United States Fifth Circuit Court of Appeals Finds That Louisiana Citizen Suit Legacy Claims Can be Heard in Federal Court

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In its recent decision in Grace Ranch, L.L.C. v. BP America Production Company, et al., No. 20-30224 (5th Cir. Feb. 24, 2021), the United States Court of Appeals for the Fifth Circuit addressed a question that has increasingly become a sticking point in Louisiana “legacy” cases:  whether claims brought under a Louisiana citizen suit provision for alleged violations of state environmental regulations can be heard in federal court. This decision is likely to have far-reaching consequences for Louisiana legacy litigation, where courts have seen a recent uptick in claims by landowner-plaintiffs brought under the citizen suit provision of Louisiana Revised Statute 30:16, seeking to have their property remediated due to alleged contamination by historical oil and gas operations.

The Grace Ranch opinion arose out of the second lawsuit by Grace Ranch L.L.C. (Grace Ranch), for alleged contamination of its property. In a prior suit, Grace Ranch sued BP America Production Company (BP) and BHP Petroleum Americas (BHP) in contract and tort for alleged contamination of Grace Ranch’s land. That first suit was dismissed pursuant to Louisiana’s “subsequent purchaser” doctrine. Grace Ranch, LLC v. BP Am. Prod. Co., 2017-1144 (La. App. 3 Cir. 7/18/18), 252 So. 3d 546, writ denied, 2018-1655 (La. 2/18/19), 264 So. 3d 450. Nearly two years after the dismissal of that initial suit, Grace Ranch sued BP and BHP again in state court under the citizen suit provision of Revised Statute 30:16. That statute allows a party in interest adversely affected by a violation of the laws of conservation to file its own lawsuit. Grace Ranch sought an injunction ordering the defendants to remediate its property. The defendants removed the case to federal court on diversity jurisdiction grounds given that Grace Ranch is a citizen of Louisiana, and BP and BHP are residents of Texas and Delaware. Grace Ranch opposed removal, arguing that there was no diversity of citizenship because the State of Louisiana was the real party in interest to its citizen suit claim. Long ago the Supreme Court held that a State has no citizenship for purposes of evaluating federal diversity jurisdiction. Alternatively, Grace Ranch argued that the district court should abstain from hearing the case under the Burford doctrine, which applies when federal court adjudication of claims may result in entanglement with state efforts to implement important policy programs. After determining that it had subject matter jurisdiction over the citizen suit claim, the district court elected to abstain under Burford, and remanded the case to state court.

On appeal by BP and BHP, the Fifth Circuit noted that this unique citizen suit provision “raises questions that would make for a tough Federal Courts exam.” This is because “[r]esolution of three issues—diversity jurisdiction; appellate jurisdiction; and Burford abstention—will determine where this case should be heard.” The Court then tackled each issue in turn.

With respect to diversity jurisdiction and, specifically, whether the State was a party to Grace Ranch’s lawsuit, the question turned on the interpretation of 30:16 which provides for a “[s]uit by [a] party in interest upon [the] [C]ommissioner [of Conservation]’s failure to sue.” The Fifth Circuit observed that while some Louisiana laws provide, either expressly or impliedly, for suits on behalf of the State by private entities, “Section 30:16 does neither.” The Court explained: “A private party suing under section 30:16 does so on its own behalf. The statute authorizes a ‘person in interest adversely affected’ by a violation of state conservation law to ‘bring suit to prevent any or further violations.’ Nowhere does the text signal that section 30:16 plaintiffs vindicate ‘the State’s interest’ through their suits or that these plaintiffs have been deputized to act ‘on the part of’ the State.” And while 30:16 provides for a procedural substitution of the Commissioner at the end of the suit if injunctive relief is granted, “[t]he State’s involvement in th[e] suit is contingent on the court’s decision to grant an injunction. Courts can resolve section 30:16 litigation without enjoining the defendant, either because an injunction is unwarranted or because an affirmative defense bars relief . . . . In those cases, the State never joins the suit and a final judgment must be entered in its absence.” Because the State was “not a proper party or real party in interest,” the Court held that federal courts have subject matter jurisdiction over these claims.

Next, the Court considered whether it had appellate jurisdiction to review the district court’s abstention ruling. While 28 U.S.C. § 1447(d) generally provides that “an order remanding a case to the State court from which it was removed is not reviewable on appeal,” the United States Supreme Court explained in Thermtron Prods., Inc. v. Hermansdorfer, 423 U.S. 336 (1976), that only certain types of remand orders—those addressed by subsection 1447(c)—are subject to 1447(d)’s prohibition. The current version of 1447(c) pertains to remands for lack of subject matter jurisdiction and remands for any nonjurisdictional “defect.” Because a remand due to abstention is neither based upon a lack of subject matter jurisdiction nor on any sort of “defect,” remands on abstention grounds are subject to appellate review.

Finally, the Fifth Circuit tackled the question of abstention, independently analyzing whether Burford’s five-factor test weighed in favor of abstention here. The Court explained that while some factors suggested that abstention could be warranted—for example, the case involves a state law claim, potentially presented an unsettled question of Louisiana law, and implicated a State interest in remediating contaminated property—those factors were insufficient to warrant abstention. The Court ultimately determined that federal resolution of the citizen suit claim will not disrupt Louisiana’s efforts to establish a coherent policy for remediation of contaminated lands, and if there are unresolved state law issues of statutory interpretation, the federal courts are equipped to interpret the statute just as a state court would do. Thus, the Fifth Circuit held that these claims “do not involve an integrated state regulatory scheme in which a federal court’s tapping on one block in the Jenga tower might cause the whole thing to crumble.”

A copy of the decision of the Fifth Circuit can be found here. BP was represented at the trial court and the U.S. Fifth Circuit by Liskow attorneys Kelly Brechtel Becker, Kathryn Gonski, and George Arceneaux. BHP Petroleum (Americas), Inc. was represented at the trial court and the U.S. Fifth Circuit by Liskow attorneys R. Keith Jarrett and Kelly Scalise. Ms. Becker argued to the U.S. Fifth Circuit for both defendants.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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