You’re driving while texting your engineers about enhancing reservoir performance with LPG gel fracturing technology, and you rear-end a broken-down 15-year old Kia. The owner demands to be made whole. Is he entitled to the equivalent of another jalopy just as good as the one he had or, say, the brand-new Mercedes he says he needs? The Louisiana Supreme Court, in its latest pronouncement in a legacy pollution case, says he gets the jalopy.
In Eagle Pipe and Supply, Inc. v. Amerada Hess Corporation, a plaintiff who purchased property after environmental damage had been done did not have a right of action against those who caused the damage unless his seller specifically transferred that right in the Act of Sale. That right was not transferred to Eagle. Thus, the subsequent purchaser doctrine deprived the plaintiff of its ”Mercedes”. The court also rejected the plaintiff’s contention that the continued pollution was an ongoing tort, denying that cause of action. The court’s view was that the pollution was a result of past activities and not ongoing action in and of itself.
On a practical level, the rationale of the majority of the court is that the buyer is presumed to know the overt condition of the property when he buys it and to take that condition into account in agreeing to the sales price. Here, the plaintiff made an as-is, where-is sale.
For those wondering how different the civil law can be from the common law, the decison features a thorough analysis of Louisiana law pertaining to the transfer of property. Welcome to the difference between jurisprudence constante (judicial decisions are persuasive) and stare decisis (decisions are authoritative); obligations that are personal (a right that can be enforced by the obligee only), heritable (the right can be transferred) and real (such as servitudes and other aspects of ownership ); and stipulations pour autrui (think third party beneficiary in common law).
The Louisiana Mineral Code requires a servitude owner to return property used in oil and gas activities to its original condition after use has been terminated. Could there be a different result with respect to liability of a servitude owner to the surface owner? The extent of that liability is not clear. Does the subsequent purchaser doctrine also bars claims against
On a practical level, the rationale of the majority of the court in this 4-3 decision is that the buyer is presumed to know the overt condition of the property when he buys it and to take that condition into account in agreeing to the sales price. Here, the plaintiff made an as-is, where-is sale.servitude owners under the Mineral Code where the plaintiff knew what he was purchasing and made an as-is-where-is sale? If the property must be returned to its original condition, should it be the condition when the plaintiff purchased the property? Finally, when does the duty to restore the surface accrue? Not until operations are complete?
This decision does not signal the end of this debate. Eagle is one of many similar cases working their way through the Louisiana courts. Legislation on this subject has passed the legislature and will be the subject of another post soon.