JPMorgan Chase & Co. has settled a lawsuit by a group of Texas mineral rights owners in the Eagle Ford Shale, Bloomberg reports.
The lawsuit alleged JP Morgan, as trustee of the South Texas Syndicate (STS) Trust, cheated beneficiaries out of millions of dollars through its’ mis-management of the trust’s oil & gas interests. The STS Trust’s beneficiaries own the mineral rights to 132,000 acres in LaSalle and McMullen counties in the heart of the Eagle Ford Shale’s oil window.
Beneficiaries claim JP Morgan entered “sweetheart deals” with its commercial clients, Petrohawk Energy Corp. and Hunt Oil Co., that cheated them out of more than $600-million in compensation. JPMorgan denied those claims as speculation.
On Nov. 14, a settlement was reached and the jury that had been called to hear testimony in the case was dismissed. The terms of the settlement were not revealed by either party.
At the heart of the lawsuit, beneficiaries claimed JPMorgan took leases for large chunks of acreage at low lease rates to gain favor with its oil company clients, but leases were taken before the Eagle Ford boom really took off. It’s hard to imagine it now, but the Eagle Ford was a wildcat area in 2008, and largely off the radar.
Petrohawk, which sold to BHP-Billiton for $12-billion in 2011, and a major lessee in the STS acreage, took a calculated risk in South Texas, and it paid off big. But for all most folks knew in 2008, if they had even heard about the Eagle Ford Shale, is it could have been a bust. Of course, that turned out not to be the case.
For further review, the case is Meyer v. JP Morgan Chase Bank, 2018-CI-10977, District Court, Bexar County, Texas (San Antonio).