OIL & GAS ALERT: Texas Supreme Court Affirms Decision Rejecting Speculative Expert Testimony

    24 April 2008

    The Texas Supreme Court has affirmed a Houston Court of Appeals decision rejecting speculative expert testimony on lost profits in connection with an exploration play in Kazakhstan. In Ramco v. Anglo-Dutch (Tenge) LLC, 207 SW3d 801, Van Dyke was soliciting investors for an exploration play; RAMCO was interested and signed a confidentiality agreement to look at the data. One of the experts to which it showed the data used that data to acquire interests in the play. Anglo-Dutch sued Ramco. While finding Ramco liable for violating the confidentiality agreement, the court found that the experts’ damage model did not properly take into account the important historical data from the Kazakhstan Field; therefore, these failures rendered the damage calculations by the Plaintiffs' experts to be uncertain and speculative. The following guidelines for experts can be derived:

    • Would the company have the ability and the rights to drill on the tracts?
    • Did the company have the funding to drill on the tracts?
    • Is the company’s development plan dependent on uncertain and changing market conditions, or based on risky business opportunities and the success of an unproven enterprise?
    • The expert's opinions or estimates of lost profits must be based on objective facts, figures, or data from which the amount of lost profits may be ascertained.
    • Was there a pre-existing profit, which together with other facts and circumstances, may indicate with reasonable certainty the amount of profits lost?