from the District Court of McKenzie County, Northwest
Judicial District, the Honorable Robin Ann Schmidt, Judge.
A. Swanson, for plaintiff and appellant.
Danielle M. Krause (argued) and Lawrence Bender (on brief),
for defendant and appellee.
VandeWalle, Chief Justice.
1] GEM Razorback, LLC appealed from a judgment dismissing its
declaratory judgment action because GEM failed to exhaust
administrative remedies, and dismissing its claim for
specific performance because GEM could not establish that it
was a third-party beneficiary of a contract. We affirm.
2] GEM and Zenergy, Inc. owned working interests in two oil
and gas wells located in McKenzie County. Zenergy operated
the wells, but GEM had not consented to pay its share of the
drilling and operating costs. GEM did not execute a joint
operating agreement for the wells and consequently was
assessed a risk penalty as a nonconsenting owner.
See N.D.C.C. § 38-08-08(3); Gadeco, LLC v.
Indus. Comm'n, 2012 ND 33, ¶¶ 4-6, 812
N.W.2d 405 (describing nonconsenting owners and risk
penalties). In May 2013, GEM began requesting from Zenergy
information and documents related to its interests in the
wells. The information requested by GEM included the
cumulative balance to payout for the wells and the costs,
revenue and expenses, and production data for the wells. In
September 2013, Zenergy provided GEM the cumulative balance
to payout for the wells.
3] In October 2013, Zenergy assigned its interest in the
wells to Oasis Petroleum North America LLC. The assignment
conveyed all assets, including "all files, records and
data maintained by" Zenergy. After the assignment, GEM
requested the same information from Oasis. Oasis provided
Zenergy with the requested information. However, according to
Oasis, some of the requested information for the time period
before the assignment was not in its possession.
4] Because of differences in the numbers provided by Zenergy
and Oasis, GEM in May 2014 filed applications for hearing
with the Industrial Commission. See N.D. Admin. Code
§ 43-02-03-88. The applications requested that the
Commission determine the actual reasonable costs plus risk
penalty for the two wells, and a hearing on the applications
was held in September 2014. As a result of the hearing, Oasis
agreed to allow GEM to conduct an audit of the wells. The
Commission dismissed the applications without prejudice,
noting "[i]n the event of any dispute as to such costs,
GEM intends to file an application for the Commission to
determine the proper costs." During the ensuing audit
process, GEM discovered there were documents it requested
that were not in Oasis' possession for the time period
before the assignment when Zenergy operated the wells. GEM
contacted Zenergy and requested an extensive list of 39
specific types of information regarding the wells. Zenergy
refused to provide GEM with the requested information.
5] In April 2015, GEM commenced this declaratory judgment and
specific performance action against Zenergy. GEM sought a
declaration that "as a nonparticipating owner in the...
wells, they have a statutory right under Chapter 38-08,
N.D.C.C., to the information for the... wells that they have
requested from [Zenergy], and that [Zenergy] is required to
provide this information to [GEM]." GEM also sought
specific performance of the assignment entered into by
Zenergy and Oasis because GEM is "a third-party
beneficiary" of the assignment and "has a right to
receive, from Zenergy, those documents and information
identified as 'Records' by" a provision in the
assignment. GEM requested "an order compelling Zenergy
to produce [those] documents and information."
6] Zenergy moved to dismiss the action under N.D.R.Civ.P.
12(b)(1) and (6). Zenergy argued the district court lacked
subject matter jurisdiction over the request for declaratory
relief because GEM failed to exhaust its administrative
remedies with the Commission before filing the complaint.
Zenergy argued the claim for specific performance failed to
state a claim upon which relief can be granted because a
provision of the assignment agreement specifically bars
third-party beneficiary status. The court agreed with
Zenergy's arguments and dismissed GEM's action.
7] GEM argues the district court erred in ruling it lacked
subject matter jurisdiction to determine whether GEM had a
statutory right to obtain the specified information from
Zenergy because GEM ...