USA v. Pioneer Natural Resources Company et al

Filing 102

RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE that 84 MOTION to Amend/Correct/Modify 61 Answer to Complaint, Counterclaim, 62 Answer to Complaint, Counterclaim be GRANTED. By Magistrate Judge Nina Y. Wang on 5/16/2018. (nywlc1, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 1:17-CV-00168-WJM-NYW
UNITED STATES OF AMERICA,
Plaintiff,
v.
PIONEER NATURAL RESOURCES COMPANY, and
PIONEER NATURAL RESOURCES USA, INC.,
Defendants.

RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
Magistrate Judge Nina Y. Wang
This matter comes before the court on Defendants Pioneer Natural Resources Company
(“Pioneer Natural Resources”) and Pioneer Natural Resources USA, Inc. (“Pioneer-USA”)
(collectively, “Defendants”) “Partially Unopposed Motion for Leave to Amend their Pleadings”
(“Motion to Amend”).

[#84, filed April 3, 2018].

The Motion to Amend is before the

undersigned Magistrate Judge pursuant to the Order Referring Case dated February 3, 2017 [#17]
and the memorandum dated May 7, 2018 [#94]. After carefully reviewing the Motion to Amend,
the entire case file, and the applicable case law, I respectfully RECOMMEND that the Motion
to Amend be GRANTED.1

1

Local Rule 72.3 defines “[d]ispositive motions” to include motions to amend.
D.C.COLO.LCivR 72.3(a).

See

BACKGROUND
Plaintiff United States of America initiated this civil action under the Comprehensive
Environmental Response, Compensation, and Liability Act (“CERCLA”), 42 U.S.C. §§ 9601 et
seq., seeking to recover from Defendants certain costs incurred in response to the release (or
threatened release) of hazardous waste at the Nelson Tunnel/Commodore Waste Rock Pile
Superfund Site, located in Mineral County, Colorado. [#1]. Defendants filed their respective
Answers on March 20, 2017. [#20; #21]. On April 19, 2017, this court presided over a
Scheduling Conference and entered a Scheduling Order directing the Parties, in relevant part, to
amend pleadings on or before September 5, 2017, complete written discovery by January 15,
2018, and complete non-written discovery by September 14, 2018. [#23; #24].
On May 19, 2017, the Government filed an early Motion for Partial Summary Judgment
on the issue of Defendants’ corporate successor liability.

[#46].

On September 5, 2017,

following the briefing of the early Motion for Partial Summary Judgment and with the
Government’s consent, Defendants filed respective Amended Answers and asserted
counterclaims for declaratory judgment for the first time.

[#61; #62]; see [#63].

The

Government filed Answers to the counterclaims on November 6, 2017. [#70; #71]. Defendants
subsequently filed the Motion to Amend, seeking leave to file amended counterclaims and
revised affirmative defenses and defenses, and to revise two responsive paragraphs.
On April 18, 2018, days before the Government’s response to the Motion to Amend was
due, the court granted the Government’s early Motion for Summary Judgment, finding that
Pioneer Natural Resources is a successor to the CERCLA liabilities of Pioneer Nuclear,
Incorporated (“PNI”), and that Pioneer-USA is a successor to the CERCLA liabilities of Mesa

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Operating Limited Partnership (“MOLP”). See [#88]. The Government did not ultimately
respond to the Motion to Amend.
ANALYSIS
I.

Applicable Law
Defendants filed the Motion to Amend after the expiration of the deadline for amendment

of pleadings as specified in this court’s Scheduling Order. Therefore, this court considers the
Motion to Amend pursuant to a two-step inquiry. First, the court considers whether the moving
party demonstrates good cause pursuant to Rule 16(b) of the Federal Rules of Civil Procedure.
See Gorsuch Ltd. B.C. v. Wells Fargo Nat’l Bank, 771 F.3d 1230, 1242 (2014). Rule 16(b)
provides that a scheduling order “may be modified only for good cause and with the judge’s
consent.” Fed. R. Civ. P. 16(b)(4). “Rule 16(b) does not focus on the bad faith of the movant, or
the prejudice to the opposing party. Rather, it focuses on the diligence of the party seeking leave
to modify the scheduling order to permit the proposed amendment.” Colo. Visionary Acad. v.
Medtronic, Inc., 194 F.R.D. 684, 687 (D. Colo. 2000).
If the moving party can demonstrate good cause, the court then weighs whether the
amendment should be allowed under Rule 15(a), which provides that “the court should freely
give leave when justice so requires.” Gorsuch, 771 F.3d at 1242. Whether to allow amendment
is within the trial court’s discretion. Burks v. Oklahoma Publ'g Co., 81 F.3d 975, 978–79 (10th
Cir. 1996). The court may refuse leave to amend upon a showing of undue delay, undue
prejudice to the opposing party, bad faith or dilatory motive, failure to cure deficiencies by
amendments previously allowed, or futility of amendment. Frank v. U.S. West, Inc., 3 F.3d
1357, 1365 (10th Cir. 1993).

A general presumption exists in favor of allowing a party to

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amend its pleadings, see Foman v. Davis, 371 U.S. 178, 182 (1962), and the non-moving party
bears the burden of showing that the proposed amendment is improper. Jefferson County Sch.
Dist. No. R-1 v. Moody’s Investor’s Services, Inc., 175 F.3d 848, 859 (10th Cir. 1999).
II.

Application
According to the certificate of conferral in the Motion to Amend, the Government does

not oppose the proposed amendments to Defendants’ counterclaims, affirmative defenses, and
defenses, [#84 at 1], and thus this court RECOMMENDS that those amendments be accepted.
Defendants also seek leave to “conform two paragraphs,” paragraphs 12 and 13, “to the
facts developed in discovery.” [Id. at 2]. Defendants’ Answers contain an almost identical
Paragraph 12, which states that the respective Defendant:
denies Plaintiff’s allegation in the first sentence of Paragraph 12 that the hydraulic
structures are or were “makeshift” or that the discharge system was “pieced
together.” Otherwise, Defendant…admits the allegations in Paragraph 12.
[#61 at ¶ 12]; see [#62 at ¶ 12]. Defendants propose amending the paragraph to add the sentence
that each Defendant “further denies that Mesa conducted mining operations at the OU1 Site.”
[#84-1 at ¶ 12; #84-2 at ¶ 12].
Defendants’ Answers similarly contain an almost identical Paragraph 13, which is
directed at the Government’s allegations of successor liability:
Defendant [Pioneer Natural Resources / Pioneer-USA] denies that PNI is a
predecessor of PNRC. Defendant [Pioneer Natural Resources / Pioneer-USA]
admits that PNR-USA is the corporate successor to MLP. Defendant [Pioneer
Natural Resources / Pioneer-USA] admits that PNI conducted limited operations,
primarily consisting of mineral exploration activities, at the Commodore Mine
between 1982 and 1986. Defendant [Pioneer Natural Resources / Pioneer-USA]
denies that Mesa conducted mining operations at the OU1 Site between 1986 and
1989. Defendant [Pioneer Natural Resources / Pioneer-USA] denies that PNI and
Mesa used the Commodore Mine Dump as the hub of their mining operations and
that PNI or Mesa ever conducted mining operations on or below the Commodore
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Mine Dump. Defendant [Pioneer Natural Resources / Pioneer-USA] admits that
PNI stabilized cribbing on the upper portion of the Commodore Mine Dump, and
used the surface of the Commodore Mine Dump as a work area. Defendant
[Pioneer Natural Resources / Pioneer-USA] denies that PNI used the surface of
the Commodore Mine Dump to dump mine waste on the side of the Commodore
Mine Dump. Defendant [Pioneer Natural Resources / Pioneer-USA] admits that
PNI monitored the condition of the cribbing and water conveyance system and
took reasonable steps to maintain the integrity of the system, but Defendant
[Pioneer Natural Resources / Pioneer-USA] denies the remaining allegations in
Paragraph 13’s fourth and fifth sentences. Defendant [Pioneer Natural Resources /
Pioneer-USA] admits that Mesa retained Steffen Robertson & Kirsten Consulting
Engineers (“SRK”) in 1988 to provide advice regarding how to break out, discuss,
and assign gross estimated costs to reclamation at the Commodore Mine Dump
and other mine sites to meet the intent of the Colorado Mined Land Reclamation
Act in the event that active mining operations were to be commenced within the
scope of the Colorado Mined Land Reclamation Act; and that Mesa retained SRK
in 1988 to provide advice regarding how to address potential reclamation
scenarios for historically discontinued mine operations. Defendant [Pioneer
Natural Resources / Pioneer-USA] also admits that SRK estimated mine-dump
regrading and stream-channeling costs at $300,000. Defendant [Pioneer Natural
Resources / Pioneer-USA] denies the remaining allegations and characterizations
in Paragraph 13’s sixth, seventh and eighth sentences. If Plaintiff has otherwise
asserted any allegations in Paragraph 13, then Defendant [Pioneer Natural
Resources / Pioneer-USA] denies such allegations. Defendant [Pioneer Natural
Resources / Pioneer-USA] states that CoCa Mines, Inc., or its subsidiary, Creede
Resources Inc., or both (collectively, “CoCa Mines”) retained all rights to the
Commodore Mine Dump materials under the Exploration Agreement and Option
dated September 9, 1982, and the Development and Operating Agreement dated
June 1, 1983 (the “1983 Development and Operating Agreement”), and PNI had
no ownership interest in or contractual responsibility for the materials contained
in the Commodore Mine Dump other than waste rock generated by its own
operations. To the extent that Plaintiff characterizes the 1983 Development and
Operating Agreement as a “joint venture” or the relationship among the parties to
the 1983 Development and Operating Agreement as a “joint venture,” Defendant
[Pioneer Natural Resources / Pioneer-USA] denies such characterization.
Moreover, Defendant [Pioneer Natural Resources / Pioneer-USA] states that when
MOLP re-conveyed the mine properties to Coca Mines in 1989, it paid
$1,000,000 toward the cost of mine-dump regrading and stream channelization at
and around the Commodore Mine Dump, which was an amount substantially
exceeding the amount necessary to reclaim the limited activities performed by
PNI and MOLP on the Commodore Mine Dump.

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[#61 at ¶ 13; #62 at ¶ 13]. Defendants propose removing the clause, “between 1986 and 1989,”
emphasized above in bold. See [#84-1 at ¶ 13; #84-2 at ¶ 13]. Defendants also propose adding
the following sentence after the statement that “Mesa retained SRK in 1988 to provide advice
regarding how to address potential reclamation scenarios for historically discontinued mine
operations”:
The tasks described in relevant portions of the resulting document were not
requirements. They were “potential reclamation scenarios” for various mines in
the Creede Mining District, in the event MLP determined to make application to
the Colorado Mined Land Reclamation Division for any permits that might be
required by that agency. Such application would have only been made if MLP or
the Mesa/CoCa Mines venture determined to continue with a mining joint
venture, and that venture never materialized. Moreover, as acknowledged by the
author in the “Background” section, MLP had no rights to process mine waste
materials described in the document (which were reserved to Coca Mines), and
had no responsibility for reclamation of those materials, other than “some waste
rock created during portal rehabilitation at the Commodore and Amethyst Mines.”
[Id.] Finally, Defendants would add the following sentence to conclude the paragraph:
When MOLP spent $1,000,000 to fund the continued maintenance and
rehabilitation of the flume system, its actions reflect an understanding that the
payment would have easily covered the cost of a permanent drainage channel.
[Id.].
Defendants assert that good cause exists to amend these paragraphs because the revisions
conform the paragraphs to Defendants’ discovery responses and, “in doing so, promote the
objective of deciding this case on its merits in light of the true historical facts of the case.” [#84
at 2]. Defendants further assert that the revisions are “important to the correct resolution of this
case,” in that they directly address and refute the Government’s allegations “that Mesa Operating
Limited Partnership ‘conducted mining operations’ in the relevant area, and could have
‘avoided’ a ‘washout’ of the Commodore Waste Rock Pile that occurred nearly 16 years after

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Mesa Operating Limited Partnership terminated its operations and sold its assets in the relevant
area.” [Id.] In addition, Defendants contend that the proposed amendments do not prejudice the
Government because, while the deadline for written discovery has passed, the discovery deadline
otherwise does not expire until September 2018, thus providing the Government with “ample
time to probe the revisions.” [Id. at 3]. Defendants further assert that the factual bases for the
revisions arose during the course of written discovery and have been disclosed to and discussed
with the Government. [Id.]
While the certificate of conferral asserts that the Government opposes these amendments,
the Government did not file a response to the Motion to Amend. Defendants do not specifically
address what precluded them from moving earlier to amend their Answers, but they do state that
the factual bases for the proposed revisions were discovered during the exchange of written
discovery, and review of the docket shows that the Parties filed multiple stipulations and motions
seeking to extend the time for responding to written discovery requests, with the final request
extending a deadline to February 23, 2018. See [#69; #72; #74; #76; #78]. Defendants filed the
Motion to Amend on April 3, 2018. And, as noted above, prior to the response deadline the
court ruled as a matter of law that Pioneer Natural Resources is a successor to the CERCLA
liabilities of PNI and that Pioneer-USA is a successor to the CERCLA liabilities of MOLP. See
[#88]. I find good cause to amend under Rule 16(b).
Additionally, I agree with Defendants that the proposed amendments should cause no
prejudice. Minter v. Prime Equipment Co., 451 F.3d 1196, 1207 (10th Cir. 2006) (“The…most
important factor in deciding a motion to amend the pleadings” under Rule 15(a), “is whether the
amendment would prejudice the nonmoving party.”). Four months remain in discovery; and the

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Government, which has the burden of showing that the proposed amendments are improper, has
not articulated (1) what prejudice would result from the amendments, or (2) how that prejudice
could not be cured through additional discovery. Accordingly, I respectfully RECOMMEND
that the Motion to Amend be GRANTED.
CONCLUSION
For the foregoing reasons, I respectfully RECOMMEND that:
1. Defendants’ “Partially Unopposed Motion for Leave to Amend their Pleadings” [#84]
be GRANTED; and
2. Defendants file clean versions of the proposed Second Amended Answers within one
business day of the court’s ruling, should the court accept this Recommendation. 2

2

Within fourteen days after service of a copy of the Recommendation, any party may serve and
file written objections to the Magistrate Judge’s proposed findings and recommendations with
the Clerk of the United States District Court for the District of Colorado. 28 U.S.C. § 636(b)(1);
Fed. R. Civ. P. 72(b); In re Griego, 64 F.3d 580, 583 (10th Cir. 1995). A general objection that
does not put the District Court on notice of the basis for the objection will not preserve the
objection for de novo review. “[A] party’s objections to the magistrate judge’s report and
recommendation must be both timely and specific to preserve an issue for de novo review by the
district court or for appellate review.” United States v. One Parcel of Real Property Known As
2121 East 30th Street, Tulsa, Oklahoma, 73 F.3d 1057, 1060 (10th Cir. 1996). Failure to make
timely objections may bar de novo review by the District Judge of the Magistrate Judge’s
proposed findings and recommendations and will result in a waiver of the right to appeal from a
judgment of the district court based on the proposed findings and recommendations of the
magistrate judge. See Vega v. Suthers, 195 F.3d 573, 579-80 (10th Cir. 1999) (District Court’s
decision to review a Magistrate Judge’s recommendation de novo despite the lack of an objection
does not preclude application of the “firm waiver rule”); International Surplus Lines Insurance
Co. v. Wyoming Coal Refining Systems, Inc., 52 F.3d 901, 904 (10th Cir. 1995) (by failing to
object to certain portions of the Magistrate Judge’s order, cross-claimant had waived its right to
appeal those portions of the ruling); Ayala v. United States, 980 F.2d 1342, 1352 (10th Cir. 1992)
(by their failure to file objections, plaintiffs waived their right to appeal the Magistrate Judge’s
ruling). But see, Morales-Fernandez v. INS, 418 F.3d 1116, 1122 (10th Cir. 2005) (firm waiver
rule does not apply when the interests of justice require review).

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DATED: May 16, 2018

BY THE COURT:

_________________________
United States Magistrate Judge

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