Crosstex Energy Services, LP, Crosstex LIG, LLC and Crosstex Processing Services, LLC v. Texas Brine Company, LLC

Opinion

STATE OF LOUISIANA

COURT OF APPEAL

FIRST CIRCUIT

2018 CA 1323

CROSSTEX ENERGY SERVICES, LP, CROSSTEX LIG, LLC AND CROSSTEX PROCESSING SERVICES, LLC

VERSUS

TEXAS BRINE COMPANY, LLC, ET AL.

Judgment Rendered: AM 0- 8 2019'

APPEALED FROM THE 23RD JUDICIAL DISTRICT COURT ASSUMPTION PARISH, LOUISIANA DOCKET NUMBER 34, 202

HONORABLE THOMAS J. KLIEBERT JR., JUDGE

Mary S. Johnson Attorneys for Third Party Mandeville, Louisiana Defendants/ Appel lees and AIG Specialty Insurance Company, Chad J. Mollere New Hampshire Insurance Company, Nichole M. Gray and National Union Fire Insurance Company New Orleans, Louisiana of Pittsburgh, Pa. ( alleged insurers of Occidental Chemical Corporation, Occidental Petroleum Corporation, and/ or Oxy USA, Inc.)

Leopold Z. Sher Attorneys for Third Party Plaintiff/Appellant James M. Garner Texas Brine Company, LLC Peter L. Hilbert Jr. Jeffrey D. Kessler New Orleans, Louisiana and

Robert Ryland Percy III Gonzales, Louisiana and

Travis J. Turner Gonzales, Louisiana

BEFORE: McDONALD, WELCH, and CRAIN, 33. McDONALD, J.

Texas Brine Company, LLC, appeals a January 31, 2018 judgment granting

declinatory exceptions of lis pendens filed by AIG Specialty Insurance Company,'

National Union Fire Insurance Company of Pittsburgh, PA, and New Hampshire

Insurance Company ( collectively, Oxy Insurers), as alleged insurers of Occidental

Chemical Corporation, Occidental Petroleum Corporation, and/ or Oxy USA, Inc.

collectively, Oxy). The judgment dismissed " any and all claims, demands, and/ or

allegations asserted by Texas Brine against the [ Oxy Insurers] ... in their entirety,

WITHOUT PREJUDICE, in favor of the first -filed set of claims and demands pending

in ... Gustave J. LaBarre, Jr., et al. versus Occidental Chemical Company, et al., Docket

No. 33, 796, 23rd Judicial District Court, Parish of Assumption, State of Louisiana." For

the following reasons, we affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

This appeal relates to one of multiple lawsuits against Texas Brine filed after the

development of a sinkhole in August 2012 near Bayou Come in Assumption Parish,

Louisiana. In this suit, Crosstex sued Texas Brine claiming Texas Brine' s negligent brine

mining operation of a salt cavern caused the sinkhole and the sinkhole damaged

Crosstex' s pipeline. z In response, in this suit and in other sinkhole suits, Texas Brine

filed duplicative third -party demands against multiple defendants, including Oxy and the

Oxy Insurers, seeking indemnification, contribution, and reimbursement for response

costs and expenses.

As each of the sinkhole suits progressed, some of the third -party defendants,

including the Oxy Insurers, filed lis pendens exceptions seeking dismissal of Texas

Brine' s duplicative third -party demands in all but the LaBarre suit, which the Oxy

1 According to AIG's lis pendens exception, AIG is formerly known as Chartis Specialty Insurance Company, and previously known as American International Specialty Lines Insurance Company and American International Surplus Lines Insurance Company, both previously known as "" AISLIC." 2 In its original petition, the plaintiffs in this case, multiple Crosstex entities, named Texas Brine Company, LLC, as the defendant. In later pleadings, the Crosstex entities additionally named other parties allegedly related to Texas Brine Company, LLC, as defendants. Here, we refer to the plaintiffs collectively as Crosstex and to the defendants collectively as Texas Brine.

2 insurers argued was the suit where Texas Brine first filed its third -party demands

against them. After a hearing, the trial court signed the January 31, 2018 judgment

granting the Oxy Insurers' exceptions, and dismissing Texas Brine' s third -party claims

against them, without prejudice, in favor of the " first -filed" set of claims in LaBarre.

After the Oxy Insurers filed their lis pendens exceptions, but before the

exceptions were decided, the trial court held a trial in three of the sinkhole cases,

namely, this Crosstex suit, Florida Gas, and Pontchartrain ( Pipeline cases) 3, to

determine liability for the sinkhole ( Phase I liability trial). On December 21, 2017 and

April 18, 2018 ( after granting motions for new trial in part), the trial court signed a

judgment allocating fault for the sinkhole to multiple parties, including 50% of the fault

to Oxy ( Liability Judgment).

Texas Brine appeals from the January 31, 2018 lis pendens judgment,

contending the trial court erred in granting the lis pendens exceptions because: ( 1) lis

pendens does not apply in the sinkhole suits where the parties in each suit are

different; ( 2) if lis pendens does apply, then its third -party claims against the Oxy

Insurers should proceed in the Pipeline cases, the " most actively litigated [ sinkhole]

cases"; and ( 3) the Oxy Insurers waived the right to assert lis pendens by their

counsel' s participation and Oxy' s participation in the Phase I liability trial.

LIS PENDENS

Louisiana Code of Civil Procedure 531 codifies the doctrine of lis pendens and

provides:

When two or more suits are pending in a Louisiana court or courts on the same transaction or occurrence, between the same parties in the same capacities,the defendant may have all but the first suit dismissed by excepting thereto as provided in Article 925. When the defendant does not so except, the plaintiff may continue the prosecution of any of the suits, but the first final judgment rendered shall be conclusive of all.

A defendant in an incidental action may plead any of the exceptions available to

a defendant in a principal action. La. C. C. P. art. 1034. The party pleading lis pendens

has the burden of proving the facts necessary for the exception to be granted.

3 The Pipeline cases are Crosstex Energy Services, LP, et al. v. Texas Brine Company, LLC, et al., No. 34, 202 ( 23rd JDQ Florida Gas Transmission Co. v. Texas Brine Co., No. 34, 316 ( 23rd JDQ and, Pontchartrain Natural Gas System v. Texas Brine Co, LLC, No. 34, 265 ( 23rd JDQ. 3 Lockhart Ins Agency, LLC v. Ryano & Beezer, LLC, 15- 1911 ( La. App. 1 Cir. 9/ 6/ 16),

2016 WL 4680091 * 2. A trial court should grant the exception if a final judgment in the

first suit would be res judicata in the subsequently filed suit. Id. The crucial inquiry is

not whether the second suit is based on the same cause of action as the first suit, but

whether the second suit asserts a cause of action that arises out of the same

transaction or occurrence that is the subject matter of the first suit. Id. For lis

pendens to apply, La. C. C. P. art. 531 requires that: ( 1) two or more suits are pending in

a Louisiana court or courts; ( 2) on the same transaction or occurrence, and ( 3)

between the same parties in the same capacities. Id. If a defendant carries his

burden, he is entitled to have all but the first -filed suit dismissed. See La. C. C. P. arts.

531 and 9238; Harris v. Breaud, 17- 0421 ( La. App. 1 Cir. 2/ 27/ 18), 243 So. 3d 572,

577. 4

Here, it is undisputed that two or more sinkhole suits are pending in Louisiana

courts. And, in this appeal, Texas Brine does not dispute that its Crosstex third -party

demand against the Oxy Insurers arises out of the same transaction or occurrence as

its LaBarre third -party demand. Rather, Texas Brine argues, in its first assignment of

error, that the third lis pendens requirement is not met, because the parties in each of

the sinkhole suits are different.

In analyzing an exception of lis pendens asserted as to incidental demands, the

proper analysis is to compare only the third -party demands in the pending suits.

Capital One, N.A. v. Service Door & Millwork, LLC, 11- 0691 ( La. App. 1 Cir. 11/ 9/ 11),

2011 WL 5420374 * 3. Thus, although the first -party plaintiffs in this Crosstex suit are

different from those in LaBarre, it is clear that the relevant third parties are the same.

4 The standard of review applicable to a trial court's ruling on an exception of lis pendens under La. C. C. P. art. 531 is unclear. Because our affirmance would be the same under any standard or review, we need not decide the appropriate standard in this case. Lockhart Ins. Agency, LLC, 2016 WL 4680091 at 3 n. 1.

rd That is, in both suits, Texas Brine is the third -party plaintiff asserting the same third -

party demands against the Oxy Insurers, the same third -party defendants. This

assignment of error is meritless.

In its second assignment of error, Texas Brine contends that, if lis pendens

applies, then its third -party demand should proceed in the Pipeline cases. According to

Texas Brine, because the Pipeline cases proceeded to and concluded the Phase I

liability trial before all other sinkhole cases, they constitute the " first suit" for lis

pendens purposes under La. C. C. P. art. 531 and " shall be conclusive of all." Texas

Brine bases its argument on the last sentence of La. C. C. P. art. 531, which states,

When the defendant does not so except [ based on lis pendens], the plaintiff may

continue the prosecution of any of the suits, but the first final judgment rendered shall

be conclusive of all." This provision only applies when the defendant does not file an

exception of lis pendens. Here, the Oxy Insurers each filed exceptions of lis pendens

on August 24, 2017, before the trial court rendered the Liability Judgment. Thus,

neither the Pipeline cases themselves nor the Liability Judgment are " conclusive of all"

within the meaning of La. C. C. P. art. 531. This assignment of error is meritless.

In its third assignment of error, Texas Brine contends the Oxy Insurers waived

their right to assert lis pendens in this case, because their counsel and their insured,

Oxy, participated in the Phase I liability trial. In support of its contention as to Oxy,

Texas Brine points to a September 13, 2018 judgment, wherein the trial court found

that Oxy had ' waived the exception of /is pendens in the Pipeline Cases on the basis of

Oxy's] participation in the Phase I Liability Trial." However, even if we assume that

Oxy did so waive its lis pendens exception, a waiver by Oxy of its lis pendens exception

does not constitute a waiver by its insurers as to their separately -filed lis pendens

5 Texas Brine' s December 1, 2015 amended third -party demand against the Oxy Insurers pertinently states: " The Oxy Insurers are ... liable to Texas Brine for [ Oxy's] full liability to Texas Brine, pursuant to

Louisiana' s Direct Action Statute, [ La. R. S.] 22: 1269"; and " Texas Brine was required to spend in excess of $100 million in unreimbursed expenses in responding to the emergence of the sinkhole, which amount Texas Brine seeks from the Oxy Insurers in addition to any additional costs that will be incurred." The record sufficiently establishes that the trial court took judicial notice of Texas Brine' s LaBarre third -party demand, which was also pending before it in the 23rd JDC. The parties do not dispute its existence, its substance, or that it was filed on September 1, 2015. See Pullin v. Chauvin, 17- 1292 ( La. App. 1 Cir. 3/ 15/ 18), 244 So. 3d 472, 474 n. 1, writ denied, 18- 0572 ( La. 6/ 1/ 18), 243 So. 3d 1061; Harris v. Breaud, 17- 0421 ( La. App. 1 Cir. 2/ 27/ 18), 243 So. 3d 572, 577 n. 3; AmSouth Bank v. Unemployment Compensation Control Systems, LLC, 05- 0253 ( La. App. 1 Cir. 5/ 8/ 09), 2009 WL 1270295 * 3. 5 exceptions to Texas Brine' s third -party claims against them, which were not tried at the

Phase I liability trial. The Liability Judgment and the trial court's December 21, 2017

Reasons for Judgment show that Texas Brine's third -party claims against the Oxy

Insurers were not tried at the Phase I liability trial. Thus, although Texas Brine points

to cases wherein a party was found to have waived his right to pursue a declinatory

exception by participating at trial, e.g., Labadot v. Labadot, 328 So. 2d 747 ( La. App. 4

Cir. 1976), none of the cited cases hold that a party's insurer is bound by its insured' s

waiver of an exception of lis pendens, when the insured' s participation at a trial did not

include adjudication of third party -claims against the insurer.6

As to the Oxy Insurers' counsel' s participation at trial, Texas Brine points to: ( 1)

a November 11, 2017 judgment, granting a motion for involuntary dismissal made by

two of the Oxy Insurers, and dismissing Texas Brine's third -party claims against them;

and ( 2) two excerpts from the Phase I liability trial showing that counsel for the Oxy

Insurers was present and addressed the court. Our review of these documents

indicates that the attorneys who were present on these three instances were there to

represent Oxy insurers, including AIG and National Union, solely in their capacities as

alleged insurers of Adams Resources Exploration Corporation, another third -party

defendant, and not in their capacities as insurers of Oxy. In fact, at the December 21,

2017 lis pendens hearing, Texas Brine's counsel admitted that counsel for National

Union, one of the Oxy Insurers, participated at the Phase I liability trial, but that

National Union was not at the trial in its capacity as Oxy's insurer. Further, Texas Brine

concedes in its brief that the November 11, 2017 judgment referenced above was

rendered in favor of the Oxy Insurers " in their capacity as insurers of Oil and Gas

Defendants," which is " albeit in a different capacity" than as insurers of Oxy. Thus, the

presence or participation of counsel for AIG and National Union, in their capacity as

Adams Resources" insurers, at the Phase I liability trial does not waive the Oxy Insurers'

right to assert lis pendens, even though counsel was the same. Accord Diamond v.

6 AIG filed an answer to Texas Brine's third -party demand before it filed its lis pendens exception. Although such may have constituted a waiver of AIGs right to assert lis pendens, Texas Brine did not assign such as error on appeal.

6 Progressive Sec. Ins, Co., 05- 0820 ( La. App. 1 Cir. 3/ 24/ 06), 934 So. 2d 739, 744- 45

Appearance by insurer was not an appearance by insurance guaranty association after

insurer became insolvent, even if the same attorney represented the parties; thus,

insurer's motion to compel discovery did not result in a waiver of the insurance

guaranty association' s objection to personal jurisdiction.). This assignment of error is

without merit.

CONCLUSION

For the foregoing reasons, the January 31, 2018 judgment: ( 1) granting

declinatory exceptions of lis pendens filed by AIG Specialty Insurance Company,

National Union Fire Insurance Company of Pittsburgh, PA, and New Hampshire

Insurance Company, as alleged insurers of Occidental Chemical Corporation, Occidental

Petroleum Corporation, and/ or Oxy USA, Inc., and ( 2) dismissing ""any and all claims,

demands, and/ or allegations asserted by Texas Brine against the [ Oxy Insurers] ... in

their entirety, WITHOUT PREJUDICE, in favor of the first -filed set of claims and

demands pending in ... Gustave J. LaBarre, Jr., et al. versus Occidental Chemical

Company, et al., Docket No. 33, 796, 231d Judicial District Court, Parish of Assumption,

State of Louisiana" is affirmed. We assess appeal costs to Texas Brine.

AFFIRMED.