Louisiana’s Third Circuit Upholds Prescription Finding in Kinder Property Contamination Case

In 1960, Hunt Petroleum Corporation (“Hunt”) entered into a surfaces lease with the Reynolds family. In 1997, Kinder Gas Processing Corporation (“Kinder Gas”), one of Hunt’s successors in interest, notified the Reynolds of an environmental study “that showed a few things [Kinder Gas] wanted to clean up,” and that it was “in the process of cleaning them up.” Over several years, Kinder Gas discussed with the Reynolds the possibility of buying part of the property and cancelling the entire lease. On January 14, 2008, the Reynolds (through a real estate appraiser) offered to sell the entire property to Kinder Gas. The offer referred to environmental problems on the property caused by Kinder Gas or its predecessors.

In 2010, Kinder Gas brought suit for a declaratory judgment against the Reynolds to avoid liability for damage to the Reynolds’ property. In turn, the Reynolds sought damages against Kinder Gas and other successors (“the Gas Companies”) in connection with toxic wastes that were spilled or disposed on the property. The Reynolds relied on theories of strict liability, nuisance, continuing trespass, and breach of contract. They asserted that the lease was cancelled as a result of the Gas Companies’ breach of contract. The Gas Companies countered that the tort claims had prescribed, and that the breach of contract claim was premature.

The Kinder Gas v. Reynolds trial court agreed with the Gas Companies, finding that the Reynolds’ had constructive knowledge of possible contamination prior to the real estate agent’s January 14, 2008 offer. Citing Marin v. Exxon Mobil Corp. and Hogg v. Chevron USA, the court held that the Reynolds’ failure to file their tort claims within a year from this date resulted in prescription. The court also found that the lease was still in effect. Relying on Dore Energy Company v. Carter-Langham, Inc., the court held that the Reynolds’ contract claim for restoration of land on which operations were ongoing was premature.

The Reynolds appealed to Louisiana’s Third Circuit Court of Appeals. The Reynolds asserted that they had no knowledge of the environmental damage, other than a few surface oil stains, until Kinder Gas’s 2010 lawsuit. The Reynolds also contended that the doctrine of contra non valentem should apply to suspend the prescriptive period, as the Gas Companies had allegedly withheld information on the severity of the contamination. Finally, the Reynolds argued that their contract claim was based on a surface lease, rather than the Louisiana Code provisions related to mineral leases considered in the Dore case.

The appeals court’s February 1, 2012 decision upheld the lower court’s ruling on prescription, citing evidence that the property contamination was discussed on numerous occasions during the course of negotiations for the sale of the property. Knowledge of this contamination triggered a duty to investigate the damage and “the legal requisite of filing suit within one year of acquiring that knowledge.” The court found that there was no evidence of information being withheld and nothing to prevent the Reynolds from filing suit as early as 1998.

The appeals court also agreed with the lower court’s rule on prematurity. Citing Corbello v. Iowa Production, the court held that the duty to restore leased property does not arise until the expiration of the lease.

Since the evidence on record showed that the trial court’s rulings on prescription and prematurity were not manifestly erroneous, the appeals court affirmed the trial court’s dismissal of the Reynolds’ claims.

The Berniard Law Firm represents plaintiffs whose land has been contaminated by oil and gas operations. For assistance pursuing a land contamination claim or a personal injury, please call the Berniard Law Firm today to speak with an attorney immediately.