MacDonald Illig Settles Multi-Million Dollar Oil and Gas Jury Trial

MacDonald Illig partner, Thomas A. Pendleton, and his co-counsel, J. Bruce McKissock, of Doylestown, Pennsylvania, recently reached a multi-million dollar settlement on behalf of investors in an oil and gas well drilling project in Northwestern Pennsylvania. The settlement was reached following five days of testimony to a jury.

The lawsuit stemmed from a contract under which the investors contributed money towards "seismic exploration" used to identify potential locations for drilling oil and gas wells. If one oil and gas well was successfully drilled on one of these locations, the drilling company could use these results in conjunction with the seismic exploration to determine whether to drill more wells in a particular area. The central issue was whether the investors' contributions entitled them to receive royalties from oil and gas wells drilled during a specific time period, or whether the investors were entitled to receive royalties from all wells drilled as a result of the seismic exploration to which the investors had contributed.

Primary to the resolution was the scope of the fiduciary duty that exists between entities involved in oil and gas exploration ventures. The trial judge determined that a fiduciary duty existed in this case, meaning each person or entity must act for the benefit of all parties involved in the project. The judge relied upon court decisions from other oil and gas-producing states which held that relationships in oil and gas drilling ventures are more akin to confidential relationships involving trusts than to arm's-length transactions typical in business ventures.

MacDonald Illig counsel presented extensive evidence, including computer simulations, to illustrate the factual issues in the case to the jury. Digital maps showed the location of the seismic exploration and the oil and gas wells that were eventually drilled.

MacDonald Illig's oil and gas practice group has extensive experience representing drilling companies, landowners, suppliers, contractors and others. In addition, MacDonald Illig can draw from its real estate, corporate, litigation and estate planning practice groups to handle both the simple and complex issues that arise out of this growing industry in Pennsylvania.