Oklahoma City-based Chesapeake Exploration LLC has lost a Wyoming Supreme Court fight over a breach of contract involving a production company.
The Supreme Court Justices recently upheld a lower court ruling against Chesapeake Exploration after it had been sued by Morton Production Company, LLC and accused of breach of contract, violation of the Wyoming Royalty Payment Ac, and conversion after Chesapeake adjusted Morton’s ownership interest and withheld production proceeds. The two firms had previously entered into a joint operating agreement for oil and gas development in Converse County, Wyoming. Morton is an oil and gas production company headquartered in Douglas, Wyoming.
After being sued, Chesapeake Exploration Chesapeake counterclaimed for breach of contract, unjust enrichment, and breach of the implied covenant of good faith and fair dealing. The district court granted summary judgment in favor of Morton.
Chesapeake appealed and the Supreme Court held that the Oklahoma City company breached the contract by adjusting Morton’s ownership interest and billing for costs beyond the twenty-four-month limitation period specified in the 1985 COPAS Form, which was incorporated into the joint operating agreement.
The court found the language in the COPAS Form unambiguous and declined to consider extrinsic evidence. The court also upheld the district court’s use of Rule 60(a) to correct a clerical error in its original order and found that Chesapeake’s counterclaims were properly dismissed as they were rendered moot by the summary judgment on Morton’s claims. Additionally, the court ruled that Chesapeake violated the WRPA by withholding production proceeds without placing the disputed funds in escrow, as required by the statute.
