Elk Energy Holdings, LLC v. Gotham Resource Development Company, LLC, 6:21-cv-01235

Elk Energy operated certain oil-and-gas leases and held a 15% working interest in the Lippelmann Lease; Gotham Resource held 85%.
On Jan. 27, 2020, Elk alleges Gotham agreed that Elk would drill the Shepherd #2-14 well and Gotham would pay drilling costs out of its net revenue from the Lippelmann wells.
Elk drilled the Shepherd #2-14 well (reported as a dry hole), sought reimbursement from Gotham, and withheld proceeds from the Lippelmann Lease to cover drilling expenses after Gotham refused to pay.
Elk sued Gotham for breach of contract on Aug. 27, 2021; Lippelmann Partners intervened, claiming it merged with Gotham and succeeded to Gotham’s working interest.
Lippelmann counterclaimed for conversion, alleging Elk converted $196,453.57 (July 2021 net revenue) and $93,416.30 (August 2021 net revenue), and that Elk lacked authorization.
Elk moved to dismiss the conversion counterclaim under Fed. R. Civ. P. 12(b)(6), arguing Lippelmann wasn’t the owner at the time of conversion and that Elk had permission; the court denied the motion.

Issue	Plaintiff's Argument (Lippelmann)	Defendant's Argument (Elk)	Held
Whether counterclaim sufficiently alleges Lippelmann owned the lease revenue at the time of the alleged conversion	Alleged ownership of the net-revenue interest and specific conversion dates put Elk on notice that Lippelmann owned the revenue when conversion occurred	Lippelmann only alleges current ownership (post-merger); it did not plead ownership at the time of the alleged conversions	Court: Allegations, read reasonably, sufficiently allege ownership at the time; dismissal denied
Whether counterclaim sufficiently alleges lack of authorization for Elk’s use of funds	Pleads Gotham never authorized Elk to use the old lease revenue; no consent existed when Lippelmann acquired the interest	Elk claims Gotham authorized the use, or any transfer to Lippelmann was subject to the prior drilling agreement, so Elk had permission	Court: Accepting pleaded facts as true, Lippelmann adequately alleges lack of authorization; dismissal denied
Whether factual disputes about timing/consent bar resolution on a 12(b)(6) motion	N/A — asks that pleadings be accepted as true for plausibility	Asserts timing and consent are factual defenses that defeat the claim now	Court: 12(b)(6) tests pleading plausibility, not factual resolution; factual disputes are not resolved on a motion to dismiss

Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must be plausibly suggestive of liability)
Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard and treatment of legal conclusions)
Ridge at Red Hawk, LLC v. Schneider, 493 F.3d 1174 (10th Cir. 2007) (applies Twombly standard in Tenth Circuit)
Robbins v. Oklahoma, 519 F.3d 1242 (10th Cir. 2008) (Rule 8 notice pleading discussion)
Bomhoff v. Nelnet Loan Servs., Inc., 279 Kan. 415 (Kan. 2005) (defines conversion under Kansas law)
Jones v. Addictive Behav. Change Health Grp., LLC, 364 F. Supp. 3d 1257 (D. Kan. 2019) (motion-to-dismiss standard cited by the court)