Jicarilla Apache Nation v. U.S. Dep't of the Interior

• Citation: 892 F.Supp.2d 285
• Decision Date: 26 September 2012
• Docket Number: Civil Action No 10–2052(JDB).
• Court: U.S. District Court — District of Columbia
• Parties: JICARILLA APACHE NATION, Plaintiff, v. U.S. DEPARTMENT OF THE INTERIOR, et al., Defendants, and Merit Energy Company, Defendant–Intervenor.

892 F.Supp.2d 285

JICARILLA APACHE NATION, Plaintiff,

v.U.S. DEPARTMENT OF THE INTERIOR, et al., Defendants,andMerit Energy Company, Defendant–Intervenor.

Civil Action No 10–2052(JDB).

United States District Court,

District of Columbia.

Sept. 26, 2012.

Jill Elise Grant, Nordhaus Law Firm LLP, Washington, DC, Steven D. Gordon, Holland & Knight, LLP, Washington, DC, for Plaintiff.

Ruth Ann Storey, Ruth Ann Storey, U.S. Department of Justice, Washington, DC, for Defendant.

Jason Richard Warran, Kensington, MD, Craig R. Carver, Carver Schwarz McNab & Bailey L.L.C., Denver, CO, for Intervenor Defendant.

MEMORANDUM OPINION

JOHN D. BATES, District Judge.

Plaintiff Jicarilla Apache Nation (“Jicarilla”) brings this action against the United States Department of the Interior and Ken Salazar, Secretary of the Interior (collectively, “Department” or “Interior”). Jicarilla seeks to set aside a decision by the Interior Board of Land Appeals (“IBLA”) on the ground that the IBLA's decision breached defendants' fiduciary duty to the tribe. See Merit Energy Co. v. Minerals Mgmt. Serv., 172 IBLA 137 (Aug. 3, 2007). Jicarilla sought review of that decision in this Court pursuant to the Administrative Procedure Act (“APA”). The Court previously concluded that Jicarilla's challenge was not yet ripe, given the IBLA's remand to an administrative law judge in the Office of Hearings and Appeals (“OAH”). See Jicarilla Apache Nation v. U.S. Dep't of Interior, 648 F.Supp.2d 140, 146–48 (D.D.C.2009).

The parties agree that there is now a final agency action to review. See Tr. 5:14–15. Currently before the Court are Jicarilla's, defendants', and defendant-intervenor Merit Energy Company's (“Merit”) motions for summary judgment. For the reasons discussed below, Merit's and defendants' motions for summary judgment will be granted, and Jicarilla's motion for summary judgment will be denied.

BACKGROUND

Most of the facts have been fully detailed in this Court's opinion in the prior case, see generally Jicarilla Apache Nation, 648 F.Supp.2d at 141–43. Jicarilla is a federally recognized Indian tribe with a reservation in northwest New Mexico. Compl. ¶ 2. Under the Indian Mineral Leasing Act of 1938, 25 U.S.C. §§ 396a–396g, Jicarilla is the lessor for various oil and gas mining leases with Merit. Id. The tribe is entitled to royalties for oil and gas produced under these leases, which are calculated using certain pricing and accounting methods. Id. ¶ 8. During an audit, the Minerals Management Service (“MMS”) ¹ determined that Merit's royalties for oil and gas production under its leases with Jicarilla were miscalculated, and that Merit had failed to report gas sales as processed. Id.

On February 16, 1999, MMS issued an Order to Perform (“OTP”) to Merit directing it to recalculate royalties on its leases with Jicarilla and to pay any additional amounts due. Id. & 10; OTP, Amended AR 7676. The OTP stated that Merit could appeal it pursuant to the regulations in 30 C.F.R. Part 290 ² “within 30 days from service of the order.” Compl. ¶¶ 10–11; OTP, Amended AR 7676. Merit did not respond to or appeal the OTP. Compl. ¶ 12. On August 19, 1999, MMS then issued a Notice of Noncompliance (“Notice” or “NON”) and assessed civil penalties against Merit for failing to comply with the OTP. Compl. ¶ 13; Notice, Amended AR 7723–25. The Notice contained procedures for requesting a hearing before an administrative law judge (“ALJ”) in the Office of Hearings and Appeals under 30 C.F.R. Part 241 and a stay of the accrual of penalties under 30 C.F.R. Part 243.³

Merit timely requested a hearing on the Notice of Noncompliance. The parties, including Jicarilla—which intervened in the administrative proceedings—disagreed about the proper scope of that hearing. Merit claimed that it should be permitted to contest its underlying liability in the hearing on the NON, even though it had failed to appeal the OTP pursuant to 30 C.F.R. Part 290. Merit also argued that service of the OTP was invalid. The ALJ rejected both contentions and, on November 16, 2001, ruled that he lacked jurisdiction to consider Merit's challenge to its underlying liability in the Part 241 hearing. Order, Amended AR 3598–3602. In July 2003, a hearing was held on the remaining service issue, and the ALJ issued a decision on May 27, 2004 concluding that the OTP had been properly served on Merit. Compl. ¶¶ 17–18; Merit Energy Co., 172 IBLA at 142.

Merit appealed to the IBLA. Compl. ¶ 19. Acting on behalf of the Department, the IBLA upheld the ALJ's decision on the issue of service, but reversed on the jurisdictional question and remanded the case to the ALJ for further proceedings. See Merit Energy Co., 172 IBLA at 156; Compl. ¶¶ 22–23. Jicarilla sought judicial review of the IBLA's decision on jurisdiction. But given the IBLA's remand, the Court concluded that the challenge was not yet ripe and dismissed the case. See Jicarilla Apache Nation, 648 F.Supp.2d at 146–48.

On remand, the ALJ then stayed the case pending proceedings in another action, Jicarilla Apache Nation v. U.S. Dep't of the Interior, No. 07–cv–803 (D.D.C.), known as the “Vastar” litigation. “Vastar” concerned the validity of the major portion pricing methodology for calculating royalty payments due under Jicarilla's leases.⁴The OTP issued to Merit had directed Merit to use the contested methodology; hence, its validity was relevant to and potentially dispositive of the issues here. Compl. ¶ 26; 2010 AR 381–85. Ultimately, the methodology was found to be invalid for the leases between Merit and Jicarilla.⁵ The ALJ therefore vacated those aspects of the OTP and the Notice of Noncompliance, concluded that all other issues had been resolved, and returned the case to the ONRR on November 16, 2010. Compl. ¶¶ 27–28. All parties agree that this remand constituted “final agency action” and that the IBLA's decision in Merit Energy Co. v. Minerals Management Service, 172 IBLA 137 (2007), is now ripe for review. Compl. ¶ 28; Mots. Hr'g Tr. 5:14–15, June 8, 2012.

Jicarilla has again brought suit in this Court. It contends that the IBLA's decision interpreting the scope of the Notice of Noncompliance hearing must be set aside because it is arbitrary and capricious, an abuse of discretion, and otherwise not in accordance with law, in violation of the APA, 5 U.S.C. § 706. Compl. ¶¶ 29–35. Jicarilla also makes a breach of trust claim. Id. ¶ ¶ 36–39. Merit has subsequently intervened and all parties have now filed motions for summary judgment.

ANALYSIS

I. APA Claim

The central issue in this case is whether the IBLA erred in finding that the scope of a Notice of Noncompliance hearing could include arguments as to a party's underlying liability. Because the Court has determined that the IBLA's interpretation was based on a reasonable construction of FOGRMA, and the regulations in Parts 241 and 290, deference to the IBLA's interpretation is warranted and the IBLA's decision will be upheld.

A. Standard of Review

Under Fed.R.Civ.P. 56(a), summary judgment is appropriate when the pleadings and the evidence demonstrate that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Id. In a case involving review of a final agency action under the APA, however, the standard set forth in Rule 56(a) does not apply because of the limited role of a court in reviewing the administrative record. See Roberts v. United States, 883 F.Supp.2d 56, 62–63, 2012 WL 975085, at *4 (D.D.C. Mar. 23, 2012); Kaiser Found. Hosps. v. Sebelius, 828 F.Supp.2d 193, 197–98 (D.D.C.2011). Instead, “the function of the district court is to determine whether or not as a matter of law the evidence in the administrative record permitted the agency to make the decision it did.” Kaiser Found. Hosps., 828 F.Supp.2d at 198 (internal quotations and citations omitted). Pursuant to the APA, a reviewing court must set aside agency action that is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). This standard of review is “narrow” and “a court is not to substitute its judgment for that of the agency.” Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983). But, the court must be satisfied that the agency has “ ‘examine[d] the relevant data and articulate[d] a satisfactory explanation for its action including a rational connection between the facts found and the choice made.’ ” Alpharma, Inc. v. Leavitt, 460 F.3d 1, 6 (D.C.Cir.2006).

In reviewing an agency's interpretation of the laws it administers, courts have applied the principles set out in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). Statutes are analyzed applying customary rules of statutory interpretation. Id. at 843, 104 S.Ct. 2778. If Congress' intent is clear with respect to the specific issue, then a court gives effect to that unambiguously expressed intent and the analysis ends there. Id. However, if a statute is “silent or ambiguous with respect to the specific issue, the question for the Court is whether the agency's answer is based on a permissible construction of the statute.” Id.

Moreover, an agency's construction of its own regulations is entitled to “substantial deference.” St. Luke's Hosp. v. Sebelius, 611 F.3d 900, 904 (D.C.Cir.2010) (quoting Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512, 114 S.Ct. 2381, 129 L.Ed.2d 405 (1994)) and is accorded “controlling weight unless it is plainly erroneous or inconsistent with the regulation.” Id.; see also Bowles v. Seminole Rock & Sand Co., 325 U.S. 410, 414, 65 S.Ct. 1215, 89 L.Ed. 1700 (1945); Martin v. Occupational Safety & Health Review Comm'n, 499 U.S. 144, 150–51, 111 S.Ct. 1171, 113 L.Ed.2d 117 (1991); Auer v. Robbins, 519 U.S. 452, 461, 117 S.Ct. 905, 137 L.Ed.2d 79 (1997). When a statute gives express...