Oil and Gas Lawyer Blog
The Texas Supreme Court yesterday denied Samson Exploration’s petition for review, ending a long-fought fraud case against Samson that began in 2007. The case was before the Court for the second time; in its first opinion in 2015 the Supreme Court reversed a court of appeals’ judgment throwing out the Hooks’ $21 million judgment against Samson and remanded to the court of appeals for further proceedings. In 2016 the court of appeals affirmed all but $2.6 million of the judgment, leaving in place a judgment for $17.5 million plus interest.
The Hooks claimed damages resulting from Samson’s fraudulent misrepresentation of the location of a well it drilled adjacent to the Hooks’ property. The Houston Court of Appeals’ first opinion in the case threw out the judgment because the Hooks’ claim was barred by limitations. But one Justice on the court made clear that he was joining the majority only because he was bound to do so by the Supreme Court’s opinion in BP v. Marshall:
In that case, the Texas Supreme Court makes clear that no lies on the part of a lessee, however self-serving and egregious, are sufficient to toll limitations, as long as it is technically possible for the lessor to have discovered the lie by resort to the Railroad Commission records. This burden the Court imposes upon lessors is severe. It is now a lessor’s duty to presume that any statement made by its lessee is false and to ransack the esoteric and oft-changing records at the Railroad Commission to discover the truth or falsity of its lessee’s statements. If, as is often the case, these records are technical in nature and require expert review to ferret out the truth, it is the lessor’s job to hire experts out of its own pocket to perform such a review. If a lessor fails to take these steps, then it will have failed in exercising reasonable diligence to protect its mineral interests and, if the lessee’s fraud is successful for longer than the limitations period, the lessor’s claims will be barred by limitations.
In its decision, the Supreme Court distinguished its earlier rulings in BP v. Marshall and Shell v. Ross. Samson had filed conflicting records at the RRC as to the offending well’s location, at least one of which was clearly false. The Court said:
We hold that when the defendant’s fraudulent misrepresentations extend to the Railroad Commission record itself, earlier inconsistent filings cannot be used to establish, as a matter of law, that reasonable diligence was not exercised. Under these circumstances, reasonable diligence remains a fact question. The factfinder, no doubt, may consider the failure to examine older records when determining whether reasonable diligence was exercised, but their availability is not enough to establish that reasonable diligence was not exercised as a matter of law.
The Supreme Court then remanded to the court of appeals to decide whether the jury’s verdict was “against the great weight and preponderance of the evidence.” On remand, the court of appeals found that there was sufficient evidence to support the fraud verdict. Samson then sought review by the Supreme Court, and the Court requested that the parties file briefs on the merits, usually an indication that the Court will agree to hear the case. But yesterday the Court denied Samson’s petition for review.
Pat Lochridge of the McGinnis Lochridge firm in Austin, one of the premier oil and gas litigators in Texas and a great human being, tried the case for the Hooks. Unfortunately, Pat died last year from cancer, before he could know the final outcome of his case. I intend to raise a glass tonight in honor of Pat’s victory.