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CAUSE NO. 20-09-11086
FALCON MIDSTREAM IN THE DISTRICT COURT
VS. 457th JUDICIAL DISTRICT
WHC, LLC AND CR FED, LLC OF MONTGOMERY COUNTY,
TEXAS
Plaintiff, Falcon Midstream, Respondent herein, filesthis Response to the Motion to
Dismiss for Lack of Jurisdiction filed by Defendants and respectfully shows the Court as
follows:
Defendant’s Motion to Dismiss should be denied because Plaintiff's pleadings clearly
establish the Court’s jurisdiction in this matter. Additionally, Defendant has already admitted the
Court’s jurisdiction over this matter when WHC, LLC filed itscounterclaim against Falcon
MidstreamServices, LLC for Breach of Contract, (a true and correct copy of Defendant WHC’s
Fourth Amended Answer and Counterclaim against Falcon, attached hereto as Exhibit A) and
stated, "The Court has jurisdiction over this action." See Ex. A, at Pg. 6, J 44.
2. Defendant’s Motion to Dismiss should be denied as CR-FED, LLC is seeking a
Declaratory Judgment from the Court to declare rights, status, and other legal relations in order
to settle and afford relief from uncertainty and insecurity with respect to rights, status, and other
legal relations with respect to an assignment and subrogation clause in the Factoring Agreement.
See Pg. 5, § 21-23 of Counter-Plaintiff’s and Cross Plaintiff's CR-FED, LLC’s Original
Counterclaim and Original Crossclaim, attached hereto as Exhibit B. Specifically, the contract
states “... Seller irrevocably assigns and contractually subrogates in favor Purchaser all of its
rights, title, and interest in and to any rights that Seller has or may have...” Jd. (emphasis added).
If this contract was intended to be an assignment, then subrogation would not be a necessary
component.
3. Defendant’s Motion to Dismiss should be denied because factual allegations contained
in Defendant’s Motion to Dismiss do not account for theinterest that Falcon Midstream has in
this case based on anypotential recovery received from WHC, LLC. Specifically, the Factoring
and Security Agreement states:
Purchaser may require that Seller repurchase, on demand, by
payment of the then unpaid Face Amount thereof, together with
any unpaid Factoring Fees relating to a Purchased Account, or at
Purchaser’s option, by Purchaser’s charge to the Reserve Account:
5.1. Any Purchased Account:
5.1.1. The payment of which as been Disputed by a Payor
obligated thereon, Purchaser being under no obligation to
determine the bona fides of such Dispute;
$.1.2. For which Seller has breached any covenant or
representation and warranty herein...
See Exhibit B, pg. 8 {5 of the Security and Factoring agreement. On August 22, 2022, the
deposition of Judy Woods and Isreal Martinez were taken. In both depositions, WHC, LLC
raised allegations thru documents and questions as to Falcon Midstream, LLC’s veracity in its
representations to CR-FED, LLC, regarding the collectability of the invoices at the time of
factoring. Falcon Midstream has standing due to an obvious controversy between the parties
that will be actually determined by the judicial declaration sought.
4. Defendant’s Motion to Dismiss should be denied because Falcon Midstream has a
contingent interest in the invoice and in the outcome of this case in that Plaintiff will be liable for
to CR-FED for any difference in the amount factored to CR-FED and the amount recovered from
WHC in this lawsuit. As a result, CR-FED, LLC will be made whole whether they aggressively
defend and prosecute this lawsuit or not.
5. Defendant’s Motion to Dismiss should be denied because Falcon Midstream has been
injured by Defendant’s violation of Chapter 28 of the Texas Property Code, otherwise known as
The transcripts of the depositions are not available at this time.
the “Prompt Payment Statute.”\See 27-28of Plaintiff's Second Amended Petition,
attached hereto as Exhibit C. Falcon Midstream has not surrendered its interests in other alleged
matters involving the same controversy. Specifically, Plaintiff alleges that Defendant failed to
timely pay on all past invoices, not just payments for the invoices assigned or subrogated to CR-
FED, LLC. Defendant’s failure to pay promptly entitles Plaintiff to separate damages. For these
reasons, Respondent argues that Falcon Midstream does have standing and the Court does not
lack subject matter jurisdiction in these claims.
PRAYER
WHEREFORE, PREMISES CONSIDERED, Respondent prays that the Court deny the
Motion to Dismiss for Lack of Jurisdiction. Respondent further requests such other and further
relief as may be determined by the Court to be appropriate.
Respectfully submitted,
Best Lawyer Ever, LLC
336 1/2 North Main Street, Suite 205
Conroe, TX 77301
Nicole Craghosfee
icole Czajk« ki
Attorney for Plaintiff
Bar no: 24046744
Phone: 936-701-1010
Email: Nicole@ConroeBestLawyerEver.com
VERIFICATION
STATE OF TEXAS §
COUNTY OF MONTGOMERY §
BEFORE ME, THE UNDERSIGNED AUTHORITY, on this day personally appeared
the person known by me to be Nicole Czajkoski who, after being by me duly swom, testified as
follows:
“My name is Nicole Czajkoski, I am over 18 years of age, and have personal knowledge
of the matters stated herein.
“T have personal knowledge of all facts stated in the above Response to Motion to
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Dismiss for Lack of Jurisdiction and all such facts are true and correct.”
4 /)
ZL
Nicole Czajkoski, Affiant
SUBSCRIBED AND SWORN TO before me on
iA NICOLE HASBELL
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1a of Texas
res Notary Public a LC
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Certificate of Service ao
I certify that a true copy of this document was served in accordance with Rule 21a of the
Texas Rules of Civil Procedure on the following on August 24, 2022.
A\
Nicole Czajkoski
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Attorney for Plaintiff
5
CAUSE NO. 20-09-11086
FALCON MIDSTREAM SERVICES, IN THE DISTRICT COURT
LLC
Vv MONTGOMERY COUNTY, TEXAS
WHC, LLC 284THJUDICIAL DISTRICT
DEFENDANT WHC, LLC’S FOURTH AMENDED ANSWER TO PLAINITFF’S
SECOND AMENDED PETITION AND COUNTERCLAIM AGAINST
FALCON MIDSTREAM SERVICES, LLC
Defendant WHC, LLC (“WHC”) files this its Fourth Amended Answer to Plaintiffs
Second Amended Petition and Counterclaim against Falcon Midstream Services, LLC (‘Falcon’),
and respectfully shows the following:
ENERAL ENIAL
ursuant to Rule 92 of the Texas Rules of Civil Procedure, WHC denies generally
each and every, all and singular, the allegations contained in Plaintiff’ s Second Amended Petition
and demands strict proof thereof by a preponderance of the evidence in accordance with the laws
of the State of Texas.
IL
FFIRMATIVEAND
THER EFENSES
leading further for a separate and complete defense and in the altemative:
ursuantto Rule 94, Falcon’s claims are barred in whole or in part by the failure to
perform conditions precedent, waiver, estoppel, laches, fraud, mutual mistake, accord and
satisfaction, statute of frauds, estoppel by contract, equitable estoppel, quasi-estoppel, collateral
estoppel, and res judicata.
alcon has failed to fully and properly mitigate its damages.
There was alack of consideration
for any alleged promise by WHC to pay for extra
work, and failure of consideration with regard to Falcon’ s claim for breach of contract.
WHC did not accept the November 8, 2019 proposal from Falcon.
WHC’s performance was excused by Falcon’s prior breach of contract.
WHC is entitled to an offset for amounts incurred to purchase bonds indemnifying
against liens assertedby Falcon’s subcontractors on the project, and for the amounts incurredin
resolving the claims associated with the liens asserted by Falcon’s subcontractors on the project,
including WHC’ s attomey’ s fees.
WHC denies that it “ratified the actions of its representative(s) in soliciting the
November8 Proposal.”
A limited liability company is not an entity against which a court may award.
attomey fees under Chapter 38 of the Texas Civil Practices and Remedies Code.
WHC asserts the defense of excessive demand.
TIL.
EFENSE TO AUSEOF CTIONFOR REACHOF ONTIRACT
Pleading further
for a separate and complete defense and in the altemative:
WHC denies that it requested the provision of additional services through a change
order issued on or about November 22, 2019, or pursuant to a proposal dated November 8, 2019.
WHC denies that Falcon provided services requested by WHC undera change order
issued on or about November 22, 2019, or pursuant to a proposal dated November 8, 2019.
WHC denies that it caused delays which caused Falcon to incur additional costs.
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Falcon has failed to perform conditions precedent to its right to recover under the
contract. Specifically, it failed to follow the notice and change order procedures outlined in the
subcontract
and primary contracts goveming the work.
Falcon’s prior breach of the subcontract and primary contracts goveming
the work
discharged WHC from performance.
EFENSE TO AUSEOF CTIONFOR UANIUM’ ERUIT
Pleading further
for a separate and complete defense and in the altemative:
There is a valid express contract between WHC and Falcon covering the materials
and services provided.
WHC denies that the charges sought by Falcon are recoverable under a theory of
quantum menuit as there was no tangible product of value provided to WHC. If any tangible benefit
‘was provided, it was nothing more than incidental.
Falcon does not have “clean hands” to allow it to recover under the equitable theory
of quantum meruit.
Vv.
EFENSE TO AUSEOF CTIONFOR ROMISSORY SIOPPEL
Pleading further
for a separate and complete defense and in the altemative:
The promises sued upon by Falcon are covered by a valid express contract between.
WHC and Falcon.
Falcon does not have “clean hands” to allow it to recover under the equitable theory
of unjust promissory estoppel.
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VI.
EFENSE TO AUSEOF CTIONFOR NJUST NRICHMENT
Pleading further
for a separate and complete defense and in the altemative:
There is a valid express contract between WHC and Falcon covering the materials
and services provided.
Falcon does not have “clean hands” to allow it to recover under the equitable theory
of unjust enrichment.
VIL.
EFENSE TO AUSEOF CTIONFOR ONEYHADAND ECEIVED
Pleading further
for a separate and complete defense and in the altemative:
There is a valid express contract between WHC and Falcon covering this dispute.
Falcon does not have “clean hands” to allow it to recover under the equitable theory
of money had and received.
VIEL.
EFENSE TO AUSEOF CTIONFOR IOLATIONOF OFTHE EXAS ROPERTY ODE
Pleading further
for a separate and complete defense and in the altemative:
WHC is not in receipt of any payments owed to Falcon under Section 28.002.
WHC asserts the exception for good faith dispute.
WHC asserts the exemption for mineral development and oilfield services.
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AYMENT
WHC has previously paid $1,451,234.30 for the services presented by Falcon. The
account describing the invoices submitted and the amounts paid by WHC to Falcon is as follows:
INVOICE DATE OF
INVOICE AMOUNT DATE OF PAYMENT
03/9/2020 Paid 4/2/2020
03/9/2020 Paid 4/9/2020
03/9/2020 Paid 4/9/2020
03/9/2020 Paid 4/16/2020
TOTAL — $1,451,234.30
WHC has issued payment to Cross Country Infrastructure Services USA, Inc.
(“Cross Country”) in the amount of $152,358.92 in exchange for releases of the liens it filed in
Johnson and Hood County.
WHC has issued payment to Boar Pipeline Supply, Inc. (“Boar”) in the amount of
$53,537.20 in exchange for release of the lien it filed in Johnson County.
WHC paid $2,057
and $1,432 as premiums on bonds to indemnify
the liens asserted.
by Cross Country
and Boar.
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Xx.
ESPONSETO NIENITO SE OCUMENTS
Falcon’s assertion of its intentto use documents, ESI, and tangible things produced
by WHC as evidence does not comply with Texas Rule of Civil Procedure 193.7. The assertion
does not provide actual notice of the documents, ESIs, or tangible things that Falcon plans to use
as trial ora pretrial proceeding. Tex. R. Civ. P. 193.7.
COUNTERCLAIM
WHC files this Counterclaim against Falcon Midstream Services, LLC.
ISCOVERY EVEL AND TATEMENTOF ELIEF OUGHT
WHC intends that discovery be conducted under Level 3. Damages sought are
within the jurisdictional limits of the court. WHC seeks monetary relief over $200,000 but not
more than $1,000,000.
ARTIESAND ERVICEOF ROCESS
WHC, LLC is a Louisiana limited liability company authorized to do business in
Texas.
Falcon Midstream Services, LLC (“Falcon”) is a Texas limited liability company
with its principal place of business in The Woodlands, Montgomery County, Texas. It has
appeared herein through counsel.
URISDICTIONAND ENUE
The court has jurisdiction over this action. The amountin controversy exceeds the
court's jurisdictional minimum.
Venue is proper pursuant to §15.002(a)(1) of the Texas Civil Practice & Remedies
Code.
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ACKGROUND ACTS
WHC was selected by the owners to build portions of the pipeline project, involving
the construction of a pipeline, more particularly described in the Work Order, referred to below
(“Pipeline”)
The Subcontract
As part of the construction of the Pipeline, WHC took hids from subcontractors to
perform work associated with the hydrostatic testing of the Pipeline. Falcon successfully bid the
work for the pretesting of the Pipeline and WHC and Falcon entered a Subcontract
Agreement
(“Subcontract”) for that specific work, which included a Proposal of Services created by Falcon
that totaled $158,760. The Subcontract was executed by Falcon.
The scope of work under the Subcontract is defined by Falcon’s Proposal of
Services. To change the scope of work, the Subcontract requires a written, acknowledged
and
executed change order form signed by both parties. Under the Subcontract, Falcon is not entitled
to any additional compensation until the change order is approved in writing and signed by the
duly authorized representatives of WHC and Falcon.
The Subcontract requires Falcon to notify WHC immediately of any stoppages that
might affect or delay the performance or completion of the scope of work.
The Subcontract permits Falcon to adjust the price due to delays, so long
as they
are not Falcon’
s fault. To do so, it has to provide notice to WHC and submit
a change order, which
must be signed by both parties. Falcon is entitled to no extra compensation if it does not follow
this procedure.
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The Subcontract states that failure of either party to enforce its provisions does not
affect the Subcontract’s
validity and shall not be deemed a waiver of the right to enforce that
proviso or require compliance with it.
The Subcontract requires all notifications and other communications to be sent to
Jared Manuel, WHC’s Director of Purchasing
and Subconiracts.
Neither party is entitled to the recovery of incidental, indirect, or consequential
damages under the Subcontract.
The Subcontract
dictates that WHC is entitled to retain payments otherwise due
Falcon foramounts considered reasonably necessary to satisfy claims, suits, orliens that fall within
Falcon’s indemnity obligations under the subcontract.
The Subcontract entitles WHC to an offset for any loss, damage, liability owed or
claim that WHC may have against Falcon, which would include any amounts owingby Falcon for
failing to comply with the Subcontract or with the MSA (defined below). Falcon failed to comply
with the Subcontract and the MSA by failing to pay its own subcontractors, and by permitting
liens
to be placed on the Pipeline. WHC is entitledto an offset for the amounts owing
by Falconto its
own subcontractors.
Finally, Falcon makes a promise in the Subcontractto protect, indemmify, and hold
WHC hamnless from any and all liens and for claims relating to Falcon’s failure to comply with
the Subcontract
or with the contract(s) between WHC and the owner. The contract(s) between.
WHC and the owner are incorporated into the Subcontract by reference and are fully binding on
Falcon.
2510865
The Work Order
The Subcontract requires Falcon
to comply with the termsof a Work Order dated.
December
28, 2018 between the owner and WHC (the “Work Order”). If the terms of the
Subcontract and Work Order are in conflict, the Work Order controls. The Work Order contains
similar change order procedures that require written, acknowledged, and executed change orders
for the scope of work to be modified.
The MSA
The Work Order is govemed by the terms of a Master Service Agreement dated.
December 15, 2016 between the owner and WHC (the “MSA”). The MSA contains change order
requirements similarto the Subcontract
and Work Order.
The MSA also contains a “no course of dealing” provision which states a failureby
any party
not to enforce
a term of the MSA does not operateas a waiver
of that term.
In the MSA, WHC promises
to defend, protect, indemnify, and hold harmless
the
owner from liens. Additionally, WHC promises not to permit liens to be affixed against the
ipeline
due to the failure of WHC’ s subcontractors to pay forlabor
and materials. Under
the terms
of the Subcontract, Falcon agreed these provisions would be fully binding on it.
Lien Claimants
Cross Country filed a lien affidavit
under Chapter 56 of the Texas Property Code
in Hood County, Texas on July 29, 2020 and in Johnson County, Texas on July 30, 2020. Cross
Country claims it is owed $152,358.93 for materials it provided to Falcon for its work on the
Pipeline.
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Boar filed a lien affidavit under Chapter 56 of the Texas Property Code
in Johnson
County, Texas on July 13, 2020. Boar claims it is owed $106,037.50 for materials it provided to
Falcon forits work on the Pipeline.
Despite its obligations in the Subcontract and the MSA, Falcon has not protected,
indenmified, or held WHC hammless from these lien claims. WHC has an obligation under the
MSA to protect the Pipeline and its owners against these liens. Falcon owes defense and indemnity
to WHC forits breach of the Subcontract
and MSA.
Default Judgment Against Falcon
Cross Country filed suit for breach of contract and other related caused of action
against Falcon in Hood County in or around November 2020 (the “Hood County Suit”). The Hood
County Suit sought damages in the principal amount of $258,396.36. Of that amount, $152,358.93
consists of the amounts claimed in the lien affidavit filed by Cross Country for materials it provided
to Falcon forits work on the Pipeline.
Falcon was served with process but failed to file an answer or otherwise appear in
the lawsuit. On January 14, 2021 the 355" Judicial District Court of Hood County, Texas entered
a Default and Final Judgment (the “Judgment”) against Falcon in the principal amount of
$258,396.38. The Judgment
also awarded Cross Country pre-judgment
interest at the rate of 18%
per annum, post-judgment
interest at the rate of 5% per annum, attomey’s fees, and other costs
and expenses.
On March 26, 2021, the 355" Judicial District Court of Hood County, Texas denied
Falcon’s motion for new trial.
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On March8, 2021, Cross Country filed a Plea in Intervention in this case and seeks
satisfaction of the Judgment through any amounts paid to Falcon or which Falcon is adjudged to
be entitled to recover.
IRST AUSEOF CTION(BREACHOF ONTIRACT)
The preceding material fact allegations are incorporated herein by reference.
The Subcontract and the MSA are valid and binding contracts between WHC and.
Falcon. WHC has performed its contractual obligations under the Subcontract. Falcon breached
the Subcontract and the MSA in the respects described above and as shown by the evidence.
Specifically, it allowed the Pipeline to be encumbered with $258,396.43 in liens, did not follow
the change order procedure, and has failed to defend or indemnify WHC. Falcon’
s breaches were
not justified.
WHC has been substantially damagedas a result of Falcon’ s actions and omissions,
forwhich
WHC seeks all remedies provided by law and under the WHC Contract, including actual
damages, attomeys’ fees, costs, and interest.
ECOND AUSEOF CTION(MONEY ADAND ECEIVED
Falcon holds money which belongs to WHC in equity and good conscience.
HIRD AUSEOF CTION(DECLARATORY UDGMENT
The preceding material fact allegations are incorporated herein by reference.
The Subcontract
states that WHC is entitled to retain payments otherwise due to
Falcon which are considered reasonably necessary to satisfy claims, suits, or liens that fall within
Falcon’s indemnity obligations under the Subcontract.
The Subcontract requires Falcon to protect, indemnify, and hold WHC hamless
from any and all liens and for claims relatingto Falcon’s failure to comply with the Subcontract
2510865 11
orwith
the contract(s) between WHC and the owner. The contract(s) between WHC and the owner
are incorporated into the Subcontract by reference and are fully binding on Falcon.
The MSA requires WHC to indemnify the owner from every kind or character of
liabilities, including liens.
The purpose of WHC’ s right to retain payments
under the Subcontract
is to ensure
Payments are made to the correct parties and to avoid WHC being subjected
to multiple liability
for the same debts.
Under the Subcontract, Falcon owes WHC indemnity for the $152,358.93 in liens
asserted by Cross Country on the Pipeline and the associated fees, interest, and costs
in the
Judgment. WHC is entitled to retain the $152,358.93 and the associated fees, interests, and costs
because those amounts fall within Falcon’ s indemnity obligations in the Subcontract.
Additionally, under the Subcontract, Falcon owes WHC indenmity for the
$106,037.50 in liens assertedby Boar
on the Pipeline and the associated fees, interest, and costs
in the promissory note made by Falconto Boar. WHC is entitled to retain the $106,037.50
and the
associated fees, interests, and costs because those amounts fall within Falcon’s indemnity
obligations in the Subcontract.
WHC is obligated under the MSA to indemnify the Pipeline owner from liens
asserted
against its property.
Therefore, WHC seeks a judgment declaring the following:
a. Under the Subcontract, WHC is entitled to recover the amounts
necessary
to remove Cross Country and Boar’s liens and either take
a judgment against Falcon for the amount of that payment or an.
2510865 12
offset
for the amount of that payment against any amounts claimed.
by Falcon in this lawsuit;
Under the Subcontract, WHC is entitled either take a judgment
against Falcon or an offset against any amounts owed Falcon, for
amounts paid by WHC to Cross Country and Boar for amounts
owing for work on the Pipeline, including costs, expenses, pre and.
post-judgment interest, and attomey’s
fees; and
Under the Subcontract, WHC is entitledto indenmity or offset of all
costs, damages, expenses, including attomeys’ fees for prosecution.
of this declaratory judgment action and for defending the Johnson.
County Suit on behalf of the Pipeline owners.
CR-FED, LLC claims to have received
an assignment of WHC’s account. Pursuant
to §9.404(a) of the UCC, the rights of CR-FED, LLC, if any, are subject to all terms of the
Subcontract and any defense or claim in recoupment arising from the transaction that gave rise to
the subcontract. Accordingly, WHC asks that CR-FED, LLC be bound by the declaratory
judgment sought herein.
WHC is entitledto an award of costs and reasonable and necessary attomey’ s fees
for bringing this action under Chapter 37 of the Texas Civil Practice and Remedies Code.
ECOVERY OF TTORNEY EES
The Subcontract requires Falconto indemnify
WHC forits attomey’ s fees and court
costs arising from Falcon’ s breaches of the Subcontract
and the MSA described herein.
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ONDITIONS RECEDENT
All conditions precedent to the recovery of the relief sought hereunder have been.
performed or have occurred.
URY EMAND
A trial by jury is requested in this case.
WHC hereby reserves all rights to plead further herein.
RAYER
For these reasons, and after trial or final hearing, WHC respectfully
prays that upon final
hearing ajudgment be entered that Falcon take nothing by its suit against WHC, and that the court
enter judgment for WHC, awarding it the following against Falcon:
WHC'’s actual damages;
WHC’s consequential damages;
WHC’s reasonable and necessary attomeys’ fees;
WHC'’s expenses and costs of court;
A declaratory judgment that WHC is entitledto the relief sought
in paragraph 73 above;
Pre-judgment and post-judgment interest at the maximum rates allowed by law; and
All other relief to which WHC is justly entitled.
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Respectfully submitted,
PREIS PLC
By: /s/ AlasdairA. Roberts
David L. Pybus
State Bar No.: 16418900
dpybus@preisplc.com
AlasdairA. Roberts
State Bar No.: 24068541
isplc.com
1235 North Loop West, Suite 1100
Houston, TX 77008
Tei: (713) 355-6062
Fax: (713) 572-9129
AND
MITBY PACHOLDER JOHNSON
PLLC
Steven Mit
State Bar No.: 24037123
smitby@mitbylaw.com
9450 Pinecroft Drive
Post Office Box 7280
Spring, TX 77387
Tei: (713) 234-1366
COUNSEL FOR DEFENDANT,
WHC, LLC
2510865 15
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the foregoing instrument was served in
accordance with the TEXAS ULESOF IVIL ROCEDURE on this the 26th day of May 2022, to all
known parties of record as follows:
Nicole Czajkoski
J. Randal Bays
office@conroebestlawyerever.com
com
THE LAW OFFICE OF NICOLE Stephanie L. Bryant
RODRIGUEZ CZAJKOSKI
336 YN Main Street, Suite 205
HE AYS IRM
Conroe, TX 77301
1503 Hailey Street
Conroe, TX 77301
James Louis Hordem, Jr.
jhordem@plochlaw.com
Timothy R. Ploch
staff@plochlaw.com
IMOTHY R. LOCH P.C.
730 N. Post Oak Rd., Suite 100
Houston, Texas 77024
/s/ DavidL. Pybus
David L. Pybus
2510865 16
CAUSE NO. 20-09-11086
FALCON MIDSTREAM SERVICES, IN THE DISTRICT COURT OF
MONTGOMERY COUNTY, TEXAS
™ JUDICIAL DISTRICT
COUNTER-PLAINTIFF/CROSS-PLAINTIFF CR-FED, LLC’S
ORIGINAL COUNTERCLAIM and ORIGINAL CROSSCLAIM
TO THE HONORABLE VINCENZO J. SANTINI:
COUNTER-PLAINTIFF/CROSS-PLAINTIFF CR-FED, LLC (“CR-FED”) files
this Original Counterclaim and Original Crossclaim complaining of Falcon Midstream
Services, LLC and WHC, LLC, respectfully showing this Court as follows:
ISCOVERY ONTROL LAN
1 Discovery in this matter should be conducted under a Level 2 discovery
control plan. EX IV
AMAGE TATEMENT
CR-FED is seeking monetary relief over $1,000,000.
CR-FED demands all other judgment to which it deems itself entitled.
EX R. IV
ARTIES
4 CR-FED is a Texas limited liability company.
5. Defendant Falcon Midstream Services, LLC (“Falcon Midstream”) is a
Texas limited liability company that has already appeared in this lawsuit. It may be
Counter-Plaintiff's and Cross-Plaintiff's CR-FED, LLC’s
Original Counterclaim and Original Crossclaim Page 1 of 7
CREDITO
REAL USA
BUSINESS CAPITAL
FACTORING AND SECURITY AGREEMEN’
THIS FACTORING AND SECURITY AGREEMENT (“Agreement”) is deemed executed and binding as
of 02/12/2020 by and between Falcon Midstream Services, LLC Seller”) and CR-FED, LLC, a
Texas limited liability company (“Purchaser”).
L
ati dex to. ns. The following terms used in this section shall have the following meanings. Each
capitalized term not herein defined shall have the meaning set forth in the Uniform Commercial Code:
1.1 “Account” - in addition to the meaning given to this term by the UCC, the Seller and Purchaser acknowledge that this
Agreement is intended to focus primarily, if not exclusively, on Seller’s sale of Accounts arising from contracts for the sale of
goods or performance
of service or material
or services furnished pursuant to and in compliance with contracts between Seller and
a Governmental Unit or a private, non-Governmental Unit, contractor, subcontractor, or sub-subcontractor on the site of a real
estate improvementor for direct delivery of material to the site of the improvement
it or, for specially fabricated materials off the site
of the improvement for Seller’s rendering of labor or services for improving real property in the ordinary course of Seller’s business
in order to make improvements to a building; erecting, placing, making, altering, removing, repairing, or demolishing any
improvement over, upon, connected with, or beneath the surface ofreal property, or excavating any land, or farnishing materials
for any ofthese purposes, or performing any labor or services upon the improvements, including the furnishing or carpet or rugs
or appliances that are permanently affixed to the real property and final construction cleanup to prepare a structure for occupancy;
or performing any laboror services or furnishing any materials in grading, seeding, sodding, or planting for landscaping purposes,
including the furnishing oftrees, shrubs, bushes, or plants that are planted om the real property, or in equipping any improvement
with fixtures or permanent apparatus which have been duly offered for sale by Seller to Purchaser and approved for purchase by
Purchaser
at 2 discount.
1.2 “Clearance Days” - one (1) banking days for checks drawn on Texas banks; otherwise, two (2) days for out of state
1.3 “Closed” - a Purchased Account is closed upon the first to occur of: (j) receipt of fall payment by Purchaser or (ii) the
unpaid Face Amount has been charged by Purchaser to the Reserve Account pursuant to the terms hereo!
14 “Collateral”- all Seller's now owned and hereafter acquired Accounts, Chattel Paper, Deposit Accounts, Inventory,
juipment, Instruments, Investment Property, Documents, Letterof Credit Rights, Commercial Tort Claims, General Intangibles,
Soporte Obligations and any sums maintained by Purchaser that are identified as payable to Seller from the Reserve Account.
As further collateral Seller hereby irrevocably assigns all of its right, title and interest in and to any rights that Seller has or may
come to have against any real property and/or bond as well as the owner of real property, including all persons who own any legal
or equitable interest in real property, which interest can be soldby legal process, and who enters into a contract for the improvement
of the real property, including but not limitedto, all accounts created as a resultof Product furnished pursuant to and in compliance
with a contract with an owner, contractor, subcontractor, or sub-subcontractor on the site ofa real estate improvement or for direct
delivery of material to the site of the improvement or, for specially fabricated materials, off the site of the improvement.
1.5 “Complete Termination” —Complete Termination occurs nsatisfaction of each ofthe following conditions: payment
in full of all Obligations of Seller to Purchaser and Purchaser's issuance of a UCC termination statement; if Purchaser has issued
or causedto be issued any guaranty, promise, or letter of credit on behalf
of Seller, acknowledgement from any beneficiaries thereof
‘that Purchaser or any other issuer has no outstanding direct or contingent lability ‘therein; and Seller has executed and delivered to
Purchaser a general release in the form attached hereto.
1.6 “Dispute” or “Disputed” any claim made in respect to a Payor against Selleror an Account, of any kind whatsoever,
valid or invalid, that has or may have the effect of reducing or potentially reducingthe amount of an Account owing to Purchaser
or collectible from a Payor.
1.7 “Early Termination Date” — see Section 15 hereof.
1.8 “Eligible Account” - an Account that is acceptable for purchase as determined by Purchaser in the exercise of its
reasonable sole credit
or business ji
1.9 “Event of Default” —as defined herein.
1.10 “Face Amount” - the total gross amount due on an Account at the time of purchase.
EXHIBIT A
Page 1 of 18
1.11 “Factoring Fee” - the Factoring Fee Percentage multiplied by the Face Amount of a Purchased Account, for each
Factoring Fee Period or portion thereof, that any portion thereof remains unpaid, computed from the end ofthe Initial Fee Period
to and including the date on which a Purchased Account is Closed.
5. 0%
1,12 “Factoring Fee Percentage” +ioe
1.13 “Advance Rate”- the percentage of the Face Amount of Purchased Accounts immediately available to the Seller
pursuant to Schedule of Accounts
1.14 “Advance Rate Percentage”: 70 %
1.15 “Pactoring Fee Period”: 30 days.
1.16 “Invoice”— any form of document that evidences or is intended to evidence an Account. ‘Where the context so requires,
reference to an Invoice shall be deemed to refer to the Account to which it relates.
1.17 “Late Charge’ Pe:: 1.25 percent per week.
1.18 “Invoice Date” Date listed on the invoice being sold
1.19 “Late Payment Date”: the date which is 30 days plus 1 day from the Invoice date on a Purchased Account.
1.20 “Maximum Amount”; $ 5,000,000.00
1.21 “Minimum Monthly Fee”: N/A
1.22 “Misdirected Payment Fee” - Fifteen percent (15%) of the amount of any payment (butin no event less than $1,000)
on account of a Purchased Account which has been received by Seller and not delivered in kind to Purchaser on the 2"! business
day following the date of receipt by Seller, or 30% (but in no event less than $1,000) ofthe amount of any such payment which has
‘been received by Seller as a result of any action taken by Seller to cause such payment to be made to Seller.
1.23 “Notice of Assignment” — any form of written notification, as required by Purchaser, that satisfies the requirements of
9-406(a) of the UCC.
1.24 “Obligation(s)” - all present and fusture obligations and liabilities owing by Seller to Purchaser, whether direct or
indirect, absolute or contingent, including obligations and liabilities that are likely to become owing by Seller to Purchaser, whether
arising hereunder or otherwise, and whether arising before, during or after the commenc of any case
ementfiled under title 11 of
the United States Bankruptcy Code or any other debtor relief proceeding in which Selleris a Debtor.
1.25 “Parties” - Seller
and Purchaser.
1.26 “Payor” - An Account Debtor or other obligor on an Account, including an entity making payment thereon for the
account
of such party.
1.27 “Purchase Date” - the date on which Seller has been advised in writing that Purchaser has agreed to purchase an
Account or in which Purchaser has caused a credit to be made to Seller’s Reserve Account.
1.28 “Purchase Price” - the Face Amount of a Purchased Account less all Factoring Fees.
1.29 “Purchased Accounts” - Accounts purchased hereunder which have not been Closed.
1.30 “Repurehased” - an Account has been repurchased when Seller has paid to Purchaser the then unpaid Face Amount.
1.31 “Required Reserve Amount” - the Reserve Percentage multiplied by the unpaid balance of all Purchased Accor
Initial
EXHIBIT A
Page 2 of 18
1.32 “Reserve Account” - a bookkeeping account on the books of the Purchaser representing the portion of the Purchase
Price which has not been paid by Purchaser to Seller, maintained by Purchaser to secure Seller's performance with the provisions
hereof,
1.33 “Reserve Percentage”: 30 %
1.34 “Reserve Shortfall” - the amount
by which the Reserve Account is less than the Required Reserve Amount.
1.35 “Schedule of Accounts” - 2 form supplied by Purchaser
from time to time wherein Seller lists such ofits Accounts as
it requests that Purchaser purchase under the terms of this Agreement.
1.36 “Term”
— A one year period.
1.37 “UCC”— The Uniform Commercial
Code as adopted in the State of Texas.
2. Sale:
Purchase
Price: Billing
2.1 Assignment and Sale.
2.1.1, Seller shall offer for sale to Purchaser, with full recourse, and as absolute owner, such of Seller's Accounts as are
listed from time to time on Schedules of Accounts. In additionto the sale, transfer, conveyance and assignment of the Accounts,
Seller irrevocably assigns and contractually subrogates in favor of Purchaser all of its right, title and interest in and to any rights
that Seller has or may come to have against any owner of real property, including all persons who own any legal or equitable
interest in real property that is improved by the Seller’s sale of Goods or services, which interest can be sold by legal process, and
who enters into a contract for the improvement of the real property with such owner, including, but not limited to, any laborer or
any other person commonly referred to as a lienor including subcontractor or sub-subcontractor. In addition, Seller assigns such
other rights ancillary to the Purchased Accounts, including, but not limited to, any surety bonds and any guarantees.
2.12 Each Schedule of Accounts shall be accompanied by such documentation supporting and evidencing each
Account, as Purchaser shall from time to time request. Simultaneously with the submission of each Schedule of Accounts that
Seller submitsto Factor (unless Factor issues a written waiver), unless waived in writingby Factor, Seller shall deliver
Preview
CAUSE NO. 20-09-11086 FALCON MIDSTREAM IN THE DISTRICT COURT VS. 457th JUDICIAL DISTRICT WHC, LLC AND CR FED, LLC OF MONTGOMERY COUNTY, TEXAS Plaintiff, Falcon Midstream, Respondent herein, filesthis Response to the Motion to Dismiss for Lack of Jurisdiction filed by Defendants and respectfully shows the Court as follows: Defendant’s Motion to Dismiss should be denied because Plaintiff's pleadings clearly establish the Court’s jurisdiction in this matter. Additionally, Defendant has already admitted the Court’s jurisdiction over this matter when WHC, LLC filed itscounterclaim against Falcon MidstreamServices, LLC for Breach of Contract, (a true and correct copy of Defendant WHC’s Fourth Amended Answer and Counterclaim against Falcon, attached hereto as Exhibit A) and stated, "The Court has jurisdiction over this action." See Ex. A, at Pg. 6, J 44. 2. Defendant’s Motion to Dismiss should be denied as CR-FED, LLC is seeking a Declaratory Judgment from the Court to declare rights, status, and other legal relations in order to settle and afford relief from uncertainty and insecurity with respect to rights, status, and other legal relations with respect to an assignment and subrogation clause in the Factoring Agreement. See Pg. 5, § 21-23 of Counter-Plaintiff’s and Cross Plaintiff's CR-FED, LLC’s Original Counterclaim and Original Crossclaim, attached hereto as Exhibit B. Specifically, the contract states “... Seller irrevocably assigns and contractually subrogates in favor Purchaser all of its rights, title, and interest in and to any rights that Seller has or may have...” Jd. (emphasis added). If this contract was intended to be an assignment, then subrogation would not be a necessary component. 3. Defendant’s Motion to Dismiss should be denied because factual allegations contained in Defendant’s Motion to Dismiss do not account for theinterest that Falcon Midstream has in this case based on anypotential recovery received from WHC, LLC. Specifically, the Factoring and Security Agreement states: Purchaser may require that Seller repurchase, on demand, by payment of the then unpaid Face Amount thereof, together with any unpaid Factoring Fees relating to a Purchased Account, or at Purchaser’s option, by Purchaser’s charge to the Reserve Account: 5.1. Any Purchased Account: 5.1.1. The payment of which as been Disputed by a Payor obligated thereon, Purchaser being under no obligation to determine the bona fides of such Dispute; $.1.2. For which Seller has breached any covenant or representation and warranty herein... See Exhibit B, pg. 8 {5 of the Security and Factoring agreement. On August 22, 2022, the deposition of Judy Woods and Isreal Martinez were taken. In both depositions, WHC, LLC raised allegations thru documents and questions as to Falcon Midstream, LLC’s veracity in its representations to CR-FED, LLC, regarding the collectability of the invoices at the time of factoring. Falcon Midstream has standing due to an obvious controversy between the parties that will be actually determined by the judicial declaration sought. 4. Defendant’s Motion to Dismiss should be denied because Falcon Midstream has a contingent interest in the invoice and in the outcome of this case in that Plaintiff will be liable for to CR-FED for any difference in the amount factored to CR-FED and the amount recovered from WHC in this lawsuit. As a result, CR-FED, LLC will be made whole whether they aggressively defend and prosecute this lawsuit or not. 5. Defendant’s Motion to Dismiss should be denied because Falcon Midstream has been injured by Defendant’s violation of Chapter 28 of the Texas Property Code, otherwise known as The transcripts of the depositions are not available at this time. the “Prompt Payment Statute.”\See 27-28of Plaintiff's Second Amended Petition, attached hereto as Exhibit C. Falcon Midstream has not surrendered its interests in other alleged matters involving the same controversy. Specifically, Plaintiff alleges that Defendant failed to timely pay on all past invoices, not just payments for the invoices assigned or subrogated to CR- FED, LLC. Defendant’s failure to pay promptly entitles Plaintiff to separate damages. For these reasons, Respondent argues that Falcon Midstream does have standing and the Court does not lack subject matter jurisdiction in these claims. PRAYER WHEREFORE, PREMISES CONSIDERED, Respondent prays that the Court deny the Motion to Dismiss for Lack of Jurisdiction. Respondent further requests such other and further relief as may be determined by the Court to be appropriate. Respectfully submitted, Best Lawyer Ever, LLC 336 1/2 North Main Street, Suite 205 Conroe, TX 77301 Nicole Craghosfee icole Czajk« ki Attorney for Plaintiff Bar no: 24046744 Phone: 936-701-1010 Email: Nicole@ConroeBestLawyerEver.com VERIFICATION STATE OF TEXAS § COUNTY OF MONTGOMERY § BEFORE ME, THE UNDERSIGNED AUTHORITY, on this day personally appeared the person known by me to be Nicole Czajkoski who, after being by me duly swom, testified as follows: “My name is Nicole Czajkoski, I am over 18 years of age, and have personal knowledge of the matters stated herein. “T have personal knowledge of all facts stated in the above Response to Motion to x Dismiss for Lack of Jurisdiction and all such facts are true and correct.” 4 /) ZL Nicole Czajkoski, Affiant SUBSCRIBED AND SWORN TO before me on iA NICOLE HASBELL hk or ai z JF LL, g Mie 1a of Texas res Notary Public a LC cq Nv vO e03007-8 Certificate of Service ao I certify that a true copy of this document was served in accordance with Rule 21a of the Texas Rules of Civil Procedure on the following on August 24, 2022. A\ Nicole Czajkoski U-> ( Attorney for Plaintiff 5 CAUSE NO. 20-09-11086 FALCON MIDSTREAM SERVICES, IN THE DISTRICT COURT LLC Vv MONTGOMERY COUNTY, TEXAS WHC, LLC 284THJUDICIAL DISTRICT DEFENDANT WHC, LLC’S FOURTH AMENDED ANSWER TO PLAINITFF’S SECOND AMENDED PETITION AND COUNTERCLAIM AGAINST FALCON MIDSTREAM SERVICES, LLC Defendant WHC, LLC (“WHC”) files this its Fourth Amended Answer to Plaintiffs Second Amended Petition and Counterclaim against Falcon Midstream Services, LLC (‘Falcon’), and respectfully shows the following: ENERAL ENIAL ursuant to Rule 92 of the Texas Rules of Civil Procedure, WHC denies generally each and every, all and singular, the allegations contained in Plaintiff’ s Second Amended Petition and demands strict proof thereof by a preponderance of the evidence in accordance with the laws of the State of Texas. IL FFIRMATIVEAND THER EFENSES leading further for a separate and complete defense and in the altemative: ursuantto Rule 94, Falcon’s claims are barred in whole or in part by the failure to perform conditions precedent, waiver, estoppel, laches, fraud, mutual mistake, accord and satisfaction, statute of frauds, estoppel by contract, equitable estoppel, quasi-estoppel, collateral estoppel, and res judicata. alcon has failed to fully and properly mitigate its damages. There was alack of consideration for any alleged promise by WHC to pay for extra work, and failure of consideration with regard to Falcon’ s claim for breach of contract. WHC did not accept the November 8, 2019 proposal from Falcon. WHC’s performance was excused by Falcon’s prior breach of contract. WHC is entitled to an offset for amounts incurred to purchase bonds indemnifying against liens assertedby Falcon’s subcontractors on the project, and for the amounts incurredin resolving the claims associated with the liens asserted by Falcon’s subcontractors on the project, including WHC’ s attomey’ s fees. WHC denies that it “ratified the actions of its representative(s) in soliciting the November8 Proposal.” A limited liability company is not an entity against which a court may award. attomey fees under Chapter 38 of the Texas Civil Practices and Remedies Code. WHC asserts the defense of excessive demand. TIL. EFENSE TO AUSEOF CTIONFOR REACHOF ONTIRACT Pleading further for a separate and complete defense and in the altemative: WHC denies that it requested the provision of additional services through a change order issued on or about November 22, 2019, or pursuant to a proposal dated November 8, 2019. WHC denies that Falcon provided services requested by WHC undera change order issued on or about November 22, 2019, or pursuant to a proposal dated November 8, 2019. WHC denies that it caused delays which caused Falcon to incur additional costs. 2510865 Falcon has failed to perform conditions precedent to its right to recover under the contract. Specifically, it failed to follow the notice and change order procedures outlined in the subcontract and primary contracts goveming the work. Falcon’s prior breach of the subcontract and primary contracts goveming the work discharged WHC from performance. EFENSE TO AUSEOF CTIONFOR UANIUM’ ERUIT Pleading further for a separate and complete defense and in the altemative: There is a valid express contract between WHC and Falcon covering the materials and services provided. WHC denies that the charges sought by Falcon are recoverable under a theory of quantum menuit as there was no tangible product of value provided to WHC. If any tangible benefit ‘was provided, it was nothing more than incidental. Falcon does not have “clean hands” to allow it to recover under the equitable theory of quantum meruit. Vv. EFENSE TO AUSEOF CTIONFOR ROMISSORY SIOPPEL Pleading further for a separate and complete defense and in the altemative: The promises sued upon by Falcon are covered by a valid express contract between. WHC and Falcon. Falcon does not have “clean hands” to allow it to recover under the equitable theory of unjust promissory estoppel. 2510865 VI. EFENSE TO AUSEOF CTIONFOR NJUST NRICHMENT Pleading further for a separate and complete defense and in the altemative: There is a valid express contract between WHC and Falcon covering the materials and services provided. Falcon does not have “clean hands” to allow it to recover under the equitable theory of unjust enrichment. VIL. EFENSE TO AUSEOF CTIONFOR ONEYHADAND ECEIVED Pleading further for a separate and complete defense and in the altemative: There is a valid express contract between WHC and Falcon covering this dispute. Falcon does not have “clean hands” to allow it to recover under the equitable theory of money had and received. VIEL. EFENSE TO AUSEOF CTIONFOR IOLATIONOF OFTHE EXAS ROPERTY ODE Pleading further for a separate and complete defense and in the altemative: WHC is not in receipt of any payments owed to Falcon under Section 28.002. WHC asserts the exception for good faith dispute. WHC asserts the exemption for mineral development and oilfield services. 2510865 AYMENT WHC has previously paid $1,451,234.30 for the services presented by Falcon. The account describing the invoices submitted and the amounts paid by WHC to Falcon is as follows: INVOICE DATE OF INVOICE AMOUNT DATE OF PAYMENT 03/9/2020 Paid 4/2/2020 03/9/2020 Paid 4/9/2020 03/9/2020 Paid 4/9/2020 03/9/2020 Paid 4/16/2020 TOTAL — $1,451,234.30 WHC has issued payment to Cross Country Infrastructure Services USA, Inc. (“Cross Country”) in the amount of $152,358.92 in exchange for releases of the liens it filed in Johnson and Hood County. WHC has issued payment to Boar Pipeline Supply, Inc. (“Boar”) in the amount of $53,537.20 in exchange for release of the lien it filed in Johnson County. WHC paid $2,057 and $1,432 as premiums on bonds to indemnify the liens asserted. by Cross Country and Boar. 2510865 Xx. ESPONSETO NIENITO SE OCUMENTS Falcon’s assertion of its intentto use documents, ESI, and tangible things produced by WHC as evidence does not comply with Texas Rule of Civil Procedure 193.7. The assertion does not provide actual notice of the documents, ESIs, or tangible things that Falcon plans to use as trial ora pretrial proceeding. Tex. R. Civ. P. 193.7. COUNTERCLAIM WHC files this Counterclaim against Falcon Midstream Services, LLC. ISCOVERY EVEL AND TATEMENTOF ELIEF OUGHT WHC intends that discovery be conducted under Level 3. Damages sought are within the jurisdictional limits of the court. WHC seeks monetary relief over $200,000 but not more than $1,000,000. ARTIESAND ERVICEOF ROCESS WHC, LLC is a Louisiana limited liability company authorized to do business in Texas. Falcon Midstream Services, LLC (“Falcon”) is a Texas limited liability company with its principal place of business in The Woodlands, Montgomery County, Texas. It has appeared herein through counsel. URISDICTIONAND ENUE The court has jurisdiction over this action. The amountin controversy exceeds the court's jurisdictional minimum. Venue is proper pursuant to §15.002(a)(1) of the Texas Civil Practice & Remedies Code. 2510865 ACKGROUND ACTS WHC was selected by the owners to build portions of the pipeline project, involving the construction of a pipeline, more particularly described in the Work Order, referred to below (“Pipeline”) The Subcontract As part of the construction of the Pipeline, WHC took hids from subcontractors to perform work associated with the hydrostatic testing of the Pipeline. Falcon successfully bid the work for the pretesting of the Pipeline and WHC and Falcon entered a Subcontract Agreement (“Subcontract”) for that specific work, which included a Proposal of Services created by Falcon that totaled $158,760. The Subcontract was executed by Falcon. The scope of work under the Subcontract is defined by Falcon’s Proposal of Services. To change the scope of work, the Subcontract requires a written, acknowledged and executed change order form signed by both parties. Under the Subcontract, Falcon is not entitled to any additional compensation until the change order is approved in writing and signed by the duly authorized representatives of WHC and Falcon. The Subcontract requires Falcon to notify WHC immediately of any stoppages that might affect or delay the performance or completion of the scope of work. The Subcontract permits Falcon to adjust the price due to delays, so long as they are not Falcon’ s fault. To do so, it has to provide notice to WHC and submit a change order, which must be signed by both parties. Falcon is entitled to no extra compensation if it does not follow this procedure. 2510865 The Subcontract states that failure of either party to enforce its provisions does not affect the Subcontract’s validity and shall not be deemed a waiver of the right to enforce that proviso or require compliance with it. The Subcontract requires all notifications and other communications to be sent to Jared Manuel, WHC’s Director of Purchasing and Subconiracts. Neither party is entitled to the recovery of incidental, indirect, or consequential damages under the Subcontract. The Subcontract dictates that WHC is entitled to retain payments otherwise due Falcon foramounts considered reasonably necessary to satisfy claims, suits, orliens that fall within Falcon’s indemnity obligations under the subcontract. The Subcontract entitles WHC to an offset for any loss, damage, liability owed or claim that WHC may have against Falcon, which would include any amounts owingby Falcon for failing to comply with the Subcontract or with the MSA (defined below). Falcon failed to comply with the Subcontract and the MSA by failing to pay its own subcontractors, and by permitting liens to be placed on the Pipeline. WHC is entitledto an offset for the amounts owing by Falconto its own subcontractors. Finally, Falcon makes a promise in the Subcontractto protect, indemmify, and hold WHC hamnless from any and all liens and for claims relating to Falcon’s failure to comply with the Subcontract or with the contract(s) between WHC and the owner. The contract(s) between. WHC and the owner are incorporated into the Subcontract by reference and are fully binding on Falcon. 2510865 The Work Order The Subcontract requires Falcon to comply with the termsof a Work Order dated. December 28, 2018 between the owner and WHC (the “Work Order”). If the terms of the Subcontract and Work Order are in conflict, the Work Order controls. The Work Order contains similar change order procedures that require written, acknowledged, and executed change orders for the scope of work to be modified. The MSA The Work Order is govemed by the terms of a Master Service Agreement dated. December 15, 2016 between the owner and WHC (the “MSA”). The MSA contains change order requirements similarto the Subcontract and Work Order. The MSA also contains a “no course of dealing” provision which states a failureby any party not to enforce a term of the MSA does not operateas a waiver of that term. In the MSA, WHC promises to defend, protect, indemnify, and hold harmless the owner from liens. Additionally, WHC promises not to permit liens to be affixed against the ipeline due to the failure of WHC’ s subcontractors to pay forlabor and materials. Under the terms of the Subcontract, Falcon agreed these provisions would be fully binding on it. Lien Claimants Cross Country filed a lien affidavit under Chapter 56 of the Texas Property Code in Hood County, Texas on July 29, 2020 and in Johnson County, Texas on July 30, 2020. Cross Country claims it is owed $152,358.93 for materials it provided to Falcon for its work on the Pipeline. 2510865 Boar filed a lien affidavit under Chapter 56 of the Texas Property Code in Johnson County, Texas on July 13, 2020. Boar claims it is owed $106,037.50 for materials it provided to Falcon forits work on the Pipeline. Despite its obligations in the Subcontract and the MSA, Falcon has not protected, indenmified, or held WHC hammless from these lien claims. WHC has an obligation under the MSA to protect the Pipeline and its owners against these liens. Falcon owes defense and indemnity to WHC forits breach of the Subcontract and MSA. Default Judgment Against Falcon Cross Country filed suit for breach of contract and other related caused of action against Falcon in Hood County in or around November 2020 (the “Hood County Suit”). The Hood County Suit sought damages in the principal amount of $258,396.36. Of that amount, $152,358.93 consists of the amounts claimed in the lien affidavit filed by Cross Country for materials it provided to Falcon forits work on the Pipeline. Falcon was served with process but failed to file an answer or otherwise appear in the lawsuit. On January 14, 2021 the 355" Judicial District Court of Hood County, Texas entered a Default and Final Judgment (the “Judgment”) against Falcon in the principal amount of $258,396.38. The Judgment also awarded Cross Country pre-judgment interest at the rate of 18% per annum, post-judgment interest at the rate of 5% per annum, attomey’s fees, and other costs and expenses. On March 26, 2021, the 355" Judicial District Court of Hood County, Texas denied Falcon’s motion for new trial. 2510865 10 On March8, 2021, Cross Country filed a Plea in Intervention in this case and seeks satisfaction of the Judgment through any amounts paid to Falcon or which Falcon is adjudged to be entitled to recover. IRST AUSEOF CTION(BREACHOF ONTIRACT) The preceding material fact allegations are incorporated herein by reference. The Subcontract and the MSA are valid and binding contracts between WHC and. Falcon. WHC has performed its contractual obligations under the Subcontract. Falcon breached the Subcontract and the MSA in the respects described above and as shown by the evidence. Specifically, it allowed the Pipeline to be encumbered with $258,396.43 in liens, did not follow the change order procedure, and has failed to defend or indemnify WHC. Falcon’ s breaches were not justified. WHC has been substantially damagedas a result of Falcon’ s actions and omissions, forwhich WHC seeks all remedies provided by law and under the WHC Contract, including actual damages, attomeys’ fees, costs, and interest. ECOND AUSEOF CTION(MONEY ADAND ECEIVED Falcon holds money which belongs to WHC in equity and good conscience. HIRD AUSEOF CTION(DECLARATORY UDGMENT The preceding material fact allegations are incorporated herein by reference. The Subcontract states that WHC is entitled to retain payments otherwise due to Falcon which are considered reasonably necessary to satisfy claims, suits, or liens that fall within Falcon’s indemnity obligations under the Subcontract. The Subcontract requires Falcon to protect, indemnify, and hold WHC hamless from any and all liens and for claims relatingto Falcon’s failure to comply with the Subcontract 2510865 11 orwith the contract(s) between WHC and the owner. The contract(s) between WHC and the owner are incorporated into the Subcontract by reference and are fully binding on Falcon. The MSA requires WHC to indemnify the owner from every kind or character of liabilities, including liens. The purpose of WHC’ s right to retain payments under the Subcontract is to ensure Payments are made to the correct parties and to avoid WHC being subjected to multiple liability for the same debts. Under the Subcontract, Falcon owes WHC indemnity for the $152,358.93 in liens asserted by Cross Country on the Pipeline and the associated fees, interest, and costs in the Judgment. WHC is entitled to retain the $152,358.93 and the associated fees, interests, and costs because those amounts fall within Falcon’ s indemnity obligations in the Subcontract. Additionally, under the Subcontract, Falcon owes WHC indenmity for the $106,037.50 in liens assertedby Boar on the Pipeline and the associated fees, interest, and costs in the promissory note made by Falconto Boar. WHC is entitled to retain the $106,037.50 and the associated fees, interests, and costs because those amounts fall within Falcon’s indemnity obligations in the Subcontract. WHC is obligated under the MSA to indemnify the Pipeline owner from liens asserted against its property. Therefore, WHC seeks a judgment declaring the following: a. Under the Subcontract, WHC is entitled to recover the amounts necessary to remove Cross Country and Boar’s liens and either take a judgment against Falcon for the amount of that payment or an. 2510865 12 offset for the amount of that payment against any amounts claimed. by Falcon in this lawsuit; Under the Subcontract, WHC is entitled either take a judgment against Falcon or an offset against any amounts owed Falcon, for amounts paid by WHC to Cross Country and Boar for amounts owing for work on the Pipeline, including costs, expenses, pre and. post-judgment interest, and attomey’s fees; and Under the Subcontract, WHC is entitledto indenmity or offset of all costs, damages, expenses, including attomeys’ fees for prosecution. of this declaratory judgment action and for defending the Johnson. County Suit on behalf of the Pipeline owners. CR-FED, LLC claims to have received an assignment of WHC’s account. Pursuant to §9.404(a) of the UCC, the rights of CR-FED, LLC, if any, are subject to all terms of the Subcontract and any defense or claim in recoupment arising from the transaction that gave rise to the subcontract. Accordingly, WHC asks that CR-FED, LLC be bound by the declaratory judgment sought herein. WHC is entitledto an award of costs and reasonable and necessary attomey’ s fees for bringing this action under Chapter 37 of the Texas Civil Practice and Remedies Code. ECOVERY OF TTORNEY EES The Subcontract requires Falconto indemnify WHC forits attomey’ s fees and court costs arising from Falcon’ s breaches of the Subcontract and the MSA described herein. 2510865 13 ONDITIONS RECEDENT All conditions precedent to the recovery of the relief sought hereunder have been. performed or have occurred. URY EMAND A trial by jury is requested in this case. WHC hereby reserves all rights to plead further herein. RAYER For these reasons, and after trial or final hearing, WHC respectfully prays that upon final hearing ajudgment be entered that Falcon take nothing by its suit against WHC, and that the court enter judgment for WHC, awarding it the following against Falcon: WHC'’s actual damages; WHC’s consequential damages; WHC’s reasonable and necessary attomeys’ fees; WHC'’s expenses and costs of court; A declaratory judgment that WHC is entitledto the relief sought in paragraph 73 above; Pre-judgment and post-judgment interest at the maximum rates allowed by law; and All other relief to which WHC is justly entitled. 2510865 14 Respectfully submitted, PREIS PLC By: /s/ AlasdairA. Roberts David L. Pybus State Bar No.: 16418900 dpybus@preisplc.com AlasdairA. Roberts State Bar No.: 24068541 isplc.com 1235 North Loop West, Suite 1100 Houston, TX 77008 Tei: (713) 355-6062 Fax: (713) 572-9129 AND MITBY PACHOLDER JOHNSON PLLC Steven Mit State Bar No.: 24037123 smitby@mitbylaw.com 9450 Pinecroft Drive Post Office Box 7280 Spring, TX 77387 Tei: (713) 234-1366 COUNSEL FOR DEFENDANT, WHC, LLC 2510865 15 CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the foregoing instrument was served in accordance with the TEXAS ULESOF IVIL ROCEDURE on this the 26th day of May 2022, to all known parties of record as follows: Nicole Czajkoski J. Randal Bays office@conroebestlawyerever.com com THE LAW OFFICE OF NICOLE Stephanie L. Bryant RODRIGUEZ CZAJKOSKI 336 YN Main Street, Suite 205 HE AYS IRM Conroe, TX 77301 1503 Hailey Street Conroe, TX 77301 James Louis Hordem, Jr. jhordem@plochlaw.com Timothy R. Ploch staff@plochlaw.com IMOTHY R. LOCH P.C. 730 N. Post Oak Rd., Suite 100 Houston, Texas 77024 /s/ DavidL. Pybus David L. Pybus 2510865 16 CAUSE NO. 20-09-11086 FALCON MIDSTREAM SERVICES, IN THE DISTRICT COURT OF MONTGOMERY COUNTY, TEXAS ™ JUDICIAL DISTRICT COUNTER-PLAINTIFF/CROSS-PLAINTIFF CR-FED, LLC’S ORIGINAL COUNTERCLAIM and ORIGINAL CROSSCLAIM TO THE HONORABLE VINCENZO J. SANTINI: COUNTER-PLAINTIFF/CROSS-PLAINTIFF CR-FED, LLC (“CR-FED”) files this Original Counterclaim and Original Crossclaim complaining of Falcon Midstream Services, LLC and WHC, LLC, respectfully showing this Court as follows: ISCOVERY ONTROL LAN 1 Discovery in this matter should be conducted under a Level 2 discovery control plan. EX IV AMAGE TATEMENT CR-FED is seeking monetary relief over $1,000,000. CR-FED demands all other judgment to which it deems itself entitled. EX R. IV ARTIES 4 CR-FED is a Texas limited liability company. 5. Defendant Falcon Midstream Services, LLC (“Falcon Midstream”) is a Texas limited liability company that has already appeared in this lawsuit. It may be Counter-Plaintiff's and Cross-Plaintiff's CR-FED, LLC’s Original Counterclaim and Original Crossclaim Page 1 of 7 CREDITO REAL USA BUSINESS CAPITAL FACTORING AND SECURITY AGREEMEN’ THIS FACTORING AND SECURITY AGREEMENT (“Agreement”) is deemed executed and binding as of 02/12/2020 by and between Falcon Midstream Services, LLC Seller”) and CR-FED, LLC, a Texas limited liability company (“Purchaser”). L ati dex to. ns. The following terms used in this section shall have the following meanings. Each capitalized term not herein defined shall have the meaning set forth in the Uniform Commercial Code: 1.1 “Account” - in addition to the meaning given to this term by the UCC, the Seller and Purchaser acknowledge that this Agreement is intended to focus primarily, if not exclusively, on Seller’s sale of Accounts arising from contracts for the sale of goods or performance of service or material or services furnished pursuant to and in compliance with contracts between Seller and a Governmental Unit or a private, non-Governmental Unit, contractor, subcontractor, or sub-subcontractor on the site of a real estate improvementor for direct delivery of material to the site of the improvement it or, for specially fabricated materials off the site of the improvement for Seller’s rendering of labor or services for improving real property in the ordinary course of Seller’s business in order to make improvements to a building; erecting, placing, making, altering, removing, repairing, or demolishing any improvement over, upon, connected with, or beneath the surface ofreal property, or excavating any land, or farnishing materials for any ofthese purposes, or performing any labor or services upon the improvements, including the furnishing or carpet or rugs or appliances that are permanently affixed to the real property and final construction cleanup to prepare a structure for occupancy; or performing any laboror services or furnishing any materials in grading, seeding, sodding, or planting for landscaping purposes, including the furnishing oftrees, shrubs, bushes, or plants that are planted om the real property, or in equipping any improvement with fixtures or permanent apparatus which have been duly offered for sale by Seller to Purchaser and approved for purchase by Purchaser at 2 discount. 1.2 “Clearance Days” - one (1) banking days for checks drawn on Texas banks; otherwise, two (2) days for out of state 1.3 “Closed” - a Purchased Account is closed upon the first to occur of: (j) receipt of fall payment by Purchaser or (ii) the unpaid Face Amount has been charged by Purchaser to the Reserve Account pursuant to the terms hereo! 14 “Collateral”- all Seller's now owned and hereafter acquired Accounts, Chattel Paper, Deposit Accounts, Inventory, juipment, Instruments, Investment Property, Documents, Letterof Credit Rights, Commercial Tort Claims, General Intangibles, Soporte Obligations and any sums maintained by Purchaser that are identified as payable to Seller from the Reserve Account. As further collateral Seller hereby irrevocably assigns all of its right, title and interest in and to any rights that Seller has or may come to have against any real property and/or bond as well as the owner of real property, including all persons who own any legal or equitable interest in real property, which interest can be soldby legal process, and who enters into a contract for the improvement of the real property, including but not limitedto, all accounts created as a resultof Product furnished pursuant to and in compliance with a contract with an owner, contractor, subcontractor, or sub-subcontractor on the site ofa real estate improvement or for direct delivery of material to the site of the improvement or, for specially fabricated materials, off the site of the improvement. 1.5 “Complete Termination” —Complete Termination occurs nsatisfaction of each ofthe following conditions: payment in full of all Obligations of Seller to Purchaser and Purchaser's issuance of a UCC termination statement; if Purchaser has issued or causedto be issued any guaranty, promise, or letter of credit on behalf of Seller, acknowledgement from any beneficiaries thereof ‘that Purchaser or any other issuer has no outstanding direct or contingent lability ‘therein; and Seller has executed and delivered to Purchaser a general release in the form attached hereto. 1.6 “Dispute” or “Disputed” any claim made in respect to a Payor against Selleror an Account, of any kind whatsoever, valid or invalid, that has or may have the effect of reducing or potentially reducingthe amount of an Account owing to Purchaser or collectible from a Payor. 1.7 “Early Termination Date” — see Section 15 hereof. 1.8 “Eligible Account” - an Account that is acceptable for purchase as determined by Purchaser in the exercise of its reasonable sole credit or business ji 1.9 “Event of Default” —as defined herein. 1.10 “Face Amount” - the total gross amount due on an Account at the time of purchase. EXHIBIT A Page 1 of 18 1.11 “Factoring Fee” - the Factoring Fee Percentage multiplied by the Face Amount of a Purchased Account, for each Factoring Fee Period or portion thereof, that any portion thereof remains unpaid, computed from the end ofthe Initial Fee Period to and including the date on which a Purchased Account is Closed. 5. 0% 1,12 “Factoring Fee Percentage” +ioe 1.13 “Advance Rate”- the percentage of the Face Amount of Purchased Accounts immediately available to the Seller pursuant to Schedule of Accounts 1.14 “Advance Rate Percentage”: 70 % 1.15 “Pactoring Fee Period”: 30 days. 1.16 “Invoice”— any form of document that evidences or is intended to evidence an Account. ‘Where the context so requires, reference to an Invoice shall be deemed to refer to the Account to which it relates. 1.17 “Late Charge’ Pe:: 1.25 percent per week. 1.18 “Invoice Date” Date listed on the invoice being sold 1.19 “Late Payment Date”: the date which is 30 days plus 1 day from the Invoice date on a Purchased Account. 1.20 “Maximum Amount”; $ 5,000,000.00 1.21 “Minimum Monthly Fee”: N/A 1.22 “Misdirected Payment Fee” - Fifteen percent (15%) of the amount of any payment (butin no event less than $1,000) on account of a Purchased Account which has been received by Seller and not delivered in kind to Purchaser on the 2"! business day following the date of receipt by Seller, or 30% (but in no event less than $1,000) ofthe amount of any such payment which has ‘been received by Seller as a result of any action taken by Seller to cause such payment to be made to Seller. 1.23 “Notice of Assignment” — any form of written notification, as required by Purchaser, that satisfies the requirements of 9-406(a) of the UCC. 1.24 “Obligation(s)” - all present and fusture obligations and liabilities owing by Seller to Purchaser, whether direct or indirect, absolute or contingent, including obligations and liabilities that are likely to become owing by Seller to Purchaser, whether arising hereunder or otherwise, and whether arising before, during or after the commenc of any case ementfiled under title 11 of the United States Bankruptcy Code or any other debtor relief proceeding in which Selleris a Debtor. 1.25 “Parties” - Seller and Purchaser. 1.26 “Payor” - An Account Debtor or other obligor on an Account, including an entity making payment thereon for the account of such party. 1.27 “Purchase Date” - the date on which Seller has been advised in writing that Purchaser has agreed to purchase an Account or in which Purchaser has caused a credit to be made to Seller’s Reserve Account. 1.28 “Purchase Price” - the Face Amount of a Purchased Account less all Factoring Fees. 1.29 “Purchased Accounts” - Accounts purchased hereunder which have not been Closed. 1.30 “Repurehased” - an Account has been repurchased when Seller has paid to Purchaser the then unpaid Face Amount. 1.31 “Required Reserve Amount” - the Reserve Percentage multiplied by the unpaid balance of all Purchased Accor Initial EXHIBIT A Page 2 of 18 1.32 “Reserve Account” - a bookkeeping account on the books of the Purchaser representing the portion of the Purchase Price which has not been paid by Purchaser to Seller, maintained by Purchaser to secure Seller's performance with the provisions hereof, 1.33 “Reserve Percentage”: 30 % 1.34 “Reserve Shortfall” - the amount by which the Reserve Account is less than the Required Reserve Amount. 1.35 “Schedule of Accounts” - 2 form supplied by Purchaser from time to time wherein Seller lists such ofits Accounts as it requests that Purchaser purchase under the terms of this Agreement. 1.36 “Term” — A one year period. 1.37 “UCC”— The Uniform Commercial Code as adopted in the State of Texas. 2. Sale: Purchase Price: Billing 2.1 Assignment and Sale. 2.1.1, Seller shall offer for sale to Purchaser, with full recourse, and as absolute owner, such of Seller's Accounts as are listed from time to time on Schedules of Accounts. In additionto the sale, transfer, conveyance and assignment of the Accounts, Seller irrevocably assigns and contractually subrogates in favor of Purchaser all of its right, title and interest in and to any rights that Seller has or may come to have against any owner of real property, including all persons who own any legal or equitable interest in real property that is improved by the Seller’s sale of Goods or services, which interest can be sold by legal process, and who enters into a contract for the improvement of the real property with such owner, including, but not limited to, any laborer or any other person commonly referred to as a lienor including subcontractor or sub-subcontractor. In addition, Seller assigns such other rights ancillary to the Purchased Accounts, including, but not limited to, any surety bonds and any guarantees. 2.12 Each Schedule of Accounts shall be accompanied by such documentation supporting and evidencing each Account, as Purchaser shall from time to time request. Simultaneously with the submission of each Schedule of Accounts that Seller submitsto Factor (unless Factor issues a written waiver), unless waived in writingby Factor, Seller shall deliver