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Two Shields v. Wilkinson

United States Court of Appeals, Eighth Circuit

June 12, 2015

Ramona Two Shields; Mary Louise Defender Wilson, individually and on behalf of others similarly situated, Plaintiffs - Appellants
v.
Spencer Wilkinson, Jr.; Rick Woodward; Robert Zinke; Dakota-3 E& P Company, LLC, Now known as WPX Energy Williston, LLC; Zenergy, Inc.; Dakota-3, LLC; Dakota-3 Energy, LLC; Zenergy Properties 6 Ft. Berthold Allottee, LLC; John Doe, Defendants - Appellees, Indigenous Law and Policy Center, Amicus on Behalf of Appellant(s)

Submitted October 9, 2014.

Appeal from United States District Court for the District of North Dakota - Bismarck.

For Ramona Two Shields, Mary Louise Defender Wilson, individually and on behalf of others similarly situated, Plaintiffs - Appellants: Mario Gonzalez, Rapid City, SD; Andres Healy, SUSMAN & GODFREY, Seattle, WA; Kenneth E. McNeil, Shawn L. Raymond, SUSMAN & GODFREY, Houston, TX; John M. Olson, Bismark, ND.

For Spencer Wilkinson, Jr., Dakota-3, LLC, Dakota-3 Energy, LLC, Defendants - Appellees: Jon W. Backes, MCGEE & HANKLA Minot, ND; Mark Simeon Barron, FULBRIGHT & JAWORSKI, Denver, CO; Van H. Beckwith, BAKER & BOTTS, Dallas, TX; Matthew Alexander Dekovich, NORTON & ROSE, Houston, TX; Daniel Mead McClure, NORTON & ROSE, Houston, TX.

For Rick Woodward, Defendant - Appellee: Van H. Beckwith, BAKER & BOTTS, Dallas, TX; Jared R. Boyer, Jodi Warmbrod Dishman, Ronald Theodore Shinn, Jr., MCAFEE & TAFT, Oklahoma City, OK.

For Robert Zinke, Defendant - Appellee: Van H. Beckwith, BAKER & BOTTS, Dallas, TX; Stuart D. Campbell, Tom Q. Ferguson, DOERNER & SAUNDERS, Tulsa, OK; James U. White, Jr., ZENERGY, INC., Tulsa, OK.

For Dakota-3 E& P Company, LLC, Now known as WPX Energy Williston, LLC, Defendant - Appellee: Van H. Beckwith, Jessica Bateman Pulliam, BAKER & BOTTS, Dallas, TX.

For Zenergy, Inc., Zenergy Properties 6 Ft. Berthold Allottee, LLC, Defendants - Appellees: Van H. Beckwith, BAKER & BOTTS, Dallas, TX; Lawrence Bender, Michael David Schoepf, FREDRIKSON & BYRON, Bismarck, ND; Stuart D. Campbell, Tom Q. Ferguson, DOERNER & SAUNDERS, Tulsa, OK; James U. White, Jr., ZENERGY, INC., Tulsa, OK.

For Indigenous Law and Policy Center, Amicus on Behalf of Appellant(s): Matthew L.M. Fletcher, Kathryn Fort, MICHIGAN STATE UNIVERSITY, College of Law, Indigenous Law and Policy Center, East Lansing, MI.

Before MURPHY, SMITH, and GRUENDER, Circuit Judges.

OPINION

Page 792

MURPHY, Circuit Judge.

Appellants Ramona Two Shields and Mary Louise Defender Wilson are Indians with interests in land allotted to them by the United States under the Dawes Act of 1887. Such land is held in trust by the government, but may be leased by allottees. Two Shields and Defender Wilson leased oil and gas mining rights on their allotments to appellee companies and affiliated individuals who won a sealed bid auction conducted by the Board of Indian Affairs (BIA) in 2007. Subsequent to the auction, appellants agreed to terms with the winning bidders, the BIA approved the leases, and appellees sold them for a large profit. Appellants later filed this putative class action in the District of North Dakota,[1] claiming that the United States had breached its fiduciary duty by approving the leases for the oil and gas mining

Page 793

rights, and that the defendant bidders aided, abetted, and induced the United States to breach that duty. The district court concluded that the United States was a required party which could not be joined, but without which the action could not proceed in equity and good conscience, and dismissed the case. Appellants challenge that dismissal. For the reasons stated below, we affirm.

I.

Two Shields and Defender Wilson are Indians who hold allotments on the Bakken Oil Shale Formation in the Fort Berthold Reservation in the state of North Dakota. Two Shields is a member of the Three Affiliated Tribes, a union of the Mandan, Hidatsa, and Arikara Nations which operate as one tribal unit located on and near the Fort Berthold Reservation. Defender Wilson is a member of the Standing Rock Sioux Tribe. Following a sealed bid auction, Two Shields leased the oil and gas mining rights for 320 acres of an allotment to the high bidder Zenergy Properties. Federal regulations provide for a minimum royalty rate of 16 b%; lower rates may be permitted if found to be in the best interest of the Indian mineral owner. 25 C.F.R. § 211.41(b). Two Shields received a lease bonus of $451.48 per acre and an agreed 18% royalty rate. Two Shields also entered into another lease with Zenergy Properties for an additional 320 acres of an allotment; Defender Wilson is also an owner and heir in trust of this property. The lease provided for a bonus of $400 per acre and an 18% royalty rate. Before their leases had operative effect, the BIA certified as required by statute that they were " in the best interest of the Indian mineral owner." See 25 U.S.C. § 396 (granting the Secretary of the Interior authority to promulgate regulations regarding leasing of mining interests on allotted lands); 25 C.F.R. § 212.20 (regulations permitting Secretary to reject winning bid and readvertise a mineral land tract for sale " if the Secretary determines that it is not in the best interest of the Indian mineral owner to accept any of the bids" ). The leases were approved by the BIA in December 2007 and February 2008.

Appellee Spencer Wilkinson is a member of the Three Affiliated Tribes and manages a casino on the Fort Berthold Reservation. Appellants allege that he and appellee Robert Woodward devised a scheme to obtain funding from an unknown third party, to use that funding to acquire oil and gas leases from the plaintiffs, and to sell the oil and gas leases for a profit. Their complaint alleges that defendants furthered this plot by using political influence to select BIA superintendents who would approve the leases and ensure election of a tribal chairman who would have the Three Affiliated Tribes pressure the BIA to approve the leases. Appellants also allege that the BIA did not deny approval of or renegotiate a single lease on behalf of Fort Berthold allottees, thereby breaching its fiduciary duty to maximize the value obtained by Indian allottees and to ensure the leases were in their best interests.

Appellants filed this class action on November 26, 2012, alleging North Dakota common law claims of aiding and abetting, tortious inducement, and conspiracy to aid and abet breaches of fiduciary duty imposed by federal law. They also raised claims for constructive trusts and an accounting. Each claim other than the accounting claim alleges as an element that the United States breached its fiduciary duty to the Indian plaintiffs and that the defendants knew of, encouraged, or wrongfully profited from that breach. The complaint named as defendants Dakota-3, Dakota-3 E& P Co., Dakota-3 Energy, Zenergy, Inc., and Zenergy Properties 6 Ft. Berthold Allottee and Spencer Wilkinson

Page 794

Jr., Rick Woodward, and Robert Zinke (who are alleged to be affiliated with, or owners of, the Dakota-3 and Zenergy companies). It also named the John Doe defendant who was alleged to have provided funding for the scheme. It alleges that defendants ultimately leased roughly 85,000 acres of land, bundled the leases together for sale, and then sold the leases in 2010 to a third party for $925 million. It claims that while defendants received over $10,000 per acre from their own sale, they paid some ...


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