The Louisiana Supreme Court recently provided much-needed guidance about the appropriate application of the damages formulas established by the Oyster Lease Damage Evaluation Board (OLDEB). Pursuant to OLDEB’s statutory scheme, these formulas were designed to apply to situations where “turf wars” erupted between oil and gas operators and oyster lessees over alleged damage to oyster leases from certain oil & gas operations. Lately, however, these damages formulas have been used by plaintiffs’ attorneys to obtain millions-of-dollars in jury verdicts in jurisdictions located in southeast Louisiana. But, on March 24, 2021, in Marty Melerine. v. Tom’s Marine and Salvage, LLC, the La. Supreme Court delivered guidance that the oil & gas industry has been seeking for years about OLDEB. The Court delineated exactly how and when these damages formulas are to be applied. Significantly, the Court found that these damages formulas should only be applied where pre-project and post-project biological assessments are conducted.
In the instant case, in April of 2016, a tugboat pushing a barge through coastal waters entered Christmas Lake in St. Bernard Parish, an area known for oyster leases. A local oyster fisherman told the captain of the tugboat that he needed to turn around because of the presence of oyster beds. The captain obliged and turned the boat around. As the tugboat was heading out of Christmas Lake, the tugboat crossed over oyster-lease grounds leased by Marty Melerine and subleased by Oyster Fisheries, Inc. The tugboat eventually became grounded on an oyster reef. The captain tried to rev the engine forward and backward to release the tugboat from the reef but to no avail. The captain waited for high tide the next day to try to remove the tugboat. The captain was successful the next day with the help of the plaintiff and was able to exit the area. Plaintiffs filed a lawsuit in the 34th Judicial District Court seeking about $9 million in damages for alleged damage to their oyster lease. Plaintiffs relied mainly on the testimony of Dr. Edwin Cake as the basis for his damages. After an extensive trial in St. Bernard Parish, a 10-2 jury returned a verdict in favor of plaintiffs awarding over $6 million in damages. Defendants filed an appeal with the Louisiana Court of Appeal, Fourth Circuit, but the judgment was affirmed. The defendants then filed a writ with the Louisiana Supreme Court, which was granted.
In rendering its decision, the Supreme Court reversed, vacated, and remanded the matter to the trial court. As to OLDEB, the Court found that the trial court should not have admitted evidence regarding OLDEB because pre-and post-project assessments had not been conducted in this case. The Court noted that the very underpinnings of the OLDEB valuation methodology depend on these critical assessments, and, without them, there is no way to compare whether there was any damage to the oyster stock and/or the water bottoms. As the Court aptly stated: “In this case, no pre-project biological survey was performed because the presence of the tugboat and grounding was unanticipated. The leased areas were not poled before the grounding to identify the existing water bottom as required by OLDEB’s detailed standards. No oyster samples were taken before the grounding to determine the number of oysters on the lease, again, as required by OLDEB’s sampling criteria. Whether OLDEB compliant or not, nothing was done before the grounding to record the quality and value of the water bottom or the oyster stock. Instead, months after the grounding, Dr. Cake tried to “piece together what the lease looked like beforehand” by talking to oyster fisherman, conducting poling and oyster sampling, and drawing inferences therefrom. Those efforts, as diligent as they may have been, are not a substitute for a pre-project biological survey required to apply the OLDEB formulas . . . [thus,] we hold as a matter of law that OLDEB guidelines and uniform evaluation methods are not applicable without [comparative biological surveys].” See pages 13-16 of the attached Opinion. This holding is a win for the oil & gas industry in these oyster lease cases because it reinforces the very foundation of the OLDEB statutory scheme—working to create a legislative compromise between mineral lessees and oyster lessees. In a venue that has consistently levied extremely high jury verdicts (e.g., over $6 million in this very case) against the oil & gas industry in favor of local oyster fishermen, this recent decision by the Louisiana Supreme Court is a game-changer and a win for the industry.
About the Author:
Oil & Gas Committee Chair
Baker, Donelson, Bearman, Caldwell & Berkowitz, PC
Ms. Jarrott is a litigator who has more than 15 years of experience assisting clients in a variety of industries including energy, transportation, and other commercial businesses. Ms. Jarrott focuses her practice on helping businesses resolve disputes with particular experience in complex commercial litigation, transactional and regulatory matters. A large portion of Ms. Jarrott's practice focuses on commercial contracts, including review and input on provisions that protect her clients' businesses and operational concerns, as well as defending businesses should a dispute arise.