• Coastal Erosion Lawsuit against the Oil and Gas Industry Dismissed
  • March 17, 2015 | Author: Tyler Moore Kostal
  • Law Firm: Kean Miller LLP - New Orleans Office
  • A federal judge dismissed the lawsuit that the New York Times referred to as “The Most Ambitious Environmental Lawsuit Ever” on February 13, 2015, with a finding that the plaintiffs did not state a viable claim for relief.

    The Board of Commissioners of the Southeast Louisiana Flood Protection Authority-East (“SLFPA-E” or “Authority”) filed a lawsuit in the Civil District Court in Orleans Parish, Louisiana, against more than 90 oil and gas and pipeline companies on July 24, 2013. The SLFPA-E filed the suit individually and as the Board governing the Orleans Levee District, the Lake Borgne Basin Levee District, and the East Jefferson Levee District, contending that it manages and is responsible for more than 150 miles of levees, 50 miles of floodwalls, and numerous drainage structures, pump stations, and floodgates in an area it described as the “Buffer Zone,” which includes coastal wetlands in eastern New Orleans, the Breton Sound Basin, and the Biloxi Marsh. The SLFPA-E alleged that historical and current oil and gas and pipeline activities in the Buffer Zone, including the construction and use of oil and gas canals and pipeline canals, caused “direct land loss and increased erosion and submergence in the Buffer Zone, resulting in increased storm surge risk, attendant increased flood protection costs, and, thus, damages” to the Authority.

    With this lawsuit, the SLFPA-E sought damages and injunctive relief “in the form of abatement and restoration of the coastal land loss” including backfilling and revegetating all canals, “wetlands creation, reef creation, land bridge construction, hydrologic restoration, shoreline protection, structural protection, bank stabilization, and ridge restoration.”

    On August 13, 2013, the oil and gas defendants removed this case from state court to the United States District Court for the Eastern District of Louisiana. On September 10, 2013, the SLFPA-E filed a motion to remand the matter to state court. On June 27, 2014, the federal court denied the SLFPA-E’s motion to remand. As a result, this matter continued in federal court, and the court considered a number of dispositive motions.

    On February 13, 2015, the federal judge dismissed the wetlands damage lawsuit against 88 remaining oil and gas defendants. At issue before the court was the defendants’ motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure. Rule 12(b)(6) provides that an action may be dismissed “for failure to state a claim upon which relief can be granted.” Therefore, for the Authority’s action to survive, its petition needed to contain sufficient factual matter to state a claim for relief that is plausible on its face. A claim is considered facially plausible when the pleaded facts allow the court to draw a reasonable inference that the defendants are liable for the alleged misconduct. All parties extensively briefed the issues, and the court heard oral argument. The court then applied this legal standard to each of the causes of action brought by the SLFPA-E in its petition—(1) negligence, (2) strict liability, (3) natural servitude of drain, (4) public nuisance, (5) private nuisance, and (6) breach of contract as a third party beneficiary.

    To state a claim for negligence, a plaintiff must establish five elements: duty, breach, cause-in-fact, scope of liability, and damages. The Authority failed to show the threshold element of a legal duty owed by defendants. Finding no legal duty under state law, the court reiterated its prior finding that oil and gas companies do not have a duty under Louisiana law to protect members of the public from the results of coastal erosion allegedly caused by operators that were physically and proximately remote from the Authority or its property. The court also found that the federal statutes on which the SLFPA-E relied to establish the requisite standard of care—namely the Rivers and Harbors Act, the Clean Water Act, and the Coastal Zone Management Act—were not intended to protect the Authority. Because the Authority failed to demonstrate that defendants owe a specific duty to protect it from the results of coastal erosion allegedly caused by defendants’ oil and gas activities, the court concluded that the Authority did not state a viable claim for negligence.

    A claim for strict liability also requires a showing of a legal duty owed to the plaintiff. Because the court already determined that defendants do not owe a legal duty to the SLFPA-E to protect it from the results of coastal erosion, the court found that the Authority did not state a viable claim for strict liability.

    A claim for natural servitude of drain involves the interference with the natural drainage of surface waters over property—i.e., from an estate situated above (dominant estate) to an estate situated below (servient estate). The owner of the lower estate may not do anything to prevent the flow of the water, and the owner of the higher estate may not do anything to render the flow more burdensome. The SLFPA-E alleged that defendants possessed temporary rights of ownership in the lands they dredged to create the canal network and that those lands constituted a dominant estate from which water flowed onto its servient estate. However, the Authority failed to show that a natural servitude of drain may exist between nonadjacent estates with respect to coastal storm surge. As such, the court concluded that the Authority did not state a viable claim for natural servitude of drain.

    The parties and the court addressed the Authority’s public and private nuisance claims together. The obligations of neighborhood are the source of nuisance actions in Louisiana. Generally, the owner of immovable property has the right to use the property as he pleases, but the owner’s right may be limited if the use causes damage to neighbors. A claim for nuisance requires a showing of (1) a landowner (2) who conducts work on his property (3) that causes damage to his neighbor. The court determined that the Authority failed to show sufficiently that it is a “neighbor,” within any conventional sense of the word, to any property of defendants. To recover, the SLFPA-E must have some interest in an immovable “near” the defendant landowners’ immovable property; yet, it did not allege physical proximity of the servient and dominant estates whatsoever. Moreover, nuisance claims after 1996 require the additional showing of negligence, except for damages resulting from pile driving or blasting with explosives. Because the Authority did not allege that defendants engaged in pile driving or blasting with explosives, and it failed to state a claim for negligence upon which relief may be granted, the court dismissed the Authority’s claims for public and private nuisance.

    For its breach of contract claim, the SLFPA-E characterized some of the dredging permits at issue as “contracts” between defendants and the US Army Corps of Engineers to maintain and restore. The Authority contended that it is a third party beneficiary of those contracts; however, the Authority failed to present any authority suggesting that a dredging permit issued by the federal government is a contract. The court noted that neither a permit nor a license is a contract. Therefore, the court concluded that because the dredging permits do not constitute contracts, the third party beneficiary doctrine is not applicable. The court additionally found that even if the permits were construed as contracts, the Authority did not establish that it is an intended beneficiary under the terms of the permits. To be a third party beneficiary to a government contract, a third party must be an intended, rather than an incidental, beneficiary. As such, the court found that the Authority failed to state a claim upon which relief may be granted for breach of contract as a third party beneficiary.

    Because the SLFPA-E did not state a viable claim for relief, the court granted defendants’ motion to dismiss and dismissed the Authority’s claims against all remaining defendants with prejudice. The SLFPA-E filed an appeal from this ruling, and the court’s prior remand ruling, with the Fifth Circuit on February 20, 2015.

    The dismissal of this lawsuit by the federal court may not be the final word on coastal erosion lawsuits in Louisiana. As noted, the SLFPA-E has appealed the court’s dismissal to the U.S. Court of Appeals for the Fifth Circuit. Further, local governmental bodies and private landowners have filed over 30 additional lawsuits against various oil and gas and pipeline entities for related claims.