On Monday, Texas’s Second District Court of Appeals partially affirmed a District Court order allowing Range Resources Corporation’s (“Range”) defamation and business disparagement claims against a landowner to proceed. A copy of the court’s opinion is available here.

This is the latest development in a case that gained notoriety when a video purporting to show water from the landowners’ well ignite went viral.

In the summer of 2010, Steven and Shyla Lipsky and Alisa Rich notified the U.S. Environmental Protection Agency (“EPA”) of possible gas contamination of the Lipskys’ water well at their home in Weatherford, Texas, which was near oil and gas drilling operations conducted by Range. In December 2010, the EPA issued an Emergency Administrative Order (“EAO”) pursuant to the Safe Drinking Water Act stating that Range’s production activities had caused or contributed to the gas in the Lipskys’ water well and that the gas could be hazardous to the Lipskys’ health. The EPA later withdrew its EAO on March 29, 2012.

The Texas Railroad Commission (“TRC”) also stepped in to investigate the claims. In March 2011, the TRC issued an order exonerating Range and other defendants in the investigation. The TRC stated that Range’s wells were not responsible for the contamination of the Lipskys’ water and that the gas present in the water was likely naturally occurring.

Later in 2011, despite the TRC’s finding, the Lipskys sued Range and other defendants, alleging that Range’s oil and gas drilling activities caused contamination of their water well at their home. In their original petition, the Lipskys claimed that the contamination had caused their water “to be flammable.” A video taken from the Lipskys’ residence, which was broadcast by two local television stations, appeared to show water from the Lipskys’ well being lit on fire.

Range responded to the Lipskys’ petition by filing a counterclaim against them and a third-party claim against Rich, an environmental consultant who was alleged to have advised and conspired with the Lipskys. Range asserted claims for civil conspiracy, aiding and abetting, defamation, and business disparagement.

The Lipskys and Rich sought to dismiss Range’s claims under Chapter 27 of the Texas Civil Practice and Remedies Code, also known as the Texas Citizens’ Participation Act. The Act creates an avenue for dismissing unmeritorious suits based on a defendant’s exercise of the rights of free speech, petition, or association.

The Lipskys and Rich argued that Range’s counterclaim and third-party claims should be dismissed. But the trial court found that there was “clear and specific” evidence to prove Range’s claims and denied the Lipskys’ motion to dismiss.

The Lipskys and Rich then filed an interlocutory appeal challenging that decision. In August 2012, the Second District Court of Appeals dismissed the appeal, but allowed the mandamus action to proceed. The court’s August 2012 opinion is available here.

The Court ruled Monday that Range’s counterclaims for defamation and business disparagement could proceed against Steven Lipsky. The court held, however, that all of Range’s claims against Shyla Lipsky and Alisa Rich, as well as Range’s claims for civil conspiracy and adding and abetting against Steven Lipsky, should be dismissed.