The Fifth Circuit ruled last week that the terms of an oil and gas lease could give a real estate firm the right to damages for drilling operations that hurt the firm's efforts to build and sell homes in a Shreveport subdivision. Greenwood 950, L.L.C. v. Chesapeake Louisiana, L.P., No. 11-30436 (5th Cir. June 12, 2012).
The lease covered 238 acres in Caddo Parish. It called for the lessee, Chesapeake, to confine its drilling work to a small part of the tract, a precise 16.5 acres. And Chesapeake kept that promise. But, because it blocked the main road into the tract, the lessor, Greenwood 950, alleged, Chesapeake injured Greenwood's prospects for turning the rest of the land into a bodacious Shreveport subdivision.
But, you ask, what does the lease say? It provides, as we learn on page 5 of the Fifth Circuit's opinion, that Chesapeake agreed to "repair all surface damages done by its operations or shall pay Lessor for all damages caused by any operations hereunder to any property, both real and personal, of Lessor and Lessor's tenant, if any".
Note the "or shall pay Lessor for all damages". Especially the "or".
The district court ruled, on motion for summary judgment, that the or clause meant "surface damages" and not injury to Greenwood's hopes for turning the tract into a cash cow. The Fifth Circuit begged to differ. It found the lease unclear and sent the case back to the district court. The promise to pay for "all" damages, the panel ruled, could cover harm to Greenwood's developmental hopes and dreams, which it assumed counted as "damages . . . to . . . property".
Blawgletter mainly wonders if hurting a real estate developer's plans for a subdivision amounts to harm to "property". Does a cause of action for consequential damages equal an interest in "property"? But perhaps a physical interference such as Chesapeake's with the doing of things necessary to make a real estate development viable does count as damages to property.