Last week, the Texas Supreme Court denied a request by Apollo Exploration, LLC, Cogent Exploration Ltd Co. SellmoCo, LLC (“the Companies”) to reconsider certain portions of its April ruling that excluded expert testimony and resulted in Apache prevailing in a $180 million drilling lease dispute.
The dispute centered around approximately 110 oil leases in the Texas panhandle. Several provisions were at issue, including the term of one lease for the Bivins Ranch. The lease’s language stated its effective date was January 1, 2007, “from which date the anniversary dates of this Lease shall be computed.” After the expiration of the primary term, Apache operated under the continuous lease provision, which required Apache to satisfy certain requirements “each year after the expiration of the Primary Term.” While the Parties agreed that the lease ultimately expired, they disputed the precise date when it expired. The Companies claim the date was December 31, while Apache maintained it expired on January 1. “The unusual features of this case mean that this single-day discrepancy could entail a full-year consequence,” and this full-year consequence could amount to $180 million in damages.
Initially, the trial court agreed with Apache and determined the lease expired on January 1, not December 31. With that ruling, the trial court then excluded the Companies’ damage expert, Peter Huddleston, as his opinions were based on the December 31 date, and granted Apache’s no-evidence motion for summary judgment.
The Companies appealed. In reversing the trial court’s summary judgment ruling, the Eastland Court of Appeals found the lease expired on December 31. Thus, the trial court erred in that determination, and in excluding Huddleston’s opinions.
The case made its way to the Texas Supreme Court. In evaluating the expiration date, the Justices examined centuries of precedent on the calculation of a time period “from” or “after” a particular date. Ultimately, the Court continued its recognition of the common-law rule that “from” or “after” a date certain is that date – not the day before. Here, since the lease was “from” January 1, the Court ruled January 1, not December 31, triggered the clauses in the lease. With its ruling, per the terms of the lease, Apache had not broken its agreement to offer the leases back to the companies before they expired.
With respect to Huddleston’s testimony, the Court affirmed the trial court’s decision to exclude this testimony. However, the Court was unable to determine whether in the absence of Huddleston’s testimony, the Companies had sufficient evidence to overcome Apache’s summary judgment motion. Thus, the Justices remanded this case back to the Court of Appeals for this determination, stating, “[w]e think it prudent to remand to the court of appeals to address this issue in the first instance and then to render judgment or remand to the trial court as appropriate.”
In a footnote of the opinion, the Court clarifies that the trial court did not abuse its discretion by excluding the portions of Huddleston’s testimony that were inconsistent with its summary judgment ruling (i.e., his opinions based on the lease expiring December 31 rather than January 1). However, the Companies argue the decision to exclude Huddleston in his entirety was in error as Huddleston’s opinions extended beyond this one issue. For its part, Apache argues that the Companies waived this issue, having not previously addressed it.
The Companies asked the Court to rehear the matter arguing that the Court’s opinion created the potential for confusion. The Companies further requested that the Court reconsider the issue of Huddleston’s testimony. Apache responded by stating there was no fear of confusion and again reiterated that the Companies waived the issue of Huddleston’s testimony. On Friday, the Court denied the request for rehearing and corrected its opinion to address the dispute pertaining to Huddleston’s testimony, adding the single sentence “[w]e express no view on the merits of this dispute or whether it was preserved for the court of appeals review; that court may address these matters in the first instance on remand.”
Given the timing of the events, this ruling by the Texas Supreme Court, should it be upheld, could result in Apache not having to pay close to $180 million.
Molly advises on all aspects of litigation, from risk mitigation to pre-suit investigation to trial investigation, and has extensive experience conducting depositions and handling motion practice. She represents clients in connection with commercial and industrial accident claims, construction disputes, engineering and design defect cases, contract and indemnity disputes, and general insurance defense litigation. In the oil and gas sector, Molly advises service companies, manufacturers, producers, operators, well interest owners, and others in complex matters before state and federal courts and regional governing agencies.