Today the TCJL filed a second amicus brief in Gene E. Phillips, Individually and d/b/a Phillips Oil Interests, LLC, et al. v. Carlton Energy Group, LLC (No. 12-255), currently pending before the Texas Supreme Court. The Court heard oral argument in the case on September 11.

TCJL submitted a previous amicus brief in this case asking the Court to correct the Court of Appeals’ decision to disregard the law of Nevada, which states that alter ego is a question of law to be determined by the court. Additionally, TCJL urged the Court to revisit and overrule Castleberry v. Branscum, 721 S.W. 2d 270 (Tex. 1986). Because of the substantial size of the jury verdict in this case and the dubious evidence adduced at trial to justify it, TCJL members requested a second brief urging the Court to reaffirm that Texas law does not permit damages awards to rest on speculation, especially with respect to future income from undeveloped oil and gas in place.

The case arises from an unsuccessful business deal to develop coal seam gas in Bulgaria. At trial, the jury awarded $66.5 million in actual damages to Carlton for tortious interference with its investment contract with Phillips. The jury award was based on the plaintiff’s expert testimony regarding the future market value of potential gas resources for development in an unproven coal field, despite Phillips’ showing that no coal seam gas production had ever occurred from the field or any similar field in Bulgaria. The trial judge set aside the jury award, but the Court of Appeals reinstated it.

TCJL’s brief argues simply that resources are not reserves, and that Texas law does not permit evidence of resources, as opposed to proven reserves, to support an estimate of future income from the production and sale of oil and gas in place. Any such estimate is pure speculation and cannot be used to calculate damages in a civil action. TCJL also urges the Court to consider adopting a bright line test requiring that in order to support an award of damages, an estimate of the market value of a future income stream from an unproduced oil and gas interest rest on proven production from similarly situated oil and gas reserves.

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