Wagner v. Exxon Mobil Corporation

654 S.W.3d 613

Bryan C. WAGNER and Duer Wagner III, Appellants

v.E XXON MOBIL CORPORATION, Appellee

NO. 14-21-00122-CV

Court of Appeals of Texas, Houston (14th Dist.).

Opinion filed November 8, 2022

Marshall M. Searcy Jr., David E. Keltner, Scott Ryan Wiehle, Whitney Beckworth, Derek Wesley Anderson, William L. Kirkman, Fort Worth, for Appellant.

David J. Beck, David M. Gunn, Erin Hilary Huber, Joseph G. Thompson III, Reagan M. Brown, Seth Isgur, Houston, for Appellee.

Panel consists of Chief Justice Christopher and Justices Jewell and Hassan.

SUBSTITUTE OPINION

Meagan Hassan, Justice

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 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 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 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 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:

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...