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Defending Louisiana Environmental Litigation: Louisiana Court of Appeals Rejects Several Legal Challenges to the Subsequent Purchaser Doctrine with Respect to Mineral Leases

A recent case from the Louisiana Court of Appeal confirms that the subsequent purchaser doctrine is applicable to bar claims of environmental contamination caused pursuant to oil, gas and mineral leases. See Grace Ranch, LLC, v. BP America Production Co., Case No. 17-1144 (La. App., 3rd Cir. July 18, 2018). The Court of Appeals also rejected numerous other arguments made by the plaintiffs.

Defending Louisiana Environmental Litigation: Legal Principles

 In Louisiana, a landowner may sue if someone or some business damages their land — such as causing an oil spill or other environmental contamination. However, the Louisiana Supreme Court has made it clear that such a right to sue is a personal right, not a right that “runs with the land.” Thus, absent a proper assignment, once the land is sold or transferred, the new property owner has no right to sue the alleged tortfeasor for the previously inflicted damage. This is called the subsequent purchaser doctrine (“SPD”) and the SPD can be a complete defense to environmental contamination lawsuits here in Louisiana. See Eagle Pipe & Supply, Inc. v. Amerada Hess Corp., 79 So.3d 246 (La. Supreme Court 2011) (clarifying that the right to sue is a personal right; making the SPD applicable to latent or hidden contamination).

The justification for the SPD is that, when a landowner sells the property, the purchase price will reflect the damage to the land. Thus, the buyer is not injured since the price paid is, theoretically, for the land-as-damaged. The seller, on the other hand, has suffered an injury since the person or business has received a reduced price for the as-damaged-land.

In Grace Ranch, the plaintiff acquired the surface estate of the land at issue in 2006. Grace Ranch acquired the full mineral estate in 2016. Thereafter, in 2017, Grace Ranch filed its various claims related to environmental contamination caused by the oil and gas production activities. The defendants — the oil and gas producers — filed motions for summary judgment based on the SPD. Those motions were granted by the trial court and the Court of Appeals affirmed.

Defending Louisiana Environmental Litigation: Plaintiff’s Argument Rejected

On appeal, Grace Ranch argued that Eagle Pipe was not applicable because Eagle Pipe involved contamination caused by a surface lease, not a subsurface mineral lease. The court rejected that argument.

Grace Ranch also challenged the main thrust of Eagle Pipe by asserting that Louisiana Revised Statutes, Art. 31:16, defines mineral rights as “real rights” — land rights. As such, according to Grace Ranch, mineral rights DO, in fact, run with the land. See La.R.S. §31:16.

However, upon review of the relevant statutory provisions, the legislative history and case law, the Court of Appeal rejected this argument. According to the court, § 31:16 was enacted as a protection for the lessees of the mineral rights, not the landowner lessors. That is, the court held that the Mineral Code designated the mineral right as a property right so as to protect the mineral lessee from losing his or her or its rights if the land was sold during the existence of the lease. Moreover, the court held that the lessee’s right under § 31:16 was “… not purely a real right that automatically attaches to the property.” As such, the Court of Appeals held that § 31:16 does not obviate the SPD as established in Eagle Pipe. The SPD concerns itself with property rights possessed by owners and the real rights possessed by a mineral lessee do not automatically attach to the land.

The Court of Appeals also rejected Grace Ranch’s argument that the various defendants violated the implied obligation of lessees under La.R.S. 31:122, which provides that a mineral lessee “…. is bound to perform the contract in good faith…” In theory, this might be an obligation that “runs with the land,” but the court stated that §31:122 does not impose a duty — either express or implied — on the mineral lessee to restore the land to its original condition. Thus, the court rejected this argument.

The Court of Appeals also rejected Grace Ranch’s argument that La.R.S. 31:11(A) provided a basis for its cause of action. Article 31:11(A) provides in pertinent part:

“The owner of land burdened by a mineral right or rights and the owner of a mineral right must exercise their respective rights with reasonable regard for those of the other. Similarly, the owners of separate mineral rights in the same land must exercise their respective rights with reasonable regard for the rights of other owners.”

By its terms, § 31:11(A) protects neighboring property owners from damage caused by extraction and production activities. This argument might have had some merit since Grace Ranch’s property was 40 acres out of a much larger tract that was subject to the mineral leases. However, the facts showed that Grace Ranch acquired its land long after such production activities ceased. As such, the court held that § 31:11(A) did not apply because Grace Ranch and the defendants were “never neighboring proprietors.”

The Grace Ranch court also rejected various arguments that the plaintiff had obtained valid assignments. We will discuss those issues in a subsequent article.

Defending Legacy Environmental Litigation: Contact New Orleans Attorney Kristin M. Lausten

Need assistance? Have questions? Contact Kristin M. Lausten. Kristin defends toxic tort cases in both state and federal courts throughout Louisiana.

The author may be contacted at:

Kristin M. Lausten

New Orleans, Louisiana
Telephone: 504.377.6585
E-mail: kristin@kristinlausten.com
Web: www.kristinlausten.com

This article is provided as an educational service for general informational purposes only. The material does not constitute legal advice or rendering of professional services.