the Huff Energy Fund, L.P., WRH Energy Partners, L.L.C., William R."Bill" Huff, Rick D'Angelo, Ed Dartley, Bryan Bloom, and Riley-Huff Energy Group, LLC v. Longview Energy Company
04-12-00630-CV
| Tex. App. | May 21, 2015Background
- Longview Energy sued Huff, D’Angelo, Huff Energy, WRH Energy Partners, and Riley‑Huff for breaches of fiduciary duty after Riley‑Huff (formed by Huff Energy principals) acquired Eagle Ford shale opportunities Longview was pursuing.
- The jury found breaches and that Riley‑Huff wrongfully obtained Eagle Ford assets; it found purchase price $24.5M, past production value $120M, and $127M development costs.
- Trial court imposed a constructive trust over most Riley‑Huff Eagle Ford assets and future net production revenues, ordered conveyance, and separately awarded Longview the same future net revenues plus an unexplained $95.5M monetary award.
- Defendants posted a $25M supersedeas bond; Longview moved to increase security (to the lesser of $25M or 50% of each defendant’s net worth). The trial court required increased security from four defendants and ordered extensive post‑judgment production of operational documents from Huff Energy.
- The court of appeals reversed the increased security order (holding the $25M posted sufficed for all defendants) and upheld the discovery order. Both sides sought mandamus review in the Texas Supreme Court.
Issues
| Issue | Plaintiff's Argument (Longview) | Defendant's Argument (Huff) | Held |
|---|---|---|---|
| Whether the monetary award ($95.5M + future net production revenues) qualifies as “compensatory damages” under Tex. Civ. Prac. & Rem. Code §52.006 / Tex. R. App. P. 24 | Award is remedial/disgorgement and thus compensatory for supersedeas security purposes | Award is disgorgement/punitive or unexplained and therefore not "compensatory damages" that trigger security requirement | Court: The monetary award is not compensatory damages; defendants need post appeal security only for costs ($66,645) |
| Whether trial court must apply §52.006 caps per defendant or to the judgment as a whole | Longview: caps apply to judgment as a whole (court of appeals’ view) | Huff: caps should apply across defendants (lower security) | Court: Did not decide caps issue because award is not compensatory; court of appeals reversal on security affirmed for different reason |
| Whether the trial court abused discretion in ordering broad post‑judgment discovery under Tex. R. App. P. 24.1(e) in lieu of additional security | Discovery was necessary to protect creditor from dissipation and to adequately protect judgment | Discovery is overbroad, coerces settlement, and impairs effective appeal | Court: Discovery order was within trial court discretion and not an abuse; Longview may obtain operational documents monthly |
| Whether trial court needed evidence of a present threat of asset dissipation before ordering discovery in lieu of bond | Longview: No specific dissipation evidence required; Rule 24.1(e) permits orders to protect creditor | Huff: Trial court should require proof of dissipation risk before imposing ongoing discovery | Court: No such showing required; discovery in lieu of bond was permissible |
Key Cases Cited
- Pennzoil Co. v. Texaco, 481 U.S. 1 (1987) (Supreme Court decision prompting legislative and procedural responses to massive supersedeas burden)
- Texaco, Inc. v. Pennzoil Co., 729 S.W.2d 768 (Tex. App. 1987) (state‑court proceedings following Pennzoil judgment context)
- In re Nalle Plastics Family Ltd. P’ship, 406 S.W.3d 168 (Tex. 2013) (attorney’s fees and other equitable amounts are not "compensatory damages" for §52.006)
- Burrow v. Arce, 997 S.W.2d 229 (Tex. 1999) (discussing disgorgement and fiduciary forfeiture remedies)
- ERI Consulting Eng’rs, Inc. v. Swinnea, 318 S.W.3d 867 (Tex. 2010) (definition of usurpation and fiduciary profit forming basis for disgorgement)