EXCO Operating Company, LP v. Mary K. McGee

ACCEPTED
12-15-00087-CV
TWELFTH COURT OF APPEALS
TYLER, TEXAS
9/15/2015 9:36:33 AM
Pam Estes
CLERK
CASE NO. 12-15-00087-CV
IN THE RECEIVED IN
TWELFTH COURT OF APPEALS 12th COURT OF APPEALS
at Tyler TYLER, TEXAS
_______________ 9/15/2015 9:36:33 AM
PAM ESTES
Clerk
EXCO OPERATING COMPANY, LP
Appellant,
V.
MARY K. MCGEE 9/15/2015
Appellee.
_______________
Appeal from Cause No. 369-09
115th District Court, Upshur County, Texas
Honorable Lauren Parish Presiding
_________
SURREPLY BRIEF OF APPELLEE MARY K. MCGEE
JOHN D. SLOAN, JR.
Texas Bar No. 18505100
E-mail: jsloan@sloanfirm.com
JUSTIN A. SMITH
Texas Bar No. 24058357
E-mail: jsmith@sloanfirm.com
Sloan, Bagley, Hatcher & Perry Law
Firm
101 East Whaley Street
P.O. Drawer 2909
Longview, Texas 75606
Telephone: 903-757-7000
Telecopier: 903-757-7574
ATTORNEYS FOR APPELLEE
MARY K. MCGEE
ORAL ARGUMENT REQUESTED
TABLE OF CONTENTS
Table of Contents. ...................................................................... i
Index of Authorities. .................................................................. ii
Terminology................................................................................ iv
Argument and Authorities. ....................................................... 1
Prayer. ........................................................................................ 14
Certificate of Service. ................................................................. 15
Certificate of Compliance. ......................................................... 16
i
INDEX OF AUTHORITIES
CASES PAGE(S)
Barker v. Eckman, 213 S.W.3d 306
(Tex. 2006) ............................................................................ 11
Findlay v. Cave, 611 S.W.2d 57 (Tex. 1981) ................................. 6
Fleming & Assocs. v. Barton, 425 S.W.3d 560
(Tex. App.—Houston [14th Dist.], Feb. 27, 2014,
pet. denied May 1, 2015) .................................... , 12, 14, 15, 16
In the Interest of C.H., 2014 Lex. App. LEXIS 8675
(Tex. App.—Fort Worth 2014, no pet.) ................................ 12
Kupchynsky v. Nardiello, 230 S.W.3d 685
(Tex. App.—Dallas 2007, pet. denied) .................................... 7
McNamara v. Fulks, 855 S.W.2d 782
(Tex. App.—El Paso 1993, orig. proceeding) ....................... 10
Outdoor Sys., Inc. v. BBE, LLC, 105 S.W.3d 66
(Tex. App.—Eastland 2003, pet. denied) ........................... 4-5
Pegasus Energy Group, Inc. v. Cheyenne Petroleum Co.,
3 S.W.3d 112
(Tex. App.––Corpus Christi 1999, pet. denied) ........ 7, 8, 10
Ragsdale v. Progressive Voters League, 801 S.W.2d 880
(Tex. 1990) ............................................................................. 8
Smith v. Patrick W.Y. Tam Trust,
296 S.W.3d 545 (Tex. 2009) ....................................... 8, 9, 10
Tatum v. Preston Carter Co., 702 S.W.2d 186
(Tex. 1986) ........................................................................... 11
ii
Texas Gen. Indem. Co. v. Speakman, 736 S.W.2d 874
(Tex. App.—Dallas 1987, no writ) ........................................ 7
Wayne v. A.V.A. Vending, Inc., 32 S.W.3d 412, 418
(Tex. App.––Corpus Christi 2001, pet. denied) ............... 2, 6
Weaver v. Jamar, 383 S.W.3d 805
(Tex. App.—Houston [14th Dist.] 2012, no pet.) ................. 9
Whole Foods Mkt. Southwest, Inc. v. Tijerina, 979 S.W.2d 768
(Tex. App.—Houston [14th Dist.] 1998, pet. denied) ........ 13
Texas Rules and Statutes
Tex. Civ. Prac. & Rem. Code § 38.001........................................... 15
Tex. Civ. Prac. & Rem. Code § 38.005........................................... 15
Tex. R. App. P. 33. .......................................................................... 12
Tex. R. Civ. P. 166a(i). ..................................................................... 7
Tex. R. Civ. P. 301 ........................................................................... 8
iii
TERMINOLOGY
“EXCO” or “Appellant” Appellant/Defendant, EXCO Operating
Company, LP
“McGee” or “Appellee” Appellee/Plaintiff, Mary K. McGee
“Judge Parish” Honorable Lauren Parish, 115th
Judicial District Court, Upshur
County, Texas
The “Lease” The Oil, Gas and Mineral Lease Dated
February 21, 1996, originally between
Curtis Webb and Wife Mary K. McGee,
as lessors, and Amoco Production
Company, as lessee. (5 R.R. Pl. Ex. 1)
The “Property” The 93.9 acres of land, more or less, a
part of the David Meredith Survey, A-
315, subject to the Lease and made the
basis of the underlying lawsuit brought
by McGee.
iv
ARGUMENT AND AUTHORITIES
A. EXCO has failed to demonstrate that McGee’s demands were
excessive.
EXCO raises several new arguments regarding excessive
demand in its Reply Brief. Of note, EXCO now argues that: (1) it
performed under the Lease; (2) McGee’s unliquidated demands
were excessive; and (3) McGee’s offers at mediation should not be
considered. (EXCO’s Reply at 2, 6, 8). The remainder of EXCO’s
excessive demand arguments echo its original brief. McGee will
not belabor those points, having addressed them in Appellee’s
Brief.
1. EXCO’s failure to perform under the Lease justified
McGee’s belief that her demands were reasonable.
EXCO argues that “[t]he jury verdict further demonstrates
that McGee’s demands sought amounts to which she was not
entitled, and that they were therefore excessive.” (EXCO’s Reply
at 3-4). Though presented in a new package, this is little more
1
than a reiteration of EXCO’s mantra in this appeal: “Foresight is
20/20.”
To evidence this, EXCO asserts that the jury did not
ultimately find McGee entitled to the full measure of damages she
sought, and that its verdict is indisputable evidence of that fact.
(EXCO’s Reply at 3). This circular argument misses the point. The
proper question is not whether the jury ultimately found McGee
entitled to the full measure of damages she sought; the proper
question is whether she acted reasonably when she made her
demands. Wayne v. A.V.A. Vending, Inc., 52 S.W.3d 412, 418 (Tex.
App.—Corpus Christi 2001, pet. denied).
Prior to litigating the Lease and based upon its plain
language, McGee had every reason to believe that she was legally
entitled to recover damages for her land. (Appellant’s App. Tab 4);
(5 R.R. D.’s Ex. 6). EXCO alleges that McGee’s attempt to enforce
that right was unreasonable because the jury did not ultimately
award her damages for that point at trial. (EXCO’s Reply at 9)
(“…EXCO did restore the well site to its proper state… [t]his is
confirmed by the jury verdict, which awarded nothing to McGee
2
for loss of property value, a finding that McGee has not
appealed.”). This reasoning would make sense if Appellee had
made demands for her land after the jury held she was not
entitled to it; because that is not the factual scenario here, the
reasoning is mystifying. Prior to a jury’s verdict, there are nothing
but fact questions existing regarding the elements of a cause of
action and damages. If a party believes that no fact questions
existing regarding these causes of action or elements of damages,
they can file a motion for summary judgment and, if they are
right, the trial court must grant that relief. Note, and this is
important, that EXCO does not assert in either their brief or reply
that they believed there was no fact question regarding Appellee’s
entitlement to damages for her land and therefore filed a motion
for summary judgment, which, being right in their assessment,
was granted.
Appellant’s argument that a jury’s verdict conclusively
precludes a party’s reasonable belief that they are entitled to
certain damages based on certain claims before that jury’s verdict
is rendered cannot be credited. Such reasoning undermines the
3
entire point of a jury trial. Though certainly not for a lack of effort,
EXCO has failed to identify any authority charging a litigant with
knowledge of the eventual outcome of their case.1
2. McGee acted reasonably when making her settlement
demands.
EXCO discusses Outdoor Sys., Inc. v. BBE, LLC at some
length, analogizing it to the case at bar. (EXCO’s Reply at 6-7);
citing 105 S.W.3d 66 (Tex. App.—Eastland 2003, pet. denied).
While that case does address an unreasonable unliquidated
demand, it bears little similarity to this case. Notably, Outdoor
hinged on a landlord’s demand for an unliquidated sum, under
threat of forfeiture of the tenant’s lease. Id. “As a general rule, the
demand for rent, for the nonpayment of which the lessor may
declare the lease forfeited, must be for the precise amount of rent
due, and if an excessive amount is demanded the demand will be
ineffectual.” Id. at 71 (emphasis added). The case here differs
1 With respect to the photographs, it is clear that the land had not been restored at
the time they were taken, regardless of when that took place. Appellee’s counsel
relied on the metadata for the photographs and the dates on the electronic folders
they were contained in to determine those dates, as the attorney representing
Appellee below is no longer with the firm. If those dates are in error, Appellee’s
counsel apologizes for the mistake, which was unintentional.
4
markedly—if nothing else, EXCO is not the sort of tenant that
pays rent. Moreover, the Outdoor Systems court took specific issue
with the fact that the demand was unliquidated: rent is a
necessarily liquidated sum, rendering such a demand wholly
improper. Id. at 73 (“BBE’s demand was not for a specific
liquidated sum.”).
3. EXCO’s arguments do not warrant the remedy it seeks.
EXCO attempts to justify its mischaracterization of the facts
below by asserting that there is no evidence of McGee’s lowered
settlement offers in the record, and that any communications it
made in mediation is confidential. (EXCO’s Reply at 8). It is worth
noting that EXCO offers only excuses for its mischaracterization,
not a denial thereof. (EXCO’s Reply at 8). While EXCO is correct
that no evidence of lowered settlement offers directly appears in
the Reporter’s Record, the motions on attorney’s fees filed by both
parties in the trial court reference their existence, and have gone
without objection. (Appellee’s App. Tab 2, p. 2 & Tab 3, p. 3).
Additionally, while EXCO correctly notes that statements a party
makes in an ADR proceeding cannot be offered against them,
5
McGee has not offered any of EXCO’s statements from the
proceeding; only her own.
EXCO concludes that McGee’s demands were unreasonable
and led directly to a jury trial, thus depriving her of the right to
recover attorney’s fees. In arriving at this conclusion, it takes a
few wrong turns. It does correctly note that the dispositive inquiry
for determining whether a demand is excessive is whether the
claimant acted unreasonably or in bad faith. (EXCO’s Reply at 1
(citing Wayne, 52 S.W.3d at 418 (Tex. App.—Corpus Christi 2001,
pet. denied) (citing Findlay v. Cave, 611 S.W.2d 57, 58 (Tex.
1981))). However, it continually fails to acknowledge the difference
between an amount to which one reasonably believes herself
entitled under the unliquidated and unlitigated terms of a
breached agreement, and the amount to which a jury eventually
finds her entitled. (EXCO’s Reply at 3-4, 7, 8, 9). Under the
holding that EXCO seeks, a litigant must let the jury verdict guide
her settlement demands—never mind the fact that a trial may
come years after the demands are made. The notion is
insupportable.
6
B. EXCO has failed to demonstrate that McGee’s attorney’s fees
were excessive.
After parroting a handful of excessive fee arguments from its
original brief, EXCO correctly notes that by putting on
controverting evidence of attorney’s fees, it created a fact issue.
(EXCO’s Reply at 11-12) (citing Texas Gen. Indem. Co. v.
Speakman, 736 S.W.2d 874, 885-86 (Tex. App.—Dallas 1987, no
writ)). Unfortunately for EXCO, merely creating a fact issue does
not establish an abuse of discretion sufficient to overturn a
factfinder’s award of attorney’s fees. Pegasus Energy Group, Inc.
v. Cheyenne Petroleum Co., 3 S.W.3d 112, 132 (Tex. App.—Corpus
Christi 1999, pet. denied). Such a fact issue would certainly
preclude a no-evidence summary judgment, directed verdict, or
judgment notwithstanding the verdict; it has no effect, however,
on an issue submitted to the trial judge for factfinding. See Tex. R.
Civ. P. 166a(i) (“The court must grant the motion unless the
respondent . . . rais[es] a genuine issue of material fact.”);
Kupchynsky v. Nardiello, 230 S.W.3d 685, 688 (Tex. App.—Dallas
7
2007, pet. denied) (“A directed verdict is proper . . . when the
evidence is insufficient to raise a material fact issue.”); Tex. R.
Civ. P. 301 (“[T]he court may render judgment non obstante
veredicto if a directed verdict would have been proper”); but see
Pegasus Energy Group, Inc., 3 S.W.3d at 132.2
1. EXCO asks this Court to apply an incorrect standard.
Despite EXCO’s contentions, McGee does not cite Smith v.
Patrick W.Y. Tam Trust in support of the trial court’s fee award.
(EXCO’s Reply at 13). Quite the contrary. Smith offers little—if
any—direct guidance in this dispute. Smith v. Patrick W.Y. Tam
Trust, 296 S.W.3d at 548 (“But the jury’s fee award is not at issue
here”). Smith addressed a procedural and evidentiary doctrine,
similar to summary judgment or judgment as a matter of law,
where uncontroverted evidence of attorney’s fees established those
fees as a matter of law, without submission to a factfinder. See id.
(citing Ragsdale v. Progressive Voters League, 801 S.W.2d 880,
2“The trial court’s award of attorney’s fees will not be disturbed absent an
abuse of discretion. A trial court may be reversed for abusing its discretion
only when the court of appeals finds the court acted in an unreasonable,
arbitrary manner, or acted without reference to any guiding rules and
principles.” (internal citations omitted).
8
882 (Tex. 1990)). 3 It did not purport to provide guidance to courts
evaluating attorney’s fees awarded by a factfinder after reviewing
controverted evidence. Smith, 296 S.W.3d at 547-48.
EXCO does correctly note that whether a jury acts as fact-
finder on attorney’s fees or the trial court does, a reviewing court
applies the same standard. (EXCO’s Reply at 15-16);Weaver v.
Jamar, 383 S.W.3d 805, 814 (Tex. App.—Houston [14th Dist.]
2012, no pet.). However, while fee awards determined by trial
courts and juries are reviewed under the same legal standard,
they necessitate different considerations. “Generally, the trial
court enjoys wide discretion in awarding attorney’s fees, and this
[c]ourt will not overturn its decision absent abuse of that
3
“It is the general rule that the testimony of an interested witness, such as a
party to the suit, though not contradicted, does no more than raise a fact
issue to be determined by the jury. But there is an exception to this rule,
which is that where the testimony of an interested witness is not contradicted
by any other witness, or attendant circumstances, and the same is clear,
direct and positive, and free from contradiction, inaccuracies, and
circumstances tending to cast suspicion thereon, it is taken as true, as a
matter of law. . . . While the present case fits the exception to the general
rule, we do not mean to imply that in every case when uncontradicted
testimony is offered it mandates an award of the amount claimed. For
example, even though the evidence might be uncontradicted, if it is
unreasonable, incredible, or its belief is questionable, then such evidence
would only raise a fact issue to be determined by the trier of fact.”
9
discretion.” Id. (citing McNamara v. Fulks, 855 S.W.2d 782, 784
(Tex. App.—El Paso 1993, orig. proceeding)).
2. A reviewing court generally may not substitute its
judgment for that of the factfinder.
A trial judge has the duty to reduce a jury’s award of
attorney’s fees if she finds a fee award, based upon uncontroverted
evidence, excessive. See, e.g., Thomas v. Bobby D. Assocs., 2008
Tex. App. LEXIS 5881 at *12. When, as here, a trial judge acting
as factfinder awards attorney’s fees after receiving evidence and
argument from both sides, she enjoys considerable latitude in
making her decision. See Pegasus Energy Group, Inc., 3 S.W.3d at
132 (“The determination of the amount to be awarded as a
reasonable attorney’s fee is a question for the trier of fact, but the
award must be supported by competent evidence.”); see also Smith
v. Patrick W.Y. Tam Trust, 296 S.W.3d 545, 547 (Tex. 2009) (“The
reasonableness of attorney’s fees is ordinarily left to the factfinder,
and a reviewing court may not substitute its judgment for the
jury’s.”).
Regarding proportionality between fees and damages, the
10
Texas Supreme Court has spoken. In Barker v. Eckman, the
Texas Supreme Court rejected the premise underlying EXCO’s
argument. See 213 S.W.3d 306, 314 (Tex. 2006). There, the Court
remanded an award of attorney’s fees for further proceedings after
reducing the award of actual damages upon which the fees were
based. Id. In doing so, it declined to substitute its judgment for
that of the fact finder. Id. It also declined to impose a
“presumptive proportionality” legal construct, under which a
reviewing court would presume that an attorney’s fee award is to
be reduced in proportion to any reduction in actual damages. Id. It
reasoned that such an approach would require a presumption that
the fact finder “awarded attorney’s fees on some proportionality
basis to actual damages.” Id. at 314-15 (emphasis added). It
declined to impose such a remedy. Id. (citing Tatum v. Preston
Carter Co., 702 S.W.2d 186, 188 (Tex. 1986) (holding that court of
appeals erred in proportionally reducing exemplary damages in
the exact ratio as the actual damages were reduced)).
The record before this Court allows a single conclusion: that
Judge Parish, having reviewed the evidence submitted to her and
11
the circumstances of the case, concluded that McGee was entitled
to the amount of attorney’s fees ultimately awarded. (Appellant’s
App. Tab 2). The fact that EXCO disagrees with the weight that
Judge Parish gave to each party’s evidence does not constitute an
abuse of discretion.
C. The recent Fleming decision does not relieve EXCO of
liability for McGee’s attorney’s fees.
EXCO asserts that the recent Fleming & Assocs. v. Barton
decision from the Fourteenth District shields it from liability for
McGee’s attorney’s fees. (EXCO’s Reply at 17); 425 S.W.3d 560,
575 (Tex. App.—Houston [14th Dist.], Feb. 27, 2014, pet. denied
May 1, 2015). As a threshold matter, EXCO has waived this
argument. To preserve an error for appeal, a litigant must object
to the error and obtain a ruling denying it. Tex. R. App. P. 33.
EXCO did neither, despite filing a Motion for New Trial on the
sole issue of attorney’s fees over a year after the Fleming decision
was issued. (C.R. 263-269). Generally speaking, any issue not
raised at trial or in a motion for new trial is waived on appeal. In
the Interest of C.H., 2014 Lex. App. LEXIS 8675, *4 (Tex. App.—
12
Fort Worth 2014, no pet.) This holds true even if a new opinion is
issued while the case is pending. See Whole Foods Mkt.
Southwest, Inc. v. Tijerina, 979 S.W.2d 768, 773 (Tex. App.—
Houston [14th Dist.] 1998, pet. denied). Tijerina involved an
appeal from a jury verdict finding the appellant liable for
retaliatory discharge under the Labor Code. See id. at 772. The
appellant raised for the first time on appeal the argument that, as
a non-subscriber to the Worker’s Compensation Act, they could
not be held liable for retaliatory discharge under the Labor Code.
See id. This argument was based upon a Texas Supreme Court
opinion, Texas Mexican Railroad. Co. v. Bouchet, issued after a
jury rendered a verdict in favor of the plaintiff. See id. at 772. The
appellee asserted that the argument was waived because it had
not been raised to the trial court. See id. at 773. The appellant, in
response, claimed that it could not have raised the argument
because two sister court had held, and dicta from the Texas
Supreme Court suggested, that the argument was precluded. See
id. Holding that the argument was waived because it was not
raised below, the court found that nothing precluded the appellant
13
from making argument at the trial court. See id. First, none of the
existing authority was binding on the trial court. See id. “After all,
[the appellant in Bouchet] objected during the trial, and having
preserved the issue for appeal, raised the issue with the court of
appeals in spite of [the contrary authority.” See id. Moreover, even
if there had been binding contrary authority, there was still “no
reason why [appellant] could not have made [the] argument,” for
purposes of preserving it for appeal. See id.
Here, of course, Appellant does not even assert that there
was any contrary authority; rather, they simply argue that
Fleming is “new law.” It is not, however, new law, as Fleming was
decided in February 27, 2014, almost a year prior to the trial court
issuing her Findings of Fact and Conclusions of Law on attorney’s
fees, in January 2015, and Appellant had ample opportunity to
raise the argument below. Nor is Fleming “new law,” because
Fleming is only binding authority for trial courts in the 14th
District Court of Appeals. Appellant has less excuse than those
put forward in Tijerina, and their attempt to raise Fleming at the
11th hour is improper and should be precluded.
14
Assuming arguendo that EXCO may still raise its Fleming
argument, this Court should decline to adopt the holding. The
opinion put great weight on the plain text and legislative history
of Texas Civil Practice and Remedies Code § 38.001, but
nonetheless came to the flawed conclusion that only individuals
and corporations may be held liable for attorney’s fees under
Chapter 38. Fleming & Assocs. v. Barton, 425 S.W.3d at 575. As
noted in the Fleming opinion, the legislative intent behind
Chapter 38’s change of wording was to eliminate governmental
liability. Id. There is simply no logical reason for Chapter 38 to
apply to individuals and corporations, but not partnerships or
other business entities. Assuming that the Chapter’s underlying
purpose is to encourage certain classes of aggrieved parties to
pursue judicial remedies for their harms, such an arbitrary
construction would surely impair the underlying purpose, rather
than further it. See Tex. Civ. Prac. & Rem. Code § 38.005 (“This
chapter shall be liberally construed to promote its underlying
purposes”). Absent a binding decision from the Texas Supreme
Court holding to the contrary, this Court should reject the
15
Fleming argument as contrary to public policy.
PRAYER
Appellee Mary K. McGee respectfully prays that this Court
affirm the trial court’s judgment awarding her the reasonable
attorney’s fees that she incurred while prosecuting this action.
Respectfully submitted,
Sloan, Bagley, Hatcher & Perry Law
Firm
101 East Whaley Street
P.O. Drawer 2909
Longview, Texas 75606
Telephone: 903-757-7000
Telecopier: 903-757-7574
By:__/s/Justin A. Smith_____________
JOHN D. SLOAN, JR.
Texas Bar No. 18505100
E-mail: jsloan@sloanfirm.com
JUSTIN A. SMITH
Texas Bar No. 24058357
E-mail: jsmith@sloanfirm.com
ATTORNEYS FOR APPELLEE
MARY K. MCGEE
16
CERTIFICATE OF SERVICE
I hereby certify that pursuant to Rule 9.5, Texas Rules of
Appellate Procedure, that a true and correct copy of the foregoing
brief was served upon the following counsel electronically, through
the electronic filing manager, and via certified mail, return receipt
requested, on this the 15th day of September, 2015:
Jennifer Parker Ainsworth
E-mail: jainsworth@wilsonlawfirm.com
Matthew T. Milam
E-mail: mmilam@wilsonlawfirm.com
[Attorneys for Appellee EXCO Operating Company, LP]
Wilson, Robertson, and Cornelius, P.C.
One American Center
909 ESE Loop 323, Suite 400 [01]
P.O. Box 7339
Tyler, Texas 75711-7339
Telephone: (903) 509-5000
Telecopier: (903) 509-5091
________________
17
CERTIFICATE OF COMPLIANCE
I, JUSTIN SMITH, attorney for Appellee Mary K. McGee,
hereby certify, pursuant to Texas Rule of Appellate Procedure
9.4(i)(3), that there are 5906 words in the foregoing Appellant’s
Brief. I am making this certification based upon reliance on the
word count of the computer program used to create Appellee’s
Brief.
18