Thursday, November 21, 2013

Third Circuit affirms summary judgment order finding well operator did not surrender non-unitized lease acreage

On Nobermber 18, 2013, the United States Court of Appeals for the Third Circuit affirmed the United States District Court for the Middle District of Pennsylvania’s decision to grant summary judgment in favor of a well operator, finding that a belated delay rental payment for non-unitized acreage was an immaterial breach insufficient for the well operator to forfeit the lease. Linder v. SWEPI, LP, 2013 WL 6052135 (3d. Cir. Nov. 18, 2013). The Third Circuit agreed with the district court holding that the lease remained in effect as to non-unitized acreage after the well operator was late in making a delay rental payment. The Third Circuit reasoned that the late payment was not detrimental to the lessor lessee relationship because the lease did not contain a “time is of the essence clause.” Further, the circuit court reasoned the late payment was not immaterial because the lease contained a sixty-day curative period that allowed the lessee to correct any incorrect or failed payments. The purpose of that clause, the court found, was to increase the chances an out-of-court resolution would occur given a breach. Therefore, it did not act as a substitute for a time is of the essence clause to establish materiality. Finally, the Third Circuit found the well operator never surrendered the non-unitized acreage because it did not file a Surrender of Lease as required by the lease’s surrender clause.

Written by: Garrett Lent, Research Assistant
Agricultural Law Resource and Reference Center
Nov. 2013

1 comment:

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