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CAUSE NO. 2022-23621
NOTZON ADVISORS LIMITED and §
TALCO PARTNERS II, LLC, §
§
Plaintiffs, §
§
v. § HARRIS COUNTY, TEXAS
§
RIO GRANDE E&P MANAGEMENT, LLC §
and RIO GRANDE E&P, LLC,
§
§ 334TH JUDICIAL DISTRICT
NAL AND NO-EVIDENCE
MOTION FOR SUMMARY JUDGMENT
SUSMAN GODFREY L.L.P.
State Bar No. 24051280
State Bar No. 24068095
State Bar No. 24121572
TABLE OF CONTENTS
INTRODUCTION ..................................................................................................................
UNDISPUTED BACKGROUND FACTS ......................................................................................4
Grande into a deal gone wrong .....................................4
Talco’s PMRA ..................................................................................................................
Notzon’s PMRA..................................................................................................................
Plaintiffs’ participation rights ..............................................................................................
RGEP acquires additional leases that Plaintiffs elect to participate in with
g the leases would be sold to Killam ..........................................11
PROCEDURAL BACKGROUND................................................................................................12
LEGAL STANDARDS ...............................................................................................................
SUMMARY JUDGMENT POINTS AND AUTHORITIES ........................................................15
Summary judgment is proper
the PMRAs (Count 1). .......................................................................................................15
summary judgment is proper on the Lease Participation
Claim. .....................................................................................................................15
Rio Grande failed to provide all required information to
Plaintiffs for their election
Whitley leases. .......................................................................................... 15
ntiffs were ready, willing, and
able to participate in the Benavides and Stewart–Whitley
leases. ........................................................................................................ 17
Participation Claim. ...............................................................................................18
Whitley leases. ................................................... 19
ffs all required information
the Benavides lease. .............................. 19
ffs all required information
for their first election on the Stewart-Whitley lease and
second election on the Benavides lease. ....................................... 21
ffs much more information
than was required under the PMRAs. ........................................... 23
Plaintiffs’ delay in asserting
itley leases warrants
laches, waiver, and/or
estoppel. ........................................................................................ 24
on the Allocation Claim. ....................25
Claim. .....................................................................................................................27
with respect to the Columbus
and Killam transactions............................................................................. 28
expired when RGEP sold Columbus in April 2022. ................................. 28
expired according to their own
Killam in May 2022. ................................................................................. 30
summary judgment also
no evidence of damages. .................... 31
Summary judgment is proper on Count 1 for the additional reason that
the PMRAs and the alleged amendment to Talco’s PMRA violate the
s” violate the
scription requirement. ..................................... 32
Notzon’s PMRA’s description of the “
legal description requirement. .............. 35
The alleged amendment to Talco’s PMRA likewise violates the
legal description requirement. ................................................................... 36
fs’ New Venture Claim (Count 2). ....................38
matter of law. .........................................................................................................39
the email as a matter of law, warranting no-evidence summary
judgment. ...............................................................................................................40
enforceable against Rio Grande, there is
nture” rights and obligations. ...................................43
energy venture.” .....................................................................................................45
(Count 4). ....................................................................................................................
CONCLUSION ....................................................................................................................
TABLE OF AUTHORITIES
Page(s)
582 S.W.3d 634 (Tex. App.—Texarkana 2019, no pet.) .........................................................30
93 S.W.3d 215 (Tex. App.—Houston [14th Dist.] 2002, no pet.) ...........................................25
593 S.W.3d 721 (Tex. 2020)....................................................................................................
165 S.W.3d 795 (Tex. App.—Eastland 2005, no pet.) ............................................................44
22 S.W.3d 831 (Tex. 2000).....................................................................................................
Hamilton v. Wilson
249 S.W.3d 425 (Tex. 2008)....................................................................................................
16 S.W.3d 92 (Tex. App.—Houston [1st Dist.] 2000, no pet.) ...............................................43
836 F.3d 516 (5th Cir. 2016) ..................................................................................................
341 S.W.3d 323 (Tex. 2011)....................................................................................................
Dist.] 1987, writ denied) ..............................24, 25
918 F.2d 1203 (5th Cir. 1990) .................................................................................................
819 S.W.2d 470 (Tex. 1991)....................................................................................................
14th Dist.] 2015, pet. denied) ...................................44
201 S.W.3d 686 (Tex. 2006)....................................................................................................
222 S.W.3d 412 (Tex. 2006)....................................................................................................
Mack Trucks, Inc. v. Tamez
206 S.W.3d 572 (Tex. 2006)....................................................................................................
375 S.W.3d 568 (Tex. App. — Dallas 2012, no pet.) ........................................................33, 35
Chemical & Metallurgical Corp.
403 S.W.3d 451 (Tex. App. — Houston [1st Dist.] 2013, pet. denied) .............................27, 32
2018 WL 683754 (Tex. App.— Waco Jan. 31, 2018, no pet.) (mem. op.) .......................33, 34
453 S.W.3d 419 (Tex. 2015)....................................................................................................
643 S.W.2d 919 (Tex. 1982) (per curiam) ...............................................................................43
st Dist.] 1989, writ denied) ....................................17
Peveto v. Starkey
645 S.W.2d 770 (Tex. 1982)....................................................................................................
Reiland v. Patrick Thomas Props. Inc.
997 S.W.2d 217 (Tex. 1999)....................................................................................................
2021 WL 3575709 (Del. Ch. Aug. 13, 2021) ..........................................................................29
847 S.W.2d 218 (Tex. 1992)....................................................................................................
644 S.W.2d 443 (Tex. 1982)....................................................................................................
W. Loop Hospitality, LLC v. Houston Galleria Lodging, LLC
Dist.] 2022, pet. denied).........................40, 41, 42
637 S.W.2d 903 (Tex. 1982)....................................................................................................
15 U.S.C. § 78cc ..............................................................................................................
ODE § 26.01(b)(6) ............................................................................................................43
RAC § 37.006(a) ...................................................................................47
P. 166a(i) ...................................................................................................................1
P. 166a(b) and (i).........................................................................................................1
RAC § 37.009 .......................................................................................47
Texas Property Code § 5.043 ...................................................................................................
Pursuant to T P. 166a(b) and (i), nde E&P, LLC (
and Rio Grande E&P Management LLC ( , together with RGEP, ) respectfully
move for traditional an judgment on all claims asserted against them
RGEP is an exploration and production company that was engaged in the acquisition and
development of natural gas prospects in South Texas before selling its assets two years ago. Glenn
Hart formed Rio Grande in March 2017. Plaintiff Talco Partners II, LLC ( ) became a
member of Rio Grande based on false representations made
that Talco had access to mi
substantial portion of Rio Grande’s acquisition of Defendant Columbus Energy, LLC
in Rio Grande to Notzon. In
fact, Talco did not have access to anywhere close to the amount of capital that had been
attempt to acquire Columbus.
RGEP and its management company, RGM, entered into agreements with Talco and then
cash Plaintiffs had contributed to the company. In addition, Plaintiffs were granted the right to
participate for 5% each in certain wells that Columbus drilled while it was owned by RGEP, and
Those “Purchase and Mutual Release Agreements” ( ) are the basis for Count 1,
Counts 3 and 5 are asserted against Defendants Columbus Energy, LLC and Killam Oil Co., Ltd.,
Glenn Hart and his son Michael Hart both are witnesses in this case. For clarity and brevity, this motion
refers to Glenn Hart as “ ” and Michael Hart as “
whereby Plaintiffs claim that Rio Grande did not provide them all required information in
connection with their participation elections on certain oil and gas leases that Rio Grande acquired
and offered to Plaintiffs (Lease Participation Claim). As explained in Section I below, no-
evidence summary judgment is appropriate on the Lease Participation Claim because the Court’s
February 14, 2023 Order precludes Plaintiffs from introducing evidence that they were not
connection with their elections due to their failure to timely
(or ever) answer interrogatories on that subject. And there is no evidence that Plaintiffs were ready,
willing, and able to exercise their options as required by Texas law; while their elections were
pending, Plaintiffs never indicated they planned to participate in the leases, and they lacked the
could conclude that Rio Grande failed to provide Plaintiffs the required
wanted Plaintiffs to participate in the leases and provided them all the information they were
entitled to and more, including geological data and analysis, forecasted production volumes and
cash flows, development plans, and more. Plaintiffs never disputed that until after they filed this
lawsuit, their proposed TRO was denied, and most of their original claims had been resolved by
more than three years after their elections to participate in the leases expired.
sserting their rights gives rise to laches, waiver, and/or estoppel
as a matter of law, further warranting summary judgment on the Lease Participation Claim.
e” claim under Count 1 (Expiration Claim) is that they somehow are
entitled to compensation based on the fact that their well participation rights expired in 2022 when
RGEP sold Columbus, and their lease participation rights expired shortly thereafter when RGEP
sold the rest of its assets to Defendant Killam Oil Co., Ltd. (Killam). RGEP was free to sell its
assets when it did, and Plaintiffs are not entitled to any compensation in connection with those
sales beyond the sums expressly provided for in the PMRAs. There is no breach of contract that
supports Plaintiffs’ claim for compensation for rights that naturally expired according to the
In any event, the PMRAs are subject to but do not satisfy the Statute of Frauds because
they do not provide a sufficient legal description of ed by Plaintiffs’
participation rights, rendering those rights unenforceable. This is another independent reason, and
Count 2 is based entirely on a May 15, 2018 email whereby Notzon attempted to extort
terms from G. Hart that went far beyond Notzon’s PMRA. Based on that email, Plaintiffs seek
damages from Rio Grande based on assets owned by Rio Grande E&P II, LLC (
false premise that Rio II is a “new energy venture” of Glenn Hart ( ). As
explained in Section II below, summary judgment is proper on Count 2 because (1) on its face, the
May 15, 2018 email does not impose any obligations on Rio Grande; (2) even if it did, the PMRAs’
merger clause bar those purported obligations as a matter of law; and (3) the May 15, 2018 email
does not contain all the essential terms of a contract, rendering it unenforceable as a matter of law.
In any event, summary judgment is proper on the New Venture Claim because no reasonable jury
could conclude that Rio II is G. Hart’s venture. G. Hart is retired, living with Alzheimer’s disease,
Count 4 seeks a declaration that Plaintiffs still ow
Participation Claim and the New Venture Claim. As explained in Section III, summary judgment
same reasons as Counts 1 and 2.
UNDISPUTED BACKGROUND FACTS
RGEP is an exploration and production company that acquired and de
prospects in South Texas before selling them in 2022. M. Hart Decl. ¶ 3. G. Hart, a petroleum
engineer with more than 30 years of experience sources throughout South
Texas, formed RGEP in March 2017. ¶ 6. While RGEP planned to acquire and develop
unconventional acreage, the first critical step in its business
gas properties to provide foundational cash flow to fund general/administrative and personnel costs
7; Ex. 4 26:6–27:14. Toward that end, RGEP’s first objective was to acquire Columbus, which
owned a portfolio of conventional producing properties with geology that was familiar to RGEP’s
Columbus was being marketed for sale in 2017, but RGEP needed to raise additional equity
capital in order to pay the approximately $30 million purchase price. Id. ¶ 8. Toward that end,
Plaintiff Notzon agreed to procure equity investors for RGEP in exchange for a success fee. M.
According to Notzon’s website, its “mission” is “giving clients an edge in securing their
growth and investment into their business,” which “may include securing equity, debt finance,”
and “sourcing strategic industry or financial partners.” Ex. 6. That admission, and discovery in this
case, confirms that Notzon has re placement of private securities
in exchange for a success fee in connection with U.S. securities transactions such as the one she
brokered here. As such, Notzon acted as a “broker” or “dealer”—but she never registered as a
broker–dealer with the U.S. Securities and Exchange Commission ( ) as required by federal
15 U.S.C. § 78 (a)(1). Rio Grande was unaware that Notzon was not registered as a
overy in this case.
Notzon’s top recommendation was Ms. Notzon’
of Plaintiff Talco, Ex. 7, even though Mr. Casso had never invested in an oil and gas business
Rio Grande was Casso’s first investment in an oil and gas
did not disclose that to G. Hart. Ex. 8 51:8–15,
53:10–13 (so admitting).
Ms. Notzon and Mr. Casso represented to G. Hart that Talco had, or could readily access,
millions of dollars in equity capital to help fund RGEP’s acquisition of Columbus. M. Hart Decl.
¶ 10. If this case proceeds to trial (Rio Grande respectfully submits that it is not tr
evidence will show that these representations were false.
Ultimately, Talco only contributed $250,000 to RGEP, which was insufficient to cover
payroll and overhead, much less fund the Columbus acquisition. M. Hart Decl. ¶ 10; Ex. 8 47:16–
17; Ex. 9 195:7–11 RGEP’s first attempt to acquire Columbus failed because Talco failed to deliver
promised capital to pay the deposit. ¶ 10. Unfortunately, by that point, Talco already had a 55%
interest in RGEP based on false representations that it could provide much more equity capital.
see also Ex. 17 at 2 (letter from Talco indicating that it could llion for the
Columbus acquisition). RGEP could not obtain the equity financing it needed to acquire Columbus
For that reason, the contracts that Notzon seeks to enforce are void, voidable, or otherwise unenforceable
as illegal and as against public policy, and are separately voidable pursuant to 15 U.S.C. § 78cc. Rio Grande
will not belabor that point here, as it is not a summary judgment point, but reserves those defenses for any
This misleading omission violated the antifraud provisions of federal securities laws and was a breach of
the duty of fair dealing owed by broker–dealers.
On January 22, 2018, Rio Grande and Talco entered into a Purchase and Mutual Release
Agreement ( ) whereby RGM purchased 50% (out of 55%) of the RGEP interest
held by Talco for $500,000—twice what Talco had contributed to RGEP just months earlier. Ex.
In addition to that quick 200% return, Talco received the right to participate in wells drilled
on the “Amplify Properties” by RGEP (defined as the “Company”):
In the event that the Company acquires or participates in any of the Amplify
Properties, which the Company shall have total discretion on whether to do so,
Seller may participate at its sole option for a five percent (5%) working interest in
any or all future wells that Company chooses to drill on any of such Amplify
at 4, § 7(a). Talco’s PMRA circularly defines “Amplify Properties” as “the Amplify Properties
Talco’s PMRA does not provide for participation rights in the “Non-Identified Properties”
at issue in Count 1. Talco contends its PMRA was amended by a May 10, 2018 email exchange,
Rio Grande wanted to purchase the remaining 5% interest in RGEP from Talco, but that
ssignment of that interest to Notzon. M. Hart Decl. ¶ 12; Ex.
18. That assignment was made without RGM’s consent, and therefore violated the transfer
In addition to rights with respect to the undefined “Amplify Properties,” Talco’s PMRA provided Talco
the right to participate in the “Laredo Energy Properties” and the “Mecom Ranch Properties,” but it is
undisputed that Rio Grande never acquired any of those properties, so those participation rights are not at
issue in this case.
restrictions set forth in Article 8 of RGEP’s governing October 13, 2017 Company Agreement. M.
that its improperly obtained 5% interest in RGEP could
not be diluted by further equity contributions—even though Notzon had not contributed cash
to RGEP. Rio Grande saw it completely differently: Notzon’s interest was held on a fully diluted
By that point, RGEP was in discussions with a suitable private equity sponsor that could
fund the Columbus acquisition and RGEP’s future projects. Under the circumstances—including
the fact that Notzon had not contributed any cash to RGEP and nevertheless claimed that her 5%
interest would not be diluted by the private equity sponsor’s investment of tens of millions of
vement in RGEP understandably
assignment to Notzon forced Rio Grande to negotiate a buyout
Notzon stalled these negotiations. Ex. 8 65:21–23. G. Hart negotiated in good faith,
but Ms. Notzon was often unreachable, and when she did respond to G. Hart’s calls and emails,
she never indicated on what terms she would sell her interest and instead asked irrelevant questions
about Rio Grande’s business partners. M. Hart Decl. ¶ 15; see, e.g., Ex. 21 (G. Hart asking Notzon
n asking Ms. Notzon to sign the Notzon PMRA);
Ex. 23 (Ms. Notzon saying she is not available to speak to G. Hart); Ex. 24 (Amid the stalled
Amplify acquisition, G. Hart telling Ms. Notzon that he “feel[s] like [he’s] on the Titanic”); Ex.
they were close to an agreement).
Throughout this time, RGEP continued to pursue the Columbus acquisition. In March
2018, before RGEP had received a funding commitment from its private equity sponsor, RGEP
executed an agreement to purchase Columbus. G. Hart, M. Hart, and other management team
members made loans to RGEP totaling approximately $800,000 just to keep the lights on and get
to the closing. If the acquisition fell through again, that money would have been lost, destroying a
significant amount of the management team’s personal wealth, and RGEP would have failed
M. Hart Decl. ¶ 16; Ex. 26 169:6–170:6.
Finally, on May 15, 2018, Rio Grande and Notzon entered into a separate Purchase and
Mutual Release Agreement (Notzon’s PMRA) whereby RGM purchased Notzon’s ill-gotten 5%
interest in RGEP for $100,000—even though Notzon ha ny cash or succeeded
in procuring suitable equity inve
the “Amplify Properties” that is functionally identical to the corresponding right in Talco’s PMRA,
at 3, § 6(a). Plaintiffs have seized upon one difference in wording between
the two PMRAs. Whereas Talco’s rights in the Amplify Properties were triggered when RGEP
(the “Company”) drilled a well, Notzon’s rights were triggered when the “Rio Grande Parties”
parties to Notzon’s PMRA, Notzon’s PMRA
defines “Rio Grande Parties” as “RGM, RGEP and any existing or future entity owned or
Unlike Talco’s PMRA, Notzon’s PMRA provi ion right in “Non-
Identified Properties” as follows:
In the event that the Rio Grande Parties propose to purchase or acquire any
properties other than the Amplify Properties (such properties, the “Non-Identified
Properties”), and such Non-Identified Properties will be purchased or acquired
on or prior to any Change of Control Date, as defined below, which the Rio
on whether to do so (the “Proposed Non-
Identified Property Acquisition”), the Rio Grande Parties shall provide Seller
a copy of the term sheet and/or definitive documents to effect such
of any of the Non-Identified Properties and all material information
(the “Non-Identified Property Acquisition
Documents”). In such event, Seller [Notzon] shall have until the earlier of (i) forty-
five (45) days after receipt of the Non-Identified
or (ii) any Change of Control Date, to determine whether it wants to participate in
funding five percent (5)% of the purchase price of any such Non-Identified
Properties, subject to the Carry Credit, and to execute and return to the Rio Grande
Parties the applicable Non-Identified
other documents as reasonably necessary to effect such purchase as the Rio Grande
Parties do and on the same terms and conditions, excluding any rights of
Notzon’s PMRA makes clear that a failure to make an election, execute the acquisition
documents, and pay its share of acquisition costs would bar Notzon from participating in the lease
[I]n the event Seller does not respond to the Rio Grande Party within said forty-
give (45) day period and provide the required funding and execute the Non-
Identified Property Acquisition Documents within said forty-five (45) day period
and return same to the Rio Grande Party, . . . then Seller shall not be permitted to
within such Non-Identified Property.
In addition to all this in exchange for adding no value, Notzon received $500,000 in credits
toward its future participation in the Ampl entified Properties (
RGEP acquires the Benavides and Stewart-Whitley leases
’ participation rights.
After acquiring Columbus in June 2018, RGEP set out to acquire o
Grande gave Plaintiffs regular updates on oil and gas leases that Rio Grande sought to acquire.
Ylitalo Decl. ¶ 30; see, e.g. update to Plaintiffs); see also Ex. 8 31:8–
32:5, 33:20–35:15, 39:4–40:23, 87:16–19 (all describing receipt of monthly updates), Ex. 9 62:16–
Unless otherwise indicated, all emphasi
RGEP ultimately acquired, and then successfully explored and began to develop, the
and four related leases collectively referred to as the
See, e.g., Ex. 8 87:16–19; Ex. 9 62:16–18. As explained in more detail in Section I.B.1, Rio Grande
fully honored Plaintiffs’ alleged rights to participate in those leases by giving them elections to
operty Acquisition Documents and
additional detailed information about the leases and RGEP’s development plans. Ylitalo Decl.
¶¶ 27–41. It is undisputed that Rio Grande provided more information than would customarily be
Plaintiffs to participate, offered to and did meet with Plaintiffs
to help them understand the merits of the opportunity, and answered their questions. Ex. 28; Ex. 4
48:18–21. Plaintiffs did not, however, elect to participate, apparently because they lacked the funds
to pay their share of leasehold acquisition costs and subsequent drilling operations. Exs. 10–
Ex. 9 97:22-98:2 (explaining that Talco did not have the funds
to pay its share of the leasehold costs and was re unds). After the election
periods expired without Plaintiffs making an election, executing the acquisition documents, and
paying their share of the acquisition costs as required by the PMRAs, Rio Grande notified Plaintiffs
that their elections had expired. Ex. 29 (Notzon notice); Ex. 30 (Talco notice); Ex. 8 120:7–13;
Ex. 9 123:17–20. Neither Notzon nor Talco responded to the notices of expiration or raised any
ion right in the Amplify Properties.
While RGEP owned Columbus (which in turn owned the Amplify Properties), Columbus
drilled one—and only one—well on the Amplify Properties, known as the “Hubberd C3 101” well.
Ylitalo Decl. ¶ 11; Ex. 8 223:18–234:3. Both Notzon and Talco were given notice of RGEP’s plan
to drill the Hubberd C3 101 months in advance. Ex. 31. On February 3, 2021, Rio Grande sent
Plaintiffs an election rd C3 101 along with all required information. Ex. 32
notice). Thereafter, Rio Grande sent Plaintiffs single well
economics, a log header, and a mud log for the new Hubberd well. Ex. 34 at 2; Ex. 35 at 2; Ex.
Notzon elected to participate in the Hubberd C3 101.
maintain its pressure after being drilled and was subsequently shut in as a dry hole. Ex. 36; Ex. 8
It is uncontroverted that, after the Hubberd C3 101 well, Columbus did not drill any other
wells on the Amplify Properties while it was owned by RGEP. Although Plaintiffs previously
RGEP acquires additional leases that to participate in
with “Carry Credits,” knowing the leases would be sold to Killam.
In late 2021 and early 2022, RGEP acquired additional leases in what were referred to as
the Thrill Prospect, the Lefty Prospect, the Neel Prospect, and the G.B.G./Hill Ranch Prospect the
, and the leases RGEP acquired in those prospects, the Drag-Along leases). Ylitalo
Decl. ¶ 42. Most of the New Prospects and Drag-Along leases were not “drill ready” after RGEP
acquired the Drag-Along leases and required millions of dollars in capital expenditures for further
leasehold acquisitions and midstream infrastructure before they would be drillable. Id.
These steps and expenditures had not occurred by the time RGEP sold the Drag-Along leases to
Killam.
At that time, Rio Grande also notified Plaintiffs that RGEP was in the process of selling
des lease, the Stewart–
Whitley lease, and the Drag-Along leases to Killam. Id. ¶ 48; Ex. 37 at 1. At that time, Plaintiffs
did not assert that they were still owed elections or more information on the Benavides or Stewart–
Whitley leases. ¶ 48 .After Rio Grande notified Plaintiffs that RGEP would be selling the Drag-
Along leases to Killam, Plaintiffs elected to participate in the acquisition of the Drag-Along leases.
¶ 49; Ex. 8 132:22–24. RGEP thereafter exercised its “drag-along” right, and Plaintiffs’
interests in the Drag-Along Leases were included along with RGEP’s interests in the sale to
Killam. Ylitalo Decl. ¶ 49.
On April 8, 2022, Rio Grande closed on its sale of Columbus. On May 25, 2022, Rio
Grande closed on the sale of the rest of its oil and gas interests and sold substantially all of its
remaining assets, including the Benavides and Stewart-Whitley leases, to Killam. Since the sale to
Killam, Rio Grande has not acquired, owned, or operated any oil and gas interests, Ylitalo Decl. ¶
PROCEDURAL BACKGROUND
Plaintiffs filed their Original Petition on April 19, 2022, seeking a TRO to block the
Columbus and Killam transactions, making a claim that they had not received proper notice in
connection with those transacti fund of Carry Credits due upon a
Change of Control. The original petition did not mention the Lease Participation Claim, the New
at issue in this summary judgment motion.
Judge Sepolio denied the TRO on April 20, 2022. On April 30, 2022, Plaintiffs and Rio
Grande entered into a Rule 11 Agreement pursuant to which Plaintiffs were paid $576,995.02 for
their claim to Carry Credits (which was undisputed as to Notzon), bringing their total take from
Rio Grande to $1,176,995.02, more than
103 at 2 § 2.a. The Rule 11 Agreement resolved all claims asserted in the original petition other
than “claims related to Plaintiffs’ allocation of sales proceeds in the event Plaintiffs elect to acquire
leases that are sold to Killam” (Allocation Claim). Ex. 38 at 2, § 4. The A
Lease Participation Claim, the alternative Expiration Claim, and a rela
claim against Rio Grande. The First Amended Petition also added Columbus and Killam as
defendants, asserting baseless claims that should be disposed of on summary judgment motions to
As explained in more detail in Section I.A.1 below, Plaintiffs failed to respond to proper
interrogatories about the factual basis for the Lease Participation Claim. Based on Plaintiffs’
failure to obey the discovery rules, on Rio Grande’s motion, on February 14, 2023, the Court
ordered “that Plaintiffs may not introduce evidence that Rio Grande failed to provide sufficient
information in connection with Plaintiffs’ elections to part
After discovery confirmed that the Lease Participation Claim was factually meritless, more
than a year after first amending their petition, Plaintiffs amended their petition again to assert the
) is the live pleading. Ex. 39. As
against Rio Grande, Count 1 asserts the Lease Participation Claim, the Allocation Claim, and the
alternative Expiration Claim; Count 2 asserts the New Venture Claim; and Count 4 seeks a
declaration that Plaintiffs sti
Claims. None of these claims merit a jury’s or tion beyond this motion
because summary judgment is proper on all claims.
LEGAL STANDARDS
After an adequate time for discovery, a party may move for summary judgment on the basis
that there is no evidence of one or more essential elements of a claim or defense on which the
adverse party would have the burden of proof at trial. T P. 166a(i); Hamilton v. Wilson
LmB, Ltd. v. Moreno
burden then shifts to the nonmovant to produce evidence raising a genuine issue of material fact
ts of his claim.” T P. 166a(i); Mack Trucks, Inc. v. Tamez
Traditional summary judgment is proper when the evidence presented shows there is no
fact such that the movant is entit a matter of law.
I. 166a(c); Rhone-Poulenc, Inc. v. Steel, 997 S.W.2d 217, 222 (Tex. 1999); Lear
Siegler, Inc. v. Perez is conclusively established if
ordinary minds cannot differ on the conclusion to be drawn from the evidence. Triton Oil & Gas
SUMMARY JUDGMENT POINTS AND AUTHORITIES
Summary judgment is proper on Plaintiffs’ claim that Rio Grande breached the
Count 1 asserts the Lease Participation Claim by which Plaintiffs claim that Rio Grande
“failed to abide by their obligations in the PMRAs regarding the Other Property Rights in the
PMRAs” by “failing to provide Plaintiffs with the required notices and/or information for certain
wells they drilled and/or property interests they acquired.” Ex. 39 ¶ 31 (TAP). In particular,
Plaintiffs contend that Rio Grande failed to provide all required information to them in connection
with their elections to participate in the Benavides and Stewart–Whitley leases. Ex. 40 at 4
(Notzon’s responses); Ex. 41 at 4.
The Court’s February 14, 2023 Order precludes evidence that Rio
Grande failed to provide all required information to Plaintiffs for their
elections on the Benavides and Stewart–Whitley leases.
In October 2022, Rio Grande asked Plaintiffs to “identify and describe each and every
instance where [they] contend that Rio Grande provided some notice about Rio Grande’s well
drilling or property acquisitions but not all ‘required notices/and or information,’” including “all
information that was allegedly required but not provided” and an explanation “why Rio Grande
was required to provide that information to Plaintiffs.” Ex. 40 at
4 (Talco’s responses). Plaintiffs’ responses identified the Benavides and Stewart-Whitley leases
but failed to describe the factual basis for the Lease Participation Claim as properly called for by
Plaintiffs failed to amend th Rio Grande’s Jan. 20, 2023 Motion
to Exclude Evidence and Compel Discovery, Ex. 8. On January 20, 2023, Rio Grande moved to
exclude Plaintiffs from introducing evidence in support of this claim at trial. Rio Grande’s Jan. 20,
2023 Motion to Exclude Evidence and Compel Discovery at 10–11. On February 14, 2023, the
Court granted Rio Grande’s motion, ordering, among other things, that Plaintiffs “may not
introduce any evidence that Rio Grande failed to provide sufficient information in connection with
Plaintiffs’ elections to participate under the ntiffs later moved to
vacate a different portion of the February 14, 2023 Order, they never sought to vacate the portion
of the Order pertaining to the Lease Participation Claim, leaving the Court’s Order on that point
Rio Grande’s April 6, 2023 response to Plaintiffs’ motion to vacate argued that Plaintiffs
failed to address the Court’s ruling with respect to evidence on the Lease Participation Claim, and
thus there was no basis to vacate that portion of the Order. In
support of their motion, Plaintiffs continued to ask only that the Court “vacate the February 14,
granting Rio Grande’s motion to exclude Eric R. Krause’s testimony and other
evidence of damages,” Ex. 43, without any mention of the portion of
The Court signed Plaintiffs’ proposed order on June 8, 2023. Because Plaintiffs have never
asked the Court to vacate the February 14, 2023 Order in relation to the Lease Participation Claim,
vacate provided no basis to vacate that portion of the Order, the
Order remains intact in relation to the Lease Participation Claim. Given that the Order precludes
On March 30, 2023, Plaintiffs moved to vacate the portion of the Court’s February 14, 2023 Order
precluding evidence of damages based on Plaintiffs’ failure to timely disclose their damages expert’s
opinions.Neither Plaintiffs’ motion nor their proposed order addressed the Order in relation to the
3/30/23 Motion to Vacate at 6–10 (discussing only the portion of the Court’s order
excluding evidence of damages). Similarly, Plaintiffs’ proposed order did not ask the Court to vacate the
order precluding Plaintiffs from introducing evidence of their Information Claim. Plaintiffs’ proposed order
asked only that the Court vacate its order excluding evidence of damages.
Plaintiffs from introducing evidence of breach in connection with their Leas
no-evidence summary judgment is appropriate.
There is no evidence that Plaintiffs were ready, willing, and able to
participate in the Benavides
Plaintiffs’ option to participate in the Bena
of the contract, but he must plead
and prove that he was ready, willing, and able to perform in order to recover damages.’”
Indus. Inc. v. Sun Co. Inc., 918 F.2d 1203, 1214 (5th Cir. 1990) (quoting Olson v. Bayland Pub’g,
, 781 S.W.2d 659, 664 (Tex. App.—Houston [1st Dist.] 1989, writ denied)). “Courts often
apply this rule to bar recovery to option holders who cannot prove they had the financial ability to
Plaintiffs have not pled that they were ready, willing, and able to fund their share of the
acquisition costs and to otherwise participate in the Benavides and Stewart–Whitley leases under
To participate in the Benavides and Stewart–Whitley leases, Plaintiffs were required to
“provide the required funding”—that is, “five percent (5%) of the purchas
of their election notices. Ex. 1 at 4, § 6(b)(i). For the Benavides lease, Notzon’s 5% share of the
purchase price was $616,452.70, after accounting for its Carry Credit. Ylitalo Decl. ¶ 37. For the
Stewart–Whitley lease, Notzon’s 5% share of the purchase price was $43,758.20, again, after
accounting for the Carry Credit. Talco did not have Carry Credits, so its 5% share of each lease
was $50,000 more than Notzon’s share. And it would have cost Plaintiffs millions more each
to participate in the wells drilled on the leases. Id. There is no evidence that Plaintiffs had the funds
required for them to participate in the lease acquisitions, much less the millions of dollars they
While their August 2, 2019 elections on the Bena itley leases were
pending, Plaintiffs never indicated that they intended to exercise their options to participate. Before
August 2, 2019, Talco stated that “ ” Plaintiffs participated, they would do so through two
different entities, Talco Partners IV, LLC and Talco Partners V, LLC. Ex. 44 at 1. These entities
were never created. Ex. 45 56:20–22; Ex. 45 at 1 (Texas Secretary of State
The reason Plaintiffs didn’t ever indicate that they would participate is simple: They didn’t
have the money to do so. In 2019, when their elections were pending, neither Notzon nor Talco
had the money needed to participate in the Benavides and Stewart–Whitley leases. Exs. 10–
11 (Notzon’s bank statements); Ex. 9 97:22-98:2 (explaining that Talco did not have the funds to
Traditional summary judgment on Plaintiffs’ claims that Rio Grande
and Talco PMRAs by not providing sufficient information is appropriate for three reasons. First,
that Rio Grande did not give Plaintiffs sufficient information.
Second, the Notzon and Talco PMRAs do not comply with the Statute of Fra
requirement. Third, the Talco PMRA does not comply with the Statute of Frauds’ requirement that
the essential terms of the agreement be in writing.
Rio Grande’s RFP No. 12 requested Talco’s “audited financial statements for fiscal years 2018–2022,
including balance sheets and statements of income and tax flow.” Ex. 16 at 8-9. The Court’s February 14,
2023 Order compelled Talco to produce documents responsive to RFP No. 12. Talco did not produce
No reasonable jury could find that Rio Grande failed to give Plaintiffs
all required information for their elections on the Benavides and
Under the PMRAs, Rio Grande was required to “provide [Plaintiffs] a copy of the term
sheet and/or definitive documents to effect such acquisition of any of the Non-Identified Properties
and all material information reasonably related thereto (the ‘Non-Identified Property Acquisition
Documents’)”—that is, relevant information that was related to the leases that Rio Grande
Rio Grande provided Plaintiffs all this information and more in connection with their
elections on the Benavides and Stewart–Whitley leases, conclusively negating Plaintiffs’ Lease
Participation Claim as a matter of law.
Rio Grande provided Plaintiffs all required information for
their first election on the Benavides lease.
On July 17, 2018, Rio Grande notified Plaintiffs that RGEP was pursuing the acquisition
of the Benavides lease. Ylitalo Decl. ¶ 29; Ex. 46 at 1. RGEP gave Plaintiffs their first notice of
election for the Benavides lease on March 11, 2019. Ylitalo Decl. ¶ 30; Ex. 47 at 2–3 (election
notice for both Notzon and Talco); Ex. 8 144:22–25 (acknowledging receipt of first election
re sending the first election not
RGEP had provided extensive information about the lease to Plaintiffs, including a map of the
lease, estimates of gas recovery from Eagle Ford wells drilled on the lease, single-well economics
for Eagle Ford wells at various depths, a development plan with costs and spud dates through
November 2021, RGEP’s plan for funding the acquisition of the lease, RGEP’s desired division
Unlike Notzon’s PMRA, Talco’s PMRA does not provide for participation rights in Non-Identified
Properties. Nevertheless, Talco contends that its PMRA was amended to include such a provision based on
a May 10, 2018 email exchange. Ex. 39 ¶ 13 & n.1 (TAP); Ex. 80 at 3 (contending that § 7(b) of Talco’s
PMRA was amended to conform to § 6(b) of Notzon’s PMRA). As explained in Section I.C below, the
alleged email amendment is unenforceable. For purposes of Sections I.A and I.B., Rio Grande assumes
solely for argument’s sake that Talco’s PMRA was amended to include the same provision for Non-
Identified Properties as Notzon’s PMRA.
of working interests for the lease, well-by-well cashflows, reserve estimates, estimated drilling and
completion costs, and a draft of the lease agreement. Ylitalo Decl. ¶ 30; Exs. 47–54 (sending
aforementioned information to Plaintiffs); see, e.g
80:20–23, 81:12–14, 82:2–8, 85:6–16; Ex. 5 145:1–8, 147:3–148:5, 152:20–153:11; Ex. 9 76:8–
10, 79:3–23. RGEP also sent Plaintiffs regular up
see, e.g., Ex. 51 (sending monthly update to Plaintiffs);
33:20–35:15, 39:4–40:23, 87:16–19 (all describing receipt of mo
Nevertheless, on March 29, 2019, Mr. Casso responded to the email sending Talco’s
election notice, saying that Notzon and Talco needed “all required inform
and Talco agreements to evaluate the prospect.” Ylitalo Decl. ¶ 31; Ex. 55 at 1; Ex. 9 82:5–13.
Neither Mr. Casso nor Ms. Notzon specified what information they allegedly needed to see over
and above what already had been provided. Mr. Hart responded to Mr. Casso’s email and offered
to get together for a presentation on the Benavides lease. Ylitalo Decl. ¶ 31; Ex. 55 at 1; Ex. 9
Thereafter, Rio Grande sent Plaintiffs an Authorization for Expenditure for wells on the
56 at 2–3 (authorization for expenditure); Ex. 57 at 2–21 (offset analysis, type curves, development
fs’ first election notice on the Bena
2019. Ylitalo Decl. ¶ 32. Plaintiffs never asked for more time, said they needed more information,
Id.
Still hopeful that Plaintiffs would elect to participate in the Benavides lease, RGEP
continued to send Plaintiffs detailed information about the lease and answered Pla
Preview
CAUSE NO. 2022-23621 NOTZON ADVISORS LIMITED and § TALCO PARTNERS II, LLC, § § Plaintiffs, § § v. § HARRIS COUNTY, TEXAS § RIO GRANDE E&P MANAGEMENT, LLC § and RIO GRANDE E&P, LLC, § § 334TH JUDICIAL DISTRICT NAL AND NO-EVIDENCE MOTION FOR SUMMARY JUDGMENT SUSMAN GODFREY L.L.P. State Bar No. 24051280 State Bar No. 24068095 State Bar No. 24121572 TABLE OF CONTENTS INTRODUCTION .................................................................................................................. UNDISPUTED BACKGROUND FACTS ......................................................................................4 Grande into a deal gone wrong .....................................4 Talco’s PMRA .................................................................................................................. Notzon’s PMRA.................................................................................................................. Plaintiffs’ participation rights .............................................................................................. RGEP acquires additional leases that Plaintiffs elect to participate in with g the leases would be sold to Killam ..........................................11 PROCEDURAL BACKGROUND................................................................................................12 LEGAL STANDARDS ............................................................................................................... SUMMARY JUDGMENT POINTS AND AUTHORITIES ........................................................15 Summary judgment is proper the PMRAs (Count 1). .......................................................................................................15 summary judgment is proper on the Lease Participation Claim. .....................................................................................................................15 Rio Grande failed to provide all required information to Plaintiffs for their election Whitley leases. .......................................................................................... 15 ntiffs were ready, willing, and able to participate in the Benavides and Stewart–Whitley leases. ........................................................................................................ 17 Participation Claim. ...............................................................................................18 Whitley leases. ................................................... 19 ffs all required information the Benavides lease. .............................. 19 ffs all required information for their first election on the Stewart-Whitley lease and second election on the Benavides lease. ....................................... 21 ffs much more information than was required under the PMRAs. ........................................... 23 Plaintiffs’ delay in asserting itley leases warrants laches, waiver, and/or estoppel. ........................................................................................ 24 on the Allocation Claim. ....................25 Claim. .....................................................................................................................27 with respect to the Columbus and Killam transactions............................................................................. 28 expired when RGEP sold Columbus in April 2022. ................................. 28 expired according to their own Killam in May 2022. ................................................................................. 30 summary judgment also no evidence of damages. .................... 31 Summary judgment is proper on Count 1 for the additional reason that the PMRAs and the alleged amendment to Talco’s PMRA violate the s” violate the scription requirement. ..................................... 32 Notzon’s PMRA’s description of the “ legal description requirement. .............. 35 The alleged amendment to Talco’s PMRA likewise violates the legal description requirement. ................................................................... 36 fs’ New Venture Claim (Count 2). ....................38 matter of law. .........................................................................................................39 the email as a matter of law, warranting no-evidence summary judgment. ...............................................................................................................40 enforceable against Rio Grande, there is nture” rights and obligations. ...................................43 energy venture.” .....................................................................................................45 (Count 4). .................................................................................................................... CONCLUSION .................................................................................................................... TABLE OF AUTHORITIES Page(s) 582 S.W.3d 634 (Tex. App.—Texarkana 2019, no pet.) .........................................................30 93 S.W.3d 215 (Tex. App.—Houston [14th Dist.] 2002, no pet.) ...........................................25 593 S.W.3d 721 (Tex. 2020).................................................................................................... 165 S.W.3d 795 (Tex. App.—Eastland 2005, no pet.) ............................................................44 22 S.W.3d 831 (Tex. 2000)..................................................................................................... Hamilton v. Wilson 249 S.W.3d 425 (Tex. 2008).................................................................................................... 16 S.W.3d 92 (Tex. App.—Houston [1st Dist.] 2000, no pet.) ...............................................43 836 F.3d 516 (5th Cir. 2016) .................................................................................................. 341 S.W.3d 323 (Tex. 2011).................................................................................................... Dist.] 1987, writ denied) ..............................24, 25 918 F.2d 1203 (5th Cir. 1990) ................................................................................................. 819 S.W.2d 470 (Tex. 1991).................................................................................................... 14th Dist.] 2015, pet. denied) ...................................44 201 S.W.3d 686 (Tex. 2006).................................................................................................... 222 S.W.3d 412 (Tex. 2006).................................................................................................... Mack Trucks, Inc. v. Tamez 206 S.W.3d 572 (Tex. 2006).................................................................................................... 375 S.W.3d 568 (Tex. App. — Dallas 2012, no pet.) ........................................................33, 35 Chemical & Metallurgical Corp. 403 S.W.3d 451 (Tex. App. — Houston [1st Dist.] 2013, pet. denied) .............................27, 32 2018 WL 683754 (Tex. App.— Waco Jan. 31, 2018, no pet.) (mem. op.) .......................33, 34 453 S.W.3d 419 (Tex. 2015).................................................................................................... 643 S.W.2d 919 (Tex. 1982) (per curiam) ...............................................................................43 st Dist.] 1989, writ denied) ....................................17 Peveto v. Starkey 645 S.W.2d 770 (Tex. 1982).................................................................................................... Reiland v. Patrick Thomas Props. Inc. 997 S.W.2d 217 (Tex. 1999).................................................................................................... 2021 WL 3575709 (Del. Ch. Aug. 13, 2021) ..........................................................................29 847 S.W.2d 218 (Tex. 1992).................................................................................................... 644 S.W.2d 443 (Tex. 1982).................................................................................................... W. Loop Hospitality, LLC v. Houston Galleria Lodging, LLC Dist.] 2022, pet. denied).........................40, 41, 42 637 S.W.2d 903 (Tex. 1982).................................................................................................... 15 U.S.C. § 78cc .............................................................................................................. ODE § 26.01(b)(6) ............................................................................................................43 RAC § 37.006(a) ...................................................................................47 P. 166a(i) ...................................................................................................................1 P. 166a(b) and (i).........................................................................................................1 RAC § 37.009 .......................................................................................47 Texas Property Code § 5.043 ................................................................................................... Pursuant to T P. 166a(b) and (i), nde E&P, LLC ( and Rio Grande E&P Management LLC ( , together with RGEP, ) respectfully move for traditional an judgment on all claims asserted against them RGEP is an exploration and production company that was engaged in the acquisition and development of natural gas prospects in South Texas before selling its assets two years ago. Glenn Hart formed Rio Grande in March 2017. Plaintiff Talco Partners II, LLC ( ) became a member of Rio Grande based on false representations made that Talco had access to mi substantial portion of Rio Grande’s acquisition of Defendant Columbus Energy, LLC in Rio Grande to Notzon. In fact, Talco did not have access to anywhere close to the amount of capital that had been attempt to acquire Columbus. RGEP and its management company, RGM, entered into agreements with Talco and then cash Plaintiffs had contributed to the company. In addition, Plaintiffs were granted the right to participate for 5% each in certain wells that Columbus drilled while it was owned by RGEP, and Those “Purchase and Mutual Release Agreements” ( ) are the basis for Count 1, Counts 3 and 5 are asserted against Defendants Columbus Energy, LLC and Killam Oil Co., Ltd., Glenn Hart and his son Michael Hart both are witnesses in this case. For clarity and brevity, this motion refers to Glenn Hart as “ ” and Michael Hart as “ whereby Plaintiffs claim that Rio Grande did not provide them all required information in connection with their participation elections on certain oil and gas leases that Rio Grande acquired and offered to Plaintiffs (Lease Participation Claim). As explained in Section I below, no- evidence summary judgment is appropriate on the Lease Participation Claim because the Court’s February 14, 2023 Order precludes Plaintiffs from introducing evidence that they were not connection with their elections due to their failure to timely (or ever) answer interrogatories on that subject. And there is no evidence that Plaintiffs were ready, willing, and able to exercise their options as required by Texas law; while their elections were pending, Plaintiffs never indicated they planned to participate in the leases, and they lacked the could conclude that Rio Grande failed to provide Plaintiffs the required wanted Plaintiffs to participate in the leases and provided them all the information they were entitled to and more, including geological data and analysis, forecasted production volumes and cash flows, development plans, and more. Plaintiffs never disputed that until after they filed this lawsuit, their proposed TRO was denied, and most of their original claims had been resolved by more than three years after their elections to participate in the leases expired. sserting their rights gives rise to laches, waiver, and/or estoppel as a matter of law, further warranting summary judgment on the Lease Participation Claim. e” claim under Count 1 (Expiration Claim) is that they somehow are entitled to compensation based on the fact that their well participation rights expired in 2022 when RGEP sold Columbus, and their lease participation rights expired shortly thereafter when RGEP sold the rest of its assets to Defendant Killam Oil Co., Ltd. (Killam). RGEP was free to sell its assets when it did, and Plaintiffs are not entitled to any compensation in connection with those sales beyond the sums expressly provided for in the PMRAs. There is no breach of contract that supports Plaintiffs’ claim for compensation for rights that naturally expired according to the In any event, the PMRAs are subject to but do not satisfy the Statute of Frauds because they do not provide a sufficient legal description of ed by Plaintiffs’ participation rights, rendering those rights unenforceable. This is another independent reason, and Count 2 is based entirely on a May 15, 2018 email whereby Notzon attempted to extort terms from G. Hart that went far beyond Notzon’s PMRA. Based on that email, Plaintiffs seek damages from Rio Grande based on assets owned by Rio Grande E&P II, LLC ( false premise that Rio II is a “new energy venture” of Glenn Hart ( ). As explained in Section II below, summary judgment is proper on Count 2 because (1) on its face, the May 15, 2018 email does not impose any obligations on Rio Grande; (2) even if it did, the PMRAs’ merger clause bar those purported obligations as a matter of law; and (3) the May 15, 2018 email does not contain all the essential terms of a contract, rendering it unenforceable as a matter of law. In any event, summary judgment is proper on the New Venture Claim because no reasonable jury could conclude that Rio II is G. Hart’s venture. G. Hart is retired, living with Alzheimer’s disease, Count 4 seeks a declaration that Plaintiffs still ow Participation Claim and the New Venture Claim. As explained in Section III, summary judgment same reasons as Counts 1 and 2. UNDISPUTED BACKGROUND FACTS RGEP is an exploration and production company that acquired and de prospects in South Texas before selling them in 2022. M. Hart Decl. ¶ 3. G. Hart, a petroleum engineer with more than 30 years of experience sources throughout South Texas, formed RGEP in March 2017. ¶ 6. While RGEP planned to acquire and develop unconventional acreage, the first critical step in its business gas properties to provide foundational cash flow to fund general/administrative and personnel costs 7; Ex. 4 26:6–27:14. Toward that end, RGEP’s first objective was to acquire Columbus, which owned a portfolio of conventional producing properties with geology that was familiar to RGEP’s Columbus was being marketed for sale in 2017, but RGEP needed to raise additional equity capital in order to pay the approximately $30 million purchase price. Id. ¶ 8. Toward that end, Plaintiff Notzon agreed to procure equity investors for RGEP in exchange for a success fee. M. According to Notzon’s website, its “mission” is “giving clients an edge in securing their growth and investment into their business,” which “may include securing equity, debt finance,” and “sourcing strategic industry or financial partners.” Ex. 6. That admission, and discovery in this case, confirms that Notzon has re placement of private securities in exchange for a success fee in connection with U.S. securities transactions such as the one she brokered here. As such, Notzon acted as a “broker” or “dealer”—but she never registered as a broker–dealer with the U.S. Securities and Exchange Commission ( ) as required by federal 15 U.S.C. § 78 (a)(1). Rio Grande was unaware that Notzon was not registered as a overy in this case. Notzon’s top recommendation was Ms. Notzon’ of Plaintiff Talco, Ex. 7, even though Mr. Casso had never invested in an oil and gas business Rio Grande was Casso’s first investment in an oil and gas did not disclose that to G. Hart. Ex. 8 51:8–15, 53:10–13 (so admitting). Ms. Notzon and Mr. Casso represented to G. Hart that Talco had, or could readily access, millions of dollars in equity capital to help fund RGEP’s acquisition of Columbus. M. Hart Decl. ¶ 10. If this case proceeds to trial (Rio Grande respectfully submits that it is not tr evidence will show that these representations were false. Ultimately, Talco only contributed $250,000 to RGEP, which was insufficient to cover payroll and overhead, much less fund the Columbus acquisition. M. Hart Decl. ¶ 10; Ex. 8 47:16– 17; Ex. 9 195:7–11 RGEP’s first attempt to acquire Columbus failed because Talco failed to deliver promised capital to pay the deposit. ¶ 10. Unfortunately, by that point, Talco already had a 55% interest in RGEP based on false representations that it could provide much more equity capital. see also Ex. 17 at 2 (letter from Talco indicating that it could llion for the Columbus acquisition). RGEP could not obtain the equity financing it needed to acquire Columbus For that reason, the contracts that Notzon seeks to enforce are void, voidable, or otherwise unenforceable as illegal and as against public policy, and are separately voidable pursuant to 15 U.S.C. § 78cc. Rio Grande will not belabor that point here, as it is not a summary judgment point, but reserves those defenses for any This misleading omission violated the antifraud provisions of federal securities laws and was a breach of the duty of fair dealing owed by broker–dealers. On January 22, 2018, Rio Grande and Talco entered into a Purchase and Mutual Release Agreement ( ) whereby RGM purchased 50% (out of 55%) of the RGEP interest held by Talco for $500,000—twice what Talco had contributed to RGEP just months earlier. Ex. In addition to that quick 200% return, Talco received the right to participate in wells drilled on the “Amplify Properties” by RGEP (defined as the “Company”): In the event that the Company acquires or participates in any of the Amplify Properties, which the Company shall have total discretion on whether to do so, Seller may participate at its sole option for a five percent (5%) working interest in any or all future wells that Company chooses to drill on any of such Amplify at 4, § 7(a). Talco’s PMRA circularly defines “Amplify Properties” as “the Amplify Properties Talco’s PMRA does not provide for participation rights in the “Non-Identified Properties” at issue in Count 1. Talco contends its PMRA was amended by a May 10, 2018 email exchange, Rio Grande wanted to purchase the remaining 5% interest in RGEP from Talco, but that ssignment of that interest to Notzon. M. Hart Decl. ¶ 12; Ex. 18. That assignment was made without RGM’s consent, and therefore violated the transfer In addition to rights with respect to the undefined “Amplify Properties,” Talco’s PMRA provided Talco the right to participate in the “Laredo Energy Properties” and the “Mecom Ranch Properties,” but it is undisputed that Rio Grande never acquired any of those properties, so those participation rights are not at issue in this case. restrictions set forth in Article 8 of RGEP’s governing October 13, 2017 Company Agreement. M. that its improperly obtained 5% interest in RGEP could not be diluted by further equity contributions—even though Notzon had not contributed cash to RGEP. Rio Grande saw it completely differently: Notzon’s interest was held on a fully diluted By that point, RGEP was in discussions with a suitable private equity sponsor that could fund the Columbus acquisition and RGEP’s future projects. Under the circumstances—including the fact that Notzon had not contributed any cash to RGEP and nevertheless claimed that her 5% interest would not be diluted by the private equity sponsor’s investment of tens of millions of vement in RGEP understandably assignment to Notzon forced Rio Grande to negotiate a buyout Notzon stalled these negotiations. Ex. 8 65:21–23. G. Hart negotiated in good faith, but Ms. Notzon was often unreachable, and when she did respond to G. Hart’s calls and emails, she never indicated on what terms she would sell her interest and instead asked irrelevant questions about Rio Grande’s business partners. M. Hart Decl. ¶ 15; see, e.g., Ex. 21 (G. Hart asking Notzon n asking Ms. Notzon to sign the Notzon PMRA); Ex. 23 (Ms. Notzon saying she is not available to speak to G. Hart); Ex. 24 (Amid the stalled Amplify acquisition, G. Hart telling Ms. Notzon that he “feel[s] like [he’s] on the Titanic”); Ex. they were close to an agreement). Throughout this time, RGEP continued to pursue the Columbus acquisition. In March 2018, before RGEP had received a funding commitment from its private equity sponsor, RGEP executed an agreement to purchase Columbus. G. Hart, M. Hart, and other management team members made loans to RGEP totaling approximately $800,000 just to keep the lights on and get to the closing. If the acquisition fell through again, that money would have been lost, destroying a significant amount of the management team’s personal wealth, and RGEP would have failed M. Hart Decl. ¶ 16; Ex. 26 169:6–170:6. Finally, on May 15, 2018, Rio Grande and Notzon entered into a separate Purchase and Mutual Release Agreement (Notzon’s PMRA) whereby RGM purchased Notzon’s ill-gotten 5% interest in RGEP for $100,000—even though Notzon ha ny cash or succeeded in procuring suitable equity inve the “Amplify Properties” that is functionally identical to the corresponding right in Talco’s PMRA, at 3, § 6(a). Plaintiffs have seized upon one difference in wording between the two PMRAs. Whereas Talco’s rights in the Amplify Properties were triggered when RGEP (the “Company”) drilled a well, Notzon’s rights were triggered when the “Rio Grande Parties” parties to Notzon’s PMRA, Notzon’s PMRA defines “Rio Grande Parties” as “RGM, RGEP and any existing or future entity owned or Unlike Talco’s PMRA, Notzon’s PMRA provi ion right in “Non- Identified Properties” as follows: In the event that the Rio Grande Parties propose to purchase or acquire any properties other than the Amplify Properties (such properties, the “Non-Identified Properties”), and such Non-Identified Properties will be purchased or acquired on or prior to any Change of Control Date, as defined below, which the Rio on whether to do so (the “Proposed Non- Identified Property Acquisition”), the Rio Grande Parties shall provide Seller a copy of the term sheet and/or definitive documents to effect such of any of the Non-Identified Properties and all material information (the “Non-Identified Property Acquisition Documents”). In such event, Seller [Notzon] shall have until the earlier of (i) forty- five (45) days after receipt of the Non-Identified or (ii) any Change of Control Date, to determine whether it wants to participate in funding five percent (5)% of the purchase price of any such Non-Identified Properties, subject to the Carry Credit, and to execute and return to the Rio Grande Parties the applicable Non-Identified other documents as reasonably necessary to effect such purchase as the Rio Grande Parties do and on the same terms and conditions, excluding any rights of Notzon’s PMRA makes clear that a failure to make an election, execute the acquisition documents, and pay its share of acquisition costs would bar Notzon from participating in the lease [I]n the event Seller does not respond to the Rio Grande Party within said forty- give (45) day period and provide the required funding and execute the Non- Identified Property Acquisition Documents within said forty-five (45) day period and return same to the Rio Grande Party, . . . then Seller shall not be permitted to within such Non-Identified Property. In addition to all this in exchange for adding no value, Notzon received $500,000 in credits toward its future participation in the Ampl entified Properties ( RGEP acquires the Benavides and Stewart-Whitley leases ’ participation rights. After acquiring Columbus in June 2018, RGEP set out to acquire o Grande gave Plaintiffs regular updates on oil and gas leases that Rio Grande sought to acquire. Ylitalo Decl. ¶ 30; see, e.g. update to Plaintiffs); see also Ex. 8 31:8– 32:5, 33:20–35:15, 39:4–40:23, 87:16–19 (all describing receipt of monthly updates), Ex. 9 62:16– Unless otherwise indicated, all emphasi RGEP ultimately acquired, and then successfully explored and began to develop, the and four related leases collectively referred to as the See, e.g., Ex. 8 87:16–19; Ex. 9 62:16–18. As explained in more detail in Section I.B.1, Rio Grande fully honored Plaintiffs’ alleged rights to participate in those leases by giving them elections to operty Acquisition Documents and additional detailed information about the leases and RGEP’s development plans. Ylitalo Decl. ¶¶ 27–41. It is undisputed that Rio Grande provided more information than would customarily be Plaintiffs to participate, offered to and did meet with Plaintiffs to help them understand the merits of the opportunity, and answered their questions. Ex. 28; Ex. 4 48:18–21. Plaintiffs did not, however, elect to participate, apparently because they lacked the funds to pay their share of leasehold acquisition costs and subsequent drilling operations. Exs. 10– Ex. 9 97:22-98:2 (explaining that Talco did not have the funds to pay its share of the leasehold costs and was re unds). After the election periods expired without Plaintiffs making an election, executing the acquisition documents, and paying their share of the acquisition costs as required by the PMRAs, Rio Grande notified Plaintiffs that their elections had expired. Ex. 29 (Notzon notice); Ex. 30 (Talco notice); Ex. 8 120:7–13; Ex. 9 123:17–20. Neither Notzon nor Talco responded to the notices of expiration or raised any ion right in the Amplify Properties. While RGEP owned Columbus (which in turn owned the Amplify Properties), Columbus drilled one—and only one—well on the Amplify Properties, known as the “Hubberd C3 101” well. Ylitalo Decl. ¶ 11; Ex. 8 223:18–234:3. Both Notzon and Talco were given notice of RGEP’s plan to drill the Hubberd C3 101 months in advance. Ex. 31. On February 3, 2021, Rio Grande sent Plaintiffs an election rd C3 101 along with all required information. Ex. 32 notice). Thereafter, Rio Grande sent Plaintiffs single well economics, a log header, and a mud log for the new Hubberd well. Ex. 34 at 2; Ex. 35 at 2; Ex. Notzon elected to participate in the Hubberd C3 101. maintain its pressure after being drilled and was subsequently shut in as a dry hole. Ex. 36; Ex. 8 It is uncontroverted that, after the Hubberd C3 101 well, Columbus did not drill any other wells on the Amplify Properties while it was owned by RGEP. Although Plaintiffs previously RGEP acquires additional leases that to participate in with “Carry Credits,” knowing the leases would be sold to Killam. In late 2021 and early 2022, RGEP acquired additional leases in what were referred to as the Thrill Prospect, the Lefty Prospect, the Neel Prospect, and the G.B.G./Hill Ranch Prospect the , and the leases RGEP acquired in those prospects, the Drag-Along leases). Ylitalo Decl. ¶ 42. Most of the New Prospects and Drag-Along leases were not “drill ready” after RGEP acquired the Drag-Along leases and required millions of dollars in capital expenditures for further leasehold acquisitions and midstream infrastructure before they would be drillable. Id. These steps and expenditures had not occurred by the time RGEP sold the Drag-Along leases to Killam. At that time, Rio Grande also notified Plaintiffs that RGEP was in the process of selling des lease, the Stewart– Whitley lease, and the Drag-Along leases to Killam. Id. ¶ 48; Ex. 37 at 1. At that time, Plaintiffs did not assert that they were still owed elections or more information on the Benavides or Stewart– Whitley leases. ¶ 48 .After Rio Grande notified Plaintiffs that RGEP would be selling the Drag- Along leases to Killam, Plaintiffs elected to participate in the acquisition of the Drag-Along leases. ¶ 49; Ex. 8 132:22–24. RGEP thereafter exercised its “drag-along” right, and Plaintiffs’ interests in the Drag-Along Leases were included along with RGEP’s interests in the sale to Killam. Ylitalo Decl. ¶ 49. On April 8, 2022, Rio Grande closed on its sale of Columbus. On May 25, 2022, Rio Grande closed on the sale of the rest of its oil and gas interests and sold substantially all of its remaining assets, including the Benavides and Stewart-Whitley leases, to Killam. Since the sale to Killam, Rio Grande has not acquired, owned, or operated any oil and gas interests, Ylitalo Decl. ¶ PROCEDURAL BACKGROUND Plaintiffs filed their Original Petition on April 19, 2022, seeking a TRO to block the Columbus and Killam transactions, making a claim that they had not received proper notice in connection with those transacti fund of Carry Credits due upon a Change of Control. The original petition did not mention the Lease Participation Claim, the New at issue in this summary judgment motion. Judge Sepolio denied the TRO on April 20, 2022. On April 30, 2022, Plaintiffs and Rio Grande entered into a Rule 11 Agreement pursuant to which Plaintiffs were paid $576,995.02 for their claim to Carry Credits (which was undisputed as to Notzon), bringing their total take from Rio Grande to $1,176,995.02, more than 103 at 2 § 2.a. The Rule 11 Agreement resolved all claims asserted in the original petition other than “claims related to Plaintiffs’ allocation of sales proceeds in the event Plaintiffs elect to acquire leases that are sold to Killam” (Allocation Claim). Ex. 38 at 2, § 4. The A Lease Participation Claim, the alternative Expiration Claim, and a rela claim against Rio Grande. The First Amended Petition also added Columbus and Killam as defendants, asserting baseless claims that should be disposed of on summary judgment motions to As explained in more detail in Section I.A.1 below, Plaintiffs failed to respond to proper interrogatories about the factual basis for the Lease Participation Claim. Based on Plaintiffs’ failure to obey the discovery rules, on Rio Grande’s motion, on February 14, 2023, the Court ordered “that Plaintiffs may not introduce evidence that Rio Grande failed to provide sufficient information in connection with Plaintiffs’ elections to part After discovery confirmed that the Lease Participation Claim was factually meritless, more than a year after first amending their petition, Plaintiffs amended their petition again to assert the ) is the live pleading. Ex. 39. As against Rio Grande, Count 1 asserts the Lease Participation Claim, the Allocation Claim, and the alternative Expiration Claim; Count 2 asserts the New Venture Claim; and Count 4 seeks a declaration that Plaintiffs sti Claims. None of these claims merit a jury’s or tion beyond this motion because summary judgment is proper on all claims. LEGAL STANDARDS After an adequate time for discovery, a party may move for summary judgment on the basis that there is no evidence of one or more essential elements of a claim or defense on which the adverse party would have the burden of proof at trial. T P. 166a(i); Hamilton v. Wilson LmB, Ltd. v. Moreno burden then shifts to the nonmovant to produce evidence raising a genuine issue of material fact ts of his claim.” T P. 166a(i); Mack Trucks, Inc. v. Tamez Traditional summary judgment is proper when the evidence presented shows there is no fact such that the movant is entit a matter of law. I. 166a(c); Rhone-Poulenc, Inc. v. Steel, 997 S.W.2d 217, 222 (Tex. 1999); Lear Siegler, Inc. v. Perez is conclusively established if ordinary minds cannot differ on the conclusion to be drawn from the evidence. Triton Oil & Gas SUMMARY JUDGMENT POINTS AND AUTHORITIES Summary judgment is proper on Plaintiffs’ claim that Rio Grande breached the Count 1 asserts the Lease Participation Claim by which Plaintiffs claim that Rio Grande “failed to abide by their obligations in the PMRAs regarding the Other Property Rights in the PMRAs” by “failing to provide Plaintiffs with the required notices and/or information for certain wells they drilled and/or property interests they acquired.” Ex. 39 ¶ 31 (TAP). In particular, Plaintiffs contend that Rio Grande failed to provide all required information to them in connection with their elections to participate in the Benavides and Stewart–Whitley leases. Ex. 40 at 4 (Notzon’s responses); Ex. 41 at 4. The Court’s February 14, 2023 Order precludes evidence that Rio Grande failed to provide all required information to Plaintiffs for their elections on the Benavides and Stewart–Whitley leases. In October 2022, Rio Grande asked Plaintiffs to “identify and describe each and every instance where [they] contend that Rio Grande provided some notice about Rio Grande’s well drilling or property acquisitions but not all ‘required notices/and or information,’” including “all information that was allegedly required but not provided” and an explanation “why Rio Grande was required to provide that information to Plaintiffs.” Ex. 40 at 4 (Talco’s responses). Plaintiffs’ responses identified the Benavides and Stewart-Whitley leases but failed to describe the factual basis for the Lease Participation Claim as properly called for by Plaintiffs failed to amend th Rio Grande’s Jan. 20, 2023 Motion to Exclude Evidence and Compel Discovery, Ex. 8. On January 20, 2023, Rio Grande moved to exclude Plaintiffs from introducing evidence in support of this claim at trial. Rio Grande’s Jan. 20, 2023 Motion to Exclude Evidence and Compel Discovery at 10–11. On February 14, 2023, the Court granted Rio Grande’s motion, ordering, among other things, that Plaintiffs “may not introduce any evidence that Rio Grande failed to provide sufficient information in connection with Plaintiffs’ elections to participate under the ntiffs later moved to vacate a different portion of the February 14, 2023 Order, they never sought to vacate the portion of the Order pertaining to the Lease Participation Claim, leaving the Court’s Order on that point Rio Grande’s April 6, 2023 response to Plaintiffs’ motion to vacate argued that Plaintiffs failed to address the Court’s ruling with respect to evidence on the Lease Participation Claim, and thus there was no basis to vacate that portion of the Order. In support of their motion, Plaintiffs continued to ask only that the Court “vacate the February 14, granting Rio Grande’s motion to exclude Eric R. Krause’s testimony and other evidence of damages,” Ex. 43, without any mention of the portion of The Court signed Plaintiffs’ proposed order on June 8, 2023. Because Plaintiffs have never asked the Court to vacate the February 14, 2023 Order in relation to the Lease Participation Claim, vacate provided no basis to vacate that portion of the Order, the Order remains intact in relation to the Lease Participation Claim. Given that the Order precludes On March 30, 2023, Plaintiffs moved to vacate the portion of the Court’s February 14, 2023 Order precluding evidence of damages based on Plaintiffs’ failure to timely disclose their damages expert’s opinions.Neither Plaintiffs’ motion nor their proposed order addressed the Order in relation to the 3/30/23 Motion to Vacate at 6–10 (discussing only the portion of the Court’s order excluding evidence of damages). Similarly, Plaintiffs’ proposed order did not ask the Court to vacate the order precluding Plaintiffs from introducing evidence of their Information Claim. Plaintiffs’ proposed order asked only that the Court vacate its order excluding evidence of damages. Plaintiffs from introducing evidence of breach in connection with their Leas no-evidence summary judgment is appropriate. There is no evidence that Plaintiffs were ready, willing, and able to participate in the Benavides Plaintiffs’ option to participate in the Bena of the contract, but he must plead and prove that he was ready, willing, and able to perform in order to recover damages.’” Indus. Inc. v. Sun Co. Inc., 918 F.2d 1203, 1214 (5th Cir. 1990) (quoting Olson v. Bayland Pub’g, , 781 S.W.2d 659, 664 (Tex. App.—Houston [1st Dist.] 1989, writ denied)). “Courts often apply this rule to bar recovery to option holders who cannot prove they had the financial ability to Plaintiffs have not pled that they were ready, willing, and able to fund their share of the acquisition costs and to otherwise participate in the Benavides and Stewart–Whitley leases under To participate in the Benavides and Stewart–Whitley leases, Plaintiffs were required to “provide the required funding”—that is, “five percent (5%) of the purchas of their election notices. Ex. 1 at 4, § 6(b)(i). For the Benavides lease, Notzon’s 5% share of the purchase price was $616,452.70, after accounting for its Carry Credit. Ylitalo Decl. ¶ 37. For the Stewart–Whitley lease, Notzon’s 5% share of the purchase price was $43,758.20, again, after accounting for the Carry Credit. Talco did not have Carry Credits, so its 5% share of each lease was $50,000 more than Notzon’s share. And it would have cost Plaintiffs millions more each to participate in the wells drilled on the leases. Id. There is no evidence that Plaintiffs had the funds required for them to participate in the lease acquisitions, much less the millions of dollars they While their August 2, 2019 elections on the Bena itley leases were pending, Plaintiffs never indicated that they intended to exercise their options to participate. Before August 2, 2019, Talco stated that “ ” Plaintiffs participated, they would do so through two different entities, Talco Partners IV, LLC and Talco Partners V, LLC. Ex. 44 at 1. These entities were never created. Ex. 45 56:20–22; Ex. 45 at 1 (Texas Secretary of State The reason Plaintiffs didn’t ever indicate that they would participate is simple: They didn’t have the money to do so. In 2019, when their elections were pending, neither Notzon nor Talco had the money needed to participate in the Benavides and Stewart–Whitley leases. Exs. 10– 11 (Notzon’s bank statements); Ex. 9 97:22-98:2 (explaining that Talco did not have the funds to Traditional summary judgment on Plaintiffs’ claims that Rio Grande and Talco PMRAs by not providing sufficient information is appropriate for three reasons. First, that Rio Grande did not give Plaintiffs sufficient information. Second, the Notzon and Talco PMRAs do not comply with the Statute of Fra requirement. Third, the Talco PMRA does not comply with the Statute of Frauds’ requirement that the essential terms of the agreement be in writing. Rio Grande’s RFP No. 12 requested Talco’s “audited financial statements for fiscal years 2018–2022, including balance sheets and statements of income and tax flow.” Ex. 16 at 8-9. The Court’s February 14, 2023 Order compelled Talco to produce documents responsive to RFP No. 12. Talco did not produce No reasonable jury could find that Rio Grande failed to give Plaintiffs all required information for their elections on the Benavides and Under the PMRAs, Rio Grande was required to “provide [Plaintiffs] a copy of the term sheet and/or definitive documents to effect such acquisition of any of the Non-Identified Properties and all material information reasonably related thereto (the ‘Non-Identified Property Acquisition Documents’)”—that is, relevant information that was related to the leases that Rio Grande Rio Grande provided Plaintiffs all this information and more in connection with their elections on the Benavides and Stewart–Whitley leases, conclusively negating Plaintiffs’ Lease Participation Claim as a matter of law. Rio Grande provided Plaintiffs all required information for their first election on the Benavides lease. On July 17, 2018, Rio Grande notified Plaintiffs that RGEP was pursuing the acquisition of the Benavides lease. Ylitalo Decl. ¶ 29; Ex. 46 at 1. RGEP gave Plaintiffs their first notice of election for the Benavides lease on March 11, 2019. Ylitalo Decl. ¶ 30; Ex. 47 at 2–3 (election notice for both Notzon and Talco); Ex. 8 144:22–25 (acknowledging receipt of first election re sending the first election not RGEP had provided extensive information about the lease to Plaintiffs, including a map of the lease, estimates of gas recovery from Eagle Ford wells drilled on the lease, single-well economics for Eagle Ford wells at various depths, a development plan with costs and spud dates through November 2021, RGEP’s plan for funding the acquisition of the lease, RGEP’s desired division Unlike Notzon’s PMRA, Talco’s PMRA does not provide for participation rights in Non-Identified Properties. Nevertheless, Talco contends that its PMRA was amended to include such a provision based on a May 10, 2018 email exchange. Ex. 39 ¶ 13 & n.1 (TAP); Ex. 80 at 3 (contending that § 7(b) of Talco’s PMRA was amended to conform to § 6(b) of Notzon’s PMRA). As explained in Section I.C below, the alleged email amendment is unenforceable. For purposes of Sections I.A and I.B., Rio Grande assumes solely for argument’s sake that Talco’s PMRA was amended to include the same provision for Non- Identified Properties as Notzon’s PMRA. of working interests for the lease, well-by-well cashflows, reserve estimates, estimated drilling and completion costs, and a draft of the lease agreement. Ylitalo Decl. ¶ 30; Exs. 47–54 (sending aforementioned information to Plaintiffs); see, e.g 80:20–23, 81:12–14, 82:2–8, 85:6–16; Ex. 5 145:1–8, 147:3–148:5, 152:20–153:11; Ex. 9 76:8– 10, 79:3–23. RGEP also sent Plaintiffs regular up see, e.g., Ex. 51 (sending monthly update to Plaintiffs); 33:20–35:15, 39:4–40:23, 87:16–19 (all describing receipt of mo Nevertheless, on March 29, 2019, Mr. Casso responded to the email sending Talco’s election notice, saying that Notzon and Talco needed “all required inform and Talco agreements to evaluate the prospect.” Ylitalo Decl. ¶ 31; Ex. 55 at 1; Ex. 9 82:5–13. Neither Mr. Casso nor Ms. Notzon specified what information they allegedly needed to see over and above what already had been provided. Mr. Hart responded to Mr. Casso’s email and offered to get together for a presentation on the Benavides lease. Ylitalo Decl. ¶ 31; Ex. 55 at 1; Ex. 9 Thereafter, Rio Grande sent Plaintiffs an Authorization for Expenditure for wells on the 56 at 2–3 (authorization for expenditure); Ex. 57 at 2–21 (offset analysis, type curves, development fs’ first election notice on the Bena 2019. Ylitalo Decl. ¶ 32. Plaintiffs never asked for more time, said they needed more information, Id. Still hopeful that Plaintiffs would elect to participate in the Benavides lease, RGEP continued to send Plaintiffs detailed information about the lease and answered Pla