Seventh Circuit Affirms Decision for Shook Client in Mining Lease Dispute

The U.S. Court of Appeals for the Seventh Circuit has affirmed a lower court's decision in favor of Shook client Kaw Valley Companies, Inc. The dispute centered on a mining lease agreement between Kaw Valley and a trust that owns land Kaw Valley sought to mine for sand, stone and rock.

Kaw Valley leased the land from the trust with the obligation to pay a production royalty when mining began, but the company ultimately decided not to pursue mining the land. The trust filed a lawsuit in Wisconsin seeking $400,000 under the minimum production royalty provision. The district court granted summary judgment in Kaw Valley's favor, finding that the lease limited production royalty payments to after mining had begun by defining "production royalty" as a "a royalty due for the tons of sand, stone and rock products mined from the property."

Analyzing the language of the contract, the Seventh Circuit agreed. "Reading the language in context, the district court properly determined that the Production Royalty payments were not owed in this case because no mining had begun on the property as set forth in [the lease]," the appeals court held. "If the provision was meant to provide a minimum payment due each year on the anniversary of the effective date, one would expect that to be set forth separately."

Pronschinske Trust Dated March 21, 1995 v. Kaw Valley Cos. Inc., No. 17-2889 (7th Cir. 2018).