AgriBank, FCB v. Laufenberg, Jerome et al

Filing 26

OPINION & ORDER granting 6 Motion to Dismiss for Lack of Jurisdiction. Signed by District Judge James D. Peterson on 2/3/2017. (kwf)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN

AGRIBANK, FCB,
Plaintiff,
v.

OPINION & ORDER

JEROME J. LAUFENBERG, HOPE LAUFENBERG,
WILLIAM SCHINDLER, THOMAS SCHINDLER, and
KAREN SCHINDLER,

16-cv-659-jdp

Defendants.
Plaintiff AgriBank, FCB, owns a one-half mineral interest in land owned by
defendants Jerome J. Laufenberg, Hope Laufenberg, William Schindler, Thomas Schindler,
and Karen Schindler. In September, AgriBank filed suit against defendants in this court,
seeking a declaratory judgment that silica sand is a “mineral” under Wisconsin law.
Defendants have moved to dismiss AgriBank’s amended complaint, contending that the court
lacks subject matter jurisdiction because there is no actual controversy between the parties
and that, in the alternative, the court should abstain from hearing the case because of parallel
state court litigation. Dkt. 6. Because the controversy between the parties is not sufficiently
real and immediate to warrant issuance of a declaratory judgment, the court will grant
defendants’ motion and dismiss the case for lack of subject matter jurisdiction.

ALLEGATIONS OF FACT
The court draws the following facts from the parties’ evidentiary submissions and the
allegations in AgriBank’s amended complaint. Dkt. 22. William Schindler owns a parcel of
land in Chippewa County, Wisconsin. Thomas and Karen Schindler own another parcel of

land in Chippewa County. Jerome and Hope Laufenberg own a parcel of land in Clark
County. Each of these properties is subject to a reservation of rights in “oil, gas, and other
minerals” in favor of AgriBank. Dkt. 22-1, at 2; Dkt. 22-2, at 2; Dkt. 22-3, at 2.
In April 2015, the Schindlers’ counsel, Mitchell Olson, sent AgriBank a letter
explaining that the Schindlers want to sell silica sand, or “frac sand,” mined from their
properties, that they believe silica sand is not a “mineral” subject to the mineral rights
reservation, and that they wish to make a lump-sum payment to AgriBank in exchange for
the release of its mineral rights in the Schindlers’ properties. Olson warned that “if AgriBank
refuses to compromise this dispute and continues to assert an interest in the silica sand, then
the Schindlers will proceed to file a lawsuit in Chippewa County Circuit Court seeking a
declaratory judgment construing the parties’ interests under the reservation of mineral
rights.” Dkt. 10-1, at 7. Agribank responded in May 2015, indicating that it believes silica
sand is a mineral subject to the mineral rights reservation, expressing its willingness to make a
lump-sum payment in exchange for the release of its mineral rights, and requesting additional
information from the Schindlers to assess the value of the silica sand on the Schindlers’
property “to arrive at a fair market price” for the release. Dkt. 10-2, at 3. Neither Olson nor
the Schindlers ever responded—the next action taken by either party on this issue was
AgriBank’s filing of this lawsuit in September 2016.
As for the Laufenbergs, Olson sent, on their behalf, an almost identical letter to
AgriBank in April 2016. The letter offered a lump-sum payment to AgriBank in exchange for
the release of its mineral rights in properties owned by the Laufenbergs and non-parties Jerry
and Vicki Huber in Clark County. Again, Olson warned that “if AgriBank refuses to
compromise this dispute and continues to assert an interest in the silica sand, then they [the

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Laufenbergs and Hubers] are prepared to proceed to file an action seeking a declaratory
judgment construing the parties’ interest under the reservation of mineral rights.” Dkt. 10-3,
at 8. AgriBank responded a week later, again requesting additional information to assess the
value of the silica sand on the Laufenbergs’ and Hubers’ properties “to arrive at a fair market
price.” Dkt. 10-4, at 2. Olson responded in May 2016, declining to provide additional
information but offering a larger lump-sum payment. Olson included a stronger warning this
time: “If that is not acceptable, we will begin work on drafting a lawsuit for declaratory
judgment eliminating the mineral reservation rights on the property with respect to silica
sand. If we prevail on such action, we will certainly make that well-known throughout the
State of Wisconsin, and there will be public record of AgriBank’s lack of interest in such
materials.” Dkt. 10-5, at 2. AgriBank responded in June 2016 with a counteroffer based on
its own research regarding the value of the silica sand on the Laufenbergs’ and Hubers’
properties, as well as the “Larson Parcel,” land apparently owned by non-parties Richard and
Teresa Larson.
The Laufenbergs did not respond to AgriBank’s counteroffer, but the Hubers and
Larsons responded by filing suit in Clark County, seeking a declaratory judgment that sand is
not a mineral under Wisconsin law and a permanent injunction barring AgriBank from
asserting any rights to the sand extracted from their properties. See Huber v. AgriBank, FCB,
No. 16-cv-124 (Clark Cty. Cir. Ct. filed Aug. 30, 2016). The Laufenbergs refused to join as
parties in the Clark County suit.
On September 30, 2016, one month after the Hubers and Larsons filed the Clark
County suit, AgriBank filed suit in this court seeking a declaratory judgment that sand is a
mineral under Wisconsin law. Dkt. 1. AgriBank later amended its complaint to clarify that it

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seeks a declaratory judgment that silica sand is a mineral under Wisconsin law. Dkt. 22.
AgriBank alleges that the court has subject matter jurisdiction over the suit under 28 U.S.C.
§ 1332, because the parties are completely diverse and the amount in controversy—the value
of the sand in question—exceeds $75,000.

ANALYSIS
On defendants’ motion to dismiss for lack of subject matter jurisdiction, the court
accepts AgriBank’s well-pleaded factual allegations as true and draws all reasonable inferences
from those facts in its favor. Lee v. City of Chicago, 330 F.3d 456, 468 (7th Cir. 2003). But
AgriBank, as plaintiff, bears the burden of establishing jurisdiction under Article III. Id.
Where, as here, subject matter jurisdiction “is challenged as a factual matter, the plaintiff
must come forward with ‘competent proof’—that is a showing by a preponderance of the
evidence—that” the court has subject-matter jurisdiction. Id. Thus, the court will consider not
only the complaint, but the supporting evidence adduced by the parties.
Article III of the Constitution limits federal courts’ jurisdiction to cases and
controversies.

Declaratory

judgment

actions

meet

Article

III’s

case-or-controversy

requirement when “the facts alleged, under all the circumstances, show that there is a
substantial controversy, between parties having adverse legal interests, of sufficient
immediacy and reality to warrant the issuance of a declaratory judgment.” MedImmune, Inc. v.
Genentech, Inc., 549 U.S. 118, 127 (2007) (quoting Md. Cas. Co. v. Pac. Coal & Oil Co., 312
U.S. 270, 273 (1941)). The issue in this case is whether the controversy is sufficiently
immediate, that is, whether it is ripe for resolution by the court. The ripeness doctrine
“hinges on ‘the fitness of the issues for judicial decision and the hardship to the parties of

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withholding court consideration.” Rock Energy Co-op. v. Village of Rockton, 614 F.3d 745, 749
(7th Cir. 2010) (quoting Abbott Labs. v. Gardner, 387 U.S. 136, 149 (1967)). It bars the
assertion of speculative injuries that “depend on so many future events that a judicial opinion
would be advice about remote contingencies.” Meridian Sec. Ins. Co. v. Sadowski, 441 F.3d 536,
538 (7th Cir. 2006). There is no precise test to determine whether a controversy is ripe for
review; instead, the court must apply general principles to the facts at hand. See Rock Energy,
614 F.3d at 748.
Applying these principles, the court concludes that it does not have subject matter
jurisdiction over AgriBank’s declaratory judgment action. There is a substantial controversy
as to whether silica sand is a mineral in which AgriBank retains an interest, and the parties
here have adverse legal interests: each party intends to lay claim to any profits derived from
mining silica sand on the properties otherwise owned by defendants. But AgriBank has not
met its burden of showing that determination of this controversy is ripe for adjudication.
AgriBank contends that defendants’ threats of suit create a real and immediate
controversy. But the threat of litigation alone is not enough. Hyatt Int’l Corp. v. Coco, 302
F.3d 707, 712 (7th Cir. 2002). That is especially true here, where the threatened suit is only
a declaratory judgment action, not an affirmative suit alleging wrongdoing and liability. And
the fact that defendants did not immediately file suit after threatening to do so further
underscores the fact that the threat of litigation is not imminent.
It is only when the threat of litigation impedes the plaintiff’s ability to conduct its
business, such that the plaintiff legitimately needs a declaration of rights “to go forward with
the project in question,” that the controversy becomes sufficiently immediate. Id. at 711.
AgriBank, as plaintiff, must show “how a decision on its declaratory judgment complaint

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would resolve some present hardship.” Rock Energy, 614 F.3d at 749. It must present evidence
that the current situation has “a present concrete, adverse, and irremediable effect on [its]
day-to-day affairs.” Id. The sole evidence AgriBank adduces on this point is the declaration of
its director of minerals management and collateral services, Julia Johnson, which states that
“AgriBank desires to market its mineral interests in the silica sand on the Laufenberg and
Schindler Properties” but is unable to do so “as long as its interests are subject to dispute
with the Laufenbergs and Schindlers.” Dkt. 12, at ¶¶ 5-6. But AgriBank adduces no evidence
that it has attempted to market its interests, taken any concrete steps to sell its interests, or
found a specific opportunity for sale. A declaration that AgriBank suddenly desires to market
its mineral interests after decades of inaction does not prove a present hardship by a
preponderance of the evidence. Its injury is, at this point, merely hypothetical.
AgriBank’s ability to assert its arguments as the defendant in the Huber suit also
speaks to the lack of hardship of withholding court consideration. In Rock Energy, the Seventh
Circuit noted that if the defendant, the Village of Rockton, were to initiate a state-court
proceeding, Rock Energy could assert the same arguments there, and the federal court would
be unlikely to interfere with the state-court proceeding due to the prohibitions of the AntiInjunction Act and abstention doctrines such as Younger. 614 F.3d at 749 (citing Younger v.
Harris, 401 U.S. 37 (1971)). Just as in Rock Energy, the declaratory judgment action here is
not ripe for review.
Here, as AgriBank concedes, there is a parallel state-court declaratory judgment action
(the Huber suit) filed against AgriBank by parties with nearly identical interests to defendants
in this case. The sole issue presented in this case is identical to the issue presented in Huber.
AgriBank can assert the same arguments it makes here in Huber. And even if this court had

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subject-matter jurisdiction over AgriBank’s suit, it would stay this case under the Colorado
River abstention doctrine. See Colo. River Water Conservation Dist. v. United States, 424 U.S.
800 (1976). Under that doctrine, a federal court may, in exceptional circumstances, stay a
suit in favor of a parallel state-court proceeding to promote “wise judicial administration.”
Clark v. Lacy, 376 F.3d 682, 685 (7th Cir. 2004) (quoting Colorado River, 424 U.S. at 818).
Several factors indicate that this case presents exceptional circumstances in which abstention
is warranted: Wisconsin law governs both cases; Huber was filed first and has progressed
further; the Wisconsin court has jurisdiction over Huber and would have jurisdiction over the
claims in this case, had it been filed in state court; allowing both actions to proceed
simultaneously would result in duplicative litigation and the risk of inconsistent results; and
AgriBank’s rights will be adequately protected by the Wisconsin court. See id. at 687-88. And
given the more advanced Wisconsin state-court action, it seems likely that the only reason
AgriBank filed the federal suit is an attempt at forum shopping. See Caminiti & Iatarola, Ltd.
v. Behnke Warehousing, Inc., 962 F.2d 698, 703 & n.7 (7th Cir. 1992).
AgriBank has not shown that it has a present hardship or immediate controversy.
Given AgriBank’s ability to assert its rights, claims, and defenses in Huber and the likelihood
of abstention, assertion of subject-matter jurisdiction over AgriBank’s claim in this court
would not resolve the controversy any more quickly than the Wisconsin state court may
resolve it. Because AgriBank’s injury is not yet ripe, the court will grant defendants’ motion
and dismiss the case.

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ORDER
IT IS ORDERED that:
1. Defendants Jerome J. Laufenberg, Hope Laufenberg, William Schindler, Thomas
Schindler, and Karen Schindler’s motion to dismiss, Dkt. 6, is GRANTED.
2. This case is dismissed, without prejudice, for lack of subject matter jurisdiction.
3. The clerk of court is directed to close this case.
Entered February 3, 2017.
BY THE COURT:
/s/
________________________________________
JAMES D. PETERSON
District Judge

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