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Phoenix Energy Marketing, Inc. v. Chase Oil Corp.

United States District Court, N.D. Oklahoma

May 30, 2017

PHOENIX ENERGY MARKETING, INC., d/b/a B/R ENERGY, Plaintiff,
v.
CHASE OIL CORPORATION, MACK ENERGY CORPORATION, and MACK C. CHASE, Defendants.

          OPINION AND ORDER

          CLAIRE V. EAGAN CJ UNITED STATES DISTRICT JUDGE.

         Now before the Court are defendant Mack C. Chase's (Chase) motion to dismiss (Dkt. # 13), defendant Chase Oil Corporation's (Chase Oil) motion to dismiss (Dkt. # 14), and defendant Mack Energy Corporation's (Mack Energy) motion to dismiss (Dkt. # 15). The defendants argue that the claims against them should be dismissed for lack of personal jurisdiction and, in the alternative, ask the Court to dismiss this case due to a similar suit pending in New Mexico state court. Chase also argues that the claims against him should be dismissed for failure to state a claim. Dkt. # 13, at 14. Plaintiff argues that the issue of personal jurisdiction was already decided before the case was removed to this Court and, even if the Court considers the issue, it has specific personal jurisdiction over the defendants in this case. Moreover, plaintiff asserts that it has sufficiently stated a claim against Chase and that the Court should not dismiss this case in favor of the New Mexico suit because the claims in this suit that are independent of the issues being litigated in New Mexico. Dkt. ## 20, 21, 22.

         I. Background

         Plaintiff is an Oklahoma corporation owned and controlled by Brian Broaddus. Dkt. # 21-1, at 1. In 1996, Broaddus was the president of B/R Energy Partners, Inc., which entered into a letter agreement with Chase Oil (Letter Agreement), under which B/R Energy Partners, Inc. agreed to purchase and market gas produced by Chase Oil from certain wells in northwest New Mexico. Dkt. # 21-2. B/R Energy Partners, Inc. and Chase Oil entered into a more formal agreement in 1997 (1997 Agreement), which was replaced by a third agreement in 1998 that altered the amount charged for certain services (1998 Agreement). Dkt. ## 21-3, 21-4. Under the 1997 and 1998 Agreements, B/R Energy Partners, Inc. agreed to make disbursements on Chase Oil's behalf for all known burdens, such as royalty interests and state and federal taxes, based on information provided by the well operators. Dkt. # 21-4, at 12. Chase Oil agreed to pay B/R Energy Partners, Inc. a monthly fee for accounting services associated with revenue disbursement, and B/R Energy Partners, Inc. agreed to provide records of disbursements to Chase Oil on a quarterly basis. Id. The 1998 Agreement was for an initial term of one year, and afterward would continue on a month-to-month basis. Id. at 8. The agreement could be terminated by either party after the initial term with thirty days written notice. Id.

         At the time of the agreements, B/R Energy Partners, Inc. was a Texas corporation with its principal place of business in Tulsa, Oklahoma. Dkt. # 21-1, at 1-2. On November 23, 1998, B/R Energy Partners, Inc. terminated its corporate existence. Two days later, Phoenix Energy Consulting Services, Inc. was incorporated in Oklahoma. Dkt. # 21-6. In 2001, Phoenix Energy Consulting Services, Inc. became Phoenix Energy Marketing, Inc., the plaintiff in this case. Dkt. # 21-1, at 1; Dkt. # 21-8. Plaintiff asserts that it is the lawful corporate successor to B/R Energy Partners, Inc. Dkt. # 21-1, at 2. Plaintiff has registered the trade name B/R Energy, and it or its predecessor has done business under that name since 1999. Id.; Dkt. ## 21-7, 21-9. Plaintiff asserts that its principal place of business, and the principal place of business of its predecessors, has always been Tulsa, Oklahoma. Dkt. # 21-1, at 2. Plaintiff also asserts that nearly all business conducted between plaintiff and defendants during their business relationship was handled, on plaintiff's end, from its office in Tulsa. Id. Moreover, the Letter Agreement was printed on B/R Energy Partners, Inc. letterhead, which features a picture of an oil rig superimposed on an outline of the state of Oklahoma and identifies offices in Tulsa, Oklahoma and Englewood, Colorado. Dkt. # 21-2. The 1997 and 1998 Agreements both direct all telephone, facsimile, and written notices to be sent to B/R Energy Partners, Inc.'s Tulsa office. Dkt. # 21-3, at 8; Dkt. # 21-4, at 8.

         Plaintiff and its predecessor corporations continued conducting business with Chase Oil[1] as B/R Energy until plaintiff terminated the 1998 Agreement on November 1, 2015. Dkt. # 14-1, at 6. Throughout this time, Broaddus remained in charge of the corporations conducting business as B/R Energy. Id. at 5; Dkt. # 21-1, at 1. In 2013 or 2014, the United States Department of Interior, Office of Natural Resource Revenue (ONRR) contacted Chase Oil because it was conducting an audit to determine whether Chase Oil had underpaid its federal royalties. Dkt. # 2-1, at 7; Dkt. # 14-1, at 7. Chase Oil requested information from plaintiff to provide to ONRR for the audit. Dkt. # 2, at 7; Dkt. # 14-1, at 9. Defendants assert that plaintiff refused to provide the information, claiming that it was proprietary. Dkt. # 14, at 9. Plaintiff asserts that the request to provide information for the audit was not covered by the 1998 Agreement and instead constituted a separate oral agreement that it calls the “Mack Agreement.” On November 1, 2015, plaintiff terminated the 1998 Agreement. Dtk. # 14-1, at 6.

         On November 30, 2015, Chase Oil filed a suit against plaintiff, Broaddus, the B/R Energy Group, Inc., and B/R Energy Inc. (New Mexico defendants) in the District Court of Eddy County, State of New Mexico (New Mexico suit). After Chase Oil filed the New Mexico suit, plaintiff presented Chase Oil with an invoice for $56, 000 for data mining work performed by plaintiff to gather information for the ONRR audit as requested by Chase Oil. Dkt. # 2-1, at 8; Dkt. #14, at 9 n.2. Plaintiff asserts that the data mining work was performed pursuant to the oral Mack Agreement. On May 21, 2016, Chase Oil filed an amended complaint in the New Mexico suit, asserting breach of the duty of good faith and fair dealing and requesting indemnity and an accounting. Dkt. # 14-1. On July 13, 2016, the New Mexico defendants filed an answer and counterclaim alleging breach of contract for disclosure of proprietary information and requesting indemnity. Dkt. # 14-2.

         On September 9, 2016, plaintiff filed this case in the District Court of Tulsa County, State of Oklahoma, alleging breach of contract and unjust enrichment arising from Chase Oil's failure to pay the data mining invoice and breach of contract for disclosure of proprietary information. Dkt. # 2-4. Plaintiff filed an amended petition on September 16, 2016. Dkt. # 2-1. On October 5, 2016, Chase Oil and Mack Energy filed motions to dismiss for lack of personal jurisdiction. Dkt. ## 2-7, 2-8. The summons was issued for the amended petition on October 21, 2016. Dkt. # 2-14, at 5. On November 7, 2016, the state court denied Chase Oil's and Mack Energy's motions to dismiss the original petition without explanation. Dkt. # 2-13. On November 11, 2016, Chase removed the case to this Court. Dkt. # 2. Defendants now move to dismiss for lack of personal jurisdiction, or, alternatively, under Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976), due to the prior filed New Mexico suit. Dkt. ## 13, 14, 15.

         II. Personal Jurisdiction

         Defendants argue that this Court does not have personal jurisdiction over them as to plaintiff's claims. Plaintiff argues that the issue of personal jurisdiction was already decided before the case was removed to this Court and, even if the Court considers the issue, it has jurisdiction over the defendants in this case. The Court will first consider the effect of the state court's November 7, 2016 order denying Chase Oil's and Mack Energy's motions to dismiss the original petition.

         A. Effect of the State Court Order

         When a case is removed from a state court to a federal court, all orders entered prior to removal “shall remain in full force and effect until dissolved or modified by the district court.” 28 U.S.C. § 1450. Federal courts have interpreted § 1450 to mean that “[a]fter removal, interlocutory orders of the state court are transformed into orders of the court to which the case is removed.” In re Diet Drugs, 282 F.3d 220, 231-32 (3d Cir. 2002); see also Resolution Trust Corp. v. Northpark Joint Venture, 958 F.2d 1313, 1316 (5th Cir. 1992) (“A prior state court order in essence is federalized when the action is removed to federal court.”); Preaseau v. Prudential Ins. Co. of Am., 591 F.2d 74, 79 (9th Cir. 1979) (“[T]he federal court . . . treats everything that occurred in the state court as if it had taken place in federal court.”) (internal quotation marks omitted). “Thus, a federal court is free to reconsider a state court order and to treat the order as it would any interlocutory order it might itself have entered.” Brown v. K-MAC Enter., 897 F.Supp.2d 1098, 1103 (N.D. Okla. 2012) (quoting Laney ex rel. Laney v. Schneider Nat'l Carriers, Inc., 259 F.R.D. 562, 564 (N.D. Okla. 2009)); cf. Jenkins v. MTGLQ Inv'rs, 218 F. App'x 719, 724 (10th Cir. 2007)[2] (finding that the district court could set aside a default judgment entered in state court after suit was removed).

         Therefore, even if the state court had denied the same motions that defendants now bring, the Court could treat defendants' motions to dismiss for lack of personal jurisdiction as motions to reconsider under Rule 54(b). However, the Court need not reconsider the state court's order, because the state court did not rule on any of the motions now before the Court. First, Chase did not file a motion to dismiss in the state court, so his personal jurisdiction argument could not have decided by that court. Second, the motions to dismiss of Chase Oil and Mack Energy filed in the state court were motions to dismiss plaintiff's original petition. Chase Oil and Mack Energy were not served with the amended petition until weeks after their motions to dismiss were filed. Because plaintiff had filed an amended petition, the motions to dismiss the original petition were moot when the state court entered its order. Cf. Edwards v. Andrews, Davis, Legg, Bixler, Milsten & Murrah, Inc., 650 P.2d 857, 859 (Okla. 1982) (noting that an amended petition is an abandonment of the original pleading).Thus, the state court order has no effect on defendants' current motions, and the Court will consider defendants' arguments that the Court lacks personal jurisdiction over them in this case.

         B. Legal Framework for Personal Jurisdiction

         When a defendant moves to dismiss for lack of personal jurisdiction under Rule 12(b)(2), the plaintiff bears the burden of establishing that the Court has personal jurisdiction over the defendant. OMI Holdings, Inc. v. Royal Ins. Co. of Canada, 149 F.3d 1086, 1091 (10th Cir. 1998). “When a district court rules on a Fed.R.Civ.P. 12(b)(2) motion to dismiss for lack of personal jurisdiction without holding an evidentiary hearing, . . . the plaintiff need only make a prima facie showing of personal jurisdiction to defeat the motion.” Id. (citations omitted). “The plaintiff may make this prima facie showing by demonstrating, via affidavit or other written materials, facts that if true would support jurisdiction over the defendant.” Id. at 1091. “In order to defeat a plaintiff's prima facie showing of jurisdiction, a defendant must present a compelling case demonstrating ‘that the presence of some other considerations would render jurisdiction unreasonable.'” Id. (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477 (1985)). The ...


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