Case: Hayes Fund for the First
United Methodist Church of Welsh, LLC, et al. v. Kerr-McGee
Rocky Mountain, LLC, et al
Louisiana Supreme Court
2015 La. LEXIS 2530; 2014–2592 (La. 12/08/15).
The Louisiana Supreme Court took the opportunity presented by this case to remind appellate courts, parties and attorneys how difficult it is to overturn a trial court's factual findings on appeal. After conducting an exhaustive review of the considerable evidence, the Supreme Court overturned the Third Circuit's decision, reinstated the trial judge's decision in favor of defendants and dismissed plaintiffs' case, finding no manifest error in the trial judge's ruling.
These claims were brought by mineral royalty owners against various defendants, their mineral lessees and working interest owners, alleging defendants mismanaged or imprudently operated two oil and gas wells in which plaintiffs held interests. The basis for plaintiffs complaints stemmed from the manner in which defendants handled the drilling of the wells at issue, which plaintiffs claimed caused them to lose over $13,000,000 in lost royalties. The evidence was presented over 11 months and included 25 full days of testimony in court. It involved pitting the one expert plaintiffs provided, a petroleum engineer, against five expert witnesses presented by defendants. The Supreme Court noted the evidence ultimately came down to two opposing expert positions: "(1) the water was extraneous or (2) the water was from the formation and produced as expected." The district court had credited defendants' witnesses over plaintiffs' experts, finding plaintiffs had failed to establish their burden that defendants' actions caused their damages, and consequently, the trial court dismissed the claims.
After the Third Circuit reversed the trial court's determination, awarding $13,437,895 in damages, the Supreme Court reminded the standard of review for factual determinations, such as causation of damages, is the "manifest error-clearly wrong standard, which precludes the setting aside of a trial court's finding of fact unless that finding is clearly wrong in light of the record reviewed in its entirety." The Court noted the question is not whether the appellate court might have resolved the question differently, but rather the appellate court must employ two steps: "there must be no reasonable factual basis for the trial court's conclusion, and the finding must be clearly wrong." Stated otherwise, "[t]he issue to be resolved on review is not whether the judge or jury was right or wrong, but whether the judge's or jury's factfinding conclusion was a reasonable one." The Court noted this is based not only on the "trial court's better capacity to evaluate live witnesses (as compared to the appellate court's access only to a cold record), but also upon the proper allocation of trial and appellate functions between the respective courts." The Supreme Court also reminded when credibility of witnesses is at issue, "the manifest error-clearly wrong standard demands great deference to the trier of fact's findings: for only the factfinder can be aware of the variations in demeanor and tone of voice that bear so heavily on the listener's understanding and belief in what is said."
In driving home just how difficult it is to justify overturning a trial court's findings of fact, the Supreme Court noted, "it should be a rare day finding a manifest error breach when two opposing views are presented to the trier of fact." After considering the evidence exhaustively, the Supreme Court found the evidence more than reasonably supported the district court's factual findings, such that they were not manifestly erroneous.
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