Prima Exploration, Inc. v. LaCounte et al

Filing 50

ORDER by Chief Judge Daniel L. Hovland granting 29 Motion to Dismiss for Lack of Jurisdiction; granting 12 Motion to Dismiss for Lack of Jurisdiction; denying 12 Motion to Dismiss for Failure to State a Claim; denying 36 Motion for Preliminary Injunction; denying 38 Motion to Stay; denying 40 Motion for Extension of Time to File Response/Reply; denying 45 Motion for Hearing; denying 16 Motion to Stay; denying 18 Motion to Dismiss. (NH)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NORTH DAKOTA

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Prima Exploration, Inc,
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Plaintiff,
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vs.
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Darryl LaCounte, in his official capacity
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ORDER FOR DISMISSAL
as Director of the United States Bureau of )
WITHOUT PREJUDICE
Indian Affairs; Bureau of Indian Affairs;
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Enerplus Resources (USA) Corporation;
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Petroshale (USA) Inc.; Madelene Bruce;
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Kevin Bruce; Lynn T. Bruce; Ronelle M.
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Bruce; Todd Bruce; Justin L. Bruce; Lisa )
Case No. 1:18-cv-116
G. Bruce; Cheryle Danks; Sheldon J. Hand; )
Deborah A. Painte; Zachiery J. Sitting
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Crow; and Carol J. Walker,
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Defendants.
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______________________________________________________________________________
Before the Court are three motions to dismiss, a motion for preliminary injunction, a
motion to stay briefing, a motion for enlargement of time to respond, and a motion for an expedited
hearing. On July 9, 2018, Enerplus Resources (USA) Corporation (“Enerplus”) filed a motion to
dismiss. See Docket No 12. On July 10, 2018, Petroshale (USA) Inc. (“PetroShale”) also filed a
motion to dismiss. See Docket No. 18. On August 10, 2018, Darryl LaCounte, in his official
capacity as Acting Director of the United States Bureau of Indian Affairs (“BIA”), and the BIA
(together the “Federal Defendants”), also filed a motion to dismiss. See Docket No. 29. On
September 11, 2018, Prima Exploration, Inc. (“Prima”) filed a motion for preliminary injunction.
See Docket No. 36. On September 14, 2018, the Federal Defendants filed a motion to stay briefing
on the motion for preliminary injunction. See Docket No. 38. Also on September 14, 2018,
Enerplus filed a motion to enlarge the time to respond to the motion for preliminary injunction.

See Docket No. 40. On September 25, 2018, Prima filed a motion for an expedited hearing on its
motion for preliminary injunction. See Docket No. 45. The motions have been fully briefed. See
Docket Nos. 26-28, 31-35, 42-44, 46, 47 and 49. For the following reasons, the Court orders
dismissal without prejudice.

I.

BACKGROUND
This controversy arises from a dispute regarding a mineral leasehold interest located on the

Fort Berthold Indian Reservation. The following facts are taken from Prima’s complaint. See
Docket No. 1. Prima held an interest in a lease approved by the BIA in 1952. The lease covered
320 acres in the south half of Section 16, Township 152 North, Range 94 West in McKenzie
County, North Dakota (the “Disputed Leasehold”). On December 17, 2013, the BIA declared 240
acres of the Disputed Leasehold terminated and approved a new lease of that same acreage to
Enerplus. Roughly two years later, on December 18, 2015, the BIA declared the remaining 80
acres of the Disputed Leasehold terminated and approved a lease of that same acreage to
PetroShale. Prima filed timely appeals of both decisions with the BIA. To date, the BIA has not
made a decision on either of Prima’s appeals. Administrative procedures allow parties to appeal
BIA inaction. See 25 C.F.R. § 2.8. No inaction appeals have been filed. See Docket No. 34, p.
11-12.
Prima filed suit in this Court on May 31, 2018. See Docket No. 1. Prima asserts Enerplus
and PetroShale have conspired with the BIA to divest Prima of its leasehold interest. According
to Prima, the “Defendants have worked together in an effort to interfere with, trespass upon, and
convert Prima’s rights. These efforts have been, for the most part, done with deceit, with improper
intent, and have been conducted in secret from Prima.” See Docket No. 1, p. 4. Prima requests a

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declaration that it has a valid interest in the Disputed Leasehold. In addition, Prima asserts various
causes of action against the BIA, including deprivation of due process and unlawful regulatory
taking. See Docket No. 1, pp. 10-11. Prima also asserts various causes of action against Enerplus
and PetroShale, including trespass, conversion, tortious interference, slander of title, unjust
enrichment, and accounting. See Docket No. 1, pp. 13-17. Last, Prima’s complaint contains a
cause of action entitled “Preliminary Injunction as Against All Defendants.” See Docket No. 1, p.
18. Prima asserts this Court has jurisdiction over its claims under 28 U.S.C. §§ 1331 (federal
question jurisdiction) and 1367 (supplemental jurisdiction). See Docket No. 1, p. 8. Prima has
also filed a motion for preliminary injunction requesting all revenue from production on the
Disputed Leasehold be placed into escrow. See Docket No. 37. The Defendants oppose Prima’s
motion for a preliminary injunction and have filed motions to stay briefing or extend the time for
briefing until after the Court has addressed the jurisdictional issues the parties have raised. See
Docket Nos. 38 and 40.

II.

LEGAL DISCUSSION
PetroShale, Enerplus, and the Federal Defendants have all filed motions to dismiss Prima’s

complaint. Enerplus and the Federal Defendants argue this Court lacks subject matter jurisdiction
because there are appeals pending before the BIA, and thus Prima has failed to exhaust its
administrative remedies. See Docket Nos. 15 and 30. On the other hand, PetroShale’s motion to
dismiss attacks Prima’s standing. PetroShale argues that, based on the chain of title, Prima never
acquired an interest in the disputed lease, Prima has no standing to sue, and this Court lacks subject
matter jurisdiction. See Docket No. 19. Prima has filed a number of briefs in opposition to
dismissal. Prima acknowledges the doctrine of exhaustion ordinarily would apply to its case, but

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it contends various exceptions excuse it from pursuing administrative remedies. See Docket Nos.
27 and 34. Prima also disputes PetroShale’s assertions regarding title and argues that, in any case,
PetroShale’s arguments go to the merits of the matter and are inappropriate at this stage of the
litigation. See Docket No. 28. As discussed below, the Court concludes Prima must exhaust
administrative remedies before bringing suit in this Court.

A.

STANDARD OF REVIEW

Parties may assert a lack of subject matter jurisdiction by motion under Fed. R. Civ. P.
12(b)(1). This defense may be brought in two ways: by facial attack or by factual attack. Branson
Label, Inc. v. City of Branson, 793 F.3d 910, 914 (8th Cir. 2015). A facial attack simply asserts
the plaintiff has not plead a basis for subject matter jurisdiction. Branson Label, at 914. In a facial
attack, the Court must afford the non-moving party the benefit of the Rule 12(b)(6) safeguards,
and it may only consider the pleadings and “materials that are necessarily embraced by the
pleadings and exhibits attached to the complaint.” Carlsen v. Gamestop, Inc., 833 F.3d 903, 906
(8th Cir. 2016) (quoting Cox v. Mortg. Elec. Registration Sys., Inc., 685 F.3d 663, 668 (8th Cir.
2012)).

On the other hand, a factual attack asserts the actual existence of subject matter

jurisdiction is lacking “irrespective of the pleadings, and matters outside the pleadings, such as
testimony and affidavits, are considered.” Id. at 914-915 (quoting Menchaca v. Chrysler Credit
Corp., 613 F.2d 507, 511 (5th Cir. 1980)). The Court will treat these motions as facial attacks and
consider only the pleadings and materials embraced by the pleadings; the Court will not consider
testimony or other evidence.

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B.

PRIMA MUST EXHAUST ADMINISTRATIVE REMEDIES

Prima asserts the BIA and other Defendants have conspired to divest Prima of its interest
in the Disputed Leasehold. Prima’s conspiracy allegations are premised upon Prima’s assertion
that the BIA’s decision regarding the Disputed Leasehold is incorrect. In its words, “Prima brings
this lawsuit seeking a declaration that Prima’s interests in the lease have not been segregated or
terminated and for judgment in the amount of all damages caused by this wrongful conduct.” See
Docket No. 1, p. 3. Consequently, the issue of whether Prima’s lease was improperly terminated
must be addressed before Prima’s conspiracy claims can be decided.
Federal district courts have subject matter jurisdiction under 28 U.S.C. § 1331 to review,
pursuant to the Administrative Procedures Act (“APA”), decisions by the BIA. Runs After v.
United States, 766 F.2d 347, 351 (8th Cir. 1985) (citing Goodface v. Grassrope, 708 F.2d 335, 338
(8th Cir. 1983)). “Although the APA may not be used as an independent grant of subject matter
jurisdiction to review agency actions, the Supreme Court stated in Califano v. Sanders, 430 U.S.
99, 105 . . . (1997), that 28 U.S.C. § 1331 confers general jurisdiction on federal courts to review
agency actions ‘subject only to preclusion-of-review statutes.’” Fort Berthold Land and Livestock
Assoc. v. Anderson, 361 F. Supp. 2d 1045, 1049 (D.N.D. 2005). Under 25 C.F.R. § 2.6—the
regulation governing appeals from BIA decisions—judicial review of BIA decisions is precluded
unless the decisions is “final.” A BIA decision is not final if it may be appealed to a superior
authority within the Department of the Interior. Id.; see also Coosewoon v. Meridian Oil Co., 25
F.3d 920, 924 (10th Cir. 1994) (“Under Department of Interior regulations, if an agency decision
is subject to appeal within the agency, a party must appeal the decision to the highest authority
within the agency before judicial review is available.”).

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This Court has had prior occasion to explain the legal framework governing BIA appeals
and its history:
Since 1975, regulations governing challenges to decisions of the Bureau of Indian
Affairs have required an administrative appeal from most BIA decisions before
judicial review of such decisions can be obtained. See, e.g., 25 C.F.R. § 2.3(b)
(1988); 40 Fed.Reg. 20, 625–626 (1975). In 1989, the regulations requiring an
administrative appeal were revised without changing the appeal requirement. See
54 Fed.Reg. 6478, 7666 (1989). The provision requiring an appeal now appears at
25 C.F.R. § 2.6(a) (1992). These regulatory revisions also eliminated an
intermediate appeal to the Commissioner of Indian Affairs and provided for direct
review of BIA Area Director decisions by the Interior Board of Indian Appeals. See
54 Fed.Reg. 6478 (1989); compare 25 C.F.R. § 2.3(a) (1988) with id. § 2.4(e)
(1992). At the same time, the rules governing appeals to the IBIA were amended to
“ensure compatibility between those regulations and regulations of the Bureau of
Indian Affairs.” 54 Fed.Reg. 6483 (1989). In particular, one amendment reiterated
the need for an appeal to the IBIA before the decision could be reviewed judicially.
See id. at 6486; compare 43 C.F.R. § 4.314(a) (1991) with id. (1988).
Fort Berthold Land and Live Stock, 361 F. Supp. 2d at 1050 (citing Stock West Corp. v. Lujan,
982 F.2d 1389, 1393 (9th Cir. 1993)). In that same case, and in the context of BIA appeals, the
Court also explained the need for exhaustion of administrative remedies:
‘The doctrine of exhaustion of administrative remedies is one among related
doctrines—including abstention, finality, and ripeness—that govern the timing of
federal-court decisionmaking.’ McCarthy v. Madigan, 503 U.S. 140, 144 (1992). It
is well-established that ‘[w]here relief is available from an administrative agency,
the plaintiff is ordinarily required to pursue that avenue of redress before
proceeding to the courts; and until that recourse is exhausted, suit is premature and
must be dismissed.’ Reiter v. Cooper, 507 U.S. 258 (1993); see Harris v. P.A.M.
Transport, Inc., 339 F.3d 635, 638 (8th Cir. 2003) (requiring the same).
The exhaustion requirement serves four primary purposes. First, it
carries out the congressional purpose in granting authority to the
agency by discouraging the ‘frequent and deliberate flouting of
administrative processes [that] could . . . encourag[e] people to
ignore its procedures.’ Second, it protects agency autonomy by
allowing the agency the opportunity in the first instance to apply its
expertise, exercise whatever discretion it may have been granted,
and correct its own errors. Third, it aids judicial review by allowing
the parties and the agency to develop the facts of the case in the
administrative proceeding. Fourth, it promotes judicial economy by
avoiding needless repetition of administrative and judicial
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factfinding, and by perhaps avoiding the necessity of any judicial
involvement at all, if the parties successfully vindicate their claims
before the agency. Bisson, 646 F.Supp. at 706; see also McKart v.
United States, 395 U.S. 185 (1969). Without an exhaustion
requirement, people would be encouraged to ignore the
administrative dispute resolution structure, destroying its utility.
Andrade v. Lauer, 729 F.2d 1475, 1484.
Peters v. Union Pacific R. Co., 80 F.3d 257, 263 (8th Cir.1996). ‘As a general rule,
judicial interference should be withheld until the administrative process has run its
course.’ Burlington Northern, Inc. v. Chicago and North Western Transp. Co., 649
F.2d 556, 558–59 (8th Cir.1981) (citing Myers v. Bethlehem Shipbuilding Corp.,
303 U.S. 41, 50–51 (1938)). Specifically, the Eighth Circuit has cautioned ‘that
declaratory actions should not be used to circumvent administrative procedures.’
Id. at 559 (citing Weinberger v. Bentex Pharmaceuticals, Inc., 412 U.S. 645, 652–
53 (1973); FPC v. Louisiana Power & Light Co., 406 U.S. 621, 647 (1972);
Whitney National Bank v. Bank of New Orleans & Trust Co., 379 U.S. 411, 421
(1965)).
Fort Berthold Land and Live Stock, at 1050-1051 (alteration in original) (portions of citations
omitted).
Prima argues that, while litigants must ordinarily exhaust administrative remedies, it should
be excused from doing so. See Docket No. 27, p. 14 and Docket No. 34, p. 2. It asserts the
exceptions discussed in McCarthy v. Madigan and Ace Property and Casualty Insurance Company
v. Federal Crop Insurance Corporation apply to its case. Those courts explained the general
exhaustion requirement may not apply if exhaustion would cause irreparable harm, it would be
futile, or the issues presented are primarily legal rather than factual. See McCarthy, at 147-48;
Ace Property, at 1000. Prima asserts the delay of its original administrative appeal, which it claims
has been pending for more than four years, has caused it undue prejudice. See Docket No. 27, p.
17. It also argues the BIA cannot grant the injunctive relief it now seeks, the BIA has ignored
applicable federal regulations, and the BIA has demonstrated bias against Prima. See Docket No.
27, pp. 18-20 and Docket No. 34, pp. 2-11. For these reasons, Prima asserts its failure to exhaust
administrative remedies is excusable.
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The Court disagrees. The exhaustion requirement should “be relaxed only under extremely
exceptional and unusual circumstances.” Fort Berthold Land and Livestock, 361 F. Supp. 2d at
1051 (quoting Glover v. United States, 286 F.2d 84, 90 (8th Cir. 1961)). This Court has required
exhaustion even when delays on the part of the BIA were “unreasonable” and “unwarranted.” Id.
at 1052 (“Neither the equities nor the law appear to favor the BIA in this prolonged dispute . . . .
Nevertheless, the Court must await a final decision by the Regional Director.”). Rather than
bringing suit in this Court, Prima should have availed itself to administrative safe guards. For
example, 25 C.F.R. § 2.8 provides a mechanism for challenging BIA inaction. Under that
procedure, a party whose interests are adversely affected “by the failure of an official to act on a
request to the official, can make the official’s inaction the subject of appeal.” If no action is taken
after the inaction appeals process, the agency’s inaction becomes final for purposes of judicial
review.

See Coosewoon, 25 F.3d at 925.

Prima’s decision to forego pursuing available

administrative remedies is a bar to this suit. When an administrative remedy is available, that
recourse must be pursued, “and until that recourse is exhausted, suit is premature and must be
dismissed.” Reiter, 507 U.S. at 269.

III.

CONCLUSION
The Court has carefully reviewed the entire record, the parties’ filings, and the relevant

law. For the reasons set forth above, the Court orders dismissal without prejudice. Enerplus and
the Federal Defendants’ motions to dismiss are GRANTED (Docket Nos. 12 and 29). Prima’s
motion for preliminary injunction is DENIED (Docket No. 38). Enerplus’s motion for stay
(Docket No. 16), Petorshale’s motion to dismiss (Docket No. 18), the Federal Defendant’s motion

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to stay briefing (Docket No. 38), Enerplus’s motion for enlargement of time to respond (Docket
No. 40), and Prima’s motion for an expedited hearing (Docket No. 45) are all DENIED.
IT IS SO ORDERED
Dated this 1st day of October, 2018.
/s/ Daniel L. Hovland
Daniel L. Hovland, Chief Judge
United States District Court

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