Justia Contracts Opinion Summaries

Appellant/cross-appellee OXY USA Inc. appealed the grant of summary judgment to appellees/cross-appellants, a class of plaintiffs represented by David and Donna Schell, and Ron Oliver, on the question of whether their oil and gas leases required OXY to make "free gas" useable for domestic purposes. OXY also appealed: the district court’s certification of plaintiffs' class; the denial of a motion to decertify; and an order to quash the deposition of an absent class member. Plaintiffs cross-appealed the district court's: denial of their motion for attorneys' fees; denial of their motion for litigation expenses; and denial of an incentive award. Notably, plaintiffs also moved to dismiss the appeal as moot. OXY opposed dismissal for mootness, but argued that if the Tenth Circuit found mootness, the Court should vacate the district court’s decision. Appellees/cross-appellants were approximately 2,200 surface owners of Kansas land burdened by oil and gas leases held or operated by OXY, executed separately from approximately 1906 to 2007. The leases contained a "free gas" clause. The clauses weren't identical, but all, in substance, purported to grant the lessor access to free gas for domestic use. All of the plaintiffs who have used free gas obtain their gas from a tap connected directly to a wellhead line. In addition, some members of the plaintiff class (including about half of the current users of free gas) received royalty payments from OXY based on the production of gas on their land. In August 2007, OXY sent letters warning free gas users that their gas may become unsafe to use, either because of high hydrogen sulfide content or low pressure at the wellhead. These letters urged the lessors to convert their houses to an alternative energy source. On August 31, 2007, leaseholders David Schell, Donna Schell, Howard Pickens, and Ron Oliver filed this action on behalf of themselves and others similarly situated, seeking a permanent injunction, a declaratory judgment, and actual damages based on alleged breaches of mineral leases entered into with OXY for failure to supply free usable gas. After review of the matter, the Tenth Circuit held that that OXY’s sale of the oil and gas leases at issue here mooted its appeal; therefore, the Court granted plaintiffs’ motion to dismiss. Nevertheless, the Court concluded that the cross-appeal had not been mooted by this sale, and affirmed the district court’s judgment as to the denial of attorneys’ fees, litigation expenses, and an incentive award. View "Schell v. OXY USA" on Justia Law

In 2012, appellant Charles D. Leone II resigned his position as a principal of Madison Street Partners, LLC (“MSP”). Pursuant to the terms of MSP’s Operating Agreement, fellow principals Steven Owsley and Drew Hayworth elected to buy Leone’s interest in MSP. The agreement required the purchase price to be set at fair market value, as determined in good faith by MSP’s managers, Owsley and Hayworth. After receiving valuations from two independent valuation firms, the Managers proposed a purchase price of $135,850, which Leone rejected. Leone then sued the Managers in federal district court, contending the proposed purchase price was far below market value and asserted claims for breach of contract and breach of the implied covenant of good faith and fair dealing. The Managers moved for summary judgment on both claims, arguing Leone’s claims were barred by their good faith reliance upon the value set by the independent valuation firms. The district court granted the motion. On appeal, Leone argued: (1) the district court misapplied the law regarding express and implied good faith obligations; (2) the district court incorrectly held that bad faith requires a tortious state of mind; and (3) he presented sufficient evidence of bad faith to survive summary judgment. After review, the Tenth Circuit concluded Leone indeed presented sufficient evidence to survive summary judgment: “three different types of ‘good faith’ were at play in this case: the express contractual provision, an implied covenant of good faith, and the statutory safe harbor for good faith reliance on experts’ opinions. Regardless of which one applies, the Managers bore the burden as movants for summary judgment to establish there were no genuine issues of material fact with respect to their defense of good faith reliance on outside valuations. Although the Managers are entitled to a rebuttable presumption of good faith in relying on the outside valuations, Mr. Leone has raised genuine issues of material fact to rebut that presumption. Without the presumption and given the existence of fact issues regarding the Managers’ good faith, we conclude the district court erred in granting summary judgment in favor of the Managers on their affirmative defense.” View "Leone v. Owsley" on Justia Law