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Click here for the full text of this decision FACTS:Eight Virginia limited partnerships hired Arkoma Basin Exploration Co. to estimate production from mineral properties in the Arkoma Basin in southeastern Oklahoma. When the properties failed to produce as predicted, they sued. Based on Virginia law, a Texas jury found clear and convincing evidence of fraud and awarded $5.5 million in damages. The trial court signed a judgment reducing the verdict to $4.7 million and later reduced that further by remittitur to about $2.9 million. When Arkoma appealed the judgment and the partnerships cross-appealed the remittitur, the 5th Court of Appeals affirmed the judgment in all respects but one, holding part of the remittitur improper and restoring about $1.5 million of the jury’s verdict. The Texas Supreme Court granted Arkoma’s petition for review to consider whether there was legally sufficient evidence of fraud under Virginia law or of damages under Texas law. HOLDING:Affirmed in part, reversed and rendered in part. Arkoma, the court stated, argued that its reserve estimates were immune from any fraud claim under Virginia law. The parties agree that Virginia law governed this issue and required clear and convincing evidence to establish liability. Reserve estimates inherently include analysis and assumptions about future events, the court stated. Virginia law draws a line between statements of opinion and of fact: “[t]he mere expression of an opinion, however strong and positive the language may be, is no fraud.” Additionally, Virginia law distinguishes between statements of existing and future facts: “fraud must relate to a present or a pre-existing fact, and cannot ordinarily be predicated on unfulfilled promises or statements as to future events.” But Virginia, the court stated, specifically eschews a bright-line test, judging each case on its facts, and considering the nature of the representation, the relative knowledge of the parties, their intentions and all of the surrounding circumstances before deciding whether a statement constitutes fraud. In some circumstances, the court stated, Virginia law allows fraud claims based on what might otherwise appear to be opinions. For example, the Virginia Supreme Court has held that a consultant who reported “nothing to indicate that wetlands are present,” but also warned that this was a matter of opinion, could nevertheless be liable for fraud when 80 percent of a property was later designated as wetlands. Accordingly, the Texas Supreme Court rejected arguments that Virginia law treats all reserve estimates � regardless of the circumstances � as mere opinions (Arkoma’s view) or as statements of fact (the partnerships’ view). Instead, viewing all the surrounding circumstances in a light favorable to the verdict, and keeping in mind Virginia’s clear and convincing evidence standard, the court held that Arkoma’s reserve estimates in the mature Wilburton field were actionable as statements of fact, while those in the South Panola field were nonactionable statements of opinion. Thus, the court affirmed the jury’s fraud verdict as to the FMF Associates 1988-B Ltd. and FMF Lazare Ltd. partnerships, and reversed the remainder. Next, Arkoma challenged the legal sufficiency of the damages evidence. The 1988-B and Lazare partnerships argued that Arkoma failed to preserve this error in the trial court. As Arkoma’s argument concerned procedural matters, Texas law governed. The two partnerships, the court noted, called Michael Harper, a petroleum engineer, to calculate the amount by which reserves were fraudulently inflated. Arkoma, the court stated, “is certainly correct that Harper’s testimony could have been a lot clearer.” But the court found his testimony regarding damages was legally sufficient. Finally, the court stated that because appellate timetables restarted when the trial court signed its remittitur order, the 5th Court of Appeals had jurisdiction to consider the remittitur. Accordingly, the court held that two of the eight limited partnerships presented legally sufficient evidence of fraud under Virginia law and of damages under Texas law. OPINION:Brister, J., delivered the opinion of the court in which Jefferson, C.J., and Hecht, Wainwright, Green, Medina, Johnson and Willett, JJ., joined. CONCURRENCE AND DISSENT:O’Neill, J. “I agree that Arkoma’s reserve estimates cannot all be treated alike, as estimates for the relatively unexplored South Panola field were much more speculative. But the mere fact that estimating the South Panola field’s reserves was more difficult did not provide Arkoma a license to deliberately falsify data to drive up the mineral rights’ acquisition price, of which it received a sizeable percentage, and then cry”opinion’ to avoid liability once it pocketed the commission.”

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