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Friday, February 23, 2024 | Back issues
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Appeals Court Tosses|Gas Leasing Claim

FORT WORTH (CN) - A Texas appeals court threw out a lawsuit from Fort Worth homeowners who claimed a natural gas company backed out of their lease agreements for mineral rights after natural gas prices plummeted in 2008.

The price drop ended the lucrative signing bonuses and royalty payments for North Texas homeowners who live on the Barnett Shale natural gas formation.

In a unanimous ruling, a three-judge panel with the Court of Appeals for the 2nd District of Texas, in Fort Worth, concluded that the homeowners lack standing to sue for breach of contract and promissory estoppel. The court dismissed both claims.

The appeals court agreed with the trial court's summary judgment dismissing a claim for negligent misrepresentation.

The homeowners lived in neighborhood associations that were associated with the Southwest Fort Worth Alliance (SFWA), a nonprofit formed to negotiate with energy companies for mineral rights to drill natural gas.

After several months of negotiations, natural gas company Vantage Energy LLC reached an agreement with SFWA that included a template oil and gas lease form for each homeowner to fill out.

The homeowners claimed that a written contract existed between Vantage and SFWA, that the contract consisted of a series of 11 emails and attachments that were exchanged between Vantage and a person acting for SFWA. They claimed that based on that record, the SFWA publicized that Vantage had "won the bid for endorsement" of SFWA and was the group's "preferred and endorsed Natural Gas Developer."

The homeowners conceded in their brief that SFWA did not possess authority to, and did not, negotiate individual leases for them or for anyone else. Instead, they claimed that the contract between Vantage and SFWA was "a contract for an endorsement of Vantage and its offer."

After the negotiations, defendants Vantage and lease acquisition agent The Caffey Group LLC obtained 4,000 to 7,500 leases from the homeowners represented by SFWA. Soon after, natural gas prices began to plummet and Vantage suspended its urban leasing activities within a month.

Writing for the court, Judge Sue Walker concluded that Vantage and the SFWA contracted for themselves.

Walker wrote that the homeowners "claim that they are identified in the purported Vantage/SFWA contract by geographic boundaries; that is, they live in one of the neighborhoods in which the neighborhood homeowners' association elected to participate in SFWA. The summary judgment evidence conclusively establishes, however, that no map was attached to or included in the documents that Appellants identify as the contract between Vantage and SFWA, and Appellants' respective properties and addresses are not described or mentioned in the alleged contract. Moreover, each Appellant testified that he or she did not pay any dues to SFWA or sign any document in order to be a member of SFWA, and the summary judgment evidence establishes that some homeowners in the neighborhoods participating in SFWA had signed mineral leases with other energy companies. The mere fact that Appellants own minerals within the geographical boundaries of one of the neighborhoods participating in SFWA cannot make them part of an identified, discrete, limited group of individuals specifically intended to be third-party beneficiaries of the purported Vantage/SFWA contract because some individuals in this very group had already signed mineral leases with other energy companies and thus were clearly not intended third-party beneficiaries of any Vantage/SFWA contract. See Tawes, 340 S.W.3d at 428."

As to the argument that the contract was intended to benefit only homeowners in neighborhoods that joined SFWA and had not already signed with another company, Walker wrote: "this subset of individuals is even more unidentifiable and more nondiscrete because the group composition could change on a daily or hourly basis as mineral owners in neighborhoods participating in SFWA executed leases with other companies; in fact, the uniform oil and gas lease form expressly acknowledges that Appellants had the "right to negotiate [their] own terms with any company." Thus, even assuming a contract existed between Vantage and SFWA, no intent to directly benefit Appellants as third-party beneficiaries is clearly written or evidenced in such contract because Appellants are not indentified individually by name, by address, or by property description and are not sufficiently specifically identified as a group by membership in SFWA, by geographic location, or by any other discrete criteria. See, e.g., Tawes, 340 S.W.3d at 428."

Walker said that under state law, only two types of third-party beneficiaries are recognized: donee beneficiaries and creditor beneficiaries. The homeowners are neither.

As to the homeowners' negligent misrepresentation claim, Walker said the promise that Vantage made to SFWA that it "would give all un-leased mineral owners in SFWA the opportunity to accept the SFWA Deal" is not a misrepresentation, but a promise "to do an act in the future that is not actionable as negligent misrepresentation."

She ruled that a promise of future conduct does not support a negligent misrepresentation claim.

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