Amco Energy, Inc. v. Tana Exploration Co. (In re Capco Energy, Inc. )

• Decision Date: 31 January 2012
• Docket Number: No. 11–20264.,11–20264.
• Citation: 669 F.3d 274,56 Bankr.Ct.Dec. 4
• Parties: In the Matter of CAPCO ENERGY, INCORPORATED; Amco Energy, Incorporated, Debtors.Amco Energy, Incorporated, formerly known as Capco Offshore, Incorporated; Capco Energy, Incorporated, Appellants, v. Tana Exploration Company; TRT Holdings, Incorporated; Tristone Capital, LLC; Ryder Scott Company, L.P., Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

56 Bankr.Ct.Dec. 4

669 F.3d 274

In the Matter of CAPCO ENERGY, INCORPORATED; Amco Energy, Incorporated, Debtors.Amco Energy, Incorporated, formerly known as Capco Offshore, Incorporated; Capco Energy, Incorporated, Appellants,

v.Tana Exploration Company; TRT Holdings, Incorporated; Tristone Capital, LLC; Ryder Scott Company, L.P., Appellees.

No. 11–20264.

United States Court of Appeals, Fifth Circuit.

Jan. 30, 2012.As Revised Jan. 31, 2012.

Jett S. Williams, III (argued), Kathleen H. Boll, Charles Lee Henke, Jr., Henke Law Firm, L.L.P., Houston, TX, for Appellants.

Robin Clay Hoblit (argued), Roberta S. Dohse, Hoblit, Ferguson, Darling, L.L.P., Corpus Christi, TX, Jeffrey Robin Elkin (argued), Porter & Hedges, L.L.P., Houston, TX, for Appellees.

Appeal from the United States District Court for the Southern District of Texas.

Before CLEMENT, OWEN and HIGGINSON, Circuit Judges.

HIGGINSON, Circuit Judge:

In a bankruptcy adversary proceeding, Amco Energy, Inc., f/k/a Capco Offshore, Inc., and Capco Energy, Inc. (together, “Capco”) brought claims of fraud and various business torts against Ryder Scott Company, L.P. (“Ryder”), Tana Exploration Company, LLC (“Tana”), TRT Holdings, Inc. (“TRT”), and Tristone Capital, LLC (“Tristone”). The claims arise out of a transaction in which Capco purchased from Tana certain oil and gas reserves located in the Gulf of Mexico. The bankruptcy court granted summary judgment in favor of Ryder, Tana, TRT, and Tristone and dismissed the claims. For the following reasons, we affirm the district court's affirmance of the bankruptcy court's ruling.

FACTS AND PROCEEDINGS

In early 2006, Tana decided to sell certain oil and gas properties located in the Gulf of Mexico (the “Properties”). Tana engaged Tristone to serve as its financial advisor and agent in marketing and selling the Properties. Tana also retained Ryder to review geological and engineering data, accounts, records, and other data in order to prepare a report estimating the reserves, future production, and income attributable to the Properties as of April 1, 2006 (the “April 1, 2006 Report”). Tristone utilized data provided by Tana, including well logs, histories, operations data, production, revenues, and the April 1, 2006 Report, to conduct its commercial evaluation of the Properties and prepare a Confidential Evaluation Brochure (“CEB”) for parties interested in placing a bid to purchase the Properties.

The CEB made clear that Tana and Tristone disclaimed any warranty as to the accuracy, completeness, or materiality of the information or data contained in the CEB. In particular, the CEB stated that, “[a]ny financial forecasts in this Evaluation Brochure and accompanying materials are based on several estimates and assumptions that are subject to uncertain economic and competitive pressures, including future business decisions that are subject to change.” The CEB urged prospective purchasers to conduct their own independent investigation and analysis of the Properties and the data set forth in the CEB.

In order to receive the information regarding the Properties, Capco signed a confidentiality agreement on April 11, 2006. In addition to promising not to disclose information categorized as confidential, Capco accepted Tana's express and highlighted disclaimer of any responsibility for the accuracy of the information Capco received. Capco also agreed that it would “rely solely on its own independent evaluation and analysis of the Information when deciding whether or not to submit a bid or offer, enter into a definitive agreement or consummate any Transaction covering one or more of the Properties.”

On May 3, 2006, Capco submitted a successful bid to purchase the Properties. Capco acknowledged that its bid was subject to “deal points” attached to the CEB. One specific deal point was that, “neither [Tana] nor [Tristone] make any representation or warranty as to the accuracy, completeness or materiality of any information or data (written or oral) that may be furnished to [Capco] in connection with this proposed transaction. In entering into this transaction, [Capco] will rely solely on its independent investigation of the Properties.”

Following Tana's acceptance of Capco's bid, the parties engaged in lengthy negotiations to draft a Purchase and Sale Agreement (“PSA”). The parties executed the PSA on June 2, 2006. The PSA specifically provided:

SELLER HEREBY EXPRESSLY NEGATES AND DISCLAIMS, AND BUYER HEREBY WAIVES, AND ACKNOWLEDGES THAT SELLER HAS NOT MADE, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, RELATING TO (a) THE ACCURACY, COMPLETENESS OR MATERIALITY OF ANY INFORMATION, DATA OR OTHER MATERIALS (WRITTEN OR VERBAL) NOW, HERETOFORE, OR HEREAFTER FURNISHED TO BUYER BY OR ON BEHALF OF SELLER OR (b) PRODUCTION RATES, RECOMPLETION OPPORTUNITIES, DECLINE RATES, GEOLOGICAL OR GEOPHYSICAL DATA OR INTERPRETATIONS, THE QUALITY, QUANTITY, RECOVERABILITY OR COST OF RECOVERY OF ANY HYDROCARBON RESERVES, ANY PRODUCT PRICING ASSUMPTIONS, OR THE ABILITY TO SELL OR MARKET ANY HYDROCARBONS AFTER CLOSING.

Furthermore, Capco represented that in making the decision to enter the agreement and consummate the transactions contemplated, it had relied solely on the basis of its own independent due diligence investigation of the Properties and not on any representations or warranties outside of the PSA.

On June 4, 2006, Ilyas Chaudhary, an employee with Capco, sent an e-mail to Pat McInturff, an employee with Ryder, informing Ryder that Capco had executed a PSA to purchase the Properties. The e-mail also stated, “Union Bank of California will tentatively fund this acquisition. They have requested a meeting in Houston with [Ryder] engineers to revisit Tana & Capco properties. (I believe to determine the loan values).”¹ Consistent with this lender request, five days later, a meeting occurred on June 9, 2006, with representatives from Ryder, Union Bank of California (“UBOC”), and Capco in attendance. Two representatives from Ryder, Olga Basanko and Pat McInturff, made a presentation regarding the Properties, which, according to a Capco attendee, included a detailed review of the April 1, 2006 Report Ryder had prepared for Tana. Following the meeting, Ryder sent an invoice to Capco in the amount of $2,032.50 for “services rendered in connection with the review of [Capco's] reserves and the Tana Acquisition Reserves with Union Bank of California.” Capco paid the invoice.

In preparation for the closing of the transaction scheduled for August 31, 2006, a closing statement was sent to Capco on August 28, 2006, in accordance with the PSA. The closing statement provided Capco with a list of adjustments to the purchase price, including a credit to Capco for approximately $20 million in net production revenue that had accrued since April, 2006. The closing statement also included a footnote: “The August revenue (estimated at $6 million) will be forwarded upon receipt as well. The majority of the August revenue will be received the last week of September.”

Capco's acquisition of the Properties closed on August 31, 2006.

Months later, in early 2007, Capco hired Ryder to prepare an estimate of the remaining volumes of oil and gas reserves, future production, and income attributable to the Properties as of December 31, 2006 (the “December 31, 2006 Report”). Capco claims that the December 31, 2006 Report indicated that reserves on a majority of the Properties were less than reflected on the earlier April 1, 2006 Report.

On April 7, 2008, Capco filed for bankruptcy protection under Chapter 11. On August 28, 2008, Capco filed an adversary proceeding in the U.S. Bankruptcy Court for the Southern District of Texas against Ryder, Tana, TRT, and Tristone seeking rescission of the bill of sale and damages. Capco alleged that Ryder breached its professional obligations in its alleged contract with Capco. Capco also alleged that Tana, TRT, and Tristone made fraudulent representations regarding the Properties.

On June 13, 2011, the bankruptcy court granted summary judgment in favor of Ryder, Tana, TRT, and Tristone. The bankruptcy court ruled that Capco had failed to raise a genuine issue of material fact with respect to whether Capco's engagement of Ryder for the June 9, 2006 presentation was an implied contract creating a duty on Ryder to advise Capco regarding the purchase of the Properties. Because Capco conceded that all of its claims against Ryder were contingent upon a contract between Capco and Ryder, the bankruptcy court dismissed Capco's claims against Ryder. The bankruptcy court also ruled that Capco had failed to raise a genuine issue of material fact with respect to whether it had relied on the alleged misrepresentations made by Tana, TRT, and Tristone. Accordingly, the bankruptcy court dismissed Capco's remaining claims against Tana, TRT, and Tristone.

In a written decision, the district court affirmed the judgment of the bankruptcy court. Amco Energy, Inc., fka Capco Offshore, Inc., et al v. Tana Exploration Co., et al, 455 B.R. 584 (Bankr.S.D.Tex.2011)

STANDARD OF REVIEW AND APPLICABLE LAW

We review the district court's decision using the same standard of review that the district court applied to the bankruptcy court's decisions. See Wells Fargo Bank of Texas N.A. v. Sommers (In re Amco Ins.), 444 F.3d 690, 694 (5th Cir.2006). We review de novo a bankruptcy court's grant of summary judgment. Ingalls v. Erlewine (In re Erlewine), 349 F.3d 205, 209 (5th Cir.2003). A bankruptcy court's grant of summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Id. (citing Fed.R.Civ.P. 56(c); Bankr.R. 7056).²

DISCUSSION

A. Capco's claims against Ryder

On appeal, Capco argues that Capco and Ryder entered into an implied contract whereby Ryder was to conduct an independent re-evaluation of the Properties and advise Capco regarding its closing on the Properties, and...