Pemex Exploracion Y Produccion v. Murphy Energy Corporation et al

Filing 150

MEMORANDUM OPINION AND ORDER granting 12 Motion to Dismiss, granting in part and denying in part 31 Motion to Dismiss, granting 36 Motion to Dismiss, granting 44 Motion to Dismiss, granting 66 MOTION to Dismiss 1 Complaint, granting 76 MOTION to Dismiss, granting 77 MOTION to Dismiss 1 Complaint, granting 120 MOTION to Designate Responsible Third Party, mooting 121 MOTION to Designate Responsible Third Party, granting 123 MOTION to Designate Responsible Third Party as to P EP's direct claims for conversion and for equitable relief, constructive trust, unjust enrichment, money had and received AND mooting as to PEP's indirect, assigned claims for fraud, breach of contract, and breach of warranty, mooting 124 MOTION for Joinder as to 123 MOTION to Designate Responsible Third Party, mooting 125 MOTION for Joinder as to 123 MOTION to Designate Responsible Third Party, granting 127 Joint MOTION to Designate Responsible Third Party, mooting 129 MOT ION for Joinder as to 123 MOTION to Designate Responsible Third Party, mooting 130 MOTION to Designate Responsible Third Party MOTION for Joinder as to 123 MOTION to Designate Responsible Third Party, mooting 132 MOTION to Designate Responsible Third Party. (Signed by Judge Sim Lake) Parties notified.(aboyd)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION

PEMEX EXPLORACION Y PRODUCCION,
individually and as assignee of
AGE REFINING, INC., FLINT HILLS
RESOURCES, L.P., and VALERO
MARKETING AND SUPPLY COMPANY,
Plaintiffs,
v.
MURPHY ENERGY CORPORATION; HIGH
SIERRA CRUDE OIL & MARKETING,
LLC, successor to PETRO SOURCE
PARTNERS, L.P.; BIG STAR
GATHERING LTD, L.L.P.; ST. JAMES
ENERGY OPERATING, INC . ; F&M
TRANSPORTATION, INC.; PLAINS
MARKETING L.P.; SUPERIOR CRUDE
GATHERING, INC.; CONOCOPHILLIPS
CO. ; FR MIDSTREAM TRANSPORT L.P.
f/k/a TEXSTAR MIDSTREAM
TRANSPORT, LLC; MARATHON
PETROLEUM CO., L.P. f/k/a
MARATHON PETROLEUM CO., LLC;
SHELL CHEMICAL L.P. d/b/a SHELL
CHEMICAL CO.; SHELL TRADING US
CO. ("STUSCO"); and SUNOCO
PARTNERS MARKETING & TERMINALS,
L.P.,
Defendants.

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CIVIL ACTION NO. H-12-1081

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MEMORANDUM OPINION AND ORDER

Plaintiff, PEMEX Exploraci6n y Producci6n ("PEP"), has brought
suit against multiple defendants for claims arising from sales in
the United States of natural gas condensate allegedly stolen from
PEP in Mexico.

On June 8, 2012, the court held a scheduling

conference and issued a Memorandum Opinion and Order (Docket Entry

No. 106) granting three motions to dismiss to the extent that they
sought dismissal of claims that PEP had asserted under Mexican law
for illegal possession and use of Mexican sovereign property:
(1) Defendant
('Sunoco")
Sever

Sunoco

Partners Marketing

Motion to Dismiss in Lieu of Answer or Alternatively to

(Docket Entry No. 17),

(2) Defendants Shell Trading US

("STUSCO") and Shell Chemical LP's

Company

Terminals, L.P.' s

&

("Shell Chemical")

Motion to Dismiss (Docket Entry No. 31), and
Midstream Transport, LP's

(3) Defendant FR

("FR Midstream") Fed. R. Civ. P. 12

Motions to Dismiss, Joinder in All Other Defendantsr Fed. R. Civ.
P. 12 Motions to Dismiss, and, in the Alternative, Fed. R. Civ.

P. 12 (e) Motion

for a More

Definite Statement

(Docket Entry

No. 43).
For

reasons stated on the record at the June

8, 2012,

scheduling conference, defendants waived all Rule 12(b) arguments
except standing asserted in the following motions to dismiss:'
Plains Marketing, L.P.'s

("Plains") Motion to Dismiss (Docket Entry

No. 12); Defendants Shell Trading US Company and Shell Chemical
LPrs Motion to Dismiss (Docket Entry No. 31) ; Defendant Murphy
Energy Corporation's

("Murphy Energy") Motion to Dismiss Original

Complaint (Docket Entry No. 36); Defendants Big Star Gathering Ltd
L.L.P.

("Big Star") and Saint James Energy Operating, Inc.'s

("St. James") Motion to Dismiss or, in the Alternative, Motion for

-

'see Hearing Minutes and Order, Docket Entry No. 107.
-

More Definite Statement

(Docket Entry No.

44); Defendant F&M

Transportation, Inc.'s Motion to Dismiss (Docket Entry No. 66);
Defendant High Sierra Crude Oil

&

Marketing, LLCrs ("High Sierra")

Motion to Dismiss (Docket Entry No. 76) ; and Defendant Superior
Crude Gathering, Inc.'s Motion to Dismiss (Docket Entry No. 77) .
Thus, to the extent that these motions seek dismissal for lack of
standing, they remain pending.
Also pending are the following motions
designate responsible third parties:

seeking leave to

Defendant

FR Midstream

Transport, LPfs Motion for Leave to Designate Responsible Third
Parties (Docket Entry No. 120); Plains Marketing, L.P. 's Motion for
Leave

to

Designate

Responsible

No. 121); Defendants

Third

Parties

(Docket Entry

Shell Chemical LP and Shell Trading US

Company's Motion for Leave to Designate Responsible Third Parties
(Docket Entry No. 123); Defendant Superior Crude Gathering, Inc. s
Motion to Join in Defendants Shell Chemical LP and Shell Trading US
Company's Motion for Leave to Designate Responsible Third Parties
(Docket Entry No. 124); High Sierra Crude Oil

&

Marketing, LLCfs

Motion to Join Defendants Shell Chemical LP and Shell Trading US
Company's Motion for Leave to Designate Responsible Third Parties
(Docket Entry No.

125); Joint Motion

for Leave to Designate

Responsible Third Parties filed by Sunoco Partners Marketing

&

Terminals L.P., ConocoPhillips Co., and Marathon Petroleum Company,
L.P. ("Marathon") (Docket Entry No. 127); Defendant Murphy Energy
Corporationfs Motion to Join the Shell Defendantsr Motion for Leave

to Designate Responsible Third Parties (Docket Entry No. 129);
Defendant F&M Transportation, Inc.'s Motion for Leave to Designate
Responsible Third Parties and Motion to Join in Defendants Shell
Chemical LP and Shell Trading US Companyfs Motion for Leave to
Designate Responsible Third Parties (Docket Entry No. 130) ; and
Defendants Big Star Gathering Ltd., LLP and Saint James Operating,
Inc.'s Motion to Join in Plains Marketing, L.P.'s Motion for Leave
to Designate Responsible Third Parties (Docket Entry No. 132).
For the reasons explained below, the motions to dismiss for
lack of

standing will be

granted; the motions

to

designate

responsible third-parties for PEP'S indirect, assigned claims will
be declared moot; and the motions to designate responsible third

parties for PEP'S direct claims for conversion, equitable relief,
constructive trust, unjust enrichment, and money had and received
will be granted.
I.

Backaround

This is the third action that PEP has filed in this court
based on allegations of "trade in the United States of natural gas
.
condensate stolen in ~ e x i c o "'

PEP filed the first of the two

previous actions in June of 2010 (the so-called BASE-action, 4:lOcv-1997), and the second in May of 2011 (the so-called Big Star
action, 4:ll-cv-2019). On October 4, 2011, the court consolidated

2

~

~Original Complaint, Docket Entry No. 1, p. 2
~ r s
-4-

¶

1.

the two previously filed actions for all purposes.3 By Memorandum
Order and Opinion dated April 12, 2012, the court denied PEP'S
motion for leave to file a fourth amended complaint in the BASF
action, but granted PEP'S motion for leave to file a first amended
complaint in the Big Star action for the purpose of adding three
new defendants (Plains Marketing, L.P., St. James Energy Operating,
and RGV Energy

Partners, L.L.C. )

.4

On

the

same day, i.e.,

April 10, 2012, PEP filed this third action.
11.

Motions t o Dismiss f o r Lack o f Standinq

Defendants Plains, STUSCO, Murphy Energy, F&M Transportation,
Big Star, St. James, High Sierra, and Superior Crude argue that the
indirect claims that PEP has asserted as assignee of AGE Refining,
Inc. ("AGE"), Flint Hills Resources, Inc. ("Flint Hills"), and/or
Valero Marketing and Supply Company ("Valero") for fraud, breach of
warranty, and breach of contract are subject to dismissal under
Rule 12(b) (1) for lack of subject matter jurisdiction because PEP
lacks standing to assert these claims.
A.

Standard o f Review

A motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(l) for
lack of subject matter jurisdiction tests the court's statutory or

3~emorandum
Opinion and Order, Docket Entry No. 287 in Civil
Action 4:lO-cv-1997.
4~ocket
Entry No. 377 in Civil Action 4:lO-cv-1997.
-5-

constitutional power

to

adjudicate the

Association of Mississippi,

Inc. v.

143 F.3d 1006, 1010 (5th Cir. 1998).
Rule

12(b) (1) motion

to

dismiss

is

case.

Citv

Home

Builders

of Madison, Miss.,

"The burden of proof for a
on

the

party

asserting

Ramrnins v. United States, 281 F.3d 158, 161 (5th

jurisdiction."

Cir. 2001), cert. denied sub nom. Cloud v. United States, 122 S.Ct.
2665 (2002).

In examining a Rule 12(b) (1) motion, the district

court can consider matters of fact that may be in dispute.
Lack of subject matter jurisdiction may be found in any
one of three instances: (1) the complaint alone; (2) the
complaint supplemented by undisputed facts evidenced in
the record; or (3) the complaint supplemented by
undisputed facts plus the courtfs resolution of disputed
facts.
Id.
- (citing Barrera-Montene~rov. United States, 74 F.3d 657, 659
(5th Cir. 1996)). Dismissal on jurisdictional grounds alone is not
a dismissal on the merits.

I . (citing Hitt v. Citv of Pasadena,
d

561 F.2d 606, 608 (5th Cir. 1977) (per curiam))

B.

.

Applicable Law

Standing questions "whether the litigant is entitled to have
the court decide the merits of the dispute or of particular
issues." Warth v. Seldin, 95 S.Ct. 2197, 2205 (1975).

" [S]
tanding

is an essential and unchanging part of the case-or-controversy
requirement of Article 111."

Luian v. Defenders of Wildlife,

112 S.Ct. 2130, 2136 (1992).

"Standing requires, at a minimum,

three elements:

injury in fact, a 'fairly traceablef causal link

between that injury and the defendantfs conduct, and the likelihood

that the injury will be

'redressed by a favorable decision.'"

Cadle Co. v. Neubauer, 562 F.3d 369, 371 (5th Cir. 2009) (quoting
Luian, 112 S.Ct. at 2136).

"A defect in Article I11 standing is a

I . at 374.
d

defect in subject-matter jurisdiction."

See also

Harold H. Hussins Realtv, Inc. v. FNC, Inc., 634 F.3d 787, 795 n.2
(5th Cir. 2011) ("dismissal for lack of constitutional standing

. .

should be granted under Rule 12 (b)(1) I .
')

question of law" for the court to decide.

.

"Standing is a

Friends of St. Francis

Xavier Cabrini Church v. Federal Emersencv Manasement Aqencv,
658 F.3d 460, 466 (5th Cir. 2011).

In deciding questions of law,

including standing, involving claims based on state law, applicable
state law governs. See Crocker v. Federal Deposit Insurance Corp.,
826 F.2d 347, 349 (5th Cir. 1987), cert. denied, 108 S.Ct. 1075
(1988).
"In Texas, the standing doctrine requires a concrete injury to
the plaintiff and a real controversy between the parties that will
be

resolved

by

the

court."

Heckman

369 S.W.3d 137, 154 (Tex. 2012).

v.

Williamson

Countv,

Because the Texas test for

standing parallels the federal test for Article I11 standing, Texas
courts "turn for guidance to precedent from the U.S. Supreme Court,
which has elaborated on standingfs three elements."
standing inquiry
complaint's

Id.
-

"The

'requires careful judicial examination of a

allegations

to

ascertain

whether

the

particular

plaintiff is entitled to an adjudication of the particular claims

asserted.' "
3325 (1984))

I . at 156 (quoting Allen v. Wrisht, 104 S.Ct. 3315,
d

.

Subject to limited exceptions, Texas law allows assignees to
assert assigned claims.

See State Farm Fire

Gandy, 925 S.W.2d 696, 705-07

(Tex. 1996)

&

Casualtv Co. v.

(acknowledging that

causes of action in Texas are freely assignable).

However, the

only injury sufficient to support an assignee's standing to assert
an assigned claim is an injury suffered by the assignor, and that
injury

must

satisfy

all

the

requirements

of

constitutional

standing, i.e., the injury suffered must be an injury-in-fact that
is causally traceable to a named defendant and likely to be
redressed by the court action.

See Gulf Insurance Co. v. Burns

Motors, Inc., 22 S.W.3d 417, 420 (Tex. 2000) (citing Jackson v.
Thweatt,

883

S.W.2d

171,

174

(Tex. 1994)

(recognizing that

assignees stand in assignorsf shoes and may assert only those
rights that the assignors' themselves could assert))
Southwestern Bell

Telephone

Co.

v. Marketins on

.

See also

Hold

Inc.,

308 S.W.3d 909, 916 (Tex. 2010) (a holder of contractually valid
assignments steps "into the shoes of the claim-holders and is
considered under the law to have suffered the same injury as the
assignors and have the same ability to pursue the claims").

PEP

acknowledges these requirements for constitutional standing by
stating that "the issue is whether there is a case or controversy

arising out of [the assignorsr] purchase of millions of dollars of
stolen gas condensate from the

C.

defendant^."^

PEP Lacks Standing to Assert Assigned Claims
Defendants Plains, STUSCO, Murphy Energy, F&M Transportation,

Big Star, St. James, High Sierra, and Superior Crude argue that PEP
lacks standing to assert indirect, assigned claims for fraud,
breach of warranty, and breach of contract because the assignors,
AGE, Flint Hills, and/or Valero, have not suffered an injury-infact

traceable

to

these

defendants.

Alternatively,

these

defendants argue that the assignments to PEP are void under Texas
law as against public policy. For the reasons explained below, the
court concludes that PEP lacks standing to assert the assigned
claims because PEP has failed to show that the assignors suffered
an injury-in-fact traceable to these defendants. Alternatively the
court concludes that PEP lacks standing to assert the assigned
claims because the assignments are void under Texas law.

5See PEP'S Opposition to Plains Marketing, L.P.'s Motion to
Dismiss, Docket Entry No. 70, p. 4; PEP'S Opposition to Shell
Chemical LP and Shell Trading US Company's Motion to Dismiss,
Docket Entry No. 71, p. 7; PEP'S Opposition to Murphy Energy
Corporation's Motion to Dismiss, Docket Entry No. 72, p. 5; Pemex
Exploraci6n y Producci6nfs Opposition to Big Star Gathering LTD
Motions to Dismiss
L.L.P. and Saint James Energy Operating, I n c a r s
or, in the Alternative, Motion for More Definite Statement, Docket
EntryNo. 75, p. 4.

1.

Assiqnors Suffered No Injury-In-Fact Causallv Traceable
to a Named Defendant

Asserting that PEP has made only conclusory allegations of
entitlement to unspecified damages for the assigned claims, Plains
argues that PEP has failed to show that the assignors suffered an
injury-in-fact.

Citing

Rivera

v.

Wveth-Averst

Laboratories,

283 F.3d 315 (5th Cir. 2002), Plains states that in that case
a plaintiff asserted that a drug she had taken was
defective, but that she herself had not suffered any
consequences of the alleged defect. Id. at 317. The
court explained that the plaintiff "paid for an effective
pain killer, and she received just that-the benefit of
her bargain." Id. at 320.
That is the situation here: Valero (and allegedly
AGE) purchased oil from Plains, received the amount of
oil promised, and used that oil. The value as warranted
and received was the same. There is no allegation that
Valero or AGE lost any money, lost the value of any oil,
were required to turn over the oil to a rightful owner,
were unable to sell the refined oil for the expected
value, or received oil that was less useful than
promised. . .
PEP/Valero has alleged that Plains breached
contracts and warranties by failing to deliver good
title, but a theoretical title defect does not substitute
for an actual injury. . .6
Plains also argues that AGE and Valero will never suffer any
damages, and that AGEfs and Valerofs promises to reimburse PEP do
not confer v tan ding.^

Plains concludes by asserting:

The fact that Valero and AGE have settled the only
potential title challenge against them for $0 while
retaining and making full use of the oil allegedly

'plains Marketing, L.P.'s
No. 12, p. 6.

Motion to Dismiss, Docket Entry

purchased from Plains dooms PEP/Valerofs claims.
PEP/Valero cannot show an injury, and it therefore does
not have standing. . .8
The other defendants all make the same or virtually the same
arguments regarding the assigned claims asserted against them.g
PEP responds that the injury-in-fact needed to establish
constitutional standing is satisfied merely by the assignorsf
involvement in this matter.''

Alternatively, PEP argues that all

&g
Defendants Shell Trading US Company and Shell Chemical
LPfs Motion to Dismiss, Docket Entry No. 31, pp. 5-10 (arguing that
assigned claims fail for lack of injury); Memorandum of Law in
Support of Defendant Murphy Energy Corporation's Motion to Dismiss
Original Complaint, Docket Entry No. 37, pp. 5-9 (arguing that
assigned claims fail for lack of injury); Defendants Big Star
Gathering Ltd. L.L.P. and Saint James Energy Operating, Inc.'s
Motion to Dismiss or, in the Alternative, Motion for More Definite
Statement, Docket Entry No. 44, pp. 15-18 (arguing that assigned
claims fail for lack of injury); Defendant F&M Transportation,
Inc.'s Motion to Dismiss, Docket Entry No. 66, pp. 1-2 (arguing
that PEP has no standing to bring the assigned claims, that the
breach of contract and breach of warranty claims fail for lack of
injury, and joining the motions to dismiss filed by all other
defendants); Defendant High Sierra Crude Oil & Marketing, LLCfs
Motion to Dismiss, Docket Entry No. 76, pp. 1, 3-4 (arguing that
PEP has no standing to bring the assigned claims, that the breach
of contract and breach of warranty claims fail for lack of injury,
and joining the motions to dismiss filed by all other defendants);
Defendant Superior Crude Gathering, Inc.' s Motion to Dismiss,
Docket Entry No. 77, pp. 1, 3-4 (arguing that PEP has no standing
to bring the assigned claims, that the breach of contract and
breach of warranty claims fail for lack of injury, and joining the
motions to dismiss filed by all other defendants).
lo&
PEPfs Opposition to Plains Marketing, L.P.'s Motion to
Dismiss, Docket Entry No. 70, p. 4; PEPfs Opposition to Shell
Chemical LP and Shell Trading US Company's Motion to Dismiss,
Docket Entry No. 71, p. 7; PEPfs Opposition to Murphy Energy
Corporation's Motion to Dismiss, Docket Entry No. 72, p. 5; Pemex
Exploracibn y Producci6nfs Opposition to Big Star Gathering LTD
L.L.P. and Saint James Energy Operating, Inc.'s Motions to Dismiss
(continued.. . )

of the assignors -- AGE, Flint Hills, and Valero -- promised to
reimburse PEP for any stolen condensate they purchased, and that
the assignments all follow the same basic structure:
The assignors agreed to make PEP whole for the
stolen condensate they purchased and used, and
PEP covenanted to collect on that promise solely
through the assignments.ll
PEP argues that "[tlhose promises are damage supporting recovery
under the assignments, despite PEP'S
recovers on those

promises to limit how it

promise^."^^

( . . .continued)
or, in the Alternative, Motion for More Definite Statement, Docket
Entry No. 75, p. 4.
10

"PEP'S
Opposition to Plains Marketing, L. P. ' s Motion to
Dismiss, Docket Entry No. 70, p. 5; PEP'S Opposition to Shell
Chemical LP and Shell Trading US Company's Motion to Dismiss,
Docket Entry No. 71, p. 8; PEP'S Opposition to Murphy Energy
Corporation's Motion to Dismiss, Docket Entry No. 72, p. 6; Pemex
Exploraci6n y Producci6nfs Opposition to Big Star Gathering LTD
L.L.P. and Saint James Energy Operating, Inc.'s Motions to Dismiss
or, in the Alternative, Motion for More Definite Statement, Docket
Entry No. 75, p. 5.
1 2 p ~ ps Opposition to Plains Marketing, L. P.'s Motion to
f
Dismiss, Docket Entry No. 70, p. 5 (citing Valero/PEP/PR Settlement
Agreement and AGE/PEP Settlement Agreement, Exhibits 1 and 2 to
Plains Marketing, L.P.'s Motion to Dismiss, Docket Entry No. 12,
and Valero/PEP/PR Assignment Agreement and Flint Hills/PEP
Settlement Agreement, Exhibits C and D to Defendants Shell Trading
US Company and Shell Chemical LP's Motion to Dismiss, Docket Entry
No. 31); PEP'S Opposition to Shell Chemical LP and Shell Trading US
Company's Motion to Dismiss, Docket Entry No. 71, p. 7 (citing
Valero/PEP/PR Assignment Agreement and Flint Hills/PEP Settlement
Agreement, Exhibits C and D to Defendants Shell Trading US Company
and Shell Chemical LP's Motion to Dismiss, Docket Entry No. 31);
PEP'S Opposition to Murphy Energy Corporation's Motion to Dismiss,
Docket Entry No. 72, pp. 5-6 (citing Valero/PEP/PR Settlement
Agreement, Exhibit 1 to Plains Marketing, L.P. s Motion to Dismiss,
Docket Entry No. 12, and AGE/PEP Settlement Agreement and Flint
(continued... )

(a) Assignorsf Involvement in this Matter Does Not
Constitute Injury-In-Fact
PEPfs argument that the threshold for constitutional standing
is met by the assignorsf involvement in this matter lacks merit
because PEP has neither alleged nor argued that the assigned claims
for fraud, breach of warranty, and/or breach of contract asserted
in this action seek redress for injuries that the assignors
suffered as a result of their involvement in this matter, or that
any such injury is traceable to any of the named defendants or
redressable by the claims asserted in this action.

Instead, PEP

candidly states that "PEP is not bringing the assigned claims to
recover for Valero' s [AGEf [Flint Hills' 1 embarrassment at having
s]
been involved in the injuring of a major trading partner.

PEP

brings the assigned claims to recover the value of the goods sold
to the assignors."I3

Nor has PEP cited any authority in support of

its argument that the

12

(

mere involvement

this action

. . .continued)

Hills/PEP Settlement Agreement, Exhibits B and D to Defendants
Shell Trading US Company and Shell Chemical LP's Motion to Dismiss,
Docket Entry No. 31); Pemex Exploraci6n y Produccibnfs Opposition
to Big Star Gathering LTD L.L.P. and Saint James Energy Operating,
Inc.'s Motions to Dismiss or, in the Alternative, Motion for More
Definite Statement, Docket Entry No. 75, p. 5.
13p~p' Opposition to Plains Marketing, L. P. 's Motion to
s
Dismiss, Docket Entry No. 70, pp. 4-5; PEPfs Opposition to Shell
Chemical LP and Shell Trading US Company's Motion to Dismiss,
Docket Entry No. 71, p. 7; PEP'S Opposition to Murphy Energy
Corporation's Motion to Dismiss, Docket Entry No. 72, p. 5; Pemex
Exploraci6n y Producci6nfs Opposition to Big Star Gathering LTD
L.L.P. and Saint James Energy Operating, Inc.'s Motions to Dismiss
or, in the Alternative, Motion for More Definite Statement, Docket
Entry No. 75, p. 4.

constitutes an injury-in-fact sufficient to establish standing to
assert assigned claims for fraud, breach of warranty, and/or breach
of contract. Accordingly, the court concludes that the assignorsf
involvement in this matter is not an injury-in-fact capable of
supporting PEP's assertion of constitutional standing to allege the
assigned claims for fraud, breach of warranty, and breach of
contract at issue in this action.
(b) Assignorsf Promises to Reimburse
Constitute Injury-In-Fact

PEP

Do

Not

PEP argues that the promises to reimburse PEP for any stolen
gas condensate that the assignors purchased and/or received are
"damage supporting recovery under the assignments, despite PEP' s
promises to limit how it recovers on those promises."

PEP explains

that the assignorsf promises to reimburse are damages supporting
recovery under the assignments "because a covenant not to collect
is a contract and not a release of the underlying liability."14
Citing National Union Fire Insurance Co. of Pittsbursh Pennsylvania

v. Puqet Plastics Corp., 649 F.Supp.2d 613 (S.D. Tex. 2009), afffd
454 Fed. Appx. 291 (5th Cir. November 28, 2011).

PEP states:

1 4 ~ ~ Opposition to Plains Marketing, L.P.'s Motion to
~ f s
Dismiss, Docket Entry No. 70, p. 4; PEP's Opposition to Shell
Chemical LP and Shell Trading US Companyfs Motion to Dismiss,
Docket Entry No. 71, p. 8; PEP's Opposition to Murphy Energy
Corporation's Motion to Dismiss, Docket Entry No. 72, p. 6; Pemex
Exploraci6n y Producci6nfs Opposition to Big Star Gathering LTD
L.L.P. and Saint James Energy Operating, Inc.'s Motions to Dismiss
or, in the Alternative, Motion for More Definite Statement, Docket
Entry No. 75, p. 6.

Some jurisdictions, like Texas, hold that a covenant not
to execute is merely a contract, rather than a release,
such that the underlying tort liability remains. . . As
long as there is no improper collusion (the defendantsf
next argument), the covenant does not vitiate the
underlying promise to make the plaintiff whole. . . See
also Ard v. Gemini Exploration Co., 894 S.W.2d 11, 15
(Tex. App. --Houston [14th Dist. ] 1994, pet. denied) ("A
covenant not to execute is a contract rather than a
release . . . Therefore, the fact that the indemnitee,
Resolve, will not have to pay any damages does not
eradicate Resolve's liability, nor does it eradicate an
indemnitorfs or an insurer' s duty to pay.") .I5
The

cases

on

inapposite because

which
they

PEP
did

relies
not

are

distinguishable

identify a mere

promise

and
to

reimburse as an injury sufficient to establish constitutional
standing.

In fact, standing was not at issue in either of the two

cases cited by PEP.

Instead, each of the cases cited by PEP

involved

from

assignments

assignors

who

had

suffered actual

injuries in the form of judgments that imposed liability on the
assignors.

See Puqet Plastics, 649 F.Supp.2d at 617, 619, 624-26

(defendant adjudged liable by trial court assigned rights to an
insurance policy, and accepted a covenant not to execute except as
to the assigned insurance);

m,

894 S.W. 2d at 15 (agreement at

issue was covenant not to execute judgments that imposed liability
on assignors).

PEP'S argument that promises made by AGE, Flint

1 5 ~ ~ ~Opposition to Plains Marketing, L.P.'s Motion to
' s
Dismiss, Docket Entry No. 70, p. 6; PEP'S Opposition to Shell
Chemical LP and Shell Trading US Company's Motion to Dismiss,
Docket Entry No. 71, p. 8; PEPfs Opposition to Murphy Energy
Corporation's Motion to Dismiss, Docket Entry No. 72, pp. 6-7;
Pemex Exploration y Producci6nrs Opposition to Big Star Gathering
LTD L.L.P. and Saint James Energy Operating, Inc.'s Motions to
Dismiss or, in the Alternative, Motion for More Definite Statement,
Docket Entry No. 75, p. 6.

Hills, and Valero to reimburse PEP for stolen gas condensate
constitute

injuries-in-fact

lacks

merit

because

instead

of

establishing that the assignors suffered an injury by having
admitted to liability, or having been held liable for purchasing
and/or receiving stolen gas condensate, the agreements establish
that the assignors (1) deny liability for having purchased and/or
received stolen gas condensate, and (2) will not be held liable for
purchasing

and/or receiving stolen gas

condensate because in

addition to agreeing not to seek reimbursement from the assignors,
PEP has agreed not to pursue its claims against the assignors.
The agreements that PEP has entered with each of the three
assignors contains the following paragraph pursuant to which the
parties agree that the assignors have not admitted liability:
The parties agree that the Agreement does not constitute
any admission of liability or wrongdoing by any party and
further agree that the Agreement does not constitute any
admission that any hydrocarbon product received by Valero
[AGE] [Flint Hills] was stolen or wrongfully obtained or
that Valero [AGE] [Flint Hills] does not have or did not
obtain proper title to the product.16
Each of the agreements also either releases the assignors from
being held liable or states that PEP agrees not to pursue its
claims against the assignors, meaning that the assignors have not
only denied liability for purchasing and/or receiving stolen gas

16~alero/~~~/PR
Settlement Agreement, and AGE/PEP Settlement
Agreement, Exhibits 1 and 2 to Plains Marketing, L.P.'s Motion to
Dismiss, Docket Entry No. 12, p. 2, ¶ 6; Flint Hills/PEP Settlement
Agreement, Exhibit D to Defendants Shell Trading US Company and
Shell Chemical LPfs Motion to Dismiss, Docket Entry No. 31, p. 2,
¶ 6.

condensate, but also face no threat of being held liable for
purchasing

and/or

receiving

stolen

gas

condensate.

Absent

liability or imminent threat of being held liable for having
purchased and/or received stolen gas condensate, the assigners have
not suffered an injury-in-fact arising from their purchase and/or
receipt of stolen gas condensate.
The Flint Hills agreement states that Flint Hills' assignment
of its claims to PEP
(a) constitutes full and final reimbursement to PEP for
any claims relating to any amounts of hydrocarbons that
PEP alleges or may in the future allege Flint Hills
received that were stolen in Mexico or the United States,
and that (b) PEP covenants that in return for the
assignment of Flint Hills's claims, and except as
necessary to effectuate the Assignments, PEP fully
releases and waives any and all claims relating to the
subject hydrocarbons that it may have against Flint
Hills. l7
Because the Flint Hillsf agreement states that "PEP fully releases
and waives any and all claims relating to the subject hydrocarbons
that it may have against Flint Hills,"18 Flint Hills faces no threat
of being

held

liable

for purchasing

and/or

receiving stolen

condensate. Moreover, even if Flint Hills could be held liable for
purchasing and/or receiving stolen gas condensate, because Flint
Hillsf assignment of claims to PEP "constitutes full and final
reimbursement to PEP for any claims relating to any amounts of

17~lint
Hills/PEP Settlement Agreement, Exhibit D to Defendants
Shell Trading US Company and Shell Chemical LP's Motion to Dismiss,
Docket Entry No. 31, p. 2, ¶ ¶ 8b and 8d.

hydrocarbons that PEP alleges or may in the future allege Flint
Hills received that were stolen,"1g Flint Hills faces no threat of
ever having to pay PEP damages for having purchased and/or received
stolen gas condensate.

Because Flint Hills has not been held

liable and faces no threat of being held liable to PEP for
purchasing and/or receiving stolen gas condensate, and because even
if Flint Hills could be held liable for such conduct, Flint Hills
would not have to pay damages or otherwise reimburse PEP for the
value of the stolen gas condensate, PEP lacks standing to assert
Flint Hillsf assigned claims because Flint Hills has not suffered
an injury-in-fact arising from its purchase and/or receipt of
stolen gas condensate.
The AGE agreement states that
(a) AGE assigns to PEP any third party claims, including,
but not limited to, claims for contribution or indemnity,
breach of warranty of title and breach of contract, AGE
has against any third party for the matters covered by
the
Release
(see
below)
[collectively,
the
"Assignments"]. . .
(b) AGE and PEP intend that PEP can utilize the
Assignments to collect PEPfs damages. Subject to the
terms and only for the purposes of this Agreement, AGE
agrees to reimburse PEP for any amounts of hydrocarbons
that AGE received that were stolen in Mexico; provided
however, PEP covenants that it will seek payment or
satisfaction of AGE'S promise exclusively through the
Assignments and PEP further covenants not to sue,
collect, file a claim against AGE or in the Bankruptcy
Case or Liquidating Trust, or otherwise act against AGE
in any manner, except PEP may use the Assignments against
third persons. The intention is that AGE will not be
subject to any monetary payments or liability to PEP. . .

(d) Upon approval of this Settlement Agreement by the
Bankruptcy Court, PEP will withdraw with prejudice its
Proof of Claim filed in the Bankruptcy Case. PEP further
agrees not to file any future claim or demand for payment
in the Bankruptcy Case or with the Liquidating Trust
ae'
established in the Bankruptcy C s . '
Because the AGE agreement states that PEP "covenants not to sue,
collect, file a claim against AGE

in the Bankruptcy Case or

Liquidating Trust, or otherwise act against AGE in any manner,"
that "[tlhe intention is that AGE will not be subject to any
monetary payments or liability to PEP," that "PEP will withdraw
with prejudice its Proof of Claim filed in the Bankruptcy Case,"
and that "PEP further agrees not to file any future claim or demand
for payment in the Bankruptcy Case or with the Liquidating Trust
established in the Bankruptcy Case," AGE faces no imminent threat
of being held
condensate.

liable

for purchasing

and/or

receiving

stolen

Consequently, AGE faces no imminent threat of ever

having to pay PEP damages for having purchased and/or received
stolen gas condensate.

Because AGE has not been held liable and

faces no threat of being held liable to PEP for purchasing and/or
receiving stolen gas condensate, AGE has not suffered an injury-infact arising from its purchase and/or receipt of stolen gas
condensate capable of supporting PEP'S

standing to assert the

assigned claims.

''AGE/PEP Settlement Agreement, Exhibit B to Defendants Shell
Trading US Company and Shell Chemical LP's Motion to Dismiss,
Docket Entry No. 31, p. 2, ¶ ¶ 8a, 8b and 8d.

As additional evidence that AGE has not suffered an injury-infact capable of supporting PEP'S standing to assert AGE'S assigned
claims, defendants point to the joint motion for approval of the
settlement agreement submitted to the AGE Bankruptcy Court on
February 2, 2012.21 The motion to approve the settlement agreement
that PEP and the Liquidating Trustee filed jointly states in
pertinent part:
12. PEPfs attorneys have alleged that they can trace
between $90 and $100 million dollars of stolen condensate
which was ultimately sold to the AGE refinery.
Such
stolen condensate was then refined by AGE and sold to
third parties. . . AGE bought the stolen condensate from
its regular suppliers. Nonetheless, PEP has alleged that
potential claims exist against AGE by PEP for at least
$90 to $100 million dollars and possibly as much as $120
million dollars. As the seller had no title to pass to
AGE, AGE is allegedly not able to avail itself of any
sort of "good faith" purchaser or bona fide purchaser for
value type defense.
13. In turn, AGE would have a claim for recourse against
the seller(s) of this stolen crude if it were found
liable to PEP. However, since AGE, a t this point, has
not suffered any damages, such claim is currently not
ripe for assertion. . .22
PEP has not submitted any evidence showing that since the joint
motion was filed on February 2, 2012, AGE has been held liable to
PEP or suffered any damages.
contained in

¶

Absent such evidence the statements

13 of the joint motion that "AGE would have a claim

'l~efendants Shell Trading US Company and Shell Chemical LPfs
Motion to Dismiss, Docket Entry No. 31, p. 11.
2 2 ~ o i nMotion Under Bankruptcy Rule 9019 to Approve Settlement
t
Agreement Pemex Exploraci6n y Produccion, Exhibit A to Defendants
Shell Trading US Company and Shell Chemical LPfs Motion to Dismiss,
Docket Entry No. 31, p. 4, ¶ ¶ 12-13 (emphasis added).

for recourse against the seller(s) of

. . .

stolen crude if it were

liable to PEP," but that "since AGE, at this point, has not
suffered any

damages,

such claim

is currently not

ripe

for

assertion," corroborates the courtrs conclusion that AGE has not
suffered an injury-in-fact capable of providing PEP standing to
assert AGErs assigned claims. Because PEP has not alleged or made
any showing that AGE has been held liable and/or suffered any
damages for purchasing and/or receiving stolen gas condensate, PEP
has failed to show that AGE has suffered an injury-in-fact capable
of providing PEP standing to assert AGErs assigned claims.

PEP'S

contention that AGE may eventually be held liable for purchasing
and/or receiving stolen gas condensate "because a covenant not to
collect

is

a

contract and

not

a

release

of

the

underlying

liability"23is not sufficient to establish PEP'S standing to assert
AGE'S assigned claims because any injury that AGE may eventually
suffer is not concrete, particularized, actual, or imminent but,
instead, conjectural or hypothetical. See Luian, 112 S.Ct. at 2136
(describing an "injury in fact" as "an invasion of a legally
protected interest which is (a) concrete and particularized,

. . .

and (b) 'actual or imminent, not 'conjecturalr or 'hypotheticalr" )

.

2
3
~ s ~ Opposition
~
r
to Plains Marketing, L.P. s Motion to
Dismiss, Docket Entry No. 70, p. 4; PEPrs Opposition to Shell
Chemical LP and Shell Trading US Company's Motion to Dismiss,
Docket Entry No. 71, p. 8; PEP'S Opposition to Murphy Energy
Corporation's Motion to Dismiss, Docket Entry No. 72, p. 6; Pemex
Exploraci6n y Producci6nrs Opposition to Big Star Gathering LTD
L.L.P. and Saint James Energy Operating, Inc.'s Motions to Dismiss
or, in the Alternative, Motion for More Definite Statement, Docket
Entry No. 75, p. 6.

PEP admits that its covenant to collect on the assignors'
promises to reimburse PEP for purchasing and/or receiving stolen
gas condensate solely through the assigned claims means that Flint
Hills and the bankrupt AGE are making no payment.24 However, PEP
argues that the assigned claims that it has alleged on behalf of
Valero are distinguishable from those that it has alleged on behalf
of Flint Hills and AGE because "Valero paid a very material sum in
damages to PEP and was clearly damaged as a result."25
PEP's argument that by paying a very material sum in damages
to PEP, Valero suffered an injury capable of establishing standing
lacks merit because the Valero agreement that PEP cites in support
of this argument required Valero to pay PEP $3,750,000.0026in order

2 4 ~ ~ ~ ' s
Opposition to Plains Marketing, L.P.' s Motion to
Dismiss, Docket Entry No. 70, p. 5 (acknowledging that "AGE is
making no payment"); PEP's Opposition to Shell Chemical LP and
Shell Trading US Company's Motion to Dismiss, Docket Entry No. 71,
p. 8 (acknowledging "that Flint Hills and the bankruptcy AGE is
making no payment") ; Pemex Exploracibn y Produccibn's Opposition to
Big Star Gathering LTD L.L.P. and Saint James Energy Operating,
Inc.'s Motions to Dismiss or, in the Alternative, Motion for More
Definite Statement, Docket Entry No. 75, p. 5 (acknowledging "that
Flint Hills and the bankruptcy AGE is making no payment").
2
5
~
~
Opposition to Plains Marketing, L.P.'s Motion to
~
'
~
Dismiss, Docket Entry No. 70, p. 5 (citing Plains Marketing, L.P.'s
Motion to Dismiss, Docket Entry No. 12, pp. 7-8 and Exhibit 1
attached thereto, v a l e r o / P ~ P / ~ RSettlement Agreement); PEP's
Opposition to Shell Chemical LP and Shell Trading US Company's
Motion to Dismiss, Docket Entry No. 71, p. 8; Pemex Exploracibn y
Producci6n's Opposition to Big Star Gathering LTD L.L.P. and
Saint James Energy Operating, Inc.'s Motions to Dismiss or, in the
Alternative, Motion for More Definite Statement, Docket Entry
No. 75, p. 5.

2 6 ~ a l e r o / Settlement Agreement at ¶ 8.a, included in
~ ~ ~ / ~ ~
Exhibit 1 to Plains Marketing, L.P.'s Motion to Dismiss, Docket
(continued.. . )

"to satisfy solely the amount sold by Kemco to Valero starting with
and to the fullest extent possible the amounts sold by Kemco
The
directly to V a l e r ~ . " ~ ~ agreement then provides that
b.
Valero and PEP/PR intend that PEP/PR can utilize the
assignments to collect damages that are not covered by
the payment in paragraph 8. It is therefore contemplated
that (1) Valero agrees to reimburse PEP/PR for any
amounts of hydrocarbons that Valero received that were
stolen in Mexico other than as set forth in paragraph 8,
and that (2) PEP/PR covenants that it will seek payment
or satisfaction of Valero's promise exclusively through
the assignment of Valero's claims and PEP/PR further
covenants not to sue, collect, or otherwise act against
Valero in any manner on Valero's promise to reimburse
except through the assignments. . . The intention is that
Valero will not be subject to further monetary payments
to PEP/PR and that PEP/PR will have the right to recover
through the assignments and on PEP/PR's direct claims to
the fullest extent possible.28
Thus, the Valero agreement establishes that (1) Valero reimbursed
PEP the sum of $3,750,000.00 for gas condensate purchased from
Kemco Resources, Inc., an entity that is not a defendant in this
action,29and (2) Valero did not assign its claims against Kemco to
PEP.30 Because Valero has not assigned its claims against Kemco to

( . . .continued)
Entry No. 12.
26

2 - ¶ ¶ 8a and 8c.
9~d.

301d. 9.a, stating:
¶
In addition to the payment, Valero assigns to PEP/PR any
third party claims, including, but not limited to, claims
for contribution or indemnity, breach of warranty or
title and breach of contract, Valero has against any
(continued. . . )

PEP, and because Kemco is not a defendant in this action, any
injury that Valero suffered by reimbursing PEP for gas condensate
purchased

from

Kemco

is

not

an

injury-in-fact

capable

of

establishing PEP'S standing to assert assigned claims against any
of the defendants named in this action.
(c) Conclusions as to Injury-in-Fact
PEP has neither alleged nor pointed to any evidence showing
that the assigned claims asserted in this action seek damages for
injuries-in-fact suffered by the assignors, or that any injuriesin-fact suffered by the assignors are traceable to a defendant
named in this action. Instead, PEP candidly admits that it "is not
bringing the assigned claims to recover for Valero's [Flint Hills']
[AGE'S] embarrassment at having been involved in the injuring of a
major trading partner.

PEP brings the assigned claims to recover

the value of the goods sold to the assignors."31

Missing from PEPfs

Original Complaint and/or responses to the pending motions to
dismiss

are

factual

allegations

and/or

evidence

capable

of

establishing that the assignors -- as opposed to PEP -- suffered

30

(

. . . continued)

third party other than Kemco or Kemcofs insurers

. . .

3 1 ~ s
~ ~ '
Opposition to Plains Marketing, L.P. ' s Motion to
Dismiss, Docket Entry No. 70, pp. 4-5; PEP's Opposition to Shell
Chemical LP and Shell Trading US Company's Motion to Dismiss,
Docket Entry No. 71, p. 7; PEP's Opposition to Murphy Energy
Corporation's Motion to Dismiss, Docket Entry No. 72, p. 5; Pemex
Exploraci6n y Producci6nfs Opposition to Big Star Gathering LTD
L.L.P. and Saint James Energy Operating, Inc.'s Motions to Dismiss
or, in the Alternative, Motion for More Definite Statement, Docket
Entry No. 75, p. 4.

injury that would allow them to recover the value of goods that
they purchased and/or received from any of the defendants named in
this action.

Accordingly, PEP lacks standing to assert the

assigned claims.

See Gulf Insurance, 22 S.W.3d at 420; Jackson,

883 S.W.2d at 174.
2.

Assisnments of Third-Party Claims to PEP Are Invalid

Defendants Plains, STUSCO, Murphy Energy, F&M Transportation,
High Sierra, and Superior Crude argue that the assignments to PEP
of the indirect claims asserted in this action are void under Texas
law as against public policy because a settling defendant cannot
attempt to preserve its contribution rights by assigning those
rights to the plaintiff, and because they distort the litigation.32
(a) Assignments Are Invalid Attempts to Preserve
Contribution Rights Against Non-Settling Defendants
Citing Jackson v. Freishtliner C o r ~ . ,938 F.2d 40, 41-42 (5th
Cir. 1991), and Beech Aircraft Corp. v. Jinkins, 739 S.W.2d 19, 22
(Tex. 1987),

defendants

Plains,

STUSCO,

Murphy

Energy,

F&M

32~efendants
Big Star and Saint James argue that the AGE
assignments are invalid for various reasons arising from AGE'S
confirmed bankruptcy plan, e.g., because AGEfs Liquidating Trustee
did not have an interest in the assigned claims, the AGE assignment
is barred by the res iudicata effect of AGE'S confirmed bankruptcy
plan, the doctrine of judicial estoppel precludes the AGE
assignment, and the AGE assignment is too indefinite to be
enforceable.
Defendants Big Star Gathering Ltd L.L.P. and
Saint James Energy Operating, Inc.'s Motion to Dismiss or, in the
Alternative, Motion for More Definite Statement, Docket Entry
No. 44, pp. 6-15. Because the court concludes that the assignments
are void under Texas law, the court does not reach these arguments
arising from the AGE bankruptcy.

Transportation, High Sierra, and Superior Crude argue that PEP
lacks standing to assert the indirect, assigned claims that it has
alleged in this action because Texas law prohibits AGE, Flint
Hills, and Valero from assigning any contribution rights against
non-settling

defendant^.^^

In Beech Aircraft, 739 S.W.2d at 20, three settling defendants
tried to bring post-settlement counterclaims for contribution
against the remaining non-settling defendant.

The Texas Supreme

Court held that "a defendant can settle only his proportionate
share of common liability and cannot preserve contribution rights
under either the common law or the comparative negligence statute
by attempting to settle the plaintiff's entire claim."

I .at 22.
d

Under well-established Texas law, therefore, a settling tortfeasor
is not entitled to contribution from a non-settling tortfeasor.
See
- Jackson, 938 F.3d at 41-42 (examining Texas case law holding

33&
Plains Marketing, L.P.'s Motion to Dismiss, Docket Entry
No. 12, p. 10; Defendants Shell Trading US Company and Shell
Chemical LPfs Motion to Dismiss, Docket Entry No. 31, pp. 10-12;
Memorandum of Law in Support of Defendant Murphy Energy
Corporation's Motion to Dismiss Original Complaint, Docket Entry
No. 37, pp. 9-11; Defendant F&M Transportation, Inc.'s Motion to
Dismiss, Docket Entry No. 66, p. 2 (arguing that PEP has no
standing to bring the assigned claims because the assignments are
invalid and joining the motions to dismiss filed by all other
defendants); Defendant High Sierra Crude Oil & Marketing, LLCfs
Motion to Dismiss, Docket Entry No. 76, pp. 2-3 (arguing that PEP
has no standing to bring the assigned claims because the
assignments are invalid and joining the motions to dismiss filed by
all other defendants); Defendant Superior Crude Gathering, Inc.'s
Motion to Dismiss, Docket Entry No. 77, pp. 2-3 (arguing that PEP
has no standing to bring the assigned claims because the
assignments are invalid and joining the motions to dismiss filed by
all other defendants).

that a settling tortfeasor has no right of contribution against a
non-settling tortfeasor).
Jackson, 938 F.3d

at

40, was

a

Fifth

Circuit products

liability death action that followed the death of Jackson, a truck
driver whose gasoline tanker hit a cow and burst into flames.
Trailmaster, the manufacturer of the gasoline trailer, settled with
Jackson's surviving beneficiaries and assigned to them its rights
of contribution and

indemnity against Betts, the

third-party

defendant who manufactured a part attached to the trailer.
Fifth

Circuit

held

that

the

assignment

from

The

Trailmaster

to

Jackson' s estate was void under Texas law because "it impermissibly
~[oughtlto preserve the settling defendant's contribution rights
against a third-party joint tortfeasor, Betts."

I .at 41-42. In
d

further support of its holding, the court explained that "the
assignment of Trailmaster's contribution claim to the plaintiffs
would cause only unnecessary additional litigation, confuse the
jury as to the role of these 'surrogate plaintiffs,' prejudice
Betts, and possibly result in a prohibited double recovery of the
same damages."
PEP

I . at 42.
d

argues

that

Jackson

is

distinguishable because

the

assigned claims in that case were for contribution and indemnity,
while the assigned claims at issue here are assigned claims for
breach of warranty and breach of contract made pursuant to Texas's
version of the Uniform Commercial Code (UCC). PEP argues that
[allthough PEP was assigned all of relevant claims,
including for contribution and indemnity (along with

warranty and contract claims), PEP brought only three
claims-breach of warranty, breach of contract, and fraud
(against certain defendants) .
Analyzed from the perspective of the claims PEP
actually raises, there is no question that the
assignments are valid. The defendants that sold stolen
goods are liable to Valero, AGE, and Flint Hills directly
for breach of warranty of title, not for contribution and
indemnity. See Nobility Homes of Texas, Inc. v. Shivers,
557 S.W.2d 77 (Tex. 1977); Mitchell v. Webb, 591 S.W.2d
547 (Tex. Civ. App.-Fort Worth 1979, not writ) .
Thus, PEP is not trying to concoct a claim in
contravention of the common law.
It is raising two
claims that could not have better legal support. In this
context-the sale of goods-the UCC controls, and the UCC
both creates a claim for breach of contract and states
that damage claims for breach of warranty and for
contract are freely assignable; indeed, the parties
cannot even agree to foreclose such an assignment. Tex.
Bus. & Com. Code § 2.210 (b).34
PEP'S

argument that the assigned claims asserted in this

action are not claims for contribution or indemnity but, instead,
claims for breach of warranty and breach of contract, is belied,
however, by the terms of the assignment clauses included in the
settlement agreements.

The Flint Hills agreement provides as

follows :
a.

Flint Hills assigns to PEP any third party claims,
including, but not limited to, claims for
contribution or indemnity, breach of warranty of
title and breach of contract, Flint Hills has
against any third party for the matters covered by
the release. . .

3 4 ~ ~ Opposition to Plains Marketing, L.P.'s Motion to
~ f s
Dismiss, Docket Entry No. 70, pp. 10-11; PEP'S Opposition to Shell
Chemical LP and Shell Trading US Company's Motion to Dismiss,
Docket Entry No. 71, p. 13; PEP'S Opposition to Murphy Energy
Corporation's Motion to Dismiss, Docket Entry No. 72, pp. 10-11.

b.

Flint Hills and PEP intend that PEP can utilize the
35
assignments to collect PEPrs damages, if any. . .

In pertinent part the AGE and Valero agreements are identically
worded.36 Thus, pursuant to the assignment clauses contained in the
settlement agreements, the only claims assigned to PEP are thirdparty claims that the parties intended PEP to use to collect PEP'S
damages. By definition, the assigned third-party claims require a
finding of liability on the part of AGE, Flint Hills, and/or Valero
before their liability can be shifted to a third-party.

See

Blackrs Law Dictionarv 34 (8th ed. 2004) (defining "third - party
action" as "[aln action brought as part of a lawsuit already
pending but distinct from the main claim, whereby a defendant sues
an entity not sued by the plaintiff when that entity may be liable
to the defendant for all or part of the plaintiff's

claim").

Like Trailmaster, the settling manufacturer of the gasoline
trailer in Jackson, 938 F.2d at 40, who impermissibly attempted to
preserve

its

contribution

rights

against

its

alleged

joint

tortfeasors by assigning its third-party claims to the decedent
truck driverrs beneficiaries, AGE, Valero, and Flint Hills have
impermissibly attempted to preserve their contribution rights

3 5 ~ l i nHills/PEP Settlement Agreement, Exhibit D to Defendants
t
Shell Trading US Company and Shell Chemical LPrs Motion to Dismiss,
Docket Entry No. 31, p. 2 ¶ ¶ 8.a and 8.b.
3- e
6 ~ e AGE/PEP Settlement Agreement, Exhibit B to Defendants
Shell Trading US Company and Shell Chemical LPrs Motion to Dismiss,
Docket Entry No. 31, p. 2 ¶ ¶ 8.a and 8.b; Valero/PEP/PR Settlement
Agreement, Exhibit 1 to Plains Marketing, L.P. ' s Motion to Dismiss,
Docket Entry No. 12, ¶ ¶ 9.a and 9.b.

against their alleged joint tortfeasors by assigning their thirdparty

claims

to

PEP.

Although

PEPfs

Original

Complaint

characterizes the assigned claims as claims for breach of contract
and breach of warranty, the claims that PEP seeks to assert as
assignee of AGE, Flint Hills, and Valero are derivative of the
causes of
therefore,

action PEP has
actually

asserted in this

third-party

claims

for

lawsuit and are,
contribution

and

indemnity. PEP acknowledged this in the joint motion for approval
of the AGE settlement agreement filed in bankruptcy court:
PEP has alleged that potential claims exist against AGE
by PEP for at least $90 to $100 million dollars and
possibly as much as $120 million dollars. As the seller
had no title to pass to AGE, AGE is allegedly not able to
avail itself of any sort of "good faith" purchaser or
bona fide purchaser for value type defense.
In turn, AGE would have a claim for recourse asainst the
seller(s) of this stolen crude if it were found liable to
PEP. However, since AGE, at this point, has not suffered
any damages, such claim is currently not ripe for
assertion.37
Because the assigned claims asserted in this action are all
contingent upon PEP'S ability to hold AGE, Flint Hills, and Valero
liable for having purchased and/or received stolen gas condensate,
the assigned claims are claims for contribution from non-settling
tortfeasors that are invalid under Texas law regardless of how they
are characterized in PEP'S pleadings.

Jackson, 938 F.3d at 40.

See also Garland Dollar General LLC v. Reeves Development, LLC,

37~oint
Motion Under Bankruptcy Rule 9019 to Approve Settlement
Agreement Pemex Exploraci6n y Producci6nf Exhibit A to Defendants
Shell Trading US Company and Shell Chemical LP' s Motion to Dismiss,
Docket Entry No. 31, p. 4, ¶ ¶ 12-13 (emphasis added).

Civil Action No. 3:09-CV-0707-D, 2010 WL 1962560, *3 (N.D. Tex. May
17, 2010) ("Reeves Development cannot bring a contribution claim
framed as an action for breach of contract.").

(b) Assignments Are Invalid Because They Increase and
Distort Litigation
Citing
925 S.W.2d

State
696

Farm

Fire

and

Casualtv

Companv

v.

Gandv,

(Tex. 19961, defendants Plains, STUSCO, Murphy

Energy, F&M Transportation, High Sierra, and Superior Crude argue
that PEP lacks standing to assert the assigned claims because the
assignments are void under Texas law as against public
Plains explains that
PEP'S only basis for standing to bring claims against
Plains on behalf of Valero and AGE is an assignment of
those claims. These purported assignments-in which PEP
settled its conversion claims against Valero and AGE for
$0 in return for an assignment of their warranty

3- Plains Marketing, L.P. 's Motion to Dismiss, Docket Entry
8~ee
No. 12, p. 10; Defendants Shell Trading US Company and Shell
Chemical LP's Motion to Dismiss, Docket Entry No. 31, pp. 11-12;
Memorandum of Law in Support of Defendant Murphy Energy
Corporation's Motion to Dismiss Original Complaint, Docket Entry
No. 37, pp. 9-11; Defendant F&M Transportation, Inc.'s Motion to
Dismiss, Docket Entry No. 66, p. 2 (arguing that PEP has no
standing to bring the assigned claims because the assignments are
invalid and joining the motions to dismiss filed by all other
defendants); Defendant High Sierra Crude Oil & Marketing, LLCfs
Motion to Dismiss, Docket Entry No. 76, pp. 2-3 (arguing that PEP
has no standing to bring the assigned claims because the
assignments are invalid and joining the motions to dismiss filed by
all other defendants); Defendant Superior Crude Gathering, Inc.'s
Motion to Dismiss, Docket Entry No. 77, pp. 2-3 (arguing that PEP
has no standing to bring the assigned claims because the
assignments are invalid and joining the motions to dismiss filed by
all other defendants).

claims-are invalid under Texas law because they are
collusive and distort the litigati~n.~'
In

Gandv

the

Texas

Supreme

Court

considered

and

found

impermissible a settlement agreement and assignment similar to the
settlements and assignments at issue in this action.

Gandy sued

her stepfather for sexual abuse, and State Farm, his insurer,
agreed to undertake his defense while reserving its right to deny
coverage. The stepfather settled with Gandy for an agreed judgment
of $6 million and assigned all his claims against State Farm both
for coverage and for negligent defense to Gandy, and Gandy agreed
not to collect from her stepfather but, instead, to pursue the
assigned claims against State Farm.

I . at 697-98.
d

Gandy then

sued State Farm in a new lawsuit, and State Farm argued that the
assignment of claims was invalid as against public policy.

The

court of appeals agreed in principle, stating that the assignment
should effectively be void because the agreement not to execute
against the stepfather meant that the stepfather had not suffered
any damages from Gandy's

tort claims against him, and could not

therefore collect on a claim against State Farm. Nevertheless, the
court of appeals reasoning that since State Farm had voluntarily
agreed to defend the stepfather, State Farm had a duty to conduct
the defense properly.
The

Texas

I . at 698.
d

Supreme

Court

reversed,

holding

that

the

stepfather's assignment of claims to Gandy violated public policy

39~lains
Marketing, L.P.'s
No. 12, p. 11.

Motion to Dismiss, Docket Entry

-32-

and, therefore, conveyed nothing.

I.
d

The Court cited four

instances in which Texas courts have held agreements to assign
claims invalid:

(1) assignment of legal malpractice claims,

id. at

707-08; (2) Mary Carter agreements, whereby a plaintiff assigns to
a settling defendant part of his claims against any nonsettling
defendants,

id. at 709-10; (3) assignment of a plaintiff's claim to

a tortfeasor as part of a settlement agreement, which allows the
settling

defendant

tortfeasor,

to

prosecute

the

claim

against

a

joint

id. at 710-11; and (4) assignment of interests in an

estate,

id. at 711. The Court observed that these instances show

that

[i]
n

"

widely

different

contexts

we

have

invalidated

assignments of choses in action that tend to increase and distort
litigation. We have never upheld assignments in the face of those
concerns."

Id.
-

Observing that the stepfather' s settlement with Gandy not only
prolonged the litigation but also "greatly distorted the litigation
id.
that followed [the settlement]," - at

the Court concluded

that Gandy and her stepfather had perpetrated a fraud against State
Farm by trying to hold it liable for damages for which it would not
have been liable had the case proceeded to trial against the
stepfather.

I . at 712-13. The Court explained that
d

[wlhile the courts favor settlement of disputes and
incline to enforcing partiesf agreements toward that end,
we do not do so when, as with Mary Carter agreements, the
result is worse than if the parties had not settled. The
settlement arrangement in the present case did not
resolve the parties' disputes but prolonged and confused
them. Such an arrangement is invalid.

Id.
- at 714.
Citing H.S.M. Acquisitions v. West, 917 S.W.2d 872 (Tex. App.
-

Corpus Christi 1996, writ denied), the Gandv Court acknowledged

that settlement arrangements like the one at issue in Gandv are not
confined to insurance cases but are also used in other contexts.
The Court explained that in the H.S.M. Acsuisitions case
a lessor sued her lessee for breach of a building lease.
The lessee in turn sued its sublessees, contending that
When
they were liable for all of lessor's claims.
mounting litigation costs began to concern lessee, it
settled with lessor by assigning lessor its claims
against the sublessees and agreeing to a substantial
judgment in lessor's favor in exchange for lessor's
agreement not to enforce the judgment against lessee and
to indemnify lessee against claims by the sublessees.
Lessor then sued the sublessees to collect its judgment
against lessee. The sublessees filed third party claims
against lessee. The trial court granted summary judgment
for the sublessees, refusing to enforce the settlement
agreement because it was collusive. Id. at 874-75. The
court of appeals affirmed [stating]:
We hold that the agreed judgment between
[lessee] and [lessor] was executed in bad
faith and is against public policy.
Public
policy favors reducing litigation and properly
aligning
adverse
parties.
[Lesseef
s]
settlement with [lessor] failed to achieve
these goals. Instead of reducing litigation,
the settlement prolonged and confused the
litigation.
Rather
than
encouraging
settlement, [lesseef and [lessor's] actions
s]
did just the opposite . . . We conclude that
the agreed judgment increased the complexity
of the litigation, unduly distorted the
posture of the litigation, and misaligned the
parties by placing [lessee] on the same side
as [lessor]. Id. at 881.
We agree with the court of appeals.
The same
reasons for invalidating the assignment in the present
case apply in H.S.M. The factor weighing in favor of
upholding an assignment in cases involving insurance the insured's expectation that his insurer will provide

a defense against plaintiff's claim - does not exist in
a case like H.S.M. Absent such a countervailing factor,
there is no reason to allow an assignment that makes
litigation more protracted and complex.
Gandv, 925 S.W.2d at 715. Because, like the settlement agreements
found invalid in Gandy and H.S.M. Acquisitions, the settlement
agreements that AGE, Flint Hills, and Valero entered with PEP
increase the complexity of the litigation and misalign the parties
by placing AGE, Flint Hills, and Valero on the same side as PEP,
the court concludes that the assignments are invalid.
Like the settlement agreements at issue in Gandv and H.S.M.
Acquisitions, the settlement agreements that AGE, Flint Hills, and
Valero entered with PEP did not end any litigation and offered no
reasonable expectation of ending any litigation.

The agreements

that PEP entered with all three assignors show that they were not
intended to secure damages from AGE, Flint Hills, or Valero but,
instead, were intended to provide PEP a way to recover against the
defendants named in this action.

Like the stepfather in Gandv and

the lessee in H.S.M. Acquisitions who suffered no damages because
plaintiffs in those cases agreed not to enforce the judgments that
they obtained against the settling defendants, AGE, Flint Hills,
and Valero have not suffered any damages because PEP, the only
party that could claim superior title to the gas condensate, has
agreed not to pursue liability claims against them, and not to
enforce their promises

to

reimburse PEP

for any

stolen gas

condensate they purchased and/or received. PEP'S covenants not to
seek to hold AGE,

Flint Hills, or Valero

liable for having

purchased and/or received stolen gas condensate and not to enforce
their promises to reimburse PEP are, therefore, analogous to the
agreements at issue in Gandv and H.S.M. Acquisitions.

Moreover,

the assignments at issue in this case put PEP into a dual role as
both the alleged original owner of the gas condensate at issue and
the last purchaser of that gas condensate.

The dual role that the

assignments require PEP to play in this litigation threatens to
confuse the jury as to whose damages should be considered and
raises the possibility that PEP could receive a prohibited double
recovery of the same damages if it is successful in this action and
in the BASE suit.

See Jackson, 938 F.2d at 42.

The court concludes that like the settlements and agreed
judgments at issue in Gandv and H.S.M. Acquisitions, the settlement
agreements and assignments of claims at issue in this action are
invalid because they did not and were not intended to end any
litigation but were instead intended to prolong PEP'S litigation
against the defendants named in this action and because they have
distorted the litigation positions of the parties by placing PEP in
the dual role of original owner and last purchaser of the gas
condensate alleged to have been stolen.
111.

Motions for Leave to Desianate Responsible Third Parties

All

of

the

defendants have

filed motions

responsible third parties pursuant to

to

designate

§§

33.004(a) and (j) of the

Texas Civil Practices and Remedies Code.

Because the only claims

asserted against the following defendants are indirect, assigned
-36-

claims that the court has already concluded PEP lacks standing to
assert, the motions to designate responsible third parties urged by
these defendants are moot: Plains (Docket Entry No. 121), Superior
Crude (Docket Entry No. 124), High Sierra (Docket Entry No. 125),
Murphy (Docket Entry No. 129), F&M Transportation (Docket Entry
No. 130), and Big Star and Saint James (Docket Entry No. 132) .
Because PEP has alleged both direct and indirect, assigned claims
against STUSCO, the motion to designate responsible third-parties
urged by STUSCO and Shell Chemical is moot as to the indirect,
assigned claims and live as to the direct claims. Accordingly, the
live motions to designate responsible third parties are those urged
by FR Midstream (Docket Entry No. 120), Shell Chemical and STUSCO
(Docket Entry No. 123), and Sunoco, ConocoPhillips, and Marathon
(Docket Entry No. 127).
A.

Standard of Review

Defendants seek leave to designate responsible third parties
under the Texas proportionate responsibility scheme contained in
Chapter 33 of the Texas Civil Practices and Remedies Code.

With

certain express exceptions not relevant here, Chapter 33 applies to
all common law torts and to statutory torts that do not include a
separate and conflicting legislative fault-allocation scheme. Tex.
Civ. Prac.

&

Rem. Code

§

33.002; JCW Electronics, Inc. v. Garza,

257 S.W.3d 701, 704-06 (Tex. 2008).
"Responsible third party" means any person who is alleged
to have caused or contributed to causing in any way the
harm for which recovery of 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 combination of these. The term "responsible third
party" does not include a seller eligible for indemnity
under Section 82.002.
Tex. Civ. Prac.

&

Rem. Code

§

33.011 (6). Responsible third parties

are not limited to those who can be joined as parties to the
litigation.
outside the

Responsible third parties may be persons or entities
court's

jurisdiction, unable

plaintiff, or even unknown.

to be

sued by

the

See In re Unitec Elevator Services

C . 178 S.W.3d 53, 58 n.5 (Tex. App.
o,

-- Houston [lst Dist.] 2005,

no pet.) .

Rem. Code

See also Tex. Civ. Prac.

&

§§

33.004 (j) (k).40
-

40~ections
33.004(j) and (k) of the Texas Civil Practices and
Remedies Code provide:
(j) Notwithstanding any other provision of this section,
if, not later than 60 days after the filing 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
the
pleading
requirements of the Texas Rules of Civil Procedure.

(k) An unknown person designated as a responsible third
party under Subsection (j) is denominated as "Jane Doe"
or "John Doe" until the person's identity is known.

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. Tex.
Civ. Prac.

&

Rem. Code

§

33.003 (a)(4).

Once a defendant has moved for leave to designate responsible
third parties plaintiffs may object.
§

33.004(f).

Tex. Civ. Prac.

&

Rem. Code

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.
Civ. Prac.

A

&

Rem. Code

court's

grant

§

. ."

Tex.

33.004 (g).

of

a motion

for

leave to

designate

a

responsible third party at this stage in the litigation does not
preclude a party from later challenging the designation.

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."
Prac.

&

Rem. Code 5 33.004(1).

Tex. Civ.

"The court shall grant the motion

to strike unless a defendant produces sufficient evidence to raise

a

genuine

issue

of

fact

regarding

responsibility for the claimant's

the

designated

person's

Id.

injury or damage."

The

burden is on the defendants to produce sufficient evidence to raise
a

genuine

issue

of

fact

regarding

the

designated

party's

responsibility for the claimantfs injury or damage. Additionally,
before trial the court must determine whether there is sufficient
evidence to support the submission of a question to the jury
regarding the
Prac.

&

designated partyfs responsibility.

Rem. Code

§

Tex.

Civ.

33.003 (b).41 Therefore, while the pleading

requirements at the outset are not stringent, as trial moves closer
the requirement for sufficient evidence to support the actual
submission of a question on the responsibility of the designated
third parties becomes more demanding.

B.

Analysis

FR Midstream Transport LP seeks to designate as responsible
third-parties 106 different entities and/or individuals, 147 Known
Traffickers, 48 Known Detainees, and 26 Accused Parties, as well as
unspecified numbers of unknown traffickers, criminals, and Mexican
government officials and customs agents.

In support of its motion

to designate responsible third parties, FR Midstream cites PEP
documents, documents from the Mexican government, PEP'S witnesses,

41~ection
33.003(b) of the Texas Civil Practices and Remedies
Code provides: "This section does not allow a submission to the
jury of a question regarding conduct by any person without
sufficient evidence to support the submission."

PEPfs disclosures, as well as pleadings and discovery materials
from the BASF litigation, Civil Action No. 4:12-c~-1997.~*
Shell Chemical and STUSCO seek to designate as responsible
third-parties 106 different entities and/or individuals, as well as
unspecified numbers of known and unknown traffickers, unknown
criminals, and unknown Mexican government officials and customs
agents. In support of their motion to designate responsible thirdparties, Shell Chemical and STUSCO cite "PEPfs Complaints in this
case and the BASF case, documents produced by PEP and other Pemex
documents, documents produced by Defendants and third parties,
reports and documents from the Mexican government, and PEP and
other witnessesf testimony." 4 3

Shell Chemical and STUSCO argue that

its motion to designate responsible third parties should be granted
because
[a]s PEP admits in its pleadings, disclosures, and
interrogatory responses in this case and the BASF case
and as identified by witnesses and in documents produced
by PEP, Defendants, and third parties, the alleged
injuries for which [PEP] seeks damages, if proven, were
caused by the criminal and/or negligent acts of these
responsible third parties.44
Sunoco, ConocoPhillips, and Marathon seek to designate as
responsible third-parties PEP and its other subsidiaries, as well

42~efendant Midstream Transport, LPfs Motion for Leave to
FR
Designate Responsible Third Parties, Docket Entry No. 120.
43~efendants
Shell Chemical LP and Shell Trading US Companyfs
Motion for Leave to Designate Responsible Third Parties, Docket
Entry No. 123, p. 3.

as

various

third-parties

alleged

to

have

stolen,

smuggled,

transported, distributed, bought and/or sold Mexican condensate or
conspired to undertake such actions named in PEPfs pleadings in
this case and the consolidated actions, PEP'S

Rule 26 initial

disclosures, interrogatory responses, and document productions,
five United States citizens who committed criminal acts (Arnoldo
Maldonado, Jonathan Dappen, Donald Schroeder, Stephen Pechenik, and
Tim Brink), and an unspecified number of unknown criminals and
traffickers.

In support of their motion to designate responsible

third parties, Sunoco, ConocoPhillips, and Marathon argue that
[dlefendants derive their list from various sources,
including but not limited to: PEPfs pleadings and Rule 26
Initial Disclosures; document productions and discovery
responses from PEP, various defendants, and other third
parties; reports and documents from the Mexican
government; and deposition testimony taken from PEP and
other witnesses.4 5
Sunoco, ConocoPhillips, and Marathon explain that
PEP has already identified hundreds of individuals and
entities that allegedly played a role in the conspiracy
to steal, smuggle, transport, distribute, and/or sell the
condensate on both sides of the border.
Discovery
productions and deposition testimony have further
revealed the names of additional parties that, according
to PEP, either knowingly or unknowingly dealt in stolen
condensate. Because all of these non-defendant actors
are alleged to have caused or contributed to PEPfs
damages, Defendants are entitled to designate them as
responsible third parties.46

4 5 ~ o i n tMotion for Leave to Designate Responsible Third
Parties, Docket Entry No. 127, p. 3.

PEP argues that the motions to designate responsible third
parties should be denied because they each suffer from procedural
defi~iencies.'~ PEP argues that
[d]efendants['] motions do not even attempt to identify
third-parties that might arguably be responsible for
their illegal conduct. Instead, the Defendants proffer
a list of every criminal entity or individual they can
find a reference to, whether or not those parties had
anything to do with Defendantsf own respective conduct.
The Defendants list over 100 individuals and entities and
then add catchalls like "Unknown Criminals," "Unknown
Mexican Government Officials and Customs Agents," and
"Unknown Traffickers." . . As a result, the Defendants'
motions are in~upportable.'~
PEP further argues that
[tlhe Defendants have not satisfied the pleading
requirements. Their motions do no identify any acts of
third parties that caused them to purchase PEP'S property
without title.
Nor do their motions indicate in any
manner how the acts of third parties caused the damages
inflicted by their actions. The Defendants do not even
offer a factual scenario describing how each designated
party c o u l d b e responsible for the Defendantsf respective
purchases of stolen condensate. Instead, the Defendants
want to lay blame on everyone and every party that is
acting criminally within Mexico and the U.S."
In addition PEP argues that the
[dlefendantshave improperly requestedthat the following
entities or individuals who are already defendants,
cross-defendants, or settling persons in this case be
designated: 5. AGE Refining, Inc.; 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, LLC; 55. Josh

4
7 Exploracibn y Producci6nf ~ Opposition to Defendantsf
~
~
~
~
s
Motions for Leave to Designate Responsible Third Parties, Docket
Entry No. 135, p. 1.

Crescenzi; 83. RGV Energy Partners, LLC; 96. Stephen
Pechenik; 100. Timothy Brink; and 101. Trammo Petroleum,
Inc.50
PEP'S argument that the pending motions are deficient because
they do not demonstrate how the parties they seek to designate as
responsible third-parties caused FR Midstream, Shell Chemical and
STUSCO, Sunoco, ConocoPhillips, and Marathon to purchase stolen gas
condensate lacks merit because Chapter 33 of the Texas Civil
Practices

&

Remedies Code

§

33.011 (6) defines " [r]
esponsible third

party" as "any person who is alleged to have caused or contributed
to causing in any way the harm for which recovery of damages is
sought." Accordingly, defendants only need to plead facts capable
of

showing how

the

third-parties they

seek

to

designate

as

responsible third-parties caused or contributed to PEP's alleged
injury, not to their own conduct.
not

deny,

that

PEP's

Defendants allege, and PEP does

pleadings,

disclosures,

and

discovery

responses identify the parties that they seek to designate as
responsible third-parties as parties who caused or contributed to
PEP'S injuries.
stage of

the

These allegations are sufficient at this early
case

to

satisfy the pleading

requirements

for

designating responsible third parties.
PEP's

contention that the defendants

improperly seek to

designate as responsible third parties certain individuals who are
already defendants, cross-defendants, or settling persons in this
case

is

similarly

without

merit

because

none

of

the

named

individuals are defendants, cross-defendants, or settling parties
in this action.

Because the court concludes that PEPrs arguments

that the motions to designate responsible third parties urged by FR
Midstream, Shell Chemical and STUSCO, Sunoco, ConocoPhillips, and
Marathon should be denied because they suffer from "procedural
deficiencies" lack merit, the live motions to designate responsible
third parties urged by these defendants will be granted.

IV.

Conclusions and Order

For the reasons explained in

§

11, above, the court concludes

that PEP lacks standing to assert the indirect, assigned claims for
fraud, breach of contract, and breach of warranty alleged in PEP'S
Original Complaint
Marketing, L.P.'s

(Docket Entry No. 1).
Motion to Dismiss

Accordingly, Plains

(Docket Entry No. 12) is

GRANTED; Defendants Shell Trading US Company and Shell Chemical

LPfs Motion to Dismiss (Docket Entry No. 31) is GRANTED in PART and
DENIED in PART; Defendant Murphy Energy Corporation's Motion to

Dismiss Original Complaint

(Docket Entry No.

36) is GRANTED;

Defendants Big Star Gathering Ltd. L.L.P. and Saint James Energy
Operating, Inc.'s

Motion to Dismiss

(Docket Entry No. 44) is

GRANTED; Defendant F&M Transportation, Inc.'s

Motion to Dismiss

(Docket Entry No. 66) is GRANTED; Defendant High Sierra Crude
Oil

&

Marketing, LLCrs Motion to Dismiss (Docket Entry No. 76) is

GRANTED; and Defendant Superior Crude Gathering, Inc.'s Motion to

Dismiss (Docket Entry No. 77) is GRANTED.

For the reasons explained in

§

111, above, the court concludes

that the motions to designate responsible third-parties for the
indirect, assigned claims that PEP has asserted against defendants
Plains, Superior Crude, High Sierra, Murphy, F&M Transportation,
and Big Star and Saint James are moot, but that defendants FR
Midstream, Shell Chemical and STUSCO, and Sunoco, ConocoPhillips,
and Marathon have

satisfied the

requirements

for designating

responsible third parties for the direct claims that PEP has
asserted

against

them.

Accordingly, Defendant

FR Midstream

Transport, LPfs Motion for Leave to Designate Responsible Third
Parties (Docket Entry No. 120) is GRANTED; Plains Marketing, L.P. ' s
Motion for Leave to Designate Responsible Third Parties (Docket
Entry No. 121) is MOOT; Defendants Shell Chemical LP and Shell
Trading US Company's Motion for Leave to Designate Responsible
Third Parties (Docket Entry No. 123) is GRANTED as to PEP'S direct
claims for conversion and for equitable relief, constructive trust,
unjust enrichment, money had and received, and is MOOT as to PEP'S
indirect, assigned claims for fraud, breach of contract, and breach
of warranty; Defendant Superior Crude Gathering, Inc.'s Motion to
Join in Defendants Shell Chemical LP and Shell Trading US Companyfs
Motion for Leave to Designate Responsible Third Parties (Docket
Entry No. 124) is MOOT; High Sierra Crude Oil

&

Marketing, LLCfs

Motion to Join Defendants Shell Chemical LP and Shell Trading US
Company's Motion for Leave to Designate Responsible Third Parties
(Docket Entry No. 125) is MOOT; Joint Motion for Leave to Designate

Responsible Third Parties filed by Sunoco Partners Marketing

&

Terminals L.P., ConocoPhillips Co., and Marathon Petroleum Co.,
L.P. (Docket Entry No. 127) is GRANTED; Defendant Murphy Energy
Corporationfs Motion to Join the Shell Defendants' Motion for Leave
to Designate Responsible Third Parties (Docket Entry No. 129) is
MOOT; Defendant F&M Transportation, Inc.'s Motion for Leave to
Designate

Responsible

Third

Parties

and

Motion

to

Join

in

Defendants Shell Chemical LP and Shell Trading US Company's Motion
for Leave to Designate Responsible Third Parties (Docket Entry
No. 130) is MOOT; and Defendants Big Star Gathering Ltd., LLP and

Saint James Operating, Inc.'s Motion to Join in Plains Marketing,
L.P. ' s Motion for Leave to Designate Responsible Third Parties
(Docket Entry No. 132) is MOOT.
SIGNED at Houston, Texas, on this the 11th day of February,

2013.

UNITED STATES DISTRICT JUDGE