CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT.
Warren, Black, Douglas, Clark, Harlan, Brennan, Stewart, White, Fortas
MR. JUSTICE HARLAN delivered the opinion of the Court.
This case presents a question concerning "federal common law" best explained after a summary of the facts and the legal proceedings involved.
At stake in the litigation are rights in several tracts, aggregating 827 acres, of oil-rich "mud lumps" or islands owned by the United States and located in a mouth of the Mississippi River near Burrwood, Louisiana.*fn1 In
petitioner, Floyd Wallis, filed with the Secretary of the Interior applications for a lease to exploit oil and gas deposits in the tracts. Because the tracts were deemed by Wallis to be "acquired lands" of the United States rather than "public domain lands," these applications were filed under the Mineral Leasing Act for Acquired Lands, which governs the former, instead of the Mineral Leasing Act of 1920, which controls the latter.*fn2 Subsequently, Wallis entered into a written joint venture agreement with respondent Patrick McKenna giving McKenna a one-third interest in the pending applications and any lease issued under those applications. Then Wallis, who had exclusive management of the property under his agreement with McKenna, sold respondent Pan American Petroleum Corporation an option to acquire any lease Wallis might obtain under the applications then on file with the Secretary.
In 1956, fearing that the tracts might prove to be public domain land, Wallis filed new applications for the same tracts under the Mineral Leasing Act of 1920.*fn3 Thereafter the tracts were ruled to be public domain land, the conflicting applications of one or more competitors were rejected, and in 1958 the Secretary issued a lease of the tracts to Wallis under the 1920 Act. See Morgan v. Udall, 306 F.2d 799. After the lease was issued to Wallis, McKenna brought a diversity action against him
in Federal District Court in Louisiana seeking to be declared a one-third owner of the lease by virtue of the original joint venture agreement. Pan American also brought a diversity action in the same court to oblige Wallis to perform the option agreement by transferring the lease to Pan American.
The actions were consolidated, and following a non-jury trial the District Court held that neither McKenna nor Pan American was entitled to any interest in the disputed lease. 200 F.Supp. 468. The trial judge ruled that Louisiana law governed the rights of the parties and required a written agreement to create or transfer any interest in a mineral lease, thus excluding oral agreements as a basis for relief in this case. The judge then decided that the written agreements available to McKenna and Pan American contemplated they would share only in leases obtained by Wallis under the Mineral Leasing Act for Acquired Lands and not in any leases granted him under any other law. The court's judgment in favor of Wallis on the question of lease ownership reserved to McKenna and Pan American whatever rights they might have to damages, restitution, or like remedies based on oral agreements or other conduct.
Over a dissent, the Court of Appeals for the Fifth Circuit reversed, filing an initial opinion, 344 F.2d 432, and after petitions for rehearing, a further opinion adhering to its earlier result, 344 F.2d 439. The court decided only that the trial judge had erred in applying Louisiana law to the controversy and it remanded for a new trial in which "applicable principles of federal law" would control the issues. 344 F.2d, at 437, 442. In its latter opinion the Court of Appeals reasoned that the Mineral Leasing Act of 1920 imposed pervasive federal regulation and that the Act's policies ...