On Friday the Texas Supreme Court handed down a decision in Rosetta Resources Operating, LP v. Kevin Martin, Jamie Martin, and Ashley Lusk (No. 20-0898). On appeal from the Corpus Christi Court of Appeals, this case involves the construction of an offset well clause in a more or less standard oil and gas lease. In January TCJL filed an amicus curiae brief urging SCOTX to accept review because, in our view, the court of appeals’ interpretation of the clause imposed a new, unprecedented, and expansive extracontractual duty on the operator to protect undrilled land against all drainage whenever a well is drilling either on that land or any adjoining property, regardless of which well may be causing the drainage. There is also an important evidentiary question in the case involving whether drainage had actually occurred on the lease.
The facts of the case are somewhat peculiar and suggest that the court of appeals adopted a novel view of the offset well clause in order to revive the appellees’ otherwise time-barred claim. As our brief argues:
The Martins urged the Court of Appeals to disregard the plain the language of the clause in order to bootstrap the non-adjacent and non-proximate Simmons well into their lease. The Court of Appeals responded by reading the clause as splitting one well into two, dropping the clause’s proximity limitation altogether, and creating a “general duty” where only a limited duty existed under the lease. And it did all of this without any finding that drainage was actually occurring, viewed from the perspective of a reasonably prudent operator. Despite Rosetta’s repeated assertions that no drainage was occurring, and the Martins’ failure to adduce any qualifying opinion to the contrary, the Court of Appeals swept these considerations aside in a rush to give the Martins’ claim new life. Its opinion not only creates a uniquely bad legal precedent, but the summary method of its reasoning cries out for review and correction. In short, the Court of Appeals has constructed new law upon an exceedingly shaky foundation of factual and legal justification.
In an opinion by Justice Busby, SCOTX reversed the court of appeals and reinstated the trial court’s grant of summary judgment on plaintiffs’ tort and statutory claims. It remanded to the trial court for further proceedings on the interpretation of the offset clause, which it found ambiguous (and poorly drafted).