In
First, the Court settled what "willful misconduct" in an operating agreement means for purposes of a non-operator proving that kind of breach of contract: "that the defendant intentionally or deliberately engaged in improper behavior or mismanagement, without regard for the consequences of his acts." Id. at *5 (citing Mo-Vac Serv. Co. v. Escobedo, 603 S.W.3d 119 (Tex. 2020)). A plaintiff alleging such misconduct does not have to show "subjective intent to cause harm." Id. The standard is whether a defendant "deliberately engaged in misconduct without regard for the consequences—not . . . whether the defendant sought the consequences of his own misconduct." Id. at *7.
The Court then held the evidence showed willful misconduct because Apache, the operator, had been "aware of the cost overruns for months and did nothing about them." Id. at *6. Apache had received the non-operator's consent to the initial budgeted expense of a project and to several subsequent increases, see id. at *2, but had not been candid about the full extent of future costs and had ignored the impact of its financial mismanagement. See id. at *6-7. Apache's employee admitted to not seeking timely supplemental approval from the non-operator for overages, and that alone was "plain evidence of misconduct." Id. at 6. Despite his knowledge of mounting costs, Apache's manager had decided "money was not a problem," so the jury "reasonably determined from this evidence that [the manager] was consciously indifferent to the cost overruns." Id. In sum, the operator "knew, but did not care," about the overspending, and that was willful misconduct. Id. at *8.
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GA 30326
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