Court Opinion

ID: 45960
Source: CourtListenerOpinion
Date Created: 2010-04-25 22:48:51+00
Date Added: 2024-06-11T12:22:31.396247
License: Public Domain

United States Court of Appeals
                                                Fifth Circuit
                                             F I L E D
                                             August 31, 2006
            REVISED SEPTEMBER 20, 2006
                                         Charles R. Fulbruge III
                                                 Clerk
       IN THE UNITED STATES COURT OF APPEALS

               FOR THE FIFTH CIRCUIT

               _____________________

                   No. 05-30857

              ______________________

               FORDOCHE INC., ET AL,

               Plaintiffs-Appellants

                         versus

                TEXACO INC; ET AL,

                    Defendants

      TEXACO EXPLORATION AND PRODUCTION, INC.

                Defendant-Appellee

___________________________________________________

  Appeal from the United States District Court for
          the Middle District of Louisiana
___________________________________________________

Before KING, BARKSDALE, and DENNIS, Circuit Judges.

DENNIS, Circuit Judge:
                                                             1
     This       case     deals     with     the    performance       of

obligations       under     right    of   first     refusal    (ROFR)

clauses, also termed “preferential rights” clauses,

in four joint operating agreements (JOAs) to which

defendant-appellee Texaco Exploration and Production,

Inc. (“TEPI”) and plaintiffs-appellants, Fordoche,

Inc.    and     Ronnie    and    Rebecca     Theriot       (“Fordoche

group”) were parties.               Each of the ROFR clauses

required that any party to the JOA, before selling

any of its mineral interest described in the JOA to

a third party, must first offer the same interest to

the other parties to the JOA on the same terms as

that of the contemplated sale to the third party.

TEPI planned to sell its mineral leases affected by

the four JOAs to a third-party, EnerVest Energy,

L.P.,      as   part   of    a   $78+     million    package       sale

including additional mineral leases in several areas

of   the    state.        Before    doing    so,    TEPI    sent   the

Fordoche group letters notifying them of its planned

                                                                      2
package sale and calling on them to exercise their

preferential rights for a price of $2+ million within

30 days. The Fordoche group expressed interest but

questioned whether TEPI’s letters amounted to a good

faith offer to sell them, for a fairly allocated

amount, the identical type and quantity of property

rights that TEPI planned to sell to EnerVest. The

Fordoche group contends that despite its requests for

information, it never received satisfactory answers

to its questions. TEPI, on the other hand, takes the

position that the letters it sent the Fordoche group

fulfilled its obligations to the Fordoche group and

that the group did not request additional data or

explanation. It is undisputed that the Fordoche group

did not exercise or waive its preferential rights as

TEPI demanded in its letters, or in any other way;

and that some seven months after the Fordoche group

received the letters TEPI sold all of its interests

affected by the four JOAs to EnerVest in the package

                                                    3
sale as planned. The Fordoche group brought this

suit, claiming that they had been damaged by TEPI’s

failure    to   comply   in   good   faith   with    the   ROFR

clauses.

    The ultimate question in this appeal is whether,

based on the record before us, TEPI performed its

obligations in good faith as required by the ROFR

clauses    and,   therefore,    is   entitled   to    summary

judgment dismissing the Fordoche group’s claims. We

conclude that TEPI has failed to carry its burden of

showing that there is no genuine issue as to any

material fact or that it is entitled to a judgment as

a matter of law.

    Favoring the non-moving parties in the resolution

of genuine issues as to material facts and in drawing

reasonable inferences, the evidence presented for and

against summary judgment is reasonably susceptible to

the following interpretation:

    (1) TEPI breached its obligations under the ROFR

                                                              4
clauses found within the JOAs because:

(a)   Under   the   August      29,       1962    JOA,    the

Fordoche group had a preferential right to

purchase from TEPI, “its interest, in whole

or in part, in the properties affected by

this agreement” that TEPI sold to EnerVest.

Thus, the 1962 JOA’s ROFR affected TEPI’s

entire   working       interest    under         that    JOA.

Accordingly,    when     TEPI     sold     that     working

interest to EnerVest after offering to sell

the Fordoche Group only a lesser interest,

viz.,    TEPI’s        share    of        the      unitized

substances,       it     breached           that        ROFR.

Alternatively, TEPI breached that RFOR by

effectively    transferring          to    EnerVest       the

right    to   control     and     use      the     tangible

facilities and the surface rights necessary

to their use after specifically excluding

them from the property it offered to sell to

                                                            5
   the Fordoche group;

   (b) TEPI failed to perform its obligations

   under   the    ROFRs     because    it   transferred

   property      affected     by      the    Fordoche’s

   preferential rights without ever making an

   offer to sell any certain or definite thing

   or property interest to the Fordoche group;

   (c)TEPI breached the ROFRs by selling the

   property affected by the Fordoche group’s

   preferential rights to EnerVest for a lesser

   price than TEPI asked in its offer to the

   Fordoche group.

(2) TEPI breached its duty to act in good faith

with   respect    to   its     performance     of   its

obligations under each of the ROFRs         by:

   (a) substantially increasing the price in its

   offer to the Fordoche group between March 1,

   2000, and April 26, 2000 with the intention

   of discouraging the Fordoche group’s exercise

                                                      6
          of their preferential rights; and

          (b) making misrepresentations to the Fordoche

          group regarding its ownership interest in

          certain    tangible     and     intangible     property

          associated with the production units, as well

          as     misrepresentations             regarding     the

          productivity of certain wells.

                              Facts

     Defendant    TEPI    and    plaintiffs,      the    Fordoche

group, along with many others not parties to this

suit, separately owned mineral leases that gave them

working    interests1    in     respect    to   four    different

production units in the Fordoche Field in Point

Coupee Parish, Louisiana.             The purpose of these

production units was to allow working interest owners

to extract certain types of minerals from designated

     1
       A working interest is defined as, “The rights to the
mineral interest granted by an oil-and-gas lease, so called
because the lessee acquires the right to work on the leased
property to search, develop, and produce oil and gas, as well as
the obligation to pay all costs. -- Also termed leasehold
interest; operating interest.” Black’s Law Dictionary, (8th ed.
2004).

                                                                   7
sands underlying particular tracts of land.   Because

no party contends otherwise, we infer that each

mineral lease involved in this case is a standard

contract whereby the lessee has the right to: (1)

explore for and extract oil, gas, or other minerals;

(2) make reasonably necessary use of the surface of

the lands affected for those purposes; and (3) assign

or transfer those rights to other persons.

    TEPI, the Fordoche group, and the non-party lease

owners were parties to four different joint operating

agreements (JOAs)formed by them or their predecessors

for the purpose of producing minerals from the four

unitized sands.   The function of a JOA is to spell

out each party's rights and duties with respect to

drilling, development, operations and accounting in

connection with each production unit.   The following

provides the dates of execution of each JOA and the

property affected by each JOA:

    (1) August 29, 1962 JOA is for the Pressure

                                                    8
Maintenance Unit “K” and Upper Dearing Sands and

covers the Commingling Facility No. 8 and the

following wells:

        * J.O. Long Well #2-D

        * J.O. Long Well #5-D

        * J.O. Long Well No. 8

        * L.E. Carpenter Well #1-D

        * Clark Heirs Well #2

(2) May 1, 1969 JOA is for the Long RA SU A and

covers the following wells:

        * Price U1 Well #1

        * Price J.O. Long Well #9-D

        * U2 Well #1 & 1 Alt.

        * Long RA SU A#2-A

(3) December 1, 1969 JOA is for the “L” Sand Unit

and covers the following well:

        * Fairchild-Chauvin U1 Well #1

(4) November 14, 1995 8000 RA SUA Operating

Agreement covers and affects the following wells:

                                                9
            * J.O. Long Well #7-D

            * J.O. Long Well #11

            * Clark Heirs Well #1

            * Clark Heirs Well #3

            * Fairchild-Chauvin Well U2-1 Alt.

            * B.W. Dreyfus Well #1-A

            * Mrs. Rap Price Well #1

            * Clark Duckworth U2 #1

    All four JOAs at issue have common features

regarding the “operator.”      First, each JOA details

the selection process of an operator in addition to

explaining the power of this position.         Under the

JOAs, the operator is designated as TEPI.       Further,

the JOAs provide that the operator, while under the

ultimate direction and control of the directives of

the JOA, is nevertheless authorized to manage and

supervise the day-to-day operations of the production

unit.   Second,   each   JOA   provides   a   replacement

process available to the owners of a majority of the

                                                       10
combined working interests upon a vacancy in the

position; said majority is empowered to elect another

owner as TEPI’s successor. Third, the JOAs authorize

the operator to develop and operate the Unit Area for

the production of Unitized Substances for the joint

account of the parties.          Finally, each JOA provides

that the property and equipment acquired by the

operator or the parties for the purpose of exploring

for and producing minerals within each respective

unit shall become the property of the parties of each

JOA as co-owners in indivision.2

    The ROFR clauses in the four JOAs are similar

except for one major difference. The August 29, 1962

JOA provides that the ROFR applies to the sale by a

party of “its interest, in whole or in part, in the

properties affected by this agreement.” By contrast,

the other three JOAs provide that the ROFR will

extend to the sale of any part of a party’s specified

    2
        See La. Civ. Code art. 797 et seq.

                                                         11
interest in “unitized substances.”3

     In   1999,   TEPI   decided    to   offer   for   sale   to

selected prospects its entire working interests in 16

oil and gas fields in Louisiana for the highest lump

sum bid in a global transaction called the “Gulf

Coast Package.”       The Gulf Coast Package included,

among others, the Fordoche Field.             TEPI solicited

bids on the Gulf Coast Package, and EnerVest was the

successful bidder with an offer of approximately

$78.7 million.      Of the $78.7 million paid to TEPI,

EnerVest initially allocated $1,998,811 as the value

of the property subject to the Fordoche group’s

preferential      rights    and    advised    TEPI     of   that

allocated price.      As part of the sale, EnerVest also

agreed to indemnify TEPI in the event of incurred

liability as a result of the ROFR clauses.

     On March 1, 2000, TEPI, in writing, offered

     3
       Unitized substances, under the JOAs, are defined as, “all
gas and condensate in and which may be produced and saved” for
the sands underlying the unit area referenced by the JOA.

                                                               12
appellants the opportunity to purchase, at EnerVest’s

allocated        price     ($1,998,811),         TEPI’s     undefined

interests in the property.               Mr. Ronnie J. Theriot,

one       of   the   plaintiffs,       responded    with    questions

regarding the property offered to them and why and

how the price had been determined as the “allocated”

price.         TEPI sent subsequent offer letters to the

appellants on April 26, 2000, purporting to clarify

the       property    interests        offered     and    stating    an

allocated price of $2,014,861.4              On May 22, 2000, the

appellants again responded with an inquiry regarding

how TEPI arrived at the allocated value, and whether

the value reflected the price that EnerVest was

offering        to   pay   for   the    specified    assets.        The

Fordoches requested an additional thirty days to

      4
       TEPI sent separate, identical letters to Fordoche, Inc.
and the Theriots. The letters essentially explain that most, but
not all, of Fordoche Field is covered by the Fordoches’
preferential rights. Upon researching the various JOAs, TEPI
realized that additional preferential rights were applicable, and
therefore, TEPI adjusted the previous allocated value. The
letter then lists the assets under each JOA that were subject to
preferential rights and gives an allocated value for each JOA.
The total of those allocated value equals $2,014,861.

                                                                     13
adequately research the matter in order to determine

whether     to   exercise   or    waive   their   preferential

rights. TEPI sold its interest in the Fordoche Field

to EnerVest on December 22, 2000, seven months after

the appellants’ request.

                     Standard of Review

     This Court reviews the district court’s grant of

summary judgment de novo, applying the same standard

as   the    district    court.5       Summary     judgment       is

appropriate “if the pleadings, depositions, answers

to interrogatories, and admissions on file, together

with the affidavits, if any, show that there is no

genuine issue as to any material fact and that the

moving party is entitled to a judgment as a matter of

law.”6     A fact is material only when it might affect

the outcome of the suit under the governing law, and

     5
      Gowesky v. Singing River Hospital Systems, 321 F.3d 503,
507 (5th Cir. 2003).
     6
       Fed. R. Civ. P. 56(c); see also Celotex Corp. v. Catrett,
477 U.S. 317, 322-23 (1986).

                                                                 14
a fact is genuinely in dispute only if a reasonable

jury could return a verdict for the nonmoving party.7

 The evidence should be viewed in the light most

favorable to the non-movant.8             If the moving party

meets the initial burden of showing there is no

genuine issue of material fact, the burden shifts to

the nonmoving party to produce evidence or designate

specific facts showing the existence of a genuine

issue for trial.”9

                             Analysis10

A. TEPI’s Breach of the Right of First Refusal

    The right of parties to contract for a “right of

first      refusal”    has   been   recognized     by   Louisiana

    7
         Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
    8
      Duckett v. City of Cedar Park, Texas, 950 F.2d 272, 276
(5th Cir. 1992).
    9
Allen v. Rapides Parish Sch. Bd., 204 F.3d 619, 621 (5th
Cir. 2000).
    10
       The federal courts are empowered by 28 U.S.C. § 1332 to
hear this suit as the parties to it are diverse and the amount in
controversy exceeds $75,000. Under the holding of Erie Railroad
Co. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817 (1938) and Klaxon Co.
v. Stentor Electric Mfg. Co., Inc., 313 U.S. 487, 61 S. Ct. 1020
(1941), we must apply Louisiana’s obligations and mineral law.

                                                                 15
courts for some time.11          In 1993, the jurisprudence

was        codified   by   the   Louisiana   Legislature      in

Louisiana Civil Code articles 2625 and 2626. Article

2625 provides:

      A party may agree that he will not sell
      a certain thing without first offering it
      to a certain person. The right given to
      the latter in such a case is a right of
      first refusal that may be enforced by
      specific performance.

Article 2626 provides:

      The grantor of a right of first refusal
      may not sell to another person unless he
      has offered to sell the thing to the
      holder of a right on the same terms, or
      on those specified when the right was
      granted if the parties have so agreed.

      It is apparent that the driving intent of the

four JOAs was to provide appellants with a right of

first refusal. What is at issue regarding the breach

of the ROFRs is as follows:

      11
       Ebrecht v. Pontchatoula Farm Bureau Assoc., Inc., 498
So. 2d 55 (La. App. 1st Cir. 1986); Crawford v. Deshotels, 359
So. 2d 118 (La. 1978); Price v. Town of Ruston, 171 La. 985, 132
So. 653 (La. 1931).

                                                                  16
        (1) the “thing” that is the subject of the

        ROFR under Article 2625;

        (2) whether TEPI clearly and unambiguously

        described the property offered to

        appellants in its March 1, and April 26, 2000

        offer letters;

        (3) whether TEPI offered the same “thing” to

        appellants, the holder of the right, on the

        same terms, before selling to Ener Vest

        1.   The “Thing” Subject to the ROFR

    According to Article 1983, “Contracts have the

effect of law for the parties....”     Therefore, to

determine the “thing” upon which the right of first

refusal was granted, we must turn to the language in

each of the four JOAs.

                   A. The 1962 JOA

    The 1962 JOA provides:

    Before the sale to a third party by any
    Operating Party of its interest, in whole or
    in part, in the properties affected by this
    agreement, the other Operating Parties shall

                                               17
     be given the refusal thereof at the best
     price offered in good faith by a third party,
     and such other Operating Parties shall have
     the preferred right to purchase at the price
     stated, which right shall be exercised within
     thirty (30) days after receipt of written
     notice of the offer made by a third party....

It   is    self-evident      that    the    1962     JOA   extends

appellants’ ROFR to TEPI’s entire working interest in

its mineral leases subject to that JOA.               The text of

that agreement provides, “before the sale to a third

party...of its interest...in the properties affected

by this agreement.” (Emphasis added).

     TEPI violated the August 29, 1962 JOA by failing

to offer the entirety of its interest in the property

affected    by   the   JOA   to     the   Fordoche    group,   yet

thereafter selling the entirety to a third-party

buyer, EnerVest. The April 26, 2000 offer letter

states,

     The following facilities are either owned
     entirely by TEPI, or if jointly owned, not
     subject to any preferential right to purchase.
     These facilities will be conveyed to EnerVest.
     Additionally, none of the rights of way, pipeline

                                                                18
    rights of way and surface leases listed on
    Schedule B to the Agreement are subject to the
    preferential right to purchase.        As your
    preferential right to purchase does not include
    all facilities or any rights of way, should you
    elect to exercise your preferential right to
    purchase, you will need to enter into a
    production handling agreement with EnerVest.

Thereafter, TEPI lists eleven tangible properties

that are excluded from the appellants’ ROFR.

    This April 26, 2000 letter indicates that TEPI

was offering to sell the Fordoche group something

less than TEPI’s entire working interest under the

1962 JOA.      In fact, the district court in its reasons

for summary judgment and        TEPI in its brief in this

court assert that the ROFR in the 1962 JOA only

grants    to   each   party   the   preferential   right    to

purchase a departing party’s interest in the unitized

substances.       However, the 1962 JOA         clearly and

unambiguously provides to the contrary             The ROFR

extends to all of each party’s property interests

affected by the JOA; that plainly includes each

party’s     undivided   interest    in   the   tangible    and

                                                            19
intangible   assets     acquired   and   employed      for    the

operation    of   the   production    unit,    as    well    each

party’s   rights   as   a   mineral   lessee    or    owner    of

another mineral interest.       The ROFR is certainly not

limited to each party’s interest in the unitized

substances according to a plain reading of the 1962

JOA.

    The April 26, 2000 letter illustrates that TEPI

offered to appellants an opportunity to exercise

preferential rights on only some of TEPI’s interests

in the properties affected by the August 29, 1962

JOA.   In contrast, TEPI offered and sold to EnerVest

the entirety of its interest.         This differentiation

directly contravenes the JOA which requires that,

“...Before the sale to a third party by any Operating

Party of its interest, in whole or in part, in the

properties affected by this agreement, the other

Operating Parties shall be given the refusal thereof

at the best price offered in good faith by a third

                                                               20
party.”     (Emphasis added).

    Had TEPI offered its entire working interest to

the appellants and had appellants purchased it, they

would have had the right, under the 1962 JOA, to

elect the successor operator to the vacancy left in

that position by the departure of TEPI, and thereby

to take control of the production unit subject to

that JOA.

                 B. The Other Three JOAs

    The ROFR clauses in the remaining three JOAs

read,

    Before the sale of, and their assignment by
    any party of all or any part of its interest
    in Unitized Substances, the other party or
    parties shall be given the preferential right
    of the refusal of the purchase of such
    interest at the minimum sale price placed
    thereon by the party offering such interest
    for sale, and any one or more of the parties
    desiring to purchase such interest shall have
    the preferential right to purchase at said
    price....

The parties agree that the unitized substances are

defined in each of the three JOAs as all oil, gas,

                                                    21
and other hydrocarbons in and which may be produced

and saved from the specific unit to which the JOAs

apply.   In its offer letter, TEPI simply offered the

Appellants    the     opportunity     to   exercise    their

preferential rights to the property covered in each

of     the three similar JOAs for prices stated as

follows:

      (a)Those covered in the May 1969 operating

      agreement for    $10.00;

      (b)Those covered in the December 1969 operating

      agreement for $10.00;

      (c) Those covered in the November 1995

      operating

      agreement for $1,998,821.00.

      TEPI’s letters stated that it would be necessary

for   the   Appellants   to   enter    into   a   production

handling agreement with EnerVest if it exercised its

preferential rights      because the tangible assets on

premises formerly used for that purpose under all

                                                          22
four JOAs were being conveyed in full ownership to

EnerVest.

      TEPI argues that it was only required to offer to

the    Appellants        its       interest      in   the    unitized

substances, and that the tangible assets were not

subject to the Appellants’ right of first refusal.

It is true that this language of the three similar

JOAs presents a complication because, rather than

referring       to    the     “properties        affected    by    this

agreement,” these JOAs at first blush appear to

restrict the parties’ preferential rights to the

acquisition      of     percentages        of    interests    in   the

unitized substances.               However, when the JOAs are

considered in their entirety, it does not necessarily

follow    that       TEPI’s     argument        presents    the    most

reasonable interpretation of the JOAs.

      In any event, each of the three JOAs in which the

ROFR clause refers to “unitized substances” provides

in    essence    that       each   party    participates      in   the

                                                                     23
acquisition of ownership of any tangible property

associated     with     unit       drilling       and    production

operations by the same percentage as it enjoys in the

minerals produced.          For example, Article 3 of the

November   14,   1995       JOA,    entitled       “Percentage     of

Interest," states:

    302.     The parties shall also own all wells

    drilled    hereunder,          and    the    property    and

    equipment acquired hereunder, in the above

    proportions,      unless       specifically         provided

    otherwise herein.

Thus, the parties not only own and participate in the

production of the minerals in the wells covered by

the JOAs; they also co-own the tangible exploration

and production equipment and property in those same

proportions.          The    JOAs        merely    authorize       the

leaseholders,    under       specified          circumstances,      to

appoint or elect a successor operator to use those

tangible assets. The JOAs do not authorize anyone to

                                                                    24
divest any party of its co-owned undivided interest

in the tangible assets or to convey that interest to

a third party or the operator. Accordingly, TEPI was

not authorized to sell the entirety of any tangible

asset on the premises covered by the JOAs because all

of the working interest owners held an indivisible

interest in those tangible assets.

    Furthermore, as was the case with the August 29,

1962 JOA, each of the other three JOAs sets forth a

method by which a successor operator is to be chosen

by agreement of the parties to the JOA.      As indicated

above, TEPI’s purported exclusion of the tangible

assets from its offer to the Fordoche group made

TEPI’s proposition to that group less attractive

than, and unequal to, its sale to EnerVest.         This is

because   the unqualified sale of the entire working

interest to EnerVest gave it effective ownership and

control   of   each   JOA’s   production   unit;   whereas,

TEPI’s ambiguous offer to the Fordoche group would

                                                         25
have allowed them to acquire with certainty only

additional shares of participation in the production

of the unitized substances.

   2. The Failure to Specify the Property Being

Offered by TEPI in the April 26, 2000 Offer Letter

    Despite     our     diligent       efforts,      we    find    no

documentation      in   the     record    showing         that    TEPI

unambiguously      specified      the    particular         property

interest   being      offered    for     sale   to    appellants.

Without such documentation, it is difficult to see

how we could determine that, as a matter of law, TEPI

complied with the contractual ROFRs in the JOAs.

Further, comparison of TEPI’s letters calling on the

Fordoche group to exercise or waive its preferential

rights with other evidence in the record only leads

to the discovery of additional disputed facts that

are material.

    TEPI’s April 26, 2000 offer letter manifests its

intent to supplement and clarify its March 1, 2000

                                                                    26
offer letter that TEPI had discovered was incomplete.

The        caption    of     the    April    26     letter     refers     to

“PRODUCING           PROPERTY       SALES/Preferential           Right    to

Purchase/Fordoche             Field/        Point       Coupee     Parish,

Louisiana.” The body of the April 26, 2000 letter

merely does the following: (1) describes each of the

four JOAs; (2) lists the well names and numbers

subject to each JOA; (3) states the 30-day election

period        to   exercise        the   ROFR;    and    (4)   lists     the

allocated          value12    of    the   unnamed       property     being

offered.

      Further, the April 26, 2000 excludes the tangible

facilities from the offer made to the Fordoche group,

as follows:

      [The following property is] either owned
      entirely by TEPI, or if jointly owned, not
      subject to preferential right to purchase.
      These facilities will be conveyed         to
      EnerVest. Additionally none of the rights of
      way, pipeline rights of way and surface
      leases listed on Schedule B to the Agreement
      are subject to the preferential right to

      12
           See offer letter, “Allocated value is $1,998,821.00.”

                                                                    27
    purchase. As your preferential right to
    purchase does not include all facilities or
    any rights-of-way, should you elect to
    exercise your preferential right to purchase,
    you will need to enter into a production
    handling agreement with EnerVest.

The letter then lists tangible property to which the

aforementioned paragraph refers.     This provision,

which itself is the subject of a genuine dispute

between the parties, describes property excluded from

the offer letter and does not help to clarify the

exact property interests offered for sale to the

Fordoche group.

    The April 26, 2000 letter also refers to “an

extract of the Agreement” to be sent apparently under

separate cover, as follows:

    With this clarification, we are re-offering
    the preferential rights to purchase as set
    out in this letter to you. Additionally we
    are resending an extract of the Agreement for
    your review as described below.        Please
    carefully review the Agreement and its
    attachments to understand the rights and
    obligations you would assume should you
    exercise your preferential right to purchase.
    These obligations include, but not limited
    to: (1) your assumption of the plugging and

                                               28
      abandonment liabilities and obligations; (2)
      your assumption of environmental obligations
      as they are defined in the Agreement; (3) the
      requirement to establish an escrow account;
      and (4) the requirement to post a Performance
      and Payment Bond. Should you exercise your
      preferential right to purchase, you will be
      required to close the transaction within
      thirty (30) days of your election.

This “extract of the Agreement” has not been included

in the record.

      The April 26, 2000 letter closes with a request

that each of the Fordoche group elect to exercise or

waive its preferential rights to purchase by signing

the bottom of the letter and marking on a check off

list.     The check off forms are no more helpful than

the   letter     in   describing     the     specific   property

interest TEPI offered to sell the Fordoche group.

For   example,     the    check   off    list   for   exercising

preferential rights simply provides:

      [     ]    hereby     elects      to   exercise    its

      Preferential Right to Purchase the following

      interests:

                                                               29
    _____ 8000 RA SU A

    _____ Operating Agreement, dated August 29,

1962            []Unit “K” and Upper Dearing Sands

    _____ Long RA SU A

    _____ L Sand Unit

This list identifies only the JOAs, the production

units, and sands from which minerals were being

produced.

    In sum, we see nothing in the April 26, 2000

offer letter from TEPI to the Fordoche group that

unambiguously   describes   the   legally    recognized

property interest offered for sale, such as, for

example,    “unitized       substances,”      “working

interests,”“leasehold    interests,”    or     “mineral

leases.”    Furthermore, the record is replete with

evidence that Ronnie J. Theriot, after receiving the

April 26, 2000 letters, was uncertain as to the

property interest offered for sale by TEPI.        Mr.

Theriot communicated his concerns over the lack of

                                                     30
specific information in the letter via his counsel in

correspondence to TEPI. Mr. Theriot was particularly

concerned by how and by whom the “allocated value for

the interest” had been derived.        As he explained in

his   deposition,   “I   had   no   idea    what   was   being

offered, what was being paid, what the terms or the

conditions were or anything.”        Further, he stated,

“...I said, ‘What is it?        What is it that’s being

offered?   What is it that you’re offering to sell?

What is the price?       What’s the terms?         What’s the

conditions?...What is the offer?           Show me the offer

and I’ll decide whether or not I want to match it.’”

“Additionally, [he stated,] and contrary to the sworn

affidavit of Pam Bikum, I discussed these matters

with her and she could not explain exactly what was

being offered pursuant to the preferential rights.”

This evidence supports the assertion that Fordoche

group was not given specific information regarding

the property interests for sale.

                                                            31
      Note, however, that there is a factual dispute as

to the truth or falsity of Mr. Theriot’s testimony.

His statements are directly refuted by the affidavit

of Ms. Pamela Bikum, Senior Land Representative for

Chevron     TEPI     North   America    Upstream    Division,

Deepwater Land Department.          She stated, in pertinent

parts,     that     the   appellants    “were    offered    the

opportunity to exercise their preferential rights,

and to thereby purchase, the Unitized Substances

subject to” the four JOAs; and that “[t]o the best of

my recollection, no one from Fordoche [neither Ronnie

Theriot nor Rebecca Theriot] ever called me to ask

any     questions    about   the    Offer   Letters.”      These

statements indicate factual disputes regarding the

clarification of the April 26, 2000 letters; their

existence makes summary judgment inappropriate, as

well.

      Without an unambiguous written document in the

record    showing     that   TEPI   clearly     described   the

                                                              32
particular property interests for sale in its offer

to the Fordoche group, we cannot conclude as a matter

of law that TEPI complied with the ROFR clauses in

the JOAs.       Although TEPI might be able to introduce

other evidence to overcome this deficiency at trial

or in further proceedings in the district court, the

vague,     general    offer     letters   it     sent   to     the

plaintiffs do not give it a solid basis upon which to

build.

   3.The Failure of TEPI to Offer the “Thing” to

Appellants on the Same Terms as It Sold to EnerVest

    As mentioned above, though it is unclear exactly

what     type   of   property    interest        TEPI   offered

appellants the right to purchase, it is clear that it

was less than the entirety of its working interest in

Fordoche    Field.     Yet,     TEPI   offered    and   sold    to

EnerVest its full interest in the same. As discussed

above, this constitutes a breach of the 1962 JOA.

Beyond this, however, it may be reasonably inferred

                                                                33
that TEPI breached all four JOAs by failing to offer

the    same   thing   for    the   same   price   to     both    the

Fordoches and EnerVest.            It is apparent that under

the basic principles of the ROFR, TEPI was obligated

to    first   offer   to    appellants    the   same     thing   it

offered to EnerVest at the same price.

      TEPI sold EnerVest the entirety of its interest

in the Fordoche Field portion of the Gulf Coast

Package for $2,014,861.         This exact price was quoted

by TEPI to appellants          as the amount they must pay

for a property interest that was substantially less

valuable      than    the   entirety      of    TEPI’s    working

interest. TEPI’s offer of sale to the Fordoche group

excluded:

      (1) tangible facilities purportedly owned by TEPI

      exclusively or not subject to the preferential

      right to purchase, i.e., equipment, structures,

      and other tangible interests related to each

      unit;

                                                                  34
    (2) rights of way; and

    (3) pipeline rights of way.

    Therefore,   had       appellants   exercised     their

preferential rights, they would have paid for those

limited rights the same amount EnerVest paid in

acquiring   unqualified     ownership   of   TEPI’s   entire

working interest in the leases subject to the JOAs.

The CEO of EnerVest testified that ten to fifteen

percent of the price allocated to the four JOAs was

attributable to the tangible property associated with

the production units.        That leaves only 85 to 90

percent of the allocated price attributable to the

interests   offered   to    the   appellants.    Plaintiff

Ronnie J. Theriot, echoed this sentiment in his

deposition by stating that the tangible facilities

themselves are “worth millions of dollars.” Thus, it

is undeniable that EnerVest, in its purchase of

TEPI’s interest received what the Fordoche group was

offered (and then some) for a lesser price.

                                                          35
                           Conclusion

    As a result of the numerous breaches by TEPI that

a reasonable trier of the facts could infer from this

record,      we   cannot   affirm    the    grant    of   summary

judgment by the district court.             Thus, the current

record reflects that TEPI may have breached the

August 29, 1962 JOA by excluding certain assets from

its offer to the Fordoche group; by not specifying

the property to which its April 26, 2000 offer letter

applied; and by selling to EnerVest the same thing

offered to the Fordoche group, but at a lower price.

B. TEPI’s Breach of the Obligation of Good Faith

    Louisiana’s Civil Code specifically provides that

good faith is an additional requirement to every

obligation and contract.            Article 1759, found in

“General Principles of Obligations,” provides, “Good

faith shall govern the conduct of the obligor and

obligee in whatever pertains to the obligation.”

Similarly,    Article      1983,    found    in     “Effects   of

                                                               36
Conventional Obligations,” provides, “...Contracts

must be performed in good faith.”          Because Louisiana

law imposes a duty of good faith upon all parties,

explicit reference in a contract to such or lack

thereof is irrelevant.

     Good faith is not defined in the Civil Code but

as explained by Professor Saul Litvinoff,

     ...as understood in modern law, good faith
     binds the parties to a contract to cooperate
     with each other in order to attain the mutual
     end for which they entered into the
     agreement. In that perspective, an obligee
     who, without justification, prevents the
     obligor’s performance, or conceals from the
     obligor facts that, to the obligee’s
     knowledge, would cause the obligor to fail to
     perform, or even facts that would make the
     latter’s performance exceedingly difficult,
     thereby refuses the cooperation he owes the
     obligor...13

     Within the record, there are several implications

of TEPI’s bad faith, i.e., evidence that leads to the

inference    that   TEPI    did   not   cooperate    with    the

Fordoche group to attain the mutual end for which

     13
       6 Saul Litvinoff, Louisiana Civil Law Treatise Part II,
§ 5.32 (2d ed. 2001).

                                                                 37
they entered into the ROFRs.       These implications can

be categorized in two ways: (a) with regard to the

price offered, both the source of it and its increase

between March 1, 2000 and April 26, 2000; and (b)

with regard to misrepresentations made by TEPI to the

appellants, including its claims of full ownership of

the surface rights and tangible property and also its

statements addressing the functionality of certain

wells.   This conduct by TEPI inferentially breaches

the good faith obligation imposed by the Louisiana

Civil Code.

                      1. The Price

     Appellants assert the source of the price for

which TEPI offered to sell them was simply EnerVest’s

extrapolation from the total package sale price.       By

doing so, Fordoche asserts that TEPI falsely inflated

the price quoted to the Fordoche group, arguably

spurred by its motivations to discourage Fordoches’

acceptance    of   that   offer.      Furthermore,   TEPI

                                                       38
increased the offer price from $1,998,811 on March 1,

2000, to     $2,014,861 on April 26, 2000.

                   2. Misrepresentations

    Appellants     additionally      argue    that    TEPI    made

misrepresentations to them, which led to a sense of

distrust on their part. First, TEPI represented that

it was the sole owner of surface use rights, tangible

equipment, structures, and property formerly used

under the JOAs.      This is evidenced by the April 26,

2000 offer letter in which TEPI specified that “[t]he

following facilities are either owned entirely by

TEPI,   of   if   jointly   owned,    not    subject     to    any

preferential right to purchase.              These facilities

will be conveyed to EnerVest.”               TEPI transferred

property over which it did not have full ownership to

EnerVest.         Under   the   JOAs,    certain       property

associated with the production units was, in essence,

co-owned by all the parties to the JOA.              Mr. Theriot

stated, “it [the offer letter] specifically says I do

                                                                39
not   [have     any   ownership   interest   in     any    of    the

facilities].”         TEPI had no legal right to transfer

that property without the concurrence of the other

co-owners.       Inferentially, by misrepresenting its

legal rights, TEPI acted in bad faith.

        Second, TEPI’s offer letter indicated certain

wells    were    no    longer   functional   when,    in       fact,

evidence in the record indicates that they were.

TEPI noted in the April 26, 2000 offer letter that

the   wells     in    question,   “have   been    depleted      and

inactive for some time.”             However, Mr. Theriot’s

affidavit provides, “[a]fter the sale, EnerVest, in

fact, operated several of these ‘depleted’ wells and

produced substantial oil and/or gas.”

      Taken together, the conduct of TEPI regarding the

price     of      the     property     as    well         as     the

misrepresentations it made to the Fordoche group lead

us to infer that there is a genuine dispute as to

whether TEPI violated its obligation of good faith.

                                                                  40
                       Conclusion

    The    district   court    granted   summary   judgment

dismissing Fordoche group’s claims with prejudice.

But as explained, genuine issues for trial exist

regarding whether TEPI honored the requirements of

the four ROFRs in the JOAs at issue in this case.        On

the present record, we cannot conclude as a matter of

law that TEPI performed its obligations in good faith

under the ROFR clauses in the JOAs. Accordingly, the

district court’s grant of summary judgment in favor

of TEPI is REVERSED and this case is REMANDED to the

district     court    for     further    proceedings   not

inconsistent with this opinion.

                                 REVERSED and REMANDED.

                                                          41