Clovelly Oil Co. v. Midstates Petroleum Co.
112 So. 3d 187
La.2013Background
- The 1972 Joint Operating Agreement (JOA) was between Scully (Operator) and Goodstein with Forman (Non-Operators).
- Clovelly Oil Co., LLC and Midstates Petroleum Co., LLC later became parties to the JOA through assignments, with Clovelly holding 56.25% and Midstates 48.75% working interests as defined in the JOA.
- Midstates acquired a new 242.28-acre lease on July 1, 2008 within the Exhibit A geographic area, and began work on abandoned Crowell wells in 2009.
- In 2009 Clovelly claimed the JOA covered Midstates’ new lease and sought breach and declaratory relief; Midstates moved for summary judgment arguing the 1972 JOA did not cover future leases.
- The trial court granted summary judgment for Midstates; the court of appeal reversed and held that leases within Exhibit A are subject to the JOA.
- This Court granted a writ to determine whether the 1972 JOA applies to Midstates’ post-execution lease.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the JOA extend to future leases within Exhibit A? | Midstates: JOA covers only leases at signing; no future leases. | Clovelly: JOA extends to all Lands in Exhibit A owned by the parties, including future leases. | No; JOA applies only to leases and unleased interests owned at execution within Exhibit A. |
| How should Preamble/Section 1(4) be read in light of Exhibit A? | Exhibit A governs coverage beyond present tense language. | Exhibit A limits coverage; present-tense language supports present ownership at execution. | Interpretation favors present ownership at execution within the Exhibit A geography. |
| What is the controlling interpretation of conflicts between printed and handwritten terms? | Exhibit A controls as tailored by the parties. | Printed form should prevail unless clearly conflicted. | No express conflict; harmonize terms to limit Exhibit A to present leases. |
| Did Amoco Production Co. v. Wilson, Jr., Inc. apply to this case? | Amoco supports broader coverage via Exhibit A. | Amoco is distinguishable and not controlling here. | Amoco distinguishable; not controlling; no after-acquired leases covered by JOA. |
| Does interpreting the JOA as covering all future leases undermine Section 23 (renewal/extension) and create absurd results? | Exhibit A could reasonably cover future renewals. | Automatic application of future leases conflicts with renewal-election provision. | Interpreting to cover only existing interests avoids rendering Section 23 meaningless. |
Key Cases Cited
- Amoco Production Co. v. Wilson, Jr., Inc., 266 Kan. 1084, 976 P.2d 941 (1999) (Kan. 1999) (Exhibit A controls where parties’ intent is reflected; fiduciary considerations noted in Kansas precedent)
- Clovelly Oil Co., LLC v. Midstates Petroleum Co., LLC, 95 So.3d 1168 (La.App. 3 Cir. 2012) (Interprets JOA scope within Exhibit A in related appeal)
- Clovelly Oil Co., LLC v. Midstates Petroleum Co., LLC, 104 So.3d 426 (La. 2012) (Supreme Court decision addressing JOA interpretation and AMI considerations)
- Frey v. Amoco Production Co., 603 So.2d 166 (La. 1992) (Contract interpretation and integration principles cited)
- Marin v. Exxon Mobil Corp., 48 So.3d 234 (La. 2010) (Outline of contract interpretation standards and related authority)