## Facts

- A certified class of oyster fishermen/lessees held state-issued oyster leases on water bottoms in the Breton Sound area.
- To address coastal land loss, the State supported projects reintroducing Mississippi River freshwater into coastal basins; the Caernarvon Freshwater Diversion Structure was announced in 1982 and became operational in 1991.
- After operation began, diverted freshwater lowered salinity over certain lease areas, resulting in substantial oyster mortality and reduced productivity.
- Beginning in 1989, the State inserted a “hold harmless”/indemnity clause into many new or renewed oyster leases, requiring lessees to hold the State harmless for losses attributable to coastal restoration, freshwater diversion, or similar projects.
- In 1994, plaintiffs filed a class action alleging the State’s operation of Caernarvon constituted a compensable “taking” or “damaging” of their property rights under La. Const. art. I, § 4.
- A jury found for plaintiffs; the trial court entered judgment awarding more than $1 billion, and the court of appeal largely affirmed while holding the indemnity clause invalid.
- The State and the Department of Natural Resources sought review in the Louisiana Supreme Court.

## Issues

1. Whether damage to oyster production caused by operation of a freshwater diversion project constituted a compensable “taking” or “damaging” under La. Const. art. I, § 4.
2. Whether lease “hold harmless”/indemnity clauses allocating risk of harm from coastal restoration and freshwater diversion projects were valid and enforceable to bar recovery.
3. Whether claims by lessees without such clauses were prescribed under La. R.S. 9:5624’s two-year period for property damage caused by public works.

## Decision

- The Louisiana Supreme Court reversed the lower courts and dismissed the class claims.
- For the large majority of lessees whose leases contained hold-harmless provisions, the court held the clauses valid and enforceable, contractually barring compensation claims.
- For lessees without hold-harmless provisions, the court held the claims prescribed under La. R.S. 9:5624 because suit was filed more than two years after damage from the public work was, or should have been, apparent.

## Legal Principles

- State oyster leases on water bottoms confer limited rights of use, taken subject to the State’s public-trust responsibilities and regulatory authority over coastal resources.
- The State, as lessor, may include enforceable indemnity/hold-harmless clauses in resource leases to allocate the risk of losses caused by coastal restoration and freshwater diversion projects.
- A valid contractual hold-harmless clause can bar claims seeking constitutional compensation for alleged property damage arising from the specified governmental projects.
- Claims for property damage caused by a public work are subject to La. R.S. 9:5624’s two-year prescriptive period, running from when the damage becomes manifest or should be discovered.

## Conclusion

The court held that most lessees contractually assumed the risk of losses from freshwater diversion through enforceable hold-harmless clauses, and that remaining claims were time-barred under the two-year prescription for damages caused by public works, requiring dismissal of the class’s compensation claims.


Avenal v. State, 886 So. 2d 1085 (La. 2004)