Coosewoon v. Meridian Oil Co.

• Decision Date: 25 May 1994
• Docket Number: No. 93-6011,93-6011
• Citation: 25 F.3d 920
• Parties: Kenneth COOSEWOON; Loraine Mathews; Sherrill James Chasenah; Guy Ware; Trina Ware Stumblingbear; Vivan Ware; Pressley Ware; Cecilia McFarland; Marcie Davilla, Plaintiffs-Appellants, v. MERIDIAN OIL COMPANY, a Delaware corporation; United States of America, Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 920

25 F.3d 920

Kenneth COOSEWOON; Loraine Mathews; Sherrill James

Chasenah; Guy Ware; Trina Ware Stumblingbear;

Vivan Ware; Pressley Ware; Cecilia

McFarland; Marcie Davilla, Plaintiffs-Appellants, v. MERIDIAN OIL COMPANY, a Delaware corporation; United States

of America, Defendants-Appellees.

No. 93-6011.

United States Court of Appeals, Tenth Circuit.

May 25, 1994.

Jeffrey P. Southwick, Oklahoma City, OK, for plaintiffs-appellants.

Fred M. Buxton (J. Kevin Hayes and Margaret A. Swimmer with him on the brief), of Hall, Estill, Hardwick, Gable, Golden and Nelson, Tulsa, OK, for Meridian Oil.

Joan Pepin, Dept. of Justice (Myles E. Flint, Acting Asst. Atty. Gen., Joe Heaton, U.S. Atty., M. Kent Anderson, Asst. U.S. Atty., Oklahoma City, OK, David C. Shilton and Katherine L. Adams, Dept. of Justice, Environmental and Natural Resources Div., Howard Chalker and Beverly Ohline, Dept. of Interior, on the brief), for U.S.

Before ANDERSON and BALDOCK, Circuit Judges, and KANE, District Judge. ^*

BALDOCK, Circuit Judge.

Plaintiffs appeal the district court's Fed.R.Civ.P. 12(b)(6) dismissal of some of the claims and grant of summary judgment as to the remaining claims in their complaint. We have jurisdiction under 28 U.S.C. Sec. 1291.

In 1977, Plaintiffs' predecessors in interest executed two oil and gas leases with Kirby Exploration Company ("lessee") on restricted Indian land in Caddo County, Oklahoma, reserving the right to receive a twenty percent royalty of proceeds derived from oil and gas production under the lease. Following the execution of the leases, the Oklahoma Corporation Commission proposed to include Plaintiffs' lease within a communitized unit, ¹ and in March 1982, the Secretary of the Interior gave the required departmental approval of the communitization plan, see 25 C.F.R. Secs. 1.4(b), 212.24(c) (requiring Secretary's approval of such plans). A gas well ("Iams well") was then drilled on the unit and completed in July 1983.

In 1985, the lessee designated Defendant Meridian Oil Company as the operator of the Iams well. The operating agreement required Meridian to act on the lessee's behalf in complying with the terms of the lease and applicable regulations. From 1982 before the time Meridian operated the well, to 1988, Plaintiffs did not receive royalty payments for gas produced under their lease. At some point thereafter, Plaintiffs notified the Minerals Management Service ("MMS"), a government agency, of the nonpayment. MMS subsequently conducted two audits of Plaintiffs' leases which resulted in collection on Plaintiffs behalf of approximately $96,000 in royalties and interest due for the years 1982-88. Despite the MMS audits, Plaintiffs continued to have problems collecting royalty payments from Meridian for the years 1989 to 1991. Instead of seeking another audit from MMS, Plaintiffs filed the instant action on May 21, 1992 against the United States and Meridian, alleging ten causes of action. ² In their complaint, Plaintiffs sought, inter alia, an order requiring the United States to institute lease cancellation proceedings and damages for Meridian's failure to timely pay royalties under the lease. Defendants filed motions for dismissal and summary judgment which the district court granted. This appeal followed.

I.

Plaintiffs contend the district court erred in dismissing several counts of their complaint pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim. We review the sufficiency of a complaint de novo and will uphold a dismissal of a complaint only when it appears that the plaintiff can prove no set of facts in support of the claims that would entitle him to relief. TV Communications Network v. Turner Network, 964 F.2d 1022, 1024 (10th Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 601, 121 L.Ed.2d 537 (1992). We must accept all the well-pleaded allegations of the complaint as true and must construe them in the light most favorable to the plaintiff. Williams v. Meese, 926 F.2d 994, 997 (10th Cir.1991).

A.

Plaintiffs first argue the district court erred in dismissing Count I of the complaint, which sought an order requiring the United States to cancel their oil and gas lease. The district court dismissed this count without prejudice for failure to exhaust administrative remedies.

Department of Interior regulations provide:

A lease will be cancelled by the Secretary of the Interior for good cause upon application of the lessor or lessee, or if at any time the Secretary is satisfied that the provisions of the lease or of any regulations heretofore or hereafter prescribed have been violated.

25 C.F.R. Sec. 212.23(a) (emphasis added). Plaintiffs concede they have failed to apply to the Secretary for lease cancellation. However, Plaintiffs argue that such an application was not required because they are seeking lease cancellation under the second clause of Sec. 212.23(a). Under this provision, Plaintiffs contend that the district court may determine whether the Secretary "is satisfied" the lease has been violated, and if so, may order lease cancellation even though no application was filed. We disagree.

Under the doctrine of exhaustion of administrative remedies, "no one is entitled to judicial relief for a supposed or threatened injury until the prescribed administrative remedy has been exhausted." McKart v. United States, 395 U.S. 185, 193, 89 S.Ct. 1657, 1662, 23 L.Ed.2d 194 (1969) (quoting Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 50-51, 58 S.Ct. 459, 463-464, 82 L.Ed. 638 (1938)). A party must exhaust administrative remedies when a statute or agency rule dictates that exhaustion is required. See White Mountain Apache Tribe v. Hodel, 840 F.2d 675, 677 (9th Cir.1988). 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. See 25 C.F.R. Sec. 2.6(a); ³ see also Western Shoshone Business Council v. Babbitt, 1 F.3d 1052, 1055 (10th Cir.1993) (administrative exhaustion completed under Sec. 2.6(a) when party appeals to highest authority within agency).

Consistent with the exhaustion requirement, the Secretary has instituted an administrative procedure by which a party may challenge the Secretary's inaction concerning a particular issue. Under this procedure, a party may request that the Secretary take action on a particular matter, see 25 C.F.R. Sec. 2.8(a), and the Secretary must respond within ten days of receipt of the request by either issuing a decision on the merits of the request or establishing a later date by which a decision shall be made, see id. Sec. 2.8(b). If no decision is rendered, the Secretary's inaction becomes final for purposes of judicial review because the Secretary is the highest authority within the agency. See id. Sec. 2.8(b); see also 25 C.F.R. Sec. 2.6(a).

In the instant case, Plaintiffs' claim there is evidence that the Secretary is satisfied that Meridian as lessee violated the lease. Consequently, Plaintiffs argue the court should order cancellation of the lease because the Secretary has failed to do so. Plaintiffs' complaint is with the Secretary's failure to act to cancel the lease. The Department of Interior has provided Plaintiffs with an administrative remedy concerning this inaction regarding lease cancellation; as a result, we hold Plaintiffs must exhaust this remedy before seeking judicial review. See 25 C.F.R. Sec. 2.6(a). Thus, the district court properly dismissed Plaintiffs' lease cancellation claim for failure to exhaust.

B.

Plaintiffs next argue the district court erred in dismissing Count II of their complaint seeking lease forfeiture pursuant to 30 U.S.C. Sec. 188. Section 188 is part of the Mineral Lands Leasing Act of 1920, 30 U.S.C. Secs. 181-194, which provides for the lease of lands owned by the United States for purposes of mineral development, see 30 U.S.C. Sec. 181. Section 188 is applicable only to leases issued pursuant to the Act. 30 U.S.C. Sec. 188. In the instant case, the leases in question were not issued pursuant to the Mineral Lands Leasing Act nor do they cover lands owned by the United States. Thus, Sec. 188 is inapplicable to Plaintiffs' claim for lease forfeiture, and the district court did not err in dismissing Count II of Plaintiffs' complaint. ⁴

C.

Plaintiffs next contend the district court erred in dismissing Count V of their complaint which alleged Meridian committed negligence per se through its alleged violation of 18 U.S.C. Sec. 1160. The district court dismissed Plaintiffs' claim because "none of Plaintiffs' claims sound in negligence."

The central feature of a negligence per se claim is a statute or ordinance which prevents a party from engaging in certain conduct. See, e.g., Ohio Casualty Ins. Co. v. Todd, 813 P.2d 508, 510 (Okla.1991) (negligence per se claim predicated on statute which prevented sale of alcohol to intoxicated persons); Hampton v. Hammons, 743 P.2d 1053, 1055 (Okla.1987) (negligence per se claim predicated on statute preventing possession of vicious animals within city limits); Boyles v. Oklahoma Natural Gas Co., 619 P.2d 613, 618 n. 14 (Okla.1980) (in negligence per se action, statute in question prevented gas companies from turning on a gas system unless open-fitted valves were closed). When a party engages in the statute's proscribed conduct, the violation constitutes negligence per se if (1) a party is injured by the statutory violation, (2) the injury was of the type intended to be prevented by the statute, and (3) the injured party was one of the class meant to be protected by the statute. See Ohio Casualty, 813 P.2d at 510.

18 U.S.C. Sec. 1160 provides:

Whenever a white person, in the commission of an offense within the Indian country takes, injures or destroys the property of any friendly Indian the judgment of conviction shall include a sentence that the defendant pay to the Indian...