In Texas, no. Read on to learn why. In Nortex Minerals LP v. Blackbeard Operating LLC et al, the question was the meaning of this limited assignment provision in the “Alliance Leases”, oil and gas leases covering 27,000 acres of the Alliance Airport in Tarrant County:
Except as provided herein, Lessee may not assign or otherwise transfer an interest in this Lease without prior written consent of Lessor, which consent may be granted or denied in the sole and absolute discretion [,] and without such consent, any instrument purporting to assign or otherwise transfer of this Lease shall be void. Lessee shall have the right to transfer this Lease in its entirety without obtaining consent of lessor if such transfer of the Lease is (i) part of a merger, sale of membership interests or combination of Lessee and other entity [,] or a sale of all or substantially all of Lessee’s assets or (ii) as part of a transaction in which the transferee is a publicly traded energy company with a market capitalization in excess of $1 billion.[ ] Items (i) and (ii) are referred to herein as “Permitted Transfers[.”]
This diagram depicts the transactions leading to the litigation. The opinion provides details that I’m assuming you don’t need to know and don’t have time for.
The Court said that its sole task was to ascertain whether the limited assignment provision required Blackbeard and co-defendant Bluestone Natural Resources II to obtain Nortex’s consent before “transferring ownership” to co-defendant Diversified Production. The Court agreed with the trial court that the sale of equity in Bluestone did not constitute a transfer of an interest in the leases and did not trigger Nortex’s consent rights.
How did the court get there?
In reaching its conclusion the Court relied on the plain language of the unambiguous limited assignment provision. The framework to be used to answer the question would be:
- Determine if a transfer occurred. If yes;
- Determine whether it was a “Permitted Transfer”. If not;
- Was the provision an unenforceable restraint on alienation?
The linchpin: No “transfer”
The Court ended its analysis after the first step because the equity sale did not constitute a transfer by a lessee. Blackbeard’s sale of the equity in Bluestone occurred through a series of mergers, with Bluestone retaining its interest in the leases after the mergers were completed.
According to Business Organization Code §10.008(a)(2)(C), the effect of a merger is not a transfer of title. To agree with Nortex would rewrite the provision so as to require a change of control. The leases contained no change of control provision and the Court refused to add one.
Nortex focused on the carveout for Permitted Transfers. Because there was no transfer, there was no Permitted Transfer.
Nortex’s argument emphasizing the merger portion of the limited assignment provision was unsuccessful because for there to be a carveout there must be a transfer of the lease and that did not happen.
Nortex focused on “an interest in this lease” but, again, ignored that there must be a transfer, which did not occur.
An evidentiary point
The limited assignment provision was unambiguous. Because the final, amended version superseded all prior versions the Court saw no need to consider the history and context of the provision.
Your musical interlude.
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