Texas' New (And Old) Take On Exculpatory Clauses

After more than two decades, at least one US federal court in Texas has followed the view of Texas state appellate courts on the limitation of the application of the exculpatory clauses found in both the AAPL 1977 and 1982 model form operating agreements to claims for breach of the operating agreement.

On February 14, 2014, the US District Court for the Southern District of Texas, Houston Division, entered its order on a motion to dismiss in MDU Barnett Limited Partnership v. Chesapeake Exploration Limited Partnership, 2014 U.S. Dist. LEXIS 18769 (S.D. Tex. Feb. 14, 2014). In doing so, the district court relied on the Texas Supreme Court's recent decision in Reeder v. Wood County Energy, 395 S.W.3d 789 (Tex. 2012), which was determined to endorse previous Texas appellate court's limited application of the exculpatory clause contained in both the 1977 and 1982 AAPL model form operating agreements, as held in in Castle Tex. Prod. Limited Partnership v. Long Trusts, 134 S.W.3d 267 (Tex. App. - Tyler 2003, pet. denied) and Abraxas Petroleum Corp. v. Hornburg, 20 S.W.3d 741 (Tex. App. - El Paso 2000, no pet.).

State and federal courts in Texas have taken conflicting positions on the scope and application of the exculpatory clause in the AAPL 1977 and 1982 model form operating agreements. Specifically, in 1992 the Fifth Circuit addressed the issue in Stine v. Marathon Oil Co., 976 F.2d 254 (5th Cir. 1992), which reviewed the following exculpatory clause language contained the AAPL 1977 and 1982 operating agreement at section V.A.:

[Operator]...