Western District Rejects Disgorgement of Profits Claim for Pipeline Trespass

Liskow & Lewis

In Mary v. QEP Energy Company, the Western District of Louisiana rejected, for the second time in this case, Plaintiffs’ claims seeking a disgorgement of QEP’s profits.  QEP was the lessee of a mineral lease covering Plaintiffs’ property, but because it wanted to transport off-site gas across their property, QEP also obtained a pipeline servitude across Plaintiffs’ land. A dispute arose after the pipeline contractor “cut the corner” of the servitude when laying the pipeline, resulting in approximately 45 feet of pipeline being buried outside the designated servitude.  Plaintiffs asserted a number of claims, all of which were resolved except their claims seeking a disgorgement of profits.

Upon remand from the Fifth Circuit, the district court examined each of the causes of action asserted by Plaintiffs to determine whether any of them supported a disgorgement of profits remedy. As to Plaintiffs’ claim under the Civil Code articles on accession, the District Court found those articles could not lead to an award of disgorgement. The gas extracted from the wells is not a “fruit” under Louisiana law. Moreover, the “so-called fruits”  from which the Plaintiffs seek to profit were actually gas produced on adjacent property, so accession did not apply.

As to Plaintiffs’ tort claims for trespass, the district court analogized the provisions of the Civil Code on contractual damages to tort cases, and held that Plaintiffs offered no evidence which supported a finding that QEP acted in bad faith; i.e. intentionally or maliciously under Civil Code art. 1997.  In fact, the district court emphasized that QEP was cautious with respect to its use of Plaintiffs’ property and often paid them additional sums to ensure rights that may not have been provided by the mineral lease.  Moreover, the district court found disgorgement is not an available remedy under Louisiana tort law for trespass.  As to the claim for breach of the servitude agreement, the district court held that Civil Code art. 1997 also provided the applicable standard for bad faith of obligors, and that disgorgement is not an available remedy for breach of contract. Finally, the district court struck those portions of Plaintiffs’ brief which sought to raise issues which had been resolved by an earlier settlement agreement.  Accordingly, the district court granted summary judgment in favor of QEP as to all of Plaintiffs’ claims.  A copy of the district court’s opinion can be found here.

This case was handled by Paul Adkins of Liskow’s Baton Rouge office. Read the opinion here.

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