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Brenco Oil, Inc. v. Blaney

United States District Court, E.D. Pennsylvania

December 13, 2017

BRENCO OIL, INC., Plaintiff,
v.
CASANDRA K. BLANEY et al., Defendants.

          MEMORANDUM

          GENE E.K. PRATTER UNITED STATES DISTRICT JUDGE

         Introduction

         In this case, an oil company alleges that its law firm committed two cardinal sins of oil-and-gas law practice: (1) carelessly misidentifying the holders of title to land, and (2) representing both sides of a land sale in a concurrent conflict of interest.

         In this partial motion to dismiss, the Court answers three limited questions about the complaint. First, the Court dismisses the count for breach of contract because the allegation that the firm carelessly misidentified the true landowners sounds in tort, not in contract. Second, the Court dismisses the count for “conflict of interest, ” because the Pennsylvania Rules of Professional Conduct do not themselves give rise to civil liability. Third, applying the so-called American Rule of fee shifting, in which each side bears its own costs, the Court excludes from the alleged damages any attorneys' fees incurred in this litigation, but not fees incurred in the other litigation and prior legal representation alleged in the complaint.

         The Court grants Brenco Oil leave to amend its complaint consistent with this opinion.

         Facts

         Brenco Oil, an oil and gas company, hired the Brann law firm to identify heirs to land in central Pennsylvania. Brenco Oil's plan was to buy the oil, gas, and mineral rights (also known as “OGM rights”) to the land and then sell those rights for a profit. Brenco Oil alleges that Casandra Blaney, an attorney at the Brann firm, identified the wrong owners of the land. Based on the Brann firm's incorrect legal services and advice, Brenco Oil bought the OGM rights to the land from those who turned out to be the non-owners. Later, Brenco Oil sold the rights (which it thought it owned) to Shepherd Royalty, a buyer from Texas - and the Brann firm represented both Shepherd and Brenco Oil in that transaction.

         Once it became clear that Brenco Oil never had legal title in the first place, Shepherd sued Brenco Oil. Brenco Oil, in turn, brought this case against Ms. Blaney and other attorneys at the Brann firm. Brenco Oil's complaint contains counts for: (1) professional negligence; (2) breach of contract; (3) breach of fiduciary duty; (4) conflict of interest; (5) negligent supervision; and (6) vicarious partnership liability. In response, the Brann attorneys filed a partial motion to dismiss. The Court heard oral argument on the motion.

         Standard of Review

         A Rule 12(b)(6) motion to dismiss tests the sufficiency of a complaint. To survive a motion to dismiss, the plaintiff must plead “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Specifically, “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The question is not whether the claimant “will ultimately prevail . . . but whether his complaint [is] sufficient to cross the federal court's threshold.” Skinner v. Switzer, 562 U.S. 521, 530 (2011) (citation and internal quotation marks omitted).

         In evaluating the sufficiency of a complaint, the Court adheres to certain well-recognized parameters. For one, the Court “must consider only those facts alleged in the complaint and accept all of the allegations as true.” ALA, Inc. v. CCAIR, Inc., 29 F.3d 855, 859 (3d Cir. 1994). Also, the Court must accept as true all reasonable inferences emanating from the allegations, and view those facts and inferences in the light most favorable to the nonmoving party. See Revell v. Port Auth., 598 F.3d 128, 134 (3d Cir. 2010).

         That admonition does not demand that the Court ignore or even discount reality. “[T]he tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Ashcroft, 556 U.S. at 678. If a claim “is vulnerable to 12(b)(6) dismissal, a district court must permit a curative amendment, unless an amendment would be inequitable or futile.” Phillips v. County of Allegheny, 515 F.3d 224, 236 (3d Cir. 2008).

         Analysis of Partial Motion to Dismiss

         The Brann attorneys have filed a partial motion to dismiss, in which they advance three arguments: (i) targeted at the count for breach of contract; (ii) aimed at the count for conflict of interest; and (iii) seeking to exclude attorneys' fees from Brenco Oil's alleged damages.

         The Court will consider each argument in turn. First, because the gist of Brenco Oil's complaint about the misidentified title-holders is the tort of professional negligence, the claim for breach of contract is dismissed with leave to amend. Second, because any independent claim for “conflict of interest” is subsumed into the count for breach of fiduciary duty, the claim for conflict of interest is dismissed with leave to amend the count for fiduciary duty. The Court excludes from Brenco Oil's claimed damages any attorneys' fees paid by Brenco Oil in this lawsuit, but includes fees paid by Brenco Oil (a) to defend itself in the suit brought by Shepherd (the erstwhile subsequent buyer), and (b) to the Brann firm during the time Brann originally represented Brenco Oil.

         I. Brenco Oil's Breach of Contract Claim is Barred by the Gist of the Action Doctrine

         The Brann firm argues that the count for breach of contract is really a count for the tort of professional negligence and should be dismissed as a result. The Court agrees. This section (a) summarizes the rule for the “gist of the action” doctrine, (b) applies the rule to dismiss the count for breach of any explicit contract term, and (c) concludes by noting ...


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