Standard Alaska Production Co. v. Schaible, s. 88-4008

• Decision Date: 21 April 1989
• Docket Number: 88-4035,Nos. 88-4008,s. 88-4008
• Parties: STANDARD ALASKA PRODUCTION COMPANY, Exxon Corporation, Chevron U.S.A., Inc., Plaintiff-Appellants/Cross-Appellees, v. Grace B. SCHAIBLE, Attorney General of Alaska, Judith M. Brady, Comm'r of Natural Resources of Alaska, Margaret J. Hayes, Director of Div. of Lands, James E. Eason, Director of Div. of Oil and Gas, and Walter L. Carpeneti, Judge of Superior Court of Alaska, Defendants-Appellees/Cross-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 624

874 F.2d 624

STANDARD ALASKA PRODUCTION COMPANY, Exxon Corporation Chevron U.S.A., Inc., Plaintiff-Appellants/Cross-Appellees, v. Grace B. SCHAIBLE, Attorney General of Alaska, Judith M Brady, Comm'r of Natural Resources of Alaska, Margaret J Hayes, Director of Div. of Lands, James E. Eason, Director of Div. of Oil and Gas, and Walter L. Carpeneti, Judge of Superior Court of Alaska, Defendants-Appellees/Cross-Appellants.

Nos. 88-4008, 88-4035.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 7, 1989.

Decided April 21, 1989.

C. Douglas Floyd, San Francisco, Cal., for plaintiff-appellant/cross-appellees, Chevron U.S.A., Inc.

Bruce Botelho, Asst. Atty. Gen., Dept. of Law, Oil, Gas & Mining Section, Juneau, Alaska, for defendants-appellees/cross-appellants.

Appeal from the United States District Court for the District of Alaska.

Before WRIGHT and ALARCON, Circuit Judges, and RAFEEDIE ^*, district judge.

ALARCON, Circuit Judge:

Standard Alaska Production Company, Exxon Corporation and Chevron U.S.A., Inc. (Producers), appeal from the order granting the motion of Grace B. Schaible, et al. (State Officials) to dismiss this suit on the ground that the claim is not ripe. The State Officials cross-appeal from (1) the denial of their motion to dismiss pursuant to the Eleventh Amendment and (2) the refusal to dismiss this matter under Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971).

I

We review independently, without deference to the district court's rulings, each of the issues raised on this appeal: (1) whether the district court erred in denying the motion to dismiss based on the ground that federal jurisdiction was lacking due to the Eleventh Amendment, South Delta Water Agency v. United States Dept. of Interior, 767 F.2d 531, 535 (9th Cir.1985); (2) whether the district court erred in dismissing the case on ripeness grounds, Assiniboine and Sioux Tribes v. Board of Oil and Gas Conservation of Montana, 792 F.2d 782, 787 (9th Cir.1986); and (3) whether this suit should have been dismissed pursuant to the Younger abstention doctrine, World Famous Drinking Emporium, Inc. v. City of Tempe, 820 F.2d 1079, 1081 (9th Cir.1987).

II

On September 2, 1977, the State of Alaska (Alaska) filed an action in an Alaskan trial court for injunctive and declaratory relief against Amerada Hess Corporation and eighteen North Slope oil companies including Standard Alaska Production Company, Exxon Corporation, and Chevron, U.S.A., Inc. State of Alaska v. Amerada Hess Corporation et al., Civil No. IJU-77-847, (Hess). Alaska sought a declaration of its rights under certain oil and gas leases negotiated with the Producers.

On July 6, 1983, Alaska filed a second amended complaint in the state action seeking damages for underpayment of royalties pursuant to the leasing agreement. In this pleading, Alaska alleged it had not received all of its royalties because the Producers had been underestimating the value of the oil and gas taken from Prudhoe Bay and Kuparuk River oil fields. The state court proceedings are scheduled for trial on April 4, 1990.

In their amended complaint for injunctive and declaratory judgment, the Producers claim that there would be three basic adjustments to Alaska's share of royalties: (1) the lessees will owe at least $1 billion in royalties on past production; (2) the value of royalties on future production would increase by an additional $1 billion; and (3) Alaska would receive $600 million in contract adjustments on any oil previously received in the form of royalties-in-kind.

The Producers contend that "the monetary recovery sought by the state in Hess will substantially increase the Alaska Permanent Fund and, consequently, the annual amount of dividends from the fund that every Alaska resident has a statutory right to receive." Brief for Appellants at 3. Every resident of Alaska who applies and who meets certain residency requirements is entitled to receive an annual dividend from the earnings on the permanent fund investment. (Alaska Statute Secs. 43.23.005-.015.) The residency requirements are: (1) that an applicant live in Alaska from October 1st through March 31st of the year preceding disbursement of dividends, and (2) the applicant submit a written statement of intent to remain a permanent resident of Alaska. Id. The amount of each year's dividend is determined by a fixed formula. (Alaska Statute 37.13.140).

III

On November 2, 1987, the Producers filed suit in the District Court for the District of Alaska for injunctive and declaratory relief under 42 U.S.C. Sec. 1983 "on the ground that the continuation of [the state] action is a violation of their Fourteenth Amendment right to trial before an impartial tribunal." Brief for Appellants at 2. They claim that with an annual increase in dividends, "every potential judge and juror in Alaska state court has a direct and substantial pecuniary interest in the outcome of Hess." Id. at 3. The Producers argue that issuance of an injunction "would not prevent the state from pursuing its royalty claims against the Hess defendants, but would require it to pursue those claims in an alternative forum where the judges and jurors have no financial interest in the case, such as the court of another state." Id.

The State Officials moved to dismiss on the following grounds: (1) The Eleventh Amendment deprives the district court of subject matter jurisdiction; (2) There is no justiciable case or controversy; (3) Principles of comity and federalism embodied in the rule of abstention require dismissal; and (4) The complaint failed to allege sufficient facts to support a finding of a due process violation.

This matter was assigned to Judge Kleinfeld of the United States District Court for the District of Alaska. Judge Kleinfeld recused himself from presiding over this matter. Judge Kleinfeld advised the parties of the reasons he disqualified himself as follows:

I don't think we need go so far as to examine a judge's balance sheets and the exact size of his family. Mine is five, as counsel obviously researched when they wrote their memorandum. Some judges have smaller families and they make less money off of dividends, but it doesn't matter a whole lot, it's still substantial. It's substantial enough so that it would make a good hostile headline impairing the appearance of integrity of the judicial process.

As a result of Judge Kleinfeld's recusal, Judge Belloni of the United States District Court for the District of Oregon was designated to preside over the federal court proceedings. The district court dismissed the Producers' federal cause of action on ripeness grounds. The court expressly denied the motions to dismiss based on the Eleventh Amendment and failure to state a claim. The court did not reach the State Officials' abstention arguments.

We first consider the State Officials' contention in their cross-appeal that the district court lacked jurisdiction to hear this matter because they are immune from suit under the Eleventh Amendment.

IV

The State Officials argue that there is no federal court jurisdiction over this matter because the Eleventh Amendment prohibits a citizen from suing a state. Ex Parte Young, 209 U.S. 123, 159-160, 28 S.Ct. 441, 453-454, 52 L.Ed. 714 (1908). Eleventh Amendment immunity extends to an action or a suit filed against a state agency or official. Pennhurst State School & Hosp. v. Halderman, 465 U.S. 89, 101-102, 104 S.Ct. 900, 908-909, 79 L.Ed.2d 67 (1984). The Eleventh Amendment does not, however, preclude a suit to enjoin a state official from violating the federal constitution. Ex Parte Young, 209 U.S. at 159-160, 28 S.Ct. at 453-454; Pennhurst, 465 U.S. at 101-103, 104 S.Ct. at 908-909.

The Producers allege that the filing of the Hess action in an Alaskan state court is a violation of their right under the Fourteenth Amendment to an impartial tribunal. They contend that the monetary recovery sought in the Hess matter will increase the annual dividends paid to the Alaska residents. Thus, it is argued, every judge and potential juror in that state "has a direct and pecuniary" interest in the outcome of Hess. Brief for Appellants at 3.

The State Officials argue, however, that "the connection between them and the alleged due process deprivation must be deemed too tenuous to permit reliance upon the doctrine of Ex Parte Young to avoid the bar of Eleventh Amendment state immunity." Brief for Appellees at 36. They further argue that the essence of the Producers' claim "is directed at the effect of the Permanent Fund dividend program on the Amerada Hess judge and jury; their claim does not arise out of any allegation of unconstitutional conduct on the part of any of the defendants named here." Id.

The State Officials' argument is unpersuasive. They are the parties responsible for the filing and maintenance of the state court action against Hess. Grace B. Schaible is the Attorney General of Alaska. She is responsible for bringing civil suits on behalf of the state. (Alaska Stat., Sec. 44.23.020(b)). Judith M. Brady, the Commissioner of Natural Resources of the State of Alaska, Mary J. Hayes, the Director of the Division of Lands, and James E. Eason, the Director of the Division of Oil and Gas are the officials responsible for collecting the royalty revenues in dispute in the state court proceedings. (Id. Secs. 44.37.010-.020, 38.05.035.) The action was assigned for trial before Walter L. Carpeneti of the Superior Court of the State of Alaska. The required connection with the enforcement of the act, under the doctrine announced in Ex Parte Young, is therefore present.

We find that the Eleventh Amendment does not bar the Producers from seeking relief in the federal courts and we affirm the district court's denial of appellees' motion to dismiss under Eleventh Amendment state immunity.

V

The Producers contend that the district court erred in granting the state officials' ...