he is entitled to summary judgment on Murphy

Energy's indemnity claim because Murphy Energy has no statutory,
contractual,

or

common-law right

to

indemnity and

that

he

is

entitled to summary judgment on Murphy Energy's claims for breach
of fiduciary duty,
because

they

are

fraud by nondisclosure,
substantive

claims

and

and civil conspiracy
are

not

contribution

claims. 162
(a)

Indemnity

Schroeder argues that he is entit
Murphy

to summary judgment on

's claim for indemnity because neither common law nor

statutory indemnity apply under the

s of this case.

161Defendant/Cross-Claimant Murphy Energy Corporation's
Amended Cross Claims, Docket Entry No. 313.

Citing

rd

rd-Party Defendant Donald Schroeder's Motion for Part
Summary Judgment on BASF FINA Petrochemicals Limited Partnership's
and Murphy Energy Corporation's Cross-Claims ("Schroeder's MPSJ") ,
Docket Entry No. 481, p. 1.
-152

Astra Oil, Inc. v. Diamond Shamrock Refining Co., L.P., 89 S.W.3d
702,

(Tex.App.-Houston

706

[1st

Dist.]

pet.

2002,

denied),

Schroeder argues that he cannot be held liable under a common law
theory of indemnity because "[a]n ordinary business or contractual
relationship does not suffice to create common-law indemnity based
on vicarious liability."

Schroeder explains that

[i] n such cases, the indemnitor is 1 iable "through no act
of his own" but "solely upon the relationship between the
two defendants."
If Murphy and BFLP are found to
be liable to PEP it would be because of their own
wrongful acts-not because of a business relationship with
Schroeder's former company. 163
Asserting that statutory indemnity is rare, Schroeder argues that
no such statute applies to the undisputed facts of this case.
Finally, Schroeder argues that there are no contractual indemnity
provisions pursuant to which he could be held liable to indemnify
Murphy Energy.
Murphy

Energy

responds

that

there

were

two

Murphy-Trammo

contracts and that both contain an indemnification provision that
runs in favor of a performing party when the other party fails to
perform.

Because

Schroeder

signed

each

of

the

Murphy-Trammo

contracts, Murphy Energy argues that Schroeder could be required to
indemnify Murphy.
signed

the

Murphy Energy explains that "[t]hough Schroeder

contracts

as

president

of

Trammo,

and

not

in

his

individual capacity, there are a host of legal theories that make

163Id.

at 7.
-153-

ions. 11164

individuals liable for corporate obI

2009, pet. denied)

Morgan, 277 S.W.3d 549, 557 (Tex.App.
(citing Mapco,

Inc. v. Carter,

817 S.W.2d 686,

Schroeder replies that Murphy Energy's
that would

Citing Seidler v.

688

(Tex. 1991)),

iance on any theories

low it to pierce the corporate veil to reach him are

misplaced because \\ [t] hese theories must be specifically pleaded or
they are waived,

unless they are

by consent.

11165

Because

Murphy Energy's complaint against Schroeder does not contain
allegations of fact in support
because such a

any veil-piercing theory,

theory cannot be asserted for the first

and

time

response to a motion for summary judgment, Schroeder is entitl

to

summary judgment on Murphy Energy's claim for indemnification.
Cutrera v. Board of Supervisors of Louisiana State University, 429
F.3d 108, 113 (5th Cir. 2005)

("A claim which is not raised in the

complaint but, rather, is raised only in response to a motion
summary judgment is not properly
(b)

the court. ") .

Contribution

Schroeder argues that he is entitled to summary judgment on
Murphy Energy's cross-claims for contribution because they are, in

fendant Murphy Energy Corporation's Response to Donald
Schroeder's Motion for Partial Summary Judgment, Docket Entry
No. 539, at p. 4.
Party Defendant Donald Schroeder's Reply in Support of
His Motion for Partial Summary Judgment on BASF FINA Petrochemicals
Limited Partnership's and Murphy Energy Corporation's Cross-Cl
Docket Entry No. 582, p. 4.
154-

reality,

not

claims

for contribution but,

instead,

substantive

claims that have already been raised and disposed of in state court
actions.

Murphy Energy responds that

Schroeder has

failed to

articulate a valid basis for dismissing its contribution claims
because the claims are not only styled as contribution claims but
the prayer for relief makes all of the claims asserted against
Schroeder expressly contingent on Murphy being found liable to PEP.
Because Schroeder does not dispute that he could be held liable for
contribution if Murphy is found liable to PEP,

the court is not

persuaded that Schroeder is entitled to summary judgment on any of
the claims for contribution asserted against him by Murphy Energy.
2.

BFLP's Cross-Claims

BFLP asserts two cross-claims against Schroeder:
"breach of express and implied warranty of title"
"contribution and/or indemnity. 11166

one for

and one for

Schroeder argues that he is

entitled to summary judgment on BFLP's claim for indemnity.
the reasons stated in

§

For

IV.G.1(a), above, the court concludes that

Schroeder is entitled to summary judgment on BFLP's claims for
indemnity.
Schroeder argues that he is entitled to summary judgment on
BFLP's claims for breach of warranty claim because he was not a

166Defendant BASF FINA Petrochemicals Limited Partnership's
Answer to PEP's Third Amended Complaint and Cross Claims, Docket
Entry No. 240.
-155-

party to the contract between BASF and Trammo and because there are
no allegations that he ever held title to the condensate.

BFLP

responds that corporate officers can be held personally liable for
breaching express or implied warranties, but the cases that BFLP
cites

in

support

of

this

argument

all

involved

claims

for

violations of the Texas Deceptive Trade Practices Act ("TDTPA").
Because BFLP did not assert its breach of warranty claim under the
TDTPA, and is not seeking relief under the TDTPA, BFLP's reliance
on

it

is

misplaced.

Accordingly,

the

court

concludes

that

Schroeder is entitled to summary judgment on BFLP's cross-claims
for

indemnity and breach of

warranty,

but

is

not

entitled to

summary judgment on BFLP's cross-claims for contribution.

v.

PEP's Dispositive Motion

PEP seeks summary judgment on claims related to the condensate
that passed through Continental Fuels,

"which was run by Timothy

Brink who pleaded guilty to trafficking in stolen goods, and Josh
Crescenzi,

the

conversations

with

government
Brink

and

informant
other

who

taped

defendants. "167

numerous
PEP

seeks

partial summary judgment as follows: 168

167PEP's Dispositive Motion, Docket Entry No. 492, p. 23.
168Id. at 31.
-156-

Full Amount

Two Year Amount

BASF

$17,084,134

$2,531,704

Murphy

$ 2,531,704

$2,531,704

Plains

$

590,098

$0

F&M

$

539,479

$0

High Sierra

$

554,279

$0

Continental

$30,749,892

$3,071,183

PEP also asks the court to strike "defenses raising PEP's alleged
contributory negligence

and other comparative

. as set forth in PEP's proposed order,

1/

169

liability issues
and

judgment

on the pleadings against Murphy Energy's counterclaims. 170
A.

PEP is Not Entitled to Partial Summary Judgment

For the reasons
above,

in

§§

IV.B.3,

IV.C.5, and IV.E.2,

the court has already concluded that genuine

issues of

material fact exist as to whether PEP can trace to the defendants
stolen condensate

and,

if

so,

whether

PEP

can establish with

reasonable certainty the amount of stolen condensate that traces to
each defendant.

For these reasons the court concludes that PEP is

not entitled to summary judgment on any of the claims for which it
seeks summary judgment.
B.

PEP Is Not Entitled to Have Affir.mative Defenses Stricken

PEP also asks the court to strike "defenses raising PEP's
alleged contributory negligence and other comparative liability
169Id. at 18.

l70Id. at 32-40.
157-

as

issues

set

forth

in PEP's proposed order.

,,171

The

proposed order attached to PEP's dispositive motion contains a long
list

of

affirmative defenses.

PEP,

however,

has not properly

identified or briefed the specific "defenses raising PEP's alleged
contributory negligence and other comparative liability issues"
that PEP contends the court should strike.

See United States v. Scroggins,

will not consider this request.
599 F.3d 433,

446

(5th Cir.

Therefore, the court

2010)

("It is not enough to merely

mention or allude to a legal theory.") .
C.

PEP Is Entitled to Judgment on Murphy Energy's Counterclaims

Defendant Murphy Energy has counterclaimed against PEP for
violation of RICO

§§

1962(c) and (d), civil conspiracy, business

disparagement, negligence, gross negligence, and various violations
of Mexican law.

PEP seeks judgment as a matter of law pursuant to

Federal Rule of Civil Procedure 12(c)

on all of Murphy Energy's

counterclaims.
1.

Standard of Review

"A motion for judgment on the pleadings under Rule 12(c) is
subject

to

the

Rule 12 (b) (6) ."

same

standard

Doe v.

as

MySpace,

a

motion

Inc.,

Cir.), cert. denied, 129 S.Ct. 600 (2008)

to

dismiss

528 F. 3d 413,

418

under
(5th

"To avoid dismissal, a

plaintiff must plead sufficient facts to state a claim for relief
that is plausible on its face," accepting as true all well-pleaded

171Id. at 18.

-158-

facts.

Gentilello v. Rege,

627 F.3d 540,

544

(5th Cir. 2010).

Courts "do not accept as true conclusory allegations, unwarranted
factual inferences, or legal conclusions."
2.

Id.

RICO Claims

Murphy Energy alleges that PEP, PEMEX, and organized criminal
cartels

(such

as

Los

Zetas)

created

an

association-in-fact

enterprise,172 and that "[t] he enterprise had a distinct purpose-to
steal, smuggle, fraudulently market, and illicitly sell condensate
to good faith purchasers in the United Sates, and then to launder
the proceeds of those illegal sales. ,,173

Murphy Energy alleges that

PEP conducted or participated,

directly and indirectly,

conduct

affairs

of

the

enterprise's

racketeering activity.

through

a

ln the

pattern

of

Murphy Energy alleges that

PEP, in conjunction with its co-conspirators, committed
numerous predicate acts under 18 U.S.C. § 1961 (1) in
furtherance of its illegal scheme, including (a) repeated
acts or threats involving kidnapping; (b) repeated acts
or threats involving bribery;
(c) repeated acts or
threats involving robbery; (d) violations of the Foreign
Corrupt Practices Act as incorporated in the Travel Act,
18 U.S.C. § 1952; (e) transporting stolen condensate
across the U.S.-Mexico border in violation of 18 U.S.C.
§ 2314; (f) receiving and/or selling stolen property in
the United States in violation of 18 U.S.C. § 2315; (g)
conducting financial transactions with the proceeds of
its
unlawful
scheme
in
violation
of
18
U. S. C.
§ 1956(a) (1); and (H) transmitting or transferring from

172Defendant
Murphy
Energy
Corporation's
Third
Amended
Counterclaim ("Murphy Energy's Third Amended Counterclaim") , Docket
Entry No. 235, p. 10, ~ 31.
173Id.

~

34.
-159-

the United States into Mexico the proceeds of its
unlawful scheme in violation of 18 U.S.C. § 1956 (a) (2) .174
Murphy Energy alleges PEP's conduct violates 18 U.S.C.

1962{c)

§§

and (d).
Sections 1962(c) and (d) state:
(c)

It shall be unlawful for any person employed by or
associated with any enterprise engaged in, or the
activit
of which
fect, interstate or foreign
commerce, to conduct or participate t directly or
indirectlYt in
conduct of such enterprise's
affairs through a pattern of racketeering activity
or collection
unlawful debt.

(d)

It shall be unlawful
any person to conspire to
violate any of
provisions of subsection . . .
(c) of this section.

18 U. S . C .

1962 (c)

§§

and

( d) .

To state a

prima facie

claim

pursuant to any RICO subsection t PEP must allege facts capable of
establishing

"(1)

racketeering

a

acti

who
ty

(3)

engages

connected

in
to

(2)

a

the

establishment t conduct, or control of an enterprise.

pattern

of

acquisition t
1I

St. Paul

Mercury Insurance Co. v. Williamson t 224 F.3d 425, 439 (5th Cir.
(quoting Delta Truck & Tractor,

2000)
F.2d

241

t

242

(5th

1988)

t

Inc. v. J.I. Case CO.

cert.

denied,

(1989) ) .
Cir. )

1

109

S. Ct.

t

855
1531

556 F.3d 261 1 263 (5th

====~======I

129 S.Ct. 2835 (2009).

PEP argues that Murphy Energyts RICO claims are implausible
because they are

on the untenable factual premise that PEP

conspired with drug

IBId. at 11

~

s to steal PEP's own property and

37.
160-

it

to good fai th purchasers. ,,175

Asserting that it "cannot steal its

own property as a matter of law,,,176 PEP argues that
since Murphy's predicate acts are premised on illegal
activity related to e
ing PEP's property or
smuggling illegal goods into the United States, the
predicate acts are unsustainable. How, for example, does
PEP knowingly engage
transactions involving stolen
goods, when it moves
sown property?177
PEP argues that Murphy Energy's RICO allegations,
that

individual

scheme, but that Murphy Energy's
allege that PEP participated

the

RICO

legations are not sufficient to
or benefitted from the alleged

In response Murphy Energy concedes that PEP is a victim

scheme.
of

show

may have participated in a

PEP

at best,

cartels,

but

participation in the scheme.

s

that

PEP

benefitted

from

its

Murphy Energy explains:

Allowing the drug cart s to take the condensate served
as protection payments.
In lieu of cash protection
payments to the cart s, PEP allowed them to take
product. Far from harming PEP, it was benefitted by this
activity because it avoided other,
more damaging
reprisals by the carte . . . PEP will likely argue that
this . . . shows that
is the victim of the scheme, not
a perpetrator, but that argument.
. is not alone a
valid basis for dismissing a RICO claim.
Moreover,
Murphy has done more than merely allege that PEP was a
victim of the
s protection racket. As extensively
alleged in Murphy's counterclaim, PEP and its employees
were willing part ipants in the scheme, which benefitted
all involved. 17B

175Plaintiff's
176

spositive Motion, Docket Entry No. 492, p. 32.

at 33.

177Id.
178Defendant Murphy Energy Corporation's Response to PEP's
Dispositive Motion ("Murphy Energy's Response to PEP's Disposit
Motion"), Docket
No. 541, pp. 31-32.
161-

In support of its contention that "[c]ase law

. establishes

that a corporation may be held liable as a RICO defendant based on
actions

of

its

employees, ,,179

Murphy

Energy

cites

Mylan

Laboratories, Inc. v. Akzo. N.V., 770 F.Supp. 1053, 1070 (D. Md.
1991).

Murphy Energy's reliance on Mylan is misplaced, however,

because that court expressly acknowledged that corporations that
have been held liable for RICO violations were anot alleged to have
ng activity."

the victim or unwitting conduit of
(citing
F.Supp.

165,

Gruber
181

v.

Prudential-Bache

(D.

Conn.

Securities,

(corporation

1987)

vicariously liable where it is the central f

Inc.,

may

be

679
found

or aggressor in

leged scheme) ; Busby v. Crown Supply, Inc., 896 F. 2d 833, 839
n.5 (4th Cir. 1990) ("The formulation of the statute is designed to
impose liability upon a
il

activity

but

corporation which is a perpetrator of

not

upon

employees' RICO violations.").
cont

any facts that,

finder

to

part

conclude

an

unwitting

Murphy Energy's

conduit

of

its

legations do not

if true, would allow a reasonable fact-

that

the

PEP

employees

who

allegedly

ipated in the scheme were acting either within the scope of

their employment or to benefit PEP.

Absent such

1

ions, the

court concludes that PEP is entitled to judgment as a matter of law
on Murphy

Energy's

substantive

RICO

claim because

it

is

not

ible that the scheme's corporate victim was a person who
in a pattern of racketeering activity connected to the

at 31 n.15.
-162-

acquisition, establishment, conduct, or control of an enterprise.
St. Paul Mercury, 224 F.3d at 439.
Alternatively,

the court concludes that PEP is entitled to

judgment on the pleadings on Murphy Energy's substantive RICO claim
because

Murphy

Energy

has

fai

to

allege

ts

capable

of

establishing that PEP's conduct was the cause of Murphy Energy's
injuries under RICO.

The RICO causation analysis focuses on "the

directness of the relationship between the conduct and the harm./I
Hemi Group,
(2010).

LLC v.

City of New York,

Murphy Energy has

N.Y.,

led to al

130 S.Ct.

983,

990

any facts that,

if

true, would allow a reasonable fact-finder to conclude that there
is a direct relationship between PEP's conduct and Murphy Energy's
purchases

of

(dismissing

legedly
RICO

claims

plaintiff's "theory of 1

stolen
on

condensate.
causation

See

grounds

at

992

because

lity rests on the independent actions

of third and even fourth parties")

i

Proctor & Gamble Co. v. Amway

Corp., 242 F.3d 539, 565 (5th Cir.), cert. denied,
(2001)

id.

122 S.Ct. 329

(injury to plaintiff did not flow directly from defendant's

conduct, and thus "there [were]
proximate causation to

too many intervening factors for

proven").

Absent allegations sufficient

to allege a substantive RICO offense, Murphy Energy's claim against
PEP for RICO conspiracy fails as a matter of law.

See

F.3d at 930 ("failure to plead the requisite elements of
§

1962(c) violation implicitly means that

. a

[Murphy Energy] cannot

plead a conspiracy to violate [that] section").
-163-

, 293

Accordingly, PEP

is entitled to judgment on the pleadings on Murphy Energy's RICO
claims for violation of both
3.

§§

1962(c) and (d).

Civil Conspiracy Claim

Murphy Energy's civil conspiracy claim against PEP fails for
essentially

same reason as Murphy Energy's RICO conspiracy

claim r i. e., Murphy Energy has failed to allege an underlying tort.
See Carroll v. Timmers Chevrolet. Inc' r 592 S.W.2d 922, 925 (Tex.
1979)

(cause of action for civil conspiracy arises from injury to

plaintiff caused by an underlying tort) .
4.

Business Disparagement Claim

The elements of a claim for business disparagement under Texas
law are:
(2)

(1)

falsity;

damages.
(5th

Cir.

(3)

publication by defendant
malice;

(4)

of

lack of privil

disparaging words;
i

and

(5)

special

Johnson v. Hospital Corp. of America r 95 F.3d 383 r 391
1996).

Murphy

Energyrs

bus

disparagement

counterclaim is based upon a press release announcing the filing of
this action that PEP posted on its website.
that the

ease disparaged it.

Murphy Energy alleges

The court concludes that

Murphy Energy has not adequately pled fals

malice r

lack of

privilege r or special damages.
The court concludes that Murphy has not pled facts that if
true would demonstrate that the statements in
falser

that they were made with malice,

-164-

press release are

or that

they were not

privileged.
~[n]owhere

Instead,

Murphy

Energy

has

merely

alleged

that

in its complaint or press releases, however, does PEP

admit that it knew Murphy Energy was purchasing condensate in good
faith yet failed to inform Murphy Energy that the condensate was
illegitimate. 11180
Murphy Energy has also failed to allege facts sufficient to
~To

satisfy the special damages element.

prove special damages,

the plaintiff must prove 'that the disparaging communication played
a substantial part in inducing third parties not to deal with the
plaintiff,

resulting

in a

direct pecuniary loss

that

has been

realized or liquidated, such as specific lost sales, loss of trade,
or loss of other dealings."
SNF,

Inc.,

denied).

223

S. W. 3d 616,

Astoria Industries of Iowa,
628

Inc. v.

(Tex.App .-Fort Worth 2007,

Murphy Energy's counterclaim merely alleges that

pet.

~PEP's

disparaging remarks have resulted in direct pecuniary losses to
Murphy Energy and Murphy Energy has suffered special damages as a
direct

result of

however,

PEP's disparagement.

11181

Murphy Energy fails,

to identify any specific sources of economic loss.

Encompass Office Solutions, Inc. v.
938, 959 (E.D. Tex. 2011)
upon finding similar

Ingenix,

Inc.,

~

775 F.Supp.2d

(dismissing business disparagement claim

~conclusory

statement, void of any supporting

18°Murphy Energy's Third Amended Counterclaim,
No. 235, p. 8 ~ 25.
181Id. at 15

See

61.
-165-

Docket Entry

insufficient

to

support

a

for

c

business

disparagement); Nationwide Bi-Weekly Administration, Inc. v. Belo

==-=-, 512 F.3d 137, 147 (5th Cir. 2007)
disparagement claim that "failed to all

firming dismissal of
any specific economic

S ") •

5.

Negligence and Gross Negligence Claims

PEP argues that it is entitled to judgment on the pleadings as
to Murphy Energy's

claims

for negligence and gross

negligence

Murphy Energy's contention that "PEP owed a legal duty to
protect Murphy Energy and other similarly situated companies from
conduct of the organized criminals who stole PEP's condensate"
has

no

basis

in

law. 1B2

Texas

repeatedly held that "[a]s a rule,
protect

another

from

the

criminal

The

Texas

Supreme

Court

has

'a person has no legal duty to
acts of

a

person. '"

Timberwalk Apartments, Partners, Inc. v. Cain, 972 S.W.2d 749, 756
(Tex. 1998)
1996».
197

(quoting Walker v. Harris, 924 S.W.2d 375, 377 (Tex.
Centeg Realty, Inc. v. Siegler, 899 S.W.2d 195,

(Tex. 1995) (same).

The exception to this rule recognized in

these cases is that "one who controls

premises does have a

duty to use ordinary care to protect invitees from criminal acts of
third
and

ies if he knows or has reason to know of an unreasonable
e risk of harm to the invitee."

Because the

's Dispositive Motion, Docket Entry No. 492, p. 34.
-166-

s case,

the court concludes that Murphy Energy's claims for

negligence and gross negligence based on
a

s of

not applicable under the

to invitees

exception appl

duty to protect

legations that PEP had

Murphy Energy from the

acts

of

third-party

criminals are subject to judgment on the pleadings because such
claims are not actionable under Texas law.
6.

Mexican Law Claims

The court has already concluded that Mexican law does not
s and claims alleged in this action. ::'83

apply to the

Moreover,

Civil Procedure 44.1 requires a party that intends

Federal Rule

written

to raise an issue about a foreign country's law (1) to
notice of its intent and (2) to furnish the court with

See Northrop Grumman

of the relevant foreign legal principles.
Ship Systems

t

Inc.

v.

ear proof

Ministry of Defense of

Venezuela, 575 F.3d 491, 496-97 (5th Cir. 2009).

the Republic of
Murphy Energy has

failed to satisfy these requirements for raising issues based on
Mexican law.

The court concludes that Murphy Energy has failed to

state a Mexican law claim that is plaus
D.

e on its

Conclusions

For

the

reasons

stated

above,

PEP's

summary judgment against defendants BASF,
Marketing,

F&M Transportation,

motions

for

Murphy Energy,

partial
Plains

and Continental will be denied;

183See Memorandum Opinion and Order,
pp. 3 -19.
-167-

Docket Entry No.

292,

defenses will be denied; and

firmat

PEP's motion to strike

pleadings as to Murphy Energy's

PEP's motion for judgment on
counterclaims will be granted.
VI.

Motions to Exc1ude and Strike Experts'
Reports and Test~ony

Various parties have filed a number of motions to exclude
and/ or to strike experts'

reports and experts'

testimony

frequently

modify

establish

more

Moreover,

the

during

the

their

extensive
context

course

opinions,

in

of

and

trial

the

because

at
s'
testimony

necessary to effectively rule on such issues.

experts

counsel

predicates
which

The

to exclude or to strike

court's practice is to rule on mot
expert

testimony.

is

often

testimony.
offered

is

Thus, the motions to

exclude and strike expert testimony of Joseph Wilkinson,
Bersin, Allejandro Valle Corona, Ana Maria

Brent

Slack, K. Scott

Van Meter, David G. Ownby, and Frank Holder will be denied.

The

motions to exclude and/or strike filed by or on behalf of Plains
All-American Pipeline, L.P. and High S
LLC will

be

declared moot

pursuant

Oil & Marketing,
to

stipulations of

dismissal filed by PEP and entered by the court ,184

184'See PEP's Agreed Stipulation and Order of
smissal of
Claims Against Plains All-American Pipel
L. p, (Docket Entry
No. 533) signed by the court on March 15, 2013, and PEP's Agreed
Stipulation and order of Dismissal of Claims Against High Sierra
Crude Oil & Marketing, LLC (Docket Entry No, 527) signed by the
court on March 14, 2013.
168-

------------------

-

----------

VII.

Motions to Designate Responsible Third Parties

Pending

before

the

court

are

responsible third parties pursuant to

three
§§

motions

to

designate

33.004(a) and (j) of the

Texas Civil Pract ices and Remedies Code: :85

(1)

Defendants BASF

Corporation and BASF FINA Petrochemicals Limited Partnership's
Amended Mot

for Leave to Designate Responsible Third Parties

(Docket Entry No. 426) and (2) Defendant Superior Crude Gathering,

185Sect
33.004 (a) and (j) of the Texas Civil Practices and
Remedies Code provide:
(a) A defendant may seek to designate a person as a
respons
e third party by filing a motion for
to
designate that person as a responsible third party. The
motion must be filed on or before the 60th day be
the
trial date unless the court finds good cause to
motion to be filed at a later date.

(j) Notwithstanding any other provision of this section,
if, not
than 60 days after the filing
the
defendant's original answer, the defendant al
an
answer fi
with the court that an unknown person
committed a criminal act that was a cause of the
or
inj ury that is the subj ect of the lawsui t , the court
shall grant a motion for leave to designate the unknown
person as a responsible third party if:
(1)
court determines that the
pleaded facts sufficient for the court to
that there is a reasonable probability that the act
of the unknown person was criminal;

(2) the defendant has stated in the answer all
identifying characteristics of the unknown person,
known at
time of the answer; and
(3)
the
legation
satisfies
the
pleading
requirements of the Texas Rules of Civil Procedure.
-169

Inc.'s Motion for Leave to Join Defendant High Sierra Crude Oil &
Leave to Designate Responsible

Marketing, LLC's Second Motion

Third Parties (Docket Entry No. 442).

For the reasons explained

below, the motion to designate responsible third parties filed by
BASF Corp. and BASF FINA will be granted.

The motion to join High

Sierra's motion to designate responsible third parties filed by
Superior Crude Gathering,

Inc. is moot because in

§

IV.F, above,

the court has concluded that Superior Crude Gathering is entitled
to summary judgment because

claims asserted against it are all

time barred.
A.

Standard of Review

Pursuant to

§

33.004(a) of the Texas Civil Practice & Remedies

Code, at least sixty days be

trial a defendant may "designate

a person as a responsible third party by filing a motion for leave
to designate that person as a responsible third party."
Prac.

&

Rem.

Code

§

33.004(a).lB6

Section

33.011

Tex. Civ.
defines

a

responsible third party as:
any person who is
leged to have caused or contributed
to causing in any way the harm for which recovery of

186Section 33.004(a) of the Texas Civil Practices and Remedies
Code provides:
(a) A defendant may seek to designate a person as a
responsible
rd party by filing a motion for leave to
designate that person as a responsible third party. The
motion must
filed on or before the 60th day before the
trial date unless the court finds good cause to allow the
motion to
fi
at a later date.
-170

damages is sought, whether by negligent act or omission,
by any defective or unreasonably dangerous product, by
other conduct or activity that violates an applicable
legal standard, or by any combinat
these.
Tex. Civ. Prac. & Rem. Code
are not
1

§

33.011(6).

Responsible third parties

limited to those who can be joined as parties to the

igation.

Pursuant to

§

33.004(j) of the Texas Civil Practice &

Remedies Code, responsible third parties may be persons or entities
outside

the

plaintiff,

court's

jurisdiction,

or even unknown.

unable

to

be

sued

by

the

See In re Unitec Elevator Services

, 178 S.W.3d 53, 58 n.5 (Tex.App.-Houston [1st Dist.] 2005, no
.).

However,

such parties must be joined "not later than 60

days after the filing of the defendant's
Ci v. Prac.

&

Rem. Code

§

answer.

II

Tex.

33. 004 (j) . 187

1B7Section 33.004 (j) of the Texas Civil Practices and Remedies
Code provides:
Notwithstanding any other provision of
s section, if,
not later than 60 days after the
ling of the
defendant's original answer, the defendant alleges in an
answer filed with the court that an unknown person
committed a criminal act that was a cause of the loss or
injury that is the subject of the lawsuit, the court
shall grant a motion for leave to designate the unknown
person as a responsible third party if:
(1) the court determines that the defendant has
pleaded facts sufficient for the court to determine
that there is a reasonable probability that the act
of the unknown person was criminal;
(2) the defendant has stated in the answer all
identifying characteristics of the unknown person,
known at the time of the answer; and
(3)
the
allegation
satisfies
pleading
requirements of the Texas Rules of Civil Procedure.
-171-

If a court gives leave to designate a responsible third party,
and there is evidence sufficient to submit a question to the jury
regarding the conduct of the party, the trier of fact determines
the percentage of

responsibility of

the claimants,

defendants,

settling persons, if any, and any responsible third parties.
Civ. Prac. & Rem. Code

§

Tex.

33.003(a) (4).

Once a defendant has moved for leave to designate responsible
Tex. Civ. Prac. & Rem. Code

third parties plaintiffs may object.
§

33.004(f).

To successfully prevent designation of a responsible

third party the burden is on the plaintiffs to establish that
(1)
the defendant did not plead sufficient facts
concerning the alleged responsibility of the [third
party] to satisfy the pleading requirement of the Texas
Rules of Civil Procedure; and ~ (2) after having been
granted leave to replead, the defendant failed to plead
sufficient facts concerning the alleged responsibility of
the person to satisfy the pleading requirements of the
Texas Rules of Civil Procedure.
Tex. Civ. Prac. & Rem. Code
A

court's

responsible

grant

of

third party

§

33.004(g) (1) and (2).

a

motion

does

not

challenging the designation.

for

leave

preclude

a

to
party

designate
from

a

later

After adequate time for discovery "a

party may move to strike the designation of a responsible third
party on the ground that there is no evidence that the designated
person is responsible for any portion of the claimant's alleged
injury or damage."

Tex. Civ. Prac. & Rem. Code

§

33.004(1).

"The

court shall grant the motion to strike unless a defendant produces
sufficient evidence to raise a genuine issue of fact regarding the
-172-

designated person's responsibility for the claimant's injury or
The

damage."

on

burden

the

regarding
Prac.

&

the

actual

the

at

party's

33.003 (b)

§

the

outset

the requirement
submission of

a

designated third part
B.

submission of a

designated

Rem. Code

requirements
closer,

whether there

The court must
support

produce

the claimant's inj ury or

designated party's responsibil

evidence to

to

issue of fact regarding the

sufficient evidence to raise a

damage.

defendants

question to the

jury

Tex.

responsibility.

Civ.

Therefore, while the pleading

.188

are

is sufficient

not

stringent,

as

trial

moves

sufficient evidence to support the
question on the

responsibility of

the

becomes more demanding.

Analysis

BASF Corp. and BASF FINA
responsible third part

s

ially sought leave to designate

to motions filed on

August 4,

2011

(Docket Entry No. 253), and August 11, 2011 (Docket Entry No. 261),
respectively.
leave

to

In those mot

designate

as

BASF Corp. and BASF FINA sought

responsible

third parties

Petro

Salum,

Importadora Exportadora, Y Oil and Gas, as well as the known and
unknown criminals
the answers f

in PEP's Third Amended Complaint and

ed by BASF Corp. and by BASF FINA.

On October 20,

lB8Section 33.003 (b) of the Texas Civil Practices and Remedies
Code provides:
"This section does not allow a submission to the
jury of a quest
regarding conduct by any person without
sufficient evidence to support the submission."
-173

2011,

the

motions

court

granted BASF Corp.'s

ignate

to

responsible

and BASF

FINA's

third parties

and

initial

held

that

Chapter 33's proportionate liability scheme applied to the tort
claims assert
BASF Corp.

by PEP .189
to

and BASF FINA now seek

and/ or individual s

responsible third parties 115 different entit
identified

on

Traffickers

pp.

4-15

of

their

designate as

pending

motion,

ified in Exhibit A to the

147

Known

pending motion,

Known Detainees identified in Exhibit B to

48

r pending motion,

and 26 Accused Parties identified in Exhibit C to their pending
motion.

In support of their motion BASF and BASF FINA cite PEP's

Complaints in this case and in the related case,

Civil Action

No. 4:12 1081, documents produced by PEP and other Pemex documents
produced by defendants and third part

s,

reports and documents

from the Mexican government,

as

the

witnesses

and

other

as well

witnesses.

Asserting

testimony of
that

discovery

PEP
is

ongoing, BASF Corp. and BASF FINA "reserve their right to designate
additional responsible third parties. 11190
PEP argues that the motions to designate responsible third
parties should be denied because (1) Chapter 33 of the Texas Civil

189Memorandum Opinion and Order, Docket Entry No. 292, pp. 25
28 and 33 35.
90

Defendants BASF Corporation and BASF FINA Petrochemi
s
Limited Partnership's Amended Motion for Leave to Designate
Respons
e Third Parties ("BASF and BASF FINA's Amended Motion
Leave to Designate Responsible Third Parties"), Docket Ent
No. 426, p. 3.
:

-174

Practice and Remedies Code does not apply to any of PEP's claims;
and

(2)

defendants

have

improperly

requested

that

defendants,

cross-defendants, and settling persons be designated as responsible
third parties. 191

PEP argues that

[f] or the reasons explained in PEP's prior ext ens
briefing on this issue, Chapter 33 of the Texas Civil
Practice and Remedies Code does not apply to any of the
claims at issue here.
In the interest of brevity, PEP
will re
from repeating its prior arguments
in
detail.
It must point out, however, that Defendants'
Motion and
s proposed designation of 115 individuals
and categories of allegedly responsible third part
highlights the absurdity of their third-party
The UCC rule is clear and simple.
One who buys stolen
goods receives no title and is liable to the true
owner-period.
For that reason and the reasons discussed in the briefing
at Docket Numbers 249, 263, 266, 267, and 279, PEP
that [High S
's] Motion be denied. 192
PEP further argues that
[a]ssuming only for the sake of argument that Chapter 33
appl s
, it does not permit defendants to designate
other defendants or settling persons as responsible third
parties. See Tex. Civ. Prac. & Rem. Code Ann. §§ 33.011
(defining "defendant,
"responsible third party," and
"settling person"
differently),
33.003
(submitting
liabili ty
"each claimant,
"each defendant," "each
settling person, II and "each responsible third party") . 193
II

II

In addition PEP argues that the
[d] efendants have improperly requested that the following
entit s or individuals who are already defendants,

191pEP's Opposition to BASF and BASF-FINA's Amended Motion to
Designate, Docket Entry No. 435, pp. 1-2.
See also PEP's
Opposition to High Sierra's Second Motion to Designate, Docket
Entry No. 436, pp. 1-2.
192 Id.
193Id. at 2.
-175-

cross-defendants, or settling persons in this case be
designated: 11. Arnoldo Maldonado; 12. Bio-NU Southwest
d/b/a Valley Fuels; 17. Continental Fuels; 22. Donald
Schroeder; 47. JAG Energy USA, Inc.; 51. Jonathan Dappen;
53. Joplin Energy, LLCi 83. RGV Energy Partners, LLCi
96. Stephen Pechenik; 100. Timothy Brink; and 101. Trammo
Petroleum, Inc. Because Chapter 33 does not
t these
ies to be designated as responsible third parties,
Defendants' Motion should be denied, at a minimum, as to
parties. 194
PEP's argument that the pending motions are

ficient because

Chapter 33 of the Texas Civil Practice and Remedies Code does not
apply to any of PEP's claims against these defendants and PEP's
citation to the U. C. C.

in support of this argument

lack merit

because PEP has not asserted any claims based on violations of the
U.C.C.;

the claims asserted in this consol

action are all

based on alleged violations of the common law
The

Liability Act,

or RICO,

18 U.S.C.

§

Texas, the Texas

1962(c)-(d).

As the

court has already explained in the Memorandum Opinion and Order
signed on October 20,

2011,

\\ [t] he proportionate responsibility

scheme contained in Chapter 33 of the Texas Civil Practices and
Remedies Code applies to any cause of action 'based in tort.'
Civ. Prac.

&

Rem. Code

§

33.002 (a) (1)

."195

Tex.

Because certain causes

of action are expressly exempted from Chapter 33 1 s proportionate
responsibility

scheme,

and because under certain circumstances

defendants may be held jointly and severally liable - as opposed to
proportionately

responsible

courts

deferentially

apply

194Id.

195Memorandum Opinion and Order, Docket Entry No. 292, p. 30.
-176-

Chapter 33 1 s proportionate responsibility scheme to all other tortbased

causes

of

action. 196

As

the

court

explained

In

the

October 20, 2011, Memorandum Opinion and Order:
PEP concedes that its claims for conversion and
conspiracy sound in tort. 197 Moreover, neither claims for
conversion nor claims for conspiracy are expressly
exempted from Chapter 33 1 s proportionate responsibility
framework, and there is no other comprehensive fault
scheme that addresses either of these claims.
PEP's
claims for violation of the TTLA are statutory tort
claims that provide plaintiffs a civil remedy for theft.
See Tex. Civ. Prac. & Rem. Code § 134.001. The TTLA does
not provide for joint and several liability, and TTLA
claims are neither expressly exempted from Chapter 33 1 s
proportionate responsibility framework, nor subject to
another comprehensive fault scheme. 198
PEP's

assertion

designation

of

that
115

"Defendants'

individuals

and

Motion

and

categories

its

proposed

of

allegedly

responsible third parties highlights the absurdity of their thirdparty defense, ,,199 does not provide the court a rat ional basis on
which to conclude that Chapter 33 1 s proportionate responsibility
scheme does not apply to the tort claims asserted in this action.
PEP's argument that Chapter 33 does not permit defendants to
designate other "defendants" or "settling persons" as "responsible

196Id.
197Id. at 32
(citing PEP's Opposition to Murphy Energy
Corporations' Motion for Leave to Designate Responsible Third
Parties, Docket Entry No. 249, p. 3 (conspiracy) and p. 7
(conversion) )

199PEP's Opposition to BASF and BASF FINA's Amended Motion to
Designate, Docket Entry No. 435, p. 1. See also PEP's Opposition
to High Sierra's Second Motion to Designate, Docket Entry No. 436,
p. 1.
-177-

third parties" because

§

33.011 of the Texas Civil Pract

Remedies Code defines each of

terms differently provides no

basis on which to deny the pending motions.
§

33.003 requires that the 1

defendant,

Ii ty of

As PEP acknowledges,

"each claimant , I I

"each

"each settling person," and "each responsible third

II

submitted to the jury.

party"

and

But PEP cites no requirement that

each individual or entity must be definitively identif

as a

"defendant,1I "settling party," or "responsible third party" before
the case is submitted to the jury.
part

Indeed, since the ident

ies of

who are today "defendants" could easily change

the

case is submitted to a jury, even assuming that PEP's contention is
correct, PEP's attempt to definitely classify each individual and
entity identified in the pending motions is premature.

Defendants

only need to plead facts capable of showing how the individuals and
entit

that they seek to designate as responsible third-parties

caused or contributed to PEP's
that

the

sources

on

which

leged injury.
the

defendants

PEP does not deny
rely

ify

the

individuals and entities that they seek to designate as responsible
third

parties

inj
al

as

The
ions

are

parties

court

who

there

sufficient

caused

or

concludes
to

satisfy

contributed
that
the

the

to

PEP's

defendants'

requirements

for

designating responsible third parties, and that PEP has failed to
carry its burden of showing that the defendants' pleadings as to
responsible third parties are inadequate.

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C.

Conclusions

Because the court concludes that PEP's arguments

that

the

motions to designate responsible third parties urged by BASF Corp.,
BASF FINA, and Superior Crude Gathering, Inc. should be denied lack
merit,

the

live motions to designate responsible third parties

urged by these defendants will be granted.
VIII.

Conclusions and Order 20o

For the reasons stated in Section IV, above,
for
is

(1 )

Defendant Plains Marketing, L.P.'s Motion
(Docket Entry No.
475)
Summary Judgment
GRANTED;

(2)

Defendant Murphy Energy Corporation's Motion for
Final Summary Judgment (Docket Entry No. 479) is
GRANTED in PART and DENIED in PART;

(3)

Third-Party Defendant Donald Schroeder's Motion
for
Partial
Summary Judgment
on BASF
FINA
Petrochemicals Limited Partnership's and Murphy
Energy Corporation's Cross-Claims (Docket Entry
No. 481) is GRANTED in PART and DENIED in PART;

200The court has allowed the parties extraordinary leeway in
submitting lengthy briefs and other written materials in connection
with the pending motions. As the length of this Memorandum Opinion
and Order indicates, the court has expended considerable time
reading these papers and performing a significant amount of
independent research to be as fully informed as possible when
addressing the parties' arguments.
While, because of the sheer
volume of information presented, it is not impossible that some
arguments were overlooked, the parties should assume that failure
to expressly address a particular argument in this Memorandum
Opinion and Order reflects the court's judgment that the argument
lacked sufficient merit to warrant discussion.
Accordingly, the
court strongly discourages the parties from seeking reconsideration
based on arguments they have previously raised or that they could
have raised.
-179-

(4)

Defendants Superior Crude Gathering Inc. and Jeff
Kirby/s Motion for Summary Judgment (Docket Entry
No. 486) is GRANTED;

(5)

BASF Corporation and BASF FINA Petrochemicals
Limited Partnership/s Motion for Summary Judgment
(Docket Entry No. 489) is GRANTED in PART and
DENIED in PART; and

(6)

Defendants RGV Energy Partners
LLC and F&M
Transportation Inc. s Motion for Summary Judgment
(Docket Entry No. 517) is GRANTED.

l

I

I

l

For the reasons stated in Section VI above
Producci6n / s

Exploraci6n

y

spositive

No. 492) is

I

Plaintiff PEMEX

Motion

(Docket

Entry

GRANTED in PART and DENIED in PART.

For the reasons stated in Section VII above,
(1)

Defendants Plains All-American Pipeline L.P. and
Plains Marketing L. P. 's Motion to Exclude
Expert Testimony
Joseph Wilkinson and Brent
Bersin (Docket Entry No. 473) is MOOT as to Plains
All-American Pipel
L. P. and DENIED without
prejudice as to PI
Marketing L.P.i

(2)

Defendants
BASF
Corporation,
BASF
FINA
Petrochemicals Limited Partnership, Murphy Energy
Corporation, Plains All-American Pipeline, L.P.,
Plains Marketing, L,P' I Superior Crude Gathering,
Inc., and Jeff Kirby's Motion to Strike
andro
Valle Corona's New Expert Report and Exclude His
Expert Testimony (Docket Entry No. 476) is MOOT as
to Plains All-American Pipeline, L. P.
Superior
Crude Gathering Inc., and Jeff Kirby, and DENIED
without prejudice as to all other movantsi

l

I

I

(3)

Defendants High
Crude Oil & Marketing, LLC,
Jeff Kirby and Superior Crude Gathering, Inc.' s
Motion to Exclude Expert Testimony of Brent Bersin
and Joseph Wilkinson (Docket Entry No. 477) is
MOOT;

(4 )

Defendants
BASF
Corporation,
Petrochemicals Limited Partnership,
180-

BASF FINA
and Murphy

Energy Corporation's Motion to Exclude Expert
Testimony of Brent Bersin and Joseph Wilkinson
(Docket
Entry No.
478)
is
DENIED
without
prejudice;
(5)

Defendants
BASF
Corporation,
BASF
FINA
Petrochemicals Limited Partnership, High Sierra
Crude Oil & Marketing, LLC, Jeff KirbYt Murphy
Energy Corporation t Plains All-American Pipeline,
L.P.
Plains Marketing L.P., and Superior Crude
Gathering,
Inc. s
Motion
to
Exclude
Expert
Testimony of Ana Maria Salazar Slack (Docket Entry
No. 482) is MOOT as to High Sierra Crude Oil &
Marketing, LLC, Plains All-American Pipeline,
L.P., Jeff Kirby, and Superior Crude Gathering,
Inc. and DENIED without prejudice as to all other
movants;
t

t

(6)

Plaintiff's Motion to Exclude the Expert Testimony
of K. Scott Van Meter t CPA (Docket Entry No. 483)
is DENIED without prejudice;

(7)

Defendants RGV Energy Partners t
LLC and F&M
Transportation, Inc.'s Motion to Join in All
Defendants' Motions to Strike Expert Reports and
Motions to Exclude Expert Testimony (Docket Entry
No. 485) is MOOT;

(8)

Plaintiff PEMEX Exploraci6n y Producci6n t s Motion
to Exclude Defendants' Expert David G. Ownby
(Docket
Entry
No.
495)
is
DENIED
without
prejudice; and

(9)

Plaintiff PEMEX Exploraci6n y Producci6n's Motion
to Exclude Defendants' Expert Frank L. Holder
(Docket
Entry No.
496)
is
DENIED
wi thout
prejudice.

For the reasons stated in Section VII, above,
(1)

Defendants
BASF
Corporation
and
BASF
FINA
Petrochemicals
Limited
Partnership's
Amended
Motion for Leave to Designate Responsible Third
Parties (Docket Entry No. 426) is GRANTED; and

(2)

Defendant Superior Crude Gathering, Inc.'s Motion
for Leave to Join Defendant High Sierra Crude
-181-

Oil & Marketing, LLC's Second Motion for Leave to
Designate Responsible Third Parties (Docket Entry
No. 442) is MOOT.
The court believes that it has resolved the motions addressed
herein without relying on evidence to which objections have been
made.

Therefore:
(1)

Defendants Plains Marketing L.P., Superior Crude
Gathering, Jeff Kirby, Murphy Energy Corporation,
BASF Corporation, and BASF FINA Petrochemicals
Limited Partnership's Objections to Plaintiff
PEP's Summary Judgment Evidence (Docket Entry
No. 537) are MOOT;

(2)

The Obj ections of PEP to the Summary Judgment
Evidence of Plains Marketing, L.P. (Dkt. 475),
Murphy Energy Corporation (Dkt. 479), Superior
Crude Gathering, Inc. and Jeff Kirby (Dkt. 486),
BASF Corporation and BASF FINA Petrochemicals, LP
(Dkt. 489), and RGV Energy Partners, LLC and F&M
Transportation, Inc.
(Dkt. 517)
(Docket Entry
No. 548) are MOOT;

(3)

Defendant Plains Marketing L. P. 's Obj ections to
Evidence Submitted in Support of Plaintiff PEP's
Opposition to Defendants' Dispositive Motions
(Docket Entry No. 565) are MOOT;

(4)

Superior Crude Gathering, Inc. and Jeff Kirby's
Objections to Evidence Submitted in Support of
PEP's
Opposition
to
Defendants'
Dispositive
Motions (Docket Entry No. 566) are MOOT;

(5)

Superior Crude Gathering, Inc. and Jeff Kirby's
Obj ect ions to Evidence Submi t ted in Support of
[Docket Entry No.
545]
PEP's Opposition to
Defendants' Dispositive Motions
(Docket Entry
No. 566); The Objections of Plaintiff PEP to the
Summary Judgment Evidence Submitted by Superior
Crude Gathering, Jeff Kirby, BASF Corporation, and
BASF FINA Petrochemicals Limited Partnership With
Their Joint Response to Plaintiff's Dispositive
Motion (Dkt. 542) and Plains Marketing, Inc. With
Its Response to Plaintiff's Dispositive Motion
(Dkt. 536) and Murphy Energy Corporation With Its
-182-

to
Plaintiff's
Disposi
Motion
Response
(Dkt. 541) (Docket Entry No. 575) are MOOT;
(6)

(7)

If,

De
s
BASF
Corporation
and
BASF
FINA
Petrochemicals Limited Partnership's Objections to
Evi
Submitted in Support of
aintiff PEP's
Opposition to Defendants' Disposit
Motions
(Docket Entry No. 583) are MOOT; and
Defendant Murphy Energy Corporation's Obj ections
to Evidence Submitted in Support of
aintiff
PEP' s
Opposition
to
Defendants'
Disposi ti ve
Mot
(Docket Entry No. 585) are MOOT.

however,

number of obj

to the large amount of

and the large

the court has overlooked an objection to

evidence on which it has relied in this Memorandum Opinion and
Order, any such objection is OVERRULED.
The Joint Pretrial Order will be filed by November 1, 2013.
Docket Call will be November 8, 2013, at 3:00 p.m., in Courtroom
9-B,

United States Courthouse,

515 Rusk Avenue,

Houston,

Texas

77002.
SIGNED at Houston, Texas, on this 30th day

September, 2013.

7
SIM LAKE
UNITED STATES DISTRICT JUDGE

-183-