Case Information

*0 FILED IN 4th COURT OF APPEALS SAN ANTONIO, TEXAS 03/9/2015 2:43:05 PM KEITH E. HOTTLE Clerk *1 ACCEPTED 04-14-00167-CV FOURTH COURT OF APPEALS SAN ANTONIO, TEXAS 3/9/2015 2:43:05 PM KEITH HOTTLE CLERK No. 04-14-00167-CV

In the Fourth Court of Appeals at San Antonio, Texas

____________________ Stephens & Johnson Operating Co., et al. , Appellants,

vs. Charles W. Schroeder, et al. , Appellees.

____________________ Appealed from the 229 th District Court of Jim Hogg County, Texas Cause No. CC-04-143

Appellees’ Brief

Baldemar Garcia Jr.

Texas Bar No. 00790740

email: bgarcia@personwhiworth.com

lead appellate counsel for appellees

Martha Cigarroa de Llano

Texas Bar No. 04250800

email: mdellano@personwhitworth.com

PWBM, LLP

602 East Calton Road, 2 nd Floor (78041)

P. O. Drawer 6668 (78042)

Laredo, Texas

voice 956.727.4441

facsimile 956.727.2696

Appellees Conditionally Request Oral Argument

Table of Contents

Index of Authorities .................................................................................................... 3

Statement of the Case ................................................................................................. 5

Statement Regarding Oral Argument ........................................................................ 5

Replies to Issues Presented ......................................................................................... 6

1. Generally speaking, an oil and gas lease terminates if there is no drilling activity or production after the expiration of its primary term. Schroeder presented an expert witness affidavit proving no drilling or production after the primary term on the Stephens & Johnson Operating Co. lease. Stephens & Johnson Operating Co. did not file an opposing affidavit. Was the declaration of termination by summary judgment proper? ................................................................................... 6 2. Reasonable attorneys’ fees are provable by billing records showing the date, rate, number of hours, and description of work. Opposing affidavits cannot be conclusory. Schroeder offered their attorneys’ affidavit and billing records. Stephens & Johnson Operating Co. filed a counter-affidavit characterizing the fees as excessive and unreasonable, but did not challenge the hourly rates or specifically object to any of the submitted hours. Did the summary judgment attorneys’ fees award constitute an abuse of discretion? ............................................................... 6

Statement of Facts ....................................................................................................... 6

I. Record References ............................................................................................. 6 II. The 10 Year Lease Termination Odyssey .......................................................... 6 Summary of Argument ............................................................................................... 9

Argument ................................................................................................................... 10

I. Unchallenged Declaratory Judgment on Lease Termination ............................. 10 II. Attorneys’ Fees ............................................................................................... 11 A. Standard of Review .................................................................................... 11 B. Reasonableness Factors ............................................................................... 11 C. Proving Reasonable Fees ............................................................................. 12 D. Challenging Fees ......................................................................................... 13 E. Schroeders’ Reasonable and Necessary Attorneys’ Fees .............................. 14 *3 Prayer .......................................................................................................................... 15

Certificate of compliance ........................................................................................ 16

Appendix .................................................................................................................... 18

Index of Authorities

Cases

Arthur Andersen & Co. v. Perry Equip. Corp. , 945 S.W.2d 812 (Tex. 1997) ........... 11

Arthur J. Gallagher & Co. v. Dieterich , 270 S.W.3d 695 (Tex. App.—Dallas 2008,

no pet.) ................................................................................................................... 11 Basin Credit Consultants, Inc. v. Obregon , 2 S.W.3d 372 (Tex. App.—San Antonio

1999, pet. denied) ...................................................................................... 12, 13, 14 Bexar County v. Deputy Sheriff ’s Ass’n , 429 S.W.3d 673 (Tex. App.—San Antonio

2014, no pet.) ......................................................................................................... 10 Bocquet v. Herring , 972 S.W.2d 19 (Tex. 1998) ......................................................... 10

Cammack the Cook, LLC v. Eastburn , 296 S.W.2d 884 (Tex. App.—Texarkana

2009, pet. denied) .................................................................................................. 13 City of Laredo v. Montano , 414 S.W.3d 731 (Tex. 2013) .................................... 12, 14

Clearview Properties, L.P. v. Property Tex. SC One Corp. , 287 S.W.3d 132 (Tex.

App.—Houston [14 th Dist.] 2009, pet. denied) ................................................. 12 El Apple I, Ltd. v. Olivas , 370 S.W.3d 757 (Tex. 2012) ............................... 11, 12, 14

Goode v. Shoukfeh , 943 S.W.2d 441 (Tex. 1997) ....................................................... 10

Holman v. Meridian Oil, Inc. , 988 S.W.2d 802 (Tex. App.—San Antonio 1999, pet.

denied) .................................................................................................................... 10 Jarvis v. Rocanville Corp. , 298 S.W.3d 305 (Tex. App.—Dallas 2009, pet. denied) 11

Kidd v. Hogett , 331 S.W.2d 515 (Tex. Civ. App.—San Antonio 1959, writ ref ’d

n.r.e.) ....................................................................................................................... 10 *4 Rapid Settlements, Ltd. v. Settlement Funding, LLC , 358 S.W.3d 777 (Tex. App.—

Houston [14 th Dist.] 2012, no pet.) ..................................................................... 11 State & Cnty. Mut. Fire Ins. Co. ex rel. So. United Gen. Agency of Tex. v. Walker , 228

S.W.3d 404 (Tex. App.—Fort Worth 2007, no pet.) ......................................... 11 Rules

T EX . D ISCIPLINARY R. P ROF . C ONDUCT 1.04 ........................................................ 11

T EX . R. A PP . P. 9.4 ..................................................................................................... 15

T EX . R. A PP . P. 9.5 ..................................................................................................... 16

No. 04-14-00167-CV Stephens & Johnson Operating Co., et al. , Appellants,

vs. Charles W. Schroeder, et al. , Appellees.

Appellees’ Brief

To the Honorable Fourth Court of Appeals:

Now Come appellees (1) Charles W. Schroeder; (2) Elsie A. Schroeder-

Schneider; (3) Hollis London; (4) Terry Mengers-Reel; (5) Ted Mengers; (6)

Debbie Mengers-Quates; (7) August H. Steinmeyer; (8) Carole Schroeder-

Miller; (9) James M. Schroeder; (10) Sally Schroeder-Tinanus; (11) James E.

Schroeder; (12) Sue Schroeder-Stanford; (13) Bill Schroeder; (14) Wayne

Hennecke; (15) Diane Hennecke-Rhodes; (16) Jerri James; (17) W. Tom Haley;

and (18) Peggy Hailey and file this their brief, and in support thereof, would

respectfully show unto the Appellate Court as follows, to-wit:

Statement of the Case

This appeal seeks review of a summary judgment declaring the termination of

a 43-year-old oil and gas lease and awarding related attorneys’ fees and costs.

Statement Regarding Oral Argument

Appellant Genessee did not request oral argument, but the other 16 appellants

did. All 18 appellees join the request for oral argument from the 16 appellants,

and concede to submission without oral argument per appellant Genessee.

Replies to Issues Presented

1. Generally speaking, an oil and gas lease terminates if there is no

drilling activity or production after the expiration of its primary term.

Schroeder presented an expert witness affidavit proving no drilling or

production after the primary term on the Stephens & Johnson Operating

Co. lease. Stephens & Johnson Operating Co. did not file an opposing

affidavit. Was the declaration of termination by summary judgment

proper?

2. Reasonable attorneys’ fees are provable by billing records showing

the date, rate, number of hours, and description of work. Opposing

affidavits cannot be conclusory. Schroeder offered their attorneys’

affidavit and billing records. Stephens & Johnson Operating Co. filed a

counter-affidavit characterizing the fees as excessive and unreasonable,

but did not challenge the hourly rates or specifically object to any of the

submitted hours. Did the summary judgment attorneys’ fees award

constitute an abuse of discretion?

Statement of Facts

I. Record References

Three clerk’s records were filed in this appeal: (1) Vol. 1 dated 4/10/2014

consisting of pages 1-168; (2) Vol. 2 dated 4/10/2014 consisting of pages 1-

293; and (3) Vol. 1 dated 5/1/2014 consisting of pages 1-348. In addition to

non-exclusive and thus duplicative numbering, there is also extensive

duplication of pleadings and documents amongst the three records. To ensure

completeness at the risk of inefficiency, all record references in this brief will

be to the last filed record on 5/1/2014 numbered 1-348.

II. The 10 Year Lease Termination Odyssey

A little over ten years ago, 18 plaintiffs/appellees (collectively “Schroeder”)

filed suit seeking the termination of a May 1, 1972 oil and gas lease on 306.71

acres of land located in Jim Hogg County, Texas. (CR at 1-9) The initial basis

of termination was an unexplained 7-month total cessation of oil and gas

production (from July 2003 to January 2004) without any drilling activity that

occurred 26 years after the 5-year primary term had expired. (CR 5-6)

After a year of adding approximately 30 defendants in the 1 st and 2 nd amended

petitions, Schroeder then moved for summary judgment in mid 2007. (CR at

12-25; 49-61; 63-68) The goal of the summary judgment motion was a

declaration that the oil gas lease expired and plaintiffs were entitled to

attorneys’ fees. (CR at 63-68) The summary judgment motion attached as an

appendix: (1) the subject oil and gas lease, (2) a petroleum engineer’s report

with pertinent Texas Railroad Commission documents establishing the

complete cessation of production, and (3) an attorney’s affidavit regarding

associated fees. (CR at 66; 71-73 [lease]; 74-75 [report]; 76-115 [RRC

supporting documentation]; 116-18 [attorneys’ fees]) The appendix was

incorporated by reference in the motion, and the motion expressly referred to

the “affidavit of Martha Cigarroa de Llano in support of attorney’s fees and

costs expended herein.” (CR at 66)

Defendant/appellant Genessee filed a 4-page response questioning the

authenticity of the lease, lodging hearsay objections to unidentified RRC

documents, and attaching an affidavit disagreeing with the amount of

Schroeder’s attorneys’ fees. (CR at 124-128) The opposing attorney’s fees

affidavit did not challenge the hourly rate claimed by Schroeder’s counsel, nor

did it state how many hours would have been reasonable and necessary. (CR at

130) Some of the co-defendants/appellants adopted the response filed by

Genessee. (CR at 164 [6], 171 [1], 174-75 [1], 178-79) A counter-report

regarding cessation of production was not provided.

Before their summary judgment could be heard, plaintiffs amended their

petition for a third time. (CR 133-47)

By early 2013, plaintiffs filed a fourth amended their petition and supplemented

their motion for summary judgment asserting non-production from July 1,

2003 to January 31, 2004 and from April 2005 to the present. (CR at 214-228;

242-47) The legal basis for the summary judgment remained the same:

• the standard, express language of the lease requiring production to perpetuate the lease (CR at 245-46; 71-73);

• the easily-controvertible but uncontested affidavits of a petroleum engineer demonstrating the 7-month lack of production between July 2003 and January 2004 and thereafter the non-production from April 2005 to the present, as documented by the attached Texas Railroad Commission records (CR at 253-56; 270-79; 76-115); and • resulting attorneys’ fees described by affidavit and detailed by an authenticated, 11-page billing statement detailing each expense and itemizing every billing entry by date, description, applicable rate, and increment of time in tenth or quarter hour. (CR at 257-58, 259-69) The supplemental motion incorporated by reference the attached appendix

consisting of the lease, the engineers’ affidavits and supporting RRC

documents, and the attorney’s affidavit and billing records “in support of

attorney’s fees and costs expended.” (CR at 244-45) Defendants/appellants

filed a new response complaining that the request for termination was vague

and objecting to Schroeders’ attorneys’ fees. (CR at 280-86, 290, 296) Again,

the opposing affidavits did not challenge the hourly rates charged by

Schroeders’ counsel or state how many hours would have been reasonable and

necessary. (CR at 289, 295)

On December 11, 2013, being a little over 10 years after suit was originally

filed, the trial court granted summary judgment on Schroeders’ termination

claim based on cessation of production. (CR at 298-301) Attorneys’ fees and

costs of $63,787.95 were awarded only against appellant/defendant Stephens &

Johnson Operating Co. (CR at 300)

Summary of Argument

The underlying litigation was filed over 10 years ago, and the substance of the

summary judgment being reviewed has been on file for 7 ½ years. The trial

court declared terminated a 1972 oil and gas lease for a cessation of production

occurring from 2003-2004 and then from 2005 to present. The summary

judgment movants/appellees Schroeder proved termination by expert witness

affidavits and supporting Texas Railroad Commission documents. The non-

movants/appellants opposed summary judgment but did not attach counter-

affidavits. The appellants now do not appear to oppose termination by

summary judgment in their briefs to this Appellate Court.

In addition to success on their request for a declaration of termination,

Schroeder was awarded attorneys’ fees against appellant Stephens & Johnson

Operating Co. only. Schroeders’ attorneys’ fees proof consisted of an affidavit

and supporting billing records showing the date, rate, amount of time, and

description of services for every fee entry. Appellant Stephens & Johnson

Operating Co. filed an opposing affidavit that complained of attorneys’ fees

generally but not addressing any single entry specifically. The trial court did not

abuse its discretion in awarding attorneys’ fees.

Argument

I. Unchallenged Declaratory Judgment on Lease Termination

By their briefs in this Appellate Court, appellants for the first time admit there

is no dispute or justiciable controversy as to the cessation of production and

consequently concede termination of the subject oil and gas lease. (Appellants

Stephens & Johnson Operating Co.’s brief, p. 4-9; Appellant Genessee’s brief, p.

4-6) These concessions were not made in the trial court, where appellants

sought the denial of Schroeders’ summary judgment motions. (CR at 281-82,

292)

Schroeder attached to their summary judgment motions an expert affidavit and

supporting RRC documentation proving a termination due to a cessation of

production since April 2005; appellants did not provide any opposing summary

judgment proof. Appellants also did not submit any summary judgment proof

to show that the terminated oil and gas lease had been released, which would

have mooted any possible controversy. Kidd v. Hogett , 331 S.W.2d 515, 517 (Tex.

Civ. App.—San Antonio 1959, writ ref ’d n.r.e.); Holman v. Meridian Oil, Inc. , 988

S.W.2d 802, 805-06 (Tex. App.—San Antonio 1999, pet. denied); (CR at 226)

Without controverting evidence raising a fact issue, a summary judgment

declaration that resolved a disputed lease termination was proper.

II. Attorneys’ Fees

A. Standard of Review

Abuse of discretion is the standard of review for an award of attorneys’ fees in

a declaratory judgment action. Bocquet v. Herring , 972 S.W.2d 19, 21 (Tex. 1998).

A trial court abuses its discretion when it rules arbitrarily, unreasonably, or

without regard to guiding legal principles. Goode v. Shoukfeh , 943 S.W.2d 441, 446

(Tex. 1997). There are four limitations on the trial court’s discretion: the fees

must be (1) reasonable, (2) necessary, (3) equitable, and (4) just. Bocquet , 972

S.W.2d at 21. Reasonableness and necessity are questions of fact; equity and

justness are questions of law. Bexar County v. Deputy Sheriff ’s Ass’n , 429 S.W.3d

673, 677 (Tex. App.—San Antonio 2014, no pet.).

B. Reasonableness Factors

In assessing the reasonableness of an attorneys’ fee award, eight non-exclusive

factors can be considered:

(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill required to perform the legal service properly;

(2) the likelihood … that the acceptance of the particular employment will preclude other employment by the lawyer; (3) the fee customarily charged in the locality for similar legal services;

(4) the amount involved and the results obtained; (5) the time limitations imposed by the client or by the circumstances;

(6) the nature and length of the professional relationship with the client;

(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and

(8) whether the fee is fixed or contingent on results obtained or uncertainty of collection before the legal services have been rendered.

Arthur Andersen & Co. v. Perry Equip. Corp. , 945 S.W.2d 812, 818 (Tex.

1997)( citing T EX . D ISCIPLINARY R. P ROF . C ONDUCT 1.04, reprinted in T EX . G OV ’ T

C ODE , tit. 2, subtit. G app. (S TATE B AR R ULES , art. X, § 9). Evidence on each

factor is not required. Rapid Settlements, Ltd. v. Settlement Funding, LLC , 358

S.W.3d 777, 786 (Tex. App.—Houston [14 th Dist.] 2012, no pet.); Arthur J.

Gallagher & Co. v. Dieterich , 270 S.W.3d 695, 706 (Tex. App.—Dallas 2008, no

pet.); State & Cnty. Mut. Fire Ins. Co. ex rel. So. United Gen. Agency of Tex. v.

Walker , 228 S.W.3d 404, 408 (Tex. App.—Fort Worth 2007, no pet.). Other

factors that can establish reasonableness include the entire record and the

common knowledge of the attorneys and judges. Rapid Settlements , 358 S.W.3d

at 786; Jarvis v. Rocanville Corp. , 298 S.W.3d 305, 318 (Tex. App.—Dallas 2009,

pet. denied).

C. Proving Reasonable Fees

Reasonable attorneys’ fees may be calculated and proved using the lodestar

method. El Apple I, Ltd. v. Olivas , 370 S.W.3d 757, 760-61 (Tex. 2012). Lodestar

calculation involves two steps: (1) the court determines the reasonable number

of hours and a reasonable hourly rate and then (2) the number of hours is

multiplied by the applicable rate, the product being the lodestar fee. Id .

Lodestar proof requires evidence of: (1) the nature of the work; (2) who

performed the services and their rate; (3) approximately when the services were

performed; and (4) the number of hours worked. El Apple , 370 S.W.3d at 762-

64. This proof will almost always depend on corroboration by

contemporaneous billing records. Id . Trial courts are accorded considerable

deference in determining fees that are not excessive, redundant, or

unreasonable, and lodestar fees are presumptively reasonable. El Apple , 370

S.W.3d at 764-65.

The importance of billing records to support attorneys’ fee awards was again

stressed by the Texas Supreme Court in City of Laredo v. Montano , 414 S.W.3d

731 (Tex. 2013)(per curiam).

D. Challenging Fees

Whether segregation is required between claims that allow for a recovery of

attorney’s fees and claims that do not is a question of law. Clearview Properties,

L.P. v. Property Tex. SC One Corp. , 287 S.W.3d 132, 143 (Tex. App.—Houston

[14 th Dist.] 2009, pet. denied).

To avoid summary judgment on attorneys’ fees, a non-movant must do more

than just file a conclusory counter-affidavit criticizing the fees as unreasonable

and excessive. Basin Credit Consultants, Inc. v. Obregon , 2 S.W.3d 372, 373-74 (Tex.

App.—San Antonio 1999, pet. denied). In Obregon , the summary judgment

movant attached her counsel’s affidavit stating his experience and basis for his

opinion on the reasonableness of his attorney’s fees. Id . The non-movant then

tried to raise a fact issue by competing affidavit:

The attorney’s fees alleged by Plaintiff ’s Motion for Summary Judgment are not reasonable and necessary for the sum sued upon. Attorney fees for Plaintiff should be less than $4,000.00. The hourly rate of $175.00 per hour is excessive by Plaintiff ’s attorney and should be $125.00 per hour. The number of hours *14 to complete Plaintiff ’s attorneys services should be less than 30 hours.

Id . at n.2. Because the counter-affidavit did not provide the affiant’s

qualifications or basis of his opinion as to what a reasonable fee might be, it

was held conclusory and insufficient. Id .

Similarly, in Cammack the Cook, LLC v. Eastburn , the summary judgment non-

movant’s affidavit did not raise a fact issue by merely complaining that “the

attorney’s fees plaintiff ’s attorney claims are not necessary or reasonable, and

they are an excessive and bad faith demand” without any challenge to the

number of hours expended, hourly rate, or necessity. 296 S.W.2d 884, 894-95

(Tex. App.—Texarkana 2009, pet. denied).

E. Schroeders’ Reasonable and Necessary Attorneys’ Fees

The trial court did not abuse its discretion in awarding Schroeder $63,787.95 in

attorneys’ fees and costs for successful oil and gas litigation that consumed

over 10 years to liberate 306.71 mineral acres of land. Schroeders’ attorneys’ fee

proof was sworn and documented by 11 pages of authenticated,

contemporaneous billing records describing every date of work, exact number

of incremental and total hours of the work (324 total hours), a substantive

description of the work, and the applicable rate for the work. (CR at 257-69)

The affidavit proof was unchallenged as to the preclusion of other work

imposed by this representation and the hourly rates charged. (CR at 288-89)

Lodestar fees, like Schroeders’, are presumptively reasonable.

Although the total amount of fees and costs was challenged by appellant

Stephens & Johnson Operating Co. (the only defendant liable for attorneys’

fees and costs), an appropriate fee was not suggested. The counter-affidavit

interposed legal conclusions (“legally sufficient evidence” and “equitable or

just”), made factual conclusions (“grossly disproportionate” and “excessive,

unreasonable”), and challenged the number of hours applicable to preparing

and prosecuting summary judgment motions—and not the underlying claims.

(CR at 288-89) Despite having access to each billing entry by date, amount, and

substantive description, appellant Stephens & Johnson Operating Co. did not

specifically object or request segregation for a single entry.

Appellees Schroeder’s attorneys’ fees proof adheres to the recent high hurdles

in El Apple and Montano set by the Texas Supreme Court over the last 2 years,

while appellant Stephens & Johnson Operating Co.’s does not clear the low

hurdle of Obregon set 16 years ago by this Appellate Court. The award of

attorneys’ fees and costs is further insulated from reversal by the deferential

abuse of discretion standard of review, and should be affirmed.

Prayer

Wherefore, Premises Considered, appellees respectfully request this Appellate

Court to affirm the trial court’s declaratory judgment as to the termination of

the subject oil and gas lease and the associated award of attorneys’ fees and

costs, and appellees further respectfully request any additional relief, both

general and special, at law or in equity, to which they may be justly entitled to

receive.

Respectfully submitted,

/s/ Baldemar Garcia Jr.

Baldemar Garcia Jr.

Texas Bar No. 00790740

email: bgarcia@personwhitworth.com

lead appellate counsel for appellees

Martha Cigarroa de Llano

Texas Bar No. 04250800

email: mdellano@personwhitworth.com

PWBM, LLP

602 East Calton Road, 2 nd Floor (78041)

P. O. Drawer 6668 (78042)

Laredo, Texas

voice 956.727.4441

facsimile 956.727.2696

Certificate of compliance

According to the word count feature in Microsoft Word, this brief is 2,346

words, excluding the caption, identities of parties and counsel, statement

regarding oral argument, table of contents, index of authorities, statement of

the case, statement of issues presented, statement of jurisdiction, statement of

procedural history, signature, proof of service, certification, certificate of

compliance, and appendix. T EX . R. A PP . P. 9.4.(i)(15,000 applicable word limit).

/s/ Baldemar Garcia Jr.

Certificate of service

Appellees’ brief was served by electronic mail on all counsel of record on

March 9, 2015. T EX . R. A PP . P. 9.5.

Augustin Rivera Jr.

Dunn, Weathered, Coffey, Rivera, & Kasperitis, PC

611 South Upper Broadway

Corpus Christi, Texas 78401

facsimile 361.883.1599

email: ariverajr@swbell.net

Lynse L. Guerra

Skaggs & Guerra, LLP

710 Laurel

P. O. Drawer 2285

McAllen, Texas 78502

facsimile 956.630.6570

email: sgllp@sbcglobal.net

/s/ Baldemar Garcia Jr.

Baldemar Garcia Jr.

No. 04-14-00167-CV Stephens & Johnson Operating Co., et al. , Appellants,

vs. Charles W. Schroeder, et al. , Appellees.

Appendix

1. Order granting summary judgment

2. Schroeder’s attorneys’ fees affidavit and attachments

3. Stephens & Johnson Operating Co. counter-affidavit