Preview
FILED
4/15/2024 2:33 PM
4/14/2023 2:34 PM
FELICIA PITRE
Marilyn Burgess - District Clerk Harris County
DISTRICT CLERK
Envelope No. 74666591
DALLAS CO., TEXAS
Gwendolyn Thomas DEPUTY By: KATINA WILLIAMS
DC-24-05498 Filed: 4/14/2023 2:34 PM
NO. 2023-05208
ETC NORTHEAST FIELD SERVICES, § IN THE DISTRICT COURT OF
LLC, §
§
Plaintiff, §
§ HARRIS COUNTY, TEXAS
v. §
§
PER MIDSTREAM, LLC, and CARDINAL §
MIDSTREAM II, LLC, §
§
Defendants. § 152nd JUDICIAL DISTRICT
DEFENDANT PER MIDSTREAM, LLC’S AMENDED
RULE 91a MOTION TO DISMISS
Defendant PER Midstream, LLC (“PER”), pursuant to Texas Rule of Civil Procedure 91a,
files this Amended Rule 91a Motion to Dismiss Plaintiff ETC Northeast Field Services, LLC’s
(“Field Services” or “Plaintiff”) First Amended Original Petition (“Petition”).
I. INTRODUCTION
Plaintiff Field Services, an affiliate of Energy Transfer, recently lost in an arbitration and
was found to have a contractual obligation to construct a high-pressure discharge pipeline in
southwestern Pennsylvania. Pet. at 1; Pet. Ex. A 1. The arbitrators found that Field Services
breached those obligations and awarded $166,648,182.99 against Field Services. Id. In response
Certified Document Number: 107632989 - Page 1 of 20
to that defeat, Energy Transfer and its affiliated companies have filed a slew of retaliatory actions
1
See November 21, 2022, Arbitration Award, attached to the Amended Petition at Exhibit T-3. Exhibits attached to
Plaintiff’s Amended Petition will be referenced by “Pet. Ex. ______.”
1
– a new arbitration 2 and multiple lawsuits in Texas 3 and Delaware 4 – in an effort to collaterally
attack the adverse arbitration decision. This is one of those actions. 5
Defendants PER and Cardinal Midstream II, LLC (“Cardinal II”) are the former co-owners
of Cardinal PA Holdings, LLC (“Cardinal Holdings”), which owned Field Services. See id. ¶¶ 45-
46. In 2017, PER and Cardinal II sold Cardinal Holdings to Energy Transfer pursuant to a
Membership Interest Purchase Agreement (“MIPA”), making Energy Transfer the owner of Field
Services. See id. ¶ 53 and Pet. Ex. K. Field Services now claims fraud, alleging that during PER’s
negotiations with nonparty Energy Transfer, PER failed to disclose “material obligations and
liabilities” and “made numerous misrepresentations to Energy Transfer’s employees over the
course of the negotiation of the MIPA.” Pet. at 15; ¶ 82. Field Services alleges that after
Defendants and Energy Transfer – but not Field Services – agreed to the commercial terms of the
MIPA (but prior to its closing), PER and Cardinal prepared a virtual data room which contained
documents relating to the obligations and liabilities of Field Services. See id. ¶¶ 58, 59. Field
Services further alleges that representatives of Energy Transfer – but not of Field Services –
reviewed the materials in the data room. See id. ¶ 60. The Petition then repeatedly alleges that
PER failed to disclose to Energy Transfer obligations to construct high-pressure discharge
pipelines. Id. at 15, 17 n.10 (“But they never disclosed that to Energy Transfer”); ¶¶ 56, 60, 64,
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82, 87, 94, 100, 101. The result of these nondisclosures, according to Field Services, is that
Defendants “offloaded a liability time-bomb onto [nonparty] Energy Transfer.” Id. at 1 (emphasis
2
See ETC Northeast Field Services’ Application to Appoint Arbitrator, at Pet. Ex. T - A.
3
See PER’s Answer filed in Energy Transfer’s Dallas County Texas lawsuit, at Pet. Ex. T.
4
See Field Services’ Complaint filed in the Delaware Court of Chancery, at Pet. Ex. T - C.
5
According to the Petition, Field Services seeks as purported damages “All liability relating to the direct damages
claimed by PennEnergy in the arbitration . . . .” Pet. ¶¶ 85, 91, 97, 102.
2
added). Thus, the Petition alleges that PER deceived Energy Transfer by selling it an asset with
an allegedly undisclosed contractual obligation.
As outlined below, Field Services’ claims fail on the pleadings because:
• PER’s alleged representations and nondisclosures to nonparty Energy Transfer cannot, as
a matter of law, constitute fraudulent acts or negligent misrepresentations committed
against Plaintiff Field Services.
• Field Services’ civil conspiracy claim fails under Rule 91a because it is dependent on its
meritless fraud claims.
• All of Field Services’ claims are barred by the applicable statutes of limitation.
II. FACTUAL BACKGROUND
A. PER and Cardinal Sold the Plaintiff to Energy Transfer.
Defendants PER and Cardinal II are the former co-owners of Cardinal Holdings, which
owned Field Services. Plaintiff Field Services is natural gas midstream company that operates
pursuant to a Gathering Agreement with non-party PennEnergy Resources, LLC (“PennEnergy”),
a company that develops and operates natural gas wells in Pennsylvania. (Id. ¶¶ 40, 45, 49). In
2017, PER and Cardinal II sold Cardinal Holdings to Energy Transfer, making it the owner of
Field Services. (Id. ¶¶ 53-54). After acquiring Plaintiff, Energy Transfer then changed the entity’s
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name from Cardinal PA Midstream, LLC to ETC Northeast Field Services, LLC. Id. n. 2.
Prior to being acquired by Energy Transfer, Cardinal PA Midstream, LLC (i.e., Plaintiff)
entered into a Gathering Agreement with PennEnergy pursuant to which Cardinal PA Midstream
LLC was required to construct certain midstream infrastructure in order to transport PennEnergy’s
gas (the “Gathering System”). See id. ¶¶ 47-49. Field Services’ obligations with respect to the
3
gathering system are expressly set forth in the Gathering Agreement, as amended, between Field
Services and PennEnergy.
The relationship between these companies is illustrated below:
See id. ¶¶ 53-54, 47, and Pet. Exs. A, K.
After Energy Transfer acquired Field Services, Field Services failed to fulfill its contractual
obligations under the Gathering Agreement, as amended, thereby forcing PennEnergy to initiate
an arbitration against Field Services in Pennsylvania (the “Pennsylvania Arbitration”).
PennEnergy prevailed in the Pennsylvania Arbitration and obtained an arbitration award against
Certified Document Number: 107632989 - Page 4 of 20
Field Services. See Pet. ¶ 77, Pet. Ex. T.
The plaintiff in this lawsuit is not Defendants’ counterparty under the MIPA (i.e., Energy
Transfer), but rather is the asset that Energy Transfer acquired pursuant thereto. See Pet. at 1, n.1.
Notably, non-party Energy Transfer – Defendants’ counterparty to the MIPA – recently filed a
lawsuit against Defendants in Dallas County as part of its efforts to attack the Pennsylvania
Arbitration award, under the following caption:
4
See Pet. Ex. T. Nevertheless, in a Petition which both defies common sense and fails to state a
claim under Texas law, Field Services – not Energy Transfer – alleges here that it was somehow
defrauded based on alleged representations and omissions to Energy Transfer.
B. PER and Cardinal Negotiate and Close the MIPA with Energy Transfer, Not
Field Services.
Field Services alleges that PER and Cardinal, on the one hand, and Energy Transfer, on the
other, negotiated the MIPA “whereby Energy Transfer would purchase [Defendants’] interest in
Holdco.” See id. ¶ 53; Pet. Ex. K. Thus, “Energy Transfer would become the 100% owner of
Certified Document Number: 107632989 - Page 5 of 20
[Cardinal PA Midstream LLC]” and, therefore, the Gathering System. See id. ¶¶53-54. The MIPA
was ultimately signed in February 2017 and closed in March 2017. See id. ¶ 67. After the close
of the MIPA, Energy Transfer renamed the purchased asset “ETC Field Services LLC.” See id. ¶
68.
After Defendants and Energy Transfer – but not Field Services – agreed to the commercial
terms of the MIPA (but prior to its closing), Field Services alleges that PER and Cardinal prepared
5
a virtual data room for the MIPA transaction. See id. ¶ 58. Field Services further alleges that
representatives of Energy Transfer – but not of Field Services – reviewed the materials in the data
room. See id. ¶ 60.
The crux of Field Services’ Petition is that two pieces of information were omitted from
the data room: (1) Cardinal’s 2013 presentation to PER which had proposed the construction of
high-pressure discharge pipelines and (2) documents reflecting an agreement requiring Field
Services to build future compressor stations and high-pressure discharge pipelines (the “Alleged
Omissions”). See id. ¶ 61.
Based upon the Alleged Omissions, Field Services has brought four claims against both
Defendants: (Count I) Fraud, (Count II) Fraud by Nondisclosure, (Count III) Negligent
Misrepresentation, and (Count IV) Civil Conspiracy. Counts I-III shall hereinafter be the “Tort-
Based Claims.” As set forth in detail below, all of Field Services’ claims fail as a matter of law
because PER made no representations or omissions to Field Services, owed no duty of disclosure
to Field Services, and Field Services could not have justifiably relied on certain alleged omissions
which were intended solely for Energy Transfer. They also fail as a matter of law because they
are barred by the applicable statutes of limitations.
III. MOTION TO DISMISS PURSUANT TO TEX. R. CIV. P. 91A
Certified Document Number: 107632989 - Page 6 of 20
A. Legal Standard
1. Rule 91a.2
Pursuant to Rule 91a.2, PER states that this Motion seeks dismissal of all the causes of
action asserted against PER in the Petition, namely:
• Fraud;
• Fraud by nondisclosure;
6
• Negligent misrepresentation;
• Civil conspiracy.
Pet. at 2126. All these causes of action have no basis in law or fact.
2. Timeliness of Motion
PER filed its Motion to Dismiss within 60 days of service of the Petition, as required by
Rule 91a.3(a). 6 Moreover, PER has sought a hearing with this Court within 45 days of the filing
of this Motion.
3. Dismissal Standard
By the express terms of Rule 91a.1, “[a] cause of action has no basis in law if the
allegations, taken as true, together with inferences reasonably drawn from them, do not entitle the
claimant to the relief sought.” See In re Houston Specialty Ins., 569 S.W.3d 138, 139 n.1 (Tex.
2019) (quoting Rule). “A cause of action has no basis in fact” under Rule 91a.1 “if no reasonable
person could believe the facts pleaded.” See City of Dallas v. Sanchez, 494 S.W.3d 722, 724 (Tex.
2016) (per curiam) (quoting the Rule). “[T]he court may not consider evidence in ruling on” a Rule
91a motion, but “must decide the motion “solely on the pleading of the cause of action.” TEX. R.
CIV. P. 91a.6.
A cause of action has “no basis in law” and requires dismissal if the facts alleged in the
Certified Document Number: 107632989 - Page 7 of 20
petition are inadequate to establish liability under an asserted cause of action. See, e.g., Weizhong
Zheng v. Vacation Network, Inc., 468 S.W.3d 180, 185-86 (Tex. App.—Houston [14th Dist.] 2015,
pet. denied) (upholding dismissal of fraudulent inducement “cause of action”); Dailey v. Thorpe,
445 S.W.3d 785, 789 (Tex. App.—Houston [1st Dist.] 2014, no pet.) (upholding dismissal of cause
6
It is undisputed that PER was served on February 4, 2023. PER timely filed its initial Rule 91a Motion to Dismiss
on April 4, 2023. As provided for by Rule 91a, PER files this Amended Motion to Dismiss to address Plaintiff’s
recently filed Amended Petition.
7
of action for breach of fiduciary duty). A court must “apply the fair notice pleading standard
applicable in Texas to determine whether the allegations of the petition are sufficient to allege a
cause of action.” Wooley v. Schaffer, 447 S.W.3d 71, 76 (Tex. App.—Houston [14th Dist.] 2014,
pet. denied). Under this standard, the pleading must give “fair and adequate notice of the facts
upon which the pleader bases his claim.” Id. (citation omitted). The opposing party must be able
to “ascertain from the pleading the nature, basic issues and the type of evidence that might be
relevant to the controversy.” Low v. Henry, 221 S.W.3d 609, 612 (Tex. 2007). The allegations
must be sufficient to allow the opposing party to “prepare a defense.” In re Lipsky, 460 S.W.3d
579, 590 (Tex. 2015).
The “availability of a remedy under the facts alleged is a question of law.” Sanchez, 494
S.W.3d at 724 (citing Wooley, 447 S.W.3d at 75-76) (further citations omitted). The “rule’s factual
plausibility standard” is also a legal question “akin to a legal-sufficiency review.” Id. Finally,
“Rule 91a permits motions to dismiss based on affirmative defenses ‘if the allegations, taken as
true, together with inferences reasonably drawn from them, do not entitle the claimant to the relief
sought.’” See Bethel v. Quilling, Selander, Lownds, Winslett & Moser, P.C., 595 S.W.3d 651, 656
(Tex. 2020).
IV. ARGUMENT
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As summarized above, Defendants and non-party Energy Transfer consummated a
transaction (i.e., the MIPA) by which non-party Energy Transfer became the owner of Field
Services. As part of the due diligence process, the Petition alleges that certain information was
not disclosed to Energy Transfer. But the Petition wholly fails to connect the dots to Field
Services; whether PER disclosed certain information to Energy Transfer does not generate tort
claims for Field Services. Nevertheless, Field Services now brings the three Tort-Based Claims,
8
all the elements of which must be pleaded with clear factual support. See Priddy v. Rawson, 282
S.W.3d 588, 598 (Tex. App.—Houston [14th Dist.] 2009, pet. denied) (“Fraud is never presumed,
and when it is alleged, the facts sustaining it must be clearly shown.”); see also Stephanz v. Laird,
846 S.W.2d 895, 903 (Tex. App.—Houston [1st Dist.] 1993, writ denied) (“In order [] to prevail
on the actionable fraud cause of action, [the plaintiff] must satisfy all elements of the tort.”).
Specifically, with respect to its fraud claim, Field Services must prove: (1) PER made a
material representation that was false; (2) PER knew the representation was false or made it
recklessly as a positive assertion without any knowledge of its truth; (3) PER intended to induce
Field Services to act upon the representation; and (4) Field Services acted in reliance on the
representation and thereby suffered injury. Guzder v. Haynes & Boone, LLP, No. 01-13-00985-
CV, 2015 WL 3423731, at *7 n.8 (Tex. App.—Houston [1st Dist.] May 28, 2015, no pet.)
(citing Aquaplex, Inc. v. Rancho La Valencia, Inc., 297 S.W.3d 768, 774 (Tex. 2009)).
With respect to its fraud by nondisclosure claim, Field Services must first prove that PER
owed a duty of disclosure to Field Services, and it must then prove all of the following: (1) PER
deliberately failed to disclose material facts to Field Services; (2) Field Services was ignorant of
the facts and did not have an equal opportunity to discover them; (3) PER intended Field Services
to act or refrain from acting based on the non-disclosure; and (4) Field Services relied on the non-
Certified Document Number: 107632989 - Page 9 of 20
disclosure, which resulted in injury. Natour v. Bank of Am., N.A., No. 4:21-CV-00331, 2022 WL
2252588, at *4 (E.D. Tex. June 22, 2022) (citing Bombardier Aero. Corp. v. SPEP Aircraft
Holdings, LLC, 572 S.W.3d 213, 219-20 (Tex. 2019)).
With respect to its negligent misrepresentation claim, Field Services must prove the
following: (1) PER made a representation in the course of its 's business,; (2) PER supplied “false
information” to Field Services; (3) PER did not exercise reasonable care or competence in
9
obtaining or communicating the information; and (4)Field Services suffered pecuniary loss by
justifiably relying on the representation. Lindsey Constr., Inc. v. AutoNation Fin. Services, LLC,
541 S.W.3d 355, 366 (Tex. App.—Houston [14th Dist.] 2017, no pet.) (citing Federal Land Bank
Ass’n of Tyler v. Sloane, 825 S.W.2d 439, 442 (Tex. 1991)).
Even accepting as true the facts alleged in Field Services’ Petition, there is simply no
plausible cause of action under which Field Services can recover based upon Alleged Omissions
in the MIPA transaction between PER and non-party Energy Transfer. Indeed, Field Services fails
to plead multiple elements of each of its Tort-Based Claims. And further still, based on Field
Services’ own admissions in its Petition, Field Services knew of its claims no later than the end of
2018 and, therefore, its claims are all barred by the applicable statutes of limitations. For multiple,
independent reasons, all four of Field Services’ claims fail as a matter of law and should be
dismissed with prejudice.
A. All Three Tort-Based Claims Should Be Dismissed Under Rule 91a Because
Field Services’ Alleged Reliance on the Alleged Omissions Was Not Justifiable.
Field Services’ alleged reliance on the Alleged Omissions is not justifiable as a matter of
law because PER and Cardinal negotiated the MIPA with Energy Transfer, not Field Services. It
is axiomatic that under Texas law that “[r]eliance is a necessary element of both negligent
misrepresentation and fraud.” Van Marcontell v. Jacoby, 260 S.W.3d 686, 691 (Tex. App.—Dallas
Certified Document Number: 107632989 - Page 10 of 20
2008, no pet.). The same is true of fraud by nondisclosure. Natour, 2022 WL 2252588, at *4. A
plaintiff establishes reliance by showing that “it actually relied on the defendant’s representation
and that such reliance was justifiable.” Fuller v. Le Brun, 616 S.W.3d 31, 41 (Tex. App.—Houston
[14th Dist.] 2020, pet. denied); see also Van Marcontell, 260 S.W.3d at 691 (“A plaintiff
establishes reliance by showing the defendant’s acts and representations induced him to either act
or refrain from acting, to his detriment.”).
10
Here, Field Services does not (and cannot) allege that it justifiably relied on the Alleged
Omissions because the Alleged Omissions were intended, if at all, for Energy Transfer—not Field
Services. This lack of justifiable reliance renders all three of Plaintiff’s Tort-Based Claims fatally
flawed. See TCA Bldg. Co. v. Entech, Inc., 86 S.W.3d 667, 674 (Tex. App.—Austin 2002, no pet.)
(“An essential element of a common-law fraud action is a plaintiff’s reasonable or justifiable
reliance upon the defendant’s alleged misrepresentation . . . .”); Van Marcontell, 260 S.W.3d at
691. Thus, the Tort-Based Claims should be dismissed under Rule 91a with prejudice. See, e.g.,
Patterson v. Five Point Cap. Midstream Funds I & II, L.P., No. 01-19-00643-CV, 2020 WL
7213348, at *9 (Tex. App.—Houston [1st Dist.] Dec. 8, 2020, no pet.) (“[A] fraud claim should
be dismissed under Rule 91a when reliance on an alleged misrepresentation is not justifiable as a
matter of law.”); Darnell v. Rogers, 588 S.W.3d 295, 305 (Tex. App.—El Paso 2019, no pet.)
(“The false information alleged [by plaintiff] concerned a matter about which [plaintiff] had
personal knowledge. Although [plaintiff] summarily alleges that he relied on this false
information, no reasonable person could believe that he did so. In addition, no such reliance would
be justifiable, as a matter of law. For this additional reason, the claim for negligent
misrepresentation lacks any basis in law or fact.”) (cleaned up).
The court’s decision in Jordan v. Jordan, No. 05-98-01971-CV, 2001 WL 856209, at *3
Certified Document Number: 107632989 - Page 11 of 20
(Tex. App.—Dallas July 30, 2001, no pet.), further demonstrates why Field Services could not
have justifiably relied on the Alleged Omissions as a matter of law. In Jordan, the plaintiff
husband and defendant wife were divorced, and the defendant wife represented to the manager of
a building owned by the plaintiffs that she was to receive sixty percent of the rent from the building.
See id. Consequently, the building manager canceled its contract with the plaintiffs, and the
11
plaintiffs sued for fraud and negligent misrepresentation based on the defendant wife’s
communication to the manager.
The trial court dismissed both the fraud and negligent misrepresentation claims in response
to the defendant wife’s special exceptions, and the Court of Appeals affirmed the dismissal. See
id. at *3-4. In so doing, the court explained:
[T]he person whom the speaker intends to influence and who relies
on the speaker’s misrepresentation has a claim for fraud; a
complainant cannot assert another’s reliance, even if the action
taken in reliance on a misrepresentation causes injury. Likewise,
liability for negligent misrepresentation is limited to the person . . .
whom the maker of the representation intends to benefit or who
foreseeably may be expected to rely on the information . . . .
Id. at *3. Thus, the court held: “[Plaintiffs’ petition] does not allege that the [plaintiffs] took any
action in reliance on any of the alleges misrepresentation[s]. Any reliance by [the manager] cannot
support a claim for fraud, intentional misrepresentation, or negligent misrepresentation by the
[plaintiffs]. Therefore, the [plaintiffs] failed to allege a cause of action for fraud or
misrepresentation. We conclude the trial court properly dismissed the causes of action for fraud
and misrepresentation.” Id. at *4.
Likewise, here Field Services does not allege that it took any action in reliance on the
Alleged Omissions. And any alleged reliance by Energy Transfer cannot support a claim for fraud
Certified Document Number: 107632989 - Page 12 of 20
or negligent misrepresentation by Field Services. As a matter of law, consistent with Jordan,
Energy Transfer’s alleged reliance on the Alleged Omissions cannot be imputed to Field Services.
Therefore, the Tort-Based Claims should be dismissed with prejudice. See, e.g., id.; DeVoll v.
Demonbreun, No. 04-14-00116-CV, 2014 WL 7440314, at *3 (Tex. App.—San Antonio Dec. 31,
2014, no pet.) (“Because DeVoll did not allege facts demonstrating reliance or harm,
12
his fraud claim has no basis in law. Accordingly, the trial court did not err in granting
Demonbreun’s Rule 91a motion to dismiss in relation to DeVoll’s fraud claim.”).
B. Field Services’ Fraud By Nondisclosure Claim Should be Dismissed Because
PER Had No Duty to Disclose Anything to Field Services.
Field Services has failed to set forth a cognizable claim for fraud by nondisclosure because
Field Services does not (and cannot) allege that PER owed a duty to disclose the Alleged
Omissions to Field Services. . “As a general rule, a failure to disclose information does not
constitute fraud unless there is a duty to disclose the information. Thus, silence may be equivalent
to a false representation only when the particular circumstances impose a duty on the party to
speak and he deliberately remains silent. Whether such a duty exists is a question of
law.” Marshall v. Kusch, 84 S.W.3d 781, 786 (Tex. App.—Dallas 2002, pet. denied) (cleaned up)
(emphasis added); see also In re 3M Combat Arms Earplug Prod. Liab. Litig., No. 3:19MD2885,
2021 WL 6882666, at *3 (N.D. Fla. Oct. 26, 2021) (“[A]t a minimum, Texas law requires some
kind of transaction between the parties before a duty to disclose arises.”).
The court’s decision in Marshall is instructive as to why PER had no duty to disclose the
Alleged Omissions to Field Services. In Marshall, the defendant sold a ranch to a third party,
Gilmore-Barclay (i.e., not the plaintiff), but he did not disclose to Gilmore-Barclay that a previous
anthrax outbreak on the reach led to the deaths of several animals. See id. at 783. Gilmore-Barclay
Certified Document Number: 107632989 - Page 13 of 20
then sold the ranch to the plaintiff, and, soon thereafter, another anthrax outbreak killed many of
the plaintiff’s animals. See id. at 783-84. Based on these facts, the plaintiff sued for, inter alia,
fraud by nondisclosure.
On appeal, the Court of Appeals held that the defendant owed no duty to disclose anything
at all to the plaintiff and, therefore, the plaintiff could not sustain a claim for fraud by omission.
See id. at 786. In so doing, the court explained: “[The defendant] sold the ranch to Gilmore–
13
Barclay. Any duty to disclose he had was to Gilmore–Barclay. [The defendant] was not the seller
nor was he involved in the sales transaction with [the plaintiff]. Accordingly, [the defendant] had
no duty to disclose anything to [the plaintiff].” Id.; see also Natour, 2022 WL 2252588, at *5
(holding that “[p]laintiffs claim against [d]efendants for fraud by nondisclosure fails as a matter of
law” where “[p]laintiffs failed to supply any facts or evidence which would show the [defendants]
owed [p]laintiffs a duty to disclose certain information”); Pellegrini v. Cliffwood-Blue Moon Joint
Venture, Inc., 115 S.W.3d 577, 581 (Tex. App.—Beaumont 2003, no pet.) (“We find no duty to
disclose the prior development of the West Ridge Prospect under the circumstances of this arms-
length commercial transaction. Because there was no duty to disclose, the fraud claim should not
have been submitted to the jury.”).
Here, Field Services baldly alleges that PER had a duty to make certain disclosures, but it
did not (and cannot) plead the basis for that alleged duty. See Pet. ¶ 88. Indeed, consistent with
the above authorities, no such duty exists. Insofar as PER had a hypothetical obligation to place
certain data into the data room in advance of the closing of the MIPA, an arms-length commercial
transaction, any such duty was owed only to Energy Transfer, but not Field Services. Just as the
plaintiff in Marshall could not sustain a fraud by nondisclosure claim because the defendant was
not a party to the transaction at issue, so too here Field Services cannot sustain a fraud by
Certified Document Number: 107632989 - Page 14 of 20
nondisclosure claim against PER because it is not a party to the MIPA. Absent a duty to disclose,
Field Services’ fraud by nondisclosure claim fails as a matter of law and should be dismissed with
prejudice.
C. Field Services’ Fraud and Negligent Misrepresentation Claims Fail Because
Field Services Has Not Alleged Any Affirmative Misrepresentations.
Under Texas law, fraud by misrepresentation and fraud by nondisclosure are distinct causes
of action with distinct elements. See Rio Grande Royalty Co. v. Energy Transfer Partners, L.P.,
14
620 F.3d 465, 468 (5th Cir. 2010) (“To state a claim of fraud by misrepresentation under Texas
law, a plaintiff must sufficiently allege (1) a misrepresentation that (2) the speaker knew to be false
or made recklessly (3) with the intention to induce the plaintiff's reliance, followed by (4) actual
and justifiable reliance (5) causing injury. Alternatively, a plaintiff may, in limited circumstances,
claim fraud by omission . . . .”) (cleaned up) (emphasis added); see also id. (“Therefore, to prevail
under either theory — affirmative misrepresentation or omission — the plaintiff must allege some
defect in the defendants' voluntary reports to Platts.”) (emphasis added). Where a plaintiff fails to
plead an actionable material misstatement, as opposed to an omission, there is no valid claim for
fraud by misrepresentation. See id. at 469 (“The plaintiff has failed to allege either a material
misstatement or actionable omission on the part of the defendants and so has failed to state a claim
for fraud.”).
As with fraud by misrepresentation, negligent misrepresentation likewise requires an
allegation of an affirmative misrepresentation. In re Precept Bus. Servs., Inc., No. 01-31351-SAF-
7, 2004 WL 2074169, at *9-10 (Bankr. N.D. Tex. Aug. 23, 2004) (“[A] fa
Preview
FILED 4/15/2024 2:33 PM 4/14/2023 2:34 PM FELICIA PITRE Marilyn Burgess - District Clerk Harris County DISTRICT CLERK Envelope No. 74666591 DALLAS CO., TEXAS Gwendolyn Thomas DEPUTY By: KATINA WILLIAMS DC-24-05498 Filed: 4/14/2023 2:34 PM NO. 2023-05208 ETC NORTHEAST FIELD SERVICES, § IN THE DISTRICT COURT OF LLC, § § Plaintiff, § § HARRIS COUNTY, TEXAS v. § § PER MIDSTREAM, LLC, and CARDINAL § MIDSTREAM II, LLC, § § Defendants. § 152nd JUDICIAL DISTRICT DEFENDANT PER MIDSTREAM, LLC’S AMENDED RULE 91a MOTION TO DISMISS Defendant PER Midstream, LLC (“PER”), pursuant to Texas Rule of Civil Procedure 91a, files this Amended Rule 91a Motion to Dismiss Plaintiff ETC Northeast Field Services, LLC’s (“Field Services” or “Plaintiff”) First Amended Original Petition (“Petition”). I. INTRODUCTION Plaintiff Field Services, an affiliate of Energy Transfer, recently lost in an arbitration and was found to have a contractual obligation to construct a high-pressure discharge pipeline in southwestern Pennsylvania. Pet. at 1; Pet. Ex. A 1. The arbitrators found that Field Services breached those obligations and awarded $166,648,182.99 against Field Services. Id. In response Certified Document Number: 107632989 - Page 1 of 20 to that defeat, Energy Transfer and its affiliated companies have filed a slew of retaliatory actions 1 See November 21, 2022, Arbitration Award, attached to the Amended Petition at Exhibit T-3. Exhibits attached to Plaintiff’s Amended Petition will be referenced by “Pet. Ex. ______.” 1 – a new arbitration 2 and multiple lawsuits in Texas 3 and Delaware 4 – in an effort to collaterally attack the adverse arbitration decision. This is one of those actions. 5 Defendants PER and Cardinal Midstream II, LLC (“Cardinal II”) are the former co-owners of Cardinal PA Holdings, LLC (“Cardinal Holdings”), which owned Field Services. See id. ¶¶ 45- 46. In 2017, PER and Cardinal II sold Cardinal Holdings to Energy Transfer pursuant to a Membership Interest Purchase Agreement (“MIPA”), making Energy Transfer the owner of Field Services. See id. ¶ 53 and Pet. Ex. K. Field Services now claims fraud, alleging that during PER’s negotiations with nonparty Energy Transfer, PER failed to disclose “material obligations and liabilities” and “made numerous misrepresentations to Energy Transfer’s employees over the course of the negotiation of the MIPA.” Pet. at 15; ¶ 82. Field Services alleges that after Defendants and Energy Transfer – but not Field Services – agreed to the commercial terms of the MIPA (but prior to its closing), PER and Cardinal prepared a virtual data room which contained documents relating to the obligations and liabilities of Field Services. See id. ¶¶ 58, 59. Field Services further alleges that representatives of Energy Transfer – but not of Field Services – reviewed the materials in the data room. See id. ¶ 60. The Petition then repeatedly alleges that PER failed to disclose to Energy Transfer obligations to construct high-pressure discharge pipelines. Id. at 15, 17 n.10 (“But they never disclosed that to Energy Transfer”); ¶¶ 56, 60, 64, Certified Document Number: 107632989 - Page 2 of 20 82, 87, 94, 100, 101. The result of these nondisclosures, according to Field Services, is that Defendants “offloaded a liability time-bomb onto [nonparty] Energy Transfer.” Id. at 1 (emphasis 2 See ETC Northeast Field Services’ Application to Appoint Arbitrator, at Pet. Ex. T - A. 3 See PER’s Answer filed in Energy Transfer’s Dallas County Texas lawsuit, at Pet. Ex. T. 4 See Field Services’ Complaint filed in the Delaware Court of Chancery, at Pet. Ex. T - C. 5 According to the Petition, Field Services seeks as purported damages “All liability relating to the direct damages claimed by PennEnergy in the arbitration . . . .” Pet. ¶¶ 85, 91, 97, 102. 2 added). Thus, the Petition alleges that PER deceived Energy Transfer by selling it an asset with an allegedly undisclosed contractual obligation. As outlined below, Field Services’ claims fail on the pleadings because: • PER’s alleged representations and nondisclosures to nonparty Energy Transfer cannot, as a matter of law, constitute fraudulent acts or negligent misrepresentations committed against Plaintiff Field Services. • Field Services’ civil conspiracy claim fails under Rule 91a because it is dependent on its meritless fraud claims. • All of Field Services’ claims are barred by the applicable statutes of limitation. II. FACTUAL BACKGROUND A. PER and Cardinal Sold the Plaintiff to Energy Transfer. Defendants PER and Cardinal II are the former co-owners of Cardinal Holdings, which owned Field Services. Plaintiff Field Services is natural gas midstream company that operates pursuant to a Gathering Agreement with non-party PennEnergy Resources, LLC (“PennEnergy”), a company that develops and operates natural gas wells in Pennsylvania. (Id. ¶¶ 40, 45, 49). In 2017, PER and Cardinal II sold Cardinal Holdings to Energy Transfer, making it the owner of Field Services. (Id. ¶¶ 53-54). After acquiring Plaintiff, Energy Transfer then changed the entity’s Certified Document Number: 107632989 - Page 3 of 20 name from Cardinal PA Midstream, LLC to ETC Northeast Field Services, LLC. Id. n. 2. Prior to being acquired by Energy Transfer, Cardinal PA Midstream, LLC (i.e., Plaintiff) entered into a Gathering Agreement with PennEnergy pursuant to which Cardinal PA Midstream LLC was required to construct certain midstream infrastructure in order to transport PennEnergy’s gas (the “Gathering System”). See id. ¶¶ 47-49. Field Services’ obligations with respect to the 3 gathering system are expressly set forth in the Gathering Agreement, as amended, between Field Services and PennEnergy. The relationship between these companies is illustrated below: See id. ¶¶ 53-54, 47, and Pet. Exs. A, K. After Energy Transfer acquired Field Services, Field Services failed to fulfill its contractual obligations under the Gathering Agreement, as amended, thereby forcing PennEnergy to initiate an arbitration against Field Services in Pennsylvania (the “Pennsylvania Arbitration”). PennEnergy prevailed in the Pennsylvania Arbitration and obtained an arbitration award against Certified Document Number: 107632989 - Page 4 of 20 Field Services. See Pet. ¶ 77, Pet. Ex. T. The plaintiff in this lawsuit is not Defendants’ counterparty under the MIPA (i.e., Energy Transfer), but rather is the asset that Energy Transfer acquired pursuant thereto. See Pet. at 1, n.1. Notably, non-party Energy Transfer – Defendants’ counterparty to the MIPA – recently filed a lawsuit against Defendants in Dallas County as part of its efforts to attack the Pennsylvania Arbitration award, under the following caption: 4 See Pet. Ex. T. Nevertheless, in a Petition which both defies common sense and fails to state a claim under Texas law, Field Services – not Energy Transfer – alleges here that it was somehow defrauded based on alleged representations and omissions to Energy Transfer. B. PER and Cardinal Negotiate and Close the MIPA with Energy Transfer, Not Field Services. Field Services alleges that PER and Cardinal, on the one hand, and Energy Transfer, on the other, negotiated the MIPA “whereby Energy Transfer would purchase [Defendants’] interest in Holdco.” See id. ¶ 53; Pet. Ex. K. Thus, “Energy Transfer would become the 100% owner of Certified Document Number: 107632989 - Page 5 of 20 [Cardinal PA Midstream LLC]” and, therefore, the Gathering System. See id. ¶¶53-54. The MIPA was ultimately signed in February 2017 and closed in March 2017. See id. ¶ 67. After the close of the MIPA, Energy Transfer renamed the purchased asset “ETC Field Services LLC.” See id. ¶ 68. After Defendants and Energy Transfer – but not Field Services – agreed to the commercial terms of the MIPA (but prior to its closing), Field Services alleges that PER and Cardinal prepared 5 a virtual data room for the MIPA transaction. See id. ¶ 58. Field Services further alleges that representatives of Energy Transfer – but not of Field Services – reviewed the materials in the data room. See id. ¶ 60. The crux of Field Services’ Petition is that two pieces of information were omitted from the data room: (1) Cardinal’s 2013 presentation to PER which had proposed the construction of high-pressure discharge pipelines and (2) documents reflecting an agreement requiring Field Services to build future compressor stations and high-pressure discharge pipelines (the “Alleged Omissions”). See id. ¶ 61. Based upon the Alleged Omissions, Field Services has brought four claims against both Defendants: (Count I) Fraud, (Count II) Fraud by Nondisclosure, (Count III) Negligent Misrepresentation, and (Count IV) Civil Conspiracy. Counts I-III shall hereinafter be the “Tort- Based Claims.” As set forth in detail below, all of Field Services’ claims fail as a matter of law because PER made no representations or omissions to Field Services, owed no duty of disclosure to Field Services, and Field Services could not have justifiably relied on certain alleged omissions which were intended solely for Energy Transfer. They also fail as a matter of law because they are barred by the applicable statutes of limitations. III. MOTION TO DISMISS PURSUANT TO TEX. R. CIV. P. 91A Certified Document Number: 107632989 - Page 6 of 20 A. Legal Standard 1. Rule 91a.2 Pursuant to Rule 91a.2, PER states that this Motion seeks dismissal of all the causes of action asserted against PER in the Petition, namely: • Fraud; • Fraud by nondisclosure; 6 • Negligent misrepresentation; • Civil conspiracy. Pet. at 2126. All these causes of action have no basis in law or fact. 2. Timeliness of Motion PER filed its Motion to Dismiss within 60 days of service of the Petition, as required by Rule 91a.3(a). 6 Moreover, PER has sought a hearing with this Court within 45 days of the filing of this Motion. 3. Dismissal Standard By the express terms of Rule 91a.1, “[a] cause of action has no basis in law if the allegations, taken as true, together with inferences reasonably drawn from them, do not entitle the claimant to the relief sought.” See In re Houston Specialty Ins., 569 S.W.3d 138, 139 n.1 (Tex. 2019) (quoting Rule). “A cause of action has no basis in fact” under Rule 91a.1 “if no reasonable person could believe the facts pleaded.” See City of Dallas v. Sanchez, 494 S.W.3d 722, 724 (Tex. 2016) (per curiam) (quoting the Rule). “[T]he court may not consider evidence in ruling on” a Rule 91a motion, but “must decide the motion “solely on the pleading of the cause of action.” TEX. R. CIV. P. 91a.6. A cause of action has “no basis in law” and requires dismissal if the facts alleged in the Certified Document Number: 107632989 - Page 7 of 20 petition are inadequate to establish liability under an asserted cause of action. See, e.g., Weizhong Zheng v. Vacation Network, Inc., 468 S.W.3d 180, 185-86 (Tex. App.—Houston [14th Dist.] 2015, pet. denied) (upholding dismissal of fraudulent inducement “cause of action”); Dailey v. Thorpe, 445 S.W.3d 785, 789 (Tex. App.—Houston [1st Dist.] 2014, no pet.) (upholding dismissal of cause 6 It is undisputed that PER was served on February 4, 2023. PER timely filed its initial Rule 91a Motion to Dismiss on April 4, 2023. As provided for by Rule 91a, PER files this Amended Motion to Dismiss to address Plaintiff’s recently filed Amended Petition. 7 of action for breach of fiduciary duty). A court must “apply the fair notice pleading standard applicable in Texas to determine whether the allegations of the petition are sufficient to allege a cause of action.” Wooley v. Schaffer, 447 S.W.3d 71, 76 (Tex. App.—Houston [14th Dist.] 2014, pet. denied). Under this standard, the pleading must give “fair and adequate notice of the facts upon which the pleader bases his claim.” Id. (citation omitted). The opposing party must be able to “ascertain from the pleading the nature, basic issues and the type of evidence that might be relevant to the controversy.” Low v. Henry, 221 S.W.3d 609, 612 (Tex. 2007). The allegations must be sufficient to allow the opposing party to “prepare a defense.” In re Lipsky, 460 S.W.3d 579, 590 (Tex. 2015). The “availability of a remedy under the facts alleged is a question of law.” Sanchez, 494 S.W.3d at 724 (citing Wooley, 447 S.W.3d at 75-76) (further citations omitted). The “rule’s factual plausibility standard” is also a legal question “akin to a legal-sufficiency review.” Id. Finally, “Rule 91a permits motions to dismiss based on affirmative defenses ‘if the allegations, taken as true, together with inferences reasonably drawn from them, do not entitle the claimant to the relief sought.’” See Bethel v. Quilling, Selander, Lownds, Winslett & Moser, P.C., 595 S.W.3d 651, 656 (Tex. 2020). IV. ARGUMENT Certified Document Number: 107632989 - Page 8 of 20 As summarized above, Defendants and non-party Energy Transfer consummated a transaction (i.e., the MIPA) by which non-party Energy Transfer became the owner of Field Services. As part of the due diligence process, the Petition alleges that certain information was not disclosed to Energy Transfer. But the Petition wholly fails to connect the dots to Field Services; whether PER disclosed certain information to Energy Transfer does not generate tort claims for Field Services. Nevertheless, Field Services now brings the three Tort-Based Claims, 8 all the elements of which must be pleaded with clear factual support. See Priddy v. Rawson, 282 S.W.3d 588, 598 (Tex. App.—Houston [14th Dist.] 2009, pet. denied) (“Fraud is never presumed, and when it is alleged, the facts sustaining it must be clearly shown.”); see also Stephanz v. Laird, 846 S.W.2d 895, 903 (Tex. App.—Houston [1st Dist.] 1993, writ denied) (“In order [] to prevail on the actionable fraud cause of action, [the plaintiff] must satisfy all elements of the tort.”). Specifically, with respect to its fraud claim, Field Services must prove: (1) PER made a material representation that was false; (2) PER knew the representation was false or made it recklessly as a positive assertion without any knowledge of its truth; (3) PER intended to induce Field Services to act upon the representation; and (4) Field Services acted in reliance on the representation and thereby suffered injury. Guzder v. Haynes & Boone, LLP, No. 01-13-00985- CV, 2015 WL 3423731, at *7 n.8 (Tex. App.—Houston [1st Dist.] May 28, 2015, no pet.) (citing Aquaplex, Inc. v. Rancho La Valencia, Inc., 297 S.W.3d 768, 774 (Tex. 2009)). With respect to its fraud by nondisclosure claim, Field Services must first prove that PER owed a duty of disclosure to Field Services, and it must then prove all of the following: (1) PER deliberately failed to disclose material facts to Field Services; (2) Field Services was ignorant of the facts and did not have an equal opportunity to discover them; (3) PER intended Field Services to act or refrain from acting based on the non-disclosure; and (4) Field Services relied on the non- Certified Document Number: 107632989 - Page 9 of 20 disclosure, which resulted in injury. Natour v. Bank of Am., N.A., No. 4:21-CV-00331, 2022 WL 2252588, at *4 (E.D. Tex. June 22, 2022) (citing Bombardier Aero. Corp. v. SPEP Aircraft Holdings, LLC, 572 S.W.3d 213, 219-20 (Tex. 2019)). With respect to its negligent misrepresentation claim, Field Services must prove the following: (1) PER made a representation in the course of its 's business,; (2) PER supplied “false information” to Field Services; (3) PER did not exercise reasonable care or competence in 9 obtaining or communicating the information; and (4)Field Services suffered pecuniary loss by justifiably relying on the representation. Lindsey Constr., Inc. v. AutoNation Fin. Services, LLC, 541 S.W.3d 355, 366 (Tex. App.—Houston [14th Dist.] 2017, no pet.) (citing Federal Land Bank Ass’n of Tyler v. Sloane, 825 S.W.2d 439, 442 (Tex. 1991)). Even accepting as true the facts alleged in Field Services’ Petition, there is simply no plausible cause of action under which Field Services can recover based upon Alleged Omissions in the MIPA transaction between PER and non-party Energy Transfer. Indeed, Field Services fails to plead multiple elements of each of its Tort-Based Claims. And further still, based on Field Services’ own admissions in its Petition, Field Services knew of its claims no later than the end of 2018 and, therefore, its claims are all barred by the applicable statutes of limitations. For multiple, independent reasons, all four of Field Services’ claims fail as a matter of law and should be dismissed with prejudice. A. All Three Tort-Based Claims Should Be Dismissed Under Rule 91a Because Field Services’ Alleged Reliance on the Alleged Omissions Was Not Justifiable. Field Services’ alleged reliance on the Alleged Omissions is not justifiable as a matter of law because PER and Cardinal negotiated the MIPA with Energy Transfer, not Field Services. It is axiomatic that under Texas law that “[r]eliance is a necessary element of both negligent misrepresentation and fraud.” Van Marcontell v. Jacoby, 260 S.W.3d 686, 691 (Tex. App.—Dallas Certified Document Number: 107632989 - Page 10 of 20 2008, no pet.). The same is true of fraud by nondisclosure. Natour, 2022 WL 2252588, at *4. A plaintiff establishes reliance by showing that “it actually relied on the defendant’s representation and that such reliance was justifiable.” Fuller v. Le Brun, 616 S.W.3d 31, 41 (Tex. App.—Houston [14th Dist.] 2020, pet. denied); see also Van Marcontell, 260 S.W.3d at 691 (“A plaintiff establishes reliance by showing the defendant’s acts and representations induced him to either act or refrain from acting, to his detriment.”). 10 Here, Field Services does not (and cannot) allege that it justifiably relied on the Alleged Omissions because the Alleged Omissions were intended, if at all, for Energy Transfer—not Field Services. This lack of justifiable reliance renders all three of Plaintiff’s Tort-Based Claims fatally flawed. See TCA Bldg. Co. v. Entech, Inc., 86 S.W.3d 667, 674 (Tex. App.—Austin 2002, no pet.) (“An essential element of a common-law fraud action is a plaintiff’s reasonable or justifiable reliance upon the defendant’s alleged misrepresentation . . . .”); Van Marcontell, 260 S.W.3d at 691. Thus, the Tort-Based Claims should be dismissed under Rule 91a with prejudice. See, e.g., Patterson v. Five Point Cap. Midstream Funds I & II, L.P., No. 01-19-00643-CV, 2020 WL 7213348, at *9 (Tex. App.—Houston [1st Dist.] Dec. 8, 2020, no pet.) (“[A] fraud claim should be dismissed under Rule 91a when reliance on an alleged misrepresentation is not justifiable as a matter of law.”); Darnell v. Rogers, 588 S.W.3d 295, 305 (Tex. App.—El Paso 2019, no pet.) (“The false information alleged [by plaintiff] concerned a matter about which [plaintiff] had personal knowledge. Although [plaintiff] summarily alleges that he relied on this false information, no reasonable person could believe that he did so. In addition, no such reliance would be justifiable, as a matter of law. For this additional reason, the claim for negligent misrepresentation lacks any basis in law or fact.”) (cleaned up). The court’s decision in Jordan v. Jordan, No. 05-98-01971-CV, 2001 WL 856209, at *3 Certified Document Number: 107632989 - Page 11 of 20 (Tex. App.—Dallas July 30, 2001, no pet.), further demonstrates why Field Services could not have justifiably relied on the Alleged Omissions as a matter of law. In Jordan, the plaintiff husband and defendant wife were divorced, and the defendant wife represented to the manager of a building owned by the plaintiffs that she was to receive sixty percent of the rent from the building. See id. Consequently, the building manager canceled its contract with the plaintiffs, and the 11 plaintiffs sued for fraud and negligent misrepresentation based on the defendant wife’s communication to the manager. The trial court dismissed both the fraud and negligent misrepresentation claims in response to the defendant wife’s special exceptions, and the Court of Appeals affirmed the dismissal. See id. at *3-4. In so doing, the court explained: [T]he person whom the speaker intends to influence and who relies on the speaker’s misrepresentation has a claim for fraud; a complainant cannot assert another’s reliance, even if the action taken in reliance on a misrepresentation causes injury. Likewise, liability for negligent misrepresentation is limited to the person . . . whom the maker of the representation intends to benefit or who foreseeably may be expected to rely on the information . . . . Id. at *3. Thus, the court held: “[Plaintiffs’ petition] does not allege that the [plaintiffs] took any action in reliance on any of the alleges misrepresentation[s]. Any reliance by [the manager] cannot support a claim for fraud, intentional misrepresentation, or negligent misrepresentation by the [plaintiffs]. Therefore, the [plaintiffs] failed to allege a cause of action for fraud or misrepresentation. We conclude the trial court properly dismissed the causes of action for fraud and misrepresentation.” Id. at *4. Likewise, here Field Services does not allege that it took any action in reliance on the Alleged Omissions. And any alleged reliance by Energy Transfer cannot support a claim for fraud Certified Document Number: 107632989 - Page 12 of 20 or negligent misrepresentation by Field Services. As a matter of law, consistent with Jordan, Energy Transfer’s alleged reliance on the Alleged Omissions cannot be imputed to Field Services. Therefore, the Tort-Based Claims should be dismissed with prejudice. See, e.g., id.; DeVoll v. Demonbreun, No. 04-14-00116-CV, 2014 WL 7440314, at *3 (Tex. App.—San Antonio Dec. 31, 2014, no pet.) (“Because DeVoll did not allege facts demonstrating reliance or harm, 12 his fraud claim has no basis in law. Accordingly, the trial court did not err in granting Demonbreun’s Rule 91a motion to dismiss in relation to DeVoll’s fraud claim.”). B. Field Services’ Fraud By Nondisclosure Claim Should be Dismissed Because PER Had No Duty to Disclose Anything to Field Services. Field Services has failed to set forth a cognizable claim for fraud by nondisclosure because Field Services does not (and cannot) allege that PER owed a duty to disclose the Alleged Omissions to Field Services. . “As a general rule, a failure to disclose information does not constitute fraud unless there is a duty to disclose the information. Thus, silence may be equivalent to a false representation only when the particular circumstances impose a duty on the party to speak and he deliberately remains silent. Whether such a duty exists is a question of law.” Marshall v. Kusch, 84 S.W.3d 781, 786 (Tex. App.—Dallas 2002, pet. denied) (cleaned up) (emphasis added); see also In re 3M Combat Arms Earplug Prod. Liab. Litig., No. 3:19MD2885, 2021 WL 6882666, at *3 (N.D. Fla. Oct. 26, 2021) (“[A]t a minimum, Texas law requires some kind of transaction between the parties before a duty to disclose arises.”). The court’s decision in Marshall is instructive as to why PER had no duty to disclose the Alleged Omissions to Field Services. In Marshall, the defendant sold a ranch to a third party, Gilmore-Barclay (i.e., not the plaintiff), but he did not disclose to Gilmore-Barclay that a previous anthrax outbreak on the reach led to the deaths of several animals. See id. at 783. Gilmore-Barclay Certified Document Number: 107632989 - Page 13 of 20 then sold the ranch to the plaintiff, and, soon thereafter, another anthrax outbreak killed many of the plaintiff’s animals. See id. at 783-84. Based on these facts, the plaintiff sued for, inter alia, fraud by nondisclosure. On appeal, the Court of Appeals held that the defendant owed no duty to disclose anything at all to the plaintiff and, therefore, the plaintiff could not sustain a claim for fraud by omission. See id. at 786. In so doing, the court explained: “[The defendant] sold the ranch to Gilmore– 13 Barclay. Any duty to disclose he had was to Gilmore–Barclay. [The defendant] was not the seller nor was he involved in the sales transaction with [the plaintiff]. Accordingly, [the defendant] had no duty to disclose anything to [the plaintiff].” Id.; see also Natour, 2022 WL 2252588, at *5 (holding that “[p]laintiffs claim against [d]efendants for fraud by nondisclosure fails as a matter of law” where “[p]laintiffs failed to supply any facts or evidence which would show the [defendants] owed [p]laintiffs a duty to disclose certain information”); Pellegrini v. Cliffwood-Blue Moon Joint Venture, Inc., 115 S.W.3d 577, 581 (Tex. App.—Beaumont 2003, no pet.) (“We find no duty to disclose the prior development of the West Ridge Prospect under the circumstances of this arms- length commercial transaction. Because there was no duty to disclose, the fraud claim should not have been submitted to the jury.”). Here, Field Services baldly alleges that PER had a duty to make certain disclosures, but it did not (and cannot) plead the basis for that alleged duty. See Pet. ¶ 88. Indeed, consistent with the above authorities, no such duty exists. Insofar as PER had a hypothetical obligation to place certain data into the data room in advance of the closing of the MIPA, an arms-length commercial transaction, any such duty was owed only to Energy Transfer, but not Field Services. Just as the plaintiff in Marshall could not sustain a fraud by nondisclosure claim because the defendant was not a party to the transaction at issue, so too here Field Services cannot sustain a fraud by Certified Document Number: 107632989 - Page 14 of 20 nondisclosure claim against PER because it is not a party to the MIPA. Absent a duty to disclose, Field Services’ fraud by nondisclosure claim fails as a matter of law and should be dismissed with prejudice. C. Field Services’ Fraud and Negligent Misrepresentation Claims Fail Because Field Services Has Not Alleged Any Affirmative Misrepresentations. Under Texas law, fraud by misrepresentation and fraud by nondisclosure are distinct causes of action with distinct elements. See Rio Grande Royalty Co. v. Energy Transfer Partners, L.P., 14 620 F.3d 465, 468 (5th Cir. 2010) (“To state a claim of fraud by misrepresentation under Texas law, a plaintiff must sufficiently allege (1) a misrepresentation that (2) the speaker knew to be false or made recklessly (3) with the intention to induce the plaintiff's reliance, followed by (4) actual and justifiable reliance (5) causing injury. Alternatively, a plaintiff may, in limited circumstances, claim fraud by omission . . . .”) (cleaned up) (emphasis added); see also id. (“Therefore, to prevail under either theory — affirmative misrepresentation or omission — the plaintiff must allege some defect in the defendants' voluntary reports to Platts.”) (emphasis added). Where a plaintiff fails to plead an actionable material misstatement, as opposed to an omission, there is no valid claim for fraud by misrepresentation. See id. at 469 (“The plaintiff has failed to allege either a material misstatement or actionable omission on the part of the defendants and so has failed to state a claim for fraud.”). As with fraud by misrepresentation, negligent misrepresentation likewise requires an allegation of an affirmative misrepresentation. In re Precept Bus. Servs., Inc., No. 01-31351-SAF- 7, 2004 WL 2074169, at *9-10 (Bankr. N.D. Tex. Aug. 23, 2004) (“[A] fa