Preston Exploration Company, L.P. v. Gsf, L.L.C. And Chesapeake Energy Corporation

669 F.3d 518 (5th Cir. 2012)

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Nature of the Case

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Facts

P and D began discussions regarding the sale/purchase of certain oil and gas leases owned by P. The parties agreed to pursue a transaction and entered into a letter of intent with a closing date of August 20, 2008. The closing date was later pushed back a number of times. The parties agreed to enter into purchase and sale agreements (PSAs). The three PSAs were executed on October 7 and 8, 2008. The PSAs are substantially identical except that each pertains to a distinct P entity. Prior to signing, the parties exchanged drafts along with drafts of the exhibits attached to the PSAs. The exhibits were specifically referenced in the PSAs, including a reference to one of the exhibits as the document describing the oil & gas leases to be conveyed and a reference to a different exhibit as the document setting out the form of the assignments to be delivered at closing. Ds specifically requested to review the final schedules and exhibits. P executed the PSAs on October 7th. On the following day, D executed the PSAs without any complaints regarding the attached exhibits. The PSAs now provided for a November 7th closing date. The PSAs also provided for payment of a non-refundable deposit of 10% of the unadjusted purchase price. The deposit amounted to $11,000,000.00. Ds specifically requested to review the final schedules and exhibits. P executed the PSAs on October 7th. On the following day, D executed the PSAs without any complaints regarding the attached exhibits. The PSAs now provided for a November 7th closing date. The PSAs also provided for payment of a non-refundable deposit of 10% of the unadjusted purchase price. Included in each PSA was a provision for post closing adjustment of the purchase (Section 10); a provision for curing any title defects pertaining to any particular lease (Section 6); and a provision obligating Seller to make available to Buyer all of its 'title files' (Section 6(b)).The deposit amounted to $11,000,000.00. D continued performing its due diligence examination of the title to the leases to be conveyed. On November 6, 2008, D confirmed P that it would not close. P sued D for specific performance. D filed its motion for summary judgment asserting that enforcement of the PSAs was barred by the statute of frauds. The trial court initially granted D's motion and thus denied relief on Preston's claim for specific performance. A three day bench trial followed. The court determined that the exhibits did not contain sufficient information to be statute of frauds compliant because they were not finalized at the time the PSAs were executed. The trial court determined that those exhibits could not be incorporated into the PSAs. The trial court also held that D was not entitled to return the $11,000,000.00 paid to P as a down payment on the transaction. D did not cross-appeal this issue. P appealed.