Eastland Court Applies Statute of Frauds to Gas Processing Agreement, Enforces Damage Limitation Clause Against Lost Profit Claims
ETC Texas Pipeline sued XTO Energy for breach of an exclusivity clause in their gathering and processing agreement, alleging XTO sold gas to third parties without compensation, but the Eastland Court of Appeals affirmed summary judgment after holding that a dedicated acreage map satisfied the statute of frauds' writing requirement and that the contract's damage limitation clause precluded recovery of lost profit damages. The court determined the agreement was a service contract rather than a mineral interest transfer, but still required compliance with the statute of frauds as a contract requiring performance beyond one year through July 2029.
Background and Procedural Posture
ETC Texas Pipeline, Ltd., a natural gas processing company, brought suit against XTO Energy Inc., a gas extraction company, asserting claims for breach of contract, fraud in the inducement, fraud and string along fraud, negligent misrepresentation, unjust enrichment, quantum meruit, and declaratory judgment. ETC alleged that XTO breached the agreement's exclusivity clause by selling gas to third parties without providing compensation to ETC. The 385th District Court in Midland County granted XTO's motion to exclude damages evidence and entered summary judgment in favor of XTO based on the statute of frauds.
The Statute of Frauds Analysis
The Eastland Court of Appeals confronted two critical statute of frauds questions. First, the court held that the contract was not a transfer of a mineral interest subject to the real property provision of the statute of frauds. The court reasoned that the contract concerned a service rather than the transfer of a mineral interest. This characterization as a service contract was crucial to ETC's position.
However, the court determined the contract was still subject to the statute of frauds under a different provision—as a contract requiring performance beyond one year. The contract term began in November 2016 and continued through July 2029, clearly establishing a definite period longer than one year and bringing it within the statute of frauds' writing requirement.
Sufficiency of the Dedicated Acreage Map
The most significant holding addressed whether a dedicated acreage map satisfied the statute of frauds' writing requirement. The court held that the map, which depicted the general area in which the companies would do business, was sufficient to satisfy the statute of frauds. This practical approach to the writing requirement reflects the court's recognition that the statute of frauds is designed to prevent fraud while still enforcing legitimate agreements between parties.
Damages Limitations
The court also held that the contract's damage limitation clause precluded recovery of both direct and indirect lost profit damages. This ruling significantly limited ETC's potential recovery even if it could establish liability on remand.
Discovery Issues
The Court of Appeals further addressed several discovery-related issues. The court held that ETC's inadvertent production of an erroneous document as to claimed reliance damages did not satisfy the good cause exception to the court's discovery deadline. Additionally, ETC failed to demonstrate lack of prejudice to XTO from the untimely disclosure, which would have constituted an exception to the court's discovery deadline.
Disposition
The Court of Appeals affirmed in part, reversed in part, and remanded the case for further proceedings consistent with its opinion. The case was subsequently reviewed, with the judgment vacated and remanded by agreement on May 16, 2025.