SGC Land, L.L.C. v. Louisiana Midstream Gas Services, L.L.C. et al

Filing 133

MEMORANDUM RULING: Before this Court is a Motion for Reconsideration filed on behalf of S G C Land L L C and Smithburg Inc. Plaintiffs move for reconsideration of the Court's 3/28/2013 Memorandum Ruling and Order which granted Defendants Motion for Summary Judgment and denied Plaintiffs Motion for Partial Summary Judgment. Specifically, Plaintiffs seek a ruling from this Court reconsidering its Memorandum Order based on their belief that the Court committed errors of fact and law in holding that Defendants were not in bad faith. Plaintiffs also contend that the Court expanded the rights of the Defendants by granting greater rights to Midstream than originally granted by Plaintiffs in the Easement and Right of Way Agreement. For the rea sons stated herein, Plaintiffs Motion for Reconsideration is GRANTED in part and DENIED in part. This Courts 127 Memorandum Ruling and 128 Order are AMENDED to hold that Midstream, the original holder of the Easement and Right of Way Agreement, i s entitled to the same type of servitude over the land now occupied by the pipeline as was granted in the Easement and Right of Way Agreement. However Midstream and/or Defendants are obligated to pay fair compensation for the value of this servitude in addition to any actual damages suffered from the deviation. The Court further declines to withdraw or amend allother aspects of the Ruling and Order. An Order consistent with the terms of the instant Memorandum Ruling shall issue herewith. Signed by Judge S Maurice Hicks on 8/3/2013. (crt,Putch, A)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
SHREVEPORT DIVISION

SGC LAND, LLC

CIVIL ACTION NO. 10-1778

VERSUS

JUDGE S. MAURICE HICKS, JR.

LOUISIANA MIDSTREAM GAS
SERVICES, CHESAPEAKE OPERATING,
INC., AND CHESAPEAKE LOUISIANA, LP

MAGISTRATE JUDGE HORNSBY

MEMORANDUM RULING
Before this Court is a Motion for Reconsideration (Record Document 129) filed on
behalf of

SGC Land, L.L.C. and Smithburg, Inc. (“Plaintiffs”).

Plaintiffs move for

reconsideration of the Court’s March 28, 2013 Memorandum Ruling and Order which
granted Defendants’ Motion for Summary Judgment and denied Plaintiffs’ Motion for Partial
Summary Judgment. Specifically, Plaintiffs seek a ruling from this Court reconsidering its
Memorandum Order based on their belief that the Court committed errors of fact and law
in holding that Defendants were not in bad faith. See Record Document 129-1 at 2.
Plaintiffs also contend that the Court expanded the rights of the Defendants by granting
greater rights to Midstream than originally granted by Plaintiffs in the Easement and Right
of Way Agreement. Id. at 6. Defendants, Louisiana Midstream Gas Services, L.L.C.,
Chesapeake Operating, Inc., and Chesapeake Louisiana, L.P. oppose the motion. For the
reasons stated herein, Plaintiffs’ Motion for Reconsideration is GRANTED in part and
DENIED in part.

LAW AND ANALYSIS
The Federal Rules of Civil Procedure do not recognize a motion for reconsideration,
per se, however, such motions are typically treated as motions to alter or amend under
Rule 54(b). See S. Snow Mfg. Co., Inc. v. SnoWizard Holdings, Inc., 2013 WL 392582, *10
(E.D. La. Jan. 31, 2013); Livingston Downs Racing Ass'n, Inc. v. Jefferson Downs Corp.,
259 F.Supp.2d 471, 474-75 (M.D. La. 2002). Under Rule 54(b), the Court is given broad
discretion to "reconsider, rescind, or modify an interlocutory order for cause seen by it to
be sufficient." Melancon v. Texaco, Inc., 659 F.2d 551, 553 (5th Cir. 1981). "The exact
standard applicable to the granting of a motion under Rule 54(b) is not clear, though it is
typically held to be less exacting than would be a motion under Rule 59(e).... Though less
exacting, courts have looked to the kinds of consideration under those rules for guidance."
Livingston Downs, 259 F.Supp.2d at 475 (internal citations omitted). Generally, a motion
to alter or amend a judgment, filed under Rule 59(e) may be granted: “(1) to correct
manifest errors of law or fact upon which judgment is based; (2) the availability of new
evidence; (3) the need to prevent manifest injustice; or (4) an intervening change in
controlling law. ” In the Matter of Self, 172 F. Supp. 2d 813, 815-16 (W.D. La. 2001) (citing
11 WRIGHT, MILLER, & KANE, FEDERAL PRACTICE AND PROCEDURE § 2810.1).
As an initial matter, this Court previously held that Chesapeake was entitled to a
predial servitude of the reasonable area surrounding the pipeline located outside the
agreed upon right of way between Midstream and Smithburg based on La. C.C. art. 670.
Record Document 127 at 13. After a full review of the briefs, case law, and relevant
contractual provisions, the Court concurs with Plaintiffs’ argument that the Court
inadvertently granted a greater scope of rights to Midstream and/or Defendants than that
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initially bargained for in the “Easement and Right of Way Agreement” entered into on July
22, 2009, and therefore, the ruling must be amended. The Court’s Memorandum Ruling
and Order [Record Document 127 and 128] are hereby amended to hold that Midstream,
the original holder of the Easement and Right of Way Agreement, is entitled to the same
personal servitude over the land now occupied by the pipeline as was originally granted in
the “Easement and Right of Way Agreement.”
Plaintiffs also make several arguments with respect to whether Defendants were in
bad faith in its construction and operation of the pipeline at issue. First, Plaintiffs argue that
Defendants, at the very least, ceased to be in good faith on November 8, 2010, the day this
lawsuit was filed. However, the definition of good faith found in Louisiana Civil Code article
487 and Lamson Petroleum Corp. v. Hallwood Petroleum Inc., 2001-1201 (La. App. 3rd Cir.
12/31/02), 843 So. 2d 424, 426, are not applicable to encroachment under the provisions
of Art. 670. See Bushnell v. Artis, 445 So. 2d 152, 154 (La. App. 3rd Cir. 1984); Winingder
v. Balmer, 632 So. 2d 408, 413 (La. App. 4th Cir. 1994). The provision in article 487, in
which the possessor “ceases to be in good faith when an these defects are made known
to him or an action is instituted against him by the owner for the recovery of the thing,” is
not controlling.

Accordingly, in this context, notice of the deviation at issue after the

pipeline was substantially completed or the filing of the instant lawsuit does not does not
automatically defeat Defendants’ good faith.
Plaintiffs also contend that summary judgement is inappropriate for matters of
subjective intent such as good faith. As stated in this Court’s previous ruling, Plaintiffs have
not presented any evidence showing legal bad faith on the part of Midstream/Chesapeake
in the construction or operation of the pipeline. Midstream specifically negotiated an
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agreement with the Plaintiffs for the purpose of transporting third-party gas and attempted
to construct the pipeline in accordance with such. The minor course variation at issue in
the pipeline’s actual location was not the subject of the complaint by Mr. Smith while the
route was surveyed. See Record Document 118-2. Plaintiffs have not provided any
evidence demonstrating any advantages or financial incentives which might motivate
purposeful deviation of four feet from the agreed upon right of way.

Furthermore,

Defendants did not receive any additional profits attributable to the placement of the
pipeline slightly outside the planned path. Ultimately, a review of the entire record reveals
an inadvertent surveying mistake, and based on the lack of evidence of bad faith on the
part of Defendants, no reasonable juror could find that any Defendant acted in bad faith in
its role in either the construction or operation of the pipeline. Accordingly, the Court
declines to withdraw or amend its previous Memorandum Ruling and Order with respect
to the findings concerning Defendants’ legal bad faith.
Here, construction of the pipeline was authorized under the Lease. Therefore,
Defendants were not trespassing onto Plaintiffs’ land when they constructed the pipeline.
Rather, the legal issue in this case was whether the transportation of third-party gas was
permitted in the pipeline because of its slight deviation from the designated path in the
“Easement and Right of Way Agreement” which specifically authorized the flow of thirdparty gas. In crafting a remedy, the Court declined to classify the exact nature of this
technical violation i.e., breach of contract, encroachment, or a technical trespass, as
Plaintiffs were not entitled to a disgorgement of profits regardless of the nature of the
violation due to the lack of any evidence of legal bad faith or actual damages. Ultimately,
in granting the servitude, the Court looked to the legal doctrine of encroachment and
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required Defendants to pay fair compensation and any actual damages suffered by
Plaintiffs due to the pipeline’s actual location. However, as pointed out by Defendants, this
same remedy would also be supported under Louisiana Civil Code article 1986 if the
inadvertent deviation was alternatively classified as breach of contract. The denial of
Plaintiffs’ request for a disgorgement of profits was therefore appropriate.
CONCLUSION
Accordingly, for the foregoing reasons,
IT IS ORDERED that Plaintiffs’ Motion for Reconsideration (Record Document 129)
be and is hereby GRANTED in part and DENIED in part. This Court’s Memorandum
Ruling and Order (Record Document 127 and 128 ) are AMENDED to hold that Midstream,
the original holder of the Easement and Right of Way Agreement, is entitled to the same
type of servitude over the land now occupied by the pipeline as was granted in the
“Easement and Right of Way Agreement.” However Midstream and/or Defendants are
obligated to pay fair compensation for the value of this servitude in addition to any actual
damages suffered from the deviation. The Court further declines to withdraw or amend all
other aspects of the Ruling and Order.
An Order consistent with the terms of the instant Memorandum Ruling shall issue
herewith.
THUS DONE AND SIGNED in Shreveport, Louisiana, this 3rd day of August, 2013.

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