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Sundown Energy, L.P. v. Haller

United States Court of Appeals, Fifth Circuit

December 8, 2014

SUNDOWN ENERGY, L.P., Plaintiff-Appellant,
v.
STEVEN G. HALLER; FLASH GAS & OIL SOUTHWEST, INCORPORATED, Defendants-Appellees. SUNDOWN ENERGY, L.P., Plaintiff-Appellee,
v.
STEVEN G. HALLER; FLASH GAS & OIL SOUTHWEST, INCORPORATED, Defendants-Appellants

Page 607

Appeals from the United States District Court for the Eastern District of Louisiana.

For SUNDOWN ENERGY, L.P., Plaintiff - Appellant (13-30294, 13-30721, 13-30748): Carl David Rosenblum, Esq., Virginia Weichert Gundlach, Lauren Courtney Mastio, Jones Walker LLP, New Orleans, LA.

For STEVEN G. HALLER, FLASH GAS & OIL SOUTHWEST, INCORPORATED, Defendants - Appellees (13-30294, 13-30721, 13-30748): Kyle D. Schonekas, Thomas Moore McEachin, Eleanor T. Schilling, Esq., Attorney, Schonekas, Evans, McGoey & McEachin, L.L.C., New Orleans, LA.

Before STEWART, Chief Judge, and DENNIS and ELROD, Circuit Judges.

OPINION

Page 608

CARL E. STEWART, Chief Judge:

This consolidated appeal arises from a dispute between Steven G. Haller and Flash Gas & Oil Southwest, Inc. (collectively, " Defendants" ) and Sundown Energy LP (" Sundown" ) regarding the terms of a settlement agreement. Sundown sued Defendants in state and federal court, seeking a partition of land they co-owned, return of rental payments, and a right of way over Haller's property. On the day trial was set to begin in federal court, the parties agreed to a settlement. Because the parties had not yet agreed on a written

Page 609

draft of the settlement, the agreement was read into the record before the district court. However, subsequently, the parties were unable to agree on the terms of the settlement. In the first appeal, No. 13-30294, Sundown challenges the district court's interpretation of the settlement agreement. In the second appeal, No. 13-30721, Sundown contests the district court's enforcement of the settlement. Lastly, in No. 13-30748, Defendants appeal the district court's denial of their motion for contempt. For the reasons stated herein, we REVERSE in part and AFFIRM in part.

I.

Sundown owns an oil and gas production facility in Plaquemines Parish, Louisiana. Although Sundown could access its facility via the Mississippi River, it did not have a viable land route. Sundown thus sought permission from landowners with property between its facility and the nearest public highway--Louisiana Highway 39--to cross their property.[1] Haller owns one of the tracts of land between Sundown's facility and Highway 39 (" Haller Tract" ). Located on the Haller Tract is a camp used by Haller and his guests for hunting and fishing. Levee Leisure, Inc. (" Levee Leisure" ), a company Haller owns, possesses a surface lease on a contiguous tract of land. Flash Gas & Oil Southwest, Inc. (" Flash Gas" ), another company owned by Haller, leased the Haller Tract from Haller and the surface lease from Levee Leisure. Unlike the majority of the landowners Sundown contacted, Haller refused to grant Sundown permission to cross his property.[2]

In 2006, Sundown entered into a lease (" Flash Lease" ) with Flash Gas for the use of a dock facility and canal access on land allegedly owned by Defendants. The lease also permitted Sundown to use a road on the Haller Tract to reach the dock and its facility. In 2010, Haller refused to renew the Flash Lease.

II.

Once it became apparent that Sundown would be unable to reach an agreement with Haller, Sundown filed suit against Haller in federal court, requesting a right of passage over the Haller Tract and return of the rental payments it made to Flash Gas pursuant to the Flash Lease.[3] Sundown claimed that its facility was an " enclosed estate" under Louisiana Civil Code article 689 and thus entitled to a right of passage. Sundown also filed suit in state court, seeking a partition by licitation of land co-owned by Haller and Sundown.

In federal court, Defendants filed a motion to dismiss Sundown's suit, which the district court denied, and Sundown filed a motion for summary judgment, which the district court granted in part. The court found that Sundown's facility was an enclosed estate but that there were genuine issues of material facts precluding summary judgment on, inter alia, the location of the right of way for Sundown. Defendants later filed a motion for summary judgment regarding Sundown's claim for return of rental payments. The district court granted the motion, holding that

Page 610

Sundown could not recover its rental payments because it had undisturbed possession of the land. Before a trial was held, however, the parties agreed to a settlement resolving both the federal suit and state suit.

The parties read the terms of the settlement agreement to the district court. They agreed on the location for the route Sundown would use to access its facility. Sundown was entitled to use this route regardless of which party owned the land in dispute. Sundown was also granted a temporary right of way by Haller to access the dock. In addition, Sundown would obtain bids for the cost of building the road to its facility.[4] Moreover, Haller agreed to not object to Sundown's acquisition of any permits or approvals necessary for construction. The parties also agreed to participate in an auction for " the other's co-ownership interest in Tracts 1 and 2 with the high bidder paying its bid price to purchase the other's interest in both tracts." If Sundown had the winning bid, it would grant a ninety-nine year recreational lease to Haller. The parties agreed to dismiss the federal and state suits and pay their respective costs. The parties' attempts to formulate a written contract memorializing the terms of their agreement were unsuccessful. Subsequently, both parties filed cross-motions for enforcement of the settlement agreement, urging the district court to adopt their respective interpretations of the settlement.

The district court therefore interpreted the provisions of the settlement read into the record and filled in the gaps necessary for enforcement of the settlement. Because the settlement agreement did not specify how the auction proceeds were to be disbursed, the district court held that the magistrate judge (" MJ" ) would have discretion to resolve that issue. However, the court noted its preference that the MJ use the approach advocated by Haller if the parties did not dispute their respective ownership interests--that is, the winning bidder would pay the portion of the bid corresponding to the party's ownership interest in the auctioned property. As for the duration of the right of way, the court noted that the agreement described it as temporary and thus imposed what it considered to be a reasonable period of time--nine months.[5]

The district court also held that, if it was the losing bidder, Sundown would no longer be entitled to use the dock facility. The court was persuaded by " the absence of any provisions in the settlement agreement addressing Sundown's lease of the dock in the event it is not the high bidder." [6] In addition, the court held that Haller was entitled to hunt and " store fuel on the property subject to the recreational lease." After noting that recreational leases in Louisiana usually permit lessors " to lease the property for oil, gas, and mineral exploration," the court held that Sundown had that right subject to the following conditions: 1) it must try to use directional drilling; 2) if directional drilling is not feasible, then the parties must submit to arbitration; and 3) Sundown must give Haller notice when it desires to use the property for mineral, gas, or oil exploration purposes. Additionally, the court held

Page 611

that Haller must pay his portion of the construction costs within ten days of receiving a bill for the construction from Sundown.

The district court then instructed the MJ to conduct the auction.[7] The MJ conducted the auction, and Haller submitted the highest bid--$1.5 million. Thereafter, the district court, adopting the MJ's recommendation, ordered Sundown to sell its ownership interest in the auctioned land to Haller. Sundown timely appealed.

After the district court approved the auction, Sundown refused to consummate the sale of the auctioned land. Defendants proceeded to file a motion for enforcement of judgment, which the district court granted. Sundown timely appealed the court's judgment. In its order enforcing the parties' settlement agreement, the district court held, inter alia, that " if the platform, lights, and other structures are incorporated into the tract of land, i.e., attached to the property by any means, th[e]n those items are component parts of the land and therefore immovable and are not subject to removal, except by the owner of the property."

Meanwhile, Sundown removed the loading platform located on the auctioned land. Defendants filed a motion for contempt, alleging that Sundown was not entitled to remove the platform. After holding an evidentiary hearing, the district court denied the motion. The district court reasoned that the platform constituted movable property, Sundown retained title to the platform, and the Flash Lease was invalid. Defendants timely appealed.

We will first address Sundown's appeal of the district court's interpretation of the settlement agreement and then proceed to the district court's enforcement of the settlement agreement. Lastly, we will turn to Defendants' appeal ...


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