MEMORANDUM & ORDER LIFTING STAY
KENNETH G. GALE, Magistrate Judge.
The undersigned Magistrate Judge entered a Minute Order suspending all deadlines in this case, by agreement of the parties, on July 24, 2017. (Doc. 638, text entry.) This stay was entered "in light of recent developments in related cases." (Id.) The case was set for a telephone status conference, which was ultimately held on October 2, 2017, wherein the Court and the parties discussed whether the stay should remain in effect. Prior to the conference, the parties supplied the Court with emails detailing their respective positions and discussing relevant events in related cases. (Docs. 641-1, 641-2.)
Defense counsel stated that at the time the deadlines were suspended, they were "preparing a petition for hearing and rehearing en banc in the Tenth Circuit relating to that court's ruling on ownership and rights to gas underlying [Defendants'] wells on and after June 2, 2010, the date that FERC issued the regulatory certificate authorizing the expansion of [Plaintiff's] storage field." (See Doc. 641-1.) That petition was denied by the Tenth Circuit, but Defendants have since "filed a motion to stay issuance of the Tenth Circuit's mandate pending their petition for a writ of certiorari in the U.S. Supreme Court," which is currently pending. (Id.)
Concurrently, in the parallel Kansas state court action, the Pratt County District Court issued a ruling that denied Plaintiff's "motion to reconsider, and affirm[ed] its original order that [Defendants] had the right to operate their wells after the June 2, 2010[,] FERC Certificate . . . ." (Id.) Plaintiff appealed that order in August, 2017.
Defense counsel contends that "[w]ith the issuance of the State court order, there are now Kansas-State and Federal rulings from separate lawsuits that stand in direct conflict, both addressing identical unresolved issues of Kansas law relating to [Plaintiff's] storage field, migrating storage gas, and the rights to and ownership of that gas." (Id.) Because of this, Defendants argue the stay should continue — "the resolution of the condemnation case and, even more importantly, the Pratt County appeal, will directly affect the parties' rights in this case." (Id.) Defendants continue that
proceeding with the present case will impose significant financial burdens on all the parties — in particular the defendants, whose imminent expert expenses will be substantial. All of those expenses could be for naught depending on how the Pratt County case and the condemnation case are finally resolved. And such waste will likely be compounded if discovery proceeds at this time because the experts' opinions regarding the producers' defenses, the producers' counterclaims, and Northern's damages claims are all directly impacted by who has the right and title to post-June 2, 2010[,] gas.
(Id.)
Plaintiff points to an Order from May 2106 in which the District Court lifted a stay in this case that had been in effect for five years. (Doc. 641-2.) Therein, the District Court held that "[t]he pending state case and the Tenth Circuit appeal do not include claims for nuisance . . ., and they clearly will not `resolve' these claims, as the court has already pointed out." (Doc. 561.) Plaintiff also quotes the following language from the District Court's February 2016 Order that initially denied the motion to lift the prior stay:
The court cannot accept defendants' premise that the above-described court decisions `have effectively disposed of Northern's remaining claims.' The question of whether Northern had title to storage gas that was in the Expansion Area after June 2, 2010 (both Judge Belot and the state court have ruled it did not), may be a factor in whether a nuisance existed, but it is not necessarily dispositive of a claim for nuisance under Kansas law. Both the Tenth Circuit and the Kansas Supreme Court recognized as much. See L.D. Drilling, Inc., 697 F.3d at 1271-72 ("The state case addressed whether Northern still had title to the natural gas that migrated several miles away from the Field. Here, on the other hand, the issue is whether Defendants' production from their wells in the expansion area unreasonably interfered with Northern's storing its natural gas in the Field. Therefore, the state court's decision . . . cannot make Defendants' interference with Northern's storage field reasonable."); ONEOK Field Svcs. Co., 296 Kan. at 928 (noting same distinction).
(Doc. 550, at 7-8.)
Plaintiff argues that "[y]et another stay will push this matter well beyond ten years since its initial filing." (Doc. 641-2.) Plaintiff contends this is unnecessary because the Tenth Circuit's opinion "provides the necessary guidance" in the present case as to whether "ownership of storage gas after issuance of the June 2010 FERC Certificate remains an issue with respect to [Plaintiff's] nuisance claim or any counterclaim advanced by [Defendants] . . . ." (Id.)
The District Judge's prior Order provides clear guidance. This matter should move forward not withstanding potential developments in related cases which may be decided for months or years. As such, the stay and agreed suspension of deadlines (Doc. 638) in this matter is lifted. The parties are directed to submit to the Court a proposed joint Scheduling Order within three (3) weeks of the date of this Order.
IT IS SO ORDERED.
1 Attachment
2017-07-25 Memorandum Opinion denying NNGs Mot to Reconsider and Affg 20 . . . . pdf
Dear Judge Gale,
In a July 24, 2017 Minute Order, the Court suspended all deadlines in this case from and after May 30, 2017, "to enable the parties to evaluate this matter in light of recent developments in related cases." (Doc. 638.) The "related cases" referred to are the parallel proceedings, both filed by Northern; namely, one Kansas-state court proceeding in Pratt County (2009-CV-111, App. No. 17-118239-A), and one federal condemnation proceeding (D. Kan. No. 10-1232, App. No. 15-3272). The Court ordered the parties to succinctly summarize "the issues and developments which they believe will be important for the status conference and proposals for a new scheduling order, so that to the extent possible, the Court has advance notice of the position of the parties." (Doc. 638.) In accordance with that Order, the Producers respectfully submit the following summary of significant developments that have occurred in both the Kansas State court proceeding and the federal condemnation proceeding, all of which bear directly on the parties' claims in this case:
• At the time the Court suspended all deadlines in this case, counsel for the Producers were preparing a petition for rehearing and rehearing en banc in the Tenth Circuit relating to that court's ruling on ownership and rights to gas underlying the Producers' wells on and after June 2, 2010, the date that FERC issued the regulatory certificate authorizing the expansion of Northern's storage field.
• Just days before the Producers filed their petition for rehearing in the Tenth Circuit, the Pratt County district court in the parallel Kansas State-court action finally issued its ruling denying Northern's motion to reconsider, and affirming its original order that the Producers had the right to operate their wells after the June 2, 2010 FERC Certificate—a ruling on which the parties had been waiting for just under three years. That ruling is attached to this email for the Court's reference.
• Notably, the Pratt County district court certified its ruling as a final, appealable order pursuant to K.S.A. 60-254(b), and Northern did appeal that order on August 23, 2017.
• With the issuance of the State court order, there are now Kansas-State and Federal rulings from separate lawsuits that stand in direct conflict, both addressing identical unresolved issues of Kansas law relating to Northern's storage field, migrating storage gas, and the rights to and ownership of that gas.
• Following Northern's appeal of the Pratt County case, the Producers filed a motion to transfer the appeal directly to the Kansas Supreme Court, which Northern opposed. That motion remains pending, but regardless of whether it is ultimately granted, the Pratt County case is currently proceeding through the Kansas appellate courts.
• Meanwhile, the Tenth Circuit denied the Producers' petition for rehearing and rehearing en banc; however, the Producers have since filed a motion to stay issuance of the Tenth Circuit's mandate pending their petition for a writ of certiorari in the U.S. Supreme Court, which motion was fully briefed September 12, 2017, and remains pending at this time. Regardless of whether the Tenth Circuit stays issuance of the mandate, the Producers will be filing a petition for certiorari in the U.S. Supreme Court relating to the same legal issues that are pending in the Pratt County appeal.
The above developments bear directly on the parties' claims in this case. First, Northern's nuisance claim necessarily contains a "reasonableness" component, PIK Civil 4th § 103.06, and the Producers' right and title to the gas certainly bears on the reasonableness of their conduct during the relevant timeframe. Moreover, in contrast to the Tenth Circuit's current ruling, the Pratt County district court held that the Producers had every right to operate their wells on and after the issuance of the June 2, 2010 FERC Certificate. This is directly relevant on a number of Northern's pending claims in this lawsuit, a fact of which Northern is well aware. The most obvious example is Northern's conversion claim, which seeks compensation for gas produced on and after issuance of the June 2, 2010 FERC Certificate, i.e., the very same money that the Pratt County court held Northern owed the Producers. (See Northern's Response to Nash's Motion for Judgment on the Pleadings, Doc. 631, at 4 (May 17, 2017) (Northern discussing its conversion claim as being related to right and ownership of post-June 2, 2010 gas and the parallel condemnation action). See also Northern's Third Am. Compl., Doc. 564, at 17-22 (Aug. 11, 2016).)
The above developments also bear directly on the Producers' defenses to Northern's claims as well as the Producers' counterclaims in this lawsuit, many of which specifically relate to their right under Kansas law to operate their wells after the issuance of the June 2, 2010 FERC Certificate.
Because it is "closely related to [the] condemnation proceeding," this case was previously stayed by Judge Bostwick (Doc. 474 at 2), and Judge Marten. And though Northern will almost certainly argue that its nuisance claim is independent of the issues present in the parallel proceedings, that is simply untrue, as noted by Judge Marten when denying Northern's previous motion to lift the stay. (Doc. 550 at 7 (acknowledging that "[t]he question of whether Northern had title to storage gas that was in the Expansion Area after June 2, 2010 (both Judge Belot and the state court have ruled it did not), may be a factor in whether a nuisance existed . . . under Kansas law").
Indeed, the Kansas Supreme Court in the ONEOK decision rejected Northern's "nuisance" claim:
Northern concedes that section (b) primarily restricts the rights of interest owners of the surface lands under which injected gas lies. Nevertheless, Northern ascribes broader meaning to the statute based on the two disjunctive phrases italicized above. Specifically, Northern contends Nash and L.D. created "pressure sinks" which caused storage gas to migrate outside Northern's certificated area and toward Nash's and L.D.'s wells. Based on these alleged activities, Northern concludes Nash and L.D. are "persons" who have "otherwise interfere[d]" with Northern's possession of the gas.
Northern's "interference" argument, while initially appealing, is unpersuasive for two reasons. First, the italicized portion of section (b) upon which Northern relies, like the remainder of section (b), applies only to "such gas." Unquestionably, the phrase "such gas" in section (b) references the gas described in section (a) above. Second, as we have determined, the gas described in section (a) does not include gas which has migrated beyond the certificated boundaries of the storage site.
Additionally, we perceive a disconnect between Northern's allegations of conversion against ONEOK and Lumen and Northern's allegations of "interference" against Nash and L.D. based on the language of section (b). We note that in the parallel federal litigation described above, the United States District Court for the District of Kansas eventually granted Northern's motion for a preliminary injunction, ordering Nash and L.D. to shut in certain wells and cease production by February 2011. The district court in that case relied, in part, on the likelihood that Northern might succeed on its nuisance claim against Nash and L.D., a claim which arises from the same "pressure sink/interference" argument Northern presses here. Northern Natural Gas Co. v. L.D. **1121 Drilling, Inc., 759 F.Supp.2d 1282 (D.Kan.2010), aff'd 697 F.3d 1259 (10th Cir.2012).
N. Nat. Gas Co. v. ONEOK Field Servs. Co., 296 Kan. 906, 927, 296 P.3d 1106 (2013) (emphasis added).
In both the Kansas State court proceeding and in the condemnation action, that issue is not finally resolved and remains hotly disputed between the parties on appeal in those cases. Simply put, the resolution of the condemnation case and, even more importantly, the Pratt County appeal, will directly affect the parties' rights in this case.
Additionally, proceeding with the present case will impose significant financial burdens on all parties— in particular the defendants, whose imminent expert expenses will be substantial. All of those expenses could be for naught depending on how the Pratt County case and the condemnation case are finally resolved. And such waste will likely be compounded if discovery proceeds at this time because the experts' opinions regarding the producers' defenses, the producers' counterclaims, and Northern's damages claims are all directly impacted by who has the right and title to post-June 2, 2010 gas.
Northern elected to file multiple lawsuits that address identical legal issues in federal and Kansas State forums at the same time, and waiting for the proper and final disposition of those overlapping issues by those courts is an appropriate and economic use of this Court's (and the parties') resources.
In light of the above, the Producers believe the present case should remain stayed pending the resolution of the Pratt County lawsuit by the Kansas appellate courts and the resolution of the condemnation proceeding by the U.S. Supreme Court. If the Court disagrees that this case should remain stayed, the Producers will expeditiously provide to the Court a proposed case schedule.
Best regards,
Daniel
Daniel J. Buller
FOULSTON SIEFKIN LLP
9225 Indian Creek Pkwy. #600
Overland Park, Kansas 66210
(913) 253-2179 - phone
(866) 347-9613 - fax
www.foulston.com
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3 Attachments
2017-07-11 OPINION.pdf 2017-08-23 Notice of Appeal.pdf 2017-09-28 proposed deadlines.pdf
Judge Gale,
Good afternoon. Pursuant to the parties' agreement and order of this court, the following summary of recent events and attached proposed schedule is submitted on behalf of Northern Natural Gas Company in the abovereferenced matter.
In early 2016, this Court examined whether to lift a long-standing stay issued by Judge Bostwick in August of 2011. See Doc. 550, 561. Ultimately, on May 18, 2016, this Court lifted the stay. In doing so, this Court found: "[t]he pending state case and the Tenth Circuit appeal do not include claims for nuisance. . ., and they clearly will not `resolve' these claims, as the court has already pointed out." See Doc. 561, p. 2 (citing Doc. 550, at p. 7-8). The Court relied upon its analysis in February 2016: "The court cannot accept defendants' premise that the above-described court decisions `have effectively disposed of Northern's remaining claims.' The question of whether Northern had title to storage gas that was in the Expansion Area after June 2, 2010 . . . may be a factor in whether a nuisance existed, but it is not necessarily dispositive of a claim for nuisance under Kansas law. Both the Tenth Circuit and the Kansas Supreme Court recognized as much." See Doc. 550, p. 7 (citing L.D. Drilling, Inc., 697 F.3d at 1271-72 ("The state case addressed whether Northern still had title to the natural gas that migrated several miles away from the Field. Here, on the other hand, the issue is whether Defendants' production from their wells in the expansion area unreasonably interfered with Northern storing its natural gas in the Field. Therefore, the state court's decision . . . cannot make Defendants' interference with Northern's storage field reasonable.")) ONEOK Field Svcs. Co. 296 Kan. at 928 (noting same distinction).
Following this Court's May 2016 decision to lift the stay, nothing has occurred that should prevent this matter from moving toward resolution, or that should alters this court's analysis in Doc 550 or 561. The following is a brief timeline of recent events:
1. On July 11, 2017, in the Condemnation Case (Northern v. Approx. 9,117.53 Acres, et. al., Case No. 10-CV-1232), the Tenth Circuit held:
a. Defendants did not own storage gas remaining in the ground on the date of the June 2, 2010 FERC Certificate; and
b. Defendants' arguments to the contrary rely upon a "fundamental misconception about the rule of capture, which the Landowners and Producers suggest gives them vested property interests in all gas that has migrated, or will ever migrate, to their property. The rule of capture, however, confers only a right to produce the migrated gas. It confers no right to the gas itself. To capitalize on their opportunity to `capture' the gas, the Landowners and Producers would have had to actually produce the gas and would then own the produced gas . . . Rather than yielding an unconstitutional taking, Kansas law merely prohibits the Landowners and Producers from recovering the value of storage gas that Northern both (1) originally owned and injected, and (2) acquired certificate authority over. . . . . Northern owned all of the gas within its certificated boundaries after the date of certification . . . The Producers only had a right to produce the gas until the date of certification.
See July 11, 2017 Opinion of the Tenth Circuit in the Condemnation Case, attached hereto.
2. On July 25, 2017, the Pratt County Court issued its Memorandum Opinion denying Northern's Motion to Reconsider the August 15, 2014 Memorandum Opinion. (By way of reminder, on August 15, 2014 the Pratt County Court issued a Memorandum Opinion granting summary judgment against Northern on issues relating to ownership of migrated storage gas in the Extension Area following the June 2, 2010 Certificate. Northern timely filed a motion for reconsideration and modification of the August 15, 2014 Memorandum Opinion.)
3. On July 31, 2017, before the Tenth Circuit, in the Condemnation Action, Producers filed a Petition for Rehearing. To support their request for rehearing, Producers argued that the case should be stayed pending a final resolution by the Kansas Appellate Courts of the issues relating to ownership of migrated storage gas in the Extension Area following issuance of the June 2, 2010 FERC Certificate.
4. On August 23, 2017, Northern timely appealed the Pratt County Court's Summary Judgment Memorandum Opinion. A copy of Northern's Notice of Appeal is attached.
5. On August 28, 2017, with knowledge of (a) the Pratt County Court's August 15, 2014 Memorandum Opinion and (b) Northern's appeal therefrom, the Tenth Circuit issued an Order denying Producers' Petition for rehearing in the Condemnation Case. See Doc. 639. By denying Producers request for rehearing, the Tenth Circuit implicitly found no ambiguity in Kansas law regarding ownership of migrated storage gas in the Extension Area following issuance of the June 2, 2010 FERC Certificate.
6. On August 31, 2017, Producers, in the Condemnation Case, filed a Motion to Stay Issuance of Mandate. Northern filed its Response to Producers Motion to Stay Issuance of Mandate on September 6, 2017. Producers filed their collective reply thereto on September 12, 2017.
7. On September 18, 2017, Producers' filed a motion to transfer the Pratt County appeal to the Kansas Supreme Court. Northern filed a response opposing that motion on September 21, 2017. Producers' filed a reply the following day. No order has issued on Producers' motion to transfer.
Based on communications with opposing counsel, Northern is informed that Producers will be requesting a stay of this case until the Pratt County case is decided by the Kansas Supreme Court. Yet another stay will push this matter well beyond ten years since its initial filing. See Doc. 1, filed December 23, 2008. By way of example, when Northern appealed the Pratt County court's first summary judgment order in June 2010, the case was transferred directly to the Kansas Supreme Court, promptly briefed and argued, and a decision did not issue until nearly three years later, in March 2013. "When a federal court has jurisdiction, it has a `virtual unflagging obligation . . . to exercise' that authority." See Doc. 561. This Court should enter a scheduling order that places this case on a path toward prompt resolution. That the Pratt County case is currently on appeal should not affect the Court's obligation to move this case forward. Indeed, once the mandate issues in the Condemnation Case, the Tenth Circuit's opinion will be binding. Though the Tenth Circuit opinion was issued in a separate case, it involved the same parties and should have the same effect in both cases. Known as the "mandate rule," the mandate informs the district court of what it must do to implement the appellate decision on remand and limits further proceedings to the scope of the mandate. The lower court "must comply strictly with the mandate rendered by the reviewing court" and "may not deviate" from the mandate. Huffman v. Saul Holdings Ltd P'ship, 262 F.3d 1128, 1132 (10th Cir. 2001); see also, e.g., United States v. Rivera-Martinez, 931 F.2d 148, 150 (1st Cir. 1991) ("When a case is appealed and remanded, the decision of the appellate court establishes the law of the case and it must be followed by the trial court on remand." (emphasis in original)). Thus, to the extent ownership of storage gas after issuance of the June 2010 FERC Certificate remains an issue with respect to Northern's nuisance claim or any counterclaim advanced by Producers, the Tenth Circuit's opinion provides the necessary guidance for this Court to follow.
Northern has attached a proposed scheduling order to move this case forward. Northern further informs the Court that Mark Coldiron and Corey Neller are set to participate in trial (for approximately 3 weeks) in United States District Court for the Western District of Oklahoma in case styled Blocker, et. al. v. ConocoPhillips Company, Case No. 17-CV-00246-D with a Trial Docket of September 3, 2018.
Thank you.
Corey A. Neller
Director
900 Robinson Renaissance
119 N. Robinson
Oklahoma City, OK 73102
Direct Dial 405.228.2135
Telephone 405.239.6040
Facsimile 405.239.6766
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