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Hawkins v. The Meridian Resource and Exploration LLC

Court of Appeals of Louisiana, First Circuit

December 6, 2017

H.L. HAWKINS III AND JOHN C. LOVELL, JR. AS SUCCESSION REPRESENTATIVES OF THE SUCCESSION OF H.L. HAWKINS, JR., HAWKEYE ENERGY, INC., AND H.L. HAWKINS, JR., INC.
v.
THE MERIDIAN RESOURCE AND EXPLORATION LLC AND THE MERIDIAN RESOURCE CORPORATION F/K/A TEXAS MERIDIAN RESOURCES EXPLORATION, INC.

         On appeal from the Nineteenth Judicial District Court In and for the Parish of East Baton Rouge State of Louisiana Docket Number 526, 922 Honorable Donald R. Johnson, Judge Presiding

          Joe B. Norman, Kelly B. Becker, Joseph I. Giarrusso III Katherine Seegers, Roth Jonathan, Andrew Hunter, Tyler D. Trew Counsel for Plaintiffs/ Appellants H.L. Hawkins III and John C. Lovell, Jr., as succession representatives of the Succession of H.L. Hawkins, Jr., Hawkeye Energy, Inc., and H.L. Hawkins, Jr., Inc.

          Deborah B. Rouen, Francis V. Liantonio, Jr., Raymond P. Ward Counsel for Defendant/ Appellee The Meridian Resource and Exploration LLC

          BEFORE: WHIPPLE, C.J., GUIDRY, McDONALD, WELCH, AND McCLENDON, JJ.

          GUIDRY, J.

         Plaintiffs appeal a judgment dismissing a portion of their claims against the defendants pursuant to the defendants' invocation of a choice of law provision, which the defendants first raised twelve years after the commencement of litigation between the parties. For the following reasons, we affirm.

         FACTS AND PROCEDURAL HISTORY

         On December 1, 2004, Hawkeye Energy, Inc., H.L. Hawkins, Jr., Inc., and H.L. Hawkins, III and John C. Lovell Jr., as co-executors of the Succession of H.L. Hawkins, Jr. (collectively "plaintiffs"), filed a petition for damages against The Meridian Resource and Exploration LLC and The Meridian Resource Corporation[1](collectively "Meridian") based on an agreement between H.L. Hawkins, Jr. and Texas Meridian Resources Exploration, Inc. (also hereinafter referred to simply as "Meridian") that was executed in 1993. According to the petition, the 1993 agreement between Hawkins, Jr. and Meridian "established a framework for Mr. Hawkins to invest as a non-operator in drilling, exploration and production operations undertaken by Meridian." Among the provisions of the 1993 agreement was a master participation agreement and a joint operating agreement.[2]

         From 1994 to 1998, Hawkins, Jr. agreed to participate with Meridian in several drilling prospects, including the Holmwood Prospect located in Calcasieu Parish, on lands owned in fee by Amoco Production Company. A separate mineral lease and joint exploration agreement existed between Meridian and Amoco relative to the Holmwood Prospect. An initial well, the Amoco Ben Todd No. 2 well, drilled by Amoco, proved productive, and according to the petition, Meridian and Hawkins, Jr. participated in the cost of the drilling operations for that well and shared in the revenue of the well.

         Meridian then desired to drill a second well on the property, the TMRX-Ben Todd No. 1 well, in an area where Amoco did not consent to drilling operations. Upon learning of Meridian's intent to drill the well without its consent, Amoco filed a declaratory judgment action against Meridian in federal district court in Texas. Later, when Amoco discovered that Meridian had begun surface operations for the disputed well, Amoco amended its suit against Meridian to assert breach of contract and damages. The federal district court eventually rendered judgment in favor of Amoco: dissolving its lease agreement with Meridian, terminating Meridian's interests in the disputed well and in the previously drilled producing wells, and awarded damages. Except for the award of legal interest on the damages award, the district court's judgment was affirmed on appeal. See Amoco Production Company v. Texas Meridian Resources Exploration Inc., 180 F.3d 664 (5th Cir. 1999).

         Once the Amoco litigation was finally concluded, Meridian sent an invoice for what it calculated as Hawkins, Jr.'s "pro rata portion of the judgment and post judgment interest" from the Amoco litigation in a letter to Hawkins, Jr. dated August 30, 1999.[3] By a letter dated September 17, 1999, Hawkins III and Lovell Jr., as co-executors of the Succession of H.L. Hawkins, Jr., [4] issued payment from the estate of Hawkins, Jr. for the sum demanded with "full reservation of any and all rights and remedies that the Estate may have, including (without limitation) the right to contest all or a portion of [the] payment, the right to audit and contest prior invoices and statements, and the right to assert a claim for any and all damages."

         Over five years later, the plaintiffs instituted the present action. In the lawsuit, the plaintiffs claimed that Meridian's action of drilling the well without Amoco's consent, and falsely representing to Hawkins, Jr. that Amoco had consented to the drilling, constituted fraud and violated duties that Meridian owed to Hawkins, Jr. under the 1993 agreement, which caused the plaintiffs to sustain millions of dollars in lost investments, realized and future revenues and profits, and other out-of-pocket expenses. The plaintiffs also asserted accounting claims based on various audits that were conducted of Meridian's operations pursuant to the 1993 agreement. Plaintiffs later amended their petition to add James T. Bond as a defendant and expanded the allegations supporting their breach of contract claim.[5] Meridian filed answers generally denying liability for all the claims asserted by the plaintiffs in the original and amended petitions.

         On February 15, 2008, the plaintiffs filed a motion seeking a partial summary judgment on the issue of Meridian's liability. In the motion, the plaintiffs argued that "[b]ased on Meridian's judicially established malfeasance, " they were entitled to partial summary judgment against Meridian on liability. Meridian filed an opposition to the motion for partial summary judgment asserting, in part, that the plaintiffs' claims had a "prescription problem, " particularly to the extent that the plaintiffs' claims were premised on allegations of fraud.

         On July 7, 2008, the trial court signed a judgment granting the plaintiffs' motion for partial summary judgment, [6] based in pertinent part on the following findings:

Meridian, as operator or manager of the parties' jointly owned property, specifically the Amoco lease, represented Hawkins' interest in the Amoco litigation pursuant to the parties' contract, the Joint Operating Agreement attached as Exhibit A to the petition. The judgment rendered in Amoco Production Company v. Texas Meridian found that Meridian acted in bad faith and therefore the Amoco lease should be cancelled. It is undisputed that this judgment resulted in a loss to Hawkins of its entire interest in the lease as well as its pro-rata share of mineral revenues awarded to Amoco. ...
This Court finds that Hawkins was in direct contractual privity with Meridian. The parties' contract, the Joint Operating Agreement, not only obligated Meridian to prudently and responsibly represent the interests of its investors, including Hawkins, but it also obligated Meridian to defend Hawkins' interests in the lawsuit with Amoco. ...
In the end, this Court finds that there is no basis to allow Meridian to relitigate those issues already decided by the federal court in Amoco. The purpose of both federal and state law on res judicata is essentially the same, which is to promote judicial efficiency and final resolution of disputes by preventing needless relitigation. For these reasons, this Court finds that there are no genuine issues of material fact in this case regarding the liability of [Meridian] as that matter has been judicially established in federal court as a matter of law. Thus, this Court will grant the Motion for Partial Summary Judgment filed by the Plaintiffs against Meridian on liability for breach of contract. Judgment to be signed accordingly. [Emphasis added.]

         In the meantime, Meridian continued to seek dismissal of the plaintiffs' non-accounting claims based on prescription. First, Meridian filed a motion for partial summary judgment, asserting that the plaintiffs' claims of fraud and misrepresentation were prescribed pursuant to either La. C.C. art. 2032 or 3492, which the trial court denied in a judgment signed August 6, 2008. Later, Meridian filed a peremptory exception, again asserting that the plaintiffs' non-accounting claims were prescribed, but this time based on the assertion that the "claims against Meridian [arose] from a joint venture, " and that as such, La. R.S. 12:1502 applied to bar the plaintiffs' non-accounting claims.

         Before the trial court held a hearing on the peremptory exception, Meridian filed an "Amended and Superseding Peremptory Exception of Prescription"[7] on May 12, 2016, wherein Meridian amended its earlier exception to completely replace the original exception and to instead plead the applicability of Texas's statute of limitations to all but the plaintiffs' non-accounting claims. In its amended exception, Meridian asserted that the sole basis for its "alleged liability ... is breach of contract, " and it pointed out that the July 7, 2008 partial summary judgment only held it liable for breach of contract The master participation agreement included in the parties' 1993 agreement provided:

8.
APPLICABLE LAW
THIS PARTICIPATION AGREEMENT SHALL BE INTERPRETED AND CONSTRUED[8] ACCORDING TO THE LAWS OF THE STATE OF TEXAS. IN THE EVENT THERE IS A CONTRACTUAL DISPUTE WHICH CANNOT BE RESOLVED AMONG YOU AND [MERIDIAN], ANY LAWSUIT BROUGHT FORTH RELATIVE TO SUCH DISPUTE SHALL BE TRIED IN THE APPROPRIATE COURT OF LAW IN THE STATE OF TEXAS.[9]

         Thus, citing Tex. Civ. Prac. & Rem. Code § 16.051 and Stine v. Stewart, 80 S.W.3d 586, 592 (Tex. 2002) (holding that under Texas law a claim of breach of contract is subject to a four-year statute of limitations), Meridian urged the trial court to find the plaintiffs' non-accounting claims to be prescribed.

         The plaintiffs opposed Meridian's amended and superseding peremptory exception, arguing that application of Louisiana choice of law rules dictated that Louisiana's prescriptive statutes apply, or alternatively, that: (1) Meridian should be found to have waived its right to assert the choice of law provision considering that the matter had been in litigation for over ten years and that until it filed the amended exception, Meridian had presented its defense solely under Louisiana law; or (2) judicial estoppel should apply to bar Meridian from presenting a defense under Texas law. Despite these arguments, following a hearing held on June 13, 2016, the trial court sustained Meridian's peremptory exception raising prescription based on Texas law and accordingly dismissed all of the plaintiffs' non-accounting claims with prejudice in a judgment signed on August 19, 2016. The trial court further designated the judgment as a final judgment under La. C.C.P. art. 1915(B), finding that because "the claims dismissed by this judgment are a completely separate cause of action from plaintiffs' remaining claims, " there was no just reason to delay an appeal of the matter.[10] The plaintiffs filed a motion for devolutive appeal on September 2, 2016.

         ASSIGNMENTS ...


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