By: Alex LeJeune
Over the last ten years, Louisiana appellate courts have grappled with the problem of how to recompense landowners who have purchased property which has been contaminated or damaged as a result of prior mineral operations and other consumption-based land activity. As mineral production increases, so does land and water pollution, meaning the problem is becoming increasingly prevalent.Legally, the issue is whether subsequent purchasers of land even have a cause of action against third parties for property damages sustained before the sale. At first thought it seems reasonable that one who causes harm should bear the responsibility for resulting damages, but Louisiana courts have taken a different approach in applying the law. Under the subsequent purchaser doctrine, courts have denied ensuing landowners the right to sue the parties who have contaminated the land under a strict analysis of Louisiana tort and property law.
Subsequent Purchaser Doctrine: A Product of the Courts
The subsequent purchaser doctrine is a jurisprudential rule which holds that an owner of property has no right or actual interest in recovering from a third party who has inflicted damage on the property before the purchase, absent an assignment or subrogation of rights belonging to the owner of the property when the damage was inflicted.
The leading authority is the Louisiana Supreme Court case Eagle Pipe and Supply Inc. v. Amerada Hess Corp. In that case, plaintiffs purchased property in Lafayette in 1988 from the defendants.Prior to that sale, defendants had leased the premises to a third company, Union Pipe, which operated a pipe yard and pipe cleaning facility on the property.During Union Pipe’s cleaning process, radioactive material leaked onto the surface of the pipe yard, contaminating the soil where plaintiffs sought to conduct business.Plaintiffs did not know of the contamination at the time of purchase.They only became aware of the pollution after the Louisiana Department of Environmental Quality conducted a field review of the premises and reported plaintiffs in violation of several environmental regulations.Plaintiffs thereafter sued the Defendant-owners, Union Pipe, and many other companies, asserting, among many others, a claim for damage to the property which occurred before Eagle Pipe was the owner.
The Court denied plaintiff’s claims for damages. The redhibition claim was granted, but the court ultimately held that Eagle Pipe did not belong to the class of persons to whom the law grants a cause of action for remediation (negligent damage to property).In denying this claim, the Court reasoned that the right to sue for damage is a personal right that belongs to the landowner at the time the damage occurred, unless the right has been assigned or subrogated to the subsequent purchaser of the land.The remedy is limited to redhibition or rescission of the sale with no right to sue the alleged tortfeasor for previously inflicted damage.In other words, the right to sue for damages to property inflicted by a prior owner or third party does not “run with the land.”
Eagle Pipe’s holding has sparked inquiry into the circumstances that trigger the subsequent purchaser rule. One of the more popular issues is whether the doctrine applies in cases where damage to property was caused by former mineral lessees. The property damage in Eagle Pipe was not the result of mineral activity.Following this decision, plaintiff-landowners have consistently argued that Eagle Pipe’s holding does not apply to damages caused by parties holding rights to explore for oil and gas under mineral leases or other instruments.The argument is that the nature and source of the rights under a mineral lease are different than those rights under a commercial or residential lease—namely, that mineral leases contemplate real rights, whereas all other leases contemplate personal rights.Louisiana appellate courts have not been persuaded by this argument.
In Global Marketing Solutions, L.L.C. v. Blue Mill Farms, Inc., plaintiffs filed a petition for damages to property caused by defendant (former lessee of premises) due to drilling operations that polluted the land.The plaintiffs argued that Eagle Pipe was distinguishable from their case because the subsequent purchaser doctrine did not operate to bar their claims for damages since rights under a mineral lease are real in nature.The First Circuit held that the subsequent purchaser doctrine applies equally in the context of mineral leases in that all leases convey personal rights only.As well, in Guilbeau v. Hess Corporation, a property owner, on which oil and gas activity had been conducted prior to the owner’s purchase, brought action against an oil and gas exploration company asserting claims for damages stemming from contamination caused by the company’s operations.The Fifth Circuit, in reliance on Louisiana property law and jurisprudence, held that a Louisiana property owner—absent an assignment or subrogation of rights—does not have a cause of action against a third-party lessee of mineral rights for damages inflicted on the property prior to purchase.
Global Marketing and Gilbeauare just two of the many appellate cases since Eagle Pipe that have prevented property damage recovery based on the subsequent purchaser doctrine.Given the widespread acceptance among Louisiana appellate courts, there is strong support that the doctrine’s application to mineral rights is here to stay. Yet, regardless of how settled the issue of law may seem, plaintiff-landowners have continued to argue otherwise.Landowners cite the classification of mineral rights, principles governing limited personal servitudes, and other Mineral and Civil Code provisions as authority.It is also important to note that the Supreme Court still has not addressed the issue of whether the rule applies in the mineral context. In a footnote to Eagle Pipe, the Court stated, “because not factually relevant, we express no opinion as to the applicability of our holding to fact situations involving mineral leases or obligations arising out of the Mineral Code.”
The Louisiana Supreme Court’s “cliffhanger” in Eagle Pipeconcerning the case’s applicability in the mineral context has been largely resolved. The appellate caselaw is rather clear on the matter.However, the doctrine’s application provokes other questions about whether it is a sufficient rule in the abstract.
But Is This the “Right Result?”
According to courts and defendants alike, it appears that the legal principles supporting the subsequent purchaser doctrine ring sound under Louisiana’s property and mineral regime—but does that make the doctrine’s application equitable?
One interesting issue in this context is whether the relief of redhibition—alone—is sufficient to appease the harm. Recall that in Eagle Pipe, and in several cases thereafter, subsequent purchasers were often granted relief in redhibition as to a recovery of their purchase price or a diminution in value of the price paid for the land.This is intended to put the buyer back in his original position prior to the purchase.However, limiting the relief in these types of cases to redhibition may overlook the potential for substantial future profit on the property for which the subsequent purchaser may be deprived. The ability to develop and forge earnings from land is essential to many companies in the fields of energy, agriculture, and development. From a plaintiff’s perspective, redhibition may not be adequate to satisfy the loss they feel they have sustained, and may be a relief that completely disregards their very intention in buying the property.
Other considerations involve real estate concerns and general notions of accountability. While the right to sue may not “run with the land,” long-term property damage does. Environmental pollution, as well as overall depletion of the land, can have negative effects on the commerciality of property—in severe cases, effectively taking property off the market entirely.As such, the lasting economic effects of land-use and contamination do not seem to be contemplated by application of the subsequent purchaser doctrine.
That being said, there is also the question of should prior operators, such as mineral lessees, be held responsible for arguably depriving sometimes large portions of property of economic viability and use for years to come? This normative question is beyond the scope of this post. The question also goes to the heart of the distinction between rights under mineral leases, servitudes, and royalties.Nevertheless, the question is an important one to ask as the subsequent purchaser doctrine continues to be cited by courts in denial of making those who cause lasting harm to property pay for it. At the end of the day, someone has to restore these properties (like the plaintiff in Eagle Pipe). Going forward, we should seriously question whether we want to let those who caused damage off the hook for a bill that continues to charge as it goes down the chain of title.
Louisiana courts have consistently held that property owners cannot recover in tort for property damage that was inflicted prior to their purchase of the property. Precedent aside, it is clear that subsequent purchasers are not satisfied with the rule’s application in the mineral context. In addition, there is reason to question the efficacy and integrity of the rule in terms of how it apportions liability for those who have caused lasting damage, and how it impacts Louisiana property as a whole. It should be interesting to see how the subsequent purchaser doctrine develops in the years to come.
Adam Peltz & Nicole Saunders, Six ways oil and gas development can contaminate land and water (and what to do about it), Environmental Defense Fund: Blog (Dec. 29, 2017);http://blogs.edf.org/energyexchange/2017/12/29/six-ways-oil-and-gas-development-can-contaminate-land-and-water-and-what-to-do-about-it/.
Eagle Pipe and Supply, Inc. v. Amerada Hess Corp., 2010-2267, p.8 (La. 10/25/11), 79 So.3d 246, 257.
Id. at 253.
Id. at 254.
Id. at 284.
Kristen Lausten, Defending Louisiana Environmental Regulation: Louisiana Court of Appeals Rejects Several Legal Challenges to Subsequent Purchaser Doctrine with Respect to Mineral Leases, Lausten: Legal Blog (2019);https://kristinlausten.com/defending-louisiana-environmental-litigation-louisiana-court-of-appeals-rejects-several-legal-challenges-to-the-subsequent-purchaser-doctrine-with-respect-to-mineral-leases/.
Eagle Pipe and Supply, Inc. v. Amerada Hess Corp., 2010-2267 (La. 10/25/11), 79 So.3d 246, 250.
Louisiana Supreme Court Denies Plaintiff-Landowner’s Writ Application in Legacy based Dismissed on the Basis of the Subsequent Purchaser Doctrine, Liskow Lewis: Blog (June 5, 2015); https://www.liskow.com/News-Insights/94415/Louisiana-Supreme-Court-Denies-Plaintiff-Landowners-Writ-Application-in-Legacy-Case-Dismissed-on-the-Basis-of-the-Subsequent-Purchaser-Doctrine.
SeeLa. Civ. Code art.667 (1996); see also La. Rev. Stat. Ann. § 31:11, 134 (2006)(for the proposition that mineral leases confer real rights).
2013-2132, p. 4 (La. App. 1 Cir. 9/19/14), 153 So.2d 1209, 1210.
Id. at 1214-17.
Id. at 1216.
No. 16-30971 (5th Cir. Apr. 18, 2017), 854 F.3d 310.
Id. at 314-15.
Litel Explorations, L.L.C. v. Aegis Development Company, L.L.C., et al., 2020-373 (La. App. 3 Cir. 11/12/20), 307 So.3d 1087; Grace Ranch, LLC, v. BP America Production Co., 2017-1144 (La. App. 3 Cir. 7/18/18), 252 So.3d 546; Lejeune Bros., Inc. v. Goodrich Petroleum Co., L.L.C, 2006-1557 (La. App. 3 Cir. 11/28/07), 981 So.2d 23.
Becker, Roth, & Gonski, Louisiana’s Third Circuit (Again) Affirms the Applicability of the Subsequent Purchaser Doctrineto Mineral Leases, Liskow Lewis: The Energy Law Blog (July 18, 2018); https://www.theenergylawblog.com/2018/07/articles/appellate/louisianas-third-circuit-again-affirms-the-applicability-of-the-subsequent-purchaser-doctrine-to-mineral-leases/.
79 So.3d 246, 281 n. 80.
“. . .there are certain principles of human conduct, awaiting discovery by human reason, with which man-made law must conform if it is to be valid” H.L.A. Hart, The Concept of Law,186 (Paul Craig eds., 3rd ed. 2012).
Eagle Pipe and Supply, Inc. v. Amerada Hess Corp., 2010-2267, p.8 (La. 10/25/11), 79 So.3d 246, 284; see alsoLa. Civ. Code art.2531 (1993).
see alsoLa. Civ. Code art.2531 cmt. a (1993).
See generallyThomas O. Jackson, The Effects of Environmental Contamination on Real Estate: A Literature Review, Journal of Real Estate Literature (2001); https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.1047.3263&rep=rep1&type=pdf.
See generally La. Rev. Stat. Ann. § 31:21, 31:80, 31:105 (1975).