Louisiana Law Blog

By Lou Grossman

The Subsequent Purchaser Doctrine is a judicially created limitation on the rights of a current landowner to sue for pre-acquisition damages. For over 160 years, Louisiana courts have held that a current landowner has no right of action to sue for damages to his/her property occurring prior to the date of sale in the absence of an express assignment of that right. In environmental contamination disputes, appellate courts were divided on whether the doctrine should apply to cases involving non-apparent or subsurface property damage.

In a recent 4/3 decision, a majority of the Justices of the Louisiana Supreme Court rejected the notion that property damage must be overt, and held that a landowner has no right to sue for non-apparent damages to land inflicted before the act of sale in the absence of an express assignment of, or subrogation to, that right. Eagle Pipe and Supply, Inc. v. Amerada Hess Corporation, 2010-2267 (La. 10/25/2011) –So.3d --. In reaching this decision, the majority acknowledged 160 years of jurisprudence constante regarding the subsequent purchaser rule and found that the rationale should also extend to the situation where damage to the property is not apparent.

In reaching this decision, the Louisiana Supreme Court also rejected various theories advanced by Eagle Pipe, most notably of which was Eagle Pipe’s continuing tort theory. According to the Court, the presence of alleged contamination on Eagle Pipe’s property was not caused by “overt, persistent and ongoing acts,” but was simply a continuing ill effect from the original tortious acts. As such, it was not a continuing tort and could not give rise to a separate tort claim under that theory.

This decision resolves any dispute among the appellate courts and explicitly limits the rights of current landowners to bring suit for environmental harm inflicted prior to the date they acquired the property, regardless of whether the purchaser could have known of the contamination. Such landowners may still seek claims against prior owners and are further permitted to seek environmental remediation, but private actions and damages have been severely abrogated by the Court’s ruling. Moreover, in rejecting the continuing tort theory, the Court refused to allow private claims for environmental harm to exist in perpetuity, providing greater certainty to industry with respect to tort liabilities.

Notably, the Court’s decision created a sharp divide among the justices which continues to persist. Justice Clark, who authored the majority opinion, and Justice Weimer, who authored the dissent have both provided additional written opinions, days after the original opinion was released. As this dispute continues, it is important to recognize a number of similar cases currently pending before the Court, including two arising from oil and gas exploration and production activities performed pursuant to mineral leases. The Court will continue to face such sharp divisions in ruling on these matters and the issue is far from final resolution.
 

By Brittany L. Buckley

Effective today, October 20, 2011, new permitting and disclosure requirements apply to hydraulic fracturing operations in Louisiana. Known as “fracking” in the oil and gas industry, hydraulic fracturing refers to the process of injecting fluid into tight shale or sandstone formations, which creates fractures in the rock through which oil and gas may travel into the wellbore. When combined with horizontal drilling, fracking allows producers to capture oil and gas reserves that were once thought to be out-of-reach.

Pursuant to the newly-implemented amendment to Subpart I of LAC 43:XIX (Statewide Order 29-B), fracking operators must now apply for and obtain a specific permit for “hydraulic fracture stimulation” from the Louisiana Department of Natural Resources’ Office of Conservation before utilizing pressurized fluids to fracture any formation for the purpose of improving its ability to produce hydrocarbons. After obtaining the requisite permit and conducting its fracking operations, the operator must be prepared to publicly disclose (1) the types and volumes of base fluid used during fracking; (2) a detailed list of all additives used in the fluid and the name of the supplier for each type of additive; and (3) a list and concentration of any chemicals contained in the fracking fluid that are regulated by the Occupational Safety and Health Administration (OSHA) and reported on Materials Safety Data Sheets (MSDS). The lone exception to these disclosure requirements permits an operator to withhold trade secrets, but the regulations still require the operator to disclose pertinent chemical characteristics of even proprietary constituents used in fracking operations.

To comply with these disclosure requirements, the operator must utilize the Office of Conservation’s new WH-1 Form to disclose the information about the base fluids (discussed above), together with detailed information about the identities and volumes of water supplies used during each phase of fracking operations. In lieu of submitting the WH-1 Form directly to the Office of Conservation, the operator may elect to satisfy its chemical reporting obligations by publishing the required information to an online database that makes the information available to the public free of charge. If utilizing the online option, the operator must also furnish a written statement to the Office of Conservation certifying that all required information has been published in an online registry. FracFocus is one online database specifically endorsed by the new regulation, but the disclosure requirements can also be met by publishing the required information to any other “similar registry.” It is anticipated that the option to satisfy Louisiana’s new disclosure requirements by publishing information to FracFocus will be heavily utilized, as many oil and gas companies have already become accustomed to using this registry to comply with other states’ disclosure regulations.
 

By Lou Grossman

In a recent decision, the Louisiana Second Circuit Court of Appeals upheld the application of the longstanding subsequent purchaser doctrine to an oilfield legacy case.  The decision Wagoner v. Chevron U.S.A. Inc., et. al., No. 10-45507 (La. 2. Cir. 2010) affirmed the legal principle that the right to recover for property damages is a personal right that does not pass to subsequent purchasers of the property.  According to the Second Circuit, this right is a personal right even when the harm is subsurface environmental contamination.

In reaching its decision, the Second Circuit rejected multiple theories advanced by the plaintiffs. Most significantly, the Second Circuit rejected plaintiffs’ contention that the existence of a mineral lease created a real obligation to restore the leased premises to its original condition.

The right to damages conferred by a lease, whether arising under a mineral lease or a predial lease, is a personal right, not a property right; and, as a personal right, it does not pass to the new owners of the land when there is no specific conveyance of that right in the instrument of sale.

The Second Circuit’s decision creates a further divide among the Circuit Courts of Appeal on the subsequent purchaser doctrine. Plaintiffs have sought Writs of Supervisory Review from the Louisiana Supreme Court and this is one of several, similar decisions currently on review.
 

By Katie D. Bell

Electronic Discovery, or “E-Discovery”, is not considered the “novel issue” it once was. However, E-Discovery still presents problems that litigants and courts struggle with. Below is a summary of recent Louisiana Federal Court opinions dealing with the issues surrounding E-Discovery.

In Frees, Inc. v. McMillian, 2007 WL 184889 (W.D. La. Jan. 22, 2007), the Western District of Louisiana granted the plaintiff’s motion to compel. In an unfair competition and trade secret theft action, the plaintiff claimed that the defendant, a former employee, had stolen various data files. Plaintiff had unsuccessfully requested production of defendant’s laptop and desktop. The Court granted the motion to compel the defendant to produce these two items because they were the most likely places that the data files would be located. The Court did institute protective measures so as to prevent the disclosure of any irrelevant or personal information.
 

By Esteban Herrera, Jr.

The July 20, 2010 Louisiana Register contained a notice from the Office of Conservation, Louisiana Department of Natural Resources that purported to promulgate rules amending Statewide Order 29-B to add a new Chapter 8 on procedures for evaluation and remediation of groundwater at E&P sites. Conservation’s Web site on July 20, 2010 contained a “final” version of the SERP Manual that was part of the proposed rules.  In a memorandum dated July 20, 2010 sent to interested parties, the Commissioner of Conservation said the July 20 notice on these proposed rules had been “unintentionally and incorrectly published” in the Louisiana Register as a final rule.  The memorandum states that Conservation does not consider the proposed rules “to be final or in effect at this time.”  Look for future information on these proposed rules.

By Victor J. Suane, Jr.

In 2006, the Louisiana Legislature enacted Louisiana Revised Statute 30:29 (“Act 312”) to provide a procedure for judicial resolution of claims for environmental damage to property. The provisions of Act 312 are applicable whenever there is “any litigation or pleading making a judicial demand arising from or alleging environmental damage” involving “contamination resulting from activities associated with oilfield sites or exploration and production (“E&P”) sites,” regardless of whether claims for remediation arise under the Louisiana Mineral Code or Civil Code. La. R.S. 30:29(I)(1).

By Linda S. Akchin

On Friday, April 9, 2010, the Louisiana Supreme Court (1) reversed the Third Circuit Court of Appeal’s decision in Cimarex Energy Co. v. Mauboules (2), in which the Circuit Court held that

(1) a royalty interest vendors’ oral assertion to a mineral lessee that the royalty interest vendee fraudulently inserted a prescription interruption provision in the royalty deed, and that therefore the royalty interest had reverted back to the vendors, is not a reasonable basis for the mineral lessee to initiate a concursus proceeding to determine the ownership of royalty payments because the innocent third party purchaser of the royalty interests is protected by the public records doctrine; and

(2) the mineral lessee is liable not only for the royalties paid into the registry of the court, but also for an additional sum equal to double the amount of royalties paid into the registry of the court, as damages.

The Third Circuit decision represented a gross departure from well-established Louisiana law relating to concursus proceedings, upon which the oil and gas industry, and mineral royalty payors in particular, have long relied in order to avoid the risk of multiple liability and the vexation of multiple lawsuits, as well as to avoid a penalty for nonpayment of royalties pursuant to Mineral Code provisions allowing a penalty under certain circumstances.

By Len Kilgore and Esteban Herrera

In the January 20, 2010 Louisiana Register, the Office of Conservation, Louisiana Department of Natural Resources issued a Notice of Intent to amend Statewide Order 29-B to incorporate new rules for the evaluation and remediation of groundwater conditions at exploration and production sites.

The proposed rules can be found at this link.   As part of the proposal, Conservation has published a draft manual entitled “Exploration and Production Waste Site Evaluation and Remediation Procedures Manual” or “SERP Manual.”   A copy of the SERP Manual can be found here. 

Conservation will accept comments on the proposal through March 8, 2010.   A public hearing on the proposal is scheduled for March 1, 2010, at 9:00 a.m. (CST).   Anyone with interests involving energy exploration and production sites should carefully review the proposal.

by Katherine K. Green and Richard D. McConnell

There are scores of oilfield contamination cases, coined “legacy lawsuits,” in which landowners claim that their property has been contaminated by historical oil and gas exploration and production operations. Legacy lawsuits are a means for plaintiffs to potentially obtain large jury verdicts to remediate property. Plaintiffs, however, are not required to use their monetary awards towards the remediation of their property. In 2006, the Louisiana Legislature, in response to windfall jury verdicts, lack of remediation obligations on landowner plaintiffs, and the adverse effect of those events on oil and gas operators in the State, enacted Louisiana Revised Statute 30:29 (“Act 312”). Act 312 reflects the Legislature’s concern that the State’s natural resources were not being protected under then-existing laws. 

The constitutionality of Act 312 was recently challenged in M.J. Farms, Ltd. v. Exxon Mobil Corporation, No. 07-CA-2371. In a unanimous opinion rendered by the Court, Act 312 was held to be not only constitutional but also applicable to legacy cases.  

by Laura L. Hart

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. 

by Laura L. Hart

The U.S. Supreme Court granted Exxon Mobil Corporation’s (“Exxon Mobil”) Petition for a Writ of Certiorari (2006 WL 1786680, 75 USLW 3009, 6/29/2006) and vacated the punitive damages award granted in the Grefer suit. See, Exxon Mobil Corporation v. Grefer, Joseph, et al., 05-1670 __ S.Ct. __, 2007 WL 559870 (2/26/2007).         

Plaintiffs claimed that their property had been contaminated with naturally occurring radioactive material (“NORM”) as a result of the pipe cleaning operations conducted thereon. A jury rendered judgment for the plaintiffs and awarded $56.145 million in compensatory damages, $145,000 in general damages, $56 million in restoration costs, and $1 billion in exemplary/punitive damages. The Louisiana Fourth Circuit Court of Appeal affirmed the awards of compensatory damages, general damages, and damages awarded for restoration costs, but reduced the $1billion award for punitive damages to $112.290 million. 

by Esteban Herrera, Jr.

On January 31, 2007, a Louisiana district court in Cameron Parish set aside a jury verdict from two months earlier that awarded $57 Million for wetlands losses allegedly caused by decades of surface water discharges of produced water. In its January 31, 2007 Ruling of the Court in the Dore Energy, Corporation v. Carter-Langham, Inc., et al case, the court concluded that the landowner could not sue the sublessee under the mineral lease at issue because the sublessee had concluded its operations under that lease prior to the Louisiana Mineral Code becoming effective.   The court found the landowner-plaintiff had no privity of contract with the sublessee-defendant. The court also found that Act 312 of the 2006 Regular Session of the Louisiana Legislature applied to the plaintiff's claims, reversing an earlier procedural ruling in the case. Act 312 creates certain procedures in lawsuits involving claims of contamination resulting from activities associated with oilfield sites or exploration and production sites. The court ordered the case stayed and ordered that appropriate notices be given to the state of Louisiana as required by Act 312.    Further developments in the case are likely.

Kean Miller is pleased to announce that 12 lawyers, formerly in the Admiralty & Maritime, Construction, and Energy practice areas with Lemle & Kelleher, LLP, have joined the firm in the New Orleans office.

"We are very excited to welcome these distinguished attorneys to our law firm. They are an outstanding resource for our clients. Our offices are located in Louisiana's major port cities --- New Orleans, Baton Rouge and Lake Charles -- and this esteemed group brings over 150 years of combined experience in maritime issues, admiralty law, marine insurance, oil & gas, drilling and exploration, pipelines, construction, and energy law to our clients." said Gary A. Bezet, managing partner of the 121-lawyer firm.

By Richard S. Pabst

Writ applications have been filed with the Louisiana Supreme Court in two oilfield pollution cases that have the potential to dramatically impact the scope of the numerous legacy lawsuits currently pending throughout the state.

As a service to the community and its clients, Kean Miller will present a Post-Katrina Energy Industry Forum on Thursday, October 13th. In addition, the firm will host its Louisiana Environmental Forum on Friday, October 14th. These two important industry events are part of a week-long breakfast briefing series designed to provide innovation, insight and ideas for business and industry in Louisiana. These breakfast briefing events will be held at Drusilla Place, 3482 Drusilla Lane (Jefferson Highway at I-12 in Baton Rouge).

By Lolly White

In-house counsel who are employed in Louisiana but are not licensed to practice law here have until July 1, 2005 to file an application for limited licensure to practice under the Louisiana Supreme Court's new In-House Counsel Rule.

By Dwayne Johnson

The Louisiana Fourth Circuit, in a decision sure to be appealed, recently upheld a lower court's award of compensatory damages - and reduced the lower court's punitive damage award - as a result of the defendants' alleged contamination of the plaintiffs' land with naturally occurring radioactive material (NORM). Grefer, et al. v. Alpha Technical, et al., 2002-CA-1237 (La. App. 4th Cir. 3/31/05); appeal from, Civil District Court, Orleans Parish.

For several years now, some landowners have been suing oil and gas operators concerning the condition of the land subject to a mineral lease. One Louisiana court recently struggled with the issue of when a landowner/lessor can sue a lessee under a mineral lease to remediate the property.

By Trey McCowan

Amicus curiae brief filed by Kean Miller Partners Bill Jarman and Linda Akchin for the American Petroleum Institute, the Louisiana Mid-Continent Oil & Gas Association, and the Louisiana Independent Oil & Gas Association.

Summary:

In Terrebonne Parish School Board vs. Castex Energy, et al., the Louisiana Supreme Court has held that a mineral lessee has no implied obligation to backfill oilfield access canals when the oil company's lease granted an express right to dredge canals and where there is no evidence that the oil company lessees exceeded the rights granted to them under the lease or acted unreasonably or negligently in dredging the canals. Article 122 of the Louisiana Mineral Code only imposes a duty to restore the surface to its original condition where there is evidence of unreasonable or excessive use of the surface of leased premises.