Victory in Fifth Circuit Royalty Case

  • April 1, 2013

On March 12, 2013, the Firm won an oil and gas royalty appeal in the U.S. Court of Appeals for the Fifth Circuit.  The case involves certain overriding royalty interests and Louisiana law, as adopted through OCSLA. The royalty instruments provide for overriding royalties on production from an offshore lease in federal waters (about 190 miles south of New Orleans).  Because the lease came from the federal government, there is a clause stating that the overrides “shall be calculated and paid in the same manner” as the landowner’s royalty. Litigation ensued when some of the working interest owners took the position that this clause allowed them to stop paying the override owners during periods of deepwater royalty relief. Although a federal district judge agreed with this, the Fifth Circuit did not. The appellate court reversed the summary judgment.  The majority held the relevant language to be ambiguous. A separate opinion by Judge Garza disagreed with the majority’s reading of the language, but Judge Garza agreed that the judgment should be reversed to allow the royalty owners to seek reformation. 

Lead counsel on appeal for the individual royalty interest owners was Beck Redden partner David M. Gunn.  He authored the briefing along with his Beck Redden colleagues Connie Pfeiffer, Erin H. Huber, and Chad Flores. They worked in collaboration with the trial lawyers, Taylor Darden and Matt Fantaci of the New Orleans firm Carver Darden. The individual royalty owners were also aligned with Kerr-McGee Oil & Gas Corp., which was represented by McGlinchey Stafford attorney Mike Rubin.