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Vintage Assets, Inc. v. Tennessee Gas Pipeline Co., L.L.C.

United States District Court, E.D. Louisiana

August 28, 2017

VINTAGE ASSETS, INC.
v.
TENNESSEE GAS PIPELINE COMPANY, L.L.C. ET AL.

         SECTION: “H”

          ORDER AND REASONS

          JANE TRICHE MILAZZO UNITED STATES DISTRICT JUDGE.

         Before the Court are Defendants Tennessee Gas Pipeline Company, LLC, Southern Natural Gas Company, LLC, High Point Gas Transmission, LLC, and High Point Gas Gathering, LLC's Motion for Partial Summary Judgment to Limit Remedies for Contract Claims (Doc. 110); Motion for Partial Summary Judgment Dismissing Claims for Restoration of State-Owned Water Bottoms (Doc. 115); and Motion for Partial Summary Judgment Dismissing Claims for Restoration or Damages to Property Within the Rights-of-Way (Doc. 114). For the following reasons, the Motions are DENIED.

         BACKGROUND

         Between 1953 and 1970, Defendants' predecessors received eight right-of-way servitudes, ranging from 100 to 175 feet, crossing various portions of Plaintiffs' property, which authorized the construction and operation of pipelines and dredge canals. The servitude agreements allowed Defendants to lay the pipelines in canals “not to exceed 40 [or in some cases 65] feet in width.” Plaintiffs[1] allege that Defendants failed to maintain these canals, resulting in erosion and damage to their property. It is undisputed that the widths of the canals now far exceed that which was established by the servitude agreements. Plaintiffs brought state law claims for trespass, breach of contract, and negligence. As a result of a series of summary judgment motions, this Court dismissed Plaintiffs' tort and trespass claims and granted summary judgment on some of its breach of contract claims. The Court held that Defendants had breached their duty to maintain the canals. Plaintiffs seek compensatory damages and injunctive relief in the form of abatement and restoration. Before the Court are now a series of summary judgment motions by Defendants asking this Court to dismiss Plaintiffs' request for remediation and limit their damages for a number of reasons. This Court will consider each motion in turn.

         LEGAL STANDARD

         Summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.”[2] A genuine issue of fact exists only “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.”[3]

         In determining whether the movant is entitled to summary judgment, the Court views facts in the light most favorable to the non-movant and draws all reasonable inferences in his favor.[4] “If the moving party meets the initial burden of showing that there is no genuine issue of material fact, the burden shifts to the non-moving party to produce evidence or designate specific facts showing the existence of a genuine issue for trial.”[5] Summary judgment is appropriate if the non-movant “fails to make a showing sufficient to establish the existence of an element essential to that party's case.”[6] “In response to a properly supported motion for summary judgment, the non-movant must identify specific evidence in the record and articulate the manner in which that evidence supports that party's claim, and such evidence must be sufficient to sustain a finding in favor of the non-movant on all issues as to which the non-movant would bear the burden of proof at trial.”[7] “We do not . . . in the absence of any proof, assume that the nonmoving party could or would prove the necessary facts.”[8] Additionally, “[t]he mere argued existence of a factual dispute will not defeat an otherwise properly supported motion.”[9]

         LAW AND ANALYSIS

         A. Motion for Partial Summary Judgment to Limit Available Remedies for Contract Claims

         In their first Motion, Defendants seek to limit Plaintiffs' contract claim remedies in two ways: (1) they argue that the clear terms of the servitude agreements do not allow the remedy of restoration, and (2) they argue that, pursuant to Louisiana law, Plaintiffs' damages are limited to the value of the land lost.

         As to the first argument, Defendants contend that the clear and unambiguous language of the contracts forestall an award requiring restoration or backfilling of the canals. They argue that because the servitude agreements give Defendants the option to leave the canals “open, ” the contracts do not require either remedy. They argue that Plaintiffs cannot obtain specific performance for an obligation that was never required by the contracts. This Court has already held that the servitude agreements still at issue are ambiguous and evince a failure of the parties to contemplate the effects of erosion.[10] This Court applied suppletive law to hold that Defendants had a duty to maintain the canals to prevent the aggravation of the servient estate.[11]Because the agreements did not contemplate erosion, they certainly did not contemplate remediation, and the agreements' failure to provide for such a remedy is therefore unsurprising. Defendants do not cite to any provision of suppletive law forestalling such a remedy.

         Second, Defendants seek to limit Plaintiffs' compensatory damages to the fair market value of the land lost. Under Louisiana law, “[d]amages are measured by the loss sustained by the obligee and the profit of which he has been deprived.”[12] Defendants argue that in this matter the “loss sustained by the obligee” is the land that was eroded by their failure to maintain the canals. They argue then that Plaintiffs' damages should be limited to the fair market value of the land that was eroded. Indeed, the Louisiana Supreme Court has held that when immovable property is damaged by tortious conduct, “damages are measured only by the difference between the value of the property before and after the harm” if “the cost of restoring property in its original condition is disproportionate to the value of the property or economically wasteful, unless there is a reason personal to the owner for restoring the original condition or there is a reason to believe that the plaintiff will, in fact, make the repairs.”[13]The Louisiana Supreme Court has also expressly held, however, that damages to immovable property under a breach of contract claim are not governed by this rule.[14] In Corbello v. Iowa Productions, the Louisiana Supreme Court held that when property is damaged pursuant to a breach of contract, the measurement of damages is not limited to the value of the property lost but is instead governed by the contract.[15] Defendants have not cited this Court to any case that calls into question the Court's ruling in Corbello. Accordingly, this Court agrees with Plaintiffs that the law does not limit their recovery to the value of the land lost. Instead, an award of damages shall be governed by the terms of the agreements and the good or bad faith of Defendants.

         Indeed, Plaintiffs argue that Defendants' breach was in bad faith, entitling them to greater damages. Louisiana Civil Code article 1996 states that “[a]n obligor in good faith is liable only for the damages that were foreseeable at the time the contract was made, ” while article 1997 states that “[a]n obligor in bad faith is liable for all the damages, foreseeable or not, that are a direct consequence of his failure to perform.” Accordingly, Plaintiffs contend that they are entitled to all damages that are a direct consequence of the Defendants' bad faith breach. Defendants argue, however, that Plaintiffs have never alleged that Defendants acted in bad faith, and they therefore cannot raise this argument for the first time in opposition to a motion for summary judgment. This Court agrees. Plaintiffs' Complaint, Amended Complaint, and Second Amended Complaint do not contain any allegations of an “intentional and malicious failure to perform.”[16] Plaintiffs' allegations are therefore insufficient to put Defendants on notice of such a claim.[17]Accordingly, Plaintiffs' damages award will be governed by the good faith standard of foreseeability. The foreseeability of damages at the time the contract was made is an issue of fact, the resolution of which is inappropriate at the summary judgment stage. Defendants' Motion is therefore denied.

         B. Motion for Partial Summary Judgment Dismissing Claims for Restoration of State-Owned Water Bottoms

         Defendants next argue that Plaintiffs' claims for restoration should be dismissed because Plaintiffs no longer own the portions of their property that have eroded into open water. Defendants argue that when formerly private land has been encroached upon by erosion such that it now forms part of the bed of a navigable water body, it becomes a public thing and is the property of the State. They argue that because the canals at issue have eroded into open water, that land now belongs to the State, and Plaintiffs have no right to seek its restoration. Defendants also point out that the State has granted oyster leases with respect to some of these areas.

         At the outset, the parties dispute who has the burden of proof with respect to this issue. On one hand, Defendants claim that Plaintiffs bear the burden of proof to show ownership as one of the elements of their claims. On the other, Plaintiffs allege that the burden lies with Defendants because they are asserting the State's ownership through erosion as an affirmative defense. In this Court's view, Plaintiffs have submitted title documents that establish ownership of the land at issue. Defendants would now have Plaintiffs further prove that ownership has not been lost in their case-in-chief. This Court finds that Plaintiffs have already carried their burden to show ownership. If Defendants claim that Plaintiffs have lost ownership of their land, they must come forth with competent evidence to establish that fact. Under Louisiana law, “[a]n affirmative defense raises a new matter, which assuming the allegations in the petition are true, constitutes a defense to the action.”[18] As such, Defendants assert an affirmative defense on which they must carry the burden.[19] This Court finds that Defendants have failed to do so.[20]

         First, Defendants fail to present any argument or evidence regarding the classification of the body of water into which Plaintiffs' land is alleged to have eroded. Whether Plaintiffs' land has eroded into a river, a lake, or the sea affects the boundary between public and private land and is an issue of fact inappropriate for summary judgment.[21] Second, Defendants make no effort to show that the body of water into which Plaintiffs' land eroded is a “natural navigable water body” such that its bottom is owned by the State.[22] This too is an issue of fact inappropriate for resolution at the summary judgment stage. Third, the parties dispute the effect of the State's grant of oyster leases on the property, however, neither has presented any evidence regarding what, if any, investigation took place regarding ownership of the land prior to the issuance of those leases. Accordingly, this Court holds that material issues of fact and the absence of pertinent information preclude summary judgment on this issue.

         As an aside, however, this Court notes its distaste for Defendants' argument. Defendants argue that, even if they breached their duty to maintain the canals so severely that parts of Plaintiffs' property have eroded into open water, they should not now be required to repair that damage because Plaintiffs have lost ownership of their land (thanks to the erosion allegedly caused by Defendants' actions).[23] Defendants' argument, whether legally sound or not, is inequitable at best and offensive at worst. Indeed, “no court was ever organized which would knowingly permit a litigant to profit by his own ...


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