On June 6, 2014, the Sixth Circuit affirmed the district court’s entry of summary judgment in favor of Chesapeake Appalachia, L.L.C. in Eastham v. Chesapeake Appalachia, L.L.C., Case No. 13-4233. This is the first appellate decision arising out of a series of cases in different jurisdictions challenging Chesapeake’s extensions of oil and gas leases pursuant to a common Paragraph 19, which provided an “option to extend or renew on similar terms a like lease.”
In Eastham, Chesapeake argued that it validly exercised an option to extend the primary term of the Lease with the Easthams pursuant to Paragraph 19, and by paying the Easthams the same consideration they received at the time they signed the Lease. The Easthams filed a class action lawsuit seeking to void the Lease, contending that Chesapeake’s interpretation of Paragraph 19 was wrong, and that Chesapeake was obligated to enter into a new lease and pay current market rates. Market rates had increased substantially as a result of the development of the Marcellus and Utica Shale formations. The Easthams also argued that enforcement of Chesapeake’s interpretation of Paragraph 19 contravened Ohio public policy or produced an unconscionable result. The United States District Court for the Southern District of Ohio entered summary judgment in favor of Chesapeake on the Easthams’ claims, and they appealed to the Sixth Circuit Court of Appeals.You can read more about this matter by clicking here.
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