August 2011 Headnotes

Dallas Bar Association

HEADNOTES

Focus Energy Law

August 2011 Volume 36 Number 8

Practical Tips From the Bench

Rock On!

The Federal Bar Association and the DBA Judiciary Committee hosted a one-hour CLE panel discussion titled, “Practical Tips for Practicing in the Northern District of Texas: Views From the Bench.” Panelists included (left to right) Hon. Sidney A. Fitzwater, Hon. Jane J. Boyle, Hon. Barbara J. Houser, Hon. Jeff Kaplan and Hon. Sam A. Lindsay.

Focus

Energy Law

Participation Agreements in the Shale Plays

by Arthur Wright

Recently, unconventional plays have dominated the industry news. These plays require technical expertise and are “cash hungry.” Some companies have acquired significant acreage but lack the necessary funds to develop it in time to hold it under oil and gas leases with near-term expiration dates. Other players have cash to invest but lack technical knowhow or the necessary acreage. Thus, companies are entering into joint development arrangements to participate in unconventional gas plays. One of the most common is a contractual relationship governing the joint exploration and development of specific assets or areas (a “Participation Agreement”).

Variants include “Joint Exploration Agreements” and “Joint Development Agreements.”

Structure and Function of Participation Agreements

Participation Agreements range in length from two-page letter agreements to 60-plus page documents and normally include a Joint Operating Agreement for future operations and development of a project area. The parties (Participants) usually disclaim fiduciary obligations, joint liability, or the creation of a partnership or joint venture. The area to be explored and/or developed is defined by geographic area and/or geological structure. To avoid confusion it is important to describe applicable geologic formations with specificity, including descriptions of their depths by reference to existing wells.

Typically, all parties to a Participation Agreement are required to participate in the initial planned development, whether it is the first well in the overall exploration area or the first well in a

specific prospect area. The Participation Agreement will then detail the procedures for proposing the development of further areas or prospects, including the initial well proposal for such prospects and the Participants’ elections whether to participate.

These procedures usually require that proposals for additional development areas include an expenditure authority, geologic information, and prospective feature and interpretative data for the area’s initial well. Each Participant then has a certain period of time to elect whether to participate. It may be advisable to include a mechanism to prevent less financially strong Participants from being forced out of prospects by an aggressive drilling program proposed by a larger Participant. A Participant that forfeits its interest in a prospect area for non-participation often forfeits its rights in a related area of mutual interest and to seismic and drilling results, and may be bound by a non-compete provision with respect to such prospect area.

Management and Development Issues

Given the vast undeveloped acreages frequently encountered in shale plays, the Participants may agree upon a plan of development (POD) to facilitate the prompt development of an exploration area, thereby reducing the risk of lease termination. A POD is typically limited to a certain period of time, and sets forth the Participants’ intentions regarding drilling and how to modify the plan.

Participants typically name one Participant (or its affiliate) as the operator. The party named as operator has primary responsibility for lease acquisition and making development proposals, and will Continued on Page 6

Inside 3 Your Client Signed a Lease—What Comes Next?

Join us for Law Jam 3 Saturday, August 20, 2011. Doors open at 5:30 p.m. Event starts at 6 The Granada Theater—Lower Greenville Avenue. Get your tickets today at www.dbalawjam.org. Tickets: $25 in advance/$30 after August 8. Any proceeds benefit the Dallas Volunteer Attorney Program.

Listen to great music by lawyer bands:

Big Wheel 7:00 p.m. – The Usuals 8:00 p.m. – Black Dirt Tango 9:00 p.m. – The Catdaddies 10:00 p.m. – Blue Collar Crime 11:00 p.m. – The Wrecking Crew Midnight – Texas Rock Association 6:00 p.m. –

NEED TO REFER A CASE? The DBA Lawyer Referral Service Can Help.

5 Mineral Royalty Mispayments: The Payor’s Right of Recoupment 9 Conflicts Between Mineral Owners and Surface Owners

Log on to www.dallasbar.org/dallas-lawyer-referral-service or call (214) 220-7499.

2 He a d n o t e s l D a l l a s B a r A s s o ciation

Calendar

August Events

AUGUST 5 -BELO Noon

FRIDAY CLINICS

“Four Generations in the Workplace: Multi-Generational Perspectives on the Practice of Law,” Penny Blackwell, Erin Callahan, Ike Vanden Eykel, Rust Reid and Cindy Pladziewicz, moderator. (Ethics 1.00)* Co-Sponsored by the CLE and Peer Assistance Committees.

AUGUST 12-NORTH DALLAS** Noon

“The New Fracking Disclosure Law and Other Issues Affecting the Barnett Shale,” Josh Imhoff. (MCLE 1.00)* At Two Lincoln Centre, 5420 Lyndon B. Johnson Frwy., Dallas, TX 75240. Parking is available in the Visitor’s Lot located in front of the entrance to Two and Three Lincoln Centre. There are several delis within the building. Food is allowed inside the Conference Center. Thank you to our sponsor Griffith Nixon Davison P.C. RSVP to kzack@dallasbar.org.

AUGUST 19-BELO Noon

MONDAY, AUGUST 8

TUESDAY, AUGUST 9

Tax Section “The Aftermath of FLPs,” Karl Springer and Peter Robbins. (MCLE 1.00)* Peer Assistance Committee

No DBA Events Scheduled

Noon

TUESDAY, AUGUST 2 Noon

Corporate Counsel Section “2011 Texas Legislative Wrap-Up,” Val Perkins and Mark Vane. (MCLE 1.00)*

Government Law Section “Local Option and Municipal Regulation of Alcohol,” John Rogers and Ben Stool. (MCLE 1.00)*

6 p.m.

Tort and Insurance Practice Section “Insurance Coverage Update,” Brent Cooper, Mike Huddleston and Ernest Martin.

(Ethics 1.00)* Morris Harrell Professionalism Committee DAYL Board of Directors

WEDNESDAY, AUGUST 3 Noon

Employee Benefits & Executive Compensation Section “Common Ethical Issues Faced by Benefits Attorneys,” Patti Hedgpeth and Randy Fickel.

(Ethics 1.00)* Solo & Small Firm Section “Texas Legislative Update: The New and Amended Laws You Must Know,” Jerry D. Bullard. (MCLE 1.00)*

Public Forum Committee

DAYL Judiciary Committee

5:00 p.m. Bankruptcy & Commercial Law Section

“The Peoples and the Courts Gets Confuseder and Confuseder,” Robin Phelan. (MCLE 1.00)*

THURSDAY, AUGUST 4 Noon

Construction Law Section “Consensus Docs: What They Are, How They Have Been Updated and Why You Should Use Them,” Kimberly Davison. (MCLE 1.00)* Judiciary Committee A Conversation With Civil District Associate Judges,” Hon. Sheryl McFarlin and Hon. Teresa Guerra Snelson. (MCLE 1.00) DAYL CLE Committee

FRIDAY, AUGUST 5 Noon

Visit www.dallasbar.org for updates on Friday Clinics and other CLEs.

WEDNESDAY, AUGUST 17 Noon

Friday Clinic – Belo “Four Generations in the Workplace: MultiGenerational Perspectives on the Practice of Law,” Penny Blackwell, Erin Callahan, Ike Vanden Eykel, Rust Reid and Cindy Pladziewicz, moderator. (Ethics 1.00)* Co-Sponsored by the CLE and Peer Assistance Committees.

Business Litigation “The Trial Lawyer: the Person in the Arena Navigating the Peaks and Valleys,” Talmage Boston. (Ethics 1.00)* DAYL Equal Access to Justice Committee

WEDNESDAY, AUGUST 10 Noon

House Committee

DAYL Lunch and Learn. For more information, e-mail cherieh@dayl.com.

5:15 p.m. LegalLine—Volunteers welcome. Second floor Belo.

THURSDAY, AUGUST 11 11:30 a.m. DAYL Barristers for Babies

Noon CLE Committee

Publications Committee

Christian Lawyers Fellowship

6 p.m.

J.L. Turner Legal Association

FRIDAY, AUGUST 12 Noon

Friday Clinic – North Dallas** “The New Fracking Disclosure Law and Other Issues Affecting the Barnett Shale,” Josh Imhoff.

(MCLE 1.00)* At Two Lincoln Centre, 5420 Lyndon B. Johnson Frwy., Dallas, TX 75240.

Parking is available in the Visitor’s Lot located in front of the entrance to Two and Three Lincoln Centre. There are several delis within the building.

Food is allowed inside the Conference Center.

Thank you to our sponsor Griffith Nixon Davison P.C. RSVP to kzack@dallasbar.org.

Trial Skills Section “Innovative and Cutting Edge Uses of Technology in the Courtroom,” Roy Atwood, Jason Barnes and Bill Mateja. (MCLE 1.00)*

MONDAY, AUGUST 15 Noon

Labor & Employment Law Section “Tax Implication of Damages,” Stephen Harris OR Brian Jorgensen. (MCLE 1.00)* DAYL Foundation Board Meeting

Energy Law Section “Energy and the Future of Oil & Gas,” John Hays. (MCLE 1.00)*

Health Law Section “The Proposed Rule on Accountable Care Organizations,” John Hoffman. (MCLE 1.00)*

Law in the Schools Committee

Pro Bono Activities Committee

5:15

Municipal Justice Bar Association

“Electronic Filing and paperless Court Records,” Gary Fitzsimmons and John Warren. (MCLE 1.00)*

MONDAY, AUGUST 1 Noon

A ugust 2011

LegalLine—Volunteers welcome. Second floor Belo.

6:30 p.m. Business Litigation Section presents documentary film maker Ken Burns to talk about his PBS Series Prohibition. Tickets $10 at www.dfwworld.org. Reserve now. Seating is limited. Sponsored by the DBA, Business Litigation Section and World Affairs Council of Dallas/Fort Worth.

THURSDAY, AUGUST 18

7:45 a.m. Energy Law Section Seminar

Review of Oil & Gas Law XXVI. Two-day event. For more information, contact Sandra Anderson at (214) 259-1871. Register online at www.reviewofoilandgaslaw.com. (Total MCLE 13.00, Ethics 2.00)

Noon Lawyer Referral Service Committee

Christian Legal Society

DAYL Freedom Run Committee

Dallas Gay & Lesbian Bar Association

FRIDAY, AUGUST 19

7:45 a.m. Energy Law Section Seminar

Review of Oil & Gas Law XXVI. Two-day event. For more information, contact Sandra Anderson at (214) 259-1871. Register online at www.reviewofoilandgaslaw.com. (Total MCLE 13.00, Ethics 2.00)

Noon Friday Clinic – Belo

“Electronic Filing and paperless Court Records,” Gary Fitzsimmons and John Warren.

(MCLE 1.00)*

MONDAY, AUGUST 22 Noon

Computer Law Section Topic Not Yet Available

Securities Section “Supreme Court and Circuit Court Securities Litigation Update,” Dan Gold and Richard Hunt.

(MCLE 1.00)*

Criminal Justice Committee

TUESDAY, AUGUST 23 Noon

American Immigration Lawyers Association

Legislative Forum Public Forum on the Legislation Session Summary. The public is welcome. RSVP to sevans@dallasbar.org. Sponsored by the DBA Public Forum Committee.

WEDNESDAY, AUGUST 24 7:45 a.m.

Dallas Area Real Estate Lawyers Discussion Group

8:45 a.m. Collaborative Law Section

Seventh Annual Civil Collaborative Law Training Seminar. Two-day event. For more information, log on to www.collaborativelaw.us. (Total MCLE 15.00, Ethics 2.00) Noon

Sports & Entertainment Law Section “Is it Fair Use?” Deena Kalai. (MCLE 1.00)*

Legal Ethics Committee

DVAP New Lawyer Luncheon. For more information, contact Reed-BrownC@lanwt.org.

THURSDAY, AUGUST 25

8:45 a.m. Collaborative Law Section

Seventh Annual Civil Collaborative Law Training Seminar. Two-day event. For more information, log on to www.collaborativelaw.us. (Total MCLE 15.00, Ethics 2.00) Noon

Criminal Law Section “Ethics,” Richard Anderson. (Ethics 1.00)*

Environmental Law Section “Public Notice Regarding Service Areas of Mitigation Banks and Upcoming Functional Assessment Methodology,” Eric Huff. (MCLE 1.00)*

FRIDAY, AUGUST 26

8:45 a.m. Collaborative Law Section

Civil Collaborative Law Symposium. For more information, log on to www.collaborativelaw.us.

(MCLE 7.25, Ethics 1.00) Noon

Intellectual Property Law Section Topic Not Yet Available. (MCLE 1.00)*

MONDAY, AUGUST 29 Noon

DAYL Solo & Small Firm Committee

7:00 p.m. SMU Louise B. Raggio Endowed Lecture Series

Speaker Ruth Bader Ginsburg. Tickets ($35) online at www.smu.edu/law. McFarlin Auditorium on the SMU Campus.

TUESDAY, AUGUST 30 6:00 p.m. Dallas Hispanic Bar Association

WEDNESDAY, AUGUST 31

2:00 p.m. Dallas Volunteer Attorney Program

Veterans Issues CLE for In-House Counsel.

RSVP to greta.cowart@haynesboone.com or Marjorie.powell@aa.com. (MCLE 2.00, including Ethics 1.00). Sponsored by American Airlines Legal Department, Haynes and Boone, LLP and DVAP.

THURSDAY, SEPTEMBER 1 Noon

Construction Law Section Topic Not Yet Available

Judiciary Committee “A Conversation with the Collin County Judiciary,” Hon. Jay A. Bender, Hon. Chris Oldner and Hon. John Roach, Jr. (MCLE 1.00, Ethics 0.25)*

Family Law Section Board Meeting DAYL CLE Committee

TUESDAY, AUGUST 16 Noon

Franchise & Distribution Law Section “Dispute Resolution in the Franchise Context,” Cheryl Mullin and Kelly Ganzberger Dion.

(MCLE 1.00)*

Speakers Committee

DAYL Animal Welfare Committee

DAYL Elder Law Committee

If special arrangements are required for a person with disabilities to attend a particular seminar, please contact Cathy Maher at 214/220-7401 as soon as possible and no later than two business days before the seminar.

All Continuing Legal Education Programs Co-Sponsored by the DALLAS BAR FOUNDATION. *For confirmation of State Bar of Texas MCLE approval, please call Teddi Rivas at the DBA office at 214/220-7447. **For information on the location of this month’s North Dallas Friday Clinic, contact KZack@dallasbar.org.

Augu st 2 0 1 1

Focus

D al l as Bar A ssoci ati on l Headnotes 3

Energy Law

Your Client Signed a Lease—What Comes Next?

by Rhodes W. Hamilton and Clifton A. Squibb

The February 2009 issue of Headnotes included an article by the foregoing authors entitled “Your Client Didn’t Sign a Lease— What Now?” That article addressed issues a practitioner might face when a client elects not to sign an oil and gas lease. This companion article addresses issues that arise once a lease is executed and operations and production begin.

Upon signing a lease, a lessor is usually pleased. A bonus check has just been delivered, no promises have been broken, and the oil and gas company has not yet had an opportunity to fall short of any expectations placed upon it by the lessor. But as time passes, such contentedness may fade as the lessor begins to question what lies ahead. Lessors who understand what to expect during the lease term will have peace of mind and will be well positioned to protect their interests.

Once a lease is signed, an operator will usually elect to have a title opinion rendered on the property describing mineral ownership and identifying any defects or irregularities in the chain of title that might impair marketability or give rise to any claims. The title opinion will contain comments and requirements that the lessee may attempt to “cure.”

This “curative” may call for the lessor to furnish documentation in its possession or to execute correction deeds, amendments, affidavits or other instruments to clarify title. Before signing any curative instrument, a lessor should know exactly what the instrument is and how it affects the mineral interest.

If the lessor’s property is a residential

lot or a small tract of land, the operator will usually elect to combine or “pool” the lease with other leases covering adjoining land. Pooling usually becomes effective when a declaration describing the pooled unit is filed in the real property records. The royalty is calculated pro-rata, based on the leased acreage in the unit and the total unit acreage.

Determining whether a particular exercise of pooling authority is valid may require navigating an esoteric body of case law. Yet lessors can guard against common pooling errors and abuses. Many leases limit the sizes of units or provide that all or some threshold percentage of leased property must be included in a pooled unit. Courts hold that such provisions require strict compliance. Less diligent operators also sometimes attempt to pool invalid leases and leases executed by individuals who own no interest in the described property. If the operator treats such leases as pooled, the royalty paid to the lessors under the remaining leases in the unit will be illegally diluted.

Once a well starts to produce, the most common question lessors have is, “When am I going to get my check?”

Unless a lease provides otherwise, following initial production, royalty payments are due 120 days after the end of the month of first sales. Thereafter, royalties are due 60 days after the end of the calendar month in which oil production is sold and 90 days after the end of the calendar month in which gas production is sold. Lessees may withhold small royalty payments until the dollar amount accumulates to set statutory levels.

Prior to receiving payment, a lessor is frequently asked to sign a division order stating the decimal or fractional inter-

est in production proceeds to which it is entitled. Prudent lessors will carefully examine such instruments before signing. At a minimum, the lessor should verify that the instrument accounts for all leased acreage included in the unit, including any adjoining strips and roadway acreage to which it has title. The division order should not misrepresent the payee’s pro-rata interest in production and should not modify previouslynegotiated terms found in the lease.

Although a lessee or payor is entitled to a signed division order, it may not condition payment on receipt of one unless it contains only the basic provisions listed in Section 91.402(c) of the Natural Resources Code.

An operator may withhold payment in several other situations as well. Sec-

tion 91.402(b) allows a payor to suspend payment on the basis of (1) a title dispute affecting distribution of payment, (2) “reasonable doubt” that a lessor has clear title to an interest in production, or (3) certain title opinion requirements that are not satisfied after reasonable requests for curative.

Accordingly, a lessor’s best interests are served by working with the operator to cure title defects. But as a practical matter, few titles are perfectly clean, and operators cannot overreach by citing minor defects as grounds for suspen HN sion of payment.

Rhodes W. Hamilton and Clifton A. Squibb, partners at Hamilton & Squibb, LLP, practice oil-and-gas and real-estate law.

They can be reached at rhamilton@hamiltonsquibb.com and csquibb@hamiltonsquibb.com, respectively.

the dallas jewish communit y foundation presents the 16 th annual

professional advisors seminar sponsors

Charitable

Tax Planning For 2011 and beyond

westin

primary underwriter

galleria 13340 dallas parkway dallas, texas 75240 major sponsor

Featuring guest speaker

Christopher hoyt Professor Christopher R. Hoyt teaches in the areas of federal taxation, business organizations, retirement plans and tax-exempt organizations. He studied economics at Northwestern University and received dual law and accounting degrees from the University of Wisconsin.

Currently, Hoyt is the Chair of the American Bar Association's Committee on Lifetime and Testamentary Charitable Gift Planning (Section of Probate and Trust) and serves on the editorial board of Trusts and Estates magazine.

Thursday,

earn

15

2

sept

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7:30 am

Cle, Cpe, Clu, CFp, CtFa pending

2011

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10:15 am

$55

beFore september 1st

$65

a F t e r september 1st

to register, OR

call

214/615.9351

visit www.djCF.org/seminar

b eneF aC tor

supporters Bessemer Trust Cole & Reed, P.C. Financial Planning Associates Goldman, Sachs & Co. Hill Schwartz Spilker Keller LLC Jackson Walker L.L.P. Klein & Pollack, L.L.P. Philip Vogel & Co. PC Prescott Pailet Benefits LP

Silverman Goodwin LLP Stanford M. Kaufman & Associates TravisWolff Independent Advisors & Accountants U.S. Trust, Bank of America Private Wealth Management Weaver Wells Fargo

For additional sponsorship opportunities, please call 214/615.9351 or e-mail info@djcf.org.

4 He a d n o t e s l D a l l a s B a r A s s o ciation

A ugust 2011

Headnotes

President's Column

Honoring the Profession

by BARRY SORRELS

Throughout this year, I have been impressed by what I have seen from individual lawyers both in the courtroom and outside of it. In Dallas, we have a lot of really good lawyers. It is important for people in our community to know what’s going on in their courtrooms. We are lucky to live in a city with excellent media. Our broadcast news, radio reporting, local newspapers, and periodicals produce in-depth, relevant articles and reports about our legal system and its participants. In October, we are going to honor those members of our media who have produced exceptional news about the law at the Philbin Awards, but we need your help getting the word out. Please think about the local, law-related news stories you have seen or heard over the last 12 months, or clients you may have in the media, and tell them about our Philbin Awards Contest and Luncheon. . For more information, please go to www.dallasbar.org/content/stephen-philbin-awards.

Ken Burns Prohibition at Belo

On August 17, documentary filmmaker Ken Burns will be at Belo to discuss his upcoming PBS film, Prohibition. The event is sponsored by the Dallas Bar Association, the DBA Business Litigation Section and the World Affairs Council of Dallas/Fort Worth. Ken Burns is probably the most important documentary filmmaker in America, and his catalogue of accomplished works includes the films Civil War, Baseball, and National Parks. Personally, I am a huge fan of his work, and I am thrilled that we will be a part of hosting him in Dallas. Some of the most exciting things we do at the Dallas Bar Association are the events that interest non-lawyers and allow us to open our doors to the general public. Dallas attracts great thinkers, artists, and leaders who perform, present, and speak to our citizens. When their topics relate to the law, we must take advantage of the opportunity to host and provide a platform for these honored guests. It is very special for the Belo and the Dallas Bar Association to be the place where these ideas are presented and discussed. I extend a very warm thank you and congratulations to Aimee Fagan of McKool Smith, Talmage Boston, of Winstead, and the rest of the Business Litigation Section, for their work in bringing this special event to the Dallas Bar Association. For tickets, log on to https://www.dfwworld.org/SSLPage.aspx?pid=714.

Law Jam 3

On August 20, we will host the Law Jam 3 concert at the historic Granada Theater. Law Jam is a benefit concert that kicks off the Equal Access to Justice Campaign. This year, seven bands featuring Dallas lawyers will rock the stage to raise awareness and money for the Dallas Volunteer Attorney Program. I like Law Jam for many reasons. It is popular, it is fun, and it is inviting. I like that the “Dallas Bar Association” and “Law Jam” are on the marquee at the Granada for that week. I like that we have an event where we spill out into one of Dallas’ most popular streets because we are having fun and raising money for a great cause. I like that we have an event that appeals to the ‘jeans and t-shirt’ crowd. Come out to support the bands, to support Equal Access to Justice, and to have fun. And bring a friend. To buy tickets, log on to www.dbalawjam.org. I want to send a big thank

Board of Directors Roundup Brad Weber, Chair, called the June 16 meeting to order and

introduced Dallas City Manager, Mary Suhm, who reported on the current state of the city, including the new Convention Center hotel, The Omni, which will open in the fall of 2011.

Mr. Weber introduced Brenda Homan, President of the Association of Legal Administrators, who gave a report on her organization.

Jim Doyle, Vice Chair of the Environmental Law Committee, updated the board on the section’s activities and noted that the section has 113 members from the private sector, the EPA and from corporations.

Reporting on the Transition to Law Practice Program, Cheryl Camin Murray encouraged participation in the program, as the number of mentees and mentors is down this year.

Justice Douglas Lang added that he believes this is an outstanding program for new lawyers to become involved in and thanked the DBA for coordinating it each year.

Caroline Peterson, Chair of the Energy Law Section, updated the Board on the section and reported that it has contributed $10,000 to the Equal Access to Justice Campaign, as well as funds to Bar None and the Pro Bono Golf Classic.

Reporting on the Media Relations Committee, Co-Chairs Lindsay Hedrick and Shannon Teicher stated that the committee has had several well-received speakers this year and hosted a Media Seminar, which was well attended. They announced that the Stephen Philbin Awards is October 17 and the keynote speaker is high-profile attorney Tom Mesereau.

Robert Udashen, Co-Chair of the CLE Committee, reported that the committee has been very busy this year and will coordinate a Masters Trial Seminar in the fall.

There being no further business, the meeting was adjourned.

you to Christina Melton Crain for Chairing Law Jam 3, as well as to Al Ellis, Sally Crawford, Scott McElhaney, Chip Brooker and the DAYL for their support of this event. We couldn’t do it without you!

Bench Bar

Another one of our signature events, the annual Dallas Bar Association Bench Bar Conference, is coming up in September.

For a couple of days, the lawyers and judges of Dallas will descend upon a Hill County resort for CLE credit, festivities, and fun activities designed to celebrate the Dallas legal community. Please join us at the Marriott Horseshoe Bay Resort in the Texas Hill Country on September 22-24. Register now at www.dallasbar.org. The Bench Bar Conference Committee Co-Chairs are Steve Bolden, of Mahomes Bolden & Warren, Dawn Estes, of Taber Estes Thorne & Carr, Honorable Elizabeth Frizell, of County Criminal Court #11, Deborah Perry, of Munsch Hart Kopf & Harr, and Rudy Rodriguez, of Gruber Hurst Johansen Hail & Shank.

These men and women worked very hard this year to create a program with a wide range of fun activities from bike rides and fun runs to brewery tours and karaoke for plenty of opportunities to meet other lawyers and judges.

Despite the fun-filled, casual atmosphere of the Bench Bar Conference, the purpose and goals of the conference are both serious and lofty. The mission statement of the Dallas Bar Association directs us to promote good relations among lawyers, the judiciary, and the community. No program facilitates relations among lawyers and the judiciary as directly as Bench Bar. We hope to see lawyers from all practice areas and judges from every courthouse come together and develop camaraderie outside of our courtrooms and offices.

Your Contributions

Programs like Bench Bar would not be possible without generous sponsorships. Events like Law Jam are effective for the Dallas Volunteer Attorney Program because, along with raising awareness, they also raise money. To the firms and individuals who have contributed to these and our many other DBA programs, I cannot thank you enough. The contributions matter because they allow us to grow in our profession and become better lawyers and judges. They also provide us with the means to share legal services with the poor and otherwise disenfranchised members of our community. When we are able to give legal resources not only to each other and to our citizens, we make Dallas a better place to practice law and a better place to live.

Keep up the good work. Thank you for your commitment to HN this bar association and this city.

Published by: DALLAS BAR ASSOCIATION 2101 Ross Avenue Dallas, Texas 75201 Phone: (214) 220-7400 Fax: (214) 220-7465 Website: www.dallasbar.org Established 1873 The DBA’s purpose is to serve and support the legal profession in Dallas and to promote good relations among lawyers, the judiciary, and the community.

OFFICERS President: Barry Sorrels President-Elect: Paul K. Stafford First Vice President: Sally Crawford Second Vice President: Scott McElhaney Secretary-Treasurer: Sean Hamada Immediate Past President: Ike Vanden Eykel Directors: Brad C. Weber (Chair), Jerry C. Alexander (Vice Chair), Kim Askew (At-Large), Penny Brobst Blackwell (President, Dallas Association of Young Lawyers), Eric Blue (President, J.L. Turner Legal Association), Hon. Rob Canas ( Judicial At-Large), Wm. Frank Carroll, Rob Crain, Laura Benitez Geisler, Hon. Martin Hoffman, Michael K. Hurst, Monica Latin (At-Large), Karen McCloud, Eunice Kim Nakamura (President, Dallas Asian American Bar Association), Mary Scott, Hon. Teresa Guerra Snelson (President, Dallas Hispanic Bar Association), Diane M. Sumoski; and Michele Wong Krause.

Advisory Directors: Chip Brooker (President-Elect, Dallas Association of Young Lawyers, Victor N. Corpuz (President-Elect, Dallas Asian American Bar Association), Lori Hayward (President-Elect, J.L. Turner Legal Association) and Carlos Morales (President-Elect, Dallas Hispanic Bar Association).

Delegates, American Bar Association: Rhonda Hunter, Hon. Douglas S. Lang Directors, State Bar of Texas: Andy Payne, Christina Melton Crain, Beverly Bell Godbey, Ike Vanden Eykel, Frank E. Stevenson, II HEADNOTES Executive Director/Executive Editor: Catharine M. Maher Communications / Media Director & Headnotes Editor: Jessica D. Smith In the News: Judi Smalling Art Director: Thomas Phillips Advertising: Karla Howes PUBLICATIONS COMMITTEE Co-Chairs: Vincent J. Allen and Timothy G. Ackermann Vice-Chairs: Lea N. Clinton and Natalie L. Arbaugh Members: H. Joseph Acosta, Kevin Afghani, Nelson Akinrinade, Vance L. Beagles, Jason Bloom, Barbara Boudreaux, Jeremy Camp, Noel Chakkalakal, Y.W. Peter Chen, Ryan Cosgrove, Sally Crawford, Weston Davis, Pat Driscoll, David Drummer, Dawn E. Fowler, Jennifer Gajak, Constance Hall, James Holbrook, Dyan House, Victor Johnson, Harold Jones, Adam Kielich, Michelle Koledi, Cherika Latham, Jamie McKey, Patrick McLain, Thomas L. Mighell, Clay Miller, Jennifer Mitchell, Heather Bailey New, Emmanuel Obi, Jenna Page, Kirk L. Pittard, Elizabeth Pletan, Irina B. Plumlee, Laura Anne Pohli, Robert Ramage, Juan Renteria, Bryon Romine, John Roper, Gregory W. Sampson, Mary Scott, Barry Sorrels, Thad Spalding, Paul K. Stafford, John C. Stevenson, Amy E. Stewart, Scott Stolley, Roxana Sullivan, Sherry Talton, Peter S. Vogel, Suzanne R. Westerheim, Elisabeth Wilson, Sarah Q. Wirskye, Sarah Woodell, Angela Zambrano and Viktoria Ziebarth DBA & DBF STAFF Executive Director: Catharine M. Maher Accounting Assistant: Shawna Bush Communications / Media Director: Jessica D. Smith Controller: Sherri Evans Director of Community Services: Alicia Hernandez Events Coordinator: Rhonda Thornton Executive Assistant: Michelle Dilda Executive Director, DBF: Elizabeth Philipp LRS Program Assistant: Biridiana Avina LRS Interviewer: Marcela Mejia Law-Related Education & Programs Coordinator: Amy E. Smith Membership Coordinator: Kimberly Watson Projects Coordinator: Kathryn Zack Publications Coordinator: Judi Smalling Receptionist/Staff Assistant: Teddi Rivas DALLAS VOLUNTEER ATTORNEY PROGRAM Director: Alicia Hernandez Managing Attorney: Michelle Alden Volunteer Recruiter: Chris Reed-Brown Paralegals: Whitney Breheny, Lakeshia McMillan, Andrew Musquiz, Jigna Gosal, Tina Douglas Data Entry/Office Support: Patsy Quinn Copyright Dallas Bar Association 2011. All rights reserved. No reproduction of any portion of this publication is allowed without written permission from publisher.

Headnotes serves the membership of the DBA and, as such, editorial submissions from members are welcome. The Executive Editor, Editor, and Publications Committee reserve the right to select editorial content to be published. Please submit article text via e-mail to jsmith@dallasbar. org (Communications Director) at least 45 days in advance of publication.

Feature articles should be no longer than 750 words. DISCLAIMER: All legal content appearing in Headnotes is for informational and educational purposes and is not intended as legal advice. Opinions expressed in articles are not necessarily those of the Dallas Bar Association.

All advertising shall be placed in Dallas Bar Association Headnotes at the Dallas Bar Associationís sole discretion.

Headnotes (ISSN 1057-0144) is published monthly by the Dallas Bar Association, 2101 Ross Ave., Dallas, TX 75201. Non-member subscription rate is $30 per year. Single copy price is $2.50, including handling. Periodicals postage paid at Dallas, Texas 75260.

POSTMASTER: Send address changes to Headnotes, 2101 Ross Ave., Dallas, TX 75201.

Augu st 2 0 1 1

Focus

D al l as Bar A ssoci ati on l Headnotes 5

Energy Law

Mineral Royalty Mispayments: The Payor’s Right of Recoupment

by Douglas R. Hafer and Daniel B. Mathis

At some point, every oil and gas company (payor) will have to address a royalty mispayment. Due to the volume and complexity of royalty calculations—which often involve cumbersome decimal and fractional interests—mispayments caused by clerical errors, computer glitches or other mistakes are inevitable. The resulting mispayments can be underpayments, overpayments, or both. While a scrupulous payee often detects an underpayment soon after it occurs, an overpayment may go undetected or unreported for years (no one wants to think they have been overpaid). Regardless of which occurs, the payor has a remedy.

Once a payor discovers a mispayment, it should first determine whether there is both an overpayment to one payee and a corresponding underpayment to another payee.

If both are present, the payor should then determine whether the payees have signed division orders. If they did, the underpaid payee must recover from the overpaid payee under Gavenda v. Strata Energy, Inc., 705 S.W.2d 690, 691 (Tex. 1986). Typically, no further action by the payor is necessary.

If there is only an overpayment, recov-

ering the overpaid money can be more challenging. The payee may have dissipated the money, or it may not be economically feasible to attempt recovery. Such practical challenges notwithstanding, commentators generally agree that a payor who mistakenly overpays royalties is legally entitled to recover the overpayment.

One commentator notes that “where as a result of good-faith mistake royalty has been paid to a person not entitled to receive same or where excessive payments have been made in good faith, it is generally held that the lessee (or purchaser) who has made such payments may recover from the payee the payments to which he is not entitled.” Williams & Meyers Oil and Gas Law § 657 (4th ed. 2010). Another commentator more broadly states that the right of the payor to withhold overpayment from royalty is an exercise of the right of recoupment. 3 Kuntz, Law of Oil and Gas § 42.8 (1989).

Oil and gas jurisprudence recognizes at least two ways in which a payor may exercise its right of recoupment. One option is to assert an affirmative recoupment claim, which typically sounds in equity as a claim for money had and received. This claim seeks to avoid unjust enrichment and gen-

erally requires proving two elements: (1) the defendant holds money; and (2) the money, in equity and good conscience, belongs to the plaintiff. In short, the payor may recover if the payee received a benefit that is unconscionable for it to retain.

In addition to seeking judicial relief, some jurisdictions have recognized the payor’s right to exercise “self-help” recoupment by withholding future royalties. The Kansas Supreme Court in Waechter v. Amoco Production Co. provided a detailed analysis of this issue. 537 P.2d 228 (Kan. 1975). There, the court concluded that a payor’s “extrajudicial” action of withholding future royalties was permissible because the payor came into possession of the royalties lawfully— that is, the payor had the right to receive proceeds from gas sales, and thus the monies were not acquired by force or unfair means.

The Waechter court also explained that the payor’s right to be refunded is a right of recoupment implied at law to avoid unjust enrichment. The payees argued that the payor’s recoupment was impermissible as barred by limitations (the payor self-help recouped five years after its cause of action accrued). The court disagreed, however, explaining that a statute of limitations is remedial in nature and does not confer

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a right of action. Thus, while the expiration of limitations might bar an affirmative remedy, it neither discharges a debt nor prevents a payor from asserting its right of recoupment defensively. Therefore, the payor in Waechter asserted its recoupment right to defeat the payees’ claims of nonpayment following its self-help remedy.

Texas courts have also recognized the claims, defenses and doctrines permeating the Waechter holding, including recoupment as a counterclaim, defensive recoupment, setoff, and how the “pure defense” doctrine allows an affirmative claim that is otherwise barred by limitations to be asserted defensively to defeat or reduce a plaintiff’s claim. Although every case is different, the payor generally has a right to recoup mistakenly overpaid royalties paid in good faith, and to do so it may seek affirmative relief from the courts or, in certain situations, exercise self-help by retaining future royalties to recoup the overpaid HN money.

Douglas R. Hafer is a partner and Daniel B. Mathis an associate at Curnutt & Hafer, L.L.P., where they practice oil and gas litigation. Both are members of the DBA Energy Law Section and may be reached at dhafer@curnutthafer.com and dmathis@curnutthafer.com, respectively.

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6 H e a d n o t e s l D a l l a s B a r A s s o ciation

A ugust 2011

DBA Earns State Bar Awards

by Jessica Smith

At the State Bar of Texas Annual Meeting on June 23, the Dallas Bar Association accepted numerous awards for its programs and services.

This year, the State Bar’s Local Bar Services Committee selected the DBA as the recipient of seven Star of Achievement Awards. The first award was presented to the DBA’s Mock Voir Dire Project, which is a program that gives high school students the opportunity to visit the Dallas County courthouse, learn about the jury system and participate in a voir dire demonstration by several accomplished trial lawyers.

This year’s event was held at the George C. Allen Courts building on May 6, 2011, and had participation from nearly 300 high school students from nine different high schools in the Dallas ISD. Kirby Drake, of Klemchuk Kubasta LLP, and Judge Martin Hoffman, of the 68th District Court, led the program, which included a panel discussion concerning the importance of the jury system. Panel participants included Judge Hoffman, Lisa Blue, of Baron &

State Bar President Terry Tottenham (center) presented awards in June to DBA’s Executive Director Cathy Maher and 2011 President Barry Sorrels.

Blue, Dick Sayles, of Sayles Werbner, and Kirk Willis, of Helms & Greene, LLC, and moderator Michael Lyons, of Deans & Lyons, L.L.P. Headnotes swept the publications category, receiving the award for Best Overall Newsletter—the highest award in the Publications Category. Several Star of Achievement Awards were also presented to the following authors for outstanding articles published in Headnotes:

m Best Feature Story: “After 50 Years, Atticus Finch Still Sets the Mark for Lawyers,” by Gregory W. Sampson, published in the May 2010 issue. m Best Human Interest Article: “DBA Salutes our Veterans,” in the November 2010 issue, which included articles written by Hugh Fuller, Michael Regitz, Andy Ryan, Dan Scott and Jessica D. Smith. m Best News Article: “Lisa Blue Baron Donates $100,000 to Equal Access to Justice Campaign,” written

by Alicia Hernandez, published in the December 2010 issue. m Best Series of Substantive Legal Articles: Sports & Entertainment law articles published in December 2010 issue: “The Changing World of Music Royalties” by Charles McGarry; “Sex, Drugs and Wheaties Boxes: Player Endorsements,” by Kate Jett and Andrew Medeiros; and “Coming to a Theater Near You: From Script to Screen,” by Sally Helppie. m Best Series of General Interest Articles: The Business of Law Column 2-part series, “Social Media Networking and Lawyers: The Good, the Bad and

the Ugly,” by Mary Louise Hopson.

Various DBA members received individual awards at the annual meeting, including: • Talmage Boston and Terry Bentley Hill received Presidential Citations • Omar J. Alaniz received the Outstanding Young Lawyer Award • Christina Melton Crain received the Outstanding Mentor Award • Kendall Hayden received the Outstanding First-Year Director Award • Robert H. Mow, Jr. received the Ronald D. Secrest Outstanding Trial Lawyer Award • William L. Wallander received the Outstanding Service Award • Judge Robert C. McGuire received the Banco Rotto Award • Lacy L. Durham and Sarah Rogers received a Texas Young Lawyers Association Presidents’ Award of Merit.

At the annual meeting, Bob Black of Beaumont assumed the role as president of the State Bar. F.R. “Buck” Files of Tyler HN will become president-elect.

Jessica D. Smith is the DBA’s Communications/Media Director.

She can be reached at jsmith@dallasbar.org.

Participation Agreements in the Shale Plays continued from page 1

carry out its duties in accordance with one or more Joint Operating Agreements governing actual operations and well proposals within established prospects. Where the exploration area is large, the Participants may elect to form a management committee to oversee broad development plans and ensure proper and timely development of the entire area. Limits are often set on bonuses, royalties and overriding royalty interests on new leases acquired in the exploration area. The Participation Agreement should set an overall budget for such lease acquisitions and have clear procedures for Participants to pay for and

receive their interests in new leases. Similarly, Participants should specify procedures for acquiring, sharing, and interpreting seismic data.

The Participation Agreement should specify a required number of scheduled meetings per year, along with a list of information that must be provided to each management committee member prior to each scheduled meeting. Such information may include budgets, the operator’s drilling proposals and a look-back review of actual performance versus budgeted performance. The scope of information to be provided is often a point of negotiation when drafting the Participation Agreement. In addition to information provided

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in connection with meetings, Participants should have reasonable rights to audit the operator’s records regarding the financial aspects of the project.

The Participant who originated the project or who acquired the acreage frequently receives a carried interest for its efforts. The form of such carry can vary widely. When designing a carry, Participants should specify (i) whether the carry will apply to lease acquisition costs or only to the costs of drilling and completion, (ii) the amount of the carry, (iii) whether the

carry is for dollars or a number of wells, (iv) an obligation to maintain records of the amount of carry paid and a right to audit such records, and (v) an affirmative election to treat the arrangement as a tax partnership to permit the deduction of intangible drilling costs attributable to the HN carried interest.

Arthur J. Wright serves as the Thompson & Knight Oil and Gas Practice Group Leader and focuses on acquisitions and dispositions of, and joint ventures relating to, E&P and midstream properties. He can be reached at Arthur.Wright@tklaw.com.

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A ugu st 2 0 1 1

D al l as Bar A ssoci ati on l Headnotes 7

Spoliation—Panacea or Curse

by Simon D. Whiting

Defense counsel’s jaw dropped when he received Plaintiff’s Motion for Partial Summary Judgment. Hours earlier he had filed what he believed to be a meritorious Motion for Summary Judgment on behalf of the Defendant. He read further. The motion asked the court to make an adverse inference and find liability as a matter of law premised upon Defendant’s spoliation. He suddenly realized that Plaintiff’s response to his earlier filed Motion for Summary Judgment would also likely use the same formula.

Plaintiff would ask the court for an adverse inference sufficient to create an issue of fact thus precluding summary judgment. Brilliant!! How could this be happening when the Plaintiff had nothing?

Anyone who litigates has been confronted with the “missing” document conundrum. Whether it results from the added complexities of e-discovery, failure to suspend routine document destruction policies, failure to preserve back-up tapes to prevent routine overwriting, failure to adequately notify the right people of retention requirements, a rogue employee who destroys important documents, or intentional destruction, there is much to be lost or gained depending on which side of the “missing” document issue you are on during litigation.

The typical scenario follows a Request for Production for relevant documents that were known to have existed, but the responding party is unable to locate, or has destroyed. The responding party responds to the Request for Production stating that it has no responsive documents. At this point the requesting party may choose to move to compel produc-

tion or move for sanctions. The remedy for spoliation may range from the court directing an adverse inference instruction to the jury up to case-ending sanctions for egregious spoliation.

As a general rule, the duty to preserve documents arises when litigation is reasonably foreseeable. It may be triggered by a lawyer’s letter, an incident occurring, e.g. a harassment allegation, or by some other means. The obligation is to preserve all relevant information and documents within the party’s possession or control (which is another can of worms).

The scope of the obligation may also be affected by cost and burdensomeness. All of which is to say that the timing, nature and extent of the duty to preserve relevant documents is case specific.

The court’s power to address spoliation arises from its inherent power to regulate litigation if it occurred prior to the case being filed. Fed R. Civ. P. 37 and Tex. R. Civ. P. 215 apply to the failure to comply with discovery orders. State and federal standards to determine whether sanctionable spoliation occurred differ significantly.

Texas law requires a court to consider (1) whether there was a duty to preserve evidence; (2) whether the alleged spoliator breached that duty; and (3) whether the spoliation prejudiced the non-spoliator’s ability to present its case or defense.

By contrast, the Fifth Circuit requires proof that: (1) the party with control over the evidence had an obligation to preserve it at the time it was destroyed; (2) the evidence was destroyed with a culpable state of mind; and (3) the destroyed evidence was “relevant” to the moving party’s claim or defense such that a reasonable trier of fact could find that it would support that

ExxonMobil Foundation Provides Intern to DVAP

by Michelle M. Alden

Mary Yang has joined the Dallas Volunteer Attorney Program as an ExxonMobil Community Summer Jobs Program intern. For eight weeks this summer, she will be responsible for assisting with case management, intake at evening clinics, organization of continuing legal education and recruiting events, and helping plan DVAP’s annual Pro Bono Awards celebration.

The Dallas Vol- Mary Yang unteer Attorney Program was selected as one of 60 nonprofit agencies in Dallas County to participate in the 2011 ExxonMobil Community Summer Jobs Program, which is funded by the ExxonMobil Foundation. This program provides agencies with additional help during the summer months and gives students the opportunity to learn about careers in the non-

profit sector.

Mary, a junior at Brown University, is majoring in International Relations and Public Policy and plans to attend law school. She believes that this internship will help her gain a better understanding of nonprofit organizations and how they make a difference in the community, as well as enhancing her understanding of the legal system. “For me, this internship is not just about making a difference in peoples’ lives—it’s about acquiring a vision and passion for nonprofit work in the future,” said Mary.

Launched in 1997, DVAP is a joint program of the Dallas Bar Association and Legal Aid of NorthWest Texas.

DVAP recruits, trains, and supports pro bono attorneys; last year approximately 5,552 families in Dallas County were assisted.

DVAP welcomes Mary to the team.

For more information about DVAP, log on to www.dallasvolunteerattorneypro HN gram.org.

Michelle M. Alden is the Managing Attorney for the Dallas Volunteer Attorney Program. She can be reached at aldenm@lanwt.org.

2011 Amendments to Local Rules U.S. District Court for the Northern District of Texas

The amended rules are effective September 1, 2011.

Complete text of the order is available on the court’s Internet website at www.txnd.uscourts.gov.

claim or defense.

These standards provide advantages and disadvantages depending on the forum in which the suit is pending. The burden on the moving party to obtain relief for spoliation is less onerous under Texas law where mere negligence is sufficient. Federal law requires a showing of bad faith. Both forums require a hearing to determine whether spoliation occurred and an appropriate remedy. Evidence from both sides as to the contents of the lost/ destroyed documents, the circumstances of their loss/destruction, relevance to the claims at issue in the suit and persons involved must be presented–all of which increases the cost of litigation for the spoliating party and the possibility of an adverse inference (or worse).

How to Avoid the Spoliation Trap

Proactively educate your clients. Prepare litigation hold letters the moment a claim or conflict becomes foreseeable.

These litigation hold letters should be distributed to more than just supervisory or management people. Often times it is the low level employees who have access or possession of important documents that are left out of the loop. Follow-up to ensure that relevant documents have been sequestered and that routine processes that could affect preservation have HN been interrupted.

Simon Whiting, a partner at Burford & Ryburn, LLP, is Board Certified in Labor & Employment Law. He can be reached at swhiting@brlaw.com.

“Four Generations in the Workplace: Multi-generational Perspectives on the Practice of Law” Ethics: 1 hour

August 5, 2011, Noon, at Belo Panel of speakers includes: Penny Blackwell, DAYL President; Erin Callahan, Law Student, President of SMU Student Bar Association; : Ike Vanden Eykel, DBA Immediate Past President; Rust Reid, Thompson & Knight; and Cindy Pladziewicz, DBA Peer Assistance Committee Chair, Moderator

Hosted by the Peer Assistance Committee

8 He a d n o t e s l D a l l a s B a r A s s o ciation

A ugust 2011

Bill Creates New Civil Remedies for Barratry

by Suzanne Raggio Westerheim

The Texas Legislature has amended Section 82.065 of the Texas Government Code, which previously applied only to contingent fee agreements, and added new Section 82.0651. See SB 1716. These changes allow clients to void all fee agreements procured as the result of barratry and create new causes of action and civil liability for prohibited barratry.

The new law applies when a fee agreement has been “procured as a result of conduct violating the laws of this state or the Texas Disciplinary Rules of Professional Conduct of the State Bar of Texas regarding barratry by attorneys or other persons.” Tex. Gov’t Code 82.065 (b), 82.0651(a). The law does not make any substantive change to the law of barratry. It simply adds new remedies.

So, what is barratry? “Barratry is the solicitation of employment to prosecute or defend a claim with intent to obtain a personal benefit.” State Bar of Texas v.

Kilpatrick, 874 S.W.2d 656, 659 (Tex. 1994). Barratry includes both prohibited payments and prohibited solicitations.

A voided fee contract or a civil judgment is not the worst thing that could happen to a lawyer who commits barratry. Barratry is, first and foremost, a crime. Texas Penal Code 38.12 sets forth the conduct that constitutes the crime of barratry and solicitation of professional employment.

Barratry can also cost a lawyer his or her law license. Texas Disciplinary Rule of Professional Conduct 7.03, regarding prohibited solicitations and payments, sets forth the conduct that constitutes barratry under the Disciplinary Rules.

The provisions of the criminal statute and the disciplinary rule are very similar. Both are designed to prevent clients from being unduly influenced in their choice of counsel by the circumstances under which the prospective client is approached and to prevent lawyers from using financial inducements to generate new clients.

Rule 7.03 prohibits payments or giving anything of value to clients (except for the litigation and other expenses authorized by Rule 1.08) or non-lawyers who are in a position to refer clients.

The Penal Code, however, prohibits payments or giving anything of value

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This year we are pleased to honor The Honorable Jane Boyle, Federal District Judge for the Northern District of Texas, with our William Roper Award, in honor of her long and distinguished service on behalf of justice. Judge Boyle is a former director of the Society and has been very involved in the Red Mass and other STMS activities throughout her career. Online registration for the Red Mass will begin on July 20 at www.stmsdallas.org.

to any “person” to solicit employment.

This would include other lawyers.

The Penal Code exempts conduct authorized by the disciplinary rules from the prohibition against giving “anything of value to solicit employment.”

Payments or giving anything of value to other lawyers for referring cases is governed by Rule 1.04(f). See Tex. Discip.

R. Prof. Conduct 7.03 cmt. 4. With the elimination of the forwarding fee as a basis for sharing fees, giving another lawyer anything of value for referring a case—even a fruit basket—without meeting the requirements of Rule 1.04(f) could be considered a disciplinary rule violation.

Texas Government Code Section 82.065(a), which requires that contingent fee agreements be in writing and signed by the lawyer and the client, has not been changed. Section 82.065(b) previously made contingent fee agreements procured as the result of barratry voidable. This provision has been amended to apply to all fee agreements, and a new .

Section 82.0651(a) now allows a client to bring an action to void a fee agreement that has been procured as a result of barratry.

Section 82.065(c) allows a lawyer whose fee agreement has been voided under Section 82.0651(a) to nevertheless recover fees and expenses in quantum meruit if the client does not prove that the lawyer committed barratry or knew that the contract was the result of barratry by another person. In order

to be entitled to quantum meruit, the innocent lawyer must have reported the misconduct as required by Texas Disciplinary Rule of Professional Conduct 8.03. The statute includes two exceptions to this requirement: 1) the misconduct has already been reported; or 2) the report would substantially prejudice the client’s interests. If the person committing the misconduct was a nonlawyer, then the requirement to report the misconduct does not apply.

A client who prevails under Section 82.0651(a) can recover: 1) all fees paid to the person who committed barratry; 2) any excess fees and expenses paid to a lawyer entitled to a quantum meruit award; 3) actual damages; and 4) attorney’s fees.

Section 82.0651(c) allows a person who was solicited by conduct in violation of the barratry laws but who did not enter into a fee agreement as a result of that conduct, to bring a civil action against any person who committed barratry. A person who prevails under this section can recover: 1) a $10,000 penalty (interestingly, a remedy not available to clients who entered into fee agreements); 2) actual damages; and 3) attorney’s fees.

These provisions go into effect September 1, 2011, and apply to conduct HN occurring after that date.

Suzanne Raggio Westerheim represents and advises lawyers and law firms on professional responsibility issues. Ms. Westerheim is the former Chair of the DBA Legal Ethics Committee. She can be reached at suzanne@legallyethical.com.

Minority Clerkship Luncheon

Panelists at the Minority Clerkship Luncheon included (left to right) Sean Hamada of Sean T. Hamada PC; Tino Ramirez, of Ramirez & Associates, P.C.; Kim Askew of K&L Gates LLP; and Leon Carter of Munck Carter, LLP.

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Focus

D al l as Bar A ssoci ati on l Headnotes 9

Energy Law

Conflicts Between Mineral Owners and Surface Owners

by Eric Camp

When there has been a severance of minerals from surface ownership, the mineral estate is the dominant estate and the surface estate is the servient estate. Accordingly, the mineral owner has an implied right to use as much of the surface as is reasonably necessary to produce the minerals under the property.

Generally speaking, mineral owners are not liable to surface owners for normal surface damages caused by drilling operations— including ingress and egress to the site and construction of surface facilities and pipelines. Two common-law safeguards exist, however, as checks on the mineral owner’s right to use the surface—the “rule of reasonable use” and the duty of “due regard.”

The “rule of reasonable use” requires the mineral owner to limit its surface use to operations “reasonably necessary” to produce the property’s minerals. The duty of “due regard” requires the mineral owner to exercise its rights with “due regard” for the surface owner’s rights. The surface owner bears the heavy burden of proof of establishing that the mineral owner’s surface operations were unreasonable.

In 1971, the Texas Supreme Court

expanded the duty of “due regard” to require a mineral owner, under special circumstances, to employ an alternative development method to accommodate the surface owner’s existing surface use. Getty Oil Co. v.

Jones, 470 S.W.2d 618 (Tex. 1971) (operator’s decision to install pumping units that interfered with surface owner’s irrigation system was impermissible because other available pumping units would have accommodated the system). This became known as the “accommodation doctrine.”

The accommodation doctrine allows a surface owner to force the mineral owner to adopt an alternative development method if: 1. The surface owner’s use existed prior to the mineral owner’s conflicting use; 2. The surface owner has no reasonable means to develop its land other than with the pre-existing use; 3. The mineral owner’s use or proposed use substantially interferes with the existing surface use; and 4. The mineral owner has other options which: a. are usual, customary, and reasonable methods; b. are practiced in the industry on

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other similar lands put to similar uses; c. would not interfere with the surface owner’s preexisting use; and d. are available on the premises.

The surface owner again bears the heavy burden of establishing all of these elements.

These common law rules sometimes produced harsh consequences for surface owners. To balance the competing interests of surface and mineral development, the Texas Legislature enacted the “Mineral Use of Subdivided Land Act” in 1983 to allow the creation of “qualified subdivisions.” Tex. Nat. Res. Code Ann. § 92.001.

The statute’s scope is extremely limited—the “qualified subdivision” can be no larger than 640 acres and must be located in a county with more than 400,000 people, a county with more than 140,000 people that borders a county with more than 400,000 people, or on a barrier island. When the statute’s remedies are available, however, a surface owner can restrict a mineral owner’s surface operations in the “qualified subdivision” to specifically designated “operations sites.”

The statute requires a surface owner to create a plat of the proposed “qualified subdivision” and apply to the Railroad Commission for approval. The plat must contain

a separate “operations site” for each 80 acres within the subdivision, each containing at least two acres where the mineral owner may conduct exploration and production activities. The plat must also contain provisions for road and pipeline easements for the operations site.

If the Commission approves the surface owner’s plat, the mineral owner’s operations are restricted to those approved in the plat.

To maintain the “qualified subdivision” status, the surface owner must commence actual construction of roads or utilities and sell a lot within the “qualified subdivision” to a third party by the third anniversary date of the Commission’s order.

Advancements in horizontal drilling have significantly reduced oil and gas operators’ surface use requirements, but the encroachment of significant exploration and production operations into urban areas will inevitably lead to high-stakes surface use conflicts between mineral and surface own HN ers.

Eric Camp is an associate with Whitaker Chalk Swindle & Schwartz PLLC and practices in the firm’s oil and gas section. He is a member of the DBA’s Energy Section and can be reached at ecamp@whitakerchalk.com.

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10 H e a d n o t e s l D a l l a s B a r A s s o ciation

A ugust 2011

Louise B. Raggio Endowed Lecture Series PLEASE JOIN US for this inaugural event

Ruth Bader Ginsburg United States Supreme Court Associate Justice

Monday, August 29, 2011 McFarlin Auditorium on the SMU Campus at 7:00 p.m.

$35 per ticket

Proceeds to benefit the SMU Dedman School of Law Louise B. Raggio Endowment Fund

Purchase tickets online: www.smu.edu/law Click under “Upcoming Events”

For additional information, please contact SMU Dedman School of Law:

Rebekah Bell e-mail: rbell@smu.edu phone: 214-768-4177

Robin Webb e-mail: rawebb@smu.edu phone: 214-768-1095

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Dal l as Bar A ssoci ati on l Headnotes 11

Classifieds

August

OFFICE SPACE

Time is Money! 3 miles from County Courthouse – 2 miles to downtown!

Quality office space at lower than market prices – $18/sf. Includes electricity and free garage parking. 9 miles to Love Field Airport. Minutes to DART rail, Baylor University Medical Center, Dallas Arts District, SMU, Oak Lawn, West Village. Centrally located on major thoroughfares. Uptown Tower. 4144 N. Central Expressway. (972) 490-7348.

High-rise views at low-rise rates. Panoramic views from 63rd floor. Class-A downtown space close to courthouse, AV-rated law firm. Access to large conference room, library, kitchen. Secretarial, clerical, reception available.

Offices available with very nice secretarial stations. Negotiable. Call Kristi Freeman at (214) 761-6460.

Office Space: Downtown Dallas Minutes from Courthouses. Two office spaces available. Perfect for attorney and legal assistant/secretary. One large two window office and one inside office space with phone system, conference room, reception area, kitchen, Internet, copier, fax, 24-hour access and parking.

Contact (214) 651-8144.

Office space available within small real estate law firm located at 4054 McKinney Avenue. Shared conference and break room, copier, DSL & phone equipment are available if needed. No long term commitment and a total monthly rate of $650.00. For inquiry, please call (214) 520-0600.

Tired of sterile office buildings and elevators? One large office ($1,200) with fire place and one small office ($600) available (together or separately) in historic

home in Uptown. These unique offices have great client appeal. Receptionist service and conference room available.

Picture of home at www.texascrimlaw. com. Call Mick (214) 720-9552.

Window office space (14x14) located at Hampton Court, 4311 Oak Lawn Avenue, Suite 600, Dallas, TX 75219 with a spectacular view of downtown Dallas. This space comes with patio access, reception area, conference rooms and kitchen. Space is shared with a family and civil litigation practice. $2,000/monthly.

Contact Wilma Viktorin, (214) 4169010 or at wviktorin@duffee-eitzen.com.

For photos of the space go to http://www.mydallasfamilyattorney.com.

Window office Space Available: 6116 N. Central Expressway across from SMU, formerly known by Dallasites as the “Dallas Cowboy Building.” Space includes access to conference rooms, receptionist, kitchen, computer network, Internet, phones, and copier.

Contact John Withers, Jr. at (214) 3632095 or johnjr@witherslaw.com.

POSITION AVAILABLE

Well established Texas law firm with offices throughout the state seeks an attorney with 3-6 years’ experience for its Dallas office. Seeking an academically superior candidate with exceptional research and writing skills for assistance with commercial insurance coverage and bad faith consultation and litigation and related risk management transactional work. Salary commensurate with experience, performance bonus program and full benefits available. Send your resume in confidence to dloyd@dloydlegalrecruiting.com.

Downtown Dallas law firm focusing on risk management solutions, civil defense litigation, personal injury, transportation, employment claims, insurance coverage

PUBLIC FORUM

“LEGISLATION SESSION SUMMARY” Tuesday, August 23, Noon, at Belo

and commercial litigation seeks an attorney who wants the opportunity to control their own development and be recognized and rewarded for effective performance.

We believe the ideal candidate would have a minimum of 4 years’ experience and the ability to write, demonstrating effective analysis, creative problem solving, and communication skills. Send resume to tammi.pintor@whitecolaw.com.

Stable work record necessary. Compensation negotiable. Some portable hourly clientele and involvement in one or more associations a plus. Firm offers first-rate office environment. This is an excellent opportunity for the right attorney. Respond to Dallas Bar Association, Box 08–11A, 2101 Ross Avenue, Dallas, TX 75201.

Godwin Ronquillo PC, a downtown Dallas law firm, seeks associates with 2009 bar date or older. Experience in commercial/civil litigation. Candidate must have excellent credentials, research and writing skills with some deposition, hearing and trial experience. Principals only. Contact: employment@godwinronquillo.com.

Experienced and conscientious litigation attorney seeks contract work.

Research, pleadings, motions, briefs, discovery, court appearances, depositions, and appeals. UT law honors graduate, AV-rated, excellent references, reasonable hourly rate. Contact attorney3503@sbcglobal.net.

Palmer & Manuel, LLP, a 13 attorney firm in Campbell Centre, seeks one experienced business litigation and one experienced family law attorney. Applicants should have substantial portable business. The firm’s compensation formula allows attorneys to keep a substantial portion of their fees. See the firm’s website at www.pamlaw.com. Please reply to spalmer@pamlaw.com.

Associate Position Available for Bankruptcy Trustee and Attorney. Position involves pleading preparation, research, briefing, attendance at depositions, hearings, and trials, discovery preparation and responses, in consumer, business and trustee bankruptcy cases. 1 to 2 years of bankruptcy or litigation experience is preferable. Top applicants only.

North Dallas location. Send resume and writing sample to Tarah Simmons at tarah_simmons@earthlink.net.

Dallas boutique business, commercial, bankruptcy, and construction litigation firm seeks experienced litigator. Candidate must have first chair trial experience and have taken expert deposition.

POSITION WANTED

SERVICES

Diamond and Gold Buyer. Buying all types of Diamonds, Immediate Cash Paid. Consignment terms available @ 10 -20% over CASH. For consultation and offers please call (214) 739-0089.

Mexican Law Expert - Attorney, former law professor testifying since 1997 in U.S. lawsuits involving Mexican law issues: FNC motions, Mexican claims/ defenses, personal injury, moral damages, contract law, corporations. Co-author, leading treatise in field. J.D., Harvard Law. David Lopez, (210) 222-9494. dlopez@pulmanlaw.com Do you have a big case or just feel overwhelmed? Top quality litigation support attorney available for contract assignments. Work experience includes complex business litigation, tort and insurance cases. Former judicial clerk, law review, appellate experience. Very competitive rates. (214) 243-8444.

Place Your Ad Here! For affordable classified advertising rates call Judi Smalling at (214) 220-7452.

Veterans Issues CLE for In-House Counsel MCLE 2.00, including Ethics 1.00 Wednesday, August 31 at Belo

Registration begins at 2:00 p.m.; Program 2:30 – 4:30 p.m.; Reception to follow.

Space is limited and pre-registration is required.

For more information, or to RSVP, contact Greta E. Cowart at greta.cowart@haynesboone.com or Marjorie Powell at marjorie.powell@aa.com.

Sponsored by American Airlines Legal Department, Haynes and Boone, LLP and the Dallas Volunteer Attorney Program

RSVP to sevans@dallasbar.org Sponsored by the DBA Public Forum Committee.

Ensure your family coverage is tailor-made...

The State Bar of Texas Insurance Trust specializes in helping all Bar Members and their Eligible Employees obtain complete insurance coverage at any point in their lives. From Health Insurance to Long Term Disability Insurance, the Trust has you covered.

Insurance Trust

800.460.7248 www.sbotit.com

10-Week Fall Course

August 22—October 24, 2011 at Belo

Turning 65: What You Need to Know if You or Your Clients Are Turning 65 A full day CLE program

State Bar of Texas

SPANISH FOR LAWYERS

Wednesday, September 7, 2011 Noon at Belo Sponsored by the DBA Solo & Small Firm Section, Estate Planning & Probate Section, Senior Lawyers’ Committee and DAYL Elder Law Committee

Beginners: Tuesdays, 6:00-7:30 p.m.

Intermediate: Wednesdays, 6:00-7:30 p.m.

Beginning Level VI: Thursdays, 6:00-7:30 p.m.

Class cost: $180 per course. Deadline to register: August 15, 2011 For more information, contact Teddi Rivas at TRivas@dallasbar.org or (214) 220-7447.

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2011 DBA 100 CLUB – CONGRATULATIONS! We are proud to recognize the following Firms, Corporate Legal departments and Government agencies for their 100% support of the Dallas Bar Association as members of the 2011 DBA 100 Club!

The DBA 100 Club is a distinguished membership recognition category that reflects a commitment to the advancement of the legal profession and the betterment of the community. The DBA 100 Club consists of Firms and Government agencies with two or more attorneys as well as corporate legal departments that have 100% membership in the DBA. Recognition for 100% support is given to the 2011 DBA 100 Club members at our Annual meeting in November and in the 2012 DBA Membership Directory.

To become a 2011 DBA 100 Club member, please submit your request via email including a list of all lawyers in your Dallas office or corporate legal department to Kim Watson, kwatson@dallasbar.org. We will verify your list with our membership records and once approved, your name will be added to the 2011 DBA 100 Club!

THANK YOU FOR YOUR SUPPORT OF THE DALLAS BAR ASSOCIATION! DBA 100 Club Members as of July 15, 2011 Law Firms with 2 to 5 Attorneys 123 Divorce Company A. William Arnold III & Associates, P.C. Abigail & Berthoff Fernandes PLLC Ackerman & Savage, L.L.P. Adair, Morris & Osborn, P.C. Aldous Law Firm Alexander Dubose & Townsend LLP Anderson & Brocious P.C. Ashcraft Law Firm Ashley & Laird Atkins, O’Toole & Briner, L.L.C. Ayres Law Office, P.C. Badmus Law Firm Barnett • McNair • Hall, L.L.P. Beirne, Maynard & Parsons, L.L.P. Blankenship, Wiland & O’Connor, P.C. Broden & Mickelsen Brousseau Graham & Dooley Brown Fox PLLC Bruegger & McCullough, P.C. Buchanan & Bellan, L.L.P. Buether Joe & Carpenter, LLC Busch Ruotolo Simpson LLP Calabrese Huff, P.C. Calloway, Norris, Burdette & Weber, PLLC Campbell & Chadwick, P.C. Carlock-Gormley-Hight Clark Law Firm Cleaves Law Firm, PLLC Coffin & Driver, PLLC Collins Law Group PC Crain Lewis, L.L.P. Curtis | Castillo PC Daniel Sheehan & Associates, LLP Dedman & Handschuch PLLC Dement, Roach & Stern, PLLC Diamond | Apgar, LLP Edwards & de la Cerda, L.L.C. Eggleston & Chambers, L.L.P. Ellis & Tierney, LLP Fair & Watts, P.C. Fisher Holmes & Welch, P.C. Garza & Harris, Ltd. Grogan & Brawner P.C. Gunnstaks Law Office Hamilton & Squibb, LLP Hance & Wickham, P.C. Holmes Firm PC Horton & Archibald, P.C. Jameson & Powers, P.C. Johnson Noriega PLLC Johnston u Tobey, P.C. Judd & Associates, PLLC Kabani & Kabani, PLLC Kapioltas & Forni, PLLC Kaplan & Associates, L.L.P. Karel & Hicks, P.C. Keane, Fowler & Donohue Kelly, Durham & Pittard, LLP

Kinser & Bates, L.L.P. Kish & Manktelow, P.C. Kleiman, Lawrence, Baskind & Fitzgerald, L.L.P. Koning Rubarts LLP Koons Real Estate Law Korn, Bowdich & Diaz, L.L.P. Krage & Janvey, L.L.P. Landa & Landa Law Office of Emily Horton PLLC Law Offices of Richard A. Gump, Jr., P.C. Lewis Brisbois Bisgaard & Smith LLP Lidji Dorey & Hooper Lillard Wise Szygenda PLLC Lippe & Associates Lori A. Leu & Associates Maris & Lanier, P.C. Marshall & Kellow, LLP McShane & Davis, L.L.P. Milby, PLLC Miller and Bennett, Attorneys and Counselors Miller Mentzer, P.C. Mills & Williams L.L.P. Mincey-Carter, PC Mitchell, Goff & Mitchell, LLP Nesbitt, Vassar, McCown & Roden, L.L.P. Owens Hervey PLLC Pace & Pace, L.L.P. Pezzulli Barnes, LLP Prager & Miller, P.C. Pratt & Yungblut, P.C. Quaid & Quaid, L.L.C. Raggio & Raggio, P.L.L.C. Ramirez & Associates, P.C. Rasansky Law Firm Ray & Thatcher, Attorneys at Law PC Reed & Riordan, P.L.L.C Reese Gordon Marketos, LLP Richardson Koudelka, LLP Rochelle & Rankin LLP Russell & Wright, PLLC Schorr Law Firm, PC Schuerenberg & Grimes, P.C. Sessions Fishman Nathan & Israel LLP Sheils Winnubst, PC Sherman & Yaquinto, L.L.P. Skiermont Puckett LLP Smith, Stern, Friedman & Nelms, P.C. Spector & Johnson, PLLC Stoddard & Welsh, PLLC Stromberg Stock Stuber Cooper Voge, PLLC Suggs Law Firm, P.C. Sullivan & Holston The Bhatti Law Firm, PLLC The Blend Law Firm, P.C. The DeLoney Law Group, PLLC The Draper Law Firm, P.C. The Elliott Law Firm, P.C. The Foret Law Firm

The Krenik Law Firm, PLLC The Law Offices of Tim O’Hare The Schmidt Firm, LLP Thomas, Cinclair & Beuttenmuller, PC Tillman Betanzos LLP Tobolowsky & Burk, P.C. Vela | Keller P.C. Walker & Long Wesner Coke & Clymer, P.C. Whaley, Letteer & Mock, P.C. Winn, Beaudry & Winn, L.L.P. Withers & Withers, P.C. Wolfish & Newman, P.C. Woodward & Shaw Woolley <> Wilson, LLP Wright & Toles Yarbrough & Elliott, P.C. Zaby & Associates Law Firms with 6 or More Attorneys Ackels & Ackels, L.L.P. Addison Law Firm P.C. Anderson Tobin, PLLC Andrews Barth & Harrison, PC Baker Botts L.L.P. Beasley, Hightower & Hartmann, P.C. Ben Abbott, P.C. Blanscet Sutherland Hooper & Hale, LLP Brown & Hofmeister, L.L.P. Brown McCarroll, L.L.P. Burford & Ryburn, L.L.P. Canterbury, Elder, Gooch, Surratt, Shapiro & Stein, P.C. Cantey Hanger LLP Carrington, Coleman, Sloman & Blumenthal, L.L.P. Carstens & Cahoon, LLP Cobb Martinez Woodward PLLC Condon Thornton Sladek Harrell LLP Cowles & Thompson, P.C. Curran Tomko Tarski LLP David, Goodman & Madole, P.C. Deans & Lyons, LLP ELROD, PLLC Fletcher, Farley, Shipman & Salinas, LLP Ford, Nassen & Baldwin, P.C. Fulbright & Jaworski L.L.P. Godwin Ronquillo PC Goldfarb Branham LLP Goranson, Bain, Larsen, Greenwald, Maultsby & Murphy, PLLC Griffith Nixon Davison, P.C. Gruber Hurst Johansen Hail Shank LLP Guida, Slavich & Flores, P.C. Hankinson Levinger LLP Haynes and Boone LLP Hiersche, Hayward, Drakeley & Urbach, P.C. Johnson, Jordan, Nipper & Monk, P.C. Kessler Collins, P.C. Klemchuk Kubasta LLP

KoonsFuller Kroney Morse Lan, PC Little Pedersen Fankhauser LLP Littler Mendelson, P.C. Locke Lord Bissell & Liddell LLP Loewinsohn Flegle Deary L.L.P. Lynn Tillotson Pinker & Cox, L.L.P. Macdonald Devin, P.C. Malouf Lynch Jackson & Swinson, P.C. Matthews, Stein, Shiels, Pearce, Knott, Eden & Davis, L.L.P. McCurley, Orsinger, McCurley, Nelson & Downing, L.L.P. McGuire, Craddock & Strother, P.C. McKool Smith P.C. Meadows, Collier, Reed, Cousins, Crouch & Ungerman, L.L.P. Munsch Hardt Kopf & Harr, P.C. Passman & Jones, P.C. Riney Palter PLLC Rochelle McCullough LLP Sayles Werbner, P.C. Scheef & Stone, L.L.P. SettlePou Shackelford, Melton & McKinley, LLP Snell Wylie & Tibbals, P.C. Sorrels, Udashen & Anton Stacy & Conder, L.L.P. Staubus & Randall, L.L.P. Steed Flagg Lamberth LLP Stinnett Thiebaud & Remington L.L.P. Susman Godfrey L.L.P. Taber Estes Thorne & Carr PLLC The Bassett Firm, P.C. The Hartnett Law Firm The Law Offices of Frank L. Branson, P.C. Thomas, Feldman & Wilshusen, L.L.P. Thompson & Knight LLP Thompson, Coe, Cousins & Irons, LLP White & Wiggins L.L.P. Winstead PC Wright Ginsberg Brusilow P.C. Zelle Hofmann Voelbel & Mason LLP Corporate Legal Departments Alon USA Energy Inc. Austin Industries, Inc. Baptist Foundation of Texas Belo Corp.

Contran Corporation Front Burner Restaurants, LP Genesco Sports Enterprises Hexter-Fair Title Company MetroPCS Communications, Inc. Morgan Management Corporation Neuberger Berman ORIX USA Corporation Tenaska Power Services Co. Government Agencies City of Irving