Opinion ID: 567657
Heading Depth: 2
Heading Rank: 2

Heading: prescription on royalty miscalculation claims

Text: 37 Frey also sued Amoco for miscellaneous royalty underpayments that are independent of take-or-pay payments. In Louisiana, claims for royalty underpayment are subject to a three-year liberative prescription (effectively a statute of limitations) that commences to run from the day payment is exigible. 7 LA.CIV.CODE ANN. arts. 3494(5), 3495 (West Supp.1991). At the close of Frey's case-in-chief, the district court held that Frey's claims for royalty miscalculations that occurred more than three years before Frey filed suit in April 1988 are time-barred. Frey appeals the court's involuntary dismissal of his pre-April 1985 royalty miscalculation claims. See FED.R.CIV.P. 41. 38 It is undisputed that payment is demandable under article 3495 upon receipt of a royalty check. We need only determine whether Louisiana's doctrine of contra non valentem agere nulla currit praescriptio 8 operates to shift the beginning of the three-year statutory prescriptive period from the time that the plaintiffs received their royalty checks to a later date. Despite the mandate of article 3495 as to the beginning of the three-year prescriptive period, Louisiana courts apply the contra non valentem doctrine to suspend the period's beginning while the cause of action is not knowable by the plaintiff through the exercise of reasonable diligence. Edmundson v. Amoco Production Co., 924 F.2d 79, 83-84 (5th Cir.1991) (citing cases); see also Plaquemines Parish Comm'n Council v. Delta Development Co., 502 So.2d 1034, 1055-56 (La.1987) (contra non valentem still viable exception to prescription statutes in Louisiana). 39 As the basis for the court's ruling, the district court stated, that which is knowable and easily obtainable by parties is not to be a basis for suspending the running of prescription. We must take this statement in concert with the time-bar date chosen by the court to mean that at the time the plaintiffs received their royalty checks and statements each month, they had enough information to enable them, through the exercise of reasonable diligence, to discover that they had a cause of action against Amoco for royalty miscalculation. The court did not issue findings of fact to support its conclusion as required under Federal Rule of Civil Procedure 41, and we have difficulty discerning any support in the evidence for that conclusion. 40 Under Louisiana law, the three-year prescriptive period did not begin to run on Frey's royalty miscalculation claim until the plaintiffs could have known through the exercise of reasonable diligence that they had such a cause of action against Amoco. 9 Perhaps the district court decided that the plaintiffs, through the exercise of reasonable diligence, could have known of the royalty miscalculations by examining their royalty check stubs each month. Amoco attaches documentation to its royalty checks that contains all of the information required by Louisiana's royalty disclosure statute. 10 Amoco also periodically sent the plaintiffs booklets explaining the significance of the numbers on their royalty check stubs and inviting questions about royalty calculations. But Louisiana law does not guarantee Amoco that it will not be sued for royalty underpayments more than three years after the payments have been accepted. If the royalty check stub contains an internal inconsistency cognizable from the face of the document, then it may be held that the stub's recipient could have reasonably known of a cause of action from the date of receipt. But if the stub simply understates the volume of gas produced from a well, its recipient need not call for an audit of the well's production each month to preserve the right to sue for royalty underpayment. It is not until the royalty owner has reason to suspect an understatement that the duty to investigate further arises. 41 To properly apply Louisiana law on contra non valentem, the district court must consider when Frey first had cause to suspect royalty miscalculations by Amoco, either from internal inconsistencies shown on check stubs, rumors, or otherwise. Frey's royalty miscalculation claims concern tax rebates that Amoco received from Columbia free of Frey's royalty interest, accounting for gas balancing among the working interests in the Morganza field, gas used by Amoco but not paid for, and unaccounted for price differentials based on the energy content of volumes of gas sold. We do not understand from our reading of the trial transcript, and the district court does not explain, how the plaintiffs could have known of these occurrences simply by reading their royalty check stubs. Absent suspicion of Amoco, the plaintiffs had no reason to request further information from Amoco when and if they received internally consistent explanations of their royalty receipts. 42 We reverse the district court's judgment based upon its ruling on prescription against the Frey claim for royalty miscalculations and direct the court to reconsider the issue in light of this opinion on remand. 43 Frey also claims that prescription was suspended under contra non valentem for the entire time that Amoco refused to supply requested well-accounting information. While prescription is suspended in Louisiana when a defendant acts to prevent a plaintiff from discovering a cause of action, Edmundson, 924 F.2d at 82, Amoco did not so act in this case. Amoco merely asserted its right to keep its information confidential, and this alone is insufficient to suspend prescription. Id. at 82-83. Absent voluntary disclosure, Frey may only get information from Amoco by asserting a statutory or contractual right, including the right to discovery in a lawsuit.