20-03169
Bankr. S.D. Tex.Jun 27, 2025Background
- Pearl Resources LLC and Pearl Resources Operating Co. LLC (collectively "Pearl") filed for Chapter 11 bankruptcy protection in March 2020.
- The Texas General Land Office (GLO), through the Texas Attorney General, filed a complaint against Pearl related to oil and gas leases, and Pearl filed counterclaims.
- The Court previously ruled that sovereign immunity barred certain recoveries from the GLO and awarded attorneys’ fees to the GLO, leading Pearl to seek reconsideration.
- Both sides filed post-trial motions: Pearl sought to overturn the sovereign immunity bar and oppose attorney fee awards, while the GLO sought to confirm or increase its fees.
- At issue were the proper application of sovereign immunity, entitlement to fee recovery under contract and Texas law, and the appropriate calculation and substantiation of attorney's fees and expenses.
- Judge Rodriguez’s June 27, 2025, Memorandum Opinion resolves these matters, including Pearl's claim for recovery of over $40 million and the GLO's attorneys’ fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Waiver of Sovereign Immunity (Liability) | GLO never expressly pled sovereign immunity as an affirmative defense; should be waived. | GLO argued it maintained sovereign immunity from liability throughout. | Sovereign immunity from liability waived; Pearl may recover $40M+. |
| Attorney’s Fees Entitlement | GLO not entitled to fees from LLCs under Texas statute at lawsuit start. | Fees recoverable under contract (State Leases) regardless of LLC status. | Fees recoverable by GLO under contract; not barred by LLC status. |
| Scope of Attorney Fee Recovery (Offset) | GLO limited claims to setoff; shouldn't get affirmative recovery. | Attorneys’ fees are independent costs, not damages; contract allows. | GLO may recover fees regardless of affirmative offset limitation. |
| Reasonableness and Substantiation of Fees | GLO’s entries too vague, excessive billing, not segregated, some unsubstantiated costs. | Fees reasonable, related to all claims, records provided; segregation not needed. | GLO’s fees and costs reduced (vagueness, partial success, lack of detail/segregation); final award $398K deducted from Pearl’s recovery. |
Key Cases Cited
- Carty v. State Office of Risk Mgmt., 733 F.3d 550 (5th Cir. 2013) (waiver of sovereign immunity from liability is an affirmative defense governed by state law and must be pled or is waived)
- Stern v. Marshall, 564 U.S. 462 (2011) (limits bankruptcy courts’ constitutional authority but not applicable here)
- Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974) (establishes 12-factor lodestar test for reasonable attorneys’ fees)