Sunday, May 15, 2011

Court Reviews Conflicting Transactions for the Assignment of Oil and Gas Leases

CNX GAS COMPANY, LLC v. MILLER PETROLEUM, INC., ET AL. (Tenn. Ct. App. May 11, 2011)

This appeal involves a business transaction for the assignment of oil and gas leases. The parties are sophisticated in the oil and gas industry and include CNX Gas Company, LLC ("CNX"), Miller Petroleum, Inc. ("Miller"), Atlas America, LLC ("Atlas"), and Wind City Oil & Gas, LLC ("Wind City").

CNX and Miller entered into a binding Letter of Intent ("LOI") for the assignment of oil and gas leases owned by Miller. Prior to signing the LOI, CNX knew that the leases were the subject of pending litigation between Miller and Wind City. The letter of intent outlined the details of the transaction and a closing date. On the closing date, Miller refused to close the transaction with CNX, claiming that it did not have possession of the leases. Approximately one week later, Miller entered into a similar deal for the assignment of those leases with Atlas. The transaction between Miller and Atlas was worth substantially more than the transaction with CNX.

Thereafter, CNX sued Miller for breach of contract; CNX also sued Atlas and Wind City for inducement to breach a contract. Miller and Atlas filed motions for summary judgment following discovery that involved depositions. After a hearing, the trial court granted summary judgment finding that the LOI permitted Miller to opt out of the closing. CNX appeals. After reviewing the record, we find the trial court erred in granting summary judgment. The LOI only provided CNX with the option to opt out of the transaction. Accordingly, we reverse.

Opinion available at: