Fordoche, Inc. v. Texaco, Inc.

Decision Date31 August 2006
Docket NumberNo. 05-30857.,05-30857.
Citation463 F.3d 388
PartiesFORDOCHE, INC., et al., Plaintiffs-Appellants, v. TEXACO, INC.; et al., Defendants, Texaco Exploration and Production, Inc., Defendant-Appellee.
CourtU.S. Court of Appeals — Fifth Circuit

Joseph R. Ward, Jr. (argued), Ward & Condrey, Covington, LA, for Plaintiffs-Appellants.

Loulan Joseph Pitre, Jr. (argued), Gordon, Arata, McCollam, Duplantis & Eagan, New Orleans, LA, B.J. Duplantis, Samuel Edgar Masur, Gordon, Arata, McCollam, Duplantis & Eagan, Lafayette, LA, for Defendant-Appellee.

Appeal from the United States District Court for the Middle District of Louisiana.

Before KING, BARKSDALE and DENNIS, Circuit Judges.

DENNIS, Circuit Judge:

This case deals with the performance of obligations under right of first refusal (ROFR) clauses, also termed "preferential rights" clauses, in four joint operating agreements (JOAs) to which defendant-appellee Texaco Exploration and Production, Inc. ("TEPI") and plaintiffs-appellants, Fordoche, Inc. and Ronnie and Rebecca Theriot ("Fordoche group") were parties. Each of the ROFR clauses required that any party to the JOA, before selling any of its mineral interest described in the JOA to a third party, must first offer the same interest to the other parties to the JOA on the same terms as that of the contemplated sale to the third party. TEPI planned to sell its mineral leases affected by the four JOAs to a third-party, EnerVest Energy, L.P., as part of a $78 + million package sale including additional mineral leases in several areas of the state. Before doing so, TEPI sent the Fordoche group letters notifying them of its planned package sale and calling on them to exercise their preferential rights for a price of $2 + million within 30 days. The Fordoche group expressed interest but questioned whether TEPI's letters amounted to a good faith offer to sell them, for a fairly allocated amount, the identical type and quantity of property rights that TEPI planned to sell to EnerVest. The Fordoche group contends that despite its requests for information, it never received satisfactory answers to its questions. TEPI, on the other hand, takes the position that the letters it sent the Fordoche group fulfilled its obligations to the Fordoche group and that the group did not request additional data or explanation. It is undisputed that the Fordoche group did not exercise or waive its preferential rights as TEPI demanded in its letters, or in any other way; and that some seven months after the Fordoche group received the letters TEPI sold all of its interests affected by the four JOAs to EnerVest in the package sale as planned. The Fordoche group brought this suit, claiming that they had been damaged by TEPI's failure to comply in good faith with the ROFR clauses.

The ultimate question in this appeal is whether, based on the record before us, TEPI performed its obligations in good faith as required by the ROFR clauses and, therefore, is entitled to summary judgment dismissing the Fordoche group's claims. We conclude that TEPI has failed to carry its burden of showing that there is no genuine issue as to any material fact or that it is entitled to a judgment as a matter of law.

Favoring the non-moving parties in the resolution of genuine issues as to material facts and in drawing reasonable inferences, the evidence presented for and against summary judgment is reasonably susceptible to the following interpretation:

(1) TEPI breached its obligations under the ROFR clauses found within the JOAs because:

(a) Under the August 29, 1962 JOA, the Fordoche group had a preferential right to purchase from TEPI, "its interest, in whole or in part, in the properties affected by this agreement" that TEPI sold to EnerVest. Thus, the 1962 JOA's ROFR affected TEPI's entire working interest under that JOA. Accordingly, when TEPI sold that working interest to EnerVest after offering to sell the Fordoche Group only a lesser interest, viz., TEPI's share of the unitized substances, it breached that ROFR. Alternatively, TEPI breached that RFOR by effectively transferring to EnerVest the right to control and use the tangible facilities and the surface rights necessary to their use after specifically excluding them from the property it offered to sell to the Fordoche group;

(b) TEPI failed to perform its obligations under the ROFRs because it transferred property affected by the Fordoche's preferential rights without ever making an offer to sell any certain or definite thing or property interest to the Fordoche group;

(c) TEPI breached the ROFRs by selling the property affected by the Fordoche group's preferential rights to EnerVest for a lesser price than TEPI asked in its offer to the Fordoche group.

(2) TEPI breached its duty to act in good faith with respect to its performance of its obligations under each of the ROFRs by:

(a) substantially increasing the price in its offer to the Fordoche group between March 1, 2000, and April 26, 2000 with the intention of discouraging the Fordoche group's exercise of their preferential rights; and

(b) making misrepresentations to the Fordoche group regarding its ownership interest in certain tangible and intangible property associated with the production units, as well as misrepresentations regarding the productivity of certain wells.

Facts

Defendant TEPI and plaintiffs, the Fordoche group, along with many others not parties to this suit, separately owned mineral leases that gave them working interests1 in respect to four different production units in the Fordoche Field in Point Coupee Parish, Louisiana. The purpose of these production units was to allow working interest owners to extract certain types of minerals from designated sands underlying particular tracts of land. Because no party contends otherwise, we infer that each mineral lease involved in this case is a standard contract whereby the lessee has the right to: (1) explore for and extract oil, gas, or other minerals; (2) make reasonably necessary use of the surface of the lands affected for those purposes; and (3) assign or transfer those rights to other persons.

TEPI, the Fordoche group, and the non-party lease owners were parties to four different joint operating agreements (JOAs) formed by them or their predecessors for the purpose of producing minerals from the four unitized sands. The function of a JOA is to spell out each party's rights and duties with respect to drilling, development, operations and accounting in connection with each production unit. The following provides the dates of execution of each JOA and the property affected by each JOA:

(1) August 29, 1962 JOA is for the Pressure Maintenance Unit "K" and Upper Dearing Sands and covers the Commingling Facility No. 8 and the following wells:

* J.O. Long Well # 2-D

* J.O. Long Well # 5-D

* J.O. Long Well No. 8

* L.E. Carpenter Well # 1-D

* Clark Heirs Well # 2

(2) May 1, 1969 JOA is for the Long RA SU A and covers the following wells:

* Price U1 Well # 1

* Price J.O. Long Well # 9-D

* U2 Well # 1 & 1 Alt.

* Long RA SU A# 2-A

(3) December 1, 1969 JOA is for the "L" Sand Unit and covers the following well:

* Fairchild-Chauvin U1 Well # 1

(4) November 14, 1995 8000 RA SUA Operating Agreement covers and affects the following wells:

* J.O. Long Well # 7-D

* J.O. Long Well # 11

* Clark Heirs Well # 1

* Clark Heirs Well # 3

* Fairchild-Chauvin Well U2-1 Alt.

* B.W. Dreyfus Well # 1-A

* Mrs. Rap Price Well # 1

* Clark Duckworth U2 # 1

All four JOAs at issue have common features regarding the "operator." First, each JOA details the selection process of an operator in addition to explaining the power of this position. Under the JOAs, the operator is designated as TEPI. Further, the JOAs provide that the operator, while under the ultimate direction and control of the directives of the JOA, is nevertheless authorized to manage and supervise the day-to-day operations of the production unit. Second, each JOA provides a replacement process available to the owners of a majority of the combined working interests upon a vacancy in the position; said majority is empowered to elect another owner as TEPI's successor. Third, the JOAs authorize the operator to develop and operate the Unit Area for the production of Unitized Substances for the joint account of the parties. Finally, each JOA provides that the property and equipment acquired by the operator or the parties for the purpose of exploring for and producing minerals within each respective unit shall become the property of the parties of each JOA as co-owners in indivision.2

The ROFR clauses in the four JOAs are similar except for one major difference. The August 29, 1962 JOA provides that the ROFR applies to the sale by a party of "its interest, in whole or in part, in the properties affected by this agreement." By contrast, the other three JOAs provide that the ROFR will extend to the sale of any part of a party's specified interest in "unitized substances."3

In 1999, TEPI decided to offer for sale to selected prospects its entire working interests in 16 oil and gas fields in Louisiana for the highest lump sum bid in a global transaction called the "Gulf Coast Package." The Gulf Coast Package included, among others, the Fordoche Field. TEPI solicited bids on the Gulf Coast Package, and EnerVest was the successful bidder with an offer of approximately $78.7 million. Of the $78.7 million paid to TEPI, EnerVest initially allocated $1,998,811 as the value of the property subject to the Fordoche group's preferential rights and advised TEPI of that allocated price. As part of the sale, EnerVest also agreed to indemnify TEPI in the event of incurred liability as a result of the ROFR clauses.

On March 1, 2000, TEPI, in writing, offered appellants the opportunity to purchase, at EnerVest's allocated price ($1,998,811), TEPI's undefined interests in the property. Mr. Ronnie J. Theriot, one of the plaintiffs, responded with...

To continue reading

Request your trial
442 cases
  • Nucor Corp. v. Requenez
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
    • January 4, 2022
    ...n.2 (5th Cir. 2011).375 Burrell v. Dr. Pepper/Seven Up Bottling Grp. , 482 F.3d 408, 411 (5th Cir. 2007).376 Fordoche, Inc. v. Texaco, Inc. , 463 F.3d 388, 392 (5th Cir. 2006) ; see Bache v. Am. Tel. & Tel. Co. , 840 F.2d 283, 287 (5th Cir. 1988) (quoting Anderson v. Liberty Lobby, Inc. , 4......
  • BAC Home Loans Servicing, LP v. Tex. Realty Holdings, LLC
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
    • September 28, 2012
    ...a fact is genuinely in dispute only if a reasonable jury could return a verdict for the non-moving party.” Fordoche, Inc. v. Texaco, Inc., 463 F.3d 388, 392 (5th Cir.2006). The moving party bears the initial burden of informing the court of all evidence demonstrating the absence of a genuin......
  • Fisher v. Halliburton, Civil Action No. H-05-1731
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
    • March 25, 2010
    ...a fact is genuinely in dispute only if a reasonable jury could return a verdict for the non-moving party.” Fordoche, Inc. v. Texaco, Inc., 463 F.3d 388, 392 (5th Cir.2006). The moving party bears the initial burden of informing the court of all evidence demonstrating the absence of a genuin......
  • U.S. ex rel. Longhi v. Lithium Power Technologies, Civil Action No. H-02-4329.
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
    • September 27, 2007
    ...a fact is genuinely in dispute only if a reasonable jury could return a verdict for the non-moving party." Fordoche, Inc. v. Texaco, Inc., 463 F.3d 388, 392 (5th Cir. 2006). The moving party bears the initial burden of informing the court of all evidence demonstrating the absence of a genui......
  • Request a trial to view additional results
8 books & journal articles
  • CHAPTER 4 PROPERTY PROVISIONS OF THE JOINT OPERATING AGREEMENT: AN UPDATE FOR THE NEW 2015 FORM JOA
    • United States
    • FNREL - Special Institute Joint Operations and the New AAPL Form 610-2015 Model Form Operating Agreement (FNREL) (2017 Ed.)
    • Invalid date
    ...Aldridge & Stroud, Inc. v. American-Canadian Oil & Drilling Corp., 357 S.W.2d 8, 11-12 (Ark. 1962). In Fordoche, Inc. v. Texaco, Inc., 463 F.3d 388 (5th Cir. 2006), the court, applying Louisiana law, determined that the written notice was deficient for two reasons. First, the notice failed ......
  • CHAPTER 4 PROPERTY PROVISIONS OF THE JOINT OPERATING AGREEMENT: AN UPDATE FOR THE NEW 2015 FORM JOA
    • United States
    • FNREL - Special Institute Joint Operations and the New AAPL Form 610-2015 Model Form Operating Agreement (FNREL) (2016 Ed.)
    • Invalid date
    ...Aldridge & Stroud, Inc. v. American-Canadian Oil & Drilling Corp., 357 S.W.2d 8, 11-12 (Ark. 1962). In Fordoche, Inc. v. Texaco, Inc., 463 F.3d 388 (5th Cir. 2006), the court, applying Louisiana law, determined that the written notice was deficient for two reasons. First, the notice failed ......
  • CHAPTER 3 PROPERTY PROVISIONS OF THE JOINT OPERATING AGREEMENT
    • United States
    • FNREL - Special Institute Oil and Gas Agreements - Joint Operations (FNREL)
    • Invalid date
    ...& Stroud, Inc. v. American-Canadian Oil & Drilling Corp., 235 Ark. 8, ___, 357 S.W.2d 8, 11-12 (1962). In Fordoche, Inc. v. Texaco, Inc., 463 F.3d 388 (5 Cir. 2006), the court, applying Louisiana law, determined that the written notice was deficient for two reasons. First, the notice failed......
  • CHAPTER 3 PROPERTY PROVISIONS OF THE JOINT OPERATING AGREEMENT
    • United States
    • FNREL - Special Institute Oil and Gas Agreements - Joint Operations (FNREL) (2008 ed.)
    • Invalid date
    ...& Stroud, Inc. v. American-Canadian Oil & Drilling Corp., 235 Ark. 8, ___, 357 S.W.2d 8, 11-12 (1962). In Fordoche, Inc. v. Texaco, Inc., 463 F.3d 388 (5 Cir. 2006), the court, applying Louisiana law, determined that the written notice was deficient for two reasons. First, the notice failed......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT