Justia Contracts Opinion Summaries

In 2006, Plaintiffs entered into a five-year oil and gas lease covering 47 acres in Ross Township, Ohio, and granting Chesapeake exclusive rights to “all oil and gas and their constituents” for $5.00 per mineral acre per year and a royalty on production. The lease provides for extension, if “Operations” are being “conducted on the Leasehold, or on lands pooled, unitized or combined with all or a portion of the Leasehold.” In 2011, Chesapeake submitted drilling-permit applications for property that did not include Plaintiffs’ property. Later, Chesapeake filed a “Declaration and Notice of Pooled Unit,” consisting of 21 properties, including Plaintiffs’ property, and declared that “operations and/or production … anywhere within the Unit shall be deemed to be operations and/or production on each separate tract sufficient to extend and maintain each included lease in the Unit.” It specified that production from the unit would be allocated among all leases in the unit proportional to the surface area of each lease. Plaintiffs sought a declaration that the lease expired; Chesapeake filed a counterclaim. The district court ruled in favor of Plaintiffs, concluding that Chesapeake’s actions did not extend the lease because the lease required that a permit application pertaining to the leased property or a property already unitized with the leased property, be filed before the expiration of the lease. The Sixth Circuit reversed and remanded. View "Henry v. Chesapeake Appalachia, LLC" on Justia Law

The Indiana Utility Regulatory Commission (IURC) approved a contract for the purchase of substitute natural gas and directed the procedure for resolving future related disputes. The court of appeals reversed the IURC's approval of the contract because a definition term in the contract deviated from the required statutory definition. The parties to the contract subsequently amended the contract to delete the language that the court of appeals found improper. The Supreme Court vacated the reversal of the IURC's order, held that the amended contract that corrected the definitional error rendered the definitional issue moot, and summarily affirmed the court of appeals as to all other claims. View "Ind. Gas Co., Inc. v. Ind. Fin. Auth." on Justia Law

Sasafrasnet, an authorized distributor of BP products, provided Joseph with notice of its intent to terminate his franchise based on three occasions when Sasafrasnet attempted to debit Joseph’s bank account to pay for fuel deliveries but payment was denied for insufficient funds. The district court denied Joseph a preliminary injunction, finding that Joseph failed to meet his burden for a preliminary injunction under the Petroleum Marketing Practices Act 15 U.S.C. 2805(b)(2)(A)(ii). After a remand, the district court found that two of Joseph’s NSFs should count as “failures” under the PMPA justifying termination, at least for purposes of showing that he was not entitled to preliminary injunctive relief. The Seventh Circuit affirmed. Joseph’s bank account was not adequately funded for the debit on two occasions because Joseph had decided to change banks, circumstances entirely within Joseph’s control. Given Joseph’s history of making late payments in substantial amounts because of insufficient funds (each was more than $22,000), the delinquent payments were not “technical” or “unimportant.” View "Joseph v. Sasafrasnet, LLC" on Justia Law

Defendant-Appellant Enerlex, Inc. offered to purchase plaintiffs'-appellees' mineral interest. At the time, plaintiffs did not know that their Seminole County mineral interests were included in a pooling order or that proceeds had accrued under the pooling order. Defendant admitted it knew about the pooling order and the accrued proceeds but did not disclose these facts in making the purchase offer. Plaintiffs signed the mineral deeds which defendant provided and subsequently discovered the pooling order, the production, and the accrued proceeds. Plaintiffs sued for rescission and damages, alleging misrepresentation, deceit and fraud. The district court entered summary judgment in favor of plaintiffs. The Court of Civil Appeals reversed the summary judgment. After its review, the Supreme Court concluded defendant obtained the mineral deeds from plaintiffs by false representation and suppression of the whole truth. Defendant was therefore liable to plaintiffs for constructive fraud. Rescission was the appropriate remedy for defendant's misrepresentation and constructive fraud. Therefore, the Court reversed the appellate court and reinstated the district court's judgment. View "Widner v. Enerlex, Inc." on Justia Law

This case stemmed from the Deepwater Horizon drilling platform oil spill. On appeal, BP challenged the district court's decision upholding the Claims Administrator's interpretation of the settlement agreement between it and the class of parties injured in the oil spill and the district court's dismissal of its action for breach of contract against the Administrator and denial of its motion for a preliminary injunction. The court concluded that the balance of equities favored a tailored stay where those who experienced actual injury traceable to loss from the Deepwater Horizon accident continued to receive recovery but those who did not receive their payments until this case was fully heard and decided through the judicial process weighed in favor of BP. Accordingly, the court reversed the denial of the preliminary injunction and instructed the district court to expeditiously craft a narrowly-tailored injunction that allowed the time necessary for deliberate reconsideration of significant issues on remand. The court affirmed the district court's dismissal of BP's suit against the Claim Administrator. View "In Re: Deepwater Horizon" on Justia Law

Thoroughbred Associates drilled a gas well (Well) in Comanche County. Thoroughbred subsequently acquired leases of land near the Well and created a unit called the Thoroughbred-Rietzke Unit (Rietzke Unit). Defendants became successors-in-interest to a lease (OXY Lease) Thoroughbred entered into for oil and gas underlying a tract near the Well. The parties disagreed, however, about whether the Well was draining the Rietzke Unit. Thoroughbred stopped submitting royalty payments to Defendants accruing from the Rietzke Unit. Thoroughbred subsequently filed a complaint for a declaratory judgment that it had been mistaken when it included the OXY Lease in the Rietzke Unit. Defendants counterclaimed. The district court concluded (1) Defendants failed to prove that any drainage of the leased lands occurred; and (2) the Lease was properly included in the Rietzke Unit. The Supreme Court affirmed in part and reversed in part, holding (1) Defendants failed to prove their drainage claim; and (2) the court of appeals erroneously granted summary judgment to Defendants on their claim that the Lease should be included in the Rietzke Unit. View "Thoroughbred Assocs., LLC v. Kansas City Royalty Co., LLC " on Justia Law

In connection with construction of a pipeline to ship natural gas from Wyoming to Eastern Ohio, Rockies Express and Minerals Management Service (MMS), within the Department of the Interior, entered into contracts containing Royalty-in-Kind (RIK) provisions. Under the RIK program, the government receives its royalty for mineral resources extracted under federal leases “in kind,” i.e., in natural gas, rather than in cash, 30 U.S.C. 192; 42 U.S.C. 15902(b). In exchange, the government makes monthly payments to ensure that a certain quantity of the mineral resources is made available for its purposes. The government then enters into processing and transportation contracts to sell the mineral royalties, often at a substantial profit over royalties received in cash. The Civilian Board of Contract Appeals determined that MMS had materially breached the contract, but that Rockies Express was only entitled to damages that had accrued before the Secretary of the Interior announced a decision to phase-out RIK contracts. The Federal Circuit affirmed that MMS materially breached the contract, but reversed the decision to limit damages. Rockies Express is entitled to compensatory damages to put it in as good a position as that in which it would have been put by full performance of the contract. View "Rockies Express Pipeline, LLC v. Salazar" on Justia Law

In 2010, Irene and John Moerman each signed an oil and gas lease with Prairie Rose Resources. In 2011, the Moermans filed a complaint for declaratory judgment claiming that their leases with Prairie had expired because, inter alia, Prairie had failed to establish oil production until after the expiration of the primary term of the lease. Prairie counterclaimed for a declaration that the lease remained in effect. The district court entered judgment in favor of Prairie and awarded Prairie its attorney fees and costs. The Supreme Court affirmed, holding (1) the district court correctly concluded that the parties' oil and gas leases remained in effect; and (2) because the Moermans failed to establish that the leases had been forfeited, Prairie's attorney fees in defending the action were recoverable. View "Moerman v. Prairie Rose Res., Inc." on Justia Law

In 2001, Union Oil Company of California entered into a contract to sell its oil to Tesoro Alaska Company. Under the contract the Tesoro took title at the North Slope, but agreed to use a pipeline company associated with Union to transport oil through the Trans-Alaska Pipeline. The price per barrel was calculated as the West Coast market price less marine transport and pipeline tariff. The contract made no mention of whether the pipeline tariff was tied to the ultimate destination of the oil. At the time, the interstate and intrastate pipeline tariffs were the same. Tesoro shipped the oil to an in-state refinery and paid the tariff to the pipeline company. Union subtracted the tariff amount from the market price of the oil less marine transport and sent invoices to the buyer. Meanwhile, Tesoro successfully challenged the intrastate tariff as unjust and unreasonable and the pipeline company issued a refund, including 10.5% interest. Union claimed that it was entitled to the tariff refund under the contract. The superior court, on motions for summary judgment, awarded the principal amount of the refund to Union and the interest to Tesoro. Both parties appealed. Upon review of the dispute, the Supreme Court held that the contract's pricing term was a netback price to the Los Angeles market referencing the interstate tariff. Accordingly, the Court reversed the superior court's grant of summary judgment to Union and remanded for entry of judgment in favor of Tesoro. View "Tesoro Alaska Company v. Union Oil Company of California" on Justia Law

The Authority was formed under Ga. Code 46-4-82(a) to provide member municipalities with natural gas. It operates as a non-profit, distributing profits and losses to member municipalities: 64 in Georgia, two in Tennessee, 12 in other states. It pays its own operating expenses and judgments; it is exempt from state laws on financing and investment for state entities and has discretion over accumulation, investment, and management of its funds. It sets its governance rules; members elect leaders from among member municipalities. Smyrna, Tennessee has obtained gas from the Authority since 2000, using a pipeline that does not run through Georgia. The Authority entered a multi-year “hedge” contract for gas acquisition, setting price and volume through 2014, and passed the costs on. The market price of natural gas then fell due to increased hydraulic fracturing (fracking), but Smyrna was still paying the higher price. Smyrna sued for breach of contract, violations of the Tennessee Consumer Protection Act, breach of fiduciary duty, and unjust enrichment. The district court denied the Authority’s motion to dismiss based on sovereign immunity under Georgia law and the Eleventh Amendment. The Sixth Circuit affirmed, stating that the Authority’s claim that any entity referred to as a state “instrumentality” in a Georgia statute is entitled to state-law sovereign immunity “requires quite a stretch of the imagination.” View "Town of Smyrna, TN v. Mun. Gas Auth. of GA" on Justia Law