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Taylor v. Chesapeake Operating, Inc.

United States District Court, W.D. Oklahoma

November 20, 2019

DANNIS R. TAYLOR, et al., Plaintiff,



         This matter comes before the Court on Defendant Chesapeake Operating, Inc.'s Motion to Dismiss [Doc. No. 23]. Plaintiffs have filed a response in opposition [Doc. No. 31], to which Defendant has replied [Doc. No. 32]. Plaintiffs have also filed a Motion for Leave to Amend their complaint as needed [Doc. No. 33]. The matter is fully briefed and at issue.


         Defendant operates wells on Plaintiffs' land. Response [Doc. No. 31], at 4. Pursuant to the contract at issue, Defendant is “to operate the wells and account for revenue and costs, make payments, and provide information to owners of interests in the wells on [Plaintiffs'] property.” Id. Plaintiffs allege to have been underpaid royalties. Defendant contends this is a simple breach of contract claim and nothing more. Motion at 3. Plaintiffs, however, maintain this action sounds in fraud. They allege Defendant engaged in a fraudulent scheme, involving hundreds of acts of fraud over the course of several years, by which Plaintiffs were deceived and underpaid. Id. at 5


         To survive a motion to dismiss under Rule 12(b)(6), “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. The “plausibility standard” announced in Twombly and Iqbal is not a “heightened standard” of pleading, but rather a “refined standard.” Khalik v. United Air Lines, 671 F.3d 1188, 1191 (10th Cir. 2012) (citing Kansas Penn Gaming, LLC v. Collins, 656 F.3d 1210, 1214 (10th Cir. 2011)). Under the “refined standard, ” plausibility refers “to the scope of the allegations in the complaint: if they are so general that they encompass a wide swath of conduct, much of it innocent, then the plaintiffs have not nudged their claims across the line from conceivable to plausible.” Khalik, 671 F.3d at 1191; see also Robbins v. Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008). Further, the Tenth Circuit has noted that “[t]he nature and specificity of the allegations required to state a plausible claim will vary based on context.” Khalik, 671 F.3d at 1191.

         Claims sounding in fraud must be pled with particularity, under a heightened pleading standard. See Fed. R. Civ. P. 9(b). The particularly requirement of Rule 9(b) applies to claims of mail and wire fraud under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961-68 (“RICO”). See Tal v. Hogan, 453 F.3d 1244, 1263 (10th Cir. 2006).


         Plaintiffs' Amended Complaint [Doc. No. 20] sets forth six causes of action. Plaintiffs' claims are as follows: (1) RICO violations; (2) unjust enrichment; (3) conversion; (4) beach of lease; (5) breach of overriding royalty interest; and, (6) actual and constructive fraud, and negligent misrepresentation. Defendant argues that because Plaintiffs lack standing to bring RICO claims, this Court lacks subject matter jurisdiction and should remand the remaining state law claims. In the alternative, Defendant seeks dismissal of counts one, two, three, and six of Plaintiffs' Amended Complaint (referred to as the first, second, third, and sixth causes of action), for failure to state a claim upon which relief can be granted.

         I. Plaintiff's RICO allegations suffice to survive a motion to dismiss.

         Defendant argues (1) Plaintiffs fail to show they were injured by the alleged RICO violations; (2) the predicate act of wire fraud is not pled with particularity; (3) the predicate act of mail fraud is not pled with particularity; (4) there is no allegation of a pattern of racketeering activity; and, (5) Plaintiffs fail to plead an enterprise.

         RICO provides a private cause of action for “[a]ny person injured in his business or property by reason of a violation of section 1962 of this chapter.” 18 U.S.C. § 1964(c). Plaintiffs allege violations of § 1962(c), which makes it “unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate . . . commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity.”

         To survive a Rule 12(b)(6) motion to dismiss a § 1962(c) claim, Plaintiffs must allege that Defendant “(1) participated in the conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.” Tal, 453 at 1244. “[R]acketeering activity” is defined to include several predicate acts, including the two alleged here-mail fraud and wire fraud. In addition to these elements, Plaintiffs must also show proximate causation between the RICO predicate act and the injury. Hemi Group, LLC v. City of New York, 559 U.S. 1, 8 (2010).

         a. Plaintiffs allege more than simple breach of contract.

         Defendant argues that because the injury resulting from the breach of contract claim and the alleged RICO violation are the same, Plaintiffs lack standing to bring a claim under RICO.

         “No distinct ‘racketeering injury' requirement is necessary to maintain a private treble damages action under RICO.” Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 495-96 (1985). If the “defendant engages in a pattern of racketeering activity in a manner forbidden by section 1962 and the racketeering activities injured the plaintiff in his business or property, ” that is enough. Id. “[T]he plaintiff only has standing if, and can only ...

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