HIGHLAND CAPITAL MANAGEMENT, L.P., MLCBO IV (CAYMAN), LTD., PAMCO CAYMAN, LTD., PAM CAPITAL FUNDING, L.P., FAMCO VALUE INCOME PARTNERS, L.P. AND FAMCO OFFSHORE LTD, v. Ryder Scott Company and Chesapea

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Laws-info.com » Cases » Texas » 1st District Court of Appeals » 2012 » HIGHLAND CAPITAL MANAGEMENT, L.P., MLCBO IV (CAYMAN), LTD., PAMCO CAYMAN, LTD., PAM CAPITAL FUNDING, L.P., FAMCO VALUE INCOME PARTNERS, L.P. AND FAMCO OFFSHORE LTD, v. Ryder Scott Company and Chesapea

State: Texas

Court: Texas Northern District Court

Docket No: 01-10-00362-CV

Case Date: 12/06/2012

Plaintiff: HIGHLAND CAPITAL MANAGEMENT, L.P., MLCBO IV (CAYMAN), LTD., PAMCO CAYMAN, LTD., PAM CAPITAL FUNDING,

Defendant: Ryder Scott Company and Chesapeake Energy Corporation

Preview:Opinion issued December 6, 2012

In The

Court of Appeals
For The

First District of Texas
------------------------ NO. 01-10-00362-CV ---------------------- HIGHLAND CAPITAL MANAGEMENT, L.P., ML CBO IV (CAYMAN) LTD., PAMCO CAYMAN, LTD., PAM CAPITAL FUNDING, L.P., FAMCO VALUE INCOME PARTNERS, L.P., AND FAMCO OFFSHORE, LTD., Appellants V. RYDER SCOTT COMPANY AND CHESAPEAKE ENERGY CORPORATION, Appellees

On Appeal from the 151st District Court Harris County, Texas Trial Court Case No. 2003-39194

OPINION ON REHEARING We originally issued our opinion in this appeal on April 5, 2012. Appellee Ryder Scott Company has filed a motion for rehearing. We grant the motion for rehearing, vacate our earlier judgment, withdraw our previous opinion, and issue this opinion in its place. In this securities case, appellants, Highland Capital Management, L.P.; ML CBO IV (Cayman) Ltd.; Pamco Cayman, Ltd.; Pam Capital Funding, L.P.; Famco Value Income Partners, L.P.; and Famco Offshore Ltd., sued appellees, Ryder Scott Company and Chesapeake Energy Corporation. Appellants asserted civil violations of the Texas Securities Act and made claims of fraud, negligent misrepresentation, conspiracy, and aiding and abetting fraud against appellees. Ultimately, the trial court granted appellees' motions for summary judgment and sustained a number of their special exceptions, resulting in a final judgment in favor of Ryder Scott and Chesapeake Energy on all of appellants' claims. Identifying seven issues, appellants now challenge the trial court's judgment. We affirm, in part, reverse, in part, and remand for further proceedings. Background Summary Seven Seas Petroleum, Inc. was an oil and gas exploration company. In 1996, Seven Seas was exploring and developing oil and gas properties in

2

Colombia. Seven Seas operated a significant working interest in the Guaduas Oil Field, located northeast of Bogata. Seven Seas began trading on the American Stock Exchange. Rule 4-10(a) of Regulation S-X of the Securities Exchange Act of 1934 ("Regulation S-X") required that, for it to issue a federally registered security, Seven Seas had to disclose the value of its oil and gas reserves in its SEC filings.1 Regulation S-X prescribed the financial accounting and reporting standards that Seven Seas was required to apply. Among these standards, the company could report, as "proved reserves," only those oil and gas quantities that "geological and engineering data demonstrate[d] with reasonable certainty to be recoverable in future years."2 Seven Seas hired Ryder Scott Company, a petroleum engineering firm, which analyzes reserve data and estimates reservoir volumes, future production, and income attributable to reserve assets in accordance with SEC rules and regulations. Seven Seas retained Ryder Scott to provide such valuations, including proved reserve estimates, for the Guaduas Field. In 1997, Ryder Scott prepared its first reserve report in which it estimated net proved reserves for the Guaduas Field to be 32.16 million barrels. The reserve report indicated that it had been prepared in accordance with SEC parameters.

1

See 17 C.F.R.

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