Rosetta Resources Operating, Lp v. Kevin Martin, Jamie Martin, and Ashley Lusk
645 S.W.3d 212
Tex.2022Background
- Landowners Kevin and Jamie Martin and Ashley Lusk (the Martins) leased mineral rights; Mesquite (later Rosetta) amended one lease with a nonstandard, error-ridden Addendum 18 that altered the lease’s drainage covenant.
- Addendum 18 (poorly punctuated) included: (1)(a) certain wells that trigger an obligation (wells on the lease, in a unit containing the lease, or on adjoining acreage); (1)(b) promise to protect the lease’s "un-drilled acreage" from "drainage"; (2)(a) use a reasonably prudent operator (RPO) standard to decide when "drainage is occurring"; (2)(b) if drainage is so found, spud an offset well within 12 months or release the acreage.
- Newfield drilled the Martin Well (inside the unit/lease); later the Simmons Well (off-unit, non-adjoining) allegedly caused production decreases on the Martins’ non-pooled southern acreage.
- The Martins sued Rosetta and Newfield for breach of Addendum 18 and various tort/statutory claims; the trial court granted Rosetta summary judgment on all claims; the court of appeals reversed in part, finding Addendum 18 required protection once an RPO concluded drainage was occurring.
- The Texas Supreme Court held Addendum 18 ambiguous as to whether the triggering well (part (1)(a)) must also be the source of "drainage" in part (1)(b), rejected Rosetta’s res judicata plea, but reinstated the trial court’s summary judgment as to the Martins’ tort and Theft Liability Act claims (which the Martins failed to defend on appeal), and remanded the contract claim for further proceedings.
Issues
| Issue | Plaintiff's Argument (Martins) | Defendant's Argument (Rosetta) | Held |
|---|---|---|---|
| Whether Addendum 18 requires the triggering well and the draining well to be the same | Triggering event in (1)(a) only starts the lessee’s obligation; drainage in (1)(b) can come from any well (including Simmons) | Drainage in (1)(b) must be from a well identified in (1)(a); obligation limited to that class of wells | Ambiguous: both interpretations are reasonable; fact issue precludes summary judgment on breach claim |
| Whether res judicata bars Martins’ argument that the Martin Well triggered duty to protect against Simmons Well drainage | Not barred—the claim against Rosetta was severed and not precluded; argument is an issue within the same claim, not a new claim | Argued prior appeal against Newfield forecloses the argument against Rosetta | Rejected: res judicata does not apply because claims were severed and Rosetta/ Newfield not in privity; issue preclusion inapplicable |
| Whether drainage was undisputed as a matter of law (sufficient for summary judgment) | Production records show drainage after Simmons Well was drilled | Disputed causal links and timing; RPO determination required | Court found a fact issue remains whether an RPO would conclude drainage was occurring; summary judgment on breach improper |
| Whether the court of appeals properly reversed summary judgment on the Martins’ tort and statutory claims | Martins focused appeal on contract interpretation; argued broadly that summary judgment was improper | Rosetta argued tort/statutory grounds (economic-loss rule; no benefit from Simmons Well) were independent bases for summary judgment that Martins failed to contest on appeal | Court of Appeals erred reversing those claims; Supreme Court reinstated trial court’s take-nothing judgment on tort and statutory claims because Martins did not challenge those independent grounds on appeal |
Key Cases Cited
- Scripps NP Operating, LLC v. Carter, 573 S.W.3d 781 (Tex. 2019) (summary-judgment de novo review and standards)
- R & P Enters. v. LaGuarta, Gavrel & Kirk, Inc., 596 S.W.2d 517 (Tex. 1980) (contract ambiguity is question of law)
- In re Davenport, 522 S.W.3d 452 (Tex. 2017) (definition of ambiguity: reasonably susceptible to more than one interpretation)
- Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd., 940 S.W.2d 587 (Tex. 1996) (if multiple reasonable interpretations exist, ambiguity creates fact issue)
- Coker v. Coker, 650 S.W.2d 391 (Tex. 1983) (ambiguity precludes summary judgment because contract interpretation becomes fact issue)
- Amoco Prod. Co. v. Alexander, 622 S.W.2d 563 (Tex. 1981) (implied covenant to protect against field-wide drainage and remedies)
- Kerr–McGee Corp. v. Helton, 133 S.W.3d 245 (Tex. 2004) (elements for breach of implied drainage covenant — substantial drainage and RPO action)
- Van Dyke v. Boswell, O’Toole, Davis & Pickering, 697 S.W.2d 381 (Tex. 1985) (severance limits res judicata effect)
- Malooly Bros. v. Napier, 461 S.W.2d 119 (Tex. 1970) (appellate reversal requires properly assigned error; appellee must negate all grounds for summary judgment)