By: Joe Norman, Kelly Becker, James Lapeze, and Kathryn Gonski
Recently the Louisiana Supreme Court handed down a ruling that has significant implications on the oil and gas industry in the state. The Court denied the Plaintiff-landowner’s writ application which sought review of a Louisiana First Circuit Court of Appeal opinion that affirmed dismissal of the landowner’s claims based upon application of the subsequent purchaser doctrine in favor of defendants who were mineral lessees.
Previous Court Ruling
In many cases alleging damage to property arising from historic oil and gas operations, the plaintiff was not the owner at the time of the alleged damage, but instead is the subsequent purchaser of the property at issue. In Eagle Pipe and Supply, Inc. v. Amerada Hess Corp., 10-2267 (La. 10/25/11), 79 So. 3d 246, a case that involved a predial (not a mineral) lease, the Louisiana Supreme Court held that whether damage to property is apparent or unapparent, the right to sue for such damage is a personal right that belongs to the landowner at the time the damage occurred unless the right has been explicitly assigned or subrogated to the subsequent buyer of the land. The rationale of the holding is that a claim for damage is a personal, not a real, right and that a subsequent purchaser’s remedy is limited to a suit to rescind the sale or recover damages against its seller. After this decision, plaintiffs involved in legacy litigation have taken the consistent position that Eagle Pipe’s holding was inapplicable to damage caused by parties holding rights to explore for oil and gas under mineral leases or other instruments since the nature and source of those rights are different from rights flowing under a typical commercial or other predial lease.
Mineral Lease Ruling
In Global Mktg. Solutions, L.L.C. v. Blue Mill Farms, Inc., 2013-2132 (La. App. 1 Cir. 9/19/14), 153 So. 3d 1209, the First Circuit considered directly the applicability of the subsequent purchaser doctrine in a case involving mineral leases. The First Circuit rejected plaintiff’s argument that the subsequent purchaser doctrine was inapplicable to mineral rights and applied the Supreme Court’s opinion in Eagle Pipe to bar the Plaintiff’s tort, contract, and Mineral Code claims for alleged contamination of property caused by oil and gas operations that occurred prior to the Plaintiff’s acquisition of the property. On April 23, 2015, the Louisiana Supreme Court denied the Plaintiff’s writ application in a 4-2 vote. In a separate concurrence, Justice Crichton unequivocally stated that the analysis of the subsequent purchaser rule articulated in Eagle Pipe is equally applicable in the Mineral Code context.
A copy of the First Circuit decision can be found here. A copy of Justice Crichton’s concurrence to the Louisiana Supreme Court’s writ denial can be found here.