$20 M verdict levied against Samson Lone Star over fraudulent oil lease

By David Yates | Nov 17, 2008

Samson Lone Star LP was smacked with a $20 million verdict on Friday, Nov. 14, as 11 out of 12 jurors concluded the company was fraudulently sucking oil and gas out of a Hardin County man's property.

The trial, which began in September but was postponed due to Hurricane Ike, took place in Judge Gary Sanderson's 60th Judicial Court.

Back in August 2004, Hardin County resident Joyce Lee filed a lawsuit against Samson in Jefferson County, alleging Samson was pooling (combining) and "unpooling" some of her lands into a well known as the Blackstone Minerals "A" No. 1 Gas Unit without her consent.

A few years later, the suit grew to include several more plaintiffs, including Charles Hooks III, who was severed out for trial and is now $20,081,638.07 richer � thanks to jurors ruling Samson owed him royalties for use of the Blackstone well.

Hooks was suing individually and on behalf of the estate of Charles Hooks Jr. Several other Hooks family members were also plaintiffs in the suit.

Throughout the 1970s, plaintiffs executed oil and gas leases with oil companies to lease and pool their land with other lands or leases.

On Dec. 6, 2000, Samson filed an application for a drilling permit with the Texas Railroad Commission for the Blackstone well, court papers say.

Samson pooled some of the plaintiffs' lands into the Blackstone Minerals "A" No. 1 Gas Unit on which it then produced from the Black Stone Minerals A-1 Well.

According to the suit, a year later Samson "amended" the pooled unit by reconfiguring its borders, changing it to a shallower depth and renaming it which effectively "unpooled" the plaintiffs' leases from the Black Stone Minerals A-1 Well.

"As a result, Samson has never paid royalty to these plaintiffs for production from that well," the suit states.

Under Texas law, the plaintiffs argue, a pooled unit is valid for any lease pooled, even if the owners of other tracts in the unit do not consent to the unit or grant pooling authority.

"Thus, Samson's initial pooling of the Black Stone Minerals A-1 Unit was valid," court papers say. "Moreover, plaintiffs' leases do not grant Samson authority to unilaterally remove pooled acreage from a unit, once pooled. Samson's actions in 'amending' the Black Stone Minerals A-1 Unit and not paying royalty breached these leases."

In a motion for summary judgment filed in October 2007, the plaintiffs cited a decision by the Ninth District Court of Appeals that once oil or gas was discovered on a pooled unit, the lessee could not reduce, modify or dissolve the unit while the well was still producing (Williamson v. Mobil Producing Texas and New Mexico Inc., 1987).

The jury of six men and five women agreed, ruling Samson committed fraud and statutory fraud against the Hooks plaintiffs through failing to disclose material facts and false representation. They determined the plaintiffs lost $20 million in income due to the fraud.

The Hooks were represented in part by attorney Gerald Flatten of Rienstra, Dowell & Flatten in Beaumont and Paul Simpson of the McGinnis, Lochridge & Kilgore law firm in Houston.

Samson was represented in part by attorney M.C. Carrington of the Mehaffy Webber law firm in Beaumont, and Dick Watt from Watt Beckworth Thompson & Henneman LLP in Houston.

Case No. B173-008-B

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