Samson Lone Star Limited Partnership, N/K/A Samson Lone Star, L.L.C. v. Charles G. Hooks, III, Individually and as Independent of the Estate of Charles G. Hooks, Jr., as Trustee of the Scott Ira McKeever Trust and the David Wayne McKeever Trust, and on Behalf of Chas. G. Hooks & Son, a General Partnership

ACCEPTED

01-09-00328-CV

FIRST COURT OF APPEALS

HOUSTON, TEXAS

7/6/2015 5:08:20 PM

ORAL ARGUMENT REQUESTED CHRISTOPHER PRINE

CLERK

No. 1-09-00328-CV

FILED IN

In the 1st COURT OF APPEALS

HOUSTON, TEXAS

First Court of Appeals 7/6/2015 5:08:20 PM

CHRISTOPHER A. PRINE

Houston, Texas Clerk

Samson Lone Star, Limited Partnership n/k/a Samson Exploration LLC

Appellant—Cross Appellee,

v.

Charles G. Hooks III, Individually and as Independent Executor of the Estate of

Charles G. Hooks, Jr., as Trustee of the Scott Ira McKeever Trust and the David

Wayne McKeever Trust, and on behalf of Chas. G. Hooks & Son, a General

Partnership; McKeever Partnership, Ltd.; Charles G. Hooks III and Sue Ann

Hooks, as Co-Trustees Under the Will of Charles G. Hooks, Sr.

Appellees—Cross-Appellants.

Appeal from Cause B173008-B, 60th District Court

Jefferson County, Texas

_________________________________________________

SAMSON’S SUPPLEMENTAL APPELLANT’S BRIEF

M.C. Carrington Michael V. Powell

State Bar No. 03880800 mpowell@lockelord.com

MEHAFFY WEBER P.C. State Bar No. 16204400

P.O. Box 16 Cynthia Keely Timms

Beaumont, Texas 77704 ctimms@lockelord.com

Telephone: (409) 835-5011 State Bar No. 11161450

Facsimile: (409) 835-5177 LOCKE LORD LLP

2200 Ross Avenue, Suite 2200

Dick Watt Dallas, Texas 75201

State Bar No. 20977700 Telephone: (214) 740-8000

WATT BECKWORTH THOMPSON Facsimile: (214) 740-8800

HENNEMAN & SULLIVAN LLP

1800 Pennzoil Place, South Tower

711 Louisiana Street

Houston, Texas 77002

Telephone: (713) 650-8100

Facsimile: (713) 650-8141

July 6, 2015

NAMES OF ALL PARTIES

The following is a complete list of the names and addresses of all parties to

the trial court’s final judgment and their counsel:

APPELLANT/CROSS-APPELLEE

1. Appellant is Samson Lone Star Limited Partnership n/k/a Samson

Exploration LLC (“Samson”).

2. Samson is represented by the following counsel of record:

a. Michael V. Powell and Cynthia Keely Timms, Locke Lord LLP, 2200

Ross Avenue, Suite 2200, Dallas, Texas 75201 (appeal).

b. M.C. Carrington (trial and appeal), Matt Marchak (trial only), and

Patricia Chamblin (trial and appeal), Mehaffy Weber, P.C., P.O. Box

16, Beaumont, Texas 77704.

c. Dick Watt (trial and appeal), T. Neal Nobles (trial), and Katherine W.

Strange (trial), Watt Beckworth Thompson & Henneman, L.L.P.,

1800 Pennzoil Place, South Tower, 711 Louisiana Street, Houston,

Texas 77002.

APPELLEES/CROSS-APPELLANTS

1. Appellees are Charles G. Hooks III, Individually and as Independent

Executor of the Estate of Charles G. Hooks, Jr., as Trustee of the Scott Ira

McKeever Trust and the David Wayne McKeever Trust, and on behalf of

Chas. G. Hooks & Son, a General Partnership; McKeever Partnership, Ltd;

Charles G. Hooks III and Sue Ann Hooks, as Co-Trustees under the Will of

Charles G. Hooks, Sr. (the “Plaintiffs”).

2. Appellees are represented by the following counsel of record:

a. David Gunn (appeal), Beck Redden L.L.P., OneHouston Center, 1221

McKinney St., Suite 4500, Houston, Texas 77010-2010

b. Paul F. Simpson (trial and appeal), McGinnis, Lochridge, & Kilgore,

L.L.P., 711 Louisiana Street, Suite 1600, Houston, Texas 77002.

i

c. Pat Lochridge (trial and appeal), Don H. McGee (trial), J. Derrick

Price (trial), and Scott S. Cooley (trial), McGinnis, Lochridge, &

Kilgore, L.L.P., 600 Congress Ave., Suite 2100, Austin, Texas 78701.

d. Jon B. Burmeister (trial), Moore Landrey, L.L.P., 905 Orleans Street,

Beaumont, Texas 77701.

e. Gerald Flatten (trial), Rienstra, Dowell & Flatten, 595 Orleans, Suite

1007, Beaumont, Texas 77701.

f. Shannon H. Ratliff (Tex. S. Ct.) and Marla Broaddus (Tex. S. Ct.),

Ratliff Law Firm, PLLC, 600 Congress Avenue, Suite 3100, Austin,

Texas 78701.

g. Dale Wainwright (Tex. S. Ct.), Bracewell & Giuliani, LLP, 111

Congress Ave., Suite 2300, Austin, Texas 78701.

ii

TABLE OF CONTENTS

NAMES OF ALL PARTIES ......................................................................................i

TABLE OF CONTENTS ......................................................................................... iii

INDEX OF AUTHORITIES................................................................................... vii

STATEMENT OF THE CASE ............................................................................... xii

STATEMENT REGARDING ORAL ARGUMENT ............................................xiv

ISSUES PRESENTED.............................................................................................xv

A. Issues Involving Plaintiffs’ Fraud Claim.......................................................xv

1. Fraud ........................................................................................................xv

2. Statute of Limitations for Fraud ........................................................... xvii

3. Fraud Damages ..................................................................................... xvii

B. Issues Involving Plaintiffs’ Most Favored Nations Claim ...........................xix

CASE HISTORY .......................................................................................................1

A. Fraud ................................................................................................................2

B. Breach of Lease Claims ...................................................................................3

1. Most Favored Nations ...............................................................................3

2. Incremental Formation Production............................................................ 5

3. Unpooling ..................................................................................................6

C. Post-Judgment Interest ....................................................................................7

D. Attorneys’ Fees ................................................................................................7

E. Hooks’ Cross-Appeal.......................................................................................8

F. Samson’s Appeal Issues on Remand ............................................................... 9

STATEMENT OF FACTS ......................................................................................10

iii

A. Hooks Was a Very Experienced Oil and Gas Attorney ................................10

B. Samson Drilled the Black Stone Minerals No. 1 Gas Well...........................11

C. The Jefferson County Lease Contained Offset Obligations ..........................11

D. Samson Contacted Plaintiffs, Offering to Include 50 Acres of

Plaintiffs’ Jefferson County Lease in the Unit .............................................13

E. Hooks Requested a Plat, and Samson Sent Him One, to Show the

Location of Plaintiffs’ Land within the Unit ................................................14

F. Hooks Testified He Relied on the “1400´± Scaled” Depiction to

Determine the Distance of the BSM1 Well from Plaintiffs’ Jefferson

County Lease ................................................................................................17

G. Plaintiffs Agreed to Include their 50 acres in the BSM1 Unit. .....................19

H. Other Operations Near and on the BSM1 Unit .............................................20

I. This Lawsuit ..................................................................................................21

SUMMARY OF THE ARGUMENT ......................................................................24

ARGUMENT ...........................................................................................................29

A. Standard of Review........................................................................................29

B. There is Legally and Factually Insufficient Evidence of Common Law

Fraud .............................................................................................................30

1. There is legally and factually insufficient evidence of a

misrepresentation on which Hooks claims to have relied.......................31

2. There is legally and factually insufficient evidence of reliance.............. 35

3. There is legally and factually insufficient evidence Samson

intended to defraud Plaintiffs ..................................................................36

4. There is legally and factually insufficient evidence of a duty to

disclose or any failure to disclose ...........................................................40

a. There is legally and factually insufficient evidence of a duty

to disclose .......................................................................................40

iv

b. There is legally and factually insufficient evidence of a

failure to disclose ...........................................................................42

C. There is Legally and Factually Insufficient Evidence of Statutory

Fraud .............................................................................................................45

1. Statutory fraud does not apply to this case because there is no real

estate transaction of the type required by that statute .............................45

2. There is legally and factually insufficient evidence of the elements

of statutory fraud .....................................................................................46

D. There is Factually Insufficient Evidence to Support the Jury’s Finding

that Plaintiffs Could Not Have Discovered the Alleged Fraud Claim

until April 2007 ............................................................................................47

E. There is Legally and Factually Insufficient Evidence to Support the

Fraud Damages Finding ...............................................................................51

1. Plaintiffs did not prove fraud damages and, instead, proved only

the same damages they would have presented for the breach of oil

and gas lease claim they previously lost on summary judgment ............ 52

2. Plaintiffs never pleaded for consequential damages; they only

pleaded for out-of-pocket damages .........................................................54

3. Plaintiffs were not entitled to consequential damages as a part of

an out-of-pocket measure of recovery ....................................................54

4. Furthermore, Plaintiffs could not seek compensatory damages

unless they set aside the pooling agreement, which is something

they never sought to do ...........................................................................55

5. Plaintiffs were not entitled to their compensatory royalty damages

based on production from the DuJay1 well ............................................56

6. The fraud damages improperly include “late charges” of 18%

compounded monthly ..............................................................................57

7. The damages have to be reversed because they include

incremental formation production damages, which the Supreme

Court held were improper .......................................................................59

v

8. If this Court reverses and remands for a new trial on fraud

damages, then fraud liability will have to be retried as well .................. 60

F. The Court Must Also Remand the Favored Nations Damages for a

Recalculation and Should Determine Issues Regarding the

Application of Prejudgment Interest to Newly Awarded Favored

Nations Damages ..........................................................................................61

PRAYER FOR RELIEF ..........................................................................................63

CERTIFICATE OF COMPLIANCE .......................................................................66

CERTIFICATE OF SERVICE ................................................................................67

APPENDIX

Tab

Final Judgment (1Supp2d CR:4-11) ................................................................. Tab A

Charge of the Court (19CR:3262-76) ............................................................... Tab B

Damages Stipulation (Court Ex. A) .................................................................. Tab C

Samson v. Hooks Ct. App. Opinion (389 S.W.3d 409) .................................... Tab D

Hooks v. Samson Tex. S. Ct. Opinion (457 S.W.3d 52) ................................... Tab E

vi

INDEX OF AUTHORITIES

Page(s)

CASES

Arbor Windsor Court, Ltd. v. Weekley Homes, LP,

No. 14-13-00480-CV, 2015 WL 1245548 (Tex. App.—Houston [14th

Dist.] Mar. 17, 2015, no pet.)..............................................................................39

Baylor Univ. v. Sonnichsen,

221 S.W.3d 632 (Tex. 2007) ........................................................................52, 55

Blue Bell, Inc. v. Peat, Marwick, Mitchell & Co.,

715 S.W.2d 408 (Tex. App.—Dallas 1986, writ ref’d n.r.e.) .............................39

Bradford v. Vento,

48 S.W.3d 749 (Tex. 2001).....................................................................32, 40, 46

Burbage v. Burbage,

447 S.W.3d 249 (Tex. 2014) ........................................................................29, 54

Burleson State Bank v. Plunkett,

27 S.W.3d 605 (Tex. App.—Waco 2000, pet. denied).......................................45

Case Corp. v. Hi-Class Bus. Sys. of Am., Inc.,

184 S.W.3d 760 (Tex. App.—Dallas 2005, pet. denied)....................................54

City of Keller v. Wilson,

168 S.W.3d 802 (Tex. 2005) ........................................................................29, 52

Coastal Oil & Gas Trust v. Garza Energy Trust,

268 S.W.3d 1 (Tex. 2008)...................................................................................52

Ehrhardt v. Elec. & Instrumentation Unlimited,

220 F. Supp. 2d 649 (E.D. Tex. 2002)................................................................40

Ernst & Young, L.L.P. v. Pac. Mut. Life Ins. Co.,

51 S.W.3d 573 (Tex. 2001)...........................................................................35, 39

Fazio v. Cypress/GR Houston I, L.P.,

403 S.W.3d 390 (Tex. App.—Houston [1st Dist.] 2013, pet. denied) ...............57

vii

Ford Motor Co. v. Ridgway,

135 S.W.3d 598 (Tex. 2004) ..............................................................................29

Formosa Plastics Corp. v. Presidio Eng’rs & Contractors, Inc.,

960 S.W.2d 41 (Tex. 1998)...........................................................................53, 55

Fortune Prod. Co. v. Conoco, Inc.,

52 S.W.3d 671 (Tex. 2000)...........................................................................52, 55

Goldman v. Olmstead,

414 S.W.3d 346 (Tex. App.—Dallas 2013, pet. denied)....................................56

Grant Thornton LLP v. Prospect High Income Fund,

314 S.W.3d 913 (Tex. 2010) ..............................................................................36

Greater Houston Transp. Co. v. Phillips,

801 S.W.2d 523 (Tex. 1990) ..............................................................................44

Haase v. Glazner,

62 S.W.3d 795 (Tex.2001)..................................................................................31

Harkins v. North Shore Energy, L.L.C.,

No. 13-12-00504-CV, 2014 WL 1789572 (Tex. App.—Corpus Christi

May 1, 2014, pet. pending) .................................................................................33

Hartford Fire Ins. Co. v. C. Springs 300, Ltd.,

287 S.W.3d 771 (Tex. App.—Houston [1st Dist.] 2009, pet. denied) ............... 35

HECI Exploration Co. v. Neel,

982 S.W.2d 881 (Tex. 1998) ........................................................................41, 43

Hooks v. Samson Lone Star, Ltd. P’ship,

457 S.W.3d 52 (Tex. 2015)...........................................................................passim

IHS Cedars Treatment Ctr. v. Mason,

143 S.W.3d 794 (Tex. 2004) ..............................................................................57

Ikon Office Solutions v. Eifert,

125 S.W.3d 113 (Tex. App.—Houston [14th Dist.] 2003, pet. den.)................. 32

Ins. Co. of N. Am. v. Morris,

981 S.W.2d 667 (Tex. 1998) ..............................................................................40

viii

Jelinek v. Casas,

328 S.W.3d 526 (Tex. 2010) ..............................................................................50

Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc.,

962 S.W.2d 507 (Tex. 1998) ........................................................................62, 63

Kerr-McGee Corp. v. Helton,

133 S.W.3d 245 (Tex. 2004) ..............................................................................52

Lee & Lee Int’l, Inc. v. Lee,

261 F. Supp. 2d 665 (N.D. Tex. 2003) ...................................................21, 47, 57

Lewis v. Bank of Am. NA,

343 F.3d 540 (5th Cir. 2003) ........................................................................36, 46

Life Ins. Co. v. Murray Inv. Co.,

646 F.2d 224 (5th Cir. 1981) ..............................................................................45

Maritime Overseas Corp. v. Ellis,

971 S.W.2d 402 (Tex. 1998) ........................................................................29, 30

In re Media Arts Group, Inc.,

116 S.W.3d 900 (Tex. App.—Houston [14th Dist.] 2003, orig. proc.) .............. 32

Miller v. Raytheon Aircraft Co.,

229 S.W.3d 358 (Tex. App.—Houston [1st Dist.] 2007, no pet.) ......................31

Montgomery Cnty. Hosp. Dist. v. Brown,

965 S.W.2d 501 (Tex. 1998) ........................................................................36, 46

Nat’l Prop. Holdings, L.P. v. Westergren,

453 S.W.3d 419 (Tex. 2015) ..............................................................................35

Nolan v. Bettis,

577 S.W.2d 551 (Tex. Civ. App.—1979, writ ref’d n.r.e.) ................................45

Olympia Marble & Granite v. Mayes,

17 S.W.3d 437 (Tex. App.—Houston [1st Dist.] 2000, no pet.) ........................58

Ortiz v. Jones,

917 S.W.2d 770 (Tex.1996)................................................................................30

ix

Pegasus Energy Grp., Inc. v. Cheyenne Petroleum Co.,

3 S.W.3d 112 (Tex. App.—Corpus Christi 1999, no pet.) ...........................62, 63

Petras v. Criswell,

248 S.W.3d 471 (Tex. App.—Dallas 2008, no pet.) ..........................................46

Porter v. Irvine,

658 S.W.2d 711 (Tex. App.—Houston [1st Dist.] 1983, no writ) .....................45

Rancho La Valencia, Inc. v. Aquaplex, Inc.,

383 S.W.3d 150 (Tex. 2012) ........................................................................60, 61

Ratcliff v. Trenholm,

596 S.W.2d 645 (Tex. Civ. App.—Tyler 1980, writ ref’d n.r.e.).......................45

Samson Lone Star. Ltd. P’ship v. Hooks,

389 S.W.3d 409 (Tex. App.—Houston [1st Dist.] 2012), rev’d in part, aff’d

in part and remanded, 457 S.W.3d 52 (Tex. 2015).......................................passim

Sawyer v. E.I. Du Pont de Nemours and Co.,

430 S.W.3d 396 (Tex. 2014) ........................................................................36, 46

Schlumberger Tech. Corp. v. Swanson,

959 S.W.2d 171 (Tex. 1997) ..............................................................................46

Scott v. Sebree,

986 S.W.2d 364 (Tex. App.—Austin 1999, pet. denied) ...................................53

Serv. Corp. Int’l v. Guerra,

348 S.W.3d 221 (Tex. 2011) ..............................................................................50

Simulis, L.L.C. v. Gen. Elec. Capital Corp.,

439 S.W.3d 571 (Tex. App.—Houston [14th Dist.] 2014, pet. denied).............32

Slagle v. Clark,

237 S.W.2d 430 (Tex. Civ. App.—Amarillo 1951, no writ)........................33, 46

Spethmann v. Anderson,

171 S.W.3d 680 (Tex. App.—Dallas 2005, no pet.) ..........................................46

Statewide Bank and SN Servicing Corp. v. Keith,

301 S.W.3d 776 (Tex. App.—Beaumont 2009, pet. abated)..............................54

x

Tracy v. Annie’s Attic, Inc.,

840 S.W.2d 527 (Tex. App.—Tyler 1992, writ denied).....................................57

United Teacher Assocs. Ins. Co. v. Union Labor Life Ins. Co.,

414 F.3d 558 (5th Cir. 2005) ..............................................................................40

In re Webber,

350 B.R. 344 (Bankr. S.D. Tex. 2006) ...............................................................46

Williams v. Khalaf,

802 S.W.2d 651 (Tex. 1990) ..............................................................................47

Willis v. Marshall,

401 S.W.3d 689 (Tex. App.—El Paso 2013, no pet.) ........................................39

CONSTITUTION, STATUTES, AND RULES

16 Tex. Admin. Code §3.11 (2015) .........................................................................44

Tex. Bus. & Com. Code §27.01(a) ....................................................................45, 47

Tex. Gov’t Code § 73.003(b) ....................................................................................xv

Tex. R. App. P. 44.1.................................................................................................60

Tex. R. App. P. 44.1(b) ............................................................................................60

Tex. R. App. P. 61.2.................................................................................................60

Tex. R. Civ. P. 56 .....................................................................................................54

TREATISES AND LAW REVIEWS

4 A. LEOPOLD, TEXAS PRACTICE SERIES, LAND TITLES AND TITLE

EXAMINATION, §15.15 (3d Ed. 2015) .................................................................32

26A C.J.S. Deeds § 274 (2015)................................................................................33

OWEN L. ANDERSON ET AL., HEMINGWAY OIL AND GAS LAW AND

TAXATION, §7.13 AT 386 (4th ed. 2004) ...............................................................11

RESTATEMENT (SECOND) OF TORTS, §551 (1977) .............................................40, 41

xi

TO THE HONORABLE COURT OF APPEALS:

This supplemental brief refers collectively to the Appellees/Cross-

Appellants as “Plaintiffs” and to Mr. Charles G. Hooks, III as “Hooks.”

STATEMENT OF THE CASE

Nature of the Case: On November 16, 2006, Plaintiffs joined a pre-

existing lawsuit brought by several lessors.

Plaintiffs asserted several breach of oil and gas

lease claims as well as fraud in connection with oil

and gas leases located in Jefferson and Hardin

Counties. Later, that case was severed into three

actions, this Hooks action being one of them.

Several of the breach claims were decided on

motions for summary judgment and the remaining

claims were tried to a jury in November 2008.

Trial Court: The Hon. Gary Sanderson in the 60th District

Court in Jefferson County.

Trial Court Disposition: The original judgment in this case was against

Samson for $21,749,376, plus attorneys’ and

expert witness fees, costs, (all totaling

$22,251,297). $20,081,638 of the judgment rested

on jury findings of fraud. Of that amount, nearly

$13 million was an 18% contractual “late charge”;

and around $3.5 million pertained to a well as to

which Hooks admitted he had not been defrauded.

The judgment also awarded damages for several

alleged breaches of Plaintiffs’ oil and gas leases,

adding $1,615,481 to the judgment. Those alleged

breaches included a favored nations claim, a claim

for additional payments based on incremental

formation production, and a claim Samson had

wrongfully “unpooled” a unit. The judgment also

awarded $52,257 to Plaintiffs for their ad valorem

tax payments.

xii

Court of Appeals: This Court’s panel was composed of Justice Keyes

(authoring judge), joined by Justice Massengale

and with Justice Sharp, concurring and dissenting.

The panel decided this case in a published decision

after it was transferred to this Court on a docket

equalization order. The opinion appears at Samson

Lone Star. Ltd. P’ship v. Hooks, 389 S.W.3d 409,

440 (Tex. App.—Houston [1st Dist.] 2012), rev’d

in part, aff’d in part and remanded, 457 S.W.3d

52 (Tex. 2015).

Court of Appeals’ Disposition: This Court reversed the judgment against Samson,

except for the $52,257 Samson agreed to pay

Plaintiffs for ad valorem tax payments.

Supreme Court Disposition: The Supreme Court granted Plaintiffs’ petition for

review and affirmed in part, reversed in part, and

remanded to this Court for consideration of

arguments previously undecided by this Court.

Hooks v. Samson Lone Star, Ltd. P’ship, 457

S.W.3d 52, 70 (Tex. 2015). The Supreme Court

affirmed this Court’s judgment reversing the trial

court’s summary judgments on the incremental

formation production and “unpooling” issues. Id.

at 65, 66. That Court reversed this Court’s reversal

of the summary judgment on the favored nations

issue. Id. at 63. The Supreme Court also reversed

this Court’s rendition of judgment against

Plaintiffs as to Plaintiffs’ fraud claim based solely

on limitations barring that claim as a matter of law.

The Supreme Court remanded the fraud limitations

issue to this Court for further consideration of the

factual sufficiency of the jury’s limitations finding.

The Supreme Court also remanded for this Court

to consider the legal and factual sufficiency of the

fraud liability and damages issues. Id. at 61.

xiii

STATEMENT REGARDING ORAL ARGUMENT

This case was previously briefed to this Court in 2009 and 2010 and orally

argued in 2011. One of the judges of the original panel no longer serves on the Court.

When this case was argued in 2011, a member of this Court stated this case was

possibly the most complicated case then-pending before the First Court of Appeals.

The previous oral argument focused on issues no longer before the Court, such

as whether Plaintiffs’ fraud claims were barred by limitations as a matter of law. The

Supreme Court’s decisions against Samson were narrowly focused. As a result,

virtually all of Samson’s appellate points regarding the jury’s findings of fraud and

fraud damages remain for determination by this Court. The remand also involves

other issues including the most favored nations damages and interest charges. Oral

argument would assist the Court in addressing issues that remain before the Court, as

informed by the Supreme Court’s opinion. Those issues remain complicated, and oral

argument will assist the Court in addressing them. Furthermore, this case has always

been factually complex, and remains so following this Court’s and the Supreme

Court’s prior opinion.

This case was transferred to this Court through docket equalization. Samson

consents to this Court conducting oral argument in Houston. Tex. Gov’t Code §

73.003(b) (allowing parties to request transferee appellate court to conduct oral

argument in the court’s regular location).

xiv

ISSUES PRESENTED

A. Issues Involving Plaintiffs’ Fraud Claim

1. Fraud

Plaintiffs sued Samson for fraud allegedly arising from Samson’s written

offer to pool 50 acres out of one of Plaintiffs’ leases into a gas unit. The unit well

was not drilled on Plaintiffs’ tract; it was drilled on a different tract. Plaintiffs,

acting through Mr. Charles G. Hooks III (“Hooks”), accepted Samson’s offer to

pool in 2001. PX156, 157.

Before Hooks accepted the offer, he requested a plat showing where

Plaintiffs’ acreage would lie within the unit. Samson sent Hooks a scaled plat

depicting the lands and leases to be included in the unit.

That plat included several indications of where the bottom hole of the well

was located, including one Hooks interpreted to mean the bottom hole was 1400

feet from Plaintiffs’ lease. The plat actually said “1400´± Scaled.” Nearly eight

years later, Hooks testified he relied on the “1400´± Scaled” indication (while

ignoring other indications) when he consented to the pooling. Hooks claimed if he

had known the well’s bottom-hole was located closer than 1320 feet to Plaintiffs’

lease line, he would not have agreed to the unit (the BSM1 unit), but would have

demanded that Samson comply with offset obligations set out in Plaintiffs’ oil and

gas lease.

xv

There is no legally or factually sufficient evidence of fraud as to each of the

following:

a) fraud - misrepresentation – Hooks testified he relied on a measurement that

was indefinite on its face and on a scaled plat to determine whether a well’s

bottom hole was within 1320 feet of Plaintiffs’ lease line.

b) fraud - reliance - Hooks read “1400´± Scaled” to mean exactly 1400 feet.

c) fraud - intent to deceive - There is no evidence Hooks told Samson why he

wanted the plat or that he wanted a plat to answer his unstated question

about the proximity between a well’s bottom hole and Plaintiffs’ lease line.

d) fraud - duty to disclose – There was no fiduciary or confidential relationship

between Samson and the Plaintiffs, no continued reliance by Plaintiffs on the

plat, no knowledge by Samson that Plaintiffs might be relying on the plat in

this way, and Plaintiffs could have found the precise location of the bottom

hole by consulting public records.

e) statutory fraud - There was no “sale” of land but only a consent by

Plaintiffs to pooling, and the evidence underlying the jury’s finding of

statutory fraud has the same misrepresentation, reliance, and intent

insufficiencies as the evidence underlying the common law fraud finding.

Since statutory fraud fails, the judgment’s award of expert witness fees and

deposition costs should be reversed.

xvi

2. Statute of Limitations for Fraud

Hooks and his wife executed the pooling agreement that is the subject of

Plaintiffs’ fraud claim in May 2001. Plaintiffs did not file any lawsuit against

Samson until November 2006 and did not amend to assert fraud claims until May

2007. There were multiple publicly-filed records from which Plaintiffs could have

discovered their alleged fraud claim at least by February 2003, and some of those

records were in the official land records of both Jefferson and Hardin Counties. At

trial, the jury found that, had Plaintiffs exercised reasonable diligence, they could

not have discovered their fraud claim until April 2007. Hooks’ testimony on that

subject was nothing more than the simple statement that he did not learn of the

claim until during discovery in the lawsuit during the Spring of 2007.

There is factually insufficient evidence that:

a) Plaintiffs could not have discovered the alleged fraud in the exercise of

reasonable diligence prior to four years before they filed suit for fraud.

b) Plaintiffs could not have discovered the alleged fraud by exercising

reasonable diligence prior to April 2007.

3. Fraud Damages

Plaintiffs originally pleaded this action as one for breach of an oil and gas

lease. They pleaded that Samson did not pay compensatory royalty on production

from Samson’s wells on adjacent leases and units, which they claimed were

xvii

bottomed within 1320 feet of their Jefferson County lease line. Plaintiffs also

pleaded fraud in the alternative. The trial court rendered summary judgment

against Plaintiffs on their breach of lease compensatory royalty claim. Plaintiffs

then tried their alleged fraud claim to the jury, but Plaintiffs introduced no

evidence of fraud damages and did not seek to set aside their written consent to the

pooled unit. Plaintiffs’ damages evidence was (i) based on exactly the same

calculation as their breach of lease claim for compensatory royalties, (ii) calculated

as if their fraud claim were a breach of lease claim, and (iii) as if their consent to

join the unit did not exist. The damages also included (i) contractual late fees

(prejudgment interest) compounded monthly at 18% (ii) damages attributable to

another well as to which Hooks admitted there was no fraud; and (iii) incremental

formation production damages later found by this Court and the Supreme Court to

have been improper.

There is legally and factually insufficient evidence of damages when

a. Plaintiffs’ evidence was not of fraud damages, but was of only breach of

lease damages.

b. Plaintiffs’ damages questions sought measures of special damages for which

they had not pleaded and to which they were not entitled as a measure of

out-of-pocket fraud damages.

xviii

c. Plaintiffs did not seek or obtain an order setting aside their written consent

to the pooled unit, but presented evidence of damages as if their land was

never a part of the pooled unit while continuing to accept payments based on

their continued inclusion in the unit.

d. The fraud damages awarded by the jury include compensatory damages for

another well as to which Plaintiffs admit there was no fraud.

e. The damages include a prejudgment interest rate of 18%, rather than 5%,

and interest was compounded monthly when it should be simple.

f. The damages included incremental formation production damages even

though Plaintiffs’ formation production claim has been reversed by this

Court and the Supreme Court and rendered against Plaintiffs on appeal.

g. As of the time of trial (and continuing through today), Plaintiffs continued to

accept payments from Samson as if Plaintiffs were still a part of the unit.

The fraud damages must be recalculated to take these payments into

account.

B. Issues Involving Plaintiffs’ Most Favored Nations Claim

The Supreme Court reversed this Court’s judgment with respect to

Plaintiffs’ most favored nations (“favored nations”) claim, holding Plaintiffs were

due an increased royalty rate of 28.28896% (rather than the lease rate of 25%) for

production attributable to Plaintiffs’ three leases to Samson. The favored nations

xix

damages awarded Plaintiffs in the judgment were based on a stipulation between

the parties. Court Ex A. The stipulation set out favored nations damages sums with

and without incremental formation production included. Both this Court and the

Supreme Court reversed Plaintiffs’ judgment for incremental formation production

damages. As awarded in the original judgment, the favored nations damages

include the substantial amounts attributable to the incremental formation

production claims. Furthermore, the damages only go through May 2008.

The fraud damages for the wells included in the BSM1 unit incorporated

favored nations amounts for those wells in the fraud damages. Should this Court

again reverse the fraud portion of the original judgment, Plaintiffs will seek an

increased royalty percentage for production attributable to production from the

wells in that unit.

This Court must remand the favored nations damages for recalculation:

a. The original judgment’s favored nations damages include incremental

formation production damages, although Plaintiffs’ incremental formation

production claim has now been reversed by this Court and the Supreme

Court.

b. Assuming reversal of any of the jury’s fraud liability, limitations, or

damages findings, Plaintiffs’ favored nations increased royalty interest in

production from the BSM1 unit will need to be calculated and awarded.

xx

c. Any prejudgment interest awarded on the favored nations damages must be

simple interest, not compounded monthly as Plaintiffs originally sought on

all their damages.

xxi

CASE HISTORY

This case returns to this Court following this Court’s reversal of the

judgment below (except for an agreed-upon amount for ad valorem taxes) and the

Supreme Court’s partial reversal, partial affirmance, and remand of this Court’s

judgment.

The original judgment in this case was against Samson for $21,749,376.15,

plus attorneys’ and expert witness fees, costs, and post-judgment interest at the rate

of 18%. Samson Lone Star, Ltd. P’ship v. Hooks, 389 S.W.3d 409, 440 (Tex.

App.—Houston [1st Dist.] 2012), rev’d in part, aff’d in part and remanded, 457

S.W.3d 52 (Tex. 2015). The judgment arose from an oil and gas case involving

allegations of fraud and breach of lease. $20,081,638 of the judgment’s total award

rested solely on jury findings of fraud. Of the fraud damages, $12,995,832

consisted of an 18% contractual “late charge”; $3,547,241 pertained to the one

well (the BSM1 well) about which Plaintiffs complained at trial; and $3,538,565

pertained to another well as to which Hooks admitted he was not defrauded. In

addition, Plaintiffs’ evidence of alleged fraud damages were based on the

assumption Plaintiffs would win all their breach of lease claims, including their

claim for payments based on incremental formation production (“formation

production”). As a result, the fraud damages have certain contractual lease claims

included within those damages, even though those claims have been reversed.

1

The breach of lease claims—in addition to their inclusion in the fraud

damages—separately added another $1,667,738 to the judgment. Those breach

allegations included $848,854 for increased payments under a favored nations

provision, $766,626 for additional payments under a claim that Samson had

wrongfully “unpooled” a unit, and $52,257 for damages related to ad valorem

taxes.

The claims, this Court’s actions, and the Supreme Court’s actions are

summarized below:

A. Fraud

Plaintiffs asserted that had Hooks known the true bottom-hole location of the

well drilled on the adjacent tract, he would not have agreed to include his Jefferson

County lease within a unit (the Black Stone Minerals No.1 “BSM1” unit) and,

instead, would have demanded compensatory royalties—one of the contractual

remedies provided by Plaintiffs’ lease. This Court reversed the fraud portion of the

judgment because it found, as a matter of law, Plaintiffs’ fraud claims were barred

by limitations. This Court concluded Plaintiffs could have discovered the adjacent

well’s location from a directional survey filed in public Railroad Commission

records. 389 S.W.3d at 428-30.

With regard to fraud, the Supreme Court held and ordered:

2

• Noting the allegedly-fraudulent plat that was the basis for Plaintiffs’ fraud claim

was also filed in Railroad Commission records attached to a P-12 pooling

authorization form, the Supreme Court held: “when the defendant’s fraudulent

misrepresentations extend to the Railroad Commission record itself, earlier

inconsistent filings cannot be used to establish, as a matter of law, that

reasonable diligence was not exercised.” 457 S.W.3d at 61. The Court

continued: “Under these circumstances, reasonable diligence remains a fact

question.” Id.

• Based on its limitations ruling, the Supreme Court remanded for this Court’s

consideration “the factual and legal sufficiency of the evidence with regard to

common-law fraud, statutory fraud, and damages for fraud, as well as the

factual sufficiency of the evidence regarding when Hooks, by the exercise of

reasonable diligence, would have discovered the fraud.” Id.

B. Breach of Lease Claims

Three breach of lease claims decided against Samson were a part of

Samson’s previous appeal to this Court. The claims and the Supreme Court’s

actions on those claims are:

1. Most Favored Nations

Plaintiffs’ leases to Samson contain a “most favored nations” clause

requiring Samson to pay Plaintiffs the same royalty percentage Samson pays a

3

third party should Samson enter into a lease (within a 3-mile radius of Plaintiffs’

premises) with a royalty exceeding 25%. 389 S.W.3d at 434. Samson entered into a

pooling agreement with the State in which Samson paid the State an increased

allocation of unit production as consideration for the State’s approval of a unit. The

Supreme Court noted the increased allocation of production was equal to a royalty

increase from 25% to 28.28896%. 457 S.W.3d at 62. This Court reversed the

favored nations judgment because Samson did not enter into a new “lease” with the

State, but entered into a settlement agreement called a “pooling agreement.” 389

S.W.3d at 435. The Supreme Court reversed, holding the payment to the State

meant “Samson increased the State's 25% royalty on production from its tract to

28.28896%” and “the royalty imposed by the Pooling Agreement is ‘payable

under’ the lease….” 457 S.W.3d 52 at 63. The Supreme Court concluded “the

court of appeals erred in holding that Samson did not breach the most-favored

nations clause.” Id.

The judgment lists “Damages for breach of Most Favored Nations Clause”

of $848,854.01. 1Supp2dCR:6. That amount is attributable to two wells: the Joyce

DuJay No.1 and the Joyce DuJay “A” No.1 wells. But that amount is composed of

(i) $431.450.71 of damages for both wells plus prejudgment interest (contractual

“late charges” calculated at 18 percent compounded monthly) resulting from the

favored nations increased royalty decimal of 3.28896%; plus (ii) $417,403.30 of

4

base damages and interest (“late charges”) for both wells attributable to formation

production damages. Court Ex A.

2. Incremental Formation Production.

Plaintiffs claimed Samson was required to pay royalty based on all liquid

condensate, and—on top of that—was required to pay royalty based on that same

condensate production again as if the condensate were produced as a gas. 389

S.W.3d at 435-37; 457 S.W.3d at 63-65. Plaintiffs’ claims were based on a lease

term stating, “all such [royalty] calculations shall be based on formation

production as reported on Texas Railroad Commission forms P-1 and P-2.” 457

S.W.3d at 63. This Court held the formation production clause “does not operate to

double the amount of royalties owed on the liquid condensate produced from the

well.” 389 S.W.3d at 437. This Court reversed the summary judgment in Plaintiffs’

favor and rendered judgment in Samson’s favor on that issue. Id. at 437, 440-41.

The Supreme Court affirmed on this issue, agreeing with this Court’s “decision

with regard to the formation-production claims.” 457 S.W.3d at 65.

Because of the disposition of this issue, any final judgment entered in this

case cannot include amounts for formation production. But both the alleged fraud

damages and the favored nations damages include formation production damages.

For fraud, the jury awarded and the judgment granted damages of $20,081,638,

which precisely matched the damages Plaintiffs’ expert set out in his fraud

5

damages exhibit, PX608. 1Supp2dCR:6; 19CR:3268. That exhibit is titled,

“Summary of Lost Compensatory Royalty with Incremental Formation

Production….” PX608 (emphasis added). Thus, the damages awarded for fraud

include formation production damages (as does favored nations damages), which

cannot be a part of any judgment.

3. Unpooling

Plaintiffs’ third breach of lease claim was that Samson allegedly wrongfully

“unpooled” a pooled unit by amending it. As the Supreme Court noted, “[b]ecause

the owner of 87.5% of the mineral interest in the tract where the well in this unit

was located refused to pool, Samson decided to ‘amend’ the unit designation.” 457

S.W.3d at 65. Samson notified Hooks of the amendment and Plaintiffs accepted the

payments made to them from the amended unit. Id. This Court held that under the

circumstances of this case, “Hooks accepted and ratified the amendment and

redesignation of the units.” 389 S.W.3d at 434. The Supreme Court affirmed this

Court’s unpooling judgment, holding: “[b]ecause of the undisputed contents of the

notice letter, Hooks' acceptance of royalties for the new unit, and Hooks' refusal to

challenge the new unit, we decide the question of ratification as a matter of law.”

457 S.W.3d at 66. Because of the disposition of this issue, there is nothing left for

this Court to consider with regard to “unpooling,” and any final judgment entered

in this case cannot include “unpooling” damages.

6

C. Post-Judgment Interest

The trial court’s judgment imposed post-judgment interest at the rate of 18%

compounded annually. Because the only remaining portion of the judgment after

the appeal to this Court was for ad valorem taxes—the subject of a trial stipulation

between the parties—this Court held the proper post-judgment interest rate was

5%, rather than 18%. 389 S.W.3d at 439. The Supreme Court held the “leases only

impose ‘the maximum [interest] rate allowed by law’ for past-due royalties.” 457

S.W.3d at 69 (emphasis added). Accordingly, to the extent Hooks ultimately

“recovers for past due royalties, he is entitled to an 18% interest rate” but “[f]or

other recoveries, the statutory rate of 5% applies….” 457 S.W.3d at 70.

D. Attorneys’ Fees

The trial court’s judgment awarded attorneys’ fees in accordance with a

stipulation between the parties. Following the reversal of all claims on appeal

(leaving only the agreed-upon ad valorem tax amounts to be paid by Samson), this

Court also reversed the attorneys’ fees award. 389 S.W.3d at 438. The Supreme

Court, however, held Plaintiffs were entitled to recover on their favored nations

claims, thus entitling them to the stipulated amounts of attorneys’ fees. 457 S.W.3d

at 69. The fees were $300,000 through trial and another $70,000 through all

appeals. 18CR:3166.

7

E. Hooks’ Cross-Appeal

Plaintiffs filed a cross-appeal challenging a summary judgment denying their

claims that Samson had supposedly breached offset obligations concerning

Plaintiffs’ two leases in Hardin County, north of the lease at issue on the fraud

claim. This Court affirmed that summary judgment based on Samson’s limitations

defense. The Supreme Court reversed this Court’s affirmance because it disagreed

the claims were entirely barred by limitations. 457 S.W.3d at 68-69. That portion

of the case has also been remanded for this Court’s consideration of “the merits of

Hooks’ claim for breach of the offset provisions and the proper construction of”

the clause at issue. Id. at 69.

In their cross-appeal, Plaintiffs asserted their offset obligation that applied

when a well was drilled on lands “not more than … 1320´ from the leased

premises” applied even when a well was drilled much farther than 1320 feet from

Plaintiffs’ leased premises. Plaintiffs’ theory is based on a common provision in

Texas oil and gas leases stating operations on pooled units

…shall be considered as operations for drilling on or production of

gas from the Leased Premises, whether or not the well or wells be

located on the Leased Premises, and the entire acreage constituting

such unit or units shall be treated for all purposes, except the payment

of royalties on production from the pooled unit, as if the same were

included in this Lease. [PX26¶V(E), PX27¶V(E).]

Plaintiffs assert this provision means all their lease terms (and the terms of

any other lease with such a provision) are spread to the entire unit so that if a well

8

is drilled within 1320 feet of any unit line (as opposed to a lease line as the lease

says), Samson owes offset obligations to Plaintiffs even though the well is not

within 1320 feet of their lease. Moreover, Samson did in fact offset the wells at

issue in Plaintiffs’ cross-appeal and Plaintiffs failed to provide notice to Samson of

Samson’s alleged default.

Because these offset obligation claims are the subject of Hooks’ cross-

appeal, Samson will address these claims in its response to Hooks’ supplemental

brief on this subject.

F. Samson’s Appeal Issues on Remand

As a result of the Supreme Court’s decision, the issues raised by Samson in

its appeal that were remanded for this Court’s consideration are:

1. Legal and factual sufficiency of the evidence supporting common law fraud;

2. Legal and factual sufficiency of the evidence supporting statutory fraud;

3. Legal and factual sufficiency of the fraud damages, along with a remand for

a reduction and recalculation of the fraud damages, including attendant

prejudgment and post-judgment interest issues;

4. Factual sufficiency of the jury’s finding on limitations;

5. Remand for recalculation of favored nations damages owed to Plaintiffs,

with consideration of interest issues including whether Plaintiffs are entitled

9

to 18% prejudgment interest compounded monthly, as they requested during

the first trial.

STATEMENT OF FACTS

A. Hooks Was a Very Experienced Oil and Gas Attorney

Hooks was an attorney with extensive experience in oil and gas matters.

13RR:9. For 33 years, in addition to practicing law, Hooks managed his family’s

considerable investments in oil, gas and mineral estates. 13RR:9-10. Plaintiffs

owned properties in Louisiana and 36 Texas counties. 13RR:11. Hooks has

negotiated at least 100 oil and gas leases. 13RR:10-11.

Samson holds three separate oil and gas leases from Plaintiffs:

(1) 640 acres in Jefferson County (PX25) (called the “Jefferson County

lease”). Fifty acres from the southwest corner of this lease is the land at issue

in Plaintiffs’ fraud claims.

(2) 95 acres in Hardin County (PX26).

(3) 10 acres in Hardin County (PX27).

The primary issue at trial was Plaintiffs’ fraud claim. Plaintiffs were co-

tenants in the mineral estate on the Jefferson County lease. 12RR:46-47, 13RR:26-

27. Plaintiffs own 42.75% of the minerals in that tract; another extended family

whom Samson called “the Broussards,” owned the remaining 57.25% of the

10

minerals. PX25; 12RR:46-47, 13RR:26-27. Plaintiffs’ Jefferson County lease did

not grant authority to pool. PX25¶V(E).1

B. Samson Drilled the Black Stone Minerals No. 1 Gas Well

In April 2000, Samson began drilling the Black Stone Minerals No. 1 Gas

(“BSM1”) well in the Walker Pettitt Survey in Hardin County. That survey lies

immediately west of the Pine Island Bayou, which is the Hardin/Jefferson County

line. The bayou forms the western boundary of Plaintiffs’ Jefferson County lease

and the 50 acres included in the BSM1 unit. PX25; PX569. The BSM1 well was

completed in August 2000; first gas sales occurred October 2000. PX569, 627. The

well was drilled as a directional well in accordance with Railroad Commission

rules. The bottom of the hole was drilled to a location southeast of the surface

location. 11RR:122-24; 8 H. WILLIAMS & C. MEYERS, OIL AND GAS LAW 264

(2008) (directional drilling is “[t]he drilling of a well that departs materially from

the vertical,” frequently because of surface conditions). As reported in public

records, the BSM1 well was originally planned with a bottom hole 1080 feet (i.e.,

within 1320 feet) from Plaintiffs’ lease line. PX616; 12RR:48-49.

C. The Jefferson County Lease Contained Offset Obligations

Plaintiffs’ Jefferson County lease provided if the leased lands were not

pooled, and a gas well was drilled within 1320 feet of the leased premises, Samson

1

“Pooling is the combining of tracts or interests, or parts of tracts or interests, for facilitating

more orderly development and production of oil, gas and associated products.” OWEN L.

ANDERSON ET AL., HEMINGWAY OIL AND GAS LAW AND TAXATION, §7.13 AT 386 (4th ed. 2004).

11

had to do one of: (1) drill a well on the lease; (2) pay Plaintiffs compensatory

royalty equal to their share of production from the adjacent producing well as if

that well had been drilled on their lease; or (3) release the Lease and have no

further obligations. PX25¶VI(A).2 Separately, in addition to the offset obligations,

Samson could at any time release “any portion or portions” of the lease “and be

relieved of all obligations as to the acreage surrendered….” PX25¶IV(B). Samson

did not owe any offset obligations if the well drilled within 1320 feet was on land

pooled with Plaintiffs’ lease.

Samson decided to create a 704-acre unit for the BSM1 well. Samson’s plan

was to include 50 acres out of the Broussards’ lease and Plaintiffs’ Jefferson

County lease in that unit. That would require Samson to pay royalty to Plaintiffs

based on their proportionate interest in the unit, but it would otherwise extinguish

Samson’s offset obligations. Otherwise, Samson simply could have released

2

The Jefferson County lease provides at ¶VI(A):

“A. …[I]n the event a well producing from a unit not comprised of acreage from the

leased premises … which has been classified as “gas” … is completed on adjacent or

nearby lands not more than … [1,320’] from the leased premises … Lessee covenants

and agrees to, within ninety (90) days from the date production is first sold …, either (1)

commence with due diligence operations for the actual drilling of an offset well on the

leased premises…, (2) pay Lessors as compensatory royalty … a sum equal to the

royalties which would be payable under this Lease on the production from said adjacent

or nearby producing well had same been producing on the leased premises, or (3) in lieu

of drilling such offset well or paying such compensatory royalty, release by recordable

instrument the offset acreage…. Notwithstanding anything herein to the contrary, Lessee

shall have no obligations under this Article … in the event a producing well ... is already

offset by a well on the leased premises or on acreage pooled therewith producing from

the same producing horizon …” [Emphasis added.]

The provision above measures the distance between the lease and where the nearby well is

“completed.” The well at issue was completed very near its bottom-hole location.

12

Plaintiffs’ lease pursuant to lease paragraphs VI(A) or IV(B), the latter of which

permitted Samson to release the lease at any time. PX25¶¶IV(B), VI(A). Samson

took steps to obtain pooling authority from Plaintiffs and other mineral owners

whose consent Samson needed to form the unit. E.g., PX62, 63, 65. 3

D. Samson Contacted Plaintiffs, Offering to Include 50 Acres of Plaintiffs’

Jefferson County Lease in the Unit

On February 15, 2001, Mr. Lanoue—a landman then working for Samson—

wrote Hooks requesting Plaintiffs’ consent to pool 50 acres of Plaintiffs’ Jefferson

County Lease with adjacent land containing the BSM1 well (the “BSM1 unit”).

PX65, 160.4 The Broussard family already had consented to the unit as to their

interest in the same acreage. PX63, 65; 12RR:122-23. Hooks wanted additional

information and telephoned Lanoue on February 20, 2001. 12RR:124, 177; PX160.

Hooks and Lanoue discussed a range of topics concerning the well and the unit.

PX160. Among Hooks’ notes of the conversation was the statement the BSM1 well

was about 1500 feet west of Pine Island Bayou—the western boundary of

Plaintiffs’ Jefferson County lease—a boundary that can move as the river moves.

PX160. Hooks’ notes do not indicate whether the two were discussing the well’s

surface or bottom-hole location, or a generalized number between the two.

3

It is typical for the planned unit to change as the well is designed and drilled. 15RR:54-56.

Thus, there were different plats showing different participants in the possible unit configurations.

15RR:56.

4

As it appears in the record, PX65 is not identical to what Samson sent to Hooks, but is an

annotated version of the letter. 12RR:175. The original letter more closely resembled PX63,

which did not have a plat attached. 12RR:176.

13

E. Hooks Requested a Plat, and Samson Sent Him One, to Show the

Location of Plaintiffs’ Land within the Unit

During the February 2001 phone call, Hooks requested a plat showing the

unit; Lanoue sent him one the next day. 12RR:180-81; PX64. Hooks testified he

wanted the plat to see (1) how his property fit within the unit, and (2) whether the

well was within 1320 feet of his lease. 12RR:180. But Hooks admitted he may not

have told Lanoue he was interested in the offset obligation. 13RR:25. He also

admitted he may not have said he needed to know whether the well was within

1320 feet of his lease. 13RR:25. Consistent with Hooks’ explanation of the first

reason he wanted the plat, Lanoue testified he sent Hooks the plat so Hooks could

understand where his land lay within the unit. 12RR:124.

The plat Lanoue sent is attached to PX65. 12RR:181. It is similar to plats

sent to other lessors, including the State of Texas (see, e.g., PX62). It was prepared

in August 2000, around the time the well was completed and months before

Lanoue contacted Hooks. The plat regularly was used through October 2001.

12RR:33, 49-50. The plat shows the well deviated toward Plaintiffs’ lease. Lanoue

testified he estimated the well’s bottom hole location on the plat, using only a ruler

to do so. 12RR:110-111. The plat repeatedly says it is “scaled,” meaning someone

used a ruler, not a survey, to make the plat. 16RR:62-63; 13RR:70-71 (Hooks,

agreeing to definition of “scaled”). It also uses the symbol: “±” in key places. As a

result, the plat does not purport to be exact or survey-accurate:

14

Following is a segment of the plat, with color coding added to highlight

certain features:

15

The plat has a line (red) depicting something is “1400´±” from the western

boundary of Plaintiffs’ Jefferson County lease. PX65. (The 50 acres included in

the unit from Plaintiffs’ lease is in yellow.) An arrow (green) points to a bottom

hole location not on that line, but to an east-west location slightly north of the line

and approximately 3/4 of the way along that line. Three-fourths of 1400 is 1050.

The plat provides the following information in the lower left corner:

PX65.

So the plat also states the bottom hole of the well is “1400´± Scaled” from

the eastern line of the unit (purple line, shown above). PX65 (“FEL” means “from

east line of unit”). The eastern line of the unit is on Plaintiffs’ lease. PX65.

16

Running a line 1400´± westward from the unit’s eastern line would place the well

on or nearly on Plaintiffs’ Lease. PX65; 12RR:62-63.

These signals are contradictory. If the estimation of “1400´±” were to the

well’s bottom hole location, the BSM1 well could be farther than 1320 feet from

Plaintiffs’ lease. “1400´± Scaled” from the east line of the unit indicates the BSM1

well could have been closer than 1320 feet to Plaintiffs’ lease. The arrow pointing

to a bottom-hole location 3/4 of the way along the “1400´± Scaled” line showed

the BSM1 well was about 1050 feet from Plaintiffs’ lease. That is very close to the

original estimated bottom-hole location of 1080 feet from Plaintiffs’ Lease.

F. Hooks Testified He Relied on the “1400´± Scaled” Depiction to

Determine the Distance of the BSM1 Well from Plaintiffs’ Jefferson

County Lease

To determine the BSM1 well’s distance from his Lease, Hooks testified he

focused on the line estimating “1400´± Scaled”:

Q. And what did you do to verify that the—what he told you was true about

the well being located 1500 feet away from Pine Bayou—Pine Bayou?

A. [Hooks] Well, I looked at the—what was indicated on the plat; and it

shows me that it was approximately—the bottom hole location was

approximately 1400 feet west of Pine Island Bayou.

Q. Now, that's a little bit different than the 1500 feet that he told you over

the telephone, right?

A. A little bit. I assumed that he was talking in generalities in that case and

that once he got the plat it was more specific on the plat.

Q. Well, did that spark any concern that he might be lying to you if he told

you 1500 on the telephone and then gave you a plat that was 1400?

17

A. No. I—the plat speaks for itself.

***

Q. Now, I want to—well, first of all, after you got this plat and checked it

out and confirmed what Mr. Lanoue had told you over the telephone, what

did you then do? Did you agree to—to accept the pooling?

A. Well, once I had satisfied myself that everything was in order, was

appropriate, then I decided I would send back the letter that he had requested

me to sign agreeing to this but with some changes on it.

12RR:181-183. On cross-examination, Hooks continued to stress his reliance on

the “1400´± Scaled” distance:

Q. But, yet, you didn't call him [Lanoue], did you, and ask him for some

clarification?

A. Well, I didn't think I needed any clarification. It seemed clear to me that

it was—it was 1400 feet away from the bayou.

***

Q. All right, Mr. Hooks. So, anyway, you concluded that wherever in there

the bottom hole was that it was in a satisfactory location, right?

A. Yes. I—I concluded that it was fourteen—approximately 1400 feet west

of Pine Island Bayou. [13RR:33, 35.]

Hooks emphasized he relied on the plat’s estimate of “1400´± Scaled” to the

exclusion of everything else, including Lanoue’s statement over the telephone.

13RR:36. He testified, “when I saw a surveyor’s plat that shows 1400 feet, I

assume that’s more accurate than what his—his verbal estimation was.” 13RR:36;

see also 13RR:68 (“I assumed that he was just estimating and—verbally, but the

18

plat would be more accurate”). Hooks made no further inquiries regarding the

location of the well’s bottom hole. 13RR:39.

G. Plaintiffs Agreed to Include their 50 acres in the BSM1 Unit.

On May 25, 2001, Hooks and his wife signed a letter consenting to pool 50

acres from the Jefferson County lease into the BSM1 unit. PX65. They specified

their acceptance was “conditioned upon the subsequent execution by Lessors and

Lessee of a formal lease amendment document to be prepared by [Hooks] and

submitted to [Samson].” PX65. Plaintiffs never prepared such a document.

12RR:187-88. At trial, Hooks testified repeatedly he always intended to be a part

of the unit and considered Plaintiffs’ 50 acres to be part of the unit. 13RR:14-17.

Hooks also agreed to the division order setting out Plaintiffs’ percentage

distribution of the unit’s proceeds. PX156, 157.

After Plaintiffs consented to the unit, Samson sent them royalty checks for

their unit interest in production for the three wells eventually drilled on the BSM1

unit. PX552. Plaintiffs cashed those checks continuing through trial and now for

more than six years after the trial. 12RR:203-04; 13RR:44-45. Plaintiffs never

sought any judicial decree setting aside their consent to the pooled unit.

19

H. Other Operations Near and on the BSM1 Unit

Samson drilled other wells in the vicinity of Plaintiffs’ lease after Plaintiffs

consented to join the BSM1 unit. One of those wells was the Joyce DuJay No. 1

well (“DuJay1 well”), north of the Jefferson County lease. PX565. That well was

completed in January 2002 and included in a unit called the DuJay1 unit. PX21,

552, 565. Plaintiffs’ two Hardin County leases were included in the DuJay1 unit.

PX21, 552. The bottom-hole location of the DuJay1 well was also within 1320 feet

of Plaintiffs’ Jefferson County lease. PX640. Samson owed no offset obligations as

to the DuJay1 well because—although the well was drilled within 1320 feet of the

Jefferson County lease—it was already offset by the BSM1 well 5 Hooks testified

he had not been defrauded with regard to the DuJay1 well:

Q. All right. Now, nobody tricked you into – or nobody did anything to

deceive you or defraud you with respect to the DuJay 1 well, did they?

A. [Hooks] Not that I'm aware of.

Q. Well, you never talked to Mr. Lanoue about it. Nobody ever sent you

anything that you say is fraudulent. With respect to the DuJay 1 nobody did

anything—or from Samson, anyway, nobody did anything to trick you or

hoodwink you or defraud you or something with respect to the DuJay 1,

right?

A. Not that I'm aware of, no.

5

The Jefferson County lease states, “Lessee shall have no [offset] obligations under this Article

VI in the event a producing well on nearby or adjacent land is already offset by a well on the

leased premises or on acreage pooled therewith producing from the same producing horizon

from which production has been secured….” PX25 ¶VI (A). Both the BSM1 well and the

DuJay1 well produced from the same formation and offset one another.

20

13RR:53. Nevertheless, alleged “damages” for the DuJay1 were included in the

jury’s award of “fraud damages.” PX608; 19CR:3268.

Other wells followed the DuJay1. See PX552; 13RR:136. Plaintiffs did not

claim any of these additional wells was within 1320 feet of the Jefferson County

lease.

No well was ever drilled on any of Plaintiffs’ three leases to Samson. The

royalties Samson paid to Plaintiffs always were based on the inclusion of

Plaintiffs’ leases in a pooled unit, with unit wells drilled on someone else’s

property. Through May 2008, Plaintiffs received over $510,000 in royalty from the

BSM1 unit (the subject of Plaintiffs’ fraud claim), and over $2.14 million in

royalty from Samson for wells drilled on units pooled with one or more of

Plaintiffs’ three leases. 16RR:21-22; DX3; PX552. Now, seven years later, those

payments—all received and deposited by Plaintiffs—are much higher than in 2008.

Despite these facts, Plaintiffs claim to have been damaged in excess of $22

million. 6

I. This Lawsuit

In August 2004, an action was filed against Samson styled Joyce DuJay Lee

v. Samson. 1CR:2. The Lee plaintiffs complained about pooling issues unrelated to

the BSM1 well. In December 2004, a second action, Thomas Klorer et al. v.

6

In recent trial court filings, Plaintiffs now assert their claims exceed $52 million.

21

Samson, was filed in which other landowners also complained about the same

unrelated pooling issue. 1Supp1stCR:2. Those two actions were consolidated in

August 2005. 2CR:295.

On his birthday in the fall of 2006, Hooks attended a seminar for oil and gas

lawyers. 12RR:165-66; 13RR:50. There, he met Plaintiffs’ attorney Paul Simpson,

who told Hooks he was handling the consolidated actions against Samson.

12RR:165-67. Following that encounter, Plaintiffs joined the pending case on

November 16, 2006. 3CR:440. At that time, however, Plaintiffs did not plead fraud

claims. 3CR:440-465. They added fraud allegations May 7, 2007. 4CR:467, 490-

94. In the May 7, 2007 petition, Plaintiffs alleged in the alternative—relying on

differing facts—(1) they had never been part of the BSM1 unit and Samson

breached its lease by not paying compensatory royalties; or (2) if they were a part

of the unit, Samson defrauded them into joining the unit. 4CR:487-94. Plaintiffs

had not notified Samson about their fraud or lease breach allegations prior to filing

those claims. Accordingly, Samson drilled wells in the vicinity of the BSM1 unit in

reliance on Plaintiffs’ participation in that unit.

In September 2007, the trial court severed the action into three cases, one of

which became this Hooks action, which was tried and is now this appeal. 4CR:626.

The trial court granted summary judgment dismissing Plaintiffs’ breach of lease

claim with regard to the drilling of the BSM1 well because it was barred by

22

limitations. That left Plaintiffs with only their fraud claim. 18CR:3162. Plaintiffs

did not appeal from the granting of the breach of lease summary judgment. The

fraud claim was tried to the jury, along with the formation production claim. The

judgment entered following the jury trial, in combination with previous summary

judgment rulings, awarded the following amounts [1Supp2dCR:6; Court Ex. A]:

18% "Late

Fee" Total

Damages Compounde Judgment

Amount d Monthly Damages

A. Fraud-

1. Blackstone Minerals No.

1 Well $3,547,241

2. Joyce DuJay No. 1 Well $3,538,565

3. Total Fraud $7,085,806 $12,995,832 $20,081,638

B. Breach of Lease-

1. Most Favored Nations $416,325 $432,529 $848,854

2. Unpooling-Black Stone

Minerals "A" No. 1 Well $288,653 $477,974 $766,627

3. Ad Valorem Taxes $52,257 $0 $52,257

4. Total Breach of Lease $757,235 $910,503 $1,667,738

C. Total Listed Damages $7,843,041 $13,906,335 $21,749,376

D. Plaintiffs’ Attorneys' and

Experts' Fees Plus Costs $501,921 $0 $501,921

E. Total Trial Court Damages $8,344,962 $13,906,335 $22,251,297

23

SUMMARY OF THE ARGUMENT

There is legally and factually insufficient evidence to support either the

jury’s common law or statutory fraud findings. There is factually insufficient

evidence to support the jury’s finding Hooks, in the exercise of reasonable

diligence, could not have discovered his fraud claim until April 2007. Further,

there is legally and factually insufficient evidence to support fraud damages and

prejudgment interest on those damages.

Common Law Fraud Liability. There is legally and factually insufficient

evidence to support Plaintiffs’ common law fraud claim for the following reasons:

• The plat was marked “scaled,” meaning it was inexact and the distance upon

which Plaintiff testified he relied said “1400´± Scaled”. A distance of

“1400´± Scaled” is too indefinite to form the basis of a misrepresentation

when someone is attempting to determine whether a well is 1320 feet from a

lease line. Plaintiffs’ witnesses admitted there had to be at least some give

on the 1400 number, with Plaintiffs’ expert admitting it could be a 100 foot

tolerance.

• Hooks ignored the “±” part of the plat when he supposedly relied on the

“1400´± Scaled” distance call. He could not justifiably have relied on such

an indefinite measurement when he was looking for a precise answer to his

supposed question—a question he never even posed to Samson.

24

• Hooks admitted he may not have told Samson why he cared about the

location of the BSM1 well. Samson’s landman, Lanoue, thought Hooks

wanted the plat only to see where Plaintiffs’ lease was located within the

unit, which the plat plainly showed. There was no evidence Samson had any

intent in supplying the plat to defraud Plaintiffs into consenting to the unit.

• Plaintiffs failed to prove a duty to disclose existed. First, as a matter of law,

no duty to disclose existed. Second, there is legally and factually insufficient

evidence of the breach of a duty to disclose. Samson did not know Plaintiffs

were relying on the plat in the way Hooks testified. Further, Plaintiffs were

not “continuing” to rely on the plat after the date they consented to the unit.

Finally, in contrast to the requirement Plaintiffs must lack an equal

opportunity to discover “the truth,” Plaintiffs had access to multiple public

records from which they could have learned the bottom hole’s precise

distance from their lease line.

Statutory Fraud Liability. Statutory fraud does not even apply to these facts

because there was no “sale” of real estate. Moreover, for the same reasons as

above, there is legally and factually insufficient evidence of statutory fraud. That

claim requires the same misrepresentation, intent, and reliance elements as

common law fraud. There is no, or insufficient, evidence of any of those elements.

25

Statute of Limitations for Fraud. The misrepresentation allegedly occurred in

February 2001 and Plaintiffs supposedly acted on it in May 2001, when they

signed the pooling consent. But Plaintiffs did not file their fraud claim until May

2007. Limitations for fraud is four years. There is factually insufficient evidence to

support the jury’s finding that Plaintiffs, by exercising reasonable diligence, could

not have discovered their fraud claim until April 2007. Hooks’ testimony on the

issue was nothing more than a statement of when he actually learned about the

claim. He did not provide any evidence why, in the exercise of reasonable

diligence (as an experienced oil and gas attorney and mineral owner), he could not

have discovered his claim earlier. Accordingly, there is factually insufficient

evidence to support the jury’s answer to when Plaintiffs could have discovered the

alleged fraud by exercising reasonable diligence.

Improper Fraud Damages. There was legally and factually insufficient

evidence supporting Plaintiffs’ damages evidence for the following reasons:

• There was no evidence of a fraud measure of damages. Instead, Plaintiffs

presented only breach of lease damages as alleged fraud damages.

• Although Plaintiffs attempted to categorize their damages as “consequential”

damages, they never pleaded for consequential damages.

• In this alleged fraud in the inducement case, Plaintiffs had a choice of (1)

setting aside the agreement they claim they were induced to sign (the

26

pooling consent) or (2) standing on that agreement and seeking fraud

damages. Plaintiffs never attempted to set aside the agreement to pool but

nevertheless sought damages as if that consent to pooling did not exist.

Throughout this case, they accepted royalty payments from that unit and

continue to do so to this day.

• Approximately half of Plaintiffs’ claimed fraud damages were attributable to

another well—the DuJay1 well—as to which Hooks admitted he was not

defrauded. Moreover, to the extent Plaintiffs were seeking compensatory

royalty damages for the DuJay1 well, there was no evidence (and

insufficient evidence) those damages were foreseeable at the time the

alleged fraud supposedly occurred.

• Almost ⅔ of the fraud damages ($12,995,832) represents an improper

contractual “late charge” of 18% compounded monthly. The 18% interest

rate “only” applies to “past due royalties” not to fraud damages. Hooks, 457

S.W.3d at 69-70. Fraud damages are an “other recovery” to which “the

statutory rate of 5% applies.” Id. at 70. Here, the 18% contractual late charge

was incorporated into the fraud damages calculations and is part of the jury’s

damages award, so there is no proper evidence of fraud damages. PX608;

1Supp2dCR:6.

27

• The fraud damages also incorporated damages for formation production. The

Supreme Court held Plaintiffs are not entitled to formation production

damages. Accordingly, the fraud damages must be reversed.

• Plaintiffs have continued to accept royalties from the unit. Accordingly,

those payments have to be taken into account if any damages are awarded to

Plaintiffs.

Recalculation of Favored Nations Damages. The parties entered into a

stipulation of the favored nations damages, both with and without formation

production damages. The favored nations damages awarded in the original

judgment are incorrect now because they, like the fraud damages, include

formation production damages. Thus, the favored nations damages need to be

recalculated. Moreover, because the damages currently only go through May 2008,

Plaintiffs certainly will request those damages be made current. As a consequence,

this Court should remand the favored nations damages to be recalculated by the

trial court. In connection with that remand, Plaintiffs asserted the late payment

provision provides for monthly compounding of interest at 18%. The Supreme

Court agreed to the 18% interest rate for past-due royalties. But Plaintiffs are

entitled to prejudgment interest measured by the standard “simple” interest

measure. Other courts, interpreting contract language similar to the language at

issue in this case, have held the language allows for 18% simple interest.

28

ARGUMENT

A. Standard of Review

Samson’s appeal presents both legal and factual insufficiency of the

evidence challenges to the jury’s findings on fraud and fraud damages. Further,

this appeal presents factual insufficiency challenges to the jury’s limitations

finding on fraud. Finally, this appeal presents legal questions surrounding damages

remand, interest calculation questions, and damages recalculations.

This Court should sustain a legal sufficiency challenge on issues on which

Plaintiffs bear the burden of proof if “the evidence demonstrates a complete

absence of a vital fact, or if the evidence offered is no more than a scintilla.”

Burbage v. Burbage, 447 S.W.3d 249, 259 (Tex. 2014). “We regard evidence that

creates a mere surmise or suspicion of a vital fact as, in legal effect, no evidence.”

Id.; accord Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 601 (Tex. 2004). The

evidence must be considered in the light most favorable to the judgment but credit

must be given to evidence a reasonable juror could not disregard. City of Keller v.

Wilson, 168 S.W.3d 802, 807 (Tex. 2005).

When considering a factual sufficiency challenge, the court “must consider

and weigh all of the evidence, not just that evidence which supports the verdict.”

Maritime Overseas Corp. v. Ellis, 971 S.W.2d 402, 407 (Tex. 1998). The appellate

court is authorized to set aside the verdict in the circumstance that it is so contrary

29

to the overwhelming weight of the evidence that the verdict is clearly wrong and

unjust. Id.; see also Ortiz v. Jones, 917 S.W.2d 770, 772 (Tex.1996).

The Supreme Court did not decide the legal or factual sufficiency of

Plaintiffs’ fraud claims. This Court reversed and rendered judgment on the fraud

claim based on limitations. The Supreme Court held that ruling was incorrect and

remanded for this Court’s consideration of the other arguments “concerning

Hooks’ fraudulent inducement claims” including “the factual and legal sufficiency

of the evidence with regard to common-law fraud, statutory fraud, and damages for

fraud….” 457 S.W.3d at 61. Furthermore, the limitations issue has been remanded

for reconsideration on factual sufficiency grounds.

Nothing in the Supreme Court’s opinion addresses the fraud liability and

damages challenges now remanded to this Court. Nor is there any decision on

limitations factual sufficiency.

B. There is Legally and Factually Insufficient Evidence of Common Law

Fraud

To recover damages for fraud, Plaintiffs must prove:

(1) a material representation that was false when made; (2) when the

representation was made, the speaker knew it was false or made it recklessly

as a positive assertion without any knowledge of its truth; (3) the speaker

made the representation with the intent that the other party should act upon

it; (4) the party actually and justifiably relied on the representation; and (5)

thereby suffered injury.

30

Miller v. Raytheon Aircraft Co., 229 S.W.3d 358, 380-81 (Tex. App.—Houston

[1st Dist.] 2007, no pet.). “Fraudulent inducement is a subspecies of fraud; ‘with a

fraudulent inducement claim, the elements of fraud must be established as they

relate to an agreement between the parties.’” 457 S.W.3d at 57 (quoting Haase v.

Glazner, 62 S.W.3d 795, 798–99 (Tex.2001)).

1. There is legally and factually insufficient evidence of a

misrepresentation on which Hooks claims to have relied

Hooks’ reliance was limited. He made it very clear he only relied on the plat,

and then on only one representation on the plat: the line saying “1400´± Scaled.”

He repeatedly disclaimed any reliance on Lanoue’s statements in their telephone

call. 12RR:181-183; 13RR:33-36, 68. He testified the “plat speaks for itself,” he

did not need “any clarification” and the plat was “more accurate” than Lanoue’s

“verbal estimation.” 12RR:181-183; 13RR:33-36.

Hooks did not point to anything else on which he relied. He did not claim he

had relied upon the X,Y coordinates on the plat. He testified he disregarded the

contradictory statement in the legend that the well was bottomed “1400´± Scaled”

from the east line of the unit. 13RR:38-39. Hooks did not rely on anything other

than the plat and he relied only on the one statement on the plat.

The problem is the plat does not say “1400´ absolute.” That is plainly how

Hooks read it; but that it not what it says. The plat does not say it is an accurate

survey. In fact, it says the opposite. Hooks admitted at trial “scaled” means there

31

may be inaccuracies in the plat. 13RR:71 (admitting there could be “some room for

error” in a plat that says it is “scaled”); 16RR:62-63 (scaled map is subject to

error). And the plat does not say “1400´”. It says “1400´± Scaled”. And the

measurement was to a waterway whose boundaries can move.

Both the statement the plat is “scaled”—meaning it says on its face it is

inaccurate—and the statement “1400´±” mean the plat did not represent the line

measured anything precisely 1400 feet from Plaintiffs’ lease.

The symbol “±” indicates a tolerance from 1400 feet. Plaintiffs’ expert

surveyor explained Lanoue’s original verbal estimate that the well was

approximately 1500 feet from Plaintiffs’ lease could be explained by the plat’s

indication of “1400´±”. 12RR:53, 67-68; see also 13RR:36, 68 (Hooks similarly

excusing Lanoue’s 1500 foot description). In other words, “1400´± Scaled” could

mean a variance of 100 feet one way or the other. 12RR:53, 67-68. If “1400´±”

could include 1500 feet, then it could equally encompass 1300 feet. 1300 feet

would place the well closer than 1320 feet to Plaintiffs’ lease.

Indefinite statements cannot form the basis of a misrepresentation. Bradford

v. Vento, 48 S.W.3d 749, 759 (Tex. 2001). 7 The purpose of using terms like “more

or less” or “plus or minus” is to relieve exactness. 4 A. LEOPOLD, TEXAS PRACTICE

7

Accord, Simulis, L.L.C. v. Gen. Elec. Capital Corp., 439 S.W.3d 571, 577, 579 (Tex. App.—

Houston [14th Dist.] 2014, pet. denied); Ikon Office Solutions v. Eifert, 125 S.W.3d 113, 128 n.

11 (Tex. App.—Houston [14th Dist.] 2003, pet. den.); In re Media Arts Group, Inc., 116 S.W.3d

900, 910 (Tex. App.—Houston [14th Dist.] 2003, orig. proc.).

32

SERIES, LAND TITLES AND TITLE EXAMINATION, §15.15 (3d Ed. 2015). Adding “±”

to a number signals indefiniteness, as Plaintiffs’ expert confirmed. Plaintiffs’

surveyor could not put a number on what “±” might mean. 12RR:54. However, she

allowed that “1400´±” could permit differences of 100 feet. 12RR:53, 67-68.

Hooks testified he thought “±” meant a few feet one direction or another. 13RR:36.

Courts addressing acreage or distance calls using terms like “plus or minus”

or “more or less” allow for variances at least up to 10%. See Slagle v. Clark, 237

S.W.2d 430, 433-34 (Tex. Civ. App.—Amarillo 1951, no writ); Harkins v. North

Shore Energy, L.L.C., No. 13-12-00504-CV, 2014 WL 1789572, at *8 (Tex.

App.—Corpus Christi May 1, 2014, pet. pending) (“more or less” allowed a

difference greater than 5%). For example, the Slagle court observed one

jurisdiction had fixed the discrepancy at 10%. Slagle noted the discrepancy before

it was less than 10% and held there was no fraud. Id. at 434; see also 26A C.J.S.

Deeds § 274 (2015) (“more or less” relieves a “stated distance or quantity of the

attribute of exactness”).

Here, if the 10% rule is applied, “1400´±” would include everything from

1260 to 1540 feet. Even greater latitude is warranted when the term “Scaled” is

used. There is less than a 6% difference between 1400 and 1320. So, even if

someone read the plat as did Hooks, ignoring the arrow showing the well’s bottom-

hole location to be about 1050 feet from Plaintiffs’ lease line, there was no

33

misrepresentation. “1400´± Scaled” warns it is inaccurate and the “±” causes

“1400´” to be too close to the 1320 foot line. There was no actionable

misrepresentation here as a matter of law. Alternatively, there is factually

insufficient evidence to support the jury’s finding.

Furthermore, Hooks specifically admitted at trial there was no fraud as to a

substantial portion of what the jury awarded as fraud damages. Plaintiffs’ expert

presented fraud damages that included compensatory royalties supposedly owed on

two wells—the BSM1 well (located in the BSM1 unit where the fraud supposedly

occurred) and another well—the DuJay1 well. PX608; 19CR:3268 (jury awarding

amount to which Plaintiffs’ expert testified). Half what the jury awarded for fraud

was for the DuJay1 well. PX608 ($3,538,565.24 of the total $7,085,806.02 fraud

damages is for DuJay1 well; an additional $12,995,832.05 is “late charges” for

both wells). But the DuJay1 well was not drilled until significantly after Plaintiffs

consented to the BSM1 unit, and was in a different unit from the BSM1 well.

Hooks admitted he was not defrauded as to the DuJay1 well. Hooks was asked:

“[N]obody did anything to deceive you or defraud you with respect to the DuJay 1

well, did they?” He answered: “Not that I'm aware of.” 13RR:53.

So, Hooks admitted there was no fraud with regard to the well comprising

half the jury’s award for fraud damages.

34

2. There is legally and factually insufficient evidence of reliance

For the same reasons the uncertainty of “1400´± Scaled” means there was no

legally or factually sufficient evidence of misrepresentation, there was similarly no

and insufficient evidence of reliance. Hooks’ testimony demonstrates he treated

“1400´±” as if it was simply “1400´.” 13RR:36. He did not “rely” on what was

represented to him. He concluded the distance from the well to his property was

1400 feet, exactly, and he relied upon his own conclusion. He did not rely on

Samson’s plat, which said the “1400´” was “±” and the entire plat was “Scaled.”

There must be legally and factually sufficient evidence that a plaintiff

“actually” and justifiably relied on the alleged misrepresentation. Ernst & Young,

L.L.P. v. Pac. Mut. Life Ins. Co., 51 S.W.3d 573, 577 (Tex. 2001); accord, Nat’l

Prop. Holdings, L.P. v. Westergren, 453 S.W.3d 419, 423 (Tex. 2015); Hartford

Fire Ins. Co. v. C. Springs 300, Ltd., 287 S.W.3d 771, 781 (Tex. App.—Houston

[1st Dist.] 2009, pet. denied). The evidence here is lacking. Hooks “relied” on

something other than the plat description. He relied on his own mental filling-in of

the number “1400´” without taking into account the “± Scaled.” Hooks assumed an

answer to his unexpressed question concerning the well’s location from Samson’s

indefinite statement “1400´± Scaled,” contained on a plat sent to Hooks for another

purpose, and did not tell Samson he had leaped to that conclusion or otherwise

seek confirmation.

35

Cases hold a plaintiff has not relied as a matter of law when the statements

he supposedly relied upon are indefinite. Grant Thornton LLP v. Prospect High

Income Fund, 314 S.W.3d 913, 923 (Tex. 2010) (quoting Lewis v. Bank of Am. NA,

343 F.3d 540, 546-47 (5th Cir. 2003); Sawyer v. E.I. Du Pont de Nemours and Co.,

430 S.W.3d 396, 401 (Tex. 2014); Montgomery Cnty. Hosp. Dist. v. Brown, 965

S.W.2d 501, 503 (Tex. 1998).

There was legally and factually insufficient evidence of reliance.

3. There is legally and factually insufficient evidence Samson intended to

defraud Plaintiffs

There is no and insufficient evidence Samson intended for Plaintiffs to rely

on the “1400´± Scaled” or any other measurement on the plat to determine the

distance between their lease and the bottom-hole location of the BSM1 well.

Hooks was asked at trial whether he mentioned his concerns about Samson’s offset

obligations during the conversation with Lanoue that resulted in Lanoue’s sending

the plat. 13RR:25. Hooks admitted he may not have mentioned them:

Q. Did you mention to Mr. Lanoue anything about offset obligations in that

phone call?

A. [Hooks] I don't know if we specifically talked about offset obligations.

We talked about the location of the well; and I believe that was clear, that

that was a potential issue.

Q. Well, you did not tell Mr. Lanoue that you were concerned about

whether the well was going to be within 1,320 feet. You never said that

specifically, did you?

A. I may not have…. [13RR:25 (emphasis added).]

36

Lanoue testified he sent this plat because he understood Hooks wanted to

visualize the location of Plaintiffs’ Lease within the unit:

Q. And, then, did you then send Mr. Hooks some additional information

about the Black Stone Minerals well and unit?

A. [Lanoue] He had called and was not sure—was not sure where their land

was laying. He wanted to know where their tract was going to be located

within the unit and requested a plat. So, I sent him one. I faxed him one.

[12RR:124.]

Lanoue also testified the lease’s offset provision was not a topic of

conversation when he sent the plat to Hooks. 12RR:92-93. Lanoue explained, “The

plat I’d sent to the Hooks wasn’t intended to be a plat showing where the—how far

away the well was located. It was purely an informational plat to show where their

tract was to be located within the unit.” 12RR:93 (emphasis added). The plat sent

to Hooks was not one created at Hooks’ request. Lanoue drew it six months before

he ever talked to Hooks. 12RR:49-50. Moreover, Lanoue used it and similar plats

from August 2000 through October 2001. 12RR:49-50.

Samson derived no advantage—monetary or otherwise—from Plaintiffs’ 50

acres being in the unit. Plaintiffs’ 57.25% cotenant in the lease—the Broussards—

already had agreed to the pooling. 15RR:63. If Plaintiffs refused to join the unit,

Samson could have released their 50 acres from their lease. PX25 ¶IV(B). The

Jefferson County lease expressly gave Samson the authority “at any time” to

37

release any portion of the lease “and be relieved of all obligations as to the acreage

surrendered.” PX25¶IV(B).

Had Samson been aware of Mr. Hooks’ allegations earlier, it obviously

would have released Plaintiffs’ lease, and Plaintiffs would have received none of

the $510,000 Samson paid them for their participation in the BSM1 unit through

May 2008, plus additional payments thereafter. 15RR:63. Samson’s geophysicist,

Mr. Beale, testified without contradiction that if Hooks had refused to consent to

the unit, Samson would have released Plaintiffs’ Jefferson County lease. 15RR:62.

Most of the Jefferson County lease was separated from productive acreage by a

geological fault. 15RR:65-66. Hooks agreed that, had Samson released his lease

and kept the Broussard lease in the unit, Samson would have made more money

than it did by including Plaintiffs’ interest in the unit:

Q. And if you did not join the unit and your property was released, your

interest in the property was released, the portion that would have gone to

you would have just stayed with Samson, wouldn't it?

A. I believe that's correct.

Q. And that's perfectly legal, isn't it?

A. Yes.

Q. They would not have been doing anything improper, illegal, or wrong by

doing that, would they?

A. I suppose not.

Q. So, they had zero incentive, didn't they, Mr. Hooks, to feel compelled to

do whatever it took to get you into the unit?

A. I don't know what their incentive is.

38

Q. Given that they had more money in their pocket without you going into

the unit, would you agree with me that certainly is a counterincentive?

A. I—if that were the case, it would appear to be.

13RR:44. Hooks could not identify any reason why Samson would want to defraud

him into consenting to the unit. 13RR:44; see also 15RR:63. In other words,

Samson would have benefitted by releasing Plaintiffs’ lease and excluding

Plaintiffs from the unit, rather than by including them. 8

Proof of intent requires something more than a foreseeable possibility

someone might rely on something. “The mere fact that it should be known that

another will rely upon a misrepresentation does not, of itself, establish that the

misrepresentation was made with the intent to induce reliance.” Blue Bell, Inc. v.

Peat, Marwick, Mitchell & Co., 715 S.W.2d 408, 415 (Tex. App.—Dallas 1986,

writ ref’d n.r.e.); see Ernst & Young, 51 S.W.3d at 579-80 (citing Blue Bell).

Rather, “[t]he ‘intent’ element of a fraud action imports a significantly greater

degree of purposeful conduct than does the ‘foreseeability’ element of a negligence

action.” Blue Bell, 715 S.W.2d at 415; Willis v. Marshall, 401 S.W.3d 689, 702

(Tex. App.—El Paso 2013, no pet.) (quoting Blue Bell in a fraudulent inducement

8

There is a breach notification provision in the Jefferson County lease, but Plaintiffs never

complied with it. See Arbor Windsor Court, Ltd. v. Weekley Homes, LP, No. 14-13-00480-CV,

2015 WL 1245548, at *1 (Tex. App.—Houston [14th Dist.] Mar. 17, 2015, no pet.) (breach

notification provision is condition precedent). Because Samson was not informed of any

potential breaches, it did not release any portion of the Hooks lease, which it was free to do at

any time. Had Samson released Plaintiffs’ lease in whole or in part, Plaintiffs would have

received no money from the BSM1 unit and Samson would have avoided Plaintiffs’ fraud claim

with all the attendant costs.

39

case); see also Ehrhardt v. Elec. & Instrumentation Unlimited, 220 F. Supp. 2d

649, 660 (E.D. Tex. 2002). There is legally and factually insufficient evidence of

an intent to defraud.

4. There is legally and factually insufficient evidence of a duty to

disclose or any failure to disclose

a. There is legally and factually insufficient evidence of a duty to

disclose

Question No. 1 presented the jury with alternative instructions on intentional

misrepresentation and a failure to disclose. 19CR:3266. Samson objected to these

instructions because there was no evidence raising a duty to disclose. 17RR:28.

Whether a party has a duty to disclose is a question of law. Bradford, 48

S.W.3d at 755. “Generally, no duty of disclosure arises without evidence of a

confidential or fiduciary relationship.” Ins. Co. of N. Am. v. Morris, 981 S.W.2d

667, 674 (Tex. 1998).

Restatement of Torts §551 describes other circumstances where parties may

have a duty to disclose. RESTATEMENT (SECOND) OF TORTS, §551 (1977). Here, the

instruction apparently was based on an alleged duty to disclose “subsequently

acquired information.” Id. But the Supreme Court has “never adopted section

551.” Bradford, 48 S.W.3d at 756.9 Samson did not have a fiduciary or

9

As the Fifth Circuit noted, “[a] reasonable jurist might well conclude … that a duty to disclose

exists in Texas only in the context of a confidential or fiduciary relationship.” United Teacher

Assocs. Ins. Co. v. Union Labor Life Ins. Co., 414 F.3d 558, 566 (5th Cir. 2005). Nevertheless,

“courts after Bradford (including [the Fifth Circuit]) have not gotten the message, but have

40

confidential relationship with Plaintiffs that could create a duty to disclose. See

HECI Exploration Co. v. Neel, 982 S.W.2d 881, 888 (Tex. 1998). There was no

duty to disclose as a matter of law in this case.

Even if there were a duty to disclose outside a fiduciary or confidential

relationship, that duty would not have existed here. In this case, the “duty to

disclose” supposedly arose “when a party makes a representation and later acquires

new information which makes the representation untrue or misleading….”

19CR:3266 (jury instructions). Under that circumstance, there is supposedly a duty

to “disclose such information to anyone whom [the party] knows to be still acting

on the basis of the original statement.” Id. Plaintiffs asserted Samson had a duty to

notify Plaintiffs of a change made to its plat in November 2001, correcting the

bottom-hole location. 17RR:8.

In order for a duty to disclose to exist under these instructions, there had to

be sufficient evidence Samson knew (1) Hooks had relied on the “1400´± Scaled”

notation and (2) was “still acting on the basis of the original statement.”

19CR:3266; see also RESTATEMENT §551. There was no (and insufficient)

evidence of either of these two elements. First, there is legally and factually

insufficient evidence Samson knew Hooks had used the plat to determine whether

the well was 1320 feet from his lease. Second, Plaintiffs had already taken the one

instead continued to find that a duty to disclose can exist in Texas absent a confidential or

fiduciary relationship.” Id.

41

action Hooks testified they took based on the plat—signing a written consent to

pooling on May 25, 2001. Since the plat was not corrected until November 2001,

there is no or insufficient evidence Plaintiffs were “still acting on the basis of the

original statement.”

b. There is legally and factually insufficient evidence of a failure

to disclose

The charge defined a “failure to disclose” as:

[1] the party fails to disclose a material fact within the knowledge of that

party; [2] the party knows that the other party is ignorant of the fact and does

not have an equal opportunity to discover the truth; [3] the party intends to

induce the other party to take some action by failing to disclose the fact; and

[4] the other party suffers injury as a result of acting without knowledge of

the undisclosed fact. [19CR:3266.]

Bearing in mind the alleged “failure to disclose” was of Samson’s November

2001 plat (17RR:8), there was no or insufficient evidence of three of the four stated

elements. Skipping to the third element, there was no or insufficient evidence

Samson intended to induce Hooks to do anything when it sent him the original plat,

or when it did not send him the corrected plat. There was no or insufficient

evidence Samson knew Hooks was trying to determine whether the bottom hole

was within 1320 feet of Plaintiffs’ lease; Hooks had not said that was why he

wanted the plat. 12RR:124; 13RR:25. On the fourth element, Plaintiffs suffered no

injury because of the alleged subsequent nondisclosure. The only injury of which

Plaintiffs complain is their granting written consent to pooling. They had already

42

sustained that supposed “injury” previously when they agreed to include their 50

acres in the unit; that occurred significantly before the time Samson corrected the

plat.

The second element calls for sufficient evidence Samson knew Hooks was

ignorant of the well’s distance from his land and did not “have an equal

opportunity to discover the truth….” 19CR:3266. As stated above, there is no or

insufficient evidence Samson knew Hooks was silently questioning the bottom

hole’s distance from his lease line. Moreover, there is no evidence Plaintiffs lacked

an equal opportunity to discover the truth. Hooks could have directly asked

Samson whether the well’s bottom hole was within 1320 feet of Plaintiffs’ lease or

whether the offset obligations had been triggered; but he did not. He was an

experienced Texas oil and gas attorney who could have requested the directional

survey from Samson. But he did not do that either.

Furthermore, Hooks could have reviewed publicly-available records.

“[F]ilings and other materials publicly available from the Railroad Commission are

a ready source of information….” HECI, 982 S.W.2d at 887. “As owners of an

interest in the mineral estate, [Plaintiffs] had some obligation to exercise

reasonable diligence in protecting their interests.” Id. at 886.10 The Texas

10

The Supreme Court fraud holdings were limited to the limitations issue. 457 S.W.3d at 61. Its

holdings and other statements do not assert Plaintiffs did not have access to the Railroad

43

Administrative Code requires a directional survey be filed at the Railroad

Commission.11 16 Tex. Admin. Code §3.11 (2015). Parties are presumed to know

the law. See Greater Houston Transp. Co. v. Phillips, 801 S.W.2d 523, 525 n.3

(Tex. 1990) (“all persons are presumed to know the law.”).

In accordance with Railroad Commission requirements, a directional survey

had been filed with the Railroad Commission six months before Lanoue contacted

Hooks. DX5. Hooks could have used it to determine (or have someone determine)

the well’s precise bottom hole location. DX5; 12RR:80; 16RR:53-54, 72, 85-86,

102-03. A plat (the “Schlumberger plat”) was filed along with the survey. DX13.

Although “some data on the plat does not completely correspond to the data on a

later correct plat,” the Supreme Court noted “the plat correctly placed the bottom

hole within the protected zone.” 457 S.W.3d at 56 n. 4. In fact, the Schlumberger

plat shows the location of the well’s bottom hole as being only slightly further

away from Plaintiffs’ lease than the 1080 feet originally planned. Thus, Plaintiffs

had access to official records showing the well’s bottom hole was within 1320 feet

of Plaintiffs’ lease.

There is legally and factually insufficient evidence of a failure to disclose.

Commission records for purposes of a duty to disclose or that Plaintiffs did not have “an equal

opportunity to discover the truth.”

11

A directional (or inclination) survey is “[a] well survey that measures the degree of departure

of a hole from the vertical and the direction of the departure.” 8 H. WILLIAMS & C. MEYERS, OIL

AND GAS LAW 265 (2008).

44

C. There is Legally and Factually Insufficient Evidence of Statutory Fraud

In Question No. 2, the jury found Samson violated Tex. Bus. & Com. Code

§27.01(a), which proscribes fraud in a real estate transaction. That statute is a form

of penalty and is strictly construed. Porter v. Irvine, 658 S.W.2d 711, 715 (Tex.

App.—Houston [1st Dist.] 1983, no writ); Ratcliff v. Trenholm, 596 S.W.2d 645,

650 (Tex. Civ. App.—Tyler 1980, writ ref’d n.r.e.).

1. Statutory fraud does not apply to this case because there is no real

estate transaction of the type required by that statute

The May 25, 2001 consent to pooling did not effect a sale of real estate.

Rather, it granted consent for Samson to pool a mineral interest Samson already

held under Plaintiffs’ Jefferson County Lease. The agreement did not involve a

transaction within §27.01.

Texas courts hold §27.01 is limited to misrepresentations made to induce

another into a contract “for the sale of land or stock.” Burleson State Bank v.

Plunkett, 27 S.W.3d 605, 611 (Tex. App.—Waco 2000, pet. denied) (emphasis

added); Nolan v. Bettis, 577 S.W.2d 551, 556 (Tex. Civ. App.—1979, writ ref’d

n.r.e.). The statute does not apply where there is “no sale of real estate … as

contemplated by the statute.” Life Ins. Co. v. Murray Inv. Co., 646 F.2d 224, 227

n.2 (5th Cir. 1981). Here, there was no such sale. Samson gained a limited power

to pool a mineral estate it already owned as lessee.

45

2. There is legally and factually insufficient evidence of the elements of

statutory fraud

For the same reasons there was legally and factually insufficient evidence of

common law fraud, the evidence was equally lacking as to statutory fraud.

Statutory fraud requires proof of a misrepresentation of a material fact, intent to

induce reliance, and reasonable reliance by the person entering the contract.

Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 182 (Tex. 1997); Petras v.

Criswell, 248 S.W.3d 471, 475 (Tex. App.—Dallas 2008, no pet.); Spethmann v.

Anderson, 171 S.W.3d 680, 688 n.1 (Tex. App.—Dallas 2005, no pet.).

As with common law fraud, “a representation is not material if it is ‘vague

and indefinite in its nature and terms.’” In re Webber, 350 B.R. 344, 367 (Bankr.

S.D. Tex. 2006); see also Sawyer, 430 S.W.3d at 401; Montgomery Cnty., 965

S.W.2d at 503. The “1400´± Scaled” line was indefinite and could not have been

the basis of a material representation. See Bradford, 48 S.W.3d at 759; Slagle, 237

S.W.2d at 433-34. Nor could Hooks justifiably rely on the “1400´±” description.

See Lewis, 343 F.3d at 546-47; Montgomery Cnty., 965 S.W.2d at 503. Likewise,

there is no and insufficient evidence Samson intended to use the plat to convince

Hooks the well was more than 1320 feet from his property. There is legally and

factually insufficient evidence of a misrepresentation, reliance, or intent to support

the jury’s finding on Question No. 2.

46

Since statutory fraud fails, the judgment’s award of expert witness fees and

deposition costs, which rest on §27.01(e), should be reversed.

D. There is Factually Insufficient Evidence to Support the Jury’s Finding

that Plaintiffs Could Not Have Discovered the Alleged Fraud Claim

until April 2007

Plaintiffs consented in 2001 to Samson’s pooling of acreage from their

Jefferson County lease to form the BSM1 unit. PX65 (agreement), PX157

(consenting again as to interest specified in PX156). Over 5 years later, in

November 2006, Plaintiffs joined the already-pending and consolidated Lee and

Klorer actions. 3CR:440; 12RR:165-67; 13RR:50-51. The Lee and Klorer actions

did not include fraud allegations. 1CR:2, 114; 2CR:297; 3CR:391, 413. Plaintiffs

did not plead fraud until May 2007, nearly 6 years after Plaintiffs consented to the

unit. 4CR:467, 490-92. The statute of limitations for fraud is four years. Williams

v. Khalaf, 802 S.W.2d 651, 652 (Tex. 1990). Plaintiffs cannot legally prejudice

Samson by sitting on claims for so long.

With regard to limitations, the jury was asked: “By what date should the

Hooks, in the exercise of reasonable diligence, have discovered the fraud of

Samson?” 19CR:3274. Hooks testified the alleged fraud was “discovered” in

Spring 2007. 12RR:165-67; 13RR:50-51. Initially, the jury answered the

limitations question: “Hooks Birthday.” 19CR:3274. Hooks had met Paul Simpson,

Plaintiffs’ lead trial lawyer, on Hooks’ birthday in 2006 at a lunch meeting of the

47

Houston Bar Association’s Oil Gas and Mineral Law section. 12RR:165-66.

Instructed to clarify their answer, the jury responded “April 2007”—months after

Hooks’ birthday. 19CR:3274; 12RR:165-66.

There is factually insufficient evidence to support the jury’s finding that

Plaintiffs should not have discovered facts putting them on notice of the alleged

fraud before April 2007.

The following testimony is the only evidence touching on why Plaintiffs

supposedly should not have, in the exercise of reasonable diligence, discovered

their fraud claim until 2007:

Q. Well, at what point in time just generally did you-all, through the

discovery process, uncover what had happened to you?

A. Oh, I think it was in the spring, the following spring that information

came out. [12RR:167.]

***

Q. Now, once—I guess it was in the fall of 2006 when you and Mr.

Simpson ran into each other up at the Houston Club, right?

A. Yes.

Q. And that's the first time that you—or sometime thereafter—and I don't

know if it was that day or when—but at some point then you became, you

know, unhappy and felt like you had been defrauded, right?

A. After some further information came to light that that was apparently

the situation. [13RR:50-51.]

That is it: a simple bald-faced statement something came to light sometime

during the spring of 2007 in discovery. There is no explanation why the claim—

48

which at least could have been discovered in various separate public records—

could not have been discovered previously. There is no explanation why discovery

was needed to find out about the fraud claim. There is no explanation what facts

discovery revealed to Plaintiffs that put them on notice of alleged fraud. Nothing.

There is the bare assertion, and nothing more.

The fraud claim is based on the location of a well. That well had been in the

same place since July 2000 when Schlumberger ran the directional survey and

since August 2000 when Schlumberger filed that survey in the Railroad

Commission records. It is not as if Plaintiffs were dealing with a moving target.

The well’s bottom-hole location has been in the same place since the summer of

2000. Why it took Plaintiffs nearly seven years to locate the well’s bottom-hole is a

mystery.

Moreover, the “April 2007” answer is wholly unsupported by the

uncontradicted evidence Plaintiffs, themselves, put in the record. Plaintiffs

acknowledge Samson filed a correct plat in the official public records of both

Hardin and Jefferson Counties in January and February 2003. 16RR:13 (Plaintiffs’

cross-examination); PX19. That plat showed the correct bottom-hole location for

the BSM1 well and was attached to an amended unit designation. 11RR:183-84;

12RR:6-7; 16RR:13; PX19.

49

So according to Plaintiffs’own evidence, the official public land records of

Jefferson County contained correct bottom-hole location information more than

four years prior to the date Plaintiffs filed their fraud claims.

Plaintiffs did not introduce a scintilla of evidence regarding why “in the

exercise of reasonable diligence” Hooks should not have discovered the alleged

fraud before April 2007. Plaintiffs provided no explanations or details, but only a

bare assertion of when the alleged fraud was actually discovered, without further

explanation. Evidence is insufficient when it is only “generalized” and

“conclusory.” Serv. Corp. Int’l v. Guerra, 348 S.W.3d 221, 232 (Tex. 2011). “Bare

assertions” with no accompanying explanation do not provide sufficient evidence

to pass the scintilla threshold. Jelinek v. Casas, 328 S.W.3d 526, 540 (Tex. 2010).

If Hooks’ testimony were sufficient to establish when facts putting him on

notice of alleged fraud should have been discovered in the exercise of reasonable

diligence, then there is little reason to have limitations in fraud cases. His

testimony was, in essence, “we discovered the claim when we discovered it.” So

long as someone testifies a claim was not discovered until it was discovered, then

all fraud claims and all claims subject to the discovery rule will be timely filed.

The question was “By what date should the Hooks, in the exercise of

reasonable diligence, have discovered the fraud of Samson?” 19CR:3274

(Question 9, emphasis added). There was no evidence concerning the “should” part

50

of this inquiry and there was no evidence concerning the “exercise of reasonable

diligence” inquiry. There was only an answer to the unasked and irrelevant

question, “when did you happen to discover the alleged fraud?”

There is factually insufficient evidence to support the jury’s response to

Question 9, and this Court should remand for a new trial on the limitations issue.

E. There is Legally and Factually Insufficient Evidence to Support the

Fraud Damages Finding

Plaintiffs’ evidence was of a legally incorrect measure of damages. 12 The

judgment for $20,081,638.07 for “damages proximately caused by fraud” should

be reversed. 19CR:3268 (verdict); 1Supp2CR:6 (judgment). There is no evidence

and factually insufficient evidence to support the jury’s answer to Question 3.

Leading up to trial, Plaintiffs pleaded, first, that they were not in the BSM1

unit and Samson had breached the Jefferson County lease by not meeting its offset

obligations. 16CR:2756-57. In the alternative, Plaintiffs pleaded that, if they were

in the unit, it was because Samson defrauded them into giving consent.

16CR:2759. The trial court granted Samson’s motions for summary judgment on

Plaintiffs’ offset obligations breach of lease claims. 18CR:3162. That left Plaintiffs

with only a fraud-in-the-inducement claim. But Plaintiffs continued to seek the

identical contract measure of damages, even including damages for a well as to

12

Samson repeatedly objected to Plaintiffs’ use of an incorrect measure of damages. 18CR:3171-

73, 3200-07, 3232; 19CR:3322-26, 3353-58; 10RR:43-44; 17RR:10-14.

51

which they admitted there was no fraud. So Plaintiffs pursued fraud liability, but

sought breach of contract damages. Awarding judgment for contract damages was

error. There was no legally or factually sufficient evidence to support the damages

awarded.

Because Plaintiffs chose to pursue an incorrect measure of damages, there is

no evidence of damages. The damages testimony is based on a flawed

methodology and is “no evidence” of damages or causation. City of Keller, 168

S.W.3d at 813; Kerr-McGee Corp. v. Helton, 133 S.W.3d 245, 247 (Tex. 2004),

abrogated in part on other grounds, Coastal Oil & Gas Trust v. Garza Energy

Trust, 268 S.W.3d 1, 18-19 (Tex. 2008).

For all the following reasons, the jury’s fraud damages award was

unsupported and should be reversed and either rendered or remanded:

1. Plaintiffs did not prove fraud damages and, instead, proved only the

same damages they would have presented for the breach of oil and

gas lease claim they previously lost on summary judgment

There are two measures of fraud damages for the necessary and usual result

of fraud: (1) out-of-pocket and (2) benefit-of-the-bargain. Baylor Univ. v.

Sonnichsen, 221 S.W.3d 632, 636 (Tex. 2007); Fortune Prod. Co. v. Conoco, Inc.,

52 S.W.3d 671, 681 (Tex. 2000). Out-of-pocket damages are restitutionary

damages that “measure the difference between the value of that which was parted

with and the value of that which was received.” Sonnichsen, 221 S.W.3d at 636;

52

see also Formosa Plastics Corp. v. Presidio Eng’rs & Contractors, Inc., 960

S.W.2d 41, 49 (Tex. 1998). Benefit-of-the-bargain damages derive from an

expectancy theory and “evaluate the difference between the value that was

represented and the value actually received.” Id. The damages for statutory fraud

are measured in the same way as common law fraud. Scott v. Sebree, 986 S.W.2d

364, 368 (Tex. App.—Austin 1999, pet. denied). Leading up to trial, Plaintiffs

pleaded an out-of-pocket damages measure (16CR:2760-61), but the evidence does

not fit within that measure.

The charge did not instruct the jury to find either out-of-pocket damages or

benefit-of-the-bargain damages. 19CR:3268. Instead, it asked only about Plaintiffs’

“lost income.” 19CR:3268. After trial, Plaintiffs’ motion for judgment plainly

admitted the judgment “is based on contract, i.e., Plaintiffs’ oil and gas leases with

Samson.” 19CR:3281. Plaintiffs elected to present only contract damages to the

jury. The judgment rests on fraud liability findings, but on contract damages.

Calculations that take into account “expected lost profits on a bargain that

was never made” are not properly a part of an out-of-pocket calculation. Formosa

Plastics, 960 S.W.2d at 49. Plaintiffs’ damages formula was composed entirely of

lost profits in the form of lost income. 19CR:3268. That was the only measure of

damages asked of the jury. Id. Plaintiffs did not plead for or seek benefit of the

bargain damages.

53

2. Plaintiffs never pleaded for consequential damages; they only pleaded

for out-of-pocket damages

In their previous briefing to this Court, Plaintiffs argued compensatory

royalty damages were permissible consequential damages. But, Plaintiffs were

required to plead for consequential damages. Tex. R. Civ. P. 56; Burbage, 447

S.W.3d at 261 n.6; Statewide Bank and SN Servicing Corp. v. Keith, 301 S.W.3d

776, 786 (Tex. App.—Beaumont 2009, pet. abated). Although Plaintiffs’ petition

mentioned compensatory royalties, it did so only in relation to their out-of-pocket

measure of damages. 13 Plaintiffs did not plead for compensatory royalties as

consequential damages. 16CR:2741-73. In fact, Plaintiffs never mentioned the

term “consequential damages” or “lost profits” anywhere in their pleading.

Accordingly, they were not entitled to recover consequential damages.

3. Plaintiffs were not entitled to consequential damages as a part of an

out-of-pocket measure of recovery

Plaintiffs clearly pled an out-of-pocket measure of recovery. 16CR:2760-61.

Out-of-pocket damages are purely restitutionary. What Plaintiffs submitted to the

jury was a lost profits measure of damages, which they now assert were actually

consequential damages. “Lost profits is not a calculation of out-of-pocket

damages.” Case Corp. v. Hi-Class Bus. Sys. of Am., Inc., 184 S.W.3d 760, 778-79

13

They pled: “The Landowners are thus entitled to damages equal to at least the difference

between the value of that with which they parted, and the value they actually received…. Such

damages would equal at least the compensatory royalties the Landowners would have been due

under the Hooks Jefferson County lease in the absence of any pooling….” 16CR:2760-61.

54

(Tex. App.—Dallas 2005, pet. denied); accord, Formosa Plastics, 960 S.W.2d at

49-50. Under the out-of-pocket measure Plaintiffs pleaded, they were not entitled

to recover lost profit-compensatory damages.

4. Furthermore, Plaintiffs could not seek compensatory damages unless

they set aside the pooling agreement, which is something they never

sought to do

Plaintiffs’ evidence was of an alleged fraud-in-the-inducement claim. They

claimed Samson supposedly made misrepresentations to convince Plaintiffs to sign

a pooling consent they otherwise would not have signed. On their fraud-in-the-

inducement claim, Plaintiffs had a choice. They could stand on the bargain and

recover fraud damages, or they could seek rescission of their consent to pool. See

Fortune Prod., 52 S.W.3d at 676-77. They could not do both. Yet, Plaintiffs never

attempted to set aside the pooling agreement and—to this day—have accepted

substantial royalty payments paid to them solely because of that pooling

agreement.

The problem is Plaintiffs waited too long before suing under their breach of

lease theory; limitations lapsed on that claim. So Plaintiffs could not sue on the

underlying contract. And, importantly, as the Supreme Court has pointed out,

Plaintiffs cannot sue through fraud to seek their contractual damages if the contract

is unenforceable. Sonnichsen, 221 S.W.3d at 637. Importantly, however, Plaintiffs

55

cannot remain a part of the pooled unit and then pretend for damages purposes that

their lease is not a part of the unit. 14

Plaintiffs had their opportunity to seek a proper measure of damages. They

refused to do so. Having had that opportunity, and having failed to prove damages

under a correct legal measure, this Court should render judgment against Plaintiffs.

See, e.g., Goldman v. Olmstead, 414 S.W.3d 346, 363-64 (Tex. App.—Dallas

2013, pet. denied).

5. Plaintiffs were not entitled to their compensatory royalty damages

based on production from the DuJay1 well

Even if consequential damages were permitted, “lost profits” based on the

DuJay1 well are not recoverable. The DuJay1 well is the source of half the $20

million in fraud damages. When asked at trial, Hooks flatly admitted no one had

done “anything to deceive [him] or defraud [him] with respect to the DuJay1 well.”

13RR:53.

Samson contacted Plaintiffs about pooling their lease into the BSM1 unit in

February 2001, and Plaintiffs consented to pool in May 2001. PX65. Plaintiffs

received their first check for unit production in September 2001. PX552. Samson

did not begin drilling the DuJay1 well until October 2001. PX565. The proximate

cause standard applicable to consequential damages requires proof of cause in fact

14

Because Plaintiffs did not set aside their pooling consent, they should receive no damages. At

a minimum, however, Samson should receive credit for the payments it has been making to

Plaintiffs on the BSM1 unit since the time of Plaintiffs’ damages calculations for trial.

56

and forseeability. IHS Cedars Treatment Ctr. v. Mason, 143 S.W.3d 794, 798-99

(Tex. 2004); see also Fazio v. Cypress/GR Houston I, L.P., 403 S.W.3d 390 (Tex.

App.—Houston [1st Dist.] 2013, pet. denied) (damages measured at the time of the

fraud, not some future time). If the initial act merely creates a condition by which

the second act could occur, the resulting harm is not a cause in fact. IHS, 143

S.W.3d at 799. Here, there would have to be evidence Samson would have drilled

the DuJay1 well (1) even if Plaintiffs had not agreed to pool; (2) within 1320 feet

of Plaintiffs’ tract; and (3) not released Plaintiffs’ tract to address offset issues. 15

See Lee & Lee Int’l, Inc. v. Lee, 261 F. Supp. 2d 665, 677 (N.D. Tex. 2003); see

also Tracy v. Annie’s Attic, Inc., 840 S.W.2d 527, 537 (Tex. App.—Tyler 1992,

writ denied). There was no evidence of these things.

It was error to award damages based on the DuJay1 well and this Court

should reverse the judgment for fraud damages.

6. The fraud damages improperly include “late charges” of 18%

compounded monthly

Approximately two-thirds of Plaintiffs’ fraud damages—an astonishing $13

million—are not actual damages at all. Instead, that sum is a “late charge”

measured at the rate of 18% compounded monthly. PX608. Those charges are

15

Samson was authorized under Plaintiffs’ Jefferson County lease at any time to release “any

portion or portions” of the lease “and be relieved of all obligations as to the acreage

surrendered….” PX25¶IV(B). This was not tied to the offset obligations paragraph. So, if

Samson had known any of its well locations were a problem for Plaintiffs, Samson could have

released all or a portion of Plaintiffs’ lease.

57

improper and the fraud damages judgment should be reversed on that ground as

well.

Plaintiffs’ “late charge” damages are another way in which Plaintiffs are

attempting to convert their barred contract case into fraud damages. The Jefferson

County lease states: “All past due royalties (including any compensatory royalties

payable under Paragraph VI.B) shall be subject to a Late Charge based on the

amount due and calculated at the maximum rate allowed by law….” PX25

¶XVII(C) (emphasis added).

“Late charges” are not proper out-of-pocket damages. 16 The “late charges”

should not be included in Plaintiffs’ fraud damages. Those charges were a part of

Plaintiffs’ breach of lease claim they lost on summary judgment. Those charges are

not part of any fraud claim. With a fraud claim, the aggrieved party can seek

prejudgment interest, not “late charges.” And the prejudgment interest is to be

assessed by the court, not the jury. See Olympia Marble & Granite v. Mayes, 17

S.W.3d 437, 441 (Tex. App.—Houston [1st Dist.] 2000, no pet.).

Moreover, the Supreme Court directly addressed this issue. The Court

restricted the 18% interest rate to “past due royalties” and held that rate could not

apply to other claims:

16

Because Plaintiffs did not seek consequential damages at all in connection with their fraud

claims, they did not plead for late charges as fraud consequential damages. Although Plaintiffs

pleaded for late charges as a part of their contract claims, they never pled for late charges as a

part of their fraud claim. 16CR:2753 (contract), 2757-58 (contract); 2765 (interest and attorneys’

fees under Natural Resources Code), 2771 (maximum damages).

58

The leases only impose “the maximum [interest] rate allowed by law”

for past-due royalties. Accordingly, to the extent Hooks recovers for

past due royalties, he is entitled to an 18% interest rate. For other

recoveries, the statutory rate of 5% applies because Hooks has not

directed us to any portion of the leases providing otherwise.

457 S.W.3d at 69-70.

Regardless how Plaintiffs measured their alleged fraud damages, those

damages are damages for fraud, not breach of lease. Accordingly, Plaintiffs’ fraud

cause of action is an “other recovery” for which “the statutory rate of 5% applies.”

457 S.W.3d at 70. As it stands, there is no (and insufficient) evidence of any fraud

damages. But, if any portion of Plaintiffs’ fraud damages survive, the trial court

must be restricted to adding 5% simple prejudgment interest to those damages.

And the post-judgment interest would also be 5%.

7. The damages have to be reversed because they include incremental

formation production damages, which the Supreme Court held were

improper

The fraud damages included Plaintiffs’ formation production damages

within the damages calculation. The exhibit on which the jury based its damages

was PX608. That exhibit calculated fraud damages as $20,081,638.07. PX608. The

jury awarded precisely that amount: $20,081,638.07. 19CR:3268. PX608 is titled

“Summary of Lost Compensatory Royalty with Incremental Formation

Production.” So, the jury’s damages award included formation production

amounts.

59

The Supreme Court held this Court was correct in determining Plaintiffs

were not entitled to formation production damages. 457 S.W.3d at 64-65. As a

consequence, the fraud damages must be reversed for improperly including

formation production damages.

8. If this Court reverses and remands for a new trial on fraud damages,

then fraud liability will have to be retried as well

Rule of Appellate Procedure 44.1 dictates, if this Court orders a new trial on

damages, it must also order a new trial on liability:

(b) Error Affecting Only Part of Case. If the error affects part of, but

not all, the matter in controversy and that part is separable without

unfairness to the parties, the judgment must be reversed and a new

trial ordered only as to the part affected by the error. The court may

not order a separate trial solely on unliquidated damages if liability is

contested.

Tex. R. App. P. 44.1(b) (emphasis added). There is a companion rule for the

decisions of the Supreme Court. See Tex. R. App. P. 61.2. There is no question this

rule means what it says. “Failure to comply with this rule is reversible error.”

Rancho La Valencia, Inc. v. Aquaplex, Inc., 383 S.W.3d 150, 152 (Tex. 2012).

There is no question here damages are unliquidated and liability is contested.

That being the case, if this Court reverses for a new trial on damages, it must also

remand for a new trial on fraud liability.

60

F. The Court Must Also Remand the Favored Nations Damages for a

Recalculation and Should Determine Issues Regarding the Application

of Prejudgment Interest to Newly Awarded Favored Nations Damages

As with the fraud damages, the favored nations damages wrongly include

formation production damages. The judgment awards a total of $848,854 for the

favored nations claim. 1Supp2dCR:6. The parties had stipulated to different

amounts in accordance with whether formation production damages should be

included with the favored nations damages. Court ExA. The amount in the

judgment includes formation production. Id. The stipulation for favored nations

damages without formation production was $431,450.71. Id. As a result, the

judgment needs to be reversed on this ground as well.

It can be expected that Plaintiffs will request that their favored nations

decimal increases be paid to them for production occurring after the end of May

2008. Furthermore, should this Court reverse and render judgment on the fraud

portion of the case, Plaintiffs will also seek favored nations damages on the BSM1

well because favored nations damages were initially included in their fraud

damages.

In the trial of this action, Plaintiffs relied on the late payments provision to

calculate their prejudgment interest. That provision states:

All past due royalties (including any compensatory royalties payable

under Paragraph VI.B) shall be subject to a Late Charge based on the

amount due and calculated at the maximum rate allowed by law

commencing on the day after the last day on which such monthly

61

royalty payment could have been timely made and for every calendar

month and/or fraction thereof from the due date until paid, plus

attorney’s fees, court costs, and other costs in connection with the

collection of the unpaid amounts. Any Late Charge that may become

applicable shall be due and payable on the last day of each month

when this provision becomes applicable.

PX25, PX 26, PX27¶XVII(C). The Supreme Court held this language set an

interest rate of 18% for past due royalties, but “only” for past due royalties.

Plaintiffs assumed previously the late payment provision meant they would

receive 18% prejudgment interest compounded monthly as prejudgment interest.

But there is nothing in the late payment provision saying that. And there is nothing

in the Supreme Court’s decision saying that either.

Typically, prejudgment interest is computed as simple interest. Johnson &

Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 532 (Tex. 1998)

(prejudgment interest is calculated as simple interest). The question is whether

there is anything in the leases changing the simple interest rate for prejudgment

interest. The answer is “no.”

Another appellate court has previously decided this question in Samson’s

favor. The language of Plaintiffs’ leases is very similar to the contract at issue in

Pegasus Energy Grp., Inc. v. Cheyenne Petroleum Co., 3 S.W.3d 112, 123 (Tex.

App.—Corpus Christi 1999, no pet.). In Pegasus, the contract provided if a

required payment was not timely made, “the unpaid balance shall bear interest

monthly at the… maximum contract rate permitted by the applicable usury laws in

62

the [applicable] state.” Id. (emphasis added). In calculating the prejudgment

interest due under that contract, the court held Kenneco applied and prejudgment

interest was to be computed as simple interest. Id. at 124-25.

When this case is remanded for a recalculation of the favored nations

damages, the prejudgment interest awarded as to those damages should be simple

interest.

PRAYER FOR RELIEF

Appellant Samson prays that the Court will again reverse the trial court’s

judgment on the fraud claim and render judgment that Plaintiffs take nothing on

their fraud claim. In the alternative, Samson prays that the Court reverse and

remand for a new trial on the fraud liability and fraud damages claims as well as

the fraud limitations defense.

In the further alternative, Samson prays that the Court will reform the

judgment to eliminate improper damages awards identified in this brief, including

formation production damages, late charges, fraud damages attributable to the

DuJay 1 well, witness fees, and deposition costs in accordance with Samson’s

arguments set out above, and to reduce the prejudgment and postjudgment interest

rate to the proper rate of 5%. Further, this Court should remand for the trial court

to credit Samson for the royalty payments it has made to Plaintiffs based on

63

production from the BSM1 unit since the damages were calculated prior to the

judgment.

Additionally, Samson requests that the favored nations damages be

remanded for a recalculation and that prejudgment interest be assessed on any new

calculations of favored nations damages using a simple interest rate for

prejudgment interest. Samson further requests its costs and any additional relief to

which it may have shown itself entitled.

64

Respectfully submitted,

LOCKE LORD LLP

/s/ Cynthia K. Timms

Michael V. Powell

mpowell@lockelord.com

State Bar No. 162004400

Cynthia K. Timms

ctimms@lockelord.com

State Bar No. 11161450

LOCKE LORD LLP

2200 Ross Avenue, Suite 2200

Dallas, Texas 75201-6776

(214) 740-8000

(214) 740-8800 (Fax)

M.C. Carrington

State Bar No. 03880800

MEHAFFY WEBER P.C.

P.O. Box 16

Beaumont, Texas 77704

Telephone: (409) 835-5011

Facsimile: (409) 835-5177

Dick Watt

State Bar No. 20977700

WATT BECKWORTH THOMPSON

HENNEMAN & SULLIVAN LLP

1800 Pennzoil Place, South Tower

711 Louisiana Street

Houston, Texas 77002

Telephone: (713) 650-8100

Facsimile: (713) 650-8141

ATTORNEYS FOR APPELLANT

SAMSON LONE STAR LIMITED

PARTNERSHIP N/K/A SAMSON

EXPLORATION LLC

65

CERTIFICATE OF COMPLIANCE

Pursuant to Texas Rule of Appellate Procedure 9.4(i)(3), as amended

effective December 1, 2012, the undersigned certifies that this Brief complies with

the length limitations of Rule 9.4(i) and the typeface requirements of Rule 9.4(e).

1. Exclusive of the contents excluded by Rule 9.4(i)(1), this Brief

contains 14,969 words as counted by the Word Count function (including

textboxes, footnotes, and endnotes) of Microsoft Office Word 2010.

2. This Brief has been prepared in proportionally spaced typeface using:

Software Name and Version: Microsoft Office Word 2010

Typeface Name: Times New Roman

Font Size: 14 point

/s/ Cynthia K. Timms

Cynthia K. Timms

66

CERTIFICATE OF SERVICE

I hereby certify that on the 6th day of July, 2015, a true and correct copy of

Samson’s Supplemental Appellant’s Brief was served by eFile Texas on Appellees

through their counsel of record listed below:

Paul F. Simpson David M. Gunn

McGinnis, Lochridge, & Kilgore Beck Redden & Secrest, L.L.P.

L.L.P., OneHouston Center

1111 Louisiana 1221 McKinney St., Suite 4500

Suite 4500 Houston, Texas 77010-2010

Houston, Texas 77002 dgunn@brsfirm.com

psimpson@mcginnislaw.com

Patton G. Lochridge Jon B. Burmeister

J. Derrick Price Moore Landrey, L.L.P.

600 Congress Avenue 905 Orleans Street

Suite 2100 Beaumont, Texas 77701

Austin, Texas 78701 jburmeister@moorelandrey.com

plochridge@mcginnislaw.com

/s/ Cynthia K. Timms

Cynthia K. Timms

67

No. 1-09-00328-CV

In the

First Court of Appeals

Houston, Texas

Samson Lone Star, Limited Partnership n/k/a Samson Exploration LLC

Appellant—Cross Appellee,

v.

Charles G. Hooks III, Individually and as Independent Executor of the Estate of

Charles G. Hooks, Jr., as Trustee of the Scott Ira McKeever Trust and the David

Wayne McKeever Trust, and on behalf of Chas. G. Hooks & Son, a General

Partnership; McKeever Partnership, Ltd.; Charles G. Hooks III and Sue Ann

Hooks, as Co-Trustees Under the Will of Charles G. Hooks, Sr.

Appellees—Cross-Appellants.

Appeal from Cause B173008-B, 60th District Court

Jefferson County, Texas

_________________________________________________

APPENDIX TO SAMSON’S SUPPLEMENTAL APPELLANT’S BRIEF

Tab

Final Judgment (1Supp2d CR:4-11) ................................................................. Tab A

Charge of the Court (19CR:3262-76) ............................................................... Tab B

Damages Stipulation (Court Ex. A) .................................................................. Tab C

Samson v. Hooks Ct. App. Opinion (389 S.W.3d 409) .................................... Tab D

Hooks v. Samson Tex. S. Ct. Opinion (457 S.W.3d 52) ................................... Tab E

CAUSE NO. Bl73008-B

CHARLES G. HOOKS III, § IN THE DISTRICT COURT OF

INDIVIDUALLY AND AS §

INDEPENDENT EXECUTOR OF THE §

ESTATE OF CHARLES G. HOOKS, JR., §

AS TRUSTEE OF THE SCOTT IRA §

MCKEEVER TRUST AND THE DAVID §

WAYNE MCKEEVER TRUST, ANDON §

BEHALF OF CHAS. G. HOOKS & SON, A §

GENERAL PARTNERSHIP; MCKEEVER §

PARTNERSHIP, LTD; CHARLES G. § JEFFERSON COUNTY, TEXAS

HOOKS III AND SUE ANN HOOKS, AS §

CO-TRUSTEES UNDER THE WILL OF §

CHARLES G. HOOKS, SR., §

Plaintiffs, §

§

vs. §

§

SAMSON LONE STAR, L.P ., §

Defendant. § 60TH JUDICIAL DISTRICT

FINAL JUDGMENT

On November 3, 2008, came on to be heard the above styled and numbered cause.

Plaintiffs Charles G. Hooks III, Individually and as Independen! Executor of the Estate of

Charles G. Hooks, Jr., as Trustee of the Scott Ira: Mckeever Trust and the David Wayne

McKeever Trust, and on Behalf of Chas. G. Hooks & Son, a General Partnership; McKeever

Partnership, Ltd; Charles G. Hooks III and Sue_ Ann Hooks, as Co-Trustees under the Will of

Charles G. Hooks, Sr. (collectively, "the Hooks"), appeared by duly designated representatives

and by and through attorneys of record and announced ready for trial. Defendant Samson Lone

Star Limited Partnership, n/k/a Samson Lone Star, L.L.C. ("Samson"), appeared by

representative and by and through attorneys ofrecord and also announced ready_ for trial.

WHEREUPON, a jury having been previously demanded, twelve (12) qualified jurors

were duly selected, impaneled, and sworn. The cause then proceeded to trial with the· making of

opening statements by the parties, followed by introduction of evidenGe. On November 10, 2008,

4

after Plaintiffs completed their case-in-chief, Defendant filed a Motion for Directed Verdict,

which the Court denied. On November 12, 2008, after conclusion of the evidence, with Plaintiffs

and Defendant having rested their cases in open court, the Court submitted the questions of fact

to the jury on special issues. On November 13, 2008, the jury announced that it had reached a.

verdfot and returned it to the Court. The jury's verdict was as follows:

> In response to Question No. I, the jury found by a vote of eleven (11) to one

that Samson committed fraud against the Hooks;

> In response to Question No. 2, the jury found by a vote of eleven (11) to one

that Samson committed statutory fraud against the Hooks;

> In response to Question No. 3, the jury found by a vote of eleven (11) to one

that the sum of money if paid now in cash that would fairly and reasonable

compensate the Hooks for their damages proximately caused by such fraud is

~')(\ /'\01 .c:tg '"'·

i.PkV,VOI,U.J .Vt,

.> The jury did not answer Questions Nos. 4,-5, 6, or 7;

> In response to Question No. 8,.the jury found by a vote of eleven (11) to one

that Samson's failure to pay royalty based on formation production resulted in

underpayment of royalty under the threy Hooks oil and gas leases entered as

Exhibits 25, 26, and 27; and · ·

.> In response to Question No. 9, the jury found by a unanimous vote that the

. HookS, in the exercise of reasonable diligence, should have discovered the

fraud of Samson by April 2007.

The verdict form was signed by the eleven jurors who concurred in the answers to Questions

Nos. 1, 2, 3, and 8. The Charge of the Court and verdict of the jury, which. the Court hereby

adopts, are incorporated herein by reference.

In ·addition, before trial, the Court had entered Orders on motions for partial summary

judgment with regard to certain claims at issue .in thi~ case. The following Orders on motions for

partial summary judgment are hereby reaffirmed and incorporated herein.by reference:

)>- · Order on Plaintiffs' First Amended Motion for Pmiial Summary Judgment

(Tract 4114 Leases), recommended by Special Master W. Frank Newton on

July 29, 2008, and adopted by the Court on July 30, 2008; arid

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5

);:> Order Granting Plaintiffs' First Amended Motion for Partial Summary

Judgment (Unpooling), recommended by Special Master W. Frank Newton on

July 29, 2008, and adopted by the Court on July 30, 2008;

Therefore, IT IS ORDERED, ADJUDGED, AND DECREED as follows:

);:> Pursuant to the Order on Plaintiffs' First Amended Motion for Partial

Summary Judgment (Tract 4/14 Leases), the royalty rate under the Hooks oil

and gas leases at issue in this case (admitted as Exhibits 25, 26, and 27 at trial)

has been equal to 28 .28896% since November 2001; and

);:> Pursuant to the Order Granting Plaintiffs' ·First Amended Motion for Partial

Summary Judgment (Unpooling), Defendant Samson must pay Plaintiffs

royalty on production from Samson's Black Stone Minerals A-1 well based on

the royalty revenue interest Plaintiffs are due pursuant to the Black Stone

Minerals "'A" No. 1 Gas Unit as described in Samson's Designation of Gas

Unit for the Black Stone Minerals "A" No. 1 Gas Unit filed ofrecord at Volillne

1259, Page 237 of the Official Public Records of Hardin County, Texas.

Moreover, Plaintiffs and Defendant Samson entered in.to certain stipulations m

connection with this case and entered into the Court's record. Accordingly, the following

stipulations are incorporated herein by reference:

);:> Stipulation (regarding damages) signed by counsel for the parties and filed

. November 7, 2008; and .

);:> Stipulation Regarding Attorneys' Fees signed by counsel for the parties and

filed October 31, 2008.

THEREFORE, pl}rsuant to the jury's verdict, the Comi's Orders on Motions for Partial

Summary Judgment, and the parties' Stipulations cited above, it is ORDERED, ADJUDGED,

AND DECREED that· Plaintiffs have and recover .actual damages from Defendant Samson as

follows:.

Damages }Jroximately caused by fraud: · $20,081,638.07

Damages for breach of Most Favored Nations Clause : $ 848,854.01

Damages for ''Unpooling" claim related to Black Stone Minerals A-1 well: $ 766,626.85

Damages Related to Ad Valorem Taxes: $ 52,257.22

Total Damages: $21,749,376.15

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6

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Plaintiffs shall have

and recover from Defendant Samson attorneys' fees in the followi.ng amounts under the

· following circumstances (pursuant to the parties' Stipulation Regarding Attorneys' Fees): the

sum of $300,000 for services rendered through the trial of this case; an additional $50,000 in the

... event of an appeal to the Court of Appeals; an additional $10,000 if a petition for review is filed

with the Texas. Supreme Court; and an additional $10,000 if the Texas Supreme Court grants the

petition for review.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, Plaintiffs shall have·

and recover from Samson the following expert· witness fees: for Nedra Foster, $47,351.79; and

· for Charies E. Graham, $58,689.07.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, Plaintiffs shall have

and recover from Sarrison $5,493.51 for costs for copies of depositions;

IT IS· FURTHER ORDERED, ADJUDGED, AND DECREED that all costs of court

spent or incurred in this case are adjudged against Defendant Samson, and that "Plaintiffs shall

have and recover from Samson all costs of court incurred by Plaintiffs. .

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, in addition to the

foregoing, Plaintiffs shall have and recover from Sam.son post-judgment interest on the total

amount of this judgment, including damages, attorneys' fees, expert witness.fees, and costs of

COUli, at th_e rate of 18%; compounded annually~ ·

- 4 - ..

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED as follows:

> Defendant Samson shall pay Plaintiffs royalty on production from Samson's

Black Stone Minerals A-I well, commencing with·production after May 2008,

based on the royalty revenue interest Plaintiffs are due pursuant to the Black

Stone Minerals "A" No. 1 Gas Unit as.described in Samson's Designation of

Gas Unit for the Black Stone Minerals "A" No. 1 Gas Unit filed of record at

Volume 1259, Page 237 of the Official Public Records of Hardin County, Texas;

> Any royalty owed on production after May 2008 under Plaintiffs' oil and gas

leases at issue in this case (admitted as Exhibits 25, 26, and 27 at trial) shall be

based on a royalty rate of 28.28896%;

> Any royalty owed on gas production after May 2008 under the oil and gas

· leases at issue in this case (admitted as Exhibits 25, 26, and 27 at trial) shall be

based on formation production gas volumes as reported on Texas Railroad

Commission records;

> Defendant Samson shall be liable for all ad valorem taxes levied upon

Plaintiffs' interest in the oil and gas .leases at issue (admitted as Exliibits 25,

26, and 27 at trial) after November 2007, as long as those leases remain in

effect; and

> Defendant Samson shall provide Plaintiffs with the following notices and

information as required by the oil and gas leases at issue in this case while

thos.e leases are in effect:

• Copies of all electric logs, formation surveys, or any other test made in a

well or wells on the land described in the leases or units into which they

were poole.d;

• Copies of written designations of production units;

• Copies of all applications and reports filed with the Texas Railroad

Commission in connection with Samson's operations under Plaintiffs'

Leases;

• Advanced notice of any deductions or adjustments against present or

· future royalty payments for royalty payments previously paid, with full

explanation of such overpayment;

• . Title opinions;

• Daily operation reP.orts . during drilling, ·completion, or reworking

operations;

• Seismic or other geophysical data obtained by Samson on the leased

premises or units into which the leased premises are pooled, including

basic d?-ta, scaled and ·platted maps, and final stacked and migrated

seismic data at all depths across su.ch acreage (for which Plaintiffs will use

their best· efforts during .the term of the applicable Lease to maintain all

such data so provided in confidence until otherwise released from this

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8

J. '

obligation by Samson or until Samson releases such data to the general oil

and gas industry, whichever occurs earlier; and

• Notice of any oil and gas lease Samson enters into covering any land

within three miles of the exterior boundary of the leased premises or units

into which the leased.premises are. pooled.

All writs and prncesses for the .enforcement and collection of this judgment or the costs

of court may issue in accordance with the law if this judgment is not timely paid.

IT IS FINALLY ORDERED, ADJUDGED, AND DECREED that any relief requested in

this case but not expressly granteq herein is DENIED.

This is a final judgment that disposes of all parties, claims, and counterclaims, a

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