Elna Sefcovic, LLC v. Tep Rocky Mountain, LLC, 031820 FED10, 19-1121

Docket Nº:19-1121
Opinion Judge:MCHUGH, CIRCUIT JUDGE.
Party Name:ELNA SEFCOVIC, LLC; WHITE RIVER ROYALTIES, LLC; JUHAN, LP; ROY ROYALTY, INC., individually and on behalf of all others similarly situated, Plaintiffs - Appellees, v. TEP ROCKY MOUNTAIN, LLC, Defendant-Appellee. CHARLES DEAN GONZALES; SUSANNAH GONZALES; TED L. VAUGHAN; HILDA VAUGHAN, Objectors, IVO LINDAUER; SIDNEY LINDAUER; RUTH LINDAUER; DIAMO...
Attorney:David G. Seely, Fleeson, Gooing, Coulson & Kitch, L.L.C., Wichita, Kansas (Thomas D. Kitch, Gregory J. Stucky, Ryan K. Meyer, Fleeson, Gooing, Coulson & Kitch, L.L.C., Wichita, Kansas; George Robert Miller, G. R. Miller, P.C., Durango, Colorado; and Nathan A. Keever, Dufford, Waldeck, Milburn & K...
Judge Panel:Before PHILLIPS, McHUGH, and MORITZ, Circuit Judges.
Case Date:March 18, 2020
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit
 
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ELNA SEFCOVIC, LLC; WHITE RIVER ROYALTIES, LLC; JUHAN, LP; ROY ROYALTY, INC., individually and on behalf of all others similarly situated, Plaintiffs - Appellees,

v.

TEP ROCKY MOUNTAIN, LLC, Defendant-Appellee.

CHARLES DEAN GONZALES; SUSANNAH GONZALES; TED L. VAUGHAN; HILDA VAUGHAN, Objectors, IVO LINDAUER; SIDNEY LINDAUER; RUTH LINDAUER; DIAMOND MINERALS, Intervenors - Appellants,

and

THE LAW OFFICES OF GEORGE A. BARTON, PC, Movant - Appellee.

No. 19-1121

United States Court of Appeals, Tenth Circuit

March 18, 2020

Appeal from the United States District Court for the District of Colorado (D.C. No. 1:17-CV-01990-MEH)

David G. Seely, Fleeson, Gooing, Coulson & Kitch, L.L.C., Wichita, Kansas (Thomas D. Kitch, Gregory J. Stucky, Ryan K. Meyer, Fleeson, Gooing, Coulson & Kitch, L.L.C., Wichita, Kansas; George Robert Miller, G. R. Miller, P.C., Durango, Colorado; and Nathan A. Keever, Dufford, Waldeck, Milburn & Krohn, LLP, Grand Junction, Colorado, with him on the briefs) for Intervenors-Appellants.

Christopher A. Chrisman, Holland & Hart LLP, Denver, Colorado (John F. Shepherd, P.C., Holland & Hart LLP, Denver, Colorado; George A. Barton and Stacy A. Burrows, Law Offices of George A. Barton, P.C., Overland Park, Kansas, with him on the brief), for Appellees.

Before PHILLIPS, McHUGH, and MORITZ, Circuit Judges.

MCHUGH, CIRCUIT JUDGE.

This appeal arises out of a class action contract dispute. Appellants intervened in the district court, seeking to dismiss the action for lack of federal subject matter jurisdiction. Through two separate motions to dismiss, the briefing from both parties confused the bounds of federal subject matter jurisdiction and conflated that concept with the doctrines of abstention and comity, and with matters of venue and forum. Despite this misdirection, the district court properly exercised jurisdiction and rebuffed appellants' attempts to unwind nearly eighteen months of class action litigation. We affirm.

I. BACKGROUND

Appellee-defendant TEP Rocky Mountain, LLC ("TEP") operates wells that produce natural gas in Colorado. These wells are subject to various leases or royalty agreements under which the owners of such instruments receive a share of profits from the sale of natural gas.

Appellant-intervenors Ivo Lindauer, Sidney Lindauer, Ruther Lindauer, and Diamond Minerals LLC (the "Lindauers" or the "Intervenors"), are the representatives for a class of royalty owners who filed suit in 2006 in Colorado state court (the "Lindauer class" or "Lindauer litigation"), alleging that TEP had underpaid royalties on various leases and royalty agreements. In 2008, TEP and the Lindauer class entered into a settlement agreement (the "Lindauer SA") purporting to "resolve all class claims relating to past calculation of royalt[ies]" and to "establish certain rules to govern future royalty" payments. App. at 411.

The Lindauer SA declared that the state court would retain "continuing jurisdiction" to enforce provisions of the settlement related to "the description of past and future royalty methodologies." App. at 427-28. The state court also issued a judgment (the "stipulated judgment" or "consent decree") certifying the class and approving the Lindauer SA. This stipulated judgment concluded that the Lindauer SA was "fair, adequate and reasonable" and stated that the parties "shall take any and all steps necessary to implement the [Lindauer SA] according to its terms and the terms of [the stipulated judgment]." App. at 447, 448. Finally, the stipulated judgment included the following provision: Without affecting the finality of this Final Judgment in any way, this Court shall retain continuing jurisdiction of this action to address any issues concerning implementation of the Settlement Agreement and enforcing this Final Judgment.

App. at 449.

Approximately eight years passed, seemingly free of incident. But on July 18, 2017, a subset of the Lindauer class (the "Sefcovic class")1 initiated this action against TEP in Colorado state court, alleging that TEP had calculated and paid royalties in a manner inconsistent with the Lindauer SA and contrary to the underlying royalty agreements. TEP removed the case to federal court on August 17, 2017. The parties engaged in discovery and ultimately reached a proposed class settlement. One year later, on August 16, 2018, the district court[2] issued an order preliminarily approving the settlement and permitting the notice to be mailed to the Sefcovic class members.

Less than a month later, on September 14, 2018, the Lindauers filed a "Motion to Enforce Court Order and Settlement Agreement" in Garfield County District Court-the Colorado state court that had entered the stipulated judgment in the Lindauer litigation. That motion made no mention of the federal action alleging breaches of the Lindauer SA-initiated fourteen months prior and having reached preliminary approval of a class settlement agreement. The state court initially ordered TEP to show cause why it should not be held in contempt for breaching the terms of the Lindauer SA but subsequently stayed the proceedings to "await [the federal district court's] ruling on pending motions." App. at 1039-40.

On September 28, 2018, the Lindauers filed a motion to intervene in the federal district court proceeding. Before the district court ruled on the motion to intervene, the Lindauers filed a motion to dismiss, arguing the court lacked subject matter jurisdiction based on the stipulated judgment's clause retaining "continuing jurisdiction" in the state court. The district court then "dismissed [the action] without prejudice based on [its] independent assessment of subject matter jurisdiction" and largely because of the state court's retention of jurisdiction over the Lindauer SA. App. at 1052. It therefore dismissed the Lindauers' motion to intervene as moot and vacated the fairness hearing on the proposed Sefcovic SA. App. at 1052-53.

TEP filed a motion to reconsider, arguing the district court's jurisdiction was proper despite the state court's retention of jurisdiction. The Lindauers filed a renewed motion to intervene, which the district court granted, and a renewed motion to dismiss, arguing again that the district court lacked subject matter jurisdiction and/or should have abstained from presiding over the case under Younger or Colorado River abstention.

The district court granted TEP's motion to reconsider and reinstated the case on January 23, 2019. In doing so, the district court clarified that in its original order it believed "dismissal would be appropriate here under principles of comity and wise judicial administration . . . akin to the doctrine set forth in Colorado River." App. at 1084. The court explained that (1) courts are authorized to retain jurisdiction over settlement agreements, and (2) when a court has done so, and that jurisdiction is explicitly (or implicitly under the totality of circumstances) exclusive, then (3) the doctrine of comity permits a court, even in the presence of subject matter jurisdiction, to defer to the settlement court in cases requiring the interpretation and enforcement of the settlement agreement.

App. at 1086 (footnote omitted). But because this doctrine is non-jurisdictional and thus "not an absolute obligation," the district court determined that dismissal was inappropriate for a variety of reasons, including that Intervenors were aware of this litigation but opted to intervene only after preliminary approval of the settlement agreement. App. at 1086.

The district court subsequently approved the Sefcovic SA, 3 and Intervenors timely appealed the district court's determination that it possessed subject matter jurisdiction.

II. DISCUSSION

In seeking dismissal of this action below, Intervenors relied primarily on two similar provisions appearing in the Lindauer SA and the stipulated judgment adopted by the state court. Those provisions declare that the state court retains "continuing jurisdiction" to enforce the Lindauer SA and the stipulated judgment. Intervenors argued below, and they maintain on appeal, that those provisions vest "exclusive jurisdiction over the parties and subject matter" in the state court. Aplt. Br. at 17. Because many of their arguments rest in whole or in part on Intervenors' erroneous assertion that the district court was without subject matter jurisdiction, we begin with a discussion of subject matter jurisdiction. We then proceed to distinguish that concept from doctrines of abstention and matters of venue and forum, and conclude by applying these concepts to this appeal.

A. Subject Matter Jurisdiction

"Subject matter jurisdiction defines the court's authority to hear a given type of case." Carlsbad Tech., Inc. v. HIF Bio, Inc., 556 U.S. 635, 639 (2009) (quoting United States v. Morton, 467 U.S. 822, 828 (1984)). "Only Congress may determine a lower federal court's subject-matter jurisdiction." Kontrick v. Ryan, 540 U.S. 443, 452 (2004) (emphasis added) (citing U.S. Const. Art. III, § 1). Thus, the scope of a federal court's subject matter jurisdiction is governed exclusively by acts of Congress.4 And when Congress grants subject matter jurisdiction, no other entity- not the litigants and not the states-can divest a federal court of the same.5 See Marshall v. Marshall, 547 U.S. 293, 313 (2006) ("Jurisdiction is determined 'by the law of the court's creation and cannot be defeated by the extraterritorial operation of a [state] statute . . ., even though it created the right of action.'" (alterations in original) (quoting

Tenn. Coal, Iron, & R.R. Co. v. George, 233 U.S. 354, 360 (1914))); Ry. Co. v. Whitton's Adm'r, 80 U.S. (13 Wall.) 270, 286 (1871) ("Whenever a general rule as to property or...

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