Tyler Grp. Partners, LLC v. Madera

• Citation: 564 F.Supp.3d 944
• Decision Date: 30 September 2021
• Docket Number: CIV 19-0777 JB/SMV
• Parties: TYLER GROUP PARTNERS, LLC, Plaintiff, v. Bert MADERA; Montie Carol Montgomery and Pitchfork Ranch Cattle Company, LLC, Defendants.
• Court: U.S. District Court — District of New Mexico

564 F.Supp.3d 944

TYLER GROUP PARTNERS, LLC, Plaintiff,

v.Bert MADERA; Montie Carol Montgomery and Pitchfork Ranch Cattle Company, LLC, Defendants.

No. CIV 19-0777 JB/SMV

United States District Court, D. New Mexico.

Filed September 30, 2021

Emilio DeAyala, Buck Keenan, LLP, Houston, Texas --and-- Joseph M. Zebas, Zebas Law Firm, LLC, Hobbs, New Mexico, Attorneys for the Plaintiff.

Clayton S. Hightower, Sanders, Bruin, Coll & Worley, P.A., Roswell, New Mexico, Attorneys for the Defendants.

MEMORANDUM OPINION, FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER

JAMES O. BROWNING, UNITED STATES DISTRICT JUDGE

THIS MATTER comes before the Court on: (i) Defendant Bert Madera's Motion In Limine to Bar Reference of Settlement Negotiations, Attorney Client-Communication and Dismissal of Parties, filed November 30, 2020 (Doc. 80)("Motion"); and (ii) a two-day bench trial on damages, see Clerk's Minutes, filed May 3, 2021 (Doc. 135)("Trial Minutes"). The Court held a hearing on the Motion on January 29, 2021. See Clerk's Minutes at 1, filed January 29, 2021 (Doc. 98). The Court held a two-day bench trial on May 3, 2021, and May 4, 2021. See Transcript of Bench Trial (held May 3, 2021), filed May 24, 2021 (Doc. 132)("May 3 Tr."); Transcript of Bench Trial (held May 4, 2021), filed May 24, 2021 (Doc. 133)("May 4 Tr."). The primary issues are: (i) whether the Court should exclude evidence of an email Defendant Bert Madera accidently sent to Frederick Harold Tyler, the sole member of Plaintiff Tyler Group Partners, LLC, discussing an offer to Tyler for the sale of the Pitchfork Ranch, because the email (a) is part of a settlement negotiations, which are inadmissible under rule 408 of the Federal Rules of Evidence ; (b) is privileged attorney-client communication; and (c) is prejudicial under rule 403 of the Federal Rules of Evidence ; and (ii) whether Tyler Group is entitled to damages under an oral water sales agreement with Defendant Bert Madera and Pitchfork Ranch Cattle Company, LLC ("Pitchfork Cattle"), because Madera acted in bad faith when he shut off water access; and (iii) whether Tyler Group formed a contract with Madera and Pitchfork Cattle, for 2.5% of Pitchfork Ranch's sale price. First, the Court concludes that the email is admissible, because (a) it is not settlement communications under rule 408 ; (b) Madera waived confidential attorney-client privilege, because he did not make the email in confidence; and (c) there is no prejudice under rule 403, because there is no risk of jury confusion. Second, the Court does not award Tyler Group damages under the water sales agreement, because Madera and Pitchfork Cattle paid Tyler Group for the one water sale Tyler negotiated, and Madera did not act in bad faith. Third, the Court concludes that Madera and Tyler had a contract for 2.5% of Pitchfork Ranch's sale to compensate Tyler for the work he did to improve Pitchfork Ranch's water sales and therefore to attract potential buyers, because the record reflects that Madera made an offer on February 12, 2018; (ii) Tyler accepted through performance; (iii) there was consideration; and (iv) the parties objectively manifested mutual assent. The Court concludes, therefore, that Madera breached the contract, because Madera and Pitchfork Cattle did not pay Tyler Group anything when Madera sold Pitchfork Ranch for $81,600,000.00. Consequently, the Court awards Tyler Group $2,040,000.00 in damages, which is 2.5% of the $81,600,000.00 sales price of Pitchfork Ranch.

FINDINGS OF FACT

Following the two-day bench trial, Tyler Group and Madera submitted proposed findings of fact. See Plaintiff's Proposed Findings of Fact and Conclusions of Law at 1-14, filed June 8, 2021 (Doc. 137)("Tyler Group FOFs"); Defendants Bert Madera and Pitchfork Ranch Cattle Company, LLC Proposed Findings of Fact and Conclusions of Law at 1-9, filed October 30, 2020 (Doc. 139)("Madera FOFs"). The Court has considered carefully Tyler Group's and Madera's sets of facts, and accepts some of those facts, rejects some, and finds some facts that no party brought to its attention. See Tyler Group FOFs at 1-14; Madera FOFs at 1-9.¹ The Court sets forth its findings below.²

1. The Parties.

1. The Tyler Group is a Texas limited liability company doing business in the State of New Mexico. See May 3 Tr. at 107:7-11 (DeAyala, Tyler); Tyler Group FOFs at 2 (no paragraph numbering); Madera FOFs ¶ 2, at 1.

2. Fredrick Harold Tyler is Tyler Group's sole member and owner. See May 3 Tr. at 107:7-11 (DeAyala, Tyler); Tyler Group FOFs at 2 (no paragraph numbering); Madera FOFs ¶ 2, at 1.

3. Tyler does not have a qualifying broker's license or associate broker's license under the New Mexico Real Estate Brokers and Salesman Act ("NMREBSA"). See Pretrial Order Madera FOFs ¶ 33, at 5.

4. Pitchfork Ranch is a cattle ranch in Lea County, New Mexico. See May 3 Tr. at 107:7-11 (DeAyala, Madera); Tyler Group FOFs at 1 (no paragraph numbering); Madera FOFs ¶ 4, at 1.

5. Bert Madera is a citizen of New Mexico and, at all times relevant to this case, has been an owner and manager of Pitchfork Cattle. See May 3 Tr. at 34:21-35:3 (DeAyala, Madera); Tyler Group FOFs at 2 (no paragraph numbering); Madera FOFs ¶ 3, at 2.

6. At one time, Pitchfork Ranch comprised more than 70,000 acres. See May 3 Tr. at 30:25-31:1 (DeAyala, Madera); Tyler Group FOFs at 1 (no paragraph numbering).

7. Pitchfork Ranch has been in the Madera family for five generations. See May 3 Tr. at 30:22-24 (DeAyala, Madera); Tyler Group FOFs at 1 (no paragraph numbering); Madera FOFs ¶¶ 6-7, at 2.

8. In 2006, Madera inherited Pitchfork Ranch from his late father. See May 3 Tr. at 31:2-4 (DeAyala, Madera); Madera FOFs ¶ 6, at 2.

9. Madera and Madera's former wife, Montie Carol Madera (now known as Montie Carol Montgomery), decided to sell Pitchfork, with the "goal of" selling it for "100-million plus." May 3 Tr. at 114:10-16 (Madera). See Tyler Group FOFs at 3 (no paragraph numbering); Madera FOFs ¶ 8, at 2.

10. On April 3, 2017, Madera and Montgomery signed an operating agreement as members and managers of Pitchfork Cattle. See Operating Agreement of Pitchfork Ranch Cattle Ranch, LLC at 1-9 (effective April 3, 2017)(admitted at Trial on May 3, 2021, as Tyler Group's Exhibit 3)("Pitchfork Ranch Operating Agreement"); May 3 Tr. at 43:22-23 (Madera)("Montie Carol was a manager, and I was a manager."); May 3 Tr. at 59:7-16 (DeAyala, Madera); Tyler Group FOFs at 2 (no paragraph numbering).

11. Montgomery owned half of Pitchfork Cattle. See May 3 Tr. at 59:13 (Madera)("[S]he owned half of it."); id. at 43:19-44:7 (DeAyala, Madera).

12. Montgomery "took care of all the administrative work" for Pitchfork Cattle: she "did the accounts payable, accounts receivable, the books. [She] took care of recordkeeping. [She and Madera] would look at contracts together and talk about those ...." May 3 Tr. at 249 (Montgomery).

13. Concho Resources was Pitchfork Ranch's largest oil and gas leaseholder. See May 3 Tr. at 59:22-24 (Madera).

14. On August 29, 2018, when Madera sold Pitchfork Ranch, Pitchfork Ranch was about 23,000 acres. See May 3 Tr. at 31:7-11 (DeAyala, Madera); Tyler Group FOFs at 1 (no paragraph numbering); Madera FOFs ¶¶ 6-7, at 2.

2. The SUCA.

15. In June 2016, Madera entered into a Surface Use and Compensation Agreement ("SUCA") with COG Operating LLC, an affiliate of Concho Resources. See Surface Use and Compensation Agreement at 1-13 (effective June 27, 2016; signed Jul 14, 2016)(admitted at Trial on May 3, 2021, as Tyler Group's Exhibit 1)("SUCA"); May 3 Tr. at 36:22-40:8 (DeAyala, Madera); Tyler Group FOFs at 2 (no paragraph numbering).

16. Under the SUCA, COG Operating LLC paid Madera fees in exchange for various land use activities on Pitchfork Ranch, such as fees for "fresh water use" in Concho Resources’ fracking operations on Pitchfork. SUCA at 4. See May 3 Tr. at 84:10-85:15 (DeAyala, Madera)(describing the SUCA); Tyler Group FOFs at 2 (no paragraph numbering);

17. Under the SUCA, COG Operating LLC, the "Operator[,] shall purchase water from" Madera," the "Surface Owner,"

for as long as it is available and of sufficient quality. Operator may supplement from other sources only when Surface Owner's water is no longer available or of sufficient quality. Operator agrees to purchase fresh water from Surface Owner's water for $2.00 per barrel. This price includes use of land to deliver water to operator's project. In the case where water is brought onto Surface Owner's land that is considered "off lease water", and additional char of twenty-five cents (.25) per barrel will be charged to Operator.

SUCA at 4.

18. Concho Resources, Pitchfork Ranch's largest oil and gas leaseholder, was expected to need a million barrels of more of water per well fracked. See May 3 Tr. at 59:22-24 (Madera); id. at 81:22-82:1 (Madera); Tyler Group FOFs at 2 (no paragraph numbering); Declaration of James Michael Mooney at 1 (Executed April 22, 2021)(admitted at Trial on May 3, 2021, as Tyler Group's Exhibit 50)("Mooney Decl.")("During the 20 months I was employed with Concho, several pads were constructed and multiple wells drilled on each pad.... Each well pad consumed, in many instances, as much as or more than 1 million barrels of frac water.").

19. Pitchfork Ranch, however, could not produce enough water for Concho Resources’ operations. See May 3 Tr. at 35:17-36:6 (Madera)("[W]e could not produce, on the ranch, ranch water to frac a well, but we had a pipeline coming into the ranch from off-lease water."); id. at 35:20-23 (DeAyala, Madera)(DeAyala: "[Pitchfork Ranch] couldn't produce enough water to water pecan trees." Madera: "You're right."); Tyler Group FOFs at 2 (no paragraph numbering).

20. The SUCA stayed in place until Madera sold the Pitchfork Ranch to Concho Resources. See May 3 Tr. at 128:10-12 (DeAyala, Tyler).

3. The Initial Offers to Buy Pitchfork Ranch.

21. Beginning in 2012 or 2013, Madera received numerous offers to purchase Pitchfork Ranch. See May 3...