Olympia Minerals, LLC v. HS Resources, Inc.

The issue this case presented to the Supreme Court centered on the lower courts’ interpretation of portions of a written mineral agreement. The agreement was prepared by a mineral leaseholder and ostensibly conveyed to an exploration company an “exclusive option to sublease” at least 15 percent of the leaseholder’s mineral rights. The lower courts interpreted the agreement as imposing an obligation on the exploration company to execute the sublease rather than simply allowing the exploration company the right to execute the sublease. Because the exploration company did not execute such a sublease, the lower courts awarded damages to the leaseholder for breach of contract. When the Court granted certiorari review, the lower courts had awarded to the leaseholder other damages, related to the exploration company’s obligation to execute a mineral sublease. The Supreme Court determined that the lower courts erred in ruling that the exploration company was obligated by the agreement to sublease mineral rights. Instead, the Court found the agreement afforded the exploration company a non-binding option to sublease (for which the exploration company paid $1.4 million), but that if the exploration company exercised the non-binding option, it was then obligated to sublease at least 15 percent of the leaseholder’s rights described in the agreement. Accordingly, the damage award on the breach of contract claim for failing to sublease at least 15 percent of the leaseholder’s mineral rights was reversed. However, the Court also found the exploration company breached its obligation to complete a seismic survey, and the Court affirmed the corresponding award of damage. Because the record did not support a finding that the exploration company acted in bad faith, we examine the effects of a contractual prohibition against consequential damages that the lower courts refused to apply based on those courts’ findings of bad faith. Because of the court of appeal's error, any meaningful review of the merits of the exploration company’s argument that its reconventional demand for improper use and sharing of its seismic data was improperly dismissed. The case was therefore remanded to the court of appeal the question of the propriety of that dismissal and, as that court then deems necessary, the question of whether the record supports the exploration company’s request for relief, or whether remanding to the district court for the taking of additional evidence is required. View "Olympia Minerals, LLC v. HS Resources, Inc." on Justia Law