THE TRIAL OF A PRIVATE ROYALTY LAWSUIT TO JUDGE AND JURY DEFENDANT PERSPECTIVE 2
| Jurisdiction | United States |
(Dec 2008)
THE TRIAL OF A PRIVATE ROYALTY LAWSUIT TO JUDGE AND JURY DEFENDANT PERSPECTIVE 2
Liskow & Lewis, PLC
Houston, Texas
Robert R. Theriot is a founding member of the Houston office of Liskow & Lewis, PLC. He heads the Houston office Litigation Team, and practices in the areas of energy and business litigation and energy transactions. Mr. Theriot handles matters before state and federal courts in Texas and Louisiana, and is also experienced in arbitration and alternative dispute resolution. His litigation experience includes a wide range of oil and gas, upstream, midstream, and downstream disputes, and various general commercial disputes. Because of his experience in these areas, he is often called upon by clients for advice and counsel in various areas of energy law transactions and business practices.
How to prepare your case for your three different audiences - the trial judge, the jury and the appellate court
The trial of a private royalty lawsuit inevitably involves a web of interconnected legal, factual, and evidentiary issues. The trial attorney anticipating a jury trial must nevertheless plan his case with his three different audiences in mind - the trial judge, the jury, and the appellate court.
I. The Three Audiences - Trial Judge, Jury, Appellate Court
Both royalty owner and lessee, typically plaintiff and defendant, respectively, will be trying their cases to three different audiences. In presenting his case, the plaintiff has the advantage inherent in being plaintiff - he is able to start the narrative that drives the case. Typically his story is more "compelling" - the story of the little guy being cheated by the big corporation. His theory of the case often lends itself better to simplification, connecting easy-to-understand points, in a straightforward narrative; whereas, the defense may depend on more complicated or opaque issues such lease interpretation, modern marketing dynamics, and royalty accounting.
The defendant, on the other hand, has one important advantage: it essentially has three "bites at the apple." The defendant can succeed with the trial judge by winning on dispositive or evidentiary motions, or obtaining advantageous jury instructions. The defendant can, of course, also succeed with the jury. Finally, even in the face of an adverse jury verdict, the defendant can win with a successful appeal on the legal issues, or even as to the sufficiency of plaintiff's evidence.
Both parties, therefore, must carefully consider each of the three audiences that will be hearing their case. Too often, trial attorneys deal with what is immediately in front of them. Early in the case, they focus on discovery and pre-trial issues. As trial approaches, they start to focus on the jury presentation. They might not focus on jury instructions until well into the trial. Too often, the appellate issues are not considered until after an adverse jury verdict. Instead, the trial attorney should consider each of these separate audiences from the start of the case and throughout to its conclusion.
A. Breakdown of Responsibilities - Who Will Decide What?
Superficially, the breakdown of responsibilities between judge, jury, and appeal court would seem obvious to most trial attorneys:
• Trial judge: admission of evidence, qualification of experts, motions in limine, control of discovery, pre-trial dispositive motions, jury instructions.
• Jury: questions of fact, witness credibility, quantification of damages.
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• Appellate court: legal issues.
In practice, however, this division of responsibility often breaks down in royalty suits. In particular, questions of "fact" and questions of "law" often get muddled. Ambiguous lease clauses get decided by the trial judge or appellate court as a "matter of law." Legal standards, such as the duty to market, get applied by the jury as "questions of fact." The trial attorney cannot always be certain how the different issues will be handled, but he should be aware of and plan for the different possibilities of the treatment of the issues.
The case of Exxon Mobil Corp. v. Alabama Dept. of Conservation and Natural Resources, 986 So.2d 1093 (Ala. 2007) illustrates the uncertainty of how certain issues might be treated as legal or factual issues. The case is, of course, famous (or infamous) for the large punitive judgment issued against Exxon by an Alabama jury. The State of Alabama sued seeking additional royalties under unique, state-form leases, asserting several different claims. The original jury awarded approximately $60 million in compensatory damages and $3.4 billion in punitive damages. On appeal, the Alabama Supreme Court reversed, finding prejudicial error in the admission of an internal attorney memorandum, in which an Exxon attorney ostensibly questioned the naiveté of State officials as to royalty issues. On retrial, a new jury awarded essentially the same amount of compensatory damages -- $63 million, but increased the punitive damages to almost $12 billion. On appeal, the Alabama Supreme Court affirmed most of the compensatory damages, but reversed the fraud finding and the award of punitive damages.
An interesting aspect of the Exxon case is how the Alabama Supreme Court dealt with the many different claims raised by the State. The principle claim (the one which received the most press coverage) involved marketing and treating deductions from gas royalties. The State also brought claims for "lost" gas, fuel gas, "payout" gas, cogeneration revenues, sulfur sales, and re-sale of injected diesel as "slop" oil. All of these claims, plus the overriding fraud claim, were submitted to the jury. The Supreme Court, however, essentially held that none of these claims should have been submitted to the jury. The court affirmed the jury verdict on the fuel gas, payout gas, deductions, and cogeneration claims - although it found that those claims should not have been submitted to the jury, but should have been decided based on the lease language and facts as a matter of law. The court reversed the jury verdict on lost gas, sulfur, injected diesel, as well as the fraud verdict, likewise finding that these issues should have been decided as a matter of law.
B. The Importance of Your Narrative
An elementary lesson for trial attorneys is the importance of one's...
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