Opinion ID: 2777362
Heading Depth: 2
Heading Rank: 2

Heading: Prescription of Lessors’ Claims

Text: We next examine whether the parties have conceded facts that, at least for this lawsuit, require us to hold that the lessors’ claims have prescribed. In Louisiana, personal actions are generally subject to a ten-year prescription period. See LA. CIV. CODE art. 3499. Actions to recover royalty payments from the production of minerals, however, prescribe in three years. See art. 3494(5). In both cases, “[p]rescription commences to run from the day payment is exigible.” art. 3495. Stated another way, prescription begins “as soon as the action accrues.” Id. comment (b). Here, Fite’s mineral lessors’ royalty claims accrued as they became due; the last such claim accrued upon cessation of the well’s production in December 2011. art. 3495; see Ledoux v. City of Baton Rouge/Parish of East Baton Rouge, 755 So.2d 877, 879-80 (La. 2000). To decide which period applies, we must determine whether the lessors’ claims relate to royalty payments. Under the lease agreement between Fite and its lessors, Fite is entitled to develop the lessors’ mineral interests and the lessors are entitled to receive royalty payments. On appeal, Fite argues that “[t]he Mineral Owners’ claims against Fite for royalty . . . are subject to a three-year liberative prescription period” and thus “are moot.” Fite maintains that, unlike its lessors’ potential claims against Fite itself, their claims against SWEPI have not prescribed because they relate to “portion of production” payments, not royalties. Fite cites two Louisiana cases for the proposition that “portion of production” claims are quasi-contractual and entail a ten-year prescription period. See Wells v. Zadeck, 89 So.3d 1145, 1149 (La. 2012); King v. Strohe, 673 So.2d 1329, 1338 (La. App. 3d Cir. 1996). In each case, an oil and gas company began production within a drilling unit after leasing mineral rights from some owners but not others. See Wells, 89 So.3d at 1147; King, 673 So.2d 9 Case: 13-31244 Document: 00512928554 Page: 10 Date Filed: 02/05/2015 No. 13-31244 at 1332. The courts applied Section 30:10(A)(3), which allows an owner of unleased mineral interests contained within a unit to seek a pro rata share of any proceeds from the sale of production relating to the unit. See LA. REV. STAT. § 30:10A(3); Wells, 89 So.3d at 1149; King, 673 So.2d at 1338. Both courts held that such claims are subject to a ten-year prescription period. See Wells, 89 So.3d at 1149; King, 673 So.2d at 1338. The question of the applicability of Section 30:10(A)(3) turns on whether a leased interest that is not a participating interest in a well should be considered an “unleased” interest for purposes of that statute. Fite cites no caselaw in which that characterization was made. As we just summarized, in the two cases it does cite, the relevant mineral owners had not executed mineral leases. In one of the two cited opinions, the Third Circuit Court of Appeal of Louisiana explained the operation of Section 30:10(A)(3) by referring to “unleased interests” as those still under the control of a mineral owner: [The statute] protects the unleased interests and avoids undue delays in the sale of production. Leased interests are usually entitled to only an in kind share of production, which they then market. It is then the lessee's duty to distribute the proceeds under its contract with its lessor. When there is no lessee, the mineral interest owner must deal directly with the unit operator, with whom he has no contractual relationship. In order to facilitate the sale of the minerals, La.R.S. § 30:10(A)(3) provides a quasicontractual relationship between the unit operator and the mineral interest owner. King, 673 So.2d at 1338. We did discover another Third Circuit Court of Appeal decision in which the court briefly but inconclusively analyzed the applicability of Section 30:10(A)(3) to the mineral rights in a small strip of land that the operator claimed was covered by one of its leases. See Lamson Petroleum, 763 So.2d at 41. The court resolved a title question and determined that that strip was not 10 Case: 13-31244 Document: 00512928554 Page: 11 Date Filed: 02/05/2015 No. 13-31244 covered by any of the operator’s leases but was instead subject to a competing lease given to the plaintiff. Id. at 43-49. The plaintiff was awarded the proceeds of production allocable to that small interest. Id. at 49. The court never determined whether Section 30:10(A)(3) applied to this leased but nonparticipating interest, though it did not categorically dismiss the possibility. The court only held that the statute was not the exclusive remedy for those seeking past revenues from production. Id. at 50. We do not consider Lamson to be contrary authority. The statute on which Fite relies for the assertion that there is a ten-year prescriptive period is inapplicable. That statute concerns the marketing of shares of production allocable to interests “for which the party or parties entitled to market production therefrom have not made arrangements to separately dispose of the share of such production . . . .” LA. REV. STAT. § 30:10(3). Fite’s interests do not fall under that category. Certain mineral owners leased their interests to Fite in exchange for royalty payments, and Fite held those leases when SWEPI decided to drill a well. The fact that Fite did not agree to participate in the drilling did not convert its lessors’ interests into unleased interests. Those nonparticipating but leased interests were forcibly pooled within the unit, and the operator had the right to market the production allocable to Fite’s leases as well as the production allocable to interests that did participate. 3 Fite has never challenged SWEPI’s authority to sell its share of production. It has only challenged whether some of that revenue was owed to Fite’s lessors. 3 One writer stated that the Louisiana statutes and caselaw do not clearly explain the rights of the operator under the forced pooling statute, but “other owners in the unit generally are considered to have no control over the operator’s conduct of operations,” which presumably includes the sale of production. Guy E. Wall, Joint Oil and Gas Operations in Louisiana, 53 LA. L. REV. 79, 88 (1992). 11 Case: 13-31244 Document: 00512928554 Page: 12 Date Filed: 02/05/2015 No. 13-31244 In summary, the mineral owners under Fite’s leases were not entitled to seek a “portion of production” but instead were required to seek unpaid royalties from whomever might have owed it, whether Fite or SWEPI. They were required to seek their royalty payments within three years of the date that those payments came due. Both Fite and SWEPI agree that none of the lessors have filed suit, and the three-year prescription period has now run; the lessors also did not file a required written notice prior to suit. See LA. REV. STAT. 31:137; see also § 30:10(A)(2)(b)(ii)(ee). These concessions do not bind absent parties. If Fite’s royalty owners have, in fact, taken the relevant steps necessary to preserve their claims under Louisiana law, those claims are not decided by this opinion. What is important today is that the parties in this lawsuit have conceded facts that make any determination of which company is to pay the lessors’ royalties a moot point in this litigation. The determination made by the district court is one for which there is no longer an actual case or controversy. We VACATE the order of the district court and REMAND with instructions that the complaint be dismissed. 12