Bryan C. Wagner, Wagner Oil Company, Trade Exploration Corporation, and Wagner & Cochran, Inc. v. Apache Corporation

Texas Supreme Court·Decided April 9, 2021·No. 19-0244·Published

Opinion

IN THE SUPREME COURT OF TEXAS ══════════

No. 19-0243

══════════

BRYAN C. WAGNER, WAGNER OIL COMPANY, TRADE EXPLORATION CORPORATION, AND WAGNER & COCHRAN, INC., PETITIONERS,

V.

APACHE CORPORATION, RESPONDENT ══════════════════════════════════════════ ON PETITION FOR REVIEW FROM THE COURT OF APPEALS FOR THE SECOND DISTRICT OF TEXAS ══════════════════════════════════════════

~ consolidated with ~

══════════

No. 19-0244

══════════

BRYAN C. WAGNER, WAGNER OIL COMPANY, TRADE EXPLORATION CORPORATION, AND WAGNER & COCHRAN, INC., PETITIONERS,

V.

APACHE CORPORATION, RESPONDENT ══════════════════════════════════════════ ON PETITION FOR REVIEW FROM THE COURT OF APPEALS FOR THE SECOND DISTRICT OF TEXAS ══════════════════════════════════════════

Argued February 3, 2021

JUSTICE BUSBY delivered the opinion of the Court.

JUSTICE HUDDLE did not participate in the Court’s decision.

This case requires us to decide whether indemnity claims fall within an exception to an arbitration clause. Also at issue is whether non-signatory assignees are bound by the agreement to arbitrate. The trial court held that the claims fell within the exception and should not be arbitrated. The court of appeals reversed, holding that the claims did not fall within the exception. The court of appeals also held that the non-signatory assignees were bound by the agreement under a theory of assumption. We agree with the court of appeals’ judgment and therefore affirm.

BACKGROUND

In 2001, Wagner Oil Company purchased several assets from Apache Corporation, including oil and gas wells, mineral leases and fee interests, and personal property used in connection with the operation of the wells. Bryan Wagner signed the Purchase and Sale Agreement (PSA) as president of Wagner Oil. Under an indemnification provision, Wagner Oil agreed to

defend, indemnify, release and hold harmless Seller against all losses, damages, claims, demands, suits, costs, expenses, liabilities and sanctions of every kind and character, including without limitation reasonable attorneys’ fees, court costs and costs of investigation, which arise from or in connection with (i) any of the claims, costs, expenses, liabilities and obligations assumed by Buyer . . . , or (ii)

any breach by Buyer of this agreement. 1

The PSA also contained an arbitration clause:

1 This text appeared in all capital letters in the original, but we have normalized the capitalization for readability.

Arbitration. Any disputes arising out of or in connection with this Agreement or the application, implementation, validity, breach or termination of this Agreement shall be finally and exclusively resolved by arbitration in Houston, Texas pursuant to the dispute resolution provisions contained in Exhibit B. Notwithstanding the above, in the event a third party brings an action against Buyer or Seller concerning this Agreement or the Assets or transactions contemplated herein, Buyer and Seller shall not be subject to mandatory arbitration under this section and Buyer or Seller shall each be entitled to assert their respective claims, if any, against each other in such third party action.

(Emphasis added). Arbitration under the PSA would be governed by the Federal Arbitration Act (FAA). The PSA also provided that it was “binding upon, and shall inure to the benefit of, the Parties hereto, and their respective successors and assigns.” At the same time the parties executed the PSA, Apache assigned the assets to Wagner Oil in an Assignment, Conveyance, and Bill of Sale (the Apache Assignment).

Following this transaction, Wagner Oil assigned the assets to Bryan Wagner (80%), Trade Exploration Corp. (19%), and Wagner & Cochran, Inc. (1%) (the Wagner Oil assignees). This Wagner Oil Assignment provided that it was “subject to all terms, provisions and conditions contained in the APACHE Assignment, and Assignees assume and agree to be bound by and perform their proportionate parts of all obligations imposed upon Assignor by the APACHE Assignment.”

Beginning in 2010, third-party surface landowners filed five lawsuits in Louisiana against Apache, seeking damages for alleged environmental contamination caused by Apache’s operation of the assets before it sold them to Wagner Oil. In 2017, Apache filed a demand for arbitration in Harris County with the American Arbitration Association against Wagner Oil, Bryan Wagner, Trade Exploration, and Wagner & Cochran (collectively, plaintiffs) for indemnity and defense. A month later, plaintiffs filed a declaratory judgment action in Tarrant

County district court seeking several declarations, including that: (1) Bryan Wagner, Trade Exploration, and Wagner & Cochran are not parties to the PSA and therefore not subject to the arbitration and indemnity clauses; (2) the Wagner Oil Assignment does not obligate Bryan Wagner, Trade Exploration, and Wagner & Cochran to defend or indemnify Apache; (3) Apache was not a third-party beneficiary of the Wagner Oil Assignment; and (4) a claim for defense and indemnity arising from a third-party lawsuit shall not be subject to mandatory arbitration.

Apache filed a motion to transfer venue in the Tarrant County suit, asserting that venue was mandatory in Harris County under both the arbitration clause of the PSA and Texas Civil Practice and Remedies Code sections 171.096 and 171.097. In the alternative, Apache filed a motion to abate and compel arbitration. Plaintiffs responded with an application to stay the arbitration proceedings. After the trial court held a hearing on the motions, it granted plaintiffs’ application to stay the arbitration proceedings initiated by Apache. The trial court also denied Apache’s motion to abate and compel arbitration and its motion to transfer venue. Apache filed an interlocutory appeal challenging the trial court’s denial of its motion to compel arbitration. See TEX. CIV. PRAC. & REM. CODE § 171.098(a)(1). 2 The court of appeals reversed, concluding that the trial court abused its discretion by denying Apache’s motion to compel arbitration. __ S.W.3d __, __ (Tex. App.—Fort Worth 2018). The court first held that the PSA included a valid agreement to arbitrate. Id. at __. The court then addressed whether the Wagner Oil assignees—as non-signatories to the PSA—were

2 As we discuss below, Apache also filed a petition for writ of mandamus challenging the trial court’s refusal to transfer the case to Harris County, which the court of appeals denied without opinion. In re Apache Corp., No. 02- 18-00137-CV, 2018 WL 2248500 (Tex. App.—Fort Worth May 17, 2018, orig. proceeding).

subject to the PSA’s arbitration clause. Id. at __. The court observed that “an assignee may be held liable under another party’s contract if it makes an express or implicit assumption of the contract’s obligations.” Id. (citing NextEra Retail of Tex., LP v. Inv’rs Warranty of Am., Inc., 418 S.W.3d 222, 227 (Tex. App.—Houston [1st Dist.] 2013, pet. denied)). The PSA provided that it was binding on the parties and “their respective successors and assigns,” the Apache Assignment was subject to all terms and conditions of the PSA, and the Wagner Oil Assignment provided that it was subject to all terms in the Apache Assignment and that the assignees assumed and agreed to be bound by obligations in the Apache Assignment. Id. Based on those provisions, the court concluded that the Wagner Oil assignees were bound by the arbitration clause.

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Bryan C. Wagner, Wagner Oil Company, Trade Exploration Corporation, and Wagner & Cochran, Inc. v. Apache Corporation, (Tex. 2021).

Bryan C. Wagner, Wagner Oil Company, Trade Exploration Corporation, and Wagner & Cochran, Inc. v. Apache Corporation (Bryan C. Wagner, Wagner Oil Company, Trade Exploration Corporation, and Wagner & Cochran, Inc. v. Apache Corporation) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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