Michael Sean
Quinn, Ph.D., J.D., Etc.
2630 Exposition Blvd. Suite 115
Austin, TX 78703
Phone: (512) 296-2594
Facsimile: (512) 344-9466
mquinn@msqlaw.com
(Resumes on
Website:
Complex Oil Well Deals—High Prestige Texas Law Firm
Errs
            Several
companies were involved in oil & gas interest acquisitions and ultimately
drilling.  The deals were
substantial—1000s of acres, for example.  Things didn’t go well for various reasons and
property interests changed hands as the companies separated.  In one of these transactions company A was to assign a set of interests, “‡”,
 to company B.
There was an error, and the interests
were assigned to a subsidiary of B.
After additional difficulties, this time with the finance and economics of some
drilling, B attempted to transfer ‡
to Patriot Exploration, the plaintiff-appellee in this case.  But it did not sign the revised and correct assignment,
perhaps because it couldn’t effectively do that, since it did not own the
property, its subsidiary did.  (It looks
likek something has gone wrong with those companies.)
In the report of the case the problem
is called the “Title Gap.”  Thompson & Knight LLP* v. Patriot
Exploration, LLC**,
444 SW3d 157 (Tex. App.—Dallas, 2014). Believe me! The
facts are much more detailed in the opinion than here, where I am just
“glancing” at the facts to illustrate a related but different point. [*Defendant
and Appellant. **Plaintiff and Appellee.]
The law firm that, as it were, made
the mistake, Thompson & Knight, an old, well known, renowned Dallas law
firm discovered its error, tried to correct it by drafting a correct assignment
document, but left the case because of the conflict of interest its error had
created between it and its client Patriot. 
T & K settled in part with Patriot, but not totally.  (The court’s opinion does not say how the
partial settlement worked.  I conjecture
it involved Patriot’s litigation and similar or related costs in getting the
error fixed.]
T & K Patriot had intended to
sell the assets involved, but the sale was 5 months after the date Patriot
wanted.  It sold the asset for $5.5M±,
but claimed it lost $960T± as the result of T & K’s error.  The firm stipulated it malpractice liability,
but asserted that its error did not cause Patriot damages, or, in any case,
that Patriot could not prove that it did. 
Patriot prevailed in the District Court—the trial court—in a judge tried
case that concerned only damages.
The Court of Appeals, however,
reversed the lower court. The basis of the reversal was the court’s conclusion
that the expert testimony did not support the plaintiff’s claims, both as to (a)whether
the law firm’s error caused Patriot’s loss and as to (b) the amount of damages
to be awarded, if any.
The testimony of Patriot’s expert was
shot full of errors. Here are at least some of them. The expert testified  
1.     that the purchaser of the assert
would have paid substantially more when the sale was originally intended than
it paid 5 months later, but there was only 1 potentially purchaser, and it did
not concede that it would have paid more;
2.     that he has a model for calculating
the correct prices but could not defend the model;
3.     that the sale prices could be
analyzed with attending to the fact that Patriot acquired the assert at issue
in a complex of facts arising out of a lawsuit;
4.     that he could predict reasonably what
the return of future production would be, though he did not really know this,
given the existing history of related production, e.g., drilling costs;
5.      that he could accurately predict the relevant
revenue of the purchaser, and therefore what he would have paid, even though he
merely assumed how many wells would be drilled, when there was no evidence as
to what the number would be;
6.     in such a way that he has assumed
that the oil and gas would be ready for market immediately upon production;
7.     assuming that the price of the
petroleum to drilled could be calculated relying on price the spot market;
8.     in such a way that his testimony was
inconsistent to that of a disinterested witness;
9.     based upon as assumption this client,
Patriot , instructed him to make;
10.                     
 and more.
This is a very long list of errors
for an expert witness to be charged with having committed. Moreover, the expert
would not have had to commit all these errors in order for his testimony to be
rejected.
Interestingly, courts around the
country are appearing to demand more and more out of expert witnesses appearing
for a plaintiff in legal malpractice cases, and other service based malpractice
cases as well.  I have argued for a while
that (i) legal mal cases are very difficult to win, but that (ii) large cases
were still promising, partly because big cases are complex and multi-faceted so
more errors may get made.   I’m right about (i), for sure, but given the
way courts are thinking about expert witnesses in legal mal cases today, I’m
not sure I’m right about (ii).  Complexity
and complicatedness are multidimensional configurations.                       My
hesitancy arises from a very simple truth: 
Complex events almost never result
from single and/or simple causes.
(The principle applies to non-occurrence
events as well as overt events.) Complex causes involving complicated human
behavior(s) and dependent economics–and not just like causes like physical
defects–are very difficult for reliable expert testimony. This case is a
paradigm of complicated behaviors, complex results, and economic/financial
results.
It is easy to see why expert
witnessing for the defendant is easier than doing it for the plaintiff.  All the defense expert must do is to
undermine the theories of the plaintiff’s expert.  To some extent and under some circumstances
the work of the expert witness for a plaintiff is more interesting than that of
the defense expert.  S/he may really do
the inventive and creative work.  Then
again, consider what happened to the plaintiff’s expert witness in this case.

I am not suggesting that I think the
court of appeals is wrong in its observations in this case.  The testimony of the plaintiff’s expert was a
disaster; at least it looks like it. Maybe I’m wrong.  Maybe the Texas Supreme Court will reverse
the court of appeals and uphold the trial judge.  I doubt it. 
See my blog dated November 18, 2014 entitled “Expert Witnesses &
Judicial Epistemology.”  It is about
another very recent legal mal case decided by the Texas Supreme Court regarding
the evaluation of damages, and the expert testimony in that case is not nearly
so bad as it is in this case.