On Nobermber 18, 2013, the United States Court of Appeals
for the Third Circuit affirmed the United States District Court for the Middle
District of Pennsylvania’s decision to grant summary judgment in favor of a
well operator, finding that a belated delay rental payment for non-unitized
acreage was an immaterial breach insufficient for the well operator to forfeit
the lease. Linder v. SWEPI, LP, 2013
WL 6052135 (3d. Cir. Nov. 18, 2013). The Third Circuit agreed with the district
court holding that the lease remained in effect as to non-unitized acreage
after the well operator was late in making a delay rental payment. The Third
Circuit reasoned that the late payment was not detrimental to the lessor lessee
relationship because the lease did not contain a “time is of the essence
clause.” Further, the circuit court reasoned the late payment was not
immaterial because the lease contained a sixty-day curative period that allowed
the lessee to correct any incorrect or failed payments. The purpose of that
clause, the court found, was to increase the chances an out-of-court resolution
would occur given a breach. Therefore, it did not act as a substitute for a
time is of the essence clause to establish materiality. Finally, the Third
Circuit found the well operator never surrendered the non-unitized acreage
because it did not file a Surrender of Lease as required by the lease’s
surrender clause.
Written by: Garrett Lent, Research Assistant
Agricultural Law Resource and Reference Center
Nov. 2013
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