Int'l Energy Ventures Mgmt., L.L.C. v. United Energy Grp., Ltd.

818 F.3d 193

INTERNATIONAL ENERGY VENTURES MANAGEMENT, L.L.C., Plaintiff–Appellant

v.UNITED ENERGY GROUP, LIMITED; Sean Mueller, Defendants–Appellees.

No. 14–20552.

United States Court of Appeals, Fifth Circuit.

March 31, 2016.

Thomas Clark Wright, Kathleen Sheila Rose (argued), Wright & Close, L.L.P., Michael D. Sydow, Sr., Sydow Law Firm, L.L.P., Houston, TX, for Plaintiff–Appellant.

Michael B. Bennett (argued), Tina Quy Phi Nguyen, Aaron Michael Streett, Baker Botts, L.L.P., Sean Gorman, Esq., Yvonne Y. Ho, Esq. (argued), Bracewell, L.L.P., Elizabeth Panill Fletcher, Esq., Sean Gorman, Esq., Ahmad, Zavitsanos, Anaipakos, Alavi & Mensing, P.C., Houston, TX, for Defendants–Appellees.

Before WIENER, SOUTHWICK, and GRAVES, Circuit Judges.

WIENER, Circuit Judge:

This panel originally issued an opinion in this case on August 21, 2015.¹ We now withdraw that opinion in its entirety and substitute the following in its place.

Plaintiff–Appellant International Energy Ventures Management, L.L.C. ("IEVM") appeals the district court's (1) denial of its motion to remand, (2) grant of a motion by Defendant–Appellee Sean Mueller ("Mueller") to dismiss for failure to state a claim, and (3) grant of a motion by Defendant–Appellee United Energy Group, Limited ("UEG") for lack of personal jurisdiction and for insufficient service of process.

I. FACTS & PROCEEDINGS

A. FACTS

These facts are drawn from IEVM's allegations, which we must accept as true. In July 2010, BP announced that it wanted to sell its Pakistan subsidiaries and those subsidiaries' assets, which included oil and gas fields. IEVM had expertise regarding the assets in Pakistan, and one of its members mentioned the sale of those assets to Mueller, a broker and investment banker. Soon after, Mueller contacted BP, stating that IEVM had retained him and that it was interested in acquiring BP's assets in Pakistan. Using a slide presentation that IEVM created and he rebranded, Mueller approached investors. He told those investors, as well, that IEVM had retained him with regard to the acquisition of BP's assets.

An associate of Mueller translated the presentation into Chinese and presented it to UEG, a Chinese petroleum company. In September 2010, UEG sent a letter of interest, drafted by Mueller, to BP. The letter mentioned that IEVM was the expert that had introduced UEG to the sale. Through Mueller, UEG also sent IEVM a proposed compensation agreement for IEVM's services. Under the final agreement between IEVM and UEG, IEVM contracted to provide consulting services to UEG during its acquisition of BP's assets in Pakistan. In consideration, UEG contracted to pay IEVM $750,000 per year for its services and its expenses. Subsequently, in consideration for services not covered by the compensation agreement, UEG agreed to pay IEVM and Mueller a commission of six percent of the acquisition price of the assets and, in addition, agreed to employ IEVM's members after the acquisition.

In November 2010, Mueller informed IEVM that BP had accepted UEG's offer to acquire the assets for $775 million. In January 2011, UEG confirmed its agreement with IEVM. IEVM performed its obligations to UEG under the compensation agreement until September 2011, when the sale of the BP assets to UEG closed. Throughout the remainder of 2011, IEVM attempted to collect from UEG under their agreement. In March 2012, UEG requested that IEVM provide further services to UEG, but IEVM refused to do so unless UEG acknowledged that IEVM had not been paid and unless UEG indemnified IEVM for liability arising from its past services. UEG did so, and also paid IEVM for the services rendered after March 2012. It has not paid IEVM for services rendered before then or the six percent commission.

B. PROCEEDINGS

IEVM sued UEG and Mueller in Texas court. IEVM's petition asserted causes of action for breach of contract, promissory estoppel, and quantum meruit. Its petition also asserted a cause of action for fraud "because [UEG and Mueller] never intended to pay IEVM its consulting fees or its finder's fee equity, and thereby deceived IEVM into working on the BP Pakistan project without compensation."

Mueller and UEG removed, asserting that Mueller had been improperly joined to defeat subject matter jurisdiction based on diversity. Mueller then moved to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), and simultaneously, UEG moved to dismiss for lack of personal jurisdiction under Rule 12(b)(2) and for insufficient service of process under Rule 12(b)(5). Soon thereafter, IEVM moved to remand. IEVM also requested leave to amend its petition, but it did not attach a proposed amendment.

Without explanation, the district court denied IEVM's motion to remand in a one-page order. IEVM then moved to compel arbitration and to stay the litigation. The district court initially granted the motion in another one-page order, but it later withdrew that order. It then granted both Mueller's and UEG's motions to dismiss. In so doing, it stated that Mueller "has 60 days to seek and effect proper service of process on UEG," before the dismissal would "become[ ] final."² IEVM timely filed its notice of appeal. Thereafter, IEVM filed a certificate of service in the district court and a motion to supplement the record on appeal, which was granted.

On appeal, IEVM challenges the district court's decisions to (1) deny IEVM's motion to remand, (2) grant Mueller's motion to dismiss for failure to state a claim, and (3) grant UEG's motion to dismiss for lack of personal jurisdiction. We consider these challenges sequentially.

II. ANALYSIS

A. DENIAL OF IEVM'S MOTION TO REMAND

In denying IEVM's motion to remand, the district court determined that IEVM had improperly joined Mueller for the purpose of defeating subject matter jurisdiction based on diversity.³ In so doing, the district court explained: "There are no facts pled that tie Mueller to the dispute that [IEVM] asserts against UEG save his role with or in behalf of IEVM."⁴ We review the denial of a motion to remand de novo.⁵

Under the federal removal statute, a civil action may be removed from a state court to a federal court on the basis of diversity. This is so because the federal court has original subject matter jurisdiction over such cases.⁶ The only caveat is that, when a properly joined defendant is a resident of the same state as the plaintiff, removal is improper.⁷ In the instant action, UEG and Mueller removed the action on the basis that there was complete diversity of the parties because IEVM, a resident of Texas, sued UEG, a resident of Bermuda, and even though IEVM also sued Mueller, a resident of Texas, Mueller was improperly joined.

A defendant is improperly joined if the moving party establishes that (1) the plaintiff has stated a claim against a diverse defendant that he fraudulently alleges is nondiverse, or (2) the plaintiff has not stated a claim against a defendant that he properly alleges is nondiverse.⁸ Because Mueller is, in fact, nondiverse, only the latter option is relevant. As the parties attempting to remove IEVM's action, UEG and Mueller have the burden of establishing that IEVM has failed to state a claim against Mueller.⁹ In doing so, they must demonstrate "that there is no possibility of recovery by the plaintiff against [a nondiverse] defendant, which stated differently means that there is no reasonable basis for the district court to predict that the plaintiff might be able to recover against [a nondiverse] defendant."¹⁰ At the heart of this appeal lies the parties' dispute whether, in determining if IEVM might recover against Mueller, we should analyze its claims under the Texas pleading standard or the federal pleading standard.

1. THE APPLICABLE PLEADING STANDARD

When deciding whether a nondiverse defendant has been improperly joined because the plaintiff has failed to state a claim against him, the court must apply the analysis articulated in our en banc opinion in Smallwood v. Illinois Central Railroad Co.: "[W]hether the defendant has demonstrated that there is no possibility of recovery by the plaintiff against an in-state defendant...."¹¹ In Smallwood, we recognized that "[t]here ha[d] been some uncertainty over the proper means for predicting whether a plaintiff ha[d] a reasonable basis of recovery under state law."¹² The Smallwood opinion declared that "[a] court may resolve the issue in one of two ways," the first of which is at issue here: "The court may conduct a Rule 12(b)(6) –type analysis, looking initially at the allegations of the complaint to determine whether the complaint states a claim under state law against the in-state defendant," elaborating that "if a plaintiff can survive a Rule 12(b)(6) challenge, there is no improper joinder."¹³ "[T]he focus of the inquiry must be on the joinder, not the merits of the plaintiff's case."¹⁴

It is well-established, of course, that the Rule 12(b)(6) analysis necessarily incorporates the federal pleading standard articulated in Bell Atlantic Corp. v. Twombly: "To pass muster under Rule 12(b)(6), [a] complaint must have contained ‘enough facts to state a claim to relief that is plausible on its face.’ "¹⁵

Despite this, several of our unpublished opinions have inadvertently confused, or perhaps merely overlooked, that directive of the Smallwood opinion by assuming that the state pleading standard governs. In the earliest of these unpublished decisions, De La Hoya v. Coldwell Banker Mexico, Inc.,¹⁶ a post-Smallwood panel of this court did not actually adopt the Texas pleading standard as much as it conflated it with the federal standard.¹⁷ After reciting both standards, the De La Hoya opinion applied both of "those liberal pleading standards" as if they were the same.¹⁸

In the next of these unpublished opinions, Akerblom v. Ezra Holdings Ltd.,¹⁹ another panel of this court applied the Texas pleading standard, but without explaining its decision to do so. In the latest of...