Mountain West Mines v. Cleveland-Cliffs Iron Co.

• Decision Date: 13 July 2005
• Docket Number: No. 04-CV-122-B.,04-CV-122-B.
• Citation: 376 F.Supp.2d 1298
• Parties: MOUNTAIN WEST MINES, INC., Plaintiff, v. CLEVELAND-CLIFFS IRON COMPANY, Power Resources, Inc., and Pathfinder Mines Corporation, Defendants.
• Court: U.S. District Court — District of Wyoming

376 F.Supp.2d 1298

MOUNTAIN WEST MINES, INC., Plaintiff, v. CLEVELAND-CLIFFS IRON COMPANY, Power Resources, Inc., and Pathfinder Mines Corporation, Defendants.

No. 04-CV-122-B.

United States District Court, D. Wyoming.

July 13, 2005.

Harold G. Morris, Jr., Lindquist & Vennum, John C. Smiley, Lindquist & Vennum, Patrick D. Frye, Lindquist & Vennum, Denver, CO, for Plaintiff.

J. Michael Morgan, Lohf Shaiman Jacobs Hyman & Feiger, Stephen E. Kapnik, Lohf Shaiman Jacobs Hyman & Feiger, Denver, CO, Tom C. Toner, Yonkee & Toner, Sheridan, WY, David R. Hammond, Davis Graham & Stubbs, Denver, CO, Thomas A. Nicholas, III, Hirst & Applegate, Cheyenne, WY, Frank D. Neville, Williams Porter Day & Neville, Scott P. Klosterman, Williams Porter Day & Neville, Casper, WY, for Defendant.

ORDER ADOPTING MAGISTRATE'S REPORT AND RECOMMENDATION REGARDING DEFENDANTS' JOINT MOTION FOR SUMMARY JUDGMENT AND PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT ON BREACH OF CONTRACT AND FOR DECLARATORY RELIEF AND RULING ON VARIOUS COUNTERCLAIMS

BRIMMER, District Judge.

This matter comes before the Court on Magistrate Beaman's Report and Recommendation Regarding Defendants' Joint Motion for Summary Judgment and Plaintiff's Motion for Partial Summary Judgment on Breach of Contract and for Declaratory Relief. The Court, having reviewed the Magistrate's Report and Recommendations and being otherwise fully advised, FINDS and ORDERS as follows:

Statement of Parties and Jurisdiction

Plaintiff Mountain West Mines, Inc., is a Nevada corporation qualified to do business in Wyoming, with its principal place of business in Duluth, Minnesota.

Defendant Cleveland Cliffs Iron Company is an Ohio corporation qualified to do business in Wyoming, with its principal place of business in Cleveland, Ohio.

Defendant Power Resources, Inc., is a Wyoming corporation with its principal place of business in Lakewood, Colorado.

Defendant Pathfinder Mines Corporation is a Delaware corporation qualified to do business in Wyoming, with its principal place of business in Mills, Wyoming.

This is a civil action between citizens of different states with an amount in controversy exceeding $75,000.00, exclusive of interest and costs. Accordingly, this Court has jurisdiction pursuant to 28 U.S.C. § 1332(a)(1). Venue is proper pursuant to 28 U.S.C. § 1391(b).

The Erie doctrine requires this Court to apply federal law to procedural matters and state law to substantive issues. Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). This Court will apply the law of the State of Wyoming to the pertinent issues at hand.

Background

This case originally came before the Court on Plaintiff Mountain West's ("Mountain West") claims for declaratory relief, breach of contract, and breach of fiduciary duty. In the 1960s, Mountain West obtained mining rights for numerous properties in the Powder River Basin. On May 17, 1967, Mountain West and Defendant Cleveland-Cliffs Iron Company ("Cliffs") entered into an "Option and Agreement" with respect to uranium properties in the Powder River Basin. The Option and Agreement granted Cliffs the option to acquire from Mountain West various mining rights and surface rights in exchange for payments to Mountain West, including percentage royalty payments on uranium production. Specifically, the Option and Agreement contained an Area of Mutual Interest clause ("AMI clause") which obligated Cliffs to pay production royalty on uranium from any properties acquired by Cliffs within the defined area of mutual interest. The AMI clause states:

With respect to "other lands" and any and all lands acquired by "Mountain West" in the "Powder River Basin" ... by lease or otherwise after the date of this Option and Agreement, said lands will be assigned or deeded at "Cliffs" request... subject only to a two and one-half percent (2-½%) overriding royalty or reserved royalty to "Mountain West" ... It is further understood and agreed that "Mountain West" will be entitled to and "Cliffs" agree [sic] to convey a two and one-half percent (2-½%) royalty interest to "Mountain West" in any lands it may hereafter acquire in the "Powder River Basin" ...

Ex. D-3, Option and Agreement at MWM 000006-7.

On May 14, 1969, Cliffs exercised its option and obtained an interest in properties known as the Greasewood Creek, North Butte, Four Mile and North Bing properties ("Original Four"). Cliffs transferred mining claims and leases (the Four Mile and North Bing properties) to Central Electricity Generating Board Exploration, Inc. ("CEGB") in 1986. CEGB sold these lands to Power in 1996. Cliffs also sold property (Greasewood Creek and North Butte) to Uranerz (U.S.A.), Inc. ("Uranerz") in 1987. Uranerz sold these lands to Pathfinder in 1991, who then sold the lands to Power in 2001. It is undisputed that no royalty payments are currently owed on the Original Four properties, which are the properties owned by Cliffs and ultimately obtained by Power and Pathfinder. It is also undisputed that if uranium production were to occur on the Original Four properties, a royalty interest would be owed to Mountain West by either Cliffs or its successors, Power and Pathfinder.¹ However, this transfer of property from Cliffs to a third party to Power and Pathfinder leads Mountain West to argue that Power and Pathfinder owe royalty payments on any property that Power and Pathfinder ultimately obtain in the Powder River Basin because Mountain West believes that the AMI clause binds all of Cliffs' successors in interest. Thus, Mountain West argues that it is owed royalty payments by Power and Pathfinder for uranium production on other properties owned by Pathfinder and Power, specifically royalties from the Smith Ranch and the Highland Uranium Project ("Highland properties"). Neither Mountain West nor Cliffs ever owned the Highland properties, nor has either ever had any type of interest in these properties. However, Mountain West maintains that by obtaining interests in the Original Four properties from Uranerz and CEGB, who obtained those interests from Cliffs, the AMI clause requires Power and Pathfinder to pay royalties on both the Original Four properties and on any other property obtained by Power or Pathfinder in the Powder River Basin, regardless of when the purchase takes place or who the property is obtained from.

Defendants filed a joint motion for summary judgment on all claims. Plaintiff filed a motion for partial summary judgment on breach of contract and for declaratory relief. The issues were referred, with the consent of the parties, to Magistrate Judge Beaman pursuant to 28 U.S.C. § 636(b)(1)(B). Judge Beaman heard oral argument on April 29, 2005, and issued the above-referenced Report and Recommendation on May 27, 2005. Plaintiff filed an Objection to the Report and Recommendation on June 10, 2005.

Standard of Review

According to 28 U.S.C. § 636(b)(1)(B), a district judge may designate a magistrate judge to conduct hearings on dispositive issues before the court. In such a case, the magistrate judge will submit proposed findings of fact and recommendations to the district court judge. Id. A copy of this report and recommendation will be mailed to the parties, at which point the parties have ten days to file written objections to such proposed findings and recommendations. Id. at § 636(b)(1)(C). Once the court receives the report and written objections thereto, the district judge:

... shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made. A judge of the court may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge. The judge may also receive further evidence or recommit the matter to the magistrate judge with instructions.

28 U.S.C. § 636. See also Fed.R.Civ.P. 72. In conducting a de novo review, the court "should make an independent determination of the issues ... The district judge is free to follow [a magistrate's recommendation] or wholly to ignore it, or, if he is not satisfied, he may conduct the review in whole or in part anew." Ocelot Oil Corp. v. Sparrow Indus., 847 F.2d 1458, 1464 (10th Cir.1988) (internal citations and quotations omitted).

Discussion

In accordance with the above-stated standard, the Court has carefully reviewed Magistrate Beaman's Report and Recommendation and Mountain West's objections to this report. The Court FINDS that Magistrate Beaman's Report and Recommendation ("Recommendation") shall be adopted in its entirety. In addition, with respect to Mountain West's objections to the Report, the Court FINDS as follows:

1. Whether the Mountain West Agreements Bind Cliffs' Successors

Mountain West argues that the Recommendation completely ignores the "successors and assigns" provisions in various agreements between the parties. However, it is clear that the Recommendation does not ignore this language. The Recommendation explicitly recognizes that either Cliffs or Cliffs' successors, i.e., Power and Pathfinder, are responsible for royalty payments to Mountain West should uranium production commence on the Original Four properties. See Recommendation, p. 18. In fact, Defendants do not assert that language within the Option and Agreement does not bind successors in this manner. There is absolutely no dispute that when Cliffs exercised its Option to acquire land within the Powder River Basin, Cliffs and its successors would be responsible for royalty payments owed to Mountain West. In other words, once Cliffs contracted with Mountain West to acquire land, it could not escape its responsibility for royalty payments by conveying that land to a third party who would not be bound by this agreement.

Thus, Mountain West is inaccurate in summarily arguing that the Recommendation ignores language regarding Cliffs' successors. Clearly, all parties, and Judge Beaman, have recognized that the...