Face Challenges Confidently

409 Kantner v. Chesapeake Energy Co.

Thursday, September 3rd, 2015

Richard F. Brown

The following is not a legal opinion.  You should consult your attorney if the case may be of significance to you.
Kantner v. Chesapeake Energy Corp., 02–11–00378–CV, et al. 2012 WL 1859873 (Tex. App.—Fort Worth May 10, 2012, no pet.) (mem. op.), held that property owners lacked standing to assert breach-of-contract claims as third-party beneficiaries of a template lease negotiated by a committee of property owners when property owners were not sufficiently identified in the contract and did not qualify as donee beneficiaries.
Property owners in an area known as Deer Creek Estates in the City of Crowley, Texas, formed an Oil & Gas Lease Committee (“Committee”).  The Committee negotiated a “Form Lease” with Chesapeake Energy Corporation and Chesapeake Exploration, LLC (collectively, “Chesapeake”) and a Supplemental Agreement Regarding Gas Lease (“Supplemental Agreement”).  Although the Form Lease was negotiated on behalf of the members of the Committee, each member retained the right to negotiate their own lease.  After a downturn in the market, Chesapeake abandoned its plans to develop the Deer Creek Estates neighborhood.
The property owners asserted a variety of issues relating to contract formation and the statute of frauds.  However, the court assumed arguendo that the Form Lease and the Supplemental Agreement constituted a binding contract between Chesapeake and the Committee.  Thus, the dispositive issue on appeal was whether the property owners had standing to assert their claims as third-party beneficiaries.
The court’s opinion relied almost exclusively on Maddox v. Vantage Energy LLC.  In Maddox, an unincorporated association had negotiated a template oil and gas lease with Vantage Energy on behalf of its members, but individual members did not execute the lease.  The court noted that there was no support for the proposition “‘that persons who in a contract are unnamed, unidentified by address or by property description, and are unidentifiable by membership in a specifically defined, discrete, limited group can be intended by the contracting parties to be beneficiaries of that contract.’”  Accordingly, the court held that the template oil and gas lease did not identify any third-party beneficiaries with sufficient specificity.  Moreover, even if the alleged third-party beneficiaries had been identified, they did not qualify as creditor or donee beneficiaries.  Consequently, the Maddox court held that the plaintiffs lacked standing to assert a breach of contract claim.
Here, like Maddox, the property owners were not specifically named as third-party beneficiaries in the Form Lease or in the Supplemental Agreement, nor was there a map with an identification of appellants by address or lot number.  Accordingly, the court held that the contract did not sufficiently identify the property owners as third-party beneficiaries.  Moreover, even if the property owners had been sufficiently identified, the court noted that there was no evidence that the property owners were donee beneficiaries.  The property owners argued that Chesapeake’s offer to lease their minerals “had value” and thus conferred on them donee beneficiary status.  The court noted that there was no legal basis for the proposition that an offer alone has value sufficient to confer donee beneficiary status.  Accordingly, the court held that the property owners lacked standing to assert their breach of contract claim.
This case indicates that third-party beneficiaries lack standing to assert a contract unless they are sufficiently identified in the contract and the intent to confer donee beneficiary status is expressly manifested in the contract.