Last week TCJL filed an amicus letter in support of a motion for rehearing in a case that should be of great concern to folks in the oil patch. The Texas Supreme Court has denied review, but we think the definitional issue is of statewide importance and should be reviewed.
Castex Energy Partners, LLC, et al. v. Apache Corporation (No. 21-0533) arose from a dispute between the parties to a joint operating agreement (JOA), in which Castex alleged that Apache had breached the exculpatory clause in the JOA by committing “willful misconduct” in its operation of two projects, one involving the expansion of a natural gas processing facility and the other the drilling of a well. After a trial, the jury returned a verdict in favor of Castex for more than $5.5 million. Apache appealed. The Houston [14th] Court of Appeals split the baby, finding the evidence sufficient to support a finding of willful misconduct as to one of the projects but not the other.
At issue is whether the court of appeals’ definition of “willful misconduct” is entirely correct, given that SCOTX has never opined on the meaning of the term in the JOA context. Applying the “ordinary meaning” of the term, the court of appeals determined that “a plaintiff can show that a defendant is liable for willful misconduct if the evidence establishes that the defendant intentionally or deliberately engaged in improper behavior or mismanagement, without regard for the consequences of his acts or omissions.” Given the importance of this definition, which is common to exculpatory clauses in thousands of JOAs governing thousands of projects across the state, we urged the Court to take another look at whether the court of appeals got the definition right. It very well may have gotten it right, but the case sets up perfectly for SCOTX to settle the question once and for all.
It’s a rare event when the Court grants rehearing, so our request is certainly a longshot. We’re hoping that the common use of this term in JOAs will attract the Court’s attention.