Kling Realty Co. Inc. v. Chevron USA Inc., 121708 FED5, 08-30043

Docket Nº:08-30043
Opinion Judge:PER CURIAM:
Party Name:KLING REALTY COMPANY INC; WALET PLANTING CO. Plaintiffs-Appellants v. CHEVRON USA INC., individually and as successor in interest, formerly doing business as Texaco Inc., formerly doing business as Texaco Exploration and Production Inc Defendant-Appellee
Judge Panel:Before HIGGINBOTHAM, BENAVIDES, and STEWART, Circuit Judges.
Case Date:December 17, 2008
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit



CHEVRON USA INC., individually and as successor in interest, formerly doing business as Texaco Inc., formerly doing business as Texaco Exploration and Production Inc Defendant-Appellee

No. 08-30043

United States Court of Appeals, Fifth Circuit

December 17, 2008

Appeal from the United States District Court for the Western District of Louisiana 6:06-CV-1492



This case involves the contamination of land by oil and gas exploration over several decades during the twentieth century. Plaintiffs-Appellants Kling Realty Co. and Walet Planting Co. (together, "Kling/Walet") sued Defendant-Appellee Chevron USA Inc. ("Chevron"), successor in interest to Texaco, and two other defendants in state court. Chevron removed to federal court, alleging improper joinder of non-diverse defendants. The district court dismissed the non-diverse defendants, and denied Kling/Walet's motion to remand. The district court dismissed all claims with prejudice, holding that they were barred by prescription and dismissed as moot Kling/Walet's motion for leave to add a non-diverse party. We AFFIRM the judgment.


Kling/Walet's claims are rooted in the contamination of their property in Iberia Parish, allegedly caused by Chevron's predecessor (Texaco) while it was engaged in the exploration and production of oil and gas. Kling/Walet and Chevron were parties to an oil and gas lease relating to the property, which terminated, at the latest calculation, in August 1974. Although four wells were established on the Kling/Walet property, the claims in this case relate to Well No. 6 ("Well"), the only one of the wells that was productive for Chevron.1 The Well was plugged and abandoned in October 1971.

Kling/Walet have used the property for sugarcane farming since the 1970s. At that time, Kling/Walet were concerned that crops would not grow on a small piece of their property. After bringing their concerns to Chevron, Kling/Walet entered into a release of claims associated with the Well and any pit, tank battery, or other piece of equipment associated with the Well (the "1973 Release"), for consideration of approximately $4, 000. It is undisputed that Chevron's activities on the property ended no later than 1974.

Kling/Walet filed this action in June 2006 in Louisiana state court. Kling/Walet sought to recover compensatory and punitive damages from Chevron, Estis Well Service, LLC ("Estis"), and Jack P. Martin, Sr. ("Martin") (collectively, "Defendants") for contamination of their property located in Iberia Parish, Louisiana. Kling/Walet are citizens of Louisiana, as are Estis and Martin. Chevron is not. Kling/Walet allege that they are lessors, assigns, and/or successors in interest to certain oil, gas, and mineral leases with Chevron. Kling/Walet alleged that Defendants conducted and/or participated in various oil and gas exploration and production activities as operators or working interest owners in land including their property.

In August 2006, Chevron filed a notice of removal. In October 2006, Kling/Walet responded with a motion to remand to state court. In January 2007, the district court entered a Memorandum Ruling and Order, concluding that non-diverse Defendants Estis and Martin had been improperly joined, dismissing the claims against them, concluding that diversity jurisdiction was proper, and denying the motion to remand.

In May 2007, Chevron filed a motion for partial summary judgment, arguing, among other bases, that Kling/Walet's claims had prescribed.2 In December 2007, the district court granted Chevron summary judgment on the issue of prescription on all claims and denied as moot Kling/Walet's motion for leave to amend. Kling/Walet appeal.


I. Diversity Jurisdiction

A determination that a party is improperly joined and the denial of a motion for remand to state court are questions of law reviewed de novo. McDonal v. Abbot Labs., 408 F.3d 177, 182 (5th Cir. 2005). However, this court reviews a district court's decision to pierce the pleadings and its procedure for determining improper joinder only for abuse of discretion. Guillory v. PPG Indus., Inc., 434 F.3d 303, 309-10 (5th Cir. 2005) (emphasizing summary inquiry "is appropriate only to identify the presence of discrete and undisputed facts that would preclude plaintiff's recovery against the in-state defendant").

Kling/Walet argue that the district court erred by piercing the pleadings and dismissing Martin because neither party presented summary judgment-type evidence related to whether they had any possibility of prevailing against Martin, and Chevron therefore did not meet its burden to show improper joinder.3 Chevron argues that Martin was properly dismissed because, although Martin was alleged to be the supervisor of production of an unnamed employer that purportedly worked on Kling/Walet's property, Chevron has found no evidence that Martin worked for Chevron or its predecessors. Chevron further points to the absence of evidence presented by Kling/Walet to show how Martin was connected to their property such that he faced any liability for the alleged contamination.

There are two bases on which the district court might determine that a plaintiff improperly joined a non-diverse defendant to defeat subject matter jurisdiction: "(1) actual fraud in the plaintiff's pleading of jurisdictional facts, or (2) inability to establish a cause of action." Campbell v. Stone Ins., Inc., 509 F.3d 665, 669 (5th Cir. 2007). Under the second prong, 4 the court must determine whether "there is arguably a reasonable basis for predicting that state law might impose liability." Id. The standard for judging fraudulent joinder claims is well-established: "[a]fter all disputed questions of fact and all ambiguity in the controlling state law are resolved in favor of the non-removing party, the court determines whether that party has any possibility of recovery against the party whose joinder is questioned." Carriere v. Sears Roebuck & Co., 893 F.2d 98...

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