Billion-Dollar Showdown: T. Boone Pickens v. J. Cleo Thompson

© 2016 The Texas Lawbook.

By Mark Curriden

(Oct. 31) – A big-dollar showdown between two legendary oil and gas names in Dallas goes to trial this week in West Texas in a decade-long dispute over ownership interests and revenues from more than 160 wells in Reeves and Pecos counties.

T. Boone Pickens’ Mesa Petroleum sued J. Cleo Thompson and three Midland E&P companies – Baytech, Patriot Resources and Delaware Basin Resources – for allegedly violating the terms of a decade-old investment contract potentially worth up to $1 billion.

Lawyers in the case are scheduled to start jury selection Monday in Pecos in a trial that could last several weeks.

Mesa accuses J. Cleo Thompson and the other companies of breach of contract, breach of fiduciary duties, tortious interference with a contract and fraud. Mesa seeks hundreds of millions of dollars in damages.

The defendants deny all the allegations and say Mesa doesn’t deserve a dime.

Despite the huge dollars at stake, the litigation has received almost no public attention.

The root of the legal dispute dates back to January 2007, when Mesa signed a “participation agreement” with J. Cleo Thompson and Baytech that required the companies to offer Mesa a 15 percent ownership in its asset acquisitions over a five year period.

Mesa paid $125,000 to join the investment agreement and a total of $1 million for its participation in what’s called the “Red Bull Prospect” in Reeves County, Texas, according to court documents.

Dallas attorney Chrysta Castaneda, who represents Mesa, claims in court documents that her client “elected to participate” in every deal the company was offered.

“But despite outward indications of honesty, defendants conspired to steal Mesa’s interests and hide their theft from Mesa, netting them an unlawful profit of over a billion dollars,” Castaneda states in court records.

“Rather than offer new opportunities to Mesa as they were required to do by the participation agreement, defendants took the new interests – in revenues, royalties, production payments, leases, easements, wells and facilities, among other things – for themselves,” according to Mesa’s legal documents.

Mesa claims that J. Cleo and Baytech hid the purchase of assets and the drilling of 166 wells in two newly formed oil E&P companies called Patriot Resources and Delaware Basin Resources.

Lawyers for J. Cleo Thompson and the other oil companies argue that Mesa – through word and deed – nullified the agreement.

Geoffrey Bracken, a partner at Gardere representing J. Cleo, claims in court documents that Mesa “opted out of acquiring” new wells by “committing a material breach” of the agreement.

“The evidence demonstrates that Mr. Pickens represented to Mr. Thompson that Mesa would no longer pay for any past or future acquired interests and was no longer interested in receiving any additional notices under the agreement,” Bracken states in recently filed court documents.

Legendary oil wildcatter J. Cleo “Jimmie” Thompson Jr. died in 2010.

“The cumulative evidence in this case – including Mesa’s payment history, the telephone calls, emails, letters, assignments and sworn testimony – demonstrates that in 2008 and 2009, Mesa represented to J. Cleo that it wanted a refund on the monies spent on ‘acquired interests,’ was opting out of paying and acquiring any future acquired interests and was no longer interested receiving any additional notices under the agreement,” according to court records for the defendants.

Bracken and fellow Gardere partner Mary Elizondo Frazier in Houston represent J. Cleo. Andrews Kurth Kenyon partner Stuart Hollimon and associate Ashley Kahn are defending Delaware Basin Resources.

Castaneda is lead counsel for Mesa. Michael Lynn and David Coale, partners at Lynn Pinker Cox & Hurst, also represent Mesa.

© 2016 The Texas Lawbook. Content of The Texas Lawbook is controlled and protected by specific licensing agreements with our subscribers and under federal copyright laws. Any distribution of this content without the consent of The Texas Lawbook is prohibited.

If you see any inaccuracy in any article in The Texas Lawbook, please contact us. Our goal is content that is 100% true and accurate. Thank you.