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Kentucky Oil and Gas, Inc. v. Rodgers

United States District Court, W.D. Kentucky, Bowling Green Division

October 3, 2019

KENTUCKY OIL AND GAS, INC. PLAINTIFF
v.
RONNIE C. RODGERS; and R&R PLUS, LLC DEFENDANTS

          MEMORANDUM OPINION AND ORDER

          Greg N. Stivers, Chief Judge

         This matter is before the Court on Plaintiff's Motion to Dismiss and for Summary Judgment. (DN 54). Defendants were given additional time to respond (DN 57) but have not filed a response. For the reasons that follow, Plaintiff's motion to dismiss and motion for summary judgment will be GRANTED.

         I. STATEMENT OF FACTS

         In February 2013, David Parlons (“Parlons”), as the President and sole Director of Plaintiff Kentucky Oil and Gas, Inc. (“KOG”), traveled to Bowling Green, Kentucky, where he met Defendant Ronnie Rodgers (“Rodgers”). (Compl. ¶¶ 11, 15, DN 1). Rodgers represented himself to Parlons as a successful driller and operator of oil wells in Kentucky and Tennessee, even though Rodgers was, at that time, subject to a temporary restraining order preventing him from selling interests in oil. (Compl. ¶¶ 16-18). Rodgers also made several misrepresentations to Parlons about Rodgers's interest in and the oil production history of several tracts of land. (Compl. ¶¶ 22-24). Relying on these and other misrepresentations, in April 2013, Parlons entered into an agreement with Rodgers who agreed to assign to KOG the oil rights of one tract of land in return for shares of common stock in KOG's parent company, Kentucky Oil and Gas, PLC (“KOG PLC”). (Compl. ¶ 29).

         Over the next two years, Parlons had KOG transfer $1, 148, 634.67 to Defendant R&R Plus, LLC (“R&R”) based on Rodgers's representations that his company was successfully acquiring the rights to land, drilling, and treating productive oil wells. (Compl. ¶¶ 31-64). In November 2015, Parlons traveled to Bowling Green with a financial advisor and quickly discovered that Rodgers's prior representations to Parlons were not accurate. (Compl. ¶¶ 65-67). Subsequently, Rodgers failed to provide accounting information requested by KOG, and he became increasingly difficult to contact. (Compl. ¶¶ 68-73). KOG ultimately determined that Rodgers had misrepresented the viability of the oil wells and R&R's claimed expenditures. (Compl. ¶¶ 74-75).

         KOG initiated this action against Rodgers and R&R (“Defendants”) on March 24, 2016, alleging fraud, breach of contract, and unjust enrichment.[1] (Compl. ¶¶ 19-20, 22). On May 17, 2016, Defendants filed their answer, denying most of KOG's allegations and asserting a counterclaim against KOG for misrepresentation. (Answer & Countercl. 4-5, DN 16). On April 30, 2019, KOG moved for summary judgment on its claims and to dismiss Defendants' counterclaim. (Pl.'s Mot. Dismiss, DN 54). The Court granted Defendants additional time to respond to the motion, but no response has been received. (Order, DN 57).

         II. DISCUSSION

         A. Motion to Dismiss Defendants' Counterclaim In order to survive dismissal for failure to state a claim, “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 Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “[A] district court must (1) view the complaint in the light most favorable to the plaintiff and (2) take all well-pleaded factual allegations as true.” Tackett v. M & G Polymers, USA, LLC, 561 F.3d 478, 488 (6th Cir. 2009) (citing Gunasekera v. Irwin, 551 F.3d 461, 466 (6th Cir. 2009)). Even so, the Court need not accept “the bare assertion of legal conclusions.” Columbia Nat. Res., Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir. 1995) (citing Allard v. Weitzman (In re DeLorean Motor Co.), 991 F.2d 1236, 1240 (6th Cir. 1993)).

         When alleging fraud, “a party must state with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b). Therefore, the party must at least provide “the time, place and contents of the misrepresentation(s) upon which he relied.” Rautu v. U.S. Bank, 557 Fed.Appx. 411, 414 (6th Cir. 2014) (citing Bender v. Southland Corp., 749 F.2d 1205, 1216 (6th Cir. 1984)). Moreover, the party must “(1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent.” Frank v. Dana Corp., 547 F.3d 564, 570 (6th Cir. 2008) (internal quotation marks omitted) (citation omitted).

         KOG moves to dismiss Defendants' counterclaim for misrepresentation, which this Court will interpret as a claim of fraud. As such, the counterclaim must meet the heightened pleading standard of Fed.R.Civ.P. 9(b). Specifically, all that Defendants allege is that KOG prevented them from completing their work and “made gross misrepresentations to the Defendant, Ronnie C. Rodgers, individually and in his capacity as the sole member/manager of R&R Plus, LLC, concerning the amounts of profitable shares he would receive when said company ‘went public . . . .'” (Answer & Countercl. 4-5).

         It cannot be said that Defendants have pleaded a claim of fraud with particularity as required by Fed.R.Civ.P. 9(b). While they briefly reference the contents of the alleged allegation-that the shares were not as profitable as Rodgers was told-Defendants make no attempt to specify the time, place, or nature of these alleged misrepresentations. Moreover, they have provided no factual allegations that would allow this Court to analyze whether KOG's representations to Rodgers were in fact fraudulent. Rather, Defendants only allege that KOG “made gross misrepresentations” regarding the profitability of certain shares. No. description is provided regarding the shares, how reality failed to measure up, or how KOG in any way misled Rodgers in the process. As such, Defendants' counterclaim presents a textbook example of a party relying on a bare assertion of legal conclusions. See Rautu, 557 Fed.Appx. at 416 (“Rautu fails to allege the nature of this fraud with sufficient particularity and does not provide any factual details on the substance of the misrepresentations, who made them, when and where they were made, or any other salient facts. Consequently, Rautu's complaint is inadequate to state a claim upon which relief may be granted.”). Because Defendants' counterclaim fails to plead the alleged fraud with particularity, it must be dismissed.[2]

         B. Motion for Summary Judgment

         Summary judgment is appropriate if “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). Judgment as a matter of law should be granted if “a reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue . . . .” Fed.R.Civ.P. 50(a)(1). The moving party bears the initial burden of stating the basis for the motion and identifying evidence in the record that demonstrates an absence of a genuine dispute of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party satisfies its burden, the non-moving party must then produce specific evidence proving the existence of a genuine dispute of fact for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

         While the Court must view the evidence in the light most favorable to the non-moving party, the non-moving party must do more than merely show the existence of some “metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986) (citation omitted). Rather, the non-moving party must present specific facts proving that a genuine factual dispute exists by “citing to particular parts of the materials in the record” or by “showing that the materials cited do not establish the absence . . . of a genuine dispute . . . .” Fed.R.Civ.P. 56(c)(1). “The mere existence of a scintilla of evidence in support of the [non-movant's] position will be insufficient” to overcome summary judgment. Anderson, 477 U.S. at 252 PLAINTIFF claims, in short, that Rodgers and R&R tricked KOG out of large sums of money for work that they never actually completed. To pull off this ruse, Rodgers made a variety of misrepresentations spanning years. To support its claims for fraud, breach of contract, and unjust enrichment, KOG has provided a plethora of specific information and verifying documentation. Further, the record includes evidence that when the business relationship between Rodgers and Parlons began, Rodgers was subject to a temporary restraining order preventing him from selling interests in oil and gas programs. (Compl. Ex. A, at 1-2, DN 1-2).[3] Next, a Confirmation of Facts, signed by Rodgers, confirmed that R&R received $1, 148, 634.67 from KOG. (Pl.'s Mot. Summ. J. Ex. A, at 1-3, DN 54-2). Rodgers previously represented, in turn, that this money was all spent for the drilling, completion, and treatment of wells in western Kentucky. (Pl.'s Mot. Summ. J. Ex. C, at 2, DN 54-4). In reality, as reported by the Kentucky Energy and Environment Cabinet after an investigation, the oil wells in question were “improperly abandoned.” (Pl.'s Mot. Summ. J. Ex. E, at ...


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