» Texas appellate court rules against owner of royalty interest in fraudulent inducement lawsuit

Texas appellate court rules against owner of royalty interest in fraudulent inducement lawsuit

A Texas appellate court held that the owner of a royalty interest could not claim fraudulent inducement with regard to its settlement with a Shell Oil affiliate that operated the oil and gas property. In 2014, a Texas state court jury found that the Syrian American Oil Corp. (Samoco) was fraudulently induced into entering a settlement agreement in 1989 with Pecten Orient Co., a Shell affiliate that owned the property in Syria. However, the jury also found that Samoco should have discovered the issue before making the agreement.

On appeal, Samoco argued that it did not discover the fraud until 2006, when Pecten made an offer to buy the royalty interest. However, the First Court of Appeals agreed with the trial court, finding that Samoco’s 2007 lawsuit was time-barred.

The Texas appellate court also held that Pecten should have been awarded a portion of the $3.5 million in attorneys’ fees and costs that it claimed to have incurred, because the jury found that Samoco breached the agreement by filing the lawsuit. The jury awarded zero dollars in damages, but Pecten argued that it was contrary to the weight of the evidence. The court said that the evidence regarding fees was undisputed, and Samoco did not substantively challenge the attorneys’ fees evidence on appeal.

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