Mountain West Mines v. Cleveland-Cliffs
| Citation | 470 F.3d 947 |
| Decision Date | 22 November 2006 |
| Docket Number | No. 05-8079.,05-8079. |
| Parties | MOUNTAIN WEST MINES, INC., Plaintiff-Appellant, v. CLEVELAND-CLIFFS IRON COMPANY, Power Resources, Inc., and Pathfinder Mines Corporation, Defendants-Appellees. |
| Court | United States Courts of Appeals. United States Court of Appeals (10th Circuit) |
Patrick D. Frye, (Harold G. Morris, Jr., with him on the briefs) Lindquist & Vennum, P.L.L.P., Denver, CO, for the Plaintiff-Appellant.
David R. Hammond, Davis Graham & Stubbs LLP, Denver, CO, (Stephen E. Kapnik, Lohf Shaiman Jacobs Hyman & Feiger P.C., and Frank D. Neville, Scott P. Klosterman, Williams, Porter, Day & Neville, P.C., Casper, WY, with him on the briefs) for Defendants-Appellees.
Before LUCERO, SILER,* and O'BRIEN, Circuit Judges.
Mountain West Mines, Inc. ("Mountain West") brought suit against Cleveland-Cliffs Iron Co. ("Cliffs"), Power Resources, Inc. ("Power"), and Pathfinder Mines Corp. ("Pathfinder") arguing it is owed royalty payments on uranium production under a series of contracts between Mountain West and Cliffs. With the facts undisputed, all parties moved for summary judgment. The district court denied Mountain West's motion, granted the defendants' joint motion, and ordered Mountain West to pay defendants' attorneys' fees. Mountain West appeals both the grant of summary judgment and the fee award. Exercising jurisdiction pursuant to 28 U.S.C. § 1291, we AFFIRM the grant of summary judgment, but REVERSE and REMAND for further proceedings on the award of attorneys' fees.
In 1967 Mountain West and Cliffs entered into an option and agreement ("Option") concerning property in Wyoming's Powder River Basin. Cliffs obtained the option to purchase Mountain West's uranium leases and mining rights in exchange for, inter alia, royalty payments on uranium production. The Option included a future acquisition clause covering the area of mutual interest ("AMI"):
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 (2-1/2%) 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 (2-1/2%) royalty interest to "Mountain West" in any lands it may hereafter acquire in the "Powder River Basin"....
Additionally, the Option included an assignment clause:
This agreement shall not be assignable in whole or in part without the prior written notification to "Mountain West". [sic] Subject to the limitation herein the provisions hereof shall inure to the benefit of and shall be binding upon the successors in interest, legal representatives and assigns of the respective parties hereto .... Nothing herein contained and no assignment of this Option and Agreement shall be construed to relieve "Cliffs" of the obligation to ... convey a two and one-half percent (2-1/2%) royalty interest to "Mountain West" of any lands acquired by it in the "Powder River Basin."
In 1968 Mountain West and Cliffs executed an addendum that extended Cliffs' rights under the Option for six months and clarified the parties' responsibilities. The addendum included the following clause (the "Getty Clause"):
With respect to all other persons, firms, corporations, or business entities including, but not limited to, Getty Oil Company acting on their own and independently of Cliffs, and not acquiring said lands from Cliffs. [sic] Mountain West recognizes their independent right to acquire lands and mining property in the Powder River Basin as defined in the Option and Agreement free and clear of any claim by Mountain West and Mountain West disclaims any right to a two and one-half percent (2-1/2%) royalty interest or any interest at all in lands acquired by such persons, corporations or other business entities.
Cliffs exercised its option in 1969, purchasing the mining rights to four properties: North Bing, Four Mile, North Butte, and Greasewood Creek (collectively the "Original Four"). In 1976 the parties executed an additional addendum clarifying the manner in which royalty payments would be computed. They agreed to the following language:
The parties acknowledge and agree that the lands subject to the Option and Agreement are all the lands in the Powder River Basin, as it is defined in the Option and Agreement, in which Cliffs has acquired or hereafter acquires any Ore and/or Other Minerals. Cliffs will pay to Mountain West royalties as provided in this Addenda on all Ores and Other Minerals mined or produced from such lands by whomsoever.
Mountain West and Cliffs also entered into a deed and agreement reflecting the revised royalty rights. That deed states: "All provisions of this Deed and Agreement shall inure to the benefit of, and be binding upon, the successors in interest, legal representatives and assigns of the respective parties hereto ...."
In 1986 Cliffs sold the mining rights on the North Bing and Four Mile properties to the Central Electricity Generating Board ("CEGB"). The purchase agreement in this transaction noted that the properties were "encumbered by certain royalty and other obligations, including the royalty and other obligations as described in the Option and Agreement between Cliffs and Mountain West Mines, Inc." Cliffs also warranted in deeds and assignments that CEGB "does not share or take any responsibility of [Cliffs] to pay a mineral production royalty to [Mountain West] from property other than the Subject Property." CEGB sold its rights in these two properties to Power in 1996.
In 1987 Cliffs sold its North Butte and Greasewood Creek mining rights to Uranerz U.S.A., Inc. ("Uranerz"). In this purchase agreement, Cliffs disclosed both the AMI clause and the royalty obligation: The agreement further noted that "[i]n general, provisions in the [Option] follow land sold by Cleveland-Cliffs." Additionally, the Cliffs-Uranerz deeds included the same warranty used in the Cliffs-CEGB transaction, stating that the buyer would only be responsible for royalties on the subject property. When Uranerz sold its interest in these properties to Pathfinder in 1991, it incorporated into the deed that same warranty limiting royalty payments to the subject property. The Original Four were reunited in 2001 when Pathfinder sold its rights in North Butte and Greasewood Creek to Power.
All parties agree that Mountain West is due royalties from production on the Original Four. This litigation concerns the responsibility for royalty payments on two other mining properties in the AMI, the Highlands Uranium Project and the Smith Ranch (collectively "Highlands Properties"), in which neither Mountain West nor Cliffs has ever held an interest.
Power acquired a 74.25% interest in the Highlands Uranium Project in 1989. Pathfinder purchased a 25% interest in the Project in 1992, while it owned mining rights on the North Butte and Greasewood Creek properties, but later sold this interest. In 2002, while Power owned mining rights on all of the Original Four, it purchased the remaining 25.75% interest in the Highlands Uranium Project, as well as the nearby Smith Ranch.
We review the grant of summary judgment de novo, applying the same legal standard employed by the district court. Sequoyah County Rural Water Dist. No. 7 v. Town of Muldrow, 191 F.3d 1192, 1196 (10th Cir.1999). Summary judgment is appropriate only where there is no genuine issue of material fact and one party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The parties do not dispute the underlying facts, limiting our analysis to whether the district court correctly applied the law. Wolf v. Prudential Ins. Co. of Am., 50 F.3d 793, 796 (10th Cir.1995). Because the district court exercised diversity jurisdiction under 28 U.S.C. § 1332(a) and the events at issue occurred in Wyoming, we apply the substantive law of that state. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938).
Mountain West argues that the district court erred in determining that the after-acquired property clause was not a covenant running with the land. Under Wyoming law, a party seeking to establish a covenant running with the land must prove four elements: Jackson Hole Racquet Club v. Teton Pines, 839 P.2d 951, 956 (Wyo.1992); see also North Finn v. Cook, 825 F.Supp. 278, 282 n. 8 (D.Wyo.1993).
The parties agree that the series of agreements between Mountain West and Cliffs were initially enforceable. We turn then to the second prong of the covenant determination: whether Mountain West and Cliffs intended the after acquired property clause to run with the land.
Covenants are "contractual in nature" and must be construed according to the principles of contract law. Stevens v. Elk Homeowners' Ass'n, 90 P.3d 1162, 1165-66 (Wyo.2004). Wyoming's general rules of contract interpretation were reiterated in Wyo. Game & Fish Comm'n v. Mills Co., 701 P.2d 819, 822 (Wyo. 1985):
Our basic purpose in construing or interpreting a contract is to determine the intention and understanding of the parties. If the contract is in writing and the language is clear and unambiguous, the intention is to be secured from the words of the contract. And the contract as a whole should be considered, with each part...
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