70 So. 3d 974
La. Ct. App.2011Background
- Ferraras own a 48-acre DeSoto Parish lease; earlier wells produced on unitized lands but none on the leased premises since 1990.
- Questar acquired Tide West’s rights (2000) and drilled a unitized well in 2000; Ferraras obtained a partial release below Baker Lime (1995).
- Demand for further exploration/development was made in 2008; August 2008 Commissioner recognized Haynesville Shale and dispensed with production tests.
- Ferraras sent a demand letter to release below Hosston or explore deeper zones; Questar did not promptly respond.
- Ferraras filed suit in October 2008 seeking dissolution (or partial release) and attorney fees; trial in May 2010.
- District court dissolved the lease below Hosston and awarded attorney fees; Questar appealed challenging multiple rulings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was Questar obligated to explore/develop under RS 31:122? | Ferraras: Questar failed to act as reasonably prudent operator. | Questar: no breach proven; insufficient evidence of unreasonable failure. | Breach not proven; reversal of dissolution. |
| May post-suit activity be considered in evaluating breach? | Ferraras: evidence post-suit relevant to intent and conduct. | Questar: post-suit activity should be barred by suspension doctrine. | District court properly considered post-suit activity; not error. |
| Was Peel properly admitted as an expert and were his materials admissible? | Ferraras: Peel provided specialized synthesis of public data; admissible under Rule 702/703. | Questar: Peel relied on unauthenticated data; exhibits not in report. | Peel properly admitted; exhibits/derivative data allowed under Rule 703/105. |
| Was attorney’s fees award proper where partial dissolution occurred? | Ferraras: Section 31:209 authorizes fees for dissolution. | Questar: fees only for extinguished/expired leases; partial dissolution not fee-entitling. | Attorney fees reversed; fees dismissed. |
| Did the district court err in its factual finding of breach under Vetter/Morrow? | Ferraras: numerous factors support breach and plans to drill. | Questar: insufficient geological/operational data to prove breach; Haynesville exception not warranted. | Breach finding reversed; partial dissolution reversed. |
Key Cases Cited
- Carter v. Arkansas-La. Gas Co., 213 La. 1028, 36 So.2d 26 (La. 1948) (reasonableness and development duty of lessee)
- Vetter v. Morrow, 361 So.2d 898 (La.App. 2 Cir. 1978) (totality of circumstances and factors for prudent development)
- Saulters v. Sklar, 158 So.2d 460 (La.App. 2 Cir. 1963) (evidence of expert support for breach matters)
- LeJeune v. Superior Oil Co., 315 So.2d 415 (La.App. 3 Cir. 1975) (continued development after initial production duties)
- Frazier v. Justiss Mears Oil Co., 391 So.2d 485 (La.App. 2 Cir. 1980) (breach standards for lessee under oil and gas leases)
- Perkins v. Long-Bell Petroleum Co., 81 So.2d 389 (La. 1955) (equitable considerations in lease disputes and delivery obligation)
- Smith v. Kennon, 175 So. 763 (La. 1937) (landowners' repudiation and lessee's continued rights)
- Lelong v. Richardson, 126 So.2d 819 (La.App. 2 Cir. 1961) (continued development prevented by pending suit)