Deep Wilcox Oil & Gas LLC v. Texas Energy Acquisitions LP

          ORDER

          Honorable John J. Tuchi United States District Judge

         At issue is Defendants' Motion to Dismiss (Doc. 18, Mot.), to which Plaintiffs filed a Response (Doc. 2, Resp.) and Defendants filed a Reply (Doc. 29, Reply). In this Order, the Court will also address but not fully resolve Plaintiffs' Motions to Amend (Docs. 19, 21). The Court finds these matters appropriate for resolution without oral argument. See LRCiv 7.2(f). For the reasons that follow, the Court will grant in part Defendants' Motion to Dismiss and transfer this case to the Southern District of Texas, Houston Division.

         As a threshold matter, the Court addresses Defendants' Amended Notice of Removal (Doc. 32). Defendants removed this case from Arizona state court. (Doc. 1.) In a recent Order (Doc. 31), the Court required Defendants to amend the Notice of Removal to provide further detail as to the citizenship of the limited liability company (LLC) and limited partnership (LP) parties, so the Court could determine if it has diversity jurisdiction over this matter. Upon review, the Court finds that Defendants' allegations in the Amended Notice of Removal (Doc. 32) are sufficient to demonstrate the Court's subject matter jurisdiction at the time of Defendants' removal of this case.

         I. FACTUAL BACKGROUND

         This case arises out of an oil exploration agreement or agreements, allegedly entered into by Defendants Texas Energy Acquisitions LP (TEA) and “by law” Alta Mesa GP LLC (GP)-both Texas entities-and Plaintiffs Deep Wilcox Oil & Gas LLC (Deep Wilcox) and Hankerson Oil LLC-both Arizona entities. In 2009, TEA, and “by law” GP, sought out Plaintiffs to invest in the exploration and development of TEA's oil well, Herrin Well #1. TEA representatives made a one-time visit to Phoenix, Arizona to attend Plaintiffs' investor meetings and discuss Herrin Well #1 in person. This well is located in Liberty County, Texas. (Doc. 14, First Am. Compl. (FAC) ¶¶ 12-14, 23.) The parties agreed to a working interest ownership in the well for Plaintiffs in exchange for funds and then drafted an Exploration Agreement. (FAC ¶ 17.) Plaintiffs remained in Arizona during the negotiation and drafting period, and Defendants remained in Texas. (FAC ¶ 18.)

         The Agreement included both a forum selection and choice of law clause, which required that any disputes between the parties be resolved in accordance with Texas law and take place in Harris County, Texas. (E.g., Mot. Ex. 1, Murrell Decl. Ex. B, Agreement § 14.) The Agreement also required TEA to send notices, updates, distributions, billing statements, and other documents from Texas to Arizona. (FAC ¶ 26.)

         After entering into the Exploration Agreement, TEA retained Defendant Alta Mesa Services LP (AMS) to operate the well. (FAC ¶ 29.) TEA learned that the well was not economically viable in 2009 but failed to inform Plaintiffs. (FAC ¶ 32.) Plaintiffs did not learn this fact until July 2016. (FAC ¶ 32.) Defendants also failed to maintain any record of Plaintiffs' working interest in Herrin Well #1. (FAC ¶ 37.)

         In the FAC, Plaintiffs allege seven claims, including fraudulent conversion, fraud, fraudulent inducement, violating the Consumer Fraud Act, gross negligence, breach of the Exploration Agreement, and unjust enrichment. (FAC ¶¶ 41-95.) Defendants have now filed a Motion to Dismiss, arguing that the Court lacks personal jurisdiction over them, that venue is improper, that the forum non conveniens doctrine applies, and that Plaintiffs fail to state a claim. (Mot. at 1.) Defendants contend that the Court should transfer the case to the Southern District of Texas, Houston Division. (Mot. at 2.) Plaintiffs subsequently filed an opposed Motion to Amend the Complaint (Doc. 19), and an Amended Opposed Motion to Amend the Complaint (Doc. 21). Because Defendants' request to transfer this case is dispositive, the Court will focus its analysis on that aspect of Defendants' Motion to Dismiss.

         II. LEGAL STANDARD

         Under 28 U.S.C. § 1404(a), “[f]or the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought.” The purpose of this statute “is to prevent the waste of time, energy and money and to protect litigants, witnesses and the public against unnecessary inconvenience and expense.” Airbus DS Optronics GmbH v. Nivisys LLC, No. CV-14-02399-PHX-JAT, 2015 WL 3439143, at *2 (D. Ariz. May 28, 2015) (citation and internal quotation marks omitted). It is the defendant's burden to show transfer is warranted, and “[t]he defendant must make a strong showing of inconvenience to warrant upsetting the plaintiff's choice of forum.” Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d 834, 843 (9th Cir. 1986); see also Jones v. GNC Franchising, Inc., 211 F.3d 495, 499 (9th Cir. 2000).

         District courts employ a two-step analysis when determining whether a transfer is proper. Airbus DS Optronics, 2015 WL 3439143, at *2. First, a court considers whether “the case could have been brought in the forum to which the moving party seeks to transfer the case.” Id. In order to meet this requirement, the court in the proposed transferee district “must have subject matter jurisdiction and proper venue, and the defendant must be amenable to service of process issued by that court.” Id. “Second, a court must consider whether the proposed transferee district is a more suitable choice of venue based upon the convenience of the parties and witnesses and the interests of justice.” Id. The Ninth Circuit has set forth factors that a court may consider in making this determination:

(1) the location where the relevant agreements were negotiated and executed, (2) the state that is most familiar with the governing law, (3) the plaintiff's choice of forum, (4) the respective parties' contacts with the forum, (5) the contacts relating to the plaintiff's cause of action in the chosen forum, (6) the differences in the costs of litigation in the two forums, (7) the availability of compulsory process to compel attendance of unwilling non-party witnesses, and (8) the ease of access to sources of proof.

Jones, 211 F.3d at 498-99.

         III. ANALYSIS

         In the Motion to Dismiss, Defendants pose five arguments in support of dismissal: 1) the Court does not have personal jurisdiction over them; 2) the forum selection clause in the Agreement renders venue improper; 3) the doctrine of forum non conveniens applies; 4) Plaintiffs failed to comply with Federal Rule of Civil Procedure 12(b)(6); ...