Monday, May 13, 2013

U.S. Fourth Circuit Upholds Viability Of Flat Rate Leases

The United States Court of Appeals for the Fourth Circuit has issued an important decision upholding viability of flat rate leases in face of challenges that the lack of production terminated the lease.  Here is a synopsis of the ruling:

In Wellman v. Bobcat Oil & Gas, Inc., Docket No. 12-1533, an unpublished per curiam opinion, the Fourth Circuit recently addressed the issue of whether lack of production and a missed or late payment could invalidate a flat-rate lease.  The Court held that under longstanding West Virginia law, “the quantity of production is irrelevant to the expiration of the secondary term” of a flat-rate mineral lease.  In addition the Court held that the lessors’ claims that missed or late rental payments resulted in a forfeiture of the lease failed on the basis of ratification and the principles of equity.   The Court specifically stated that absent a clear and unequivocal stipulation in the lease that a failure to pay will result in forfeiture, missed or late payments are insufficient to justify cancelling or forfeiting the lease. 

Lewis Glasser Casey & Rollins PLLC has been involved in representing other lessees in similar claims by lessors.  We will continue to keep you apprised of these legal matters.