Devon Energy Prod. Co. v. Grayson Mill Operating, LLC

• Decision Date: 27 February 2020
• Docket Number: S-19-0170
• Citation: 458 P.3d 1201
• Parties: DEVON ENERGY PRODUCTION COMPANY, LP, Appellant (Plaintiff), v. GRAYSON MILL OPERATING, LLC, Appellee (Defendant).
• Court: Wyoming Supreme Court

458 P.3d 1201

DEVON ENERGY PRODUCTION COMPANY, LP, Appellant (Plaintiff),

v.GRAYSON MILL OPERATING, LLC, Appellee (Defendant).

S-19-0170

Supreme Court of Wyoming.

February 27, 2020

Representing Appellant: Jeffery J. Oven, Crowley Fleck, PLLP, Billings, Montana; Timothy M. Stubson, Crowley Fleck, PLLP, Casper, Wyoming. Argument by Mr. Oven.

Representing Appellee: Lori Dawkins, Melissa J. Lyon, Steptoe & Johnson PLLC, Denver, Colorado. Argument by Ms. Dawkins.

Before DAVIS, C.J., and FOX, KAUTZ, GRAY, JJ, and SHARPE, DJ.

SHARPE, District Judge.

[¶1] This case concerns a "race to permit" dispute between Plaintiff Devon Energy Production Company, L.P. ("Devon") and Defendant Grayson Mill Operating, LLC, ("Grayson").¹ Both parties hold mineral interests in certain drilling and spacing units and both want to be the "operator" of those units. Grayson won the race to permit and ultimately obtained operator status over the lands in question. Devon subsequently filed a complaint against Grayson, claiming Grayson illegally trespassed on the lands to obtain data to include in its applications for permits to drill. Devon claims Grayson’s actions violated Wyo. Stat. Ann. § 40-27-101 (LexisNexis 2019), which prohibits a party from trespassing on private lands to unlawfully collect resource data. The district court granted Grayson’s motion to dismiss the complaint for lack of subject matter jurisdiction, finding the Wyoming Oil and Gas Conservation Commission ("Commission") had primary jurisdiction to resolve the dispute and Devon failed to exhaust its administrative remedies with the Commission. On appeal, Devon argues the district court, and not the Commission, is the proper forum to resolve the trespass claim. We agree with Devon and reverse and remand for further proceedings.

ISSUES

[¶2] We frame the issues on appeal as follows:

1. Does Devon have standing to sue Grayson?

2. Did the district court abuse its discretion in granting Grayson’s motion to dismiss for lack of subject matter jurisdiction for failing to exhaust administrative remedies?

3. Did the district court abuse its discretion in granting Grayson’s motion to dismiss for lack of subject matter jurisdiction under the primary jurisdiction doctrine?

FACTS

[¶3] Devon is a foreign limited partnership in good standing in the State of Wyoming and is a wholly-owned subsidiary of Devon Energy Corporation. Grayson is a Wyoming limited liability company. On February 15, 2019, Devon filed a complaint against Grayson for trespass as defined in § 40-27-101, declaratory judgment, and injunctive relief. Several days later, Devon filed applications to deny or revoke Grayson’s Applications for Permits to Drill ("APDs") with the Commission. Devon asked the Commission to stay that action pending resolution of its trespass action in the district court.

[¶4] Devon claims Grayson trespassed on private lands to collect land use data on several proposed oil wells and used that data in the administrative proceedings before the Commission. Devon further claims Grayson’s actions were done in the race to permit several oil wells and become the operator of record within several oil and gas spacing units. Devon asked the district court to prevent Grayson from developing the lands, expunge the data Grayson collected from all public files, and award economic and consequential damages.

[¶5] Devon filed the complaint with the hope of becoming the operator of the lands in which it claims to have a working interest. Devon has an interest in being the operator because it owns a working interest in some of the mineral rights to three (3) separate Drilling and Spacing Units ("DSUs") in Township 39 North, Range 71 West, Converse County, Wyoming: Sections 25 & 36; Sections 26 & 35; and Sections 27 & 34 ("the lands" or "subject lands"). Devon claims it complied with all laws and regulations regarding access to the lands within the DSUs and properly filed several APDs with the Commission. Grayson also holds a working interest in some of the mineral rights to the same DSUs and wanted to be the operator for the subject lands. When multiple entities hold working interests in a DSU, the first to obtain a permit to drill becomes the operator for that unit.

[¶6] Ultimately, Grayson won the race to permit and became the operator of the lands. To become operator of the lands within the DSUs, Grayson applied for forty-eight (48) APDs. As a part of the applications, Grayson represented to the Commission that it had a current working interest within the DSUs, the well locations and survey data were lawfully obtained, and the lands were not protected by Wyoming’s Split Estate Act, Wyo. Stat. Ann. § 30-5-402(a) (LexisNexis 2019). Devon believes these representations were false and/or included illegally obtained information. Relevant to this decision, Devon asserts Grayson unlawfully obtained the data it submitted in its APDs. Devon claims Grayson’s misrepresentations to the Commission resulted in Devon’s loss of operator status in the DSUs, loss of the orderly and legal development of the DSUs, and costs and fees.

Procedural Background

[¶7] In response to the complaint, Grayson filed a motion to dismiss on March 7, 2019. Grayson asked the district court to dismiss Devon’s complaint under Wyoming Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction because Devon failed to exhaust its administrative remedies through the Commission and under Rule 12(b)(6) for failing to state a claim upon which relief may be granted. Regarding Grayson’s jurisdictional arguments, it claimed the doctrine of primary jurisdiction required the district court to dismiss the complaint because the Commission was the proper forum for Devon’s claims. Grayson also argued Devon failed to exhaust its administrative remedies under the Commission’s rules. As for Grayson’s Rule 12(b)(6) arguments, it claimed surveying does not violate § 40-27-101, Devon lacks standing to bring a claim under § 40-27-101 and to seek a declaratory judgment, and Devon is not entitled to injunctive relief. Devon filed a response on March 28, 2019. Devon argued, in part, that the Commission lacked jurisdiction to consider the trespass claim and the complaint was properly before the district court.

[¶8] On July 1, 2019, the district court granted Grayson’s motion to dismiss for lack of subject matter jurisdiction. The district court did not address Grayson’s arguments under Rule 12(b)(6). The district court first found Devon failed to exhaust its administrative remedies. The district court stated:

The Court finds that the [Commission] has the authority to determine the validity of the permits and whether or not to revoke or deny the permits at issue in this case. Further, the Plaintiff is asking the [Commission] to expunge the records in the commission relative to the applications to drill granted to the Defendant. Therefore, the Court finds that the Plaintiff is asking this Court to substitute its judgment for that of the agency on issues pertaining to the administration of the subject matter for which the [Commission] was created.

Next, the district court declined to exercise its jurisdiction because it found the Commission had primary jurisdiction over Devon’s claims. The district court stated:

The Court finds that while the District Court does have jurisdiction over Wyo. Stat. Ann. § 40-27-101 and declaratory judgments, there are genuine issues of material fact and a threshold determination that would be better made by an agency with expertise. ... The Plaintiff is not asking the Court to determine the validity or construction of agency regulations nor the constitutionality or interpretation of a statute upon which the administrative action was based. Thus, the Court finds that the Commission has primary jurisdiction in this matter.

Devon timely filed a notice of appeal on July 17, 2019.

[¶9] Prior to oral arguments, Devon supplemented the record with a notice of additional authority which contained the Commission’s November 19, 2019 order dismissing Devon’s Applications to Deny or Revoke Applications for Permit to Drill filed by Grayson. The Commission dismissed Devon’s claims because it found it lacked jurisdiction to consider a civil trespass under § 40-27-101.

STANDARD OF REVIEW

[¶10] We review the dismissal of an action under Rule 12(b)(1) de novo because subject matter jurisdiction is a question of law. Hall v. Park Cty. , 2010 WY 124, ¶ 3, 238 P.3d 580, 581 (Wyo. 2010). "If the district court lacked subject matter jurisdiction, this Court has jurisdiction on appeal, not on the merits, but only as to the jurisdictional issue." Id. We have said:

When reviewing the dismissal of an action under W.R.C.P. 12(b)(1) for lack of subject matter jurisdiction, we accept the allegations of the complaint as true and we consider the facts in the light most favorable to the non-movant. We note also that in ruling on a W.R.C.P. 12(b)(1) motion to dismiss for lack of subject matter jurisdiction, materials outside the complaint, such as affidavits and other documents, may be considered.

Apodaca v. Safeway, Inc. , 2015 WY 51, ¶ 9, 346 P.3d 21, 23 (Wyo. 2015) (citations omitted).

[¶11] As we have explained, "[s]ubject matter jurisdiction is ‘the power to hear and determine cases of the general class to which the proceedings in question belong.’ " Weller v. Weller , 960 P.2d 493, 495 (Wyo. 1998) (citation omitted). Subject matter jurisdiction "either exists or it does not, and a court should be satisfied that it possesses subject matter jurisdiction before it makes a decision in a case." Id. "Subject matter jurisdiction is not a subject of judicial discretion." Id. If the district court lacks subject matter jurisdiction, then "action taken by that court, other than dismissing the case, is considered to be null and void." Id. at 496.

[¶12] However, when the district court grants a motion to dismiss for failing to exhaust its administrative remedies or under the primary jurisdiction...