ACCEPTED 04-14-00167-CV FOURTH COURT OF APPEALS SAN ANTONIO, TEXAS 3/9/2015 2:43:05 PM KEITH HOTTLE CLERK
No. 04-14-00167-CV In the FILED IN Fourth Court of Appeals 4th COURT OF APPEALS at San Antonio, Texas SAN ANTONIO, TEXAS 03/9/2015 2:43:05 PM ____________________ KEITH E. HOTTLE Clerk Stephens & Johnson Operating Co., et al., Appellants, vs. Charles W. Schroeder, et al., Appellees. ____________________ Appealed from the 229th District Court of Jim Hogg County, Texas Cause No. CC-04-143
Appellees’ Brief
Baldemar Garcia Jr. Texas Bar No. 00790740 email: bgarcia@personwhiworth.com lead appellate counsel for appellees Martha Cigarroa de Llano Texas Bar No. 04250800 email: mdellano@personwhitworth.com PWBM, LLP 602 East Calton Road, 2nd Floor (78041) P. O. Drawer 6668 (78042) Laredo, Texas voice 956.727.4441 facsimile 956.727.2696 Appellees Conditionally Request Oral Argument Table of Contents Index of Authorities....................................................................................................3 Statement of the Case .................................................................................................5 Statement Regarding Oral Argument ........................................................................5 Replies to Issues Presented.........................................................................................6 1. Generally speaking, an oil and gas lease terminates if there is no drilling activity or production after the expiration of its primary term. Schroeder presented an expert witness affidavit proving no drilling or production after the primary term on the Stephens & Johnson Operating Co. lease. Stephens & Johnson Operating Co. did not file an opposing affidavit. Was the declaration of termination by summary judgment proper? ................................................................................... 6 2. Reasonable attorneys’ fees are provable by billing records showing the date, rate, number of hours, and description of work. Opposing affidavits cannot be conclusory. Schroeder offered their attorneys’ affidavit and billing records. Stephens & Johnson Operating Co. filed a counter-affidavit characterizing the fees as excessive and unreasonable, but did not challenge the hourly rates or specifically object to any of the submitted hours. Did the summary judgment attorneys’ fees award constitute an abuse of discretion? ............................................................... 6 Statement of Facts.......................................................................................................6 I. Record References ............................................................................................. 6 II. The 10 Year Lease Termination Odyssey .......................................................... 6 Summary of Argument ...............................................................................................9 Argument ................................................................................................................... 10 I. Unchallenged Declaratory Judgment on Lease Termination ............................. 10 II. Attorneys’ Fees ............................................................................................... 11 A. Standard of Review .................................................................................... 11 B. Reasonableness Factors ............................................................................... 11 C. Proving Reasonable Fees ............................................................................. 12 D. Challenging Fees ......................................................................................... 13 E. Schroeders’ Reasonable and Necessary Attorneys’ Fees .............................. 14
Page 2 of 18 Prayer.......................................................................................................................... 15 Certificate of compliance ........................................................................................ 16 Appendix.................................................................................................................... 18
Index of Authorities Cases
Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812 (Tex. 1997) ........... 11 Arthur J. Gallagher & Co. v. Dieterich, 270 S.W.3d 695 (Tex. App.—Dallas 2008, no pet.) ................................................................................................................... 11 Basin Credit Consultants, Inc. v. Obregon, 2 S.W.3d 372 (Tex. App.—San Antonio 1999, pet. denied) ...................................................................................... 12, 13, 14 Bexar County v. Deputy Sheriff ’s Ass’n, 429 S.W.3d 673 (Tex. App.—San Antonio 2014, no pet.) ......................................................................................................... 10 Bocquet v. Herring, 972 S.W.2d 19 (Tex. 1998) ......................................................... 10 Cammack the Cook, LLC v. Eastburn, 296 S.W.2d 884 (Tex. App.—Texarkana 2009, pet. denied) .................................................................................................. 13 City of Laredo v. Montano, 414 S.W.3d 731 (Tex. 2013) .................................... 12, 14 Clearview Properties, L.P. v. Property Tex. SC One Corp., 287 S.W.3d 132 (Tex. App.—Houston [14th Dist.] 2009, pet. denied) ................................................. 12 El Apple I, Ltd. v. Olivas, 370 S.W.3d 757 (Tex. 2012) ............................... 11, 12, 14 Goode v. Shoukfeh, 943 S.W.2d 441 (Tex. 1997) ....................................................... 10
Holman v. Meridian Oil, Inc., 988 S.W.2d 802 (Tex. App.—San Antonio 1999, pet. denied) .................................................................................................................... 10 Jarvis v. Rocanville Corp., 298 S.W.3d 305 (Tex. App.—Dallas 2009, pet. denied) 11
Kidd v. Hogett, 331 S.W.2d 515 (Tex. Civ. App.—San Antonio 1959, writ ref ’d n.r.e.) ....................................................................................................................... 10
Page 3 of 18 Rapid Settlements, Ltd. v. Settlement Funding, LLC, 358 S.W.3d 777 (Tex. App.— Houston [14th Dist.] 2012, no pet.) ..................................................................... 11 State & Cnty. Mut. Fire Ins. Co. ex rel. So. United Gen. Agency of Tex. v. Walker, 228 S.W.3d 404 (Tex. App.—Fort Worth 2007, no pet.) ......................................... 11 Rules
TEX. DISCIPLINARY R. PROF. CONDUCT 1.04 ........................................................ 11 TEX. R. APP. P. 9.4 ..................................................................................................... 15 TEX. R. APP. P. 9.5 ..................................................................................................... 16
No. 04-14-00167-CV Stephens & Johnson Operating Co., et al., Appellants, vs. Charles W. Schroeder, et al., Appellees.
To the Honorable Fourth Court of Appeals:
Now Come appellees (1) Charles W. Schroeder; (2) Elsie A. Schroeder- Schneider; (3) Hollis London; (4) Terry Mengers-Reel; (5) Ted Mengers; (6) Debbie Mengers-Quates; (7) August H. Steinmeyer; (8) Carole Schroeder- Miller; (9) James M. Schroeder; (10) Sally Schroeder-Tinanus; (11) James E. Schroeder; (12) Sue Schroeder-Stanford; (13) Bill Schroeder; (14) Wayne Hennecke; (15) Diane Hennecke-Rhodes; (16) Jerri James; (17) W. Tom Haley;
Page 4 of 18 and (18) Peggy Hailey and file this their brief, and in support thereof, would respectfully show unto the Appellate Court as follows, to-wit:
Statement of the Case This appeal seeks review of a summary judgment declaring the termination of a 43-year-old oil and gas lease and awarding related attorneys’ fees and costs.
Statement Regarding Oral Argument Appellant Genessee did not request oral argument, but the other 16 appellants did. All 18 appellees join the request for oral argument from the 16 appellants, and concede to submission without oral argument per appellant Genessee.
Page 5 of 18 Replies to Issues Presented
1. Generally speaking, an oil and gas lease terminates if there is no drilling activity or production after the expiration of its primary term. Schroeder presented an expert witness affidavit proving no drilling or production after the primary term on the Stephens & Johnson Operating Co. lease. Stephens & Johnson Operating Co. did not file an opposing affidavit. Was the declaration of termination by summary judgment proper?
2. Reasonable attorneys’ fees are provable by billing records showing the date, rate, number of hours, and description of work. Opposing affidavits cannot be conclusory. Schroeder offered their attorneys’ affidavit and billing records. Stephens & Johnson Operating Co. filed a counter-affidavit characterizing the fees as excessive and unreasonable, but did not challenge the hourly rates or specifically object to any of the submitted hours. Did the summary judgment attorneys’ fees award constitute an abuse of discretion?
Statement of Facts
I. Record References Three clerk’s records were filed in this appeal: (1) Vol. 1 dated 4/10/2014 consisting of pages 1-168; (2) Vol. 2 dated 4/10/2014 consisting of pages 1- 293; and (3) Vol. 1 dated 5/1/2014 consisting of pages 1-348. In addition to non-exclusive and thus duplicative numbering, there is also extensive duplication of pleadings and documents amongst the three records. To ensure completeness at the risk of inefficiency, all record references in this brief will be to the last filed record on 5/1/2014 numbered 1-348.
II. The 10 Year Lease Termination Odyssey A little over ten years ago, 18 plaintiffs/appellees (collectively “Schroeder”) filed suit seeking the termination of a May 1, 1972 oil and gas lease on 306.71
Page 6 of 18 acres of land located in Jim Hogg County, Texas. (CR at 1-9) The initial basis of termination was an unexplained 7-month total cessation of oil and gas production (from July 2003 to January 2004) without any drilling activity that occurred 26 years after the 5-year primary term had expired. (CR 5-6)
After a year of adding approximately 30 defendants in the 1st and 2nd amended petitions, Schroeder then moved for summary judgment in mid 2007. (CR at 12-25; 49-61; 63-68) The goal of the summary judgment motion was a declaration that the oil gas lease expired and plaintiffs were entitled to attorneys’ fees. (CR at 63-68) The summary judgment motion attached as an appendix: (1) the subject oil and gas lease, (2) a petroleum engineer’s report with pertinent Texas Railroad Commission documents establishing the complete cessation of production, and (3) an attorney’s affidavit regarding associated fees. (CR at 66; 71-73 [lease]; 74-75 [report]; 76-115 [RRC supporting documentation]; 116-18 [attorneys’ fees]) The appendix was incorporated by reference in the motion, and the motion expressly referred to the “affidavit of Martha Cigarroa de Llano in support of attorney’s fees and costs expended herein.” (CR at 66)
Defendant/appellant Genessee filed a 4-page response questioning the authenticity of the lease, lodging hearsay objections to unidentified RRC documents, and attaching an affidavit disagreeing with the amount of Schroeder’s attorneys’ fees. (CR at 124-128) The opposing attorney’s fees affidavit did not challenge the hourly rate claimed by Schroeder’s counsel, nor did it state how many hours would have been reasonable and necessary. (CR at 130) Some of the co-defendants/appellants adopted the response filed by
Page 7 of 18 Genessee. (CR at 164 [6], 171 [1], 174-75 [1], 178-79) A counter-report regarding cessation of production was not provided.
Before their summary judgment could be heard, plaintiffs amended their petition for a third time. (CR 133-47)
By early 2013, plaintiffs filed a fourth amended their petition and supplemented their motion for summary judgment asserting non-production from July 1, 2003 to January 31, 2004 and from April 2005 to the present. (CR at 214-228; 242-47) The legal basis for the summary judgment remained the same:
• the standard, express language of the lease requiring production to perpetuate the lease (CR at 245-46; 71-73); • the easily-controvertible but uncontested affidavits of a petroleum engineer demonstrating the 7-month lack of production between July 2003 and January 2004 and thereafter the non-production from April 2005 to the present, as documented by the attached Texas Railroad Commission records (CR at 253-56; 270-79; 76-115); and • resulting attorneys’ fees described by affidavit and detailed by an authenticated, 11-page billing statement detailing each expense and itemizing every billing entry by date, description, applicable rate, and increment of time in tenth or quarter hour. (CR at 257-58, 259-69)
The supplemental motion incorporated by reference the attached appendix consisting of the lease, the engineers’ affidavits and supporting RRC documents, and the attorney’s affidavit and billing records “in support of attorney’s fees and costs expended.” (CR at 244-45) Defendants/appellants filed a new response complaining that the request for termination was vague
Page 8 of 18 and objecting to Schroeders’ attorneys’ fees. (CR at 280-86, 290, 296) Again, the opposing affidavits did not challenge the hourly rates charged by Schroeders’ counsel or state how many hours would have been reasonable and necessary. (CR at 289, 295)
On December 11, 2013, being a little over 10 years after suit was originally filed, the trial court granted summary judgment on Schroeders’ termination claim based on cessation of production. (CR at 298-301) Attorneys’ fees and costs of $63,787.95 were awarded only against appellant/defendant Stephens & Johnson Operating Co. (CR at 300)
Summary of Argument The underlying litigation was filed over 10 years ago, and the substance of the summary judgment being reviewed has been on file for 7 ½ years. The trial court declared terminated a 1972 oil and gas lease for a cessation of production occurring from 2003-2004 and then from 2005 to present. The summary judgment movants/appellees Schroeder proved termination by expert witness affidavits and supporting Texas Railroad Commission documents. The non- movants/appellants opposed summary judgment but did not attach counter- affidavits. The appellants now do not appear to oppose termination by summary judgment in their briefs to this Appellate Court.
In addition to success on their request for a declaration of termination, Schroeder was awarded attorneys’ fees against appellant Stephens & Johnson Operating Co. only. Schroeders’ attorneys’ fees proof consisted of an affidavit and supporting billing records showing the date, rate, amount of time, and description of services for every fee entry. Appellant Stephens & Johnson
Page 9 of 18 Operating Co. filed an opposing affidavit that complained of attorneys’ fees generally but not addressing any single entry specifically. The trial court did not abuse its discretion in awarding attorneys’ fees.
Argument
I. Unchallenged Declaratory Judgment on Lease Termination By their briefs in this Appellate Court, appellants for the first time admit there is no dispute or justiciable controversy as to the cessation of production and consequently concede termination of the subject oil and gas lease. (Appellants Stephens & Johnson Operating Co.’s brief, p. 4-9; Appellant Genessee’s brief, p. 4-6) These concessions were not made in the trial court, where appellants sought the denial of Schroeders’ summary judgment motions. (CR at 281-82, 292)
Schroeder attached to their summary judgment motions an expert affidavit and supporting RRC documentation proving a termination due to a cessation of production since April 2005; appellants did not provide any opposing summary judgment proof. Appellants also did not submit any summary judgment proof to show that the terminated oil and gas lease had been released, which would have mooted any possible controversy. Kidd v. Hogett, 331 S.W.2d 515, 517 (Tex. Civ. App.—San Antonio 1959, writ ref ’d n.r.e.); Holman v. Meridian Oil, Inc., 988 S.W.2d 802, 805-06 (Tex. App.—San Antonio 1999, pet. denied); (CR at 226)
Without controverting evidence raising a fact issue, a summary judgment declaration that resolved a disputed lease termination was proper.
Page 10 of 18 II. Attorneys’ Fees
A. Standard of Review Abuse of discretion is the standard of review for an award of attorneys’ fees in a declaratory judgment action. Bocquet v. Herring, 972 S.W.2d 19, 21 (Tex. 1998). A trial court abuses its discretion when it rules arbitrarily, unreasonably, or without regard to guiding legal principles. Goode v. Shoukfeh, 943 S.W.2d 441, 446 (Tex. 1997). There are four limitations on the trial court’s discretion: the fees must be (1) reasonable, (2) necessary, (3) equitable, and (4) just. Bocquet, 972 S.W.2d at 21. Reasonableness and necessity are questions of fact; equity and justness are questions of law. Bexar County v. Deputy Sheriff ’s Ass’n, 429 S.W.3d 673, 677 (Tex. App.—San Antonio 2014, no pet.).
B. Reasonableness Factors In assessing the reasonableness of an attorneys’ fee award, eight non-exclusive factors can be considered:
(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill required to perform the legal service properly; (2) the likelihood … that the acceptance of the particular employment will preclude other employment by the lawyer;
(3) the fee customarily charged in the locality for similar legal services; (4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the circumstances; (6) the nature and length of the professional relationship with the client;
Page 11 of 18 (7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and
(8) whether the fee is fixed or contingent on results obtained or uncertainty of collection before the legal services have been rendered.
Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 818 (Tex. 1997)(citing TEX. DISCIPLINARY R. PROF. CONDUCT 1.04, reprinted in TEX. GOV’T CODE, tit. 2, subtit. G app. (STATE BAR RULES, art. X, § 9). Evidence on each factor is not required. Rapid Settlements, Ltd. v. Settlement Funding, LLC, 358 S.W.3d 777, 786 (Tex. App.—Houston [14th Dist.] 2012, no pet.); Arthur J. Gallagher & Co. v. Dieterich, 270 S.W.3d 695, 706 (Tex. App.—Dallas 2008, no pet.); State & Cnty. Mut. Fire Ins. Co. ex rel. So. United Gen. Agency of Tex. v. Walker, 228 S.W.3d 404, 408 (Tex. App.—Fort Worth 2007, no pet.). Other factors that can establish reasonableness include the entire record and the common knowledge of the attorneys and judges. Rapid Settlements, 358 S.W.3d at 786; Jarvis v. Rocanville Corp., 298 S.W.3d 305, 318 (Tex. App.—Dallas 2009, pet. denied).
C. Proving Reasonable Fees Reasonable attorneys’ fees may be calculated and proved using the lodestar method. El Apple I, Ltd. v. Olivas, 370 S.W.3d 757, 760-61 (Tex. 2012). Lodestar calculation involves two steps: (1) the court determines the reasonable number of hours and a reasonable hourly rate and then (2) the number of hours is multiplied by the applicable rate, the product being the lodestar fee. Id. Lodestar proof requires evidence of: (1) the nature of the work; (2) who performed the services and their rate; (3) approximately when the services were performed; and (4) the number of hours worked. El Apple, 370 S.W.3d at 762-
Page 12 of 18 64. This proof will almost always depend on corroboration by contemporaneous billing records. Id. Trial courts are accorded considerable deference in determining fees that are not excessive, redundant, or unreasonable, and lodestar fees are presumptively reasonable. El Apple, 370 S.W.3d at 764-65.
The importance of billing records to support attorneys’ fee awards was again stressed by the Texas Supreme Court in City of Laredo v. Montano, 414 S.W.3d 731 (Tex. 2013)(per curiam).
D. Challenging Fees Whether segregation is required between claims that allow for a recovery of attorney’s fees and claims that do not is a question of law. Clearview Properties, L.P. v. Property Tex. SC One Corp., 287 S.W.3d 132, 143 (Tex. App.—Houston [14th Dist.] 2009, pet. denied).
To avoid summary judgment on attorneys’ fees, a non-movant must do more than just file a conclusory counter-affidavit criticizing the fees as unreasonable and excessive. Basin Credit Consultants, Inc. v. Obregon, 2 S.W.3d 372, 373-74 (Tex. App.—San Antonio 1999, pet. denied). In Obregon, the summary judgment movant attached her counsel’s affidavit stating his experience and basis for his opinion on the reasonableness of his attorney’s fees. Id. The non-movant then tried to raise a fact issue by competing affidavit:
The attorney’s fees alleged by Plaintiff ’s Motion for Summary Judgment are not reasonable and necessary for the sum sued upon. Attorney fees for Plaintiff should be less than $4,000.00. The hourly rate of $175.00 per hour is excessive by Plaintiff ’s attorney and should be $125.00 per hour. The number of hours
Page 13 of 18 to complete Plaintiff ’s attorneys services should be less than 30 hours.
Id. at n.2. Because the counter-affidavit did not provide the affiant’s qualifications or basis of his opinion as to what a reasonable fee might be, it was held conclusory and insufficient. Id.
Similarly, in Cammack the Cook, LLC v. Eastburn, the summary judgment non- movant’s affidavit did not raise a fact issue by merely complaining that “the attorney’s fees plaintiff ’s attorney claims are not necessary or reasonable, and they are an excessive and bad faith demand” without any challenge to the number of hours expended, hourly rate, or necessity. 296 S.W.2d 884, 894-95 (Tex. App.—Texarkana 2009, pet. denied).
E. Schroeders’ Reasonable and Necessary Attorneys’ Fees The trial court did not abuse its discretion in awarding Schroeder $63,787.95 in attorneys’ fees and costs for successful oil and gas litigation that consumed over 10 years to liberate 306.71 mineral acres of land. Schroeders’ attorneys’ fee proof was sworn and documented by 11 pages of authenticated, contemporaneous billing records describing every date of work, exact number of incremental and total hours of the work (324 total hours), a substantive description of the work, and the applicable rate for the work. (CR at 257-69) The affidavit proof was unchallenged as to the preclusion of other work imposed by this representation and the hourly rates charged. (CR at 288-89) Lodestar fees, like Schroeders’, are presumptively reasonable.
Although the total amount of fees and costs was challenged by appellant Stephens & Johnson Operating Co. (the only defendant liable for attorneys’ fees and costs), an appropriate fee was not suggested. The counter-affidavit
Page 14 of 18 interposed legal conclusions (“legally sufficient evidence” and “equitable or just”), made factual conclusions (“grossly disproportionate” and “excessive, unreasonable”), and challenged the number of hours applicable to preparing and prosecuting summary judgment motions—and not the underlying claims. (CR at 288-89) Despite having access to each billing entry by date, amount, and substantive description, appellant Stephens & Johnson Operating Co. did not specifically object or request segregation for a single entry.
Appellees Schroeder’s attorneys’ fees proof adheres to the recent high hurdles in El Apple and Montano set by the Texas Supreme Court over the last 2 years, while appellant Stephens & Johnson Operating Co.’s does not clear the low hurdle of Obregon set 16 years ago by this Appellate Court. The award of attorneys’ fees and costs is further insulated from reversal by the deferential abuse of discretion standard of review, and should be affirmed.
Prayer Wherefore, Premises Considered, appellees respectfully request this Appellate Court to affirm the trial court’s declaratory judgment as to the termination of the subject oil and gas lease and the associated award of attorneys’ fees and costs, and appellees further respectfully request any additional relief, both general and special, at law or in equity, to which they may be justly entitled to receive.
Page 15 of 18 Respectfully submitted,
/s/ Baldemar Garcia Jr. Baldemar Garcia Jr. Texas Bar No. 00790740 email: bgarcia@personwhitworth.com lead appellate counsel for appellees Martha Cigarroa de Llano Texas Bar No. 04250800 email: mdellano@personwhitworth.com PWBM, LLP 602 East Calton Road, 2nd Floor (78041) P. O. Drawer 6668 (78042) Laredo, Texas voice 956.727.4441 facsimile 956.727.2696
Certificate of compliance According to the word count feature in Microsoft Word, this brief is 2,346 words, excluding the caption, identities of parties and counsel, statement regarding oral argument, table of contents, index of authorities, statement of the case, statement of issues presented, statement of jurisdiction, statement of procedural history, signature, proof of service, certification, certificate of compliance, and appendix. TEX. R. APP. P. 9.4.(i)(15,000 applicable word limit).
/s/ Baldemar Garcia Jr.
Page 16 of 18 Certificate of service Appellees’ brief was served by electronic mail on all counsel of record on March 9, 2015. TEX. R. APP. P. 9.5. Augustin Rivera Jr. Dunn, Weathered, Coffey, Rivera, & Kasperitis, PC 611 South Upper Broadway Corpus Christi, Texas 78401 facsimile 361.883.1599 email: ariverajr@swbell.net Lynse L. Guerra Skaggs & Guerra, LLP 710 Laurel P. O. Drawer 2285 McAllen, Texas 78502 facsimile 956.630.6570 email: sgllp@sbcglobal.net
/s/ Baldemar Garcia Jr. Baldemar Garcia Jr.
Page 17 of 18 No. 04-14-00167-CV Stephens & Johnson Operating Co., et al., Appellants, vs. Charles W. Schroeder, et al., Appellees.
Appendix
1. Order granting summary judgment 2. Schroeder’s attorneys’ fees affidavit and attachments 3. Stephens & Johnson Operating Co. counter-affidavit
Page 18 of 18 FILED IN 4th COURT OF APPEALS SAN ANTONIO, TEXAS 03/9/2015 2:43:05 PM KEITH E. HOTTLE Clerk FILED IN 4th COURT OF APPEALS SAN ANTONIO, TEXAS 03/9/2015 2:43:05 PM KEITH E. HOTTLE Clerk FILED IN 4th COURT OF APPEALS SAN ANTONIO, TEXAS 03/9/2015 2:43:05 PM KEITH E. HOTTLE Clerk