Pursuant to 28 U.S.C. § 1333, federal courts have original subject matter jurisdiction over general maritime law claims. However, 28 U.S.C. § 1333(1), commonly known as the “savings to suitors clause,” preserves a plaintiff’s right to instead file a general maritime law action in state court. Until recently, a defendant sued in state court for a general maritime law claim could not remove the case to federal court unless an independent basis of subject matter jurisdiction existed (such as diversity). See Tennessee Gas Pipeline v. Houston Cas. Ins. Co., 87 F. 3d 150 (5th Cir. 1996). As explained below, several district courts have concluded that recent revisions to the removal statute, 28 U.S.C. § 1441, have changed this rule and now allow general maritime law claims to be removed to federal court without an independent basis of subject matter jurisdiction.

The basis for the U.S. Fifth Circuit’s prohibition against removal of a general maritime law claim unless an alternative basis of subject matter existed was the provision contained in the then-current version of 28 U.S.C. § 1441(b) which stated that “any civil action of which the district courts have original jurisdiction founded on a claim or right under the Constitution, treaties or laws of the United States shall be removable without regard to the citizenship or residence of the parties.” The U.S. Fifth Circuit concluded that this portion of the then-current version of 28 U.S.C. § 1441(b) – combined with the U.S. Supreme Court’s holding in Romero v. International Terminal Operating Co., 358 U.S. 354 (1959), that general maritime law claims do not “arise under the Constitution, laws, or treaties of the United States” – precluded the removal of general maritime law claims unless an independent basis of subject matter jurisdiction existed.Continue Reading Because of Revisions to 28 U.S.C. Section 1441, Several District Courts Have Concluded That General Maritime Law Claims Can Be Removed to Federal Court Without an Independent Basis of Subject Matter Jurisdiction

Traditionally, a party seeking injunctive relief from the courts bears the burden of proving four elements: (1) a substantial likelihood of success on the merits of their claims; (2) a substantial threat that failure to grant the injunction will result in irreparable injury; (3) the threatened injury outweighs any damage that the injunction will cause to the adverse party; and (4) the injunction will not have an adverse effect on the public interest.  See Johnson Controls, Inc. v. Guidry, 724 F. Supp. 2d 612 (W.D. La. July 12, 2010); Mississippi Power & Light v. United Gas Pipeline Co., 760 F. 2d 618 (5^th Cir. 1985).  Due to the first element – a substantial likelihood of success on the merits – a court that is asked to rule upon a request for injunctive relief in effect pre-judges the entire case.  Although in most cases this is not problematic (and can potentially lead to the matter being resolved without the need for a full trial on the merits), the presence of a mandatory arbitration clause in the parties’ contract can lead to problems.Continue Reading If a Contract Includes a Mandatory Arbitration Clause, the Parties Should be Aware that Injunctive Relief from the Courts can be Available Without the Necessity of Satisfying the Traditional Four-Element Test

The overriding royalty interest (commonly known as “ORRI”) is prevalent in the oil and gas industry. A party who obtains an ORRI in a lease will receive a set percentage of the production that is obtained from the lease. The lease between the landowner and the lessee usually reserves an ORRI to the landowner as compensation for granting the lease, and the lease also specifically describes how that ORRI will be calculated.

Since the Outer Continental Shelf (“OCS”) off the coast of the United States is owned by the U.S. government, parties wishing to drill for oil and gas on the OCS are required to obtain those leasing rights from the U.S. government. Pursuant to federal regulation, the U.S. government, as lessor, receives a set royalty on all production that is obtained from an OCS lease.

Other parties besides the landowner can obtain ORRI’s. For instance, an investor may contribute funds towards the project in the hopes that the lease will be productive. Also, a geologist may perform surveys of a lease and receive an ORRI as compensation. Or, the lessee may wish to reduce its risk and capital outlay by sub-letting the drilling operation to another entity. In these instances, the ORRI is created by way of an agreement separate and apart from the lease between the landowner and the lessee. Oftentimes those ORRI agreements will state that the ORRI it grants “shall be calculated and paid in the same manner and subject to the same terms and conditions as the landowner’s royalty under the lease.” Ordinarily, that language makes calculating everyone’s (the landowner and any investors) ORRI a matter of simple mathematics.Continue Reading Does the Deep Water Royalty Relief Act Affect the Calculation of Overriding Royalties? The U.S. Fifth Circuit May Decide This Issue Soon