CHARLESTON – A Roane County oil and gas company accuse an Oregon-based company and a Charleston-based law firm of circumventing business and legal rules regarding a subscription agreement.
The defendants, however, claim the plaintiffs are trying to re-visit issues already addressed by other courts.
Drilco Oil and Gas Inc., Hugh D. Dale Jr. and Drilco 2019 IV2H Drilling Program filed their complaint in Kanawha Circuit Court against Signal Ventures Inc., Jason Adams and Charleston law firm Johnstone & Gabhart. Dale lives in Ritchie County, while Signal Ventures is based in Bend, Oregon, and Adams is the owner of the company.
According to the complaint, Signal and Adams entered into a subscription agreement with the plaintiffs on March 3, 2020, for the Drilco program. The purpose of the agreement was for Signal and Adams to purchase a percentage of interest in the Drilco program.
The plaintiffs, however, claim Adams and Signal have failed to follow the corporate formalities, including properly insuring the entity, commingling funds and failing to properly capitalize the entity for its necessary business activities.
Sometime before April 2022, according to the complaint, Signal and/or Adams filed a lawsuit in District Court in Texas against the plaintiffs. On April 26, 2022, Signal and/or Adams moved to enter default judgment against the plaintiffs in that case. The plaintiffs claim the Texas district court permitted a substitution of process that does not comport to laws and rules of the State of West Virginia, including permitting the defendants to tape a copy of the complaint and summons on the door of the plaintiffs’ office.
They say that practice also does not satisfy the Texas long-arm statute necessary to give the court jurisdiction over the plaintiffs, and they say the filing is “in direct violation of the agreement and partnership agreement” and constitutes a breach of contract.
On November 11, 2022, the Texas court entered a final judgment against the plaintiffs ordering Signal and Adams to recover almost $104,000 in actual damages from the plaintiffs, $200,000 each from each of the three plaintiffs in this lawsuit as well as post-judgment interest at a rate of 5 percent compounded annually.
“The defendant Signal Ventures and/or Jason Adams attempted to subvert the proper legal process in an attempt to receive their default judgment and unlawfully collect the damages,” the complaint states.
On March 3, 2023, Signal and/or Adams filed the notice of foreign judgment in Calhoun Circuit Court through Johnstone & Gabhart. The plaintiffs say the law firm failed to conduct any due diligence into the legitimacy of the foreign judgment prior to filing the notice.
The plaintiffs say they never received the notice of filing of foreign judgment, each summons, each writ of execution, each suggestion of personal property and every abstract of judgment in the case. They also say the defendants issued two suggestions to Peoples Bank on May 18, 2023, causing two cashier checks – one for $130,165.03 from Dale’s account and another for $303,936.15 from other accounts – payable to Signal through Johnstone & Gabhart to be issued.
“Johnstone & Gabhart became aware of the illegitimacy of the foreign judgment they sought to collect on in the underlying collection proceedings, yet, continued to abuse the legal process to collect on the foreign judgment,” the complaint states. “Johnstone & Gabhart knew or should have known that the foreign judgment was invalid and unenforceable.”
The plaintiffs accuse the defendants of violating the West Virginia Uniform Enforcement of Foreign Judgments Act, negligence, intentional infliction of emotional distress, conversion and abuse of process. They also accuse Signal and Adams of breach of contract.
They seek compensatory damages, general damages, injunctive relief to return the funds taken from the bank accounts and to prohibit the defendants from seizing more funds, nominal damages, punitive damages, court costs, attorney fees, pre- and post-judgment interests and other relief.
In the defendants’ motion to dismiss, they call the complaint the “latest effort to re-visit issues that have been addressed by other courts.”
“Drilco has unsuccessfully challenged the Texas judgment and Signal’s collection efforts in the Circuit Court of Calhoun County, West Virginia, and the matter is now pending in the Intermediate Appellate Court of West Virginia upon Drilco’s appeal from the Circuit Court’s Final Order,” the defendants’ memorandum in support of the motion to dismiss states. “The current action fails to state a claim upon which relief may be granted and is no more than an attempt at a second bite of the apple and should be dismissed.”
The defense motion, filed by Johnstone & Gabhart partner Johnson W. Gabhart, said all of the claims asserted by Drilco in the current action are barred by res judicata, a lack of personal jurisdiction over the defendants or are not supported by facts alleged in the complaint.
“For these reasons, Drilco’s complaint in this action should be dismissed,” Gabhart wrote. “In the alternative, should the court find the dismissal is not warranted at this time, the matter should by stayed … until the Intermediate Appellant Court has ruled on Drilco’s currently pending appeal from the Final Order of the Circuit Court of Calhoun County, which may be dispositive of Drilco’s claims in this action.”
Gabhart says the plaintiffs have failed to plead adequate factual support to enable the court to assert personal jurisdiction over the non-resident defendants.
“The fact that they have retained West Virginia counsel that maintains an office in West Virginia and that it has asserted its rights to enforce its judgment under West Virginia law, are not sufficient to support an allegation that the non-resident defendants are doing business in West Virginia,” he wrote. “Additionally, the claims asserted by the plaintiffs in this action all address issues that have been previously dealt with by entry of judgment by the District Court of Dallas County, Texas and by the Final Order of the Circuit Court of Calhoun County, West Virginia.
“As such each of the claims asserted is barred by res judicata or collateral estoppel. Furthermore, Signal, Mr. Adams, and their counsel, are all entitled to an absolute litigation privilege for actions taken to enforce their legal rights and remedies. Finally, the law in West Virginia is manifest and clear that the party’s attorney owes no duty to an opposing party which may give rise to a claim of negligence.”
Gabhart wrote that the plaintiffs seem to have other motivations for filing the complaint.
“In fact, the plaintiffs’ claims are so clearly without factual or legal justification, taken during the pendency of an appeal from a proceeding where the same underlying issues have been previously addressed, that the motivation for the filing of this action can only be for the purpose of harassment and gamesmanship,” he wrote. “The inclusion of Signal’s legal counsel as a party defendant, despite manifest legal authority that such claims are barred by both lack of duty and an absolute litigation privilege, can only be a transparent effort to manufacture jurisdiction in this court and to destroy diversity of citizenship.”
The plaintiffs are being represented by Vienna attorney J. Morgan Leach, who declined further comment on the case. The case has been assigned to Circuit Judge Tera Salango.
Kanawha Circuit Court case number 24-C-285
