The Fort Worth Court of Appeals has affirmed a trial court order granting defendant operators’ summary judgment motions seeking enforcement of defense and indemnity obligations.
Urban Fund III, LP and Urban Oil and Gas Partners C-1, LP v. Blackbeard Operating East, LLC; Blackbeard Resources, LLC; Legacy Reserves Operating LP; Legacy Reserves, LP; Revenir Energy Inc. f/k/a Legacy Reserves Inc.; Marathon Oil Company; Marathon Oil (East Texas) LP; Oxy USA, Inc.; Kerr-McGee Oil & Gas Onshore LP, in its own capacity and as successor to Sun Exploration and Production Company (No. 02-25-00214-CV; August 27, 2026) arose from a dispute over contractual indemnity obligations. Urban acquired certain oil and gas properties in Louisiana (the Louisiana assets) from Blackbeard. Blackbeard’s predecessors to the properties (the Up-Chain Defendants) consisted of Legacy, Marathon, OXY, and Kerr-McGee. In 2018, a group of Louisiana landowners filed several environmental lawsuits in Louisiana against all Defendants alleging damages sustained from the exploration and production of oil from the properties. The Up-Chain Defendants tendered demands for defense and indemnity down the chain, which Urban accepted, with the exception of Blackbeard. Blackbeard tendered its own demand for defense and indemnity to Urban, which it accepted as to Blackbeard’s direct liability in the Louisiana lawsuits but refused to defend and indemnify Blackbeard for amounts it paid to defend and indemnify the Up-Chain Defendants.
Subsequently, Urban filed a declaratory judgment action seeking to determine the parties’ rights and obligations under the 2018 agreement governing Blackbeard’s sale of the Louisiana Assets to Urban. Defendants responded with their own dec actions regarding Urban’s defense and indemnity obligations. All parties moved for summary judgment. The trial court denied Urban’s motion, granted Defendants’ motions, awarded Blackbeard damages and attorney’s fees, and awarded the Up-Chain Defendants’ attorney’s fees. Urban appealed.
In an opinion by Justice Womack, the court of appeals affirmed. Her analysis commenced with the 1985 sale of some of the properties to Marathon pursuant to a partial assignment and bill of sale. This agreement included an indemnification provision imposing on Marathon an obligation to defend and indemnity Sun for claims arising from the leases. In 1994, Oxy sold other properties in the Louisiana Assets to Marathon. That agreement likewise included an indemnification clause, which required Marathon to defend and indemnify Oxy. This provision applied broadly, but specifically alluded to environmental damage and pollution claims. Marathon sold the Louisiana Assets to Legacy in 2015. This agreement required Legacy to assume Marathon’s liabilities and also included an indemnification obligation. Legacy conveyed the leases to a wholly owned subsidiary, which it immediately sold to Blackbeard. In 2018, Blackbeard sold the Louisiana Assets to Urban, with Urban’s agreement to defend and indemnify Blackbeard. Legacy, however, filed for Chapter 11 bankruptcy in 2019. Legacy’s reorganization plan provided that all executory contracts be “assumed by the applicable [r]eorganized [d]ebtor” as of the effective date. This assumption included the Marathon-Legacy agreement.
Urban argued that its deal with Blackbeard did not require it to provide defense and indemnity to Blackboard for its defense of the Up-Chain Defendants. Looking to the contract provision, the court observed that Urban agreed to “assume and be responsible for, . . . pay on a current basis, and . . . defend[], indemnif[y], hold[] harmless[,] and forever release” Blackbeard for “any and all Liabilities, whether or not relating to Third[-]Party Claims or incurred in the investigation or defense of any of the same . . . arising from, based upon, related to[,] or associated with” the assumed obligations. The agreement defined “liabilities” contained broad “all claims” and “all losses” (including attorney’s fees and legal defenses) language. Under the plain language of the contract, consequently, Urban assumed Blackbeard’s liability to defend and indemnity the Up-Chain Defendants for damages and expenses arising from the Lousiana lawsuit. In response to Urban’s argument that it didn’t have any indemnity obligation to the Up-Chain Defendants, the court noted that those defendants didn’t tender their defense to Urban. But Urban had that obligation by virtue of its assumption of Blackbeard’s liabilities.
Urban then argued that it had no obligation to defend and indemnify Blackbeard because Blackbeard’s duty to defend and indemnify the Up-Chain Defendants on the basis of the “Retained Obligations” clause in the agreement between Urban and Blackbeard. That clause excluded contracts prohibiting assignment without consent, and since Oxy, Marathon, and Legacy didn’t consent to any assignments to Urban before it signed the deal with Blackbeard, it was off the hook. But, as the court observed once more, Urban’s contention was irrelevant because “Blackbeard never purported to assign or transfer to Urban its contractual obligations to defend and indemnify the Up-Chain Defendants.” None of the Up-Chain defendants dealt away their right to defense and indemnity, either. If the parties had intended to exclude Blackbeard’s contractual obligations to the Up-Chain Defendants, “they could have easily done so in a straightforward manner instead of relying on a byzantine chain of defined terms rooted in the obscure, technical definition of Excluded Information.” Indeed, the court noted, Urban and Blackbeard’s agreement did exclude one of the Louisiana lawsuits, but not all of them.
Urban tried to argue that Legacy’s 2019 bankruptcy case discharged Marathon’s indemnity claims, which also extended to Sun’s and Oxy’s claims. Not so, the court concluded, because “Legacy assumed the Marathon-Legacy PSA, the defense and indemnification obligations arising from that agreement were not discharged and instead became Legacy’s post-confirmation obligations” (citations omitted). Even had Marathon’s claims been discharged, the court continued, Urban wouldn’t have benefited because “a bankruptcy discharge protects debtors but not their third-party insurers or indemnitors.” Finally, the court rejected Urban’s argument that an anti-assignment provision in the agreement between Blackbeard and Legacy barred Blackbeard’s claim. But none of defendants ever assigned their defense and indemnity obligations, so Urban’s contention was beside the point. In any event, Urban couldn’t enforce the anti-assignment provision because it was neither a party to or third-party beneficiary of the contract. The court affirmed the trial court’s judgment.
