Louisiana Defenses: What is a Valid Assignment of a Right to Sue?
Written by Kristin Lausten
In New Orleans and in Louisiana, the right of a landowner to sue for environmental contamination is a personal right. That is, the right to sue does not “run with the land.” If a given landowner sells the real property, the right to sue for past contamination remains with the former owner and does not pass to the new owner UNLESS there is a proper contractual assignment of that right. This is known as the subsequent purchaser doctrine (“SPD”). See Eagle Pipe & Supply, Inc. v. Amerada Hess Corp., 79 So.3d 246 (La. Supreme Court 2011) (clarifying that the right to sue is a personal right; making the SPD applicable to latent or hidden contamination).
The idea behind the SPD is that, during the sale of property that has been damaged, it is assumed the damage would result in a loss of value to the property which would be reflected in the sale price. Since the former owner is the one receiving less consideration for the real property, the former owner retains the right to sue for loss of value.
In this article, we discuss what constitutes a valid and enforceable assignment of the right to sue for previous environmental contamination with reference to a recent Court of Appeals case. See Catahoula Lake Investments v. Hunt Oil, 237 So. 3d 585 (La. App. 3rd Cir. January 10, 2018). A proper assignment is, of course, important because if the assignment is ineffective, then a motion to dismiss will be granted based on the SPD.
Defending Louisiana Environmental Litigation: The Assignment Clause in Catahoula
In Catahoula Lake Investments, the plaintiff purchased certain lands in 2007 and thereafter filed suit against certain defendants claiming that their past operations on the property under mineral leases caused environmental damage to the property. Defendants countered by asserting that, because all mineral operations had ceased prior to 2007, the SPD barred plaintiff’s claims since plaintiff’s 2007 purchase contract did not expressly and explicitly pass the seller’s personal rights of action to the purchaser.
That 2007 contract provided, in pertinent part (emphasis added):
“Vendor is selling the Property “AS IS, WHERE IS” without any warranties whatsoever as to fitness or condition, whether expressed or implied, and Vendee expressly waives the warranty of fitness and the guarantee against hidden or latent vices … Vendee forfeits the right to avoid the sale or reduce the purchase price on account of some hidden or latent vice or defect in the Property sold. Vendor expressly subrogates Vendee to all rights, claims and causes of action Vendor may have arising from or relating to any hidden or latent defects in the Property.”
At the trial level, the court held that this language was “non-explicit” and too vague to be a proper assignment of the right to sue for environmental contamination. The trial court cited Louisiana caselaw to the effect that the assignment of the right to sue must be explicit. For example, this was the language from Eagle Pipe which the Louisiana Supreme Court held to NOT be explicit enough to transfer the right to sue:
“… [the sellers] do by these presents sell, transfer and deliver, with full guarantee of title and free from all encumbrances, and with full subrogation to all their rights and action of warranty against previous owners …”
The trial court also cited Matthews v. Alsworth, 45 La. Ann. 465, 12 So. 518 (1893) where, again, the Louisiana Supreme Court held contract language did NOT assign the right to sue. The pertinent language in that case was:
“This conveyance is made with complete transfer and subrogation of all rights and all actions of warranty or otherwise against all former claimants, proprietors, tenants, or warrantors of the property herein conveyed.”
Based on the foregoing caselaw and other caselaw, the trial court held that the 2007 purchase contract did not use language that was explicit enough to transfer to the plaintiff the right to sue the defendants for past environmental contamination.
However, the Court of Appeals reversed. The court focused on the language with respect to “latent and hidden defects.” For the Court of Appeals, the use of that language was an intentional attempt by the parties to protect the purchaser by transferring any rights the seller might have against a third party for “hidden or latent” contamination to the property. The court noted that, because the environmental contamination was hidden/latent, the underlying principle of the SPD was not implicated. That is, the purchaser was at risk for overpaying for the property. Thus, it was reasonable for the parties to protect the purchaser by assigning the right to sue for such hidden/latent contamination. When/if contamination was discovered, it would be the purchaser — not the seller — who would suffer loss in market value.
The holding in Catahoula Lake Investments seems stained. The language in the 2007 contract seems about as vague and non-explicit as the contract language in Eagle Pipe. It appears then that Louisiana courts are creating a new rule for hidden/latent defects where a certain level of vagueness in the contract language will be tolerated.
Defending Louisiana Environmental Litigation: Contact New Orleans Attorney Kristin M. Lausten
Need assistance? Have questions? Contact Kristin M. Lausten. Our legal team defends toxic tort and environmental cases in both state and federal courts throughout Louisiana. We use state-of-the art technology and maintain relationships with a broad range of scientific and legal experts who are needed for defending environmental contamination cases.
In addition, we provide legal consultation and planning so that you can decrease your risks of being sued for torts related to toxic substances.
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Kristin M. Lausten
This article is provided as an educational service for general informational purposes only. The material does not constitute legal advice or rendering of professional services.