A team of lawyers, including Pittsburgh partner Leonard J. Marsico, successfully represented Power Gas Marketing & Transmission, Inc. in an appeal before the Superior Court of Pennsylvania — Power Gas Marketing & Transmission, Inc. v. Cabot Oil & Gas Corporation and Linn Energy, LLC. Power Gas appealed an order granting Cabot and Linn Energy respective motions for summary judgment in a case where Power Gas filed a complaint raising a breach of contract claim against Cabot for conveying its interests in a joint venture to Linn Energy.
The complaint alleged that Cabot failed to offer Power Gas the opportunity to purchase Cabot’s interest prior to conveying it to Linn Energy, a company with no prior interest in the joint venture, thus breaching a preferential purchase rights provision in the joint venture. The trial court ruled that the preferential rights provision was not enforceable because the rule against perpetuities applied, and granted the defendants summary judgment.
This case was important because it addressed the applicability of the rule to a standard form that is used throughout the gas industry in Pennsylvania, and the rest of the country. If Power Gas had lost the appeal, the validity of countless joint operating agreements would have been placed into question because of the application of the rule.
The superior court ruled that the rule did not apply to the agreement, because the agreement did not fetter specific property (a requirement for the application of the rule). The court noted that because the state legislature had abolished the rule on a prospective basis, the policy underlying the rule (which dates to the 1500s) was no longer applicable.