Fifth Circuit Adds Clarity to “Seaman Status” Test

Louisiana's long relationship with oil and gas has been profitable for both the oil and gas industry and Louisiana's citizens. However, the nature and extent of the duty to restore the land after drilling has often been a disputed and litigated issue. Recently, the Louisiana Supreme Court's decision in State v. Louisiana Land and Exploration Co., 2012-0884 (La. 1/30/13), - So.3d - added clarity to the law by establishing that the presence of a Court-approved remediation plan does not create a "cap" on damages.

The Louisiana Legislature passed La. R.S. 30:29 to provide a procedure for the clean-up, or "remediation," of oilfield, exploration and production sites. Before this statute, a plaintiff who was awarded monetary "remediation" damages to restore land was not obligated to actually use the money to perform remediation work. The purpose of La. R.S. 30:29 was to ensure that any money awarded to remediate polluted sites be used for this purpose. By the statute, any such award is to be deposited with the Court and spent under a Court-approved plan.

Even after the statute, it remained unclear whether a Court's approval of a remediation plan created a "damages cap" whereby the plaintiff landowner could not recover in excess of the plan. This issue was resolved in State v. Louisiana Land and Exploration Co.

The suit involved the State's action for remediation of land owned by the State and managed by the Vermilion Parish School Board. The property was allegedly polluted by oil and gas exploration performed pursuant to a mineral lease. Consistent with recovery allowed in earlier cases, the State sought to recover damages in excess of the remediation costs. Attorneys for one of the defendants filed a motion for partial summary judgment and argued that, under La. R.S. 30:29, the plaintiffs did not have a right to seek damages in excess of the amount necessary to complete the Court's remediation plan

The trial court held the plaintiffs could only recover damages equal to the amount listed in the Court's remediation plan. The appellate court overturned the trial court's decision and held that the landowner could recover damages in excess of the Court's plan, whether those damages are based on a contract or tort law. The Supreme Court affirmed the appellate court's decision and confirmed that there is no "cap" on damages.

Before and after State v. Louisiana Land and Exploration Co., an award for damages in excess of the remediation plan is available and arises from a private right in either contract or tort law. Contract damages are permitted if they are expressly provided by the contract. If contract damages are not available, tort damages may be recovered if the plaintiff shows that the defendant acted unreasonably or excessively in its exploration of gas, oil or minerals. See Terrebonne Parish School Bd. v. Castex Energy, Inc., 2004-0968, p. 10 (La. 1/9/05), 893 So.2d 789.

In view of the State v. Louisiana Land and Exploration Co. decision, oil and gas companies should be aware that they face exposure in excess of the statutory remediation plan, making them potentially liable for far more than just clean-up.

Arbitration is a favored method of dispute resolution in the energy and construction sectors, where complex, high-value contracts often generate multimillion-dollar disputes. Understanding the courts' standard of review of arbitration awards directly impacts risk assessment, contract drafting, and dispute resolution strategies. A recent U.S. Fifth Circuit decision reinforces the limited grounds for judicial intervention, a principle that remains central to the effectiveness of arbitration as an efficient alternative to litigation.

In United States Trinity Services, LLC v. Southeast Directional Drilling, LLC, a drilling subcontractor obtained a $1.7 million arbitration award against the general contractor for standby costs incurred on a pipeline installation project. The subcontractor incurred costs when ordered to stop work for causes outside its control, including delayed permits, mud infiltration, and COVID-19. The subcontract contained a provision that called for reimbursement of standby costs. On appeal, the general contractor sought to vacate the award in the U.S. Northern District of Texas, arguing that the arbitration panel failed to properly interpret various contract provisions related to standby costs and exceeded its authority and acted in manifest disregard of Texas law in interpreting the contract.

The Federal Arbitration Act, 9 USC §10 (“FAA”) applies and provides the exclusive grounds to vacate an award: corruption, fraud, evident partiality, misconduct in refusing to postpone the hearing, refusing to hear evidence, or where arbitrators exceeded their powers. The U. S. Fifth Circuit Court of Appeals noted that the FAA was enacted to create a national policy favoring arbitration; the arbitrator’s authority derives from the parties’ contract; and once parties agree to arbitrate, they “bargain for” the arbitrator’s, not the court’s, interpretation of their contract.

The Court instructed that a party challenging an award bears a high burden to show that the arbitrator ignored the contract. It is not sufficient to show the arbitrator erred in interpreting the contract. The question the court asks is “whether the arbitrators construed the contract at all” not “whether they construed it correctly.” A court should not reassess the merits of the arbitrator’s decision. Here, the award recited the pertinent contract terms and the arbitrators’ analysis. This showed the arbitrators considered the contract provisions, thus ending the Court’s inquiry.

The Court rejected the argument that the arbitrators manifestly disregarded the law in interpreting the contract. “Manifest disregard” – a judicially-created concept – is not a freestanding ground for vacatur. It does not serve as a separate basis to establish that arbitrators exceeded their powers. Otherwise, the FAA’s stated grounds for vacatur would be expanded to essentially a “full-bore” judicial review process.*

However, the Circuits are split on the validity of manifest disregard of the law or contract as a basis to vacate an award. See for example, Dewan v. Walia, where the U.S. Fourth Circuit Court of Appeals vacated an award after finding the arbitrator’s contract interpretation ‘untenable.”

Mary Anne Wolf, PE, FCIArb, is an arbitrator, mediator, and attorney in construction, energy, commercial and complex cases.

References:

United States Trinity Services, LLC v. Southeast Directional Drilling, LLC, 2025 WL 1218096 (5^th Cir. 2025).

Dewan v. Walia, 544 Fed Appx 240 (4th Cir. 2013).

* Hall Street Assoc., LLC v. Mattel, 128 S.Ct. 1396 (2008).

In a decision released October 9, 2013, the U.S. Fifth Circuit upheld the grant of the defendants' Motion to Dismiss by concluding that the Federal Power Act ("FPA") preempts property damage claims based in Louisiana state tort law where the alleged damage is the result of operations that comply with the FERC-issued license. Simmons v. Sabine River Authority, No. 12-30494, - F.3d - , (5th Cir. 10/09/2013).

This issue, recognized as a question of first impression in the Fifth Circuit, arose in a case where the plaintiffs, all Louisiana owners and residents of property located downstream from the federally-licensed hydroelectric Toledo Bend Dam situated on the Sabine River, sued Sabine River Authority of Louisiana and various Entergy defendants to recover damages for flooding incidents and to enjoin the opening of the Dam's flood gates in such a way as to cause inundation of the downstream properties.

On behalf of defendants, Keogh Cox moved to dismiss the suit by claiming state tort law claims for damages and injunctive relief interferes with the exclusive authority of the Federal Energy Regulatory Commission ["FERC"] to regulate and control the operations of the federally-licensed Toledo Bend project such that the plaintiffs' claims were preempted under the FPA. The District Court granted the motion after extensive briefing and argument by Keogh Cox attorneys, John P. Wolff, III, Nancy B. Gilbert, Martin E. Golden, and Virginia J. McLin.

In affirming the district court's ruling, the Fifth Circuit recognized U.S. Supreme Court precedent that has interpreted the FPA as "occupying the field of public water use and power generation except for water use rights." As a result, in accord with Ninth Circuit law, it interpreted the general savings clause in the FPA [16 U.S.C. § 821] narrowly to exempt only "a state property law regime [that] enables users of streams and wells to obtain proprietary rights in a continuing quantity of water." The Court also recognized that state damage claims can have the same effect as a state regulation and may serve as a collateral attack on a federal license, such that it refused to interpret the limited savings clause [16 U.S.C. § 803(c)] to permit "state tort law to supplant FERC's exclusive control of dam operations." Because "applying state tort law to set the duty of care for the operation of the FERC-licensed project would 'stand as an obstacle to the accomplishment and execution of the full purposes and objectives' of the FPA," the Fifth Circuit held plaintiffs' state law property damages claims were conflict preempted under the FPA.

That a single federal agency should control public water use and dam operations was noted to be especially appropriate because the Toledo Bend Dam spans Texas and Louisiana state lines and, if not preempted, different causes of action and standards of conduct could have been imposed under the laws of the two states.