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was always curious about behind-the-scenes motivations. He carefully plotted his adversaries’ actions in order to predict their next move. As a result, he always was one step ahead. Mr. Hudson was also a student of the law. He and a group of other lawyers gathered one evening a month in one of their libraries and read Vernon’s Annotated Black Statues from the first volume to the last. When they completed the task, they would start again. He confided in me that appreciation of the law was enhanced by a bottle of whiskey. Mr. Hudson’s greatest skills were in legal research. He once told Kleber Miller that he knew Kleber would be successful because he had the type of “iron ass” necessary to sit through marathon legal research projects. Mr. Hudson was no stranger to those projects and could often be found in the library with his feet propped up on a table puffing on a pipe full of Sir Walter Raleigh tobacco. He often traced a legal theory back to its origin. As a result, his research often dead-ended at Blackstone’s Commentaries. He had an abiding respect for Sir William and his observations of the common law. That explains the title of our Association’s most prestigious award.
One of Texas’ Largest Judgments During his mid-career, Mr. Hudson caught the oil and gas litigation wave. He and his firm were general outside counsel to a number of independent oil and gas companies, such as Texas Pacific Oil & Coal Co. and Southland Royalty. His greatest victory happened in Crane County, Texas in a celebrated oil and gas case. Gulf Oil Corp. v. Southland Royalty Co., 496 S.W.2d 547 (Tex. 1973). With all due respect to Joe Jamail, Gulf v. Southland had a greater monetary impact than Pennzoil v. Texaco. And it also demonstrated luther Hudson’s cunning. Mr. Hudson discovered that a significant part of the Permian Basin was leased in the 1920s by major oil companies using startlingly similar lease forms. Those forms provided for a 50-year lease in the habendum (granting) clause with a separate force majeure (excuse) clause. After he analyzed the leases, Mr. Hudson came to the conclusion that the 50-year habendum clause controlled over any extensions that might be invoked by the force majeure clause unless there had been a complete cessation of production. The 50-year term was fast approaching. Mr. Hudson advised Southland Royalty to top lease as much of the Permian Basin as possible and obtain reversionary interests on top of the major oil companies’ leases. As he predicted, the majors responded by filing a declaratory judgment action in Crane County on a particularly large lease of over 45,000 acres. Gulf and the majors claimed that the proration rules and regulations 10 www.tarrantbar.org ■ April 2016
adopted by the Texas Railroad Commission were intervening events anticipated by the force majeure clause. As a result, they argued that the leases should be extended. The proration rules came into effect in 1938 on the eve of World War ii and continued through 1967, when they were replaced by other regulations that limited production in order to prevent waste. Gulf calculated that, on the Crane lease, it was denied a total of over 4,661 days of production and asked that the lease be extended for that additional period of time. But Mr. Hudson knew that the force majeure clause would apply only if a complete cessation of operations occurred. He wrangled a stipulation from Gulf that proration rules and regulations never caused a complete cessation of production even though wells were not allowed to produce to their full capacity. nonetheless, Gulf and the other majors were confident that they would win in Crane County. They were the largest employer in the county, and most of the remaining businesses depended on big oil for their existence. But Mr. Hudson knew something big oil did not. He never planned for the case to be submitted to a jury. His research showed that Judge Austin seldom granted summary judgments. instead, Judge Austin allowed the plaintiff to complete its presentation to a jury. After the plaintiff rested, the Judge seriously considered matters raised in summary judgment as the basis for granting a directed verdict. Gulf’s Dallas lawyers put on a case based on the unfairness of the proration rule and argued that the only fair thing was to extend the lease. Confident that they had won over the jury, Gulf rested. Mr. Hudson orally made the motion for directed verdict. Judge Austin did not hesitate and granted the motion from the bench. The result was pandemonium. Gulf and the other major companies had counted on the leases continuing. Their earnings estimates and SeC filings depended on continued leases. Gulf promised an immediate appeal and, good to its word, filed in the el Paso Court of Civil Appeals. A divided court affirmed Judge Austin, but there was a strong dissent in favor of big oil. The case was appealed to the Texas Supreme Court. When the court granted writ, the new York Stock exchange halted trading in Gulf’s stock. in a move unheard of at the time, the exchange asked the Texas Supreme Court to alert it prior to the issuance of any decision so that stock trading could be halted again until the results of the decision were fully digested. The Supreme Court affirmed Judge Austin in an opinion authored by Justice Tom Reavley. The result was the transfer of billions of dollars of oil and gas interests that dwarfed the $13 billion Pennzoil/Texaco judgment. And luther Hudson did all of that from right here in Fort Worth, Texas.