It is often a worthy strategy for the lessee to be aggressive with counterclaims against the lessor. Or how about we’re the Wehrmacht and the other guy is Poland.

Lessees should think twice about that strategy if it means complaining about the lessor’s public statements. In Lona Hills Ranch v. Creative Oil & Gas Operating LLC et al, that strategy ran afoul of the Texas Citizens Participation Act, Texas’s “anti-SLAPP” statute (“Strategic Lawsuits Against Public Participation”).

The TCPA authorizes dismissal of a legal action based on, relating to, or in response to a party’s exercise of the right of free speech, right to petition, or right of association.

The lessor’s actions

Lona Hills Ranch, lessor of a Lee County lease, sued operator Creative Operating for trespass and trespass to try title, alleging that the lease had terminated. In connection with the dispute the Ranch took three actions:

  • Before suing, filed a complaint at the Railroad Commission challenging Operating’s good-faith claim to continue to operate the lease in disregard of a notice-and-cure provision in the lease. That claim was denied (No surprise there; the operator’s burden was lower than Joey Gallo’s homerun-to-strikeout ratio).
  • Communicated to purchasers of production that the lease had terminated, thereby shutting down oil purchases.
  • Filed suit, also in disregard of a notice-and-cure provision.

Operating counterclaimed for breach of contract, asserting that the Ranch breached the lease by those three actions. Creative Leasing, the lessee, intervened making the same assertions.

The process

The Ranch sought to dismiss the counterclaims under the TCPA. The process has two stages. First, the Ranch had to prove that the counterclaims were predicated on the Ranch’s exercise of its right to free speech or right to petition the courts. If that was successful the burden shifted to Operating/Leasing to establish, by clear and specific evidence, a prima facie case for each essential element of their claims.

The Ranch proved that assertions that it communicated the alleged lease termination to third parties were predicated on the Ranch’s exercise of its right to free speech. That was clear from Operating/Leasing’s pleadings.

Operating was not a party to the lease so it couldn’t establish any breach of contract claim and its claims were dismissed.

After the burden shifted, Leasing offered no evidence that any provision in the lease prohibited the Ranch from communicating to third parties that the lease had terminated. That deprived Leasing of one essential element of its breach of contract claim and that counterclaim was dismissed.

That left the counterclaims that the Railroad Commission complaint and lawsuit violated the lease’s notice-and-cure provision. Those claims were not predicated on an injury from a TCPA-protected “expressive activity”. By agreeing to notice-and-cure the Ranch contractually restricted its normally unrestricted constitutional right to petition. That was a waiver of its TCPA remedies.

Now the parties can get back to whatever they were fighting about in the first place.

Free speech; shouldn’t it be for everybody?