March 2013 Legal Update by Megan E. Donohue

by: Martha Mills at 3/12/2013 12:13:05 PM | Viewed 3396 times.

LOUISIANA LEGAL UPDATE

by Megan E. Donohue

Jones Walker

The Louisiana Supreme Court’s Latest Interpretation of Legacy Lawsuits and the Law: the Vermilion Parish School Board Case

State of Louisiana and the Vermilion Parish School Board vs. The Louisiana Land and Exploration Company, et al., 2012-0884, (La. 01/30/2013) --- So.3d ----, 2013 WL 336004. 

The Louisiana Supreme Court recently issued an opinion that could have a significant impact on legacy lawsuits.  Where previously courts did not award plaintiffs “excess” remediation damages in the absence of a contractual provision requiring them, the Court has created the possibility of an award of those excess damages even in the absence of a contractual provision.  Pursuant to this decision, defendants may become obligated to restore the surface of a mineral lease to its pre-lease conditions, even where the mineral lease is silent concerning restoration of the surface. 

In the VPSB case, the State of Louisiana and the Vermilion Parish School Board filed a Petition for Damages to School Lands.  This sixteenth section property, located in the East White Lake Field in Vermilion Parish, is owned by the State and managed by the VPSB for the benefit of the local schools.  The property was allegedly polluted by oil and gas exploration and production performed pursuant to certain leases.  The lease at issue before the court did not include an express contractual provision related to remediation. 

Defendants filed a motion for partial summary judgment, asserting that Plaintiffs had no right to seek remediation damages in excess of those found necessary by the Court to fund the plan for remediation mandated under Act 312.  Defendants contended that Act 312 acted as a substantive cap on remediation damages resulting from a tort or the implied restoration obligation of a mineral lease.

The trial court granted the motion.  The Third Circuit reversed the trial court.  The Louisiana Supreme Court granted writs, and ultimately agreed with the Third Circuit, reversing the trial court.  The Court held that Act 312 is a solely procedural statute that does not strip landowners of their substantive rights and concluded that the substantive right to recover excess remediation damage existed and was not changed by the procedural Act 312. 

In reaching its conclusion that the substantive right to recover excess remediation damage existed and was not changed by the procedural Act 312, the Court described, at length, the history of the relevant provisions of general lease law under the Civil Code, lease obligations under the Mineral Code, related case law, including Castex, Roman Catholic Church, Coleman, Hornsby, Corbello, and how it all led to the enactment of Act 312. 

Particularly important in the Court’s interpretation were Subsections D and H of the Act.  Subsection D provides how the most feasible plan is implemented.  The Court interpreted Subsection H to state “that the procedure enacted by this Section shall not preclude a landowner from pursuing a judicial remedy or receiving a judicial award for private claims other than those remediation damages necessary to fund the feasible plan to remediate the land to a standard that protects the public interest, i.e., ‘except as otherwise provided in this Section.’” Thus, according to the Court, if a trial court awards remediation damages greater than the amount that is ordered to be placed into the trial court’s registry to fund the remediation plan, then the landowner is entitled to those “excess” remediation damages.  Likewise, “any award” for “additional remediation” may be kept by the landowner, as well.  If the money judgment for remediation exceeds the amount necessary to fund the plan, the plaintiff is granted a personal judgment for the “excess” remediation damages; plaintiff is also granted a personal judgment on his other non-remediation private claims (if he prevailed on such claims at trial).  All of these determinations are made part of a single judgment, and any party aggrieved by any aspect of this single judgment may appeal.  Citing the Third Circuit’s decision in the VPSB case, the Court agreed that the Third Circuit correctly determined that “[t]he clear language of the statute contemplates the landowner receiving an award in addition to that provided by the feasible plan.”

Although the Court cited various cases in an attempt to support its finding, it failed to explain the source of the “substantive right” that the Court concluded the plaintiffs may have to receive excess remediation damages.  Ultimately, the Court concluded that the court of appeal correctly reversed the ruling of the trial court on the motion for partial summary judgment.

Justice Victory’s dissent highlights the major deficiencies in the Court’s logic and its conflict with its prior decisions.  The following are expansions from select excerpts from Justice Victory’s dissent:

La. R.S. 30:29, in several clear provisions, limits the recovery of remediation damages to those awarded by the trial court in its determination of the most feasible regulatory plan, unless there is an express contractual provision providing otherwise.  The general rule established by La. R.S. 30:29(D)(1) is that all damages for evaluation and remediation of environmental damage shall be paid exclusively into the registry of the trial court to fund the clean up of the environmental damage.  Act 312 does contain an exception to its rule that “all remediation damages” must be paid into the registry of the court.  The first sentence of La. R.S. 30:29(H) provides that La. R.S. 30:29 does not preclude an award “for private claims suffered as a result of environmental damage, except as otherwise provided in this Section.”  The Court concluded that these “private claims” include claims for excess remediation damages.  But if this were true, there would be no need for the second sentence of 30:29(H), which specifically covers claims for damages for “additional remediation in excess of the requirements of the plan adopted by the court pursuant to this Section,” and allows such damages “as may be required in accordance with the terms of an express contractual provision.”  As an exception to the “all remediation damages” rule of 30:29(D)(1), these awards for “additional remediation” are not required to be paid into the registry of the court.

The majority opinion in VPSB effectively ignored the second sentence of La. R.S. 30:29(H), which limits claims for excess remediation damages to cases where the excess damages are allowed by an express contractual provision.  And by giving the landowner the substantive right to collect excess remediation damages in the absence of an express contractual provision, the Court conflicts with 30:29(H), which states that “[t]his Section shall not be interpreted to create any cause of action or to impose additional implied obligations under the mineral code or arising out of a mineral lease.”  By referencing these new “implied obligations,” the Court is doing exactly what is prohibited in La. R.S. 30:29(H), not to mention creating substantive rights under what this Court has already held is a procedural statute. That these “implied obligations” are newly created substantive rights is evident because the Court held in Marin that remediation to 29B standards was all plaintiffs were entitled to, even though the defendants acted unreasonably under their lease.  The court of appeal in Marin held that, in the absence of an express contractual provision, the plaintiffs were not entitled under the Mineral Code or the Civil Code to anything more than a regulatory cleanup, even though they had proven defendants’ conduct was unreasonable and excessive. 

Because the Court has heretofore held that there are no implied obligations under either the Mineral Code or the Civil Code to provide anything more than a regulatory remediation in compliance with La. 30:29 in the absence of an express contractual provision, the Court’s holding that a landowner is indeed entitled to such excess remediation damages in the absence of an express contractual provision amounts to the creation of new substantive rights.  This is in conflict with both Marin and M.J. Farms, which held that La. R.S. 30:29 is a procedural, not substantive, statute.  As a result, the Court has misconstrued Act 312 and created new substantive rights for landowners that never previously existed.

The defendants in the VPSB case have applied for rehearing before the Louisiana Supreme Court.  It will be important to see what action, if any, the Supreme Court takes on the application for rehearing.  Considering the 2012 changes in the law relating to legacy cases, it will also be interesting to see whether the Louisiana legislature takes any action in response to the VPSB case. 

 

A copy of the case discussed above, or any other cases referenced above, may be obtained upon request from Megan E. Donohue by fax (337-593-7601) or e-mail (mdonohue@joneswalker.com). 

Megan E. Donohue is an associate in Jones Walker’s Business & Commercial Litigation Practice Group and practices from the firm’s Lafayette office.  Ms. Donohue’s practice includes a wide range of business and commercial litigation cases as well as environmental/legacy litigation.  She has represented clients in the oil, insurance, and telecommunications industries. Ms. Donohue has been involved in many aspects of litigation, including traditional discovery and complex e-discovery, drafting substantive pleadings, taking and defending depositions, oral argument, and trial. Her experience also extends to various types of complex litigation, including multi-district litigation.

For Ms. Donohue’s full biography, please visit Jones Walker’s website: http://www.joneswalker.com/professionals-366.html. 

 

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