Opinion
Case No. A1-03-009
March 19, 2003
ORDER GRANTING MOTION TO REMAND
Before the Court is the Plaintiff's Motion to Remand the above-entitled action to the Southwest Judicial District Court for Billings County, North Dakota. The basis for remand is lack of subject matter jurisdiction under Rule 12(b)(1) of the Federal Rules of Civil Procedure and 28 U.S.C. § 1447. For the reasons outlined below, the Plaintiff's Motion to Remand is GRANTED.
I. BACKGROUND OF THE CASE
For the purposes of this order, the facts as set forth in the Plaintiff's Complaint are presumed to be true. The Plaintiff, Helen Kary ["Kary"], is a North Dakota resident. Defendant ExxonMobil Corporation ["ExxonMobil"] is a New Jersey corporation with its principal place of business in Texas. Defendant BP America Production Company ["BP America"] is a Delaware corporation that also has its principal place of business in Texas.
Kary initiated the above-entitled action in state district court in Billings County, North Dakota, on behalf of herself and of all royalty holders similarly situated in the Big Stick Madison Unit. Kary alleges in her complaint that ExxonMobil breached its royalty obligations since November 1999; that ExxonMobil has breached its fiduciary duties to royalty holders; that ExxonMobil has failed to provide an accounting of the sale of unitized royalty oil as required by state law, and that ExxonMobil and BP America have converted unitized oil for their own use.
According to Kary's complaint, a lessee developed oil production on land it leased from Gus and Doris Meschke in an area of Billings County, North Dakota, known as the Big Stick Madison Field. Under the terms of two leases with the Meschkes, the lessee agreed to provide the Meschkes with either one-eighth of any oil produced or one-eighth of any royalties derived through the sale of any oil produced by the wells. Kary, her children, her brothers and their children, and some grandchildren subsequently obtained a fractional interest in the oil/royalties derived from one of the wells.
The Big Stick Madison Unit was created in March 1987 when oil production in the Big Stick Madison Field was unitized in accordance with a Unit Agreement approved by the Industrial Commission of the State of North Dakota. Kary and other members of her family possessing an interest in the lease signed a Ratification and Joinder of the Unit Agreement that designated their individual participating royalty shares of all the unitized oil produced from the Big Stick Madison Unit. Tenneco Oil Company served as Unit Operator until selling its operations along with its entire interest in the Meschke I Lease and a portion of its interest in the Meschke II Lease to the Amoco Production Company (since merged with BP America). In 1989, the Exxon Corporation (since merged into ExxonMobil) assumed the mantle of Unit Operator of the Big Stick Madison Unit after acquiring Amoco Production Company's unit operations and interests in both Meschke leases. It sold its unit operations and interests in the Meschke leases sometime after April 2002.
The `unitization' of oil and gas production combines the separately-owned tracts overlying a pool. . .of oil and gas for production by one or more `operators' in behalf of all interest owners." Charles B. Renfrew, Intercompetitor Cooperation in the Petroleum Industry, 61 Antitrust L.J. 559, 565 (1993). "Unitization functionally transforms a multiple-owner reservoir into a single-owner reservoir. . .[where the] owners agree to designate one party as the unit operator, subject to supervision by an operating committee, and agree to share the total oil and gas production of the unit in accordance with a formula that recognizes each owner's correlative rights." Richard J. Pierce, Jr., State Regulation fo National Gas in a Federally Deregulated Market: The Tragedy of the Commons Revisited, 73 Cornell L. Rev. 15 (1987). Voluntary unitization requires the consent of all affected parties subject to the approval of North Dakota's Industrial Commission. See N.D. Cent. Code Chapter 38-08.
Between November 1999 and April 2002, ExxonMobil allegedly withheld $1.05 in royalties for each barrel of oil due Kary from the Meschke I Lease wells. Kary now seeks to recover these unpaid royalties from ExxonMobil. She also seeks to recover royalties from BP America on the grounds that it purchased the oil from ExxonMobil.
ExxonMobil and BP America removed Kary's action to this Court on January 27, 2003, citing diversity of citizenship and an amount in controversy exceeding $75,000 as a basis for removal. Kary now seeks to remand the action back to state court and contends that the claims of each putative class member (all royalty holders similarly situated in the Big Stick Madison Unit) do not meet the amount in controversy requirement necessary to sustain federal court jurisdiction. In her prayer for relief Kary requests an accounting, compensatory damages, conversion damages, antitrust damages, pre-judgment interest at the rate of 18% per annum, post-judgment interest at the same rate, and costs and attorney's fees. See Complaint, ¶ 23. While Kary has not quantified the damages she seeks to recover in her prayer for relief, she maintains that no individual royalty holder/proposed plaintiff (exclusive of lease royalty for federal leases) appears to have a claim in excess of $25,000. See Plaintiff's Statement of Material Facts ¶ 7. Kary adds that her basic claim for unpaid royalties "would approximate $1,000." See Plaintiff's Brief on Motion to Remand, p. 8.
II. LEGAL DISCUSSION A. MOTION TO REMAND
28 U.S.C. § 1332(a)(1) provides that district courts shall have original jurisdiction of all civil actions between citizens of different states where the amount in controversy exceeds the sum or value of $75,000. Whether a plaintiff satisfies the $75,000 amount in controversy requirement is a jurisdictional issue for the Court to decide. See Trimble v. Asarco, Inc., 232 F.3d 946, 959 (8th Cir. 2000). A complaint must be dismissed or the case remanded if it appears that the value of the claim is less than the required amount of $75,000. Id. The party opposing remand has the burden of establishing federal subject-matter jurisdiction. Green v. Ameritrade, Inc., 279 F.3d 590, 596 (8th Cir. 2002).
It is well-established that in order to establish diversity jurisdiction in a class action suit, each member of the putative class must meet the $75,000 amount in controversy requirement. Trimble v. Asarco, Inc., 232 F.3d 946, 959. See Zahn v. Int'l Paper Co., 414 U.S. 291, 300 (1973). It is generally accepted that individual class members' claims for actual damages, punitive damages, restitution, and attorneys fees may not be aggregated for jurisdictional purposes. See Crawford v. F. Hoffman-La Roche Ltd., 267 F.3d 760, 765 (8th Cir. 2001). However, courts have recognized an exception to this non-aggregation rule in instances where several plaintiffs "unite to enforce a single title or right in which they have a common and undivided interest." Crawford v. F. Hoffman-La Roche Ltd., 267 F.3d 760, 765; see Chase v. W.R. Grace Co. — Conn., 168 F. Supp.2d 1020, 1022 (D.Minn. 2001). An individual claim is one that the plaintiff cannot enforce without the presence of the other class member.
The paradigm cases, allowing claims to be aggregated, are those which involve a single indivisible res, such as an estate, a piece of property (the classic example), or an insurance policy. Chase v. W.R. Grace Co. — Conn., 168 F. Supp.2d 1020, 1022; see Gilman v. BHC Securities, Inc., 104 F.3d 1418, 1430 (2d Cir. 1997) (explaining that "one feature of `common and undivided' interests in a single title or indivisible res is that the rights to such interests cannot be determined without implicating the rights of every other person claiming a similar entitlement").
In a remand action, it is the defendant's burden to demonstrate that the plaintiff is seeking to enforce a single, indivisible right. Chase v. W.R. Grace Co.-Conn, 168 F. Supp.2d 1020, 1022. If the plaintiff's claims are separate and distinct claims related to their properties, aggregation may not be used to reach the threshold amount. The fact that claims may be common does not mean the claims are undivided. Id.
In Kary's Brief on Motion to Remand, Kary acknowledges that she did not plead a specific amount of damages in her Complaint's prayer for relief. Kary states that she does not know with certainty the actual amount in controversy, but speculates that each putative class members claim would not exceed $25,000. In any event, Kary asserts that neither ExxonMobil nor BP America can establish that each prospective plaintiff can satisfy the amount in controversy requirement of $75,000. She also asserts that the aggregation of the proposed plaintiffs' claims would be inappropriate given that her right of recovery is not dependent or interrelated to the other proposed plaintiffs'_ right of recovery. Rather, Kary maintains that each putative class member is entitled to enforce their own separate and distinct right to royalties under their respective oil leases.
As a result, the action is one that should not be certified as a class action under either Rule 23 of the North Dakota Rules of Civil Procedure or Rule 23 of the Federal Rules of Civil Procedure.
ExxonMobil and BP America contend that any determination regarding the amount in controversy for purposes of federal jurisdiction rests on an examination of the Complaint as it existed at the time the petition for removal was filed and that aggregation of the putative class members' damages is appropriate under the circumstances. They maintain that the royalty holders' share of the unitized oil is an "indivisible res" and estimate that the collective amount in controversy with respect to the royalty holders' share of the unitized oil is approximately $76,000. For support they rely upon Rocket Oil and Gas Company v. Arkla Exploration Company, 435 F. Supp. 1303, 1304 (W.D.Okla. 1977).
In Rocket Oil, the plaintiff initiated a class action in state court on behalf of royalty owners entitled to royalties under the terms of either oil and gas leases or a pooling order of the Oklahoma Corporation Commission. The defendants removed the action to federal court. The plaintiff sought to remand the action back to state court arguing in part that several class members did not satisfy the amount in controversy requirement necessary to maintain federal court jurisdiction. The trial court rejected the argument and held that the class members' claims could be aggregated because each had "a common and undivided interest in the 1/8 royalty interest in all gas produced from the pooled formation by virtue of the communitization of their fractional mineral interests under the pooling order." 435 F. Supp. 1303, 1305.
While the facts in the present case are similar to those in Rocket Oil, little information about the specific terms and conditions of the proposed plaintiffs' Unit Agreement has been presented to the Court, making it difficult to make accurate comparisons between the Unit Agreement and the Oklahoma Corporation Commission's order that served as the basis for the trial court's holding in Rocket Oil. Further, the trial court's holding in Rocket Oil is not binding on this Court.
This case is essentially a claim for underpayment of royalties. Each royalty holder has an individual claim for unpaid royalties for their share of production. While the putative class members have a common interest with respect to the manner in which oil is recovered from their respective property, there is nothing to suggest that they possess a common and undivided interest in the resulting royalties. Each putative class member has a separate, divisible interest in royalties as calculated under the Unit Agreement. Each member is entitled to enforce their own separate claim and right to royalties. The fact that the claims may be common does not mean that the claims are undivided. The plaintiff seeks to enforce her own right to recovery that is not dependent on any other royalty owner's right to recover. Therefore, the Court finds that aggregation of all of the prospective plaintiffs' claims is inappropriate and a remand is warranted under the circumstances.
B. REQUEST FOR ATTORNEY'S FEES
In addition to remanding the above-entitled action back to state court for lack of subject matter jurisdiction, Kary also seeks to recover costs and attorney's fees that she incurred as a result of her motion. See 28 U.S.C. § 1447(c). Kary acknowledges that the recovery of costs and attorney's fees is discretionary with the Court.
Although the Court has concluded that a remand is appropriate, it will not award costs or attorney's fees to the non-removing party. The facts and the legal issues presented are unique and there is no evidence that the defendants decision to remove the action was made for an improper purpose. The Court, in its discretion, does not believe that an award of costs or attorney's fees is appropriate or warranted under the circumstances.
III. CONCLUSION
For the reasons outlined above, the Court concludes that removal jurisdiction is lacking and a remand to state court is appropriate. Accordingly, the Court GRANTS Kary's Motion to Remand (Docket No. 3), and DENIES Kary's request for costs and attorney's fees.
IT IS SO ORDERED.