“Reports that say that something hasn’t happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns — the ones we don’t know we don’t know.”
Donald Rumsfeld. Feb 12, 2002.
Exxon Corporation et al v. Miesch et al is another skirmish in the long war between Exxon Corporation and its lessors, the Miesch family. The Exxon lease, from the 1950’s, called for a 50% royalty. During negotiations for a lower royalty, Exxon made representations about whether the reserves under the leases were depleted. The data furnished by Exxon did not include materials and information on undeveloped formations.
Which brings us to Mr. Rumsfeld. Exxon claimed that this case was similar to other misrepresentation cases where the plaintiffs had knowledge sufficient to inform them of the truth. The court said no. The Miesches did not know what they did not know; that is, the information Exxon hid prevented them from knowing what information they would need to decide whether Exxon was telling the truth. In the other cases “the plaintiffs knew what they did not know.” They did not need the hidden information to have the knowledge necessary to know the truth.
This case has been to the Texas Supreme Court twice, once between Exxon and the Miesches and once between Exxon and Emerald Oil & Gas Company, who took a lease after Exxon plugged the wells and refused to give well and field data to the Miesches. At issue in the earlier Emerald appeal was the accusation that Exxon left junk in old wellbores, making it impossible for any other party, such as Emerald, to reenter the well. That decision was the subject of a Looper Reed Client Alert.
Exxon asserted that the fraud claim was barred because this was really a contract suit. The court disagreed and found that this was a claim for fraudulent inducement, regardless of whether the fraudulent representations were subsumed in a contract, and also because the Miesches’ losses were different than their contract damages.
Incidentally, the Miesches claims for negligence per se, gross negligence, tortious interference and violation of the statutory duty to properly plug wells were barred by limitations. The Miesches knew more than two years before they filed suit of Exxon’s actions that caused damage to the well.
Another story of betrayal inspires a musical interlude.