Walls v Petrohawk Properties, L.P., U.S. Court of Appeals for the 8th Circuit, 2015 U.S. App. LEXIS 22684, December 28, 2015

To reject a proposed assignment where such an assignment cannot be made without the written consent of the Lessor requires the Lessor to have “fair, solid and substantial” cause to reject the proposal.

A lease contained a provision prohibiting assignments without the written consent of the lessor, which could not be unreasonably withheld. Several assignments were made without a request for approval being sought. The Court held that accepting royalties from the assignee ratified the assignments for which no consent was sought. For the one assignment for which approval was sought, and denied, the Court held that such a denial was unreasonable. In response to the request for approval of the assignment, Walls’ counsel advised of the denial of approval, citing no ground for the refusal and only asked Petrohawk why the assignment was in the best interest of Walls. The Court explained that the term “unreasonable” is a term of art meaning “without fair, solid and substantial cause or reason” and since no such cause or reason was given by Walls, the failure to consent was unreasonable.