Bear Peak Res., LLC v. Peak Powder River Res., LLC

403 P.3d 1033

BEAR PEAK RESOURCES, LLC, a Texas limited liability company, Appellant (Plaintiff),

v.PEAK POWDER RIVER RESOURCES, LLC, a Wyoming limited liability company, Appellee (Defendant).

S-16-0268.

Supreme Court of Wyoming.

October 13, 2017

Rehearing denied November 7, 2017

Representing Appellant: Jackie S. Shields and A. Clifford Edwards of Edwards, Frickle & Culver, Billings, Montana; William L. Simpson and Larry B. Jones of Burg, Simpson, Eldredge, Hersh & Jardin, P.C., Cody, Wyoming. Argument by A. Clifford Edwards and Jackie S. Shields.

Representing Appellee: Neil S. Cohen of Fox Rothschild, LLP, Denver, Colorado; Patrick J. Murphy of Williams, Porter, Day & Neville, P.C., Casper, Wyoming. Argument by Mr. Cohen.

Before BURKE, C.J., and HILL, DAVIS, FOX, and KAUTZ, JJ.

KAUTZ, Justice.

[¶1] Bear Peak Resources, LLC (Bear) and Peak Powder River Resources, LLC (Peak) agreed to work together in acquiring mineral interests for development. Their relationship deteriorated, Peak obtained some mineral interests without compensating Bear, and terminated the parties' agreement. Bear sued Peak, claiming breach of contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, negligent misrepresentation, and unjust enrichment. Bear also requested an accounting and asserted a claim for punitive damages. Peak moved for summary judgment which the district court granted, dismissing all of Bear's claims. Bear appealed the district court's decision. We affirm in part, and reverse and remand in part.

ISSUES

[¶2] Bear raises the following issues in this appeal:

1. Whether the district court misinterpreted the contract and erroneously granted summary judgment dismissing Bear's claim for breach of contract, because genuine issues of material fact exist regarding Peak's wrongful termination of the contract and acquisition of interests in the AMI [area of mutual interest] for its sole benefit in a manner that was contrary to the parties' intent and the terms of the contract.

2. Whether the district court erroneously granted summary judgment dismissing Bear's claim for breach of the implied covenant of good faith and fair dealing, given the evidence that Peak took actions that interfered with Bear's performance of the PSA [purchase and sale agreement] and were inconsistent with the agreed upon purpose of the contract and Bear's justified expectations.

3. Whether the district court erroneously determined Peak had no fiduciary duty and inappropriately granted summary judgment dismissing Bear's claim for breach of fiduciary duty.

4. Whether the district court erroneously granted summary judgment and dismissed Bear's claim for an accounting when Bear has viable claims for relief.

FACTS

[¶3] Bear is in the business of acquiring and selling mineral interests and leases, while Peak is in the business of developing oil and gas interests, including the drilling of oil and gas wells. On June 19, 2012, the two entered into a Purchase and Sale Agreement (PSA) wherein Peak agreed to purchase certain oil and gas interests owned by Bear. The PSA included a section which outlined the parties' agreement for procurement of additional mineral interests within an Area of Mutual Interest (AMI) over a two-year term. The agreement contemplated that Bear would acquire oil and gas interests in the AMI, and Bear would then offer Peak the opportunity to purchase the interests from Bear.

[¶4] Although lengthy, recitation of the contract provisions at issue in this appeal will be helpful in putting Bear's claims into context. Specifically at issue is Section 11.3 of the contract, which states in relevant part:

Acquisitions in the AMI . If during the term of the AMI, any Bear Party acquires or has the binding opportunity to acquire any oil and gas leasehold interests, fee title to oil and/or gas interests, royalty interests, overriding royalty interests (other than those contemplated to be reserved by or assigned to Bear under this Agreement), or other interests covering lands within the AMI (hereinafter the "Interests") including, but not limited to, farmout agreements, participation agreements or any other agreements or force pooling notices, actions or ruling through which such Bear Party might acquire (or obtain rights to acquire) an interest in lands within the AMI, such Bear Party shall notify Peak in writing of such acquisition or binding opportunity within thirty (30) business days after the acquisition or binding opportunity arises.

....

Peak shall have a period of thirty (30) days after receipt of such written notice in which to notify the Bear Party, in writing, as to whether it elects to acquire one hundred percent (100%) of the Interest (Peak if it elects to acquire must acquire 100%) under the same terms and conditions as those specified in the written notice related thereto (subject to Section 11.5) for payment of consideration to the Bear Party in the amount of $2,350.00 per net mineral acre covered by the Interest. Peak shall thereafter be entitled to receive, upon payment of $2,350.00 per net mineral acre covered by the Interest which Peak elects to acquire, an assignment of one hundred percent (100%) of the Interest. ...

Notwithstanding the foregoing, from and after the Effective Date, prior to any Bear Party acquiring Interests in the AMI, such Bear Party shall consult with Peak and cooperate in good faith with Peak as to (i) the area/lands within the AMI where such Interests are to be acquired; (ii) the terms and conditions pursuant to which such Interests shall be acquired; (iii) the terms and conditions of the oil and gas lease(s)/term assignments covering such Interests, including, but not limited to, the royalties and/or overriding royalties and rentals paid thereunder; (iv) any changes or modifications proposed to the terms of the oil and gas lease/term assignment forms provided by Peak; and (v) the form and substance of all oil and gas leases/term assignments executed covering such Interests. In the event that Peak and Bear cannot agree as to any of the foregoing, after good faith cooperation with one another with regard to the same, Bear and/or Peak may proceed with the acquisition of such Interest provided that Bear shall offer any such Interests to Peak in accordance with the immediately preceding paragraph.

It is intended that Bear primarily be the acquiring party in the AMI; however, if Peak feels Bear is not performing as expected (such expectations to be on the basis of reasonably [sic] industry standards with respect to the performance Bear is to perform under this article), it shall notify Bear of such lack of performance and the specific details regarding what is expected. Thereafter the parties shall meet to attempt to resolve any issues. If after a reasonable time (not less than thirty days) after such meeting the performance is not to Peak's satisfaction, reasonably determined, then on not less that fifteen (15) days further notice to Bear (and Bear's continued failure to perform to stated expectations during such notice period), Peak may further notify Bear that Peak may start making acquisitions for its own account in the AMI whereupon, at the expiration of such notice period (and provided Bear is not then performing to Peak's reasonable expectations) (i) Bear shall have no further obligation to make efforts to make acquisitions in the AMI during the AMI Term (but if it does, such acquisitions shall be subject hereto) and (ii) thereafter Peak and/or its officers, employees, agents or affiliates may acquire any leasehold interests, mineral interests or other oil, gas or mineral interests or rights of whatsoever nature or kind within the AMI for Peak's sole account and benefit and Bear shall have no claims, rights or interests of any kind in or to any such Interests acquired by Peak through Peak's efforts. Notwithstanding the foregoing in the event Peak has proposed a well and one or more of the other working interest owners in the proposed pool or unit (who has not been identified and who is not in current conversations with Bear about the interest) contacts Peak directly about entering into a transaction with Peak regarding transferring to Peak some or all of their working interest in the pool or unit, whether through farmout, direct acquisition or otherwise, such interest if acquired by Peak shall be for Peak's sole account and benefit, free of any rights of Bear hereunder. Similarly, if Bear has identified and is under negotiations with, a similarly situated third party, the acquisition, even if made by Peak, shall be deemed an acquisition through Bear for which Bear is entitled to its full compensation as set out in the Section 11.3.

[¶5] During the term identified in the PSA, Peak acquired several mineral interests in the AMI without Bear's assistance and Peak did not compensate Bear for those interests. Additionally, before the term would have expired on its own, Peak took steps to terminate the AMI provision in the PSA. On May 1, 2013, Peak issued a Notice of Non-Performance letter to Bear, wherein Peak notified Bear it was not performing its obligations in the PSA based on reasonable industry standards. The parties met to discuss the issue on May 21, 2013, and on June 18, 2013, Peak sent Bear a letter stating that Bear's performance continued to fail to meet the terms of the PSA and reasonable industry standards. On July 11, 2013, Peak notified Bear that Bear continued to fail to perform and, therefore, based on the terms of the PSA, Peak was entirely free to obtain leases or other interests without paying Bear.

[¶6] Bear filed a complaint against Peak alleging breach of contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, negligent misrepresentation, and unjust enrichment. Bear also sought an accounting and punitive damages. Peak moved for summary judgment and argued that all of the mineral interests it acquired without the assistance of Bear...