Border Resources, LLC v. Irish Oil & Gas, Inc.
2015 ND 238
| N.D. | 2015Background
- Border Resources (landman) contracted with Irish Oil to acquire leases in a defined prospect (IRS-TP), perform due diligence/title curative work, and submit acreage in a separate “review” area; compensation: 25% of profit on sale of leases Border acquired for Irish.
- Irish authorized Border to buy leases in a mapped "purchase" area (limits on price/royalty); Irish later told Border to "cut off all negotiations" as of March 24, 2011, and expected to close by April 15.
- Border stopped acquiring leases for Irish after March 24 but continued due diligence on already-acquired leases. In mid‑April Border learned of Wolski acreage in the “review” area and, later in April–May, acquired those leases for itself and others.
- In June 2011 Irish sold a package of leases (IRS‑TP plus ELCA leases) to Chesapeake at $1,100 per net mineral acre (a “blended” sale); Irish paid Border based on $825/acre initially and withheld ~ $45,500.
- Border sued for unpaid contract compensation; Irish counterclaimed for breach of fiduciary duty based on Border’s acquisition of the Wolski leases and sought to add individual Border landmen as counterdefendants. After a bench trial the district court awarded Border damages (using $1,100/acre) and dismissed Irish’s counterclaim; this Court affirms.
Issues
| Issue | Border/ Plaintiff's Argument | Irish Oil/ Defendant's Argument | Held |
|---|---|---|---|
| Whether Border owed Irish Oil a fiduciary duty (and breached it by taking Wolski leases) | Agency/fiduciary duties terminated when Irish instructed Border to stop negotiations March 24; after that Border had no authority to acquire leases for Irish and could acquire leases for itself | Border (and its landmen) were agents/subagents providing professional landman services and thus owed continuing fiduciary duties (including under AAPL standards) through completion of due diligence; acquiring Wolski leases breached loyalty | Court: No clearly erroneous finding of breach — scope of fiduciary duty is defined by the parties’ agreement; agency authority to acquire leases ended March 24, so Border did not breach a fiduciary duty by acquiring Wolski leases afterward |
| Proper sale price to calculate Border’s contractual share of profits (blended price issue) | The Irish–Chesapeake Purchase & Sale Agreement stated $1,100/acre uniformly; Border entitled to share based on that price | Irish contends the $1,100 was a blended price covering IRS‑TP + ELCA acreage and Border should only share profit attributable to IRS‑TP (argues $825/acre allocation) | Court: Finding that the IRS‑TP leases sold for $1,100/acre was not clearly erroneous; used that stated sale price to compute Border’s recovery |
| Whether Irish could amend counterclaim to add Border’s individual landmen as defendants | Denies fiduciary liability independent of Border; amendment untimely/futile; limited liability considerations | Irish sought leave to add individual landmen (subagents/agents) alleging they owed fiduciary duties and personally profited | Court: Denial of leave to amend not an abuse of discretion — amendment would be futile given trial findings that no separate principal-agent relationships with the individuals existed and Border did not breach fiduciary duties |
| Whether AAPL ethical standards impose civil fiduciary duties enforceable here | Border: AAPL membership/standards are optional and do not create a civil duty or expand contractual fiduciary obligations | Irish: AAPL code governs professional landmen and imposes duties of loyalty that should govern the parties’ relationship | Court: Rejected use of AAPL standards to expand duties here; found insufficient evidence that AAPL created an industry-wide enforceable standard applicable to alter the contract-defined scope of duties |
Key Cases Cited
- Brash v. Gulleson, 835 N.W.2d 798 (N.D. 2013) (bench‑trial findings reviewed for clear error; credibility findings entitled to deference)
- Grynberg v. Dome Petroleum Corp., 599 N.W.2d 261 (N.D. 1999) (existence and scope of fiduciary duty depend on parties’ agreement)
- Burlington N. & Santa Fe Ry. Co. v. Burlington Res. Oil & Gas Co., 590 N.W.2d 433 (N.D. 1999) (agency imposes fiduciary duties in scope of relationship; prohibition on self‑dealing)
- Spagnolia v. Monasky, 660 N.W.2d 223 (N.D. 2003) (when contract ambiguous, extrinsic evidence and intent become factual questions)
- Tenneco Oil Co. v. Joiner, 696 F.2d 768 (10th Cir. 1982) (recognizing fiduciary/confidential duties between oil companies and landmen)
- Chisholm v. Western Res. Oil Co., 655 F.2d 94 (6th Cir. 1981) (similar recognition of landman fiduciary duties)