Wesolek v. Layton

JOHN S. WESOLEK, DEBORAH J. WESOLEK, JOEL T. JOHNSON,RANDY LINSTEDT, DOUGLAS A. CARSON, DR. ENRIQUE REYES-B,MARIA GEORGINA REYES, LEVI LINDEMANN, STEPHANIE LINDEMANN,MICHAEL P. WAGNER, DANIEL MILLER, KRISHNA MILLER, ROEL TREVINO,TIM PETERSON, JANICE LAU, MIKE TASZAREK, E. BRENT LUNDGREN,GLORIA GACKLE, PETE HILL, KELCEY HILL, KEN ULLMANN, DALE SCHNEIDER,DEBORAH SCHNEIDER, JOHN MCINTOSH, MARGARET MCINTOSH, MERYL A. WILLERT,JR., JULIE WILLERT, TYLER ROEHL, PAMELA G. KLOOS, JEFFERY T. KLOOS,JUDY KVAALE, CLIFF LARSON, JUDY DVORAZK, MONA THORSTAD, ARLYN LAND,STEVE JOHNSON, LORI JOHNSON, JANET SKINNER, and GEORGE SLIGHT,JERRY TALBERT, JASON GION, VICKIE GION, MARY OHLHAUSER, RANDY OHLHAUSER,TIM HOLLAND, RICK ERICKSON, PAUL QUINNILD, CAROL QUINNILD, MARK FOLAND,KAREN FOLAND, DEVIN LUBINUS, BRENT LARSON, SANDRA UELAND, JOE HENJUM,GARY HEARNEN, DON HEARDEN, RANAIE BALL, BRIAN TJERLUND, MIKE TASZARCK,RON BIUR, DAVE PAULSON, BRUSE KUSLER, MIKE HOLMGREN, and GUSTAV KOPRIVA,Individually and Derivatively, on Behalf of LAYTON ENERGY WHARTON FUND, LPand LAYTON ENERGY FUND 2, LP, Plaintiffs, v. DANIEL LAYTON, J. CLARK LEGLER, LAYTON ENERGY TEXAS, LLC,LAYTON CORPORATION, LAYTON ENERGY WHARTON FUND, LP,and LAYTON ENERGY FUND 2, LP, Defendants.

CIVIL ACTION NO. H-12-3210

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

SIGNED: March 14, 2014

MEMORANDUM OPINION AND ORDER

Pending before the court is Defendants' Motion for Relief (Docket Entry No. 19) in which

Defendants seek recovery of all of the attorney's fees and expenses incurred by Defendants in Wesolek I and Wesolek II in the current amount of approximately $350,000, jointly and severally, from all of Plaintiffs who were also Plaintiffs in Wesolek I and their counsel, Kevin L. Colbert, and his law firm, The Law Office of Kevin L. Colbert, JD, LL.M, PLLC. In addition, Defendants seek recovery of all of the attorney's fees and expenses incurred by Defendants in Wesolek II, jointly and severally, from Plaintiffs and their counsel, Kevin L. Colbert, and his law firm, The Law Office of Kevin L. Colbert, JD, LL.M, PLLC.¹

Also pending is Plaintiff, Michael P. Wagner's, Response and Motion for Relief (Docket Entry No. 27) seeking orders requiring defendants to provide him copies of their relevant fee agreements, requiring plaintiffs' counsel to provide a written explanation of the status of the case, and an order adding 90 days to the filing deadlines set forth in the court's Order of January 13, 2014 (Docket Entry No. 25). For the reasons stated below, defendants' motion for relief will be granted in part and denied in part, and Wagner's motion for relief will be denied as moot.

I. Factual and Procedural Background

Defendants in this action are partnerships and their managing partners who have twice been sued by the same attorney representinggroups of plaintiffs who invested in the partnerships. The current action is the second of the two actions filed against the named defendants ("Wesolek II"). The first action was initiated on December 21, 2011, by the filing of a class action petition in state district court, which was removed to this court on January 6, 2012 (Wesolek, et al. v. Layton, et al., Civil Action No. 4:12-cv-00063, "Wesolek I"). On January 25, 2012, the first 39 plaintiffs in the current lawsuit filed Plaintiffs' Amended Class Action Complaint in Wesolek I.² On February 2 and 8, 2012, defendants filed motions to dismiss in response to which plaintiffs voluntarily dismissed one defendant — Platinum Energy Solutions, Inc. — and argued that the claims asserted against the remaining defendants should not be dismissed.³ On May 18, 2012, the court entered a Memorandum Opinion and Order granting defendants' motions to dismiss and a Final Judgment dismissing plaintiffs' derivative claims without prejudice and plaintiffs' direct claims with prejudice, Wesolek v. Layton (Wesolek I), 871 F. Supp. 2d 620 (S.D. Tex. 2012).⁴

The court concluded that the plaintiffs' claims for common law fraud and violation of the Texas Securities Act arising frommisrepresentations made before they invested in the partnerships were claims that the plaintiffs could assert directly, but that the plaintiffs' claims for conversion, violation of the Texas Theft Liability Act, money had and received, breach of fiduciary duty, negligence, common law fraud, and violation of the Texas Securities Act arising from misrepresentations made after they had invested in the Funds were claims that the plaintiffs could only assert derivatively on behalf of the Funds. The court dismissed with prejudice the plaintiffs' direct claims for common law fraud and violation of the Texas Securities Act arising from misrepresentations made before the plaintiffs invested in the partnerships after concluding that the plaintiffs failed to plead fraud with particularity as required by Federal Rule of Civil Procedure 9(b), and pursuant to Rule 12(b)(6) for failure to state a claim for which relief may be granted. But the court dismissed without prejudice the claims that plaintiffs could only assert derivatively pursuant to Rule 12(b)(1) for lack of standing. Id. at 638.

Plaintiffs did not appeal the final judgment entered in Wesolek I. Instead, on August 30, 2012, plaintiffs acting individually and derivatively on behalf of Layton Energy Wharton, LP or the Layton Energy Fund 2, LP filed Plaintiffs' Original Petition and Requests for Production in the 189th Judicial District Court of Harris County, Texas, against defendants Daniel Layton, J. Clark Legler, Layton Energy Texas, LLC, Layton Corporation,Layton Energy Wharton Fund, LP, and Layton Energy Fund 2, LP. The Plaintiffs' Original Petition asserted claims for common law fraud, conversion, violation of the Texas Theft Liability Act, money had and received, violations of the Texas Securities Act, breach of fiduciary duty, and negligence.⁵ Plaintiffs' prayer for relief sought

rescission of the sale of their limited partnership units, recovery of all sums invested in Wharton Energy Fund and Layton Energy Fund 2 on behalf of themselves and the members of the classes. Specifically, Plaintiffs seek recovery of $13,500,00[0] plus pre-judgment, post-judgment interest, costs of court, punitive damages and attorney's fees.⁶

On October 29, 2012, defendants filed a Notice of Removal (Docket Entry No. 1) asserting that "[t]his action is removable under the provisions of the Class Action Fairness Act (CAFA), 28 U.S.C. § 1332(d), and 28 U.S.C. § 1453(b),"⁷ and that "[a]ll the elements for removal of the instant action under CAFA are met."⁸ The case was assigned to Judge Gilmore. On the same day defendants filed Defendants' Motion to Dismiss Plaintiffs' Original Petition (Docket Entry No. 2) pursuant to Federal Rules of Civil Procedure 9(b) for failure to plead fraud with particularity and 12(b)(6) forfailure to state a claim for which relief may be granted. Also on October 29, 2012, defendants filed Defendants' Original Answer (Docket Entry No. 3). On November 19, 2012, plaintiffs filed a response to the defendants' motion to dismiss in which they "concede[d] they do not have direct claims against Defendants and that all claims are derivative in nature on behalf of Layton Wharton Energy, LP and Layton Energy II, LP."⁹ Plaintiffs asserted that "[b]ecause Defendants do not complain about facts and representations as pled that occurred after Plaintiffs became limited partners, Defendants motion to dismiss under 12(b)(6) and 9(b) should be denied."¹⁰ At the end of their response to defendants' motion to dismiss, plaintiffs also sought leave to replead.¹¹ On December 3, 2012, defendants filed a Reply to Plaintiffs' Response (Docket Entry No. 13). Also on December 3, 2012, defendants filed a Notice of Related Litigation, Motion to Transfer, and Motion for Expedited Consideration (Docket Entry No. 12) in which defendants noticed Judge Gilmore of the related Wesolek I case, and based on that case, requested transfer to this court. Plaintiffs did not oppose defendants' request to transfer. On December 5, 2012, Judge Gilmore entered an Order transferringthe current action to this court (Docket Entry No. 13). On December 18, 2012, Plaintiffs' Amended Class Action and Derivative Complaint (Docket Entry No. 16) was filed.

On December 21, 2012, the court entered a Memorandum Opinion and Order granting Defendants' Motion to Dismiss (Docket Entry No. 17) and a Final Judgment dismissing all of plaintiffs' claims with prejudice (Docket Entry No. 18). See Wesolek v. Layton (Wesolek II), 914 F. Supp. 2d 853 (S.D. Tex. 2012). For the reasons explained in § II.A of the December 21, 2012, Memorandum Opinion and Order, the court concluded that the claims the plaintiffs asserted against the defendants directly for common law fraud, conversion, violation of the Texas Theft Liability Act, Tex. Civ. Prac. & Rem. Code § 134.003(a), and the Texas Securities Act, Tex. Rev. Civ. Stat. Art. 581-33, money had and received, breach of fiduciary duty, and negligence were barred by the doctrine of res judicata. Id. at 859-61 (citing Wesolek I, 871 F. Supp. 2d at 620). For the reasons explained in § II.B of the December 21, 2012, Memorandum Opinion and Order, the court concluded that the claims that the plaintiffs asserted against the defendants derivatively on behalf of Layton Energy Wharton Fund and the Layton Energy Fund 2 for common law fraud, conversion, violation of the Texas Theft Liability Act, Tex. Civ. Prac. & Rem. Code § 134.003(a), and the Texas Securities Act, Tex. Rev. Civ. Stat. Art. 581-33, money had and received, breach of fiduciary duty, and negligence should be dismissed with prejudice pursuant to FederalRule of Civil Procedure 12(b)(6) for failure to state a claim for which relief may be granted. Id. at 861-63. For the reasons explained in § II.C of the December 21, 2012, Memorandum Opinion and Order, the court denied plaintiffs' request for leave to replead. Id. at 863-64.

On ...