Fifth Circuit Applies Equitable Recoupment to Bar Successor Royalty Owner's Claims for Overpayments Made to Predecessor

The Fifth Circuit affirmed summary judgment for Ovintiv USA in a dispute over more than $608,000 in royalty withholdings, holding that DDR Weinert and DDR Williams—entities owned and controlled by the Richters—acquired their Karnes County mineral interests subject to all valid leases and other indebtedness, including Ovintiv's right to recoup prior overpayments made to the Richters before the transfer. The court rejected the plaintiffs' breach of contract, Texas Natural Resources Code, and conversion claims arising from Ovintiv's Prior Period Adjustment to correct a gas flow error that resulted in overpayments to the Richters between September 2016 and January 2018.