Blog | The Law Offices of Gregory D. Jordan

Texas Court Issues Opinion in Case Involving Fraudulent Business Venture

Earlier this month, a state appellate court issued an opinion in a Texas business law case involving allegations that the founders of a business committed fraud when soliciting new investments. The case was brought by former Houston-Oilers cornerback, Tomur Barnes.

The Facts of the Case

According to the court’s opinion, since retirement, Barnes began a career as a personal trainer. While at the gym, Barnes met a woman named Patoka, who told him about an investment opportunity. Evidently, Patoka, one of the defendants in the case, was opening a physical rehabilitation center with former Houston-Rockets star, Robert Horry. She explained to Barnes that she was looking for other athletes to make an investment, hoping this would bring credibility and notoriety to the newly opened facility, the Robert Horry Center.

Barnes agreed to invest $100,000, which he borrowed from another party. Barnes believed that he was investing in the Robert Horry Foundation. However, in reality, his investment was for a percentage of a separate company called K&K Holdings. As it turns out, K&K holdings was formed by Patoka and her then-boyfriend, Smith, to protect them from any liability arising out of the Robert Horry Center.

The history leading up to the filing of the case is complex. However, in short, Patoka and Smith, the sole members of K&K Holdings, had a profit-sharing agreement with the Robert Horry Center. Under the agreement, K&K Holdings was to receive 15 percent of the profits from the Robert Horry Center, with the remaining income to stay within the company.

Barnes eventually filed a Texas fraud lawsuit. Barnes explained that he was told by Patoka that he was investing in the Robert Horry Center and that all discussions he had with Patoka before he made his investment were centered around the Center. He testified that Patoka never mentioned the existence of K&K Holdings. It was not until a year later, when he received a letter indicating he owned a 12 percent ownership in K&K Holdings. At that time, Barnes was told that K&K Holdings was a holding company that owned all of the Robert Horry Center. It was not until later that he learned that was not the case, and that he did not have any direct ownership interest in the Robert Horry Center.

Patoka also testified. She testified that she made it clear to Barnes that he was investing in K&K Holdings, and that the company only held a 12 percent stake in the Robert Horry Center. However, Patoka could not produce any documentation of this. She also explained that she and Smith, who has since gotten married, opened Robert Horry Sports Medicine, LLC, in 2015. This business was an entirely separate legal entity from the Robert Horry Center, and that Barnes had no legal interest in the new company.

When asked about specifics regarding Barnes’ interest in the Robert Horry Center, Patoka knew little, and could not provide the court with documentation supporting her version of the events. She alluded to “informal meetings” where she explained everything to Barnes. However, she could not recall if there was any document that was ever given to Barnes clearly indicating his ownership interests.

Ultimately, the jury returned a verdict in favor of Barnes, awarding him $850,000. The award consisted of $500,000 in actual damages and $350,000 in punitive damages. Patoka and Smith appealed on several grounds.

Statute of Limitations

The appellants’ first issue on appeal was that Barnes’ claims of fraud were time-barred because he waited too long to file them. They argued that Barnes’ case arose when Barnes signed the document indicating he owned 12 percent of K&K Holdings. However, the court rejected the appellants’ argument, finding that the ongoing misrepresentations made by Smith and Patoka meant that Barnes’ cause of action accrued much later. The court explained, according to Barnes, he was not provided with any documentation of his interest, and that he was not given the full picture when asked to sign that document. The jury credited Barnes’ testimony, thus, his cause of action did not accrue upon the signing of the document.

Sufficiency of the Evidence

The appellants also challenged the sufficiency of the evidence on appeal. However, after reviewing the elements of Barnes’ specific allegations, the court affirmed the jury’s verdict. The court explained that there was ample evidence suggesting that Patoka and Smith were not acting in good faith when they solicited an investment from Barnes, and that the jury was free to accept Barnes’ testimony, as it did.

To be sure, this case is a complex one. However, in essence, it illustrates the importance of having an experienced attorney at your side throughout business negotiations. Had either party been working with an attorney, this case could likely have been avoided. Of course, some disputes are unavoidable, in which case having an attorney is also crucial.

Reach Out to a Dedicated Austin Business Lawyer

When success matters, every decision you make for yourself or your business is essential. Choosing which Austin business dispute attorney to handle your case is no exception. Attorney Gregory D. Jordan has over 30 years of experience helping businesses of all types deal with the full range of legal issues they confront, including breach of contract claims, fraud allegations, and more. To learn more about how we can help your business through the issues it faces, call 512-419-0684 to schedule a consultation today.

Court Issues Opinion in Texas Wrongful Termination Case

Last month, a state appellate court issued an opinion in a Texas wrongful termination case discussing whether an employee presented sufficient evidence to survive his employer’s motion for summary judgment. Ultimately, the court found that the plaintiff was an “at-will” employee, and no evidence he presented indicated that he was terminated for an impermissible reason.

The Facts of the Case

The plaintiff worked as a licensed vocational nurse at a skilled rehabilitation center. The plaintiff was fired based on his interactions with one of the residents. However, the plaintiff’s story was vastly different from the story presented by the facility.

According to the plaintiff, one of the residents in the facility attacked another resident. The facility consulted with doctors, and it was decided that the facility would give the unruly resident a shot to calm him down. The plaintiff was asked to administer the shot. As the plaintiff entered the resident’s room, the resident threw a table at the plaintiff. Although the resident was screaming, the plaintiff successfully administered the shot. However, as the plaintiff was giving the resident the shot, the resident struck him in the head.

The facility offered a very different version of the events leading up to the plaintiff’s termination. The facility agreed that the plaintiff was asked to administer a shot to an unruly resident. However, according to the facility, it was the plaintiff who struck the resident in the head. In fact, as a result of the incident, the plaintiff was later charged with a felony.

The facility immediately suspended the plaintiff, pending an investigation. Once the investigation wrapped up, the facility fired the plaintiff. The plaintiff then filed a wrongful termination claim. In response, the facility filed a motion for summary judgment, arguing that the plaintiff’s claim could not succeed under the law and should be dismissed by the judge.

The Employer’s Motion for Summary Judgment

In its motion, the employer claimed that the plaintiff was an at-will employee. Because of this, the facility argued it could fire the plaintiff for any reason or no reason at all. The plaintiff’s position was that a contract was formed when the employer gave him an employee handbook. He also claimed that, because the allegations leading to his termination were false, and that because he was fired based on incorrect information, he was wrongfully terminated.

The court began its analysis by explaining the general rule that “absent a specific agreement to the contrary, employment may be terminated by the employer or employee at will, for good cause, bad cause, or no cause at all.” Here, the court found that the employee handbook did not change the nature of the employee-employer relationship, and that the plaintiff was an at-will employee. The court noted that the manual specifically stated that “the relationship between employees and [the facility] is an at-will employment relationship” and that either party can end the relationship at any time without reason or prior notice.

That being the case, the court went on to determine if the facility fired the employee for an impermissible reason. While an employer can generally fire an at-will employee for “any reason, or no reason at all,” there are exceptions. For example, an employer cannot base their decision to fire an employee on the employee’s race, color, disability, religion, filing of a worker’s compensation claim, union membership or non-membership, active duty in State military forces, jury service, or the employee’s refusal to perform an illegal act.

Here, however, the court noted that the plaintiff did not raise any of these claims. Instead, the plaintiff argued that he was wrongfully terminated because the facility relied on false information when it fired him. However, because he was an at-will employee, even if the information was false, it would not have rendered the employer’s decision an illegal one.

Contact a Travis County Employment Attorney

If you are an employee or employer involved in a Texas employment dispute, contact the Law Offices of Gregory D. Jordan. Attorney Jordan is a skilled Texas employment attorney with extensive hands-on experience representing both employees and employers in a wide range of employment matters. Since 1989, Greg Jordan has been helping clients obtain the results they desire through his effective representation. He commands an in-depth understanding of the various state and federal employment laws that govern employment claims and is ready to put this advanced knowledge to use in your case. To learn more, and to schedule a consultation, call 512-419-0684 today.

Appellate Court Resolves Texas Oil and Gas Dispute by Looking to a Deed Written Nearly 100 Years Ago

Earlier this year, a state appellate court issued an opinion in a Texas oil and gas case, requiring the court to interpret a 1927 deed. The deed purported to convey a “royalty interest” as well as an “equivalent reversionary interest in and to all oil, gas, casinghead gas and other minerals” pertaining to certain land. Ultimately, the court affirmed the lower court’s ruling.

In this case, Five Star claimed it was the successor in interest to the original grantee, and that it was entitled to a “floating” royalty interest, providing the company a 3/8 interest in any leased royalty. Ultimately, the court found that Five Star owns an undivided 3/8 interest in the minerals. However, the court clarified that the interest consists only of the “right to receive a proportionate share of royalties and does not include any executive right or right to develop the land.”

The Facts of the Case

According to the court’s opinion, Five Star sought to establish that it was the successor in interest to an earlier grantee. Five Star tried to prove that it owned a 3/8 interest in the mineral interests. In response, the defendants argued that Five Star was only entitled to 3/8 of a 1/8 interest, or a 3/64 interest.

In support of its claim, Five Star presented the court with a quit-claim deed that purported to convey a “ROYALTY ONLY” interest. The question for the court was whether the quit-claim deed conveyed a 3/8 interest or a 3/64 interest to Five Star. In resolving this question, the court had to wrestle with the fact that the Texas oil and gas industry’s customs and terms have changed significantly since the original deed was created in 1927.

The court began its analysis by noting that there are two types of royalty interests.

  1. a “mineral interest” that includes a right to receive a proportionate share of reserved royalties; and
  2. a free “royalty interest” granting a right to a fixed fraction of gross production.

The court then went on to explain that a mineral estate consists of five separate interests:

  1. The right to develop,
  2. The right to lease,
  3. The right to receive bonus payments,
  4. The right to receive delayed rentals, and
  5. The right to receive royalty payments.

Under state law, a party can convey any of the above interests while reserving others. If any of the above interests are conveyed, they are generally referred to as “mineral interests.” The court explained that when a deed conveys a royalty interest, through a fractional share, “what is conveyed is a fraction of royalty, not a fixed fraction of total production royalty.”

Here, the court noted that the original deed conveyed a “royalty interest of three-eighths of all . . . minerals.” The court acknowledged this alone may indicate that the conveyance only consisted of a 3/8 fixed royalty. However, later in the document, the same interest is referred to as “a three-eighths part of the royalty provided by the then-operative lease” and again as a “three-eighths of one-eighth interest.” The court also noted that the deed did not address production costs. This led the court to find that the “royalty interest” mentioned in the deed was not a fixed royalty, but a right to receive royalties proportionate to a held mineral interest. Ultimately, the court concluded that Five Star was entitled to a full 3/8 interest, but that its interest was limited to receive a proportionate share of royalties and does not enable Five Star to develop or lease the land.

The court acknowledged that the original deed used confusing, and at times, conflicting language. The court attributed some of this confusion to the fact that the deed was nearly 100 years old, and that the customs and common terms used in the oil and gas industry have changed.

If nothing else, this case illustrates the complexity of oil and gas litigation in Texas. These cases often involve old documents that may not comport with the current state of the law. Thus, anyone dealing with a dispute surrounding Texas mineral interests should work with an experienced attorney to ensure that their rights are adequately protected.

Reach Out to a Dedicated Austin Oil and Gas Lawyer

Oil and gas disputes can be extremely complicated. Choosing an attorney to represent you or your business 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, we have been effectively handling Texas oil and gas cases for over 30 years. This experience provides us with a detailed understanding of this unique practice area, which we put into each of our clients’ cases. We genuinely value your business and time and strive for quick and effective resolutions to whatever legal issues you face. To learn more, and to schedule an initial consultation, call 512-419-0684. You can also contact me online.

Court Issues Opinion in Texas Business Law Case Involving “Imploding Partnership”

Earlier this month, a state appellate court issued an opinion in a Texas business law case discussing a partner’s claims against a former partner. The case is a good illustration of how business relationships can sour and what can be done to minimize the chances of a dramatic ending.

The Facts of the Case

According to the court’s opinion, four architects formed a partnership in 2000. Years later, two of the founding members retired and, in 2005, the firm was reorganized into a professional limited liability corporation (PLLC).

By 2014, the relationship between the remaining two partners, Boucher and Thacker, began to sour. The firm was heavily in debt and Thacker accused Boucher of “not pulling his weight.” Boucher refused to inject additional capital into the company and, in late 2014 or early 2015, the two began talking about dissolving the company.

In early February 2010, the two went over the firm’s debts and discussed how to dissolve the firm. Boucher explained that he intended to retire and, under the terms of the agreement, would receive $300,000 upon his retirement. Thatcher responded that the firm did not have the money to pay this lump-sum amount, and the two should focus on shutting down the firm instead.

By February 16, the two had agreed to dissolve the firm, with both partners splitting the firm’s debt evenly. However, later that day, Boucher sent Thatcher a notice of his intent to retire on February 20. In response, Thatcher immediately withdrew from the firm. Both parties continued to conduct business individually after the dissolution of the firm.

Thacker subsequently sued Boucher for breach of contract, arguing that he had abandoned “the firm at the time of dissolution and fail[ed] to pay all obligations, losses and debts of the firm.” Thacker claimed that Boucher’s actions resulted in the unnecessary accrual of interest and also sought attorney’s fees. Boucher filed a counterclaim, seeking the $300,000 in retirement compensation.

The trial court determined that Boucher breached the agreement, by not paying his share of the debts and by not participating in the winding down of the business. The court also found that Boucher violated his fiduciary duty to the firm. Finally, the court ruled against Boucher in his counterclaim for retirement compensation. The court awarded Thacker the full amount of attorney’s fees he requested.

The Court’s Opinion

The court reviewed the evidence presented below and largely affirmed the lower court’s decision. The appellate court explained that the evidence suggested that the firm had been dissolved upon Thacker’s withdrawal. Thus, because the firm was no longer in existence at the time Boucher retired, the court explained that Thacker did not breach any duty owed to the firm or Boucher, and that Boucher was not entitled to the retirement compensation.

However, the court disagreed with the lower court regarding the award of attorney’s fees. The court explained that to obtain attorney’s fees, “a party must 1.) prevail on a cause of action for which attorney’s fees are recoverable, and 2.) recover damages.”

Here, the court held that because Thacker did not recover any economic damages as a result of Boucher’s conduct, he was not entitled to an award of attorney’s fees. The court acknowledged that there were exceptions to this general rule but found that neither applied in this case. One exception is when the agreement between the parties provides for an award of attorney’s fees absent an award of damages. However, the partnership agreement between the parties did not provide for such an award. Thus, the court reversed the award of attorney’s fees to Thacker.

Are You Dealing With a Texas Business Dispute?

When success matters, every decision you make for your business is essential. Choosing which Austin partnership dissolution attorney or contract dispute attorney to handle the unique issues your business faces is no exception. At the Law Offices of Gregory D. Jordan, we have over three decades 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 also routinely assist businesses through the dissolution process, reducing the chances of costly and time-consuming 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.

U.S. Supreme Court Issues Opinion in Landmark Sex Discrimination Lawsuit

Earlier this year, the United States Supreme Court issued a written opinion in an employment discrimination case that will have significant implications in Texas, as well as throughout the county. The opinion involved the interpretation of Title VII of the Civil Rights Act of 1964. Specifically, whether the Act’s prohibition against discrimination on the basis of an employee’s “sex” precludes an employer from firing an employee for being gay or transgender. The Court answered the question in the affirmative, finding that employers cannot discharge an employee for being gay or transgender, even if other motivations supported the employer’s decision.

Background Into the Civil Rights Act

The Civil Rights Act of 1964 (CRA) was the country’s first civil rights legislation, protecting against discrimination based on an employee’s race, color, religion, sex, or national origin. However, initially, the protections under the CRA were weak and under-inclusive. So, while the CRA was an important step toward seeking a more equal workplace, it was not a complete solution. For example, the Act did not apply to discrimination based on a worker’s age or disability status. Additionally, although the Act purported to protect against sex discrimination, it was subsequently interpreted by the courts not to protect against pregnancy discrimination and, until recently, an employee’s status as gay or transgender.

Of course, subsequent legislation filled in some of the holes left by the CRA. The Age Discrimination in Employment Act of 1967 provides protection for employees and job applicants over the age of 40. The Americans with Disabilities Act, passed in 1990, protects workers who are experiencing disability. And the Pregnancy Discrimination Act of 1978 amended the CRA to “prohibit sex discrimination on the basis of pregnancy.”

The Supreme Court’s Recent Opinion

The Court’s opinion in Bostock v. Clayton County, is a consolidation of three similar cases, all arising from different states. Gerald Bostock was a child welfare advocate in Clayton County, Georgia. After he began playing in a gay softball league, he was fired for engaging in conduct “unbecoming” of an employee. Donald Zarda was a skydiving instructor who was fired days after mentioning that he was gay. And Aimee Stephens, who presented as a male when she was hired, was fired after telling her employer that she intended to “live and work full-time as a woman.”

In each of these three cases, the employee was fired at least in part for either being gay or transgender. All three employees filed employment discrimination claims against their employers under Title VII of the CRA. Oversimplifying the procedural background of each individual case; two of the cases were allowed to proceed toward trial while one was dismissed as a matter of law. The question that was eventually presented to the United States Supreme Court was whether Title VII to the CRA prevents an employer from making an employment decision because an employee is gay or transgender. In other words, does the CRA’s language precluding discrimination based on “sex” extend to an employee’s sexual orientation or status as a transgender person.

The Court’s Analysis

The Court began its analysis by noting that the CRA precludes employees from making an employment decision “because of” an employee’s sex. In its preliminary discussion of the applicable law, the Court reviewed several other opinions to glean a general rule regarding what is covered under the CRA.

First, the Court noted that it is “irrelevant what an employer might call its discriminatory practice, how others might label it, or what else might motivate it.” In making this statement, the Court was pointing out that it does not matter if the employer does not believe that they are engaging in sex discrimination. The Court explained “when an employer fires an employee for being homosexual or transgender, it necessarily and intentionally discriminates against that individual in part because of sex.”

Next, the Court went on to explain that the plaintiff’s sex does not need to be the only criteria leading to an employer’s decision. In other words, an employer cannot reframe their reason or firing an employee to be based on some non-protected trait.

Finally, the Court held that an employer cannot avoid the requirements of Title VII by showing that it treats men and women equally. The Court noted, “an employer who intentionally fires an individual homosexual or transgender employee in part because of that individual’s sex violates the law even if the employer is willing to subject all male and female homosexual or transgender employees to the same rule.”

In coming to its conclusion, the Court rejected each of the employers’ arguments. For example, the employers argued that firing an employee for being gay or transgender was not “sex” discrimination because it had nothing to do with an employee’s sex. In support of their argument, the employers noted that each of the employees, if asked, would likely have explained that they were fired for being gay or transgender (rather than for being male or female). However, the court reiterated that an employment discrimination charge does not require an employee to prove that the employer intended to discriminate, only that the employer acted in a discriminatory manner.

The Court also rejected the employers’ argument that public policy supported their actions. Specifically, the employers argued that, when enacted, few would have thought the CRA covered gay and transgender employees. The Court noted that “people are entitled to rely on the law as written, without fearing that courts might disregard its plain terms based on some extratextual consideration.” And the Court even acknowledged that these cases fell outside the “principal evil” at which the CRA was directed. However, rather than use that as a reason to minimize the protections afforded by the CRA, the Court explained that it “demonstrates the breadth of the legislative command.”

In the end, the Court’s holding was simple; employers cannot base an employment decision on an employee’s status as gay or transgender.

Contact an Experienced Austin Employment Law Attorney for Immediate Assistance

Whether you are an employer trying to navigate the new changes in the law, or an employee who believes that your employer illegally fired you, contact the Law Offices of Gregory D. Jordan for help. For over 30 years, we have been helping individuals and businesses with complex employment law issues, including claims of employment discrimination, wrongful termination, retaliation, wage and hour violations and more. To learn more about how we can help you with your situation, call 512-419-0684 to schedule a consultation today.

Texas Appellate Court Rules Against Pipeline Company in Condemnation Hearing

Earlier this year, a state appellate court issued an opinion in a Texas oil and gas case discussing a pipeline company’s condemnation claim against a landowner based on the parties’ inability to reach an agreement regarding an easement. Ultimately, the court ruled in favor of the landowners, finding that the pipeline company failed to prove that it was a “common carrier” with eminent domain power. The court also held that one of the property owners should not have been prevented from testifying as an expert regarding the value of the easement. 

The Facts of the Case

In the early 2000s, the Hlavinkas purchased 15,000 acres in Brazoria County for the primary purpose of generating income by acquiring additional pipeline easements. At the time the family purchased the land, there were about 25 pipelines already traversing the property. A pipeline company, HSC Pipeline Partnership (HSC), wanted to obtain an easement across the property to build a pipeline from Texas City to Brazoria County. 

The Hlavinkas and HSC could not agree on the terms of the easement, so HSC filed for a condemnation hearing. Essentially, HSC was attempting to use its purported eminent domain power to compel the Hlavinkas to grant HSC the easement. The Hlavinkas challenged HSC’s ability to exercise eminent domain powers, arguing that propylene, the product HSC intended on transporting through the pipeline, was neither crude petroleum under the Texas Natural Resources Code, nor an oil product or liquefied mineral under the Texas Business Organizations Code. The Hlavinkas also argued that the pipeline was not for public use, which prevented HSC from exercising eminent domain powers. The trial court rejected the Hlavinkas’ arguments, granting HSC’s motion for summary judgment and subsequently awarded HSC the easement. The court ordered HSC to pay the Hlavinkas $132,293.36 for the easement. In calculating this figure, the court precluded one of the Hlavinkas from testifying to the value of the easement. The Hlavinkas appealed. 

On appeal, the case found in favor of the Hlavinkas on both issues. First, the court held that HSC was not a “common carrier” as a matter of law, and summary judgment should not have been entered in favor of HSC. The court also held that the Hlavinkas should have been allowed to present testimony regarding the value of the easement. 

Regarding the “common carrier” issue, the court began by noting that the burden rests with a company to establish that it is a common carrier. To do this, the company must serve a public purpose, which requires the company show that “at or before the time common-carrier status is challenged, that the pipeline will serve the public by transporting gas for customers who will either retain ownership of their gas or sell it to parties other than the carrier.” The court explained that whether a pipeline serves a public purpose is a judicial question. In finding that there was conflicting evidence regarding whether the HSC pipeline served a public purpose, the court noted the following:

  • The pipeline did not have any interconnections, and there was no evidence that HSC advertised other companies could use the pipeline. 
  • There was no evidence of the pipeline’s capacity. 
  • The pipeline was designed to serve only one customer. 

Taking all this into account, the court held that the lower court erred when it ruled, as a matter of law, that the pipeline served the public and that HSC was a common carrier. 

Moving on to the issue regarding the Hlavinkas’ ability to testify to the value of the easement, the appellate court ruled that the lower court was wrong to prevent the Hlavinkas’ testimony. The court explained that, generally, an expert testifies regarding the value of the condemned property. However, in certain situations, a landowner can testify to the value of their property. 

Here, the court noted that Terry Hlavinka would have testified that he bought and sold property and negotiated pipeline easements and oil and gas leases for over thirty years, and that the “main driver” behind purchasing the land was the opportunity to generate income through pipeline development. He was also planning on testifying that the income derived from pipeline development exceeds the income he could get from any other use of his property. Additionally, he would have explained that there were at least twenty-five pipelines located on the property before HSC expressed its interest in the easement, and that he relied on this fact when determining that the best use of the property was for pipeline development. Terry used comparable sales from other deals to arrive at a value for the easement. 

Ultimately, the court concluded that Terry Hlavinka’s methodology for calculating the value of the easement was sound and should have been presented to the jury. The court also noted that “the sale of easements to private pipelines who are not common carriers, and, therefore, do not have the power to acquire property by eminent domain are necessarily voluntary.”

The issues presented in this case, especially landowners’ ability to testify regarding the value of their property, is a hot-button issue in Texas oil and gas law. This case represents one of the few times a property owner was able to do so.  

Are you dealing with a Texas oil and gas issue?

Oil and gas disputes can be 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 30 years. To learn more, and to schedule an initial consultation, call 512-419-0684. You can also contact me online.

Texas Court Discusses Scope of Assignment in Recent Oil and Gas Case

Oil and gas law in Texas is often closely intertwined with contract law. In fact, many Texas oil and gas disputes are based on disagreements over unclear terms in lease or sale agreements. Earlier this year, the state’s high court issued a written opinion in a Texas oil and gas case highlighting the importance of unambiguous contractual terms. The case required the court to determine the scope of an oil and gas assignment that was, by all accounts, far from clear.

The facts of the case

According to the court’s opinion, Neuhoff Oil purchased a two-thirds interest in a mineral lease for a piece of property referred to as Section 28. A few years after its initial purchase, Neuhoff Oil assigned its two-thirds interest, reserving for itself a 3.75 percent overriding royalty interest on all production under the lease.

From 1975 to 1999, there was only one well on Section 28. Under the assignment agreement, Neuhoff received royalty payments until 1999, when Neuhoff sold its overriding royalty interest to Piranha Partners. The following year, Neuhoff Oil went out of business, and all the company’s assets were assigned to individual members of the Neuhoff family.

After the sale to Piranha Partners, the operator drilled several other wells on Section 28. Piranha Partners continued to receive payments related to the initial well. However, the Neuhoff family received payment for all the newly drilled wells. However, in 2012, the operator obtained a title opinion suggesting that Piranha Partners actually owned the royalty interest according to the sale. The operator then paid Piranha Partners what it believed the company was due, and asked the Neuhoff family to refund it for the amount they received in error.

The Neuhoffs filed this lawsuit, claiming that the sale to Piranha Partners only included the one well in existence at the time of the agreement. The trial court agreed with Piranha Partners, finding that the sale agreement transferred the rights to all wells then in existence and those not yet in existence. The court of appeals reversed, finding that the agreement only transferred the Neuhoff’s rights for some of the future wells. Not satisfied with the appellate court’s opinion, Piranha Partners appealed to the Texas Supreme Court.

The Texas Supreme Court agreed with Piranha Partners, that the agreement conveyed the mineral rights to the entirety of Section 28. The court first looked to the language of the conveyance:

Neuhoff Oil does hereby assign, sell and convey unto Piranha . . . without warranty or covenant of title, express or implied, subject to the limitations, conditions, reservations and exceptions hereinafter set forth . . . all of Neuhoff Oil’s right, title and interest in and to the properties described in Exhibit “A.”

The court then looked to Exhibit A, which described both the individual well that existed at the time of the sale, as well as the property as a whole. The court reviewed the typical rules of construction and the surrounding circumstances, finding neither helpful to resolving the issue at hand. Ultimately, the court determined that Exhibit A was ambiguous because it referred to the individual well, the general area where the well was located, as well as the entire property. Thus, the court looked to the agreement as a whole, trying to reconcile what the original intent of the parties would have been at the time the agreement was executed. Ultimately, the court agreed with the trial court, holding that Piranha Partners obtained a royalty interest in the entire property.

Are you involved in a Texas oil and gas dispute?

If you have a Texas oil and gas legal issue, 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 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 30 years. To learn more, call 512-419-0684. You can also contact us online.

Texas Court Rules in Subcontractor’s Favor in Prompt Payment Act Claim

The Prompt Payment Act is a federal law that was passed to ensure the timely payment to all tiers of contractors who work on federally funded construction projects. The Act accomplishes this by providing a timeline of when payments will be released to the prime contractor, subcontractors, and suppliers. The State of Texas has its own version of the Prompt Payment Act that applies to state-funded construction projects.

Recently a state appellate court issued an opinion in a Texas construction payment dispute case under the Prompt Payment Act. The lawsuit arose when a window company, a subcontractor, installed windows on a hotel construction project at the request of the general contractor. The two companies entered into an agreement outlining the terms of the project, as well as how payment would be made.

As the project got underway, the owner of the hotel contacted the general contractor, concerned that the construction was not going according to schedule. As a result, the owner of the hotel began to withhold payment to the general contractor. Eventually, the general contractor submitted a bill to the hotel owner, including an amount for the windows that were installed by the subcontractor. However, while the hotel owner paid most of the amount due, it withheld a certain sum that was designated for the general contractor’s “overhead and profit.” Rather than take the potential loss itself, the general contractor kept the money and only paid select subcontractors. The window company was not paid by the general contractor. Eventually, after finding out what the general contractor had done, the hotel owner terminated the general contractor for cause.

The hotel owner then sued the general contractor, and the window company intervened in that lawsuit, claiming breach of contract, violation of the Prompt Payment Act, quantum meruit, breach of fiduciary duty, violation of the Construction Trust Fund Act, and unjust enrichment. The general contractor responded by explaining that the hotel owner did not pay the general contractor, and that it was permissible to pass this loss on to the subcontractor.

The trial court heard and granted the subcontractor’s motion for summary judgment, and awarded the subcontractor the amount it was due.

The Court’s Analysis

The court began its analysis by citing the language from the Prompt Payment Act, which provides:

A contractor who receives a payment from the owner . . . in connection with a contract to improve real property shall pay each of its subcontractors the portion of the owner’s payment, including interest, if any, that is attributable to work properly performed or materials suitably stored or specially fabricated as provided under the contract by that subcontractor, to the extent of that subcontractor’s interest in the owner’s payment. The payment . . . must be made not later than the seventh day after the date the contractor receives the owner’s payment.

The court went on to explain that the only exception to this requirement arises when there is a “good faith dispute concerning the obligation to pay or the amount of payment.”

The court then noted that, to prove its claim under the Prompt Payment Act, the subcontractor needed to show that the general contractor received payment from the hotel owner that was attributable to the work performed by the subcontractor. The general contractor argued that, because some of the windows were installed after the hotel owner started to withhold payment to the general contractor, the hotel owner was responsible for paying the subcontractor. However, as the court pointed out, the agreement between the general contractor and subcontractor provided that the general contractor would pay the subcontractor, not the owner of the hotel.

Ultimately, the court agreed that the subcontractor was entitled to payment from the general contractor, pursuant to their agreement. In so holding the court rejected the general contractor’s argument under the Construction Trust Fund Act. The Construction Trust Fund Act provides that:

It is an affirmative defense to prosecution or other action brought under section 162.031(a) that the trust funds not paid to the beneficiaries of the trust were used by the trustee to pay the trustee’s actual expenses directly related to the construction or repair of the improvement or have been retained by the trustee, after notice to the beneficiary who has made a request for payment, as a result of the trustee’s reasonable belief that the beneficiary is not entitled to such funds or have been retained as authorized or required by statute.

In reaching this conclusion, the court noted that the subcontractor was not a beneficiary to the Construction Trust, and that the Act did not apply.

Is Your Business Dealing with a Complex Texas Contract Issue?

When success matters, every decision you make for your business is essential. Choosing which Austin contract dispute or business litigation attorney 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. To learn more about how we can help your business through the issues it faces, call 512-419-0684 to schedule a consultation today.

COVID-19 and How It May Impact the Rights of Texas Employers and Employees

The COVID-19 pandemic has dramatically impacted our country since arriving on United States soil. City, county, state and federal lawmakers have scrambled to keep up with the rapid spread of the virus. In Texas, Governor Abbott signed a state-wide stay-at-home order, requiring the closure of schools, non-essential businesses and many government offices. Cities and counties have issued their own orders, and Governor Abbott has revised and amended his orders. These actions have created many concerns regarding Texas employment law.

Business owners and employees face different, yet equally serious, concerns about how the novel coronavirus and the state’s response to it will affect them. Lawmakers have stepped in to address some of these concerns.

The Families First Coronavirus Response Act

One of the most important new laws that Texas employers and employees should familiarize themselves with is the Families First Coronavirus Response Act (Families First Act). The Families First Act requires certain employers to provide employees with paid sick leave or expanded family and medical leave for specified reasons related to COVID-19. The amount of leave employers that are covered by the Act must provide is dependent on the reason for the requested leave:

Two weeks of paid sick leave at an employee’s regular rate of pay must be provided to:

  • Employees who are unable to work because they are quarantined pursuant to state, federal or local orders, or have been ordered to do so by a healthcare professional; or
  • Employees who are experiencing symptoms of COVID-19 and are seeking a medical diagnosis.

Two weeks of paid sick leave at two-thirds of an employee’s regular rate of pay must be provided to:

  • Employees who need to take time to care for an individual who is in quarantine;
  • Employees who need time to care for a child whose school is closed due to concerns surrounding COVID-19; or
  • Employees who are experiencing a substantially similar condition.

Up to an additional 10 weeks of paid expanded family and medical leave at two-thirds of an employee’s regular wage must be provided to:

  • Employees who have been with the organization for 30 or more days and are unable to work because they must care for a child whose school or childcare provider is closed due to the COVID-19 pandemic.

The Act covers the period between April 1, 2020 and December 31, 2020 and only applies to covered employers. The Act defines a covered employer as:

  • Public employers, and
  • Private employers with fewer than 500 employees.

Notably, small businesses with fewer than 50 employees may be exempt from the Families First Act’s provision regarding paid leave for an employee’s child-care needs, if providing such leave would jeopardize the business’ continued viability. Additionally, all employees, regardless of the amount of time they have been employed with an organization, are eligible for the two weeks of paid sick leave. However, only employees who have worked for the organization for more than 30 days are eligible for the 10 weeks of expanded family and medical leave.

The Act also imposes limits on the total amount employers are required to pay. For example, employees who cannot work because they are quarantined can receive a maximum of $511 per day, or a total of $5,110. Employees who take leave to care for a child are eligible for a maximum of $200 per day, or $2,000 in total.

To be sure, the interplay between the Families First Act and the Family and Medical Leave Act (FMLA) can be complicated, and employers or employees who have questions about the required amount of leave should reach out to a dedicated Austin employment lawyer for immediate assistance.

Contact a Travis County Employment Attorney

If you have concerns about your rights, either as an employee or as an employer, contact the Law Offices of Gregory D. Jordan. Attorney Jordan is a veteran Texas employment attorney with over 30 years of experience representing both employees and employers in a diverse range of employment matters. He commands an in-depth understanding of various state and federal employment laws, and is ready to put this advanced knowledge to use in your case. To learn more, and to schedule a consultation today, call 512-419-0684 today.

Texas Court Discusses the Formation of a Texas Contract Through Email

In Texas, a contract can be something as simple as an agreement between two parties that is supported by consideration. Notably, not all contracts need to be written to be enforceable. However, before a court determines that a contract is enforceable, the party in favor of the contract must show that there was, indeed, an agreement between the parties. In contract law, this is referred to as a “meeting of the minds.”

Recently, a state appellate court issued a written opinion in a case involving a Texas contract dispute illustrating how courts analyze agreements. The specifics of the purported agreement are not particularly relevant to the court’s discussion. Essentially, a group of sellers, the defendants, agreed to develop and eventually sell a group of assets worth hundreds of millions of dollars. The sellers moved forward with development and, when it came time to sell the assets, enlisted the assistance of a third-party.

The third-party solicited bids from several potential buyers. The plaintiff was one of the high bidders. The parties exchanged several emails back and forth. Eventually, the plaintiff sent a counter offer with the following email:

We will not be modifying or accepting any changes to the base deal described above and don’t want to be jerked around anymore. We will give you till 5:00 pm CST tomorrow to accept. Best we can do and you hopefully understand I have recommended to my Board to pass if the timeline is not met or a counter proposal is sent.

An agent for the sellers responded that they are ready to “move forward” with the sale. However, before the contract was drawn up, another bidder revised their offer, making it more favorable to the sellers. The sellers then accepted the other buyer’s offer and the plaintiff filed a breach-of-contract claim against the sellers.

The case ultimately came down to whether a contract was formed through email. If so, then the sellers were committed to selling the assets to the plaintiff. However, if a contract had not formed by the time the sellers accepted the other bidder’s offer, then the sellers were under no obligation to the plaintiff.

The court determined that no contract existed, and that the sellers were free to accept the other bidder’s offer. The court explained that, in general, parties are free to write contracts however they see fit. Included in this freedom of contract, is the ability to insert language into negotiations explaining when a contract comes into existence. Here, the sellers included the following language in the Confidentiality Agreement that they sent out to all prospective buyers:

The Parties hereto understand that unless and until a definitive agreement has been executed and delivered, no contract or agreement providing for a transaction between the Parties shall be deemed to exist and neither Party will be under any legal obligation of any kind whatsoever with respect to such transaction by virtue of this or any written or oral expression thereof.

The court explained that this “no obligation” clause required a definitive agreement before a legally enforceable contract could be formed. The court then held that the emails between the parties did not constitute a definitive agreement.

In concluding that the emails were not a definitive agreement, the court explained that the emails resembled a preliminary agreement in that they represented a “precontractual understanding in which two commercial parties allocate their contributions to an undertaking but do not specify all the important terms of the deal.” The court noted that a definitive agreement requires a “final solution” that is “authoritative and apparently exhaustive.”

The court explained that the emails contemplated the need for an upcoming formal agreement. In fact, the court pointed out that the emails even referenced a purchase and sale agreement. In addition, the court found that a contract was not created merely by laying out the “assets to be sold, the purchase price, a closing day, and other key provisions.” The court explained that the emails “left much to the imagination” and that there were still key areas that needed to be negotiated.

Is Your Business Dealing with a Complex Texas Contract Issue?

When success matters, every decision you make for your business is essential. Choosing which Austin contract dispute attorney 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. To learn more about how we can help your business through the issues it faces, call 512-419-0684 to schedule a consultation today.

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