BRP LLC v. MC La. Minerals LLC

• Citation: 196 So.3d 37
• Decision Date: 18 May 2016
• Docket Number: 50,549–CA.
• Court: Court of Appeal of Louisiana (US)
• Parties: BRP LLC (DELAWARE), Plaintiff–Appellant v. MC LOUISIANA MINERALS LLC, Chesapeake Louisiana LP, PXP Louisiana LLC, PXP Louisiana Operations LLC, Empresa Energy LLC, Chesapeake Royalty LLC, Black Stone Minerals Company LP, Ivory Acquisitions Partners LP, Encana Oil & Gas (USA) Inc., International Paper Company, Swepi LP and Forestland Partners LP, Defendants–Appellees.

196 So.3d 37

BRP LLC (DELAWARE), Plaintiff–Appellant
v.
MC LOUISIANA MINERALS LLC, Chesapeake Louisiana LP, PXP Louisiana LLC, PXP Louisiana Operations LLC, Empresa Energy LLC, Chesapeake Royalty LLC, Black Stone Minerals Company LP, Ivory Acquisitions Partners LP, Encana Oil & Gas (USA) Inc., International Paper Company, Swepi LP and Forestland Partners LP, Defendants–Appellees.

50,549–CA.

Court of Appeal of Louisiana, Second Circuit.

May 18, 2016.

196 So.3d 39

Davidson, Jones & Summers, APLC, by Randall S. Davidson, Grant E. Summers, Julia E. Blewer, Shreveport, LA, for Appellant.

Baker & Hostetler L.L.P., by Michael W. Mengis, Baker Donelson, by Sarah K. Casey, Kenneth M. Klemm, Stamey & Miller, L.L.C., by Joseph B. Stamey, Erika F. Cedars, for Appellees, MC Louisiana, Louisiana LP, PXP, Louisiana LLC, PXP, Louisiana Operations LLC, Empresa Energy LLC, Chesapeake Royalty LLC, Empress LLC.

Bradley Murchison Kelly & Shea, LLC, by Katherine S. Baker, Joseph L. Shea, Jr., Shreveport, LA, for Appellees, Black Stone Minerals Company LP, Ivory Acquisitions Partners LP & Ivory Working Interests.

Cook, Yancey, King & Galloway, by Herschel E. Richard, Jr., John T. Kalmbach, Shreveport, LA, for Appellee, Encana Oil & Gas (USA) Inc.

Forman Watkins & Krutz LLP, by Tim Gray, Jason Elam, for Appellee, International Paper Company.

Liskow & Lewis, by Lawrence P. Simon, Jr., Lafayette, LA, for Appellee, Swepi LP.

Theus, Grisham, Davis & Leah, L.L.C., by Paul D. Spillers, Monroe, LA, for Appellee, Forestland Partners LP.

Before WILLIAMS, GARRETT, and BLEICH (Ad Hoc), JJ.

GARRETT, J.

This matter involves a dispute over the proper interpretation to be given to a depth limitation clause contained in a large sale of mineral interests in 2008, from International Paper Company (“IP”) to Chesapeake Royalty, LLC (“Chesapeake”). The plaintiff here, BRP, LLC (“BRP”), later acquired mineral interests from IP and brought this action seeking a declaratory judgment that it owned all of the Bossier Shale formerly held by IP. BRP appeals from the trial court judgment which denied its request and ruled in favor of Chesapeake. For the following reasons, we affirm.

FACTS

The plaintiff in this matter, BRP, was not involved in the transaction at issue. BRP acquired mineral interests from IP after the transaction occurred. By way of background, IP owned thousands of acres of land in Bienville, DeSoto, Red River, and Sabine Parishes. It decided to sell off some of its mineral rights. Prior to the sale involved in this matter, David Hooper managed IP's mineral interests. In 2008, during the height of the Haynesville Shale boom, Hooper left IP and went to work at Empresa Energy LLC (“Empresa”). Hooper knew about IP's extensive mineral

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holdings and contacted Chesapeake to try to work out a deal between Chesapeake and IP. On June 19, 2008, Empresa sent a letter of intent to IP. Although IP had a consulting contract with Hooper, it refused to work with him in this matter because he had recently been an employee. At IP's insistence, Chesapeake dealt directly with IP. On June 20, 2008, Chesapeake relayed the same letter of intent to IP. Chesapeake was under a time constraint to close this deal by June 30, 2008, so that it could include IP's acreage in a deal it had with Plains Exploration and Production Company (“PXP”). A letter of intent between Chesapeake and IP was signed on June 30, 2008. The final purchase and sale agreement, for nearly $263 million, was signed on July 24, 2008, in which Chesapeake bought a limited portion of the mineral rights in approximately 13,000 acres owned by IP. Empresa received a payment of $39 million from Chesapeake for arranging the deal and Hooper was given a bonus of $3 million from Empresa.

In the sale and purchase agreement, paragraph 1.1 defined the rights to be purchased and sold as follows (with boldface added for emphasis):

The “Assets ” shall mean the following: all of Sellers' right, title and interest in and to (a) the oil, gas and other minerals in, to and under the lands described in the attached Exhibit A, and any and all oil and gas leases covering such lands, INSOFAR AND ONLY INSOFAR as such oil, gas and other minerals are located below that depth which is the stratigraphic equivalent of the base of the Cotton Valley formation and the top of the Louark Group defined as correlative to a depth of 10,765' in the Winchester Samuels 23 # 1 well (API # 1703124064) located in Section 23–14N–13W, DeSoto Parish, LA, and correlative to a depth of 9,298' in the Tenneco Baker # 1 well (API # 1701320382) located in Section 12–16N–10W, Bienville Parish, LA (such depths, the “Subject Depths ”), including, but not limited to all rights to royalties on production, executive rights to lease, leasehold interests, overriding royalty interests and any and all other rights, permits or privileges relating to the ownership of such oil, gas and other mineral interests (collectively, the “Mineral Interests ”); (b) those agreements and contracts relating to the Mineral Interests set forth on the attached Exhibit B and (c) copies of all files, records and data (including electronic data, lease files, land files, abstracts, title files, maps, and other information), in each case in the possession of Sellers to the extent specifically related to such Mineral Interests and to the extent Sellers can transfer such data without the consent of a third party.¹

At some point after the sale, IP transferred its mineral interests to BRP, a joint venture between IP and some of its subsidiaries. BRP considered selling more of its mineral rights and a dispute arose regarding the depth of minerals conveyed in the sale to Chesapeake. BRP claimed that IP intended to sell its mineral rights only in the Haynesville Shale and lower depths. BRP claimed its predecessor in interest, IP, retained all mineral interests above the top of the Louark Group. The Louark Group included only the Haynesville Shale and everything below it. Chesapeake

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claimed that the agreement conveyed rights in the Bossier Shale, as well as the Haynesville Shale, even though arguably, the Bossier Shale lies above the Louark Group. In November 2010, BRP filed a petition for damages, declaratory judgment, and injunctive relief.²

BRP and Chesapeake each filed a motion for summary judgment claiming that the description contained in the sales contract was unambiguous and should be construed in the mover's favor. After extensive briefing and lengthy oral arguments from both sides, the trial court denied both motions. The trial court stated that “based on the facts and evidence presented I don't think I could grant either one of the summary judgments at this time.”³

After many months of legal maneuvering and discovery, the trial court entered a scheduling order that bifurcated the trial. Phase I of the trial, the portion at issue in this appeal, concerned the interpretation of the instruments of conveyance and assignment from IP to Chesapeake. The only parties required to participate in Phase I were BRP, Chesapeake Royalty LLC, and MC Louisiana Minerals LLC. Defendants claiming to hold leases or lease extensions in the depths in dispute were allowed to participate in Phase I, but would be subject to the court's determination in Phase I. Those defendants who did not claim to hold title to the disputed depths under the leases or lease extensions from Chesapeake or MC Louisiana Minerals would not be prejudiced by the outcome of Phase I.⁴

A bench trial in Phase I was held on March 24–26, 2014. Persons involved in the sale and several experts in geology testified. Numerous exhibits and depositions were introduced into evidence. The trial court heard several days of testimony on the intent of the parties, as well as expert testimony explaining and construing the language used in the legal description. The admissibility of the parol evidence has not been made an issue on appeal.

David Liebetreu, vice-president of global sourcing at IP, testified that Hooper had been the manager of IP's oil and gas interests. Hooper had been with IP for more

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than 20 years and knew the most about the company's oil and gas holdings. IP had been selling assets and in 2008, when Hooper left the company to work for Empresa, he was not replaced.

Liebetreu said that in 2008, Hooper contacted him about IP selling some of its minerals. IP did not want to deal with Hooper or Empresa, so IP was contacted directly by Chesapeake. According to Liebetreu, the parties talked only about rights to the Haynesville Shale. However, Liebetreu acknowledged receiving an email and a letter of intent from George P. Denny, the business development land manager at Chesapeake, dated June 20, 2008, which stated:

Chesapeake Louisiana, L.P. (“Chesapeake”) hereby offers to purchase all of the rights owned by Sustainable Forest, LLC and Coval Leasing Company, LLC (jointly “IP”) below the Cotton Valley Formation (defined below) subject to the following terms and conditions[.]

The definition of the depths to be conveyed was identical to the language in the purchase and sale agreement set forth...