Summary
The United States Court of Appeals for the Fifth Circuit certified three unresolved questions of Texas law to the Supreme Court of Texas concerning royalty liability under a Working Interest Unit Agreement and Joint Operating Agreement. The questions address Barnes’s rights as a potential third-party beneficiary or through privity of estate, whether the agreement insulated Tawes from liability, and whether Tawes’s liability was proportionate or extended to all unpaid royalties.
Topics
Practice areas
Questions Presented
- Whether Barnes could enforce the WIUA and JOA to recover unpaid royalties as a third-party beneficiary or through privity of estate with Tawes.
- Whether the WIUA provision making Moose Oil & Gas liable to the operator on behalf of the Moose Assignees barred Barnes from recovering directly from Tawes.
- Whether the JOA's Royalty Provision made Tawes responsible for all of Barnes's unpaid royalty or only royalty proportionate to Tawes's interest in the wells.
- Whether Tawes waived a separate argument that Barnes's settlement and release of Dominion eliminated her ability to recover under the JOA.
Holdings
- Tawes waived his separate argument that Barnes's release of Dominion eliminated her rights under the JOA because he failed to raise the issue before the bankruptcy court or in his district-court appellate briefs and raised it for the first time in a motion for rehearing.
Key quotations
“We accordingly hereby certify the following three determinative questions of Texas law to the Supreme Court of Texas:” (at 531)
“We disclaim any intention or desire that the Supreme Court of Texas confine its reply to the precise form or scope of the questions certified.” (at 531)
Factual background
Moose Oil & Gas Company, Tawes, Dominion, and other parties pooled adjacent oil, gas, and mineral leases under a Working Interest Unit Agreement and Joint Operating Agreement. Dominion elected not to participate in drilling two wells, while Moose Oil & Gas and the Moose Assignees, including Tawes, consented and operated the wells. Barnes claimed unpaid royalties, and the lower courts held Tawes liable under the JOA's provision making consenting parties responsible for royalties applicable to a non-consenting party's share of production.
Procedural history
Barnes sued to recover unpaid royalties and related damages arising from production on two oil wells. After removal to the bankruptcy court, that court held Tawes liable for unpaid royalties, denied an offset for a settlement, and denied attorney's fees. The district court affirmed liability, reversed on attorney's fees, and remanded for factual development. On Tawes's appeal, the Fifth Circuit certified three questions concerning third-party-beneficiary or privity rights, the effect of the WIUA's liability provision, and the extent of Tawes's royalty liability.