ACCEPTED 04-12-00630-CV FOURTH COURT OF APPEALS SAN ANTONIO, TEXAS 6/1/2015 3:48:01 PM KEITH HOTTLE CLERK
NO. 04-12-00630-CV
FILED IN THE HUFF ENERGY FUND, L.P., WRH ENERGY PARTNERS4th,COURT L.L.C.,OF APPEALS SAN ANTONIO, TEXAS WILLIAM R. “BILL” HUFF, RICK D’ANGELO, AND 6/1/2015 3:48:01 PM RILEY-HUFF ENERGY GROUP, LLC, KEITH E. HOTTLE Clerk APPELLANTS,
vs.
LONGVIEW ENERGY COMPANY,
APPELLEE.
APPELLANTS’ JOINT ORAL ARGUMENT BENCH BOOK FOR EN BANC ARGUMENT JUNE 3, 2015
CROFTS & CALLAWAY, P.C. BAKER BOTTS L. L.P. Sharon E. Callaway Thomas R. Phillips sharonc@ccjappellate.com tom.phillips@bakerbotts.com State Bar No. 05900200 State Bar No. 00000102 613 N.W. Loop 410, Suite 800 98 San Jacinto Boulevard, Suite 1500 San Antonio, Texas 78216-5509 Austin, Texas 78701-4078 BROCK PERSON GUERRA REYNA, P.C. FULBRIGHT & JAWORSKI L.L.P. Ricardo R. Reyna Dean V. Fleming rreyna@bpgrlaw.com dean.fleming@nortonrosefulbright.com State Bar No. 16794845 State Bar No. 07122100 17339 Redland Road Michael W. O’Donnell San Antonio, Texas 78247-2302 mike.odonnell@nortonrosefulbright.com State Bar No. 24002705 PAMELA STANTON BARON Jeffrey A. Webb psbaron@baroncounsel.com jeff.webb@nortonrosefulbright.com State Bar No. 01797100 State Bar No. 24053544 Post Office Box 5573 300 Convent Street, Suite 2100 Austin, Texas 78763 San Antonio, Texas 78205 DARYL L. MOORE, P.C. Daryl L. Moore daryl@heightslaw.com State Bar No. 14324720 1005 Heights Boulevard Houston, Texas 77008 TABLE OF CONTENTS
Tab 1 Longview’s “Hypothetical” Plan
Tab 2 Riley Already Knew and Planned to Buy From Ford and Wyldfire
Tab 3 Longview’s CEO: Ford Selling to Anyone
Tab 4 Longview’s Pearce: Plenty of Acreage
Tab 5 Lober Line drawn in red onto Fly Like an Eagle public map
Tab 6 Longview Failed to Plead a Separate Competition Claim
Tab 6 Maximum Award Under the Jury Verdict is $10.5 Million
Tab 8 The Judgment Ignores the Jury Verdict
Tab 9 Longview’s Counsel: Jury Charge re Production Costs
Tab 10 Longview’s Counsel: Closing Argument re Production Costs
Tab 11 Restatement (Third) of Restitution and Unjust Enrichment § 55
Tab 12 Texas Rule of Civil Procedure 279
Tab 13 Defendants’ Objection to Question 5
1 CERTIFICATE OF SERVICE
I hereby certify that, on June 1, 2015, a true and correct copy of the Joint
Oral Argument Bench Book has been served upon the following counsel of record
by e-service:
GARDERE WYNNE SEWELL LLP WATTS GUERRA LLP Craig B. Florence Mikal C. Watts Randy D. Gordon Francisco Guerra IV Stacy R. Obenhaus Four Dominion Drive Rachel Kingrey Building 3, Suite 100 1601 Elm Street, Suite 3000 San Antonio, Texas 78257 Dallas, Texas 75201
/ s / Thomas R. Phillips Thomas Phillips
2 Longview’s “Hypothetical” Plan (36 RR PX-369)
• Acquire 21,000 acres in 7 prospects (3,000 acres each) for $42 million • 5 prospects to be in the gas-condensate window and 2 in the dry-gas window • Joint venture with industry partner reducing interest by 50% (yielding 10,500 net acres) • Drill one well per prospect at a rate of 2 wells per quarter at cost of $5.5 million per well Riley Already Knew and Planned to Buy From Ford and Wyldfire (35 RR PX-65)
In a December 18, 2009 email, D’Angelo asked Riley:
Have you heard of a broker out of Ft. Worth called Wildfire…..or a Pat Goodin…?
Riley immediately responded:
Pat Goodin is in Houston. Worked on Edwards play in Bastrop and Caldwell County Texas. Don’t think he is associated with Wildfire. Wildfire is Tamara Ford out of Pala Pinto County. Two counties west of Tarrant County. She has buyers on the ground is spending some of her own money she is the real deal. Wildfire is the group we would use to buy acreage when we get to that point. Longview’s CEO: Ford Selling to Anyone (29 RR 140)
Q Based on your understanding in late 2009, was Ms. Ford trying to broker this land to anyone who was willing to pay for it?
A Yes. Longview’s Pearce: Plenty of Acreage (19 RR 21)
Q Okay. So if you could -- is it fair to say that there’s plenty of acreage out there for Longview’s plan?
A Yes. Q And even if we assume for the moment, for the sake of argument, that not all that acreage was there because of Riley-Huff or some other entity bought it, there’s plenty of acres to purchase? A But it was changing daily, but at that point in time, Tamara Ford suggested that there was plenty of acreage to be purchased in those counties. Longview Failed to Plead a Separate Competition Claim (5 CR 1865)
III. ~lailils
A. Breach of Fiduci_ary Duty/Usurpation of Corporate Opportunity (Against Huff and D' Angelo)
55. D'Angelo and Huff owe Longview a duty of loyalty.
56. Longview was financially able to ~xploit the Eagle Ford opportunity.
57. The Eagle Ford opportunity~ wi~n.in Longview's li_ne ofbw;_i1_1ess.
58. Longview had an interest or ~xpectancy in the Eagle Ford opportunity.
59. By diverting the Eagle Ford opportunity to themselves, D' Angelo and Huff place.d
themselves in a position of conflict ot competition with Longview.
60. D' Angelo and HUff br~ached their fidueiary dut_ies to Longview by usurping the
Eagle Ford opportunity and. misu.sing proprie~ i_nfonnation supplied by Longview i.n re·gard t(l
the Eagle Ford.
61 . D' Angelo a;nd Huff act~ with m_alice_.
62. D' An:gel() and Huff's breaches of duty and usurpation of Longview's opportunity
proxi.m~tely caused L.Qngvi_ew injucy and 4amages. Maximum Award Under The Jury Verdict is $10.5 Million
$120,000,000 $42,000,000 Past-Production Property Value Revenues
$24,500,000 $127,000,000 Property Cost Past-Production Costs
$17,500,000 (-$7,o00,000)
$10,500,000 Net Profit The Judgment Ignores The Jury Verdict
X $42,000,000 $120,000,000 Past-Production Property Value Revenues
$24,500,000 Property Cost X $127,000,000 Past-Production Costs
(-$24,500,000) $120,o00,000
$95,500,000 Award Longview’s Counsel: Jury Charge re Production Costs (32 RR67)
MS. CALLAWAY: The Huff Defendants object to Question Number 8 for the following reasons: First, the valuation should be based on the net of production cost and expenses, including taxes . . . . MR. WOHLFORD: I point out that that is taken into account by Question 9. Longview’s Counsel: Closing Argument re Production Costs (33 RR 42-43)
MR. WATTS: What did Riley-Huff Energy Group pay to develop the assets it acquired? We've got that answer as well. Basically, you would add the drilling and completion, add it to the operating expenses for the leases, and that would be $261,850,000. So you would write in 261.8. Restatement (Third) of Restitution and Unjust Enrichment § 55
If a defendant is unjustly enriched by the acquisition of title to identifiable property at the expense of the claimant or in violation of the claimant's rights, the defendant may be declared a constructive trustee, for the benefit of the claimant, of the property in question and its traceable product.
The obligation of a constructive trustee is to surrender the constructive trust property to the claimant, on such conditions as the court may direct. _____________________________________________________________ Comments g. Requirements of constructive trust: identification and tracing. Constructive trust permits the claimant to assert ownership of (i) specifically identifiable property for which the defendant is liable in restitution or (ii) its traceable product by the rules of §§ 58-59.
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ACCEPTED 04-12-00630-CV FOURTH COURT OF APPEALS SAN ANTONIO, TEXAS 6/1/2015 3:48:01 PM KEITH HOTTLE CLERK
NO. 04-12-00630-CV
FILED IN THE HUFF ENERGY FUND, L.P., WRH ENERGY PARTNERS4th,COURT L.L.C.,OF APPEALS SAN ANTONIO, TEXAS WILLIAM R. “BILL” HUFF, RICK D’ANGELO, AND 6/1/2015 3:48:01 PM RILEY-HUFF ENERGY GROUP, LLC, KEITH E. HOTTLE Clerk APPELLANTS,
vs.
LONGVIEW ENERGY COMPANY,
APPELLEE.
APPELLANTS’ JOINT ORAL ARGUMENT BENCH BOOK FOR EN BANC ARGUMENT JUNE 3, 2015
CROFTS & CALLAWAY, P.C. BAKER BOTTS L. L.P. Sharon E. Callaway Thomas R. Phillips sharonc@ccjappellate.com tom.phillips@bakerbotts.com State Bar No. 05900200 State Bar No. 00000102 613 N.W. Loop 410, Suite 800 98 San Jacinto Boulevard, Suite 1500 San Antonio, Texas 78216-5509 Austin, Texas 78701-4078 BROCK PERSON GUERRA REYNA, P.C. FULBRIGHT & JAWORSKI L.L.P. Ricardo R. Reyna Dean V. Fleming rreyna@bpgrlaw.com dean.fleming@nortonrosefulbright.com State Bar No. 16794845 State Bar No. 07122100 17339 Redland Road Michael W. O’Donnell San Antonio, Texas 78247-2302 mike.odonnell@nortonrosefulbright.com State Bar No. 24002705 PAMELA STANTON BARON Jeffrey A. Webb psbaron@baroncounsel.com jeff.webb@nortonrosefulbright.com State Bar No. 01797100 State Bar No. 24053544 Post Office Box 5573 300 Convent Street, Suite 2100 Austin, Texas 78763 San Antonio, Texas 78205 DARYL L. MOORE, P.C. Daryl L. Moore daryl@heightslaw.com State Bar No. 14324720 1005 Heights Boulevard Houston, Texas 77008 TABLE OF CONTENTS
Tab 1 Longview’s “Hypothetical” Plan
Tab 2 Riley Already Knew and Planned to Buy From Ford and Wyldfire
Tab 3 Longview’s CEO: Ford Selling to Anyone
Tab 4 Longview’s Pearce: Plenty of Acreage
Tab 5 Lober Line drawn in red onto Fly Like an Eagle public map
Tab 6 Longview Failed to Plead a Separate Competition Claim
Tab 6 Maximum Award Under the Jury Verdict is $10.5 Million
Tab 8 The Judgment Ignores the Jury Verdict
Tab 9 Longview’s Counsel: Jury Charge re Production Costs
Tab 10 Longview’s Counsel: Closing Argument re Production Costs
Tab 11 Restatement (Third) of Restitution and Unjust Enrichment § 55
Tab 12 Texas Rule of Civil Procedure 279
Tab 13 Defendants’ Objection to Question 5
1 CERTIFICATE OF SERVICE
I hereby certify that, on June 1, 2015, a true and correct copy of the Joint
Oral Argument Bench Book has been served upon the following counsel of record
by e-service:
GARDERE WYNNE SEWELL LLP WATTS GUERRA LLP Craig B. Florence Mikal C. Watts Randy D. Gordon Francisco Guerra IV Stacy R. Obenhaus Four Dominion Drive Rachel Kingrey Building 3, Suite 100 1601 Elm Street, Suite 3000 San Antonio, Texas 78257 Dallas, Texas 75201
/ s / Thomas R. Phillips Thomas Phillips
2 Longview’s “Hypothetical” Plan (36 RR PX-369)
• Acquire 21,000 acres in 7 prospects (3,000 acres each) for $42 million • 5 prospects to be in the gas-condensate window and 2 in the dry-gas window • Joint venture with industry partner reducing interest by 50% (yielding 10,500 net acres) • Drill one well per prospect at a rate of 2 wells per quarter at cost of $5.5 million per well Riley Already Knew and Planned to Buy From Ford and Wyldfire (35 RR PX-65)
In a December 18, 2009 email, D’Angelo asked Riley:
Have you heard of a broker out of Ft. Worth called Wildfire…..or a Pat Goodin…?
Riley immediately responded:
Pat Goodin is in Houston. Worked on Edwards play in Bastrop and Caldwell County Texas. Don’t think he is associated with Wildfire. Wildfire is Tamara Ford out of Pala Pinto County. Two counties west of Tarrant County. She has buyers on the ground is spending some of her own money she is the real deal. Wildfire is the group we would use to buy acreage when we get to that point. Longview’s CEO: Ford Selling to Anyone (29 RR 140)
Q Based on your understanding in late 2009, was Ms. Ford trying to broker this land to anyone who was willing to pay for it?
A Yes. Longview’s Pearce: Plenty of Acreage (19 RR 21)
Q Okay. So if you could -- is it fair to say that there’s plenty of acreage out there for Longview’s plan?
A Yes. Q And even if we assume for the moment, for the sake of argument, that not all that acreage was there because of Riley-Huff or some other entity bought it, there’s plenty of acres to purchase? A But it was changing daily, but at that point in time, Tamara Ford suggested that there was plenty of acreage to be purchased in those counties. Longview Failed to Plead a Separate Competition Claim (5 CR 1865)
III. ~lailils
A. Breach of Fiduci_ary Duty/Usurpation of Corporate Opportunity (Against Huff and D' Angelo)
55. D'Angelo and Huff owe Longview a duty of loyalty.
56. Longview was financially able to ~xploit the Eagle Ford opportunity.
57. The Eagle Ford opportunity~ wi~n.in Longview's li_ne ofbw;_i1_1ess.
58. Longview had an interest or ~xpectancy in the Eagle Ford opportunity.
59. By diverting the Eagle Ford opportunity to themselves, D' Angelo and Huff place.d
themselves in a position of conflict ot competition with Longview.
60. D' Angelo and HUff br~ached their fidueiary dut_ies to Longview by usurping the
Eagle Ford opportunity and. misu.sing proprie~ i_nfonnation supplied by Longview i.n re·gard t(l
the Eagle Ford.
61 . D' Angelo a;nd Huff act~ with m_alice_.
62. D' An:gel() and Huff's breaches of duty and usurpation of Longview's opportunity
proxi.m~tely caused L.Qngvi_ew injucy and 4amages. Maximum Award Under The Jury Verdict is $10.5 Million
$120,000,000 $42,000,000 Past-Production Property Value Revenues
$24,500,000 $127,000,000 Property Cost Past-Production Costs
$17,500,000 (-$7,o00,000)
$10,500,000 Net Profit The Judgment Ignores The Jury Verdict
X $42,000,000 $120,000,000 Past-Production Property Value Revenues
$24,500,000 Property Cost X $127,000,000 Past-Production Costs
(-$24,500,000) $120,o00,000
$95,500,000 Award Longview’s Counsel: Jury Charge re Production Costs (32 RR67)
MS. CALLAWAY: The Huff Defendants object to Question Number 8 for the following reasons: First, the valuation should be based on the net of production cost and expenses, including taxes . . . . MR. WOHLFORD: I point out that that is taken into account by Question 9. Longview’s Counsel: Closing Argument re Production Costs (33 RR 42-43)
MR. WATTS: What did Riley-Huff Energy Group pay to develop the assets it acquired? We've got that answer as well. Basically, you would add the drilling and completion, add it to the operating expenses for the leases, and that would be $261,850,000. So you would write in 261.8. Restatement (Third) of Restitution and Unjust Enrichment § 55
If a defendant is unjustly enriched by the acquisition of title to identifiable property at the expense of the claimant or in violation of the claimant's rights, the defendant may be declared a constructive trustee, for the benefit of the claimant, of the property in question and its traceable product.
The obligation of a constructive trustee is to surrender the constructive trust property to the claimant, on such conditions as the court may direct. _____________________________________________________________ Comments g. Requirements of constructive trust: identification and tracing. Constructive trust permits the claimant to assert ownership of (i) specifically identifiable property for which the defendant is liable in restitution or (ii) its traceable product by the rules of §§ 58-59.
A claimant who can show unjust enrichment, but who cannot identify such property in the hands of the defendant, is not entitled to the remedy of constructive trust.
This fundamental limitation, commonly referred to as the “tracing requirement,” applies in one form or another to all the principal means of specific relief in restitution (constructive trust, equitable lien, subrogation). Texas Rules of Civil Procedure Rule 279 Omissions From the Charge Upon appeal all independent grounds of recovery or of defense not conclusively established under the evidence and no element of which is submitted or requested are waived.
When a ground of recovery or defense consists of more than one element, if one or more of such elements necessary to sustain such ground of recovery or defense, and necessarily referable thereto, are submitted to and found by the jury, and one or more of such elements are omitted from the charge, without request or objection, and there is factually sufficient evidence to support a finding thereon, the trial court, at the request of either party, may after notice and hearing and at any time before the judgment is rendered, make and file written findings on such omitted element or elements in support of the judgment.
If no such written findings are made, such omitted element or elements shall be deemed found by the court in such manner as to support the judgment. Defendants’ Objection to Question 5 (32 RR 62-63)
There is no identifiable X property here that belonged to Longview and which was taken from Longview by Huff or D’Angelo and placed under the control of Riley Huff. . . .
Longview’s claim for a constructive trust fails because it cannot trace by strict proof or otherwise something misappropriated from it to an identifiable res.