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Fifth District Court of Appeals Affirms Award of Attorney Fees for Frivolous Conduct in Action to Challenge The Validity of an Oil & Gas Lease

10.06.14 written by

In Bilbaran, the Fifth District Court of Appeals affirmed a decision from the Knox County Court of Common Pleas awarding attorney fees in the amount of $22,414.36 for frivolous conduct. Bilibaran Farm Inc. brought an action to invalidate an oil and gas lease which Bilibaran, as lessor, granted on May 12, 2003, in favor of Professional Petroleum Services, Inc., alleging the 275-acre leasehold was not sufficiently developed by lessee. The lessor alleged three oil and gas wells drilled to the Clinton formation constituted insufficient development and sought an order partially releasing the lease as to the undeveloped portions of the leasehold (which the lessor alleged constituted 215 acres). 

On the basis of a waiver of any implied covenants contained in the underlying lease, the trial court granted the lessee’s motion to dismiss the lessor’s complaint pursuant to Civ.R. 12(B)(6) (the Fifth District previously affirmed the trial court’s entry of dismissal in Bilbaran Farm, Inc. v. Bakerwell Inc., 993 N.E.2d 795, 2013-Ohio-2487 (5th Dist. Knox County)). 

The Fifth District held the trial court properly found lessor’s complaint to constitute frivolous conduct pursuant to O.R.C. § 2323.51(A)(2)(a)(ii), which is defined as conduct that “is not warranted under existing law, cannot be supported by a good faith argument for an extension, modification or reversal of existing law, or cannot be supported by a good faith argument for the establishment of the new law.” Id. The Fifth District found the lessor “had no claim under the express terms of the lease, and [lessor’s] claims concerning an implied obligation for further development were contradicted by both the terms of the lease and prior legal prescient.”  Bilbaran, supra, at ¶29.

The Fifth District further held the trial court’s award of fees was not limited to the lessee’s fees incurred only at the trial court, but could also include an award of fees incurred defending lessor’s initial appeal of the dismissal, as set forth in O.R.C. § 2323.51(B)(1), which provides for recovery of fees “incurred in connection with the civil action or appeal.” Id.

Bilbaran Farm, Inc. v. Bakerwell, Inc., et al., 5th Dist. Knox No. 14 CA 07, 2014-Ohio-4017 (Sep. 15, 2014)

NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.

If you have any questions concerning this client alert, please contact Attorney Gregory W. Watts at 330-497-0700.