Forest Oil Corp. v. McAllen – Case Brief Summary (Texas)

In Forest Oil Corp. v. McAllen, 268 S.W.3d 51, 58 (Tex. 2008) the disclaimer of reliance stated the parties were not "relying upon any statement or any representation of any agent of the parties being released." Id. at 54 n.4.

The parties released all claims "in any manner relating to" certain oil and gas leases. Id. at 53. The parties also agreed to arbitrate all claims for environmental damage and personal injuries "relating to" the leases. When McAllen sued Forest Oil for environmental damage, Forest Oil invoked the arbitration clause. Id. at 54.

McAllen argued the arbitration provision was induced by fraud and was therefore unenforceable because a lawyer for Forest Oil told him there was no environmental contamination on the property. Id. at 55.

McAllen argued that the disclaimer of reliance applied only to the released claims and not to the arbitration provision. Id. at 58-59.

The supreme court disagreed and stated, "the parties disclaimed reliance with respect to all decisions being made during negotiations, including the decision to resolve future disputes regarding environmental and personal-injury claims via arbitration." Id. at 59.

The court's decision was not based on any similarity between the topics of discussion during negotiations and the factual allegations of McAllen's fraudulent inducement claim.

The Texas Supreme Court clarified the factors for the court to consider in determining whether a disclaimer of reliance bars a fraudulent inducement claim:

(1) the terms of the contract were negotiated, rather than boilerplate, and during negotiations the parties specifically discussed the issue which has become the topic of the subsequent dispute;

(2) the complaining party was represented by counsel;

(3) the parties dealt with each other in an arm's length transaction;

(4) the parties were knowledgeable in business matters;

(5) the release language was clear.

(holding that waiver-of-reliance provision precluded fraudulent inducement claim with respect to arbitration clause in release).

In that case, the disclaimer stated:

"Defendants expressly represent and warrant . . . that no promise or agreement which is not herein expressed has been made to them in executing the releases contained in this Agreement, and that they are not relying upon any statement or representation of any of the parties being released hereby. Defendants are relying upon their own judgment and each has been represented by its own legal counsel in this matter." Id. at 54 n.4.