* Pursuant to 5TH CIR. R. 47.5, the court has determined that

this opinion should not be published and is not precedent except

under the limited circumstances set forth in 5TH CIR. R. 47.5.4.

United States Court of Appeals

Fifth Circuit

FILED

February 11, 2004

Charles R. Fulbruge III

Clerk

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

 

No. 03-30539

 

LOUISIANA LAND AND EXPLORATION CO.; ET AL,

Plaintiffs,

versus

OXY USA, INC.; ET AL,

Defendants,

OXY USA, INC.,

Defendant-Cross-Claimant-Appellee,

versus

ONLINE RESOURCES, INC.,

Defendant-Cross-Defendant-Appellant.

--------------------

Appeal from the United States District Court

for the Eastern District of Louisiana

(01-CV-2236-S)

--------------------

Before HIGGINBOTHAM, SMITH, and WIENER, Circuit Judges. 

PER CURIAM:*

Defendant-Cross-Defendant-Appellant Online Resources, Inc.

(“Online”) appeals from the district court’s determination that, by

virtue of a Purchase Sale Agreement (“PSA”) between Online and OXY
1 The record reflects conflicting termination dates alleged by

the various parties and never determined as a finding of fact by

the district court, which ruled that the termination date was

irrelevant inasmuch as none contends that the subject lease was not

in force on December 1, 1998, on December 31, 1998, and for at

least two weeks thereafter.

2

USA, Inc. (“OXY”), signed December 31, 1998 and expressly made

effective on December 1, 1998, Online and not OXY is responsible

for, inter alia, the agreed ratable costs of plugging and

abandoning a well on a government mineral lease (the “subject

lease”) of a specified tract on the Outer Continental Shelf

offshore from the coast of Louisiana. The subject lease was in

full force and effect on the effective date specified in the PSA

and on the date the PSA was signed, but terminated subsequent to

those dates.1 

The PSA was, in essence, a contract by which OXY disposed of

all of its mineral interests and related properties in a large area

off the Gulf Coast for a lump sum of $3,500,000, and Online agreed

to purchase all of such interests and properties, “as is” and

“where is,” retroactively effective as of December 1, 1998. The

PSA specified that a Bill of Sale and Assignment (the “Assignment”)

transferring record title to all assets being conveyed as of the

effective date would be executed at a date well after December 31,

1998, during which period each of the parties would perform its own

due diligence. The PSA also afforded Online a period of two weeks

following its signing during which to assert any title deficiencies

in existence on the effective date and to make price adjustments
3

accordingly. Inasmuch as, under the earliest date asserted by

Online as its termination, the subject lease was in full force and

effect on the effective date, the execution date, and two weeks

thereafter, no issue of its title was asserted within that twoweeks period (there was, however, a title-problem price adjustment

regarding a different property in the package). 

Transfers of title to all assets covered by the PSA were

accomplished in the Assignment signed on May 12, 1999. That

document too expressed that all transfers of title thereunder were

as of the effective date of the PSA.

The instant controversy arose subsequent to the signing of the

Assignment, when LL&E demanded contribution for plugging and

abandoning the well in question, thus alerting the parties to the

fact that the subject lease had terminated. Despite a Texas

choice-of-law provision in the PSA, the parties and the court

applied the law of Louisiana as mandated by the Outer Continental

Shelf Lands Act (“OCSLA”).

In simplest form, Online’s contention that it has no

responsibility for plugging and abandoning the well is grounded in

the premise that, regardless of the effective date specified in the

PSA and the Assignment, the subject lease had terminated before

title was properly transferred in the Assignment as signed on May

12, 1999, and thus could not possibly have been transferred to

Online by OXY. It follows, Online insists, that absent a valid

assignment of the subject lease, Online owes no contribution to the
4

cost of plugging and abandoning the well on the tract formerly

covered by the subject lease. Specifically, Online argued to the

district court, and again to this court on appeal, that both the

existence of the lease on the date of the Assignment and

authorization of the transfer of the subject lease by the

government’s Mineral Management Service (“MMS”) were conditions

precedent (“suspensive conditions” under Louisiana law) to the

valid transfer of title to the subject lease, unaffected by the

lease’s existence on the effective date specified in the PSA and

the Assignment; and that the subject lease’s expiration or

termination before execution of the Assignment made transfer of the

subject lease to Online —— also assertedly a suspensive condition

—— a legal impossibility. 

The gravamen of OXY’s counterposition was that the PSA is the

law between the parties and that nothing in the suppletive

provisions of the Louisiana Civil Code or other such laws of that

State prohibits the parties from contracting for a retroactive

effective date, which they did in the PSA and confirmed in the

Assignment; that the subject lease was in existence on the

effective date of December 1, 1998 as well as on December 31 when

the PSA was signed; that, subject only to pre-effective date title

defects noticed within two weeks following the execution of the

PSA, the transfer of benefits and assumption of the risk of losses

to Online occurred as of the effective date; that the existence of

the subject lease (and other leases and properties in the package)
5

was relevant only on the effective date (December 1, 1998) and was

not relevant on May 12, 1999 when the title-transferring Assignment

was signed, making lease existence in May irrelevant and thus not

a suspensive condition to Online’s entitlement to benefits and

responsibility for obligations connected with or arising from the

subject lease (or any other properties) after the effective date;

and that the post-transaction refusal of the MMS to authorize

transfer of the subject lease once it ceased to exist at a time

after the effective date, after execution date of the PSA, and

after execution of the Assignment, was neither the failure of a

suspensive condition nor otherwise relevant.

The district court essentially agreed with OXY’s reasoning and

its position. The court determined that the precise date on which

the subject lease terminated was immaterial because, even under

Online’s contention, the subject lease terminated well after the

execution of the PSA and even further after the effective date of

that agreement. The district court also concluded that the

existence of the subject lease on May 12, 1999, when the Assignment

was executed, was not a suspensive condition to Online’s

responsibility for any obligations under that lease once all the

contracts were executed, any more than it would have been relative

to Online’s entitlement to production or other benefits under the

subject lease, had there been any. 

The court also ruled that MMS authorization was not a

suspensive condition or a material factor but rather was merely a
6

routine post-closing matter that, pursuant to subsection 5.1 of the

PSA would not “release [Online] of its obligation to close” the

transaction. The court indicated its agreement with OXY that,

because the subject lease terminated after the effective date and

the execution date of the PSA, all benefits and obligations,

including risk of loss and the cost of plugging and abandoning

wells, had shifted from OXY to Online before the subject lease

terminated. The controlling date of such shifts as to all leases

and properties covered by the global sale, as memorialized in the

PSA, was the effective date of December 1, 1998, as expressly and

unconditionally agreed to by these sophisticated and experienced

parties. MMS approval after the lease terminated, implied the

district court, would have been a meaningless, hollow act.

We have reviewed the extensive record in this case and have

considered the reasoning of the district court, as well as that of

able counsel for the respective parties, both as set forth in their

appellate briefs and expressed in their oral arguments to this

court. As a result, we are satisfied that the judgment of the

district court should be and is, in all respects,

AFFIRMED.