Using Affidavits to Transfer Mineral Interests

A Story About a Man Named Jed

by Cody Jones

An oil and gas operator calls you to tell you he’s interested in leasing your mineral rights in western Oklahoma.  Your first thought is what mineral rights?

With the introduction of new drilling technologies, mineral interests that have been dormant for years have become hot commodities.  Through cold calls from operators or mineral acquisition companies, many of our clients are discovering they have rights in minerals of which they were previously unaware.  

More often than not, the story goes something like this: Grandpa and Grandma die, leaving five children to take over the farm.  Over time, four of the children decide to leave the farm, and one remains to oversee the operation.  The siblings convey the land in bits and pieces, granting quarter-sections to each other and reserving mineral rights, or some portion thereof.  The siblings then pass away, leaving their interests to their children.  Rinse and repeat.  The minerals haven’t been leased in decades, so the younger generations are unaware that anyone still has an interest to lease.  Then Jed, the one cousin who still lives in the county, receives an oil and gas lease proposal in the mail – the modern day version of shooting and hitting bubblin’ crude.

Jed discovers his father inherited the minerals from his grandfather, so Jed assumes he and his siblings own the minerals.  The only problem is that no probate was conducted when Jed’s father passed away, and the severed mineral interests are the only asset remaining in his father’s estate. Thus, Jed doesn’t have a final decree or a deed transferring the mineral interests to him and his siblings. They can’t reap the economic benefits of the minerals without proving ownership.  Thankfully, Section 67 in Title 16 of the Oklahoma Statutes provides a possible alternative to probate – an affidavit of death and heirship (c.f. 16 O.S. § 3.2(A)).

Jed can record an affidavit of death and heirship in the county records to establish the rebuttable presumption of ownership.  The affidavit must recite the following: (1) that the decedent died without a will, or if the decedent had a will, the will was never probated and a copy of the will is attached, (2) the names of the decedent’s heirs and their relationship to the decedent, and (3) that the affiant is related to the decedent or otherwise has personal knowledge of the facts stated therein.  A properly prepared affidavit is not a true substitute for a deed or decree because it will not provide marketable title until it has been recorded without challenge for ten years.  However, many operators will assume the risk of relying on an affidavit and lease the mineral rights from the presumed heirs in the meantime.  In this way, Jed and his siblings can receive income from the minerals, but they cannot sell or transfer their interest until they obtain marketable title. 

The simplicity of the affidavit appeals to many of our clients who stumble upon mineral interests, but the affidavit can only be used when severed mineral interests are the only remaining estate assets.  If surface interests or other assets are involved, a probate or intestate administration may be necessary.   Furthermore, clients should weigh the risks of waiting ten years to obtain marketable title.  During the interim, an instrument may be filed which contradicts the heirship alleged in the affidavit. Similarly, the client may die or become incapacitated before the client’s interest vests, in which case the client may have lost the opportunity to control the disposition of his or her interest.  Lastly, if the client foresees possible family discord regarding ownership of the mineral interests, an affidavit may not be the easiest, or cheapest, alternative in the end. 

Restrictive Employment Covenants in Oklahoma

by Cara Nicklas

Restrictive employment covenants are becoming more commonplace.  Employers have an interest in protecting against the unfair competitive advantage employees gain by access to an employer’s customers, trade secrets, business decisions, etc.  Employees may betoo desperate for work and unequipped to negotiate such covenants, so they sign without much thought.  Both employer and employee should make sure they understand the restrictive employment covenant they sign and ensure it makes sense for their particular industry and situation.
 

Restrictive employment covenants are governed by state law rather than federal law.  Therefore, employers should exercise caution before using “free and easy” downloadable agreements from the internet.  They are not “one-size-fits-all” type of agreements.  Employees should carefully consider the impact of a proposed restrictive covenant when the employment relationship ends and should seek advice as to the enforceability of the particular provisions in order to understand the potential risks in signing an employment agreement.  
 

Restrictive employment covenants may include the following provisions:

1. A non-compete provision prohibits the employee from working for competitors during a specified period of time and within a defined geographical area.   General non-compete agreements are not permitted in Oklahoma.  A broadly worded contract that restrains a person from exercising a lawful profession, trade or business is void as a violation of Oklahoma public policy except as provided by Oklahoma statute.  In an agreement to purchase another’s business, which includes the goodwill of the business, the parties may agree that the seller will refrain from carrying on a similar business (bear in mind such provision can affect the tax consequences of the sale of a business).  Similarly, partners who dissolve a partnership may agree that none of them will carry on a similar business within a specified geographical area.
    
2. A non-solicitation provision bars the employee from soliciting the business of the employer’s customers.  The Oklahoma Legislature created a third statutory exception to the general prohibition against contracts in restraint of trade.  An agreement prohibiting a former employee from directly soliciting the sale of goods and services from the “established customers of the former employer” is not a contract in restraint of trade and may be enforced in Oklahoma.  Courts will likely enforce such agreements only if the agreement includes a reasonable length of time as opposed to a permanent ban.  Courts will be left to define terms such as “established customers” but employers are clearly permitted to prohibit direct solicitations of its “established customers” by former employees.   
    
3. A nonrecruitment provision or anti-raiding provision bars the employee from recruiting the employer’s employees and contractors for a subsequent or concurrent employer.  Effective November 1, 2013, the Oklahoma Legislature expanded the exception to the prohibition against restrictive employments contracts by authorizing employers or businesses to prohibit its employees or independent contractors from soliciting its employees or independent contractors to work for their new employer/business.
    
4. A confidentiality/nondisclosure provision prohibits the disclosure of the employer’s confidential and proprietary information.  Oklahoma law permits confidentiality/non-disclosure agreements.  Such provisions are common in employment agreements but often poorly written.   A written agreement specifying an employee’s obligations regarding the employer’s confidential and proprietary information should 1) clearly define what is “confidential” and “proprietary” so the employee understands what information is protected, 2) state the duration of the obligation, and 3) identify the specific prohibitions on disclosure or use of confidential and proprietary information.   Vague provisions are difficult to enforce.

Employment Law Basics for the Small Business Owner

by Cara Nicklas

Small business owners sometimes assume the onerous employment laws apply only to the big corporations.  This misconception is fed by the reality that more wrongful discharge cases have historically been filed against larger employers with deep pockets rather than the small businesses.  However, as our society grows increasingly more litigious, small businesses are becoming more prone to lawsuits and should take precautions.

Generally, Oklahoma is an “at-will employment” state.  That means an employer may discharge an employee for good cause, for no cause or even for cause that is morally wrong, without being liable.  However, this general rule has been engulfed by exceptions.  Those exceptions include many statutory causes of action such as Title VII of the Civil Rights Act of 1964, Fair Labor Standards Act, Family Medical Leave Act, Americans With Disabilities Act, and Age Discrimination in Employment Act, to name just a few.   Each law’s applicability depends on the size of the employer, ranging from a minimum of 2 to 50 employees.

Besides the various statutory causes of action that constitute exceptions to the at-will employment doctrine, Oklahoma has recognized another common law exception.  The public policy tort claim (also referred to as the Burk tort claim, named after the Oklahoma Supreme Court case of Burk v. Kmart Corporation) permits a former employee to sue an employer if the employee believes he or she was discharged for 1) refusing to act in violation of an established and well-defined Oklahoma public policy, or 2) performing an act consistent with a clear and compelling Oklahoma public policy.  Small businesses, with as few as one employee, may be sued under this theory.  This claim is becoming widely used by terminated employees.

Oklahoma Courts’ expansion of the public policy tort claim makes it difficult to completely protect oneself against such claims.   A discharged employee may simply claim to have complained to a supervisor about a suspected violation of an Oklahoma law, i.e., public policy, and allege his or her discharge resulted from the complaint.  The case becomes a question of whether the former employee or the supervisor is telling the truth.  Resolution of this allegation, which may be completely false, requires an expensive, protracted jury trial that most small businesses cannot afford.

For a small business owner to be placed in the most favorable position, the employer should consider the following:

• Develop a written, but not overly detailed, employee handbook. Do NOT include policies you do not intend to enforce.

• Ensure your hiring process is fair. Spend time at the front end thoroughly vetting your new employees. Conduct a background check, including a verification of prior employment, before hiring. This will save time and money in the long run.

• Do NOT ignore or dismiss employee complaints, even if informal or based on hearsay. Thoroughly document your handling of complaints.

• Seek legal advice before disciplining or terminating an employee. Making sure you properly handle an employee termination may save you the considerable expense of a lawsuit.

• Consider the purchase of insurance to defend against employment related claims.