In Alexander O&G, LLC v. Nomad Land & Energy Res., LLC, Nomad entered into a Purchase and Sale Agreement (“PSA”) with Alexander O&G, LLC (“AOG”) for the sale of oil and gas interests. No. H-16-2065, 2017 U.S. Dist. LEXIS 130415 (S.D. Tex. August 16, 2017). The PSA provided that AOG would deposit earnest money into an escrow account:

Upon execution and delivery of the Agreement, [AOG] shall tender [Nomad], in an agreed escrow agent’s account, an earnest money deposit of $100,000.00 to help ensure [AOG’s] performance hereunder, which deposit shall be non-refundable, except in the event that [Nomad] shall be unwilling or unable to perform his obligations hereunder, in which case the entirety of the earnest money deposit, and any interest or any additions thereto, shall be refunded to [AOG].

Id. AOG later informed Nomad that it was terminating the PSA, and Nomad requested that AOG’s counsel release the $100,000 deposit they held in escrow pursuant to the terms of the PSA. AOG’s counsel responded that it had returned the funds to its client, AOG, as it was the owner of those funds. Nomad then sued AOG and AOG’s counsel, and alleged that AOG’s counsel breached fiduciary duties as an escrow agent. AOG’s counsel filed a motion to dismiss the complaint.

The federal district court denied the motion to dismiss regarding the claims against the attorneys. The court first determined whether the attorneys acted as an escrow agent. The court held that to create an escrow relationship “the parties to the underlying transaction need only to deposit instruments or funds with a third party and to agree to the terms in which the third party would deliver the items deposited.” Id. “There must be a valid underlying contract to support the escrow agreement. However, in the absence of a contract, a fiduciary relationship may still exist.” Id. The court held that “[e]ven where no formal escrow agreement exists, a party that receives money accompanied by specific instructions on how to apply the money has the duties of an escrow agent.” Id.

The court then held that Nomad sufficiently pled the existence of a fiduciary relationship by alleging that “the PSA between AOG and Nomad is a valid, underlying contract in which the parties agreed to clear and definite escrow terms.” Id. Further, “Nomad also alleged that the Counter-Defendants were counsel to AOG for the PSA, and therefore should have been on notice of the instructions to the escrow agent.” Id. The court concluded that “these facts create a more than plausible basis that the Counter Defendants were on notice of the explicit instructions to the escrow agent in the PSA and assumed a fiduciary duty to Nomad when they accepted the $100,000 earnest money deposited into Jones Gill’s IOLTA account” and that a fiduciary relationship existed between the attorneys and Nomad.

The court noted that in Texas an escrow agent owes the duty of loyalty, the duty to make full disclosure, and the duty to exercise a high degree of care to conserve the money and pay it only to those entitled to receive it. Id. Thereunder, the court found that Nomad alleged facts that the attorneys breached their fiduciary duty because the earnest money was returned to the wrong party and that such breach resulted in injury. The court denied the motion to dismiss.

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Photo of David Fowler Johnson David Fowler Johnson

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David maintains an active trial and appellate practice and has consistently worked on financial institution litigation matters throughout his career. David is the primary author of the The Fiduciary Litigator blog, which reports on legal cases and issues impacting the fiduciary…

[email protected]

David maintains an active trial and appellate practice and has consistently worked on financial institution litigation matters throughout his career. David is the primary author of the The Fiduciary Litigator blog, which reports on legal cases and issues impacting the fiduciary field in Texas. Read More

David’s financial institution experience includes (but is not limited to): breach of contract, foreclosure litigation, lender liability, receivership and injunction remedies upon default, non-recourse and other real estate lending, class action, RICO actions, usury, various tort causes of action, breach of fiduciary duty claims, and preference and other related claims raised by receivers.

David also has experience in estate and trust disputes including will contests, mental competency issues, undue influence, trust modification/clarification, breach of fiduciary duty and related claims, and accountings. David’s recent trial experience includes:

  • Representing a bank in federal class action suit where trust beneficiaries challenged whether the bank was the authorized trustee of over 220 trusts;
  • Representing a bank in state court regarding claims that it mismanaged oil and gas assets;
  • Representing a bank who filed suit in probate court to modify three trusts to remove a charitable beneficiary that had substantially changed operations;
  • Represented an individual executor of an estate against claims raised by a beneficiary for breach of fiduciary duty and an accounting; and
  • Represented an individual trustee against claims raised by a beneficiary for breach of fiduciary duty, mental competence of the settlor, and undue influence.

David is one of twenty attorneys in the state (of the 84,000 licensed) that has the triple Board Certification in Civil Trial Law, Civil Appellate and Personal Injury Trial Law by the Texas Board of Legal Specialization.

Additionally, David is a member of the Civil Trial Law Commission of the Texas Board of Legal Specialization. This commission writes and grades the exam for new applicants for civil trial law certification.

David maintains an active appellate practice, which includes:

  • Appeals from final judgments after pre-trial orders such as summary judgments or after jury trials;
  • Interlocutory appeals dealing with temporary injunctions, arbitration, special appearances, sealing the record, and receiverships;
  • Original proceedings such as seeking and defending against mandamus relief; and
  • Seeking emergency relief staying trial court’s orders pending appeal or mandamus.

For example, David was the lead appellate lawyer in the Texas Supreme Court in In re Weekley Homes, LP, 295 S.W.3d 309 (Tex. 2009). The Court issued a ground-breaking opinion in favor of David’s client regarding the standards that a trial court should follow in ordering the production of computers in discovery.

David previously taught Appellate Advocacy at Texas Wesleyan University School of Law located in Fort Worth. David is licensed and has practiced in the U.S. Supreme Court; the Fifth, Seventh, and Eleventh Federal Circuits; the Federal District Courts for the Northern, Eastern, and Western Districts of Texas; the Texas Supreme Court and various Texas intermediate appellate courts. David also served as an adjunct professor at Baylor University Law School, where he taught products liability and portions of health law. He has authored many legal articles and spoken at numerous legal education courses on both trial and appellate issues. His articles have been cited as authority by the Texas Supreme Court (twice) and the Texas Courts of Appeals located in Waco, Texarkana, Beaumont, Tyler and Houston (Fourteenth District), and a federal district court in Pennsylvania. David’s articles also have been cited by McDonald and Carlson in their Texas Civil Practice treatise, William v. Dorsaneo in the Texas Litigation Guide, and various authors in the Baylor Law ReviewSt. Mary’s Law JournalSouth Texas Law Review and Tennessee Law Review.

Representative Experience

  • Civil Litigation and Appellate Law