Louisiana Record

Sunday, November 17, 2019

3rd Circuit affirms settlement against Riceland Petroleum, BP

By Robert Davis | Mar 24, 2018

Oilrig 09

LAKE CHARLES — The Louisiana 3rd Circuit Court of Appeal has affirmed a decision to settle claims that Riceland Petroleum Co. and BP America Production Co. caused property damage in a legacy lawsuit filed by multiple landowners in Jefferson Davis Parish. 

Judge Ulysses Gene Thibodeaux delivered the decision, with Judges John D. Saunders and Elizabeth A. Pickett concurring.

The initial settlement was accepted by the Louisiana Department of Natural Resources (LDNR) and the state attorney general in May 2017. Later that month, the trial court granted the settlement. 

Landowners filed the lawsuit against Ricelands and BP seeking redemption of their property that was contaminated by the companies' historical oil and gas operations. After nearly three years of litigation, the claims were settled without appeal.

In turn, Riceland filed a third-party demand against seven insurance companies: St. Paul Fire and Marine Insurance Co., St. Paul Surplus Lines Insurance Co., Northfield Insurance Co., Lexington Insurance Co., United National Insurance Co., Mount Hawley Insurance Co. and Commercial Union Assurance Co. The demand seeks to reclaim indemnity, contribution, payment of attorneys’ fees, defense costs and other expenses.  

Riceland also assigned to the plaintiffs its rights, causes of action, claims or abilities to recover against the seven insurance companies, while reserving the right to recoup any unpaid attorneys’ fees, expert fees and expenses incurred during the settlement's litigation, suggesting the court erred in its findings that the settlement meets Act 312 requirements, a law that requires remediation of oilfield sites and exploration and production sites.

The insurance companies never disagreed with the terms of the settlement. If they had, then the insurance companies would have been required to provide required notice to the LDNR and the attorney general asking for a review. Following the mandatory review time, the settlement would have returned to the court for approval or dismissal. 

Instead, the insurance companies alleged that the trial court failed to hold a contradictory hearing, determine if remediation was required, and order the deposit of funds into the court registry, thereby releasing their duty to pay the settlement fees. Instead, Riceland and BP should be responsible for depositing fees into the Court registry. 

The court found they had not erred in the settlement's decision since BP and Riceland both agreed to remediate the property in accordance with the state regulatory standards. The court also noted that they made no such findings against the Act 312 requirements. 

Only if certain circumstances such as holding a contradictory hearing where the court requires remediation, or the settlement amount is de minimis and the settlement does not dispose of the entire matter were met, then they would have sided with the insurance companies, the 3rd Circuit said. 

Because the settling parties provided sufficient notice to the LDNR and attorney general and waited the necessary time for the entities to respond, the court, therefore, made a legally sound decision to approve the settlement, the 3rd Circuit found.

Reading the law under the provisions that the insurance companies' argued would expand the law beyond its explicit intent, the 3rd Circuit said.

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Louisiana Third Circuit Court of Appeal