The Pennsylvania Supreme Court will soon decide if Pennsylvania will join the majority of other oil-and-gas-producing jurisdictions in recognizing the equitable principle that where a lessor files a lawsuit seeking to invalidate an oil and gas lease that is later adjudicated against the lessor, the primary term of the lease may be extended by the length of the period of uncertainty cast by the litigation. The case at issue is Harrison v. Cabot Oil & Gas, 96 A.3d 988 (Pa. 2014). Given the fact that lawsuits to invalidate leases may take years to litigate to a final conclusion through appeals, the extension of a lease after an unsuccessful litigation will have a significant impact on both lessors and lessees.
This equitable remedy of extending the term of an oil and gas lease for the length of time that unsuccessful litigation is pending, also known as “tolling,” is derived from the contract theory that where a lessor interferes with the lessee’s performance under the contract, the lessee may suspend performance during the time of interference. The corollary to this is that the lessee gets additional time to perform as a result of any wrongful interference.
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