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Rip Tide Investors Inc. v. W & T Offshore Inc.

United States District Court, W.D. Louisiana, Lafayette Division

November 13, 2017

RIP TIDE INVESTORS, INC.
v.
W & T OFFSHORE, INC., ET AL.

          MEMORANDUM RULING

          S. MAURICE HICKS, JR., CHIEF JUDGE UNITED STATES DISTRICT COURT.

         Before the Court in this litigation involving a lease dispute are cross-motions for summary judgment filed by Defendant W&T Offshore, Inc. (“W&T”) and Plaintiff Rip Tide Investors, Inc. (“Rip Tide”). W&T seeks a judgment of dismissal with prejudice of all claims asserted against it by Rip Tide (Record Document 14), on the basis that the lease was not renewed and all obligations owed by W&T were extinguished by performance prior to expiration of the initial lease period. Rip Tide seeks judgment in its favor, holding W&T liable for payment of the balance of rentals due under the lease, which Rip Tide contends was extended by virtue of W&T's assignee, Black Elk Energy Offshore Operations, LLC's (“Black Elk”), exercise of an option to renew (Record Document 16). Because the Court finds there is no genuine issue of material fact and W&T is entitled to judgment as a matter of law, W&T's Motion (Record Document 14) is hereby GRANTED, and Rip Tide's Motion (Record Document 16) is hereby DENIED.

         FACTUAL AND PROCEDURAL BACKGROUND

         The following facts are not in dispute. Rip Tide is the primary surface lessee of approximately 350 acres of land in Vermilion Parish, Louisiana, leased to it by Vermilion Corporation and Humble Oil & Refining Company (now ExxonMobil). Record Document 1-1 at ¶ 3; Record Document 16-2 at 6. Effective December 1, 2008, Rip Tide (as Sublessor) entered into a surface sublease (“the Sublease”) with W&T (as Sublessee) of two tracts of land situated within that 350 acres. Record Document 1-1 at ¶ 4; Record Document 16-1 at ¶ 1. The primary term of the Sublease between Rip Tide and W&T was from December 1, 2008 through November 30, 2013, at a monthly rental rate of $7, 500.00. Record Document 14-1 at ¶ 3; Record Document 16-2 at 6. The Sublease contained an option to extend the primary term of the lease for an additional three and a half years, which reads as follows:

SUBLESSEE is granted the option to renew this lease for one (1) additional period ending May 31, 2017 under the same terms, conditions and rentals due under the primary term of this lease, except as modified in paragraph 2.[1] In the event SUBLESSEE desires to exercise the option herein granted, it shall do so by giving written notice to SUBLESSOR by Certified Mail or Registered mail at least ninety (90) days before the expiration of the lease.

         Record Document 14-5 at ¶ 3. Thus, in order to timely exercise the option to renew the Sublease, Rip Tide had to receive written notice by certified or registered mail on or before September 2, 2013. Record Document 14-1 at ¶ 5; Record Document 16-2 at 7.

         On October 29, 2009, W&T assigned the Sublease to Black Elk by Conveyance and Bill of Sale. Record Document 14-1 at ¶ 1; Record Document 16-3 at 19. All interested parties consented to the assignment. Record Document 16-1 at ¶ 3; Record Document 19-1 at 1. On September 19, 2013, seventeen (17) days after the September 2 deadline for renewal, Jeff Hemingway, a Senior Landman for Black Elk, mailed a letter to Rip Tide via regular U.S. Mail, which stated in pertinent part, “By copy of this letter, Black Elk Energy Offshore Operations, LLC (as successor in interest to W&T Offshore, Inc.) hereby requests to renew that certain Surface Sublease dated effective December 1, 2008 for an additional term until May 31, 2017, as provided in paragraph 3 of the agreement.” Record Document 16-4 at 18; Record Document 14-1 at ¶ 6. On November 12, 2013, Dexter Duhon, Secretary/Treasurer of Rip Tide, responded to Mr. Hemingway by e-mail as follows: “With regard to the renewal of your lease with Riptide Investors Inc., the new monthly lease payment, beginning on December 1, 2013, will be $7975.45. This renewal period will end on May 31, 2017.” Record Document 16-4 at 19. Rip Tide had no further communications with Black Elk about the option to renew. Record Document 16-4 at ¶¶ 15, 17; Record Document 14-1 at ¶ 8. Neither Rip Tide nor Black Elk contacted W&T to obtain its consent to Black Elk's untimely attempt to exercise the option to renew the Sublease. Record Document 14-1 at ¶ 9; Record Document 16-1 at ¶ 5.

         All payments due under the Sublease were paid by Black Elk through November 30, 2013. Record Document 14-1 at ¶ 10; Record Document 16-1 at ¶ 12. Thus, all amounts owed for rent under the original Sublease term were paid. After expiration of the original Sublease term, Black Elk paid the increased monthly rental rate of $7, 975.45 for the months of December 2013 through November 2014. Record Document 14-1 at ¶ 11; Record Document 16-1 at ¶ 13. No further rental payments were made by Black Elk after the November 2014 payment. Record Document 14-1 at ¶ 13; Record Document 16-1 at ¶ 15. Although it continued to pay the rent, Black Elk did not occupy the leased premises Page 3 of 15 at any time after the expiration of the primary term of the Sublease on November 30, 2013. Record Document 14-1 at ¶ 12; Record Document 16-1 at ¶ 14.

         Rip Tide initiated this suit against W&T and Black Elk in state court on March 24, 2015, seeking “judgment in favor of Rip Tide and against W&T and Black Elk, jointly, severally and in solido, for all rentals due under the terms of the lease, together with legal interest thereon from the date of judicial demand, all costs associated with the prosecution of this suit, and all just and equitable relief.” Record Document 1-1 at 5. On May 7, 2015, Defendants removed this matter to this Court, based upon 28 U.S.C. § 1332, diversity of citizenship. Record Document 1. On August 11, 2015, an Involuntary Petition for Bankruptcy was filed against Black Elk in the United States Bankruptcy Court for the Southern District of Texas. Record Document 10. Accordingly, Rip Tide's claim against Black Elk is stayed pursuant to 11 U.S.C. § 362(a), pending notice from the presiding bankruptcy court that the stay has been lifted. Record Document 11. In accordance with a previous Order of the Court, Rip Tide and W&T conferred and agreed there is no need to stay the litigation of Rip Tide's claim against W&T. Record Document 11; Record Document 13.

         W&T now seeks judgment in its favor, dismissing all claims asserted against W&T by Rip Tide with prejudice. Record Document 14 at 1. W&T contends Black Elk's attempted exercise of the option to renew was untimely; therefore, the Sublease expired at the end of the primary term on November 30, 2013. Record Document 14-2 at 15-16. According to W&T, because all obligations under the primary Sublease were extinguished by performance, W&T owes no further contractual obligations to Rip Tide. Record Document 14-2 at 11, 16.

         Contrarily, Rip Tide seeks judgment in its favor “holding W&T liable for payment of the balance of rentals due under the Surface Sublease.” Record Document 16 at 2. Rip Tide acknowledges Black Elk's purported exercise of the option to renew was untimely. Record Document 16-1 at ¶¶ 6-8. Nevertheless, Rip Tide contends it waived Black Elk's untimely exercise of the option, and therefore W&T, as assignor, remains solidarily liable with Black Elk for the unpaid rentals from December 2015 through May 2017. Record Document 16-2 at 9.

         LAW AND ANALYSIS

         I. Summary Judgment Standard

         “A party may move for summary judgment, identifying each claim or defense - or the part of each claim or defense - on which summary judgment is sought.” Fed.R.Civ.P. 56(a). “The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Id. A fact is material if proof of its existence or nonexistence might affect the outcome of the lawsuit under the ...


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