Appeals court directs Floyd to transfer $60M oil and gas case to Harris County

David Yates Aug. 4, 2009, 6:49am


The Ninth District Court of Appeals of Texas granted the transfer to Harris County of a $60 million oil and gas lawsuit which defendants argued was improperly filed in Jefferson County.

"Texas Civil Practice and Remedies Code requires this action be brought in the county in which the property at issue is located," the July 30 per curium opinion states. "We conditionally grant the petition for writ of mandamus."

In December 2007, Etoco LP, a Houston oil and gas discovery business, filed a suit in Jefferson County against Thorp Petroleum and others for allegedly defrauding the company on mineral interests obtained from a couple of Harris County wells.

A month later, defendants Robinson Kerr, James E. Thorp, Thorp Petroleum, Cobra Operating Co. and Hal Energy – all located in Harris County – sought a change in venue.

The defendants argued that since ownership of the mineral rights was in question, venue should be transferred out of Jefferson County to Harris County where the properties are located.

On Jan. 16, Jefferson County 172nd District Court Judge Donald Floyd denied the defendants' motion to transfer venue, ruling that the motion was without merit, court papers say.

The defendants appealed the judge's ruling and filed a petition for a writ of mandamus March 2, asking that Judge Floyd be directed to transfer the case.

The appeals court granted the motion.

"We are confident that the trial court will withdraw its previous order and transfer the case. The writ will issue only if the trial court fails to comply with this opinion," justices stated in the order.

They wrote that when rightful ownership of real property must be decided as a prerequisite to the relief requested, the mandatory venue statute governs.

"Because this dispute is essentially over the rightful ownership of an interest in land in Harris County, (Texas civil law) requires the claim be litigated in Harris County."

Case Background

According to the original lawsuit, Etoco hired Thorp as its CEO and president in 1984. After several years of employment, Thorp allegedly began to "surreptitiously and fraudulently" attempt to locate gas and oil reserves behind Etoco's back.

"Thorp even used plaintiff's Houston office to conduct … clandestine … business on reserves he located for himself," the suit states.

"At no time did Thorp disclose to plaintiff that he located and obtained for himself … reserves along with leases to the mineral rights … despite the fact that he owed a fiduciary duty to Etoco as president and CEO."

In order to tap the oil and gas deposits, Thorp cemented a partnership with Kerr, an investor, and the two subsequently formed Thorp Petroleum, Cobra Operating Co. and Hal Energy to extract the minerals.

Court documents show that Thorp resigned from Etoco in 1996.

Etoco alleges Thorp breached his fiduciary duty, is guilty of fraud and owes the company $60 million in lost profit.

During oral arguments before the appeals court, the defendants argued that the mandatory venue statute governing real property disputes requires that an action for an interest in real property must be brought in the county in which the property is located.

"(Defendants) promptly moved to transfer venue because Etoco was seeking ownership and possession of the Harris County properties," the defendant's brief states.

Conversely, Etoco's appeals brief argued that Judge Floyd "did not abuse (his) discretion in denying a venue transfer because this suit is not an action for land but a suit for fraud in an employment relationship."

Etoco is represented in part by attorney Mitchell Toups of the Weller, Green, Toups & Terrell law firm.

The defendants are represented in part by attorneys Russell S. Post, Douglas Pritchett Jr., Barnet B. Skelton Jr., and John T. McDowell.

Trial case No. E180-940
Appeals case No. 09-09-00079-CV.

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