The Third Circuit Court of Appeal in Louisiana issued an opinion on December 11, 2013, that may have a profound impact on litigation related to contamination from historic oil and gas exploration and production operations in the State. In Dietz v. Superior Oil Company, No. 13-657, slip op. (La. App. 3 Cir. Dec. 11, 2013), the court affirmed the dismissal of a landowner's claims of "oil and gas contamination from numerous operators under multiple leases on noncontiguous pieces of property" id. at 9, concluding that the claims were improperly cumulated due to a lack of community of interest between the joined mineral lessees. This holding not only implicates how claims for oil and gas-related contamination will be litigated, but also where those claims may be litigated.
In Dietz, the family-member plaintiffs owned two non-contiguous pieces of property in Acadaia Parish, Louisiana. One piece was subject to a mineral lease that had been granted to several oil and gas companies over the years, including ExxonMobil, Superior Oil, Mobil Exploration and Production North America, Inc., and Big Energy, L.L.C. The other property had a separate mineral lease chain that included Chevron U.S.A. Inc. and Carla Oil Co. The plaintiffs filed a single suit in 2007 against the mineral lessees under the two leases, asserting that the lessees had engaged in conduct that resulted in extensive contamination to the properties. Ultimately, the trial court dismissed the plaintiffs' claims, holding that the claims were premature because the plaintiffs had not given pre-suit notice of their property contamination claims and that there was no community of interest among the cumulated actions as required under Article 463 of the Louisiana Code of Civil Procedure.
The Third Circuit Court of Appeal's holdings on prematurity and improper cumulation should be of interest for all oil and gas lessees in Louisiana, past and present. The court gave little attention to the trial court's basis for granting the defendants' exception of prematurity: a reliance on an inapplicable Mineral Code provision to require pre-suit notice when no notice was necessary. The significance of the court of appeal's holding on the prematurity issues lies in the more than three pages worth of dicta in which the court considered whether a suit for restoration of contaminated property can be brought during the term of the lease. Relying on Marin v. Exxon Mobil Corp., 48 So. 3d 234 (La. 2010), a case whose interpretation continues to be the subject of much debate among Louisiana litigants, the court stated that "the Louisiana Supreme Court has, in [its] view, definitively decided this issue." Dietz, slip op., at 5. The court of appeal's deference to the Marin ruling is not at all surprising. Should Dietz find its way to the Louisiana Supreme Court, however, there can be little doubt that this statement by the court of appeals will be put to the test.
The more significant pronouncement from the court of appeals in Dietz arises out of the trial court's grant of the defendants' exception of improper cumulation. Article 463 of the Louisiana Code of Civil Procedure provides that two or more parties may be joined in the same suit as plaintiffs or defendants if, among other things, "[t]here is a community of interest between the parties joined." According to Louisiana precedent, "community of interest is present between different actions or parties, where enough factual overlap is present between the cases to make it commonsensical to litigate them together." Albarado v. Union Pac. R.R. Co., 787 So. 2d 431, 438 (La. App. 4 Cir.), rev'd on other grounds, 796 So. 2d 666 (La. 2001). The court of appeal rejected the plaintiffs' argument that community of interest existed because "the defendants all engaged in similar negligent conduct." Dietz, slip op., at 9. Rather, the court focused on "the extensive time period of operations, the different lease obligations, and the specific facts that would need to be proven to show liability for each operator" to support its conclusion that there was not sufficient factual overlap between the challenged actions of the defendants to make it "commonsensical to litigate them together." Id.
The potential ramifications of the court's ruling are what make this case significant to the oil and gas industry. Obviously, plaintiffs lawyers would prefer to gather up as much land as possible in a single action for restoration damages; the potential recovery is likely to be greater and it is more convenient and cost-efficient to litigate a single case rather than numerous individual actions each with its own set of facts to discover and present. An outcome that requires plaintiffs lawyers to litigate separate actions against individual defendants based on specific conduct during specific time periods allegedly causing specific damage is, by itself, a significant victory for the oil and gas industry.
But, in Louisiana, where defendants generally view federal court as a much-favored venue over state court, the Dietz ruling may have a profound effect on the matter of jurisdiction. The Dietz ruling, in the proper situation, counters a plaintiff's attempt to defeat federal diversity jurisdiction by cumulating claims to ensure inclusion of a non-diverse defendant. The court of appeal's recognition that claims involving oil and gas contamination require fact-specific inquiries of the leases and the lessees' particular conduct means that a plaintiff cannot escape federal subject matter jurisdiction by combining a claim against a diverse defendant under one lease with an action against a non-diverse defendant under a separate lease. At the very least, the Dietz ruling will require plaintiffs lawyers to be more creative in how they attempt to craft a lawsuit.
An en banc review is likely, as one judge dissented from the court's ruling on improper cumulation, contending that where, as in Dietz, only two tracts of land were involved, the tracts were close to one another, and the plaintiffs claimed that the same groundwater plumes affected both tracts, there was a sufficient community of interest to satisfy the requirements of Article 463. The dissent's view, relying on the specifics of the case before it, would do little to guide future litigants, as it does not endeavor to identify a standard for determining at which point a community of interest ceases to exist.
Ultimately, the issue appears ripe for consideration by the Louisiana Supreme Court. Given the amount of historic and on-going oil and gas exploration and production operations throughout the State, much hinges on how Article 463 is to be applied. A decision upholding the Dietz dismissal on improper cumulation grounds could provide the oil and gas industry with a much-needed advantage with respect to how and where contamination-related claims are to be litigated.