## Facts

- Long Brothers Oil Company and other investors acquired the Fouke Field in Miller County, Arkansas, and Long Brothers obtained a preferential right to purchase Texaco Producing, Inc.’s remaining 11.22% working interest in the Silberberg B-1 well.
- Long Brothers, South Central Petroleum, Inc. (SCPI), and Jerry R. Sawyer executed a written agreement dated September 27, 1988 (effective September 15, 1988) to work together to acquire Texaco’s interest, with a purchase-price cap of $400,000.
- The agreement provided that, if the Texaco interest was acquired and not promptly resold, the parties would own it 50% (Long Brothers), 37.5% (SCPI), and 12.5% (Sawyer).
- The agreement stated it would continue for six months from the effective date and thereafter until terminated by any party with 30 days’ prior written notice.
- Texaco later agreed to sell its interest to a third party, which allowed Long Brothers to use its preferential right to match the offer.
- On February 14, 1989, Long Brothers sent notice stating it was terminating the agreement.
- On March 15, 1989—less than 30 days after the notice and within the agreement’s initial six-month term—Long Brothers exercised its preferential right and purchased Texaco’s 11.22% interest for $137,500 without giving SCPI or Sawyer the participation described in the agreement.
- SCPI and Sawyer sued in federal court (diversity) seeking recognition of their ownership share and a calculation of the amount they owed Long Brothers in exchange for one-half ownership.
- To calculate revenues and offsets, SCPI presented an opinion from a witness who relied on production figures obtained through a commercial production service; the service obtained the figures from state government reporting, which originated with the well operator.
- The parties did not dispute the production figures were hearsay, and did not dispute that this type of information is commonly relied on for such calculations.
- The district court admitted the witness’s opinion but not the underlying hearsay materials, granted summary judgment for SCPI and Sawyer, and ordered them to pay Long Brothers $62,627 in exchange for one-half ownership.
- Long Brothers appealed.

## Issues

1. Whether the September 1988 agreement was still in effect when Long Brothers purchased Texaco’s interest on March 15, 1989, given the six-month term and the requirement of 30 days’ prior written notice to terminate.
2. Whether Long Brothers’ acquisition of Texaco’s interest through its preferential purchase right fell within the scope of the agreement requiring the parties to work together to buy Texaco’s interest and share ownership.
3. Whether the district court could rely at summary judgment on an admitted opinion regarding revenue calculations when the opinion was based on hearsay production data of a type reasonably relied upon in the field under Federal Rule of Evidence 703.

## Decision

- The Eighth Circuit affirmed the district court’s summary judgment.
- The court held the agreement remained in force when Long Brothers bought Texaco’s interest because termination required 30 days’ prior written notice and the purchase occurred before that notice period could take effect.
- The court held Long Brothers’ purchase of Texaco’s 11.22% interest—accomplished via the preferential right during the agreement’s life—triggered the agreement’s sharing arrangement, entitling SCPI and Sawyer to one-half ownership upon payment.
- The court held the district court did not abuse its discretion under Rule 703 by admitting and relying on the opinion testimony even though the supporting production information was hearsay, because it was the type of information reasonably relied upon for revenue calculations, and only the opinion (not the hearsay data) was admitted.

## Legal Principles

- When a contract allows termination only with “30 days prior written notice,” the contract remains operative during the notice period; termination is not immediate.
- An agreement to jointly pursue acquisition of a specified property interest can be enforced when one party acquires that interest during the agreement’s effective period, even if the acquisition is achieved by exercising a preferential purchase right.
- Summary judgment is proper when the material facts (including the contract terms and key dates) are not genuinely disputed and the dispute turns on the legal effect of those facts.
- Under Federal Rule of Evidence 703, an opinion may be based on otherwise inadmissible information if it is of a type reasonably relied upon in the relevant field; the court may admit the opinion without admitting the underlying hearsay and may consider the opinion at summary judgment.

## Conclusion

The Eighth Circuit affirmed summary judgment requiring Long Brothers to convey one-half of Texaco’s Silberberg B-1 working interest to SCPI and Sawyer in exchange for $62,627, holding that the agreement had not terminated when Long Brothers purchased the interest and that the district court could rely under Rule 703 on an admitted revenue-calculation opinion grounded in hearsay production data commonly relied upon for such calculations.


South Central Petroleum, Inc. v. Long Brothers Oil Co., 974 F.2d 1015 (1992)