in Re: EOG Resources, Inc. ( 2018 )

NO. 12-18-00054-CV
IN THE COURT OF APPEALS
TWELFTH COURT OF APPEALS DISTRICT
TYLER, TEXAS
IN RE: §
EOG RESOURCES, INC., § ORIGINAL PROCEEDING
RELATOR §
MEMORANDUM OPINION
Relator EOG Resources, Inc., seeks mandamus relief from the trial court’s order refusing
to transfer venue of the underlying proceeding to Harris County, Texas.1 We conditionally grant
the writ.
BACKGROUND
Cabot Oil and Gas Corporation owns several gas producing wells in San Augustine
County, Texas. Cabot contracted with EOG to operate those wells while Cabot maintained a
non-operating working interest in them. Specifically, EOG and Cabot executed a Participation
Agreement (PA) on February 28, 2011. The PA required the parties to execute Joint Operating
Agreements (JOAs) that, among other things, authorized EOG to market Cabot’s share of the gas
produced from the wells, and to deduct certain expenses from the gas sale proceeds.2
In 2015, Cabot contacted EOG regarding its belief that EOG improperly deducted
“unused firm transportation reservation charges,” a type of pipeline cost, from Cabot’s share of
1
Respondent is the Honorable Craig M. Mixon, Judge of the 1st District Court in San Augustine County,
Texas. The Real Party in Interest is Cabot Oil and Gas Corporation.
2
The JOAs also authorized the parties to execute gas marketing agreements (GMAs), although this was not
a requirement in order for EOG to market the gas produced from the wells. The parties later executed GMAs on
some, but not all, of the wells at issue.
the proceeds. Accordingly, in 2017, it filed suit in San Augustine County, which is where the
relevant wells are located.3
EOG filed a motion to transfer venue of the underlying lawsuit to Harris County, alleging
that a mandatory venue provision in the PA required that claims “arising from this Agreement
shall be brought in the State or Federal District Court of Harris County, Texas.” Cabot
responded that its claims are not based on any of the PA’s provisions, they do not arise from it,
and consequently do not trigger its venue provision. Moreover, it argued that the PA expired
prior to the events giving rise to the suit, rendering it inapplicable. After a hearing, the trial court
denied EOG’s motion. EOG then filed this original mandamus proceeding.4
AVAILABILITY OF MANDAMUS
A party may petition for a writ of mandamus with an appellate court to enforce
mandatory venue provisions. See TEX. CIV. PRAC. & REM. CODE ANN. § 15.0642 (West 2017);
see also In re Hannah, 431 S.W.3d 801, 806 (Tex. App.—Houston [14th Dist.] 2014, no pet.)
(orig. proceeding) (per curiam). Contractual determination of venue is permitted by statute for
actions arising from a “major transaction.” See TEX. CIV. PRAC. & REM. CODE ANN. § 15.020
(West 2017). This statute authorizing contractual determination of venue is a mandatory venue
provision. See id. § 15.020(b), (c)(2).
Ordinarily, mandamus will issue only to correct a clear abuse of discretion for which the
relator has no adequate remedy by appeal. In re Prudential Ins. Co. of Am., 148 S.W.3d 124,
135–36 (Tex. 2004) (orig. proceeding). However, a party seeking to enforce a mandatory venue
provision is not required to prove the lack of an adequate appellate remedy, but is required only
to show that the trial court abused its discretion. In re Mo. Pac. R.R. Co., 998 S.W.2d 212, 216
(Tex. 1999) (orig. proceeding). A trial court has no discretion in determining what the law is or
applying the law to the facts. Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992) (orig.
proceeding). A trial court abuses its discretion by failing to analyze or apply the law correctly.
Id. As the party seeking relief, the relator bears the burden of demonstrating entitlement to
mandamus relief. Id. at 837.
3
See TEX. CIV. PRAC. & REM. CODE ANN. § 15.011 (West 2017).
4
TEX. CIV. PRAC. & REM. CODE ANN. § 15.0642 (West 2017).
2
MOTION TO TRANSFER VENUE
EOG contends that the trial court abused its discretion when it failed to transfer venue of
the proceeding to Harris County, because the parties contracted that venue would be fixed there
for claims arising from this “major transaction.”
Applicable Law
An action arising from a “major transaction” shall be brought in a county if the party
against whom the action is brought has agreed in writing that a suit arising from the transaction
may be brought in that county. TEX. CIV. PRAC. & REM. CODE ANN. § 15.020(b). Similarly, an
action arising from a major transaction may not be brought in a county if the party bringing the
action has agreed in writing that an action arising from the transaction must be brought in
another county of this state and the action may be brought in that other county. See id.
§ 15.020(c)(2). “Major transaction” means a transaction evidenced by a written agreement under
which a person pays or receives, or is obligated to pay or entitled to receive, consideration with
an aggregate stated value equal to or greater than $1 million. See id. § 15.020(a).
Section 15.020 does not require that an action arise out of a specific agreement. In re
Fisher, 433 S.W.3d 523, 531 (Tex. 2014) (orig. proceeding). Rather, it applies to an action
“arising from a major transaction.” Id. (emphasis in original). In determining whether the
claims asserted “arise from” a major transaction, the court is to apply a “commonsense”
examination of the substance of the claims made to determine if they “arise” from the
transaction. Id. at 529-30. A court should consider whether a claimant seeks a direct benefit
from a major transaction and whether that transaction, or some other general legal obligation,
establishes the duty at issue. Id. at 529. To resolve the issue, we apply the same type of analysis
courts use to determine whether a claim is within the scope of a contract’s forum selection
clause. Id. at 530 (finding “no reason to deviate from the type of analysis” used in forum
selection clause cases to determine applicability of Section 15.020 mandatory venue provision).
As part of this analysis, we focus on “the parties’ intent as expressed in their agreement.”
Pinto Tech. Ventures, L.P. v. Sheldon, 526 S.W.3d 428, 437 (Tex. 2017). The Texas Supreme
Court observed that the words “arising out of the agreement” have broad significance absent any
significant limitation from the language employed in the underlying agreement. Id. at 437. The
court defined “arise” in the forum selection clause context to mean “to originate from a specified
source,” “to stem from,” and “to result from.” Id. Moreover, the court stated that this standard
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connotes “a causal connection or relation,” concluding that but-for causation is sufficient. Id. at
437–38. A “but for” cause is one “without which the event could not have occurred.” Id. at 438.
In describing the temporal reach of but-for causation, the court stated that it “has in itself no
limiting principle; it literally embraces every event that hindsight can logically identify in the
causative chain.” Id. Therefore, a party’s “claims arise out of the agreement” when “but for the
agreement, the party would have no basis to complain.” Id. (citing In re Lisa Laser USA, Inc.,
310 S.W.3d 880, 886 (Tex. 2010) (orig. proceeding) (per curiam)).
Section 15.020 is a mandatory venue provision, and when it is implicated, the tag-along
venue provision in Section 15.004 also applies. Pinto Tech. Ventures, 526 S.W.3d at 447.
Section 15.004 states that “[i]n a suit in which a plaintiff properly joins two or more claims or
causes of action arising from the same transaction, occurrence, or series of transactions or
occurrences, and one of the claims or causes of action is governed by the mandatory venue
provisions of Subchapter B [including section 15.020], the suit shall be brought in the county
required by the mandatory venue provision.” TEX. CIV. PRAC. & REM. CODE ANN. § 15.004
(West 2017); see Pinto Tech. Ventures, 526 S.W.3d at 447.
Discussion
The parties do not dispute, independently or in the aggregate, that the PA, the JOAs, and
the GMAs constitute a major transaction or transactions. EOG argues that the PA expressly
required the parties to enter JOAs, the JOAs are expressly subject to the terms of the PA,
including its venue selection provision, and that but for the working interests established in the
PA and JOAs, Cabot would have no claims against EOG. Moreover, its argument continues, the
parties executed gas marketing agreements (GMAs) on some of the relevant wells but not others,
and the GMAs are expressly subject to the JOAs, which are in turn subject to the PA containing
the venue selection provision.
Cabot responds that the entire text of Section 7.9(a) of the PA shows that the parties
intended to apply the venue provision only to claims under the PA, and its claims do not arise
from the PA. Specifically, Cabot argues that the choice of law provision in Section 7.9(a) of the
PA states that it applies to “this agreement and the transactions contemplated hereby,” whereas
the venue selection provision in that same section applies only to a cause of action “arising from
this Agreement.” Section 7.9(a) provides in its entirety as follows:
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THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY SHALL
BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF
RELATING TO CONFLICTS OF LAW RULES THAT WOULD DIRECT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION. Any claim or cause of
action arising from this Agreement shall be brought in the State or Federal District Court of Harris
County, Texas.
The PA defined “Agreement” as “this PARTICIPATION AGREEMENT.” However,
Section 7.10 states that “the exhibits and schedules referred to herein are attached hereto and
incorporated herein by this reference, and unless the context expressly requires otherwise, the
exhibits and schedules are incorporated in the definition of ‘Agreement.’” (emphasis added).
Section 7.14 states that “[t]his Agreement, together with the exhibits and schedules hereto, and
any other documents delivered in connection with this Agreement contain the entire agreement
of the Parties with respect to the subject matter hereof . . . .” (emphasis added).
The PA also defined “JOA” as “a joint operating agreement in the form attached to this
Agreement as Exhibit C.” The form JOA attached to the PA in Exhibit C states that “[t]his
Agreement is subject to that certain Participation Agreement dated February 28, 2011, by and
between Cabot Oil & Gas Corporation and EOG Resources, Inc. (Participation Agreement). In
the event of any conflicts between this Agreement and the Participation Agreement, the terms
and provisions of the Participation Agreement shall prevail to the extent of the conflict.”
Article III of the PA was entitled “Joint Operating Agreements and Operator,” and
Section 3.1 stated that “[c]ontemporaneously with the execution of this Agreement, the Parties
shall execute a separate JOA covering . . . the Nolte GU No. 1H . . . . Prior to the
Commencement of operations for each Qualified Well to be drilled on the Joint Interest or on a
Drilling Unit that includes Joint Interests, the Parties will enter into a JOA for such Drilling
Unit.” The record shows that the parties executed a JOA in the form required by Exhibit C to the
PA for the Nolte GU No. 1H on the same date that they executed the PA as contemplated by
Section 3.1 of the PA.
The GMAs contain a provision that “[i]n the event of a conflict between this Agreement
and the applicable Joint Operating Agreement, the terms of the applicable Joint Operating
Agreement shall control.”
As support for its argument, Cabot relies extensively on Christus Spohn Health Sys.
Corp. v. Nueces County Hosp. Dist., 39 S.W.3d 626 (Tex. App.—Corpus Christi 2000, no pet.).
5
In that case, Christus contracted with the hospital district to provide health care to indigent
residents of the county. Christus Spohn Health Sys. Corp., 39 S.W.3d at 628. The parties
entered three agreements, a Master agreement, a Lease Agreement, and an Indigent Care
Agreement. Id. Christus later filed suit, seeking a declaratory judgment concerning terms of the
Indigent Care Agreement. Id. As part of its suit, Christus demanded arbitration, alleging that the
arbitration provision in the Master Agreement applied to all of the agreements. Id. The
arbitration provision provided in pertinent part that all “claim[s] arising out of this Agreement . .
. shall be settled by arbitration conducted in Corpus Christi, Texas . . . .” Id. The court held that
the Master Agreement explained that “this Agreement” refers to the Master Agreement, and that
elsewhere, the phrase “this Agreement, and the Related Agreements” was used to indicate
application of a provision to all three agreements. Id. at 629.
Christus argued that the Indigent Care Agreement indicated it was executed under the
terms of the Master Agreement. Id. at 629–30. The court, when examining the actual language
of the Indigent Care Agreement, explained that “this Agreement constitutes a Related Agreement
under the terms . . . expressed in the Master Agreement,” which indicated the parties’ intent to
distinguish between the Master Agreement as “this Agreement” and the Lease Agreement and
Indigent Care Agreement as “Related Agreements.” Id. at 630.
Christus also pointed to the fact that the Indigent Care Agreement was attached as an
“exhibit” to the Master Agreement, and the Master Agreement expressly included exhibits
attached to it. Id. However, the court noted that the provision actually stated “This Agreement,
(including all Exhibits and Schedules hereto) and the Related Agreements (including all Exhibits
and Schedules thereto) constitute the entire agreement between the parties.” Id. The court
reasoned that “[i]f the Indigent Care Agreement were nothing more than an exhibit to the Master
Agreement, then there would be no need for this provision to refer separately to ‘the Related
Agreements’ to incorporate the Indigent Care Agreement into the ‘entire agreement between the
parties.’” Id.
Christus also argued that one of the provisions in the Master Agreement specifically
stated that they would form the Indigent Care Agreement, which indicated that the contracts are
inseparable. Id. The court disagreed, stating that they are related, but distinct agreements based
on the language used in the contracts. Id. Moreover, importantly, not only did the Master
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Agreement contain an arbitration provision, but the Lease Agreement contained its own separate
arbitration provision, whereas the Indigent Care Agreement contained none. Id.
Similarly, Cabot relies on Pinto Tech. Ventures, where the Texas Supreme Court held
that a mandatory venue provision in an amended shareholder’s agreement did not apply to a
finance agreement, noting that they were “separate and distinct,” and there was no evidence that
the parties ever agreed to a particular venue for an action arising from the financing transaction.
Pinto Tech. Ventures, 526 S.W.3d at 447.
The agreements in this case are distinguishable from the agreements in those cases, and
the evidence establishes that the parties agreed to venue for Cabot’s claims in Harris County.
See id. First, Christus involved the application of an arbitration provision, not a mandatory
venue provision. Second, in contrast to Christus, only one of the agreements here contains a
venue selection clause. Third, the Master Agreement in Christus merely recited that the parties
would execute the Lease Agreement and the Indigent Care Agreement. Here, the PA not only
expressly required that the parties execute JOAs, but the form JOA was attached as an exhibit to
the PA, included in the definition of “this Agreement,” and the JOAs were expressly made
“subject to” the PA, which is an incorporation of its terms. See In re 24R, Inc., 324 S.W.3d 564,
567 (Tex. 2010) (orig. proceeding) (per curiam) (“Documents incorporated into a contract by
reference become part of that contract.”); see also In re Houston Cnty. ex rel Session, 515
S.W.3d 334, 341 (Tex. App.—Tyler 2015, no pet.) (orig. proceeding) (stating that when a
contract is “subject to” a letter agreement, at minimum, the letter agreement is incorporated by
reference into the contract) (citing EOG Res., Inc. v. Hanson Prod. Co., 94 S.W.3d 697, 702
(Tex. App.—San Antonio 2002, no pet.)). A contrary interpretation would render the JOAs’
“subject to” language meaningless with respect to the venue provision. Furthermore, under the
applicable legal standard, “but for” the interests created by the PA, Cabot would have no claims
against EOG, and consequently Cabot’s claims “arise from” the PA. See Pinto Tech. Ventures,
526 S.W.3d at 437–38; In re Fisher, 433 S.W.3d at 530.
Even if some of the claims did not arise from the PA, we would conclude that all of the
claims should nevertheless be transferred to Harris County. The PA expressly required that a
JOA covering the Nolte GU No. 1H interest be contemporaneously executed with the PA. The
record shows that the parties satisfied this obligation and that it contained the provision stating
that it was subject to the PA. This interest pertains to one of the wells that forms the basis of
7
Cabot’s suit. Thus, the parties manifested the intent that, at a minimum, with respect to this
interest, they are part of the same major transaction. See Fort Worth Indep. Sch. Dist. v. City of
Fort Worth, 22 S.W.3d 831, 840 (Tex. 2000) (holding that instruments pertaining to same
transaction may be construed together). Therefore, the trial court was required to transfer
Cabot’s claims with respect to that interest. See TEX. CIV. PRAC. & REM. CODE ANN. § 15.020.
In addition, the tag-along venue provision applies to all of Cabot’s remaining claims, requiring
that all claims be transferred to the state or federal courts in Harris County.5 See id. § 15.004; see
Pinto Tech. Ventures, 526 S.W.3d at 447 (noting that if one claim is required to be transferred
pursuant to Section 15.020, then all claims in suit must likewise be transferred pursuant to
Section 15.004).
Cabot also argues that the caselaw development in this area concerned whether a
contractual venue provision also applied to tort claims which arose out of the transaction
governed by the contract at issue. See, e.g., Pinto Tech. Ventures, 526 S.W.3d at 447; In re
Fisher, 433 S.W.3d at 529–30. Although the caselaw in this area “discusse[s] a tort/contract
dichotomy [in implementing the “but for” test], rather than the scope of contractual coverage, its
reasoning [also] applies in [the forum selection clause context],” and consequently, the Section
15.020 “major transaction” context. See In re Lisa Laser USA, Inc., 310 S.W.3d at 884; see
also In re Fisher, 433 S.W.3d at 530 (holding that the reasoning and analysis in In re Lisa Laser
applies not only to forum selection clauses, but also to venue selection clauses in “major
transactions” under Section 15.020).
Finally, Cabot contends that the PA expired prior to the events giving rise to its claims
against EOG, and consequently, the venue provision does not apply. Section 6.1 of the PA
creates a three year term. However, the PA expressly states that the provisions of Section 6.2
and Article VII shall survive the termination of the agreement, and Section 6.2 states that “any
executed JOA shall survive the termination of this Agreement.” Section 7.9, found in Article
VII, contains the mandatory venue selection clause, which survives the termination of the
agreement. Additionally, Section 7.6 states in pertinent part that “the provisions of this
5
Similarly, EOG marketed gas for some of the interests that form the basis of Cabot’s claims solely under
the JOAs as authorized by those agreements, unaccompanied by a corresponding GMA. With respect to these
interests, the JOAs are “subject to” the PA, including its mandatory venue provision. As a result, the trial court
should have transferred the claims based on these interests, along with the wells subject to GMAs according to the
tag-along venue statute in Section 15.004. See TEX. CIV. PRAC. & REM. CODE ANN. § 15.004; see Pinto Tech.
Ventures, 526 S.W.3d at 447.
8
Agreement shall constitute covenants running with the land and shall remain in full force and
effect and be binding upon and inure to the benefit of the Parties and their respective successors
and permitted assigns.” Cabot’s argument is therefore without merit. We hold that the trial court
abused its discretion in denying EOG’s motion to transfer venue. See In re Fisher, 433 S.W.3d
at 530–31.
CONCLUSION
Based upon our review of the record and the foregoing analysis, we conclude the trial
court abused its discretion by denying EOG’s motion to transfer venue of this proceeding to
Harris County. Accordingly, we conditionally grant Relator’s petition for writ of mandamus.
We direct the trial court to (1) vacate its December 6, 2017 order denying EOG’s motion to
transfer venue, and (2) transfer the case to Harris County. We trust the trial court will promptly
comply with this opinion and order. The writ will issue only if the trial court fails to do
so within fifteen days of the date of the opinion and order. The trial court shall furnish this
Court, within the time of compliance with this Court’s opinion and order, a certified copy of the
order evidencing such compliance.
GREG NEELEY
Justice
Opinion delivered June 29, 2018.
Panel consisted of Worthen, C.J., Hoyle, J., and Neeley, J.
(PUBLISH)
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COURT OF APPEALS
TWELFTH COURT OF APPEALS
DISTRICT OF TEXAS
ORDER
JUNE 29, 2018
NO. 12-18-00054-CV
EOG RESOURCES, INC.,
Relator
V.
HON. CRAIG M. MIXSON,
Respondent
ORIGINAL PROCEEDING
ON THIS DAY came to be heard the petition for writ of mandamus filed
by EOG Resources, Inc.; who is the relator in Cause No. CV-17-9753, pending on the docket of
the 1st Judicial District Court of San Augustine County, Texas. Said petition for writ
of mandamus having been filed herein on March 15, 2018, and the same having been duly
considered, because it is the opinion of this Court that the petition for writ of mandamus be, and
the same is, conditionally granted.
And because it is further the opinion of this Court that the trial judge will
act promptly, vacate his order of December 6, 2017, denying relator’s motion to transfer venue,
and issue an order transferring the cause to Harris County, Texas; the writ will not issue unless
the HONORABLE CRAIG M. MIXSON fails to comply with this Court’s order within fifteen
(15) days from the date of this order.
Greg Neeley, Justice.
Panel consisted of Worthen, C.J., Hoyle, J. and Neeley, J.
10