927 F.3d 303
5th Cir.2019Background
- EnerQuest and several parties (including Glassell, Yates, DKE, and Pati‑Dubose) entered a Development Agreement (Letter Agreement + Amendment + Ratification) covering a defined Dubose Field Area of Mutual Interest (AMI) effective August 1, 2010.
- The Agreement defines “Acquired Interest” as certain oil/gas interests in the AMI that “were or are acquired after” the Effective Date, and requires a party acquiring such interests to notify others and offer a pro‑rata share.
- Section 2.3 (and parallel provisions in the Amendment/Ratification) expressly excludes “all interests, leases or agreements owned by a Party prior to the Effective Date” from the AMI.
- EnerQuest purchased interests previously owned by two parties who had ratified the Agreement (DKE and Pati‑Dubose) and declined to offer them for sharing, claiming those interests were excluded from the AMI.
- Appellees sued for breach of contract; the district court granted summary judgment for Appellees. EnerQuest appealed, also asserting the Texas Statute of Frauds affirmative defense (which the court found unnecessary to decide after resolving contract interpretation).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether interests owned by a party before the Effective Date become Acquired Interests if later sold to another party after the Effective Date | Appellees: When EnerQuest acquired the DKE/Pati‑Dubose interests after Aug. 1, 2010, those acquisitions were Acquired Interests within the AMI and therefore subject to the sharing obligation | EnerQuest: Interests owned by any party prior to the Effective Date are expressly excluded from the AMI forever and thus cannot become Acquired Interests when later transferred | Held for EnerQuest: §2.3 excludes interests owned by a party prior to the Effective Date from the AMI, so such interests cannot be Acquired Interests subject to sharing |
| Whether extrinsic purpose of AMI should control over plain text | Appellees: AMI purpose (promote cooperation and sharing) supports reading transfers into the AMI | EnerQuest: Plain contract text governs; parties could have prohibited these transfers but did not | Held for EnerQuest: Court enforces the plain text, refusing to rewrite the agreement based on alleged purposes |
| Whether the district court properly granted summary judgment for Appellees | Appellees: contract breach established as a matter of law | EnerQuest: Contract language precludes breach; genuine issue of law exists | Held for EnerQuest: Reversed district court; summary judgment should have been for EnerQuest |
| Whether the Texas Statute of Frauds bars enforcement (affirmative defense) | EnerQuest argued Statute of Frauds would make the contract unenforceable | Appellees maintained contract enforceable | Not reached on the merits: court found no breach and thus the Statute of Frauds defense was moot |
Key Cases Cited
- Wallace v. Texas Tech Univ., 80 F.3d 1042 (5th Cir. 1996) (summary judgment standard review)
- Neff v. Am. Dairy Queen Corp., 58 F.3d 1063 (5th Cir. 1995) (summary judgment principles)
- F.D.I.C. v. Firemen’s Ins. Co. of Newark, N.J., 109 F.3d 1084 (5th Cir. 1997) (use state law for contract interpretation)
- MCI Telecomms. Corp. v. Texas Utils. Elec. Co., 995 S.W.2d 647 (Tex. 1999) (contract construction is a question of law)
- Sun Oil Co. v. Madeley, 626 S.W.2d 726 (Tex. 1981) (court seeks parties’ intent from the instrument)
- W. Reserve Life Ins. Co. v. Meadows, 261 S.W.2d 559 (Tex. 1953) (give contract terms their ordinary meaning)
- Westland Oil Dev. Corp. v. Gulf Oil Corp., 637 S.W.2d 903 (Tex. 1982) (purpose of AMI agreements to describe geographic area for sharing future leases)
- Gilbert Texas Constr., L.P. v. Underwriters at Lloyd’s London, 327 S.W.3d 118 (Tex. 2010) (courts enforce written terms, not unexpressed intentions)
- Miller v. BAC Home Loans Servicing, L.P., 726 F.3d 717 (5th Cir. 2013) (Statute of Frauds treated as an affirmative defense)
- Holloway v. Dekkers, 380 S.W.3d 315 (Tex. App.—Dallas 2012) (affirmative defense and procedural considerations regarding Statute of Frauds)