In Gloria’s Ranch, L.L.C. v. Tauren Exploration, Inc., the Louisiana Second Circuit upheld a trial court’s ruling that Wells Fargo, a mortgage lender with a security interest in a mineral lease, was solidarily liable with its borrowers (the mineral lessees) for a breach of the mineral lessees’ contractual and statutory obligations to produce in paying quantities, pay royalties, and respond to the mineral lessor’s demands regarding those obligations.  A detailed summary of that decision is available here.

On August 7, in a 3-2 decision, a panel of five Second Circuit judges denied the defendants’ application for rehearing. A vigorous dissent by Judge Bleich warns that, if maintained, the original opinion could have both “[d]evastating economic repercussions” for the lending industry, and “[s]erious and harmful impact on the oil and gas industry.”

The dissent states that the decision—i.e., holding a mortgagee solidarily liable with its mortgagor for the mortgagor’s actions—is legal error with far-reaching public policy consequences:

Solidary liability between a lender and its borrower/owner for its actions will have a calamitous effect in Louisiana on banking and the relationship between creditors and debtors. . . . [T]he opinion will have a most chilling effect on the financing of oil and gas operations, which in turn will have an adverse economic effect on government and business in our state.

Chief Judge Henry Brown, Jr., also dissented from the denial of rehearing and “strongly agree[d] with the written reasons assigned by J. Bleich.”

The defendants will have until September 7, 2017 to seek a writ from the Louisiana Supreme Court.

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Photo of Kelly Brechtel Becker Kelly Brechtel Becker

Kelly Becker is a litigator whose appellate practice regularly includes cases before the Louisiana courts of appeal, the Louisiana Supreme Court, and the United States Fifth Circuit Court of Appeal. Her practice focuses on complex litigation, including environmental, energy, and commercial matters.  Based…

Kelly Becker is a litigator whose appellate practice regularly includes cases before the Louisiana courts of appeal, the Louisiana Supreme Court, and the United States Fifth Circuit Court of Appeal. Her practice focuses on complex litigation, including environmental, energy, and commercial matters.  Based on her experience, Kelly is frequently retained to write amicus briefs on behalf of businesses and trade organizations in matters of industry-wide significance. Kelly is certified by the Louisiana Board of Legal Specialization as an Appellate Practice Specialist. She is one of only thirteen lawyers in the state of Louisiana with this designation.

Photo of Laura Springer Brown Laura Springer Brown

Laura Brown is an energy and environmental litigation attorney, with emphasis on high-stakes “legacy” and coastal land loss litigation.

Laura represents energy clients—from small midstream entities to the largest E&P companies in the world—in both state and federal court and in state regulatory…

Laura Brown is an energy and environmental litigation attorney, with emphasis on high-stakes “legacy” and coastal land loss litigation.

Laura represents energy clients—from small midstream entities to the largest E&P companies in the world—in both state and federal court and in state regulatory proceedings. In addition to her environmental practice, Laura enjoys diversifying her work with a variety of general litigation, appellate, and pro bono matters. She has written and presented on the nationally significant topic of Louisiana’s coastal litigation at conferences and CLEs in Louisiana and Texas.