Defective Acknowledgement Does Not Invalidate Oil and Gas Lease According to Ohio Courts

May 6, 2013

On April 15, 2013, U.S. District Judge John R. Adams of the Northern District of Ohio dismissed Ohio landowners’ claim that oil and gas leases not properly notarized are invalid, in Cole v. EV Properties, L.P. In this class action lawsuit, the landowner plaintiffs admitted to signing an oil and gas lease, but contended that the lease should be declared invalid because they did not acknowledge their signatures on the lease before a notary, as required by Ohio law. The landowners’ argument rested on their allegation that oil and gas leases are akin to standard leases of surface property, and not the conveyance of a greater interest in property.

The court rejected the landowners’ argument, explaining that oil and gas leases are inherently different from standard leases of property and convey a fee simple interest in the rights contained therein. Based on this finding, the court agreed with the gas producer defendants that it should follow the ruling in Citizens National Bank v. Denison, in which the Supreme Court of Ohio held that “[a] defectively executed conveyance of an interest in land is valid as between the parties thereto, in the absence of fraud.”

This result followed a similar result in the Trumbull County, Ohio, Court of Common Pleas, on Feb. 25, 2013, in Tomko v. Cobra Leasing, LLC, when the court granted the gas producer defendants’ motion to dismiss in its entirety, dismissing the landowner plaintiffs’ claim to invalidate their oil and gas lease due to defective notarization. Cole and Tomko were the first favorable rulings by Ohio federal and state courts on this issue for an exploration and production company. To be sure, a decision in the landowners’ favor on this issue would have prompted countless Ohio landowners to flood the court system with challenges to the validity of the landowners’ oil and gas leases.