Bryan C. Wagner and Duer Wagner III v. Exxon Mobil Corporation ( 2022 )

Motion to Correct Judgment Granted; Opinion of September 1, 2022
Withdrawn; Reversed and Rendered and Substitute Opinion filed November
8, 2022.
In The
Fourteenth Court of Appeals
NO. 14-21-00122-CV
BRYAN C. WAGNER AND DUER WAGNER III, Appellants
V.
EXXON MOBIL CORPORATION, Appellee
On Appeal from the 189th District Court
Harris County, Texas
Trial Court Cause No. 2009-60726
SUBSTITUTE OPINION
We construe Exxon Mobil Corporation’s “Motion to Correct the Fourth
Sentence of the Judgment” as a motion for rehearing and grant the motion. We
withdraw our opinion and judgment dated September 1, 2022, and issue the
following substitute opinion and judgment.
Exxon Mobil Corporation (“Exxon”) sued Bryan C. Wagner and Duer
Wagner III (together, the “Wagners”) over the Wagners’ alleged indemnity
obligations with respect to Exxon’s settlement of two Louisiana lawsuits. The
parties proceeded to trial and the jury returned a verdict in favor of Exxon, finding
that the two settlements were reasonable and made in good faith. Exxon moved for
judgment on the verdict and asked the trial court to award it the full amount it paid
for both settlements — approximately $71 million. The Wagners filed a motion
for judgment notwithstanding the verdict (“JNOV”).
The trial court signed a final judgment that granted in part the Wagners’
JNOV motion and awarded Exxon a total of $28.22 million for its settlement of the
Louisiana lawsuits. The Wagners appealed and raise five issues challenging
(1) the viability of Exxon’s indemnity claims and the evidence offered in support;
(2) this court’s prior decision in a pretrial mandamus proceeding; and (3) the
prejudgment interest awarded in the trial court’s final judgment. Exxon filed a
cross-appeal and asserts the trial court erred by granting in part the JNOV motion
and reducing the award for the settlements.
For the reasons below, we reverse the trial court’s judgment, reinstate the
jury’s verdict, and render judgment in accordance with that verdict.
BACKGROUND
In 1994, the Wagners and Exxon executed an Agreement to Purchase and
Sell (the “PSA”), through which the Wagners acquired from Exxon certain oil and
gas interests in Louisiana. The parties also executed an Assignment, Bill of Sale
and Quitclaim (the “Assignment”) to effectuate the property transfer.1 The
Assignment transferred from Exxon to the Wagners a 50% interest in a mineral
1
Along with the Wagners, two other parties also entered into the 1994 transaction with
Exxon: Trade Exploration Corp. and James D. Finley. Exxon asserted claims against Trade
Exploration Corp. and Finley in the underlying proceeding. For the reasons discussed below,
Trade Exploration Corp. and Finley are not parties to this appeal.
2
servitude encumbering over 120,000 acres in north Louisiana. The other half of
this mineral servitude was owned by Tensas Delta Land Company (“Tensas
Delta”).
The parties agreed that, as part of the purchase and sale, the Wagners would
indemnify Exxon for certain liabilities, including damages arising from
environmental claims.
In 2006, Exxon, the Wagners, and Tensas Delta were sued in three Louisiana
lawsuits: M.J. Farms, Agri-South, and Avahoula Resources. Alleging
environmental contamination, the plaintiffs in these suits sought remediation of the
property previously conveyed from Exxon to the Wagners in the 1994 transaction.
M.J. Farms was the first case set for trial. In its pre-trial rulings, the
Louisiana trial court held that Exxon and Tensas Deltas owned the property’s
mineral servitude despite the 1994 conveyance to the Wagners.2 The trial court
determined the Wagners were leaseholders with respect to the property and severed
the claims against them into a different lawsuit.
Two weeks into the M.J. Farms trial, Exxon and Tensas Delta settled with
plaintiff M.J. Farms for $59 million — $57.5 million of which was paid by Exxon.
Agri-South was settled for $14.11 million and Avahoula settled for no cost.
In September 2009, Exxon sued the Wagners in the underlying proceeding,
seeking indemnification for the M.J. Farms and Agri-South settlements. To aid
their defense, the Wagners moved to compel the production of certain documents
pertinent to Exxon’s defense and settlement in the M.J. Farms litigation. Exxon
2
Under the Louisiana Mineral Code, the mineral servitude owner is the party responsible
for restoration obligations. See La. R.S. 31:22 (“The owner of a mineral servitude . . . is
obligated, insofar as practicable, to restore the surface to its original condition at the earliest
reasonable time.”).
3
resisted the motion to compel by invoking the attorney-client privilege. The trial
court determined that Exxon waived the attorney-client privilege by offensive use
and ordered the production of specific documents.
Exxon filed a petition for writ of mandamus in this court, which was
conditionally granted. See In re Exxon Mobil Corp., 389 S.W.3d 577 (Tex. App.—
Houston [14th Dist.] 2012, orig. proceeding [mand. denied]). This court ordered
the trial court to vacate its order compelling Exxon to produce the privileged
documents at issue. Id. at 583.
In March 2016, the parties announced ready for trial. At that time, another
defendant, James Finley, reached a settlement with Exxon. Exxon non-suited its
claims against Finley and the parties agreed that the Finley settlement would be
credited against any judgment for Exxon.
After the close of evidence, the charge asked the jury whether the M.J.
Farms and Agri-South settlements were “made in good faith and reasonable and
prudent under the circumstances.” The jury responded “Yes” for both settlements.
Exxon sought judgment on the jury’s verdict and asked the court to award it the
full amounts paid for the M.J. Farms and Agri-South settlements: $57.5 million
and $14.11 million, respectively. The Wagners filed a JNOV motion and sought a
directed verdict in their favor on both the M.J. Farms and Agri-South settlements.
On December 31, 2018, the trial court signed two judgment-related orders,
the first of which granted in part the Wagners’ JNOV motion. Reasoning that
Exxon “clearly received valuable consideration in the settlement in the form of
collateral transactions for which the [Wagners] had not indemnified Exxon,” the
trial court held that Exxon failed to prove “an allocation of the [M.J. Farms]
settlement between non-indemnity consideration and indemnified losses.” The
trial court disregarded the jury finding in part and determined that only $14.11
4
million of the M.J. Farms settlement “should be considered applicable to the
indemnified claims.”.
The trial court’s second order was styled an “Interlocutory Judgment” and
instructed the parties to recalculate prejudgment interest. After this order was
signed, Exxon appealed and the Wagners filed a cross-appeal. This court
dismissed the appeal for lack of jurisdiction, concluding that the trial court’s
“Interlocutory Judgment” did not constitute a final judgment. See Exxon Mobil
Corp. v. Trade Expl. Corp., No. 14-19-00091-CV, 2020 WL 7214159, at *7 (Tex.
App.—Houston [14th Dist.] Dec. 8, 2020, no pet.) (mem. op.).
The trial court signed a final judgment on December 23, 2020. The final
judgment retains the amounts awarded to Exxon in the “Interlocutory Judgment”:
$14.11 million each for the M.J. Farms and Agri-South settlements, for a total of
$28.22 million. The final judgment also awards prejudgment interest.
The Wagners appealed and Exxon filed a cross-appeal. On January 20,
2022, the case was abated due to the pending bankruptcy of Trade Exploration
Corp. Exxon filed a motion to sever the case into two separate proceedings, one
comprising the appeal between Exxon and the Wagners and the other comprising
the appeal between Exxon and Trade Exploration Corp. This court granted the
motion and the present proceeding comprises the appeal between Exxon and the
Wagners.
OVERVIEW
The Wagners raise the following issues on appeal:
1. Exxon’s failure to allocate the M.J. Farms settlement between
indemnified and non-indemnified benefits “dooms any judgment.”
2. Exxon’s indemnity claim arising from the M.J. Farms settlement is
5
barred by res judicata.
3. The evidence is legally and factually insufficient to warrant the
submission of and the jury’s responses to the charge questions
inquiring about the reasonableness of the M.J. Farms and Agri-South
settlements.
4. This court’s prior decision in the mandamus proceeding was incorrect.
5. The prejudgment interest assessed in the final judgment should be
tolled “due to Exxon’s delays.”
In its cross-appeal, Exxon raises two issues: (1) the trial court erred by
disregarding the jury’s finding with respect to the M.J. Farms settlement; and
(2) the Wagners forfeited the right to challenge the M.J. Farms settlement amount.
For the reasons below, we overrule the Wagners’ issues on appeal and
sustain Exxon’s issue challenging the trial court’s partial grant of the Wagners’
JNOV motion.
ANALYSIS
I. The Wagners’ Issues
A. The Scope of the Wagners’ Indemnity Obligations
The Wagners raise two arguments in their first issue: (1) Exxon’s failure to
allocate between indemnified and non-indemnified benefits in the M.J. Farms
settlement is fatal to its recovery, and (2) the Wagners did not agree to indemnify
Exxon for damages arising from plugged and abandoned wells. We consider these
contentions separately, beginning with the Wagners’ allocation argument.
1. Allocation of the M.J. Farms Settlement
Inquiring about the reasonableness of the M.J. Farms settlement, Question
No. 2 was submitted to the jury as follows:
6
Was ExxonMobil’s settlement of the M.J. Farms litigation in 2011 . . .
made in good faith and reasonable and prudent under the
circumstances?
The question whether a settlement is reasonable, prudent, and in good
faith is an objective determination, not a subjective one. An objective
determination is one that is measured by objective standards, not the
subjective or personal views of the person or entity making the
determination.
In determining the issues of reasonableness, prudence, and good faith,
you may consider factors such as the identity of the parties, the
damage elements claimed by a plaintiff, the defenses asserted by the
defendant, settlement amounts agreed to in similar cases, the
complexity of the case, the strength and resources of the counsel for
the settling parties, and such other factors as you may think are
pertinent to the issue.
The jury responded, “Yes.”
Challenging this finding, the Wagners assert that Exxon’s failure to allocate
the M.J. Farms settlement between those benefits that were covered by the parties’
indemnity agreements and those that were not is fatal to any recovery. The
Wagners base this argument on precedent examining allocation in the context of
attorney’s fees and insurance. See Tony Gullo Motors I, L.P. v. Chapa, 212
S.W.3d 299, 314 (Tex. 2006) (“[I]f any attorney’s fees relate solely to a claim for
which such fees are unrecoverable, a claimant must segregate recoverable from
unrecoverable fees.”); Comsys Info. Tech. Servs., Inc. v. Twin City Fire Ins. Co.,
130 S.W.3d 181, 198 (Tex. App.—Houston [14th Dist.] 2003, pet. denied)
(“Because the insured can recover only for covered events, the burden of
segregating the damages attributable solely to the covered event is a coverage issue
for which the insured carries the burden of proof.”).
Specifically, the Wagners contend that Exxon received benefits from the
M.J. Farms settlement that exceed the indemnity agreements in the PSA and the
7
Assignment, including (1) the right of first refusal to purchase the 32,000 acre
farm; (2) plaintiff M.J. Farms’ assignment of its claims to Exxon; and (3) plaintiff
M.J. Farms’ dismissal of the “Part B and Part C lawsuits”.3 The Wagners also
point out that Exxon’s witnesses testified at trial that Exxon could not and did not
separate what was paid for the non-indemnifiable benefits.
In response, Exxon points out that the Wagners did not object to the charge,
so their complaint must be evaluated in light of the charge as submitted. Citing the
language of Question No. 2, Exxon asserts that sufficient evidence supports the
jury’s “Yes” response.
a. Standard of Review and Governing Law
This court previously has delineated the showing required for a settling
indemnitee seeking to recover the amount of the settlement from its indemnitor:
“the indemnitee must show its potential liability to a claimant and show that the
settlement was reasonable, prudent, and made in good faith under the
circumstances.” Amerada Hess Corp. v. Wood Grp. Prod. Tech., 30 S.W.3d 5, 11
(Tex. App.—Houston [14th Dist.] 2000, pet. denied); see also Fireman’s Fund Ins.
Co. v. Com. Standard Ins. Co., 490 S.W.2d 818, 824 (Tex. 1972), overruled on
other grounds by Ethyl Corp. v. Daniel Constr. Co., 725 S.W.2d 705, 708 (Tex.
1987). These standards were incorporated into the wording of Question No. 2,
which asked the jury whether the M.J. Farms settlement was “made in good faith
and reasonable and prudent under the circumstances.”
The Wagners did not object to the wording of Question No. 2 on the grounds
they advance here regarding the necessity of allocation. Accordingly, we judge the
sufficiency of the evidence by the legal standards contained in the trial court’s
3
The Wagners assert the “Part B and Part C lawsuits” are different servitudes that do not
invoke the Wagners’ indemnification obligation under the PSA and the Assignment.
8
charge. Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex. 2000); Deluxe Barber Sch.,
LLC v. Nwakor, 609 S.W.3d 282, 293 (Tex. App.—Houston [14th Dist.] 2020, pet.
denied).
Evidence is legally insufficient to support a jury finding when (1) there is a
complete absence of evidence of a vital fact; (2) the court is barred by rules of law
or evidence from giving weight to the only evidence offered to support a vital fact;
(3) the evidence offered to prove a vital fact is no more than a mere scintilla; or
(4) the evidence conclusively establishes the opposite of the vital fact. City of
Keller v. Wilson, 168 S.W.3d 802, 810 (Tex. 2005). For this analysis, we consider
the evidence in the light most favorable to the challenged finding and indulge
every reasonable inference that would support it. Id. at 822. We credit favorable
evidence if a reasonable fact finder could and disregard contrary evidence unless a
reasonable fact finder could not. Id.
In applying these standards, we are mindful that the trier of fact is the sole
judge of the witnesses’ credibility and the weight afforded to their testimony. Id.
at 819-20. We may not pass upon the witnesses’ credibility or substitute our
judgment for that of the fact finder, even if the evidence would support a different
result. 4922 Holdings, LLC v. Rivera, 625 S.W.3d 316, 325 (Tex. App.—Houston
[14th Dist.] 2021, pet. denied).
b. Evidence and Application
Question No. 2 gave the jury wide latitude on the factors it could consider in
determining whether the M.J. Farms settlement was reasonable, including “the
identity of the parties, the damage elements claimed by a plaintiff, the defenses
asserted by the defendant, settlement amounts agreed to in similar cases, the
complexity of the case, the strength and resources of the counsel for the settling
parties, and such other factors as you may think are pertinent to the issue.”
9
Considered in light of these instructions, the jury’s finding that the M.J. Farms
settlement was reasonable is supported by sufficient evidence.
The jury heard testimony from Exxon’s witnesses discussing the progression
of the M.J. Farms litigation in Louisiana, from its filing through the signing of the
final settlement agreement. Plaintiff M.J. Farms filed suit in April 2006 against
Exxon, Tensas Delta, and five other companies, alleging that the companies’ oil
and gas operations caused environmental damage. In a supplemental petition,
plaintiff M.J. Farms added the Wagners as defendants.
According to Jason Bergeron, one of Exxon’s attorneys, the trial court’s
March 2009 scheduling order set trial for November 2009.4 Testifying at trial,
Bergeron said Exxon’s outside counsel sent a “tender letter” to the Wagners, which
“request[ed] that the Wagner Group defend and indemnify Exxon Mobil against
the claims at issue in M.J. Farms.” In a May 2009 letter, the Wagners “decline[d]
to accept” Exxon’s request for defense and indemnity.
Judge Leo Boothe was assigned to the case as presiding judge. Bergeron
testified that Exxon, the Wagners, and certain other defendants filed a motion to
recuse Judge Boothe because of “what we perceive[d] to be some conflicts that he
had with the underlying litigation.” Bergeron described two conflicts in particular:
(1) Judge Boothe or a member of his family allegedly owned an interest in one of
the mineral leases at issue; and (2) Judge Boothe had a close relationship with a
person related to Michael Johnson, the owner of plaintiff M.J. Farms. The motion
to recuse was denied and the defendants appealed the ruling.
4
Bergeron said that, after the filing of the M.J. Farms petition, plaintiff M.J. Farms
challenged the constitutionality of Louisiana Act 312, which referred to a “series of statutes that
the legislature implemented in order to govern how these types of lawsuits are basically tried
with respect to the regulatory cleanup aspect . . . and how cleanups actually get accomplished.”
This challenge “brought everything to a standstill” until the stay was lifted in 2009.
10
While the appeal was pending, Judge Boothe made several pivotal rulings in
the case. Importantly, Judge Boothe ruled that Exxon and Tensas Delta were the
current owners of the mineral servitude at issue and that the Wagners owned only a
“leasehold interest.” In addition, Judge Boothe issued the following rulings:
• Judge Boothe denied Exxon’s subsequent purchaser defense and
permitted plaintiff M.J. Farms to seek damages for what had occurred
before it purchased the property.
• With respect to the obligation to restore the property’s “surface,”
Judge Boothe ruled that “surface” included “everything from ground
level down to the core of the Earth.”
• Judge Boothe denied Exxon’s statute of limitations defense.
• Judge Boothe ruled that Exxon could be held “solidarily bound” with
Tensas Delta with respect to any damages assessed, which meant that
plaintiff M.J. Farms could “recover 100 percent of its damages” from
either party.
• Judge Boothe severed plaintiff M.J. Farms’ claims against the
Wagners into a separate cause of action.
Reviewing the denial of the motion to recuse Judge Boothe, the Louisiana Supreme
Court determined that Judge Boothe would no longer continue as the case’s
presiding judge. Judge Glenn Strong took over as presiding trial judge. Exxon
“file[d] a series of motions for reconsideration to have Judge Strong revisit Judge
Boothe’s prior rulings” but Judge Strong denied the motions. Judge Strong also
made several rulings limiting Exxon’s presentation of its defense:
• Judge Strong excluded testimony from one of Exxon’s experts who
would have presented evidence “to show the value of the property and
demonstrate how it was disproportionate to the damage claims.”
• Judge Strong did not permit Exxon to question plaintiff M.J. Farms’
expert on “whether or not the Corps of Engineers would approve” his
recommended remediation project.
• Judge Strong did not permit Exxon to put on evidence showing that
similar remediation plans proposed by plaintiff M.J. Farms’ expert
11
had not been implemented.
• Judge Strong precluded Exxon from offering evidence to show that
plaintiff M.J. Farms’ actions contributed to the claimed damages.
• Judge Strong did not permit Exxon to present evidence that it had sold
the mineral servitude at issue to the Wagners.
• Judge Strong allowed evidence of the Exxon Valdez incident5 to be
introduced at trial.
After additional delays, trial was scheduled to begin in March 2011. Exxon’s
expert in the underlying proceeding, Bernard McLaughlin, described the M.J.
Farms litigation as “complex” and said it “was basically the trial of the century for
Catahoula Parish.” According to Bergeron, Catahoula Parish was comprised of
approximately eight thousand people and, for jury selection, the parties “had four
panels of approximately a hundred people each.”
Plaintiff M.J. Farms’ lead counsel was Mike Vernon, whom McLaughlin
described as “very effective.” According to Bergeron, during jury selection
Vernon “referred to Exxon’s size many times, the largest corporation in the world.
He referred to how — the profits of the company in the last quarter, the last year,
so that was a fairly frequent reference.” Vernon also told the panel members that
Michael Johnson, the owner of plaintiff M.J. Farms, would spend all recovered
monies on the property’s remediation.
Of the people selected to sit on the jury, Bergeron recalled that some of them
previously had worked for or had family that worked for plaintiff M.J. Farms.
Bergeron testified that several members of the jury also were friends with members
of Michael Johnson’s family.
Trial began on March 22, 2011. Plaintiff M.J. Farms called Austin Arabie as
5
On March 24, 1989, the oil tanker Exxon Valdez ran aground in Prince William Sound,
Alaska, spilling 11 million gallons of oil.
12
an expert witness. Arabie opined that oil and gas operations on the property
caused contamination of the property’s soil, shallow groundwater, and alluvial
aquifer.6 According to Arabie, the shallow groundwater contamination was caused
by leakage from unlined earthen pits used to store water produced during oil and
gas operations. Arabie also opined that contamination could be traced to saltwater
injection wells used on the property. Arabie’s proposed remediation plan cost
approximately $3.9 billion, allocated as follows: $105,907,147 for soil
remediation, $37,233,511 for shallow groundwater remediation, and
$3,833,271,901 for aquifer remediation.
According to Bergeron, Arabie previously had served as an expert witness in
Corbello v. Shell, a similar “legacy”7 lawsuit filed in Louisiana. In Corbello, the
jury returned a verdict for the plaintiff and assessed approximately $60 million in
damages. Bergeron also said that Arabie’s testimony in a separate case had been
cited by the Louisiana Supreme Court as “providing the sufficient or necessary
evidence to support the jury’s verdict[.]”
Plaintiff M.J. Farms also relied on expert testimony from Bill Griffin.
Bergeron described Griffin’s theory of contamination as follows:
So Mr. Griffin identified a series of saltwater disposal wells and
plugged and abandoned wellbores that — within the boundaries of the
alluvial aquifer plumb that Mr. Arabie delineated. According to Mr.
Griffin, . . . [s]altwater that was injected into the saltwater disposal
wells allegedly traveled back up these plugged and abandoned
6
Alluvial aquifers are “relatively young aquifers in geologic time” that “consist of
unconsolidated sand and gravel material.” See Luke W. Harris & Christopher J. Sanchez,
Considerations for Analyzing Colorado Ground Water: A Technical Perspective, 15 U. Denv.
Water L. Rev. 105, 111 (2011). Alluvial aquifers are “relatively shallow and proximal to the
surface stream systems that created the deposits.” Id.7
“Legacy litigation” refers to hundreds of cases filed by landowners seeking damages
from oil and gas companies for alleged environmental contamination in the wake of the
Louisiana Supreme Court’s decision in Corbello v. Iowa Production, 850 So.2d 686 (La. 2003).
13
wellbores and impacted the alluvial aquifer.
Bergeron testified that the M.J. Farms litigation settled after the close of evidence
and the charge conference. Caj Boatright, one of Exxon’s attorneys, was the
“point person” when it came to the M.J. Farms settlement. According to
Boatright, when he took over the M.J. Farms litigation in October 2010, the
settlement demand pending from plaintiff M.J. Farms was $2.1 billion. Boatright
recalled that, in February 2011, plaintiff M.J. Farms lowered its settlement demand
to $635 million; Exxon responded with an offer of $15 million. Boatright testified
that plaintiff M.J. Farms’ next offer was for $475 million, to which Exxon
responded with a $22 million offer.
During jury selection, plaintiff M.J. Farms offered $152 million to settle and
Exxon counter-offered with $52 million. Settlement discussions remained at an
impasse until the conclusion of trial, when plaintiff M.J. Farms offered $59 million
to settle. Boatright offered Exxon’s acceptance of the proposal, with $57.5 million
to be paid by Exxon and $1.5 million to be paid by Tensas Delta. Boatright said
the parties subsequently agreed on the settlement.
According to Boatright, in his settlement discussions with plaintiff M.J.
Farms up to this point, the parties discussed only “the amount of money and a
complete release from the M.J. Farms lawsuit claims[.]” Boatright said the parties
had not discussed any additional terms of the settlement, including a right of first
refusal, a surface-use agreement, an assignment of claims, or confidentiality.
Boatright testified that the parties subsequently entered into a “Memorandum of
Understanding” and, approximately seven weeks later, the parties signed a final
settlement agreement. According to Boatright, the settlement amount did not
change from the initial agreement through the signing of the final agreement.
Scott Sinclair, president of Tensas Delta, testified about Tensas Delta’s role
14
in the M.J. Farms litigation and the ensuing settlement. According to Sinclair,
Boatright approached him about the settlement negotiations with plaintiff M.J.
Farms and asked if Tensas Delta “would want to make an offer to the plaintiffs to
resolve its liability to them.” Sinclair told Boatright they were interested in a
settlement. Sinclair subsequently approached Tensas Delta’s board of directors
and received $1 million in settlement authority. According to Sinclair, the
company’s insurance carrier agreed to contribute an additional $500,000 to the
settlement.
Sinclair recalled that, at the time of the settlement negotiations, Tensas Delta
had approximately 15 employees, $1 million in cash, and $5.6 million in liquid
assets. According to Sinclair, “prior to the parties sitting down and documenting”
the settlement agreement, there had not been any discussion of the settlement’s
terms apart from the money and that plaintiff M.J. Farms agreed to a “full release”
of Tensas Delta. Sinclair said it took approximately seven weeks to finalize the
parties’ settlement agreement. During this period, Sinclair said the settlement
amount never changed.
Evaluating the course of the M.J. Farms litigation and the settlement,
McLaughlin ultimately opined that the settlement was “made in good faith” and
“reasonable and prudent.” Reviewing the circumstances discussed above,
McLaughlin stated that “Exxon faced a significant and serious exposure in this
case to a very, very large damage award by the jury.” Continuing on, McLaughlin
testified that “there are numbers even higher than the settlement that I would still
have considered to be reasonable, considering the risk and exposure Exxon Mobil
faced.” McLaughlin also referenced verdicts returned in other legacy cases,
including $60 million in Corbello, $168 million in Grefer, $60 million in Dore,
$42 million in Marin, and $54 million in Savoie.
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Against this backdrop, the Wagners fully explored their contention that the
settlement was unreasonable because it included indemnified and non-indemnified
benefits.
At trial, the Wagners called Rick Sarver as an expert witness. Sarver is an
attorney licensed in Lousiana and has practiced law for 35 years. Reviewing the
M.J. Farms final settlement agreement, Sarver opined that “[t]here were a number
of things that Exxon bought with its settlement money that were never agreed to by
the [Wagners] to indemnify them for.” Sarver identified the following non-
indemnified benefits: settlements of two other legacy cases; a right of first refusal
to purchase the farm acreage; confidentiality; and the assignment of plaintiff M.J.
Farms’ claims against other defendants, including Tensas Delta. When asked
generally about the settlement’s reasonableness, Sarver testified:
The settlement, itself, wasn’t in good faith. When you are trying to
buy all these different items, many of which — most of which are not
the responsibility of the defendants for any indemnity and then to
attempt to hold those defendants responsible for things that you know
they don’t have any obligation for, that’s not in good faith.
The Wagners also questioned Exxon’s witnesses about the benefits that were
allegedly outside the scope of the Wagners’ indemnity obligations. The Wagners’
counsel had the following colloquy with Boatright during his cross-examination:
Q. There’s nothing in the agreement, itself, that indicates how
much of the 57.5 million was paid for any of these items, is
there?
A. 57.5 [million] is paid for the release. It doesn’t say how
much was paid for these other ones because they came after
we reached a deal on the money.
Q. It’s true that Exxon cannot allocate how much of the 57.5
[million] was paid for any of these pieces; isn’t that true?
Isn’t that true?
16
A. I don’t know how to say it, other than we reached a deal on
the money and these things came afterwards.
When asked if it was “true that the settlement agreement has a variety of things
that Exxon received in exchange for $57[.5] million, and there is not a specific
allocation for each of those things,” Boatright responded: “True. The way you
read it, true.”
Exxon also called as a witness Jack Balagia, an attorney at Exxon who was
involved in the M.J. Farms settlement. On cross-examination, Balagia confirmed
that Exxon made no allocation of the sums it paid to settle the M.J. Farms
litigation.
Considered together and in light of the charge’s wording, this evidence is
sufficient to support the jury’s “Yes” response to Question No. 2. Specifically, the
evidence supports the finding that Exxon’s $57.5 million payment to settle the M.J.
Farms litigation was “made in good faith and reasonable and prudent under the
circumstances.” Even though the Wagners’ counsel elicited testimony showing the
settlement was not reasonable because it included benefits allegedly outside their
indemnity obligations, the jury was entitled to disregard this contrary evidence in
reaching the finding under review. See City of Keller, 168 S.W.3d at 822.
c. The Contractual Scope of the Wagners’ Indemnity
Obligations
Setting aside the evidence supporting the challenged finding, the breadth of
the Wagners’ indemnity obligations under the PSA and the Assignment does not
support the argument that Exxon’s alleged failure to allocate is fatal to its recovery
for the M.J. Farms settlement.
The obligation to indemnify is a creature of contract and defined according
to the terms therein. See Griffin Indus., Inc. v. Foodmaker, Inc., 22 S.W.3d 33, 36
17
(Tex. App.—Houston [14th Dist.] 2000, pet. denied) (“The Supreme Court has
stated that the question of whether indemnity exists is a rule of contract
interpretation and should be determined by the court as a matter of law.”) (citing
Fisk Elec. Co. v. Constructors & Assocs., Inc., 888 S.W.2d 813, 814 (Tex. 1994));
DBHL, Inc. v. Moen Inc., 312 S.W.3d 631, 635 (Tex. App.—Houston [1st Dist.]
2009, pet. denied) (“Courts may not expand the parties’ rights and responsibilities
beyond the limits defined in an indemnity contract.”); see also, e.g., RKI Expl. &
Prod., LLC v. Ameriflow Energy Servs., LLC, No. 02-20-00384-CV, 2022 WL
2252895, at *8-20 (Tex. App.—Fort Worth June 23, 2022, no pet. h.) (mem. op.)
(determining the scope of an indemnity obligation based on an examination of the
operative agreement).
Here, the PSA and the Assignment set broad parameters for the Wagners’
indemnity obligations. In relevant part, the first indemnity provision in the PSA
states that the Wagners:
agree to release, defend, indemnify, and hold Exxon . . . harmless
from and against all damages, losses, expenses (including, but not
limited to, court costs and attorneys’ fees), civil fines, penalties, and
other costs and liabilities as a result of claims, demands, and causes
of action whether arising or made prior to or subsequent to the
effective time or manifested in lawsuits filed prior to or subsequent
to the effective time, as a result of the following:
(a) the ownership or the operation of, or any act or omission in
connection with, the interests or property, by buyer,[8] its
employees, independent contractors, agents, successors or assigns,
or by Exxon, its officers, directors, employees or agents, or by
third parties, whether prior to or subsequent to the effective time;
* * *
Including, but not limited to: . . .
(2) claims, demands, causes of action, costs, and expenses arising
8
The PSA defines the term “Buyer” to include the Wagners.
18
out of, or in connection with, the plugging and abandoning and
reabandoning of any wells, removal or modification of facilities
(including, but not limited to, flowlines and pipelines), closure of
pits, and restoration of the surface, regardless of whether the
obligation to plug, abandon, reabandon, remove, modify, close, or
restore arose prior to or subsequent to the effective time, whether
such plugging, abandoning and reabandoning, removal,
modification, closure or restoration was the obligation of Exxon,
buyer, or third parties.
(emphasis added).
In the portion of the PSA entitled “Material Adverse Environmental
Conditions,” the Wagners agreed:
to accept all responsibility and liability for the environmental
condition of the property and interests pursuant to the terms of this
agreement, including, but not limited to, all existing and prospective
claims, causes of action, fines, losses, costs, and expenses, including,
but not limited to, costs to cleanup or remediate in accordance with
and to the extent required by law, and buyer, its successors and
assigns hereby agree to release Exxon, its officers, directors,
employees and agents from any and all liability and responsibility
therefor and agree to indemnify, defend, and hold Exxon, its officers,
directors, employees and agents harmless from any and all claims,
causes of action, fines, expenses, costs, losses, and liabilities
whatsoever in connection with the environmental condition of the
property, interests, or other property affected thereby (including, but
not limited to, their active, passive, joint, concurrent or sole
negligence or strict liability) or the failure of buyer, its successors or
assigns to remediate property.
(emphasis added). Finally, the Wagners also agreed to indemnify Exxon for any
claims “on account of . . . contamination or threat of contamination of natural
resources (including, but not limited to, soil, air, surface water or ground water), or
other threat to the environment” arising from any operations on the property before
or after the PSA’s effective date. (emphasis added). These same provisions were
included in the parties’ Assignment.
19
Read together, these provisions obligate the Wagners to indemnify Exxon
for all damages, losses, and expenses (1) as a result of the Wagners’ ownership of
or any act taken in connection with the property; (2) arising out of the “closure of
pits, and restoration of the surface”; (3) arising from the property’s environmental
condition, including “costs to cleanup or remediate”; and (4) sought by any person
on account of contamination of natural resources. Considered in conjunction with
the evidence at trial addressing the source and extent of the M.J. Farms
environmental contamination, all costs related to the settlement of the M.J. Farms
litigation likely fall within the scope of the Wagners’ indemnity obligations as
defined by the PSA and the Assignment.
In light of this conclusion and our evidentiary-sufficiency analysis above, we
overrule the Wagners’ allocation argument.
2. Plugged and Abandoned Wells
As discussed above, expert witness Griffin testified in the M.J. Farms
litigation and opined that some of the contamination at issue was caused by
injected saltwater that traveled up the wellbores of plugged and abandoned wells.
On appeal, the Wagners argue that the 1994 transaction conveyed to them only
those wells that were “abandoned” — not those that were “plugged and
abandoned.” This error, the Wagners contend, “fatally undermines the judgment
because Exxon’s payments to M.J. Farms and Agri-South encompassed damages
arising from plugged and abandoned wells, for which no indemnity was owed.”
During trial, the trial court admitted evidence on this point and submitted the
issue to the jury as Question No. 1:
Did ExxonMobil agree to sell and the Wagner Group agree to
purchase plugged and abandoned wells in the 1994 purchase and sale
agreement and the assignment in evidence as Plaintiff’s Exhibits 1 and
20
2?
The jury responded, “Yes.”
Our analysis of this issue begins with the documents that effected the 1994
transaction. The PSA conveyed to the Wagners:
Exxon’s interest in those certain oil and gas leasehold estates or other
interests, as set forth in Exhibit A-19 . . . , together with Exxon’s
ownership interest in all wells (abandoned and unabandoned) located
on the land described in Exhibit A-1.
(emphasis added). The Assignment incorporates the same definition of the
interests conveyed from Exxon to the Wagners.
Well-settled principles of contract interpretation guide our analysis of these
provisions. See Port of Houston Auth. of Harris Cnty. v. Zachry Constr. Corp.,
513 S.W.3d 543, 551 (Tex. App.—Houston [14th Dist.] 2016, pet. denied). Our
primary concern when interpreting a contract is to ascertain and give effect to the
intent of the parties as expressed in the contract. Seagull Energy E & P, Inc. v.
Eland Energy, Inc., 207 S.W.3d 342, 345 (Tex. 2006). Contract terms are given
their plain, ordinary, and generally-accepted meanings, and contracts are to be
construed as a whole in an effort to harmonize and give effect to all provisions.
Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 662 (Tex. 2005).
When a contract is ambiguous, its interpretation becomes a fact issue for the
jury to resolve. XCO Prod. Co. v. Jamison, 194 S.W.3d 622, 627 (Tex. App.—
Houston [14th Dist.] 2006, pet. denied). A contract is ambiguous if it is subject to
two or more reasonable interpretations after applying the pertinent rules of contract
construction. Id. The fact that the parties disagree about a contract’s meaning
9
Exhibit A-1 listed the leasehold interests covering approximately 120,000 acres in
northern Lousiana, including those properties at issue in the M.J. Farms and Agri-South
litigation.
21
does not necessarily render the contract ambiguous. Polaris Guidance Sys., LLC v.
EOG Res., Inc., 575 S.W.3d 85, 89 (Tex. App.—Houston [14th Dist.] 2019, no
pet.).
The contract provision quoted above suggests a single interpretation
regarding which wells were conveyed from Exxon to the Wagners: all of them.
See, e.g., Project Dev. Grp., Inc. v. Metro. Transit Auth. of Harris Cnty., No. 07-
96-0350-CV, 1998 WL 416131, at *4 (Tex. App.—Amarillo July 24, 1998, pet.
denied) (not designated for publication) (noting the “undeniable fact that the plain,
ordinary meaning of ‘all’ is ‘all’”).
The Wagners do not point to any provisions suggesting that “plugged and
abandoned” wells are excluded from the conveyance of “all wells.” Moreover, this
contention is at odds with other provisions in the PSA and the Assignment
delineating the Wagners’ obligations with respect to plugged and abandoned wells.
For example, as set out more fully above in Section I.A.1.c., the Wagners
agreed “to properly plug and abandon and reabandon, if necessary, all wells
(abandoned and unabandoned)” and “to pay all costs and expenses associated with
any such plugging and abandoning and reabandoning.” This obligation to Exxon
applied both before and after the transaction’s 1994 effective date and included
those wells for which the Wagners were “not the Operator.” The Wagners also
agreed to indemnify Exxon for any expenses “arising out of, or in connection with,
the plugging and abandoning and reabandoning of any wells.”
These provisions, read in conjunction with the interests conveyed in the PSA
and the Assignment, show that the parties intended to convey all wells to the
Wagners, including those that were plugged and abandoned. Therefore, the trial
court erred in submitting a jury question asking whether plugged and abandoned
wells were conveyed to the Wagners in the 1994 transaction. See, e.g., XCO Prod.
22
Co., 194 S.W.3d at 632 (holding that the trial court erred when it did not construe
an unambiguous provision as a matter of law and, instead, submitted the issue to
the jury). However, because the jury’s finding is in accordance with the relevant
provisions’ unambiguous meaning, the error is harmless. See Tex. R. App. P.
44.1(a)(1); XCO Prod. Co., 194 S.W.3d at 632.
We overrule the Wagners’ challenge to the jury’s finding in response to
Question No. 1. Therefore, we overrule all arguments raised in the Wagners’ first
issue.
B. Res Judicata
Before delving into the Wagners’ second issue, we begin with a brief
overview of the relevant procedural history underlying their res judicata argument.
As discussed above, Judge Boothe (during the pre-trial stages of the M.J.
Farms litigation) ruled that the Wagners were leaseholders with respect to the
property at issue and that Exxon, in contrast, owned the mineral servitude. The
trial court severed plaintiff M.J. Farms’ claims against the Wagners and those
claims proceeded independently of the claims asserted against Exxon and Tensas
Delta.
Exxon and Tensas Delta subsequently settled with plaintiff M.J. Farms and,
in the parties’ final settlement agreement, plaintiff M.J. Farms “assign[ed] to
ExxonMobil all Claims that it has, as of the date this Agreement is approved by the
Court, against Wagner[10] . . . .”
After the final settlement agreement was signed, the Wagners filed a motion
for summary judgment with respect to the severed claims asserted against them by
The final settlement agreement defined “Wagner” to include Bryan C. Wagner and
10
Duer Wagner III.
23
plaintiff M.J. Farms. Pointing out that the final settlement agreement obligated
Exxon to remediate the sites of the alleged contamination, the Wagners asserted
that plaintiff M.J. Farms “has received full recovery for the claims it alleged in this
case” and requested a judgment in their favor.
Exxon filed a response to the Wagners’ summary judgment motion and
argued that the Wagners remained liable for the remediation and that their
remediation obligation exceeded the one in the final settlement agreement. In a
footnote, Exxon asserted:
If [the trial court] finds that Plaintiff’s settlement with ExxonMobil
released Plaintiff’s claims against the Wagner Defendants, then by
operation of law, ExxonMobil is subrogated to Plaintiff’s rights
against Wagner for Wagner’s virile portion in addition to any
contractual indemnification rights that ExxonMobil has against
Wagner.
(emphasis added). In March 2013, the Louisiana trial court granted the Wagners’
motion for summary judgment and dismissed the claims asserted by plaintiff M.J.
Farms.
On appeal here, the Wagners cite to the footnote in Exxon’s summary
judgment response and argue that the indemnity claims pursued in the underlying
suit are barred by res judicata. In response, Exxon contends that the Wagners
(1) failed to conclusively prove res judicata, and (2) waived any res judicata
defense.
The preclusive effect of a prior judgment is determined by the law of the
state that issued the decision which, here, is Lousiana. See Purcell v. Bellinger,
940 S.W.2d 599, 601 (Tex. 1997) (per curiam); Charles Brown, L.L.P. v. Lanier
Worldwide, Inc., 124 S.W.3d 883, 894 n.20 (Tex. App.—Houston [14th Dist.]
2004, no pet.). Under Lousiana law, res judicata requires proof of the following:
24
(1) the judgment is valid; (2) the judgment is final; (3) the parties are the same;
(4) the cause or causes of action asserted in the second suit existed at the time of
the final judgment in the first litigation; and (5) the cause or causes of action
asserted in the second suit arose out of the transaction or occurrence that was the
subject matter of the first litigation. Burguieres v. Pollingue, 843 So.2d 1049,
1053 (La. 2003). “The doctrine of res judicata is stricti juris and, accordingly, any
doubt concerning the applicability of the principle must be resolved against its
application.” McCalmont v. McCalmont, 297 So.3d 1057, 1063 (La. Ct. App.
2020) (internal quotation omitted).
Assuming without deciding that the March 2013 summary judgment satisfies
the elements of res judicata in Louisiana, we conclude that the Wagners’ failure to
timely raise the defense in the underlying proceeding constitutes waiver.
The doctrine of res judicata is not absolute; rather, the defense may be
waived in certain circumstances. See Restatement (Second) of Judgments § 26
(1982); see also, e.g., In re DEK-M Nationwide, Ltd., 627 S.W.3d 353, 363 (Tex.
App.—Houston [14th Dist.] 2021, orig. proceeding) (applying section 26).11
Relevant here, res judicata does not bar a subsequent claim if “[t]he parties
have agreed in terms or in effect that the plaintiff may split his claim, or the
defendant has acquiesced therein[.]” Restatement (Second) of Judgments
§ 26(a)(1) (1982). A comment to this exception states:
A main purpose of the general rule stated in § 24 is to protect the
defendant from being harassed by repetitive actions based on the same
claim. The rule is thus not applicable where the defendant consents,
in express words or otherwise, to the splitting of the claim.
11
Even though Louisiana substantive law controls the effect of the prior judgment, Texas
procedural rules control how that effect is determined. See Hercules Offshore, Inc. v. Excell
Crane & Hydraulics, Inc., 454 S.W.3d 70, 77-78 (Tex. App.—Houston [1st Dist.] 2014, pet.
dism’d).
25
* * *
Where the plaintiff is simultaneously maintaining separate actions
based upon parts of the same claim, and in neither action does the
defendant make the objection that another action is pending based on
the same claim, the judgment in one of the actions does not preclude
the plaintiff from proceeding and obtaining judgment in the other
action. The failure of the defendant to object to the splitting of the
plaintiff’s claim is effective as an acquiescence in the splitting of the
claim.
Restatement (Second) of Judgment § 26 cmt. a (1982). “This exception essentially
operates as a waiver where the parties fail to object at the outset of the subsequent
litigation.” Ganske v. WRS Grp., Inc., No. 10-06-00050-CV, 2007 WL 1147357,
at *6 (Tex. App.—Waco Apr. 18, 2007, no pet.) (mem. op.). Waiver is necessary
“to discourage unsavory tactical maneuvers,” such as when a party pursues
separate litigation and then seeks to hide behind the first judgment rendered. Id.(citing In re Matter of Super Van Inc., 92 F.3d 366, 371 (5th Cir. 1996)).
This exception forecloses the res judicata defense advanced here. In the
Louisiana litigation, the Wagners moved for summary judgment on the severed
claims asserted against them by plaintiff M.J. Farms in November 2012 and Exxon
filed its response (which contained the footnote referencing Exxon’s “contractual
indemnification rights”) in February 2013. The trial court granted the Wagners’
summary judgment motion in March 2013.
When this judgment was signed, the proceedings in the underlying action
were ongoing. The parties proceeded to trial on April 7, 2016, and trial lasted nine
days. The Wagners first raised their res judicata defense in a supplement to their
fifth amended answer filed on April 22, 2016 — the last day of trial.
As this timeline shows, the Wagners waited over three years after the
signing of the operative judgment to assert their res judicata defense. During this
26
period, the parties and the judicial system expended considerable resources as the
case was prepared for and proceeded through trial. Permitting res judicata to be
asserted at this late stage would undercut the goals the doctrine is intended to
advance, i.e., the efficient resolution of lawsuits. See Restatement (Second) of
Judgment § 26 cmt. a (1982); see also, e.g., John G. & Marie Stella Kennedy
Mem’l Found. v. Dewhurst, 90 S.W.3d 268, 288-89 (Tex. 2002) (stating that the
doctrine of res judicata serves “the dual purpose of protecting litigants from the
burden of relitigating an identical issue with the same party or his privy and of
promoting judicial economy by preventing needless litigation”) (citing Parklane
Hosiery Co. v. Shore, 439 U.S. 322, 326 (1979)).
Therefore, the Wagners waived the defense of res judicata. See Restatement
(Second) of Judgments § 26(a)(1) (1982). We overrule the Wagners’ second issue.
C. Sufficiency of the Evidence
In their third issue, the Wagners argue that the evidence is insufficient to
support the submission of and the jury’s responses to Questions Nos. 2 and 3.
Question No. 2 inquired about the reasonableness of the M.J. Farms settlement; its
text is set out in Section I.A.1. above. Question No. 3, which inquired about the
reasonableness of the Agri-South settlement, used the same operative language.
The Wagners’ challenge on this point focuses on the testimony of Exxon’s
expert, McLaughlin, and raises three arguments: (1) McLaughlin’s testimony is
impermissible ipse dixit; (2) McLaughlin’s testimony is unreliable because he did
not compare the M.J. Farms and Agri-South settlements to similar settlement
agreements; and (3) McLaughlin’s opinion rests on a material fact that was
contradicted by the undisputed evidence.
We examine these arguments in light of the evidentiary sufficiency
27
standards outlined above in Section I.A.1.a.
1. Impermissible Ipse Dixit
Focusing on the M.J. Farms settlement, the Wagners contend that
McLaughlin’s only real justification for the settlement amount was the “risk” of a
large judgment. Asserting that “reasonableness cannot turn solely on the amount
of the plaintiff’s demand,” the Wagners argue that McLaughlin’s testimony on this
point is impermissible ipse dixit.
“Although expert opinion testimony often provides valuable evidence in a
case, ‘it is the basis of the witness’s opinions, and not the witness’s qualifications
or his bare opinions alone, that can settle an issue as a matter of law; a claim will
not stand or fall on the mere ipse dixit of a credentialed witness.’” Coastal Transp.
Co. v. Crown Cent. Petroleum Corp., 136 S.W.3d 227, 232 (Tex. 2004) (quoting
Burrow v. Arce, 997 S.W.2d 229, 235 (Tex. 1999)). Conclusory opinion testimony
is not relevant evidence because it does not tend to make the existence of a
material fact “more or less probable.” See Tex. R. Evid. 401; see also Coastal
Transp. Co., 136 S.W.3d at 232. Accordingly, conclusory expert testimony cannot
support a judgment. Custom Transit, L.P. v. Flatrolled Steel, Inc., 375 S.W.3d
337, 345 (Tex. App.—Houston [14th Dist.] 2012, pet. denied).
We conclude that McLaughlin’s testimony addressing the reasonableness of
the M.J. Farms settlement is not impermissible ipse dixit. Rather, McLaughlin’s
testimony supplied an appropriate foundation for his opinion.
Testifying at trial, McLaughlin said he graduated law school in 1976 and is
licensed to practice in Louisiana. According to McLaughlin, he currently
specializes in mediation but previously has tried various lawsuits, including
“defending oil and gas environmental claims.” McLaughlin testified that he first
28
became involved with the Louisiana legacy lawsuits in the early-2000s, when he
worked with plaintiff M.J. Farms’ attorney, Mike Vernon. McLaughlin said he
began mediating legacy lawsuits around 2004 and, since then, has mediated
between 20-30 legacy cases.
Discussing his preparation to testify at trial, McLaughlin said he reviewed
documents relevant to the M.J. Farms litigation, including the pleadings,
depositions, expert reports, hearing transcripts, pre-trial transcripts, trial transcripts,
and law review articles discussing Louisiana legacy litigation. Ultimately,
McLaughlin concluded the M.J. Farms settlement was “made in good faith” and
“reasonable and prudent.” McLaughlin pointed to the following factors to support
his conclusion, many of which were discussed in detail above in Section 1.A.1.b.:
• Pre-trial rulings that limited Exxon’s defense, including Judge
Boothe’s ruling that Exxon was the property’s mineral servitude
owner.
• The size of the M.J. Farms trial relative to the location in which it was
held. McLaughlin described it as “the trial of the century for
Catahoula Parish.”
• The composition of the jury, which “presented a significant risk”
based on their connections to plaintiff M.J. Farms and plaintiff’s
counsel.
• The strength of plaintiff M.J. Farms’ counsel, Mike Vernon.
McLaughlin said he had known Vernon “for probably close to 30
years” and described him as “extremely effective.”
• Evidence that the jury heard about Exxon, including that it is the
world’s largest company and that its 2007 profits were $40 billion.
• Plaintiff M.J. Farms’ damage models, including Arabie’s testimony
that environmental remediation would cost over $3 billion.
• Evidence showing that Exxon “clearly had potential liability to M.J.
Farms.”
• Similar legacy cases that resulted in multi-million-dollar verdicts for
29
the plaintiffs.
Describing this as a “very volatile, explosive combination” of factors, McLaughlin
opined that it was “remarkable” Exxon settled the case for $57.5 million.
Considered together, this testimony and evidence provide a demonstrable
and reasoned basis supporting McLaughlin’s opinion that the M.J. Farms
settlement was reasonable. See Coastal Transp. Co., 136 S.W.3d at 232; see also,
e.g., Amerada Hess Corp., 30 S.W.3d at 12 (evidence was sufficient to support
finding that settlement was reasonable when expert based his opinion on “facts
from deposition testimony,” including valuations from the plaintiff’s medical and
economic experts). We overrule the Wagners’ contention that McLaughlin’s
testimony constitutes impermissible ipse dixit.
2. Settlement Comparisons
The Wagners frame this argument by asserting that “[t]here can be no better
guide to settlement values than the amounts that willing plaintiffs and defendants
actually negotiate in similar lawsuits.” Pointing out that McLaughlin “did not
compare the Exxon settlement to similar settlement agreements,” the Wagners
contend that McLaughlin’s opinion therefore is “unreliable and no evidence to
support the judgment.”
But the cases cited by the Wagners do not support the application of this
principle to the facts presented here. See Elizondo v. Krist, 415 S.W.3d 259, 262-
63 (Tex. 2013) (in a legal malpractice case, the court concluded the plaintiff’s
damages expert was not limited to comparing cases that were actually tried and
could rely on evidence of cases that settled); McMahon v. Zimmerman, 433 S.W.3d
680, 688-89 (Tex. App.—Houston [1st Dist.] 2014, no pet.) (the court concluded
the expert failed to connect his opinion regarding the expected judicial division of
community debt to “actual divisions made in factually-similar divorces”; the expert
30
relied on four divorce cases but did not offer any proof that these cases “out of the
thousands of divorce cases in Texas” were representative); Sieber & Calicutt, Inc.
v. La Gloria Oil & Gas Co., 66 S.W.3d 340, 348 (Tex. App.—Tyler 2001, pet.
denied) (when “[d]etermining whether a settlement in a wrongful death case is
reasonable”, an attorney “must review and analyze, among other things, . . . the
settlement amounts received in similar cases”) (emphasis added). These cases do
not hold that an expert’s failure to incorporate comparable settlements into his
analysis renders his testimony legally insufficient.
Moreover, McLaughlin testified at trial about jury verdicts reached in other
legacy cases, including $60 million in Corbello, $168 million in Grefer, $60
million in Dore, $42 million in Marin, and $54 million in Savoie. McLaughlin
testified about these cases’ similarities to the M.J. Farms litigation and, on cross-
examination, he was questioned about the cases’ differences. The Wagners do not
cite any cases that warrant discounting this evidence in favor of evidence that
addresses only settlements.
We overrule the Wagners’ contention that McLaughlin’s testimony is
unreliable because it did not incorporate comparable settlements.
3. Contradicted Material Fact
In their final challenge to McLaughlin’s testimony, the Wagners assert that
his opinion “rests on a material fact that was contradicted by the undisputed
evidence.” Specifically, the Wagners point out that McLaughlin’s testimony was
“based on the assumption that Exxon could be held responsible, as the mineral
servitude owner” but, in subsequent litigation, the Wagners secured a judgment
that the Wagners — not Exxon — owned the mineral servitude at issue.
This judgment was rendered in 2018, in a Louisiana lawsuit separate from
31
the M.J. Farms litigation or the suit involving plaintiff M.J. Farms’ severed claims
against the Wagners. This 2018 judgment grants a motion for partial summary
judgment filed by the Wagners and, in relevant part, states:
It is hereby ordered, adjudged and decreed that as a matter of law,
Exxon Corporation, now Defendant, Exxon Mobil Corporation, as
Assignor, conveyed all of its interest in any mineral servitude, oil and
gas leasehold estates and/or other interests burdening the Plaintiffs’
lands . . . unto Defendants, Bryan C. Wagner, Duer Wagner, III,
Trade Exploration Corp. and James D. Finley, as Assignees[.]
However, this judgment was rendered after the M.J. Farms litigation and after
McLaughlin’s testimony in the underlying proceeding. The Wagners do not cite
any authority to support their contention that a ruling on an issue obtained in
subsequent, separate litigation can be used to discount testimony in an earlier suit.
Therefore, this argument does not show that McLaughlin’s testimony
impermissibly rested on a contradicted material fact.
We overrule the arguments raised in the Wagners’ third issue and conclude
that sufficient evidence supports the submission of and the jury’s findings in
response to Questions Nos. 2 and 3.
D. Mandamus Proceeding
In their fourth issue, the Wagners ask us to revisit our prior decision
conditionally granting Exxon’s petition for writ of mandamus. See In re Exxon
Mobil Corp., 389 S.W.3d at 577.
In In re Exxon Mobil Corp., we examined whether Exxon waived its
attorney-client privilege under the offensive-use doctrine with respect to certain
documents pertaining to Exxon’s defense and settlement in the M.J. Farms
litigation. Id. at 580. The offensive-use doctrine prohibits a plaintiff from
maintaining evidentiary privileges that protect from discovery outcome-
32
determinative information not otherwise available to a defendant. See id. We
outlined three factors relevant to this determination: (1) the party asserting the
privilege must be seeking affirmative relief; (2) the privileged information is such
that, if it is believed by the fact finder, in all probability it would be outcome
determinative of the cause of action asserted; and (3) the disclosure of the
confidential communication is the only means by which the aggrieved party may
obtain the evidence. Id.
Concluding that this showing was not made, we held that (1) the relevant
inquiry — i.e., whether the settlement was reasonable, prudent, and in good faith
— was objective rather than subjective, so as to put attorney-client
communications beyond the offensive-use doctrine’s reach, and (2) under this
objective standard, the Wagners could obtain evidence from sources other than the
privileged materials they were seeking. Id. at 580-83.
The Wagners do not raise any arguments on appeal addressing these
determinations. Rather, the Wagners assert that we should revisit this decision
because (1) allowing Exxon to withhold these materials limited the Wagners’
ability to cross-examine Exxon’s witnesses; and (2) the decision permitted Exxon
to “craft a trial strategy that effectively invoked the ‘advice of counsel’ rationale
without the concomitant waiver of privilege.”
We decline the Wagners’ invitation to revisit In re Exxon Mobil Corp.
Under the law of the case doctrine, a decision rendered in a former appeal
generally is binding in a later appeal of the same case. Paradigm Oil, Inc. v.
Retamco Operating, Inc., 372 S.W.3d 177, 182 (Tex. 2012); Hoagland v. Butcher,
474 S.W.3d 802, 809 (Tex. App.—Houston [14th Dist.] 2014, no pet.). The
doctrine’s purpose is to streamline litigation by winnowing the issues in each
successive appeal, thus promoting efficiency and uniformity in the decision-
33
making process. Paradigm Oil, Inc., 372 S.W.3d at 182.
The law of the case doctrine applies only to questions of law and does not
necessarily apply when either the issues or the facts presented at successive
appeals are not substantially the same as those involved in the first appeal.
Hoagland, 474 S.W.3d at 809. But ultimately, the decision to revisit a previous
holding is left to the discretion of the court under the particular circumstances of
each case. Id.; see Tex. Law Shield, LLP v. Crowley, No. 14-18-00986-CV, 2020
WL 4873250, at *3 (Tex. App.—Houston [14th Dist.] Aug. 20, 2020, pet. denied)
(mem. op.).
As discussed above, our decision in In re Exxon Mobil Corp. held that the
relevant inquiry was objective and, accordingly, Exxon’s privileged information
relating to the M.J. Farms litigation was not necessary to the Wagners’ defense.
389 S.W.3d at 582-83. The Wagners do not raise any arguments addressing the
substance of these determinations. Likewise, the Wagners do not point to any
changed facts or issues relevant to these determinations that would warrant their
reconsideration.
Rather, the Wagners’ arguments allege that the In re Exxon Mobil Corp.
decision operated as a “strait-jacket” that Exxon “[e]xploit[ed]” at trial. These
arguments do not address the reasoning underlying In re Exxon Mobil Corp.
Therefore, we conclude that the law of the case doctrine precludes reconsideration
of the issues resolved in the mandamus proceeding. See Paradigm Oil, Inc., 372
S.W.3d at 182; Hoagland, 474 S.W.3d at 809.
We overrule the Wagners’ fourth issue.
E. Prejudgment Interest
The trial court’s final judgment includes prejudgment interest on the
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$28,220,000.00 assessed as actual damages for Exxon’s settlements in the M.J.
Farms and Agri-South lawsuits. In their fifth issue, the Wagners assert that
prejudgment interest should be tolled for the following time periods: (1) the period
during which trial court proceedings were “stayed” to permit Exxon to seek
mandamus regarding the trial court’s decision to compel certain discovery (see In
re Exxon Mobil Corp., 389 S.W.3d at 578); and (2) for “the duration of Exxon’s
premature appeal” (see Exxon Mobil Corp., 2020 WL 7214159, at *1).
In Texas, an award of prejudgment interest arises from two legal sources:
(1) general principles of equity, and (2) an enabling statute. Johnson & Higgins of
Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 528 (Tex. 1998). Statutory
provisions for prejudgment interest apply only to cases involving claims for
wrongful death, personal injury, property damage, and condemnation. Trevino v.
City of Pearland, 531 S.W.3d 290, 297 (Tex. App.—Houston [14th Dist.] 2017, no
pet.). Because Exxon’s claims do not fall within an enabling statute, equitable
principles govern the trial court’s award of prejudgment interest. See id.When no statute controls, the decision to award prejudgment interest falls
within the trial court’s discretion. Id. at 297-98. The trial court abuses its
discretion when it fails to analyze or apply the law correctly. Hand & Wrist Ctr. of
Houston, P.A. v. Republic Servs., Inc., 401 S.W.3d 712, 717 (Tex. App.—Houston
[14th Dist.] 2013, no pet.).
“Prejudgment interest is awarded to fully compensate the injured party, not
to punish the defendant.” Brainard v. Trinity Universal Ins. Co., 216 S.W.3d 809,
812 (Tex. 2006). “It is compensation allowed by law as additional damages for the
lost use of money due as damages during the lapse of time between the accrual of
the claim and the date of judgment.” Id.We apply these principles to the Wagners’ two tolling arguments.
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1. The Mandamus Proceeding
Referencing the parties’ Rule 11 agreement, the Wagners assert it would be
inequitable to permit Exxon to recoup interest for the period of time when trial
court proceedings were stayed at Exxon’s request while it sought mandamus
review of the trial court’s decision to compel production of privileged documents.
In relevant part, this Rule 11 agreement states that the parties “agree to abate all
pretrial deadlines until the mandamus is finally resolved, at which time [the
parties] will submit an amended agreed docket control order[.]”
But the cases the Wagners cite do not support the conclusion that this Rule
11 agreement required tolling prejudgment interest. See Johnson & Higgins of
Tex., Inc., 962 S.W.2d at 531; Ellis v. City of Dallas, 111 S.W.3d 161, 167-68
(Tex. App.—Eastland 2003, no pet.).
In Johnson & Higgins of Texas, Inc., the Supreme Court of Texas stated that
“[t]he purpose of a standstill agreement is normally to maintain the status quo and
temporarily suspend or stop all aspects of a suit. In most circumstances, this would
operate to toll the accrual of prejudgment interest while the agreement is in effect.”
962 S.W.2d at 531. But the court concluded that the agreement at issue did not toll
prejudgment interest, reasoning that the agreement had a “narrow” application that
“applie[d] only to limitations, laches, and other defenses” and “expressly reserved”
the plaintiff’s other rights. Id. at 531-32. Continuing on, the court stated:
The [parties’] agreement was silent with regard to prejudgment
interest. The parties easily could have included a provision that
prejudgment interest would abate during the specified standstill time
period. Absent such provision, this court cannot imply one.
Id. at 531 n.12; see also Ellis, 111 S.W.3d at 167-68 (holding that the trial court
did not abuse its discretion in tolling prejudgment interest for a period of time that
certain claims were dismissed without prejudice pursuant to the parties’
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agreement).
As in Johnson & Higgins of Texas, Inc., the parties’ Rule 11 agreement had
a narrow application that applied only to “pretrial deadlines.” The Rule 11
agreement is silent with respect to prejudgment interest and, absent such a
provision, we will not imply one. See Johnson & Higgins of Tex., Inc., 962
S.W.2d at 531 & n.12. Therefore, the parties’ Rule 11 agreement does not show
that the trial court’s failure to toll prejudgment interest during the pendency of the
mandamus proceeding constitutes an abuse of discretion.
2. The Premature Appeal
The Wagners also contend that prejudgment interest should be tolled to
exclude the time period during which Exxon’s “premature appeal” was pending.
See Exxon Mobil Corp., 2020 WL 7214159, at *1-2 (dismissing Exxon’s earlier
appeal for lack of subject matter jurisdiction, this court concluded that the trial
court’s judgment was not final).
The Wagners do not cite any cases holding that a trial court abuses its
discretion when it awards prejudgment interest for a period of time when an
ultimately dismissed appeal was pending. Without such authority, we cannot
conclude that the trial court’s failure to toll prejudgment interest here constitutes an
abuse of discretion. See Trevino, 531 S.W.3d at 297; Hand & Wrist Ctr. of
Houston, P.A., 401 S.W.3d at 717.
We overrule the Wagners’ fifth issue.
II. Exxon’s Issues
Raising two issues in its cross-appeal, Exxon contends: (1) the trial court
erred by disregarding the jury’s finding with respect to the M.J. Farms settlement;
and (2) the Wagners forfeited the right to challenge the M.J. Farms settlement
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amount. Because we sustain Exxon’s first issue, we need not reach its second.
As discussed above, in its verdict the jury found that the M.J. Farms
settlement was “made in good faith and reasonable and prudent under the
circumstances.” Exxon sought judgment on the verdict and asked the trial court to
award it the full amount paid for the M.J. Farms settlement: $57.5 million. The
trial court granted in part the Wagners’ JNOV motion, disregarded the jury’s
finding regarding the M.J. Farms settlement, and determined that $14.11 million
“should be considered applicable to the indemnified claims.” The trial court
signed a final judgment on December 23, 2020, and awarded Exxon $14.11 million
for the M.J. Farms settlement.
We review the propriety of a trial court’s grant of JNOV under a legal
sufficiency standard, which we outlined above in Section I.A.1.a. But essentially,
“[t]he final test for legal sufficiency must always be whether the evidence at trial
would enable reasonable and fair-minded people to reach the verdict under
review.” Adam v. Marcos, 620 S.W.3d 488, 499 (Tex. App.—Houston [14th Dist.]
2021, pet. denied). We must affirm the directed verdict if the record establishes
any ground that entitles the movant to judgment as a matter of law, even if it was
not raised in the JNOV motion. Elloway v. Pate, 238 S.W.3d 882, 889 (Tex.
App.—Houston [14th Dist.] 2007, no pet.).
Here, legally sufficient evidence supports the jury’s finding that the M.J.
Farms settlement was “made in good faith and reasonable and prudent under the
circumstances.” We set out the relevant evidence above in Section I.A.1.b. This
recitation details the factors relevant to the M.J. Farms litigation, including the
parties and their counsel, pre-trial and trial proceedings, the evidence, expert
testimony, damage models, settlement discussions, and the parties’ final settlement
agreement. In sum, the jury repeatedly heard evidence that Exxon paid $57.5
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million to settle the M.J. Farms litigation. Exxon provided evidence to support the
amount it paid and, in response, the Wagners put on evidence to show that the
amount paid for the settlement was not reasonable. Viewing this evidence in the
light most favorable to the challenged finding, we conclude that it is sufficient to
support the challenged finding. See City of Keller, 168 S.W.3d at 810; Adam, 620
S.W.3d at 499.
The Wagners did not raise any grounds in their JNOV motion that warrant
disregarding the jury’s finding with respect to the M.J. Farms settlement. Aside
from challenging the sufficiency of the evidence, the Wagners also argued that the
jury’s finding should be disregarded because (1) Exxon failed to allocate the M.J.
Farms settlement between indemnified and non-indemnified benefits; (2) res
judicata bars Exxon from seeking recovery for the M.J. Farms settlement; and
(3) Exxon damaged the Wagners’ subrogation rights with respect to any claims
they had against Tensas Delta.
Our analyses above reject the Wagners’ arguments premised on allocation
and res judicata. We briefly address the Wagners’ contention regarding
subrogation.
In the M.J. Farms final settlement agreement, Exxon purchased plaintiff
M.J. Farms’ claims against Tensas Delta and subsequently released those claims.
In their JNOV motion, the Wagners argued that they would have been subrogated
to these claims that Exxon released. Therefore, the Wagners argued, they “are
excused from indemnifying Exxon for the M.J. Farms settlement.”
But the cases the Wagners cited to support this contention analyze the issue
in the context of insurance contracts that expressly provided for subrogation. See
Mendez v. Allstate Prop. & Cas. Ins. Co., 231 S.W.3d 581, 584-85 (Tex. App.—
Dallas 2007, no pet.) (parties’ arguments premised on provision in insurance
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contract that addressed subrogation); Found. Reserve Ins. Co. v. Cody, 458 S.W.2d
214, 216 (Tex. Civ. App.—Dallas 1970, no writ) (“we conclude that the contract of
insurance involved in this litigation, and upon which appellee must rely,
specifically affords the right of subrogation”). Unlike these cases, the PSA and the
Assignment do not contain any provisions addressing subrogation.
Aside from contractual subrogation, Texas courts also recognize the doctrine
of equitable subrogation. See Frymire Eng’g Co. ex rel. Liberty Mut. Ins. Co. v.
Jomar Int’l, Ltd., 259 S.W.3d 140, 142 (Tex. 2008). “[E]quitable subrogation
applies ‘in every instance in which one person, not acting voluntarily, has paid a
debt for which another was primarily liable and which in equity should have been
paid by the latter.’” Id. (quoting Mid-Continent Ins. Co. v. Liberty Mut. Ins. Co.,
236 S.W.3d 765, 774 (Tex. 2007)). Thus, the party seeking equitable subrogation
“must show it involuntarily paid a debt primarily owed by another in a situation
that favors equitable relief.” Id.The Wagners do not identify any place in the record that makes this
showing. Likewise, our review of the record does not reveal a situation warranting
the application of equitable subrogation. Accordingly, this ground does not
support the trial court’s partial grant of the Wagners’ JNOV motion.
Our review of the record does not establish any other grounds that would
entitle the Wagners to judgment as a matter of law. See Elloway, 238 S.W.3d at
889. Therefore, we sustain Exxon’s first issue and conclude the trial court erred by
granting in part the Wagners’ JNOV motion and awarding only $14.11 million for
the M.J. Farms settlement. Because of this disposition, we need not reach Exxon’s
second issue.
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CONCLUSION
In their appeal, the Wagners raised five issues challenging (1) the viability of
Exxon’s indemnity claims and the evidence offered to support them; (2) this
court’s prior decision in a pretrial mandamus proceeding; and (3) the prejudgment
interest awarded in the trial court’s final judgment. For the reasons above, we
overrule these issues.
Exxon raised two issues in its cross-appeal challenging the trial court’s
partial grant of the Wagners’ JNOV motion. We conclude that legally sufficient
evidence supports the jury’s finding with regard to the M.J. Farms settlement and,
accordingly, the trial court erred when it awarded Exxon only $14.11 million for
this settlement. We reverse the trial court’s judgment, reinstate the jury’s verdict,
and render the following judgment in accordance with that verdict:
Exxon is entitled to recover from Bryan C. Wagner and Duer Wagner
III, jointly and severally, the following amounts:
1. Actual damages in the amount of $71,611,869.52.
2. Prejudgment interest through December 22, 2020 in the amount
of $20,765,405.00.
3. Court costs incurred by Exxon.
4. Post-judgment interest on the preceding amounts at the rate of
five percent (5%), compounded annually, from December 23,
2020 until all amounts are paid in full.
/s/ Meagan Hassan
Justice
Panel consists of Chief Justice Christopher and Justices Jewell and Hassan.
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