Devon Energy Corporation, Devon Energy Production Company, L.P., and Devon Gas Services, L.P. v. Iona Energy, L.P.

In the
Court of Appeals
Second Appellate District of Texas
at Fort Worth
___________________________
No. 02-19-00343-CV
___________________________
DEVON ENERGY CORPORATION; DEVON ENERGY PRODUCTION
COMPANY, L.P.; AND DEVON GAS SERVICES, L.P., Appellants
V.
IONA ENERGY, L.P., Appellee
On Appeal from the 271st District Court
Wise County, Texas
Trial Court No. CV18-05-382
Before Gabriel, Womack, and Wallach, JJ.
Memorandum Opinion by Justice Gabriel
MEMORANDUM OPINION
Appellants Devon Energy Corporation (Devon Energy); Devon Energy
Production Company, L.P. (DEPCO); and Devon Gas Services, L.P. (Devon Gas)
(collectively, the Devon Parties) appeal from the trial court’s order denying their
motion to transfer venue of appellee Iona Energy, L.P.’s claims to Tarrant County.
The Devon Parties failed to establish their pleaded mandatory-venue provision
applicable to major transactions. However, Iona similarly failed to prove that Wise
County was a county of permissive venue. Because the Devon Parties, in turn,
established that Tarrant County was a county of proper, permissive venue, the trial
court erred by denying the Devon Parties’ motion to transfer venue. We reverse the
trial court’s order and remand the case with instructions to sustain the motion and to
transfer Iona’s claims to Tarrant County. See Tex. R. App. P. 43.2(d); Tex. R. Civ. P.
89.
I. BACKGROUND1
In 2001, Iona entered into an individualized oil and gas lease with DEPCO,
allowing DEPCO to produce Iona-owned minerals on 7,238.944 acres in Tarrant and
Parker Counties.2 The lease set venue in Tarrant County for any disputes:
1
Several of the operative facts were stipulated to by the Devon Parties and Iona
for the purposes of the Devon Parties’ motion to transfer venue.
2
The original lease was between Mitchell Energy Company, L.P., which was
DEPCO’s predecessor-in-interest, and the Veale Testamentary Trust, which later
transferred its interest in the minerals to Iona. The parties stipulated, however, that
2
“Jurisdiction and venue of any action relating to this lease or the leased premises shall
lie in Tarrant County, Texas.”3 The parties stipulated that the wells at issue were
located in Tarrant and Parker Counties and that the gas produced from those wells
was “primarily processed” at a large plant in Wise County—the Bridgeport Plant.4
Iona’s “offices” and principal place of business are in Tarrant County; the Devon
Parties’ principal places of business are in Oklahoma.
On May 8, 2018, twenty-seven plaintiffs, all of whom had signed leases with
DEPCO regarding their mineral interests located in Wise, Denton, and Tarrant
Counties, sued the Devon Parties for alleged royalty underpayments.5 Almost a year
later on April 22, 2019, Iona and other mineral owners joined the suit as plaintiffs.6
The plaintiffs raised claims for (1) breach of the leases’ royalty clauses against
the lease at issue was between Iona and DEPCO at the relevant time and that the
lease was valid and enforceable.
3
The Devon Parties did not treat this provision as a forum-selection clause in
the trial court nor did they seek to dismiss Iona’s claims based on the contractual
selection of “[j]urisdiction and venue.” See generally Carlile Bancshares, Inc. v. Armstrong,
Nos. 02-14-00014-CV, 02-14-00018-CV, 2014 WL 3891658, at *6–7 (Tex. App.—
Fort Worth Aug. 7, 2014, no pet.) (mem. op.) (discussing differences between
contractual forum-selection and venue clauses); Ramsay v. Tex. Trading Co., 254 S.W.3d
620, 626 (Tex. App.—Texarkana 2008, pet. denied) (recognizing motion to dismiss is
procedural device to enforce forum-selection clause).
The Bridgeport Plant was partially owned by Devon Gas until March 2014.
4
5
The plaintiffs named other defendants, but those defendants are not parties to
this appeal.
Currently, there are fifty plaintiffs.
6
3
DEPCO, (2) breach of the implied contractual duty to deduct only reasonable
expenses for processing against DEPCO, (3) fraud by affirmative misrepresentations
against DEPCO, (4) fraud by nondisclosure against DEPCO, (5) statutory fraudulent
transfer against the Devon Parties, (6) “Corporate Entities Used to Perpetrate Fraud”
against the Devon Parties, and (7) conspiracy against the Devon Parties. Iona and the
other plaintiffs pleaded for the recovery of their damages (including exemplary
damages), attorney’s fees, a constructive trust on the money that the Devon Parties
retained as a result of their royalty calculations, and the disgorgement of the Devon
Parties’ profits. To support their chosen venue of Wise County, the plaintiffs alleged
general, permissive venue under Section 15.002(a)(1)—all or a substantial part of the
acts or omissions giving rise to their claims occurred in Wise County.7 Tex. Civ. Prac.
& Rem. Code Ann. § 15.002(a)(1); see also Tex. Specialty Trailers, Inc. v. Jackson & Simmen
Drilling Co., No. 2-07-228-CV, 2009 WL 2462530, at *5 (Tex. App.—Fort Worth
Aug. 13, 2009, pet. denied) (mem. op.) (referring to Section 15.002 as permissive
venue).
7
The plaintiffs also cited to the permissive-venue provision applicable to cases
involving multiple defendants, which requires a plaintiff to first establish proper venue
as to one defendant. See Tex. Civ. Prac. & Rem. Code Ann. § 15.005. This venue
provision is not at issue in this appeal.
4
The Devon Parties quickly filed a motion to transfer venue of Iona’s claims to
Tarrant County and denied Iona’s pleaded venue facts.8 The Devon Parties asserted
mandatory venue based on the contractual venue provision in DEPCO’s lease with
Iona, arguing that the lease was a major transaction; permissive, general venue based
on their payment of royalties to Iona in Tarrant County—the site of the execution of
the lease and the location of some of Iona’s wells; and permissive venue based on its
contractual obligation to remit payment to Iona in Tarrant County. See Tex. Civ. Prac.
& Rem. Code Ann. §§ 15.002(a)(1), 15.004, 15.020, 15.035; Tex. R. Civ. P. 86.3,
87.3(a). Iona responded that the contractual venue provision did not relate to a major
transaction, that the events occurred in Wise County because the gas produced from
Iona’s wells in Tarrant and Parker Counties was processed in Wise County, that Iona
met the joinder elements to permit venue in Wise County, and that DEPCO’s
contractual payment obligation in the transfer order was irrelevant because Iona did
not allege wrongdoing under the transfer order. See Tex. Civ. Prac. & Rem. Code
Ann. §§ 15.002(a)(1), 15.003(a); Tex. R. Civ. P. 87.2(b). The Devon Parties filed a
reply, attaching affidavits and documents in support of their venue arguments.
The trial court held a nonevidentiary hearing and denied the Devon Parties’
motion to transfer venue on September 2, 2019. See Tex. R. Civ. P. 87.3(b). The
Devon Parties filed a notice of accelerated, interlocutory appeal and now argue that
8
The Devon parties did not seek to transfer venue regarding the other
plaintiffs’ claims.
5
Iona did not independently establish venue in Wise County, that Iona failed to meet
the joinder requirements that would allow venue in Wise County even though Iona
failed to independently establish venue there, and that the Devon Parties established
proper venue in Tarrant County. See Tex. Civ. Prac. & Rem. Code Ann.
§ 15.003(b)(1), (c); Tex. R. App. P. 26.1(b), 28.1.
II. VENUE CONSIDERATIONS
In reviewing a trial court’s venue ruling, we must make “an independent
determination from the record” that is not governed by “either an abuse of discretion
or substantial evidence standard.” Tex. Civ. Prac. & Rem. Code Ann. § 15.003(c)(1).
In other words, we review the ruling de novo, considering the entire record. See id.
§ 15.064(b); Surgitek, Bristol-Myers Corp. v. Abel, 997 S.W.2d 598, 603 (Tex. 1999);
Sustainable Tex. Oyster Res. Mgmt. L.L.C. v. Hannah Reef, Inc., 491 SW.3d 96, 107 (Tex.
App.—Houston [1st Dist.] 2016, pet. denied). If we conclude that the trial court
erred by denying the Devon Parties’ motion to transfer venue, we must reverse the
order without conducting a harm analysis. See Tex. Civ. Prac. & Rem. Code Ann.
§ 15.064(b).
Once the Devon Parties moved to transfer venue, specifically denying Iona’s
pleaded venue facts and proffering affidavits and attachments, Iona was required to
prove that venue was proper in the county of suit. See Tex. R. Civ. P. 87.2(a)–(b),
87.3(a); Surgitek, 997 S.W.2d at 602; In re Masonite Corp., 997 S.W.2d 194, 197 (Tex.
1999) (orig. proceeding); Lynn Smith Chevrolet-GEO, Inc. v. Tidwell, 161 S.W.3d 738, 742
6
(Tex. App.—Fort Worth 2005, no pet.). Because there was more than one plaintiff in
the suit against the Devon Parties, Iona must have independently established proper
venue through prima facie proof. See Tex. Civ. Prac. & Rem. Code Ann. § 15.003(a);
Tex. R. Civ. P. 87.2(a), 87.3(a); Surgitek, 997 S.W.2d at 602–03.
Here, Iona relied on the general venue statute and argued that all or a
substantial part of the events or omissions giving rise to its claims occurred in Wise
County. See Tex. Civ. Prac. & Rem. Code Ann. § 15.002(a)(1). Section 15.002 is a
permissive-venue statute such that Iona’s choice of venue controls if Iona
independently established this ground of permissive venue and if the Devon Parties
did not establish a ground of mandatory venue. See Tex. R. Civ. P. 87.3(b); Perryman v.
Spartan Tex. Six Capital Partners, Ltd., 546 S.W.3d 110, 130 (Tex. 2018); Kerri D. Condie,
P.C. v. McLaughlin, No. 05-18-00085-CV, 2019 WL 2353443, at *3 (Tex. App.—Dallas
June 4, 2019, no pet.) (mem. op.). If Iona did not independently establish proper
venue under the general venue statute, its claims were required to be transferred to a
county of proper venue unless Iona independently established by prima facie proof
that it, as one of multiple plaintiffs, met four statutory joinder factors. See Tex. Civ.
Prac. & Rem. Code Ann. § 15.003(a); Surgitek, 997 S.W.2d at 602–03; Sustainable Tex.
Oyster, 491 S.W.3d at 106–07. See generally 72 Tex. Jur. 3d Venue § 14 (2013)
(recognizing joinder factors considered only if plaintiff failed to independently
establish proper venue).
7
In any event, if the Devon Parties established mandatory venue by prima facie
proof, the trial court was required to transfer Iona’s claims to the county of
mandatory venue. See Tex. R. Civ. P. 87.3(c); Sustainable Tex. Oyster, 491 S.W.3d at
106; In re City of Dall., 977 S.W.2d 798, 803 (Tex. App.—Fort Worth 1998, orig.
proceeding). Thus, mandatory venue trumps permissive venue. See Perryman,
546 S.W.3d at 130; see also Tex. Civ. Prac. & Rem. Code Ann. § 15.001(b) (defining
proper venue as a county of mandatory venue or if no mandatory-venue provision
applies, a county of permissive venue).
III. APPLICATION
A. MANDATORY VENUE
Because mandatory venue controls even if Iona independently established
permissive venue in Wise County under Section 15.002(a)(1) or established the joinder
factors under Section 15.003(a), we first address whether the Devon Parties
established that a mandatory-venue provision applied to Iona’s claims. As we
recounted, the Devon Parties raised mandatory venue based on the fact that they and
Iona had contractually agreed that jurisdiction and venue for any dispute involving the
lease “shall lie” in Tarrant County.9 See Tex. Civ. Prac. & Rem. Code Ann. § 15.020.
9
Although the Devon Parties only tangentially raise mandatory venue under
Section 15.020 in their appellate brief by relying on the contractual venue provision,
we will consider mandatory venue as part of our review of the entire record because
the Devon Parties clearly raised the issue to the trial court in support of their motion
to transfer. Cf. Renzenberger, Inc. v. O’Bryant, No. 13-05-00090-CV, 2005 WL 1361620,
at *3 n.3 (Tex. App.—Corpus Christi–Edinburg June 9, 2005, no pet.) (en banc)
8
Section 15.020 provides that in suits arising from a “major transaction,” the
parties’ written agreement that a suit arising from the transaction may be brought in a
particular county controls to set mandatory venue. Id. § 15.020(b); see also In re Fisher,
433 S.W.3d 523, 534 (Tex. 2014) (orig. proceeding) (op. as corrected on reh’g)
(concluding Section 15.020 controls even over other mandatory-venue provisions). A
major transaction is
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. The term does not include a transaction entered into primarily
for personal, family, or household purposes, or to settle a personal injury
or wrongful death claim, without regard to the aggregate value.
Tex. Civ. Prac. & Rem. Code Ann. § 15.020(a). Iona asserted that the lease was not a
major transaction as that term is defined for venue purposes because the lease did not
state on its face that it involved an aggregate value of $1 million or more.
The aggregate stated value is the value of the consideration a person paid or
was obligated to pay under the lease. See In re Tex. Ass’n of School Bds., Inc., 169 S.W.3d
653, 657–58 (Tex. 2005) (orig. proceeding); Shamoun & Norman, LLP v. Yarto Int’l
Grp., LP, 398 S.W.3d 272, 294 (Tex. App.—Corpus Christi–Edinburg 2012, pet.
dism’d & orig. proceeding) (op. on reh’g). The Devon Parties asserted that because
(mem. op.) (not addressing collateral estoppel as basis for essential need for joinder
under Section 15.003 because collateral estoppel not raised in the trial court). See
generally Tex. R. App. P. 38.9 (providing for liberal construction of briefing). Iona also
addressed the applicability of Section 15.020 in the trial court.
9
DEPCO has paid $52 million in royalties on the production from Iona’s wells
“pursuant to its written agreements with Iona,”10 the aggregate-value requirement is
met. But the lease itself stated that it was entered into “[f]or and in consideration of
Ten ($10.00) Dollars and other cash paid to [Iona’s predecessor-in-interest]
concurrently with the execution and delivery of the lease” and that DEPCO was
obligated to pay “an annual minimum royalty of $6,000.” There is no evidence of the
amount of any additional consideration Iona’s predecessor received over the stated
$10 at the time the lease was executed.
Section 15.020 requires that the aggregate value be “stated” and, thus, “requires
the terms of the contract to include provisions stating the contract’s value.” Tex. Civ.
Prac. & Rem. Code Ann. § 15.020(a); Blacklands R.R. v. Ne. Tex. Rural Transp. Dist.,
No. 1:19-CV-250, 2019 WL 3613071, at *4 (E.D. Tex. Aug. 5, 2019) (mem. & order);
see also Tex. Ass’n of School Bds., 169 S.W.3d at 659–60; In re Togs Energy, Inc., No. 05-09-
01018-CV, 2009 WL 3260910, at *1 (Tex. App.—Dallas Oct. 13, 2009, orig.
proceeding) (mem. op.). The only value reflected in the lease is the $10 consideration
and the minimum $6,000 royalty per year. We decline the Devon Parties’ invitation to
look prospectively at the aggregate value of the lease instead of focusing on the
aggregate value reflected on the face of the lease. The lease’s stated value falls short
Iona has received $7 million in royalties since 2015.
10
10
of the statutory threshold amount; thus, Section 15.020 does not apply to set
mandatory venue in Tarrant County.
B. PERMISSIVE VENUE
1. General Venue—Site of Factual Allegations
No other mandatory venue provision was raised in the trial court;11 thus, we
look to whether Iona established through prima facie proof that Wise County was a
county of proper venue. If Iona did so, its selected venue should be honored over all
other nonmandatory-venue provisions, including any permissive-venue provision
raised by the Devon Parties. See Perryman, 546 S.W.3d at 130 (quoting In re Omni
Hotels Mgmt. Corp., 159 S.W.3d 627, 629 (Tex. 2005) (orig. proceeding)). Because the
trial court denied the Devon Parties’ motion to transfer, we look for any probative
evidence supporting Iona’s selected venue on the bases it alleged. See Moveforfree.com,
Inc. v. David Hetrick Inc., 288 S.W.3d 539, 541–42 (Tex. App.—Houston [14th Dist.]
2009, no pet.).
a. Specific denial of pleaded venue facts
Iona argues that because the Devon Parties did not specifically deny Iona’s
pleaded venue facts or point out areas of disputed fact, Iona’s venue facts are
presumed true; thus, the Devon Parties waived their assertion that Section
11
For example, the Devon Parties did not raise Section 15.011, applicable to
some interests in real property, or Section 91.404, applicable to nonpayment of oil or
gas proceeds. Tex. Civ. Prac. & Rem. Code Ann. § 15.011; Tex. Nat. Res. Code Ann.
§ 91.404.
11
15.002(a)(1) did not supply permissive venue. A specific denial of a pleaded venue
fact is one that denies the fact itself. State v. Life Partners, Inc., 243 S.W.3d 236, 239
(Tex. App.—Waco 2007, pet. denied) (op. on reh’g); see also Tex. R. Civ. P. 87.3(a)
(“All venue facts, when properly pleaded, shall be taken as true unless specifically
denied by the adverse party.”).
Iona alleged that venue was proper in Wise County under Section 15.002(a)(1)
because “all or a substantial part of the events or omissions giving rise to the claims
occurred in [Wise] [C]ounty.” In their motion to transfer venue, the Devon Parties
addressed Iona’s chosen venue based on Section 15.002(a)(1):
All of Iona’s claims . . . stem from allegations that DEPCO has not paid
the proper amount of royalty under the Iona Lease or that DEPCO
made misrepresentations in check stubs provided to Iona with the
royalty payments made pursuant to the Iona Lease. . . . The Iona Lease
covers thousands of acres in Tarrant County and Parker County (and no
acreage in Wise County).
. . . All of the wells drilled pursuant to the Iona Lease are located
in Tarrant County and Parker County. None of the wells drilled
pursuant to the Iona Lease are in Wise County.
. . . The Iona Lease states that notices required or permitted by
the Lease must be sent to Iona at 6300 Ridglea Place, Suite 1119, Fort
Worth, Texas 76116. Any correspondence sent by the Devon [Parties]
to Iona is sent to that address, which is in Tarrant County, Texas.
....
. . . The Devon [Parties] specifically deny that a substantial part of
the events or omissions giving rise to Iona’s claims occurred in Wise
County, Texas. The Devon [Parties] further specifically deny that any
part of the events or omissions giving rise to the claims pled by Iona
occurred in Wise County, Texas.
12
In their reply, the Devon Parties attached affidavits and relevant documents and
asserted that DEPCO paid the royalty amounts to Iona at its office in Fort Worth,12
as required by the lease, and that all of DEPCO’s “revenue and royalty accounting”
relating to gas production from Iona’s wells was performed in Oklahoma. See In re
Socorro ISD, No. 13-09-00500-CV, 2010 WL 1138451, at *4 (Tex. App.—Corpus
Christi–Edinburg Mar. 22, 2010, orig. proceeding) (mem. op.) (considering “the
totality of Socorro’s allegations regarding venue,” including those in a reply in support
of the motion to transfer venue, to determine whether defendant specifically denied
venue facts under Rule 87.3(a)). The Devon Parties parsed the elements of Iona’s
claims and contended that they did not occur in Wise County.
We conclude that the Devon Parties’ attached exhibits, denials, and arguments
directed to Iona’s reliance on Section 15.002(a) were not mere general denials; rather,
they were denials of the alleged venue facts themselves and were specific enough to
provide notice of the Devon Parties’ reasons why Section 15.002(a)(1) did not set
proper, permissive venue in Wise County. See Life Partners, 243 S.W.3d at 240. We
reject Iona’s argument that the Devon Parties failed to specifically deny Iona’s pleaded
venue facts regarding Section 15.002(a)(1).
12
The parties stipulated that DEPCO paid royalties to Iona “pursuant to the
Lease and the Transfer Order” and that the “address for IONA on each royalty check
stub . . . is a Tarrant County address.”
13
b. Iona’s burden under Section 15.002(a)(1)
Because the Devon Parties specifically denied Iona’s pleaded venue facts, Iona
bore the burden to prove by prima facie proof that venue was proper in Wise County.
See Tex. R. Civ. P. 87.2(a)–(b), 87.3(a); Wilson v. Tex. Parks & Wildlife Dep’t, 886 SW.2d
259, 260 (Tex. 1994); Lynn Smith Chevrolet, 161 S.W.3d at 742. “Prima facie proof is
made when the venue facts are properly pleaded and an affidavit, and any duly proved
attachments to the affidavit, are filed fully and specifically setting forth the facts
supporting such pleading.” Tex. R. Civ. P. 87.3(a).
Iona argued that all or a substantial part of the facts giving rise to its claims
occurred in Wise County because the gas from Iona’s Tarrant and Parker County
wells was “primarily processed” in Wise County at the Bridgeport Plant. See Tex. Civ.
Prac. & Rem. Code Ann. § 15.002(a)(1). Iona relied on the terms of a contract
between DEPCO and Devon Gas under which Devon Gas would take the gas from
the wellhead and deliver it to nearby Wise County gathering lines, which were owned
and operated by EnLink Midstream Services, LLC (the transport contract).13 EnLink,
in turn, would gather and process the gas mainly at the Bridgeport Plant in Wise
County under the terms of its contract with Devon Gas (the processing contract).
Iona asserted that these contracts show that a substantial part of the facts implicated
in its claims against the Devon Parties occurred in Wise County.
13
Until 2018, EnLink was partially owned by Devon Gas.
14
Iona’s contractual claims against DEPCO are based on its alleged failure “to
pay a proper royalty” because DEPCO engaged in “self-dealing pricing and internal
‘marketing fee[s]’” based on “affiliated, self-dealing sham contracts”—the transport
and processing contracts. Similarly, Iona’s tort and statutory claims are based on the
Devon Parties’ alleged “self-dealing” accounting deductions from the eventual royalty
payments that Iona alleged were shadily allowed under the transport and processing
contracts and the lease. In short, Iona alleged that through the transport and
processing contracts, the Devon Parties were able to delay paying royalties, to re-
calculate the owed royalty payments through accounting sleight of hand, and to
increase their profits.
DEPCO’s actions in calculating Iona’s royalties under the terms of the Iona
lease, the transport contract, and the processing contract were not undertaken in Wise
County. DEPCO performed all royalty and revenue calculations and accounting at its
office in Oklahoma and sent the resulting payment amounts to Iona in Tarrant
County. Iona’s main contention in each of its claims was that its royalties were
improperly paid under the terms of its lease with DEPCO and the transfer order
based on the Devon Parties’ interrelated contractual maneuvers. Iona’s claims
substantially arise from these royalty calculations and from the Devon Parties’ alleged
statements or misstatements to Iona about how the royalties were calculated, not
from the actual procedures by which the gas was transported and processed. Cf. Beard
v. Endeavor Nat. Gas, L.P., No. 01-08-00180-CV, 2008 WL 5392026, at *3 (Tex.
15
App.—Houston [1st Dist.] Dec. 19, 2008, pet. denied) (mem. op.) (recognizing county
where division-order contract was executed was not county of proper venue because
“the heart of the dispute is over the calculations of royalty payments . . . rather than
the construction or validity of the division order itself” and confirming proper venue
lay in county were “all revenue processing” was undertaken). Further, we question
whether Iona can rely on two contracts to which it was not a party—the transport and
processing contracts—to provide permissive venue for its claims under Section
15.002(a)(1). See Russell v. Panhandle Prod. Co., 975 S.W.2d 702, 710–11 (Tex. App.—
Amarillo 1998, no pet.).
Iona argues that whether a deducted expense was reasonable under the lease “is
dependent on the location of the gathering and processing,” which was Wise County.
But the federal opinion that Iona cites in support did not involve venue but rather
determined whether a charged and deducted amount for the installation of a
compressor “upon the leased premises” was reasonable. Martin v. Glass, 571 F. Supp.
1406, 1417 (N.D. Tex. 1983) (mem. op.), aff’d mem., 736 F.2d 1524 (5th Cir. 1984).
We conclude that Martin does not compel a different result here because it did not
discuss whether the location where a deducted expense was incurred affected proper
venue.
Additionally, the dispute in Martin was based on whether the installer’s charges
were reasonable based on “typical charge[s]” for such services where the compressor
was installed. Id. Although Iona alleges that the Devon Parties’ deductions were
16
“unreasonable,” Iona’s claims are based on how the Devon Parties maximized their
returns through acquisitions and contractual maneuvers that reduced the amount of
royalties they were required to contractually pay Iona. Iona’s claims do not challenge
the reasonableness of the deducted service fees based on a comparison to typical
service charges for the geographical area; rather, Iona challenges the Devon Parties’
business practices and contractual ability to increase the deducted amounts and,
thereby, to reduce the royalty payments.14 In short, Iona attacks the Devon Parties’
accounting practices that led to the disbursed royalty amounts. Cf. Seelingson v. Devon
Energy Prod. Co., No. 2:14-cv-996-JRG-RSP, 2015 WL 4944481, at *5 (E.D. Tex. Aug.
19, 2015) (mem. order) (denying motion to transfer venue in similar action regarding
DEPCO’s royalty payments and characterizing putative class’s claims as “an
accounting dispute”).
In any event, Iona failed to proffer prima facie proof that the facts giving rise
to its claims against the Devon Parties based on their alleged royalty underpayments
substantially occurred in Wise County.
14
Indeed, Iona asserts in its brief that the “contractual dedications” in the
transport and processing contracts between Devon Gas, DEPCO, and EnLink
resulted in the “payments to the royalty owners [being] decreased proportionally.”
And it further argues that its claims were “to recover damages it suffered as a result of
[the Devon Parties’] underpayment of royalties based on [their] failure to sell the
production based on a market price and deduction of excessive gathering and
processing fees under the [transport and processing] contracts.” [Emphasis
added.]
17
2. Multiple Parties—Joinder Factors
Because Iona failed to establish permissive joinder under Section 15.002(a)(1),
its choice of permissive venue may still control if Iona established, by prima facie
proof, four joinder factors:
(1) joinder of that plaintiff or intervention in the suit by that plaintiff is
proper under the Texas Rules of Civil Procedure;
(2) maintaining venue as to that plaintiff in the county of suit does not
unfairly prejudice another party to the suit;
(3) there is an essential need to have that plaintiff’s claim tried in the
county in which the suit is pending; and
(4) the county in which the suit is pending is a fair and convenient venue
for that plaintiff and all persons against whom the suit is brought.
Tex. Civ. Prac. & Rem. Code Ann. § 15.003(a)(1)–(4); see also Surgitek, 997 S.W.2d at
602–03 (holding a plaintiff unable to independently establish proper venue bears the
burden of proof on each joinder factor). Iona seems to suggest that the Devon
Parties had the burden to present evidence that Wise County was not proper under
Section 15.003(a). Based on Surgitek, we reject this contention—the burden rested
squarely on Iona.
Regarding the third factor, Iona must have demonstrated an essential need to
try its claims in Wise County. This means Iona must have shown that it was
“indispensably necessary” to try its claims in Wise County, which is a very “high
burden” to meet. Surgitek, 997 S.W.2d at 604; see also 2 Roy McDonald & Elaine A.
18
Grafton Carlson, Texas Civil Practice § 6:59 (2d ed. 2002) (describing essential-need
factor as the “most difficult factor to establish”).
Iona contended in the trial court and now on appeal that the need to avoid the
potential of inconsistent judgments is prima facie proof of its essential need to try its
claims in Wise County. Iona relies on Sustainable Texas Oyster for this assertion.
491 S.W.3d at 109. But in that case, the plaintiffs’ individual leases were modified by
the same overriding exclusive lease, which was the basis of their declaratory-judgment
claims. Id. at 101, 110-11. Because a declaration in one county as to the effect of the
overriding exclusive lease would act to collaterally estop any later inconsistent
declaration in another county, the appellate court concluded that the plaintiff had
established the essential-need factor. Id. at 111–12; see also Nat’l Union Fire Ins. Co. of
Pittsburgh, PA v. Valero Energy Corp., 143 S.W.3d 859, 861–62, 865–66 (Tex. App.—
Corpus Christi–Edinburg 2004, pet. denied) (holding plaintiff raising claims directed
to the scope of a settlement agreement that involved other plaintiffs had established
essential need based on collateral estoppel, which would deny some plaintiffs “their
day in court”).
Here, however, DEPCO’s obligation to pay royalties to Iona is governed by a
separate, individualized lease as opposed to the leases between DEPCO and the other
Wise County plaintiffs. See generally In re Devon Energy Prod. Co., 321 S.W.3d 778, 783–
84 (Tex. App.—Tyler 2010, orig. proceeding) (recognizing oil-and-gas lessor could
not intervene in other lessors’ suit against DEPCO even though “same lease form”
19
was used because intervenor-lessor was not a party to other leases and was not
entitled to benefits from those separate leases). Any judgment regarding the other
Wise County plaintiffs would not collaterally estop a different county from entering
an inconsistent judgment based on Iona’s separate lease and the Devon Parties’
separate obligations under the lease and the transfer order. See Fincher v. Wright,
141 S.W.3d 255, 261–62 (Tex. App.—Fort Worth 2004, no pet.) (holding collateral
estoppel requires privity, which is more than a common interest in proving the same
facts or an interest in the same question); Tex. Capital Sec. Mgmt., Inc. v. Sandefer,
80 S.W.3d 260, 265–66 (Tex. App.—Texarkana 2002, pet. struck) (holding privity, for
collateral-estoppel purposes, means parties who essentially have the same legal right in
the dispute). Even if Iona’s and the other Wise County plaintiffs’ claims are
adjudicated in the same suit, different results could occur based on Iona’s separate
lease and transfer order.
We conclude that Iona’s inconsistent-judgments argument does not meet its
high burden to establish the essential need that its claims be tried in Wise County. Cf.
Tex. Mut. Ins. Co. v. E. Side Surgery Ctr., Inc., 159 S.W.3d 155, 158–59, 161–62 (Tex.
App.—Corpus Christi–Edinburg 2004, pets. dism’d) (holding multiple class actions
brought by medical service providers against insurance companies for payment
practices in violation of the worker’s compensation statutory scheme would lead to
inconsistent judgments sufficient to establish essential need); Ramirez v. Collier,
Shannon, Scott, PLLC, 123 S.W.3d 43, 52 (Tex. App.—Houston [1st Dist.] 2003, pet.
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denied) (op. on reh’g) (holding benefits of pooling resources, shared facts and issues,
and location of witnesses does not show essential need); Smith v. Adair, 96 S.W.3d
700, 707 (Tex. App.—Texarkana 2003, pet. denied) (recognizing essential need means
more than judicial economy or convenience); O’Quinn v. Hall, 77 S.W.3d 438, 451
(Tex. App.—Corpus Christi–Edinburg 2002, no pet.) (“[T]he mere fact that a related
suit is already proceeding in that county is insufficient to establish that it is
indispensably necessary for the plaintiff seeking joinder or intervention to try his
claims there.”). Because Iona failed to establish essential need, we need not address
the other joinder factors. See Smith, 96 S.W.3d at 708.15 We sustain portions of the
Devon Parties’ first and second issues.16
15
We do note however that Iona’s proof of no unfair prejudice and
convenience (the second and fourth joinder factors) does not meet its prima facie
burden on those factors. Iona’s “general partner” submitted an unsworn declaration
in which he stated that transferring Iona’s claims to Tarrant County would “not
promote justice,” would “decrease convenience,” and would “create a multiplicity of
suits.” See generally Tex. Civ. Prac. & Rem. Code Ann. § 132.001 (allowing unsworn
declaration to act as an affidavit if declaration subscribed under penalty of perjury).
These bare assertions do not establish by prima facie proof that venue in Wise County
would not unfairly prejudice another party or that it would be fair and convenient for
the Devon Parties. See Tex. R. Civ. P. 87.3(a); cf. Tex. Mut. Ins., 159 S.W.3d at 161-62
(discussing affidavit proof establishing no unfair prejudice and fair and convenient
venue).
Specifically, we sustain the Devon Parties’ argument that Iona did not meet its
16
burden under Section 15.002(a)(1) or its burden under Section 15.003(a)(3).
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3. Permissive, Contractual Venue
Because Iona failed to meet its burden to establish proper venue under either
Section 15.002(a)(1) or Section 15.003,17 “the right to cho[o]se proper venue passe[d]
to the [Devon Parties] who must prove that venue is maintainable in the county to
which transfer is sought.” Wilson, 886 S.W.2d at 260 n.1; see Tex. Civ. Prac. & Rem.
Code Ann. § 15.063(1); Crown Cent. LLC v. Anderson, 239 S.W.3d 385, 389 (Tex.
App.—Beaumont 2007, pet. denied). Again, the Devon Parties must establish proper
venue by prima facie proof. See Tex. R. Civ. P. 87.2(a)–(b); Garza v. State & Cty. Mut.
Fire Ins. Co., No. 2-06-202-CV, 2007 WL 1168468, at *3 (Tex. App.—Fort Worth
Apr. 19, 2007, pet. denied) (mem. op.).
The Devon Parties argued that permissive venue lies in Tarrant County because
DEPCO was contractually obligated through the transfer order to pay royalties to
Iona at its address in Tarrant County. In limited circumstances, a contract can
provide a county of permissive venue:
[I]f a person has contracted in writing to perform an obligation in a
particular county, expressly naming the county or a definite place in that
county by that writing, suit on or by reason of the obligation may be
brought against him either in that county or in the county in which the
defendant has his domicile.
Tex. Civ. Prac. & Rem. Code Ann. § 15.035(a). In short, Section 15.035(a) allows
parties to contractually agree to venue but only if the obligation sued upon was to be
Again, these were the only applicable venue bases asserted by Iona in the trial
17
court.
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performed in a particular county. See Fid. Union Life Ins. Co. v. Evans, 477 S.W.2d 535,
536 (Tex. 1972).
The transfer order imposed a binding obligation on DEPCO to pay Iona in
Tarrant County and the order, along with the lease terms, the transport contract, and
the processing contract, were the bases for Iona’s underpayment claims against the
Devon Parties.18 Cf. Gavenda v. Strata Energy, Inc., 705 S.W.2d 690, 691 (Tex. 1986)
(“The general rule in Texas, though, is that division and transfer orders bind
underpaid royalty owners until revoked.”); Exxon Corp. v. Middleton, 613 S.W.2d 240,
250 (Tex. 1981) (op. on reh’g) (recognizing division order, although not supplanting
the lease, bound the parties regarding applicable royalty rate because order provided
basis for payments). Here, the lease contractually set venue in Tarrant County, and
the transfer order obligated DEPCO to perform its payment obligations to Iona
under the lease by remitting the calculated royalties to Iona in Tarrant County. Iona’s
claims center on DEPCO’s failure to appropriately discharge its payment obligations
either through underpayments based on accounting practices or based on the Devon
Parties’ interrelated contractual agreements. We conclude that the Devon Parties
established permissive venue under Section 15.035 based on DEPCO’s contractual
18
Importantly, the parties stipulated that the royalties due to Iona were paid
“pursuant to the Lease and the Transfer Order.” [Emphasis added.] This stipulation
belies Iona’s trial-court argument that the transfer order was irrelevant to a venue
analysis. Indeed, Iona does not raise this argument on appeal and does not address
the applicability of Section 15.035.
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obligation to remit payment to Iona in Tarrant County, which payment amounts were
the bases of Iona’s claims. See Gonzalez v. Nielson, 770 S.W.2d 99, 102 (Tex. App.—
Corpus Christi–Edinburg 1989, writ denied); Reynolds v. Groce-Wearden Co., 250 S.W.2d
749, 749–50 (Tex. App.—San Antonio 1952, writ ref’d). These facts also established
general, permissive venue under Section 15.002(a)(1) as pleaded by the Devon Parties.
See Mekdessi v. RISC, Inc., No. 2-02-169-CV, 2003 WL 1564304, at *2 (Tex. App.—
Fort Worth Mar. 27, 2003, pet. denied) (per curiam) (mem. op.). We sustain the
Devon Parties’ third issue.
IV. CONCLUSION
In general, a plaintiff’s choice of venue controls. See Masonite, 997 S.W.2d at
197. But that choice must be supported by the statutory venue provisions and the
applicable burdens of proof. Here, Iona failed to meet its burden to show, either
independently or as a joined plaintiff, that venue was proper in Wise County. The
Devon Parties pleaded permissive-venue statutes and met their burden of proof to
show proper venue in Tarrant County for Iona’s claims against them. Therefore, the
trial court’s order denying the Devon Parties’ motion to transfer was in error. See
generally id. (“If the plaintiff fails to establish proper venue, the trial court must transfer
venue to the county specified in the defendant’s motion to transfer, provided that the
defendant has requested transfer to another county of proper venue.”). Accordingly,
we reverse the trial court’s order and remand the case with instructions for the trial
24
court to sustain the Devon Parties’ motion and to transfer Iona’s claims to Tarrant
County. See Tex. Civ. Prac. & Rem. Code Ann. § 15.063(1); Tex. R. Civ. P. 89.
/s/ Lee Gabriel
Lee Gabriel
Justice
Delivered: January 9, 2020
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