Written by John McFarland of the Oil and Gas Lawyer Blog.
In January of last year the Texas Supreme Court decided Hooks v. Samson, a suit by royalty owners against Samson Lone Star Limited Partnership. I wrote a post on the Supreme Court’s decision, found here. The Hooks obtained a $21 million fraud judgment against Samson, but the First District Court of Appeals reversed and rendered judgment that the Hooks should take nothing. The Hooks appealed to the Texas Supreme Court. The focus of the Supreme Court’s opinion was whether the Hooks’ claim was barred by limitations — whether the Hooks should have discovered Samson’s conduct more than four years before it sued Samson. The court of appeals had held that, under prior Supreme Court cases, it was bound to rule that the Hooks’ case was barred by limitations and should be dismissed. But the Supreme Court distinguished its prior opinions and held that, when the fraudulent documents Samson gave to Hooks were filed by Samson in the Railroad Commission, the Hooks could rely on them, even if the documents are contradicted by other public records.
The Supreme Court remanded the case to the First Court of Appeals to consider Samson’s “factual sufficiency” arguments for reversing the judgment. In Texas, the Supreme Court’s jurisdiction over jury verdicts is limited. It cannot reverse a jury finding unless it finds that there is “no evidence” to support the finding. Lawyers refer to this as “legal sufficiency” of the evidence. But an intermediate court of appeals also has jurisdiction to reverse a jury verdict (and remand for new trial) if it finds that the verdict was “against the great weight and preponderance of the evidence.” Lawyers refer to this as “factual sufficiency” of the evidence. Samson had also argued to the court of appeals that the evidence was not “factually sufficient” to support the jury’s finding on Samson’s fraudulent conduct in concealing the true location of the well. So the Supreme Court sent the case back to the Houston court for it to consider whether the evidence on when the Hooks should have, with reasonable diligence, discovered the true location of the well was “factually sufficient” to support the verdict.
The court of appeals has now ruled on Samson’s appeal after remand to that court. It upheld the jury’s verdict and the judgment, finding that there was factually sufficient evidence to support the jury’s verdict, except that it said the amount of the verdict was excessive. The court concluded that there was not sufficient evidence to support $2,620,475.50 of the $20,081,638.07 judgment. It therefore ruled that, if the Hooks agree to reduce the judgment by $2,620,475.50, it would affirm a judgment in the amount of $17,461,162.57. Lawyers for the Hooks indicated that their clients would be happy to agree to the court of appeals’ suggestion of a remititur and agree to the lesser judgment.
Samson Lone Star is a subsidiary of Samson Resources, which filed for bankruptcy protection last summer. Plans for a quick exit out of the bankruptcy have stalled. The Hooks’ victory may therefore be Pyrrhic.