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A recent decision from the Eastern District of Louisiana provides a mixed bag for pipeline companies or others whose operations involve canals.  Significantly, the decision from Judge Milazzo holds that during the existence of a right-of-way/servitude, Louisiana servitude law imposes a continuing duty to prevent canals from expanding and widening over time, unless unambiguous contractual language allows otherwise.

For the busy reader, Part I summarizes this holding; Part II questions it. Part III describes other noteworthy holdings from the decision.

I. The finding of a “duty to maintain” canals

In Vintage Assets v. Tennessee Gas Pipeline Company, coastal landowners sued pipeline operators for their alleged “failure to maintain” canals dredged pursuant to numerous rights-of-way granted from the 1950s to 1970s.  It was not disputed that now, decades later, the canals surpassed the widths described in the rights-of-way, which are still in existence.

The court began its analysis with the language of the contracts at issue, and found four of them to be ambiguous.  Specifically, the court found the contracts to be internally inconsistent because they allowed canals to be left “open,” but contemplated a maximum width of the canals or rights-of-way (e.g., by providing the right to lay pipeline in canals “not to exceed 40 feet in width”).

Relying on the case of Terrebonne Parish School Board v. Columbia Gulf Transmission Co., 290 F.3d 303 (5th Cir. 2002), the court held that contractual ambiguity in a servitude agreement requires resort to Louisiana’s suppletive servitude rules. Then, citing a dominant estate’s duty not to aggravate the servient estate, the court found it “self-evident that allowing a canal to widen such that it encroaches on the servient estate or erodes the servient estate into open water constitutes aggravation.” The court thus held that Louisiana servitude law supplies a duty to maintain the width of canals.  Furthermore, because the duty is a continuing one, prescription does not apply as long as the servitude exists.

II. The conspicuous absence of Castex

Central to the court’s ruling was its finding that, “as in Columbia Gulf, the agreements are ambiguous as to Defendants’ duty to maintain the canals and, indeed, evince a failure to contemplate the effects of erosion.” But interestingly, in this analysis of duty under Louisiana law, the court did not address the Louisiana Supreme Court case of Terrebonne Parish School Board v. Castex Energy, Inc., 893 So.2d 789 (La. 2005), which post-dates Columbia Gulf.   Castex, a mineral lease case, held that Louisiana mineral law does not supply a duty to restore canals that erode over time. Thus, absent an express contractual provision (or evidence of “unreasonable” operations), no restoration is required.

The contract in Castex granted the right to dredge canals, but said nothing about restoration.  However, the Louisiana Supreme Court did not interpret this silence to mean that the parties did not contemplate the effects of erosion.  Instead, the Court held:

The lessor may be considered to have given his assent to the “wear and tear” normally involved in exercising the rights granted. Here, the School Board’s express grant of the right to dredge canals constituted consent to or approval of the changes necessarily incident to dredging. Thus, the marshland here was “worn” and “torn” in precisely the manner the parties contemplated.

Id. at 800.

Although phrased in terms of a “duty to maintain” canals rather than to “restore” them, the complaints and the relief sought in Vintage Assets are strikingly similar to Castex, where the landowner complained about “widening of the canals and additional loss of coastal acreage to erosion.” Id. at 793.  Arguably, under Castex, the grant of a contractual right to dredge—whether under a lease or a right-of-way—should not impart duty to fight against the natural consequence of authorized activity absent an express contractual provision otherwise.  It is unknown whether the court in Vintage Assets considered Castex and found it distinguishable.

III. Some good news for operators

As mentioned earlier, the Vintage Assets ruling is a mixed bag. While the analysis of a “duty to maintain” is worrisome, the opinion contains some useful tools for operators facing litigation.

  • Trespass: The court dismissed the plaintiffs’ trespass claims, reasoning that “[a]llowing a canal to slowly widen outside of a right-of-way” was not the kind of intentional, affirmative act necessary to constitute a trespass.
  • Prescription after a “reasonable time” for performance: The court found that prescription had run on the plaintiffs’ claims for breach of some 1970s agreements that required construction of dams or bulkheads at the boundaries of the plaintiffs’ property. No particular time frame was specified for the construction, but Louisiana law requires that obligations without a specified term must be undertaken within a “reasonable time,” which the court found would have accrued and prescribed well before the suit was filed.
  • Language: While the court found a duty to maintain canal width for the “ambiguous” contracts, it also held that servitude agreements which granted operators the right to lay pipelines in a canal “which may be filled in or left open at the option of Grantee” had language that “unambiguously g[a]ve Defendants the right to leave the canals open, and therefore they are absolved of any obligation to backfill or . . . dam those canals.”
  • Tort: The court dismissed the plaintiffs’ tort claims, recognizing that Louisiana law distinguishes active and passive breaches of contract, and only an active breach can sound in tort. Here, the court held that plaintiffs’ allegations that defendants failed to perform an obligation of their right-of-way contract— the duty to maintain—constituted a passive breach of contract.  As a result, the plaintiffs did not state a viable tort claim.

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