In Waterfowl Limited Liability Co. v. United States, No. 05-30219 (5th Cir. Dec. 12, 2006), the United States Court of Appeals for the Fifth Circuit granted the petition for panel rehearing, withdrew its earlier panel opinion, and held that Louisiana law did not apply to a settlement agreement that arose out of earlier litigation over mineral servitudes.
Owners of mineral servitudes in Louisiana sued the United States — who claimed a share of the royalties under the earlier settlement agreement — asking the district court to declare that the United States’ mineral servitudes had prescribed under Louisiana law as a result of the lack of qualifying production for a period in excess of ten years. The district court agreed. In its original panel opinion, the Fifth Circuit also agreed. On rehearing, however, the Fifth Circuit reversed its original panel opinion and the district court.
Relying on United States v. Little Lake Misere Land Co., Inc., 412 U.S. 580 (1973), the Fifth Circuit found that “when a land acquisition by the United States arises from and bears heavily on a federal regulatory program, state law cannot, of its own force, govern the acquisition. Instead, federal law must provide the rule of decision.” Because the United States had purchased the land to include in the Lacassine National Wildlife Refuge pursuant to the Migratory Bird Conservation Act, 16 U.S.C. § 715, et seq., the court found that the two-tiered inquiry established by the United States Supreme Court in Little Lake Misere controlled.
First, the court had to determine whether federal law controlled or whether state law applied of its own force. Here, the court found that the United States acquired its interest pursuant to a federal regulatory program.
Second, the court had to determine the content of federal law, i.e., whether to adopt Louisiana law as the federal rule of decision even though it did not apply of its own force. The court rejected Louisiana law, finding that the parties had bargained for the settlement agreement with the understanding that Louisiana law would not apply to the United States’ mineral interest.