Louisiana has made strides over the past few years, but there is still work to be done if it wants to escape the Judicial Hellholes® list once and for all. Meritless coastal litigation continues to bog down the state’s economy and drive jobs to neighboring states. Judges make headlines for all the wrong reasons and the state has opened the floodgates for COVID-19 litigation that has been stymied by other states.
Since 2013, Louisiana courts have had their hands tied with coastal litigation. Louisiana parishes have sued Exxon Mobil, Chevron, and more than 200 energy companies alleging that their operations have dam- aged coastal marshes and wetlands. Coastal litigation has had enormous implications for the state’s energy industry with the potential to dish out billions of dollars in damages.
There is no end in sight to this litigation. Last year, U.S. Court of Appeals for the Fifth Circuit partially reversed an earlier decision that had kept 42 lawsuits filed by six Louisiana parishes in state court. The federal appellate court found that the oil and gas companies had filed a timely request to remove the cases to federal court soon after it became apparent that the parishes had sued the companies for actions they took during World War II while acting under the authority of a federal wartime agency.
After the Fifth Circuit returned the case to the federal district court, however, Judge Martin Feldman
of the Eastern District of Louisiana ruled that the state’s 25th Judicial District Court in Plaquemines Parish should decide the bellwether Plaquemines Parish case. While the removal request was timely, the district court found that the companies’ compliance with federal regulations was not enough to show that they were directly “acting under” the direction of a federal officer, which would have provided jurisdiction in federal court.
This issue is now again before the Fifth Circuit. During oral argument, this August in Plaquemines Parish v. Chevron USA, Chevron’s attorney, Peter Keisler, argued that a remand to state court would rob oil companies of the opportunity to present a federal defense that arises directly out of their relationship with the government. Keisler cited WWII-era directives that demanded oil producers drill and extract excess oil to support the war effort. In order to meet the oil production quotas, companies contend that the federal government directed them to ditch their best practices and overlook the damage that the excessive drilling would cause the coastal marshes.
These lawsuits have a tremendous impact on Louisiana’s economy, affecting an industry with more than 250,000 workers. As the home to one-fourth of the nation’s energy supply, the Louisiana natural gas and oil industry has a value exceeding $16 billion a year. Louisiana Oil & Gas Association President Mike Moncla said, “since the beginning of the coastal litigation process, the oil and gas industry in Louisiana has been on the decline. These frivolous lawsuits have hurt jobs, bankrupted marine service companies and operators, and have decimated the state’s tax revenue it receives from energy production.”
These unfounded lawsuits continue to drive jobs and investment away from Louisiana. In fact, a 2019 study found that two years after the lawsuits began, 2,000 job losses were directly attributable to the impact of the litigation risk. While proponents of the lawsuits claim they will help bring resources to rebuild Louisiana’s coastline, this litigation stifles job creation while doing little to nothing for the coast.
After about a decade of time-consuming and expensive litigation, some companies are considering settlement. Last year, Freeport McMoRan agreed to pay $100 million over 20 years to end the lawsuits. About
$23.5 million of the money is intended to fund coastal restoration projects, however, these funds would be controlled by a new unelected bureaucracy called the Coastal Zone Recovery Authority (CZRA), which has broad power to direct funds to non-restoration-related projects. Critics fear that the settlement leaves a large percentage of the dollars in unrestricted funding buckets, which may be used for efforts that have nothing to do with restoring the coast. They call it a political slush fund.
There are already indications that the settlement is unraveling. As of September 2022, at least four of the twelve coastal parishes that must sign off on the Freeport-McMoRan settlement have rejected the deal. Meanwhile, the state legislature has twice declined to approve legislation that would establish the CZRA, doubting the benefit of the litigation to the environment and public.
As a critic of the litigation, Pelican Institute CEO Dan Erspamer, observed, “Momentum is building toward what should be the goal: End the suits and get back to the hard work of coming together to protect our environment and create jobs for our people.”
Fueled by a climate of lawsuit abuse, the high cost of auto insurance has long plagued Louisiana families and businesses. Louisiana drivers pay an average of $2,906 per year for full coverage car insurance, ranking Louisiana as the second most expensive state in the nation behind Florida.
One driver of Louisiana’s high cost of auto insurance is simply fraud. A sprawling federal investigation, dubbed “Operation Sideswipe,” is exposing the scope of one such scheme, staged accidents with big rigs in the New Orleans area. These accidents typically involved a driver (“the slammer”) intentionally colliding with a tractor trailer then another person entering the vehicle and feigning injury. Working with lawyers and doctors who may have been in on the scheme, the participants would then demand compensation for the bogus accident. Those involved ultimately secured settlements from insurance companies that provided coverage for the commercial carriers.
The dominos continue to fall in this ongoing investigation. In February 2022, U.S. Attorney Duane Evans of the Eastern District of Louisiana announced seven more indictments in this widespread staged- accident fraud scheme. In April, a court ordered three defendants to pay $5.5 million in restitution for faking a wreck with a tractor-trailer and received either probation or jail time. The next month, federal prosecutors announced two more sentencings for conspiracy to commit wire fraud arising out of the staged automobile collisions. At least 38 defendants have been convicted in operation sideswipe.
A Louisiana court has potentially opened the floodgates for COVID-19 coverage lawsuits with its decision in Cajun Conti LLC v. Certain Underwriters at Lloyd’s. In a 3-2 majority opinion, the state’s Fourth Circuit Court of Appeal ruled in August 2022 that an insurer must cover a restaurant’s lost revenue during government-mandated closures.
“All-risks” insurance policies such as the one in this case typically cover “direct physical loss.” The need to close a restaurant due to structural damage from a fire, storm, or earthquake are obvious examples.
Oceana Grill, a New Orleans restaurant, took a leap by claiming that the existence of the virus on surfaces was a “direct physical loss” to property and argued that the policy lacked a specific exclusion for losses from viruses or global pandemics. When filed in March 2020, it was a first-of-its-kind business interruption suit for COVID-19 pandemic losses.
Federal district courts around the country have permanently tossed about 50% of the 1,427 suits from policyholders against their insurance companies seeking pandemic loss-related coverage, according to Law360’s COVID-19 Insurance Case Tracker. Another 20% of the pandemic insurance suits filed in federal courts have been voluntarily dismissed, the tracker shows, though about 27% have yet to be fully decided.
The Louisiana appellate decision is an outliner. The court’s majority found the policy language of “direct physical loss” to be ambiguous, and Cajun Conti was reasonable to interpret the policy to cover COVID-19 losses. Judge Joy Cossich Lobrano concurred with the majority opinion that physical damage was not necessary to trigger policy coverage in a contamination case as long as the property was made unusable.
Plaintiffs’ lawyers plan to use the ruling as “persuasive authority for cases involving identical policies held by other restaurants and businesses,” according to John W. Houghtaling II of Gauthier Murphy & Houghtaling LLC. Already, plaintiffs’ lawyers representing a New Orleans jeweler have asked a federal appellate court to revive a dismissed business interruption suit based on the Cajun Conti ruling. Obviously, requiring insurers to pay for widespread shutdowns that were not contemplated by the policy would lead to higher insurance rates for all.
Louisiana has a longstanding reputation for its lack of transparency dealing with judicial misconduct. Scandals continue to bring attention to this issue, contributing to both the public and legislature losing patience with the judicial branch’s repeated promises to do better.
Changes to the Louisiana Supreme Court’s procedures adopted in 2020 are a step in the right direction, but do not do enough. Most notably, “confidentiality still remains during the Commission’s initial consideration of a complaint and during any investigation of a complaint,” the Court announced. This means that the public will remain unaware of complaints filed against judges that do not lead to action by the Judiciary Commission.
According to Louisiana Supreme Court’s Annual Report for 2021, “the Judiciary Commission of Louisiana received and docketed 526 complaints against judges and justices of the peace, and 110 com- plaints were pending from previous years… Of the 526 complaints filed, 320 were screened out as not within the jurisdiction of the Commission or failing to allege facts implicating a possible violation of the Code of Judicial Conduct or Louisiana Constitution. The remaining 206 complaints were reviewed to consider the need for investigation. The Commission authorized in-depth investigations in 25 complaints, including some filed before Jan. 1, 2021.” In order words, the Commission acted on less than 5% of complaints.
Through August 2022, the Louisiana Judiciary Commission issued seven hearing dispositions.
In November 2021, Louisiana Supreme Court made substantive changes to Rule XXIII in an effort to increase accountability for judges facing allegations of judicial misconduct, protect the public, and help expedite judicial discipline matters. Under the rule changes, judges who have been indicted or charged with a serious crime, if convicted, will typically be required to repay the costs of appointing a judge to cover his docket while he is suspended from performing judicial functions.
In 2021, Louisiana suffered a major setback after Governor John Bel Edwards, a longtime plaintiffs’-bar ally, vetoed Senate Bill 43, which would have prohibited certain common misleading lawsuit advertising practices. Despite overwhelming support for the bill, the Louisiana Legislature failed to garner enough votes to override the veto.
The sponsor, Senator Barrow Peacock, introduced similar legislation in 2022, and this time, Governor Edwards signed the bills into law. SB 378 prohibits deceptive or misleading practices in lawsuit advertisements, specifically those presented as a medical alert, health alert, drug alert, or public service announcement. The new law also prohibits displaying federal or state government agency logos in a misleading manner and requires a lawsuit advertisement that references an FDA approved prescription drug to include the following statement or a substantially similar statement: “Consult your physician before making decisions regarding prescribed medication or medical treatment.”
In addition, Louisiana enacted SB 383, which protects the public from other practices in lawsuit ads that are likely to deceive the public by requiring certain disclaimers. Specifically, lawsuit ads cannot reference past successes, such as large verdicts, without disclosing that results may vary or do not guarantee future success. Nor can they present staged scenes or client testimonials without disclosure or use trade names or other practices that could be understood as promising results. This new law is consistent with Public Citizen, Inc. v. Louisiana Attorney Disciplinary Board (5th Cir. 2011), which recognized that lawyer advertising that is potentially mis- leading but can be presented in a way that is not deceptive can be regulated when needed to protect consumers.
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