McCarthy v. Evolution Petroleum Corp.Annotate this Case
This case arose from a petition filed by vendors of mineral rights, plaintiff John C. McCarthy, individually and as trustee of the Kathleen Balden Trust, and plaintiff Marjorie Moss. Plaintiffs named as defendant Evolution Petroleum Corporation, which was formerly known as Natural Gas Systems, Inc. Plaintiffs also named as a defendant NGS Sub. Corp. (“NGS”). Plaintiffs sought damages and rescission of their sale of royalty interests in mineral leases within the Delhi Field Unit, located in Richland Parish. Plaintiffs alleged fraud and error as grounds for rescission. The defendants filed a peremptory exception of no cause of action, which the district court granted, and the case was dismissed. In the first of two appeals in this case, the appellate court affirmed the exception of no cause of action, but reversed the dismissal with instructions to the district court on remand to allow the plaintiffs the opportunity to amend their petition to state a cause of action. The cause of action that plaintiffs came up with was, according to the appellate court, "novel and untested," and the Supreme Court granted review to determine whether that cause of action comported with Louisiana mineral law. The purported cause of action imposed a duty on a mineral lessee purchasing the lessor’s mineral royalty rights to disclose to the lessor that the lessee has already negotiated the resale of the mineral rights to a third party for a significantly higher price. Finding the lessee’s duties upon which the appellate court premised its cause of action to be expressly excluded in the Mineral Code, the Supreme Court reversed the appellate court’s decision, and reinstated the district court’s decision, which ruled plaintiffs failed to state a cause of action and dismissed this case with prejudice.