June Oil and Gas, Inc. v. Andrus

• Decision Date: 16 January 1981
• Docket Number: Civ. A. No. 79-K-1334,79-K-1771.
• Citation: 506 F. Supp. 1204
• Parties: JUNE OIL AND GAS, INC., and Cook Oil and Gas, Inc., Plaintiffs, v. Cecil D. ANDRUS, Secretary of the Interior of the United States; Dale R. Andrus, Colorado State Director of the Bureau of Land Management, Department of the Interior; Interior Board of Land Appeals, United States Department of the Interior, and James L. Burski, Edward W. Stubbing and Joan B. Thompson, Judges thereof, Defendants. Celeste C. GRYNBERG and Dean G. Smernoff as Co-Trustees For the Stephen Mark Grynberg Trust, Plaintiffs, v. Cecil D. ANDRUS, Secretary of the Interior of the United States; Dale R. Andrus, Colorado State Director of the Bureau of Land Management, Department of the Interior; Interior Board of Land Appeals, United States Department of the Interior, and Joseph W. Goss and Joan B. Thompson, Judges thereof, Defendants.
• Court: U.S. District Court — District of Colorado

506 F. Supp. 1204

JUNE OIL AND GAS, INC., and Cook Oil and Gas, Inc., Plaintiffs, v. Cecil D. ANDRUS, Secretary of the Interior of the United States; Dale R. Andrus, Colorado State Director of the Bureau of Land Management, Department of the Interior; Interior Board of Land Appeals, United States Department of the Interior, and James L. Burski, Edward W. Stubbing and Joan B. Thompson, Judges thereof, Defendants.

Celeste C. GRYNBERG and Dean G. Smernoff as Co-Trustees For the Stephen Mark Grynberg Trust, Plaintiffs, v. Cecil D. ANDRUS, Secretary of the Interior of the United States; Dale R. Andrus, Colorado State Director of the Bureau of Land Management, Department of the Interior; Interior Board of Land Appeals, United States Department of the Interior, and Joseph W. Goss and Joan B. Thompson, Judges thereof, Defendants.

Civ. A. Nos. 79-K-1334, 79-K-1771.

United States District Court, D. Colorado.

January 16, 1981.

Philip G. Dufford and Phillip D. Barber, Welborn, Dufford, Cook & Brown, Denver, Colo., for plaintiffs.

Richard A. Jost, Asst. U. S. Atty., Denver, Colo., for defendants.

MEMORANDUM OPINION AND ORDER

KANE, District Judge.

This action is a consolidation of two cases involving three plaintiffs, June Oil and Gas, Inc., (June Oil), Cook Oil and Gas, Inc., (Cook Oil) and Celeste C. Grynberg and Dean G. Smernoff as co-trustees for the Stephen Mark Grynberg Trust (Grynberg Trust). The facts in each case are different; however both allege that they were denied oil and gas leases, although their drawing entry cards or offers received priority in the lottery, and such denials were an abuse of discretion, arbitrary, capricious, and otherwise not in accordance with law. Plaintiffs' contend that the Secretary of the Interior ignored established legal principles and the plain meaning and intent of the prohibition against multiple filings contained in 43 C.F.R. 3112.5-2. Both cases are before the court on cross motions for summary judgment.

FACTS

The Grynberg Trust

The Stephen Mark Grynberg Trust was established on August 1, 1969 by Jack Grynberg for his son Stephen Mark. Companion trusts were also established by the same instrument for Stephen's siblings Rachel Susan and Mariam Lela. These irrevocable discretionary support trusts are managed by co-trustees Dean G. Smernoff and Celeste C. Grynberg, the children's mother. In February 1978, drawing entry cards were filed for parcel CO-167 by each of the three trusts, Jack Grynberg and Celeste Grynberg. The Stephen Mark Trust received first priority on the parcel.

The Bureau of Land Management rejected all five offers as violative of the regulatory prohibition against multiple filings found at 43 C.F.R. 3112.5-2. Plaintiffs appealed to the Interior Board of Land Appeals which affirmed the bureau's rejection of the lease offers. Celeste C. Grynberg, Dean G. Smernoff, 44 I.B.L.A. 197, 203 (1979). The board reasoned that simultaneous offers for the same parcel by the children's parents and their trust and by a trustee of a trust and the trust proper both created a prohibited multiple filing under § 3112.5-2. Id. at 202, 203. Plaintiffs now seek review of the decision, damages, injunctive relief, declaratory relief and extraordinary relief.

June Oil and Gas, Inc.

and

Cook Oil and Gas, Inc.

In June and July, 1978, June Oil and Cook Oil submitted offers for the simultaneous oil and gas lease drawings held by the Colorado State Office of the Bureau of Land Management. June Oil received first priority on parcel CO-337 and second priority on parcel CO-361, while Cook Oil received first priority on parcel CO-361. The bureau rejected each company's offer concluding that given the common officers, incorporators, address and other factors, the two corporations were interrelated and consequently had gained a greater probability of obtaining a lease. Both corporations appealed the decision and their cases were consolidated for review before the Interior Board of Land Appeals which affirmed the decision. June Oil and Cook Oil now seek review of the decision, damages, injunctive relief, declaratory relief, and extraordinary relief.

SCOPE OF REVIEW

Jurisdiction to review the judgment of defendant board is conferred upon me by the Administrative Procedure Act, 5 U.S.C.A. §§ 701, et seq. Judicial review of administrative action is based upon the full administrative record before the agency decision maker at the time the challenged action was taken. I am authorized to conduct a de novo review. Cooperative Services, Inc. v. United States Department of Housing and Urban Development, 562 F.2d 1292, 1295 (D.C.Cir.1977). See also Ballard E. Spencer Trust, Inc. v. Morton, 544 F.2d 1067 (10th Cir. 1976). In reviewing the agency's decision, it is not my function to weigh the conflicting evidence adduced at the administrative proceeding, but rather to determine whether based upon the entire record there is substantial evidence to support the agency's determination. Nickol v. United States, 501 F.2d 1389 (10th Cir. 1974); Roberts v. Morton, 389 F.Supp. 87 (D.Colo.1975), aff'd 549 F.2d 158 (10th Cir. 1976), cert. denied 434 U.S. 834, 98 S.Ct. 121 (1977).

5 U.S.C.A. § 706(2)(a) requires a finding that the agency decision was not arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 823, 28 L.Ed.2d 136 (1971); Sabin v. Butz, 515 F.2d 1061 (10th Cir. 1975). The burden of proving that agency action is arbitrary and capricious is upon the plaintiff. Angel v. Butz, 487 F.2d 260, 263 (10th Cir. 1973), cert. denied 417 U.S. 967, 94 S.Ct. 3170, 41 L.Ed.2d 1138 (1974); Hiatt Grain & Feed, Inc. v. Bergland, 446 F.Supp. 457, 478-479 (D.Kan.1978), aff'd 602 F.2d 929 (10th Cir. 1979), cert. denied 444 U.S. 1073, 100 S.Ct. 1019, 62 L.Ed.2d 755 (1980). To make this finding I must consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment. Citizens to Preserve Overton Park v. Volpe, 401 U.S. at 416, 91 S.Ct. at 823. Although this inquiry must be searching and careful, the standard of review is a narrow one. I am not allowed to substitute my judgment for that of the agency. Id., American Petroleum Institute v. E. P. A., 540 F.2d 1023, 1029 (10th Cir. 1976) cert. denied 430 U.S. 922, 97 S.Ct. 1340, 51 L.Ed.2d 601 (1977). Rather, I must uphold agency action that has a rational basis for its treatment of the evidence. Bowman Transportation, Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 290, 95 S.Ct. 438, 444, 42 L.Ed.2d 447 (1974); Coleman v. Darden, 595 F.2d 533 (10th Cir. 1979); American Petroleum Institute v. E. P. A., 540 F.2d at 1029; Sabin v. Butz, 515 F.2d at 1061; Hiatt Grain & Feed, Inc. v. Bergland, 446 F.Supp. at 4. If I determine that agency action has a rational basis, I must affirm that action even though I disagree with the agency's decision. Bowman Transportation, Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. at 290, 95 S.Ct. at 444. Finally, if the agency interpretation is of an administrative regulation, I must show a high level of deference to that interpretation. Udall v. Tallman, 380 U.S. 1, 85 S.Ct. 792, 13 L.Ed.2d 616 (1964).

The Grynberg Trust

The terms of the prohibition against multiple filing in § 3112.5-2 are not restricted to those instances where the applicants are owners. The regulation provides in pertinent part:

When any person, association, corporation, or other entity or business enterprise files an offer to lease for inclusion in a drawing, and an offer (or offers) to lease is filed for the same lands in the same drawing by any person or party acting for, on behalf of, or in collusion with the other person, association, corporation, entity or business enterprise, under any agreement, scheme, or plan which would give either, or both, a greater probability of successfully obtaining a lease, or interest therein, in any public drawing, held pursuant to § 3110.1-6(b), all offers filed by either party will be rejected.

The Interior Board of Land Appeals has held a variety of oil and gas interests sufficient to violate this provision. See e. g. William R. Boehm, 36 I.B.L.A. 346 (1978); Panra Corporation, 27 I.B.L.A. 220 (1976); Richard Donnelly, 11 I.B.L.A. 170 (1973); Schermerhorn Oil Corporation, 72 I.D. 486 (1965).

The first basis upon which the board found a prohibited multiple interest to exist is where parents, and their children's trust file simultaneous offers for the same parcel. Grynberg Trust, 44 I.B.L.A. at 202. To reach this conclusion the trust instrument was examined to ascertain the interests of the beneficiary relative to his parents and to Celeste Grynberg as co-trustee. Article VI of the trust agreement delineates support provisions and provides:

It is the grantor's wish that the term "best interests" of the beneficiary be liberally construed and include not only the possibility of distributions for the support, medical care and education (including professional education of said beneficiary but also the possibility of distributions for his comfort, convenience and happiness. As illustrations, and not in limitations of the purposes for which distributions can be made under such standard, the trustee may make distributions or permit said beneficiary to travel for education or pleasure purposes or permit said beneficiary to purchase a personal residence or invest in a business. (Emphasis added.)

Parents are liable for the support obligations contemplated by the trust agreement. Perkins v. Westcoat, 3 Colo.App. 338, 33 P. 139 (1893) (support in general); Union Pac. R. Co. v. Jones, 21 Colo. 340, 40 P. 891 (1895) (medical expenses); Haynes v. Haynes, 41 Colo.App. 469, 586 P.2d 1010 (1978) (divorced parent may be liable for college education expenses); VanOrman v. VanOrman, 30 Colo.App. 177, 492 P.2d 81 (1971) (college education expenses)...