Petrohawk Properties, L.P. v. Chesapeake Louisiana, L.P.
2012 U.S. App. LEXIS 15286
5th Cir.2012Background
- Stockmans owned property in Caddo Parish, Louisiana; Stellios Lease to Chesapeake expired 7/14/2008 but could be kept alive by drilling; Chesapeake extended the Stellios Lease and paid $241,430 but did not record promptly.
- Petrohawk, via Broomfield of Pangaea, offered a $1.45 million bonus for a May 9, 2008 Petrohawk lease with Petrohawk recording that day; Stockmans struck warranty exclusion during signing.
- Stockmans learned Chesapeake Extension was unrecorded and raced to courthouse; Stockmans deposited Petrohawk draft on 5/12/2008 after confirming race-state priority.
- Petrohawk later presented a July 15, 2008 Amendment/Lease with higher bonus ($1.7 million) and new terms, including Pugh clauses and a three-year term; that lease incorporated May 9 terms.
- Petrohawk dishonored the May 9 draft to pressure the Stockmans for July 15 timing; trial court found May 9 lease procured by fraud and rescinded it; Petrohawk sought return of bonus and declaration of May 9 validity.
- District court awarded fees to Stockmans, struck May 9 from public records, and dismissed Petrohawk’s bonus return claim; Petrohawk and Chesapeake appealed/dross-appealed, court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Petrohawk procured the May 9 Lease by fraud | Stockmans (Petrohawk) claim fraud by misrepresentations about recordation | Petrohawk denies misrepresentation of fact or intent to defraud | Yes, fraud; May 9 Lease rescinded |
| Whether Stockmans validly confirmed the fraud | Stockmans’ June 2 revocation and July 15 lease imply confirmation | Confirmation requires actual knowledge of fraud; not shown until 2009 trial | No confirmation; rescission upheld |
| Whether the July 15 Lease is a stand-alone contract or an amendment | If an amendment, might rescind May 9 and return bonus | July 15 is a stand-alone contract incorporating May 9 otherwise | July 15 is stand-alone; incorporates May 9 provisions via reference, no implied warranty of title; no bonus return |
| Whether Petrohawk is entitled to return of the leased bonus | If May 9 rescinded, bonus should be returned; if novation/amendment, different result | No return because July 15 stands and excludes warranty per incorporation | No return; July 15 incorporates May 9 exclusion; no warranty implied |
| Chesapeake’s claim of intentional interference with contract | Petrohawk owed duty to refrain from interfering with Chesapeake’s contract | Louisiana law limits such claim to narrow corporate-officer duties; no duty here | Dismissed; no viable duty under 9 to 5 Fashions; affirmed |
Key Cases Cited
- Erie R. Co. v. Tompkins, 304 U.S. 64 (U.S. 1938) (choice of law for diversity cases; apply forum state law)
- Shelton v. Standard/700 Assocs., 798 So.2d 60 (La. 2001) (elements of Louisiana fraud in inducement)
- Lupo v. Lupo, 475 So.2d 402 (La. Ct. App. 1985) (misrepresentation of law can support fraud)
- Mack v. Evans, 804 So.2d 730 (La. Ct. App. 2001) (misrepresentation of law as fraud example)
- 9 to 5 Fashions, Inc. v. Spurney, 538 So.2d 228 (La. 1989) (narrow tort for interference with contract; corporate officer duty)
- American Waste & Pollution Control Co. v. Browning-Ferris, Inc., 949 F.2d 1384 (5th Cir. 1991) (limits on expanding Louisiana tort of interference)
- Egorov, Puchinsky, Afanasiev & Juring v. Terriberry, Carroll & Yancey, 183 F.3d 453 (5th Cir. 1999) (recognition of narrow scope of 9 to 5 interference claim)
- Rahier v. Rester, 11 So.2d 87 (La. Ct. App. 1942) (principles for express confirmation requiring knowledge)
- Action Fin. Corp. v. Nichols, 180 So.2d 81 (La. Ct. App. 1965) (incorporation by reference of terms into later contract)