GLASSELL NON-OPERATED INTERESTS, LIMITED; ACG3 MINERAL INTERESTS, LIMITED; YATES ENERGY CORPORATION, Plaintiffs - Appellees
ENERQUEST OIL & GAS, L.L.C., Defendant-Appellant
from the United States District Court for the Southern
District of Texas
HIGGINBOTHAM, ELROD, and HO, Circuit Judges.
C.HO, CIRCUIT JUDGE
of oil companies agreed to cooperatively develop oil
prospects in Texas. One of the parties, EnerQuest Oil &
Gas L.L.C., acquired an interest in the specified area after
the agreement took effect, but then refused to offer a share
of those interests to the other parties. After the
acquisition, other parties to the agreement-Glassell
Non-Operated Interests, Ltd., Yates Energy Corporation, and
ACG3 Mineral Interests, Ltd. (collectively,
"Appellees")-filed suit against EnerQuest.
Appellees alleged that EnerQuest breached the contract by
refusing to offer a pro-rata share of the newly acquired
interests. Upon examination of the agreement, we conclude
that EnerQuest did not breach.
the contract requires that the parties share interests
acquired within the area of mutual interest
("AMI"), the contract excludes interests already
owned by parties from the AMI. What is excluded from the AMI
at the outset may never be included without a new agreement.
Accordingly, we reverse the judgment of the district court
and render judgment for EnerQuest.
Glassell, Yates, and several others entered into a Letter
Agreement to develop the Dubose Field, an area in Texas.
Shortly after the Parties signed the Letter Agreement,
additional parties sought to join the endeavor. The original
parties allowed the new parties to ratify the agreement (the
"Amendment") and then the new parties officially
ratified that Letter Agreement (the
"Ratification"). The Letter Agreement, Amendment,
and Ratification compose the Development Agreement.
Letter Agreement contains an AMI provision. The parties
generally describe the AMI in § 2.1, which states that
the AMI shall cover all lands within the Dubose Field that
are acquired after August 1, 2010-the "Effective
Date." Section 2.1 then defines those interests within
the AMI that are acquired after the Effective Date as
Letter Agreement excludes some interests from the AMI.
Section 2.3 of the Letter Agreement excludes "[a]ll
interests, leases or agreements owned by a Party prior to the
Effective Date." Sections 1.4 of the Amendment and 1.5
of the Ratification include substantially the same provision,
so the exclusions apply to both the original parties and new
parties agreed to share interests that they acquired within
the AMI. The Letter Agreement's sharing obligation-found
in §§ 2.6 and 2.7-directs that, "[w]ithin
thirty (30) business days after a Party acquires an Acquired
Interest within the AMI after the execution of this
Agreement, such Party shall promptly notify the other Parties
in writing of the details of the acquisition of such Acquired
Interest." And after an acquiring party has informed the
other parties of the gained interests, a party "may
elect in writing to acquire its pro-rata share of such
years after entering the Development Agreement, EnerQuest
sought to acquire the Dubose Field interests of DKE and
Pati-Dubose (the "DKE/Pati-Dubose interests"). Both
DKE and Pati-Dubose were new parties to the Development
Agreement. EnerQuest's president emailed Yates'
president about the potential acquisition, stating that
EnerQuest would be offering the interest to the other parties
pursuant to the Development Agreement. But after the
transaction closed, EnerQuest determined that the
DKE/Pati-Dubose interests were not subject to the AMI.
Therefore, according to EnerQuest, the sharing obligation did
sued EnerQuest for breach of contract. EnerQuest contested
Appellees' construction of the Development Agreement and
asserted an affirmative defense that the Development
Agreement was unenforceable under the Texas Statute of
Frauds. See Tex. Bus. & Com. Code §
26.01(a), (b)(4), (5). The district court granted
Appellees' motion for summary judgment on liability for
breach of contract and denied EnerQuest's motion for
summary judgment on the affirmative defense of a violation of
the Texas Statute of Frauds. EnerQuest appeals.
of summary judgment is reviewed de novo. Wallace
v. Texas Tech Univ., 80 F.3d 1042, 1046 (5th Cir. 1996)
(citing Neff v. Am. Dairy Queen Corp., 58 F.3d 1063,
1065 (5th Cir. 1995)). "The court shall grant summary
judgment if the movant shows that there is no genuine dispute
as to any material fact ...