Pontchartrain Nat. Gas Sys. v. Tex. Brine Co.

• Decision Date: 20 January 2023
• Docket Number: 2022 CA 0594,2022 CW 0961
• Court: Court of Appeal of Louisiana — District of US
• Parties: PONTCHARTRAIN NATURAL GAS SYSTEM, K/D/S PROMIX, L.L.C. & ACADIAN GAS PIPELINE SYSTEM v. TEXAS BRINE COMPANY, LLC

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PONTCHARTRAIN NATURAL GAS SYSTEM, K/D/S PROMIX, L.L.C. & ACADIAN GAS PIPELINE SYSTEM
v.
TEXAS BRINE COMPANY, LLC

Nos. 2022 CA 0594, 2022 CW 0961

Court of Appeals of Louisiana, First Circuit

January 20, 2023

On Appeal from the 23rd Judicial District Court In and for the Parish of Assumption State of Louisiana Trial Court Docket Number 34265, Div. B Hon. Thomas J. Kliebert, Jr., Judge Presiding, Ad Hoc

Leopold Z. Sher

James M. Garner

Peter L. Hilbert, Jr.

Neal J. King

Rebekka C. Veith

Martha Y. Curtis

Kevin M. McGlone

Jeffrey D. Kessler

Christopher T. Chocheles

Amanda R. Schenck

New Orleans, Louisiana

and

Ulysses Gene Thibodeaux

Lake Charles, Louisiana

and

Travis J. Turner

Gonzales, Louisiana

and

Robert Ryland Percy, III

Gonzales, Louisiana

Counsel for Appellant/ Third -Party Plaintiff/Relator, Texas Brine Company, L.L.C.

Roy C. Cheatwood

Kent A. Lambert

Adam B. Zuckerman

Leopoldo J. Yanez

Colleen C. Jarrott

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Lauren Brink Adams

Matthew S. Chester

Matthew C. Juneau

New Orleans, Louisiana

and

Antonio M. "Tony" Clayton

Port Allen, Louisiana

Counsel for Appellee/ Third -Party Defendant/Respondent, Legacy Vulcan, LLC

BEFORE: WELCH, HOLDRIDGE, AND PENZATO, JJ.

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PENZATO, J.

Texas Brine Company, LLC appeals from a January 6, 2022 judgment that granted Legacy Vulcan, LLC's motion for partial summary judgment and dismissed, with prejudice, Texas Brine's fraud and concealment/omission contentions and causes of action against Legacy Vulcan. For the following reasons, the January 6, 2022 judgment is affirmed. Additionally, we deny Texas Brine's writ application concerning the trial court's denial of Texas Brine's motion for partial summary judgment regarding Legacy Vulcan's liability as an intentional tortfeasor for Texas Brine's damages, which was previously referred to this panel.

FACTS AND PROCEDURAL HISTORY

On August 3, 2012, a sinkhole developed in Assumption Parish in an area known as the Napoleonville Salt Dome. The pertinent factual and procedural background of this case, which arises out of the sinkhole, is thoroughly set forth in Pontchartrain Natural Gas System, k/d/s Promix, L.L.C. and Acadian Gas Pipeline System v. Texas Brine Co., LLC, 2018-1249 (La.App. 1st Cir. 12/30/20), 317 So.3d 715, writs denied, 2021-00382, 2021-00386 (La. 6/8/21), 317 So.3d 323. The trial court divided the case into four trial phases, with the first to determine liability. The Phase 1 trial was held in September and October 2017 "for the purpose of determining what caused the sinkhole to form and which parties, if any, were at fault under any theory of law for causing the formation of the sinkhole." Pontchartrain, 317 So.3d at 725. Texas Brine and Legacy Vulcan, among others, participated in the Phase 1 trial.

Pertinently, it was established at trial that the sinkhole was caused by the collapse of the cavern surrounding a brine well known as the Oxy Geismar 3 (OG3). Pontchartrain, 317 So.3d at 745, 749. The OG3 was drilled by Texas Brine in May 1982 on a tract of land (referred to as the "North 40") on the western edge of the Napoleonville Salt Dome. Texas Brine drilled the OG3 pursuant to a series of interdependent contracts with Legacy Vulcan, the lessee of the North 40

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until 2005. In June 2005, Legacy Vulcan sold its chloralkali business to Occidental Chemical Corporation. Pontchartrain, 317 So.3d at 725-27, 732. Texas Brine served as operator of the OG3 for the life of the well and mined brine from the OG3, which was used by Legacy Vulcan, then Occidental, in connection with the lessees' chloralkali business. Pontchartrain, 317 So.3d at 754, 757, 762.

After taking the matter under advisement and ruling on various motions for new trial, the trial court signed an amended Phase 1 judgment on April 18, 2018, and allocated fault among the entities found to be responsible for causing the sinkhole: 40% to Occidental; 5% each to Occidental's affiliates, Occidental Petroleum Corporation and OXY USA, Inc.; 25% to Texas Brine; 10% to United Brine Services Company, LLC; and 15% to Legacy Vulcan. Pontchartrain, 317 So.3d at 739.

Texas Brine filed an appeal with this court, resulting in the Pontchartrain, 317 So.3d 715, decision. On appeal, the April 18, 2018 Phase 1 judgment was reversed in part, amended in part, and affirmed in part. Specifically, this court reduced Occidental's fault allocation to 30% and assigned no fault to Occidental Petroleum Corporation and OXY USA, Inc. The allocations of 15% of fault to Legacy Vulcan and 10% to United Brine Services Company, LLC were affirmed, and the fault allocation to Texas Brine was amended to 45%. Pontchartrain, 317 So.3d at 763. The judgment of this court became final following the Louisiana Supreme Court's denial of all related writs of certiorari. See Pontchartrain, 317 So.3d 323; La. C.C.P. art. 2166(E).

The case proceeded before the trial court on the remaining issues and trial phases. Legacy Vulcan filed the instant motion for partial summary judgment in August 2021. Legacy Vulcan sought to dismiss Texas Brine's fraud and concealment/omission claims and causes of action that were to be tried in connection with Phase 2. In its motion, which was premised on the issue preclusion principle of res judicata, Legacy Vulcan asserted that the merits of

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Texas Brine's fraud allegations were tried during the Phase 1 trial and were essential to the Phase 1 judgment. Legacy Vulcan maintained that issue preclusion bars relitigation of the same factual contentions during future trial phases. See La. R.S. 13:4231(3).

Specifically, Texas Brine alleged and sought to prove during the Phase 1 trial that Legacy Vulcan fraudulently withheld assessments and reports prepared for it by its employee, Mark Juzsli, and outside consultants, Larry Sevenker (PB-KBB) and RE/SPEC, Inc. The reports set forth the consultants' analyses, observations, and, sometimes, concerns, regarding the OG3 and, particularly, its proximity to the edge of the salt dome. Pontchartrain, 317 So.3d at 726-730. In connection with the trial court's Phase 1 liability determination, Texas Brine undisputedly raised Legacy Vulcan's alleged fraud as an affirmative defense and urged that Legacy Vulcan should be assessed with a greater percentage of fault for intentionally withholding this information from Texas Brine.

In its motion for partial summary judgment, Legacy Vulcan asserted that the trial court and this court, in Pontchartrain, 317 So.3d 715, rejected Texas Brine's fraud contentions. Since the Pontchartrain (Phase 1) judgment is now final, Legacy Vulcan maintained that Texas Brine is barred from relitigating the same factual contentions in support of its fraud-based incidental demands against Legacy Vulcan.

Texas Brine opposed the motion and argued that its "contractual fraud" incidental demand against Legacy Vulcan was not tried during the Phase 1 trial. Although Texas Brine acknowledged that its fraud allegations were at issue in the Phase 1 trial, it asserted that the trial court was not asked to adjudicate the merits of its contractual fraud claim. Instead, "[f]raud was only addressed to the extent that Legacy Vulcan's intentional withholding of information affected the allocation of fault...." Texas Brine asserted that the trial court allocated 15% of fault to Legacy Vulcan after specifically finding that Legacy Vulcan withheld the Sevenker reports

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from Texas Brine. However, because the trial court made no specific finding as to Legacy Vulcan's fraud, Texas Brine maintained that the issue of Legacy Vulcan's fraud was not "necessarily decided" during the Phase 1 trial for purposes of res judicata. Finally, Texas Brine argued that exceptional circumstances justify relief from the effects of res judicata, citing the complex, multi-phase nature of the case and a voluminous document production made by Legacy Vulcan two years after the Phase 1 trial. See La. R.S. 13:4232.

Following a contradictory hearing on the motion, held in December 2021, the trial court took the matter under advisement. On January 6, 2022, the trial court signed a judgment granting Legacy Vulcan's motion for partial summary judgment and dismissing, with prejudice, "any fraud and concealment/omission contentions and causes of action by Texas Brine against [Legacy] Vulcan." In its January 6, 2022 written reasons for granting Legacy Vulcan's motion for partial summary judgment, the trial court found that Texas Brine "put its contention of fraud before the Court" during the Phase 1 trial "by way of an affirmative defense." The trial court pointed out that, during the Phase 1 trial, "Texas Brine argued that its fraud affirmative defense and contentions absolved it of fault completely" under La. C.C. art. 2323(C). The trial court noted that it "allocated a significant portion of fault to Texas Brine" in the Phase 1 judgment, thereby implicitly rejecting Texas Brine's fraud claim, and concluded that the determination of this issue was essential to the Phase 1 judgment. The trial court explained, "Texas Brine's 'contract fraud' claim is based on the same facts and implicates the same essential legal elements as its 'tortious fraud' affirmative defense, which was fully...