fifth

By Chase Zachary

On April 18, 2017, the U.S. Court of Appeals for the Fifth Circuit released a published opinion in Guilbeau v. Hess Corp.[1] The court affirmed the application of Louisiana’s subsequent purchaser doctrine to claims for environmental damages allegedly caused by activities of a former mineral lessee prior to the date that the plaintiff owned the property. Although the Fifth Circuit previously reached a similar conclusion in an unpublished decision,[2] Guilbeau is the court’s first precedential opinion addressing the subsequent purchaser doctrine.

As discussed on Kean Miller’s Louisiana Law Blog, here[3] and here,[4] the subsequent purchaser doctrine bars a plaintiff’s claims for property damages that occur prior to the plaintiff’s ownership of the property. The Louisiana Supreme Court provided a “thorough analysis”[5] of the doctrine in Eagle Pipe & Supply, Inc. v. Amerada Hess Corp.[6] There, the court “clarified that damage to property creates a personal right to sue, which unlike a real right, does not transfer to a subsequent purchaser ‘[i]n the absence of an assignment or subrogation.’”[7] However, plaintiffs have argued that the Eagle Pipe opinion did not address whether the subsequent purchaser doctrine applies “to fact situations involving mineral leases or obligations arising out of the Mineral Code.”[8]

The facts of Guilbeau are straightforward. Defendant Hess Corporation’s (“Hess’s”) predecessors operated until 1971 on the property-in-suit under several mineral leases.[9] All of those leases expired in 1973.[10] The plaintiff purchased the property-in-suit in 2007.[11] The “sale did not include any assignment of rights to sue for pre-purchase damages.”[12] After the plaintiff sued Hess for alleged contamination to the property, the federal district court granted Hess’s motion for summary judgment and dismissed the plaintiff’s claims based on the subsequent purchaser doctrine.[13] The Fifth Circuit affirmed.[14]

Making an “Erie guess” of how the Louisiana Supreme Court would decide the issue,[15] the Fifth Circuit identified a “clear consensus . . . among all Louisiana appellate courts that have considered the issue . . . that the subsequent purchaser rule does apply to cases . . . involving expired mineral leases.”[16] After tracing those Louisiana appellate decisions,[17] the Court found “no occasion to depart from the above-described precedent” and held that the subsequent purchaser doctrine barred the plaintiff’s claims.[18] The Court also noted that “the Louisiana Supreme Court has had multiple opportunities to consider this issue and has repeatedly declined to do so.”[19] Notably, the Fifth Circuit declined to certify the subsequent purchaser issue to the Louisiana Supreme Court on the basis that “[w]hen, as here, the appellate decisions are in accord, the law is not unsettled, and certification is unwarranted.”[20]

The Fifth Circuit is simultaneously considering a companion case, Tureau v. Hess Corp.[21] That suit involves an identical issue—i.e., whether the district court correctly applied the subsequent purchaser doctrine to dismiss claims for alleged property damage against former mineral lessees. The Fifth Circuit previously held Tureau in abeyance pending its decision in Guilbeau, and a decision in Tureau is expected shortly.

The Fifth Circuit’s Guilbeau opinion affirmatively resolves, for Louisiana federal courts, whether the subsequent purchaser doctrine applies to property damage claims against current and former mineral lessees. The decision accordingly provides much-needed certainty to both property owners and oil and gas operators involved in “legacy” litigation.

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[1] No. 16-30971, — F.3d –, 2017 WL 1393709 (5th Cir. Apr. 18, 2017), http://www.ca5.uscourts.gov/opinions/pub/16/16-30971-CV0.pdf

[2] See Broussard v. Dow Chem. Co., 550 F. App’x 241 (5th Cir. 2013).

[3] http://www.louisianalawblog.com/coastalwetlands-issues/louisiana-supreme-court-expands-judicial-limitations-on-landowner-tort-claims/.

[4] http://www.louisianalawblog.com/energy/louisiana-second-circuit-court-of-appeals-upholds-application-of-subsequent-purchaser-doctrine-in-oilfield-legacy-case/.

[5] Guilbeau, 2017 WL 1393709, at *2.

[6] 79 So. 3d 246 (La. 2011).

[7] Guilbeau, 2017 WL 1393709, at *2 (quoting Eagle Pipe, 79 So. 3d at 279) (emphasis in original).

[8] 79 So. 3d at 281 n.80.

[9] Guilbeau, 2017 WL 1393709, at *1.

[10] Id.

[11] Id.

[12] Id.

[13] Id.

[14] Id.

[15] Id.

[16] Id. at *2.

[17] Id. at *2-4.

[18] Id. at *4.

[19] Id.

[20] Id.

[21] No. 16-30970.