A federal judge overseeing four consolidated cases where Houston-based W&T Offshore and W&T Energy VI accuses a group of insurers of wrongly seeking an additional $250 million in collateral to back its production activities has asked the parties to confirm she has the authority to hear the dispute.
In an order issued Wednesday, U.S. Magistrate Judge Christina A. Bryan told the parties — W&T, Endurance Assurance, Lexon Insurance, U.S. Specialty Insurance, United States Fire Insurance and Pennsylvania Insurance — that while none of them have challenged that jurisdiction exists, she has an independent obligation to determine that it does.
“Therefore, in order to ensure that federal subject matter jurisdiction exists in each consolidated case, it is ordered that within 21 days of the entry of this order, plaintiffs in each consolidated case … must file a statement of jurisdictional facts setting forth in full the citizenship of each party to the action, including the citizenship of the members of W&T Energy VI, LLC,” Judge Bryan wrote. “The statement must contain a certificate of conference indicating whether any party opposes the exercise of diversity jurisdiction.”
W&T has accused the insurers of colluding, in violation of the Sherman Antitrust Act, to demand collateral they aren’t entitled to under an indemnity agreement. The energy company, which is the plaintiff in one lawsuit but has been sued by insurers in three others, is seeking declaratory relief that it does not have to hand over the collateral the insurers are seeking.
W&T has pointed to rules from the Federal Bureau of Ocean Management that went into effect at the end of June requiring energy companies to provide a bond that would cover any decommissioning costs in the outer continental shelf. BOEM said they were imposing the rule so taxpayers wouldn’t have to foot the bill for decommissioning activities.
In a Dec. 11 press release announcing its amended lawsuit against the insurers — which added claims for price-fixing, collusion and antitrust violations — W&T pushed back on that premise.
“In over 70 years of producer operations in the Gulf of Mexico, the federal government has never been forced to pay for any abandonment cleanup operations associated with well, platform facility, or pipeline operations,” the company said.
W&T originally filed suit against the insurers in August. In October, it asked the court to disqualify Vinson & Elkins from representing Endurance and Lexon, based on the firm’s previous work representing W&T for nearly a decade “in a vast and wide ranging web of corporate legal matters, including but not limited to, arranging and structuring its corporate financing, negotiating credit facilities, and negotiating second lien notes.”
“During these representations, there was no aspect of W&T’s business to which V&E did not have access,” W&T argues in the motion. “A material component of V&E’s representation of W&T was the firm’s access to, and interpretation of, W&T’s past, present, and future bonding requirements and the substantial business implications of those bonding requirements.”
Specifically, W&T alleges that V&E had “unfettered access to W&T’s most sensitive financial records and strategy during the period in which the very instruments that are at issue in this litigation were negotiated,” which constitutes a conflict of interest.
On Nov. 13, V&E responded, telling the court W&T’s request is “without merit and should be denied.”
“The issue in this suit is whether the plain and unambiguous terms of an indemnity agreement entitled defendants Endurance Assurance Corporation and Lexon Insurance Company (the ‘Sompo Sureties’) to demand collateral from W&T, which is a legal question this Court should decide as a matter of law,” V&E argued. “W&T asks this Court to disregard the Sompo Sureties’ choice of counsel and disqualify V&E merely because years ago V&E represented W&T on unrelated financing transactions. None of those financing transactions relates — much less substantially relates — to the Indemnity Agreement at issue in this suit.”
The consolidated cases have been assigned to U.S. District Judge Keith P. Ellison.
W&T is represented by Yasser A. Madriz, Jason Huebinger, Miles O. Indest and J. Brent Justus of McGuireWoods.
U.S. Specialty Insurance is represented by Brandon Bains of Bains Law in Aledo.
U.S. Fire Insurance and Pennsylvania Insurance are represented by Steven Beauchamp and Ryan Dry of Dry Law in Plano.
Endurance Assurance and Lexon Insurance are represented by Jason Halper, Alyx Eva and Sara Brauerman of Vinson & Elkins. The case numbers are 4:24-cv-03047, 4:24-cv-04113, 4:24-cv-04395 and 4:24-cv-04400.