Republic Petroleum LLC and Republic Petroleum Partners, LP v. Dynamic Offshore Resources NS LLC and W&T Offshore Inc.

474 S.W.3d 424, 2015 Tex. App. LEXIS 9055, 2015 WL 5076700
Court of Appeals of Texas·Decided August 27, 2015·No. NO. 01-14-00370-CV·Published·Cited by 32 cases

Opinion

OPINION

Jane Bland, Justice

Republic Petroleum LLC, an offshore gas producer, entered into a Production Handling Agreement (PHA) with Dynamic Offshore Resourcés NS LLC and W & T Offshore Inc. (the platform' owners) to process natural gas from an offshore well. In this suit, Republic claimed that the platform owners breached their agreement in the PHA to maintain and repair the platform’s processing equipment and charged excessive amounts for the repairs that were made. The platform owners responded by contending that Republic LLC lacked standing and capacity to seek damages for these breaches because (1) it had assigned its working interest in the well before the claimed breaches occurred, and (2) even if it could sue On behalf of the company in which it had an interest, it did not sue on behalf of the other working interest owners.

The parties tried their claims and defenses to a jury. The jury found that the platform owners did not comply with the PHA and further found that $741,235 in damages would fairly and reasonably compensate Republic L.L.C. for the repair and other costs that it had incurred as a result of the platform owners’ breaches of the PHA. Following the verdict, the trial court held a bench trial on the issue of attorney’s fees. It then entered a final judgment on the verdict and its finding of reasonable and necessary attorney’s fees.

Post-trial, the platform owners urged their standing and capacity arguments in a motion for judgment notwithstanding the verdict (jnov), motion for remittitur, and motion to modify the judgment. The trial court initially denied the' motions, but on reconsideration signed a modified final judgment that reduced the jury and attorney’s fee awards to correspond to the fractional interest in the well’s production that Republic LLC, through Republic LP, owned.

On appeal, Republic LLC challenges the modified judgment.' The platform owners cross-appeal, challenging the trial ■ court’s denial of their motion for directed verdict, motion for jnov, motion for new trial 'and motion for remittitur, contending that Republic LLC should take nothing. Because we conclude that Republic had standing to sue the platform owners, and its capacity to, prosecute the suit was a contested issue *428 at trial that the jury impliedly found against the platform owners, we conclude that the trial court erred in reducing the jury’s verdict to Republic LP’s proportional interest in the well’s production. We reverse the amended, judgment, and we remand with instructions to 'reinstate the jury’s verdict and to:reconsider.attorney’s fees in light- of this opinion.

Background

Republic LLC developed a producing well, named the Satellite Well, in the Gulf of Slexico near High Island, Texas. In November 2007, Republic LLC entered into the PHA with the platform owners for processing the natural gas that the well produced. The PHA governed the (processing and handling of the natural gas and condensate produced from the well and delivered by Itepublie LLC through a 6-mile-long seafloor pipeline to an onshore host facility. Under the PHA, Republic LLC paid the platform owners a monthly volumetric fee for processing gas in exchange for, among other things, the platform owners’ routine maintenance and repair of the processing equipment. Republic Petroleum LLC was -the signatory of the PHA and the designated operator of the producing welk-

in addition, Republic LLC introduced an Offshore' Operating Agreement into evidence. In that agreement, Republic LLC was the designated representative of'the non-operating working interest participants in the well and was authorized to act on behalf of all of the working interest owners.; That agreement authorized Republic LLC to negotiate and, execute the PHA with the platform owners.

In October 2008, Republic LLC assigned its working interest in the well to Republic Petroleum Partners LP; at that point, although Republic -LLC- continued- to be the operator under the PHA it was no longer a working interest owner. Republic LLC continued to be the operator under the operating agreement until July 2010.

The evidence at trial showed that the equipment on the platform was old and in disrepair, and that the platform owners overcharged' Republic LLC for repairs to the platform’s processing equipment. By the summer of 2008, the separator equipment on the platform did not work properly, Shut-ins and downtime occurred frequently, halting production. The platform owners gave their 90-day notice of intent to terminate the contract in the spring of 2009, and they did not perform any further maintenance on the equipment from that point forward.

Republic LLC sued the platform owners for breach of the PHA, seeking reimbursement for overcharges and'excessive billings during the period .that it was the designated operator acting on behalf of the working interest owners. The jury heard testimony from Scott Stanford, president of Republic Petroleum Partners, LP and president and managing partner of Republic Petroleum, LLC. Republic LLC is the general partner authorized to act on behalf of Republic LP. Republic LLC also introduced into evidence records, of the invoices and the payments that it. had made to the platform owners relevant to the activities under the PHA. Stanford also testified that Republic LLC was the well’s designated operator for federal reporting and compliance purposes.

The platform owners challenged this evidence with evidence regarding Republic LLC’s. lack of working interest ownership, and at a minimum, they sought to limit the damages to Republic LP’s working interest share. ( .

The jury-found that the platform owners had: breached -the PHA and further found that Republic LLC was entitled to recover *429 $741,235 in compensatory damages for “repairs” and “costs paid by Republic LLC.” The jury found that Republic LLC did not sustain any damages under the PHA , for loss of production, or for damage to the well reservoir or a platform reconnection.

The trial court held a post-verdict bench trial on Republic LLC’s request for attorney’s fees. It found that Republic LLC had incurred $665,640.37 in reasonable and necessary fees. It entered a final judgment on the jury’s verdict and its fee finding.

The platform owners moved for judgment notwithstanding the verdict, for new trial, for remittitur, and to modify the judgment, contending that Republic LLC lacked standing or capacity to bring suit under the PHA, claiming that Republic LLC had transferred its working- interest in the well before the platform owners had breached - the agreement. Alternatively, the platform owners contended that Republic LLC was limited to the percentage of damages that corresponded to the Republic entities’ working interest in the well, because it had not.timely identified itself as acting in a representative capacity on behalf of the working interest owners. Although Republic LLC is the designated operator of the producing well under the PHA, the platform owners pointed to evidence admitted at trial establishing that Republic LLC had transferred its working interest in the well to Republic LP and two other owners. ,

The trial court denied the platform owners’ motions for jnov, new trial, and remit-' titur but granted their motion to modify the judgment.

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Republic Petroleum LLC and Republic Petroleum Partners, LP v. Dynamic Offshore Resources NS LLC and W&T Offshore Inc., 474 S.W.3d 424, 2015 Tex. App. LEXIS 9055, 2015 WL 5076700 (Tex. Ct. App. 2015).

474 S.W.3d 424 (Republic Petroleum LLC and Republic Petroleum Partners, LP v. Dynamic Offshore Resources NS LLC and W&T Offshore Inc.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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