The year was 1994 and Union Oil of California had been dealt a big blow in court.
A Texas jury had decided that an affiliate of Unocal, then a prominent oil company, had committed fraud in a dispute involving the ownership of mineral rights in Louisiana. At stake: $80 million in damages.
Enter Marie Yeates.
Yeates, then a young partner at V&E, was tasked with handling the appeal. At the time, V&E had only recently launched a standalone appellate practice – it was among the first big law firms in the country to do so – and had named Yeates as its chief.
Thanks to her efforts, the Texas Court of Appeals in Beaumont handed Unocal a complete victory, reversing the $80 million judgment and rendering judgment in favor of the Unocal affiliate.
Today Yeates is the co-head of V&E’s renowned Appellate practice and she has gained a reputation as one of the country’s leading appellate lawyers representing energy clients and others in federal and state appellate courts across the country.
Several of her victories in recent years have made law in the oil and gas arena. For instance, in an appellate win on behalf of Denbury Resources, the Texas Supreme Court clarified the test for common carrier status for pipelines in Texas, a status required for pipeline companies to exercise eminent domain.
Likewise, in a victory for Midstates Petroleum, Yeates prevailed on the Louisiana Supreme Court to interpret the Model Form Joint Operating Agreement not to cover “after-acquired” leases in the operating area.
Yeates, a V&E lifer who has practiced at the firm for 38 years, recently sat down to answer questions about a much earlier career highlight, her 1994 Unocal win. Here’s what she had to say.
What was the original lawsuit about?
The case involved an affiliate of Unocal called Prairie Producing. Prairie Producing had gotten tangled up in a dispute between Angelina Hardwood Lumber Co. and the Hankamer family, over who owned oil and gas mineral rights in a certain tract of land in Calcasieu Parish, Louisiana.
You had the Hankamers on one side and Angelina — owned by the Henderson family — on the other. I called them the Hatfields and the McCoys.
Ultimately, the Hendersons and the Hakamers settled their dispute. Angelina got one-third of the mineral rights and the Hankamers got the rest.
Angelina subsequently sued Prairie, alleging that, in order to secure leases from Angelina, Prairie had represented to Angelina that Prairie would be neutral in the dispute over ownership of the Louisiana mineral rights. Angelina alleged that Prairie committed fraud because, according to Angelina, Prairie never intended to be impartial in that mineral rights dispute.
Angelina contended that, as a result of Prairie’s alleged fraud, Angelina was compelled to settle with the Hankamers for much less in mineral rights than Angelina would otherwise have received. A jury found that Prairie Producing had indeed defrauded Angelina and awarded the plaintiff $80 million in actual and exemplary damages.
How did it come about that V&E was hired to handle the appeal?
The case was tried in Texas, and Unocal, which was already a client of V&E, wanted Texas appellate counsel.
The case was a good fit for me because while it was tried in Texas, it involved Louisiana law. I had attended Louisiana State University School of Law and I had some familiarity with Louisiana oil and gas law.
Did your knowledge of Louisiana law help you win?
It did. In fact, we prevailed in the appeal by convincing the appellate court that the “measure of damages” submitted in the jury charge would, as a matter of Louisiana law, result in zero damages.
The jury had been asked: What was the difference between the value of Angelina’s mineral interest under the settlement with the Hankamers, and the value of Angelina’s mineral interest “but for the conduct of Prairie Producing?” In other words, what did Angelina give up by settling?
In our legal research, we found a significant case out of the Louisiana Supreme Court called American Lung Association of Louisiana, Inc. v. State Mineral Board. In that case, the Louisiana Supreme Court held that when you settle ownership of mineral rights, you are deemed to have always owned the minerals in the amount for which you settled.
So, when Angelina agreed in that settlement in Louisiana that it owned one-third of the minerals, Louisiana law says that’s how much Angelina always owned. Therefore, under the applicable Louisiana law, the difference between the value of Angelina’s mineral interests before the settlement and the value of its mineral interests after the settlement was zero. So, the answer to the damages question put to the jury was, as a matter of law, zero.
That sounds pretty jaw dropping.
It was.
Why hadn’t Angelina’s lawyers thought this through before posing the damages question to the jury?
Remember, the case was tried in Texas. They may not have been familiar with the relevant aspect of Louisiana oil and gas law.
Did you ever encounter an appeal like this again?
I did. Ten years after the Unocal appeal, I handled another appeal for a large oil company facing tens of millions of dollars in damages.
Similar to our argument in the Unocal appeal, I argued in this later appeal that the measure of damages submitted in the jury charge, when applying Texas oil and gas law, could only result in zero damages.
At the time, there were people on our own team who said, “A court will never accept that argument. The plaintiff clearly did not mean to submit a question to the jury that took him to zero damages.”
And I said, “Oh, really? Go read Prairie Producing.”
Later on, the appeal went to mediation. I remember being in a room full of oil and gas gurus, including my client’s CEO.
I stood in front of a white board and explained how the damages, as submitted in the jury charge, could only result in a zero finding. I think the argument was instrumental in getting the case settled.
V&E partner Marie Yeates is the co-head of the firm’s Appellate practice.
What lessons can we take away from the Unocal appeal?
This case shows a number of things about good appellate work.
Obviously, you have to be good at legal research and you have to know the law. But another part of being a successful appellate lawyer is being willing to think creatively and make creative arguments.
Every appeal is like a puzzle, and there’s always an answer if you work at it hard enough and you are creative.