Oxy USA Inc. v. Babbitt, 98-5222

• Decision Date: 10 October 2001
• Docket Number: No. 98-5222,98-5222
• Citation: 268 F.3d 1001
• Parties: (10th Cir. 2001) OXY USA, INC., Plaintiff-Appellee, MOBIL EXPLORATION & PRODUCING U.S., INC., Plaintiff, v. BRUCE BABBITT, Secretary, Department of Interior; BOB ARMSTRONG, Assistant Secretary, Land and Minerals Management; CYNTHIA QUATERMAN, Director, Minerals Management Service; ERASMO GONZALES, Chief, Houston Compliance Division, Minerals Management Service; GARY L. JOHNSON, Chief, Dallas and Tulsa Compliance Offices, Minerals Management Service, Defendants-Appellants. UNION OIL COMPANY OF CALIFORNIA; INDEPENDENT PETROLEUM ASSOCIATION OF AMERICA; NATIONAL MINING ASSOCIATION; AMERICAN CHEMISTRY COUNCIL; AMERICAN PETROLEUM INSTITUTE; CHAMBER OF COMMERCE OF THE UNITED STATES; AMERICAN TORT REFORM ASSOCIATION; NATIONAL ASSOCIATION OF MANUFACTURERS; LAWYERS FOR CIVIL JUSTICE; SHELL OIL COMPANY. Amici Curiae
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1001

268 F.3d 1001 (10th Cir. 2001)

OXY USA, INC., Plaintiff-Appellee, MOBIL EXPLORATION & PRODUCING U.S., INC., Plaintiff, v. BRUCE BABBITT, Secretary, Department of Interior; BOB ARMSTRONG, Assistant Secretary, Land and Minerals Management; CYNTHIA QUATERMAN, Director, Minerals Management Service; ERASMO GONZALES, Chief, Houston Compliance Division, Minerals Management Service; GARY L. JOHNSON, Chief, Dallas and Tulsa Compliance Offices, Minerals Management Service, Defendants-Appellants.

UNION OIL COMPANY OF CALIFORNIA; INDEPENDENT PETROLEUM ASSOCIATION OF AMERICA; NATIONAL MINING ASSOCIATION; AMERICAN CHEMISTRY COUNCIL; AMERICAN PETROLEUM INSTITUTE; CHAMBER OF COMMERCE OF THE UNITED STATES; AMERICAN TORT REFORM ASSOCIATION; NATIONAL ASSOCIATION OF MANUFACTURERS; LAWYERS FOR CIVIL JUSTICE; SHELL OIL COMPANY. Amici Curiae.

No. 98-5222

UNITED STATES COURT OF APPEALS TENTH CIRCUIT

October 10, 2001

Appeal from the United States District Court for the Northern District of Oklahoma (D.C. No. 96-CV-1067-K) Oliver S. Howard (Teresa B. Adwan, Dennis C. Cameron and Amelia A. Fogleman of Gable & Gotwals, P.C.; Patricia Dunmire Bragg and Stephen R. Ward, of Gardere & Wynne, L.L.P., Tulsa, Oklahoma, with him on the briefs) of Gable & Gotwals, P.C., Tulsa, Oklahoma, for Plaintiff-Appellee.

Sean H. Donahue (Lois J. Schiffer, Assistant Attorney General; Peter Coppelman, Acting Assistant Attorney General; William B. Lazarus, Donna S. Fitzgerald and Robert L. Klarquist, Department of Justice, with him on the briefs) of the Department of Justice, Washington, D.C., for Defendants-Appellants.

David L. Bryant, of Bryant Law Firm PLLC, Tulsa, Oklahoma, filed a brief for amicus curiae Union Oil Company of California.

Michael E. Smith and Sharon Taylor Thomas of Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C., Oklahoma City, Oklahoma, filed a brief for amici curiae Independent Petroleum Association of America, and National Mining Association.

Victor E. Schwartz, Timothy M. Biddle, Mark A. Behrens, and Donald J. Kochan, of Crowell & Moring LLP, Washington, D.C., filed a brief for amici curiae American Chemistry Council (David F. Zoll and Donald D. Evans, Arlington, Virginia, of counsel on the brief); American Petroleum Institute (G. William Frick, Washington, D.C., of counsel on the brief); Chamber of Commerce of the United States (Stephen A. Bokat of National Chamber Litigation Center, Inc., Washington, D.C., of counsel on the brief); American Tort Reform Association (Sherman Joyce, Washington, D.C., of counsel on the brief); National Association of Manufacturers (Jan S. Amundson, Washington, D.C., of counsel on the brief); and Lawyers for Civil Justice (Barry Bauman, Washington, D.C., of counsel on the brief).

L. Poe Leggette and Nancy L. Pell of Fulbright & Jaworski L.L.P., Washington, D.C.; David L. Bryant, Tulsa, Oklahoma; and Michael E. Coney, Of Counsel, Shell Oil Company, New Orleans, Louisiana, filed a brief for amicus curiae Shell Oil Company.

Before TACHA, BRORBY,^* EBEL, KELLY, HENRY, BRISCOE, LUCERO, and MURPHY, Circuit Judges.

ON REHEARING EN BANC

BRORBY, Circuit Judge.

The issue before the en banc court is straightforward: Does the six-year statute of limitations provided by 28 U.S.C. 2415(a) govern Mineral Management Service (MMS) orders directing oil and gas lessees to pay additional royalties on production procured prior to September 1, 1996?¹ We hold it does.

BACKGROUND

In December 1996, the MMS issued an order directing OXY USA, Inc. (OXY) to pay additional royalties of $551,693.26, plus interest, for oil production from federal onshore and offshore leases in California for the period January 1980 - September 1983.² OXY brought suit seeking, inter alia, a declaration the government's claims were time-barred under 28 U.S.C. 2415(a). The district court granted OXY summary judgment based on statements from Phillips Petroleum Co. v. Lujan, 4 F.3d 858, 860 & n.1 (10th Cir. 1993) ("Phillips III"), indicating that 2415(a) does, indeed, bar belated MMS orders.³ The government appealed. A divided panel of this court reversed, holding (1) the remarks in Phillips III concerning the applicability of 28 U.S.C. 2415(a) are dicta, and (2) 2415(a) is inapplicable because the MMS orders OXY challenges are not "actions" under that provision. OXY USA, Inc. v. Babbitt, 230 F.3d 1178, 1185-90 (10th Cir. 2000).

We granted Petition for Rehearing in consolidated appeals, including Shell Oil Co. v. Babbitt, Nos. 98-5252 & 99-5098. As a result of settlement, we subsequently dismissed the Shell Oil cases by Order dated March 21, 2001. By that same Order, we agreed to treat the briefs filed in the Shell Oil cases as amicus briefs in this, the remaining appeal, OXY USA Inc. v. Babbitt, No. 98-5222.⁴

ANALYSIS

28 U.S.C. 2415(a) provides in pertinent part:

Subject to the provisions of section 2416 of this title, and except as otherwise provided by Congress, every action for money damages brought by the United States or an officer or agency thereof which is founded upon any contract express or implied in law or fact, shall be barred unless the complaint is filed within six years after the right of action accrues or within one year after final decisions have been rendered in applicable administrative proceedings required by contract or by law, whichever is later ....

(emphasis added.) The Government argues (1) 2415(a) limits the time within which the MMS may commence a judicial action (i.e., a lawsuit) to recover royalties, but not administrative collection proceedings; and (2) even if we determine the MMS order to pay constitutes an "action" under 2415(a), it is not an action founded on contract, does not seek money damages, and is encompassed by the "otherwise provided by Congress" exception.⁵

Reviewing this matter de novo,⁶ we conclude the statutory language, together with a forthright statutory scheme and purpose, clearly instruct that the six-year statute of limitation under 28 U.S.C. 2415(a) applies to the MMS orders in this case.

"Every Action"

We decipher what constitutes "every action" affected by 2415(a) by considering the language and structure of the statute as a whole. See Medlock v. Ortho Biotech, Inc., 164 F.3d 545, 556 (10th Cir.) (citing Dole v. United Steelworkers of America, 494 U.S. 26, 41 (1990)), cert. denied, 528 U.S. 813 (1999). Although we are instructed to strictly construe any statute of limitation sought to be applied to bar rights of the Government, see Badaracco v. Commissioner of Internal Revenue, 464 U.S. 386, 391 (1984), we are not authorized to contort the language or structure of a statute of limitations in order to reach a result favorable to the government.

The phrase "every action" is patently broad, and is expressly limited in scope only by reference to the possibility of a specific exception "otherwise provided by Congress." 28 U.S.C. 2415(a). Congress' subsequent reference to the filing of a "complaint" within six years cannot fairly be read to limit this broad language to formalized judicial proceedings in light of (1) the statute's obvious purpose to level the playing field between the government and private litigants by forcing the government to promptly assert its claims; and (2) a reading of the entire text of 2415, including subsections (f) and (i), which evidence Congress' desire to deal with extra-judicial agency actions as well as judicial actions.

The express purpose of 28 U.S.C. 2415(a) was to establish a general statute of limitations on contract claims asserted by the government or a government agency. Congress believed the imposition of a limitations period on government claims would compel government agencies to assert their claims promptly, thereby putting the government in a position more nearly equal to that of private litigants. See S. Rep. No. 89-1328, at 2 (1966), reprinted in 1966 U.S.C.C.A.N. 2503-04; see also United States v. Hanover Ins. Co., 82 F.3d 1052, 1055-56 (Fed. Cir. 1996); Phillips III, 4 F.3d at 863 ("The legislative history in support of 2415(a) indicates Congress was motivated in part by notions of fairness and equity in government dealings with private litigants, and further motivated to reduce the costs of record keeping and encourage prompt agency actions on claims."). In the words of the Federal Circuit,

[T]he clear purpose of Congress in passing [section 2415] was to promote fairness to parties defending against stale Government contract and tort claims notwithstanding whatever prejudice might accrue thereby to the Government as a result of the negligence of its officers.

S.E.R., Jobs for Progress, Inc. v. United States, 759 F.2d 1, 8 (Fed. Cir. 1985) (footnote omitted). An interpretation of 2415 permitting federal agencies to avoid the limitation period by utilizing administrative orders to collect monies owed under contract obviously would thwart this purpose. An interpretation of 2415 encompassing such administrative orders within the phrase "every action" obviously serves this purpose. See Griffin v. Oceanic Contractors, Inc., 458 U.S. 64, 575 (1982) (giving preference to a reasonable alternative interpretation consistent with legislative purpose over an interpretation that would produce absurd results).

The structure of 2415 as a whole further advocates a broad interpretation of the phrase "every action." To elaborate, subsection (f) includes two narrowly drafted exceptions to the time-bar, permitting the government to defensively assert time-barred claims by way of offset or counter claim. 28 U.S.C. 2415(f). Section 2415(i), added in 1982, expressly exempts administrative offsets from the six-year limitations period set forth in 2415(a). 28 U.S.C. 2415(i); see also S. Rep. No. 97-378, at 16 (1982), reprinted in U.S.C.C.A.N. 3377, 3392 (explaining that 2415(i) "allows collection of delinquent debts owed the government by administrative offset beyond the six-year statute of limitations"). We agree with the Federal...