Forest Oil Corp. v. McAllen
Forest Oil Corp. v. McAllen
Opinion of the Court
delivered the opinion of the Court,
This commercial contract case asks whether an unambiguous waiver-of-reliance provision precludes a fraudulent-inducement claim as a matter of law. Here, sophisticated parties represented by counsel in an arm’s-length transaction negotiated a settlement agreement that included clear and broad waiver-of-reliance and release-of-claims language. Because that agreement conclusively negates reliance on representations made by either side, any
1. Factual and Procedural Background
In 1999, Forest Oil Corporation settled a long-running lawsuit over oil and gas royalties and leasehold development with James McAllen and others with interests in the McAllen Ranch.
Importantly, the settlement agreement specifically disclaimed reliance “upon any statement or any representation of any agent of the parties” in executing the releases contained in the agreement.
In 2004, McAllen sued Forest Oil to recover for environmental damage caused when Forest Oil allegedly “used its access under the leases to the surface estate to bury highly toxic mercury-contaminated” material on the McAllen Ranch. McAllen also alleged environmental and personal injuries caused when Forest Oil moved oilfield drilling pipe contaminated with radioactive material from the McAllen Ranch to a nearby property, the Santillana Ranch, which housed a sanctuary for endangered rhinoceroses.
Forest Oil sought to compel arbitration under the settlement agreement, but
After an evidentiary hearing on Forest Oil’s motion to compel arbitration, the trial court denied the motion, and the court of appeals affirmed, applying a no-evidence standard of review because the case was “an interlocutory appeal from an order denying a motion to compel arbitration that involves the defense of fraudulent inducement.”
This interlocutory appeal followed.
2. Enforcement of the Parties’ Arbitration Agreement Under the Texas General Arbitration Act
We first address appbeation of the TAA, which the parties’ settlement
Forest Oil challenges the trial court’s refusal to compel arbitration on three grounds: (1) the waiver-of-reliance provision in the contract precludes as a matter of law McAllen’s ability to show the reliance element of fraudulent inducement; (2) McAllen cannot establish justifiable reliance on oral representations that directly contradict the terms of a signed contract; and (3) McAllen cannot establish justifiable reliance on statements made by an adversary. Because Forest Oil’s first argument defeats McAllen’s claim, we do not reach the other two.
3. Schlumberger Controls this Relevantly Similar Case: The Parties’ Broad Disclaimer of Reliance is Dispositive
Forest Oil contends the waiver-of-reliance provision in the settlement agreement conclusively defeats McAllen’s fraudulent inducement claim. We agree.
We considered today’s question in Schlumberger Technology Corp. v. Swanson, holding that a disclaimer of reliance on representations, “where the parties’ intent is clear and specific, should be effective to negate a fraudulent inducement claim.”
[E]ach of us [the Swansons] expressly warrants and represents and does hereby state ... and represent ... that no promise or agreement which is not herein expressed has been made to him or her in executing this release, and that none of us is relying upon any statement or representation of any agent of the parties being released hereby. Each of us is relying on his or her own judgment and each has been represented by Hubert Johnson as legal counsel in this matter. The aforesaid legal counsel has read and explained to each of us the entire contents of this Release in Full, as well as the legal consequences of this Release....18
After learning that Schlumberger later sold the interest to DeBeers for about $4 million, the Swansons sued, claiming Schlumberger had fraudulently induced them to accept the low-price buyout.
Our decision in Schlumberger assumed that (1) the company knew during negotiations that it was misrepresenting the value of the interest, and (2) the misrepresentations were made with the intent of inducing the Swansons to settle.
McAllen argues that Schlumberger is not controlling because we restricted that holding to the record, and today’s case involves “notable distinctions” and “material fact differences.” McAllen’s chief argument to distinguish Schlumberger is that Schlumberger “focuses on representations that were made regarding the underlying agreement’s core subject matter.” The dispute in Schlumberger concerned the value of the Swansons’ interest in the sea-diamond project, and the alleged misrepresentation, as described by McAllen, “pertained to the very thing disputed, which was resolved ‘once and for all’ in the settlement.”
First, McAllen stresses that the parties’ settlement in Schlumberger definitively ended their valuation dispute. McAllen points out that the settled dispute was the only dispute, meaning that the agreed-to disclaimer was sufficiently specific to bar a
McAllen identifies a valid factual distinction, but we fail to see how the disclaimer’s preclusive effect should be different where, as here, the parties agreed to resolve litigated claims and arbitrate future ones. Although we noted in Schlumberger that the company’s representations about the project’s value and feasibility led to “the very dispute that the release was supposed to resolve,”
Second, McAllen contends the settlement language itself compels a different result from Schlumberger. McAllen maintains that the disclaimer he signed is limited by its terms to representations about the matters released and settled, not to misrepresentations about matters reserved and excluded from the settlement. Here, the waiver-of-reliance provision states: “Each of the [plaintiffs] expressly warrants and represents and does hereby state and represent that no promise or agreement which is not herein expressed has been made to him, her, or it in executing the releases contained in this Agreement....”
Third, McAllen argues that fraudulent inducement “is essentially a meeting-of-the-minds argument,” and there was no such meeting here regarding the arbitration agreement because Forest Oil knew all along of the potential for environmental claims while simultaneously assuring McAllen “there [were] no issues having to do with the surface.” The parties thus had no common understanding of the facts underlying the contract, according to McAllen. But the settlement agreement itself belies this argument. The parties agreed that they might disagree and decided to arbitrate any environmental or personal-injury disputes that might later arise. If they were certain such disagreements would never arise, there would have been no need to reserve future claims for arbitration. The act of specifically carving out this discrete category of contamination claims shows that McAllen in fact placed little trust in Forest Oil’s assurances that there were “no issues having to do with the surface” and that both parties recognized the possibility that McAllen might pursue future claims. Moreover, there is an arbitration provision in the environment-focused surface agreement itself, not only in the broader settlement agreement. According to the surface agreement,
It is true that Schlumberger noted a disclaimer of reliance “will not always bar a fraudulent inducement claim,”
Refusing to honor a settlement agreement — an agreement highly favored by the law
We conclude the arbitration requirement is integral to the overall release and the settlement agreement’s waiver-of-reliance language applies by its terms to the parties’ commitment to arbitrate. None of McAllen’s arguments materially distinguishes our holding in Schlumberger: “a release that clearly expresses the parties’ intent to waive fraudulent inducement claims, or one that disclaims reliance on representations about specific matters in dispute, can preclude a claim of fraudulent inducement.”
4. Scope of the Arbitration Clause
Having determined that McAl-len’s fraudulent-inducement claim cannot defeat the arbitration provision in the 1999 settlement agreement, we now turn to whether McAllen’s claims fall within the scope of that arbitration provision.
The remaining question is what should happen to the claims brought by the non-signatory plaintiffs who are not parties to the arbitration requirement (or to this appeal). Forest Oil concedes the trial court cannot order the nonsignatory plaintiffs to arbitration. Section 171.025(a) of the Civil Practice and Remedies Code provides that “[t]he court shall stay a proceeding that
However, as noted above, McAllen and Forest Oil agreed to arbitrate disputes over what the agreement covers. In terms of timing, the arbitrators should decide scope before the trial court decides severance. It is impractical (and probably impossible) for the trial court to decide the severability of the nonsignatories’ claims before the arbitration panel has decided the scope of the signatories’ claims. Accordingly, the trial court, in order to make an informed severance decision, should defer its decision until the arbitrators decide which issues are arbitrable.
5. Conclusion
McAllen may be correct that “[t]he facts of this case are not the facts of Schlumberger ”• — every case involves unique facts — but the decisive ones are assuredly close enough that Schlumberger binds this relevantly similar case. The unequivocal disclaimer of reliance in the parties’ bargained-for settlement agreement conclusively negates as a matter of law the element of reliance needed to support McAllen’s fraudulent-inducement claim. Because Forest Oil has demonstrated that a valid arbitration agreement exists, an agreement that empowers the arbitrators to determine what issues are arbitrable, we reverse the court of appeals’ judgment and remand this case to the trial court to compel arbitration in accordance with our opinion.
. This appeal does not involve every party to the 1999 settlement agreement at issue. The defendants in the litigation that resulted in that settlement were Forest Oil Corporation, Shell Oil Company, Conoco Incorporated, and Fina Oil & Chemical Company, along with divisions of these entities. The plaintiffs included various business entities, individuals, and individual trusts. These parties settled their dispute in June 1999.
Five years later, James McAllen and several others filed suit against Forest Oil, its employee (Daniel B. Worden), and ConocoPhil-lips Corporation. ConocoPhillips was non-suited, so only Forest Oil and Worden are petitioners here. They are referred to collectively as “Forest Oil.” Four plaintiffs to the pending litigation — James McAllen, El Rucio Land & Cattle Company, San Juanito Land Partnership, and McAllen Trust Partnership— are respondents to this appeal and referred to collectively as "McAllen,” unless otherwise noted. These four plaintiffs admit they are bound by the 1999 settlement agreement either as signatories or successors in interest thereto. Several other plaintiffs are not parties to this appeal, and Forest Oil concedes the trial court lacked authority to require these other plaintiffs to arbitrate the current dispute.
. The release language reads:
[The plaintiffs] generally and unconditionally RELEASE, DISCHARGE, and ACQUIT [the defendants] of and from any and all claims and causes of action of any type or character known or unknown, which they presently have or could assert, including but not limited to all claims and causes of action (i) in any manner relating to, arising out of or connected with the McAllen Ranch Leases, or any of them, (ii) in any manner relating to, arising out of or connected with the Lands covered by the McAl-len Ranch Leases, or any of them, (iii) in any manner relating to, arising out of or connected with any implied covenants pertaining to the McAllen Ranch Leases, or any of them, including (without limitation) implied covenants or obligations with respect to drainage, development, unitization, marketing or the administration of the McAllen Ranch Leases ... (vi) all claims and causes of action that the [plaintiffs] asserted or could have asserted in the Lawsuit including (without limitation) matters arising or sounding in contract, in tort (including intentional torts, fraud, conspiracy, and negligence), in trespass, for forfeiture, or under any other theory or doctrine, including any claim for attorneys fees, costs, and sanctions; and the [plaintiffs] hereby declare that all such claims and causes of action have been fully compromised, satisfied, paid and discharged; except that the [plaintiffs] reserve and except from this release only (a) their rights to receive the consideration (monetary and otherwise) provided in this Agreement, (b) their rights to accrued but unpaid royalties ..., (c) any rights and claims arising under the McAllen Ranch Leases ... after the Effective Date of this Agreement, (d) any rights or claims they may have, if any, for environmental liability, surface damages, personal injury, or wrongful death occurring at any time and relating to the McAllen Ranch Leases, (e) the funds held [pursuant to this Agreement], and (f) any intentional act done in contravention of this Agreement or the*54 McAllen Ranch Leases between the date of execution hereof and the Effective Date. Any disputes over any of the above items excepted and reserved from this release shall be resolved in arbitration pursuant to [this Agreement],
. The surface agreement required that oil companies remove nonnatural materials from the sites of abandoned wells and “not store or dispose of any hazardous materials on the surface of the Leases.” In addition, the surface agreement states plainly that surface issues shall be addressed by arbitration: “Surface issues which arise in connection with the Leases shall be subject to that certain Arbitration Agreement set forth and described in the Settlement Agreement. The specific issues addressed below shall become part of the Settlement Agreement and shall be enforceable in accordance with the terms of such Agreement.”
. The waiver-of-reliance provision reads:
[1] Each party acknowledges and confirms that each has had the opportunity to consult with counsel and has been fully advised by counsel prior to the execution of this Agreement.
[2] Each of the Plaintiffs and Intervenors expressly warrants and represents and does hereby state and represent that no promise or agreement which is not herein expressed has been made to him, her, or it in executing the releases contained in this Agreement, and that none of them is relying upon any statement or any representation of any agent of the parties being released hereby. Each of the Plaintiffs and Intervenors is relying on his, her, or its own judgment and each has been represented by his, her, or its own legal counsel in this matter. The legal counsel for Plaintiffs have read and explained to each of the Plaintiffs the entire contents of the releases contained in this Agreement as well as the legal consequences of the releases....
[3] Defendants expressly represent and warrant and do hereby state and represent that no promise or agreement which is not herein expressed has been made to them in executing the releases contained in this Agreement, and that they are not relying upon any statement or representation of any of the parties being released hereby. Defendants, and each of them are relying upon its own judgment and each has been represented by its own legal counsel in this matter. The legal counsel for Defendants have read and explained to them the entire contents of the releases contained in this Agreement as well as the legal consequences of the releases.
.The plaintiffs filed a joint petition asserting negligence, gross negligence, trespass, nuisance, strict liability, negligence per se, misrepresentation, fraud, fraudulent concealment, and intentional battery. The facts giving rise to these causes of action took place on two properties: the Santillana Ranch and the McAllen Ranch. We will refer to the claims arising on the McAllen Ranch as the “McAllen Ranch claims” and claims arising on the Santillana Ranch as the “Santillana Ranch claims.”
Forest Oil produces oil on the McAllen Ranch pursuant to the McAllen Ranch Leases;
The Third Amended Petition claims Forest Oil buried radioactive material on the McAl-len Ranch, resulting in groundwater and soil contamination. The petition does not assert personal injuries related to the McAllen Ranch. McAllen tried to establish a rhinoceros sanctuary on the Santillana Ranch and asked Forest Oil, which has no lease on that ranch, to donate oilfield pipe to be used as pen enclosures. Forest Oil took pipe from the McAllen Ranch to the Santillana Ranch, where McAllen and his employees worked on the rhinoceros pens. McAllen claims this pipe was radioactive and has produced both environmental and personal injuries.
Forest Oil claims that because the pipe giving rise to the Santillana Ranch claims came from the McAllen Ranch, the Santillana Ranch claims also fall within the settlement agreement’s arbitration clause, which requires arbitration of claims "arising out of or relating to the McAllen Ranch Leases." We do not reach this issue.
. 268 S.W.3d 63.
. Id. at 64.
. We have jurisdiction to hear an appeal from an interlocutory order denying arbitration if the court of appeals' decision conflicts with our precedent. See Tex. Gov’t Code §§ 22.001(a)(2), 22.225(c); Tex. Civ. Prac. & Rem.Code § 171.098; Certain Underwriters at Lloyd’s of London v. Celebrity, Inc., 988 S.W.2d 731, 733 (Tex. 1998). As explained below, the court of appeals’ decision conflicts with Schlumberger Technology Corp. v. Swanson, 959 S.W.2d 171 (Tex. 1997).
. When an appeal from a denial of a motion to compel arbitration turns on a legal determination — here, the preclusive effect of the contract’s disclaimer — we apply a de novo standard. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003) ("The trial court's determination of the arbitration agreement’s validity is a legal question subject to de novo review.”); see also In re D. Wilson Constr. Co., 196 S.W.3d 774, 781 (Tex. 2006).
. Prudential Sec. Inc. v. Marshall, 909 S.W.2d 896, 898 (Tex. 1995); see also In re FirstMerit Bank, N.A., 52 S.W.3d 749, 753 (Tex. 2001). Whether a case is governed by the Federal Arbitration Act (FAA) or the TAA, many of the underlying substantive principles are the same; where appropriate, this opinion relies interchangeably on cases that discuss the FAA and TAA.
. In re D. Wilson Constr. Co., 196 S.W.3d at 781; Webster, 128 S.W.3d at 227.
. Tex. Civ. Prac. & Rem.Code § 171.001(b) ("A party may revoke the agreement only on a ground that exists at law or in equity for the revocation of a contract.”); see also Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996); In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 738 (Tex. 2005).
. See Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403-04, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967). If a fraudulent-inducement claim attacks the broader contract, then the arbitrator, not a court, considers the matter. See In re FirstMerit Bank, N.A., 52 S.W.3d at 758. In this case, we assume that the alleged fraud went to the arbitration agreement itself since Forest Oil does not argue otherwise. See TexR.App. P. 53.2(f); Ramos v. Richardson, 228 S.W.3d 671, 673 (Tex. 2007).
. In re FirstMerit Bank, N.A., 52 S.W.3d at 753-54; see also Tex. Civ. Prac. & Rem.Code § 171.021.
. 959 S.W.2d 171, 179 (Tex. 1997).
. Id. at 174.
. Id.
. Id. at 180. The disclaimer in today’s case is virtually the same. See supra note 4.
. Id. at 174.
. Id.
. Id. at 178.
. Id. at 181.
. Id. at 179-81.
. Id. at 180 ("The sole purpose of the release was to end the dispute about the value of this commercial project between Schlumberger and the Swansons once and for all.”).
. Id. The reasoning of the case applies broadly to contracts generally, and we see no reason to accept McAllen’s restrictive interpretation.
. Id.
. See supra note 4.
. Id.
. See also supra note 3 ("Surface issues which arise in connection with the Leases shall be subject to that certain Arbitration Agreement set forth and described in the Settlement Agreement.”).
. Id. at 179.
. See, e.g., Warehouse Assocs. Corporate Ctr. II, Inc. v. Celotex Corp., 192 S.W.3d 225, 230-34 (Tex.App.-Houston [14th Dist.] 2006, pet. filed) (limiting Schlumberger to cases in which the parties resolve a long-running dispute that is also the topic of the alleged fraudulent representation); Coastal Bank SSB v. Chase Bank of Texas, N.A., 135 S.W.3d 840, 844 (Tex.App.-Houston [1st Dist.] 2004, no pet.) (considering the broad language of the waiver-of-reliance provision to be the controlling factor); IKON Office Solutions, Inc. v. Eifert, 125 S.W.3d 113, 124-28 (Tex.App.-Houston [14th Dist.] 2003, pet. denied) (applying Schlumberger in a factual situation that did not involve a settlement agreement or a contract that terminated the parties' relationship); John v. Marshall Health Servs., Inc., 91 S.W.3d 446, 450 (Tex.App.-Texarkana 2002, pet. denied) (refusing to apply Schlumberger because "[h]ere, the contract was the beginning, not the end, of the relationship between” the parties).
. See Transp. Ins. Co. v. Faircloth, 898 S.W.2d 269, 280 (Tex. 1995) (“Settlements are favored because they avoid the uncertainties regarding the outcome of litigation, and the often exorbitant amounts of time and money to prosecute or defend claims at trial.”); Bocanegra v. Aetna Life Ins. Co., 605 S.W.2d 848, 855 (Tex. 1980) (Campbell, J., concurring) ("Settlement agreements are highly favored in the law because they are a means of amicably resolving doubts and preventing lawsuits.”).
. The TAA allows personal-injury claims to be arbitrated when each party, on advice of counsel, has agreed to do so in a writing signed by the parties and their attorneys. Tex Civ. Prac. & Rem.Code § 171.002(c). All parties to this appeal — or their predecessors in interest — and their attorneys signed the settlement agreement, which contains the arbitration agreement, so there is no statutory prohibition to arbitrating these claims.
. In re FirstMerit Bank, N.A., 52 S.W.3d 749, 753 (Tex. 2001).
. The arbitration provision reads: "All disputes arising out of or relating to the McAllen Ranch Leases, including, without in any way limiting the foregoing, disputes relating to this Agreement or disputes over the scope of this arbitration clause, will be resolved by arbitration in Houston, Texas, using three neutral arbitrators.” While this provision clearly encompasses the McAllen Ranch claims, it is not clear that it includes the Santillana Ranch claims.
. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 129-30 (Tex. 2004) ("As a rule, parties have the right to contract as they see fit as long as their agreement does not violate the law or public policy.”); see also Fairfield Ins. Co. v. Stephens Martin Paving, LP, 246 S.W.3d 653, 663-64 (Tex. 2008).
. Tex. Civ. Prac. & Rem.Code § 171.021; In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571, 573 (Tex. 1999).
. Tex. Civ. Prac. & Rem.Code § 171.025(b) ("The stay applies only to the issue subject to arbitration if that issue is severable from the remainder of the proceeding.”).
Dissenting Opinion
joined by Justice MEDINA, dissenting.
According to the Court, the considerations most relevant to our analysis in Schlumberger Technology Corp. v. Swanson, 959 S.W.2d 171 (Tex. 1997), were:
(1) the terms of the contract were negotiated, rather than boilerplate, and during negotiations the parties specifically discussed the issue which has become the topic of the subsequent dispute; (2) the complaining party was represented by counsel; (8) the parties dealt with each other in an arm’slength transaction; (4) the parties were knowledgeable in business matters; and (5) the release language was clear.
268 S.W.3d 60. My disagreement with the Court centers on the first point. Under the Court’s analysis, a party may intentionally misrepresent facts essential to the bargain to induce the other to sign, as long as the agreement says rebanee is waived. This is not sound policy, and Schlumberger does not support this result. I would hold that McAllen’s fraudulent inducement claim survives the disclaimer of reliance at issue here. Because the Court does not, I respectfully dissent.
I
Schlumberger
In Schlumberger, we noted that we had previously held “as a matter of policy, that a merger clause can be avoided based on fraud in the inducement and that the parol evidence rule does not bar proof of such fraud,” and that “[i]n doing so, we brought
But Schlumberger is not so broad. There, we held that, where the four other factors listed by the Court are present, “a release that clearly expresses the parties’ intent to waive fraudulent inducement claims, or one that disclaims reliance on representations about specific matters in dispute, can preclude a claim of fraudulent inducement.” Id. at 181. The release in Schlumberger did not contain an express waiver of fraudulent inducement claims, but did disclaim reliance on representations about specific matters in dispute. Id. at 180. The release itself noted that “ ‘there [wa]s considerable doubt, disagreement, dispute and controversy with reference to the validity of the [claim being settled],’” and the “sole purpose of the release was to end [that] dispute.” Id. The Schlumberger Court therefore concluded “that the parties contemplated, by the inclusion of [the disclaimer of reliance], that the Swansons would not rely on any representations of Schlumberger about the commercial feasibility and value of this project, which, after all, was the very dispute that the release was supposed to resolve.” Id.
That the Schlumberger Court limited its holding to a release “that clearly expresses the parties’ intent to waive fraudulent inducement claims, or one that disclaims reliance on representations about specific matters in dispute” is clear from the rest of the opinion. Id. at 181. Indeed, we “emphasize[d]” in Schlumberger “that a disclaimer of reliance or merger clause will not always bar a fraudulent inducement claim.” Id. We cited Prudential Insurance Co. of America v. Jefferson Associates, in which we said “[a] buyer is not bound by an agreement to purchase something ‘as is’ that he is induced to make because of a fraudulent representation or concealment of information by the seller.” Prudential, 896 S.W.2d 156, 162 (Tex. 1995). This would be a strange authority to cite if Schlumberger were as sweeping as the Court suggests: it is difficult to imagine a party making fraudulent representations on a subject that has not been discussed. And while the Court states that “this statement merely acknowledges that facts may exist where the disclaimer lacks ‘the requisite clear and unequivocal expression of intent necessary to disclaim reliance’ on the specific representations at issue,” it does so without addressing Prudential, instead quoting an earlier passage
In sum, in Schlumberger we balanced parties’ need to settle disputes against our strong aversion to fraud. The result was a narrow exception to the rule that integration clauses do not bar fraudulent inducement claims. By expanding Schlum-berger, the Court’s holding will force courts to honor contracts indisputably induced by fraud on the basis of blanket reliance waivers, like the one at issue here. I would not.
II
McAllen’s Fraudulent Inducement Claim
As discussed above, under Schlumber-ger, to bar a fraudulent inducement claim, a disclaimer of reliance must either expressly waive the claim or disclaim reliance on representations about the specific disputed matter, Schlumberger, 959 S.W.2d at 181; otherwise, the general rule that integration clauses do not bar fraudulent inducement claims applies. The disclaimer in this case does neither. The relevant portion of the disclaimer reads:
Each of the Plaintiffs and Intervenors expressly warrants and represents and does hereby state and represent that no promise or agreement which is not herein expressed has been made to him, her, or it in executing the releases contained in this Agreement, and that none of them is relying upon any statement or any representation of any agent of the parties being released hereby.
This disclaimer makes no explicit reference to fraudulent inducement. The question, then, is whether it disclaims reliance on representations about a specific disputed matter in the agreement. While the disclaimers in this case and Schlumberger may appear to be “virtually identical,” 268 S.W.3d at 60, the factual differences between this case and Schlumberger are critical. In Schlumberger, there was essentially one dispute — specifically described in the agreement — being settled, and therefore, “[b]ecause courts are to assume that the parties intended every contractual provision to have some meaning,” the Court was able to “presume” that the disclaimer of reliance applied specifically to representations about that sole dispute. Schlumberger, 959 S.W.2d at 180. In the instant case, in contrast, the settlement agreement covered a number of topics, chiefly royalty underpayment and mineral underdevelopment. Thus, unlike Schlumberger, we cannot presume that the disclaimer of reliance referred specifically to environmental issues, and the general rule that fraudulent inducement claims are not barred by integration clauses should apply.
Ill
Forest Oil’s Remaining Issues
Forest Oil argues that McAllen could not have justifiably relied on Forest Oil’s representation that there were no existing issues with the surface because that representation was contradicted by the agreement’s express terms. Because the surface agreement contains no contrary statement regarding surface conditions, it is not necessary to examine this claim in detail.
Forest Oil also argues that McAllen could not justifiably rely on the representation of his litigation adversary during settlement negotiations. Forest Oil cites McCamish, Martin, Brown & Loeffler v. F.E. Appling Interests, for the proposition that “a third party’s reliance on an attorney’s representation is not justified when the representation takes place in an adversarial context.” McCamish, 991 S.W.2d 787, 794 (Tex. 1999). This statement, however, refers not to whether attorneys’
Q. (By Mr. Mancias) Yes, sir. Were you told in no uncertain terms by the oil companies, including Forest Oil Company, that there were no contaminants or pollutants on the surface of your property?
A. (By Mr. McAllen) Yes. And all the Forest attorneys were there. I believe Forest Doran himself was there.
Q. Who is Forest Doran?
A. I believe he’s the majority stockholder of Forest Oil Company.
Q. Can you tell the Judge whether or not Mr. Doran was present when those representations you just testified about were made to you?
A. That, I can’t recall.
Q. All right, sir. But the attorneys were present?
A. The attorneys — his attorneys were present.
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A. But during the process, the owners for Forest and Conoco and everybody else who was involved in the lawsuit assured me that there was no issues [sic] having to do with the surface, and if I wanted to get this settlement agreement behind us, I had to do that. But they were very convincing.
(Emphasis added.) McAllen’s reliance on these statements was not, therefore, unjustifiable as a matter of law.
IV
Conclusion
Today the Court replaces Schlumber-geYs requirement that a release must “clearly express[] the parties’ intent to waive fraudulent inducement claims, or ... disclaim[ ] reliance on representations about specific matters in dispute” in order to preclude a fraudulent inducement claim, 959 S.W.2d at 181, with the requirement that the parties merely “specifically discussed the issue which has become the topic of the subsequent dispute” during negotiations, 268 S.W.3d 60. Courts, including this one, have long battled the specter of fraud in contracts; I fear that the Court’s opinion may one day be a weapon in the hands of those who profit from it. I respectfully dissent.
Reference
- Full Case Name
- FOREST OIL CORPORATION and Daniel B. Worden, Petitioners, v. James Argyle McALLEN, El Rucio Land and Cattle Company, Inc., San Juanito Land Partnership, and McAllen Trust Partnership, Respondents
- Cited By
- 243 cases
- Status
- Published