Preview
FILED
DALLAS COUNTY
8/17/2016 2:30:06 PM
FELICIA PITRE
DISTRICT CLERK
CAUSE NO. DC-16-01439
TRO-X, L.P., § IN THE DISTRICT COURT
§
Plaintiff, §
§
v. § DALLAS COUNTY, TEXAS
§
EAGLE OIL & GAS CO. §
§
Defendant. § 116TH JUDICIAL DISTRICT
DEFENDANT EAGLE OIL & GAS CO.’S
MOTION FOR SUMMARY JUDGMENT
Deborah G. Hankinson
dhankinson@hankinsonlaw.com
State Bar No. 00000020
Brett Kutnick
bkutnick@hankinsonlaw.com
State Bar No. 00796913
Jennifer Stagen
jstagen@hankinsonlaw.com
State Bar No. 90001283
Hankinson LLP
750 N. St. Paul St., Suite 1800
Dallas, Texas 75201
214-754-9190 -- Telephone
214-754-9140 -- Telecopier
Attorneys for Defendant
Eagle Oil & Gas Co.
TABLE OF CONTENTS
I. Introduction ..........................................................................................................................3
II. Summary of the Argument...................................................................................................4
III. Grounds for Summary Judgment .........................................................................................7
IV. Summary Judgment Evidence..............................................................................................8
V. Statement of Undisputed Material Facts ............................................................................11
VI. TRO-X’s Claims Are Barred by Res Judicata. ..................................................................24
A. The Midland Lawsuit resulted in a final judgment on the merits. .........................24
B. TRO-X and Eagle were both parties to the judgment in the Midland
Lawsuit...................................................................................................................25
C. TRO-X’s present lawsuit is based on the same claims that were raised or
could have been raised in the Midland Lawsuit.....................................................25
VII. TRO-X’s Claims Are Barred by Collateral Estoppel. .......................................................39
A. The facts TRO-X seeks to litigate in this lawsuit were fully and fairly
litigated in the Midland Lawsuit. ...........................................................................39
B. The facts TRO-X seeks to litigate in this lawsuit were essential to the
judgment in the Midland Lawsuit. .........................................................................42
C. TRO-X and Eagle were cast as adversaries in the Midland Lawsuit. ....................42
VIII. TRO-X’s Claims Are Barred by the Statute of Limitations. .............................................43
A. The statute of limitations on TRO-X’s claims is four years. .................................43
B. Chronology of relevant events ...............................................................................45
C. TRO-X’s claims accrued no later than June 2008 -- the date of the
Chesapeake transaction. .........................................................................................46
D. Even if TRO-X filed suit within the limitations period, itdid not timely
serve Eagle or use diligence to effect service. .......................................................48
IX. TRO-X Waived Any Claim It Has to the Interests. ...........................................................50
X. To the Extent TRO-X Now Complains About Its Right to Retain an Unpromoted
Working Interest, Eagle Is Entitled to Summary Judgment on Any Such Claim. .............51
XI. Prayer ................................................................................................................................54
DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT -- Page 2
CAUSE NO. DC-16-01439
TRO-X, L.P., § IN THE DISTRICT COURT
§
Plaintiff, §
§
v. § DALLAS COUNTY, TEXAS
§
EAGLE OIL & GAS CO. §
§
Defendant. § 116th JUDICIAL DISTRICT
DEFENDANT EAGLE OIL & GAS CO.’S
MOTION FOR SUMMARY JUDGMENT
To the Honorable Tonya Parker, District Judge:
Pursuant to TEX. R. CIV. P. 166a(c), Defendant Eagle Oil & Gas Co. (“Eagle”) moves for
summary judgment on all claims brought by Plaintiff TRO-X, L.P (“TRO-X”), and respectfully
shows the Court as follows:
I. Introduction
In October 2007, TRO-X sued Eagle in Midland County for breach of contract and
breach of fiduciary duty because, under the parties’ agreement, Eagle allegedly failed to share oil
and gas interests with TRO-X. After nearly nine years of litigation and two appeals, TRO-X lost
on its claims. Undaunted by this result, TRO-X has now sued Eagle for a second time. In this
lawsuit, TRO-X seeks to have this Court and Eagle expend additional resources to try the very
same claims regarding the same interests and the same agreement again. This Court should not
permit TRO-X to make an end run around the court of appeals’s decision (upheld by the Texas
Supreme Court) that TRO-X take nothing on its breach of contract and breach of fiduciary duty
claims.
DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT -- Page 3
II. Summary of the Argument
Approximately eleven years ago, Eagle and TRO-X entered into a contract to (1) acquire
oil and gas interests in a “wildcat” prospect located in Reeves County and Pecos County, Texas, 1
(2) sell those interests on a promoted basis to third parties for exploration, drilling, and
development, and (3) share the cash and non-cash sales proceeds (including any overriding
royalties and back-in working interests). After the relationship between the parties soured,
TRO-X sued Eagle in Midland County in 2007 for claims arising under that contract.
Specifically, TRO-X asserted claims for breach of contract and breach of fiduciary duty,
alleging, in relevant part, that Eagle acquired an overriding royalty interest and back-in working
interest when it sold the prospect to Chesapeake Exploration, but failed to assign or share those
interests with TRO-X.
Despite complaining about the Chesapeake transaction and Eagle’s actions in allegedly
depriving TRO-X of these interests, TRO-X unequivocally instructed Eagle that TRO-X would
not accept an assignment of the interests or the properties as a remedy. Thus, TRO-X did not
seek an order of specific performance requiring Eagle to assign TRO-X a share of the interests in
the Midland lawsuit. Nor did TRO-X seek to recover the actual proceeds (if any) generated by
the interests or a declaration of its rights concerning the interests. Rather, as part of its litigation
strategy, TRO-X made the deliberate and calculated decision to only seek damages for Eagle’s
alleged breaches based on the purported fair market value of the interests or, alternatively, the
millions of dollars in supposed profits those interests hypothetically would have generated over a
54-year period if 800 wells were drilled on the prospect.
1
A “wildcat” is a speculative, unproven, high-risk venture because it involves drilling in an area
without any existing commercial oil and gas production. (See Ex. 22 at 90-91 [2.App.195-96]; Ex. 25 at
93-94 [2.App.327-28])
DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT -- Page 4
After a multi-week trial in April and May 2011, TRO-X persuaded a Midland jury that
Eagle breached the contract by preventing TRO-X from acquiring its proportionate share of the
interests from the Chesapeake sale. The trial court rendered judgment on the jury’s verdict,
awarding TRO-X $6,600,000 on that claim. The Eastland Court of Appeals, however, reversed
and rendered judgment that TRO-X take nothing on its breach-of-contract claims because the
evidence was legally insufficient to support the jury’s liability finding. 2
Notwithstanding TRO-X’s intentional decision to only pursue monetary damages in lieu
of the interests in the trial court, TRO-X abruptly reversed course in the appellate courts after the
court of appeals issued its opinion and rendered judgment. In particular, TRO-X argued that it
had “equitable title” to the overriding royalty and back-in working interest from the Chesapeake
sale and that itshould be allowed to secure its rights under that equitable title and recover the
benefits of its contract with Eagle. TRO-X therefore asked the court of appeals and, in turn, the
Texas Supreme Court to modify the judgment to reflect and account for TRO-X’s equitable
interest. Both the court of appeals and Texas Supreme Court rejected TRO-X’s request.
Nevertheless, while the underlying proceeding was still pending in the Texas Supreme
Court, TRO-X filed this lawsuit against Eagle, asserting claims for declaratory judgment, breach
of fiduciary duty, and breach of contract. In particular, TRO-X again alleges that it holds
equitable title to the interests from the Chesapeake sale and that Eagle breached its purported
fiduciary duties and the contract by failing to protect, preserve, convey, or deliver the proceeds
from those interests to TRO-X. For at least four reasons, Eagle is entitled to summary judgment
on all of TRO-X’s claims.
2
Instead, the court of appeals rendered judgment that TRO-X recover $379,788.80, the amount
owed to TRO-X under a court-ordered accounting.
DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT -- Page 5
Res judicata. First, TRO-X’s claims are barred by res judicata. A final judgment on the
merits was rendered by the court of appeals in TRO-X’s Midland County lawsuit. Both TRO-X
and Eagle were parties to the prior lawsuit. And this action is based on the very same claims and
transaction that were raised or could have been raised in the earlier lawsuit. As a result, res
judicata prevents TRO-X from having two bites at the apple by splitting its cause of action or
relitigating its claims.
Collateral estoppel. Second, TRO-X’s claims also are barred by collateral estoppel.
TRO-X now alleges that Eagle breached a purported fiduciary duty. But in the earlier lawsuit,
the parties fully and fairly litigated the threshold issue of whether Eagle owed TRO-X a fiduciary
duty; the trial court granted summary judgment on that issue and rendered a final judgment that
TRO-X take nothing on its fiduciary duty claim; and TRO-X never appealed that ruling.
Consequently, collateral estoppel bars TRO-X from relitigating that issue in this lawsuit.
Collateral estoppel likewise bars TRO-X from relitigating the issue of whether Eagle
prevented TRO-X from acquiring its proportionate share of the overriding royalty and back-in
working interest from the Chesapeake transaction. That issue was the central subject of a
multi-week jury trial and appeals that spanned more than four years. Although Eagle ultimately
prevailed on that issue, TRO-X inexplicably seeks to relitigate that very issue once again by
alleging that Eagle has not conveyed the interests or delivered all of the proceeds of the interests
to TRO-X.
Limitations. Third, all of TRO-X’s claims are barred by the four-year statute of
limitations. To the extent TRO-X was entitled to a share of the interests, TRO-X suffered a legal
injury, its claims accrued, and limitations began to run no later than June 2008 when Eagle sold
the prospect to Chesapeake, reserved the interests, and failed to assign those interests to TRO-X.
In fact, during the earlier lawsuit, TRO-X repeatedly asserted that Eagle was required to assign
DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT -- Page 6
the interests to TRO-X in 2008 immediately after the Chesapeake transaction. TRO-X, however,
did not file this lawsuit within four years of the accrual of its claims. Rather, itwaited nearly
eight years -- until February 8, 2016 -- to file this suit. And even indulging the fiction that
limitations did not begin to run until February 17, 2012, as TRO-X erroneously implies in its
petition, its claims still would be barred by limitations because TRO-X did not exercise diligence
in having Eagle served with process. In fact, TRO-X did not serve Eagle until July 5, 2016 --
nearly five months after TRO-X filed suit.
Waiver. Fourth, summary judgment is also warranted because, as a matter of law and
undisputed fact, TRO-X waived its claims to the interests at issue. More than five years ago
during the earlier lawsuit, TRO-X expressly and knowingly renounced any right it had to recover
the interests by instructing Eagle that “assignments of any interests related to this litigation will
not be accepted” and confirming that TRO-X “didn’t want [the interests] anymore.” It is simply
too late for TRO-X to change its mind now.
For these reasons, as further discussed below, the Court should grant Eagle’s motion and
render summary judgment that TRO-X take nothing on its claims.
III. Grounds for Summary Judgment
Pursuant to TEX. R. CIV. P. 166a(c), Eagle respectfully moves for summary judgment on
the following grounds:
1. TRO-X’s claims are barred by res judicata;
2. TRO-X’s claims are barred by collateral estoppel;
3. TRO-X’s claims are barred by the applicable statute of limitations; and
4. TRO-X’s claims are barred by waiver.
DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT -- Page 7
IV. Summary Judgment Evidence
This motion is based upon the summary judgment evidence attached to the 5-volume
Appendix of Evidence in Support of Defendant Eagle Oil & Gas Co.’s Motion for Summary
Judgment (“Appendix”), filed contemporaneously herewith and incorporated by reference
herein, and, in particular, the following pleadings, motions, briefs, exhibits, trial transcripts, and
court orders from TRO-X, L.P. v. Eagle Oil & Gas Co., No. CV-49,916, in the 238th Judicial
District Court of Midland County, and the appeals of that lawsuit styled Eagle Oil & Gas Co. v.
TRO-X, L.P., No. 11-11-00290-CV, in the Eastland Court of Appeals, and TRO-X, L.P. v. Eagle
Oil & Gas Co., No. 14-0409, in the Supreme Court of Texas:
Exhibit 1: Plaintiff’s Original Verified Petition and Application for Temporary
Restraining Order and Injunctive Relief, filed October 24, 2007
Exhibit 2: Plaintiff’s Third Amended Petition, filed February 27, 2008
Exhibit 3: Plaintiff’s Fourth Amended Petition, filed April 15, 2008
Exhibit 4: Defendants’ Motion to Appoint Auditor, filed October 17, 2008
Exhibit 5: Agreed Order Granting Motion to Appoint Auditor, signed November 14,
2008
Exhibit 6: Plaintiff’s Sixth Amended Petition, filed January 27, 2011
Exhibit 7: Defendants’ Motion for Partial Summary Judgment, filed March 16, 2011
Exhibit 8: Defendants’ No Evidence Motion for Partial Summary Judgment, filed
March 16, 2011
Exhibit 9: Defendants’ Motion to Exclude Expert Testimony from Roy C.
Williamson (with exhibits A-1 and A-2 only), filed March 16, 2011
Exhibit 10: Plaintiff’s Response to Defendants’ Motion for Partial Summary
Judgment, filed April 1, 2011
Exhibit 11: Plaintiff’s Response to Defendants’ No Evidence Motion for Partial
Summary Judgment (without attached evidence), filed April 1, 2011
DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT -- Page 8
Exhibit 12: Order on Defendants’ Motions for Partial Summary Judgment, signed
September 22, 2011
Exhibit 13: Plaintiff’s Trial Brief on the Admissibility of Greg McCabe’s Valuation
Testimony, filed April 28, 2011
Exhibit 14: Charge of the Court, filed May 19, 2011
Exhibit 15: Plaintiff’s Motion for Entry of Judgment, filed July 21, 2011
Exhibit 16: Final Judgment, signed September 26, 2011
Exhibit 17: Defendant Eagle Oil & Gas Co.’s Notice of Appeal, filed October 6, 2011
Exhibit 18: Plaintiff TRO-X, L.P.’s Notice of Appeal, filed October 17, 2011
Exhibit 19: Excerpts from Volume 4 of the Reporter’s Record (April 26, 2011)
Exhibit 20: Excerpts from Volume 5 of the Reporter’s Record (April 27, 2011)
Exhibit 21: Excerpts from Volume 6 of the Reporter’s Record (April 28, 2011)
Exhibit 22: Excerpts from Volume 7 of the Reporter’s Record (April 29, 2011)
Exhibit 23: Excerpts from Volume 8 of the Reporter’s Record (May 2, 2011)
Exhibit 24: Excerpts from Volume 9 of the Reporter’s Record (May 3, 2011)
Exhibit 25: Excerpts from Volume 10 of the Reporter’s Record (May 4, 2011)
Exhibit 26: Excerpts from Volume 11 of the Reporter’s Record (May 5, 2011)
Exhibit 27: Excerpts from Volume 12 of the Reporter’s Record (May 6, 2011)
Exhibit 28: Excerpts from Volume 13 of the Reporter’s Record (May 9, 2011)
Exhibit 29: Excerpts from Volume 14 of the Reporter’s Record (May 10, 2011)
Exhibit 30: Excerpts from Volume 15 of the Reporter’s Record (May 11, 2011)
Exhibit 31: DX 1 (Acreage Acquisition Agreement: South Haley Prospect)
Exhibit 32: DX 2 (Acreage Acquisition Agreement: New Prospects and Amendment
No. 1 to South Haley Prospect Agreement)
Exhibit 33: DX 4 (Addendum to Acreage Acquisition Agreement: New Prospects and
Amendment No. 1 to South Haley Prospect Agreement)
DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT -- Page 9
Exhibit 34: DX 19 (Presentation for Encap Investments, Inc.)
Exhibit 35: DX 23.6 (Limited Liability Company Agreement for Eagle Oil & Gas
Partners, LLC)
Exhibit 36: DX 23.9 (Agreement of Sale and Purchase between Eagle and Eagle Oil &
Gas Partners, LLC)
Exhibit 37: DX 23.10 (Conveyance to Eagle Oil & Gas Partners, LLC)
Exhibit 38: DX 25 (October 15, 2007 letter from Pat Bolin to Greg McCabe)
Exhibit 39: DX 27.1 (Assignment of Oil and Gas Leases (Collier East) to Chesapeake)
Exhibit 40: DX 27.3 (Assignment of Oil and Gas Leases (Collier West) to
Chesapeake)
Exhibit 41: DX 27.5 (Assignment of Oil and Gas Leases (Balmorhea) to Chesapeake)
Exhibit 42: DX 32 (Timeline)
Exhibit 43: DX 33 (Agreement of Limited Partnership of TRO-X, LP)
Exhibit 44: DX 69 (August 17, 2010 letter from TRO-X’s counsel to Eagle’s counsel)
Exhibit 45: PX 46 (November 10, 2009 Audit Report)
Exhibit 46: PX 103.1-103.3 (Summary - Reserves and Economics)
Exhibit 47: PX 222 (Handwritten calculations of lost profits present value)
Exhibit 48: PX 223 (Handwritten calculations of fair market value)
Exhibit 49: Brief of Appellee TRO-X, L.P., filed June 15, 2012
Exhibit 50: Judgment from Eastland Court of Appeals (“COA Judgment”), issued
October 31, 2013
Exhibit 51: TRO-X’s Motion for Rehearing in the court of appeals, filed December
12, 2013
Exhibit 52: TRO-X’s Reply in Support of Its Motion for Rehearing, filed February 26,
2014
Exhibit 53: TRO-X’s letter brief to Eastland Court of Appeals, dated March 4, 2014
DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT -- Page 10
Exhibit 54: TRO-X’s Petition for Review (without appendix), filed September 10,
2014
Exhibit 55: TRO-X’s Brief on the Merits (without appendix), filed May 1, 2015
Exhibit 56: Order denying TRO-X’s petition for review, issued November 20, 2015
Exhibit 57: TRO-X’s Motion for Rehearing in the Texas Supreme Court (without
appendix), filed February 5, 2016
Exhibit 58: TRO-X’s Reply in Support of Motion for Rehearing, filed May 11, 2016
Exhibit 59: Order denying TRO-X’s motion for rehearing, issued May 27, 2016
Exhibit 60: Mandate from Eastland Court of Appeals, issued June 7, 2016
Eagle additionally relies upon and incorporates any and all summary judgment evidence filed by
TRO-X, as well as all pleadings, admissions, affidavits, stipulations of the parties, and
authenticated or certified public records on file with this Court at the time of the hearing,
pursuant to TEX. R. CIV. P. 166a(c). 3
V. Statement of Undisputed Material Facts
1. TRO-X and Eagle entered into the Acreage Acquisition Agreement: South Haley
Prospect (“South Haley Agreement”), Acreage Acquisition Agreement: New Prospects and
Amendment No. 1 to South Haley Prospect Agreement (“New Prospects Agreement”), and
Addendum to Acreage Acquisition Agreement: New Prospects and Amendment No. 1 to South
Haley Prospect Agreement (“Addendum”) (collectively, the “Agreement”) in April 2005, July
2005, and September 2005, respectively. (Ex. 31 [2.App.655-61]]; Ex. 32 [2.App.663-70];
3
For the Court’s convenience, each volume of the Appendix of summary judgment evidence has
been sequentially bates-labeled in the lower right-hand corner as “Eagle MSJ App. [page#]” to
correspond with the electronic page number of the Appendix. Citations to the summary judgment
evidence will be to the electronically bookmarked exhibit number (and, where applicable, the relevant
page, paragraph, or section) followed by the volume and individual page(s) where such information can
be found. For example, a citation to “Ex. 32 at § II.A [2.App.664]” refers to section II.A of Exhibit 32,
which can be found on page 664 of volume 2 of the Appendix. Relevant pleadings and other filings by
TRO-X in this case (as contained in the Court’s online docket) are not included in the Appendix and will
be cited by the title of the pleading or document.
DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT -- Page 11
Ex. 33 [2.App.672-73]) The purpose of the Agreement was to acquire oil and gas interests in the
South Haley Prospect and New Prospects and then sell those interests on a promoted basis to
third parties. (Ex. 31 [2.App.655-61]; Ex. 32 [2.App.663-70]) 4
2. Although the “general intent was to sell the leases at a profit,” either party could
“elect to keep an interest” for itself. (Ex. 21 at 124-25 [2.App.131-32] ; see Ex. 32 at ¶ 3
[2.App.663]) Specifically, section II.A granted TRO-X and Eagle the unilateral right to “retain
an unpromoted working interest” in the prospect of up to 40% and 60%, respectively. (Ex. 32 at
§ II.A [2.App.664]) TRO-X could exercise this right by paying Eagle the “out-of-pocket costs”
Eagle incurred to acquire the leasehold interests. (Id. §§ I, II.A [2.App.663-64]) The Agreement
further provided that “[u]npromoted working interests shall be chosen by the Parties prior to the
sale of all working interests to third parties on a promoted basis.” (Id. § II.A [2.App.664]) And
the Agreement set forth a formula under which any cash and non-cash proceeds (including
overriding royalties and back-in working interests) would be shared between the parties after the
recovery of their respective expenses. (Id. §§ II.B, II.C, II.D, III.C [2.App.664-65])
3. Beginning in the latter half of 2005, Eagle bought over $10 million in leases
covering approximately 80,000 acres in the New Prospects. (Ex. 21 at 141-43 [2.App.141-43]) 5
4. In January 2007, Eagle showed the New Prospects to EnCap Investments, a
mezzanine finance group. (Ex. 24 at 53-54 [2.App.268-69]; Ex. 25 at 155-57 [2.App.359-61];
Ex. 34 [2.App.674-91]) After several months of negotiations, EnCap formed a new company --
Eagle Oil & Gas Partners, LLC (“Eagle Partners”) -- in April 2007 to purchase an undivided
4
The New Prospects consists of four areas: the Collier, West Gomez, Balmorhea, and the Pecos
Grande. (Ex. 25 at 88-89 [2.App.324-25])
5
Because Eagle acquired more than 25,000 acres, TRO-X’s proportionate share in the New
Prospects decreased from 40% to 35%. (Ex. 21 at 145-46 [2.App.145-46]; see Ex. 32 at § IV.B
[2.App.666])
DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT -- Page 12
50% working interest in approximately 32,000 acres in the New Prospects for $200 per acre.
(Ex. 35 [2.App.693-752]; Ex. 36 [3.App.8-207]; Ex. 25 at 137-38 [2.App.351-52]) Before the
sale to Eagle Partners, TRO-X never elected to retain an unpromoted working interest for itself.
(Ex. 27 at 149 [2.App.502]); see Ex. 20 at 208-09 [2.App.91-92])
5. Because an undivided 50% interest in the New Prospects still remained available
for sale after the Eagle Partners transaction (Ex. 25 at 183 [2.App.374]; Ex. 26 at 31
[2.App.427]), Eagle continued to market the New Prospects throughout 2007 (Ex. 27 at 149-50
[2.App.502-03]).
6. The relationship between Eagle and TRO-X soured, and in October 2007, TRO-X
filed suit against Eagle in TRO-X, L.P. v. Eagle Oil & Gas Co., No. CV-49,916, in the 238th
Judicial District Court of Midland County, asserting claims arising under the Agreement (the
“Midland Lawsuit”). (Ex. 1 [1.App.14-68]) In relevant part, TRO-X alleged claims against
Eagle for breach of the Agreement and breach of fiduciary duty. (Id. at 7-15 [1.App.20-28]) In
addition, TRO-X sought a declaratory judgment that it “owns an equitable interest” in certain
property Eagle acquired in the New Prospects. (Id. at 8 [1.App.21]) 6
7. TRO-X subsequently amended its petition to also request, among other relief, an
accounting to determine the proceeds, if any, to which TRO-X was entitled under the
Agreement. (Ex. 2 at ¶¶ 5.09-5.12 [1.App.80-82])
8. In April 2008, Eagle and Eagle Partners sold 100% of the Collier Prospect to
Chesapeake for $325 per acre. (Ex. 39 [4.App.170-73]; Ex. 40 [4.App.175-79]; Ex. 20 at 188-89
[2.App.82-83]; Ex. 25 at 187 [2.App.378]; Ex. 26 at 76-78 [2.App.430-32]) These sales
proceeds (like the proceeds from the Eagle Partners’ sale) were to the benefit of both TRO-X and
6
TRO-X later amended its petition to also assert claims against Eagle Partners. (Ex. 3 at ¶¶ 2.03,
5.09-5.12 [1.App.85, 96-97]; Ex. 6 at ¶¶ 2.03, 5.07-5.08 [1.App.111, 133])
DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT -- Page 13
Eagle, to be split according to the Agreement. (See Ex. 32 at § II.C [2.App.665]; Ex. 45
[4.App.214-93]) As part of the transaction and the assignment of the Collier leases to
Chesapeake, Eagle reserved or retained an overriding royalty interest and back-in working
interest (collectively, the “Interests”). (Ex. 39 [4.App.170-73]; Ex. 40 [4.App.175-79]; Ex. 25 at
202-05 [2.App.393-96]; Ex. 26 at 76-78 [2.App.430-32]) Two months later, Chesapeake
purchased an 85% interest in the Balmorhea Ranch Prospect under the same terms. (Ex. 41
[4.App.181-90]; Ex. 20 at 189 [2.App.83]; Ex. 25 at 205-06 [2.App.396-97]) Before the sales to
Chesapeake, TRO-X never informed Eagle that it wanted to retain an unpromoted working
interest in the New Prospects. (Ex. 21 at 148-49 [2.App.148-49]; Ex. 25 at 206-07 [2.App.397-
98]; see also Ex. 20 at 209 [2.App.92])
9. Although TRO-X complained that it never received an assignment of its
proportionate share of the Interests from Eagle (Ex. 20 at 64-65 [2.App.61-62]; see also Ex. 20
at 189 [2.App.83]; Ex. 22 at 80-81, 97 [2.App.190-91, 199]; Ex. 29 at 66-67, 218-20 [2.App.606-
07, 638-640]; Ex. 30 at 100 [2.App.652]), TRO-X sent a letter to Eagle during the Midland
Lawsuit, unequivocally stating that it did not want (and would not accept) any assignment of its
Interests from the Chesapeake transaction:
In order to avoid your spending unnecessary time preparing assignments of
interest, TRO-X intends to seek monetary damages for the breaches of Eagle Oil
& Gas Co. Therefore, assignments of any interests related to this litigation will
not be accepted.
(Ex. 44 [4.App.212])
10. After the Chesapeake transaction, the parties’ accounts became positive for the
first time. (See Ex. 45 [214-93]) Nonetheless, because the parties were unable to agree on how
to split the sales proceeds, Eagle asked the trial court to appoint an auditor to resolve the
DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT -- Page 14
accounting issues. (Ex. 4 [1.App.102-04]; Ex. 23 at 70-71 [2.App.240-41]; see Ex. 20 at 223
[2.App.96]) With TRO-X’s approval, the trial court did so. (Ex. 5 [1.App.106-09])
11. The auditor ultimately issued a report concluding that TRO-X’s proportionate
share of the sales proceeds was $1,064,789.45. (Ex. 45 at 11-12 & Attachment 10 [4.App.229-
30, 254-71]; see Ex. 20 at 24-30 [2.App.50-56]; Ex. 23 at 70-72, 76 [2.App.240-43]) 7
12. In January 2011, TRO-X amended its petition for the sixth and final time before
trial. (Ex. 6 [1.App.111-39]) In its Sixth Amended Petition, TRO-X specifically complained
about Eagle’s 2008 transaction with Chesapeake and alleged that:
• Eagle obtained cash and non-cash benefits that “should have been disclosed, offered,
and/or distributed to TRO-X”;
• “TRO-X was deprived of its right to acquire its proportionate share of these
interests”;
• TRO-X “expected to share in the cash profits, back-in working interests, .. . and/or
overriding working royalties”;
• “[t]here is [a fiduciary relationship] regarding the division of proceeds (cash and
non-cash)”; and
• Eagle “retained cash and non-cash benefits from TRO-X above and beyond what was
contractually agreed.”
(Id. ¶¶ 4.14, 4.18-4.20 [1.App.119, 126-29])
13. TRO-X also asserted a breach-of-contract claim, alleging that Eagle breached the
Agreement by, among other acts, failing to (1) “properly and equitably distribute the proceeds
and benefits” to TRO-X that Eagle obtained in selling the prospects, (2) “use best efforts in the
receipt, application and sharing of cash and non-cash proceeds of sales to third parties,”
(3) “consult with TRO-X in connection with the sale to Eagle Partners and/or Chesapeake,” and
7
The auditor did not form an opinion as to whether Eagle was entitled to reimbursement for
expenses relating to its exploration department and Midland office. (Ex. 45 at 9, 12 [4.App.227, 230])
The auditor did, however, determine that those expenses totaled $685,000.65. (Id. at Attachment 9, 10
[4.App.252, 255])
DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT -- Page 15
(4) “offer TRO-X an opportunity to acquire its interest in the sale to Eagle Partners and/or
Chesapeake.” (Id. ¶ 5.02(d), (n), (p), (q) [1.App.130-31])
14. In addition, TRO-X alleged that “Eagle owes TRO-X fiduciary duties,” that Eagle
breached those supposed duties by “acquir[ing] benefits through the sale of these interests that it
did not disclose to or share with TRO-X,” and that TRO-X was entitled to recover damages as a
result of Eagle’s alleged breaches and to “seek a constructive trust on any funds or benefits it
received.” (Id. ¶ 5.06 [1.App.132-33])
15. Eagle, in turn, moved for partial summary judgment, arguing that TRO-X’s
breach of fiduciary duty claim fails as a matter of law and undisputed fact because “Eagle does
not owe a fiduciary duty to TRO-X” and “there is no evidence that Eagle and TRO-X had a
formal or informal fiduciary relationship.” (Ex. 7 at 1-2, 10-17 [1.App.143-44, 152-59]; Ex. 8 at
1, 5-6 [1.App.177, 181-82])
16. In response, TRO- attempted to raise a fact issue that Eagle owed a fiduciary duty
to TRO-X. (Ex. 10 at 17-37 [1.App.238-58]; Ex. 11 at 9-12 [1.App.288-91])
17. After an April 2011 hearing, the district court granted Eagle’s motions for partial
summary judgment as to TRO-X’s cause of action for breach of fiduciary duty and rendered
judgment that TRO-X take nothing on such claim. (Ex. 12 [1.App.305-08])
18. The case proceeded to trial in April 2011 on TRO-X’s remaining claims.
Specifically, TRO-X claimed that Eagle allegedly breached the Agreement by (1) depriving
TRO-X of its right to retain an unpromoted working interest in the New Prospects in 2007 by
selling to Eagle Partners without consultation, and (2) preventing TRO-X from acquiring its
proportionate share of the Interests acquired in the 2008 Chesapeake sale. (See Ex. 14 at 6
[1.App.321]; Ex. 29 at 72-74 [2.App.612-14])
DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT -- Page 16
19. During trial, TRO-X repeatedly asserted that it held “equitable title” to or an
“equitable interest” in its proportionate share of the Interests that Eagle reserved in the
Chesapeake transaction. (Ex. 21 at 9, 17, 20 [2.App.104, 107, 110]; see Ex. 13 [1.App.310-14])
TRO-X also asserted it had a “right to have [those] property right[s] assigned to [it]
immediately” when Eagle received them (Ex. 29 at 218-20 [2.App.638-40]); TRO-X
“complain[ed] about [Eagle’s] failure to give assignments” (Ex. 20 at 64-65 [2.App.61-62]; see
also id. at 189 [2.App.83]; Ex. 22 at 80-81, 97 [2.App.190-91, 199]; Ex. 29 at 66-67
[2.App.606-07]; Ex. 30 at 100 [2.App.652]); and TRO-X argued it “would have received
income” from the Interests if it had “received an assignment” (Ex. 29 at 225 [2.App.641]).
20. Nonetheless, Greg McCabe (TRO-X’s president) confirmed during trial that
TRO-X “would not accept assignments of [its] interest under [the] agreement” and that TRO-X
did not “want an interest under the oil and gas leases.” (Ex. 22 at 100-02 [2.App.202-04]) As
McCabe testified, TRO-X had the right to “either demand for properties or demand for the cash
value of those properties,” and “[a]s of August 17, 2010, [TRO-X] officially decided that [it]
would not accept properties as a remedy.” (Id. at 98-99, 102-04 [2.App.200-02, 204-06]; see
also Ex. 44 [4.App.212] [“assignments of any interests relating to this litigation will not be
accepted” because “TRO-X intends to seek monetary damages for the breaches of Eagle”])
21. Thus, rather than seek an order of specific performance compelling Eagle to
Preview
FILED DALLAS COUNTY 8/17/2016 2:30:06 PM FELICIA PITRE DISTRICT CLERK CAUSE NO. DC-16-01439 TRO-X, L.P., § IN THE DISTRICT COURT § Plaintiff, § § v. § DALLAS COUNTY, TEXAS § EAGLE OIL & GAS CO. § § Defendant. § 116TH JUDICIAL DISTRICT DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT Deborah G. Hankinson dhankinson@hankinsonlaw.com State Bar No. 00000020 Brett Kutnick bkutnick@hankinsonlaw.com State Bar No. 00796913 Jennifer Stagen jstagen@hankinsonlaw.com State Bar No. 90001283 Hankinson LLP 750 N. St. Paul St., Suite 1800 Dallas, Texas 75201 214-754-9190 -- Telephone 214-754-9140 -- Telecopier Attorneys for Defendant Eagle Oil & Gas Co. TABLE OF CONTENTS I. Introduction ..........................................................................................................................3 II. Summary of the Argument...................................................................................................4 III. Grounds for Summary Judgment .........................................................................................7 IV. Summary Judgment Evidence..............................................................................................8 V. Statement of Undisputed Material Facts ............................................................................11 VI. TRO-X’s Claims Are Barred by Res Judicata. ..................................................................24 A. The Midland Lawsuit resulted in a final judgment on the merits. .........................24 B. TRO-X and Eagle were both parties to the judgment in the Midland Lawsuit...................................................................................................................25 C. TRO-X’s present lawsuit is based on the same claims that were raised or could have been raised in the Midland Lawsuit.....................................................25 VII. TRO-X’s Claims Are Barred by Collateral Estoppel. .......................................................39 A. The facts TRO-X seeks to litigate in this lawsuit were fully and fairly litigated in the Midland Lawsuit. ...........................................................................39 B. The facts TRO-X seeks to litigate in this lawsuit were essential to the judgment in the Midland Lawsuit. .........................................................................42 C. TRO-X and Eagle were cast as adversaries in the Midland Lawsuit. ....................42 VIII. TRO-X’s Claims Are Barred by the Statute of Limitations. .............................................43 A. The statute of limitations on TRO-X’s claims is four years. .................................43 B. Chronology of relevant events ...............................................................................45 C. TRO-X’s claims accrued no later than June 2008 -- the date of the Chesapeake transaction. .........................................................................................46 D. Even if TRO-X filed suit within the limitations period, itdid not timely serve Eagle or use diligence to effect service. .......................................................48 IX. TRO-X Waived Any Claim It Has to the Interests. ...........................................................50 X. To the Extent TRO-X Now Complains About Its Right to Retain an Unpromoted Working Interest, Eagle Is Entitled to Summary Judgment on Any Such Claim. .............51 XI. Prayer ................................................................................................................................54 DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT -- Page 2 CAUSE NO. DC-16-01439 TRO-X, L.P., § IN THE DISTRICT COURT § Plaintiff, § § v. § DALLAS COUNTY, TEXAS § EAGLE OIL & GAS CO. § § Defendant. § 116th JUDICIAL DISTRICT DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT To the Honorable Tonya Parker, District Judge: Pursuant to TEX. R. CIV. P. 166a(c), Defendant Eagle Oil & Gas Co. (“Eagle”) moves for summary judgment on all claims brought by Plaintiff TRO-X, L.P (“TRO-X”), and respectfully shows the Court as follows: I. Introduction In October 2007, TRO-X sued Eagle in Midland County for breach of contract and breach of fiduciary duty because, under the parties’ agreement, Eagle allegedly failed to share oil and gas interests with TRO-X. After nearly nine years of litigation and two appeals, TRO-X lost on its claims. Undaunted by this result, TRO-X has now sued Eagle for a second time. In this lawsuit, TRO-X seeks to have this Court and Eagle expend additional resources to try the very same claims regarding the same interests and the same agreement again. This Court should not permit TRO-X to make an end run around the court of appeals’s decision (upheld by the Texas Supreme Court) that TRO-X take nothing on its breach of contract and breach of fiduciary duty claims. DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT -- Page 3 II. Summary of the Argument Approximately eleven years ago, Eagle and TRO-X entered into a contract to (1) acquire oil and gas interests in a “wildcat” prospect located in Reeves County and Pecos County, Texas, 1 (2) sell those interests on a promoted basis to third parties for exploration, drilling, and development, and (3) share the cash and non-cash sales proceeds (including any overriding royalties and back-in working interests). After the relationship between the parties soured, TRO-X sued Eagle in Midland County in 2007 for claims arising under that contract. Specifically, TRO-X asserted claims for breach of contract and breach of fiduciary duty, alleging, in relevant part, that Eagle acquired an overriding royalty interest and back-in working interest when it sold the prospect to Chesapeake Exploration, but failed to assign or share those interests with TRO-X. Despite complaining about the Chesapeake transaction and Eagle’s actions in allegedly depriving TRO-X of these interests, TRO-X unequivocally instructed Eagle that TRO-X would not accept an assignment of the interests or the properties as a remedy. Thus, TRO-X did not seek an order of specific performance requiring Eagle to assign TRO-X a share of the interests in the Midland lawsuit. Nor did TRO-X seek to recover the actual proceeds (if any) generated by the interests or a declaration of its rights concerning the interests. Rather, as part of its litigation strategy, TRO-X made the deliberate and calculated decision to only seek damages for Eagle’s alleged breaches based on the purported fair market value of the interests or, alternatively, the millions of dollars in supposed profits those interests hypothetically would have generated over a 54-year period if 800 wells were drilled on the prospect. 1 A “wildcat” is a speculative, unproven, high-risk venture because it involves drilling in an area without any existing commercial oil and gas production. (See Ex. 22 at 90-91 [2.App.195-96]; Ex. 25 at 93-94 [2.App.327-28]) DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT -- Page 4 After a multi-week trial in April and May 2011, TRO-X persuaded a Midland jury that Eagle breached the contract by preventing TRO-X from acquiring its proportionate share of the interests from the Chesapeake sale. The trial court rendered judgment on the jury’s verdict, awarding TRO-X $6,600,000 on that claim. The Eastland Court of Appeals, however, reversed and rendered judgment that TRO-X take nothing on its breach-of-contract claims because the evidence was legally insufficient to support the jury’s liability finding. 2 Notwithstanding TRO-X’s intentional decision to only pursue monetary damages in lieu of the interests in the trial court, TRO-X abruptly reversed course in the appellate courts after the court of appeals issued its opinion and rendered judgment. In particular, TRO-X argued that it had “equitable title” to the overriding royalty and back-in working interest from the Chesapeake sale and that itshould be allowed to secure its rights under that equitable title and recover the benefits of its contract with Eagle. TRO-X therefore asked the court of appeals and, in turn, the Texas Supreme Court to modify the judgment to reflect and account for TRO-X’s equitable interest. Both the court of appeals and Texas Supreme Court rejected TRO-X’s request. Nevertheless, while the underlying proceeding was still pending in the Texas Supreme Court, TRO-X filed this lawsuit against Eagle, asserting claims for declaratory judgment, breach of fiduciary duty, and breach of contract. In particular, TRO-X again alleges that it holds equitable title to the interests from the Chesapeake sale and that Eagle breached its purported fiduciary duties and the contract by failing to protect, preserve, convey, or deliver the proceeds from those interests to TRO-X. For at least four reasons, Eagle is entitled to summary judgment on all of TRO-X’s claims. 2 Instead, the court of appeals rendered judgment that TRO-X recover $379,788.80, the amount owed to TRO-X under a court-ordered accounting. DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT -- Page 5 Res judicata. First, TRO-X’s claims are barred by res judicata. A final judgment on the merits was rendered by the court of appeals in TRO-X’s Midland County lawsuit. Both TRO-X and Eagle were parties to the prior lawsuit. And this action is based on the very same claims and transaction that were raised or could have been raised in the earlier lawsuit. As a result, res judicata prevents TRO-X from having two bites at the apple by splitting its cause of action or relitigating its claims. Collateral estoppel. Second, TRO-X’s claims also are barred by collateral estoppel. TRO-X now alleges that Eagle breached a purported fiduciary duty. But in the earlier lawsuit, the parties fully and fairly litigated the threshold issue of whether Eagle owed TRO-X a fiduciary duty; the trial court granted summary judgment on that issue and rendered a final judgment that TRO-X take nothing on its fiduciary duty claim; and TRO-X never appealed that ruling. Consequently, collateral estoppel bars TRO-X from relitigating that issue in this lawsuit. Collateral estoppel likewise bars TRO-X from relitigating the issue of whether Eagle prevented TRO-X from acquiring its proportionate share of the overriding royalty and back-in working interest from the Chesapeake transaction. That issue was the central subject of a multi-week jury trial and appeals that spanned more than four years. Although Eagle ultimately prevailed on that issue, TRO-X inexplicably seeks to relitigate that very issue once again by alleging that Eagle has not conveyed the interests or delivered all of the proceeds of the interests to TRO-X. Limitations. Third, all of TRO-X’s claims are barred by the four-year statute of limitations. To the extent TRO-X was entitled to a share of the interests, TRO-X suffered a legal injury, its claims accrued, and limitations began to run no later than June 2008 when Eagle sold the prospect to Chesapeake, reserved the interests, and failed to assign those interests to TRO-X. In fact, during the earlier lawsuit, TRO-X repeatedly asserted that Eagle was required to assign DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT -- Page 6 the interests to TRO-X in 2008 immediately after the Chesapeake transaction. TRO-X, however, did not file this lawsuit within four years of the accrual of its claims. Rather, itwaited nearly eight years -- until February 8, 2016 -- to file this suit. And even indulging the fiction that limitations did not begin to run until February 17, 2012, as TRO-X erroneously implies in its petition, its claims still would be barred by limitations because TRO-X did not exercise diligence in having Eagle served with process. In fact, TRO-X did not serve Eagle until July 5, 2016 -- nearly five months after TRO-X filed suit. Waiver. Fourth, summary judgment is also warranted because, as a matter of law and undisputed fact, TRO-X waived its claims to the interests at issue. More than five years ago during the earlier lawsuit, TRO-X expressly and knowingly renounced any right it had to recover the interests by instructing Eagle that “assignments of any interests related to this litigation will not be accepted” and confirming that TRO-X “didn’t want [the interests] anymore.” It is simply too late for TRO-X to change its mind now. For these reasons, as further discussed below, the Court should grant Eagle’s motion and render summary judgment that TRO-X take nothing on its claims. III. Grounds for Summary Judgment Pursuant to TEX. R. CIV. P. 166a(c), Eagle respectfully moves for summary judgment on the following grounds: 1. TRO-X’s claims are barred by res judicata; 2. TRO-X’s claims are barred by collateral estoppel; 3. TRO-X’s claims are barred by the applicable statute of limitations; and 4. TRO-X’s claims are barred by waiver. DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT -- Page 7 IV. Summary Judgment Evidence This motion is based upon the summary judgment evidence attached to the 5-volume Appendix of Evidence in Support of Defendant Eagle Oil & Gas Co.’s Motion for Summary Judgment (“Appendix”), filed contemporaneously herewith and incorporated by reference herein, and, in particular, the following pleadings, motions, briefs, exhibits, trial transcripts, and court orders from TRO-X, L.P. v. Eagle Oil & Gas Co., No. CV-49,916, in the 238th Judicial District Court of Midland County, and the appeals of that lawsuit styled Eagle Oil & Gas Co. v. TRO-X, L.P., No. 11-11-00290-CV, in the Eastland Court of Appeals, and TRO-X, L.P. v. Eagle Oil & Gas Co., No. 14-0409, in the Supreme Court of Texas: Exhibit 1: Plaintiff’s Original Verified Petition and Application for Temporary Restraining Order and Injunctive Relief, filed October 24, 2007 Exhibit 2: Plaintiff’s Third Amended Petition, filed February 27, 2008 Exhibit 3: Plaintiff’s Fourth Amended Petition, filed April 15, 2008 Exhibit 4: Defendants’ Motion to Appoint Auditor, filed October 17, 2008 Exhibit 5: Agreed Order Granting Motion to Appoint Auditor, signed November 14, 2008 Exhibit 6: Plaintiff’s Sixth Amended Petition, filed January 27, 2011 Exhibit 7: Defendants’ Motion for Partial Summary Judgment, filed March 16, 2011 Exhibit 8: Defendants’ No Evidence Motion for Partial Summary Judgment, filed March 16, 2011 Exhibit 9: Defendants’ Motion to Exclude Expert Testimony from Roy C. Williamson (with exhibits A-1 and A-2 only), filed March 16, 2011 Exhibit 10: Plaintiff’s Response to Defendants’ Motion for Partial Summary Judgment, filed April 1, 2011 Exhibit 11: Plaintiff’s Response to Defendants’ No Evidence Motion for Partial Summary Judgment (without attached evidence), filed April 1, 2011 DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT -- Page 8 Exhibit 12: Order on Defendants’ Motions for Partial Summary Judgment, signed September 22, 2011 Exhibit 13: Plaintiff’s Trial Brief on the Admissibility of Greg McCabe’s Valuation Testimony, filed April 28, 2011 Exhibit 14: Charge of the Court, filed May 19, 2011 Exhibit 15: Plaintiff’s Motion for Entry of Judgment, filed July 21, 2011 Exhibit 16: Final Judgment, signed September 26, 2011 Exhibit 17: Defendant Eagle Oil & Gas Co.’s Notice of Appeal, filed October 6, 2011 Exhibit 18: Plaintiff TRO-X, L.P.’s Notice of Appeal, filed October 17, 2011 Exhibit 19: Excerpts from Volume 4 of the Reporter’s Record (April 26, 2011) Exhibit 20: Excerpts from Volume 5 of the Reporter’s Record (April 27, 2011) Exhibit 21: Excerpts from Volume 6 of the Reporter’s Record (April 28, 2011) Exhibit 22: Excerpts from Volume 7 of the Reporter’s Record (April 29, 2011) Exhibit 23: Excerpts from Volume 8 of the Reporter’s Record (May 2, 2011) Exhibit 24: Excerpts from Volume 9 of the Reporter’s Record (May 3, 2011) Exhibit 25: Excerpts from Volume 10 of the Reporter’s Record (May 4, 2011) Exhibit 26: Excerpts from Volume 11 of the Reporter’s Record (May 5, 2011) Exhibit 27: Excerpts from Volume 12 of the Reporter’s Record (May 6, 2011) Exhibit 28: Excerpts from Volume 13 of the Reporter’s Record (May 9, 2011) Exhibit 29: Excerpts from Volume 14 of the Reporter’s Record (May 10, 2011) Exhibit 30: Excerpts from Volume 15 of the Reporter’s Record (May 11, 2011) Exhibit 31: DX 1 (Acreage Acquisition Agreement: South Haley Prospect) Exhibit 32: DX 2 (Acreage Acquisition Agreement: New Prospects and Amendment No. 1 to South Haley Prospect Agreement) Exhibit 33: DX 4 (Addendum to Acreage Acquisition Agreement: New Prospects and Amendment No. 1 to South Haley Prospect Agreement) DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT -- Page 9 Exhibit 34: DX 19 (Presentation for Encap Investments, Inc.) Exhibit 35: DX 23.6 (Limited Liability Company Agreement for Eagle Oil & Gas Partners, LLC) Exhibit 36: DX 23.9 (Agreement of Sale and Purchase between Eagle and Eagle Oil & Gas Partners, LLC) Exhibit 37: DX 23.10 (Conveyance to Eagle Oil & Gas Partners, LLC) Exhibit 38: DX 25 (October 15, 2007 letter from Pat Bolin to Greg McCabe) Exhibit 39: DX 27.1 (Assignment of Oil and Gas Leases (Collier East) to Chesapeake) Exhibit 40: DX 27.3 (Assignment of Oil and Gas Leases (Collier West) to Chesapeake) Exhibit 41: DX 27.5 (Assignment of Oil and Gas Leases (Balmorhea) to Chesapeake) Exhibit 42: DX 32 (Timeline) Exhibit 43: DX 33 (Agreement of Limited Partnership of TRO-X, LP) Exhibit 44: DX 69 (August 17, 2010 letter from TRO-X’s counsel to Eagle’s counsel) Exhibit 45: PX 46 (November 10, 2009 Audit Report) Exhibit 46: PX 103.1-103.3 (Summary - Reserves and Economics) Exhibit 47: PX 222 (Handwritten calculations of lost profits present value) Exhibit 48: PX 223 (Handwritten calculations of fair market value) Exhibit 49: Brief of Appellee TRO-X, L.P., filed June 15, 2012 Exhibit 50: Judgment from Eastland Court of Appeals (“COA Judgment”), issued October 31, 2013 Exhibit 51: TRO-X’s Motion for Rehearing in the court of appeals, filed December 12, 2013 Exhibit 52: TRO-X’s Reply in Support of Its Motion for Rehearing, filed February 26, 2014 Exhibit 53: TRO-X’s letter brief to Eastland Court of Appeals, dated March 4, 2014 DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT -- Page 10 Exhibit 54: TRO-X’s Petition for Review (without appendix), filed September 10, 2014 Exhibit 55: TRO-X’s Brief on the Merits (without appendix), filed May 1, 2015 Exhibit 56: Order denying TRO-X’s petition for review, issued November 20, 2015 Exhibit 57: TRO-X’s Motion for Rehearing in the Texas Supreme Court (without appendix), filed February 5, 2016 Exhibit 58: TRO-X’s Reply in Support of Motion for Rehearing, filed May 11, 2016 Exhibit 59: Order denying TRO-X’s motion for rehearing, issued May 27, 2016 Exhibit 60: Mandate from Eastland Court of Appeals, issued June 7, 2016 Eagle additionally relies upon and incorporates any and all summary judgment evidence filed by TRO-X, as well as all pleadings, admissions, affidavits, stipulations of the parties, and authenticated or certified public records on file with this Court at the time of the hearing, pursuant to TEX. R. CIV. P. 166a(c). 3 V. Statement of Undisputed Material Facts 1. TRO-X and Eagle entered into the Acreage Acquisition Agreement: South Haley Prospect (“South Haley Agreement”), Acreage Acquisition Agreement: New Prospects and Amendment No. 1 to South Haley Prospect Agreement (“New Prospects Agreement”), and Addendum to Acreage Acquisition Agreement: New Prospects and Amendment No. 1 to South Haley Prospect Agreement (“Addendum”) (collectively, the “Agreement”) in April 2005, July 2005, and September 2005, respectively. (Ex. 31 [2.App.655-61]]; Ex. 32 [2.App.663-70]; 3 For the Court’s convenience, each volume of the Appendix of summary judgment evidence has been sequentially bates-labeled in the lower right-hand corner as “Eagle MSJ App. [page#]” to correspond with the electronic page number of the Appendix. Citations to the summary judgment evidence will be to the electronically bookmarked exhibit number (and, where applicable, the relevant page, paragraph, or section) followed by the volume and individual page(s) where such information can be found. For example, a citation to “Ex. 32 at § II.A [2.App.664]” refers to section II.A of Exhibit 32, which can be found on page 664 of volume 2 of the Appendix. Relevant pleadings and other filings by TRO-X in this case (as contained in the Court’s online docket) are not included in the Appendix and will be cited by the title of the pleading or document. DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT -- Page 11 Ex. 33 [2.App.672-73]) The purpose of the Agreement was to acquire oil and gas interests in the South Haley Prospect and New Prospects and then sell those interests on a promoted basis to third parties. (Ex. 31 [2.App.655-61]; Ex. 32 [2.App.663-70]) 4 2. Although the “general intent was to sell the leases at a profit,” either party could “elect to keep an interest” for itself. (Ex. 21 at 124-25 [2.App.131-32] ; see Ex. 32 at ¶ 3 [2.App.663]) Specifically, section II.A granted TRO-X and Eagle the unilateral right to “retain an unpromoted working interest” in the prospect of up to 40% and 60%, respectively. (Ex. 32 at § II.A [2.App.664]) TRO-X could exercise this right by paying Eagle the “out-of-pocket costs” Eagle incurred to acquire the leasehold interests. (Id. §§ I, II.A [2.App.663-64]) The Agreement further provided that “[u]npromoted working interests shall be chosen by the Parties prior to the sale of all working interests to third parties on a promoted basis.” (Id. § II.A [2.App.664]) And the Agreement set forth a formula under which any cash and non-cash proceeds (including overriding royalties and back-in working interests) would be shared between the parties after the recovery of their respective expenses. (Id. §§ II.B, II.C, II.D, III.C [2.App.664-65]) 3. Beginning in the latter half of 2005, Eagle bought over $10 million in leases covering approximately 80,000 acres in the New Prospects. (Ex. 21 at 141-43 [2.App.141-43]) 5 4. In January 2007, Eagle showed the New Prospects to EnCap Investments, a mezzanine finance group. (Ex. 24 at 53-54 [2.App.268-69]; Ex. 25 at 155-57 [2.App.359-61]; Ex. 34 [2.App.674-91]) After several months of negotiations, EnCap formed a new company -- Eagle Oil & Gas Partners, LLC (“Eagle Partners”) -- in April 2007 to purchase an undivided 4 The New Prospects consists of four areas: the Collier, West Gomez, Balmorhea, and the Pecos Grande. (Ex. 25 at 88-89 [2.App.324-25]) 5 Because Eagle acquired more than 25,000 acres, TRO-X’s proportionate share in the New Prospects decreased from 40% to 35%. (Ex. 21 at 145-46 [2.App.145-46]; see Ex. 32 at § IV.B [2.App.666]) DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT -- Page 12 50% working interest in approximately 32,000 acres in the New Prospects for $200 per acre. (Ex. 35 [2.App.693-752]; Ex. 36 [3.App.8-207]; Ex. 25 at 137-38 [2.App.351-52]) Before the sale to Eagle Partners, TRO-X never elected to retain an unpromoted working interest for itself. (Ex. 27 at 149 [2.App.502]); see Ex. 20 at 208-09 [2.App.91-92]) 5. Because an undivided 50% interest in the New Prospects still remained available for sale after the Eagle Partners transaction (Ex. 25 at 183 [2.App.374]; Ex. 26 at 31 [2.App.427]), Eagle continued to market the New Prospects throughout 2007 (Ex. 27 at 149-50 [2.App.502-03]). 6. The relationship between Eagle and TRO-X soured, and in October 2007, TRO-X filed suit against Eagle in TRO-X, L.P. v. Eagle Oil & Gas Co., No. CV-49,916, in the 238th Judicial District Court of Midland County, asserting claims arising under the Agreement (the “Midland Lawsuit”). (Ex. 1 [1.App.14-68]) In relevant part, TRO-X alleged claims against Eagle for breach of the Agreement and breach of fiduciary duty. (Id. at 7-15 [1.App.20-28]) In addition, TRO-X sought a declaratory judgment that it “owns an equitable interest” in certain property Eagle acquired in the New Prospects. (Id. at 8 [1.App.21]) 6 7. TRO-X subsequently amended its petition to also request, among other relief, an accounting to determine the proceeds, if any, to which TRO-X was entitled under the Agreement. (Ex. 2 at ¶¶ 5.09-5.12 [1.App.80-82]) 8. In April 2008, Eagle and Eagle Partners sold 100% of the Collier Prospect to Chesapeake for $325 per acre. (Ex. 39 [4.App.170-73]; Ex. 40 [4.App.175-79]; Ex. 20 at 188-89 [2.App.82-83]; Ex. 25 at 187 [2.App.378]; Ex. 26 at 76-78 [2.App.430-32]) These sales proceeds (like the proceeds from the Eagle Partners’ sale) were to the benefit of both TRO-X and 6 TRO-X later amended its petition to also assert claims against Eagle Partners. (Ex. 3 at ¶¶ 2.03, 5.09-5.12 [1.App.85, 96-97]; Ex. 6 at ¶¶ 2.03, 5.07-5.08 [1.App.111, 133]) DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT -- Page 13 Eagle, to be split according to the Agreement. (See Ex. 32 at § II.C [2.App.665]; Ex. 45 [4.App.214-93]) As part of the transaction and the assignment of the Collier leases to Chesapeake, Eagle reserved or retained an overriding royalty interest and back-in working interest (collectively, the “Interests”). (Ex. 39 [4.App.170-73]; Ex. 40 [4.App.175-79]; Ex. 25 at 202-05 [2.App.393-96]; Ex. 26 at 76-78 [2.App.430-32]) Two months later, Chesapeake purchased an 85% interest in the Balmorhea Ranch Prospect under the same terms. (Ex. 41 [4.App.181-90]; Ex. 20 at 189 [2.App.83]; Ex. 25 at 205-06 [2.App.396-97]) Before the sales to Chesapeake, TRO-X never informed Eagle that it wanted to retain an unpromoted working interest in the New Prospects. (Ex. 21 at 148-49 [2.App.148-49]; Ex. 25 at 206-07 [2.App.397- 98]; see also Ex. 20 at 209 [2.App.92]) 9. Although TRO-X complained that it never received an assignment of its proportionate share of the Interests from Eagle (Ex. 20 at 64-65 [2.App.61-62]; see also Ex. 20 at 189 [2.App.83]; Ex. 22 at 80-81, 97 [2.App.190-91, 199]; Ex. 29 at 66-67, 218-20 [2.App.606- 07, 638-640]; Ex. 30 at 100 [2.App.652]), TRO-X sent a letter to Eagle during the Midland Lawsuit, unequivocally stating that it did not want (and would not accept) any assignment of its Interests from the Chesapeake transaction: In order to avoid your spending unnecessary time preparing assignments of interest, TRO-X intends to seek monetary damages for the breaches of Eagle Oil & Gas Co. Therefore, assignments of any interests related to this litigation will not be accepted. (Ex. 44 [4.App.212]) 10. After the Chesapeake transaction, the parties’ accounts became positive for the first time. (See Ex. 45 [214-93]) Nonetheless, because the parties were unable to agree on how to split the sales proceeds, Eagle asked the trial court to appoint an auditor to resolve the DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT -- Page 14 accounting issues. (Ex. 4 [1.App.102-04]; Ex. 23 at 70-71 [2.App.240-41]; see Ex. 20 at 223 [2.App.96]) With TRO-X’s approval, the trial court did so. (Ex. 5 [1.App.106-09]) 11. The auditor ultimately issued a report concluding that TRO-X’s proportionate share of the sales proceeds was $1,064,789.45. (Ex. 45 at 11-12 & Attachment 10 [4.App.229- 30, 254-71]; see Ex. 20 at 24-30 [2.App.50-56]; Ex. 23 at 70-72, 76 [2.App.240-43]) 7 12. In January 2011, TRO-X amended its petition for the sixth and final time before trial. (Ex. 6 [1.App.111-39]) In its Sixth Amended Petition, TRO-X specifically complained about Eagle’s 2008 transaction with Chesapeake and alleged that: • Eagle obtained cash and non-cash benefits that “should have been disclosed, offered, and/or distributed to TRO-X”; • “TRO-X was deprived of its right to acquire its proportionate share of these interests”; • TRO-X “expected to share in the cash profits, back-in working interests, .. . and/or overriding working royalties”; • “[t]here is [a fiduciary relationship] regarding the division of proceeds (cash and non-cash)”; and • Eagle “retained cash and non-cash benefits from TRO-X above and beyond what was contractually agreed.” (Id. ¶¶ 4.14, 4.18-4.20 [1.App.119, 126-29]) 13. TRO-X also asserted a breach-of-contract claim, alleging that Eagle breached the Agreement by, among other acts, failing to (1) “properly and equitably distribute the proceeds and benefits” to TRO-X that Eagle obtained in selling the prospects, (2) “use best efforts in the receipt, application and sharing of cash and non-cash proceeds of sales to third parties,” (3) “consult with TRO-X in connection with the sale to Eagle Partners and/or Chesapeake,” and 7 The auditor did not form an opinion as to whether Eagle was entitled to reimbursement for expenses relating to its exploration department and Midland office. (Ex. 45 at 9, 12 [4.App.227, 230]) The auditor did, however, determine that those expenses totaled $685,000.65. (Id. at Attachment 9, 10 [4.App.252, 255]) DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT -- Page 15 (4) “offer TRO-X an opportunity to acquire its interest in the sale to Eagle Partners and/or Chesapeake.” (Id. ¶ 5.02(d), (n), (p), (q) [1.App.130-31]) 14. In addition, TRO-X alleged that “Eagle owes TRO-X fiduciary duties,” that Eagle breached those supposed duties by “acquir[ing] benefits through the sale of these interests that it did not disclose to or share with TRO-X,” and that TRO-X was entitled to recover damages as a result of Eagle’s alleged breaches and to “seek a constructive trust on any funds or benefits it received.” (Id. ¶ 5.06 [1.App.132-33]) 15. Eagle, in turn, moved for partial summary judgment, arguing that TRO-X’s breach of fiduciary duty claim fails as a matter of law and undisputed fact because “Eagle does not owe a fiduciary duty to TRO-X” and “there is no evidence that Eagle and TRO-X had a formal or informal fiduciary relationship.” (Ex. 7 at 1-2, 10-17 [1.App.143-44, 152-59]; Ex. 8 at 1, 5-6 [1.App.177, 181-82]) 16. In response, TRO- attempted to raise a fact issue that Eagle owed a fiduciary duty to TRO-X. (Ex. 10 at 17-37 [1.App.238-58]; Ex. 11 at 9-12 [1.App.288-91]) 17. After an April 2011 hearing, the district court granted Eagle’s motions for partial summary judgment as to TRO-X’s cause of action for breach of fiduciary duty and rendered judgment that TRO-X take nothing on such claim. (Ex. 12 [1.App.305-08]) 18. The case proceeded to trial in April 2011 on TRO-X’s remaining claims. Specifically, TRO-X claimed that Eagle allegedly breached the Agreement by (1) depriving TRO-X of its right to retain an unpromoted working interest in the New Prospects in 2007 by selling to Eagle Partners without consultation, and (2) preventing TRO-X from acquiring its proportionate share of the Interests acquired in the 2008 Chesapeake sale. (See Ex. 14 at 6 [1.App.321]; Ex. 29 at 72-74 [2.App.612-14]) DEFENDANT EAGLE OIL & GAS CO.’S MOTION FOR SUMMARY JUDGMENT -- Page 16 19. During trial, TRO-X repeatedly asserted that it held “equitable title” to or an “equitable interest” in its proportionate share of the Interests that Eagle reserved in the Chesapeake transaction. (Ex. 21 at 9, 17, 20 [2.App.104, 107, 110]; see Ex. 13 [1.App.310-14]) TRO-X also asserted it had a “right to have [those] property right[s] assigned to [it] immediately” when Eagle received them (Ex. 29 at 218-20 [2.App.638-40]); TRO-X “complain[ed] about [Eagle’s] failure to give assignments” (Ex. 20 at 64-65 [2.App.61-62]; see also id. at 189 [2.App.83]; Ex. 22 at 80-81, 97 [2.App.190-91, 199]; Ex. 29 at 66-67 [2.App.606-07]; Ex. 30 at 100 [2.App.652]); and TRO-X argued it “would have received income” from the Interests if it had “received an assignment” (Ex. 29 at 225 [2.App.641]). 20. Nonetheless, Greg McCabe (TRO-X’s president) confirmed during trial that TRO-X “would not accept assignments of [its] interest under [the] agreement” and that TRO-X did not “want an interest under the oil and gas leases.” (Ex. 22 at 100-02 [2.App.202-04]) As McCabe testified, TRO-X had the right to “either demand for properties or demand for the cash value of those properties,” and “[a]s of August 17, 2010, [TRO-X] officially decided that [it] would not accept properties as a remedy.” (Id. at 98-99, 102-04 [2.App.200-02, 204-06]; see also Ex. 44 [4.App.212] [“assignments of any interests relating to this litigation will not be accepted” because “TRO-X intends to seek monetary damages for the breaches of Eagle”]) 21. Thus, rather than seek an order of specific performance compelling Eagle to