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Prime Energy and Chemical, LLC v. Tucker Arensberg, P.C.

United States District Court, W.D. Pennsylvania

July 23, 2018


          OPINION AND ORDER, Re: ECF, 15

          Maureen P. Kelly Chief Magistrate Judge

         Pending before the Court is a Motion to Dismiss Complaint, ECF No. 15, filed on behalf of Tucker Arensberg, P.C. ("Tucker"), Michael A. Shiner ("Shiner"), and Kenneth L. Carroll, III ("Carroll") (collectively, "Defendants"). For the following reasons, the Motion to Dismiss is denied.


         In September 2015, Plaintiff Prime Energy and Chemical, LLC ("Prime Energy") entered into a Letter of Intent and, in November 2015, a Purchase and Sale Agreement ("PSA"), with Mark A. Thompson and Mid-East Oil Company. The agreements related to oil, gas, and shallow mineral rights at the "Swamp Angel" property, located in McKean County, Pennsylvania. At all times related to the transactions at issue, Thompson and Mid-East Oil were represented by Shiner and Carroll, attorneys with Tucker. Prime Energy alleges that Shiner and Carroll engaged in three separate instances of fraudulent misrepresentation and concealment related to the underlying transactions, followed by an attempt to cover up the fraud, as follows:

(1) Defendants represented that Thompson owned the Property through MarcellX and Mid-East Oil, providing Thompson the unfettered right to engage in the subject transactions; when in fact Thompson owned an equal but not controlling share of the property's titled owner, MarcellX, and the remainder of MarcellX was owned by parties who had not consented to or participated in the Prime Energy transaction;
(2) Defendants represented that a deposit by Prime Energy of $600, 000, equal to 20% of the purchase price, and an additional $78, 800 payment, were required to ensure fulfillment of the purchase and to bring current an outstanding mortgage on the land. Defendants represented that such funds were to be wired to Shiner for placement in a designated attorney/Tucker escrow account; when in fact, upon receipt, the money was transferred directly to Thompson, or to Shiner for his personal use;[1]
(3) Defendants represented that the property was not subject to pending litigation, when at the time of the transactions at issue, at least one other multi-party fraud action was pending in this Court related to the sale of oil and gas rights, and that litigation resulted in the entry of judgment against Thompson in the sum of $2, 000, 000;
(4) Upon Plaintiffs discovery of the true ownership of the property, and the fact that the deposit money was never received by those who owned MarcellX and the property, Defendants covered up the misappropriation of the Prime Energy's funds by:
(1) presenting a post-dated "consent" by MarcellX to Thompson's attempted sale of the property; (2) falsely stating that the funds were used to fulfill the PSA for MarcellX; (3) continuing to misrepresent Thompson's status as principal owner of the property through MarcellX and Mid-East Oil; (4) hiding the fact that the funds had not been deposited into Tucker's attorney escrow account; (5) failing to disclose that the funds were transferred directly to Thompson; (6) deceptively accounting for the use of the funds; (7) never disclosing pending litigation regarding the subject premises, oil and gas rights; (8) falsely asserting that Defendants and Thompson acted in compliance with the PSA in disregard of their diversion of funds and concealment of MarcellX's true owners.

ECF No. 1 at 6 -15. Prime Energy alleges that the factual representations made by Shiner and Carroll were material to the underlying transactions, and resulted in the loss of the escrow and mortgage payment funds wired to Shiner. Had the relevant facts been presented to Prime Energy, the funds would not. have been remitted, and Prime Energy would not have lost the expected benefits of the underlying transaction, represented by the anticipated proceeds generated by the operation of existing oil and gas wells, and the drilling of additional wells.

         Prime Energy alleges that Shiner and Carroll's conduct was intentional, fraudulent, reckless, and occurred as the result of Tucker's failure to supervise each of its attorneys to ensure that accurate and required truthful disclosures were made to all parties involved in commercial transactions in which the firm is engaged. Id. at 16. Accordingly, Prime Energy brings common law claims for fraud (Count I), reckless misrepresentation (Count II), negligent supervision. (Count III), and respondeat superior (Count IV). Defendants move to dismiss Plaintiffs Complaint pursuant to Rules 9 and 12(b)(6) of the Federal Rules of Civil Procedure. The parties have filed briefs and extensive exhibits documenting the underlying transactions in support and in opposition to the Motion to Dismiss, and it is now ripe for disposition. ECF Nos. 16, 18 and 24.


         In assessing the sufficiency of the complaint pursuant to a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the Court must accept as true all material allegations in the complaint and all reasonable factual inferences must be viewed in the light most favorable to the plaintiff. Odd v. Malone, 538 F.3d 202, 205 (3d Cir. 2008). The Court, however, need not accept bald assertions or inferences drawn by the plaintiff if they are unsupported by the facts set forth in the complaint. See California Public Employee Retirement System v. The Chubb Corp., 394 F.3d 126, 143 (3d Cir. 2004), citins Morse v. Lower Merion School Dist, 132 F.3d 902, 906 (3d Cir. 1997). Nor must the Court accept legal conclusions set forth as factual allegations. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Rather, "[f]actual allegations must be enough to raise a right to relief above the speculative level." Id., citing Papasan v. Allain, 478 U.S. 265, 286 (1986).

         The United States Supreme Court has held that a complaint is properly dismissed under Fed.R.Civ.P. 12(b)(6) where it does not allege "enough facts to state a claim to relief that is plausible on its face," id. at 570, or where the factual content does not allow 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). See Phillips v. County of Allegheny. 515 F.3d 224, 231, 234 (3d Cir. 2008) (finding that, under Twombly, "labels and conclusions, and a formulaic recitation of the elements of a cause of action" do not suffice but, rather, the complaint "must allege facts suggestive of [the proscribed] conduct" and that are sufficient "to raise a reasonable expectation that discovery will reveal evidence of the necessary element[s]" of his claim).

         In deciding a motion to dismiss, we may consider the allegations contained in the complaint, exhibits attached to the complaint, matters of public record, and any undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiffs claims are based on the document. Pension Benefits Guar. Corp. v. White Consol. Industries, Inc., 998 F.2d 1192, 1196 (3d Cir. 1993). Where appropriate, the Court shall consider certain of the exhibits ...

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