McCarthy v. Evolution Petro. Corp., Louisiana Supreme Court
October 14, 2015, 2015 La. LEXIS 2242

In what the court held to be a “novel and untested” cause of action, the court held that the purchaser of a mineral interest that had already resold the interest at a much higher price had no duty to disclose the subsequent sale to the mineral owner.

McCarthy owned mineral rights in the Delhi Field Unit in Richland Parish. Evolution was a successor lessee. Evolution sought a purchaser who would employ CO2 enhanced oil recovery technology in the field and entered into a purchase agreement with Denbury Resources. Without disclosing the Denbury deal, Evolution sought to purchase McCarthy’s royalty interests, which the plaintiffs sold to Evolution for 16 years’ worth of the previous royalties.

McCarthy alleged fraud based on Evolution’s prior sale which was not disclosed. The court of appeals held that Art 122 of the Mineral Code imposed a duty on the lessee and that there was “fraud by silence.” The Louisiana Supreme Court disagreed.