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Higher Perpetual Energy, LLC v. Higher Power Energy, LLC

United States District Court, E.D. Texas, Sherman Division

June 18, 2018

HIGHER PERPETUAL ENERGY, LLC,
v.
HIGHER POWER ENERGY, LLC, MARK PATKUNAS, MICHAEL MILLER, LANCE WILKERSON,

          MEMORANDUM OPINION AND ORDER

          AMOS L. MAZZANT, UNITED STATES DISTRICT JUDGE.

         Pending before the Court is Counter-Defendant Higher Perpetual Energy, LLC's (“Higher Perpetual”) Motion to Dismiss Counter-Plaintiff Higher Power Energy, LLC's (“Higher Power”) Original Counterclaim (Dkt. #25). After reviewing the relevant pleadings and motion, the Court finds that the motion should be denied.

         BACKGROUND

         On approximately July 27, 2007, Higher Perpetual and Higher Power entered into a Lease Purchase Agreement, which enabled a series of wind farm development projects (the “2007 Agreement”). On or about, January 17, 2011, the parties entered into a new agreement-HP & HPE Supplemental De Wind/SW1 Wind Farms, LLC Agreement (“Supplemental Agreement)-which terminated and rendered void the 2007 Agreement. Subsequently, in the summer of 2012, the parties entered into a Supplement to HP & HPE Supplemental De Wind/SW1 Wind Farms, LLC Agreement (“Supplement to the Supplemental Agreement”). Disputes arose regarding the negotiations and implementation of such agreements, which resulted in Higher Perpetual filing suit on June 12, 2017 (Dkt. #1). On October 19, 2017, Higher Perpetual filed its First Amended Original Complaint (Dkt. #9). Subsequently, on February 27, 2018, Higher Power filed its Original Counterclaim (Dkt. #23). On March 20, 2018, Counter-Defendant Higher Perpetual filed its Motion to Dismiss Counter-Plaintiff Higher Power's Original Counterclaim (Dkt. #25) pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b). On April 3, 2018, Higher Power filed its response (Dkt. #26). On April 10, 2018, Higher Perpetual filed its reply (Dkt. #28).

         LEGAL STANDARD

         I. Federal Rule of Civil Procedure 12(b)(6)

         The Federal Rules of Civil Procedure require that each claim in a complaint include a “short and plain statement . . . showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Each claim must include enough factual allegations “to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).

         A Rule 12(b)(6) motion allows a party to move for dismissal of an action when the complaint fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). When considering a motion to dismiss under Rule 12(b)(6), the Court must accept as true all well-pleaded facts in plaintiff's complaint and view those facts in the light most favorable to the plaintiff. Bowlby v. City of Aberdeen, 681 F.3d 215, 219 (5th Cir. 2012). The Court may consider “the complaint, any documents attached to the complaint, and any documents attached to the motion to dismiss that are central to the claim and referenced by the complaint.” Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010). The Court must then determine whether the complaint states a claim for relief that is plausible on its face. ‘“A claim has facial plausibility when the plaintiff pleads factual content that allows the [C]ourt to draw the reasonable inference that the defendant is liable for the misconduct alleged.'” Gonzalez v. Kay, 577 F.3d 600, 603 (5th Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “But where the well- pleaded facts do not permit the [C]ourt to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not ‘show[n]'-‘that the pleader is entitled to relief.'” Iqbal, 556 U.S. at 679 (quoting Fed.R.Civ.P. 8(a)(2)).

         In Iqbal, the Supreme Court established a two-step approach for assessing the sufficiency of a complaint in the context of a Rule 12(b)(6) motion. First, the Court should identify and disregard conclusory allegations, for they are “not entitled to the assumption of truth.” Iqbal, 556 U.S. at 664. Second, the Court “consider[s] the factual allegations in [the complaint] to determine if they plausibly suggest an entitlement to relief.” Id. “This standard ‘simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary claims or elements.'” Morgan v. Hubert, 335 Fed.Appx. 466, 470 (5th Cir. 2009) (citation omitted). This evaluation will “be a context-specific task that requires the reviewing [C]ourt to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679.

         Thus, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.”' Id. at 678 (quoting Twombly, 550 U.S. at 570).

         II. Federal Rule of Civil Procedure 9(b)

         Rule 9(b) states, “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally.” Fed.R.Civ.P. 9(b).

         Rule 9(b)'s particularity requirement generally means that the pleader must set forth the “who, what, when, where, and how” of the fraud alleged. United States ex rel. Williams v. Bell Helicopter Textron, Inc., 417 F.3d 450, 453 (5th Cir. 2005). A plaintiff pleading fraud must “specify the statements contended to be fraudulent, identify the speaker, state when and where the statements were made, and explain why the statements were fraudulent.” Herrmann Holdings Ltd. v. Lucent Techs. Inc., 302 F.3d 552, 564-65 (5th Cir. 2002). The goals of Rule 9(b) are to “provide[] defendants with fair notice of the plaintiffs' claims, protect[] defendants from harm to their reputation and goodwill, reduce[] the number of strike suits, and prevent[] plaintiffs from filing baseless claims.” U.S. ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 190 (5th Cir. 2009) (citing Melder v. Morris, 27 F.3d 1097, 1100 (5th Cir. 1994)). Courts are to read Rule 9(b)'s heightened pleading requirement in conjunction with Rule 8(a)'s insistence on simple, concise, and direct allegations. Williams v. WMX Techs., Inc., 112 F.3d 175, 178 (5th Cir. 1997). However, this requirement “does not ‘reflect a subscription to fact pleading.'” Grubbs, 565 F.3d at 186. “Claims alleging violations of the Texas Insurance Code and the DTPA and those asserting fraud, fraudulent inducement, fraudulent concealment, and negligent misrepresentation are subject to the requirements of Rule 9(b).” Frith v. Guardian Life Ins. Co. of Am., 9 F.Supp.2d 734, 742 (S.D. Tex. 1998); see Berry v. Indianapolis Life Ins. Co., No. 3:08-CV-0248-B, 2010 WL 3422873, at *14 (N.D. Tex. Aug. 26, 2010) (“‘[W]hen the parties have not urged a separate focus on the negligent misrepresentation claims, ' the Fifth Circuit has found negligent misrepresentation claims subject to Rule 9(b) in the same manner as fraud claims.”). Failure to comply with Rule 9(b)'s requirements authorizes the Court to dismiss the pleadings as it would for failure to state a claim under Rule 12(b)(6). United States ex rel. Williams v. McKesson Corp., No. 3:12-CV-0371-B, 2014 WL 3353247, at *3 (N.D. Tex. July 9, 2014) (citing Lovelace v. Software Spectrum, Inc., 78 F.3d 1015, 1017 (5th Cir. 1996)).

         ANALYSIS

         Higher Power, in its Original Counterclaim (Dkt. #23), alleges claims for common law fraud, negligent misrepresentation, promissory estoppel, breach of contract, and a request for declaratory relief. Higher Perpetual avers that each claim warrants dismissal for various reasons. The Court addresses each claim in turn.

         I. Common Law Fraud

         Higher Power complains that Higher Perpetual, by and through its principal David Tatton (“Tatton”), knowingly or recklessly made false material representations of fact to Higher Power (Dkt. #23 at pp. 7-8). Higher Perpetual avers that Higher Power's fraud claim is time barred and fails to satisfy the heightened pleading standards of Rule 9(b). Higher Power responds that its fraud claim is timely pursuant to the discovery rule and/or savings clause and that its pleadings are sufficient under Rule 9(b). The Court addresses each argument separately.

         a. Statute of Limitations

         Higher Perpetual contends that Higher Power's fraud claim is time barred because Higher Power filed such claim more than seven years after the cause of action accrued. Further, Higher Perpetual avers that neither the discovery rule nor savings clause cures such untimeliness. Conversely, Higher Power asserts that its fraud claim is timely pursuant to the discovery rule and/or savings clause.

         Under Texas law, the statute of limitations for fraud is four years. Tex. Civ. Prac. & Rem. Code § 16.004(a). Accrual occurs “when the fraud is perpetrated, or if the fraud is concealed, from the time it is discovered or could have been discovered by the exercise of reasonable diligence.” Woods v. William M. Mercer, Inc., 769 S.W.2d 515, 517 (Tex. 1988). “It is the defendant's burden to establish the affirmative defense of limitations, including ...


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