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Multi-million dollar oil and gas lawsuit set for trial

A lawsuit is set for trial in Texas between two well-known oil and gas names over revenue and ownership interests, with hundreds of millions of dollars in damages claimed.

Mesa Petroleum, founded by T. Boone Pickens, filed suit against J. Cleo Thompson and three exploration and production companies based in Midland. Mesa alleging that Patriot Resources, Baytech and Delaware Basin Resources violated the terms of an investment contract.

The complaint alleges that Thompson and the Midland companies are liable for fraud, breach of contract, tortious interference with a contract, and breach of fiduciary duty. The defendants deny the allegations. The trial in Pecos, Texas is expected to take several weeks.

In January 2007, Thompson and Baytech signed a “participation agreement” with Mesa that committed the companies to offering Mesa an ownership stake of 15 percent in asset acquisitions over five years. According to court documents, Mesa paid $125,000 to enter into the investment agreement and $1 million to participate in an investment known as the Red Bull Prospect.

Mesa claims that the company “elected to participate” in all of the investments that were offered, but the defendants allegedly took new investment opportunities for themselves, failing to offer interests to Mesa as required by the participation agreement. The investments that Mesa claims it missed out on include royalties, revenues, leases, easements, production payments, wells and facilities. Thompson and the other companies claim that they nullified the agreement.

Texas drill pipe supplier files lawsuit against company alleging breach of contract

A breach of contract lawsuit was filed by a Houston, Texas drill pipe supplier against a North Dakota company.

The lawsuit was filed in the U.S. District Court for the Southern District of Texas Aug. 31 by Vallourec Drilling Products USA Inc. (Vallourec) against B.J.’s Drill Stem Testing, Inc. d/b/a Drill Tech LLC (Drill Tech).

According to the lawsuit, Drill Tech purchased 60 joints of 4-inch heavyweight drill pipe and 620 joints of 4-inch drill pipe from Vallourec. The complaint alleges that the drill pipe was delivered, but Vallourec has not received the full payment of $1,282,748.40.

Vallourec claims that Drill Tech paid a deposit of $384,824.52, but failed to pay the remaining balance. According to the complaint, the parties had agreed that the pipe would be delivered “Ex-Works,” meaning that it would be considered delivered once the seller made the goods available for pickup by the buyer. Vallourec claims that it made the pipe available for pickup, but Drill Tech failed to take physical possession after delivery, and Vallourec has therefore incurred storage and other expenses. The plaintiff further alleges that it has been unable to resell the goods, despite commercially reasonable attempts.

The plaintiff is seeking payment for past-due amounts, pre- and post-judgment interest, court costs, attorney fees and other relief to which it may be entitled. A jury trial has been requested.

Texas Appeals Court rules against lessee in offset well dispute

The Fourth Court of Appeals in San Antonio, Texas found that a lessee had failed to prove that it had drilled an offset well as required by oil and gas leases.

In the case, Shirley Adams et al. v. Murphy Exploration & Production Co.-USA, the lessors and royalty owners sued lessee Murphy for breach of contract, claiming that Murphy had failed to drill an offset well to protect two tracts of land against drainage.

Murphy was assigned oil and gas leases executed by lessors in the Eagle Ford Shale. The parties did not dispute that the leases required the lessee, if a well was completed, to drill an offset well to prevent drainage. A lower court granted Murphy’s motion for summary judgment based on evidence that a well had been drilled and Murphy’s expert’s testimony that it was an offset well.

The Fourth Court of Appeals held that in order for Murphy’s summary judgment burden to be met, Murphy had to conclusively prove that the well was an offset well as a matter of law, thus disproving the element of breach. However, the appeals court found that Murphy failed to meet that burden, as it failed to prove that the well met the commonly understood meaning of the term “offset well,” which is a well used for protection from drainage. The appeals court reversed the grant of summary judgment and remanded the case to the trial court for further proceedings.

Texas jury awards 1.5 million dollars to mineral rights owner

A Harris County, Texas jury awarded $1.5 million to Jack Grynberg and his family, finding that Exxon Mobil did not act in good faith in determining the mineral royalties the company owed him.

Grynberg says he is owed even more and is considering appealing the verdict. Grynberg says his royalties compensation could have been nearly $40 million if a damages expert he hired had been permitted to testify before the jury. Grynberg, an 84-year-old resident of Denver and graduate of the Colorado School of Mines, said that he had been in the oil business since 1953. Grynberg said he suspected something wrong when he noticed that his mineral royalties from Kinder Morgan were 40 percent higher than his royalties from Exxon Mobil.

“I will not be cheated,” said Grynberg.

The lawsuit and similar lawsuits filed recently may inspire other royalty owners to take legal action. A major problem for many royalty owners is that the royalty statements they receive from production companies are often a single page, with no information on how the royalties were calculated or what costs were deducted. Some lawsuits have accused companies of deducting “post-production” costs from royalty payments.

Grynberg’s land contains large reserves of carbon dioxide gas, which is used to boost production in oil wells. The jury found that Exxon Mobil paid royalties based on less than the market value of the carbon dioxide.

Austin company files lawsuit alleging unfair competition

An unfair competition lawsuit has been filed in U.S. District Court in Austin, Texas.

Yeti Coolers, an Austin company, accuses a Missouri company, Mammoth Coolers, of selling products that infringe on Yeti’s rights. Yeti alleges unfair competition, unjust enrichment, trade dress infringement and trade dress dilution. The company seeks money damages and the recall and destruction of the offending products.

The products at issue are similar to Yeti’s Roadie and Tundra coolers and high-end Rambler tumblers. The company reports that it has sold more than 1 million Tundra coolers, which sell for $300 to $1,400, and more than 400,000 Roadie coolers, which sell for $250. The Rambler tumblers sell for between $30 and $40.

Yeti claims in the lawsuit that Mammoth Coolers’ Titan and Discovery coolers and its Rover tumblers are confusingly similar to Yeti’s products. Yeti alleges that Mammoth is using Yeti’s trade dress or colorable imitations, which are likely to create the misleading and false impression that the allegedly infringing products are associated with or authorized by Yeti. Yeti claims that the company used its trade dress continuously and extensively, and it became famous and acquired secondary meaning, before Mammoth entered the market.

Mammoth advertises its products as less expensive than their competitors.

Yeti has requested a jury trial.

Former employee alleges unpaid overtime in Texas employment lawsuit

A former employee of an environmental services company, who claims that the company did not pay him for overtime worked, has filed an employment lawsuit in federal court in Texas.

The collective action lawsuit was filed in U.S. District Court for the Eastern District of Texas, Beaumont Division, by Tommy Breed, individually and for all others similarly situated. Breed alleges that his former employer, Wastewater Specialties, violated the Fair Labor Standards Act by failing to pay him overtime wages.

According to the lawsuit, Wastewater Specialities employed Breed from May 2013 until Sept. 2015. The complaint alleges that Breed and others worked more than 40 hours per week, but were not paid overtime; instead they were paid straight time for what the company called “unbillable” hours.

The lawsuit seeks damages for Breed and others in the class, including compensation for overtime worked, liquidated damages, interest and attorney’s fees and costs.

Wastewater Specialties is an environmental services company that operates in the gulf coast region, with its headquarters in Sulphur, Louisiana, and offices in Texas City and Beaumont.

Certain employees who work more than 40 hours per week are entitled to one and a half times their regular rate of pay, under the federal Fair Labor Standards Act and the Texas Payday Law. Certain executive, professional and administrative employees who make more than a certain amount per week are exempt from the overtime requirements.

Texas appeals court rules in lawsuit over gas well blowout costs

A Texas appeals court issued a ruling in a lawsuit over costs associated with the blowout of a gas well.

The Eleventh Court of Appeals issued its opinion Aug. 31, 2015 in the case of St. Paul Fire & Marine Insurance Company and St. Paul Surplus Lines Insurance Company, Appellants v. Petroplex Energy, Inc, Appellee, on appeal from the 142nd District Court, Midland County, Texas.

The case involved a gas well, the Quinn 1-6H Well in Reeves County, Texas, that was operated by Petroplex Energy and insured by the appellant insurance companies. The Quinn Well was intended to be operated as a partnership between Petroplex and Endeavor Energy Resources, LP, but the two companies disagreed over certain matters including blowout insurance, and a joint operating agreement was never signed. A partial assignment of the Quinn Well to Endeavor was executed, but the 80 percent interest was subsequently reassigned to Petroplex.

On Sept. 14, 2007, a buildup of gas caused the Quinn Well to blow out, and Petroplex lost control of the well. As a result, equipment owned by third parties was damaged, and Endeavor advanced blowout expenses to Petroplex. A well-control policy and commercial liability policy were held by Petroplex, but the insurance companies claimed that Petroplex did not own 100 percent of the working interest in the Quinn Well, that it was not an insured well, and Petroplex could not recover under the policies.

The appeals court affirmed the trial court’s judgment in favor of Petroplex on all issues presented.

Texas jury awards over 60 million dollars in oil and gas lease breach of fiduciary duty case

A Texas jury awarded over $60 million to investors in an oil and gas breach of fiduciary duty case.

The plaintiff investors claimed that their business partners gave themselves credit for financial contributions that were not actually made and excluded the investors from a lease acquisition project when the defendants learned that it would be extremely profitable.

The case is Tiburon Land and Cattle LP and Trek Resources on behalf of The Three Finger/Black Shale Prospect Partnership v. Sarah Kate Jones, as Independent Executrix of the Estate of Thomas J. Taylor, deceased, et al.

The plaintiffs presented evidence that although they shared in the first 30,000 acres of leases that the project acquired, they were excluded from a later acquisition of 16,000 acres. According to the plaintiffs, the defendants, including Abilene oil man Thomas J. Taylor, Kerwin Stephens and Chester Carroll, used a second set of accounting books to hide profits and make it appear as if they had made contributions that were not actually made by them.

The jury awarded $24 million in actual damages and $9 million in exemplary damages to one set of plaintiffs, and $28 million to another group of investors who intervened in the case.

The jury found that the fiduciary breaches by Stephens constituted theft, strengthening the total verdict amount.

Texas employment lawsuit claims company made employees work off the clock

An employee at a Texas call center has filed a lawsuit claiming that she and other employees were not paid for work that they were required to do off the clock.

Elissa Shetzer filed the lawsuit in U.S. District Court for the Eastern District of Texas against her employer, Harte-Hanks Response Management/Austin LP, which manages the call center in Texarkana, Texas. Shetzer claims that employees were not paid for time spent on tasks such as logging in to call systems and performing administrative work at the end of their shifts.

The lawsuit alleges that it took approximately 15 minutes to log into the computer system before the start of a shift, which was required in order to be able to take calls. In addition, the suit claims that employees had to spend about 10 minutes after each shift logging off and shutting down computer programs.

According to the lawsuit, if employees were on a call when their shift ended, they were paid only until the end of the phone call, even if there was additional administrative work related to the call that still needed to be completed before they could leave work. In addition, the suit alleges that workers often had to take a final customer call after their phones had automatically clocked them out.

Shetzer claims violations of the Fair Labor Standards Act and is seeking class-action status for her lawsuit. The suit seeks monetary damages, liquidated damages, interests and costs from the defendants.

Texas Supreme Court hears gas royalties case

The Texas Supreme Court heard arguments in a lawsuit by property owners against Chesapeake Energy, claiming that the energy giant improperly withheld millions of dollars in natural gas royalty payments.

Chesapeake is appealing a 2014 ruling by a San Antonio appeals court that upheld a decision by a state district court awarding at least $1 million to a Fort Worth family. The Hyder family argued that its lease with Chesapeake was heavily negotiated and specifically tailored to be “cost-free,” but Chesapeake has altered its interpretation of its obligations, attempting to deduct post-production costs.

The case is being closely watched by the oil and gas industry in Texas. The National Association of Royalty Owners-Texas and the Texas Land and Mineral Owners Association are backing the Hyders, saying that this case is one of many in which Chesapeake has sought to improperly deduct costs from royalty payments.

Observers say that the impact of the case will depend on whether the high court addresses its previous ruling in Heritage Resources v. NationsBank, which permitted the deduction of post-production costs even when contracts appear to disallow it. The Hyder lease included a provision stating that the findings in the Heritage case do not apply. The Fourth Court of Appeals in San Antonio agreed that the contract provision served to modify the general rule set forth in the Heritage case.

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