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Sagebrush Resources, LLC v. Peterson

Supreme Court of North Dakota

January 14, 2014

SAGEBRUSH RESOURCES, LLC, Plaintiff and Appellant
v.
Daryl PETERSON, Larry Peterson, and Galen Peterson, Defendants and Appellees.

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[Copyrighted Material Omitted]

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Michael D. Schoepf (argued), Lawrence Bender (on brief), and Amy L. De Kok (on brief), Bismarck, N.D., for plaintiff and appellant.

Derrick L. Braaten (argued) and Lindsey R. Nieuwsma (appeared), Bismarck, N.D., for defendants and appellees.

KAPSNER, Justice.

[¶ 1] Sagebrush Resources, LLC, appeals from a summary judgment dismissing with prejudice its action for trespass and for injunctive relief against Daryl, Larry, and Galen Peterson, determining the action was frivolous and not made in good faith, and awarding the Petersons $23,729 in attorney fees. Sagebrush argues the district court abused its discretion in deciding Sagebrush's claims were frivolous and not made in good faith and in awarding the Petersons $23,729 in attorney fees. We hold the district court did not abuse its discretion in awarding the Petersons attorney fees under N.D.C.C. § 28-26-31, and we affirm.

I

[¶ 2] In April 2011, Sagebrush sued the Petersons, alleging that at all material times it was the owner and operator of several oil and gas wells and related equipment in Bottineau County. Sagebrush alleged the Petersons had wrongfully entered Sagebrush's property without permission and sought damages for trespass and to enjoin them from unlawfully interfering with Sagebrush's oil and gas exploration and production activities. Sagebrush claimed: (1) that " on or about January 28, 2011," Galen Peterson " was seen in, around and on the well site of Rice Well, as well as certain equipment, dikes, berms, tanks and other facilities" owned, used, and operated by Sagebrush in connection with that well; (2) that on September 28, 2010, on March 8, 2011, and on other occasions Daryl Peterson or Larry Peterson " entered into and upon the Cramer Central Tank Battery and climbed onto and upon several of the tanks and other facilities ... for the purpose of taking pictures" ; (3) that " on certain occasions in the past year," Daryl Peterson was " in, around and on the well sites for the Bronderslev Wells and the Peterson Wells, as well as on the equipment, dikes, berms, tanks and other facilities owned and used by Sagebrush in connection with its operation" of those wells; and (4) that " on certain occasions over the past year," Daryl Peterson " was seen on the well sites for certain of the Kuroki Wells."

[¶ 3] The Petersons answered, generally denying any wrongdoing. They specifically alleged that Larry and Daryl Peterson entered the Cramer Central Tank Battery at the request of Rick Hummel, the Bottineau Emergency Services Manager, and that Daryl Petersen had been at the site of the Peterson Wells to document spills on his land and had driven on the

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lease road for the Bronderslev Wells in the past year. They alleged Sagebrush's claims were frivolous and brought in bad faith for purposes of harassment and intimidation and sought attorney fees and costs under N.D.C.C. §§ 28-26-01 and 28-26-31.

[¶ 4] In responses to discovery, Sagebrush stated that information about the claimed trespass was based on encounters with one or more of the Petersons and review of complaints and information submitted by Daryl Peterson to the North Dakota Industrial Commission, including pictures of the various well sites. Sagebrush stated it was damaged by the Petersons' actions because they:

filed a series of complaints against Sagebrush with the North Dakota Industrial Commission alleging that Sagebrush had violated or was violating North Dakota statutes and regulations that govern the extraction of minerals from below the surface of the land. Such complaints directly impacted Sagebrush's operations because some or all of said complaints resulted in investigations by the North Dakota Industrial Commission. Sagebrush's participation in said investigations led to direct expenditures by Sagebrush. The investigation also caused the North Dakota Industrial Commission to withhold its approval of a planned sale of Sagebrush's interests in the affected units, thereby delaying said sale.

[¶ 5] The Petersons moved for summary judgment, claiming Sagebrush could not show that the Petersons actually entered the well sites without authorization or that Sagebrush was damaged. The Petersons asserted that Sagebrush, as a well operator, did not have a sufficient property interest in the surface estate to maintain a trespass claim under Hunt Oil Co. v. Kerbaugh, 283 N.W.2d 131 (N.D.1979). The Petersons also contended Sagebrush did not have standing to seek injunctive relief because Sagebrush was not currently operating any oil and gas wells in North Dakota and lacked a sufficient property interest in the wells to seek injunctive relief. The Petersons claimed Sagebrush's lawsuit was frivolous and not brought in good faith and sought attorney fees under N.D.C.C. §§ 28-26-01(2) and 28-26-31.

[¶ 6] In an affidavit supporting the Petersons' motion for summary judgment, Daryl Peterson averred he was a board member of the Northwest Landowners Association (" NWLA" ), a grassroots organization in northwestern North Dakota working to save farmland and protect agriculture, and stated:

9. On or about March 17, 2011, I met with North Dakota Industrial Commission Inspector Scott Dihle, the adjacent landowner Scott Rice, and Galen Peterson on the township road across from the Rice Well to discuss and point out a spill that occurred on the well site. We did not enter onto the location and we did not take any pictures.
10. I did not enter onto the Cramer Central Tank Battery site on September 28, 2010. I received pictures of the Cramer Central Tank Battery, date stamped September 28, 2010, from an NWLA supporter. I did not take the pictures.
11. On or around early March 8, 2011, I accompanied Rick Hummel, principal manager of the Local Emergency Planning Committee for Bottineau County, and Larry Peterson at Mr. Hummel's request to the Cramer Central Tank Battery, also known as the Rice-Glessing Tank Battery, to inspect a spill and potential release of hazardous substances. I did not take any pictures

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and did not climb on the tanks or other facilities.
12. With regard to the Bronderslev wells, I stopped on the access road to the Bronderslev location with the permission of surface owner Kent Huber on or about September 2010. I did not enter the location and took pictures only from my position on the road.
13. I have never been to any of the Kuroki Wells.

[¶ 7] Galen Peterson submitted an affidavit stating that on March 17, 2011, he met with Scott Dihle, Scott Rice, and Daryl Peterson on a township road across from the Rice Well to discuss a spill on that well site, but they did not enter the location and did not take any pictures. Larry Peterson also submitted an affidavit, stating: (1) he was a member of the Bottineau County Local Emergency Planning Committee; (2) he did not enter the Cramer Central Tank Battery site or take pictures on September 28, 2010; (3) he accompanied Daryl Peterson and Rick Hummel of the Bottineau County Local Emergency Planning Committee to the Cramer Central Tank Battery on March 8, 2011, to inspect a spill; and (4) he did not take any pictures or climb on any tanks or facilities. The Petersons also submitted an affidavit from Rick Hummel stating that Larry and Daryl Peterson accompanied him to the Cramer Central Tank Battery on March 8, 2011, to inspect a spill.

[¶ 8] Sagebrush resisted the Petersons' motion for summary judgment, arguing it had a legal right to use as much of the surface of its leasehold interest as necessary to explore and produce its mineral interests under Hunt,283 N.W.2d 131, and it provided sufficient evidence of the Petersons' unauthorized entry onto Sagebrush's well sites and equipment to defeat their motion for summary judgment. Sagebrush claimed the Petersons' self-serving denials were insufficient to permit summary judgment because the record clearly demonstrated they provided the Industrial Commission with photographs that could only have been taken from property controlled by Sagebrush and on which the Petersons were not authorized to enter. Sagebrush asserted that by entering Sagebrush's well sites and conducting unauthorized inspections, the Petersons interfered with Sagebrush's use of the well sites. Sagebrush argued the interference, whether technically a trespass or not, was clearly actionable under Hunt. Sagebrush claimed actual harm was not an element of trespass and it was required to ...


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