Quality Envtl. Processes, Inc. v. IP Petroleum Co.

• Decision Date: 12 April 2017
• Docket Number: 2016 CA 0230
• Citation: 219 So. 3d 349
• Parties: QUALITY ENVIRONMENTAL PROCESSES, INC., Michael X. St. Martin, and Virginia Rayne St. Martin v. IP PETROLEUM COMPANY, INC., International Paper Company, Montgomery Barnett, L.L.P, and John Y. Pearce
• Court: Court of Appeal of Louisiana — District of US

219 So.3d 349

QUALITY ENVIRONMENTAL PROCESSES, INC., Michael X. St. Martin, and Virginia Rayne St. Martin

v.IP PETROLEUM COMPANY, INC., International Paper Company, Montgomery Barnett, L.L.P, and John Y. Pearce

2016 CA 0230

Court of Appeal of Louisiana, First Circuit.

APRIL 12, 2017

Rehearing Denied May 1, 2017

Jamie S. Manuel, Baton Rouge, Louisiana, and H. Alston Johnson, III, Baton Rouge, Louisiana, Attorneys for Appellants/Cross–AppelleesDefendants—IP Petroleum Company, Inc. and International Paper Company

W. Shelby McKenzie, Amy C. Lambert, Kelley Dick, Jr., Baton Rouge, Louisiana, Attorneys for Appellants/Cross–Appellees

Defendants—Montgomery Barnett, L.L.P. and John Y. Pearce

A.J. Gray, III, Lake Charles, Louisiana, Attorney for Appellees/Cross–AppellantsPlaintiffs—Michael X. St. Martin, Virginia Rayne St. Martin, and Quality Environmental Processes, Inc.

Michael X. St. Martin, Christopher J. St. Martin, Houma, Louisiana, Attorneys for Appellees/Cross–AppellantsPlaintiffs—Quality Environmental Processes, Inc.

BEFORE: PETTIGREW, McDONALD, AND CALLOWAY,¹ JJ.

CALLOWAY, J.

The protracted litigation in this case involves mineral rights and royalties associated with a production well, IPPet. PPCO No. 1 well, located on a certain tract of land owned by the plaintiffs in Terrebonne Parish (hereinafter "St. Martin property").In this appeal, the defendantsIP Petroleum Company, Inc.(hereinafter "IP Petroleum") and International Paper Company challenge a trial court judgment on remand that awarded the plaintiffs, Quality Environmental Processes, Inc.(hereinafter "Quality"), Michael X. St. Martin, and Virginia Rayne St. Martin: (A) $107,612.67 in unpaid mineral royalties; (B) $215,225.34 in statutory penalties pursuant to La.R.S. 31:139;(C) $230,563.83 in interest from October 31, 2002, on the unpaid royalties and penalties; (D) $138,350.46 in statutory attorney's fees pursuant to La.R.S. 31:139; and (E) $691,752.30 in intentional tort damages.The plaintiffs assert their own appeal of the judgment on remand insofar as the judgment: (F) dismissed their claim for $817,464.29 in mineral royalties.In this appeal, we amend, in part, the judgment of the trial court, and affirm as amended.

In a related appeal, also rendered this date, 2016 CA 0171 consolidated with 2016 CA 0172, the plaintiffs appeal a judgment granting partial summary judgment in favor of the defendant, IP Petroleum, and dismissing with prejudice the plaintiffs' claims for mineral royalties attributable to production on the IPPet. PPCO No. 1 well prior to April 1, 2001.

FACTS AND PROCEDURAL HISTORY

The background facts and procedural history of this case are more detailed and fully set forth in the Louisiana Supreme Court's opinion in Quality Environmental Processes, Inc. v. I.P. Petroleum Co., Inc. , 2013-1582(La.5/7/14), 144 So.3d 1011(rehearing denied July 1, 2014)(hereinafter "Quality I" ).²For efficiency, we discuss only the facts and procedural history relevant to the current appeal.

On June 29, 2000, Quality and the St. Martins filed a petition for declaratory judgment and damages against Energy Development Corporation(hereinafter "EDC"), Phillips Petroleum Corporation(hereinafter "Phillips"), Mobil Exploration & Producing U.S., Inc.(hereinafter "Mobil"), and IP Petroleum.³That suit bears trial courtdocket number 129,412 and was assigned to Division D of the 32nd JDC in Terrebonne Parish, presided over by Judge David W. Arceneaux.It is referred to by the parties as the "Blue Line I" litigation.SeeQuality I , 144 So.3d at 1018.The Blue Line I litigation is the subject of the related appeal before this court, 2016 CA 0171 consolidated with 2016 CA 0172.

In the Blue Line I suit, the plaintiffs alleged they were entitled to receive from the defendants all mineral royalties on production from the IPPet. PPCO No. 1 well attributable to the St. Martin property from June 29, 1997, through the date the well was plugged and abandoned (September 2002), in the amount of $817,464.29.⁴The trial court later granted the plaintiffs leave to amend their suit to add Noble Energy, Inc.(hereinafter "Noble Energy"), as the successor to EDC, as a defendant.

At the time the Blue Line I suit was filed, some $817,464.29 in royalties had been paid by IP Petroleum to Noble Energy and Phillips between June 29, 1997, and April 1, 2001(hereinafter "previously-paid royalties"), while the remaining $106,977.66 in royalties (derived from production on the well between April 1, 2001, and September 1, 2002) were placed in escrow by the law firm of Montgomery, Barnett, Brown, Read, Hammond & Mintz, L.L.P.(hereinafter "escrowed royalties").SeeQuality I , 144 So.3d at 1018.

Ultimately, Mobil was dismissed from the Blue Line I suit.The plaintiffs settled their claims with Phillips in 2001 and with Noble Energy in 2005, who were also dismissed from the suit.SeeQuality I , 144 So.3d at 1018.In the 2001 and 2005 settlement agreements with Phillips and Noble Energy, the plaintiffs obtained all of the mineral interests in the St. Martin property that had belonged to Phillips and Noble Energy, respectively.SeeQuality I , 144 So.3d at 1018.IP Petroleum is the sole remaining defendant in the Blue Line I suit.⁵

In 2006, the plaintiffs attempted to amend their petition to add as a defendantInternational Paper Company(the parent company of IP Petroleum) and to assert a claim for tortious conspiracy against the defendants, as well as the attorneys for IP Petroleum: John Y. Pearce and the law firm of Montgomery Barnett, L.L.P. SeeQuality I , 144 So.3d at 1018.The trial court denied the plaintiffs' motion to amend their pleadings to add the above-described defendants.SeeQuality I , 144 So.3d at 1018.

Thereafter, Quality and the St. Martins filed the instant suit on December 1, 2006, against IP Petroleum, International Paper Company, Montgomery Barnett, L.L.P., and Mr. Pearce, which is the subject of this appeal.The plaintiffs again asserted a claim for unpaid royalties for production from the IPPet. PPCO No. 1 well against IP Petroleum and International Paper, specifically, the previously-paid royalties in the amount of $817,464.29.The plaintiffs also asserted a claim against IP Petroleum and International Paper Company for double the amount of royalties due, interest, and attorney's fees pursuant to La.R.S. 31:137, et seq.The plaintiffs asserted a claim against Mr. Pearce and Montgomery Barnett, L.L.P. for the escrowed royalties, in the amount of $106,977.66, as well as damages and attorney's fees.Further, the plaintiffs sought damages against all the defendants for certain alleged "willful and deliberate acts" under the Louisiana Unfair Trade Practices Act(hereinafter "LUTPA"), La.R.S. 51:1401, et seq.SeeQuality I , 144 So.3d at 1018.Additionally, under LUTPA, the plaintiffs sought three times the actual damages shown at the trial of this matter for the defendants' knowing commitment of the alleged unfair and deceptive acts.The instant suit bears trial courtdocket number 149,973 and was assigned to a different division of the 32nd JDC in Terrebonne Parish—Division B—which is presided over by Judge John R. Walker.This suit is referred to by the parties as the "Blue Line II" litigation.⁶SeeQuality I , 144 So.3d at 1018.

The case came before the trial court for trial on May 11, 12, and 13, and September 14 and 15, 2009.Thereafter, the trial court signed a judgment on October 28, 2011, in favor of the plaintiffs and against the defendants, decreeing 100% ownership of the mineral rights in the plaintiffs, and ordering IP Petroleum to pay a total of $6,725,375.98 for unpaid royalties, penalties (twice the royalties due), interest on unpaid royalties and penalties from July 1, 1997, through October 28, 2011, and 25% attorney's fees.As to the LUTPA claim, the judgment ordered IP Petroleum, International Paper Company, Mr. Pearce, and Montgomery Barnett, L.L.P. to pay a total of $4,549,227.91 in penalties (triple unpaid royalties), interest on treble damages from the date of demand, and 25% attorney's fees.SeeQuality I , 144 So.3d at 1019.

The defendants suspensively appealed the October 28, 2011 judgment of the trial court.The plaintiffs did not appeal any portion of the trial court's judgment.On appeal, this court vacated the judgment of the trial court in an unpublished, summary opinion.SeeQuality Environmental Processes, Inc. v. I.P. Petroleum Co., Inc. , 2012–CA–0776, 2013 WL 690535(La. App. 1 Cir.Feb. 25, 2013).This court held the trial court erred in finding that the plaintiffs obtained 100% ownership rights in the mineral rights at issue, and erred in awarding damages, penalties, interest, attorney's fees, and costs to the plaintiffs.This court remanded the case to the trial court to consider the plaintiffs' claims in connection with any mineral interests they may have obtained by virtue of their 2001 and 2005 settlements with Phillips and Noble Energy.This court did not address the merits of the plaintiffs' LUTPA claims, and the defendants unsuccessfully sought rehearing regarding those claims.Following the decision of this court, the plaintiffs and defendants each filed writ applications with the Louisiana Supreme Court, which were granted.⁷

The supreme court affirmed the decision of this court in Quality I , holding: (1) the 1966 mineral deed was sufficiently specific to identify the property to be conveyed and thus, to create a valid mineral servitude and to place third parties on notice of the existence of that servitude; (2) the St. Martins and Quality did not acquire the mineral rights to the subject property via the 1992 warranty deed whereby they purchased the St. Martin property; (3) the actions of the defendants did not rise to the level of an unfair trade practice within the meaning of LUTPA; and (4) affirmed this court's remand of the case to the trial court for consideration of any royalty payment issues stemming from...