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Barton Properties, Inc., A California Corporaiton and Kentuck Oil LLC v. John Burse

June 23, 2011


The opinion of the court was delivered by: Dean D. Pregerson United States District Judge



[Motion filed on 1/21/11]

Presently before the court is defendant John Robbins ("Robbins")'s Motion to Dismiss First Amended Complaint. Having reviewed the papers submitted by the parties, the court DENIES the motion and adopts the following order.

I. Background

Robbins placed an internet advertisement ("the Advertisement") for a "750 Acre Lease Package w/33 Oil Wells for Sale or [Joint Venture]."*fn1 (First Amended Complaint ("FAC") ¶ 11. The Advertisement stated that each lease in the package had "something special" about it, and that each lease had "either got a good history of production or [is] adjacent to properties that have production." (FAC ¶ 11.)

On February 15, 2010, Plaintiffs, represented by Stephen R. Selinger ("Selinger"), responded to the Advertisement. Between February 15, 2010 and March 13, 2010, Robbins repeatedly informed Plaintiffs of the opportunity to purchase interests in leases on oil wells that were ready to produce oil, and told Plaintiffs that investment in "the existing, equipped wells" "would likely yield significant oil." (FAC ¶ 12.) Robbins also informed Plaintiffs that he used a standard lease form to acquire oil leases from property owners, and forwarded Plaintiffs a copy of the standard lease form. (FAC ¶ 13.)

Robbins continued to discuss the leases with Plaintiffs over the telephone into May 2010. In the telephone conversations, Robbins represented to Plaintiffs that any payments received from Plaintiffs would be forwarded to the property owners who had leased to Robbins. (FAC ¶ 15.) Robbins, therefore, would not profit from Plaintiffs' acquisition of interests in the oil leases, but rather would only make money if significant oil was actually found. (FAC ¶ 15).

Between March 12, 2010 and May 20, 2010, Plaintiffs entered into four separate purchase agreements for investments in oil leases. (FAC ¶ 17-21.) The agreements called for payments of over $150,000 to Robbins. (Id.) Three of the agreements contained provisions obligating Robbins to assist Plaintiffs in operating the oil leases and acquiring drilling and pumping services. (FAC ¶ 17-20.) Plaintiffs continued to invest funds, at Robbins's suggestion, in pursuit of oil production. (FAC ¶ 22.)

Plaintiffs discovered little or no oil. (FAC ¶ 23.) Plaintiffs also discovered that the wells described by Robbins did not function, or were otherwise unsuitable for oil production. (Id.) Plaintiffs also discovered that, contrary to Robbins' representations, certain leases were not free from liens and encumbrances. (Id.) In August 2010, one of the landowners who had leased to Robbins informed Plaintiffs that he had earlier personally informed Robbins that none of the lease properties was likely to produce oil. (FAC ¶ 24.) The lessor also informed Plaintiffs that he had told Robbins that the leased wells were not suitable for oil production, and further revealed that Robbins used a handwritten note, not the standard lease form, to acquire the oil leases. (FAC ¶ 26).

Plaintiffs ultimately brought suit against Robbins alleging fifteen causes of action, including fraud and securities fraud. Robbins now moves to dismiss the entire complaint.

II. Legal Standard

A complaint will survive a motion to dismiss when it "contain[s] sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). When considering a Rule 12(b)(6) motion, a court must "accept as true all allegations of material fact and must construe those facts in the light most favorable to the plaintiff." Resnick v. Hayes, 213 F.3d 443, 447 (9th Cir. 2000). Although a complaint need not include "detailed factual allegations," it must offer "more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Iqbal, 129 S. Ct. at 1949. Conclusory allegations or allegations that are no more than a statement of a legal conclusion "are not entitled to the assumption of truth." Id. at 1950. In other words, a pleading that merely offers "labels and conclusions," a "formulaic recitation of the elements," or "naked assertions" will not be sufficient to state a claim upon which relief can be granted. Id. at 1949 (citations and internal quotation marks omitted).

"When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement of relief." Id. at 1950. Plaintiffs must allege "plausible grounds to infer" that their claims rise "above the speculative level." Twombly, 550 U.S. at 555-56. "Determining whether a complaint states a plausible claim for relief" is "a context-specific task that ...

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