BAD Holdings, LLC v. Halliburton Energy Servs.

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BAD HOLDINGS, LLC, Plaintiff, v. HALLIBURTON ENERGY SERVICES, INC., Defendant.

No. 21-cv-427-wmc

United States District Court, W.D. Wisconsin

November 1, 2022

OPINION AND ORDER

WILLIAM M. CONLEY,, DISTRICT JUDGE

Plaintiff BAD Holdings, LLC, claims that defendant Halliburton Energy Services, Inc., left its train cars on property belonging to BAD Holdings without paying storage fees. In turn Halliburton brings counterclaims against BAD for replevin and wrongful conversion of those same cars. Now before the court is plaintiff's motion for partial summary judgment (dkt #25) addressing both its claims for trespass, unjust enrichment and interference with business relations, and Halliburton's counterclaims.^[1] For the reasons provided below, plaintiff's motion is rejected.

UNDISPUTED FACTS^[2]

On December 1, 2020, BAD Holdings purchased out of receivership real property located in Barron County, Wisconsin. The property was previously owned by Northern Industrial Sands LLC, and its associated companies (collectively known as “NIS”), which had stored railcars there, as well as loaded fracking sand for sale. Before the receivership and sale of the property, Halliburton was a customer of NIS' fracking sand, and the two had entered into a Railcar Pooling Agreement, which among other things allowed NIS to use Halliburton's stored railcars to fulfill orders from other customers on an as-needed basis. Other of NIS' customers had entered into similar pooling agreements, allowing NIS to load and transport sand in any of the pooled cars, regardless of the customer. Under the term of their pooling agreement, NIS loaded with sand all 85 Halliburton railcars at issue in this case for delivery to a third party.

After a severe downturn in the fracking industry in early 2020, NIS' assets were placed in receivership by the Circuit Court of Barron County, Wisconsin. A notice of receivership was then filed in May 2020, which instructed creditors like Halliburton to file claims against NIS by August 2020. The court also authorized separate public auctions for NIS' real estate and other assets.

After receiving this notice, Halliburton filed a Proof of Claim in the receivership. In response, NIS then emailed Halliburton directly on August 6, 2020, giving notice that: (1) railcar owners should retrieve their cars from the property; and (2) Halliburton's cars were currently loaded with sand. In particular, that email advised Halliburton, “Lessors/owners/customers/vendors can file in the receivership if they believe they are entitled to any amounts by NIS as the estate will not be paying for any shipment/return of the cars, from any and all locations.” (Pl.'s Rep. to Def.'s Resp. to Pl.'s PFOF (dkt. #47) ¶ 32.) Nevertheless, Halliburton apparently made no attempt to retrieve its cars before November, 2020.

In late August of 2020, the underlying property was auctioned off to BAD. On November 30, just before the closing and filing on December 1, 2020, of the deed conveying the property, BAD sent an email to the NIS receiver stating, “BAD does not agree to accept possession, expense, responsibility and/or any liability associated with the 439 railcars and the contents on site.” In reply, the receiver stated that her “email confirms the terms outlined below.” (Duke Decl. (dkt. #28-1) 1-2.)

Starting on November 10, 2020, however, Halliburton was in communication with BAD in an attempt to retrieve its cars. Halliburton asked for updates on the cars several times and notified BAD that it couldn't accept the cars until they were unloaded. On November 13, 2020, BAD replied to Halliburton that “[w]e are still working on finalizing the plans to empty the remaining cars. Please bear with us.” (Atanasoff Decl. (dkt. #45-6) 5.) Halliburton asked for another update six days later, to which BAD responded, “Thank you for checking in! We are still working out all of the details on how to proceed with everything.” (Id. at 4.)

On December 1, 2020, the date that BAD actually took possession of the property, Halliburton again asked, “What is the latest plan to get these cars unloaded?” to which BAD responded “We are still working out the details. We will stay in touch with you.” (Id. at 3.) Halliburton asked for an update the next day, to which BAD replied, “[r]est assured we are working diligently to resolve this matter. Thank you in advance for your patience.” (Id. at 2.) Although it appears that BAD never provided a plan for unloading and retrieving the cars before the end of 2020, the parties discussed whether Halliburton would be willing to purchase the sand already loaded in its cars from BAD between late December, 2020, and January 2021.

Halliburton next notified BAD on January 28, 2021, that it might be willing to purchase certain loads of sand, but for cars carrying sand that Halliburton did not need, “[w]e will need those cars emptied out prior to taking [them] back.” (Atanasoff Decl. (dkt. #45-2) 5.) Ultimately, Halliburton decided not to purchase any of the sand due to quality concerns. (Id. at 1.)

On March 26, 2021, BAD asked Halliburton where to send invoices for the cars currently in storage. Halliburton responded that the cars were not being stored; rather, Halliburton was waiting for BAD to unload the cars before taking possession, as noted by previous communications. (Atanasoff Decl. (dkt. #45-16) 2-4.) By April 23, 2021, Halliburton submitted a demand letter asking for its cars to be emptied out and returned, with Halliburton paying reasonable costs to move the cars but not any storage fees. (Carruth Decl. (dkt. #40-2) 1.) On May 20, 2021, BAD refused and insisted that Halliburton pay storage fees and the costs of removing any sand. (Carruth Decl. (dkt. #40-3) 1.) This appears to be the first time that BAD told Halliburton that BAD would not remove the sand.

Since December 1, 2020, BAD has operated the property as railcar storage. Before BAD's acquisition, Halliburton had paid no storage fees for the cars on the property, presumably because NIS was allowed to use those cars to transport sand. Once BAD took control of the property, however, it began to charge between $4.50 and $6 per railcar per day for railcar storage, $350 per railcar to switch railcars, and $450 per railcar for cherry- picking costs. Switching and cherry-picking are operations used to extract certain railcars from a pool of cars and assemble the cars for transport. Halliburton's railcars have been on the subject property since December 1, 2020, and all cars remain loaded with sand. To date, Halliburton has paid no storage fees to BAD, and BAD has refused to incur the costs of removing sand from Halliburton's cars.

OPINION

Summary judgment must be granted against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If there is any genuine issue as to any material fact, the court cannot grant summary judgment. Id. A dispute is genuine “if the evidence is such that a reasonable jury could return a verdict for the non-moving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (citation omitted). Finally, “[t]he evidence of the non-movant[s] is to be believed, and all justifiable inferences are to be drawn in [their] favor.” Id. at 255.

I. Ownership of Sand

As a preliminary question, a disputed question of fact is whether BAD owns the sand in the Halliburton railcars. To begin, NIS previously loaded the sand in Halliburton's railcars before going into receivership, and the sand was abandoned prior to BAD taking title of the property, given the reasonable “infer[ences] from ‘words spoken, acts done, and other objective facts' whether [NIS] ‘voluntarily discarded, left behind, or otherwise relinquished [its] interest in the property in question.'” Bond v. United States, 77 F.3d 1009, 1013 (7th Cir. 1996) (citing United States v. Ramos, 12 F.3d 1019, 1022 (11th Cir.1994).) Moreover, as a defunct entity, NIS is unable to take responsibility for the sand. The real question is whether BAD assumed ownership of the sand at some point.

Before BAD's purchase, the receivership sold much of the personal property on the parcel to third-parties, who were notified on October 1, 2020, that “any equipment left at the dry plant property after October 31,2020” will be considered “to have been abandoned to the receivership estate and any such equipment will be sold along with the real estate.” (Atanasoff Decl. (#45-10) 1.) The sand was never claimed by NIS or a third party before the receivership conveyed the property to BAD. After purchasing the real estate, BAD emailed counsel for the receivership in November, 2020, to confirm that “BAD does not agree to accept possession, expense, responsibility and/or any liability associated with the 439 railcars and the contents on site.” (Duke Decl. (dkt. #28-1) 2.) Lauren Stanley, representing the receivership, replied that she “confirmed the terms outlined.” (Id. at 1.) Despite this, BAD attempted to sell the sand loaded in the Halliburton railcars in December 2020, to Halliburton and other third parties, offering a reduced price per ton due to quality concerns. (Atanasoff Decl. (dkt. #45-2) 5.)

Ultimately the word “property” is used to “denote the group of rights inhering in the citizen's relation to the physical thing, as the right to possess, use and dispose of it.” United States v. Gen. Motors Corp., 323 U.S. 373, 378 (1945). Here, BAD both possesses the sand and has attempted to dispose of it via sale. While BAD argues that its November email disclaimed all responsibility for the sand, its attempt to sell the sand later muddles...