Reeder v. Wood County Energy, LLC, 395 S.W.3d 789

This case concerns the duties and standard of care of an oil and gas operator under a joint operating agreement (JOA) with an exculpatory clause exempting the operator from liability for activities under the agreement unless gross negligence or willful misconduct.
The exculpatory clause in the JOA provides that the operator is not liable to other parties except for gross negligence or willful misconduct, shaping the jury instruction on breach of the JOA.
Reeder operated the Harris Sand Unit under a partnership structure and sought funding for necessary repairs while tensions with partners persisted, leading to production and unit-severance issues.
The Fry Interests alleged Reeder illegally produced oil, misreported production, failed to obtain paying-quantity production, and caused damages to leases and personal property.
A jury found that Reeder breached his duties as operator; the trial court entered a take-nothing judgment for Reeder and awarded damages to Fry Interests and Wood County entities.
The court of appeals held the exculpatory clause did not apply to breach-of-contract claims and that gross-negligence/willful-misconduct instructions were improper, affirming most damages but with modifications.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Does the JOA exculpatory clause apply to the breach claims against Reeder?	Reeder	Reeder	Clause applies to breach claims
Is there legally sufficient evidence Reeder acted with gross negligence or willful misconduct to breach the JOA?	Fry Interests	Reeder	Evidence is legally insufficient

Interstate Contracting Corp. v. City of Dallas, 135 S.W.3d 605 (Tex. 2004) (exculpatory clause concepts in contract terms)
Dresser Indus., Inc. v. Page Petroleum, Inc., 853 S.W.2d 505 (Tex. 1993) (exculpatory clauses and liability limitations in oil/gas contracts)
Tex. Gas Utils. Co. v. Barrett, 460 S.W.2d 409 (Tex. 1970) (exculpatory provisions in contracts)
Long Trusts v. Castle Tex. Prod. Ltd. P’ship, 134 S.W.3d 267 (Tex. App.—Tyler 2003, pet. denied) (limitations of exculpatory language in JOAs)
Abraxas Petroleum Corp. v. Hornburg, 20 S.W.3d 741 (Tex. App.—El Paso 2000, no pet.) (exculpatory clause limited to operation-related conduct)
Stine v. Marathon Oil Co., 976 F.2d 254 (5th Cir. 1992) (exculpatory clause extends to acts under JOA (operator’s protection))
Moriel v. Transp. Ins. Co., 879 S.W.2d 10 (Tex. 1994) (definition and elements of gross negligence (objective/subjective components))
City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (standard for reviewing legal sufficiency of evidence)