United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
July 6, 2004
For the Fifth Circuit
___________________________
Charles R. Fulbruge III
Clerk
No. 03-30602
___________________________
CHEVRON USA, INC.
Plaintiff - Counter Defendant - Appellee
v.
VERMILION PARISH SCHOOL BOARD
Defendant - Counter Claimant - Appellant
___________________________
TEXACO INC; TEXACO EXPLORATION & PRODUCTION, INC.
Plaintiffs - Counter Defendants - Appellees
v.
VERMILION PARISH SCHOOL BOARD
Defendant - Counter Claimant - Appellant
___________________________
AMERADA HESS CORP.
Plaintiff - Counter Defendant - Appellee
v.
VERMILION PARISH SCHOOL BOARD
Defendant - Counter Claimant - Appellant
___________________________
UNION OIL COMPANY OF CALIFORNIA
Plaintiff - Counter Defendant - Appellee
v.
VERMILION PARISH SCHOOL BOARD
Defendant - Counter Claimant - Appellant
___________________________
MOBIL OIL CORP; MOBIL OIL EXPLORATION & PRODUCING SOUTHEAST, INC.
Plaintiff - Counter Defendant - Appellees
v.
VERMILION PARISH SCHOOL BOARD
Defendant - Counter Claimant - Appellant
___________________________
EXXON MOBIL CORP.
Plaintiff - Counter Defendant - Appellee
v.
MARSHALL W. GUIDRY
Defendant - Counter Claimant - Appellant
___________________________
EXXON MOBIL CORP.
Plaintiff - Counter Defendant - Appellee
v.
VERMILION PARISH SCHOOL BOARD
Defendant - Counter Claimant - Appellant
Appeal from the United States District Court
for the Western District of Louisiana
Before DAVIS, BARKSDALE and PRADO, Circuit Judges.
W. EUGENE DAVIS, Circuit Judge:
This case returns to us after the Louisiana Supreme Court denied certification, Chevron
USA, Inc. v. Vermilion Parish School Board, La. LEXIS 1696 (La. 2004), of the following
question which is the subject of this appeal:
Whether the notice given in this case by counsel for a lessor on behalf of the
putative class satisfies the requirement of Articles 137-141 of the Louisiana
Mineral Code, requiring the lessor to give written notice of the lessee’s failure to
make timely or proper payment of royalties as a prerequisite to a judicial demand
for damages or dissolution of the lease.
2
The procedural history and background of this case are set forth in our prior opinion. Chevron
U.S.A., Inc. v. Vermilion Parish Sch. Bd., 364 F.3d 607 (5th Cir. 2004). The Royalty Owners
assert that class notice is permissible, based on favorable decisions on this issue by Louisiana
Appellate courts in Lewis v. Texaco Exploration and Prod. Co., 698 So.2d 1001 (La. App. 1 Cir.
1997), and Duhé v. Texaco, Inc., 779 So.2d 1070 (La. App. 3 Cir. 2001). The Oil Companies
contend that class notice is incompatible with the purpose of the Mineral Code provisions
governing this issue.
Based on the plain language and purpose of LSA - R.S. 31:137 and related Mineral Code
provisions, we conclude that the notice given of a lessee’s failure to make timely or proper
payment of royalties on behalf of a putative class does not satisfy the requirements of the
Louisiana Mineral Code for the unnamed members of the class.
I.
Louisiana Mineral Code Article 137 provides:
If a mineral lessor seeks relief for the failure of his lessee to make timely or proper
payment of royalties, he must give his lessee written notice of such failure as a
prerequisite to a judicial demand for damages or dissolution of the lease.
LSA-R.S. 31:137. Neither this provision of the Mineral Code nor any of the related provisions in
Articles 138-141 contain specific guidelines as to the precise requirements of the formal written
demand set forth in LSA-R.S. 31:137. Neither do the statutes indicate explicitly whether notice
must be given by each and every mineral lessor individually.1 As set forth in our prior decision,
1
We agree with the Lewis court that the use of the word “he” in Article 137 does not indicate
legislative intent that each individual lessor must provide the notice required by that provision.
Lewis, 698 So.2d at 1009. Under Louisiana Revised Statutes, Sections 7 and 8, words used in the
singular include the plural and words used in one gender apply equally to the other gender. LSA -
R.S. 1:7 and 8.
3
no decisions of the Louisiana Supreme Court directly address the question in this case and
decisions of Louisiana intermediate appellate courts are conflicting.2
Even if the Louisiana intermediate appellate court decisions were not in conflict, under
Louisiana’s Civil Law tradition, courts look first and foremost to the statutory law.3 Article 1 of
the Louisiana Civil Code instructs that “the sources of law are legislation and custom.”
La.Civ.Code Ann. art.1. “The primary basis of law for a civilian is legislation, and not (as in the
common law) a great body of tradition in the form of prior decisions of the courts. The concept
of stare decisis is foreign to the Civil Law, including Louisiana” Transcontinental Gas Pipe Line
Corp. v. Transportation Ins. Co., 953 F.2d 985, 988 (5th Cir. 1992); quoting Tate, Techniques of
Judicial Interpretation in Louisiana, 22 La.L.Rev. 727 (1962); other internal citations omitted.
Therefore, in cases such as this, although we may be guided by decisions rendered by the
Louisiana appellate courts, we are not strictly bound by them, particularly when the jurisprudence
has not developed to the status of jurisprudence constante (a series of decisions in accord on a
given issue). Id. As our analysis calls for interpreting a statute, our starting point is the statute
itself.
To properly understand Article 137, it must be considered in context with its purpose and
2
See Lewis v. Texaco Exploration and Production Co., Inc., 698 So.2d 1001 (La. App. 1
Cir. 1997), and Duhé v. Texaco, Inc., 779 So.2d 1070 (La. App. 3 Cir. 2001). Compare Stoute v.
Wagner & Brown, 637 So.2d 1199 (La. App.1 Cir. 1994).
3
In predicting how the Louisiana Supreme Court would rule on an issue of state law, the
decisions of intermediate state courts provide guidance to a federal court, but are not controlling.
Matheny v. Glen Falls Ins. Co., 152 F.3d 348, 354 (5th Cir. 1998).
4
the purpose and function of related articles 138 to 141.4 Article 137 requires a mineral lessor to
give his lessee written notice of his claim of failure to make timely or proper payment of royalties
as a prerequisite to a judicial demand, i.e. filing suit seeking relief. LSA - R.S. 31:137. Once
written notice has been given, Article 138 gives the mineral lessee thirty days to either pay the
royalties due or respond, in writing, by stating a reasonable cause for non-payment.5 Under
Article 139, if the lessee pays the royalties demanded within thirty days after receipt of the lessor's
written notice, the remedy of dissolution of the lease becomes unavailable to the lessor, unless the
lessee fraudulently withheld payment.6 Under Article 140, if the lessee fails to pay royalties due
or fails to inform the lessor of a reasonable cause for failure to pay in response to the notice, the
court may award as damages double the amount of royalties due, interest on that sum from the
date due, and a reasonable attorney's fee, regardless of the cause for the original failure to pay
4
See La. Civ. Code Ann. art. 10, “when the language of the law is susceptible of different
meanings, it must be interpreted as having the meaning that best conforms to the purpose of the law.”
5
LSA - R.S. 31:138 states, “Required response of lessee to notice. The lessee shall have
thirty days after receipt of the required notice within which to pay the royalties due or to respond by
stating in writing a reasonable cause for nonpayment. The payment or nonpayment of the royalties
or stating or failing to state a reasonable cause for nonpayment within this period has the following
effect on the remedies of dissolution and damages.”
6
LSA - R.S. 31:139 states, “Effect of payment in response to notice. If the lessee pays
the royalties due in response t o the required notice, the remedy of dissolution shall be unavailable
unless it be found that the original failure to pay was fraudulent. The court may award as damages
double the amount of royalties due, interest on that sum from the date due, and a reasonable
attorney's fee, provided the original failure to pay royalties was either fraudulent or willful and
without reasonable grounds. In all other cases, such as mere oversight or neglect, damages shall be
limited to interest on the royalties computed from the date due, and a reasonable attorney's fee if such
interest is not paid within thirty days of written demand therefor.”
5
royalties.7 The court may also, in its discretion, dissolve the lease.8
The Official Comment to LSA-R.S. 31:137 states that “[i]t is the intent of [Mineral Code]
Articles 137-141 to provide lessors with a meaningful remedy while simultaneously giving
operators who have made substantial investments in producing properties the security of title
which the nature and size of their investment deserves.” The Official Comment further describes
the balance struck by these articles as follows:
The total effect of these articles, then, is to provide a spur to timely payment of
royalties due while giving lessees a reasonable way in which to avoid the harsh
remedy of cancellation. The spur is the special remedy. The means for avoiding
cancellation is by responding within the stated period to the notice of failure to pay
required by Article 137.
LSA - R.S. 31:137, Official Comment.
The Oil Company lessees argue that the above provisions, read as a whole, compel the
conclusion that the notice and response system described above is incompatible with allowing
notice to be given on a class basis, rather than by each individual lessor or royalty owner. We
agree. The notice to lessees required by Article 137 does not simply trigger a thirty day waiting
period before suit may be filed. Rather it triggers an obligation on the lessee to investigate the
complaint and respond in order to avoid substantial penalties, including lease cancellation. The
7
LSA - R.S. 31:140 states, “Effect of nonpayment in response to notice or failure to state
cause therefor. If the lessee fails to pay royalties due or fails to inform the lessor of a reasonable
cause for failure to pay in response to the required notice, the court may award as damages double
the amount of royalties due, interest on that sum from the date due, and a reasonable attorney's fee
regardless of the cause for the original failure to pay royalties. The court may also dissolve the lease
in its discretion.”
8
Id. See also, LSA - R.S. 31:141 states, “Dissolution not a favored remedy. In a case
where notice of failure to pay royalties is required, dissolution should be granted only if the conduct
of the lessee, either in failing to pay originally or in failing to pay in response to the required notice,
is such that the remedy of damages is inadequate to do justice.”
6
putative class as defined by the Royalty Owners in this case would include all royalty and
overriding royalty interest owners in all Louisiana mineral leases owned by the Oil Companies
whose royalties have been computed using either of the two methods challenged by the Royalty
Owners. The Royalty Owners concede that the class would number in the thousands. Permitting
the demand to be made on a class basis, especially in a case such as this, would deprive the lessee
of any real ability to respond within the relatively short time period allowed and upset the balance
of rights between lessor and lessee carefully established by the Louisiana Legislature in Mineral
Code Articles 137 to 141.
The Royalty Owners note that Articles 138 and 140 require only a “reasonable” response
and suggest that a “reasonable” response to a class notice may be that the lessees require
additional time to investigate the claim of improper payment of royalties. The Mineral Code
provisions do not define what constitutes a reasonable response and failure to make what a court
considers a reasonable response carries harsh penalties. These penalties include damages equal to
double the amount of royalties due, interest and attorney’s fees, and even lease cancellation.
Allowing class notice increases the burden of responding to an Article 137 notice by the additional
complexity necessarily related to multiple and unidentified lessors, multiple leases, multiple
contracts between lessees and their purchasers of oil and gas, and expanded geographic area with
no clear provision that the lessees would be protected in the event that they are unable to resolve
the question raised by the notice within the thirty day period allowed for a response.
Allowing demand to be made on a class basis also raises other questions not answered by
these Mineral Code provisions. It is questionable whether class notice can satisfy the statutory
prerequisite to litigation for the putative class members because it is unclear whether the putative
7
class representatives have the legal authority to make demand under Article 137 for lessors who
do not know that demand is being made on their behalf. It is also unclear to whom the lessees
should respond. Does a reasonable, timely response to the putative class representative protect
the lessee from owing statutory penalties to the individual class members who do not receive a
response? If the lessee elects to respond by paying royalties due, to whom should the payments
be made, to the putative class representative or to individual lessors and royalty owners? These
questions which arise under the interpretation urged by the Royalty Owners but which would not
arise under our reading of these articles are a significant consideration leading us to conclude that
class notice does not satisfy the requirements of the Mineral Code as to unnamed members of the
class.
II.
In summary, we conclude that notice given by counsel for a lessor on behalf of a putative
class does not satisfy the requirements of Articles 137-141 of the Louisiana Mineral Code, which
require the lessor to give written notice of the lessee’s failure to make timely or proper payment
of royalties as a prerequisite to a judicial demand for damages or dissolution of the lease.
Permitting class notice, particularly in a case such as this, upsets the careful balance established by
Mineral Code Articles 137 - 141 between providing an incentive to lessees to promptly pay
royalties, yet giving the lessee a reasonable way to avoid the harsh remedy of lease cancellation.
Accordingly, we affirm the district court’s denial of class certification on this basis. Because class
certification was properly denied, we need not consider whether the district court erred in holding
that a Louisiana school board does not have the legal capacity to act as a class representative.
AFFIRMED.
8