As the coronavirus continues to adversely impact so many, the court systems across the country are adapting in kind, with many of them suspending jury trials and moving to reduced-contact scenarios for other matters. Below is a digest of the most up-to-date information regarding courts in Texas as of the time of this posting. Please check back often as this information may be updated.

  1. Eastern District of Texas: Attorneys and parties were ordered to communicate if court proceedings could cause someone to come into contact with an individual exposed to or infected with the virus.
  2. Northern District of Texas: All courthouses are open. However, civil and criminal bench and jury trials from March 13th to May 1st will be continued and rescheduled for a later date.
  3. Southern District of Texas: All jury trials are suspended until May 1st. The federal courthouse in Houston and Galveston will remain open for other matters, including matters scheduled for hearing in bankruptcy court. Docketing and most other tasks will be handled remotely. Bankruptcy judges have agreed to conduct most hearings by telephone or video conferencing.
  4. Western District of Texas: All civil and criminal bench and jury trial cases will be continued and rescheduled from now until May 1st.
  5. The Texas Supreme Court: Issued guidance calling on courts to suspend proceedings or schedule them to avoid gatherings of large groups of people until at least April 1st, including jury trials and large docket calls. It is encouraging courts to implement remote appearances by phone or video for all proceedings that may occur remotely.
  6. S. Court of Appeals for the Fifth Circuit: Plans to hold pending oral arguments as scheduled as of this posting.
  7. Harris County Civil District Court: All civil jury trials are suspended through April 30th. Effective March 18th, the Harris County District Clerk’s office will suspend in-person services to the public. The county courthouses remain open. Parties with cases in district or county courts should contact their courts regarding their respective dockets. The courts will review this situation regarding plans on an ongoing basis. The Harris County District Attorney’s office is closed. Effective March 23rd, the Criminal Justice Center, the Juvenile Center and the Civil Courthouse will be open from 7 a.m. to 6 p.m. Monday through Thursday.
  8. Bexar County: All jury trials are suspended jury trials from March 16th to April 16th. Dismissal Docket for the weeks of March 24th, April 7th and April 14th have been cancelled. Only the Reinstatement Docket will be heard on those dates in the 408th District Court.
  9. Brazoria County: Jury duty is cancelled through end of April. The courthouse and all annexes will remain open, with reduced staff.
  10. Cameron County: Jury duty is cancelled. Further court information still pending.
  11. Collin County District Courts: All nonessential court matters, in-person hearings, and trials from March 16th to April 1st are rescheduled. Essential matters, including temporary restraining orders, temporary injunctions and any suits or hearings with jurisdictional deadlines, are not affected as of the time of this posting. Attorneys must contact each court regarding each setting. No uncontested matters will be heard. The courts are developing a plan for electronic appearances. All walk-in traffic at county buildings is suspended.
  12. Dallas County: No civil or criminal jury trials held through May 8th. The District Clerk’s office is closed to in person services. Dallas County Tax Offices and Passport Offices are closed to in-person services.
  13. Fort Bend County: The District Clerk’s office is closed to the public until April 3rd. Jury service has been suspended for ALL district, county and justice of the peace courts through May 8th.
    • 268th District Court – All dockets have been cancelled through March 20th. Civil cases: All parties should contact the Court to reschedule all hearings and trials.
    • 328th, 387th and 505th – Family Courts. If a party requests a reset between now and April 3rd, that reset will be granted. All other cases will be heard as scheduled subject to the Court’s discretion. Hearing dates and reset dates will be given for dates after April 13th.
  14. Jefferson County: Each court shall exercise its own discretion on a case-by-case basis regarding hearings and the calling of bench trials and jury trials.
  15. Montgomery County: As of the time of this posting, all court operations, including jury service, will remain open and normal with all services available. The District Clerk’s office will be operating with reduced staff. The office will be open, but the public is strongly urged to call instead of coming in person.
    • 284th District Court – All jury trials for the month of March and April are cancelled. Courtroom activity will be limited to bench trials, temporary injunction hearings, minor settlements, Robinson Challenges, and structured settlements. Reset matters by calling at least 3 days in advance. All other matters will be moved to and set on a submission docket.
  16. Nueces County: All jury trials canceled. All other court business will continue as normal. Courts are basically adjourned unless there is an urgent matter. Remote proceedings will begin.
  17. Tarrant County: Jury trials are suspended until April 20th. This affects criminal district courts, county criminal courts, county courts at law, civil, family, probate courts and justice of the peace courts.
  18. Travis County: Civil and family courts are suspending non-emergency hearings until April 13th, impacting all jury trials, bench trials, and non-essential hearings.

Kean Miller obtained the dismissal of a suit filed against its client, a foreign manufacturer of an industrial product who was sued by the Texas purchaser of the product, because the Texas court did not have personal jurisdiction over the manufacturer. A Texas court of appeals recently affirmed this dismissal.

After the foreign manufacturer filed its exception to the trial court’s jurisdiction, the parties conducted discovery regarding the manufacturer’s contacts with Texas, stipulated certain facts, and filed affidavit regarding these contacts. The trial court dismissed the case for lack of personal jurisdiction over the manufacturer. The plaintiff appealed.

In order for a Texas court to have jurisdiction over a party before it, the party must have had sufficient contacts that were purposefully directed at the state, seeking some benefit, advantage, or profit. A court’s analysis of personal jurisdiction is a multi-step process. In considering whether the Texas court had jurisdiction over the manufacturer, the appeals court focused on a number of facts.

  • Foreign location.   The manufacturer was a foreign company with its principal place of business in that country.
  • Title and risk of loss. Although the three contracts between manufacturer and the purchaser required the manufacturer to pay to insure and ship the product to the Port of Houston, the terms of the contracts (“CIF Houston Port, TX, USA”) provided that that title to the product and the risk of loss transferred to the purchaser when the product was loaded on the ship in the foreign country.
  • Foreign law and arbitration.   The contracts selected the law of the manufacturer’s country to govern their interpretation and application, and specified that disputes would be arbitrated in that country.
  • Minimal sales in Texas. The appeals court found that these contractual terms were not an effort to avoid Texas jurisdiction for two reasons: first, the manufacturer did not have a sales agent in Texas; second, while the manufacturer had executed 100 contracts with Texas residents for the sale of $51 million of product over a five–year period, these sales accounted for only 2.27% of its sales inthose years. The court observed that Texas courts have found there was no jurisdiction over a company with “many more goods flowing into and out of” the state than in this case.
  • No other purposeful activities. Nor was there any of the other “additional conduct” required to convert a manufacturer’s act of placing a product into the stream of commerce into an act that was purposefully directed at the state: the manufacturer had not designed the product specifically for marketing in Texas, did not advertise in Texas, and had not established channel to provide regular advice to customers in Texas.

The appellate court’s opinion demonstrates that Texas courts look critically at the facts of each case to determine whether a court has jurisdiction over a foreign company, and that significant discovery will probably be required before an exception to jurisdiction can be submitted to the trial court.

At the time In re XTO Energy (In re XTO Energy, Inc., 2018 WL 2246216 (Tex. App.-Houston [1st Dist.]) was decided by the 1st Court of Appeal in May of 2018, Texas Appeals Courts had already issued a slew of cases in preceding years that looked very favorably upon defendant forum non conveniens motions when the incident, most of the witnesses, and evidence were located outside the State of Texas.   Defendants had obtained mandamus relief in numerous decisions leading up to In re XTO Energy: In re Mantle Oil & Gas (In re Mantle Oil & Gas, LLC, 426 S.W.3d 182, 187 (Tex. App.-Houston [1st Dist.] 2012, orig. proceeding), In re BPZ Resources Inc. (In re BPZ Res., Inc., 359 S.W.3d 866, 875 (Tex. App.-Houston [14th Dist.] 2012 orig. proceeding), and In re Transco (In re Transcontinental Gas Pipeline Co., LLC, 542 S.W.3d 703 (Tex. App.-Houston [14th Dist.], 2017).

The courts, in all those matters, found that the six forum non conveniens factors overwhelmingly gravitated in favor of a dismissal motion under Texas Rule of Civil Practice 71.051 (b), despite the trial court’s denial of the motion.  Because the accidents took place outside the state of Texas, because most witnesses, evidence and investigative agencies were located outside of the state of Texas, and given the availability of an appropriate alternate forum, it was too much for the appeals court to overlook, and reversed the trial court’s ruling in each of those cases.

In contrast, a recent decision by the 14th Court of Appeal, has taken predominately similar facts and affirmed the trial court’s denial of such a motion, keeping the matter in Harris County.  A review of the case indicates the existence of factors that would normally tilt the forum non-convenience decision towards dismissal.

In In re Friede & Goldman, LLC (In re Friede & Goldman, LLC, 2019 WL 2041071 (Tex. App.-Houston [14th Dist.], forty-four plaintiffs filed suit in Harris County based on an accident arising out of an off-shore oil well in the Bay of Campeche, which are territorial waters of Mexico.  One worker died, and numerous other workers, most of which were citizens of Mexico, were injured.  The worker plaintiffs were all working for Mexico-based employers at the time of the incident, and all Mexico-based health care providers treated their injuries.  At the time of the incident, the vessel was contracted to Mexico’s National Oil Company.  Defendants moved to dismiss the suit on the grounds of forum non conveniens, but the motion was denied by the trial court.

The 14th Court of Appeal examined the six forum non conveniens factors.  An alternate court (in Mexico) offered an available forum, and the laws of Mexico offered an adequate remedy at law. The evidence further established most of the relevant documents in evidence, and most of the witnesses to the incident, were located in Mexico, although the vessel in issue had been constructed in China and there was some conflicting evidence that the ship manager, operator and technical manager of the vessel was a German entity.  The matter was being investigated in Mexico, and in accordance with Mexican regulations.

The Court further found that no other litigation was pending in Texas so there was no duplication of litigation to weigh in favor of keeping the case in Harris County. Finally, with regard to whether Mexican courts could exercise jurisdiction over the defendants, the Court found in favor of dismissal as well, as all defendants stipulated to the jurisdiction of the Mexican court system.

Seemingly de-emphasizing the above facts, the Court focused on the substantial injustice factor and, without much analysis either way, provided great deference to the trial court’s determination that this factor weighed in favor of neither dismissal nor maintaining the action in Harris County. Finally, the Court observed that neither the relator nor the plaintiffs put on any evidence of “the extent to which injuries resulted from acts or omissions that occurred in Texas”, and as a result, the Court could make no determination with regard to that factor.

Weighing all the factors, the Court surprisingly denied the writ of mandamus, affirming the trial court’s decision.

It is unclear whether this case is an aberration, or a shift in precedent as to what constitutes “inconvenience” for the purpose of the forum non conveniens analysis.  It is fair to say that there is no longer a de-facto presumption that industrial accidents that occur outside of the state of Texas, involving foreign entities, with non-Texas plaintiffs and non-Texas evidence and witnesses, will summarily be dismissed under Texas Rule of Civil Practice 75.051.

In an attempt to mitigate risk, most commercial contracts contain a provision limiting monetary recovery. The most common provision is a waiver of consequential damages. Despite the parties’ best intentions, whether a category of damages are considered direct damages or consequential damages is often determined on a case-by-case basis.  Texas courts have provided the following general framework.

Direct damages are “the necessary and usual result of the defendant’s wrongful act; they flow naturally and necessarily from the wrong.”[1] Direct damages are intended to compensate the plaintiff for the loss incurred that was foreseeable by the defendant from his wrongful act.  Consequential damages, on the other hand, may “result naturally, but not necessarily, from the defendant’s wrongful acts.”[2]  Consequential damages must be foreseeable and must trace directly back to the wrongful act in order to be recoverable.

While a seemingly simple test, Texas courts have had varying outcomes depending the specific facts and circumstances. In Powell Electric Systems, Inc. v. Hewlett Packard Co.,[3] Powell and Hewlett Packard contracted for the installation, testing, and repair of a new transformer. During installation, Powell negligently connected a new transformer resulting in damages to Hewlett’s facilities. The court analyzed each of the damage items submitted by Hewlett and held that those specific items contemplated at the time of contract, such as repair costs, increased labor, facilities, and costs of materials, were all considered direct damages. However, the court ruled that a temporary transformer used in place of the defective transformer was not contemplated in the contract and, therefore, considered a consequential damage – waived under the contract’s damage limitation provisions.

In Cherokee Cty. Cogeneration Partners, L.P. v. Dynegy Mktg. & Trade,[4] the court held that the lost profits on the contract itself were direct damages, but the lost profits on other contracts for the sale of electricity produced by the facility were consequential damages.  The court opined that the parties’ contract contemplated the purchaser’s ability to profit from resales of the purchased gas as a higher price, so that those lost profits were considered direct damages.

In Continental Holdings, Ltd. v. Leahy,[5] the parties’ dispute centered on the wrongful termination of a contract for a vessel. The parties disagreed on whether Continental was entitled to the unrealized charter hire Western initially contracted. The court held that “lost profits damages may take the form of ‘direct’ damages or the form of ‘consequential’ damages.”[6] Those profits lost on the breached contract itself, such as the amount the non-breaching party would have received, less expenses saved, are considered direct damages. However, lost profits on other contracts or relationships resulting from the breach are indirect damages.

Thus, as we have seen through this sample of cases, while the Texas courts generally respect the parties’ contractual language classifying certain damages as direct or consequential, the courts will closely examine the circumstances giving rise to the claim. Depending on whether you are the breaching party or non-breaching party, we can assist you in determining what damages are recoverable.


[1] Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 816 (Tex. 1997).

[2] Id.

[3] 356 S.W.3d 113, 117 (Tex. App.—Houston [1st Dist.] 2011, no pet. h.).

[4] 305 S.W.3d 309, 315 (Tex.App. —Houston [14th Dist.] 2009, no pet. h.)

[5] 132 S.W. 3d 471, 473 (Tex. App.—Eastland 2003, no pet. h.).

[6] Id. at 475.

Commercial contracts involve a certain amount of risk allocation between the parties. Indemnity provisions are among the most aggressive risk shifting provisions because they can require a party to assume liability for the mistakes of another.  As a result, Texas courts require indemnity provisions to comply with the Fair Notice Doctrine in order to be enforceable in Texas.[1]  The Fair Notice Doctrine requires that indemnity provisions (1) be conspicuous and (2) expressly state the scope of the risk allocated in order to be enforceable.

Conspicuous:  This prong of the test is generally met by changing the visual appearance of the text that creates the obligations by using bolding, underlying, italics, all caps or other visual tools to draw attention to the indemnity provision “to attract the attention of a reasonable person when he looks at it.”[2]  Courts have also found that evidence of the defending party’s actual notice of the indemnity provision will satisfy this requirement, such as when the defending party made modifications of the indemnity provision in prior drafts of the contract.

Scope of the Risk:  The enforcing party must also show that the provision expressly states the scope of the risk shifted.  The court’s concern is that vague and/or broad language should not be used to seek indemnity for situations that were never envisioned by one or both parties.  Instead, “a party seeking indemnity from the consequences of that party’s own negligence must expressly state the intended scope within the four corners of the contract.”[3]  Indemnity provisions must expressly state what type of liability (e.g. negligence) that is covered and the scope of coverage.  For instance, will there be indemnity for a party’s sole negligence (100% fault) or is it limited to cases in which both parties share the fault (i.e. jointly or concurrently negligence)?  If the clause fails to expressly answer questions like these then it may not be enforceable in Texas.

Texas has developed the Fair Notice Doctrine to protect unsuspecting parties from taking on more liability than they anticipated. However, the Fair Notice Doctrine is not shared by every state. Therefore, contracts that are prepared outside of Texas sometimes fail to comply with the doctrine and are later found unenforceable in Texas.  Be sure to have your commercial contracts reviewed by a local attorney to ensure that you will be able to achieve the benefit of all you bargain for in your contracts.


[1] Dresser Ind., Inc. v. Page Petroleum, Inc., 853 S.W.2d 505, 508 (Tex. 1993).

[2] Dresser Ind., Inc. v. Page Petroleum, Inc., 853 S.W.2d at (quoting Ling & Co. v. Trinity Sav. & Loan Ass’n, 482 S.W.2d 841, 843 (Tex. 1972).

[3] Enserch Corp. v. Parker, 794 S.W.2d 2, 8 (Tex.1990); Ethyl Corp. v. Daniel Const. Co., 725 S.W.2d 705, 707-08 (Tex.1987).

By Jessica C. Engler, CIPP/US [1]

In the wake of sweeping privacy law reforms both in and outside of the United States, Texas has become the latest state of many to makes changes to its existing data privacy laws. This summer, Texas Governor Greg Abbott signed into law HB 4390, christened the Texas Privacy Protection Act, which amendments the Texas Identity Theft Enforcement and Protection Act (“TITEPA”), Tex. Bus. & Com. Code § 521.002, 521.053.[2] Though significantly rewritten since its introduction, HB 4390 amends the data breach notification statute and creates a privacy council to advise the Texas legislature regarding potential future privacy legislation.

New Breach Notification Requirements

HB 4390’s amendments of the data breach notification requirements are common to those found elsewhere in the United States, bringing Texas more in-line with other states’ requirements. These changes will go into effect on January 1, 2020.

First, HB 4390 adds a deadline for notification of the breach to individuals affected by the breach. Currently, the TITEPA requires that notifications be made “as quickly as possible.” The amendments will now require that the notification be made “without unreasonable delay” and in any case no later than 60 days from the date of discovery of the breach.

Second, once in effect in 2020, the TITEPA will require that notification of the breach also be made to the Attorney General of Texas if the breach affected 250 or more Texas residents. This notification must be made within the 60 day period for reporting to affected individuals, and must contain the following information:

  1. a detailed description of the nature and circumstances of the breach, or the use of sensitive personal information acquired as a result of the breach;
  2. the number of Texas residents affected by the breach at the time of notification;
  3. any measures taken by the reporting party as a result of the breach;
  4. any measure that the reporting party intends to take regarding the breach after notification; and
  5. information as to whether law enforcement is involved in investigation of the breach.

Both of these updates are similar to those found in other states. At least 17 other states currently require notification within a specific time frame, ranging from 30 to 90 days from discovery of the breach. Several states—including the neighboring states of Louisiana and New Mexico—similarly require notification to state authorities when notification is made to a threshold number of state residents.


As originally filed in the beginning of the 86th Texas Legislative Session, HB 4390 was a comprehensive consumer privacy bill. During the session, it was amended and diluted multiple times. Rather than pass comprehensive privacy legislation, the legislature passed the amended HB 4390 including the creation of the Texas Privacy Protection Advisory Council (“TPPAC”) to study data privacy laws in advance of the next legislative session. As a result of the study, the TPPAC will make recommendations to the Texas legislature on specific statutory changes regarding data privacy, including necessary further amendments to the TITEPA or to the Texas Penal Code.

The Council will be composed of 15 Texas residents who are appointed by the Speaker of the House, Lieutenant Governor, and Governor no later than November 1, 2019. Of those 15 members:

  • Three members will be members of the Texas House of Representatives;
  • Three members will be Texas senators;
  • Nine members will be industry representatives from several industries, including the medical profession, technology, internet, retail and electronic transactions, consumer banking, telecommunications, consumer data analytics, advertising, internet service providers, social media platforms, cloud data storage, virtual private networks, or retail electric; and
  • Two members comprising either: (i) a representative of a nonprofit organization that studies or evaluates data privacy laws from a consumer perspective; or (ii) a professor who teaches at a Texas law school or other higher education institution who has been published on the subject of data privacy.

The Council will meet on a regular basis until it reports its findings and makes recommendations to the Texas legislature no later than September 1, 2020. It is anticipated that the Council’s recommendations will form the basis for comprehensive consumer privacy legislation when the Texas Legislature reconvenes in January 2021.


[1] Special thanks to Dara Mouhot, Tulane University Law School Class of 2021, for her assistance with this article.

[2] House Bill 4390 is available at

Many people complete their estate planning documents, place them in a safe/drawer, and never think about them again. It’s an understandable pattern, but estate planning requires maintenance just like your house, your car, and the rest of your valuable assets.  So when should you review and update your will or trust?

In a perfect world, people would review their estate planning documents annually but a more attainable goal is to review your documents every 3-5 years (regardless of life events), or earlier if there is a significant change in your circumstances.  The most apparent reasons to revisit your estate plan is when you change your mind about the gifts being made, the people receiving gifts, or the people you appointed to make decisions (e.g. power of attorney or trustee).  Some less obvious life changes that may warrant a review of your estate planning include:

    1. Marriage, remarriage or divorce: Marriage changes just about everything in your life. Your estate plan is no exception. Whether your marriage is beginning or ending, you should review your documents to ensure your existing plan still meets your goals.
    2. Birth or adoption: Like marriage, kids change our lives and often change our ideas about what is important. Even documents that plan forward for the possibility of future kids should be reviewed to confirm that a new addition to the family does not modify your ideas or plans.
    3. Empty nest: As our children grow and mature our ideas about what gifts we want to leave them or how we want to leave those gifts often change.
    4. Change in tax laws:Tax laws change over time. An estate plan that had proper tax planning in 2009 may be unduly complex and burdensome under 2019’s higher exemption amount, and may even result in worse tax treatment than if you had no tax planning.
    5. Living in a new state: On the bright side, most wills/trusts that are properly executed in one state will be honored when you move to a new state. Unfortunately, out-of-state documents rarely capitalize on the planning benefits available in your new state, and may result in unnecessary costs and delays after your passing. Worse still, private institutions in the new state may hesitate or even refuse to honor your financial power of attorney or medical power of attorney because they look different than what they are used to seeing.
    6. Buying land: Land ownership can have a major impact on your plan. A plan that is properly tailored when you only owned your home in The Woodlands may prove woefully inadequate after you purchase an out-of state vacation house.
    7. Significant changes in the value or complexity of your assets: Buying, selling or changing the structure of your business, making significant changes in your investment assets, and/or increased or decreased risk of legal liabilities are all issues that should be contemplated in your estate plan. Consequently, significant changes in those variables may warrant changes to your plan.

If your life has undergone a significant change since the last time you reviewed your estate planning documents then it’s time to dust them off and look them over. If your review raises questions about how your plan works or how one of these issues might impact your plan, then you should get in touch with your estate planning attorney to make sure your plan is properly suited to your life as it exists today.

Despite most people believing it’s important to have an estate plan, only about 40% of people actually get one.[1]  There are a number of reasons that someone may not have gotten an estate plan but the idea that you do not need one because you do not have kids should not be one of those reasons.  In fact, it could be argued that not having kids actually increases your need for a well-crafted estate plan.  If you do not chose who receives your property and who is in charge of managing your property, then the state of Texas will decide for you.  Without kids, Texas’ default rules often produce results that are dramatically different than you might think.

Decide Who Makes Decisions.

A complete estate plan should include powers of attorney allowing you to designate who will make financial and medical decisions while you are alive but incapable of making decisions for yourself (i.e. incapacitated).  Using a power of attorney for this purpose allows you to pick who will be making those decisions on your behalf, and allows your chosen agent to make those decisions without the need to open a guardianship proceeding with the court.  That is a two-fold benefit.  First, managing your affairs through a guardianship is costly and slow.  Second, you will have no control over who the court appoints as your guardian, and it may prove to be the last person you would have chosen.  Similarly, your will or trust can be used to decide who will control the process of distributing your property after your passing.

Settle who gets the property and how it is used.

Every state has default rules that determine where property goes if someone dies without a valid plan distributing their property. In many cases your spouse will receive all or the bulk of your property but not always.  In certain cases, a property interest will bypass your spouse and end up in the hands of a parent, sibling, niece or nephew that you had no plan to benefit.  By completing your estate plan complete you can take control of who gets your property and how it is used.  For instance, you may direct that the funds be held in trust to care for your parents, if they survive you, and then pass to your chosen family members or charities.  Texas also allows you to create a trust that is used to care for your pets during their life and then leave the funds to a person or charity after the pet passes.  If you do leave a gift to a charity your plan can include directions (or in some cases strict conditions) regarding how the funds may or may not be used.

With or without kids there are decisions to be made about your property when you are incapacitated or dead. A well-crafted estate plan can make sure that your wishes and desires are carried out by someone that you trust instead of a court appointee applying Texas’ default rules.



The drafters of an Assignment of Overriding Royalty Interest in Burlington Resources Oil & Gas Company, L. P. v. Texas Crude Energy, LLC did not “say what they meant to say” and received an admonition from the Texas Supreme Court. In Burlington, the Court determined a royalty interest owned by Texas Crude was subject to post-production costs. Burlington reinforces the holding in Heritage Resources, Inc. v. NationsBank, that a royalty is valued where the agreement states it will be valued.

First, what are post-production costs and what effect do they have on a royalty interest? Post-production costs are the costs of processing, compression, transportation, and other costs expended to prepare raw oil or gas for sale at a downstream location. Generally, royalty interests are subject to post-production costs, however, parties may modify this rule by agreement.

The point at which parties agree to value oil and gas production from a well is called the “valuation point.” The valuation point determines what costs are attributable to the royalty interest absent clear provisions stating otherwise. For example, if the royalty is valued at the well but the sale takes place after the product has been processed and transported, the product sold is generally of greater value than the product in which the royalty owner has an interest, and therefore, the sales price must be adjusted to properly calculate the royalty payment. A way to calculate the royalty payment of a valuation point at the well is to subtract the post-production costs from the market price.

Conversely, if the parties agree that the valuation point is at the point of sale, the royalty interest owner would generally not be responsible for post-production costs since those costs would have already been expended prior to the sale. Naturally, a royalty owner would want a valuation free of all costs and an operator would want to share as much of these costs as possible with a royalty owner.

In Burlington, the Court determined the royalty owner, Texas Crude, was subject to post-production costs because the Assignment stated the royalty interest was to be “delivered to Assignee into the pipelines,” which the Court decided created an “at the well” valuation point because, in theory, production from a well goes directly into a pipeline to be transported to a point for processing or sale.

The Assignment also contained a clause that stated the value of the royalty is “the amount realized from such sale of such production,” which Texas Crude argued created a royalty interest free of post-production costs. The Court agreed with Texas Crude that “in isolation,” an amount realized valuation creates a royalty interest free of post-production costs. However, that is not the case when accompanied by an “at the well” valuation point, as was determined in this case.  Therefore, the Court held that Texas Crude’s royalty interest was subject to post-production costs.

Pro-Tip from the Texas Supreme Court: If you find yourself drafting an oil and gas contract, agreement, or assignment in Texas, by this case, you have free reign and are encouraged to clearly state the agreement between the parties, especially the valuation point and which costs can be deducted from a royalty interest. Accordingly, in Burlington, the Court said what it meant to say about the Assignment:

But the parties could have saved considerable time, money, and heartache if their cryptic language had truly been “delivered … into the … receptacle [ ].” It could then have been re-written to say exactly what the parties intend, without resort to industry jargon, outdated legalese, or tenuous assumptions about how judges will interpret industry jargon or outdated legalese. If you can’t understand what your contract means without asking the lawyer who wrote it, you should not be surprised later if judges—who can’t just take your lawyer’s word for it—also have trouble understanding what it means.



The Texas Supreme Court has ruled that Chapter 95, a statute that protects property owners from personal injury suits by employees of contractors and subcontractors, applies to claims against property owners for the negligent hiring of the contractor or subcontractor.

In certain circumstances, Chapter 95 of the Texas Civil Practice and Remedies Code protects property owners from liability for personal injury to the employee of a contractor or subcontractor who constructs, repairs, renovates, or modifies an improvement to real property when the claims arise from the condition or use of that improvement. Tex Civ. Prac. & Rem. Code §§ 95.002 – .003.

In Cuevas v. Endeavor Energy Res., L.P., 531 S.W.3d 375, 378 (Tex.App.–Eastland 2017, pet. granted), an employee of an independent contractor who was hired by the property owner to drill a well was killed while preparing the rig for drilling operations. The employee’s family sued the property owner, asserting various claims, including the owner’s negligent hiring, training, supervision and retention of the contractor. Id. The trial court granted the owner’s motion for summary judgment under Chapter 95 on all of the plaintiffs’ claims. Id. The appellate court reversed on the claim of negligent hiring, holding that Chapter 95 applies to contemporaneous negligent acts of the property owner, which it defined as acts that occur on the premises at the time the claimant is injured. Id. at 382. The appellate court held that negligent supervision and retention were such contemporaneous acts, but negligent hiring presented a claim for acts that occurred prior to injury, and thus were not covered by Chapter 95. Id.

In Endeavor v. Cuevas, ___ S.W.3d ___, 2019 WL 1966625, *3 (Tex. May 3, 2019), the Texas Supreme Court explained that a claim for negligent hiring arises from, and is caused by, a combination of two separate negligent acts, the negligent hiring and the negligence that causes the injury. The “plain language” of Chapter 95

requires only that the claim arise from the use of an improvement to the property, not that the property owner’s negligence involve the use of the improvement, or that the use of the improvement be the only cause of the injury. When one of the negligent acts involves the contemporaneous use of an improvement to real property, the claim arises from that act, regardless of when the other negligent act occurred or whether it involved the use of an improvement.

Id. (emphasis in the original).   Since the plaintiff’s claim of negligent hiring depended, in part, on proof that the contemporaneous use an improvement caused his injury, the claim arose from the use of an improvement, and Chapter 95 applied. Summary judgment for the property owner was rendered.

For more information, please contact Judith Meyer.