On September 21, 2015, the North Dakota Supreme Court found that a fiduciary relationship between an oil company and its landman could exist depending upon the existence of a confidential relationship.
Irish Oil contracted with Border Resources to acquire oil and gas leases within a designated prospect area. Border also was tasked with record title review and other broker-related tasks. As compensation, Border was to receive a percentage of the profit from the sale of the leases that it acquired. After some time working together, Irish Oil requested that Border cease all negotiations on its behalf by March 24, 2011. One day before the request, Border was approached regarding the acquisition of new leases within the Irish Oil review area. On April 6, Border confirmed to Irish Oil that it was no longer purchasing leases on its behalf. Border continued to perform title work for Irish Oil. Between April 26 and May 11, Border acquired the new leases for itself and a separate oil company.
In the dispute that followed, Irish Oil alleged that Border had breached its fiduciary duties by acquiring the new leases. The Supreme Court adopted the rule that the confidential relationship between a landman and an oil company may give rise to certain fiduciary duties, including the duty of loyalty and honesty. The court further stated that the existence and scope of the fiduciary duty depends on the parties' agreement.
The court noted that had the contract at issue expressly set forth the scope of the parties' fiduciary duties to one another, or if confidential information had been used by Border in acquiring the leases, a fiduciary duty may have existed. Moreover, the court found that ethical standards promulgated by the American Association of Professional Landmen do not as a matter of law create a fiduciary relationship between landmen and oil companies, but adherence to such standards may give rise to a fiduciary relationship in certain instances.