Bruzzese v. Chesapeake Exploration, LLC
998 F. Supp. 2d 663
| S.D. Ohio | 2014Background
- Stephen and Elizabeth Albery signed an "Agreement to Accept Lease Offer" from Chesapeake on July 16, 2011, committing ~160 acres and acknowledging a $2,700/acre bonus and 17.5% royalty, subject to marketable title and not being "undevelopable."
- The Alberys had earlier joined a landowners group (Agreement to Join / OVL Commitment) that retained counsel to negotiate group leases and collect a fee.
- After signing the Chesapeake agreement, the Alberys learned of a better offer, told their counsel on July 24, 2011 they wished to terminate, and later signed a lease with Shell (which was later rescinded when Shell discovered the Chesapeake agreement).
- Chesapeake prepared a paid-up oil and gas lease and related forms dated July 25, 2011 but did not deliver them after the Alberys’ termination notice.
- Chesapeake sued (removed to federal court); it settled with other landowners but not the Alberys. Cross-motions for partial summary judgment addressed solely whether the Alberys’ Agreement to Accept Lease Offer was an enforceable contract.
- The district court held that the Agreement was an enforceable contract and granted Chesapeake partial summary judgment on enforceability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Offer — whether Chesapeake made a definite offer | Albery: Agreement was vague, merely promised a future lease, not a present offer | Chesapeake: Agreement explicitly set forth material terms and stated landowners were "accepting Chesapeake’s offer" | Court: Valid offer; terms (price, royalty, term, title standards) were sufficiently definite |
| Terms/Definiteness — ambiguous words (marketable title, due diligence, undevelopable) | Albery: Terms too uncertain to form a binding contract | Chesapeake: Terms are industry-knowable and supplemented by Order of Payment and course of dealing | Court: Terms are capable of definition by usage, documents, and law — sufficiently definite |
| Consideration & Illusory Promise — whether Chesapeake’s commitments were binding | Albery: No consideration because bonus payable only upon lease; discretion clauses rendered promise illusory | Chesapeake: Promised to prepare and execute the lease (an obligation); standards limited its discretion and good-faith duty applies | Court: Adequate consideration (mutual promises); discretion not illusory — good-faith performance implied |
| Meeting of the minds / assent & notarization requirement | Albery: Thought Agreement was nonbinding due to opt-out language in group documents; Chesapeake didn’t sign; not notarized so §5301.01 applies | Chesapeake: Agreement objectively manifested assent; Chesapeake’s conduct (LOI, acceptance of counteroffer, holding offer open) showed assent; §5301.01 covers deeds/leases not preliminary agreements | Court: Objective manifestation of mutual assent existed despite no Chesapeake signature; notarization statute inapplicable because Agreement is not the lease itself |
Key Cases Cited
- Normandy Place Assoc. v. Beyer, 2 Ohio St.3d 102 (Ohio 1982) (preliminary agreements to lease enforceable when parties manifest intent and terms are sufficiently definite)
- Kostelnik v. Helper, 96 Ohio St.3d 1 (Ohio 2002) (elements of contract formation)
- Reedy v. The Cincinnati Bengals, Inc., 143 Ohio App.3d 516 (Ohio Ct. App. 2001) (definition of offer and requirement of definite terms)
- Illinois Controls, Inc. v. Langham, 70 Ohio St.3d 512 (Ohio 1994) (implied duty of good faith in contract performance)
- Celotex Corp. v. Catrett, 477 U.S. 317 (U.S. 1986) (summary judgment burden)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S. 1986) (standard for genuine dispute of material fact)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (U.S. 1986) (summary judgment and reasonable inferences standard)
- Nilavar v. Osborn, 137 Ohio App.3d 469 (Ohio Ct. App. 2000) (trade usage/course of dealing can supply precision to contract terms)