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Texas Lawmakers Pass Law to Curtail Common Oil and Gas Scam Tactic

To some extent, the history of Texas is closely tied to the state’s historically ample supply of oil and gas. Texas has been at the forefront when it comes to establishing oil and gas laws throughout the country. Unfortunately, due to the value of the commodity, over the years, enterprising scammers have come up with ways to bilk unsuspecting landowners of their mineral rights. Earlier last year, Texas lawmakers passed HB 3838, which was designed to stop one of the more common Texas oil and gas scams.

The scam worked like this: someone posing to be an employee of a reputable oil and gas operator approaches a landowner who is receiving nonparticipating royalties with what looks to be an “oil and gas lease.” The document looks and reads as though it is a typical lease for mineral interests; however, it is an agreement by which the landowner sells their interest in the land for what is termed a “bonus.” While this should be a red flag because nonparticipating royalty holders are not technically permitted to sign a lease — few owners are aware of this fact, and scam artists have been able to take advantage of this.

To help curb this dishonest practice, Texas lawmakers recently passed HB 3838. The bill was signed into law by Governor Abbott last year in June and took effect in September. It is currently codified at Texas Property Code Section 5.152, and it clarifies what language an oil and gas royalty lease must contain to be valid. The new law applies to contracts that convey mineral or royalty interests but are presented to the owner in the form of a document that “is titled an oil and gas lease or an oil and gas royalty lease.” Under the terms of the new law, for such a document to be valid, it must contain the following language in size 14 font, at the top of the document’s first page: THIS IS NOT AN OIL AND GAS LEASE. YOU ARE SELLING ALL OR A PORTION OF YOUR MINERAL OR ROYALTY INTERESTS IN (DESCRIPTION OF PROPERTY BEING CONVEYED). In addition, the same language must be displayed immediately above the signature line of the agreement. If this language is not included in an agreement, the contact will be deemed void.

As noted above, the new law went into effect in September 2019. That said, those who have been bilked prior to the passage of the new law may have other remedies available to them. However, aggrieved right holders need to act quickly to preserve all of their rights as the statutes of limitations that govern these disputes are relatively short.

Are you involved in a Texas oil and gas dispute?

If you believe that you have been the victim of a Texas oil and gas scam, contact Austin oil and gas attorney Gregory D. Jordan for immediate assistance. Choosing an attorney to represent you or your business in a Texas oil and gas dispute is a crucial decision that can save months or even years of litigation, and many thousands of dollars. At the Law Offices of Gregory D. Jordan, Mr. Jordan has been effectively handling Texas oil and gas cases for over 30 years.

Texas Court Holds Plaintiff Failed to “Pierce the Corporate Veil” of Employer 

One of the primary factors business owners consider when choosing how to set up their company is how each type of structure will impact their personal liability, should the business fail, or incur sizable debt during its operation. Historically, there have been three main types of business organization structures: sole proprietorship, partnership and corporation. Sole proprietorships and partnerships generally do not protect business owners’ personal assets. On the other hand, limited partnerships and corporations can protect businessowners’ individual assets, limiting liability to their ownership of the business. It was not until more recently that business owners had the choice to set up their business as a Limited Liability Company (LLC), which also can protect a business owner’s individual assets.

While corporations, limited partnerships and LLCs all provide for the protection of a business owner’s individual assets, that protection is not absolute. In a recent Texas employment dispute, an employee argued that his employer’s misconduct should allow him to pierce the corporate veil and hold the business owners personally liable.

According to the court’s opinion, an employee was working in an at-will position with a sign company. One day, the employee was seriously injured while working on a job. His employer did not subscribe to the Texas Workers’ Compensation program, so the injured employee was unable to obtain workers’ compensation benefits. The employee, however, filed a claim against the business and two of the business’ owners, claiming that the two owners were “the alter ego” of the sign company and also because the sign company was “a sham entity used to perpetrate a fraud.” In a brief opinion, the trial court dismissed the employee’s claim without providing a reason. The employee appealed to a higher court.

On appeal, the employee argued that the lower court should have held that the business owners’ conduct pierced the corporate veil. The court began by noting that, in general, “a corporation is presumed to be a separate entity from its officers and Shareholders.” However, a court may ignore this protection if a plaintiff can establish one of at least three situations:

  1. The corporation is an alter ego of its shareholders;
  2. The corporation is being used for an illegal purpose; or
  3. The corporation is being used as a sham to perpetrate a fraud.

Here, the court noted, that the only claim raised by the employee was that the business owners were alter egos of the sign company. The court explained that there is a general reluctance for courts to allow a corporate veil to be pierced, and that it is reserved for “exceptional circumstances.” When it comes to piercing the corporate veil on the basis of the business being the alter ego of the shareholders, courts consider whether 1) the corporation is being used as a mere conduit for another, 2) there is such “unity between corporation and individual that the separateness of the corporation has ceased” and 3) holding that only the corporation was liable would result in an injustice.  

The court went on to explain that certain facts may support a finding that a business is an alter ego of its owners, including:

  • A failure to keep the assets of the business separate from those of the business owner;
  • Inadequate capitalization;
  • The use of company profits for personal reasons;
  • Any representations that the business owner will financially back the corporation; and
  • The payment of corporate debts with personal checks, or other evidence that business owners commingled personal and business funds.

Here, the court weighed each of the factors and determined that the employee did not present sufficient evidence to pierce the corporate veil. Specifically, the court considered that there was no evidence that the business owners paid corporate debts with personal funds, comingled business and personal funds, made any representation that they would financially back the business, or used the business profits for personal use. Thus, the court rejected the employee’s claim against the business owners.

Is Your Texas Business Dealing with a Complex Legal Issue?

When success matters, every decision you make for your business is essential. Choosing which Austin business litigation firm to handle the unique issues your business faces is no exception. At the Law Offices of Gregory D. Jordan, we have over 30 years of experience helping all types of businesses deal with the full range of legal issues they confront, including breach of contract claims, and business fraud cases. We can confidently handle many problems your business may be facing. To learn more about how we can help your business through the issues it faces, call 512-419-0684 to schedule a consultation today.

Texas employees who are pregnant or recently returning from maternity leave are protected from employment discrimination

In 1964, the United States Congress passed the Civil Rights Act. The Civil Rights Act was a landmark piece of legislation that ended segregation of public places and banned discrimination based on the basis of race, color, religion, sex or national origin. The Civil Rights Act did much to combat the discrimination that was common throughout the United States at the time. However, as years passed, it became clear that the Act was not as comprehensive as lawmakers may have hoped or believed.

In the wake of the Civil Rights Act, women were still being made the victim of discrimination. This is at least partly because the Civil Rights Act protected female employees only on the basis that they were women. Thus, soon after the passage of the Civil Rights Act, courts held that an employer could legally base an employment decision on whether an employee was pregnant.

The seminal Supreme Court decision came down in 1974, and involved the availability of medical benefits. In that case, a public employer refused to cover the costs of health benefits for pregnant women. The court held that an employer who uses an employee’s pregnancy status as a basis for an employment decision is not making a decision based on a woman’s sex, and is not prohibited.

In 1978, however, the United States Congress passed the Pregnancy Discrimination Act, which amended the Civil Rights Act of 1964. Quite simply, the Act prohibited employers from discriminating based on pregnancy. The Act clarified language in the Civil Rights Act, noting that the terms “because of sex” or “on the basis of sex” include, “because of or on the basis of pregnancy, childbirth, or related medical conditions.” The Act goes on to mandate that women who are affected by a pregnancy, childbirth or related medical conditions shall be treated the same for all employment-related purposes.

According to a recent article by the New York Times, despite the passage of the Pregnancy Discrimination Act, women are still experiencing discrimination in the workplace. Indeed, studies have shown that a woman’s pay is reduced, on average, four percent for each child they have, whereas a man’s pay increases by six percent when he becomes a father.

The article notes that the number of pregnancy discrimination claims filed with the Equal Employment Opportunity Commission has been steadily increasing for 20 years, and is near an all-time high. Claims of pregnancy discrimination are not limited to the private sector, as many of the claims were brought by women working for the state, local and federal governments.

The article notes that, as soon as a woman starts to show physical signs of pregnancy, employers begin to view a woman differently. The piece details the career of a particularly successful trader who was praised as being at the top of her field until she announced that she was pregnant. Shortly after sharing the news with her boss, she was told that her decision to get pregnant would “plateau” her career. Despite arranging her schedule to ensure that family would not interfere with her work obligations, the employee has been passed over for every promotion and received only cost-of-living salary increases when many of her colleagues were given more significant increases.

Unfortunately, this woman’s case is not unique. Some less than honorable employers routinely engage in sex discrimination. And the problems do not stop once the baby arrives. New mothers also frequently experience discrimination when returning to the workplace, either on the basis of having been recently pregnant or based on their new status as a mother. Mothers returning from maternity leave often face assumptions that their work is no longer their top priority. However, when employers act on this assumption without any evidence to support a decreased commitment to the job, they may be engaging in discrimination based on familial status.

As is often the case with most types of discrimination, pregnancy discrimination is commonly based on outdated beliefs and stereotypes. However, some truly well-intentioned employers can still go awry based on a lack of understanding of the applicable laws. Employers should be sure to have a firm understanding of the Family Medical Leave Act, short- and long-term disability, and the requirements of the Pregnancy Discrimination Act to ensure that they do not inadvertently discriminate on the basis of an employee’s sex. Employees who believe that they may have been the victim of pregnancy discrimination should consult with a dedicated Austin employment law attorney for assistance.

Contact a dedicated Austin employment discrimination attorney

At the Law Offices of Gregory D. Jordan, Attorney Jordan represents both employers and employees in all types of Texas employment lawsuits and arbitration matters. Attorney Jordan has over 25 years of relevant experience assisting businesses and employees in Travis County and throughout Central Texas. Contact the Law Offices of Gregory D. Jordan at http://www.theaustintriallawyer.com/.

Texas court rejects drilling company’s claim against co-lessee for its share of the profits

Earlier this year, the Court of Appeal for the Eighth District of Texas in El Paso issued an opinion in a Texas oil and gas case discussing whether the plaintiff company was entitled to an accounting for its share of the profits from a majority-interest co-tenant. Ultimately, the court concluded that the plaintiff company’s lease had expired, eliminating any right the company had to an accounting of the profits.

The facts of the case

According to the court’s written opinion, the plaintiff company leased a one-sixth interest in a tract of land in Ward County, Texas. Another oil and gas company, the defendant, leased the remaining five-sixths of the property. The plaintiff’s lease provided for a five-year term that was “paid-up,” plus an optional second term that was to continue “as long thereafter as oil or gas is produced from said land or from land with which said land is pooled.”

The plaintiff company requested permission from the defendant to drill wells on the property. However, as the primary lessee, the defendant was able to preclude the plaintiff from drilling by withholding permission. Thus, during the initial five-year period of the lease, the plaintiff did not drill a well or produce any oil. During that time, however, the defendant company drilled several productive wells. The plaintiff was paid a portion of these profits during the initial five-year period of the lease.

When that five-year period ended, however, the defendant stopped making payments to the plaintiff. The defendant’s position was that the plaintiff’s primary lease term was over, and because the plaintiff never produced oil or gas from the land, the lease was no longer valid. The trial court agreed with the defendant and dismissed the case, and the plaintiff appealed.

The court affirms the dismissal of the plaintiff’s case

On appeal, the Court of Appeal for the Eighth District affirmed the dismissal of the plaintiff’s lawsuit. The focus of the court’s inquiry was on whether the plaintiff’s lease was still valid. If so, then the plaintiff would still be entitled to an accounting of any profits generated from the property. However, if the plaintiff’s lease had expired, then the defendant had no obligation to provide an accounting.

The plaintiff presented several arguments in favor of a finding that the lease was valid. Most importantly, the plaintiff argued that the lease was unclear, and that the defendant’s production of oil on the land could satisfy the continuation clause in the plaintiff’s lease. Essentially, the plaintiff argued oil was produced (by the defendant), and that the contract did not state whether the plaintiff had to be the one to produce it. The court disagreed, noting that notwithstanding the language in the lease, Texas courts have held such clauses to require the lessee to cause production in order to meet the continuation clause requirements. The court also noted that this interpretation was consistent with the intentions of the parties at the time the lease was formed, because the landowner would not likely have bothered leasing to the plaintiff if it planned on making no effort to extract oil or gas.

The court was similarly unpersuaded by the plaintiff’s policy argument that the court’s decision in favor of the defendant will negatively impact minority interest holders. By allowing the defendant to prevent the plaintiff from producing oil, the plaintiff claimed that the defendant effectively forced the termination of the plaintiff’s lease. The plaintiff argued that this was unfair, and would discourage others from obtaining minority interest rights in the future. The court dismissed the plaintiff’s argument, explaining that the parties were co-lessees and had no duty to each other. The court added that, presumably, the plaintiff knew of its rights when it entered into the minority-interest lease.

Are you involved in a Texas oil and gas dispute?

Oil and gas disputes can be very complicated. Choosing an attorney to represent you or your business is a crucial decision that can save months or even years of litigation, and tens of thousands of dollars. At the Law Offices of Gregory D. Jordan, we have been effectively handling Texas oil and gas cases for over 25 years. To learn more, and to schedule an initial consultation, call 512-419-0684. You can also contact us online.

Texas appellate court hears business dispute centering on tortious interference and misappropriation claims

Last month, a state appellate court issued an opinion in a Texas tortious interference case discussing whether the defendant corporation improperly “poached” workers whom the plaintiff corporation had “located and groomed.” Ultimately, the appellate court concluded that the defendant corporation was entitled to summary judgment on each of the plaintiff’s claims, affirming the dismissal of the case. 

The facts of the case

According to the court’s opinion, both plaintiff and defendant corporations are in the business of supplying offshore labor to energy companies. The plaintiff had a contract with two other companies in which one company would provide the plaintiff with laborers that the plaintiff would then place with one of its energy clients. In effect, the plaintiff corporation was the middleman in the staffing transaction. 

On December 15, 2015, the plaintiff’s client gave notice to the plaintiff that it would no longer continue to use the plaintiff’s services, because it needed a lower-cost option. After several months of discussion between the defendant corporation, the labor supplier and the plaintiff’s former client, the defendant was invited to submit a bid for the client’s business. The defendant corporation did so, and ultimately secured the client’s business. The agreement provided that the defendant would supply the same laborers that had previously been provided by the plaintiff corporation. The plaintiff corporation filed a lawsuit against the defendant alleging that the defendant engaged in tortious interference with its contracts between the labor supplier and its client. 

The trial court granted the defendant’s motion for summary judgment, noting that the plaintiff’s case was contingent on proving that the defendant misappropriated workers from the plaintiff. However, the court pointed out that the theory of misappropriation had not been applied to people, explaining “had the workers in question been employed by the plaintiff they could not have been prevented from going to work for defendants or anyone else. Why, then, where the plaintiff does not employ the workers in question, could plaintiff prevent them going to work for Defendants or anyone else?” The plaintiff appealed. 

The appellate court affirms the lower court’s decision

The court began its analysis by noting that a defendant bringing a motion for summary judgment must show “that no genuine issues of material fact exist on at least one essential element of the cause of action asserted against it and that it is entitled to judgment as a matter of law.”

To establish a claim of misappropriation, or unfair competition, the court explained that a plaintiff must establish three elements:

  • The plaintiff created a product through extensive time, labor, skill and money;
  • The defendant used that product in competition against the plaintiff, gaining a special advantage because the defendant did not have to incur the expense to develop the product; and
  • The plaintiff suffered commercial damage as a result.

The plaintiff’s claim centered on a finding that its system of locating, hiring, training and getting offshore laborers to domestic corporations constitutes a “work product.” In support of its claim, the plaintiff argued that the “institutional knowledge that it developed over time and used to craft this pool of labor,” and its “ability to navigate the international customs issues involved” constitute work product.

The court rejected the plaintiff’s claim. Initially, the court noted that knowledge, training and expertise, are not typically considered work product. The court went on to explain that the training and certification provided by the plaintiff were similarly not work product. These assets, the court held, could not be separated from the laborers themselves, once they were imparted. The court also noted that the contract the plaintiff relied on to establish its claim clearly states that the employees themselves were to remain employees of the labor-supplying corporation, meaning that they never “belonged” to the plaintiff.  

The court went on to affirm the denial of the plaintiff’s remaining claims, finding that the plaintiff’s evidence was insufficient to establish a claim of tortious interference. In so holding, the court noted that the contract between the plaintiff and its client was not in effect at the time when the defendant engaged the client, and that the plaintiff could not point to any evidence that the defendant induced the labor-supplying corporation to terminate its contract with the plaintiff.

Texas appellate court rejects employee’s claim of age discrimination, affirming arbitrator’s award in favor of employer

On July 30, 2019, the Texas Court of Appeals for the Eighth District issued a written opinion in a Texas employment discrimination lawsuit discussing whether an arbitrator correctly determined that the employee’s claim was not filed on time. The case is important for Texas employees and employers because it illustrates the need to act in a timely manner, and the deference that courts give to arbitrators’ decisions.

According to the court’s opinion, the plaintiff was hired as a trainer for Xerox in 2009. In 2016, the plaintiff was laid off. The plaintiff filed an age discrimination claim against Xerox, claiming that younger trainers with less seniority were not laid off. He also claimed that, during his tenure with the company, younger workers were given pay raises, while he was not.

The plaintiff initially filed a claim with the Equal Employment Opportunity Commission (EEOC) and the Texas Workforce Commission. On November 3, 2016, the EEOC provided the plaintiff with a right to sue letter, and the next day, the plaintiff filed a lawsuit. Xerox responded by seeking to compel arbitration of the claim under the company’s “Dispute Resolution Procedure,” (DRP) which required all claims that were not informally resolved to be handled through arbitration.

First, the parties argued over whether the plaintiff was required to arbitrate his claim. However, on May 5, 2017, the plaintiff withdrew his case and submitted his claim to an arbitrator of his choice. Xerox, however, objected to the plaintiff’s choice of arbitrator, arguing that the DRP specified the arbitrators that must hear claims against the company. Finally, on August 16, 2017, the plaintiff submitted his case to one of the arbitrators in the DRP.

The DRP provided that a plaintiff who files a claim for arbitration must bring a claim “within the time allowed by applicable law.” If a plaintiff files a case in court rather than proceeding directly to arbitration, the plaintiff must file within “ninety days after the date a party is ordered by the court to arbitration … or ninety days after the date the parties agree to submit the dispute to arbitration under the DRP.” Additionally, under the Texas Labor Code, the plaintiff had to file his claim within 60 days of receiving the right to sue letter from the EEOC.

Xerox claimed that the plaintiff filed his claim too late. The plaintiff argued that he filed his initial complaint with his chosen arbitrator within 60 days of receiving the right to sue letter. However, Xerox argued that by withdrawing his case, the plaintiff “wiped the slate clean” because there was no longer an active case to base the 60-day time period. Additionally, there was never a court order or agreement to arbitrate the claim, making the 90-day time limits mentioned above inapplicable. Thus, Xerox argued that the plaintiff was required to file his claim within 60 days of November 3, 2016, the day he received the right to sue letter. Xerox argued that the plaintiff’s initial claim with his selected arbitrator did not constitute “filing” under the DRP because it was not with the correct arbitrator.

The arbitrator found in favor of Xerox, holding that the plaintiff failed to bring a case against Xerox in the appropriate amount of time. The plaintiff filed a motion in district court to set aside the arbitrator’s award based on the alleged bias and misconduct of the arbitrator. The trial court agreed with the plaintiff and reversed the arbitrator’s decision. However, an appellate court reversed the trial court’s decision, finding that there was no actual conflict of interest, and the arbitrator did not limit the plaintiff’s ability to present evidence. Thus, the court ordered that the arbitrator’s decision in favor of Xerox be reinstated.

Texas Supreme Court rejects plaintiff’s breach-of-contract claim in unambiguous oil and gas farmout agreement

In Barrow-Shaver Resources Co. v. Carrizo Oil & Gas, Inc., on June 28, 2019, the state’s high court issued an opinion in a Texas breach-of-contract case involving a farmout agreement. Generally, a farmout agreement is one in which a party that owns rights to drill for oil on a property agrees to allow another entity to drill on the property in exchange for defined rights. While the underlying claim arose in the context of a dispute involving Texas oil and gas law, the court ultimately resolved the case by applying fundamental contract law.

According to the court’s opinion, the plaintiff was a company that engaged in oil and gas drilling, and the defendant was a current leaseholder of a tract of land. The parties entered into an agreement whereby the plaintiff would drill on the leasehold property. Among other terms included in the contract was a consent-to-assign term, which is the focus of this appeal.

Initially, the contract provided that, “The rights provided to [the plaintiff] under this Letter Agreement may not be assigned, subleased or otherwise transferred in whole or in part, without the express written consent of [the defendant] which consent shall not be unreasonably withheld.” However, the agent for the defendant later submitted a revised draft of the contract, eliminating the phrase “which consent shall not be unreasonably withheld.”

The plaintiff took issue with the removal of this phrase, and was verbally reassured by the defendant that, even without the term in the contract, consent would not be withheld. Ultimately, the final version of the contract provided that, “The rights provided to [the plaintiff] under this Letter Agreement may not be assigned, subleased or otherwise transferred in whole or in part, without the express written consent of [the defendant].”

The plaintiff spent $22 million drilling wells, but was unsuccessful in establishing production. At that time, another company approached the plaintiff interested in purchasing the plaintiff’s drilling rights. The plaintiff negotiated an agreement with the company, and submitted the agreement to stakeholders, all of which approved the assignment of the plaintiff’s rights except for the defendant. As a result of the defendant’s refusal to consent to the assignment, the deal fell through. The plaintiff then sued the defendant for breach-of-contract, fraud and tortious interference.

The Court’s Decision

Ultimately, the court rejected each of the plaintiff’s claims against the defendant, first discussing the breach-of-contract claim. The court explained that when a contract is unambiguous, interpretation of the agreement is a matter of law which is to be resolved by a judge. Despite the plaintiff’s arguments to the contrary, the court concluded that the contract was unambiguous because it provided an unqualified right for the defendant to refuse to consent to the assignment of the plaintiff’s drilling rights. In so holding, the court rejected the plaintiff’s request to read in an implied requirement of good faith, noting that Texas contract law imposes no such duty.

The court then discussed the plaintiff’s fraud claim, holding that the plaintiff could not rely on the defendant’s oral assurances that consent would not be withheld and therefore, the defendant was not liable for fraud. The court noted that it is a basic principle of contract law that “a written contract vitiates any oral promises.” Here, the court explained that regardless of what the defendant may have told the plaintiff during contract negotiations, the only relevant agreement between the parties was the written document. The court went on to hold that because there was no limitation included in the contract regarding the defendant’s ability to withhold consent, the plaintiff’s fraud claim must fail.

Are You Involved in a Texas Oil and Gas Dispute?

Texas oil and gas law can be exceedingly complex. The Law Offices of Gregory D. Jordan helps individuals and businesses effectively navigate the legal system to resolve their claims efficiently and practically. Through his Austin oil and gas practice, Attorney Jordan confidently serves clients throughout the State of Texas, including those involved in the Eagle Ford Shale and in the Permian Basin, and he has been doing so since 1989.

Texas High Court Holds Limitation-Of-Liability Clause Can Effectively Bar a Party From Obtaining Punitive Damages

In November 2018, the state supreme court issued a written opinion in a Texas breach of contract case discussing whether a clause purporting to limit the availability of punitive damages in a contract between two business was enforceable. Ultimately, the court concluded that the term was enforceable and reversed the lower court’s award of punitive damages.

According to the court’s opinion, the plaintiffs planned to purchase an aircraft from the defendant manufacturer, Bombardier. The nature of the transaction was somewhat complex in that it involved several purchasing companies and subsidiaries; however, in essence, the transaction was for the sale of an aircraft.

During negotiations, Bombardier required the plaintiffs to execute a management agreement so that Bombardier could handle preliminary matters such as inspection and registration of the aircraft. The contract contained a clause stating that neither party could be held liable to the other party for any “indirect, special or consequential damages and/or punitive damages for any reason, including delay or failure to furnish the aircraft or by the performance or non-performance of any management services covered by this Management Agreement.”

While Bombardier marketed the plane as new, the aircraft’s engines were previously installed on other planes. When the plaintiffs found this out, they filed several claims against Bombardier, including a claim for punitive damages. The case proceeded to trial, and the jury awarded $2,694,160 in actual damages for fraud and $5,388,320 in exemplary (punitive) damages.

Bombardier appealed, making several arguments including that the award for punitive damages was improper based on the valid agreement signed by the plaintiffs. Initially, the court agreed with the plaintiffs that, absent the agreement, punitive damages would have been appropriate. However, the court explained that it has “long recognized the strongly embedded public policy favoring freedom of contract,” and that the parties in this case indisputably entered into a contract agreeing to waive any right to pursue punitive damages.

The plaintiffs argued that Bombardier knew that the engines were not new and violated a fiduciary duty when it failed to inform them that the engines were used. However, the court held that the plaintiffs’ general claim that Bombardier fraudulently concealed this information did not specifically mention the violation of a fiduciary duty. Thus, the court did not consider whether the violation of a fiduciary duty eliminated any protection the contract provided to Bombardier. Instead, the court held that any fraud on Bombardier’s part did not void the agreement because the court must “respect and enforce terms of a contract that parties have freely and voluntarily entered.”

Contact an experienced business litigation attorney

When success matters, every decision you make for your business is important. Choosing which Austin business litigation firm to handle the unique issues your business faces is no exception. At the Law Offices of Gregory D. Jordan, we have over 25 years of experience assisting businesses in dealing with the full range of issues they confront, including breached contracts and business fraud cases. We also provide guidance and advice to companies looking to anticipate their future needs. To learn more about how we can help your business through the issues it faces, call 512-419-0684 to schedule a consultation today.

Are Texas Arbitration Agreements Between Employers and Their Employees Always Enforceable?

Over the past decade, it has become common to see arbitration agreements in a variety of business agreements. Indeed, arbitration is the preferred method for many businesses to resolve all kinds of Texas business disputes, whether a dispute is between a company and its customers, employees, suppliers or another business.

Recently, forced arbitration clauses have come under fire, with appellate courts across the country hearing a wide range of cases involving the circumstances in which arbitration agreements are valid. Last year, the U.S. Supreme Court issued an opinion strengthening a business’ ability to compel arbitration based on a validly executed arbitration agreement.

The case consisted of three separate cases that were consolidated before the Court. In each case, employees signed agreements before or during their employment, agreeing that they would resolve any claims that arose during their employment individually and through arbitration, rather than through the court system.

Each of the three cases was based on a dispute that is not relevant to the issue at hand. What is important is that an employee filed a claim against his employer in federal court. The case was filed as a “class action lawsuit,” meaning that a single employee filed the claim, but did so on behalf of other similarly situated employees. The employers sought dismissal of the plaintiff’s claims against them, asking the court to enforce the agreement in which the employees agreed to resolve their grievances through arbitration.

The employees argued that the clause in the agreement requiring they resolve their claim individually violated their rights under the National Labor Relations Act (NLRA). Specifically, the right to take “concerted action” with fellow employees against an employer. The lower court agreed with the employees. On appeal to the Ninth Circuit, the court added that, because the agreement violated the NLRA, the entire contract was invalid, including the arbitration portion of the agreement. The employers appealed the case to the United States Supreme Court.

In its opinion, the Court noted that the terms of the agreement were clear in that the contract called for employees’ claims to be resolved individually and through arbitration. The Court acknowledged that the National Labor Review Board (the federal agency that is responsible for enforcing the NLRA) believed that compelling individualized dispute resolution was a violation of the NLRA. However, the Court added that this was a recent change in the National Labor Review Board’s policy.

The U.S. Supreme Court ultimately reversed the lower courts’ decisions, notwithstanding the National Labor Review Board’s agreement with the employees. The Court explained that the Federal Arbitration Act (FAA) instructs federal courts “to enforce arbitration agreements according to their terms” and that the NLRA “does not mention class or collective action procedures.” Thus, the Court determined that the NLRA does not “displace” the FAA.

The Court reasoned that, when presented with two acts of Congress that could possibly be read to conflict with one another, if possible, the Court must read both in a manner such that there is no conflict. Thus, the Court based its decision on the fact that the FAA explicitly condones individualized dispute resolution and the NLRA does not confer a right to pursue a class action lawsuit.

Are you involved in a Texas business dispute?

When success matters, every decision you make is important. Choosing which Texas business law firm will handle your case is no exception. At the Law Offices of Gregory D. Jordan, we have over 25 years of experience assisting businesses in dealing with the full range of issues they confront, including breach of contract, employment law and franchise litigation. To learn more about how we can help your business through the issues it faces, call 512-419-0684 to schedule a consultation today.

The Duties of the Holder of the Executive Right to Minerals

In the case of Texas Outfitters, LLC vs. Nicholson, the Texas Supreme Court examined the holder of the executive right’s duty of utmost good faith and fair dealing to non-participating mineral interest owners. In Texas Outfitters, the holder of the executive right to lease minerals refused to sign a lease which the owner of a non-participating mineral interest alleged it should have signed.

A company called Texas Outfitters, LLC purchased over a thousand acres, including 1/24th of the mineral rights, as well as the exclusive right to lease 11/24th of the mineral rights retained by the sellers of the property. At the time, the land was not leased and had no oil and gas production. Approximately a decade after the sale of the land, the owners of the remaining 50 percent of the minerals leased to El Paso Oil Exploration and Production Company. El Paso made the same offer to Texas Outfitters; however, Texas Outfitters refused to lease even though the sellers made it clear to Texas Outfitters that they wanted Texas Outfitters to lease. Ultimately, the sellers filed suit against Texas Outfitters for breaching its duty of good faith and fair dealing as the executive holder of the right to lease the mineral rights. The sellers sought damages in the amount that they lost due to Texas Outfitters refusing to lease the mineral rights.

At a bench trial, the trial court found in favor of the sellers, holding that Texas Outfitters did not act in good faith and breached its duty as the holder of the executive right. The case was eventually appealed to the Texas Supreme Court. The Court looked at the history of the executive right and ultimately held that, in this case, Texas Outfitters breached its duty of good faith and fair dealing where it engaged in acts of self-dealing to the benefit of its interest in the surface estate and to the detriment of the owners of the mineral estate. The Court stated that Texas Outfitters, in refusing to lease the mineral rights, did so “in acts of self-dealing that unfairly diminished the value of the non-executive interest.” This action “crossed the line” bringing Texas Outfitters, LLC into the realm of breaching its duty to the non-executive rights holder.

Attorney Gregory D. Jordan is an oil and gas attorney with offices in the Austin area. To learn more, visit http://www.theaustintriallawyer.com/

Law Offices of Gregory D. Jordan
5608 Parkcrest Drive, Suite 310
Austin, Texas 78731
Call: 512-419-0684

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