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Litigation Attorney Caleb Davis Successfully Represents Fraud Victims

August 16, 2021

Dallas associate Caleb Davis recently secured a victory for his clients before the 13th Court of Appeals. The Court affirmed lower court decisions, including punitive damages and attorneys’ fees, against the seller of oil and gas leases for the seller’s fraudulent property dealings.

“The damages awards are nearly immaterial, the fraud finding, however, preserved lucrative property rights,” Davis said. “I took this one personally, these clients were very vulnerable. I am so happy for them.”

Davis represented 31 investors, including many retirees, who had invested all or a significant portion of their retirement in an oil and gas scheme. Davis recalled that the seller’s marketing team cold called investors nationwide. They then marked up the leasehold 415% and sold it in parts to the investors as purported partnership interests in a joint venture. The average industry markup is about 133%. The seller then made himself the manager of that purported joint venture and prevented the investors from communicating with their fellow venturers—one another.

When the first well on the venturer’s leasehold produced minerals, the leasehold was worth as much as $30 million. Through sophisticated and self-dealing property assignments, the seller then re-sold the leasehold interest he had sold to Davis’ clients. In fact, some of Davis’ clients, many who were long retired and unfamiliar with oil and gas dealings, unwittingly purchased a second mineral well from the seller on property Davis’ clients already owned. Davis’s clients now faced multiple claims to their leasehold.

Following an impromptu capital call by the seller, a disgruntled employee of the seller furnished a contact list to a venturer. That venturer, a pig farmer from Iowa, then turned to Davis for counsel.

Davis organized the Venturers and conducted a vote to expel the seller as manager. Davis then reorganized the venture as a limited liability company, structured its C-suite, published new corporate rules, and coached the clients on best business practices.

“It was a wild ride,” Davis said. “Many of the clients were well past their wage-earning years and tradesman, not CEOs, managers, or businessman. They had long passed on any notion of steering a multimillion-dollar company. But they did it. They are amazing people. It was very humbling and I learned a lot from them.”

The matter was tried in four separate actions spanning five years. Davis first secured a declaration that the seller’s property documents were invalid and earned damages and his clients’ attorneys’ fees in arbitration. He next attacked the seller’s assets in Colorado and Nueces County to satisfy the arbitration award. Davis strategically chose the Nueces County trial, both the trial and appellate courts, to prosecute and secure the fraud finding. “It was a strategic and economic decision. The Nueces County trial was summary in nature—there would not be a long, expensive fight. It was also an opportunity to test the limits of Texas’s fraudulent lien claims statute,” Davis said.

“The decision was remarkable for a number of reasons,” said Dallas Member Jadd Masso. “First, Caleb used the Texas fraudulent liens and claims statute in a novel way—to earn a fraud finding on a collateral issue in an area of largely unsettled law. Second, the Senior Justice of the Court delivered a one-sided opinion that quoted very heavily not only from a very junior attorney’s appellate brief but from his trial work too. The strategy and execution overwhelmed his opposition.”

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