Lothian Cassidy, LLC v. Lothian Exploration & Development II, L.P.

487 B.R. 158, 2013 WL 440103, 2013 U.S. Dist. LEXIS 14464
CourtDistrict Court, S.D. New York
DecidedJanuary 28, 2013
DocketNo. 12 Civ. 710 (VM)
StatusPublished
Cited by20 cases

This text of 487 B.R. 158 (Lothian Cassidy, LLC v. Lothian Exploration & Development II, L.P.) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Lothian Cassidy, LLC v. Lothian Exploration & Development II, L.P., 487 B.R. 158, 2013 WL 440103, 2013 U.S. Dist. LEXIS 14464 (S.D.N.Y. 2013).

Opinion

DECISION AND ORDER

VICTOR MARRERO, District Judge.

Lothian Cassidy, LLC and Israel Gross-man (“Grossman,” and collectively, “Plain[159]*159tiffs”) filed an Amended Verified Complaint (the “Amended Verified Complaint”) in New York State Supreme Court, New York County (the “State Court”), Index No. 600586/2009, against Lothian Exploration & Development II, L.P. (“LEAD II”), Lothian Energy PLC, Michael Raleigh, Paul B. Loyd, Jr., Belridge Energy Advis-ors, L.P., Peninsula Catalyst Fund (QP) L.P., JVL Global Energy, L.P., JVL Global Energy (QP) L.P., Navitas Fund, L.P., and Nawab Energy Partners, L.P. (“Na-wab,” and collectively, “Defendants”). LEAD II and Lothian Energy PLC excluded, the remaining defendants (collectively, the “Belridge Group,”) removed the action to this court pursuant to 28 U.S.C. §§ 1334, 1446, and 1452. (Dkt. No. 1.) Plaintiffs moved to remand to the State Court, (Dkt. No. 28) while the Belridge Group has moved for the matter to be transferred to the Western District of Texas (see Dkt. Nos. 9 & 31).

Upon consideration of the parties’ submissions and arguments, the Court DENIES Plaintiffs’ motion to remand this action to the State Court, and GRANTS the Belridge Group’s motion to transfer venue to the Western District of Texas.

I. BACKGROUND

On June 13, 2007, Lothian Oil Inc. (“LOI”) and several related entities — but not LEAD II or Lothian Energy PLC— filed petitions for Chapter 11 bankruptcy protection (the “LOI Bankruptcy”) in the United States Bankruptcy Court for the Western District of Texas (the “Bankruptcy Court”). On June 27, 2008, the Bankruptcy Court issued an order confirming the Second Modified Amended Joint Plan of Liquidation for LOI (the “LOI Bankruptcy Plan”) and the related entities (the “Confirmation Order”).

Both before and after the Confirmation Order, a number of interested parties, including Plaintiffs and Defendants in this action, engaged in what appears from the filings before this Court to be an arduous and complicated squabble for various rights, assets, and monies. This lawsuit is but the latest iteration of that struggle.

Initially, in April 2009, Plaintiffs filed a motion for summary judgment in lieu of a complaint in the State Court, naming only LEAD II as a defendant, and seeking recovery of $500,000 under a promissory note. The motion was denied, and Plaintiffs were ordered to file a formal complaint, which they did in January 2010. The resulting Verified Complaint, again naming only LEAD II as a defendant, made mention of the $500,000 promissory note, but also sought damages under a number of other causes of action, including fraud, conversion, and constructive trust. LEAD II never appeared, and the State Court issued a default judgment against it and referred the matter to a Special Referee on the issue of damages.1

In May 2010, the Special Referee determined that Plaintiffs could recover based on the promissory note at issue in the initial motion for summary judgment but dismissed all other causes of action without prejudice, specifically noting that “it is beyond cavil that, at the most, Lothian Energy, PLC; Lothian Oil, Inc.; Lothian Oil Texas I; NAWAB Energy Partners, L.P.; and the Belridge Group Texas minority shareholders group, ought to be parties to this action to the extent amplified in the complaint....” (Dkt. No. 1 Ex. 6, Conclusions of Law ¶ 33.) Notably, both LOI and Lothian Oil Texas I are entities cov[160]*160ered by the initial petition for bankruptcy protection filed in the Bankruptcy Court.

Meanwhile, in Texas, the Bankruptcy Court issued an order enforcing the injunction contained in the LOI Bankruptcy Plan, thereby preventing Plaintiffs in this action from continuing their claims against LEAD II. The injunction in question prevented “all Persons who have been, are, or may be holders” of claim against LOI from “commencing, conducting, or continuing in any manner, directly or indirectly, any suit, action, or other proceeding of any kind against the Debtors, their Estates, or the Estate Property.” On appeal, the United States District Court for the Western District of Texas overturned the order enforcing the injunction as it applied to Plaintiffs’ Verified Complaint, holding that the bankruptcy court erroneously concluded that the suit affected “Estate Property’ as the term is defined in the LOI Bankruptcy Plan. (Dkt. No. 30 Ex. 1 at 10-11.)

Subsequently, in January 2012, Plaintiffs filed the Amended Verified Complaint at issue in this action in the State Court asserting the claims dismissed by the Special Master, and adding Lothian Energy PLC and the Belridge Group as defendants. Plaintiffs did not name LOI and Lothian Oil Texas I despite the Special Master’s finding that they “ought to be parties.” Plaintiffs’ Amended Verified Complaint asserts fourteen causes of action: 1) aiding and abetting conversion; 2) breach of contract; 3) breach of implied covenant of good faith and fair dealing; 4) tortious interference with a contract; 5) willful, wanton, and gross negligence; 6) conversion; 7) fraud; 8) false representation or concealment of material facts; 9) detrimental reliance; 10) unjust enrichment; 11) quantum meruit; 12) specific performance; 13) delivery of title to Gross-man; and 14) imposition of a constructive trust. (See Dkt. No. 1 Ex. 7.)

Plaintiffs’ claims are variations on a theme: at base, Plaintiffs allege that the Belridge Group wrongfully absconded with property (specifically, oil wells) that should have been subject to the LOI Bankruptcy by funneling it through LEAD II, which had a partnership with LOI. Plaintiffs’ allegations focus on the treatment of the two “Casselman” oil wells — which LEAD II and LOI at one time owned in partnership, and in which Grossman claims a one-half interest — and similar allegations regarding the transfer of the “East Cowden,” “Bo-hannon,” “Foster” and “Nobles” properties. In all instances, Plaintiffs allege that Defendants wrongfully transferred assets to the Belridge Group that should have been used instead to satisfy LEAD II and LOI’s obligations to Grossman. (See, e.g., Dkt. No. 1 Ex. 7, ¶ 85 (“Defendant is responsible for the consequences of the improper transfer of its assets to the bankrupt non-party Lothian, the anticipated fraudulent conveyance by non-party Lothi-an of its assets and fraudulent settlement of litigation through bankruptcy that resulted in the failure of defendant to have adequate assets to satisfy the contractual obligation to Plaintiffs.”).)

As noted above, the history of the LOI Bankruptcy appears to be long and quite complicated, and the dispute over proper ownership of the oil at issue has claimed many trees. It is not necessary § or desirable) to recount the full history, but the Court notes that the Bankruptcy Court has considered a range of issues that include: 1) rights to oil in the Casselman, Cowden, and Bohannon properties (see In re Lothian Oil Inc., No. 07 BK 70121, Dkt. Nos. 17 & 169 (Bankr.W.D.Tex. July 16, 2007)); 2) transfer of ownership of the Nobles property from LOI to the Belridge Group (see Dkt. No. 31 Ex. A-15, A-16, & A-19); and 3) Grossman’s claim to the Casselman wells (see Dkt. No. 31 Ex. A-22).

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487 B.R. 158, 2013 WL 440103, 2013 U.S. Dist. LEXIS 14464, Counsel Stack Legal Research, https://law.counselstack.com/opinion/lothian-cassidy-llc-v-lothian-exploration-development-ii-lp-nysd-2013.