SHELL OIL COMPANY, SWEPI LP D/B/A SHELL WESTERN E&P, SUCCESSOR IN INTEREST TO SHELL WESTERN E&P, INC., PETITIONERS, v RALPH ROSS, RESPONDENT.

In the case, Shell entered into a mineral lease with the Ross family in 1961. Under the lease, Shell agreed to pay the Rosses the standard one-eighth royalty realized from the sale of any gas produced from the land. 1994, it used a weighted average to calculate the sales price, by averaging third-party sales of the plaintiffs’ gas along with other parties from the same unit. Shell contended this was a permissible calculation, but plaintiffs disagreed. Second, and more critically, from 1994 to 1997, Shell did not pay the royalty based on any sales price. Instead, Shell acknowledged that it used an “arbitrary” price by mistake. The Ross family sued over these discrepancies in 2002, which was outside the Texas four-year statute of limitations for a contract claim. But plaintiffs argued that the claims were not barred because of the fraudulent concealment doctrine, which tolls limitations when a person attempts to conceal his wrongdoing until limitations has run. Plaintiffs contended that Shell had concealed the fact that it was underpaying the royalties because Shell’s royalty statements did not reflect the amount that Shell was actually receiving from the third-party gas sales, as required by Texas law. Nothing on the face of the royalty statement, plaintiffs’ argument continued, suggested that Shell was actually selling the gas for more. At trial, Shell stipulated that unless it prevailed on its statute of limitations defense, the Rosses were entitled to recover damages for the use of the arbitrary price between 1994 and 1997. And the trial court ruled, as a matter of law, that Shell breached the lease by paying based on a weighted average between 1988 and 1994. The jury agreed with the plaintiffs and awarded damages to the Ross family. The Texas Supreme Court reversed. The Court acknowledged that the royalty statements did not reveal that the Ross family was being underpaid. But the Court found that the Ross family had a duty to get behind the royalty statement, and “make themselves aware of relevant information available in the public record.” The Court found that there were a number of such records that would have revealed to the Ross family that they were being underpaid. These other avenues of information included: asking Shell about the prices, asking the companies that bought the gas how much they paid, consulting publically available records at the Land Office, and reviewing publically available index prices for gas sales. Also important to the Court’s decision was the fact that the Rosses were being paid royalties on multiple units, some of which were correctly calculated. The Court found the discrepancy in royalty amounts between the various units should have caused the Rosses to investigate. Ultimately, the Court concluded, “[b]ecause the Rosses could have discovered Shell’s alleged fraud through the use of reasonable diligence, we hold that, as a matter of law, the doctrine of fraudulent concealment cannot apply to toll the statute of limitations.