A Louisiana Legacy Case Finds Its Way Into Federal Court

In the past, some oil and gas operators in Louisiana would periodically dispose of their byproducts in unlined pits, which in some instances could allow for toxic waste to leech into the soil and groundwater.  Although this practice was ultimately banned in the mid-1980s, Louisiana landowners who came into possession of these contaminated properties became known as “legacy plaintiffs.”

Under Louisiana’s “subsequent purchaser doctrine,” landowners who acquired property after it was contaminated typically did not have the right to sue the oil and gas operators for that damage.  As a result, plaintiffs’ remaining remedy was to enforce Louisiana’s statutory remedies for their land.

Louisiana law allows private citizens to sue to enforce state conservation laws, but any injunction they receive is entered in favor of the Louisiana Commissioner of Conservation.  See La. Rev. Stat. § 30:16.  Grace Ranch was a landowner who acquired property after it had allegedly been contaminated by BP.  Grace Ranch first sued BP for the alleged damages caused by BP’s activities, but its case was dismissed under the subsequent purchaser doctrine because Grace Ranch did not own the property when the alleged contamination occurred.  Left without other options, Grace Ranch sued BP in Louisiana state court under § 30:16 to enforce the State’s conservation laws.  Specifically, Grace Ranch sought an injunction ordering BP to remediate the contamination on its property.

BP removed the case to federal court on grounds that the court had diversity jurisdiction over the case.  Simply put, federal courts may normally hear matters involving questions of pure state law when all plaintiffs are citizens of different states from all the defendants.  Grace Ranch opposed removal and asked the federal court to remand the case to state court.  Grace Ranch argued that the federal court lacked the ability to hear the case and that, even if it could legally entertain the case, it shouldn’t.  Plaintiffs in Louisiana legacy lawsuits notoriously prefer state court over federal court: plaintiffs’ lawyers prefer the informal, slower pace of state court with familiar, elected judges and looser enforcement of procedural rules.  Plaintiffs in these suits also are tirelessly attempting legal theories that undercut the subsequent purchaser doctrine.

The federal court ultimately decided that, although it had jurisdiction to hear the case, it would exercise its discretion to remand the case back to state court anyway.  BP appealed.

In addressing the discretionary remand of the case back to state court, the Fifth Circuit delved into the complex procedural questions these issues raised, ultimately deciding that the case was appropriately removed to federal court and should stay there.  See Grace Ranch v. BP Am. Prod. Co., No. 20-30224 (5th Cir. Feb. 24, 2021).  Grace Ranch made two main arguments in support of remand.  First, it claimed that diversity jurisdiction was lacking, because federal law permits federal courts to hear cases only between citizens of different states, and not between a citizen and a State; Grace Ranch asserted that because it was suing on behalf the Louisiana Commissioner of Conservation, Louisiana was the real party to the suit.  Although the Fifth Circuit noted the “intuitive” appeal of the argument, it ultimately rejected it.  Louisiana had not approved the suit, and private citizens are not authorized to institute legal actions on behalf of the State.  Therefore, the State was not a party.

Grace Ranch’s second argument concerned a doctrine referred to as “Burford abstention.”  Even when federal courts have the ability to hear a case, they may nevertheless abstain in certain circumstances when doing so would “be prejudicial to the public interest.”  Here, Grace Ranch claimed that it would be deleterious for a federal court to involve itself in the proceedings and orders of state administrative agencies.  Although the Fifth Circuit found some considerations favored abstention, it ultimately decided that Burford did not apply because federal resolution of this suit would not disrupt Louisiana’s efforts to establish a coherent policy for the remediation of contaminated lands.

The Fifth Circuit’s holding presents new considerations for plaintiffs bringing legacy lawsuits.  First, the decision finally establishes that plaintiffs cannot use § 30:16 to avoid federal diversity jurisdiction.  The court made it clear that the State is not a party to claims asserted under this statute so as to defeat diversity.  Second, plaintiffs similarly cannot use § 30:16 to avoid federal court on the grounds that the statute implicates purely State interests.  That alone is not enough.  However, it is only a matter of time before a creative plaintiff molds a new legal argument to try to keep cases out of federal court.

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