Warren, et al. v. Chesapeake Exploration, L.L.C., et al., No. 13-10619 (5th Cir. 2014)
Annotate this CasePlaintiffs, the Warrens and the Javeeds, filed suit against defendants (Chesapeake entities), alleging that defendants breached royalty provisions in oil and gas leases by deducting post-production costs from the sales proceeds of natural gas. The district court held that the leases contained "at the well" royalty provisions, under decisions of the Supreme Court of Texas in Heritage Resources, Inc. v. NationsBank and Judice v. Mewbourne Oil Co., Chesapeake was authorized to make post-production deductions in determining the amount realized at the mouth of the well, despite the provisions in the Warrens' leases that the royalty would be free of certain post-production costs. The court affirmed the district court's dismissal of the Warrens' claims for failure to state a claim. However, the court concluded that the Javeeds' claim should not have been dismissed with prejudice where it was not apparent from the face of the complaint or attachments that they could not conceivably state a cause of action. Accordingly, the court modified the district court's judgment as to the Javeeds' claims.
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