798 F.3d 90
2d Cir.2015Background
- Leases grant oil and gas rights in Tioga County, NY, with a habendum clause providing a five-year primary term and a secondary term that lasts while production continues.
- Each Lease contains a force majeure clause stating delays or interruptions caused by government action or other causes beyond Lessee’s control do not count against the lease term and covenants are subject to applicable laws and regulations.
- Starting in 2008–2010, NY state regulatory action related to high-volume hydraulic fracturing and horizontal drilling culminated in a moratorium and a state-mandated review process; the DEC issued a draft and then revised GEIS accordingly.
- In 2010, Inflection extended notices to landowners asserting force majeure due to regulatory actions, and in 2012 the Landowners filed suit seeking a declaration that the Leases’ primary terms had not been extended.
- The District Court granted summary judgment for the Landowners, holding the force majeure clause did not extend the primary term.
- The parties appealed; this court certified two NY law questions to the NY Court of Appeals and subsequently affirmed the District Court under NY law, applying the Court of Appeals’ interpretation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the moratorium on HVHF qualify as a force majeure event? | Energy Companies argue moratorium is force majeure. | Landowners contend it is not a force majeure event extending terms. | Not necessary to decide; NY law applied shows moratorium does not extend primary terms. |
| If moratorium is force majeure, does it modify the habendum clause to extend the primary term? | Energy Companies contend force majeure could extend term via habendum. | Landowners contend it does not modify habendum or prolong the term. | Force majeure does not modify the habendum clause and does not extend the primary term. |
Key Cases Cited
- Beardslee v. Inflection Energy, LLC, 25 N.Y.3d 150 (N.Y. 2015) (NY Court of Appeals held force majeure does not modify habendum and does not extend leases)
- Beardslee v. Inflection Energy, LLC, 761 F.3d 221 (2d Cir. 2014) (certification opinion addressing NY law questions)
- Beardslee v. Inflection Energy, LLC, 904 F.Supp.2d 213 (N.D.N.Y. 2012) (district court decision granting Landowners’ summary judgment)
- Wiser v. Enervest Operating, L.L.C., 803 F.Supp.2d 109 (N.D.N.Y. 2011) (habendum context and lease duration definitions)
- Erie R. Co. v. Tompkins, 304 U.S. 64 (1938) (final appellate authority deference to court decisions; respect for established rulings)