© 2016 The Texas Lawbook.
By Natalie Posgate
PECOS, TEXAS (Nov. 23) – Two Midland-based oil companies and Dallas-based J. Cleo Thompson intentionally failed to meet their end of a decade-old agreement with Dallas oil mogul T. Boone Pickens to acquire and drill more than 160 oil wells in Reeves and Pecos counties, a West Texas jury ruled Wednesday.
After about three hours of deliberation over the course of two days, the Reeves County jury of five women and seven men awarded Mr. Pickens’ Mesa Petroleum Partners up to $146 million in damages against the three defendants combined.
Lawyers and officials with the defendants said Wednesday that the verdict is not supported by the evidence and they plan to appeal.
The verdict follows a three-week trial in a decade-old business dispute in which Pickens claims J. Cleo Thompson, Baytech and Delaware Basin Resources improperly cut Mesa out of a lucrative deal in the Red Bull region of the Permian Basin.
“We have maintained from the beginning that Mesa’s oil and gas interests were taken from it illegally,” said Chrysta Castañeda, who represented Pickens in the litigation. “The Red Bull is part of what is now one of the biggest resource plays in the world, and we are hopeful that the jury’s decision here will mean that the long history of fair dealings in the oil industry continues.
“This case emphasizes and validates important legal rights, and we are proud to have been a part of it,” Castañeda said.
The jury hit Baytech and Delaware Basin Resources with a $130 million judgment, plus lawyer and J. Cleo Thompson with damages of more than $12 million plus attorneys’ fees, according to lawyers for Pickens.
Houston attorney Stuart Hollimon, who represents Baytech and DBR, said his clients respectfully disagree with the verdict returned by the jury.
“We are, of course, disappointed and will be reviewing the record of the case and consulting with our clients to determine what our course of action will be at this point,” said Hollimon, a partner at Andrews Kurth in Houston.
In a written statement, J. Cleo Thompson chief financial officer Paul Rudnicki said the company is pleased that the jury rejected the initial $1 billion that Pickens demanded.
The jury’s award against J. Cleo Thompson… is a fraction of what Mr. Pickens and his lawyers originally sought,” Rudnicki said. “We believe the evidence does not support the verdict that J. Cleo Thompson breached the joint operating agreement. For example, J. Cleo Thompson did not even drill the wells at issue in the verdict.”
In closing arguments Tuesday, lawyers for Pickens told jurors that the case was their opportunity to make the West Texas courthouse a “house of justice” where written agreements are enforced.
“You have no earthly idea how powerful you are,” Dallas trial lawyer Mike Lynn, who also represents Pickens, told the jury. “You’re going to be making a decision that will affect my client, for sure. But it will also affect Reeves. And it’s going to affect the JOA, how that’s interpreted, and what people think of it.”
Lawyers for Pickens argued that J. Cleo Thompson, another legendary name in the industry, conspired with Baytech and DBR to steal Mesa’s 15 percent interest in the Red Bull project.
Defense attorneys told jurors that their clients did nothing wrong and that Pickens willingly opted out of the deal. Lawyers for J. Cleo Thompson and the two exploration and production companies argued that Pickens only brought the lawsuit to repair his own ego and shift the blame from himself for cashing out of a deal that in 2014 became very lucrative.
“[Pickens] told you from the stand himself, ‘I’m dealing with crooks.’ So instead of taking responsibility for the decision… he’s calling these people crooks,” Tim McConn, a lawyer for Baytech and DBR, told jurors.
“I’m proud to represent these crooks, McConn said next, gesturing toward DBR and Baytech executives present. “They’re not crooks. They’re good people,” McConn said.
Defense lawyers told jurors that Pickens called J. Cleo “Jimmie” Thompson, who died in 2010, and J. Cleo’s chief financial officer, Cliff Milford, to say he was “out” of the Red Bull project – a phone call Pickens denies he ever made.
Twenty-one witnesses testified during the three-week trial. More than 30 documents, including emails, letters, internal memos, deal contracts, spreadsheets and maps of the Red Bull area, were presented to jurors as evidence.
Earlier today (10:30 a.m.):
The sounds of the train horns blared in the distance as lawyers for T. Boone Pickens told jurors that their verdict in a decade-long dispute would either make the West Texas courthouse a “house of justice” or a “brick building.”
Though it has passed by in critical times of the trial – often making it hard to hear what a witness or lawyer had just said – the train’s last blare coincided during closing arguments yesterday, almost serving as an opening bell for the task jurors are now left with.
Five women and seven men are deliberating whether J. Cleo Thompson and two Midland oil firms, Baytech and affiliates Delaware Basin Resources, upheld their end of an agreement with Pickens’ Mesa Petroleum Partners to acquire and drill more than 160 wells in Reeves and Pecos counties, or whether Pickens willingly opted out of the agreement.
At stake are hundreds of millions of dollars. Pickens’ lawyers argue that something non-monetary but equally valuable is also at stake: the manner in which oil and gas companies execute joint operating agreements in the Red Bull area of the Permian Basin, which last week was included in the region that the U.S. Geological Survey discovered 20 billion barrels of oil in. That amount is three times larger than the oil found in 2013 in the Bakken and Three Forks formations in Montana and the Dakotas.
“You have no earthly idea how powerful you are,” Mike Lynn, one of Pickens’ attorneys, told the jury Tuesday afternoon. “You’re going to be making a decision that will affect my client, for sure. But it will also affect Reeves. And it’s going to affect the JOA, how that’s interpreted, and what people think of it.”
Lawyers for Mr. Pickens, a legend in oil and gas, have argued to jurors for the past three weeks that J. Cleo Thompson, another legendary name in the industry, as well as Baytech and DBR breached their duty as business partners by cutting Mesa out of the Red Bull prospect and, in the process, stealing Mesa’s 15 percent interest in the project.
Bill Weinacht, Pickens’ local counsel, told jurors in a quite animated manner that they can either make the Pecos courthouse a “brick building” by ruling for the defendants and letting them “worm out” of the written agreements or a “house of justice where you enforce the rules” and the “written agreements.
“When you go home and you’re sitting there at Thanksgiving dinner and they ask you, ‘What did you do up there at the courthouse all that time?’ ” Weinacht said. “You can say, ‘You know what? I helped some people weasel out of a deal they made so they didn’t have to sign it.’ Or you can say, ‘I did justice for a man who deserved it.’ “
Lawyers for the defense have argued they did nothing wrong, that Pickens willingly opted out of the deal and that he only brought the lawsuit to repair his own ego and shift the blame from himself for cashing out of a deal that in 2014 became very lucrative.
“If it wasn’t clear during opening statement when [Pickens’] lawyers talked about us hiding things, stealing things, being deceptive, Mr. Pickens eliminated any doubt about what was going to happen in this trial,” said Tim McConn, a lawyer for Baytech and DBR. “He told you from the stand himself, ‘I’m dealing with crooks.’ So instead of taking responsibility for the decision that he and… all the others working at Mesa Petroleum… he’s calling these people crooks.
“I’m proud to represent these crooks, McConn said next, gesturing toward DBR and Baytech executives present. “They’re not crooks. They’re good people.”
Throughout the three weeks, jurors heard testimony from 21 witnesses and evidence from a couple hundred documents including emails, letters, internal memos, deal contracts, spreadsheets and maps of the Red Bull area.
The Texas Lawbook is in the courtroom awaiting the verdict and will update the article throughout the day.
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