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.

The plaintiff, M.J. Farms, Ltd., made two arguments: that Act 312 was inapplicable to legacy lawsuits and that it was unconstitutional. In support of its argument that Act 312 is inapplicable to legacy lawsuits, plaintiff argued that Act 312 was not applicable to its claims for restoration under the Louisiana Mineral Code (Title 22) and the Louisiana Civil Code. In the alternative, plaintiff argued that the Legislature did not expressly provide for Act 312 to be applied retroactively. The Louisiana Supreme Court rejected these arguments.

In finding that the statutory language was clear and unambiguous, the Louisiana Supreme Court held that Act 312 is 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 sites.” The Court reasoned that remediation of contamination caused by oilfield exploration and production activities is within the jurisdiction of the Louisiana Department of Natural Resources (“DNR”) and requires compliance by public and private parties alike. This is true regardless of whether plaintiff’s claims for remediation arise from the Louisiana Mineral Code or Civil Code. On this point, the Court concluded that Act 312 supplemented the Mineral Code.

The Louisiana Supreme Court further held that the Legislature intended Act 312 to be applied retroactively. Act 312 states that it “shall not apply to any case in which the court on or before March 27, 2006, has issued or signed an order setting the case for trial, regardless of whether such trial is continued.” The Court concluded that the inclusion of “any case” evidenced the Legislature’s express intent for Act 312’s retroactive and prospective application except in those limited cases that had trial dates as of March 27, 2006.

Because the case could not be resolved on non-constitutional grounds, the Louisiana Supreme Court further addressed plaintiff’s constitutional arguments. Plaintiff first argued that the retroactive application of Act 312 disturbed plaintiff’s vested right to “receive a full and complete recovery for [its] private injury to [its] property.” Prior to Act 312, a plaintiff could receive the full amount of damages a court awarded and was not obligated to use any money awarded to remediate the damaged property. Act 312 was enacted to require the money awarded to be used to remediate the damaged property. Act 312 requires that any award received by a plaintiff must be deposited in the registry of the court which will be used to fund a remediation plan. This, the plaintiff argued, is a substantive change of the law.

The Louisiana Supreme Court rejected plaintiff’s argument and held that Act 312 does not impair a vested right. The Court concluded that Act 312 provides a procedure for resolving claims for environmental damage, the goal of which is to ensure that the damaged property is actually remediated according to standards protecting the public’s interest.

The Louisiana Supreme Court also rejected plaintiff’s constitutional argument that Act 312 divests district courts of their original jurisdiction and denies plaintiffs access to district courts. To the contrary, the Court noted that any claim for environmental damage that is filed in a district court triggers Act 312. The claim is not deferred to DNR until the court determines the existence of environmental damage and the legally responsible party. The court is not required to adopt the remediation plan approved by DNR but may choose a remediation plan more feasible to “protect the environment and the public health, safety, and welfare.”

Although the Louisiana Supreme Court upheld the constitutionality of Act 312, how it is applied to legacy lawsuits is presently being argued in district courts and appellate courts throughout the State. The issues facing district and appellate courts include the following: how to apply the provisions of Act 312 when a defendant admits it is a legally responsible party; when should a district court refer a matter to DNR for development of a remediation plan; who should decide who the legally responsible parties are; and does Act 312 call for two trials or one. These are some of the issues that the Louisiana Supreme Court will likely have to address in the future.