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Fifth Circuit: Louisiana’s Subsequent Purchaser Doctrine Bars Claims for Damage to Real Property

In a case that may have implications at contaminated former oil and gas production sites across Louisiana, the Fifth Circuit applied Louisiana’s “subsequent purchaser doctrine” and affirmed the dismissal of a landowner’s property damage claims stemming from a decades-old oil and gas operation.  See Guilbeau v. Hess Corp., No. 16-30971 (5th Cir. Apr. 18, 2017).  Although the Fifth Circuit acknowledged the Louisiana Supreme Court had not directly addressed the issue, the court held that a Louisiana property owner without assignment or subrogation of rights held by previous landowners cannot sue a third-party lessee of mineral rights for damages inflicted on the property before the current property owner purchased the property. 

Defendant Hess Corporation’s predecessors conducted oil and gas operations on the property in dispute for years, until the early 1970s.  Thirty-five years later, in 2007, the plaintiff purchased the property without obtaining from the seller any assignment of rights to bring pre-purchase damage claims.  After the purchase, the new owner sued Hess Corporation for contamination allegedly caused decades ago by its oil and gas operations.  Hess moved for summary judgment, arguing that under Louisiana’s “subsequent purchaser rule,” no property owner without the right of assignment or subrogation may sue a third party for damages inflicted before the land sale.  The trial court granted the motion and the plaintiff appealed to the Fifth Circuit. 

The key question on appeal was whether Louisiana’s subsequent purchaser rule applies to mineral lease scenarios.  In 2011, the Louisiana Supreme Court reaffirmed the “subsequent purchaser rule” as valid state law, but “express[ed] no opinion as to the applicability of [its] holding to fact situations involving mineral leases or obligations arising out of the Mineral Code.”  Based on this language, the plaintiff argued that the law was unsettled and that some prior Louisiana cases rejected applicability of the rule to mineral leases. 

The Fifth Circuit disagreed.  The court looked into cases from three Louisiana intermediate appellate courts after 2011 and found that “a clear consensus ha[d] emerged among all Louisiana appellate courts that have considered the issue, and they ha[d] held that the subsequent purchaser rule does apply to cases, like this one, involving expired mineral leases.”  Id. at 7-8.  The Fifth Circuit therefore affirmed the district court’s decision to dismiss the case.