United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT February 11, 2004
Charles R. Fulbruge III
Clerk
No. 03-30539
LOUISIANA LAND AND EXPLORATION CO.; ET AL,
Plaintiffs,
versus
OXY USA, INC.; ET AL,
Defendants,
OXY USA, INC.,
Defendant-Cross-Claimant-Appellee,
versus
ONLINE RESOURCES, INC.,
Defendant-Cross-Defendant-Appellant.
--------------------
Appeal from the United States District Court
for the Eastern District of Louisiana
(01-CV-2236-S)
--------------------
Before HIGGINBOTHAM, SMITH, and WIENER, Circuit Judges.
PER CURIAM:*
Defendant-Cross-Defendant-Appellant Online Resources, Inc.
(“Online”) appeals from the district court’s determination that, by
virtue of a Purchase Sale Agreement (“PSA”) between Online and OXY
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
USA, Inc. (“OXY”), signed December 31, 1998 and expressly made
effective on December 1, 1998, Online and not OXY is responsible
for, inter alia, the agreed ratable costs of plugging and
abandoning a well on a government mineral lease (the “subject
lease”) of a specified tract on the Outer Continental Shelf
offshore from the coast of Louisiana. The subject lease was in
full force and effect on the effective date specified in the PSA
and on the date the PSA was signed, but terminated subsequent to
those dates.1
The PSA was, in essence, a contract by which OXY disposed of
all of its mineral interests and related properties in a large area
off the Gulf Coast for a lump sum of $3,500,000, and Online agreed
to purchase all of such interests and properties, “as is” and
“where is,” retroactively effective as of December 1, 1998. The
PSA specified that a Bill of Sale and Assignment (the “Assignment”)
transferring record title to all assets being conveyed as of the
effective date would be executed at a date well after December 31,
1998, during which period each of the parties would perform its own
due diligence. The PSA also afforded Online a period of two weeks
following its signing during which to assert any title deficiencies
in existence on the effective date and to make price adjustments
1
The record reflects conflicting termination dates alleged by
the various parties and never determined as a finding of fact by
the district court, which ruled that the termination date was
irrelevant inasmuch as none contends that the subject lease was not
in force on December 1, 1998, on December 31, 1998, and for at
least two weeks thereafter.
2
accordingly. Inasmuch as, under the earliest date asserted by
Online as its termination, the subject lease was in full force and
effect on the effective date, the execution date, and two weeks
thereafter, no issue of its title was asserted within that two-
weeks period (there was, however, a title-problem price adjustment
regarding a different property in the package).
Transfers of title to all assets covered by the PSA were
accomplished in the Assignment signed on May 12, 1999. That
document too expressed that all transfers of title thereunder were
as of the effective date of the PSA.
The instant controversy arose subsequent to the signing of the
Assignment, when LL&E demanded contribution for plugging and
abandoning the well in question, thus alerting the parties to the
fact that the subject lease had terminated. Despite a Texas
choice-of-law provision in the PSA, the parties and the court
applied the law of Louisiana as mandated by the Outer Continental
Shelf Lands Act (“OCSLA”).
In simplest form, Online’s contention that it has no
responsibility for plugging and abandoning the well is grounded in
the premise that, regardless of the effective date specified in the
PSA and the Assignment, the subject lease had terminated before
title was properly transferred in the Assignment as signed on May
12, 1999, and thus could not possibly have been transferred to
Online by OXY. It follows, Online insists, that absent a valid
assignment of the subject lease, Online owes no contribution to the
3
cost of plugging and abandoning the well on the tract formerly
covered by the subject lease. Specifically, Online argued to the
district court, and again to this court on appeal, that both the
existence of the lease on the date of the Assignment and
authorization of the transfer of the subject lease by the
government’s Mineral Management Service (“MMS”) were conditions
precedent (“suspensive conditions” under Louisiana law) to the
valid transfer of title to the subject lease, unaffected by the
lease’s existence on the effective date specified in the PSA and
the Assignment; and that the subject lease’s expiration or
termination before execution of the Assignment made transfer of the
subject lease to Online —— also assertedly a suspensive condition
—— a legal impossibility.
The gravamen of OXY’s counterposition was that the PSA is the
law between the parties and that nothing in the suppletive
provisions of the Louisiana Civil Code or other such laws of that
State prohibits the parties from contracting for a retroactive
effective date, which they did in the PSA and confirmed in the
Assignment; that the subject lease was in existence on the
effective date of December 1, 1998 as well as on December 31 when
the PSA was signed; that, subject only to pre-effective date title
defects noticed within two weeks following the execution of the
PSA, the transfer of benefits and assumption of the risk of losses
to Online occurred as of the effective date; that the existence of
the subject lease (and other leases and properties in the package)
4
was relevant only on the effective date (December 1, 1998) and was
not relevant on May 12, 1999 when the title-transferring Assignment
was signed, making lease existence in May irrelevant and thus not
a suspensive condition to Online’s entitlement to benefits and
responsibility for obligations connected with or arising from the
subject lease (or any other properties) after the effective date;
and that the post-transaction refusal of the MMS to authorize
transfer of the subject lease once it ceased to exist at a time
after the effective date, after execution date of the PSA, and
after execution of the Assignment, was neither the failure of a
suspensive condition nor otherwise relevant.
The district court essentially agreed with OXY’s reasoning and
its position. The court determined that the precise date on which
the subject lease terminated was immaterial because, even under
Online’s contention, the subject lease terminated well after the
execution of the PSA and even further after the effective date of
that agreement. The district court also concluded that the
existence of the subject lease on May 12, 1999, when the Assignment
was executed, was not a suspensive condition to Online’s
responsibility for any obligations under that lease once all the
contracts were executed, any more than it would have been relative
to Online’s entitlement to production or other benefits under the
subject lease, had there been any.
The court also ruled that MMS authorization was not a
suspensive condition or a material factor but rather was merely a
5
routine post-closing matter that, pursuant to subsection 5.1 of the
PSA would not “release [Online] of its obligation to close” the
transaction. The court indicated its agreement with OXY that,
because the subject lease terminated after the effective date and
the execution date of the PSA, all benefits and obligations,
including risk of loss and the cost of plugging and abandoning
wells, had shifted from OXY to Online before the subject lease
terminated. The controlling date of such shifts as to all leases
and properties covered by the global sale, as memorialized in the
PSA, was the effective date of December 1, 1998, as expressly and
unconditionally agreed to by these sophisticated and experienced
parties. MMS approval after the lease terminated, implied the
district court, would have been a meaningless, hollow act.
We have reviewed the extensive record in this case and have
considered the reasoning of the district court, as well as that of
able counsel for the respective parties, both as set forth in their
appellate briefs and expressed in their oral arguments to this
court. As a result, we are satisfied that the judgment of the
district court should be and is, in all respects,
AFFIRMED.
6