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In February 2007, William R. Thomas granted Pride Oil and Gas Properties, Inc. an oil and gas lease covering 17 acres in Red River Parish, Louisiana. Thomas subsequently filed suit seeking to rescind the lease, asserting three alternative bases for rescission—(1) that he was defrauded by Pride; (2) that the price paid for the lease was grossly out of proportion with its fair market value; and (3) that Thomas was mistaken concerning “a substantial quality” of the mineral rights that the lease conveyed, absent which mistake he would not have agreed to the lease. Pride moved to dismiss the suit for failure to state a valid claim.

Thomas alleged that Pride suppressed the truth and perpetrated fraud through silence or inaction. Under Louisiana law, in order “[t]o find fraud from silence or suppression of the truth, there must exist a duty to speak or disclose information.” The Louisiana Mineral Code provides that a “mineral lessee is not under a fiduciary obligation to his lessor.” Therefore, the court concluded that Pride did not owe Thomas a duty to disclose any information that Pride may have possessed regarding the possibility that substantial mineral deposits underlay Thomas’s property, and the court dismissed Thomas’s fraud claim.

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¹ 2009 WL 1309725 (W.D. La. May 7, 2009)