CASE NO. 12-15-00087-CV IN THE TWELFTH COURT OF APPEALS at Tyler

_______________ EXCO OPERATING COMPANY, LP Appellant, V. MARY K. M C GEE Appellee.

_______________ Appeal from Cause No. 369-09 115th District Court, Upshur County, Texas Honorable Lauren Parish Presiding

_________ SURREPLY BRIEF OF APPELLEE MARY K. M C GEE
JOHN D. SLOAN, JR. Texas Bar No. 18505100 E-mail: jsloan@sloanfirm.com JUSTIN A. SMITH Texas Bar No. 24058357 E-mail: jsmith@sloanfirm.com Sloan, Bagley, Hatcher & Perry Law Firm 101 East Whaley Street P.O. Drawer 2909 Longview, Texas 75606 Telephone: 903-757-7000 Telecopier: 903-757-7574

ATTORNEYS FOR APPELLEE MARY K. M C GEE
ORAL ARGUMENT REQUESTED ACCEPTED 12-15-00087-CV TWELFTH COURT OF APPEALS

TYLER, TEXAS 9/15/2015 9:36:33 AM

Pam Estes CLERKi TABLE OF CONTENTS
Table of Contents. ...................................................................... i Index of Authorities. .................................................................. ii Terminology. ............................................................................... iv Argument and Authorities. ....................................................... 1 Prayer. ........................................................................................ 14 Certificate of Service. ................................................................. 15 Certificate of Compliance. ......................................................... 16ii INDEX OF AUTHORITIES CASES PAGE(S) Barker v. Eckman , 213 S.W.3d 306 (Tex. 2006) ............................................................................ 11 Findlay v. Cave , 611 S.W.2d 57 (Tex. 1981) ................................. 6 Fleming & Assocs. v. Barton , 425 S.W.3d 560 (Tex. App.—Houst on [14th Dist.], Feb. 27, 2014, pet. denied Ma y 1, 2015) .................................... , 12, 14, 15, 16 In the Interest of C.H. , 2014 Lex. App. LEXIS 8675 (Tex. App.—F ort Worth 2014, no pet.) ................................ 12 Kupchynsky v. Nardiello , 230 S.W.3d 685 (Tex. App.—Dallas 2007, pet. denied ) .................................... 7 McNamara v. Fulks , 855 S.W.2d 782 (Tex. App.—El Pa so 1993, orig. proceeding) ....................... 10 Outdoor Sys., Inc. v. BBE, LLC , 105 S.W.3d 66 (Tex. App.—Eas tland 2003, pet. denied) ........................... 4-5 Pegasus Energy Group, Inc. v. Cheyenne Petroleum Co. , 3 S.W.3d 112 (Tex. App.––Corpu s Christi 1999, pet. denied) ........ 7, 8, 10 Ragsdale v. Progressive Voters League , 801 S.W.2d 880 (Tex. 1990) ............................................................................. 8 Smith v. Patrick W.Y. Tam Trust , 296 S.W. 3d 545 (Tex. 2009) ....................................... 8, 9, 10 Tatum v. Preston Carter Co. , 702 S.W.2d 186 (Tex. 1986) ........................................................................... 11iii Texas Gen. Indem. Co. v. Speakman , 736 S.W.2d 874 (Tex. App.—Dallas 1987, no writ) ........................................ 7 Wayne v. A.V.A. Vending, Inc. , 32 S.W.3d 412, 418 (Tex. App.––Corpus Christi 2001, pet. denied) ............... 2, 6 Weaver v. Jamar , 383 S.W.3d 805 (Tex. App.—Houston [14th Dist.] 2012, no pet.) ................. 9 Whole Foods Mkt. Southwest, Inc. v. Tijerina , 979 S.W.2d 768 (Tex. App.—Houston [14th Dist.] 1998, pet. denied) ........ 13 Texas Rules and Statutes Tex. Civ. Prac. & Rem. Code § 38.001

........................................... 15 Tex. Civ. Prac. & Rem. Code § 38.005

........................................... 15 Tex. R. App. P. 33. .......................................................................... 12 Tex. R. Civ. P. 166a(i). ..................................................................... 7 Tex. R. Civ. P. 301 ........................................................................... 8iv TERMINOLOGY

“EXCO” or “Appellant” Appellant/Defendant, EXCO Operating Company, LP “McGee” or “Appellee” Appellee/ Plaintiff, Mary K. McGee “Judge Parish” Honorable Lauren Parish, 115th Judicial District Court, Upshur County, Texas The “Lease” The Oil, Gas and Mineral Lease Dated February 21, 1996, originally between Curtis Webb and Wife Mary K. McGee, as lessors, and Amoco Production Company, as lessee. (5 R.R. Pl. Ex. 1) The “Property” The 93.9 acres of land, more or less, apart of the David Meredith Survey, A315, subject to the Lease and made the basis of the underlying lawsuit brought by McGee.1 ARGUMENT AND AUTHORITIES

A. EXCO has failed to demonstr ate that McGee’s demands were excessive.
EXCO raises several new ar guments regarding excessive demand in its Reply Brief. Of no te, EXCO now argues that: (1) it performed under the Lease; (2) McGee’s unliquidated demands were excessive; and (3) McGee’s offers at mediation should not be considered. (EXCO’s Reply at 2, 6, 8). The remainder of EXCO’s excessive demand arguments echo its original brief. McGee will not belabor those points, having addressed them in Appellee’s Brief. 1. EXCO’s failure to perform under the Lease justified McGee’s belief that her demands were reasonable

. EXCO argues that “[t]he jury verdict further demonstrates that McGee’s demands sought amounts to which she was not entitled, and that they were th erefore excessive.” (EXCO’s Reply at 3-4). Though presented in a ne w package, this is little more2 than a reiteration of EXCO’s mantra in this appeal: “Foresight is 20/20.” To evidence this, EXCO asserts that the jury did not ultimately find McGee entitled to the full measure of damages she sought, and that its verdict is indisputable evidence of that fact. (EXCO’s Reply at 3). This circular argument misses the point. The proper question is not whether the jury ultimately found McGee entitled to the full measure of damages she sought; the proper question is whether she acted reasonably when she made her demands

. Wayne v. A.V.A. Vending, Inc. , 52 S.W.3d 412, 418 (Tex. App.—Corpus Christi 2001, pet. denied). Prior to litigating the Leas e and based upon its plain language, McGee had every reason to believe that she was legally entitled to recover damages for he r land. (Appellant’s App. Tab 4); (5 R.R. D.’s Ex. 6). EXCO alleges that McGee’s attempt to enforce that right was unreasonable becaus e the jury did not ultimately award her damages for that point at trial. (EXCO’s Reply at 9) (“...EXCO did restore the well site to it s proper state... [t]his is confirmed by the jury verdict, which awarded nothing to McGee3 for loss of property value, a finding that McGee has not appealed.”). This reasoning wo uld make sense if Appellee had made demands for her land after the jury held she was not entitled to it; because that is not the factual scenario here, the reasoning is mystifying. Prior to a jury’s verdict, there are nothing but fact questions existing regard ing the elements of a cause of action and damages. If a party believes that no fact questions existing regarding these causes of action or elements of damages, they can file a motion for summa ry judgment and, if they are right, the trial court must grant that relief. Note, and this is important, that EXCO does not assert in either their brief or reply that they believed there was no fact question regarding Appellee’s entitlement to damages for her la nd and therefore filed a motion for summary judgment, which, being right in their assessment, was granted. Appellant’s argument that a jury’s verdict conclusively precludes a party’s reasonable belie f that they are entitled to certain damages based on certain claims before that jury’s verdict is rendered cannot be credited. Such reasoning undermines the4 entire point of a jury trial. Though certainly not for a lack of effort, EXCO has failed to identify any au thority charging a litigant with knowledge of the eventual outcome of their case. 1 2. McGee acted reasonably wh en making her settlement demands.
EXCO discusses Outdoor Sys., Inc. v. BBE, LLC at some length, analogizing it to the ca se at bar. (EXCO’s Reply at 6-7); citing 105 S.W.3d 66 (Tex. App.—E astland 2003, pet. denied). While that case does address an unreasonable unliquidated demand, it bears little similari ty to this case. Notably, Outdoor hinged on a landlord’s demand for an unliquidated sum, under threat of forfeiture of the tenant’s lease. Id . “As a general rule, the demand for rent, for the nonpay ment of which the lessor may declare the lease forfeited, must be for the precise amount of rent due, and if an excessive amount is demanded the demand will be ineffectual.” Id. at 71 (emphasis added). The case here differs

1 With	respect	to	the	photographs,	it	is	clear	that	the	land	had not	been	restored	at the	 time	 they	 were	 taken,	 regardless	 of	 when	 that	 took	 place.	 A ppellee’s	 counsel relied	on	the	metadata	 for	the	photographs	and	the	dates	on	 the electronic	 folders they	 were	 contained	 in	 to	 determine	 those	 dates,	 as	 the	 attorne y	 representing Appellee	 below	 is	 no	 longer	 with	 the	 firm.	 If	 those	 dates	 are	 i n	 error,	 Appellee’s counsel	apologizes	for	the	mistake,	which	was	unintentional.5 markedly—if nothing else, EXCO is not the sort of tenant that pays rent. Moreover, the Outdoor Systems court took specific issue with the fact that the demand was unliquidated: rent is a necessarily liquidated sum, rend ering such a demand wholly improper. Id . at 73 (“BBE’s demand was not for a specific liquidated sum.”). 3. EXCO’s arguments do not wa rrant the remedy it seeks. EXCO attempts to justify its mischaracterization of the facts below by asserting that there is no evidence of McGee’s lowered settlement offers in the record, and that any communications it made in mediation is confidential. (EXCO’s Reply at 8). It is worth noting that EXCO offers only ex cuses for its mischaracterization, not a denial thereof. (EXCO’s Repl y at 8). While EXCO is correct that no evidence of lowered settl ement offers directly appears in the Reporter’s Record, the motions on attorney’s fees filed by both parties in the trial court referenc e their existence, and have gone without objection. (Appellee’s App. Tab 2, p. 2 & Tab 3, p. 3). Additionally, while EXCO correctly notes that statements a party makes in an ADR proceeding ca nnot be offered against them,6 McGee has not offered any of EXCO’s statements from the proceeding; only her own.
EXCO concludes that McGee’ s demands were unreasonable and led directly to a jury trial, thus depriving her of the right to recover attorney’s fees. In arriving at this conclusion, it takes a few wrong turns. It does correctly note that the dispositive inquiry for determining whethe r a demand is excessive is whether the claimant acted unreasonably or in bad faith. (EXCO’s Reply at 1 ( citing Wayne , 52 S.W.3d at 418 (Tex. A pp.—Corpus Christi 2001, pet. denied) ( citing Findlay v. Cave , 611 S.W.2d 57, 58 (Tex. 1981))). However, it continually fai ls to acknowledge the difference between an amount to which one reasonably believes herself entitled under the unliquidated and unlitigated terms of a breached agreement, and the amou nt to which a jury eventually finds her entitled. (EXCO’s Reply at 3-4, 7, 8, 9). Under the holding that EXCO seeks, a litigant must let the jury verdict guide her settlement demands—never mi nd the fact that a trial may come years after the demands are made. The notion is insupportable.7 B. EXCO has failed to demonstrat e that McGee’s attorney’s fees were excessive. After parroting a handful of ex cessive fee arguments from its original brief, EXCO correctl y notes that by putting on controverting evidence of attorney ’s fees, it created a fact issue. (EXCO’s Reply at 11-12) ( citing Texas Gen. Indem. Co. v. Speakman , 736 S.W.2d 874, 885-86 (T ex. App.—Dallas 1987, no writ)). Unfortunately for EXCO, me rely creating a fact issue does not establish an abuse of discre tion sufficient to overturn a factfinder’s award of attorney’s fees. Pegasus Energy Group, Inc. v. Cheyenne Petroleum Co. , 3 S.W.3d 112, 132 (Tex. App.—Corpus Christi 1999, pet. denied). Such a fact issue would certainly preclude a no-evidence summary ju dgment, directed verdict, or judgment notwithstanding the verdict; it has no effect, however, on an issue submitted to th e trial judge for factfinding. See Tex. R. Civ. P. 166a(i) (“The court must grant the motion unless the respondent . . . rais[es] a genui ne issue of material fact.”); Kupchynsky v. Nardiello , 230 S.W.3d 685, 688 (Tex. App.—Dallas8 2007, pet. denied) (“A directed ve rdict is proper . . . when the evidence is insufficient to raise a material fact issue.”); Tex. R. Civ. P. 301 (“[T]he court may re nder judgment non obstante veredicto if a directed verdic t would have been proper”); but see Pegasus Energy Group, Inc. , 3 S.W.3d at 132. 2
1. EXCO asks this Court to apply an incorrect standard. Despite EXCO’s contentions, McGee does not cite Smith v. Patrick W.Y. Tam Trust in support of the tr ial court’s fee award. (EXCO’s Reply at 13). Quite the contrary. Smith offers little—if any—direct guidance in this dispute. Smith v. Patrick W.Y. Tam Trust , 296 S.W.3d at 548 (“But the jury ’s fee award is not at issue here”). Smith addressed a procedural an d evidentiary doctrine, similar to summary judgment or judgment as a matter of law, where uncontroverted evidence of at torney’s fees established those fees as a matter of law, without submission to a factfinder. See id. ( citing Ragsdale v. Pro gressive Voters League , 801 S.W.2d 880,

2 “The trial court’s award of attorney’s fees will not be disturbed absent an abuse of discretion. A trial court may be reversed for abusing its discretion only when the court of appeals finds the court acted in an unreasonable, arbitrary manner, or acted without reference to any guiding rules and principles.” (internal citations omitted).9 882 (Tex. 1990)). 3 It did not purport to provide guidance to courts evaluating attorney’s fees awarded by a factfinder after reviewing controverted evidence. Smith , 296 S.W.3d at 547-48. EXCO does correctly note that whether a jury acts as factfinder on attorney’s fees or the trial court does, a reviewing court applies the same standard. (EXCO’s Reply at 15-16); Weaver v. Jamar , 383 S.W.3d 805, 814 (Tex. App.—Houston [14th Dist.] 2012, no pet.). However, while f ee awards determined by trial courts and juries are reviewed under the same legal standard, they necessitate different consid erations. “Generally, the trial court enjoys wide discretion in aw arding attorney’s fees, and this [c]ourt will not overturn its decision absent abuse of that

3 “ It is the general rule that the testimon y of an interested witness, such as a party to the suit, though not contradicted, does no more than raise a fact issue to be determined by the jury. Bu t there is an exception to this rule, which is that where the testimony of an interested witness is not contradicted by any other witness, or attendant ci rcumstances, and the same is clear, direct and positive, and free from contradiction, inaccuracies, and circumstances tending to cast suspicio n thereon, it is taken as true, as a matter of law. . . . While the present ca se fits the exception to the general rule, we do not mean to imply that in every case when uncontradicted testimony is offered it mandates an award of the amount claimed. For example, even though the evidence might be uncontradicted, if it is unreasonable, incredible, or its belief is questionable, then such evidence would only raise a fact issue to be determined by the trier of fact.”10 discretion.” Id. ( citing McNamara v. Fulks , 855 S.W.2d 782, 784 (Tex. App.—El Paso 1993, orig. proceeding)). 2. A reviewing court genera lly may not substitute its judgment for that of the factfinder. A trial judge has the duty to reduce a jury’s award of attorney’s fees if she finds a f ee award, based upon uncontroverted evidence, excessive. See, e.g., Thomas v. Bobby D. Assocs. , 2008 Tex. App. LEXIS 5881 at *12. When , as here, a trial judge acting as factfinder awards attorney’s f ees after receiving evidence and argument from both sides, she enjoys considerable latitude in making her decision. See Pegasus Energy Group, Inc. , 3 S.W.3d at 132 (“The determination of the amount to be awarded as a reasonable attorney’s fee is a questi on for the trier of fact, but the award must be supported by competent evidence.”); see also Smith v. Patrick W.Y. Tam Trust , 296 S.W.3d 545, 547 (Tex. 2009) (“The reasonableness of attorney’s fees is ordinarily left to the factfinder, and a reviewing court may not su bstitute its judgment for the jury’s.”). Regarding proportionality between fees and damages, the11 Texas Supreme Court has spoken. In Barker v. Eckman , the Texas Supreme Court rejected the premise underlying EXCO’s argument. See 213 S.W.3d 306, 314 (Tex. 2006). There, the Court remanded an award of attorney’s fees for further proceedings after reducing the award of actual da mages upon which the fees were based. Id . In doing so, it declined to substitute its judgment for that of the fact finder. Id . It also declined to impose a “presumptive proportionality” legal construct, under which a reviewing court would presume that an attorney’s fee award is to be reduced in proportion to an y reduction in actual damages. Id . It reasoned that such an approach would require a presumption that the fact finder “awarded attorney’s fees on some proportionality basis to actual damages .” Id . at 314-15 (emphasis added). It declined to impose such a remedy. Id . ( citing Tatum v. Preston Carter Co. , 702 S.W.2d 186, 188 (Tex. 1986) (holding that court of appeals erred in proportionally reducing exemplary damages in the exact ratio as the actual damages were reduced)). The record before this Court a llows a single conclusion: that Judge Parish, having reviewed th e evidence submitted to her and12 the circumstances of the case, co ncluded that McGee was entitled to the amount of attorney’s fees ultimately awarded. (Appellant’s App. Tab 2). The fact that EXCO disagrees with the weight that Judge Parish gave to each party’s evidence does not constitute an abuse of discretion.

C. The recent Fleming decision does not relieve EXCO of liability for McGee’s attorney’s fees.

EXCO asserts that the recent Fleming & Assocs. v. Barton decision from the Fourt eenth District shields it from liability for McGee’s attorney’s fees. (EXCO’ s Reply at 17); 425 S.W.3d 560, 575 (Tex. App.—Houston [14th Dist.] , Feb. 27, 2014, pet. denied May 1, 2015). As a threshold ma tter, EXCO has waived this argument. To preserve an error fo r appeal, a litigant must object to the error and obtain a ruling denying it. Tex. R. App. P. 33. EXCO did neither, despite filing a Motion for New Trial on the sole issue of attorney’s fe es over a year after the Fleming decision was issued. (C.R. 263-269). Genera lly speaking, any issue not raised at trial or in a motion for new trial is waived on appeal. In the Interest of C.H. , 2014 Lex. App. LEXIS 8675, *4 (Tex. App.—13 Fort Worth 2014, no pet.) This holds true even if a new opinion is issued while the case is pending. See Whole Foods Mkt. Southwest, Inc. v. Tijerina , 979 S.W.2d 768, 773 (Tex. App.— Houston [14th Dist.] 1998, pet. denied). Tijerina involved an appeal from a jury verdict fi nding the appellant liable for retaliatory discharge under the Labor Code. See id. at 772. The appellant raised for the first time on appeal the argument that, as a non-subscriber to the Worker’s Compensation Act, they could not be held liable for retaliatory discharge under the Labor Code. See id. This argument was based up on a Texas Supreme Court opinion, Texas Mexican Railroad. Co. v. Bouchet , issued after a jury rendered a verdict in favor of the plaintiff. See id. at 772. The appellee asserted that the argument was waived because it had not been raised to the trial court. See id. at 773. The appellant, in response, claimed that it could not have raised the argument because two sister court had he ld, and dicta from the Texas Supreme Court suggested, that the argument was precluded. See id. Holding that the argument wa s waived because it was not raised below, the court found that nothing precluded the appellant14 from making argument at the trial court. See id. First, none of the existing authority was binding on the trial court. See id. “After all, [the appellant in Bouchet ] objected during the trial, and having preserved the issue for appeal, rais ed the issue with the court of appeals in spite of [the contrary authority.” See id. Moreover, even if there had been binding contrary auth ority, there was still “no reason why [appellant] could not ha ve made [the] argument,” for purposes of preserving it for appeal. See id. Here, of course, Appellant does not even assert that there was any contrary authority; ra ther, they simply argue that Fleming is “new law.” It is not, however, new law, as Fleming was decided in February 27, 2014, almost a year prior to the trial court issuing her Findings of Fact and Conclusions of Law on attorney’s fees, in January 2015, and Appellant had ample opportunity to raise the argument below. Nor is Fleming “new law,” because Fleming is only binding authority for trial courts in the 14 th District Court of Appeals. Appe llant has less excuse than those put forward in Tijerina , and their attempt to raise Fleming at the
11 th hour is improper and should be precluded.15 Assuming arguendo that EXCO may still raise its Fleming argument, this Court should dec line to adopt the holding. The opinion put great weight on the plain text and legislative history of Texas Civil Practice and Re medies Code § 38.001, but nonetheless came to the flawed conclusion that only individuals and corporations may be held li able for attorney’s fees under Chapter 38. Fleming & Assocs. v. Barton , 425 S.W.3d at 575. As noted in the Fleming opinion, the legislative intent behind Chapter 38’s change of wo rding was to eliminate governmental liability. Id

. There is simply no logical reason for Chapter 38 to apply to individuals and corporations, but not partnerships or other business entities. Assuming that the Chapter’s underlying purpose is to encourage certain classes of aggrieved parties to pursue judicial remedies for th eir harms, such an arbitrary construction would surely impair the underlying purpose, rather than further it. See Tex. Civ. Prac. & Rem. Code § 38.005 (“This chapter shall be liberally cons trued to promote its underlying purposes”). Absent a binding de cision from th e Texas Supreme Court holding to the contrary, this Court should reject the16 Fleming argument as contrary to public policy.

PRAYER

Appellee Mary K. McGee respec tfully prays that this Court affirm the trial court’s judgment awarding her the reasonable attorney’s fees that she incurred while prosecuting this action. Respectfully submitted, Sloan, Bagley, Hatcher & Perry Law Firm 101 East Whaley Street P.O. Drawer 2909 Longview, Texas 75606 Telephone: 903-757-7000 Telecopier: 903-757-7574

By:__ /s/Justin A. Smith

_____________ JOHN D. SLOAN, JR. Texas Bar No. 18505100 E-mail: jsloan@sloanfirm.com JUSTIN A. SMITH Texas Bar No. 24058357 E-mail: jsmith@sloanfirm.com ATTORNEYS FOR APPELLEE MARY K. M C GEE17 CERTIFICATE OF SERVICE

I hereby certify that pursuant to Rule 9.5, Texas Rules of Appellate Procedure, that a true and correct copy of the foregoing brief was served upon the following counsel electronically, through the electronic filing manager, and via certified mail, return receipt requested, on this the 15th day of September, 2015:
Jennifer Parker Ainsworth E-mail: jainsworth@wilsonlawfirm.com Matthew T. Milam E-mail: mmilam@wilsonlawfirm.com [Attorneys for Appellee EXCO Operating Company, LP] Wilson, Robertson, and Cornelius, P.C. One American Center 909 ESE Loop 323, Suite 400 [01] P.O. Box 7339 Tyler, Texas 75711-7339 Telephone: (903) 509-5000 Telecopier: (903) 509-5091

________________18 CERTIFICATE OF COMPLIANCE
I, JUSTIN SMITH, attorney for Appellee Mary K. McGee, hereby certify, pursuant to Te xas Rule of Appellate Procedure 9.4(i)(3), that there are 5906 words in the foregoing Appellant’s Brief. I am making this certific ation based upon reliance on the word count of the computer pr ogram used to create Appellee’s Brief.