Boulter v. Noble Energy, Inc.
Filing
58
ORDER Granting 23 and 24 Defendants' Motions to Dismiss. Entered by Judge William J. Martinez on 2/17/2021.(afran)
Case 1:20-cv-00861-WJM-KLM Document 58 Filed 02/17/21 USDC Colorado Page 1 of 15
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge William J. Martínez
Civil Action No. 20-cv-861-WJM-KLM
MIKE BOULTER,
BOULTER, LLC,
RALPH NIX PRODUCE, INC., and
BARCLAY FARMS, LLC, on behalf of themselves and classes of similarly situated
persons,
Plaintiffs,
v.
NOBLE ENERGY, INC., and
KERR-MCGEE OIL & GAS ONSHORE, LP,
Defendants.
ORDER GRANTING DEFENDANTS’ MOTIONS TO DISMISS
Before the Court are: (1) Defendant Noble Energy, Inc.’s (“Noble”) Motion to
Dismiss (“Noble Motion”) (ECF No. 23); and (2) Defendant Kerr-McGee Oil & Gas
Onshore, LP’s (“KMOG”) Motion to Dismiss Pursuant to Federal Rule of Civil Procedure
12(b)(1) and, In the Alternative, Motion to Stay Proceedings (“KMOG Motion”) (ECF No.
24). 1 Plaintiffs Mike Boulter; Boulter, LLC; Ralph Nix Produce, Inc. (“Ralph Nix
Produce”); and Barclay Farms, LLC (“Barclay Farms”) (collectively, “Plaintiffs”) filed
responses. (ECF Nos. 28, 29.) Noble and KMOG filed replies. (ECF Nos. 31, 32.) For
the following reasons, the Noble Motion and the KMOG Motion are granted.
1
The Court refers to Noble and KMOG jointly as “Defendants.”
Case 1:20-cv-00861-WJM-KLM Document 58 Filed 02/17/21 USDC Colorado Page 2 of 15
I. BACKGROUND 2
On April 10, 2020, Plaintiffs, a group of royalty owners, filed the Complaint (ECF
No. 7), alleging on behalf of themselves and three purported classes, that Noble and
KMOG have underpaid oil royalties under several decades-old oil and gas leases in
Colorado. Plaintiffs allege the Court has subject-matter jurisdiction under the Class
Action Fairness Act, 28 U.S.C. § 1332(d). (Id. ¶ 2.) Different Plaintiffs bring claims
against Noble and KMOG, as follows.
A.
Claims Against Noble
Mike Boulter and Boulter, LLC are lessors under lease agreements in which
Noble is the lessee. (ECF No. 7 ¶¶ 11–15.) Each lease agreement has an identical oil
royalty provision:
To deliver to the credit of the lessor, free of cost, in the pipe
line to which the lessee may connect his wells, the equal [a
specified percentage] part of all oil produced and saved from
the leased premises, as royalty or, at lessee’s election, to
pay the lessor for such royalty the market price prevailing the
day the oil is run into the pipe line, or in storage tanks.
(Id. ¶ 15.)
Since April 1, 2014, Noble has allegedly consistently deducted from the market
price of the oil various costs related to transporting the oil from the well to a
transportation pipeline, tariff costs within the transportation pipeline, and various selfdescribed “other costs” related to transporting the oil to a delivery point where the oil
has been sold to third parties for a market price. (Id. ¶ 16.) Mike Boulter and Boulter,
2
The Background is drawn from the First Amended Class Action Complaint
(“Complaint”) (ECF No. 7). The Court assumes the allegations contained in the Complaint to be
true for the purpose of deciding the Motion. See Ridge at Red Hawk, L.L.C. v. Schneider, 493
F.3d 1174, 1177 (10th Cir. 2007).
2
Case 1:20-cv-00861-WJM-KLM Document 58 Filed 02/17/21 USDC Colorado Page 3 of 15
LLC claim that Noble has materially breached its royalty payment obligations by
deducting these post-production costs from the market price of the oil in the calculation
of royalties paid to them and the Noble Class, 3 causing them damages. (Id. ¶¶ 18–19,
22–23.) Based on these allegations, Mike Boulter and Boulter, LLC, on behalf of the
Noble Class bring two claims against Noble: breach of contract (id. ¶¶ 31–34) and
declaratory judgment (id. ¶¶ 35–37).
B.
Claims Against KMOG
1.
Mike Boulter and Ralph Nix Produce’s Claims
The allegations against KMOG are similar. Mike Boulter and Ralph Nix Produce
are lessors under lease agreements in which KMOG is the lessee. (Id. ¶¶ 44, 47.)
Each lease agreement has an identical oil royalty provision:
To deliver to the credit of the lessor, free of cost, in the pipe
line to which Lessee may connect wells on said land the
equal one-eighth (1/8) part of all oil produced and saved
from the leased premises.
(Id. ¶¶ 45, 48.)
Since April 1, 2014, KMOG has allegedly consistently deducted from the sales
price of the oil, various costs related to transporting the oil from the well to a
transportation pipeline and various self-described “other costs” related to transporting
3
The “Noble Class” is defined as: “All persons to whom Noble has paid royalties on oil
produced from wells located in the State of Colorado since April 1, 2014, pursuant to leases or
overriding royalty agreements which require Noble to ‘. . . deliver to the credit of the lessor, free
of cost, in the pipe line to which the lessee may connect his wells, the equal [a specified
percentage] part of all oil produced and saved from the leased premises, as royalty or, at
lessee’s election [or option], to pay the lessor for such royalty the market price prevailing the
day the oil is run into the pipe line, or in storage tanks.’
The Noble Class excludes: (a) the United States; (b) any person who has been a
working interest owner in a well located in Colorado on whose behalf Noble has paid royalties
on oil or natural gas produced by Noble in Colorado since April 1, 2014; and (c) Noble and its
affiliated entities, and their respective employees, officers, and directors.” (ECF No. 7 at 1–2.)
3
Case 1:20-cv-00861-WJM-KLM Document 58 Filed 02/17/21 USDC Colorado Page 4 of 15
the oil to a delivery point where the oil has been sold to third parties for a sales price.
(Id. ¶ 49.) The costs which KMOG allegedly improperly deducted from the selling price
(equivalent to the market price) of the oil include costs which KMOG describes as
gathering, transportation, and other deductions. (Id. ¶ 50.) Mike Boulter and Ralph Nix
Produce allege that the deduction of these costs is not permitted under the royalty
provision, and KMOG has materially breached its contractual obligations to them and
Kerr-McGee Subclass I 4 under the leases by taking such deductions, causing them
damages. (Id. ¶¶ 51–52, 55–56.) Based on these allegations, Mike Boulter and Ralph
Nix Produce, on behalf of the Kerr-McGee Subclass I, bring two claims against KMOG:
breach of contract (id. ¶¶ 64–67) and declaratory judgment (id. ¶¶ 68–70).
2.
Barclay Farms’s Claims
Barclay Farms is a lessor under a lease agreement in which KMOG is the lessee.
(Id. ¶ 77.)5 The lease agreement contains the following royalty provision:
The lessee shall deliver to lessor as royalty, free of cost, on
the lease, or into the pipe line to which lessee may connect
its wells the equal one-eighth part of all oil produced and
saved from the leased premises, or at the lessee’s option
4
The “Kerr-McGee Subclass I” is defined as: “All persons to whom Kerr-McGee has paid
royalties on oil produced from wells located in the State of Colorado since April 1, 2014,
pursuant to leases or overriding royalty agreements which require Kerr-McGee to ‘. . . deliver to
the credit of lessor, free of cost, in the pipe line to which lessee may connect [his] wells on said
land, the equal [a specified percentage] part of all oil produced and saved from the leased
premises.’
The Kerr-McGee Subclass I excludes: (a) the United States; (b) any person who has
been a working interest owner in a well located in Colorado on whose behalf Kerr-McGee has
paid royalties on oil or natural gas produced by Kerr-McGee in Colorado since April 1, 2014;
and (c) Kerr-McGee and its affiliated entities, and their respective employees, officers, and
directors.” (ECF No. 7 at 2.)
5
Paragraphs 77 and 78 appear to contain inconsistent statements regarding when
KMOG acquired its interest in the February 5, 1970 lease. (See ECF No. 7 ¶¶ 77–78.)
However, the inconsistency is not relevant to the resolution of the pending motions to dismiss.
4
Case 1:20-cv-00861-WJM-KLM Document 58 Filed 02/17/21 USDC Colorado Page 5 of 15
may pay to the lessor for such one eighth royalty the market
price for oil of like grade and gravity prevailing on the day
such oil is run into the pipe line or into storage tanks.
(Id. ¶ 79.) Since April 1, 2014, KMOG, in its calculation of royalties paid to Barclay
Farms on oil sales subject to the lease agreement, has consistently deducted from the
market price of the oil various costs related to transporting the oil from the well to a
transportation pipeline and various self-described “other costs” related to transporting
the oil to a delivery point where the oil has been sold to third parties for a market price.
(Id. ¶ 80.) The costs which KMOG allegedly improperly deducted from the market price
of the oil include, but are not limited to, costs which KMOG describes as gathering,
transportation, and other deductions. (Id. ¶ 81.) Barclay Farms alleges that the
deduction of these costs is not permitted under the royalty provision, and KMOG has
materially breached its contractual obligations to it and Kerr-McGee Subclass II 6 under
the leases by taking such deductions, causing them damages. (Id. ¶¶ 82–83, 86–87.)
Based on these allegations, Barclay Farms, on behalf of the Kerr-McGee Subclass II,
brings two claims against KMOG: breach of contract (id. ¶¶ 95–98) and declaratory
judgment (id. ¶¶ 99–101).
6
The “Kerr-McGee Subclass II” is defined as: “All persons to whom Kerr-McGee has
paid royalties on oil produced from wells located in the State of Colorado since April 1, 2014,
pursuant to leases or overriding royalty agreements which require Kerr-McGee to ‘. . . deliver to
the lessor as royalty, free of cost, on the lease, or into the pipeline to which lessee may connect
its wells the equal [a specified percentage] part of all oil produced and saved from the leased
premises, or at lessee’s option [or election] may pay to the lessor for such [a specified
percentage] royalty the market price for oil of like grade and gravity prevailing on the day such
oil is run into the pipe line or into storage tanks.’
The Kerr-McGee Subclass II excludes: (a) the United States; (b) any person who has
been a working interest owner in a well located in Colorado on whose behalf Kerr-McGee has
paid royalties on oil or natural gas produced by Kerr-McGee in Colorado since April 1, 2014;
and (c) Kerr-McGee and its affiliated entities, and their respective employees, officers, and
directors.” (ECF No. 7 at 2–3.)
5
Case 1:20-cv-00861-WJM-KLM Document 58 Filed 02/17/21 USDC Colorado Page 6 of 15
II. LEGAL STANDARD
A.
Federal Rule of Civil Procedure 12(b)(1)
As courts of limited jurisdiction, federal courts may only adjudicate cases that the
Constitution and Congress have granted them authority to hear. See U.S. Const. art.
III, § 2; Morris v. City of Hobart, 39 F.3d 1105, 1111 (10th Cir. 1994). Statutes
conferring jurisdiction on federal courts must be construed strictly. See F&S Constr. Co.
v. Jensen, 337 F.2d 160, 161 (10th Cir. 1964).
Federal Rule of Civil Procedure 12(b)(1) empowers a court to dismiss a
complaint for “lack of jurisdiction over the subject matter.” A Rule 12(b)(1) motion to
dismiss “must be determined from the allegations of fact in the complaint, without regard
to mere conclusionary allegations of jurisdiction.” Groundhog v. Keeler, 442 F.2d 674,
677 (10th Cir. 1971). A Rule 12(b)(1) motion may take one of two forms: a facial attack
or a factual attack. When reviewing a facial attack on a complaint pursuant to Rule
12(b)(1), the Court accepts the allegations of the complaint as true. See Holt v. United
States, 46 F.3d 1000, 1002 (10th Cir. 1995). Conversely, when reviewing a factual
attack on subject matter jurisdiction, a district court may not presume the truthfulness of
the complaint’s factual allegations. See id. A court has wide discretion to allow
affidavits, other documents, and may conduct a limited evidentiary hearing to resolve
disputed jurisdictional facts under Rule 12(b)(1). See id.
B.
Federal Rule of Civil Procedure 12(b)(6)
Under Rule 12(b)(6), a party may move to dismiss a claim in a complaint for
“failure to state a claim upon which relief can be granted.” “The court’s function on a
Rule 12(b)(6) motion is not to weigh potential evidence that the parties might present at
trial, but to assess whether the plaintiff’s complaint alone is legally sufficient to state a
6
Case 1:20-cv-00861-WJM-KLM Document 58 Filed 02/17/21 USDC Colorado Page 7 of 15
claim for which relief may be granted.” Dubbs v. Head Start, Inc., 336 F.3d 1194, 1201
(10th Cir. 2003) (internal quotation marks omitted).
The Rule 12(b)(6) standard requires the Court to “assume the truth of the
plaintiff’s well-pleaded factual allegations and view them in the light most favorable to
the plaintiff.” Ridge at Red Hawk, 493 F.3d at 1177. Thus, in ruling on a Motion to
Dismiss under Rule 12(b)(6), the dispositive inquiry is “whether the complaint contains
‘enough facts to state a claim to relief that is plausible on its face.’” Id. (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see also Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009).
Granting a motion to dismiss “is a harsh remedy which must be cautiously
studied, not only to effectuate the spirit of the liberal rules of pleading but also to protect
the interests of justice.” Dias v. City & Cnty. of Denver, 567 F.3d 1169, 1178 (10th Cir.
2009) (internal quotation marks omitted). “Thus, ‘a well-pleaded complaint may proceed
even if it strikes a savvy judge that actual proof of those facts is improbable, and that a
recovery is very remote and unlikely.’” Id. (quoting Twombly, 550 U.S. at 556).
However, “[t]he burden is on the plaintiff to frame a ‘complaint with enough factual
matter (taken as true) to suggest’ that he or she is entitled to relief.” Robbins v.
Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008) (quoting Twombly, 550 U.S. at 556).
“[C]omplaints that are no more than ‘labels and conclusions’ or ‘a formulaic recitation of
the elements of a cause of action,’ . . . ‘will not do.’” Id. (quoting Twombly, 550 U.S. at
555).
III. COLORADO’S OIL AND GAS CONSERVATION ACT
Colorado’s Oil and Gas Conservation Act, §§ 34-60-101 et seq. (the “Act”),
7
Case 1:20-cv-00861-WJM-KLM Document 58 Filed 02/17/21 USDC Colorado Page 8 of 15
expressly grants jurisdiction to the Colorado Oil and Gas Conservation Commission
(“COGCC”) to determine “[t]he amount of the proceeds plus interest, if any, due a payee
by a payer” from the sale of oil and gas from Colorado wells. Colo. Rev. Stat. § 34-60118.5(5)(c).
The one exception to the COGCC’s jurisdiction over a proceeds dispute is when
there is a “bona fide dispute over the interpretation of a contract for payment.” Id. § 3460-118.5(5). Thus, the COGCC is precluded from exercising jurisdiction over any
controversy involving a bona fide dispute regarding contract interpretation. Id.
However, the Act provides that the COGCC determines in the first instance
whether such a bona fide dispute exists:
Before hearing the merits of any proceeding regarding
payment of proceeds pursuant to this section, the oil and gas
conservation commission shall determine whether a bona
fide dispute exists regarding the interpretation of a contract
defining the rights and obligations of the payor and payee. If
the commission finds that such a dispute exists, the
commission shall decline jurisdiction over the dispute and
the parties may seek resolution of the matter in district court.
Id. § 34-60-118.5(5.5).
IV. ANALYSIS
A.
Parties’ Arguments
Defendants argue that Plaintiffs’ claims fall within the scope of the Act and that it
is the COGCC’s responsibility—not the Court’s—to determine in the first instance
whether a bona fide dispute over the interpretation of a contract between the payer and
the payee exists. (ECF No. 23 at 4; ECF No. 24 at 2–3.) By filing this lawsuit in federal
court without first bringing their case before the COGCC, Defendants contend that
Plaintiffs have failed to exhaust their administrative remedies. In any event, Defendants
8
Case 1:20-cv-00861-WJM-KLM Document 58 Filed 02/17/21 USDC Colorado Page 9 of 15
argue that no bona fide dispute exists here, such that the COGCC has jurisdiction to
decide this case. (ECF No. 23 at 2; ECF No. 24 at 2.)
In response, Plaintiffs argue that Defendants ignore certain pertinent cases
relating to the COGCC’s jurisdiction. For example, Plaintiffs argue that Defendants
ignore Grynberg v. Colorado Oil and Gas Conservation Commission, 7 P.3d 1060
(Colo. App. 1999), which they contend holds that the COGCC does not have jurisdiction
to decide contractual disputes involving a producer’s deduction of post-production costs,
and that royalty owners who have such a contract dispute are not required to exhaust
their administrative remedies with the COGCC. (ECF No. 28 at 2, 4–7.)
In addition, Plaintiffs state that Defendants ignore binding Tenth Circuit
precedent, Atlantic Richfield Co. v. Farm Credit Bank of Wichita, 226 F.3d 1138 (10th
Cir. 2000), which Plaintiffs assert stands for the propositions that the Colorado
legislature clarified the Act to exclude the resolution of contractual disputes from the
COGCC’s jurisdiction, and that a Colorado litigant alleging breach of an oil and gas
royalty agreement “must assert his claim in a court of law.” (ECF No. 28 at 2, 7–10.)
Finally, Plaintiffs contend that Defendants ignore the fact that the COGCC has
repeatedly determined that it lacks jurisdiction under the Act to decide royalty owners’
claims for breach of contract based upon an oil and gas producer’s deduction of postproduction costs in the calculation of royalties. (ECF No. 28 at 2, 10–11.) According to
Plaintiffs, there is a bona fide dispute over the interpretation of the royalty provisions at
issue, so the COGCC lacks jurisdiction, and it would therefore be futile for them to
present their case to the COGCC. (Id. at 11–13.)
B.
Plaintiffs Have Failed to Exhaust Administrative Remedies
The Court finds that Plaintiffs have failed to exhaust their administrative remedies
9
Case 1:20-cv-00861-WJM-KLM Document 58 Filed 02/17/21 USDC Colorado Page 10 of 15
based on: (1) the clear language of the Act providing that the COGCC determines
whether a bona fide dispute exists which divests it of jurisdiction; and (2) Plaintiffs have
not demonstrated it would be futile to bring their case before the COGCC. As a result,
the Court lacks subject-matter jurisdiction over this lawsuit.
1.
The COGCC Has Jurisdiction to Determine Whether a Bona Fide Dispute
Exists
Under Colorado law, “[i]f complete, adequate, and speedy administrative
remedies are available, a party must pursue these remedies before filing suit in district
court.” City & Cnty. of Denver v. United Air Lines, Inc., 8 P.3d 1206, 1212 (Colo. 2000)
(citations omitted). Failure to exhaust administrative remedies before seeking judicial
relief is a jurisdictional defect. See Burlington Res. Oil & Gas Co. v. Colo. Oil & Gas
Conservation Comm’n Dep’t of Nat. Res., 986 F. Supp. 1351, 1354 (D. Colo. 1997)
(citing Kendal v. Cason, 791 P.2d 1227, 1228 (Colo. App. 1990)).
Here, the statutory language of the Act could not be clearer. Under the Act, the
COGCC “shall determine whether a bona fide dispute exists regarding the interpretation
of a contract defining the rights and obligations of the payor and payee.” Colo. Rev.
Stat. § 34-60-118.5(5.5) (emphasis added). Only in the event that the COGCC finds
that such a dispute exists does it decline jurisdiction. At that point, “the parties may
seek resolution of the matter in district court.” Id. Therefore, it is clear that the COGCC
has jurisdiction to determine in the first instance whether there is a bona fide dispute.
2.
Plaintiffs Have Not Demonstrated Futility
The doctrine of exhaustion of administrative remedies is subject to limited
exceptions. State v. Golden’s Concrete Co., 962 P.2d 919, 923 (Colo. 1998), as
modified on denial of reh’g (June 22, 1998). Relevant here, an “exception applies when
10
Case 1:20-cv-00861-WJM-KLM Document 58 Filed 02/17/21 USDC Colorado Page 11 of 15
it is ‘clear beyond a reasonable doubt’ that further administrative review by the agency
would be futile because the agency will not provide the relief requested.” Id. (quoting
Colorado v. Veterans Admin., 430 F. Supp. 551, 558 (D. Colo. 1977)); (see ECF No. 28
at 10; ECF No. 29 at 11). “If the agency refuses to reconsider its decisions or
procedures, or has stated a categorical rule to apply in a group a cases, rendering
exhaustion futile, requiring the protesting party to pursue administrative remedies would
not further such interests as allowing the agency to correct its own errors and to develop
a record for judicial review.” United Air Lines, Inc., 8 P.3d at 1213.
Plaintiffs’ contention that it is “clear beyond a reasonable doubt that the [COGCC]
would not exercise jurisdiction over [their] royalty underpayment claims” is unavailing.
(ECF No. 28 at 10; ECF No. 29 at 10.)
a.
The Parties Dispute Whether a Bona Fide Dispute Exists
As an initial matter, the Court notes that the parties dispute whether there is a
bona fide dispute regarding the interpretation of a contract. Plaintiffs argue there is a
dispute regarding Defendants’ right to deduct post-production costs in its calculation of
royalties paid to the Plaintiffs under the lease agreements at issue. (ECF No. 28 at 11–
12; ECF No. 29 at 12–13.)
By contrast, Noble argues that “it is established law that where royalties are paid
under a provision like the one at issue—providing for delivery of oil ‘in the pipeline to
which lessee may connect wells’—post-wellhead costs of transporting and treating the
oil are borne by both the operator and royalty owners.” (ECF No. 31 at 5 (citing 3
Williams & Meyers, Oil and Gas Law § 646.2).) According to Noble, the generally
accepted meaning of the lease’s language removes any ambiguity concerning Noble’s
right to deduct the post-production costs at issue. (Id.)
11
Case 1:20-cv-00861-WJM-KLM Document 58 Filed 02/17/21 USDC Colorado Page 12 of 15
Like Noble, KMOG contends that there is no bona fide dispute here, pointing to
the failure of the Amended Complaint to identify either the “specific deductions Plaintiffs
allege were wrongful, nor the clause, phrase, or term of the royalty provisions that
requires further interpretation related to any specific deductions.” (ECF No. 32 at 1–2.)
KMOG emphasizes that the Amended Complaint only states that “some unidentified
costs should not have been deducted” and “does nothing but seek an accounting of the
‘amount of the proceeds plus interest, if any, due.’” (Id. at 2.) In sum, KMOG argues
that it is “not enough, however, for Plaintiffs to merely state that there is a contract
interpretation at issue . . . .” (Id. at 1.)
To resolve the disagreement between the parties on this point would require the
Court to invade the province of the COGCC. See Colo. Rev. Stat. § 34-60-118.5(5.5).
This the Court will not do.
b.
The Case Law Does Not Support Plaintiffs’ Position
To support their argument that it is clear beyond a reasonable doubt that the
COGCC would not exercise jurisdiction over Plaintiffs’ claims against Defendants,
Plaintiffs rely on certain cases which the Court finds do not support their position. 7
First, Plaintiffs rely primarily on the Colorado Court of Appeals’ decision in
Grynberg and its progeny to demonstrate futility. In Grynberg, a dispute arose between
oil and gas developers and royalty owners of an interest in oil and gas property.
Grynberg, 7 P.3d at 1062. The royalty owners brought an action to recover royalties
before the COGCC so that it could determine the amount of royalties owed. Id. The
COGCC determined it lacked jurisdiction to decide the case because it involved a
7
Plaintiffs rely on numerous cases for support, but the Court limits its discussion to the
three cases most critical to their argument.
12
Case 1:20-cv-00861-WJM-KLM Document 58 Filed 02/17/21 USDC Colorado Page 13 of 15
dispute regarding a contractual interpretation. On appeal, the Grynberg court affirmed,
holding that “the [COGCC] does not have jurisdiction to interpret any royalty agreement
to determine the propriety of disputed post-production deductions.” Id. at 1063.
The Court acknowledges that Grynberg found that the COGCC lacked
jurisdiction over disputed post-production deductions. Even KMOG “does not dispute
Grynberg’s interpretation of the Act, or Plaintiffs’ legal entitlement to royalties. Cases
presenting bona fide contract interpretation disputes are properly before the courts.”
(ECF No. 32 at 3.) But the pertinent point is that Grynberg was a review of the
COGCC’s decision to decline jurisdiction over such a dispute. As Defendants point out,
this procedural posture reinforces the notion that COGCC determines in the first
instance whether it has jurisdiction, not the Court. (See ECF No. 31 at 7.) To argue
that Grynberg is directly on point, Plaintiffs must first assume that a dispute regarding
contractual interpretation exists; such an assumption, however, invades the province of
the COGCC. As the Court has explained, the parties here dispute whether there is a
bona fide dispute over contract interpretation. Under these circumstances, the Court
finds Grynberg readily distinguishable.
Similarly, while Plaintiffs state that Atlantic Richfield is “binding Tenth Circuit
precedent” (ECF No. 29 at 2), that position is without merit. Exhaustion of
administrative remedies was not at issue in Atlantic Richfield. 226 F.3d 1138. Rather,
in Atlantic Richfield, the operator argued that the district court should have applied
certain provisions of the Act to determine the proper rate of prejudgment interest. Id. at
1156. In rejecting this argument, the Tenth Circuit noted that the statutory provision in
question only applied to proceedings before the COGCC. Id. at 1157. In dicta, the
13
Case 1:20-cv-00861-WJM-KLM Document 58 Filed 02/17/21 USDC Colorado Page 14 of 15
Tenth Circuit stated that the Act did not apply to claims alleging a breach of contract. Id.
As noted above, the parties here dispute whether there is a bona fide dispute
regarding the interpretation of a contract. Thus, the Court’s determination that the
COGCC should—in accordance with the Act—determine whether such a dispute exists,
is not contrary to the Tenth Circuit’s statement that the COGCC lacks jurisdiction over
disputes involving contractual interpretation. Presupposing that a dispute exists,
however, runs afoul of the Act’s grant of jurisdiction to the COGCC to decide such an
issue. Should the COGCC determine a contract interpretation dispute exists, the Act
provides that “the parties may seek resolution of the matter in district court.” Colo. Rev.
Stat. § 34-60-118.5(5.5).
Plaintiffs also rely on Crichton for support. 2017 WL 4838735 (D. Colo. Oct. 26,
2017). In Crichton, however, the court determined that the dispute was “contractual in
nature,” whereas here, the Court has found that based on the dispute between the
parties, it cannot definitively state that the dispute is contractual in nature. Id. at *4.
This is for the COGCC to decide.
The Court emphasizes that this decision is not intended to prejudge one way or
another as to whether the COGCC or a court of law has jurisdiction over this dispute.
Instead, with this Order, the Court merely adheres to the provision of the Act granting
the COGCC authority to determine whether a bona fide dispute exists which divests it of
jurisdiction. Depending on what decision the COGCC reaches, consistent with the Act,
the parties very well may seek resolution of this matter in district court. 8
8
Because the Court has determined that it lacks subject-matter jurisdiction based on
Plaintiffs’ failure to exhaust administrative remedies, it need not address Defendants’ other
arguments.
14
Case 1:20-cv-00861-WJM-KLM Document 58 Filed 02/17/21 USDC Colorado Page 15 of 15
V. CONCLUSION
1.
Defendant Noble Energy, Inc.’s Motion to Dismiss (ECF No. 23) is GRANTED;
2.
Plaintiffs’ claims against Noble are DISMISSED without prejudice for lack of
subject-matter jurisdiction;
3.
Defendant Kerr-McGee Oil & Gas Onshore, LP’s Motion to Dismiss Pursuant to
Federal Rule of Civil Procedure 12(b)(1) and, In the Alternative, Motion to Stay
Proceedings (ECF No. 24) is GRANTED;
4.
Plaintiffs’ claims against KMOG are DISMISSED without prejudice for lack of
subject-matter jurisdiction;
5.
Defendants shall have their costs upon compliance with D.C.COLO.LCivR 54.1;
and
6.
The Clerk shall terminate the case.
Dated this 17th day of February, 2021.
BY THE COURT:
______________________
William J. Martinez
United States District Judge
15
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?