Northern Natural Gas Company v. L.D. Drilling, Inc. et al
MEMORANDUM AND ORDER granting in part and denying in part 572 Northern's Motion to Strike; granting 597 Northern's Motion to Dismiss defendant's abuse of process claims. See order for details. Signed by Chief Judge J. Thomas Marten on 3/20/2017. (mam)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
NORTHERN NATURAL GAS COMPANY,
Case No. 6:08-cv-01405-JTM
L.D. DRILLING, INC., et al.,
MEMORANDUM AND ORDER
This matter is before the court on motions by plaintiff Northern Natural Gas to
strike various counterclaims (Dkt. 572) and to dismiss a counterclaim for abuse of
process (Dkt. 597). For the reasons set forth herein, the motion to strike is granted in
part and denied in part, and the motion to dismiss the abuse of process claims is
I. Motion to Strike (Dkt. 572).
1. Abuse of process claims. Northern moves to strike defendants’ abuse of process
claims. For reasons set forth infra the court finds that Northern’s separate motion to
dismiss these claims for failure to state a valid claim for relief should be granted. The
court therefore does not address the argument that the claims are procedurally barred.
2. Overriding royalty interest owner counterclaims. Northern moves to strike
counterclaims asserted by the L.D. Group1 and Val Energy Group2 on behalf of
The L.D. Group includes: L.D. Drilling, Inc.; Carl Dudrey; HJB, Inc.; Larry E. Keenan; Timothy R.
Keenan; Ivan W. Milton; Lisa M. Milton; Marilyn M. Davis, Executrix of the L.S. Davis Estate; Bill R.
overriding royalty interest owners. The defendants concede this portion of Northern’s
argument. Dkt. 581 at 12. The court will therefore grant the motion to strike
counterclaims on behalf of overriding royalty interest owners.
3. Nash counterclaim for slander of title. Northern argues this claim is precluded by
a prior stipulation of dismissal. See Dkt. 124 (stipulation dismissing with prejudice
Nash’s counterclaim for slander of title). It also contends the alleged false statements are
absolutely privileged and were not false at the time they were made. Dkt. 587 at 1-4. In
response, Nash argues that the claim now asserted accrued after the prior stipulation of
dismissal and is not barred. Nash also contends Northern has waived any privilege
defense and, in any event, that the statements are not protected by privilege.
Northern’s motion to strike this claim is denied. As Northern recognizes, “where
the facts that have accumulated after the first action are enough on their own to sustain
[a] second action, the new facts clearly constitute a new claim.” Dkt. 587 at 2 (quoting
Hatch v. Boulder Town Council, 471 F.3d 1142, 1150 (10th Cir. 2006) (citing Storey v. Cello
Holdings, LLC, 347 F.3d 370, 384 2nd Cit. 2003)). Nash claims the statements underlying
its slander of title claim were made after the August 2009 dismissal of its earlier claim. If
so, and if the allegations are otherwise sufficient to support a claim, then the August
2009 order of dismissal does not bar the claim. See also Dkt. 152 at 17 (“subsequent
Milton; Tammy L. Milton; Kim B. Shoemaker; Nancy H. Shoemaker; Whitetail Energy, Inc.; and Steven E.
Young. Dkt. 581 at 1, n.1.
The Val Energy Group includes: VAL Energy, Inc.; Allam Exploration, LLC; Apollo Energies, Inc.;
Robert P. Bayer II; Lies Exploration, LLC; David Munro; Brenda M. Riffye; Larry D. Riffey; Eric D. Stinson
Trust Dated January 25, 2007; Vosburgh Exploration, LLC; John P. Hastings; and Dale L. Smith and Mae
D. Smith Revocable Trust Dated December 5, 2007. Dkt. 582.
conduct, … even if it is of the same nature as the conduct complained of in a prior suit,
may give rise to an entirely separate cause of action.”) [citing Waddell & Reed Financial,
Inc. v. Torchmark Corp., 292 F.Supp.2d 1270, 1281 (D. Kan. 2003) (quoting Kilogar v. Colbert
County Bd. of Educ., 578 F.2d 1033, 1035 (5th Cir. 1978))].
As for privilege, the court first rejects Nash’s contention that Northern waived
this defense. It is true that Rule 8(c) generally requires an affirmative defense to be
included in a responsive pleading, and Northern failed to assert privilege in its answer.
Dkt. 575. But discovery still has months to go, the dispositive motion deadline is
months off as well, and the trial is more than a year away. Northern has timely alerted
Nash to the defense via the motion to strike, and Nash offers no suggestion of prejudice
or unfair surprise. Under the circumstances, the court finds no waiver. See Creative
Consumer Concepts, Inc. v. Kreisler, 563 F.3d 1070, 1076 (10th Cir. 2009) (when the failure
to raise an affirmative defense does not prejudice the plaintiff, it is not error for the trial
court to consider the issue); Ahmad v. Furlong, 435 F.3d 1196, 1201 (10th Cir. 2006)
(“strict adherence to the pleading requirement is inappropriate when the [notice]
purpose of the requirement has been otherwise fulfilled”). As for application of the
defense, however, both parties allude to facts outside the pleadings to support their
positions. The court cannot make such factual findings on a motion to strike. Similarly,
Northern’s argument that its statements “were not or could not have been false or
slanderous at the time” depends upon facts outside of the pleadings, and is more
properly the subject of a motion for summary judgment than a motion to strike.
Accordingly, the motion to strike the slander of title claim is denied.
4. Request to strike allegations under Fed. R. Evid. 408. Northern argues that L.D.
Drilling’s answer improperly includes statements made by Northern during
compromise negotiations, contrary to Fed. R. Evid. 408(a). While the admissibility of
such material under Rule 408 appears questionable, the court agrees with L. D. Drilling
that the request to strike the allegations from the pleadings is premature. Rule 12(f),
which allows the court to strike any “redundant, immaterial, impertinent, or scandalous
matter,” should be used “only when the material may be prejudicial to a party and lacks
any ‘possible relation to the controversy.’” Sawo v. Drury Hotels Co., LLC, 2011 WL
3611400, *2 (D. Kan. Aug. 15, 2011) (citing Rubio ex rel. Z.R. Turner Unif. Sch. Dist. No.
202, 475 F.Supp.2d 1092, 1101 (D. Kan. 2007)). The rule is not designed to allow parties
to obtain advance rulings on the admissibility of evidence. Thus, “Rule 408 disputes are
more appropriately resolved in the context of a motion in limine instead of prematurely
through a Rule 12(f) motion.” Sawo, 2011 WL 3611400 at *2. See also Fed. R. Civ. P.
56(c)(2) (party may object that material cited on summary judgment cannot be
presented in a form that would be admissible). The motion to strike the material is
II. Motion to Dismiss (Dkt. 597).
Northern moves to dismiss defendants’ abuse of process claims for failure to
state a claim upon which relief can be granted. Dkt. 598. Northern essentially argues
that defendants have failed to allege facts showing an improper use of court processes.
A complaint must contain sufficient factual matter to “state a claim to relief that
is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 570 (2007)). Only a complaint that states a plausible claim for
relief survives a motion to dismiss. Id. at 679. “A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged.” Id. at 678. All well-pleaded
factual allegations in the complaint are accepted as true and viewed in the light most
favorable to the plaintiff for purposes of determining whether the complaint states a
plausible claim for relief. Smith v. United States, 561 F.3d 1090, 1098 (10th Cir. 2009).
In dismissing defendants’ prior attempt to assert an abuse of process claim,
Judge Brown identified the following essential elements under Kansas law: (1) the
defendant made an illegal, improper, perverted use of the process, a use neither
warranted nor authorized by the process; (2) the defendant had an ulterior motive or
purpose in exercising such illegal, perverted, or improper use of process, and (3)
damage resulted to plaintiff from the irregularity. Dkt. 382 at 10 (citing Merkel v. Keller,
232 P.3d 887, 2010 WL 2670846 (Kan. App. June 25, 2010) (Table, text in Westlaw); Porter
v. Stormont-Vail Hospital, 228 Kan. 641, 647, 621 P.2d 411 (1980); and Welch v. Shepherd,
169 Kan. 363, 366, 219 P.2d 444 (1950)). Judge Brown also cited the following standards
from Am.Jur.2d, Abuse of Process § 11:
Abuse of process contemplates some overt act done in addition to the
initiating of the suit; thus, the mere filing or maintenance of a lawsuit,
even for an improper purpose, is not a proper basis for an abuse of
process action. Generally, therefore, no right of action exists for damages
resulting from the institution and prosecution of a civil action if the action
is confined to its regular and legitimate function in relation to the cause of
action stated in the complaint, even if the plaintiff had an ulterior motive
in bringing the action, or if the plaintiff knowingly brought suit upon an
unfounded claim. However, if the suit is brought not to recover on the
cause of action stated in the complaint, but to accomplish a purpose for
which the process was not designed, there is an abuse of process.
Dkt. 382 at 10.
Defendants allege five specific ways in which they contend Northern made an
improper or illegal use of process. An examination of these five allegations shows that
defendants have failed to state a plausible claim.
Defendants first allege that Northern utilized “discovery or injunction” to obtain
“information that is not relevant to any disputed issue in these cases” so it could use the
information in FERC proceedings. Defendants fail to identify any such irrelevant
information or how Northern obtained it. Of course, any discovery Northern obtained
was subject to objection as being outside the proper scope of discovery, and could have
been (or was) ruled on by the court. Defendants may simply be referring to a
disagreement with some court ruling about the scope of discovery. See Khalik v. United
Air Lines, 671 F.3d 1188, 1191 (10th Cir. 2012) (if the allegations are so general that they
encompass a wide swath of conduct, much of it innocent, then the plaintiff has not
nudged his claims across the line from conceivable to plausible). Absent an allegation
identifying the irrelevant information and the circumstances under which it was
obtained, defendants have failed to show a use “neither warranted nor authorized by
the process.” Cf. Younger v. Solomon, 38 Cal. App. 3d 289, 113 Cal. Rptr. 113 (Ct. App.
1974) (use of an interrogatory to publish material injurious to an attorney’s reputation,
where publication had no relation or connection with the action, supported a claim).
A second allegation is that Northern used court processes to “inflict financial
injury on the Defendants” to reduce their ability to defend the litigation and to induce
them to abandon exploration. Defendants fail to explain how Northern inflicted the
injury, or, for that matter, the nature of the injury. As Am.Jur.2d § 11 indicates, “the
mere filing or maintenance of a lawsuit, even for an improper purpose, is not a proper
basis for an abuse of process action.” By its nature, any court process imposes costs
upon the parties involved. That fact alone does not show abuse of process. And
although defendants allege that Northern filed a series of cases over the years against
producers around the Cunningham Storage Field, absent from their claim are facts
plausibly showing that such cases were not properly confined to their regular and
legitimate function given the claims asserted. As the Tenth Circuit has pointed out, the
nature and specificity of the allegations required to state a plausible claim varies with
context. Kan. Penn Gaming, LLC. v. Collins, 656 F.3d 1210, 1215 (10th Cir. 2011). The
context here relates to claims of underground migration of storage gas – a matter that
“presents difficult issues of proof and determination by the courts and by private
parties alike,” Dkt. 382 at 7, in the midst of an unsettled (indeed, unprecedented) area of
law that was dramatically affected by a 2013 Kansas Supreme Court ruling. See
Benjamin Carmichael, Drinking a Milkshake from Someone Else's Private Collection: How the
Rule of Capture Remains in Play for Storage Gas (Northern Natural Gas Co. v. Oneok Field
Services Co., 296 P.3d 1106 (Kan. 2013)), 54 Washburn L.J. 397, 412 (2015) (“The Kansas
Supreme Court’s use of the surface term ‘adjoining’ to define rights in a vast
underground reservoir led to a result contrary to the intent of the Kansas legislature,
drastically limiting the extent of protection afforded to migrating gas.”). In this context,
the allegation that Northern brought multiple lawsuits asserting an interest in injected
storage gas fails to support a claim for abuse of process.
A third alleged abuse of process occurred from Northern “inducing ONEOK and
Lumen [gas purchasers], and others to take steps that would reduce the Defendants’
legitimate exploration and production against which Northern has no legitimate right
of complaint or expectation of relief in those cases.” Dkt. 567 at 33. The vagueness of
Northern “inducing” purchasers “to take steps” to reduce exploration renders this
claim too speculative to survive a motion to dismiss. The allegations show nothing
beyond Northern’s resort to judicial processes to assert claims arising from and related
to storage gas migration.
Defendants also allege that Northern “caus[ed] the Defendants to convey
property to Northern, or [took] Defendants’ properties by eminent domain for nothing
or for far less than those properties are worth….” Dkt. 567 at 33. This allegation fails to
explain how Northern abused court processes to “cause” defendants to convey
property. As for eminent domain, federal law and state law specifically authorize
natural gas utilities to invoke eminent domain to acquire property for gas storage.
Nothing is alleged to show how Northern abused this process to take defendants’
property for nothing or for far less than it was worth. The claim seemingly reflects
defendants’ disagreement with the amount of just compensation determined by a
commission and by Judge Belot in a related condemnation proceeding, Northern Nat.
Gas Co. v. Approx. 9117.53 Acres, No. 10-1232-MLB. As such, it fails to state a plausible
claim for relief.
Defendants’ final allegation alludes to the foregoing acts and claims Northern
did similar things “aimed at other producers or potential producers.” Dkt. 567 at 33.
This allegation fails to state a claim for the reasons stated above, and because the
defendants fail to show standing to assert a claim for injuries that Northern may have
caused to other producers.
As noted above, “no right of action exists … from the institution and prosecution
of a civil action if the action is confined to its regular and legitimate function in relation
to the cause of action stated in the complaint….” The allegations here show frequent
and long-running disputes over rights to migrated storage gas. Northern’s attempts to
establish property rights in the gas that it injected, even if ultimately unsuccessful, do
not show the use of judicial process for a purpose other than that for which it was
designed. See Restatement (Second) of Torts § 682 comment b (1977) (“[T]here is no
action for abuse of process when the process is used for the purpose for which it is
intended, [although] there is an incidental motive of spite or an ulterior purpose....”).
IT IS THEREFORE ORDERED this 20th day of March, 2017, that Northern’s
Motion to Strike (Dkt. 572) is GRANTED IN PART and DENIED IN PART; Northern’s
Motion to Dismiss defendant’s abuse of process claims (Dkt. 597) is GRANTED.
___s/ J. Thomas Marten___________
J. THOMAS MARTEN, JUDGE
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