Equinor Energy L.P. et al v. Sunny Acres, LLC et al

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NORTH DAKOTA
Equinor Energy L.P. f/k/a and a/k/a )
Brigham Oil & Gas L.P. and Statoil ) ORDER DENYING MOTION
Oil & Gas L.P., ) TO DISMISS
)
Plaintiffs, )
)
vs. ) Case No. 1:21-cv-082
)
Sunny Acres, LLC and Larry Novak, )
)
Defendant. )
______________________________________________________________________________
Before the Court is the Defendant Larry Novak’s motion to dismiss filed on June 4, 2021.
See Doc. No. 9. The Plaintiffs filed a response in opposition to the motion on June 25, 2021. See
Doc. No. 12. For the reasons below, the motion is denied.
I. BACKGROUND
Equinor Energy LP (“Equinor”) is a Delaware Limited Partnership with its principal place
of business in Austin, Texas. Equinor was formerly known as Brigham Oil & Gas L.P. Based on
the citizenship of its members, Equinor is a citizen of Delaware, Nevada, and Texas.
Sunny Acres LLC (“Sunny Acres”) is a North Dakota limited liability company with its
principal place of business in Alexander, North Dakota. Larry Novak is a citizen and resident of
North Dakota and the president of Sunny Acres.
On March 3, 2012, Novak, on behalf of Sunny Acres, signed a participation agreement with
Brigham Oil & Gas L.P. indicating Sunny Acres agreed to participate in the drilling and completion
of the Greenstein 30-31 #1H well. Sunny Acres was the owner of oil and gas leases and a working
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interest in the area underlying the Greenstein 30-31 #1H well. Brigham/Equinor was to be the
driller and operator of the Greenstein 30-31 #1H well. By agreeing to participate in the well, Sunny
Acres agreed to pay a reasonable and proportionate share of the drilling costs. Equinor contends
Sunny Acres failed to pay its proportionate share of the costs.
On April 4, 2021, Equinor brought this action against Sunny Acres for breach of contract and
named Novak as a Defendant in an attempt to pierce the corporate veil and impose liability on
Novak personally. Equinor alleges Sunny Acres and Novak are not actually separate entities and
allowing the illusion to persist would work an injustice. Equinor seeks to pierce the corporate veil
and impose joint and several liability on Sunny Acres and Novak. To this end, Equinor alleges that
“upon information and belief, the requisite corporate formalities were not consistently and properly
observed” and Sunny Acres “was a mere device, sham, or alter ego used to disguise wrongs or avoid
legal obligations.” See Doc. No. 1, ¶ 14.
II. STANDARD OF REVIEW
Rule 8(a)(2) of the Federal Rules of Civil Procedure requires a pleading to contain a “short
and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P.
8(a)(2). Rule 12(b)(6) of the Federal Rules of Civil Procedure mandates the dismissal of a claim
if there has been a failure to state a claim upon which relief can be granted. In order to survive a
motion to dismiss under Rule 12(b)(6), a complaint must contain “sufficient factual matter, accepted
as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (quotes omitted). A plaintiff must show that success on the merits is more than a “sheer
possibility.” Id. A complaint does not need to contain detailed factual allegations, but it must
contain more than labels and conclusions. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).
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The court must accept all factual allegations of the complaint as true, except for legal
conclusions or “formulaic recitation of the elements of a cause of action.” Iqbal, 556 U.S. at 678.
A complaint does not “suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual
enhancement.’” Id. The determination of whether a complaint states a claim upon which relief can
be granted is a “context-specific task that requires the reviewing court to draw on its judicial
experience and common sense.” Id. at 679. Dismissal will not be granted unless it appears beyond
doubt the plaintiff can prove no set of facts entitling him to relief. Ulrich v. Pope Cty., 715 F.3d
1054, 1058 (8th Cir. 2013).
III. LEGAL DISCUSSION
Novak contends in his motion that Equinor has failed to properly plead piercing the corporate
veil. Specifically, Novak contends Equinor has failed to articulate any supporting facts and that in
light of Iqbal and Twombly, the claim against Novak for piercing the corporate veil should be
dismissed. Equinor contends it has alleged all necessary facts to support a claim to pierce the
corporate veil. In addition, Equinor contends the documents and information which would further
support the claim are in Novak’s possession and piercing the corporate veil is best considered an
equitable remedy rather than an independent claim.
“Whether to pierce a corporate veil is a legal determination that is governed by state law.”
Depositors Ins. Co. v. Hall’s Rest., Inc., 717 F. App’x 653 (8th Cir. 2018). In this diversity action
the Court will apply the law of the forum state. In North Dakota, limited liability companies, like
corporations, enjoy limited liability such that a member or owner of a limited liability company
generally is not liable for company debts. Bakke v. D & A Landscaping Co., LLC, 820 N.W.2d 357,
360 (N.D. 2012). However, a member or owner of a limited liability company will be personally
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responsible if the conditions and circumstances which would permit a corporation’s corporate veil
to be pierced are present. Monster Heavy Haulers, LLC v. Goliath Energy Servs., LLC, 883 N.W.2d
917, 926 (N.D. 2016). A request to pierce the corporate veil is simply a means of imposing liability
for an underlying cause of action and is not a cause of action in and of itself. Id. The factors to be
considered in determining whether to pierce the corporate veil are as follows:
(1) insufficient capitalization for the purposes of the corporate undertaking;
(2) failure to observe corporate formalities;
(3) nonpayment of dividends;
(4) insolvency of the debtor corporation at the time of the transaction in
question;
(5) siphoning of funds by the dominant shareholder;
(6) nonfunctioning of other officers and directors;
(7) absence of corporate records; and
(8) the existence of the corporation as merely a facade for individual dealings.
Id. at 926-27. “An element of injustice, inequity or fundamental unfairness must be present before
a court may properly pierce the corporate veil.” Id. at 927. Not all the factors need be demonstrated
in order to pierce the corporate veil. Id.
This Court, like other district courts in the Eighth Circuit, is reluctant to dismiss an attempt
to pierce the corporate veil in the early stages of a case on a motion to dismiss. See Foreman Elec.
Servs., Inc. v. Haliron Power, LLC, No. 4:19-CV-4157, 2022 WL 55015, at *3 (W.D. Ark. Jan. 5,
2022) (noting the court was hesitant to dismiss actions that attempt to pierce the corporate veil on
a motion to dismiss); Container Life Cycle Mgmt. LLC v. Safety Mgmt. Servs. Co., No.
6:20-CV-06001, 2020 WL 2843224, at *6 (W.D. Ark. June 1, 2020) (noting veil piercing is a
factually intensive inquiry and acknowledging the possibility of prematurely deciding this issue on
a motion to dismiss); Ward v. Shad, No. 18-CV-01933, 2019 WL 1084219, at *5 (D. Minn. Mar.
7, 2019) (noting that providing notice of the intent to pierce the corporate veil was sufficient to
withstand a motion to dismiss). The Court finds Equinor’s allegations, although minimal, are
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sufficient at this stage of the proceedings under Rule 8, Twombly, and Iqbal. Equinor alleges Novak
failed to consistently and properly maintain corporate formalities and that Sunny Acres was a mere
deice, sham, and alter ego used to disguise wrongs and avoid legal obligations - namely the failure
to pay invoices. Equinor further alleges the failure to pierce the corporate veil would work an
injustice. These allegations are sufficient to put Novak on notice as to Equinor’s intent to pierce the
corporate veil. It is important to remember that under North Dakota law the intent to pierce the
corporate veil is not a distinct claim for relief but rather a means of imposing liability. Monster
Heavy Haulers, 883 N.W.2d at 926. Discovery will reveal evidence as to the relationship between
Novak and Sunny Acres and the ultimate burden remains on the Plaintiff. Dismissal at this stage
of the proceedings is unwarranted.
IV. CONCLUSION
Accordingly, and for the reasons set forth above, the Defendant Larry Novak’s motion to
dismiss (Doc. No. 9) is DENIED.
IT IS SO ORDERED.
Dated this 23rd day of February, 2022.
/s/ Daniel L. Hovland
Daniel L. Hovland, District Judge
United States District Court
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