158 XCO Production Company v. Jamison

Richard F. Brown

 
The following is not a legal opinion. You should consult your attorney if the case may be of significance to you.
 
XCO Production Company v. Jamison, _____ S.W.3d ____, 2005 WL 1242289 (Tex. App.—Hous. [14 Dist.] 2005, no pet.), holds that the two-year contractual limitations period contained in a joint operating agreement (“JOA”) is inapplicable to disputes between non-operators. XCO and Jamison entered into a Memorandum of Agreement that created a tax partnership between XCO and Jamison. XCO owned non-operated working interests in oil and gas properties in Louisiana, which it contributed to the partnership, and Jamison contributed cash. The partners got into a dispute involving the deduction of certain costs and the calculation of payout.
 
The Memorandum of Agreement incorporated the operating agreements for the oil and gas properties. Among other issues in the case, XCO contended that the two-year contractual limitation on accounting disputes in the operating agreement applied to the dispute between XCO and Jamison. The court disagreed and held that the “provision clearly applies to accounting procedures between the operator and the non-operators.” This dispute was not between the operator and a non-operator, but between two partners who own a non-operator’s interest.
 
The significance of the case is that disputes between parties as to the terms of their “deal” will be governed by the usual statute of limitations (four years as to contracts) and not by the shorter term provided in most JOA’s for accounting disputes involving the operator’s accounting.