An article written by Jordan, Lynch & Cancienne attorney Katherine Raunikar on the application of the exculpatory clause in breach of contract cases has been featured in The Energy Dispatch newsletter, a publication by the Institute for Energy Law’s Young Energy Professionals Committee.
“Bachtell Enterprises, LLC v. Ankor E&P Holdings Corporation: Impeding Application of the Exculpatory Clause to Accounting-Related Breaches” is centered around the use of the American Association of Professional Landmen Joint Operating Agreement (JOA) Form 610 – specifically the 1989 form – which governs many oil and gas joint ventures.
The article compares the 1989 form’s exculpatory clause to other forms and describes how courts have applied the clauses. It then highlights court decisions that have impacted the use of joint operating agreements. They include:
- In 2012, the Texas Supreme Court in Reeder v. Wood County Energy LLC “expanded operators’ protection under the 1989 form to exempt their liability for breaches of contract.”
- In 2022, the 14th Court of Appeals in Houston held in Bachtell v. Ankor that Reeder did not extend the 1989 form’s exculpatory clause to “intentional” breaches of contract.
The article details how the Bachtell decision could impact future JOA disputes. “Because the court in Bachtell noted the exculpatory clause protects operators only from ‘negligent injury,’ it has hindered operators’ argument that the exculpatory clause protects them after overcharging nonoperators,” Ms. Raunikar wrote.
The article also points out the court’s description of Ankor’s conduct as “intentional” to distinguish it from “willful misconduct.”
“This undefined ‘intentional’ conduct may eventually serve to prevent operators from breaching contracts in factual situations outside of Bachtell,” Ms. Raunikar writes. “But this depends on how the 14th Court of Appeals eventually defines ‘intentional,’ what proof it would require, and whether other appellate courts adopt the standard for the 1989 form.”
To read the full article, click here.