JMA Energy Co. v. State ex rel. Dep't of Transp.

• Decision Date: 13 March 2012
• Docket Number: No. 109,089.,Released for Publication by Order of the Court of Civil Appeals of Oklahoma, Division No. 2.,109,089.
• Citation: 278 P.3d 1053,2012 OK CIV APP 55
• Parties: JMA ENERGY COMPANY, LLC, Plaintiff/Appellee, v. STATE of Oklahoma ex rel. DEPARTMENT OF TRANSPORTATION, Defendant/Appellant.
• Court: United States State Court of Criminal Appeals of Oklahoma. Court of Civil Appeals of Oklahoma

278 P.3d 1053

2012 OK CIV APP 55

JMA ENERGY COMPANY, LLC, Plaintiff/Appellee,

v.STATE of Oklahoma ex rel. DEPARTMENT OF TRANSPORTATION, Defendant/Appellant.

No. 109,089.Released for Publication by Order of the Court of Civil Appeals of Oklahoma, Division No. 2.

Court of Civil Appeals of Oklahoma,

Division No. 2.

March 13, 2012.

Appeal from the District Court of Washita County, Oklahoma; Honorable Christopher S. Kelly, Trial Judge.

AFFIRMED.

Michael E. Smith, Sharon T. Thomas, Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C., Oklahoma City, Oklahoma, for Plaintiff/Appellee.

Kelly F. Monaghan, Lori Gilliard, Holloway & Monaghan, Tulsa, Oklahoma, for Defendant/Appellant.

DEBORAH B. BARNES, Presiding Judge.

¶ 1 Defendant/Appellant State of Oklahoma ex rel. Department of Transportation (DOT) appeals the trial court's Order filed on December 14, 2010, denying DOT's exception to the report of appraisers. The issues on appeal concern the Oklahoma Surface Damages Act (SDA), 52 O.S.2011 §§ 318.2–318.9. DOT argues it is exempt from operation of the SDA and, therefore, Plaintiff/Appellee JMA Energy Company, LLC, (JMA) has no right, absent DOT's consent, to undertake drilling operations on land whose surface owner is the State. Based on our review of the record on appeal and applicable law, we find DOT is not exempt from operation of the SDA and, therefore, we affirm the Order denying DOT's exception to the report of appraisers.

FACTS AND PROCEDURAL BACKGROUND

¶ 2 In January of 2009, JMA filed a petition to appoint appraisers pursuant to the SDA. JMA stated it was intending “to serve as operator in the drilling and completion of an oil and/or gas well” on certain property, that DOT is the surface owner of a portion of this property, and that “[b]y virtue of the express and implied terms and provisions of certain oil and gas leases and/or related operational agreements of JMA covering the mineral rights in the Subject Property, JMA has the right to enter and conduct oil and gas drilling operations on the Subject Property.” ¹

¶ 3 JMA further stated it had complied with the SDA (1) by notifying DOT of its intention to drill, (2) by initiating efforts to negotiate a surface damage agreement for any damages which might occur to DOT's property, and (3) by filing an appropriate bond or security. JMA stated that despite its efforts to reach an agreement with DOT concerning potential surface damages, the parties had been unable to reach an agreement. Therefore, JMA petitioned the trial court pursuant to 52 O.S. Supp.2002 § 318.5² for appointment of appraisers to make recommendations concerning the amount of damages, if any.

¶ 4 In February of 2009, DOT filed a motion to dismiss and stay proceedings. DOT argued that “[s]overeign immunity precludes the State from being sued unless such sovereign immunity has been waived.... Because the [SDA] does not waive sovereign immunity, and the State has not waived such immunity either expressly or by implication, [JMA's] Petition must be dismissed.” ³

¶ 5 Following a hearing held on March 6, 2009, the trial court, in an order filed on March 17, 2009, stated as follows:

In reviewing the requirements of the [SDA], JMA followed proper procedure in requesting appointment of appraisers. Title 52 O.S. Sec. 318.5 sets out the process by which an operator of heavy equipment shall negotiate with the surface owner for the payment of any damages which may be caused by any drilling operation. JMA in doing so did not file suit against the State but rather petitioned the Court to have appraisers appointed to establish the extent of any damages.⁴

¶ 6 The trial court further stated that the SDA explicitly exempts property held by an Indian, an Indian tribe, or by the United States for any Indian tribe, but does not explicitly exempt property held by the State. The trial court concluded that “[t]he State of Oklahoma is not immune from suit in this type of case,” and denied DOT's motion to dismiss and stay proceedings. Following the trial court's denial, DOT filed an “Application to Assume Original Jurisdiction and Petition for Writ of Mandamus or in the Alternative for Writ of Prohibition” in the Oklahoma Supreme Court,⁵ which the Supreme Court denied in an order filed in May of 2009.⁶

¶ 7 In July of 2009, DOT again filed a motion to dismiss,⁷ arguing that because JMA had not taken any action since May of 2009, that JMA had failed to diligently prosecute pursuant to Oklahoma District Court Rule 9(b).⁸ JMA filed a response along with a motion for sanctions against DOT.⁹ JMA argued there had been no failure to prosecute and that all delays had been caused, instead, by DOT.

¶ 8 A hearing on DOT's motion to dismiss and on JMA's motion for sanctions was held on January 7, 2010. The trial court, ruling from the bench, denied DOT's motion to dismiss and denied JMA's request for sanctions against DOT. The trial court appointed two additional appraisers in addition to the appraiser already appointed by JMA.

¶ 9 The three appraisers filed their report in May of 2010.¹⁰ The report of the appraisers states that the “quantity” of property utilized by JMA in the drilling operation of which DOT is the surface owner is 0.77 acres, and that “the resulting diminution in the fair market value” of DOT's surface estate caused by JMA's operations is $1,925.

¶ 10 In June of 2010, DOT filed an exception to the report of the appraisers. DOT stated it was specially appearing for the limited purpose of filing its exception, and that it “expressly preserves its defense that [the trial court] lacks jurisdiction because the State is immune from suit under the [SDA].” ¹¹ In November of 2010, DOT filed a “Continued Special Appearance for Application to Set Hearing and Request for Findings of Fact and Conclusions of Law.” ¹²

¶ 11 Following a hearing held on November 23, 2010, the trial court, in an Order filed on December 14, 2010, denied DOT's exception to the report of the appraisers. From this Order, DOT appeals.¹³

STANDARD OF REVIEW

¶ 12 The issues on appeal, concerning the status of Oklahoma's common-law sovereign immunity as well as statutory interpretation, are issues of law. “In cases involving questions of law relating to statutory interpretation, the appropriate standard of review is de novo ....” Hubbard v. Kaiser–Francis Oil Co., 2011 OK 50, ¶ 6, 256 P.3d 69, 72 (citations omitted). Regarding sovereign immunity, “[t]he standard of review for questions concerning the jurisdictional power of the trial court to act is de novo.” Dilliner v. Seneca–Cayuga Tribe, 2011 OK 61, ¶ 12, 258 P.3d 516, 519 (citation omitted).

ANALYSIS

I. Common–Law Sovereign Immunity

¶ 13 DOT argues that because the SDA does not specifically waive the State's sovereign immunity, DOT, as a State agency, is exempt from operation of the SDA. In Vanderpool v. State, 1983 OK 82, 672 P.2d 1153, the Oklahoma Supreme Court explained, “[t]he doctrine of sovereign immunity was first recognized in early England and required that the sovereign could not be sued without his permission.” Vanderpool, ¶ 7, 672 P.2d at 1154.

The doctrine found its way into the common law of the United States, and in 1821, in Cohens v. Virginia,¹⁴ Chief Justice Marshall applied it in suits against the United States, declaring that suits could not be commenced or prosecuted against the federal government without its consent. Subsequently, the doctrine was applied to the states.

Id. ¶ 8, 672 P.2d at 1154.

¶ 14 The Court explained that at the state level, “it was early recognized that local government entities occupy a dual character....” Id. On one hand, a state is “charged with governmental functions and responsibilities,” and on the other it is “a corporate body, capable of much the same acts as a private corporation....” Id. “This duality resulted in the attempted differentiation between governmental and proprietary functions, the first generally protected by immunity, the second generally not.” Id. (footnote omitted).

¶ 15 The Court explained that this differentiation proved to be too cumbersome, and “resulted in confusion and uncertainty....” Id. ¶ 9, 672 P.2d at 1154–55. The Court, therefore, held “that the governmental-proprietary-function inquiry shall no longer be determinative in assessing liability for tort as to all levels of government in this State,” id. ¶ 18, 672 P.2d at 1156, and abrogated common-law sovereign immunity for injury caused by the negligent or wrongful act or omission of any governmental entity or any employee or agent of the governmental entity while acting within the scope of employment, id. ¶¶ 19–22, 672 P.2d at 1156–57.

¶ 16 DOT argues that Vanderpool abrogated common-law sovereign immunity only as to tort claims. However, the Oklahoma Supreme Court has subsequently interpreted Vanderpool as completely abrogating common-law sovereign immunity. See, e.g., Fehring v. State Ins. Fund, 2001 OK 11, ¶ 23, 19 P.3d 276, 283 (“this Court abrogated common-law sovereign immunity in Vanderpool v. State ....”); McCathern v. City of Oklahoma City, 2004 OK 61, ¶ 15, 95 P.3d 1090, 1096 (“The common-law doctrine of sovereign immunity was abrogated in 1983 by Vanderpool v. State.”). In Oklahoma, governmental immunity must now be established statutorily. State ex rel. State Ins. Fund v. JOA, Inc., 2003 OK 82, ¶ 17, 78 P.3d 534, 539.See also Sullins v. American Medical Response of Oklahoma, Inc., 2001 OK 20, 23 P.3d 259, 266 (Opala, J., concurring in result) (“[i]n contrast to federal law, Oklahoma's immunity regime is governed solely by legislative enactments. The common-law doctrine of sovereign immunity stands abrogated in toto ....”).¹⁵ Therefore, Oklahoma's common-law sovereign immunity has been abrogated, and DOT must point to some statute that creates sovereign immunity from the operation of the SDA.

II. The Sovereign Immunity Established in the Governmental Tort Claims Act

¶ 17 In 1984, following the abrogation of common-law sovereign immunity in Vanderpool, ...