Do you think of Chicago as an oil and gas town? Dallas, yes; Houston, for sure; New Orleans, uh-huh; maybe Bismarck, North Dakota (for the shale gas); and perhaps even New York (because of trading oil futures on the NYMEX).

Chicago? Meh.

But wait up. Today Judge Richard Posner wrote about oil and gas leases. Forget that the leases covered acreage in Texas. And never mind that he mainly lays out some basics on "lessor", "lessee", "primary term", "secondary term", and "operator". Judge Posner represents Chicago the way J. R. Ewing does Dallas. And the fact that a Chicagoan wrote about oil and gas sort of tickled Blawgletter.

The case involved a not-so-mundane fight over contempt of an Indiana district court's order. The edict in question called on SonCo Holdings to pay a $250,000 bond to the Texas Railroad Commission, which deals with oil and gas matters in the Lone Star State, and to replace ALCO Oil & Gas as the leases' "operator", which handles drilling wells and so forth. Except the order didn't say the part about getting a new operator in So Many Words. Yet the judge held SonCo in "contempt" for not doing what the order required and as a "sanction" forced SonCo to sign the leases over to ALCO. SonCo appealed.

Judge Posner didn't buy SonCo's point that it didn't violate the order because the order didn't say in So Many Words "get a new operator to replace ALCO". "We said the order was poorly drafted, and meant it wasn't clear." Securities and Exchange Comm'n v. First Choice Mgmt. Svcs., Inc., No. 11-1702, slip op. 10 (7th Cir. May 1, 2012). That differs from calling the order "ambiguous". He noted that "context . . . can disambiguate . . . [and] does so in this case." Id.

The panel vacated the sanction, though, finding that the district court didn't explain how forcing SonCo to give the leases over to ALCO counted as compensation rather than punishment and therefore made the order one for civil contempt rather than the criminal kind.

Scene: A beach. Palms sway in an August breeze. Salt water swells wash the sandy coast. Snappy and Bitey sit in wicker chairs, beneath a fan that rotates faster than the heat calls for.

Snappy: Did you hear about all those nice lawyers whose big firm liked them so much its leaders told them they ought to get a job somewhere else?

Bitey: Younger than springtime, are you.

Snappy: You got that right, sister!

Bitey: Gayer than laughter, am I.

Snappy: You always go too far, Bitey.

Bitey: So you say. Hmm. And yet you must wonder what made people who worked at Dewey Ballantine and LeBoeuf Lamb think the magic of the wedding would last.

Snappy: Mating made so much sense, Bitey! Hugeness produced catnip for big clients! Haven't you read in The Wall Street Journal about how nuts law firms have gotten about making themselves beautiful — and sweet-smelling — to Corporate America?

Bitey: You and me.

Snappy: What?

Bitey: You. And. Me.

Snappy: Come again, please, my dear Bitey.

Bitey: Never mind.

Fade to the swaying palms.

In the last 30 days, two U.S. courts of appeals have held (sort of) that no "settlement privilege" — a right to deny others access to the terms of your settlements with third-parties — exists.

In the first case, the Federal Circuit ruled, "in light of reason and experience, . . . that settlement negotiations related to reasonable royalties and damages calculations [in patent infringement cases] are not protected by a settlement negotiation privilege." In re MSTG, Inc., Misc. No. 996, slip op. 19 (Fed. Cir. Apr. 9, 2012) (denying mandamus petition seeking to halt order that required claimant to turn over documents showing settlement negotiations with infringement defendants).

The other case dealt with a barge that the Government of Ghana hired Balkan to render able to produce 150 megawatts of electricity. Balkan settled a case in Missouri federal court against its subcontractor, ProEnergy. Ghana wanted to know on what terms — not least because Balkan had accused ProEnergy in the Show Me state case of messing up the barge at the same time it said, in its dispute with Ghana, that everything on the barge worked just fine. The Eighth Circuit said "[w]e have no reason to assume that the district court intended to acknowledge a novel claim to privilege." Government of Ghana v. ProEnergy Services, LLC, No. 11-2714, slip op. 6 n.3 (8th Cir. May 1, 2012). But it (a) went on to hold that the district court acted within its discretion when it refused to order ProEnergy to turn over its settlement agreement with Balkan but (b) seemed pretty clear it thought the settlement privilege idea a dim one.

Blawgletter notes that the later case didn't cite the one from three weeks earlier. Clerks, wake up!

When a firm borrows money by selling an issue of bonds or notes to the public, it does so under an "indenture" that sets out the loan terms and creates a trust in favor of the buyers. The indenture also names a trustee to run the trust for the benefit of people who acquire the bonds or notes, and it lists the trustee's rights and duties.

Many such indentures include a "no-action clause", which aims to bar most lawsuits by holders of the debt, leaving the right to sue to protect their interests largely in the hands of the trustee.

The Eleventh Circuit this week ruled on the effect of one such provision. The panel held that the clause required the district court to dismiss a complaint in which holders of a majority (by face amount) of the notes alleged claims under the Georgia Fraudulent Transfer Act against CompuCredit (a sub-prime lender) and its officers and directors.

The court thus rejected the holders' arguments (1) that only CompuCredit (and not the officers and directors) could enforce the no-action clause, (2) that the clause didn't apply because they almost complied with an exception that in some instances allowed holders of a majority of the notes to sue (having failed to follow the literal terms of the exception), and (3) an extra-contractual exception for when a trustee has a conflict of interest in doing its duty did not apply either. Akanthos Capital Mgmt., LLC v. CompuCredit Holdings Corp., No. 11-13227 (11th Cir. Apr. 27, 2012) (applying New York law).

Blawgletter suspects that the holders' status as hedge funds didn't help their cause.

We also note that the hedge funds didn't even try to show that the trustee had a conflict of interest. Because most trustees — banks, by and large — do often have a great many interests, at least some of which may conflict with the interests of debt owners.

If you've tried an oil and gas case, you've likely seen a form contract that the American Association of Professional Landmen wrote to "help landmen effectively do their jobs." And if your case dealt with a falling out over efforts to explore for, find, and produce oil and gas, the AAPL form you saw more often than not will have laid out the terms in one of the AAPL's Model Form Operating Agreements.

But a form can do only so much. Many times you'll see big parts of an MFOA with slashes across them, meaning those sections don't apply, or smaller changes by way of write-ins or type-ins. And, at the end, you'll probably find a section that says "OTHER CONDITIONS, IF ANY, ARE:" with either a blank space or the parties' other terms.

A case the Fifth Circuit decided this week concerned that last part of a joint operating agreement, this one on the AAPL's first model form for JOAs — the 1956 version.

The JOA in question involved the pooling in 1971 of oil and gas leases that covered lands within 10 townships in Montana. The two parties to the JOA — predecessors in interest to A. L. Ballard and Devon Energy Production Company — agreed to work together under the JOA towards finding oil and gas within the 10 townships (almost 250,000 acres), which they deemed their "Area of Mutual Interest" in subparagraph F of paragraph 31, the "OTHER CONDITIONS" part of the JOA.

Ballard claimed that Devon breached the JOA by not giving him the chance to buy into leases that Devon acquired within the AMI decades after the predecessors of Ballard and Devon had entered into the JOA. His lawsuit turned on whether parts of the AMI provision in paragraph 31 lasted for only three years or whether they instead endured until the End of Time.

Can you see where this will come out?

The pieces that Ballard relied on in subparagraph 31F did oblige Devon to share any leases it got within the AMI. Another sentence, later in the subparagraph, dealt with losing rights to share if, for example, a party failed to maintain a lease. And just below that sentence, which the court called "a 'surrender' provision", appeared this:

The above subparagraph of 31F shall be effective from the date of the Farmout Agreement to which this Operating Agreement is attached and shall terminate and be of no further force and effect after three years from the date of this operating agreement.

Did the three-year term apply to all the parts of 31F or just the "surrender" sentence?

The Fifth Circuit panel held Ballard's view, while "plausible", would produce the "absurd" result that the AMI would bind the parties until Kingdom Come. And it therefore upheld summary judgment in favor of Devon. Ballard v. Devon Energy Production Co., L.P., No. 10-20497 (5th Cir. Apr. 19, 2012) (applying Montana law).

Talk about goofy.

Today's WSJ — The Wall Street Journal — includes a column that gets antitrust law so wrong you wonder why the paper's pundits, who include those who write the official editorials, bother.

The column in question takes aim at the U.S. Department of Justice's case that calls Apple and five book publishers price-fixers for, well, fixing prices.

As the WSJ so often does when dealing with antitrust law, this item reflects a breed of magical thinking.

It first claims that the e-book cartel couldn't have conspired because they simply applied Apple's standard "agency model" to e-books. That model lets the makers of a good or service — here, the book-publishers — set Apple's price. Apple keeps 30 percent of that price.

The writer doesn't seem to have picked up on the fact that the book people didn't use the agency model until they jointly chose to change their model. Adoption of the model resulted not from independent decisions but from a string of secret meetings where the book-makers' top execs agreed on a common plan to keep book prices high. Prices for their books shot back up and have stayed there. Buyers paid more. And Apple got 30 percent of the bigger take.

Can you say price-fixing?

The writer claims that the DOJ lawsuit has HURT competition by giving Amazon cover to . . . lower prices. You read that right. Paying less for e-books hurts competition.

Who does the author cite for that idea? The head of a group that lobbies for people who write books. They of course want high prices for their products, pretty much for the same reason Apple does — they get a cut, too.

But, wait, there's more.

The writer ends by quoting antitrust guru and prophet Richard Posner, who for many years has taught antitrust law both as a judge on the Seventh Circuit Court of Appeals in Chicago and as a prof at the University of Chicago. The quote has Judge Posner saying that courts may often do a bad job of weighing "efficiency against monopoly". But the e-book case doesn't deal with "monopoly" — which by its terms ("mono") involves a single firm. No, this case concerns a price-fixing cartel. And the balance in cases like that falls almost always on the side of condemnation.

The irony? The same paper talked with a bunch of antitrust experts and put what they said about United States v. Apple Corporation in an article. The title?

"Critics of E-Books Lawsuit Miss the Mark, Experts Say".

A firm fires an employee for the sole reason (say) that she refused to murder the CEO of the firm's main rival. May a jury consider, in deciding whether to award the employee punitive damages, the firm's murderous motive that resulted in the firing?

No, the Supreme Court of Texas held today. No matter how egregiously bad the reasons for the employee's discharge, the unanimous court ruled, only the potential harm to the employee matters. Safeshred, Inc. v. Martinez, No. 10-426 (Tex. Apr. 20, 2012) (reversing jury punitive damages award of $200,000 for firing of employee who refused to drive truck whose overload endangered driver and other motorists).

If you don't live and breath patent law, you may wonder how people get patents. The Supreme Court today put a spotlight on the process. It made inventors happy.

You may have guessed that you have to apply for a patent. So far so good. One or more "examiners" in the United States Patent and Trademark Office look over your application and either accept or reject it, in whole or in part. Your lawyer or "patent agent" may argue with the PTO folks and may or may not convince them to "allow" your patent "claims". You may choose to resolve the examiners' concerns about your claims by making them narrower. Instead of a patent on light bulbs that use electricity, for instance, you might settle for a patent on light bulbs that use electricity flowing through a piece of tungsten.

But what if you think the PTO made you narrow your claims for no good reason? What recourse do you have?

The patent law of 1952 gives you the right either to go to the Court of Appeals for the Federal Circuit to review the PTO's ruling or to file suit in the United States District Court for the Eastern District of Virginia (until recently the District of the District of Columbia) to do something more.

Say you opt for the district court route. Can you offer new evidence, which you never showed to the PTO, to support your argument that your patent claims deserve a wider scope?

The Supreme Court held today, unanimously, that you can do just that. Kappos v. Hyatt, No. 10-1219 (U.S. Apr. 17, 2012).

The lawyer you hired to help you with lawsuits over the rights to Superman runs off with documents that you say contain top-secret attorney work product and attorney-client communications.

Worse, the lawyer gives a copy of the to your opponent, D.C. Comics. You report the theft to the Federal Bureau of Investigation. A grand jury subpoenas the documents from you. You hand the docs over without making any objection. D.C. Comics sues you and demands a copy of the docs you provided to the grand jury. Have you waived privilege?

Yes. Pacific Pictures Corp. v. D.C. Comics, No. 11071844 (9th Cir. Apr. 18, 2012).

The Wall Street Journal reports that law firm partners on the high end boosted their hourly rates more than those at the low end.

Blawgletter doubts that should surprise anyone. The difference between a really good lawyer and a good one resembles the difference (with apologies to Samuel Clemens) between lightning and a lightning bug.

If you can't afford top-end rates or even if you just don't like them, think about trying a risk-sharing deal — such as a flat fee, contingent fee, or bonus for good results. That will better align your interests with your dear lawyer's and just might pay off big time.