• Louisiana's Third Circuit Court of Appeals Upholds District Court's Dismissal of Legacy Oil Field Plaintiff's Contract and Tort Claims In LeJeune Brothers, Inc. v. Goodrich Petroleum Co., L.L.C., et al.
  • April 21, 2008
  • Law Firm: Kean Miller Hawthorne D'Armond McCowan & Jarman, L.L.P. - Baton Rouge Office
  • The 16th Judicial District Court granted a well operator’s motion for summary judgment and exception of no right of action and dismissed all of a property owner’s claims in a pending legacy oilfield suit. The Louisiana Third Circuit Court of Appeal upheld the trial court’s decision in LeJeune Brothers, Inc. v. Goodrich Petroleum Co., L.L.C., et al., 2006-1557 (La.App. 3 Cir. 11/28/07), __ So. 2d __, 2007 WL 4178946, rehearing denied (1/9/2008).  

    LeJeune Brothers, Inc. (“LeJeune”), the property owner, claimed that the Goodrich Petroleum Company, L.L.C. (“Goodrich”), a company whose predecessor had operated an oil and gas well on the property at issue, was liable to LeJeune for damages arising in tort and in contract, punitive damages, as well as damages for claims arising under the Mineral Code. Goodrich’s predecessor had operated pursuant to a mineral lease that had been executed with LeJeune’s predecessor in interest. LeJeune claimed that it was only after the purchase of the property in 2000 that it discovered that the property was contaminated with waste resulting from oilfield exploration and production activities and LeJeune maintained that it had no knowledge that the property was contaminated prior to the purchase of the property.

    The operative mineral lease had been granted to Goodrich’s predecessor in 1970 by LeJeune's predecessor in interest. The well at issue was drilled in 1976 and was plugged and abandoned in 1987. In 1999, production from the mineral lease ceased entirely. LeJeune purchased the property on September 19, 2000 from their predecessor in interest who was the original mineral lessor. As part of the purchase, LeJeune’s predecessor reserved one-half (1/2) of the mineral rights. LeJeune filed suit in 2003.

    TRIAL COURT

    In dismissing LeJeune’s contract claims the trial court ruled that LeJeune: (1) was not a successor or assignee to its predecessor’s rights and obligations under the mineral lease;  (2) was not a beneficiary of a stipulation pour autrui contained in the mineral lease; and (3) was not entitled to bring claims for restoration for breach of implied obligations contained in the Mineral Code.

    In dismissing LeJeune’s tort claims the trial court found that LeJeune’s claims for damages arising in tort that belonged to its predecessor in interest had not been transferred to LeJeune. Thus, the trial court granted Goodrich’s exception of no right of action dismissing all of LeJeune’s tort claims.

    COURT OF APPEAL

    LeJeune’s motion for new trial was denied by the trial court and LeJeune appealed the following rulings from the trial court:

    1. The judgment granting Goodrich’s motion for partial summary judgment that dismissed LeJeune’s contract claims.
    2. The judgment granting Goodrich’s exception of no right of action that dismissed all tort claims filed by LeJeune.
    3. The judgment dismissing all of Goodrich’s claims (ruling followed granting of motion for partial summary judgment and was rendered at same time as granting of exception of no cause of action).

    On appeal, the Louisiana Third Circuit Court of Appeal upheld the trial court’s dismissal of all of LeJeune’s claims for damages, including its contract claims, tort claims, claims for punitive damages, claims based on obligations arising under the Mineral Code and unjust enrichment.

    Contract Claims

    In upholding the trial court’s dismissal of LeJeune’s contract claims, the Third Circuit explained that because the mineral lease expired two (2) years before LeJeune acquired an interest in the property, there was no way that the LeJeune’s predecessor in interest could have transferred any interest in the mineral lease to LeJeune. LeJeune’s predecessor was not a mineral lessor under the lease at the time he sold the property to Plaintiff. Therefore, LeJeune’s predecessor did not have any rights in the mineral lease to transfer to LeJeune. It is simply “impossible to transfer rights to an assignee under an expired mineral lease.” Id. at *4. Further, the Third Circuit upheld the trial court’s ruling that no stipulation pour autrui was created by the Lease at issue in this suit. To the contrary, the Lease at issue limited the Lessee’s liability to damages caused to the Lessor: “The Lessee shall be responsible for all damages to Lessor caused by Lessee’s operations.” Therefore, because the Lease provided rights only to the Lessor and because LeJeune was not a Lessor, LeJeune could not seek damages under the Lease as a third party beneficiary. 

    Tort Claims

    The Third Circuit upheld the trial court’s grant of Goodrich’s exception of no right of action based on the subsequent purchaser doctrine. The September 2000 sale from LeJeune’s predecessor to LeJeune did not contain a specific assignment of any claims for damage to the property. In reaching the conclusion that LeJeune did not acquire rights to sue in tort as a result of its purchase of the property, the Third Circuit denied LeJeune’s argument that the decision rendered in Hopewell, Inc. v. Mobil Oil Co., 00-3280 (La. 2/9/01), 784 So.2d 653, “overturned consistently held jurisprudence that the right to assert a claim for damages to land is a personal right, not a real right, and can only be transferred through a specific assignment of that right.” Id. at *7.   The Third Circuit explained that the Hopewell decision did not establish a new legal principle and reiterated that the rule in Prados v. South Central Bell Telephone Co., 329 So.2d 744 (La. 1975), applied- “the right to damages conferred by a lease was a personal right, not a property right, and as a personal right/obligation, it did not pass to the new owners of the land because there was no specific conveyance of it in the instrument of sale.” Id. a *7 (citing Hazelwood , 844 So.2d 380; May v. Texaco, Inc., 73 Fed.App. 78 (5th Cir. 2003); and Frank C. Minvielle, L.L.C. v. IMC Global Operations, Inc., 380 F.Supp.2d 755, 771 (W.D. La. 2004)).

    The Third Circuit also failed to follow LeJeune’s argument that because a mineral lease is classified as a real right under the Mineral Code that LeJeune acquired the benefits of the mineral lease when it bought the property. The Third Circuit explained that “a claim for damages, whether it arises under a predial lease or a mineral lease, is a personal right which must be specifically assigned to run with the property.” Id. at *8 (citing Prados, 329 So.2d at 751).   

    Further, the Third Circuit ruled that because LeJeune’s predecessor in interest was the landowner and the mineral lessor from the execution of the Lease until the Lease completely terminated, no mineral servitude was created. Therefore, the Third Circuit ruled that Goodrich was not liable for restoration damages under the obligations implied by Articles 22 or 122 of the Mineral Code.

    The Third Circuit also refused to find that Goodrich’s actions constituted a continuing tort explaining that where “‘a tort involves continuing injury, the cause of action accrues at the time the tortious conduct ceases.’” Id. at *8 (citing Grefer v. Alpha Technical, 02-1237 (La.App. 4 Cir. 3/31/05) 901 So.2d 1117, writ denied, 05-1590 (La. 3/31/06), 925 So.2d 1248 (which quotes In re Med. Rev. Panel of Moses, 00-2643 (La. 5/25/01), 788 So.2d 1173. The Third Circuit found that the tortious conduct ended in 1987 when the well site was plugged and abandoned.  The Third Circuit explained that “[w]hen a defendant’s damage-causing act is completed, the existence of continuing damages to the plaintiff, even progressively worsening damages, does not present successive causes of action accruing because of a continuing tort.” Id. at *9 (citing Derbofen v. T.L. James & Co., 355 So.2d 963 (1977), writs denied, 357 So.2d 1168, cert. denied, 439 U.S. 911, 99 S.Ct. 280, 58 L.Ed.2d 257 (1978)). Therefore, the Third Circuit ruled that as in Minvielle, 380 F.Supp2d at 765-66, “the tortious conduct was the disposal of the waste into plaintiff’s property, not the failure to remove it” and did not apply the continuing tort doctrine to allow LeJeune to bring claims in tort against Goodrich.

    Other Damages

    LeJeune had conceded that there were no issues of material facts with respect to their punitive damages claims under former La. C.C. 2315.3 and claims for mental anguish and the trial court dismissed those claims. No appeal of the dismissal of those claims was made by LeJeune.

    Further, the Third Circuit stated in denying LeJeune’s claims for unjust enrichment that such relief only is granted when no other express remedy exists. Id. at 12 (citing Mouton v. State, 525 So.2d 1136, 1142 (La.App. 1 Cir. 1988), writ denied, 526 So.2d 1112 (La. 1988) (other citation omitted)). The Third Circuit ruled that because a remedy for alleged oil and gas contamination is provided by law, LeJeune did not have a claim for unjust enrichment. Id.at 12.