In the recent case of Cain v. Transocean Offshore USA, Inc., et al., No. 05-300963, the United States Court of Appeals for the Fifth Circuit affirmed its long standing decision that a watercraft under construction is not a “vessel in navigation” for purposes of the Jones Act.

The determination of whether a vessel is “in navigation” is a critical part of the “seaman status” analysis. Congress did not define the term “seaman” when it passed the Jones Act. Thus, it has been left to the Courts to interpret and define that term. The U.S. Supreme Court’s most recent holding defines a “seaman” as an “employee whose duties contribute to the function of a vessel or to the accomplishment of its mission, and who has connection to a vessel in navigation (or to an identifiable group of such vessels) that is substantial in terms of both its duration and nature.” Chandris, Inc. v. Latsis, 515, U.S. 347, 354 (1995).  

The Fifth Circuit has long held that a vessel under construction is not a vessel. It reaffirmed this decision in Cain, in which, the Plaintiff was employed by Transocean and assigned to work aboard the M/V CAJUN EXPRESS a semi-submersible mobile offshore drilling rig under construction in Singapore. In 2000, the M/V CAJUN EXPRESS underwent sea trials and was moved from Singapore to Grand Isle, Louisiana  with tugboat assistance. Construction continued throughout the move. Upon arriving in Grand Isle, the M/V CAJUN EXPRESS was moored to a “floating shipyard” for completion of construction. In September 2000, while the M/V CAJUN EXPRESS was moored and under construction, the Plaintiff was (allegedly) injured when he walked into a low-hanging light fixture. Approximately eight months later (April/May 2001), the M/V CAJUN EXPRESS was completed and began drilling operations in the Gulf of Mexico.

The Plaintiff filed suit under the Jones Act alleging that his injuries were the result of Transocean’s negligence and the unseaworthiness of the M/V CAJUN EXPRESS.  Transocean moved for summary judgment arguing that the Plaintiff was not a Jones Act seaman at the time of his injury because the M/V CAJUN EXPRESS was not yet a vessel in navigation. There was no question that the M/V Cajun Express was still under construction at the time of Plaintiff’s injury. It lacked vital equipment to make it a fully functional and operational oil drilling rig. Indeed, no drilling contractor would have found the M/V CAJUN EXPRESS fit to drill in the Gulf of Mexico.   However, the District Court denied Transocean’s motion citing the U.S. Supreme Court’s decision in Stewart v. Dutra Construction Co., 543 US 41 (2005) as authority overruling the Fifth Circuit’s precedent concerning watercraft under construction. 

The Fifth Circuit reversed the District Court’s decision and held that Stewart did not extend the definition of “vessel” to include watercraft under construction. The Fifth Circuit reasoned that Stewart “examined an already completed structure in use for its intended purpose.” Steward did not concern what to do with ships and other structures under construction. Accordingly, the Fifth Circuit’s ruling that a vessel under construction is not a vessel “in navigation” remains “good law.”

The second annual "Kean Miller Connection," a 2-day law school prep program for college students, will be held May 15th and 16th at Kean Miller's office in Baton Rouge.

The goal of the program is to “connect” participants with information helpful to their decision to attend law school and become a lawyer. Program details and eligibility requirements (including that each participant must be a member of a group traditionally underrepresented in law school and the law practice) can be found at http://www.keanmiller.com/docs/km_connection_information.pdf.

On January 28, 2008, the Family and Medical Leave Act (“FMLS”) was amended as part of the National Defense Authorization Act (“NDAA”) for Fiscal Year 2008. A copy of the amended FMLA is available at www.dol.gov. The amendments provide special leave rights to family members of certain servicemembers. There are two different types of leave rights created by the amendments:

(1) The circumstances for which up to 12 weeks of FMLA leave is available in a 12 month period are extended to include an additional qualifying reason ---“because of any qualifying exigency (as the Secretary shall, by regulation, determine) arising out of the fact that the spouse, or a son, daughter, or parent of the employee is on active duty (or has been notified of an impending call or order to active duty) in the Armed Forces in support of a contingency operation.” 29 USC 102(a)(1)(E). Until regulations define a “qualifying exigency”for which the leave is available, employers should not be required to extend this leave. An employer may require certification for this leave should the Secretary’s regulations provide for the manner and timing of any such certification. 29 U.S.C. Sec. 103(f).

            Both types of leave may be taken intermittently or on a reduced leave schedule, subject to any certification requirements.

            All FMLA rights afforded employees (such as reinstatement, maintenance of health benefit coverage, etc.) are made applicable to the new types of FMLA leave.

The Louisiana Department of Environmental Quality recently finalized revisions to the “Comprehensive Toxic Air Pollutant Emission Control Program” set forth in LAC 33:III.Chapter 51 of the Louisiana Air Quality Regulations. A final rulemaking, first initiated in September 2005, was published in the December 20, 2007 Louisiana Register and can be obtained at the following web address: http://www.deq.louisiana.gov/portal/tabid/2644/Default.aspx.  Unlike some states, Louisiana has its own air toxics program, which applies to major sources of “toxic air pollutants” as defined in LAC 33:III.5103. State toxic air pollutants include all federal “hazardous air pollutants” set forth in Clean Air Act § 112, and also 13 other pollutants, including ammonia, sulfuric acid, nitric acid, and hydrogen sulfide.

The final rulemaking, published in AQ-256, provides for the following revisions:

2.        a clarification of the definition of “virgin fossil fuel” and a related exemption in LAC 33:III.5103 to exclude both refinery fuel gas and certain types of plant produced fuel with a Btu value greater than 7,000 Btu/lb and that is generated onsite and collected by a “fuel gas system” as defined in 40 CFR 63, Subpart G;

3.        the deletion of certain regulations pertaining to air toxic compliance plans;

4.        an exemption from the Standard Operating Procedure requirements set forth in LAC 33:III.5109.C for sources complying with applicable federal MACT standards in 40 CFR Part 63;

5.        a requirement that the LDEQ review the ambient air standards listed in LAC 33:III.5112 at least every three years, instead of annually;

6.        the replication of a complete exemption from the Louisiana Air Toxics Program for “electric utility steam-generating units;” and

7.        the deletion of certain provisions no longer effective since the original promulgation of the Chapter 51 air toxic regulations in 1991.

The LDEQ is continuing to review proposed revisions to the ambient air quality standards for TAPs. Ambient standards for toxic air pollutants are set forth in LAC 33:III.5112. In the September 20, 2007 Louisiana Register, the LDEQ proposed to revise the ambient standards for existing TAPs and also proposed to add new short-term standards for Class I TAPs. Various industry groups submitted comments on the proposed revisions to the rulemaking (AQ-281) on October 25, 2007. In response, the LDEQ requested additional information for specific TAPs, including sulfuric acid, MEK, and ammonia in a Potpourri Notice published on December 20, 2007. The deadline to submit comments on this notice was March 4, 2008. According to an LDEQ spokesperson, the Department intends to finalize the AQ-281 rulemaking in 2008 after reviewing all relevant comments. 

The Transportation Worker Identification Credential (TWIC) is a new security measure established by Congress through the Maritime Transportation Security Act (MTSA) to ensure that individuals who pose a threat do not gain unescorted access to secure areas of the nation’s maritime transportation system. The TWIC is a tamper-resistant “smart card” containing an individual’s biometric (fingerprint) template to allow for a positive link between the card itself and the individual. The TWIC card is valid for five years.  

Workers who require unescorted access to secure areas of ports, vessels, and outer continental shelf facilities will require a TWIC card. This includes mariners holding Coast Guard issued credentials, non-credentialed mariners in a vessel crew, facility employees who work in a secure area, truckers bringing/picking up cargo at a facility, agents, port chaplains, longshoremen, drayage truckers, surveyors, chandlers, and other maritime professionals. Facility security officers and personnel responsible for security duties are also required to obtain a TWIC card. The category of “other marine professionals” would, in this author’s opinion, include attorneys and their experts who may enter a port or other secure area to inspect vessels. 

To obtain a TWIC card, an individual must provide biographic and biometric information (fingerprints), sit for a digital photograph, and successfully pass a security threat assessment (background check) conducted by the Transportation Safety Administration. The TWIC card costs $132.50, and the fee is payable by Visa or Master Card.   A worker applying for a TWIC card should pre-enroll by calling 1-866-DHS-TWIC (1-866-347-8492) or online at www.TSA.gov/TWIC. The pre-enrollment process allows a worker to submit the necessary biographic information before enrolling and speed along the process.

After completing the pre-enrollment process, the worker must schedule a fifteen minute appointment at an enrollment center. The appointment can be scheduled on-line. The worker will then meet with a TSA representative who will review the worker’s application data. The worker will then be fingerprinted and photographed. The worker must bring certain identifying documents (state driver’s license, social security card, passport, merchant mariner’s documents, etc.) to the interview. After completing the interview, the worker must pay for the card which will arrive in 6 – 8 weeks. The entire enrollment process is similar to obtaining a driver’s license at a state department of motor vehicles office. 

The Enrollment Center for the New Orleans area is located at 170 James Drive East, Suite 104, St. Rose, LA 70087. The Enrollment Center opens at 6:30 a.m.  The Baton Rouge Enrollment Center is located at the Safety Council for Louisiana Capital Area, 8180 Siegen Lane, Baton Rouge, LA 70810. Finally, the Houston Enrollment Center is located at the West Gulf Maritime Association, 1717 Turning Basin, Houston, TX 77029. 

If you have any questions regarding the TWIC card or the enrollment process, please do not hesitate to contact the author who recently completed the enrollment process and is waiting the 6-8 weeks for his card to arrive.

1. The taxpayer must own each of the properties (the two properties exchanged) for the "qualifying use period," a term defined in the Revenue Procedure as either the 24 month period before the exchange (for the relinquished property) or the 24 month period after the exchange (for the replacement property). Therefore, for the relinquished property, the taxpayer must have owned the property for at least 24 months immediately before the exchange and for the replacement property, the taxpayer must continue owning it for at least 24 months immediately after the exchange.

2. Within the qualifying use period, in each of the two 12 month periods immediately preceding the exchange (for the relinquished property) and in each of the two 12 month periods immediately following the exchange (for the replacement property), the taxpayer must rent the dwelling unit to another person at a fair rental for 14 days or more and the period of the taxpayer’s personal use of the dwelling unit cannot exceed the greater of 14 days or ten percent of the days during the 12 month period that the dwelling unit is rented at a fair rental.

The Revenue Procedure is effective for exchanges occurring after March 9, 2008.

In general, for qualified GO Zone property, taxpayers can claim a 50% bonus depreciation deduction for the qualified Go Zone property. However, this depreciation deduction is subject to recapture if the property ceases to be substantially used in the GO Zone or in the active conduct of a trade or business by the taxpayer. If GO Zone property is no longer GO Zone property in the hands of the same taxpayer at any time before the end of the GO Zone property’s recovery period under the normal depreciation rules, then the taxpayer must generally recapture in the taxable year in which the GO Zone property is no longer GO Zone property (the recapture year) the benefit derived from claiming the GO Zone bonus depreciation deduction. The benefit derived from claiming this bonus depreciation deduction is equal to the excess of the total depreciation claimed, including the bonus depreciation, for the property for the taxable years before the recapture year over the total depreciation that would have been allowable for the taxable years prior to the recapture year under the normal depreciation rules. The recapture amount will be treated as ordinary income in the recapture year.

In general, for qualified GO Zone property, taxpayers can claim a 50% bonus depreciation deduction for the qualified Go Zone property. However, this depreciation deduction is subject to recapture if the property ceases to be substantially used in the GO Zone or in the active conduct of a trade or business by the taxpayer. If GO Zone property is no longer GO Zone property in the hands of the same taxpayer at any time before the end of the GO Zone property’s recovery period under the normal depreciation rules, then the taxpayer must generally recapture in the taxable year in which the GO Zone property is no longer GO Zone property (the recapture year) the benefit derived from claiming the GO Zone bonus depreciation deduction. The benefit derived from claiming this bonus depreciation deduction is equal to the excess of the total depreciation claimed, including the bonus depreciation, for the property for the taxable years before the recapture year over the total depreciation that would have been allowable for the taxable years prior to the recapture year under the normal depreciation rules. The recapture amount will be treated as ordinary income in the recapture year.

The Notice provides guidance on the application of the recapture rule in situations involving like kind exchanges or involuntary conversions. Specifically, the Notice provides as follows:

1. If GO Zone property is transferred by taxpayer in a like kind exchange or as a result of an involuntary conversion and the property acquired by the taxpayer in the exchange or conversion is GO Zone property in the hands of the taxpayer, then there is no recapture. Furthermore, as illustrated in Section 3.03(d), Example 4, of the Notice, the replacement property could qualify for additional GO Zone bonus depreciation. This amounts to a "double bonus" because the bonus depreciation was taken on the original property and then again on the replacement property.

2. If GO Zone property is transferred by taxpayer in an exchange or a conversion and the replacement property is not GO Zone property in the hands of the taxpayer and is not substantially used in the active conduct of a trade or business by the taxpayer in the GO Zone, then there is recapture.

3. If GO Zone property is transferred by a taxpayer in a like kind exchange or as a result of an involuntary conversion and the replacement property is not GO Zone property in the hands of the taxpayer but the replacement property is substantially used in the active conduct of a trade or business by the taxpayer in the GO Zone, then there is no recapture.

The above rules make it clear that if a taxpayer enters into a like kind exchange of GO Zone property or is subject to an involuntary conversion of GO Zone property, then the replacement property must at least be used in the active conduct of a trade or business in the GO Zone to avoid recapture. If the replacement property is located or used outside of the GO Zone or is not used in the active trade or business of the taxpayer, then recapture will be triggered. The Notice contains several helpful examples that illustrate the application of the recapture rule as well as the like kind exchange rule.

The United States Supreme Court recently held that a single standard of causation now applies when assessing the negligence of an employer and employee under FELA. Norfolk Southern R. Co. v. Timothy Sorrell, 127 S.Ct. 799, 166 L.Ed. 2d 638(1/10/07) (U.S. Reporter citation unavailable).  Because the Jones Act is modeled closely upon FELA’s statutory language, federal courts tend to apply the same analysis of negligence issues arising under both statutes. It appears that the Sorrell decision supports the conclusion of earlier maritime cases indicating that a Jones Act employer is held to the same standard of causation in a negligence analysis as his seaman-employee

The Gautreaux decision sets forth the similarities of causation standards for an employer’s negligence under both FELA and the Jones Act. However, the certainty of a uniform causation standard has been repeatedly questioned in the years following the Gautreaux decision. In 2007, the United States Supreme Court ended the uncertainty regarding differing causation standards for employee and employer negligence under FELA. Norfolk Southern R. Co. v. Timothy Sorrell, 127 S.Ct. 799, 166 L.Ed. 2d 638(1/10/07) (U.S. Reporter citation unavailable). Timothy Sorrell, an employee of Norfolk Southern Railway Company sued his employer for injuries incurred while driving a dump truck between railroad crossings. Sorrell claimed that another Norfolk truck forced him off the road and caused him to tip over into a ditch. 

Sorrell filed suit under FELA alleging that his employer failed to provide him with a reasonably safe place to work and that its negligence caused his injuries. Norfolk argued that Sorrell’s own negligence caused the incident. The trial Court instructed the jury to find the employee negligent only if the employee’s negligence directly contributed to cause his injury. In contrast, the Court instructed the jury to find the railroad at fault if its negligence contributed in whole or in part to the employee’s injury. Norfolk objected to the disparity of the instructions, but the trial court overruled the objection. The jury returned a verdict in favor of Sorrell. Norfolk argued on appeal that the same causation standard should apply to the negligence of the employer and the employee. The appellate court affirmed the lower court’s ruling, rejecting Norfolk’s contention. After the Missouri Supreme Court denied discretionary review, Norfolk sought certiorari with the United States Supreme Court, which was granted.

Faced with the issue of whether, under FELA, causation standards for the negligence of an employee differed from the causation standard for the employer’s negligence, the Supreme Court held that a single standard of causation applies to both parties. In its holding the Supreme Court agreed with Norfolk that FELA not only mandates a single standard of causation, but stated that it is far simpler for a jury to conduct a negligence analysis using a single standard. Although the Supreme Court determined that the applicable duty standard was that of "ordinary prudence," in line with the 5th Circuit's decision in Gautreaux, it declined to provide the specific causation standard for the negligence analysis, emphasizing that its task was merely to decide that the same standard of causation applied to both employer and employee.

The U.S. Fifth Circuit Court of Appeals has unequivocally held that a shipowner-employer may pursue a claim for reimbursement of costs for damage to property against its negligent seaman-employee. Withhart v. Otto Candies, 431 F.3d 840 (5^th Cir. 2005). The seaman-employee in Witthart was a mate, or relief captain, who allegedly left the wheel house to attend to personal business while in command of the vessel. During his absence, the vessel, navigating through congested waters with no captain at the helm, collided with and damaged another vessel. 

 The Fifth Circuit recognized that no statutory provision in the Federal Employers’ Liability Act (“FELA”), or in the Jones Act, prohibits a shipowner-employer from pursuing a claim against its negligent seaman-employee for property damage. The Court addressed the fact that Congress did not specifically enumerate the rights of seamen in the Jones Act, but extended to them the same rights granted to railway employees under FELA. The Court indicated that every other federal court to address this issue has concluded that FELA does not deprive an employer of its common law right to sue its employees for property damage caused by the employees. 

The Court acknowledged that the purpose of the Jones Act is to “benefit and protect seamen by enlarging, not narrowing, the remedies available to them,” but added that, “permitting a shipowner-employer to sue its seamen-employee for property damage arising out of the seaman-employee’s negligence will not narrow the remedies available to seamen-employees under the Jones Act.” Further, the Court pronounced that the difficult working conditions prong of the seaman’s due care analysis does not exist to shield seamen from liability for their negligence merely because a seaman may work under difficult conditions.

In New Investment Properties, L.L.C. v. ABC Company, et al, 2007 W.L. 4305464 (4^TH Cir. 2007), the Court of Appeals addressed the range of personal jurisdiction. Like that of a shepherd’s crook, the court exercised personal jurisdiction over a non-resident defendant. Plaintiffs, New Investment Properties, L.LC. and Creek Apartments Team, L.L.C. (“Creek Apartments) are both Louisiana corporations and the owners of two apartment complexes in New Orleans. Defendant, R. P. Beckendorf, is a California corporation with its principal place of business in Los Angeles. It is an independent insurance agency which obtained flood and wind policies for an apartment complex. The policies were delivered to the Champion Group, Inc., which is a California corporation with its principal place of business in Los Angeles.   The two managers of the plaintiffs are both residents of California, who are also managers of the Champion Group in California.

The Court of Appeals reversed this ruling. It concluded that R. P. Beckendorf could have reasonably anticipated being brought into court in Louisiana as a result of the insurance policy it secured for the property. R. P. Beckendorf dispensed advice with regard to insurance policies and the levels of insurance coverage and ultimately secured the various insurance policies for the real property in Louisiana. The court found that it would be unreasonable to conclude that the minimum contacts were lacking simply because R.P. Beckendorf did not solicit business, place phone calls, or mail documents to Louisiana in connection with insurance for the Louisiana property. The court stated, “Although territorial presence frequently will enhance a potential defendant’s affiliation with a State and reinforce the reasonable foreseeability of suit there, it is an inescapable fact of modern commercial life that a substantial amount of business is transacted solely by mail and wire communications across state lines, thus obviating the need for physical presence within a State in which business is conducted. So long as a commercial actor’s efforts are purposefully directed toward residents of another State, we have consistently rejected the notion that an absence of physical contacts can defeat personal jurisdiction there.” The court concluded that R. P. Beckendorf was cognizant of the fact the policies were procured for property in Louisiana and thus it should have reasonably anticipated being hailed into court to defend a claim of failure to procure appropriate insurance coverage.

The issue of recovery of non-pecuniary damages [1] by a Jones Act seaman is one that often confronts both the seaman’s employer and non-employer third-parties from whom damages are sought. No case sets forth a more succinct resolution of this issue than Scarborough v. ClemcoInd., 391 F.3d 660 (5^th Cir. 2004). Under the Fifth Circuit’s holding in Scarborough and its progeny, both Jones Act employers and non-employer third-parties sued by either a seaman or his survivors are able to rest easy knowing that they will not have to pay non-pecuniary damages – at least for now considering that no case has given negative treatment to the Scarborough decision. 

The United States Supreme Court, interpreting the Jones Act/FELA survival provision limiting a deceased seaman’s recovery to losses suffered during the decedent’s lifetime, unequivocally holds that representatives of a seaman’s estate may not recover non-pecuniary losses.  Miles v. APEX Marine Corp., 498 U.S. 19, 111 S.Ct. 317, 112 L.Ed. 2d 275 (1990). The Scarboroughcourt’s decision upholds the uniformity principal set forth in Miles by concluding that neither a seaman nor his survivors may recover non-pecuniary damages from either the seaman’s employer or non-employer third-party.

Critics of the Scarborough decision argue that it stepped outside the lines of existing jurisprudential authority by expanding the Miles opinion to address not only Jones Act employers, but also non-employer third-parties. However, as the Scarborough Court stated in its decision, the Miles opinion focuses on the uniformity of damages recoverable by a Jones Act seaman and his survivors, not on the uniformity of the damages to which various defendants might be subjected. Further, the Scarborough decision cites to Davis v. Bender Shipbuilding & Repair Co., 27 F.3d 426, 430 (9^th Cir. 1994), in which the 9^th Circuit states that nothing in Miles’ reasoning suggests that the decision turned upon the identity of the defendant. In fact, not all defendants in Miles were Jones Act employers. Thus, the Fifth Circuit has, at least for now, plainly resolved the issue in favor of the Jones Act employer and non-employer third-parties by limiting recovery of Jones Act seamen and their survivors to pecuniary damages.

[1] Non-pecuniary losses include loss of society, loss of consortium, loss of companionship, loss of love and affection, loss of comfort, grief and mental anguish, and pecuniary damages. Another element of damages that is not recoverable by the estate of a deceased Jones Act seaman is loss of future earnings.  Miles v. Apex Marine Corp., 498 U.S. 19, 111 S.Ct. 317, 112 L.Ed. 275 (1990); In the Matter of Waterman SS Corp., 780 F.Supp. 1093 (E.D. La. 1992). Pecuniary losses include loss of support from past and future earnings (that portion of the decedent’s wages used to provide support for his living family members), loss of value of household services, loss of nurture and guidance to minor children, and pre-death pain and suffering, if any. Decenteno v. Gulf Fleet Crews, Inc., 798 F.2d 138, 1987 AMC 2462 (5^th Cir. 1986). See also, Ivy v. Security Barge Lines, Inc., 606 F.2d 524 (5^th Cir. 1979) (en banc). 

The 16^th Judicial District Court granted a well operator’s motion for summary judgment and exception of no right of action and dismissed all of a property owner’s claims in a pending legacy oilfield suit. The Louisiana Third Circuit Court of Appeal upheld the trial court’s decision in LeJeune Brothers, Inc. v. Goodrich Petroleum Co., L.L.C., et al., 2006-1557 (La.App. 3 Cir. 11/28/07), __ So. 2d __, 2007 WL 4178946, rehearing denied (1/9/2008).   

LeJeune Brothers, Inc. (“LeJeune”), the property owner, claimed that the Goodrich Petroleum Company, L.L.C. (“Goodrich”), a company whose predecessor had operated an oil and gas well on the property at issue, was liable to LeJeune for damages arising in tort and in contract, punitive damages, as well as damages for claims arising under the Mineral Code. Goodrich’s predecessor had operated pursuant to a mineral lease that had been executed with LeJeune’s predecessor in interest. LeJeune claimed that it was only after the purchase of the property in 2000 that it discovered that the property was contaminated with waste resulting from oilfield exploration and production activities and LeJeune maintained that it had no knowledge that the property was contaminated prior to the purchase of the property. 

TRIAL COURT

In dismissing LeJeune’s contract claims the trial court ruled that LeJeune: (1) was not a successor or assignee to its predecessor’s rights and obligations under the mineral lease;  (2) was not a beneficiary of a stipulation pour autrui contained in the mineral lease; and (3) was not entitled to bring claims for restoration for breach of implied obligations contained in the Mineral Code.

In dismissing LeJeune’s tort claims the trial court found that LeJeune’s claims for damages arising in tort that belonged to its predecessor in interest had not been transferred to LeJeune. Thus, the trial court granted Goodrich’s exception of no right of action dismissing all of LeJeune’s tort claims. 

COURT OF APPEAL

LeJeune’s motion for new trial was denied by the trial court and LeJeune appealed the following rulings from the trial court:

(1)           The judgment granting Goodrich’s motion for partial summary judgment that dismissed LeJeune’s contract claims.

(2)           The judgment granting Goodrich’s exception of no right of action that dismissed all tort claims filed by LeJeune.

(3)           The judgment dismissing all of Goodrich’s claims (ruling followed granting of motion for partial summary judgment and was rendered at same time as granting of exception of no cause of action).

          On appeal, the Louisiana Third Circuit Court of Appeal upheld the trial court’s dismissal of all of LeJeune’s claims for damages, including its contract claims, tort claims, claims for punitive damages, claims based on obligations arising under the Mineral Code and unjust enrichment. 

Contract Claims

In upholding the trial court’s dismissal of LeJeune’s contract claims, the Third Circuit explained that because the mineral lease expired two (2) years before LeJeune acquired an interest in the property, there was no way that the LeJeune’s predecessor in interest could have transferred any interest in the mineral lease to LeJeune. LeJeune’s predecessor was not a mineral lessor under the lease at the time he sold the property to Plaintiff. Therefore, LeJeune’s predecessor did not have any rights in the mineral lease to transfer to LeJeune. It is simply “impossible to transfer rights to an assignee under an expired mineral lease.” Id. at *4. Further, the Third Circuit upheld the trial court’s ruling that no stipulation pour autrui was created by the Lease at issue in this suit. To the contrary, the Lease at issue limited the Lessee’s liability to damages caused to the Lessor: “The Lessee shall be responsible for all damages to Lessor caused by Lessee’s operations.” Therefore, because the Lease provided rights only to the Lessor and because LeJeune was not a Lessor, LeJeune could not seek damages under the Lease as a third party beneficiary.  

Tort Claims

The Third Circuit upheld the trial court’s grant of Goodrich’s exception of no right of action based on the subsequent purchaser doctrine. The September 2000 sale from LeJeune’s predecessor to LeJeune did not contain a specific assignment of any claims for damage to the property. In reaching the conclusion that LeJeune did not acquire rights to sue in tort as a result of its purchase of the property, the Third Circuit denied LeJeune’s argument that the decision rendered in Hopewell, Inc. v. Mobil Oil Co., 00-3280 (La. 2/9/01), 784 So.2d 653, “overturned consistently held jurisprudence that the right to assert a claim for damages to land is a personal right, not a real right, and can only be transferred through a specific assignment of that right.” Id. at *7.   The Third Circuit explained that the Hopewell decision did not establish a new legal principle and reiterated that the rule in Prados v. South Central Bell Telephone Co., 329 So.2d 744 (La. 1975), applied- “the right to damages conferred by a lease was a personal right, not a property right, and as a personal right/obligation, it did not pass to the new owners of the land because there was no specific conveyance of it in the instrument of sale.” Id. a *7 (citing Hazelwood , 844 So.2d 380; May v. Texaco, Inc., 73 Fed.App. 78 (5^th Cir. 2003); and Frank C. Minvielle, L.L.C. v. IMC Global Operations, Inc., 380 F.Supp.2d 755, 771 (W.D. La. 2004)). 

The Third Circuit also failed to follow LeJeune’s argument that because a mineral lease is classified as a real right under the Mineral Code that LeJeune acquired the benefits of the mineral lease when it bought the property. The Third Circuit explained that “a claim for damages, whether it arises under a predial lease or a mineral lease, is a personal right which must be specifically assigned to run with the property.” Id. at *8 (citing Prados, 329 So.2d at 751).    

Further, the Third Circuit ruled that because LeJeune’s predecessor in interest was the landowner and the mineral lessor from the execution of the Lease until the Lease completely terminated, no mineral servitude was created. Therefore, the Third Circuit ruled that Goodrich was not liable for restoration damages under the obligations implied by Articles 22 or 122 of the Mineral Code. 

 The Third Circuit also refused to find that Goodrich’s actions constituted a continuing tort explaining that where “‘a tort involves continuing injury, the cause of action accrues at the time the tortious conduct ceases.’” Id. at *8 (citing Grefer v. Alpha Technical, 02-1237 (La.App. 4 Cir. 3/31/05) 901 So.2d 1117, writ denied, 05-1590 (La. 3/31/06), 925 So.2d 1248 (which quotes In re Med. Rev. Panel of Moses, 00-2643 (La. 5/25/01), 788 So.2d 1173. The Third Circuit found that the tortious conduct ended in 1987 when the well site was plugged and abandoned.  The Third Circuit explained that “[w]hen a defendant’s damage-causing act is completed, the existence of continuing damages to the plaintiff, even progressively worsening damages, does not present successive causes of action accruing because of a continuing tort.” Id. at *9 (citing Derbofen v. T.L. James & Co., 355 So.2d 963 (1977), writs denied, 357 So.2d 1168, cert. denied, 439 U.S. 911, 99 S.Ct. 280, 58 L.Ed.2d 257 (1978)). Therefore, the Third Circuit ruled that as in Minvielle, 380 F.Supp2d at 765-66, “the tortious conduct was the disposal of the waste into plaintiff’s property, not the failure to remove it” and did not apply the continuing tort doctrine to allow LeJeune to bring claims in tort against Goodrich. 

Other Damages

LeJeune had conceded that there were no issues of material facts with respect to their punitive damages claims under former La. C.C. 2315.3 and claims for mental anguish and the trial court dismissed those claims. No appeal of the dismissal of those claims was made by LeJeune. 

Further, the Third Circuit stated in denying LeJeune’s claims for unjust enrichment that such relief only is granted when no other express remedy exists. Id. at 12 (citing Mouton v. State, 525 So.2d 1136, 1142 (La.App. 1 Cir. 1988), writ denied, 526 So.2d 1112 (La. 1988) (other citation omitted)). The Third Circuit ruled that because a remedy for alleged oil and gas contamination is provided by law, LeJeune did not have a claim for unjust enrichment. Id.at 12.   

The issue of the enforceability of an arbitration clause in a service contract was recently addressed in Wright v. 3P Delivery, L.L.C., 2007 WL 3171260 (La. App. 3d Cir. 2007). In this action, Plaintiff Chester Wright and Defendant 3P Delivery, L.L.C. entered into the contract entitled “Driver Service Agreement.” The contract called for the Plaintiff to “provide pick up and delivery service,” to “provide loading and unloading of ... shipments,” and to “handle, load, unload, and transport shipments... and equipment.” The contract also contained an arbitration clause. Plaintiff filed suit claiming breach of contract. In response thereto, the Defendant filed a Motion to Compel Arbitration and Stay Litigation. 

The Third Circuit stated that although this was a contract entitled “Driver Service Agreement,” the terms of the contract set forth its true nature, which can be discerned from the wording thereof. The Court looked beyond the mere title of the contract and said that “loading, unloading, and handling of shipments and equipment” clearly require the application of “physical force, or brawn and muscle” as opposed to the performance of mental tasks or services of those recognized as professional men or women. From the four corners of the contract, the parties intended that Mr. Wright engage primarily in labor services. The Court stated, “Although these activities may provide a ‘service’ to their recipient, all of these activities are accomplished through physical labor.”    Thus, the Court concluded that pursuant to La. R.S. 9:4216, the contract was exempt from mandatory arbitration. The Court affirmed the trial court ruling denying the Motion to Compel Arbitration and Stay Litigation.

On January 22, 2008, in Allen v. Administrative Review Bd., ____ F.3d ____, 2008 WL 171588 (5th Cir. 2008), the United States Court of Appeals for the Fifth Circuit (the federal appellate court circuit that includes Louisiana, Mississippi, and Texas) issued its first ruling addressing the employee whistleblower protections provided by the Sarbanes-Oxley Act (“SOX”). In the Allen ruling, the Fifth Circuit interpreted the scope of “protected activity” under SOX narrowly. Hopefully, this trend will continue and this new whistleblower protection for employees of publicly-traded companies will not be unreasonably broadened by the courts.

In Allen, the plaintiffs alleged their terminations in a company-wide reduction-in-force were retaliation for engaging in protected activity under SOX. Specifically, the plaintiffs alleged the following protected activity: (1) expressing concern to supervisors that the employer was not complying with an SEC Staff Accounting Bulletin; and (2) complaining about the employer’s erroneous interest calculations for customers and untimely refunds and billing problems related to the same. In order to satisfy the “protected activity” requirement of the statute, the employee need only show that he or she had a “reasonable belief” the employer was engaged in an unlawful employment practice, not that an actual violation occurred.

An administrative law judge held a six-day hearing and determined that plaintiffs did not have a reasonable basis for believing that the subject-matter of any of their whistleblowing involved potential violations of the laws for which SOX provides whistleblower protection. An administrative appellate board reviewed these findings and affirmed. The Fifth Circuit then affirmed and held the plaintiffs lacked a reasonable belief that they were reporting violations of law.

In reaching its decision, the Fifth Circuit held the plaintiff who expressed concern about the SEC Staff Accounting Bulletin could not have reasonably believed that she was reporting a violation of a law covered by SOX because that plaintiff was an accountant who should have known that an SEC Staff Accounting Bulletin was not an SEC rule or regulation and did not carry with it the force of law. Regarding the employee complaints about interest calculations, untimely refunds, and billing problems, the plaintiffs argued SOX applied because the company intentionally refused to disclose the problem to their shareholders. The Fifth Circuit rejected the argument this rendered the plaintiffs’ complaints “protected” because it only alleged a violation of some unidentified law relating to fraud against shareholders and not one of the laws enumerated under SOX.

In conclusion, the Allen decision is promising for employers who are publicly-traded companies. It indicates that the Fifth Circuit will likely interpret the scope of “protected activity” under SOX narrowly and not extend broad protections to a large class of employees of publicly-traded companies. Hopefully, this approach will discourage employees who have adverse actions taken against them for legitimate business reasons from bringing frivolous whistleblower suits under SOX.

The European Commission recently released a preliminary package of broad climate change policies that would affect industry, energy generation and transportation in the European Union. The goals of the climate change policies are to: (1) to reduce greenhouse gas emissions by twenty percent (20%) below 1990 levels by the year 2020; (2) to increase the proportion of power generated by renewable resources to twenty percent (20%) of total energy consumption; and (3) to institute a mandate that ten percent (10%) of the fuel consumed by the European vehicles to be from biofuel sources.            

The proposed measures include:

• an improved emissions trading system that allows firms in one European Union country to buy allowances in any other country;

• an emission reduction target for sectors not covered by the emissions trading system, including transportation, buildings, agriculture, and garbage, so that all sectors and individuals in the European Union are contributing;

• legally binding targets for each European Union country that increases the share of renewable energy sources in the overall energy mix; and

• new rules for carbon capture and underground storage and certain environmental subsidies to encourage investment in those endeavors.

In order to meet the goal of decreasing greenhouse gas emissions by twenty percent (20%), the Emissions Trading System will be changed to require power generators that currently receive their carbon credits for free to purchase at least two-thirds (2/3) of them at auctions beginning in 2013 and to purchase all of the credits by 2020. The European Commission wanted to extend the same requirement to all of Europe’s high-polluting industries, but the recently-released policies exempted those “sectors vulnerable to international competition” from having to purchase credits. Those industries excepted include steelmaking, aluminum, and concrete. Industries that are not required by the recent policies to comply with the Emissions Trading System would have to reduce their emissions by ten percent (10%). 

The package of proposed legislation sets forth quotas for each country’s required reduction of greenhouse gas emissions and for each country’s use of renewable energy sources. However, the proportion of reduction in greenhouse gas emissions and the use of renewable energy sources by each country are not equal. 

The package of climate change policies must be adopted by the European Parliament and a majority of the twenty-seven (27) European Union governments, a process that could take until 2009. In addition, the President of the European Commission estimated that the cost to implement the climate change policies would be about $87.4 billion per year, though there is argument that the cost could be twice that.

For more information, see the European Union’s website here.