Ridge Natural Resources, LLC, Calvin Smajstrla, Christopher Hawa and Wilson Hawa v. Double Eagle Royalty, LP
This case involves an arbitration dispute between two oil companies, Ridge Natural Resources, L.L.C. (appellant) and Double Eagle Royalty, L.P. (appellee), concerning a disputed royalty interest in minerals in Winkler County, Texas. Double Eagle, as successor-in-interest to the original lessors (McDaniels), sued to quiet title, and Ridge moved to compel arbitration based on a clause in a 'Royalty Lease' signed with the McDaniels. The trial court denied Ridge's motion, finding the arbitration clause unconscionable. The Court of Appeals reversed the trial court's decision, agreeing that the agreement's cap on punitive damages is against public policy and must be severed, but found that Double Eagle failed to provide sufficient evidence to dissolve the arbitration agreement entirely on unconscionability grounds. The case was remanded with instructions to compel arbitration after severing the punitive damages prohibition.