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CAUSE NO. 2013-06598
SUN COAST RESOURCES, INC., § IN THE DISTRICT COURT
Plaintiff,
OF HARRIS COUNTY, TEXAS
PLAINS MARKETING, L.P.,
Defendant. JUDICIAL DISTRICT
PLAINS MARKETING SUPPLEMENTAL BRIEF IN OPPOSITION TO SUN
COAST’S MOTION TO RE URGE ITS MOTION FOR SUMMARY JUDGMENT ON
PLAINS’ FRAUDULENT INDUCEMENT CLAIM BASED ON NEW EVIDENCE
Plains Marketing, L.P. (“Plains”) respectfully files this Supplemental Brief in Opposition
Sun Coast’s “Motion to Re Urge its Motion for Summary Judgment on Plains’ Fraudulent
Inducement Claim Based on New Evidence” (this “Supplemental Brief ), and would show the
Court as follows:
NTRODUCTION
The Court should deny Sun Coast’s “Motion to Re-Urge its Motion for Summary
Judgment on Plains’ Fraudulent Inducement Claim Based on New Evidence” (the “Motion to
Urge”). The reasons why are straightforward.
First, Sun Coast promised the but it has not provided any evidence
that it did not have before filing its original motion.
Second, even ifSun Coast did have new evidence, th Court would be well within its
rights to refuse to give Sun Coast a second bite at the apple.
Third, as a matter of law, Sun Coast’s legal position is simply wrong. Texas law is
crystal clear that failure to perform constitutes evidence of fraudulent intent.
At the hearing on September 12, 2017, the Court raised two additional concerns
regarding Plains’ fraudulent inducement counterclaim:
1. The Court was concerned about the effect of the contract’s notice provision on Plains’
counterclaim.
2. The Court was also concerned about the effect of the district split in July 2012, and
whether Alan Ritchey actually provided substitute service for Sun Coast after that date.
As explained below, neither issue is relevant to the legal argument raised by Sun Coast—i.e.,
that there is no evidence of fraudulent intent. Regardless, neither issue forecloses any of Plains’
claims.
II. BACKGROUND
The core of this case is very simple: Sun Coast promised to provide efficient, effective
crude oil hauling services. It failed to do so. Sun Coast knew it was failing to live up to its
obligations, but instead of remedying its operational problems, it invented millions of dollars in
false “stand-by time” charges and submitted them to Plains for payment. The evidence in the
record shows—and the testimony at trial will show—that Sun Coast had no intention of
performing at the time it contracted with Plains. The evidence further shows that Sun Coast
knew exactly what it was doing and deliberately concocted a scheme to overbill Plains for its
underperformance.
Plains’ fraudulent inducement counterclaim relates to both the original contract that the
parties executed in February 2012 and the amendment to the contract that the parties executed in
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September 2012. Plains has alleged Sun Coast fraudulently induced it into both the original
contract and the amendment.
Sun Coast’s Motion to Re-Urge relates exclusively to one narrow issue regarding
Plains’ fraudulent inducement counterclaim: Sun Coast claims there is no evidence that Sun
Coast intended to fraudulently induce Plains into the contract and amendment. In other words,
Sun Coast claims the “intent” element of Plains’ fraudulent inducement counterclaim is not
satisfied, and so the counterclaim should be dismissed. The Motion to Re-Urge does not address
Plains’ breach of contract or fraud counterclaims in any way.
There is ample evidence in the record that Sun Coast intended to fraudulently induce
Plains into both the original contract and the amendment. For one thing, Sun Coast’s internal
emails show that it knew it was sending Plains invalid charges that were derived from a
“formula” rather than the drivers’ “actual times” spent working. Ex. 1. Sun Coast worried that
Plains would “notice” this discrepancy when it reviewed Sun Coast’s bills. Id. Sun Coast
concocted its formula for fraudulent “stand-by time” before entering into the contract
amendment that defined permissible “stand-by time.” See Ex. 2.
For another thing, Sun Coast’s abysmal performance throughout the contract period
constitutes more than sufficient circumstantial evidence that it never intended to perform as
promised at the time it entered into the original contract. Sun Coast’s shoddy operations led to a
litany of complaints from producers in the field and Plains’ personnel. Among Sun Coast’s
operational problems were the following:
Improperly rejecting loads, failing to show up to haul dispatched loads even after being
called multiple times, failing to properly record information on load tickets, and making a
mess on leases. See Ex. 3; Ex. 4.
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Leaving trash on leases and causing property damage on leases. See Ex. 5.
Failing to properly enter load information into Plains’ tracking system. See Ex. 6.
Failing to haul the correct tank numbers on leases, even though the tank numbers were
specified in Plains’ dispatches to Sun Coast. See Ex. 7 at 4.
These problems were persistent and pervasive throughout the contract period. See Plains’
Consolidated Response in Opposition to Plaintiff Sun Coast Resources, Inc.’s Motions for Partial
Summary Judgment on Plains’ Fraud and Fraudulent Inducement Counterclaims (filed October
31, 2016).
III. ARGUMENT
A. Sun Coast simply has not provided any “new evidence” that warrants reopening its
motion for summary judgment.
As Plains explained to the Court in its briefing and at the hearing on September 12, 2017,
Sun Coast simply has not submitted any new evidence in support of reopening its previously
denied motion for summary judgment. The snippets of deposition testimony Sun Coast cites at
best “confirm” (to use Sun Coast’s own term) information that Sun Coast had already known for
over a year through Plains’ interrogatory responses—which were verified by the very same
witnesses whose depositions Sun Coast cites. See Plains Marketing, L.P.’s Response in
Opposition to Sun Coast’s Motion to Re-Urge its Motion for Summary Judgment on Plains’
Fraudulent Inducement Claim based on New Evidence at 5-7 (filed August 21, 2017).
The depositions did not provide any new or different information that had not been
available to Sun Coast long before it filed its motion for summary judgment. Not even Sun
Coast claims they provided any new or different information. For this reason alone, there is no
reason to revisit the Court’s prior summary judgment ruling.
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B. Even if Sun Coast had presented new evidence, there would be no reason for the
Court to give Sun Coast a second bite at the apple.
Even if the deposition testimony Sun Coast cites constituted “new evidence”—which it
did not—that evidence was available to Sun Coast before the Court ruled on its original motion
for summary judgment. The depositions were taken on November 8 and 16, 2016, and the Court
ruled on Sun Coast’s motion for summary judgment on November 28, 2016. And there was no
reason Sun Coast had to take the depositions that close to the Court’s ruling. Sun Coast did not
start asking for the depositions until nearly a week into October 2016. See Ex. 8 at 2. It could
easily have asked for the depositions well before that. It did not do so.
As the Fourteenth Court of Appeals has held, “‘[g]enerally, a party may not rely on new
evidence in a motion for [rehearing] without showing that the evidence was newly discovered
and could not have been discovered through due diligence prior to the ruling on a summary
judgment motion.’” Bridgestone Lakes Cmty. Improvement Ass’n, Inc. v. Bridgestone Lakes
Dev. Co., Inc., 489 S.W.3d 118, 125 (Tex. App.—Houston [14th Dist.] 2016, pet. denied)
(quoting McMahan v. Greenwood, 108 S.W.3d 467, 500 (Tex. App.—Houston [14th Dist.] 2003,
pet. denied)) (second alteration in original) (emphasis added). Here, Sun Coast’s purported “new
evidence” easily could have been discovered through due diligence prior to the ruling on its
summary judgment motion. Accordingly, its Motion to Re-Urge should be denied. See id.
C. Regardless, Sun Coast’s argument is simply wrong on the merits.
Texas law is crystal clear that a party’s failure to perform under a contract is competent
evidence supporting the “intent” element of fraudulent inducement:
While a party’s intent is determined at the time the party made the representation,
it may be inferred from the party’s subsequent acts after the representation is
made. Intent is a fact question uniquely within the realm of the trier of fact
because itso depends upon the credibility of the witnesses and the weight to be
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given to their testimony. Failure to perform, standing alone, is no evidence of the
promissor’s intent not to perform when the promise was made. However, that fact
is a circumstance to be considered with other facts to establish intent. Since intent
to defraud is not susceptible to direct proof, it invariably must be proven by
circumstantial evidence. “Slight circumstantial evidence” of fraud, when
considered with the breach of promise to perform, is sufficient to support a
finding of fraudulent intent.
Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 434–35 (Tex. 1986) (emphasis added). Here,
there is more than just “slight circumstantial evidence” of fraud—there is direct evidence that
Sun Coast knew itwas failing to live up to its contract obligations and instead billing Plains
improper and fabricated “stand-by” charges. This is more than enough to require denial of
summary judgment. See, e.g., id.; Ginn v. NCI Building Systems, Inc., 472 S.W.3d 802, 835 (Tex.
App.—Houston [1st Dist.] 2015, no pet.); Kelly v. Rio Grande Computerland Group, 128
S.W.3d 759, 770 (Tex. App.—El Paso 2004, no pet.); Arthur v. Wilson, C14-90-00210-CV, 1991
WL 35082, at *4 (Tex. App.—Houston [14th Dist.] Mar. 14, 1991, writ denied).1
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The cases Sun Coast cites in its Motion to Re-Urge are readily distinguishable. For instance, in Bank One,
Texas, N.A. v. Stewart, 967 S.W.2d 419 (Tex. App.—Houston [14th Dist.] 1998, pet. denied), the court held that
there was no evidence of fraudulent inducement by the defendants where the joint venture that the defendants had
formed continued to make payments as required under the contract at issue. Id. at 445. The holding turned on the
fact that members of joint ventures are jointly and severally liable for the joint venture’s debts.
See id. Here there is
no such issue. Sun Coast alone conceived and executed a plan to underperform and overbill Plains.
Far from furthering Sun Coast’s argument, AKB Hendrick, LP v. Musgrave Enterprises, Inc., 380 S.W.3d
221 (Tex. App.—Dallas 2012, no pet.), shows why Plains’ fraudulent inducement claim stands. In AKB Hendrick,
there was no circumstantial evidence of fraud—there was simply a failure to perform as promised. See id. at 233-
34. Here, in contrast, there is ample evidence of Sun Coast’s fraudulent scheme.
Reyna v. First Nat. Bank in Edinburg, 55 S.W.3d 58 (Tex. App.—Corpus Christi 2001, no pet.), involved
alleged failure to pay invoices for deliveries of computer equipment. Id. at 68. The parties had an overarching
agreement that the plaintiff would provide a new computer system to the defendant. Id. at 63.The defendant paid
invoices for computer equipment received, but withheld payment for equipment that had not yet been received. See
id. at 68.Again, there was no evidence of fraud—just alleged nonperformance with respect to certain invoices. See
id.
Cunningham v. Williams, 2-06-154-CV, 2007 WL 4462390 (Tex. App.—Fort Worth Dec. 20, 2007, pet.
denied), likewise turned on the absence of any evidence of fraud. Id. at *6. The defendant failed to deliver
possession of a rental property as promised. Id. There was no contention that the defendant had any intent to
defraud the plaintiff.Id. Here, in contrast, there is uncontroverted evidence that Sun Coast intended to engage in a
fraudulent scheme.
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D. The contract’s notice provision is irrelevant to fraudulent inducement, but
regardless, it specifically allows Plains to maintain its claim.
In full, the contract’s notice provision provides as follows:
Each Party hereto, whether performing or non-performing, breaching or non-
breaching, defaulting or non-defaulting shall be entitled to setoffs, claims,
counterclaims, and credits (disregarding whether a Party failed to perform,
breached first, or defaulted first) in connection with any payment or the
performance of any obligations under or in connection with this Contract or
termination of this Contract. In case of a breach of this Contract by either Party,
the non-breaching Party shall give notice of the breach and a reasonable period to
cure under the circumstances.
Ex. 9 at 6 (¶ 18) (emphases added).
Three points are important regarding this provision.
First, the notice provision only requires a party to give notice of a “breach”—i.e., a
breach of the contract. Nothing in the notice provision requires notice of a claim for fraudulent
inducement.
Second, the notice provision specifically preserves all parties’ claims even if they fail to
give the required notice. It specifically states that all parties “shall be entitled” to all claims—
“disregarding whether a Party failed to perform, breached first, or defaulted first.” Thus, even if
Plains failed to give any notice under this provision, the contract specifically provides that
Plains’ claims are not waived.
Third, fraud by its very nature is not something Plains could have put Sun Coast on
notice about. If Plains had known of Sun Coast’s fraudulent intent, it would have never entered
into the contract to begin with. Likewise, Plains certainly never would have entered into the
contract amendment (which Plains entered into after hiring Alan Ritchey) had it known the
extent to which Sun Coast was attempting to defraud it. Thus, to a large degree it does not make
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sense to suggest that Plains should have given Sun Coast notice of its fraudulent inducement or
fraud. It would not have been possible for Plains to do so.
E. The district split issue is completely irrelevant to Sun Coast’s fraudulent intent, but
regardless the issue does not reduce Plains’ damages.
From the start of the contract through June 2012, Sun Coast operated in the Elk City
District in Oklahoma. Sun Coast and Plains originally contracted for Sun Coast to haul oil from
the entire Elk City District. Plains’ expectation—and Sun Coast’s promise—was that Sun Coast
would efficiently and effectively haul crude oil over the entire area. As discussed above, Sun
Coast failed to do so.
At the end of June 2012, Plains split the former Elk City District into two separate
districts—one named the Elk City District and one named the Enid District. Plains implemented
this split solely for purposes of internal administrative efficiency. The two split districts covered
the exact same territory as the former Elk City District, and Plains continued to transport oil from
the exact same wells. Compare Ex. 10 with Ex. 11.
After the districts were split, Sun Coast was still under the same contract with Plains, and
had Sun Coast been performing adequately, Sun Coast should have been able to haul oil from
both districts. Because Sun Coast failed to do so, Plains was forced to bring in Alan Ritchey to
make up the difference.
Importantly, the issue of the Elk City/Enid district split is completely irrelevant to Sun
Coast’s fraudulent intent. Even if Sun Coast is right in its presentation of the issue, all that
means is that Plains’ damages for fraudulent inducement may be reduced. It has no effect on
Sun Coast’s liability, because the evidence proving Sun Coast’s fraudulent intent—set out
above—stands on its own regardless of whether Alan Ritchey provided any substitute service.
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IV. CONCLUSION
Sun Coast has not presented any “new evidence,” especially not any new evidence it
could not have discovered through the exercise of reasonable diligence before the Court ruled
the first time. And regardless, Sun Coast is wrong on the merits—there is more than sufficient
“slight circumstantial evidence” of fraud here. There is at least a fact issue on Plains’ fraudulent
inducement counterclaim, and Plains should be permitted to present that claim to a jury. Sun
Coast’s Motion to Re-Urge should be denied.
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Respectfully submitted,
AHMAD, ZAVITSANOS, ANAIPAKOS, ALAVI &
MENSING P.C.
/s/ John Zavitsanos
John Zavitsanos
Texas Bar No. 22251650
Elizabeth Pannill Fletcher
Texas Bar No. 24056087
Sammy Ford IV
Texas Bar No. 24061331
Mark Holden
Texas Bar No. 24092531
1221 McKinney Street, Suite 2500
Houston, Texas 77010
Telephone: (713) 655-1101
Facsimile: (713) 655-0062
PAUL DOYLE & ASSOCIATES
/s/ Paul Doyle
Paul Doyle
State Bar No 24011387
440 Louisiana Street, Suite 2300
Houston, Texas 77002
Telephone: (713) 228-9200
paul@pauldoylelaw.com
COUNSEL FOR DEFENDANT
PLAINS MARKETING, L.P.
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CERTIFICATE OF SERVICE
I hereby certify that on the 4th day of October 2017, a true and correct copy of the
foregoing was served to all counsel of record in accordance with Texas Rules of Civil Procedure
21 and 21a as follows:
Geoffrey Bracken
Rhonda R. Weiner
GARDERE WYNNE SEWELL LLP
Wells Fargo Plaza, Suite 3400
1000 Louisiana
Houston, Texas 77002
Facsimile: (713) 276-5555
gbracken@gardere.com
rweiner@gardere.com
/s/ Sammy Ford IV
Sammy Ford IV
4841-2532-2321, v. 1
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