On September 30, 2024, United States District Judge Charles Eskridge, sitting as an appellate court in a bankruptcy case, affirmed a 2021 ruling by United States Bankruptcy Judge Marvin Isgur in favor of SDM client EP Energy E&P Company, L.P. In the bankruptcy case, Judge Isgur denied a claim alleging more than $100 million in trespass damages against EP Energy, asserted by an Eagle Ford lessor group known as “MSB.”

During the COVID-19 pandemic’s onset, EP Energy temporarily stopped producing its wells in the Eagle Ford field in May of 2020 as a result of an unprecedented collapse in oil prices. EP Energy then resumed production in June of 2020 as the markets recovered.

MSB alleged that its sixteen leases to EP Energy—covering roughly 40,000 acres—terminated as a result of that gap in production. MSB sought trespass damages as an administrative expense under EP Energy’s now-confirmed Chapter 11 Plan of Reorganization.

After Judge Isgur denied MSB’s claims in 2021, MSB appealed to the United States District Court.

SDM represents EP Energy in the appeal, along with Weil Gotshal & Manges LLP. SDM & Weil briefed and argued the threshold bankruptcy jurisdictional matters as well as the lease termination issue. SDM partner Mark Hanna led the SDM team’s efforts and SDM partner Willie Cochran handled oral argument on behalf of EP Energy.

EP Energy argued that it maintained its continuous-development leases by drilling wells on schedule and that it maintained its held-by-production leases by restoring actual production within the permitted time period under the temporary cessation of production clause in the leases.

Judge Eskridge agreed with EP Energy in full, upholding federal bankruptcy jurisdiction over the claims and concluding that “EP Energy maintained seven leases by complying with drilling obligations in the continuous development clause and maintained nine leases by restoring actual production within 120 days under the temporary-cessation clause.”

Judge Eskridge’s memorandum opinion is available here, and as In re: EP Energy E&P Company, LP, Debtor, No. 4:21-CV-04148, 2024 WL 4356581 (S.D. Tex. Sept. 30, 2024).

SDM partners Mark Hanna, John Gasink, and Willie Cochran represent EP Energy.