Sponsoring the most paranoid Texas conspiracy theory since the puff of smoke from the grassy knoll, groups of neighborhood associations, homeowners, and businesses sued virtually all of the major Barnett Shale producers over their failure to complete negotiations for oil and gas leases for bonuses of up to $20,000 per acre. Cessation of negotiations – or culmination of the sinister and well-orchestrated scheme if you prefer to see it that way – occurred in October 2008 when the bottom fell out of gas prices.
In two cases described by the appellate court rendering them as having no substantive differences, Eastland Express, L.P. vs. XTO Energy, Inc. et al, and Maddox v. Vantage Energy, L.L.C, there was no valid written contract between the prospective lessees and the associations that were negotiating for everyone, and no claims existed for promissory estoppel, negligent misrepresentation, and antitrust violations.
You Must Be a Party To the Contract You Try to Enforce
SEACTX and SFWA were formed to negotiate the best oil and gas leases for many mineral owners in various portions of Tarrant County, Texas. The mineral-owner plaintiffs claimed that agreements had been reached by a series of emails. The producers took thousands of leases, but when gas prices dropped the producers were no longer willing to acquire additional leases on the same terms.
There was an agreement with an approved lease form, which said each individual property owner was not obligated to sign the form, but had the right to negotiate his or her own terms with any oil and gas company of their choosing, and should conduct their own investigation. The negotiating entities did not have authority to, and did not, negotiate individual leases for each of the mineral owners, or for anyone. The contract did not identify any individual mineral owner by name as a person who would benefit from a lease. The plaintiffs failed in their claim to be third-party beneficiaries of the contract to lease. Under Texas law, a third party beneficiary must be named in the contract he is trying to enforce.
Promissory estoppel didn’t work because the promise was not made to the plaintiffs, but to the associations who spoke for them. Thus, they did not have standing to bring that claim. On negligent misrepresentation, under Texas law reliance damages, and not benefit-of-the-bargain damages, are recoverable. The plaintiffs could not point to any out-of-pocket expenditures made in reliance on the representations.
The court threw out the antitrust claim on the basis that the plaintiffs were not consumers of an alleged violator’s goods or services or a competitor of the alleged violator in the market.