the Huff Energy Fund, L.P., WRH Energy Partners, L.L.C., William R."Bill" Huff, Rick D'Angelo, Ed Dartley, Bryan Bloom, and Riley-Huff Energy Group, LLC v. Longview Energy Company ( 2015 )

ACCEPTED
04-12-00630-CV
FOURTH COURT OF APPEALS
SAN ANTONIO, TEXAS
6/1/2015 3:48:01 PM
KEITH HOTTLE
CLERK
NO. 04-12-00630-CV
FILED IN
THE HUFF ENERGY FUND, L.P., WRH ENERGY PARTNERS4th,COURT
L.L.C.,OF APPEALS
SAN ANTONIO, TEXAS
WILLIAM R. “BILL” HUFF, RICK D’ANGELO, AND
6/1/2015 3:48:01 PM
RILEY-HUFF ENERGY GROUP, LLC, KEITH E. HOTTLE
Clerk
APPELLANTS,
vs.
LONGVIEW ENERGY COMPANY,
APPELLEE.
APPELLANTS’ JOINT ORAL ARGUMENT BENCH BOOK
FOR EN BANC ARGUMENT JUNE 3, 2015
CROFTS & CALLAWAY, P.C. BAKER BOTTS L. L.P.
Sharon E. Callaway Thomas R. Phillips
sharonc@ccjappellate.com tom.phillips@bakerbotts.com
State Bar No. 05900200 State Bar No. 00000102
613 N.W. Loop 410, Suite 800 98 San Jacinto Boulevard, Suite 1500
San Antonio, Texas 78216-5509 Austin, Texas 78701-4078
BROCK PERSON GUERRA REYNA, P.C. FULBRIGHT & JAWORSKI L.L.P.
Ricardo R. Reyna Dean V. Fleming
rreyna@bpgrlaw.com dean.fleming@nortonrosefulbright.com
State Bar No. 16794845 State Bar No. 07122100
17339 Redland Road Michael W. O’Donnell
San Antonio, Texas 78247-2302 mike.odonnell@nortonrosefulbright.com
State Bar No. 24002705
PAMELA STANTON BARON
Jeffrey A. Webb
psbaron@baroncounsel.com
jeff.webb@nortonrosefulbright.com
State Bar No. 01797100
State Bar No. 24053544
Post Office Box 5573
300 Convent Street, Suite 2100
Austin, Texas 78763
San Antonio, Texas 78205
DARYL L. MOORE, P.C.
Daryl L. Moore
daryl@heightslaw.com
State Bar No. 14324720
1005 Heights Boulevard
Houston, Texas 77008
TABLE OF CONTENTS
Tab 1 Longview’s “Hypothetical” Plan
Tab 2 Riley Already Knew and Planned to Buy From Ford and Wyldfire
Tab 3 Longview’s CEO: Ford Selling to Anyone
Tab 4 Longview’s Pearce: Plenty of Acreage
Tab 5 Lober Line drawn in red onto Fly Like an Eagle public map
Tab 6 Longview Failed to Plead a Separate Competition Claim
Tab 6 Maximum Award Under the Jury Verdict is $10.5 Million
Tab 8 The Judgment Ignores the Jury Verdict
Tab 9 Longview’s Counsel: Jury Charge re Production Costs
Tab 10 Longview’s Counsel: Closing Argument re Production Costs
Tab 11 Restatement (Third) of Restitution and Unjust Enrichment § 55
Tab 12 Texas Rule of Civil Procedure 279
Tab 13 Defendants’ Objection to Question 5
1
CERTIFICATE OF SERVICE
I hereby certify that, on June 1, 2015, a true and correct copy of the Joint
Oral Argument Bench Book has been served upon the following counsel of record
by e-service:
GARDERE WYNNE SEWELL LLP WATTS GUERRA LLP
Craig B. Florence Mikal C. Watts
Randy D. Gordon Francisco Guerra IV
Stacy R. Obenhaus Four Dominion Drive
Rachel Kingrey Building 3, Suite 100
1601 Elm Street, Suite 3000 San Antonio, Texas 78257
Dallas, Texas 75201
/ s / Thomas R. Phillips
Thomas Phillips
2
Longview’s “Hypothetical” Plan
(36 RR PX-369)
• Acquire 21,000 acres in 7 prospects (3,000 acres each) for
$42 million
• 5 prospects to be in the gas-condensate window and 2 in
the dry-gas window
• Joint venture with industry partner reducing interest by
50% (yielding 10,500 net acres)
• Drill one well per prospect at a rate of 2 wells per quarter
at cost of $5.5 million per well
Riley Already Knew and Planned to Buy From
Ford and Wyldfire (35 RR PX-65)
In a December 18, 2009 email, D’Angelo asked Riley:
Have you heard of a broker out of Ft. Worth called Wildfire…..or a Pat
Goodin…?
Riley immediately responded:
Pat Goodin is in Houston. Worked on Edwards play in Bastrop
and Caldwell County Texas. Don’t think he is associated with
Wildfire. Wildfire is Tamara Ford out of Pala Pinto County. Two
counties west of Tarrant County. She has buyers on the ground is
spending some of her own money she is the real deal. Wildfire is
the group we would use to buy acreage when we get to that point.
Longview’s CEO: Ford Selling to Anyone
(29 RR 140)
Q Based on your understanding in late 2009,
was Ms. Ford trying to broker this land to anyone who was
willing to pay for it?
A Yes.
Longview’s Pearce: Plenty of Acreage
(19 RR 21)
Q Okay. So if you could -- is it fair to say
that there’s plenty of acreage out there for Longview’s plan?
A Yes.
Q And even if we assume for the moment, for the
sake of argument, that not all that acreage was there because
of Riley-Huff or some other entity bought it, there’s plenty of
acres to purchase?
A But it was changing daily, but at that point in
time, Tamara Ford suggested that there was plenty of acreage
to be purchased in those counties.
Longview Failed to Plead a Separate Competition Claim
(5 CR 1865)
III. ~lailils
A. Breach of Fiduci_ary Duty/Usurpation of Corporate Opportunity
(Against Huff and D' Angelo)
55. D'Angelo and Huff owe Longview a duty of loyalty.
56. Longview was financially able to ~xploit the Eagle Ford opportunity.
57. The Eagle Ford opportunity~ wi~n.in Longview's li_ne ofbw;_i1_1ess.
58. Longview had an interest or ~xpectancy in the Eagle Ford opportunity.
59. By diverting the Eagle Ford opportunity to themselves, D' Angelo and Huff place.d
themselves in a position of conflict ot competition with Longview.
60. D' Angelo and HUff br~ached their fidueiary dut_ies to Longview by usurping the
Eagle Ford opportunity and. misu.sing proprie~ i_nfonnation supplied by Longview i.n re·gard t(l
the Eagle Ford.
61 . D' Angelo a;nd Huff act~ with m_alice_.
62. D' An:gel() and Huff's breaches of duty and usurpation of Longview's opportunity
proxi.m~tely caused L.Qngvi_ew injucy and 4amages.
Maximum Award Under The Jury Verdict
is $10.5 Million
$120,000,000
$42,000,000
Past-Production
Property Value
Revenues
$24,500,000 $127,000,000
Property Cost Past-Production Costs
$17,500,000 (-$7,o00,000)
$10,500,000 Net Profit
The Judgment Ignores The Jury Verdict
X
$42,000,000
$120,000,000
Past-Production
Property Value
Revenues
$24,500,000
Property Cost
X
$127,000,000
Past-Production Costs
(-$24,500,000) $120,o00,000
$95,500,000 Award
Longview’s Counsel: Jury Charge re Production Costs
(32 RR67)
MS. CALLAWAY: The Huff Defendants object to
Question Number 8 for the following reasons: First, the
valuation should be based on the net of production cost and
expenses, including taxes . . . .
MR. WOHLFORD: I point out that that is taken into
account by Question 9.
Longview’s Counsel: Closing Argument re
Production Costs (33 RR 42-43)
MR. WATTS: What did Riley-Huff Energy Group pay to
develop the assets it acquired? We've got that answer as well.
Basically, you would add the drilling and completion, add it to
the operating expenses for the leases, and that would be
$261,850,000. So you would write in 261.8.
Restatement (Third) of Restitution and Unjust Enrichment § 55
If a defendant is unjustly enriched by the acquisition of title to identifiable property at the
expense of the claimant or in violation of the claimant's rights, the defendant may be declared
a constructive trustee, for the benefit of the claimant, of the property in question and its
traceable product.
The obligation of a constructive trustee is to surrender the constructive trust property to the
claimant, on such conditions as the court may direct.
_____________________________________________________________
Comments
g. Requirements of constructive trust: identification and tracing.
Constructive trust permits the claimant to assert ownership of (i) specifically identifiable
property for which the defendant is liable in restitution or (ii) its traceable product by the
rules of §§ 58-59.
A claimant who can show unjust enrichment, but who cannot identify such
property in the hands of the defendant, is not entitled to the remedy of
constructive trust.
This fundamental limitation, commonly referred to as the “tracing requirement,”
applies in one form or another to all the principal means of specific relief in restitution
(constructive trust, equitable lien, subrogation).
Texas Rules of Civil Procedure Rule 279
Omissions From the Charge
Upon appeal all independent grounds of recovery or of defense
not conclusively established under the evidence and no element of
which is submitted or requested are waived.
When a ground of recovery or defense consists of more than one
element, if one or more of such elements necessary to sustain such
ground of recovery or defense, and necessarily referable thereto, are
submitted to and found by the jury, and one or more of such elements
are omitted from the charge, without request or objection, and
there is factually sufficient evidence to support a finding thereon,
the trial court, at the request of either party, may after notice and
hearing and at any time before the judgment is rendered, make and file
written findings on such omitted element or elements in support of the
judgment.
If no such written findings are made, such omitted element or elements
shall be deemed found by the court in such manner as to support the
judgment.
Defendants’ Objection to Question 5
(32 RR 62-63)
There is no identifiable X property here that belonged
to Longview and which was taken from Longview by
Huff or D’Angelo and placed under the control of Riley
Huff. . . .
Longview’s claim for a constructive trust fails because
it cannot trace by strict proof or otherwise something
misappropriated from it to an identifiable res.