Oil and Gas Success in the Texas Supreme Court

On January 30, 2015, the Texas Supreme Court handed down a significant ruling for the Firm’s client. The decision is Charles G. Hooks III v. Samson Lone Star, Limited Partnership.

The case involves a large number of important legal issues. One of the most important is the relationship between the statute of limitations and the existence of documents filed in public records, such as papers on file with the Railroad Commission. In recent years, arguments have been made that the law automatically charges property owners with notice of all filings in the public records and that the filing of such documents could immediately start the clock running on the time period required to file their claims in court. The Hooks decision corrects that misperception.

Mr. Hooks was a royalty owner who was lied to by his lessee, Samson Lone Star. Along with other claims, he sued for fraud because Samson supplied him with false information about the location of a particular well. Samson pleaded that the statute of limitations barred the claim on the theory that Mr. Hooks could have spotted the lie if he had gone to the Railroad Commission and consulted some of the documents on file there. The Supreme Court rejected that defense, explaining that Samson had polluted the public records with false filings and that a fraudfeasor cannot blame its victim for failing to dig beneath the false filings in search of older, truthful ones: “Although reasonable diligence should examine readily available information in the public record, it may stop at more recent filings with the Railroad Commission, without needing to double-check more recent filings against earlier filings.”

The opinion also addresses several other issues, including interpretation of a “most favored nations” royalty clause and other lease provisions, calculation of interest, and attorney’s fees.

Mr. Hooks was represented on appeal by two of the Firm’s appellate lawyers, David Gunn and Erin Huber. The trial attorneys for Mr. Hooks were Pat Lochridge and Paul Simpson of the McGinnis Lochridge law firm. Mr. Gunn and Mr. Simpson presented the oral argument for Mr. Hooks in the court of appeals. When the case was granted by the Supreme Court, the legal team added former Supreme Court Justice Dale Wainwright, now of Bracewell & Giuliani, and Shannon Ratliff and Marla Broaddus of the Ratliff Law Firm. Mr. Ratliff presented the oral argument in the Supreme Court in September 2014. The Supreme Court’s unanimous opinion was authored by Justice John P. Devine.