A Houston-based team of Vinson & Elkins attorneys recently spent two months in trial in Bakersfield, California, and came away with a win, convincing a jury that their client should not have to pay $100 million in damages to two business partners over the operation of an oil and gas lease.
Aera Energy had been sued in Superior Court in California by Vaquero Partners and Madison Energy about two years ago, accused of failing to develop a lease, called the King Ellis lease, in the South Belridge oil field, northwest of Bakersfield. Vaquero, Madison and Aera collectively own the working interest rights in the property. Vaquero and Madison also accused Aera of breaching an agreement to act in good faith and fair dealing in its operation of the lease and of lying about development plans.
The companies asked the jury for damages between $88 million and $100 million.
The jury awarded zero.
“The one thing we wanted the jury to understand from the beginning is to alert them that plaintiffs were likely going to show them only snippets of documents, and we wanted to show them the full context of the parties’ working relationship,” Stephanie Noble of Vinson & Elkins said. “These parties had been working together for 20 years, and the allegations of wrongful conduct went back to 2014. We did a good job of setting jurors’ expectations from the beginning that it’s going to take a while, it’s going to take time to explain the full context of the working relationship.”
Vaquero and Madison are represented by Samuel Bacon and Brian S. Tooley of Welborn Sullivan Meck & Tooley in Colorado. The attorneys did not immediately respond to an email seeking comment Thursday afternoon.
Jury selection began in the case Oct. 10. The jury deliberated a full day Dec. 7 and came back for a half day Dec. 11 before rejecting Vaquero and Madison’s requests for damages.
The jury did answer “yes” to a question asking whether Aera failed to do something that’s required in the joint-operating agreement, but awarded no damages for that failure. The jury also found that Aera had made a promise to Vaquero and Madison, but again, awarded no associated damages.
The answers left some question marks for the defense team.
“I think it’s difficult to speculate what they found to be either the failure to perform or what promise they were focused in on when they answered the question,” Jim Thompson of Vinson & Elkins said. “Because we’re talking about a nine-year period … there might be some minor failure here and there to perform. … But the important takeaway is that when asked if that breach or failure to perform caused harm the answer was a resounding no.”
Thompson said the jurors the team spoke with after trial did not share what specific promise or failure to perform they believed had occurred.
The jury heard that there were many reasons why some developments failed to come to fruition over the past nine years — the cost of oil and whether it made sense to drill new wells as a result was something to consider, as was the increasingly stringent regulatory environment in California at the time and the impact of the Covid-19 pandemic.
Another piece of the decision-making puzzle was that the King Ellis lease was already “very mature and well developed,” Noble said, noting it had been producing since the 1970s.
“It was much more developed than surrounding areas,” she said. “And with a finite resource, you have to tell that story about how much had already been developed.”
Another member of the V&E trial team, Nicholas Shum, said Vaquero and Madison presented a “fairly emotional opening statement” to the jury, framing the case as one about “honesty and fairness.”
“Their theme was King Ellis was left behind,” he said.
In this case, Shum said the credibility of the Aera employees who testified was key.
“They took this very seriously and presented as true subject-matter experts,” he said. “They explained the decisions they made and why they made them, and their credibility carried a lot of weight in this trial.”
Judge Thomas S. Clark presided over the case.
Aera was also represented by Grover H. Waldon and Donald C. Oldaker of Clifford & Brown in Bakersfield and Leslie Mason, Brooke Noble, Austin Turman, Mike Heidler, Cathy Smith, Carly Sagehorn and Emily Bamesberger of Vinson & Elkins.
The case number is BCV-21-101467.