June 16th, 2022

US Court of Appeals for the Fifth Circuit Opinions
Franklin v. Regions Bank

Docket: 21-30324
Opinion Date: June 14, 2022
Judge: Stuart Kyle Duncan
Areas of Law: Contracts

Plaintiffs, two sisters, and a family friend own a large farm in north Louisiana. The farm sits atop the storied Haynesville Shale. A bank’s landman who was managing the sisters’ interests extended a mineral lease for only a tenth of the farm. The landman had misread the extension, which covered the whole farm. Within months, advances in drilling technology would open up the Haynesville Shale. Lease bonuses soared. But the faulty extension clouded the sisters’ farm.
 
Plaintiffs sued the bank for breach of contract. The district court found the landman violated the standards of his profession by extending the entire lease. But the court ruled this was a “mistake in judgment” under the bank’s contract with the sisters, shielding the bank from liability. It also ruled the mistake was not gross fault, which a Louisiana contract cannot exculpate.
 
The Fifth Circuit affirmed in part, reversed in part, and remanded. Then court explained that the landman did not make a mistake in judgment, but a mistake pure and simple. He misread the extension. The contract’s exculpatory clause does not cover this kind of error, and so the court reversed the dismissal of the sisters’ claims. The court remanded as to damages. The extension stuck the sisters with a lower royalty rate than they would have gotten otherwise. But the parties’ experts disagree over whether the differing rates would make any economic difference. The district court did not resolve this technical, fact-bound question.

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