Reported / Citable
Background
John Randall Holstead and six other plaintiffs sued Continental Resources in the 143rd Judicial District Court of Reeves County, Texas, alleging that Continental improperly deducted royalties owed under an oil and gas lease. Continental timely removed the case to federal court based on diversity jurisdiction.
The plaintiffs moved to remand, relying on Paragraph 15 of the lease. That provision required suits to be initiated in a court “of the State of Texas,” placed exclusive venue in the county where the leased premises were located, and directed appeals to the appropriate Texas appellate court. The parties did not dispute federal subject-matter jurisdiction; the issue was whether Continental had contractually waived its statutory right to remove.
The Court’s Holding
U.S. Magistrate Judge David B. Fannin concluded that Paragraph 15 clearly and unequivocally waived Continental’s removal right and recommended that the district court grant the plaintiffs’ motion and remand the case to Reeves County state court. This was a report and recommendation, not a final remand order.
Reading the lease as a whole under Texas law, the magistrate judge reasoned that the phrase “court of the State of Texas” selected Texas state courts, while the venue provision selected Reeves County and the appellate provision confirmed an exclusively state-court path. Although the county-based venue language alone could encompass the federal courthouse in Reeves County, its neutrality did not make the sovereign-specific jurisdiction clause ambiguous. The report also concluded that removal would violate the requirement that litigation be “initiated” in state court because a removed action is treated as having commenced in federal court.
Key Takeaways
- A forum-selection clause can waive removal without expressly using the words “waiver” or “removal,” provided the waiver is clear and unequivocal.
- A reference to courts “of the State of Texas” denotes Texas state courts, not federal courts located in Texas.
- Forum provisions must be read together: the state-court jurisdiction clause, Reeves County venue clause, and Texas appellate clause collectively prescribed litigation in the Texas court system.
Why It Matters
The recommendation illustrates how lease language governing jurisdiction, venue, and appeals can eliminate a defendant’s otherwise available right to remove a diversity case. A county-specific venue clause may permit either state or federal court when both sit in the county, but accompanying language selecting courts “of” a state and that state’s appellate system can make the state forum exclusive.
Because the decision is a magistrate judge’s report and recommendation, the district judge must still act on it, subject to the parties’ opportunity to file objections.