United States District Court, S.D. Texas, Houston Division
MEMORANDUM OPINION AND ORDER
LAKE UNITED STATES DISTRICT JUDGE
before the court are Defendants Fila Oilfield Services, LLC
and Fila-Mar Energy Services, LLC's ("Fila")
Motion to Exclude Testimony of Charles Mazur
("Fila's Motion to Exclude") (Docket Entry No.
30); Defendants Fila Oilfield Services, LLC and Fila-Mar
Energy Services, LLC's Motion for Partial Judgment on the
Pleadings ("Fila's Motion for Partial Judgment on
the Pleadings") (Docket Entry No. 31); Defendant NST
Transload Operating Company, LLC d/b/a NorthStar
Midstream's ("NST") Motion for Summary Judgment
("NST's MSJ") (Docket Entry No. 32); Defendants
Fila Oilfield Services, LLC and Fila-Mar Energy Services,
LLC's Motion for Leave to Amend Answer ("Fila's
Motion for Leave to Amend") (Docket Entry No. 33);
Defendant NST Transload Operating Company, LLC d/b/a
NorthStar Midstream's Motion for Leave to File an Amended
Answer ("NST's Motion for Leave to Amend")
(Docket Entry No. 34); Defendant NST Transload Operating
Company, LLC d/b/a NorthStar Midstream's Motion for
Summary Judgment on Damages ("NST's MSJ on
Damages") (Docket Entry No. 38); and Defendants Fila
Oilfield Services, LLC and Fila-Mar Energy Services,
LLC's Motion for Summary Judgment ("Fila's
MSJ") (Docket Entry No. 39).
reasons stated below, Fila's Motion to Exclude will be
denied, Fila's Motion for Partial Judgment on the
Pleadings will be granted, NST's MSJ will be denied,
Fila's Motion for Leave to Amend will be granted,
NST's Motion for Leave to Amend will be granted,
NST's MSJ on Damages will be denied, and Fila's MSJ
-- insofar as it is ripe for decision -- will be denied.
Factual and Procedural Background
spring of 2014 an associate trader with plaintiff Traxys
North America, LLC ("Traxys"), Scott Musser,
visited North Dakota in an attempt to locate indoor
warehousing suitable for ceramic proppant. While there Musser saw an
advertisement for storage at the NST transloading facility
and contacted NST about the possibility of storing
proppant. NST could not meet Traxys' storage
needs because it did not have indoor
facilities. NST referred Musser to Fila, which was
planning to construct indoor storage facilities at the NST
terminal. Fila had an agreement with NST, titled
the Commodity Transloading Services Agreement, under which it
could store goods at the NST terminal. But per that
agreement, Fila's right to access the storage facility
was not "to substantially interfere with or diminish
[NST's] complete control and responsibility for the
operation of the [storage facility] and the performance of
the [transloading services]. "
eventually entered into an agreement with Luoyang Aoxiang
Ceramics Co., Ltd., to purchase 6, 000 metric tons of 20/40
ISP ceramic proppant to be shipped from Qingdao,
China. On August 28, 2014, Traxys entered
into an agreement with Fila for the delivery of the 6, 000
metric tons of ceramic proppant in 4, 000 bulk bags, each
containing 1.5 metric tons of proppant. Fila agreed that it
would be responsible for the loading, ocean transport,
discharging, loading onto railcars, and rail freight from
Qingdao, China to the Bakken Shale play in North Dakota, and
the discharging of railcars to a warehouse. The agreement
between Traxys and Fila also included the following term:
"Warehouse storage at NorthStar Terminal is $5.00 per
1.5 MT super-sack after 30 free days."
proppant was loaded at the Port of Qingdao on or about
October 23, 2014. The vessel carrying the proppant
arrived in Everett, Washington, on or around November 12,
2014. A Fila-ordered survey of the
proppant completed upon arrival found that moisture levels in
the proppant ranged from 9 to 11%.
mid-December of 2 014 the proppant began to be transported by
rail from the port and to NST's terminal in North
Dakota. When Traxys visited the NST facility
on May 7, 2015, to check on the condition of the bags, it
found that only 1, 0 90 of the 4, 000 bags had been moved
inside the warehouse. A moisture probe analysis
conducted by Scott Musser in May of 2015 revealed that some
of the bags had moisture readings up to 29.9%. Traxys
withheld storage payments from February of 2015 through June
of 2015. Fila eventually sent an invoice
reflecting a reduced rate of $3 per bag to cover the months
of outdoor storage, which Traxys paid. Fila's later
invoices reverted to the rate of $5 per bag. As of
September of 2015, approximately 1, 000 bags remained
outside. A number of the bags had been
damaged during attempts to move them by
forklift. On September 30, 2015, Fila notified
Traxys that Fila was defaulting on its storage agreement with
NST that required Fila to move a specified quantity of
material through the storage facility monthly. Traxys
subsequently sold the proppant for salvage. Traxys sold 828,
000 pounds of proppant to RockPile Energy Services at
$0.06/lb for a total of $46, 368,  and Traxys sold 12,
387, 720 pounds of proppant to Kelly Supply at $0.009/lb for
a total of $111, 489. 48.
March 18, 2016, Traxys sued NST and Fila asserting
breach-of-contract and negligence claims in connection with
damages to the ceramic proppant stored on NST's property.
Defendants have moved for summary judgment on several issues,
moved to amend their original answers, and moved to exclude
Traxys' expert testimony.
Choice of Law
preliminary matter, defendants argue that North Dakota law
controls. A federal court sitting in diversity applies the
forum state's choice-of-law rules to determine which
substantive law will apply. See Erie Railroad Co. v.
Tompkins, 58 S.Ct. 817 (1938); Klaxon Co. v. Stentor
Electric Manufacturing Co., Inc., 61 S.Ct. 1020 (1941).
Texas courts resolve the issue of which state's law
applies in a contract dispute by looking to the Restatement
(Second) of Conflict of Laws (1971) . Maxus Exploration
Co. v. Moran Brothers, Inc., 817 S.W.2d 50, 53 (Tex.
1991). If the contract does not stipulate the law to be
applied in the event of a dispute, as is the case here, the
general rule of section 188 of the Restatement controls.
See id.; see also DeSantis v. Wackenhut
Corp., 793 S.W.2d 670, 677-78 (Tex. 1990), cert,
denied. 111 S.Ct. 755 (1991). Under that rule
"[t]he rights and duties of the parties with respect to
an issue in contract are determined by the local law of the
state which, with respect to that issue, has the most
significant relationship to the transaction and the parties
under the principles stated in § 6." Restatement
(Second) of Conflicts of Laws § 188(1) (1971). State
contacts are evaluated not by their number, but by their
quality. Minnesota Mining and Manufacturing Co. v.
Nishika Ltd.. 955 S.W.2d 853, 856 (Tex. 1996) (citations
omitted). In applying this test, the court considers (1)
"the place of contracting, " (2) "the place of
negotiation of the contract, " (3) "the place of
performance, " (4) "the location of the subject
matter of the contract, " and (5) "the domicile,
residence, nationality, place of incorporation and place of
business of the parties." Bailey v. Shell Western
E&P, Inc., 609 F.3d 710, 723 (5th Cir. 2010).
parties' contract does not stipulate which law is to be
applied in the event of a dispute. Defendants argue that the
balance of factors supports application of North Dakota law.
Fila notes that the proppant at issue was to be delivered to
and stored in North Dakota. The remaining factors do not
clearly indicate a more significant relationship with another
state. Traxys does not dispute the significance of the
relationship with North Dakota but argues that no choice of
law analysis is required because it has withdrawn its claims
for punitive damages and thereby removed the conflict
Fila identified between the applicable law of Texas and that
of North Dakota. But Fila identifies another conflict between
North Dakota and Texas law in its Reply. Moreover, the
alleged torts and the resulting damage occurred in North
Dakota. For clarity and consistency, the court will therefore
apply North Dakota law to all state law issues.
Motion to Exclude
asks the court to exclude the testimony of Traxys' expert
witness, Charles Mazur. Fila argues that Mazur's
references to the facts and data he relied upon do not
satisfy the notice requirements of Federal Rule of Civil
Procedure 26, that Mazur lacks the requisite background, that
Mazur's testimony is based on sources not reasonably
relied upon by experts in the relevant fields, and that Mazur
offers impermissible legal opinions. Traxys argues that
Mazur's experience valuing projects in the oil and gas
industry qualifies him "to testify on the market
conditions of ceramic proppant, as well as other related
matters, including logistics. "
an expert is clearly unqualified to render an opinion, the
court's usual practice is to rule on such motions at
trial because (1) counsel frequently limit the scope of
experts' testimony at trial, (2) counsel often establish
more extensive predicates for experts' testimony at
trial, and (3) experts sometimes modify their opinions at
trial. Having carefully considered the parties' arguments
the court is not persuaded that Mazur should be excluded.
Although there is no indication that Mazur is an expert on
proppant from a materials standpoint, his experience as a
valuation expert for oil and gas projects may qualify him to
opine on relevant aspects of the proppant market. At any
rate, the court is not persuaded that Mazur is clearly
unqualified. Questions regarding the sources relied upon by
an expert typically go to credibility rather than
admissibility. For the reasons stated above, the court will
decide on the admissibility of specific portions of
Mazur's testimony at trial. Accordingly, Fila's
Motion to Exclude will be denied. Traxys should, however,
supplement Mazur's report with the specific identities of
sources upon which Mazur relies. Specifically, Traxys must
identify the records and information on which Mazur relied,
the identity of the source from Carbo Ceramics with whom
Mazur or his organization discussed moisture testing of
ceramic proppant, the industry sources on which Mazur relied
for his pricing of distressed ceramic proppant, and the
identifying information of the Carbo Ceramics report on the
value of undamaged proppant. Traxys will have 14 days from
the entry of this Memorandum Opinion and Order to provide
that information to all defendants.
Motion for Partial Judgment on the Pleadings
responsive pleading has been filed, a motion to dismiss for
failure to state a claim is treated as a motion for judgment
on the pleadings under Rule 12(c). Jones v.
Greninger, 188 F.3d 322, 324 (5th Cir. 1999) (per
curiam). "VA motion brought pursuant to
Fed.R.Civ.P. 12(c) is designed to dispose of cases where the
material facts are not in dispute and a judgment on the
merits can be rendered by looking to the substance of the
pleadings and any judicially noticed facts.'" In
re Enron Corp. Securities, Derivative & "ERISA"
Litigation, 439 F.Supp.2d 692, 695 (S.D. Tex. 2006)
(quoting Great Plains Trust Co. v. Morgan Stanley Dean
Witter & Co., 313 F.3d 305, 312 (5th Cir. 2002) and
Herbert Abstract Co. v. Touchstone Properties, Ltd.,
914 F.2d 74, 76 (5th Cir. 1990) (per curiam)).
"A motion for judgment on the pleadings under Rule 12(c)
is subject to the same standard as a motion to dismiss under
Rule 12(b)(6)." Doe v. MySpace, Inc., 528 F.3d
413, 418 (5th Cir. 2008) (citing Johnson v. Johnson,
385 F.3d 503, 529 (5th Cir. 2004)). Accepting the
plaintiff's factual allegations as true, the court
considers whether the complaint states a plausible claim for
relief. See Young v. City of Houston, 599
F.App'x 553, 554 (5th Cir. 2015).
seeks judgment as a matter of law as to Traxys' tort
claims. Fila argues that a breach of
contract, without more, cannot support a tort claim, such as
negligence. Traxys responds by citing Texas cases involving
parties who were not in a contractual relationship. Under
North Dakota law "[c]onduct that constitutes a breach of
contract does not subject the actor to an action in tort for
negligence, unless the conduct also constitutes a breach of
an independent duty that did not arise from the
contract." Dakota Grain Co., Inc. v.
Ehrmantrout, 502 N.W.2d 234, 236-37 (N.D. 1993) .
Accepting Traxys' factual allegations as true, Traxys has
not identified any independent duty that did not arise from
its contract with Fila. See Olander Contracting Co. v.
Gail Wachter Investments, 643 N.W.2d 29, 39 (N.D. 2002).
Fila's Motion for Partial Judgment on the Pleadings will
therefore be granted, and Traxys' tort claims against
Fila will be dismissed.
Motion for Leave to Amend
Rule 16(b)(4) "[a]fter a scheduling order deadline has
passed, a party must show good cause [in order] to obtain
leave to amend the operative pleadings." Meaux
Surface Protection, Inc. v. Fogleman, 607 F.3d 161, 167
(5th Cir. 2010). The court's discretion to grant such
leave is "guided by the following factors: ' (1) the
explanation for the failure to timely move for leave to
amend; (2) the importance of the amendment; (3) potential
prejudice in allowing the amendment; and (4) the availability
of a continuance to cure such prejudice.'"
Id. (quoting S&W Enterprises, L.L.C. v.
SouthTrust Bank of Alabama, NA, 315 F.3d 533, 536 (5th
Cir. 2003)). Once the Rule 16(b)(4) standard has been met,
the court applies the more liberal Rule 15(a) standard by
which "leave to amend 'shall be freely given when
justice so requires.'" S&W Enterprises,
315 F.3d at 53 5 (quoting Fed.R.Civ.P. 15(a)) . Leave may be
denied under Rule 15(a) only for a "substantial
reason." In re Southmark Corp., 88 F.3d 311,
314-15 (5th Cir. 1996) .
asks the court to modify its September 23, 2016, deadline for
amended pleadings to permit Fila to amend its answer to
include counterclaims for breach of contract and quantum
meruit. Fila argues that there is good cause to amend the
scheduling order because (1) the amendment is of critical
importance, (2) Traxys will not suffer prejudice by the
amendment, but (3) if Traxys is prejudiced, a continuance
could cure the prejudice, and (4) litigation had not begun in
earnest as of the deadline for motions to amend. Fila's
argument regarding the status of the litigation at the time
of the deadline for amendments constitutes an adequate excuse
for Fila's failure to timely amend its answer. The court
encourages parties to attempt early resolution, and the fact
that no parties had begun conducting discovery as of the
court's initial deadline for amendment suggests that all
parties were working toward that end. The court concludes
that the delayed start of discovery also minimizes the
potential prejudice to Traxys. When Fila filed its motion, it
had only taken one deposition and Traxys had taken none. The
court also concludes that the amendment is important as it
may constitute a dispositive defense and allow the suit to
serve as a "final accounting" between the
parties. Moreover, a continuance would cure
any prejudice Traxys may suffer from the amendment. Because
the balance of Rule 16 factors weighs in favor of permitting
amendment, and because the court is not aware of any
substantial reason to deny the amendment, Fila's Motion
for Leave to Amend will be granted. Fila will not, however,
be permitted to re-depose any witness.
Motion for Summary Judgment
seeks summary judgment on Traxys' breach-of-contract
claim, on damages, on Traxys' gross-negligence claim, and
on its counterclaims for breach of contract and quantum
meruit. Because Traxys' tort claims will
be dismissed for the reasons stated in Section III.B.,
Fila's motion is moot as to those claims. Summary
judgment is appropriate if the movant establishes that there
is no genuine dispute about any material fact and the movant
is entitled to judgment as a matter of law. Fed.R.Civ.P.
56(a) . "The movant accomplishes this by informing the
court of the basis for its motion, and by identifying
portions of the record which highlight the absence of genuine
factual issues." Topalian v. Ehrman, 954 F.2d
1125, 1131 (5th Cir. 1992) (citing Fed.R.Civ.P. 56(c)).
"In order to avoid summary judgment, the nonmovant must
identify specific facts within the record that demonstrate
the existence of a genuine issue of material fact."
CO, Inc. v. TXU Mining Company, L.P., 565 F.3d 268,
273 (5th Cir. 2009).
reviewing the evidence "the court must draw all
reasonable inferences in favor of the nonmoving party, and it
may not make credibility determinations or weigh the
evidence." Reeves v. Sanderson Plumbing Products,
Inc., 120 S.Ct. 2097, 2110 (2000). The court resolves
factual controversies in favor of the nonmovant, "but
only when there is an actual controversy, that is, when both
parties have submitted evidence of contradictory facts."
Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th
Cir. 1994). "Unsubstantiated assertions are not
competent summary judgment evidence." Hugh Symons
Group, pic v. Motorola, Inc., 292 F.3d 466, 468 (5th
Cir. 2002) (citing Celotex Corp. v. Catrett, 106
S.Ct. 2548, 2553 (1986)). And "[m]ere conclusory
allegations are not competent summary judgment
evidence." Id. (citing Eason v.
Thaler, 73 F.3d 1322, 1325 (5th Cir. 1996)).