What does it take these days to get money from a Texas jury? Not much, it seems; in XTO v. Goodwin the trick was convincing a higher court that you should keep it.
Let’s start with the minefield that is the law of evidence:
- Expert opinion testimony must be based on facts, and sound reasoning and methodology.
- Conclusory or speculative opinion testimony is not relevant.
- An opinion with no factual substantiation is speculative or conclusory.
- Expert testimony based on unreliable data or flawed methodology is unreliable and does not satisfy the relevancy requirement.
- Unreliable expert testimony is legally no evidence.
XTO trespassed when its wellbore drifted 126 feet into the subsurface of Goodwin’s tract for 2,900 feet, then out again. XTO requested a subsurface easement, which Goodwin denied (which, in the end, was a bad idea), and suspended royalty payments, claiming Goodwin had been overpaid. Goodwin sued for subsurface trespass, bad faith pooling, and conversion.
Prior to trial a lease on a one of Goodwin’s tracts was terminated for XTO’s failure to properly calculate Goodwin’s ownership interest. A jury awarded $815,000 for trespass, $1.2 million for bad-faith pooling and $636,000 for conversion.
Trespass but no damages
The court of appeals reversed the trespass award and ordered that Goodwin take nothing. XTO did trespass (a property owner does have a cause of action for subsurface trespass), but Goodwin didn’t offer a proper damage model.
His damages expert testified as to the value of the trespass based solely on XTO’s own projections of the well’s profitability as stated in SEC filings. This was not a proper measure of damages. This case continues the recent trend in Texas to require more detailed damage testimony.
There was no evidence that the subsurface intrusion would interfere with Goodwin’s ability to develop his minerals. Goodwin’s damages were derived by multiplying XTOs valuation of the well by the proportion of the wellbore trespass to the entire lateral length. Basing the damage calculation on the value of the well as projected in SEC filings was flawed. The valuations were forecasts. The expert performed no independent analysis of the reservoir and provided no factual information about past or future gas pricing, production costs, and other factors. There was no evidence that XTO’s data is reliable. The testimony was speculative.
There was a problem of Goodwin’s creation: XTO didn’t produce the well and didn’t have the legal right to do so until it obtained a subsurface easement from Goodwin.
Other claims – same result
XTO attempted to pool Goodwin’s void lease with other tracts. Goodwin’s claim for bad-faith pooling was doomed because XTO had no contractual authority to pool in the first place. A void contract is no contract.
Likewise, Goodwin’s conversion award was reversed. Because his tract was not pooled he had no right in production from a well not drilled on his tract.
Fats Domino RIP