Narrow Fifth Circuit ruling could have broad implications for Louisiana coastal lawsuits

By David Jacobs | The Center Square

A recent federal appeals court ruling that lawsuits seeking compensation from oil companies for alleged damage to Louisiana’s wetlands belong in state court only applies directly to two of the dozens of lawsuits that have been filed, but the impact could be much broader.

Seven local governments in 2013 filed 42 lawsuits against more than 200 energy companies, alleging the companies violated state law and their permits and caused environmental damage in the state’s fragile coastal zone. The plaintiffs say they want those companies to pay for fixing the damage they caused, and the lawsuits potentially could be worth billions.

The oil and gas industry has long contended the companies followed the rules as they were at the time. They say the lawsuits discourage energy exploration, which provides government revenue for coastal restoration and protection.

Monday’s unanimous decision by a three-judge panel of the New Orleans-based U.S. Court of Appeals for the Fifth Circuit doesn’t touch on the merits of the cases. Instead, it focused on an expert report that Plaquemines Parish produced that notes some of the alleged damage dates back to World War II.

At the time, the companies argue, they were under strict wartime regulation and essentially were acting as agents of the federal government. That raises a federal issue, which means the cases should be heard in federal court, they say. They also say plaintiffs’ claims regarding federally regulated activities prior to passage of Louisiana’s State and Local Coastal Resources Management Act of 1978 raise substantial federal questions.

The Fifth Circuit didn’t reject that argument outright. But judges said the ties to wartime activities already were established in evidence much earlier, and the defendants missed their window to ask for a removal on that basis.

“You can have the best argument in the world,” said Adam Babich, a professor of environmental law at Tulane Law School. “If you don’t make it in time, it doesn’t do you any good.”

Oil industry advocates point to an earlier Fifth Circuit decision involving the Southeast Louisiana Flood Protection Authority-East that found a similar claim belonged in federal court, even though the plaintiff wasn’t suing a federal agency, because “the breadth of plaintiff’s claims amounts to a collateral attack on an entire regulatory scheme.”

“Reaching back in time to sue for decades of federally authorized activities that were lawfully conducted and actively encouraged by these very same government plaintiffs is neither fair nor productive,” said Melissa Landry, speaking on behalf of the legal teams representing BP America Production Company, Chevron, ConocoPhillips, ExxonMobil Pipeline Company and Shell.

Keith Hall, an LSU law professor who directs the school’s John P. Laborde Energy Law Center and has been following the coastal suits, said the tie to World War II activity seemed fairly tenuous to him. The federal government regulates virtually every industry, so that’s not enough to meet the “federal officer” standard to get into federal court, he said.

Hall said that, given the similarity among the parish coastal lawsuits, it’s likely the Fifth Circuit ruling effectively will control all of them. That could be a big deal, because corporate defendants tend to prefer federal court.

That’s partly because they might fear a “home cooking” advantage in state court with a more sympathetic jury, Hall said. And in federal court, cases generally are less likely to even get to a jury, he said.

Hall said federal courts tend to be stricter about adherence to the letter of the law and more likely to shut a case down quickly on summary judgment. State courts often are more willing to give plaintiffs the benefit of the doubt and let the case go to trial.

“They’re really desperate to be in federal court,” said Karen Sokol, associate professor at Loyola University New Orleans College of Law. “I can only imagine what’s going to come out in discovery.”

The oil industry has been fighting the lawsuits on two fronts: in the courtroom, and in the court of public opinion. If serious violations are revealed in court, it could jeopardize both efforts, Sokal said.

Asked about next steps for the defendants, Landry said all options are being explored. She said she wouldn’t consider this week’s ruling precedent-setting, since only two lawsuits were addressed.

“In whichever forum these cases are ultimately considered, these flawed legal attacks do not advance meaningful solutions to restore our coast,” she says.

John Carmouche, an attorney representing the plaintiffs, said this week’s ruling applies to all of the coastal lawsuits and that parishes will “move immediately for a trial date upon return of the cases to Louisiana state court.” All three members of the Fifth Circuit panel were appointed by President Donald Trump, he said, which he said “demonstrates the restoration of Louisiana’s coast is not a partisan issue but an issue of law and equity.”