Tera, L.L.C. v. Rice Drilling D, L.L.C.
2024 Ohio 1945
| Ohio | 2024Background
- Tera, L.L.C. (successor to Shaw) leased mineral rights to Rice Drilling D, L.L.C. for formations "commonly known as the Marcellus Shale and the Utica Shale" beneath land in Belmont County, Ohio.
- The dispute centered on whether the lease's term "Utica Shale" included rights to the Point Pleasant formation (geologically below Utica Shale), which Rice Drilling had drilled into.
- Tera filed suit claiming Rice Drilling trespassed and converted minerals by drilling into Point Pleasant, arguing these rights were not part of the lease.
- The trial court granted summary judgment to Tera, finding the lease unambiguously excluded Point Pleasant and holding Rice Drilling liable for bad-faith trespass; jury awarded over $40 million in damages.
- The Seventh District Court of Appeals affirmed, finding the lease language unambiguous and excluding Point Pleasant.
- The Ohio Supreme Court reversed, finding the lease ambiguous regarding whether Point Pleasant is part of "Utica Shale," and remanded for fact-finding and further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the lease grant Rice Drilling rights to the Point Pleasant formation? | Lease unambiguously only grants rights to Marcellus and Utica Shale, not Point Pleasant. | "Utica Shale" should be interpreted to include Point Pleasant, based on common/industry usage. | Lease is ambiguous as to what "Utica Shale" includes; dispute of material fact remains. |
| Was summary judgment proper on the meaning of the lease? | The language is clear; summary judgment appropriate. | There are factual disputes over the meaning of "Utica Shale"; summary judgment improper. | Summary judgment was improper; genuine issues of material fact exist. |
| Was defendants’ trespass into Point Pleasant in bad faith (affecting damages)? | Trespass was in bad faith as they knowingly exceeded lease rights. | Acted in good faith, believing lease granted rights; damages should reflect good faith. | Court of appeals' judgment on bad faith reversed; must be determined after fact-finding. |
| Should extrinsic evidence/experts be considered in interpreting "Utica Shale"? | No; lease is clear and should be read as a matter of law. | Yes; term is ambiguous and has specialized/industry meaning needing expert input. | Extrinsic evidence is necessary due to ambiguity, meaning must be determined at trial. |
Key Cases Cited
- Grafton v. Ohio Edison Co., 77 Ohio St.3d 102 (standard for appellate review of summary judgment)
- Lutz v. Chesapeake Appalachia, L.L.C., 148 Ohio St.3d 524 (oil and gas leases interpreted under traditional contract law principles)
- Sunoco, Inc. (R&M) v. Toledo Edison Co., 129 Ohio St.3d 397 (courts look to plain meaning unless special meaning is clearly apparent)
- Nationwide Mut. Fire Ins. Co. v. Guman Bros. Farm, 73 Ohio St.3d 107 (interpretation only becomes question of fact if contract language is ambiguous)
- Harris v. Ohio Oil Co., 57 Ohio St. 118 (lease interpretation under Ohio law)