The Houston-based business court [Eleventh Division] has transferred venue of a declaratory judgment action to Loving County because the essence of the action involved damages to real property, not a contractual damage waiver with a venue-selection clause designating venue in Harris County.
NGL Water Solutions, LLC v. Lime Rock Resources V-A, L.P., d/b/a Lime Rock Resources, L.P., LRR Pecos Valley(Cause No. 25-BC11B-0005; 2025 Tex. Bus. 20; May 20, 2025) arose from a dispute between NGL, which operates wastewater disposal wells in the Permian Basin, and Pecos Valley, an operator with several wells in Loving County nearby an NGL injection well. In October 2024, Pecos Valley, believing migration from NGL’s injection well flooded some of its wells, sent NGL a demand letter and draft petition of a lawsuit it intended to file in Loving County. The parties entered into a mutual standby agreement to attempt to settle the matter. When the effort failed, NGL filed a declaratory judgment action in the business court [Eleventh Division], seeking a declaration that it wasn’t liable for damages to Pecos Valley’s wells and the surrounding formation. NGL further alleged that a “Shut In Agreement” between it and Lime Rock contained a damages waiver provision protecting it from liability. This agreement was effective from May 10, 2023 until December 31, 2023. It also contained a venue selection provision stipulating venue in Harris County.
Pecos Valley responded by filing suit in Loving County, alleging causes of action for trespass, negligence, negligence per se, common law and statutory waste, and declaratory judgment. Pecos Valley filed a motion to transfer venue of NGL’s declaratory judgment action to Loving County on the basis that it was a suit involving real property, which § 15.011, CPRC, dictates be brought in the county in which the property is located. NGL countered that its action involved a contract and that the contract’s venue selection clause prevailed.
In an opinion by Judge Dorfman, the court granted Pecos Valley’s motion to transfer venue to Loving County. Section 15.011 stipulates mandatory venue for actions for, among other things, recovery of damages to real property and controls if NGL’s action fits that category. Looking to the “essence” of the dispute, Judge Dorfman concluded that “[a]lthough NGL’s declaratory judgment action seeks an interpretation of the Shut In Agreement, it does so only to avoid potential liability for damages to Pecos Valley’s real property as a result of its alleged trespass, negligence, and statutory waste—the very claims set out in the Loving County Lawsuit.” That NGL pleaded the action as a declaratory judgment doesn’t change its essential character, which even NGL’s complaint stated was brought in response to Pecos Valley’s “attempt to recover damages from NGL ….”
Turning to the text of the Shut In Agreement, Judge Dorfman noted that it refers specifically to Pecos Valley’s wells in the vicinity of its Loving County injection well. Thus its claim for immunity under the agreement “plainly affects Pecos Valley’s interest in real property” and the dispute “concerns the attempted recovery of damages to real property, which necessitates transfer to Loving County.” Judge Dorfman bolstered his conclusion by pointing to SCOTX authority construing the “addition of the word ‘interest’” to mean “that the Legislature intended Section 15.011 to be more inclusive regarding the types of real property suits subject to mandatory venue.” This clearly covers the “interest” referred to in the Shut In Agreement.
Consequently, the agreement’s venue-selection clause could not be enforced unless the contact constituted a “major transaction” under § 15.020(a), which defines the term as a “written agreement under which a person pays or receives, or is obligated to pay or receive, consideration with an aggregate stated value equal to or greater than $1 million.” The Shut In Agreement, however, didn’t state a value, nor did it impose any monetary obligation on either party. “[A]ny potential consideration was conditioned on several events that never occurred,” Judge Dorfman wrote. “The parties agree that no shut-in request was ever made, accepted, or paid under its terms and during its Terms” (citation omitted). As to § 25A.006(a), Government Code, which for purposes of the business court provides that venue may be established either by law or contract, that provision is permissive (“may”) rather than mandatory (“shall”). The mandatory venue statute thus controls, and the court granted Pecos Valley’s motion to transfer venue.
It’s fun to read these early business court opinions because you can see the judges working towards uniform interpretations of statutory definitions and procedures. This is exactly how it was supposed to work.
