Justices reverse judgments in oil and gas royalty case, wipe $446K attorney's fees award

By David Yates | Jun 29, 2012


The Texas Ninth District Court of Appeals has reversed three judgments in an oil and gas royalty case, effectively erasing an award of more than $400,000 in attorney's fees.

In June 2009, the Southeast Texas Record reported on an oil-and-gas lease trial between M&M Resources and DSTJ Corp., who is also a counter-plaintiff in the lawsuit.

The first trial ended with a hung jury on June 11, 2009. The second trial started Feb. 7, 2011, and ended five days later, with jurors opting not to award any damages to either party.

Jurors did, however, choose to award M&M's attorneys $446,580 for services rendered and additional $53,700 for court costs, according to the charge of the jury.

Court records show that on March 9, 2011, a final judgment was entered affirming the award and approving two of M&M's previous motions for summary judgment.

On June 8, 2011, DSTJ appealed, questioning the summary judgment rulings, the royalty paid on the oil and gas lease and whether the award of the attorney's fees and court costs was improper under the Texas Declaratory Judgment Act, appellate briefs show.

On June 28 the Ninth Court issued an opinion reversing all three judgments, remanding the cause back to the trial court for further proceedings.

Case background

In 2006, M&M and Energy Land Resources sued DSTJ, claiming DSTJ owed seven months of royalties on an area well shut down by the Texas Railroad Commission, court papers say.

Court records show that on Sept. 22, 2002, M&M assigned 21 leases to DSTJ for a .5 percent royalty fee. Four of the 21 leases were known as the Blackman Tract, a region of land owned by multiple Jefferson County residents.

Once the agreement was in place, DSTJ proceeded to drill the Quail No. 1 well on the Blackman Tract, which was functional from October 2003 until March 2004, when the Texas Railroad Commission sealed it.

"Despite the production obtained from the Quail No. 1, DSTJ has never made any royalty payments to plaintiff," the suit states. "DSTJ's failure to make royalty payments ... constitutes a default of DSTJ's obligations under the assignment."

DSTJ filed a countersuit alleging M&M and ELR were engaged in shady dealings and had snuck "improper lease provisions" into their agreement that prevented DSTJ from pooling the tracts.

Although jurors found that there was an agreement in place between the two parties, no damages were awarded for the alleged breaches.

M&M is represented in part by attorney Terry Wood of the Crutchfield, De Cordova & Wood law firm in Beaumont.

DSTJ is represented in part by the Law Offices of Keith Kebodeaux in Beaumont.

Judge Gary Sanderson, 60th District Court, presided over the trial.

Trial case No. A172-979
Appeals case No. 09-11-00292

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